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EXHIBIT 4.6
SIXTH AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS SIXTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as of
the 1st day of September, 1999 (the Agreement), is made by and between CRESTAR
BANK, a Virginia banking corporation (the Lender), and HALIFAX CORPORATION, a
Virginia corporation (the Company), HALIFAX ENGINEERING, INC., a Virginia
corporation (Engineering), HALIFAX TECHNICAL SERVICES, INC., a Virginia
corporation (Technical), and HALIFAX REALTY, INC., a Virginia corporation
(Realty), and each other Subsidiary (as defined below) that becomes a party to
this Agreement with the Lender's approval, in accordance with the provisions set
forth below (together with the Company and Engineering, Technical and Realty,
collectively, the Borrowers, and individually, a Borrower).
RECITALS
The Lender has agreed to provide financing to the Borrowers, subject to
the terms and conditions of this Agreement. Each Borrower will derive
substantial direct and indirect benefits by the credit extended by the Lender to
the other Borrowers. Accordingly, for good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the Lender and the Borrowers
agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings assigned to them below, which meanings shall be equally
applicable to the singular and plural forms of the terms defined.
"Accounts Receivable" means, collectively, and includes all of the
following, whether now owned or hereafter acquired by a Borrower: all property
included within the definitions of "accounts," "chattel paper," "documents" and
"instruments" set forth in the UCC; all present and future rights to payments
for goods sold or leased or for services rendered, whether or not represented by
instruments or chattel paper, and whether or not earned by performance; contract
rights; all present and future rights to payments for computer software,
computer hardware or computer systems sold, leased or licensed; proceeds of any
letter of credit of which a Borrower is a beneficiary; all forms of obligations
whatsoever owed to a Borrower, together with all instruments and documents of
title representing any of the foregoing; all rights in any goods that any of the
foregoing may represent; any and all rights in any returned or repossessed
goods; and all rights, security and guaranties with respect to any of the
foregoing, including, without limitation, any right of stoppage in transit.
"Affiliate" means, with respect to any specified Person, any other Person
that, directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, direct or indirect,
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of the power to direct or cause the direction of the management and policies of
a Person, whether through ownership of common stock, by contract or otherwise.
"Aging" means a schedule of all outstanding Receivables of the Borrowers
showing the age of such Receivables in intervals of 30 days.
"Agreement" means this Loan and Security Agreement, as the same may be
amended, modified or supplemented from time to time.
"Assignment of Claims Act" means, collectively, the Assignment of Claims
Act of 1940, as amended, 31 U.S.C. Section 3727, 41 U.S.C. Section 15, any
applicable rules, regulations and interpretations issued pursuant thereto, and
any amendments to any of the foregoing.
"Assumption Agreement" means each Assumption Agreement, substantially in
the form of Exhibit A attached to this Agreement, executed by a Subsidiary that
becomes a party to this Agreement in accordance with the provisions of Section
Section 7.3 below.
"Borrowing Base" means, at any time, without duplication, the sum of (a)
90% of Eligible Billed Government Receivables, plus (b) 85% of Eligible Billed
Commercial Receivables, plus (c) until such time as the HTSI Sale occurs, the
Tier Two Contribution, provided that at no time shall the Borrowing Base
attributable to the Tier Two Contribution exceed $2,000,000, and upon the
closing of the HTSI Sale, the Tier Two Contribution shall not be included as
part of the Borrowing Base. The Lender agrees that Eligible Billed Commercial
Receivables due from Siemens may be included in the Borrowing Base, provided
that the Borrowing Base attributable thereto shall not exceed $1,000,000 at any
time.
"Borrowing Base Certificate" means a certificate of the Company
containing a computation of the Borrowing Base and certifying that no Default or
Event of Default has occurred and is continuing, in substantially the form of
Exhibit B attached to this Agreement.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required to close under the laws of
the State, and, with respect to the determination of LIBOR, on which banks in
the London interbank market are open for business.
"Capital Expenditures" means, for any period, expenditures made by the
Company or any of its Subsidiaries to acquire or construct fixed assets, plant
and equipment (including renewals, improvements and replacements, but excluding
repairs) during such period, computed in accordance with GAAP.
"Capital Lease" means any lease that has been or should be capitalized
on the books of the lessee in accordance with GAAP.
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"Cash Management Agreement" means any applicable agreement between the
Company and the Lender pursuant to which funds are transferred automatically to
and from the Company's operating account or controlled disbursement account with
the Lender, as any such agreement may be amended, modified or supplemented from
time to time.
"Closing" means the satisfaction of all conditions precedent set forth in
Section Section 7 of this Agreement.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and all regulations issued pursuant thereto.
"Collateral" means, collectively, and includes all Accounts Receivable,
Deposit Accounts, Equipment, General Intangibles, Intellectual Property,
Inventory, Investment Property and all other property of a Borrower in which a
Lien is granted to the Lender pursuant to this Agreement or any other Loan
Document.
"Commercial Receivable" means any Account Receivable that does not arise
out of a Government Contract on which a Borrower is the prime contractor. An
Account Receivable arising out of a Government Contract on which a Borrower is a
subcontractor shall be a Commercial Receivable.
"Covenant Compliance Certificate" means a certificate executed by a
Principal Officer of the Company, substantially in the form of Exhibit C
attached to this Agreement, containing a calculation of the financial covenants
contained in Section Section 6.11 below and certifying that no Default or Event
of Default has occurred.
"Customer" means any Person obligated on a Receivable.
"Customer List" means a schedule of all Customers of the Borrowers,
showing the address of each Customer and a listing of the active contracts
between each Borrower and such Customer, which is otherwise in form and
substance satisfactory to the Lender.
"Date Affected Information Technology" means a system comprised of one or
more components including computer hardware, computer software or equipment with
computerized functions, which reads, produces or processes date data by input,
output or otherwise.
"Debt" means, collectively, and includes, without duplication, with
respect to any specified Person, (a) indebtedness or liability for borrowed
money (whether by loan, the issuance and sale of debt securities or the sale of
assets to another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such assets from such Person) or for the deferred
purchase price of property or services; (b) obligations as a lessee under a
Capital Lease; (c) obligations to reimburse the issuer of letters of credit or
acceptances; (d) all guaranties,
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endorsements (other than for collection or deposit in the ordinary course of
business) and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any other Person or otherwise to assure a
creditor against loss; (e) obligations under interest rate swap, cap or collar
agreements or similar agreements or arrangements designed to protect that Person
against fluctuations in interest rates; (f) obligations under any foreign
exchange contract, currency swap or other similar agreements or arrangements
designed to protect that Person against fluctuations in currency values; and (g)
obligations secured by any Lien on property owned by the specified Person,
whether or not the obligations have been assumed.
"Default" means any event that, with the giving of notice, the lapse of
time, or both, would constitute an Event of Default.
"Default Rate" means the rate at which interest accrues on the loans upon
the occurrence of an Event of Default, determined in accordance with the
provisions of Section Section 2.4.
"Deposit Account" means any "deposit account," as defined in Section
9-105 of the UCC, whether now owned or hereafter acquired by a Borrower.
"Dollars" and "$" means the lawful currency of the United States of
America.
"Eligible Billed Commercial Receivable" means an Eligible Billed
Receivable that is not an Eligible Billed Government Receivable.
"Eligible Billed Government Receivables" means Eligible Billed
Receivables arising out of a Government Contract on which a Borrower is the
prime contractor.
"Eligible Billed Receivables" means Eligible Receivables that have been
billed to the appropriate Customer and are aged not greater than 90 days from
the date of the initial invoice. For the purposes of this definition, the term
"initial invoice" shall mean the first invoice relating to the applicable goods
shipped or services rendered, and not any subsequent invoice relating thereto.
"Eligible Bonded Receivables" means, at any time, Accounts Receivable of
a Borrower that satisfy all of the criteria of Eligible Billed Receivables other
than the requirement that such Accounts Receivable not arise out of a contract
secured by a surety bond.
"Eligible Receivables" means Accounts Receivable of a Borrower (a) that
represent valid obligations incurred by a Customer for software, goods or
services licensed, shipped and delivered, installed or completed under valid
contracts of license, sale, or service that have been formally awarded to a
Borrower, for which all required contract documents have been executed by such
Borrower and such Customer, and, if the Government is the Customer, for which
funds have been appropriated and allocated; (b) that are due and payable not
more than 30 days from the date of the initial invoice; (c) on which the
Customer is not an Affiliate or Subsidiary of a Borrower; (d) with respect to
which no Borrower has knowledge or notice of any inability of the
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Customer to make full payment; (e) from the face amounts of which have been
deducted all payments, setoffs, amounts subject to adverse claims made in
writing to a Borrower, contractual allowances, bad debt reserves and other
credits applicable thereto; (f) that are subject to no Liens other than those
permitted by this Agreement; (g) that continue to be in full conformity with the
representations and warranties made by the Borrowers to the Lender in this
Agreement; (h) with respect to which the Lender is and continues to be satisfied
with the credit standing of the Customer; (i) on which the Customer is not a
creditor of a Borrower; (j) on which the Customer is not a Foreign Customer,
unless the Foreign Customer's obligations are secured by a letter of credit
acceptable to the Lender, or the Lender elects, in its sole discretion, to
permit such Account Receivable to be included in the Borrowing Base if it
otherwise is an Eligible Receivable, at such advance percentage as the Lender
may elect in its sole discretion; (k) that are not subject to any dispute; (l)
with respect to which the applicable software, goods or services have been
accepted by the applicable Customer on an absolute sale basis and not on a xxxx
and hold sale basis, a consignment sale basis, a guaranteed sale basis, a sale
or return basis or on the basis of any other similar understanding pursuant to
which such Borrower would repurchase or accept a return of, or give a credit
for, any such software, goods or services; and (m) that are not subject to any
contingencies, and (n) no portion of which has been assigned, in whole or in
part, to any Person other than the Lender; provided, however, and without
limiting any other provisions of this Agreement with respect to the exclusion of
Accounts Receivable from the category of Eligible Receivables and the Borrowing
Base, that (1) if the Lender reasonably determines that the collectibility of
any Account Receivable makes it unacceptable for inclusion in the Borrowing Base
and gives written notice to the Company indicating the reasons for such
determination, then such Account Receivable shall thereafter be excluded from
the category of Eligible Receivables, (2) if more than 50% of the aggregate face
amount of Accounts Receivable owed by a Customer are aged 90 days or more, then
all Accounts Receivable owed by such Customer shall be excluded from the
category of Eligible Receivables, (3) in no case shall Eligible Receivables
include any Accounts Receivable representing or arising out of retainages,
holdbacks, progress xxxxxxxx, the final payment due under a Government Contract,
revenues recognized or costs incurred in excess of approved or allowed
reimbursement rates, cost overruns, unauthorized work or work beyond the scope
of a contract, rebillings, contracts secured by surety bonds or classified
Government Contracts; (4) an Account Receivable arising out of a Material IP
Agreement shall not be an Eligible Receivable unless the applicable Intellectual
Property, and an appropriately completed instrument sufficient to file and
record the Lender's Lien with respect thereto, shall be duly registered and
filed with the United States Copyright Office and the United States Patent and
Trademark Office, as applicable; (5) Receivables arising out of the obligation
of any Person to purchase or finance Receivables of a Borrower shall not be
Eligible Receivables; and (6) no Receivables arising out of the VDOT Contract
shall be Eligible Receivables. If required by the Lender, no Eligible Receivable
shall be included in more than three month-end Borrowing Base calculations.
"Embezzlement" means the embezzlement of funds from Technology by a
perpetrator identified by the Borrowers prior to the date of this Agreement and
any Person acting in concert with such perpetrator.
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"Equipment" means collectively and includes all of the following,
whether now owned or hereafter acquired by a Borrower: equipment and fixtures,
including, without limitation, computer hardware, computer software, computer
systems, furniture, machinery, vehicles and trade fixtures together with any and
all accessories, accessions, parts and appurtenances thereto, substitutions
therefor and replacements thereof, together with all other such items that are
included within the definitions of "equipment" and "fixtures" as set forth in
the UCC.
"Equity Issuance" means any issuance or sale by a Person of its capital
stock or other similar equity security, or any warrants, options or similar
rights to acquire, or securities convertible into or exchangeable for, such
capital stock or other similar equity security.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all regulations issued pursuant thereto.
"Event of Default" means any of the events specified as an "Event of
Default" under this Agreement, provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition, has been satisfied.
"Existing Agreement" means the Fifth Amended and Restated Loan and
Security Agreement, dated as of June 25, 1998, between the Lender, the Borrowers
and Technology, as amended to the date hereof.
"Existing Subordination Agreement" means the Subordination Agreement,
dated as of January 27, 1998, between the Lender, the Company and Research
Industries.
"Foreign Customer" means a Customer that is a foreign government, an
entity organized under the laws of a country other than the United States or an
individual who is not a United States citizen.
"Fully Date Capable" means the ability to correctly process date data
(including, but not limited to, reading, producing, calculating, comparing, and
sequencing date data) from, into, and between the twentieth and twenty-first
centuries) without material degradation in performance and without unusual
intervention, including correct and continuous processing during the transition
between 1999 and 2000, and correct processing of leap years.
"GAAP" means generally accepted accounting principles consistently
applied.
"General Intangibles" means, collectively, and includes all of the
following, whether now owned or hereafter acquired by a Borrower: all property
that is included within the definition of "general intangibles" as set forth in
the UCC; choses in action, causes of action and all other intangible property of
every kind and nature, including, without limitation, corporate or other
business records, inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, good will, registrations,
copyrights, licenses, franchises,
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customer lists, tax refunds, tax refund claims, rights of claims against
carriers and shippers, leases and rights to indemnification.
"Government" means the United States of America or any agency or
instrumentality thereof.
"Government Contract" means any contract with the Government under which
a Borrower is a prime contractor or a subcontractor.
"HTSI Sale" means the sale of all or substantially all of the assets or
stock, or both, as applicable, of Technical.
"Increased Costs" means any reserve, special deposit, capital adequacy
guideline or similar requirement relating to any extensions of credit, Letters
of Credit, or other assets of the Lender, or the deposits with or other
liabilities of the Lender, that (a) is imposed as a result of any Regulatory
Change or as a result of the application of existing capital adequacy guidelines
(including, without limitation, any Regulatory Change or capital adequacy
guideline that requires that letters of credit issued, or lines of credit
established, by the Lender be classified as "risk assets" for purposes of, or
otherwise be subject to the provisions of, any capital adequacy guidelines
applicable to the Lender), and (b) increases the cost to the Lender of making,
issuing or maintaining any Loan or Letter of Credit, reduces the amount
receivable by the Lender in connection with any Loan or Letter of Credit, or
reduces the rate of return on the Lender's capital as a consequence of its
obligations under this Agreement.
"Intellectual Property" means, collectively, and includes all of the
following, whether now owned or hereafter acquired by a Borrower: all copyrights
(whether registered or unregistered), copyright registrations, trademarks,
servicemarks, patents and rights as a licensor or licensee of any of the
foregoing and all applications with respect to any of the foregoing.
"Interest Payment Date" means the first day of each calendar month.
"Inventory" means collectively and includes all of the following, whether
now owned or hereafter acquired by a Borrower: all goods, computer hardware,
computer software and computer systems held or intended for sale, lease,
installation or licensing by a Borrower, or furnished or to be furnished under
contracts of service, all raw materials, work in process, finished goods,
materials and supplies of every nature used or usable in connection with the
manufacture, packing, shipping, advertising or sale of any such goods, together
with all property including within the definition of "inventory" set forth in
the UCC.
"Investment Property" means all of the following, whether now owned or
hereafter acquired by a Borrower: all property that is included within the
definition of "investment property" as set forth in the UCC, including all
securities, whether certificated or uncertificated, security entitlements,
securities accounts, commodity contracts and commodity accounts, and all
financial assets held in any securities account or otherwise, and any commercial
paper, securities,
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repurchase agreements, deposit accounts or other instruments or obligations
purchased for the Borrower pursuant to a Cash Management Agreement.
"Letters of Credit" means any letter of credit issued by the Lender for
the account of any Borrower, whether now outstanding or issued after the date of
this Agreement.
"Letter of Credit Agreement" means, collectively and individually, each
standard form of Application and Agreement for Irrevocable Standby Letter of
Credit, to be executed and delivered by the Borrowers to the Lender in
connection with each Letter of Credit, as any of the same may be amended,
modified or supplemented from time to time.
"LIBOR" means for each calendar month, the rate at which dollar deposits
with a one-month maturity are offered to leading banks in the London interbank
market at 11:00 a.m. (London time) on the first Business Day of such calendar
month, based on the British Bankers Association quotations published by an
On-Line Information Service, selected by the Lender, plus adjustments (expressed
as a percentage) for reserve requirements, deposit insurance premium
assessments, broker's commissions and other regulatory costs, all of the
foregoing as determined by the Lender's Funds Management Division in accordance
with its customary practices.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement, or preferential
arrangement, charge or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
Capital Lease and the filing of any financing statement under the UCC or
comparable law of any jurisdiction to evidence any of the foregoing).
"Loans" means the Revolving Loans, Term Loan One and Term Loan Two.
"Loan Documents" means this Agreement, the Notes, each Assumption
Agreement, each Letter of Credit Agreement, each Cash Management Agreement, the
Existing Subordination Agreement, the Release Agreement, and any other document
now or hereafter executed or delivered in connection with the Obligations, in
evidence thereof or as security therefor, including, without limitation, any
life insurance assignment, pledge agreement, security agreement, deed of trust,
mortgage, guaranty, promissory note or subordination agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
the Company and its Subsidiaries taken as a whole, (b) the ability of any
Borrower to perform its obligations under any Loan Document or (c) the rights of
or benefits available to the Lender under any Loan Document.
"Material Contract" means any contract or other arrangement (other than
the Loan Documents), whether written or oral, to which a Borrower or any
Subsidiary is a party (a) requiring annual payments by any party thereto of more
than 10% of the annual consolidated gross revenues of the Company and its
Subsidiaries, or (b) as to which the breach,
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nonperformance, cancellation or failure to renew by any party thereto could
have a Material Adverse Effect.
"Material IP Agreement" means any contract or agreement between a
Borrower and a Customer providing for the sale or licensing to such Customer of
Intellectual Property owned by such Borrower and subject or entitled to United
States copyright, patent or trademark protection, unless such sale or license is
ancillary to other goods or services provided under such contract or agreement
and is not a material element of such goods or services.
"Maximum Amount" means $12,000,000, as the same may be permanently
reduced from time to time pursuant to Section Section 2.8 hereof.
"Minimum Compliance Level" means Tangible Net Worth as of March 31, 1999,
and adjusted upward, effective as of September 30, 1999, and as of the end of
each fiscal quarter thereafter, by (a) $150,000, plus (b) the net proceeds of
cash and other consideration received by the Borrower or any Subsidiary in
respect of any Equity Issuance issued after March 31, 1999, minus (c)
extraordinary, unusual or non-recurring gains for such period, as determined in
accordance with GAAP, plus (d) extraordinary, unusual or non-recurring losses
for such period, as determined in accordance with GAAP.
"Net Income" means, for any Person for any period, the consolidated gross
revenues (including extraordinary, unusual or non-recurring losses) of such
Person and its Subsidiaries for such period less all consolidated operating and
non-operating expenses (including extraordinary, unusual or non-recurring gains)
of such Person and its Subsidiaries for such period, all as determined in
accordance with GAAP.
"Notes" means the Revolving Note, Term Note One and Term Note Two.
"Obligations" means the Loans, the Notes, the Letter of Credit
Agreements, all indebtedness and obligations of a Borrower under this Agreement
and the other Loan Documents and all other indebtedness and obligations of a
Borrower to the Lender, now existing or hereafter arising, of every kind and
description, direct or indirect, fixed or contingent, liquidated or
unliquidated, due or to become due, secured or unsecured, joint, several or
joint and several, as amended, modified, renewed, extended or increased from
time to time, including, without limitation, any overdrafts in any Deposit
Account maintained by a Borrower with the Lender.
"On-Line Information Service" means a text line or other on-line
information service provided to the Lender by any of Reuters Information
Services, Inc., Xxxxxx-Xxxxxx Financial/Americas, Dow Xxxxx Telerate, Inc. or
Bloomberg Financial Markets News Services, or any comparable reporting service
selected by the Lender.
"Optional Termination Date" means the date on which the Borrowers elect
to terminate the Lender's obligations to make Loans and issue Letters of Credit
in accordance with a notice given pursuant to Section Section 2.9.
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"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority, limited liability company or other entity of whatever
nature.
"Primary Operating Account" means any deposit account or controlled
disbursement account on which the Company draws to pay all or substantially all
of its operating expenses.
"Prime Rate" means the rate of interest established and announced from
time to time by the Lender and recorded in its Central Credit Administration
Division as its Prime Rate, it being understood and agreed that the Prime Rate
is used as a reference for fixing the lending rate on commercial loans and is
not necessarily the lowest or most favorable rate of interest charged by the
Lender on such loans.
"Principal Officer" means the President, the Chief Executive Officer or
the Chief Financial Officer of the Company.
"Receivables" means the Accounts Receivable and the General Intangibles.
"Recoveries" means any amounts collected or recovered by the Borrowers,
directly or indirectly, with respect to, or arising out of, the Embezzlement,
whether prior to or subsequent to the date of this Agreement, including, without
limitation, the proceeds of restitution made by any perpetrator, insurance
proceeds, and tax refunds and claims attributable to the effect of the
Embezzlement.
"Regulatory Change" means any change, after the date of this Agreement,
in any federal or state laws, rules and regulations, or interpretations thereof,
or the adoption after the date of this Agreement of any rules, interpretations,
directives or requests, applying to a class of financial institutions including
the Lender, under any federal or state laws or regulations by any court or
regulatory authority charged with the interpretation or administration thereof.
"Release Agreement" shall mean the Release Agreement, in the form of
Exhibit E, between the Borrowers and the Lender.
"Research Industries" means Research Industries Incorporated, a Delaware
corporation.
"Revolving Loans" means the loans to be made by the Lender to the
Borrowers pursuant to Section Section 2.1 of this Agreement.
"Revolving Note" means a promissory note in the principal amount equal to
the Maximum Amount, in substantially the form of Exhibit D attached to this
Agreement, made by the Borrowers and payable to the order of the Lender, as
amended, modified or supplemented from time to time.
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"Siemens" means Siemens Atiengesellschaft, a corporation organized under
the laws of the Federal Republic of Germany, and its Affiliates and
Subsidiaries.
"State" means the Commonwealth of Virginia.
"Subordinated Debt" means (a) the Debt of the Company to Research
Industries outstanding on the date hereof and subject to the terms of the
Existing Subordination Agreement, and (b) any unsecured Debt of the Company
incurred after the date hereof that has a maturity of not less than three years,
is subordinated to the Obligations pursuant to a subordination agreement
containing terms that are identical in all material respects to those contained
in the Existing Subordination Agreement, and accruing interest at a rate
acceptable to the Lender.
"Subsidiary" as to any Person, means a corporation, partnership, limited
partnership, limited liability company or other entity of which shares of stock
or other ownership interests having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other
managers of such entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary
or Subsidiaries of the Company.
"Synthetic Lease" means any synthetic lease, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing product
where the transaction is considered Debt for borrowed money for federal income
tax purposes but is classified as an operating lease in accordance with GAAP for
financial reporting purposes.
"Tangible Net Worth" means, at any time, amounts that would be included
under redeemable preferred stock and stockholders' equity on the consolidated
balance sheet of the Company and its Subsidiaries, provided that, in any event,
such amounts are to be net of amounts carried on the books of the Company and
its Subsidiaries for (1) any write-up in the book value of any assets of the
Company resulting from a revaluation subsequent to the date of this Agreement,
(2) investments in non-marketable securities, (3) treasury stock, (4)
unamortized debt discount expense, (5) any cost of investments in excess of net
assets acquired at any time of acquisition, (6) loans, advances or other amounts
owed to the Company or any of its Subsidiaries by any of its officers,
directors, shareholders, employees or Affiliates, except for travel advances
made in the ordinary course of business, (7) leasehold improvements, (8) prepaid
expenses, and (9) patents, patent applications, copyrights, trademarks, trade
names, goodwill, research and development costs, organizational expenses,
capitalized software costs and other like intangibles.
"Technology" means Halifax Technology Services Company, a Virginia
corporation, which has been merged into the Company.
"Term Loan One" means the loan to be made by the Lender to the Borrowers
pursuant to Section Section 2.2 of this Agreement.
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"Term Loan Two" means the loan to be made by the Lender to the Borrowers
pursuant to Section Section 2.3 of this Agreement.
"Term Note One" means the $2,500,000 promissory note, in substantially
the form of Exhibit F attached to this Agreement, evidencing the joint and
several obligations of the Borrowers to repay Term Loan One, together with
interest thereon, and all extensions, renewals, modifications and amendments of
such note.
"Term Note Two" means the $1,000,000 promissory note, in substantially
the form of Exhibit G attached to this Agreement, evidencing the joint and
several obligations of the Borrowers to repay Term Loan Two, together with
interest thereon, and all extensions, renewals, modifications and amendments of
such note.
"Termination Date" means September 8, 2000.
"Tier Two Contribution" means, at any time 80% of Eligible Bonded
Receivables in excess of $1,500,000 outstanding, provided that the Tier Two
Contribution shall not exceed $2,000,000 at any time.
"UCC" means the Uniform Commercial Code as adopted in the State, and all
amendments thereto.
"VDOT Contract" means Contract Number 844 between Technology and the
Virginia Department of Transportation.
SECTION 2. LOANS AND LETTERS OF CREDIT.
SECTION 2.1. REVOLVING LOANS AND LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, the Lender
agrees to make Revolving Loans to the Borrowers from time to time until the
Termination Date in an aggregate principal amount not to exceed at any one time
outstanding the Maximum Amount. Up to the Maximum Amount, the Borrowers may
borrow, repay without penalty and reborrow hereunder from the date of this
Agreement until the Termination Date; provided, however, that no Revolving Loan
will be disbursed by the Lender if, after such disbursement the aggregate
principal amount of the Revolving Loans and outstanding Letters of Credit would
exceed the Borrowing Base.
(b) The proceeds of the Revolving Loans shall be used to refinance Debt
outstanding under the Existing Agreement and for short-term working capital
purposes.
(c) The Company authorizes the Lender to make Revolving Loans from time
to time in amounts sufficient to pay checks drawn on the operating accounts of
the Company with the Lender, subject to the limitation set forth in Section
Section 2.1((a)) above, all as more
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particularly described in the Cash Management Agreement. In addition, the
Company may request that a Revolving Loan be made. Any request for a Revolving
Loan must be received by the Lender no later than 12:00 noon (Washington, D.C.
time) on the date on which the Revolving Loan is to be made. Each request must
specify the amount of the Revolving Loan and, at the option of the Lender, shall
be accompanied by a current Borrowing Base Certificate and a current Aging. The
Lender, in its sole discretion, may accept requests from the Company by
telephone. If required by the Lender, any request made by telephone shall
include all of the information required by a current Borrowing Base Certificate
and a current Aging. Requests made by telephone shall be confirmed in writing
and delivered to the Lender, and if requested by the Lender, accompanied by the
current Borrowing Base Certificate and the current Aging, within two Business
Days after the date of the request. Each Borrower appoints the Company as its
agent to request and receive the proceeds of the Revolving Loans on behalf of
all Borrowers. The Company agrees to distribute the proceeds of the Revolving
Loans among the Borrowers when and as needed by the Borrowers for working
capital. Revolving Loans may be requested by those individuals designated by the
Company from time to time in written instruments delivered to the Lender;
provided, however, that the Borrowers shall remain liable with respect to any
Revolving Loan disbursed by the Lender in good faith hereunder, even if such
Loan is requested by an individual who has not been so designated. The proceeds
of each Revolving Loan will be credited to a Deposit Account maintained with the
Lender by the Company pursuant to the Cash Management Agreement. The Company
agrees to confirm in writing from time to time, when and as requested by the
Lender, the purpose for which the proceeds of each Revolving Loan were used.
(d) The unpaid principal balance of the Revolving Loans shall
bear interest at a rate per annum equal to LIBOR plus 4.25%. The interest rate
on the Revolving Loans shall be determined initially based on LIBOR in effect on
the Closing Date and shall be adjusted on the first Business Day of each
succeeding calendar month (to be effective as of the first day of such calendar
month if not a Business Day) to reflect LIBOR then in effect. Payments of
interest on each Revolving Loan shall be made on each Interest Payment Date,
beginning on the Interest Payment Date next succeeding the date of disbursement
of such Revolving Loan.
(e) The joint and several obligations of the Borrowers to repay
the Revolving Loans, together with interest thereon, shall be evidenced by the
Revolving Note. The unpaid principal balance of the Revolving Note shall be
payable on the Termination Date.
(f) Subject to the terms and conditions of this Agreement, the
Lender, in its sole and absolute discretion, may issue Letters of Credit for the
account of the Borrowers from time to time until the Termination Date, upon the
request of the Company; provided, however, that no Letter of Credit will be
issued by the Lender if, after such issuance, the aggregate principal amount of
the outstanding Revolving Loans and Letters of Credit would exceed the Borrowing
Base. Prior to the issuance of any Letter of Credit, the Lender must receive an
appropriately completed Letter of Credit Agreement, executed by the Borrowers,
not less than five Business Days prior to the date on which the Letter of Credit
is to be issued. Each such request shall
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specify the name of the beneficiary of the Letter of Credit, the amount and
expiration date of the Letter of Credit and the purpose for which the Letter of
Credit is being issued. Unless otherwise approved by the Lender in its sole
discretion, no Letter of Credit shall have a stated maturity of more than one
year after the date of its issuance, and in no event shall a Letter of Credit
expire later than the Termination Date. The purpose for which each Letter of
Credit is to be issued and the form of each Letter of Credit shall be subject to
the Lender's approval. The Borrowers shall pay to the Lender upon its demand
therefor any amounts paid by the Lender under a Letter of Credit, together with
interest on such amounts from the date of demand at the applicable per annum
rate specified by the Lender in the applicable Letter of Credit Agreement. The
Borrowers shall pay such fees and commissions as the Lender shall require with
respect to any Letter of Credit. Any outstanding letter of credit issued prior
to the date hereof for the account of any Borrower or Technology shall be deemed
to be an outstanding Letter of Credit under this Agreement. Notwithstanding
anything to the contrary contained in the foregoing sentence, the issuance of
any letter of credit deemed to be an outstanding Letter of Credit hereunder,
which letter of credit is separately secured by cash collateral acceptable to
the Lender in its sole discretion, shall not cause a reduction in the Borrowing
Base by the face amount of such letter of credit.
SECTION 2.2. TERM LOAN ONE.
(a) Subject to the terms and conditions of this Agreement, the
Lender agrees to make Term Loan One to the Borrowers in a principal amount equal
to $2,500,000. The proceeds of Term Loan One shall be used to refinance Debt of
the Borrowers to the Lender under the Existing Agreement.
(b) The unpaid principal balance of Term Loan One from time to
time outstanding shall bear interest at a per annum rate equal to LIBOR plus
4.65%. The interest rate on Term Loan One shall be determined initially based on
LIBOR in effect on the Closing Date and shall be adjusted on the first Business
Day of each succeeding calendar month (to become effective as of the first day
of such calendar month if not a Business Day) to reflect LIBOR then in effect.
Payments of interest on Term Loan One shall be made on each Interest Payment
Date, beginning on the Interest Payment Date next succeeding the Closing Date.
(c) The joint and several obligations of the Borrowers to
repay Term Loan One, together with interest thereon, shall be evidenced by Term
Note One. The principal of Term Loan One and Term Loan Two shall be payable in
consecutive quarterly installments of $125,000 due on December 15, 1999,
$500,000 due on March 15, 2000, and $500,000 due on June 15, 2000, with such
installments being applied first to Term Loan Two and then to Term Loan One. On
the Termination Date, the unpaid principal balance of Term Loan One and all
accrued and unpaid interest thereon shall be due and payable. The Borrowers
shall have the right to prepay Term Note One in whole or in part at any time
after Term Note Two has been paid in full. Partial prepayments of Term Note One
shall be applied to installments due thereunder in the inverse
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order of their maturities. Amounts prepaid with respect to Term Loan One may not
be reborrowed.
SECTION 2.3. TERM LOAN TWO.
(a) Subject to the terms and conditions of this Agreement, the
Lender agrees to make Term Loan Two to the Borrowers in a principal amount equal
to $1,000,000. The proceeds of Term Loan Two shall be used to refinance Debt of
the Borrowers to the Lender under the Existing Agreement.
(b) The unpaid principal balance of Term Loan Two from time to
time outstanding shall bear interest at a per annum rate equal to LIBOR plus
5.55%. The interest rate on Term Loan Two shall be determined initially based on
LIBOR in effect on the Closing Date and shall be adjusted on the first Business
Day of each succeeding calendar month (to become effective as of the first day
of such calendar month if not a Business Day) to reflect LIBOR then in effect.
Payments of interest on Term Loan Two shall be made on each Interest Payment
Date, beginning on the Interest Payment Date next succeeding the Closing Date.
(c) The joint and several obligations of the Borrowers to repay
Term Loan Two, together with interest thereon, shall be evidenced by Term Note
Two. The principal of Term Loan Two shall be payable on the respective dates and
in the respective amounts set forth in Section Section 2.2((c)) of this
Agreement. If not sooner paid, the entire unpaid principal balance of Term Loan
Two and all accrued and unpaid interest thereon shall be due and payable in full
on the Termination Date. The Borrowers shall have the right to prepay Term Note
Two in whole or in part at any time. Partial prepayments of Term Note Two shall
be applied to installments due thereunder in the inverse order of their
maturities. Amounts prepaid with respect to Term Loan Two may not be reborrowed.
SECTION 2.4. PAYMENTS AND COMPUTATIONS. All payments due under this
Agreement (including any payment or prepayment of principal, interest, fees and
other charges) or with respect to the Notes, the Letter of Credit Agreements or
the Loans shall be made in lawful money of the United States of America, in
immediately available funds, without defense, setoff or counterclaim, to the
Lender at its office at Commercial Loan Services, X.X. Xxx 00000, Xxxxxxxx,
Xxxxxxxx 00000-0000, or at such other place as the Lender may designate, and
shall be applied first to accrued fees, next to accrued late charges, next to
accrued interest and then to principal. If any payment of principal, interest or
fees is due on a day other than a Business Day, then the due date will be
extended to the next succeeding full Business Day and interest and fees will be
payable with respect to the extension. If any payment of principal, interest or
fees is not made within ten days of its due date, the Borrowers agree to pay to
the Lender a late charge equal to 5% of the amount of the payment; provided,
however, that as long as a Borrower makes payments of principal, interest and
fees through the Lender's automatic debit service, no late charge shall be
payable if the Lender fails to debit any such payment when it is due (if
sufficient collected funds are on deposit in such Borrower's account with the
Lender), and such failure shall
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not constitute an Event of Default hereunder. Upon the occurrence of an Event of
Default and during the continuation of such Event of Default, interest shall
accrue on the Loans at a per annum rate of 2% above the rate of interest that
otherwise would be applicable. Interest and fees shall be computed on the basis
of a year of 360 days and actual days elapsed. The Lender may, but shall not be
obligated to, debit the amount of any payment due from the Borrowers under this
Agreement to any deposit or investment account of any Borrower maintained with
the Lender or any Affiliate of the Lender. No setoff, claim, counterclaim,
reduction or diminution of any obligation of any defense of any kind or nature
that a Borrower has or may have against the Lender (other than the defense of
payment) shall be available against the Lender in any suit or action brought by
the Lender to enforce this Agreement or any other Loan Document, including,
without limitation, any UCC Claim (as such term is defined in the Release
Agreement). The foregoing shall not be construed as a waiver by the Borrowers of
any rights or claims that the Borrowers may have against the Lender, but any
recovery upon such rights and claims shall be had from the Lender separately, it
being the intent of this Agreement and the other Loan Documents that the
Borrowers shall be obligated to pay, absolutely and unconditionally, all amounts
due hereunder and under the other Loan Documents.
SECTION 2.5. INCREASED COSTS. If, as a result of any Regulatory Change or
for any other reason, the Lender incurs Increased Costs, the Borrowers agree to
pay such Increased Costs to the Lender within ten Business Days after receipt by
the Company of the Lender's invoice therefor. The invoice will be accompanied by
a written statement of the Lender setting forth in reasonable detail the basis
and the calculation of the Increased Costs. The Lender's calculation shall
include reasonable averaging and attribution methods to determine the Increased
Costs attributable to the Loans and the Letters of Credit.
SECTION 2.6. FEES.
(a) In consideration of the expenses incurred by the Lender in
connection with administering the Loans and monitoring the Borrowing Base, the
Borrowers agree to pay to the Lender a commitment fee on the daily average
balance of the amount by which the Maximum Amount exceeds the amount of
outstanding Revolving Loans and Letters of Credit. The commitment fee shall be
payable for the period beginning on the date of this Agreement and ending on the
Termination Date at a .35% per annum rate. The commitment fee shall be payable
quarterly, in arrears, on the last day of each March, June, September and
December, beginning on September 30, 1999, and on the Termination Date.
(b) On the Closing Date, the Borrowers shall pay to the Lender
a structuring and underwriting fee equal to $46,500.
(c) Unless the Borrowers have exercised their termination
rights pursuant to Section Section 2.9 below, and made the payments required
thereby, the Borrower shall pay to the Lender, on the dates set forth below, the
applicable fee set forth below, applied to the sum of
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the Maximum Amount then in effect plus the unpaid principal balances of Term
Loan One and Term Loan Two then outstanding:
DATE FEE
---- ---
November 30, 1999 .35%
February 28, 2000 .40%
May 30, 2000 .45%
SECTION 2.7. PRIMARY DEPOSITORY RELATIONSHIP. If the Company fails to
maintain its Primary Operating Account with the Lender, interest shall accrue on
the Loans at a per annum rate of 1.0% above the rate of interest that otherwise
would be applicable, effective as of the first day following the day on which
the Company moves its Primary Operating Account.
SECTION 2.8. MANDATORY PREPAYMENT.
(a) The Borrowers shall first prepay the Revolving Loans and
then provide cover for the Letters of Credit, as specified below, upon the
Lender's demand therefor, to the extent that the aggregate amount of outstanding
Revolving Loans and Letters of Credit exceeds the Borrowing Base or the Maximum
Amount, or both, at any time. In the event that the Borrowers shall be required
to provide cover for the Letters of Credit, the Borrowers shall effect the same
by paying to the Lender immediately available funds in an amount equal to the
required amount, which funds shall be retained by the Lender in a cash
collateral account until such time as the Letters of Credit shall have been
terminated and all Obligations with respect to the Letter of Credit are paid in
full.
(b) The Borrowers shall deliver to the Lender 90% of any
Recoveries arising out of the sale of the ___ acre ranch located at
__________________, the condominium located at __________________, Florida, or
the 199___ Chevrolet Tahoe immediately upon receipt by the Borrowers. The Lender
shall apply the proceeds of such Recoveries to the prepayment of Term Loan Two,
then to Term Loan One and then to the Revolving Loans.
(c) Upon the first to occur of November 30, 1999, or the
receipt of the Recoveries arising out of the Company's income tax refund
attributable to the Embezzlement, the Borrowers shall make a principal
prepayment of the Obligations in an amount equal to 90% of such Recoveries, with
such amount being applied first to Term Loan Two and then to Term Loan One. If
neither such Recoveries have been received nor the HTSI Sale has been
consummated by such date, the value of such Recoveries for purposes of such
calculation on such date shall be deemed to be $600,000.
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(d) Upon the first to occur of November 30, 1999, or the
receipt of the Recoveries arising out of the sale of certain jewelry, the
Borrowers shall make a prepayment of the Obligations in an amount equal to 90%
of the net sales proceeds of such Recoveries, with such amount being applied
first to Term Loan Two, then to Term Loan One and then to the Revolving Loans.
If neither such Recoveries have been received nor the HTSI Sale has been
consummated by such date, the value of such Recoveries for purposes of such
calculation on such date shall be deemed to be $200,000.
(e) Upon the closing of the HTSI Sale, (1) the Borrowers shall
make a $2,000,000 principal prepayment of Term Loan Two and Term Loan One (with
such amount being applied first to Term Loan Two and then to Term Loan One), (2)
the Maximum Amount shall be permanently reduced to $10,000,000, (3) the
references to "90%" in Sections Section 2.8((b)), Section 2.8((c)), Section
2.8((d)) and Section 2.8((f)) hereof shall be reduced to and otherwise deemed to
be references to "50%" for purposes of such Sections, (4) the words "the first
to occur of November 30, 1999, or" in the first line of Section Section 2.8((c))
and Section Section 2.8((d)) hereof shall be deemed to be deleted for purposes
of such Sections, and (5) the references to "$500,000" in Section Section
2.2((c)) hereof shall be reduced to and otherwise deemed to be references to
"$125,000" for purposes of such Section.
(f) The Borrowers shall prepay Term Loan One and Term Loan Two
in an amount equal to 90% of the net proceeds received with respect to any
Recoveries of $150,000 or more, other than those Recoveries otherwise described
in this Section Section 2.8, with each such prepayment being made upon receipt
of the applicable Recoveries.
SECTION 2.9. OPTIONAL TERMINATION DATE. The Borrowers may terminate the
Lender's obligations to make Revolving Loans and issue Letters of Credit under
this Agreement provided that (a) the Company gives the Lender not less than one
Business Day's prior written notice of such termination, specifying the Optional
Termination Date, (b) the Borrowers pay in full, on the Optional Termination
Date, all Obligations, and (c) the Borrowers, on the Optional Termination Date,
provide cover for the Letters of Credit pursuant to Section Section 2.8(a).
SECTION 3. COVENANTS, REPRESENTATIONS AND OTHER TERMS REGARDING
COLLATERAL.
SECTION 3.1. SECURITY INTEREST. To secure the Obligations, each Borrower
ratifies and affirms the grant in the Existing Agreement, and again grants
hereby, to the Lender, its successors and assigns, a first priority security
interest in the Accounts Receivable, the Deposit Accounts, the Equipment, the
General Intangibles, the Intellectual Property, the Inventory and the Investment
Property, all additions and accessions thereto and replacements thereof, all
proceeds and products thereof, all books of account and records, including all
computer software relating thereto, all policies of insurance on any property of
a Borrower and all proceeds of such policies.
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SECTION 3.2. RECEIVABLES.
(a) Each Borrower represents and warrants as to each and every
Eligible Receivable now existing that: (1) it is a bona fide existing
obligation, valid and enforceable against the Customer, for software installed
or licensed, goods sold or leased or services rendered in the ordinary course of
business; (2) it is subject to no dispute, defense or offset in excess of
$75,000 except as disclosed in writing to the Lender; (3) all instruments,
chattel paper and other evidence of indebtedness issued to a Borrower with
respect to any Eligible Receivable have been delivered to the Lender, and,
together with all supporting documents delivered to the Lender, are genuine,
complete, valid and enforceable in accordance with their terms; (4) it is not
subject to any discount, allowance or special terms of payment except as
disclosed in writing to the Lender; and (5) it is not and shall not be subject
to any prohibition or limitation upon assignment. Each Borrower covenants and
agrees that each Eligible Receivable arising after the date of this Agreement
will be in conformance with the foregoing representations.
(b) Each Borrower shall immediately notify the Lender of (1)
any dispute in excess of $75,000 with a Customer and (2) the bankruptcy,
insolvency, receivership, assignment for the benefit of creditors or suspension
of business of any Customer of which such Borrower has knowledge. No Borrower
shall compromise or discount any Receivable of more than $10,000 without the
prior written consent of the Lender except for (i) ordinary trade discounts or
allowances for prompt payment, and (ii) prior to the occurrence of a Default or
an Event of Default, such compromises or discounts that, after giving effect
thereto, will not cause the Borrowing Base to be less than the unpaid principal
balance of the Revolving Loans and Letters of Credit then outstanding.
(c) Upon the written request of the Lender, each Borrower shall
establish and maintain a lockbox with the Lender and shall direct all Customers
to make payments on Receivables to such lockbox by printing such direction on
all invoices given to Customers. Each Borrower also shall remit to such lockbox
or deliver to the Lender all payments on Receivables received by such Borrower.
Such payments shall be remitted or delivered in their original form on the day
of receipt. All notes, checks and other instruments so received by each Borrower
shall be duly endorsed to the order of the Lender. The payments remitted to the
lockbox and all payments delivered to the Lender shall be credited to a cash
collateral account maintained by the Lender in the name of the Company over
which the Lender shall have the exclusive power of withdrawal. All funds in the
cash collateral account shall be retained in the cash collateral account and be
held as security for the Obligations, and funds in the cash collateral account
may be applied to the Obligations by the Lender from time to time, whether or
not such Obligations are then due.
(d) Upon the occurrence of a Default or an Event of Default,
the Lender shall have the right to notify account debtors of its security
interest in the Receivables and require payments to be made directly to the
Lender, and to facilitate direct collection of the Receivables, the Lender shall
have the right to take over the post office boxes of the Borrowers or make other
arrangements, with which the Borrowers shall cooperate, to receive the mail of
each Borrower,
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provided that the Lender shall not be entitled to receive any mail that does not
concern the Receivables.
(e) The Borrowers shall execute all other agreements,
instruments and documents and shall perform all further acts that the Lender may
require with respect to Receivables owing by the Government to ensure compliance
with the Assignment of Claims Act.
SECTION 3.3. INVENTORY AND EQUIPMENT.
(a) All of the Inventory and Equipment will be kept only at the
places of business listed on Schedule 3.3 to this Agreement. The Borrowers shall
give the Lender prior written notice before any Inventory or Equipment is moved
or delivered to a location other than such designated places of business, and
the Lender's lien and security interest will be maintained despite the location
of the Inventory or Equipment. Without the prior written consent of the Lender,
no Borrower shall move or deliver the Inventory or Equipment with a book value
in any instance or in the aggregate of $100,000 or more to a location outside of
the United States of America.
(b) Each Borrower shall keep and maintain the Equipment in good
operating condition and repair, reasonable wear and tear excepted. No Borrower
shall permit any of the Equipment to become a fixture to any real estate unless
subordination agreements satisfactory to the Lender are obtained by any owner or
mortgagee of such real estate. Each Borrower, immediately on demand therefore by
the Lender, shall deliver to the Lender any and all evidence of ownership of any
of the Equipment. None of the Equipment shall be sold, transferred, leased or
otherwise disposed of without the prior written consent of the Lender, except
for (1) sales or dispositions of obsolete or unnecessary Equipment, and (2)
sales or dispositions of any item of Equipment that is replaced
contemporaneously with Equipment of comparable value and utility.
(c) The Lender's security interest shall extend and attach to
Inventory that is presently in existence and is owned by each Borrower or in
which a Borrower purchases or acquires an interest at any time and from time to
time in the future, whether such Inventory is in transit or in such Borrower's
constructive, actual or exclusive occupancy or possession or not and wherever
the same may be located, including, without limitation, all Inventory that may
be located at the premises of a Borrower or upon the premises of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents, finishers,
convertors or other third parties who may have possession of the Inventory.
(d) Upon the sale, exchange, lease or disposition of the
Inventory, the security interest of the Lender, without break in continuity and
without further formality or act, shall continue in and attach to all cash and
non-cash proceeds of such sale, exchange, lease or disposition, including
Inventory returned or rejected by Customers or repossessed by either a Borrower
or the Lender. As to any such sale, exchange, lease or disposition, the Lender
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, detinue and reclamation.
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(e) Except for licenses, sales or leases made in the ordinary
course of business and Liens permitted by this Agreement, no Borrower shall
sell, lease, encumber, license or dispose of, or permit the sale, lease,
encumbrance or disposal of, any Inventory without the prior written consent of
the Lender.
(f) Each Borrower shall have the Equipment and Inventory
insured against loss or damage by fire, theft, burglary, pilferage, loss in
transportation and such other hazards as the Lender shall specify, by insurers
satisfactory to the Lender, in amounts satisfactory to the Lender and under
policies containing loss payable clauses satisfactory to the Lender. Any such
insurance policies, or evidence thereof satisfactory to the Lender, shall be
deposited with the Lender. Each Borrower agrees that the Lender shall have a
security interest in such policies and the proceeds thereof, and, if any loss
should occur, the proceeds may be applied to the payment of the Obligations or
to the replacement or restoration of the Inventory or Equipment damaged or
destroyed, as the Lender may elect or direct. After the occurrence of a Default
or an Event of Default, the Lender shall have the right to file claims under
any insurance policies, to receive, receipt and given acquittance for any
payments that may be made thereunder, and to execute any and all endorsements,
receipts, releases, assignments, reassignments or other documents that may be
necessary to effect to the collection, compromise, or settlement of any claims
under any of the insurance policies.
SECTION 3.4. INTELLECTUAL PROPERTY.
(a) All of each Borrower's present and future Intellectual
Property that is subject to United States copyright, patent or trademark
protection, the sale, licensing or other disposition of which results in the
creation of Receivables pursuant to a Material IP Agreement, shall be registered
with the United States Copyright Office or the United States Patent and
Trademark Office, as applicable, prior to the date such Borrower includes any
such Receivables in the Borrowing Base.
(b) Upon the occurrence of an Event of Default, in addition to
any other remedies available to the Lender, each Borrower agrees that the Lender
shall have a non-exclusive, royalty-free license to use, or to grant a license
to use, the Intellectual Property.
SECTION 3.5. DEFENSE OF COLLATERAL. Each Borrower, at its expense, will
defend the Collateral against any claims or demands adverse to the Lender's
security interest and will promptly pay when due all taxes or assessments
levied against such Borrower on the Collateral.
SECTION 3.6. INFORMATION REGARDING COLLATERAL. Each Borrower shall
provide the Lender such information as the Lender from time to time reasonably
may request with respect to the Collateral, including, without limitation,
statements describing, designating, identifying and evaluating all Collateral.
SECTION 3.7. PERFECTION OF SECURITY INTEREST. Each Borrower shall perform
any and all steps in all relevant or appropriate jurisdictions as may be
necessary or reasonably requested by
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the Lender to perfect, maintain and protect the Lender's security interest in
the Collateral. All instruments and chattel paper that are part of the
Collateral shall be delivered to the Lender, duly endorsed to the order of the
Lender. Each Borrower shall pay the taxes and costs of, or incidental to, any
recording or filing of any financing statements concerning the Lender's security
interests. Each Borrower agrees that a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement is sufficient
as a financing statement.
SECTION 3.8. POWER OF ATTORNEY. Each Borrower appoints the Lender and any
officer, employee or agent of the Lender, as the Lender from time to time may
designate, as attorneys-in-fact for a Borrower to perform all actions necessary
or desirable in the discretion of the Lender to effect the provisions of this
Agreement and to carry out the intent of this Agreement, to do any act that a
Borrower is required to do pursuant to the terms of this Agreement and to
exercise such rights and powers as each Borrower might exercise with respect to
the Collateral, all at the cost and expense of the Borrowers. Each Borrower
agrees that neither the Lender nor any other such attorney-in-fact will be
liable for any acts of omission or commission, unless such acts were willful and
malicious or grossly negligent, nor for any error of judgment or mistake of law
or fact. This power is coupled with an interest and is irrevocable so long as
any Obligations are outstanding. The Lender agrees that it shall not be entitled
to exercise its rights under this Section Section 3.8 prior to the occurrence of
a Default or an Event of Default.
SECTION 3.9. LIMITATIONS ON OBLIGATIONS. It is expressly agreed by each
Borrower that, notwithstanding any other provision of this Agreement, each
Borrower shall remain liable under each Receivable and contract giving rise to
each Receivable to observe and perform all the conditions and obligations to be
observed and performed by each Borrower in accordance with and pursuant to the
terms and provisions of each such Receivable and contract. The Lender shall not
have any obligation or liability under any Receivable or contract by reason of
or arising out of this Agreement or the assignment of such Receivable or
contract to the Lender or the receipt by the Lender of any payment relating to
the Receivable pursuant to this Agreement, nor shall the Lender be required or
obligated in any manner to perform or fulfill any of the obligations of a
Borrower under or pursuant to any Receivable or contract, or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party under
any Receivable, or to present or file any claim, or to take any action to
collect or enforce any performance or the payment of any amounts that may have
been assigned to it or to which it may be entitled at any time or times.
SECTION 3.10. INDEMNIFICATION. In any suit, proceeding or action brought
by or against the Lender relating to the Collateral, the Borrowers will save,
indemnify and keep the Lender harmless from and against all expense, loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of any obligor thereunder, arising out of a
breach by a Borrower of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of such
obligor or its successors from a Borrower, and all such obligations of the
Borrowers shall be and remain enforceable against and only against the Borrowers
and shall not be enforceable against the Lender. The foregoing
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obligation of the Borrowers to indemnify the Lender shall not extend to any
suit, proceeding or action arising out of the Lender's gross negligence or
willful or malicious misconduct.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Each Borrower represents and
warrants that:
SECTION 4.1. INCORPORATION, GOOD STANDING AND DUE QUALIFICATION. Each
Borrower (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation;
(b) has the power and authority to own its assets and to transact the business
in which it is now engaged or in which it is proposed to be engaged; and (c) is
duly qualified as a foreign corporation and in good standing under the laws of
each other jurisdiction in which such qualification is required. On
_________________, 1999, Technology was merged into the Company. As of the date
of this Agreement, the Company has no Subsidiaries other than Engineering,
Technical and Realty, and no other Borrower has any Subsidiary.
SECTION 4.2. POWER AND AUTHORITY. The execution, delivery and performance
by the Borrowers of the Loan Documents have been duly authorized by all
necessary corporate actions and do not and will not (a) require any consent or
approval of, or filing or registration with, any governmental agency or
authority or the stockholders of a Borrower; (b) contravene a Borrower's
articles of incorporation or bylaws; (c) result in a breach of or constitute a
default under any agreement or instrument to which a Borrower is a party or by
which it or its properties may be bound or affected; (d) result in or require
the creation or imposition of any Lien upon or with respect to any of the
properties now owned or hereafter acquired by a Borrower; or (e) cause a
Borrower to be in default under any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to the Borrower.
SECTION 4.3. LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each
of the other Loan Documents when delivered under this Agreement will be, legal,
valid and binding obligations of each Borrower, enforceable against each
Borrower in accordance with their respective terms.
SECTION 4.4. FINANCIAL STATEMENTS. The financial statements of the
Borrowers that have been furnished to the Lender in connection with this
Agreement are complete and correct and fairly present the financial condition of
the Borrowers as of the dates of such statements. Since the dates of such
statements, there has been no Material Adverse Change in the condition
(financial or otherwise), business or operations of the Borrowers.
SECTION 4.5. LITIGATION. There is no pending or threatened action,
investigation or proceeding against or affecting a Borrower before any court,
governmental agency or arbitrator, that, in any one case or in the aggregate,
if adversely determined, would have a Material Adverse Effect on the financial
condition, operations, properties or business of a Borrower.
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SECTION 4.6. OWNERSHIP AND LIENS. Each Borrower has title to all of its
assets, including the Collateral, and none of the Collateral or such assets is
subject to any Lien, except Liens permitted by this Agreement.
SECTION 4.7. ERISA. No Borrower has incurred any material "accumulated
funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of
the Code, nor has the Borrower incurred any material liability to the PBGC in
connection with any "employee pension benefit plan" (as defined in Section 3(2)
of ERISA) established or maintained by a Borrower. None of the employee pension
benefit plans (as defined above) of a Borrower, nor any trusts created
thereunder, nor any trustee or administrator thereof, has engaged in a
"prohibited transaction," as such term is defined in Section 406 of ERISA or
Section 4975 of the Code, that could subject such plans or any of them, any such
trust, or any trustee or administrator thereof, or any party dealing with such
plans or any such trust to any material liability or tax or penalty on
prohibited transactions imposed by such Sections 406 or 4975. Neither the
Borrowers nor any Affiliate of the Borrowers are now, or at any time in the past
have been, obligated to make contributions to a "multiemployer plan," as such
term is defined in Section 4001(a)(3) of ERISA.
SECTION 4.8. TAXES. Each Borrower has filed all tax returns (federal,
state and local) required to be filed and has paid all taxes, assessments and
governmental charges and levies thereon to be due, including interest and
penalties.
SECTION 4.9. DEBT. No Borrower is in no manner directly or contingently
obligated with respect to any Debt that is not permitted by this Agreement. No
Borrower is in default with respect to any Debt.
SECTION 4.10. CORPORATE NAME; CHIEF EXECUTIVE OFFICE. During the five
years immediately preceding the date of this Agreement, no Borrower nor any
predecessor of a Borrower has used any name other than its current corporate
name and the names listed on Schedule 4.10. The chief executive office of each
Borrower, within the meaning of Section 9.103(3)(d) of the UCC, is at 0000
Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx.
SECTION 4.11. DEBARMENT AND SUSPENSION. No event has occurred and no
condition exists that may result in the debarment or suspension of a Borrower
from any contracting with the Government, and no Borrower nor any Affiliate of a
Borrower has been subject to any such debarment or suspension prior to the date
of this Agreement.
SECTION 4.12. YEAR 2000. Each Borrower has undertaken reasonable efforts
to determine whether all material Date Affected Information Technology used in
the business operations of each Borrower is Fully Date Capable, and, to the
extent necessary, each Borrower has initiated efforts to make its material Date
Affected Information Technology Fully Date Capable prior to the date that the
failure to be Fully Date Capable would adversely affect the operation thereof.
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SECTION 4.13. MATERIAL CONTRACTS. Attached hereto as Schedule 4.13 is a
correct and complete list, as of the date of this Agreement, of each Material
Contract. No Borrower, Subsidiary or any other party thereto is in material
default under any Material Contract.
SECTION 4.14. INTELLECTUAL PROPERTY. As of the date hereof, the
Borrowers and the Subsidiaries do not own or hold any Intellectual Property
subject or entitled to United States copyright, patent or trademark protection,
other than as listed on Schedule 4.14 attached hereto. All such Intellectual
Property has been registered with the United States Patent and Trademark Office
and the Register of Copyrights. Each Borrower and each Subsidiary owns or has
the right to use under valid license agreements or otherwise all Intellectual
Property that is required or necessary for the conduct of the business of each
Borrower and its Subsidiaries as now conducted or proposed to be conducted
without any conflict with any rights of any other Person.
SECTION 4.15. TRUE AND COMPLETE INFORMATION. All factual and financial
information (taken as a whole) previously furnished to the Lender in connection
with this Agreement by the Borrowers and each Subsidiary is, and all factual and
financial information (taken as a whole) furnished to the Lender by the
Borrowers and the Subsidiaries after the date of this Agreement will be, true
and accurate in all material respects on the date on which such information is
dated, certified or furnished, and is not, and will not be, incomplete by
omitting to state any fact necessary to make such information (taken as a whole)
not misleading at such time in light of the circumstances under which such
information was provided.
SECTION 4.16. INTEGRATED BUSINESS. The Borrowers and the Subsidiaries
will be engaged as an integrated group in providing services and goods to their
respective Customers. The integrated operation will require financing on such a
basis that credit supplied to the Borrowers be made available from time to time
to all Borrowers and Subsidiaries of the Borrowers, as required for the
successful operation of the Borrowers and the Subsidiaries separately, and the
integrated operation as a whole. In that connection, the Borrowers and the
Subsidiaries will request that the Lender provide the Loans to and issue the
Letters of Credit for the Borrowers to finance such operation. Each Borrower
will derive benefit, directly and indirectly, from the credit so extended to the
Borrowers, both in its separate capacity and as a member of the integrated
group.
SECTION 4.17. EMPLOYEE RELATIONS. Except as set forth on Schedule 4.17,
no Borrower is a party to any collective bargaining agreement nor has any labor
union been recognized as the representative of its employees. No Borrower knows
of any pending, threatened or contemplated strikes, work stoppage or other
collective labor disputes involving its employees.
SECTION 4.18. BURDENSOME PROVISIONS. No Borrower is a party to any
indenture, agreement, lease or other instrument, or subject to any corporate or
partnership restriction, governmental approval or applicable law which is so
unusual or burdensome as in the foreseeable future could be reasonably expected
to have a Material Adverse Effect. The Borrowers do not
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presently anticipate that future expenditures needed to meet the provisions of
any statutes, orders, rules or regulations of a governmental authority will be
so burdensome as to have a Material Adverse Effect.
SECTION 4.19. ABSENCE OF DEFAULTS. No event has occurred and is
continuing which constitutes a Default or an Event of Default. No event has
occurred and is continuing which constitutes, or which with the passage of time
or giving of notice or both would constitute, a default or event of default by
any Borrower under any Material Contract or judgment, decree or order to which
any Borrower is a party or by which any Borrower or any of its properties may be
bound or which would require any Borrower to make any payment thereunder prior
to the scheduled maturity date therefor.
SECTION 4.20. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
statements contained in any certificate, financial statement or other instrument
delivered by or on behalf of any Borrower to the Lender pursuant to or in
connection with this Agreement or any of the other Loan Documents (including,
but not limited to, any such statement made in or in connection with any
amendment thereto or any statement contained in any certificate, financial
statement or other instrument delivered by or on behalf of any Borrower prior to
the date hereof and delivered to the Lender in connection with closing the
transactions contemplated hereby) shall constitute representations and
warranties made by the Borrowers under this Agreement. All representations and
warranties made under this Agreement and the other Loan Documents shall be
deemed to be made at and as of the date hereof, the Closing Date and at and as
of the date of the disbursement of any Loan or issuance of any Letter of Credit,
except to the extent that such representations and warranties expressly relate
solely to an earlier date (in which case such representations and warranties
shall have been true and accurate on and as of such earlier date). All such
representations and warranties shall survive the effectiveness of this
Agreement, the execution and delivery of the Loan Documents, the making of the
Loans and the issuance of the Letters of Credit.
SECTION 5. AFFIRMATIVE COVENANTS. Each Borrower covenants and agrees
that:
SECTION 5.1. MAINTENANCE OF EXISTENCE. Each Borrower will preserve and
maintain its corporate existence and good standing in the jurisdiction of its
formation, and qualify and remain qualified, as a foreign corporation in each
jurisdiction in which such qualification is required.
SECTION 5.2. MAINTENANCE OF RECORDS. Each Borrower will keep adequate
records and books of account, in which complete entries will be made in
accordance with GAAP, reflecting all financial transactions of such Borrower.
The principal records and books of account, including those concerning the
Collateral, shall be kept at the chief executive office of the Borrowers
described above. No Borrower will move such records and books of account or
change its chief executive office or the name under which it does business
without (a) giving the Lender at least 30 days' prior written notice, and (b)
executing and delivering financing statements satisfactory to the Lender prior
to such move or change.
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SECTION 5.3. MAINTENANCE OF PROPERTIES. Each Borrower will maintain, keep
and preserve all of its properties (tangible and intangible) necessary or useful
in the proper conduct of its business in good working order and condition,
ordinary wear and tear excepted.
SECTION 5.4. CONDUCT OF BUSINESS. Each Borrower will continue to engage
in a business of the same general type as conducted by it on the date of this
Agreement.
SECTION 5.5. MAINTENANCE OF INSURANCE. Each Borrower will maintain
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated,
including, without limitation, insurance covering the Inventory and Equipment as
required hereby.
SECTION 5.6. COMPLIANCE WITH LAWS. Each Borrower will comply in all
respects with all applicable laws, rules, regulations and orders (including,
without limitation, ERISA), such compliance to include, without limitation,
paying, before the same become delinquent, all taxes, assessments and
governmental charges imposed upon it or upon its property.
SECTION 5.7. RIGHT OF INSPECTION. At any reasonable time and from time to
time, with reasonable notice, each Borrower will permit the Lender or any agent
or representative of the Lender to audit, examine and verify the Collateral,
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, each Borrower, and to discuss the affairs,
finances and accounts of each Borrower with any of its officers and directors
and each Borrower's independent accountants. The Borrowers agree to reimburse
the Lender for all reasonable audit and Collateral verification and examination
expenses incurred by it.
SECTION 5.8. REPORTING REQUIREMENTS. The Borrowers will furnish to the
Lender:
(a) Monthly Financial Statements of the Company. As soon as
available and in any event within 30 days after the end of each calendar month,
financial statements of the Company and its Subsidiaries as of the end of such
month in substantially the same format as Schedule 5.8(a) attached hereto, and
prepared in accordance with the GAAP. Such financial statements shall be
certified to be accurate by a Principal Officer of the Company (subject to
year-end adjustments) and each of the statements for each fiscal quarter end
shall be accompanied by a Covenant Compliance Certificate for such quarterly
period;
(b) Annual Financial Statements of the Company. As soon as
available and, in any event, within 90 days after the end of each fiscal year of
the Company, audited financial statements consisting of the consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such fiscal year, and consolidated and consolidating statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for such
fiscal year, all in reasonable detail and all prepared in accordance with GAAP,
accompanied by an opinion thereon acceptable to the Lender of Ernst & Young or
any other independent certified public accounting firm selected by the Company
and acceptable to the Lender;
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(c) Management Letters. Promptly upon receipt thereof, copies
of any reports submitted to the Company by independent certified public
accountants in connection with examination of the financial statements of the
Company made by such accountants;
(d) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits, investigations and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting a Borrower, that, if determined
adversely to such Borrower, could have a Material Adverse Effect;
(e) Notice of Defaults and Events of Default. As soon as
possible and, in any event, within ten days after the occurrence of each Default
and Event of Default, a written notice setting forth the details of such Default
or Event of Default and the action that is proposed to be taken by the Borrowers
with respect thereto;
(f) SEC Reports; Proxy Statements, etc. Promptly after the
sending or filing thereof, copies of all proxy statements, financial statements
and reports that the Company files with the Securities and Exchange Commission
or sends to its stockholders;
(g) Borrowing Base Certificate and Receivables Detail. As soon
as available and, in any event, within 20 days after the end of each calendar
month, (1) a Borrowing Base Certificate appropriately completed and executed by
a Principal Officer of the Company and including a computation of the Borrowing
Base as of the last day of such calendar month, accompanied by (i) an Aging as
of the last day of the previous calendar month, (ii) such other supporting
documents as the Lender from time to time reasonably may request, and (iii) such
invoices, instruments, chattel paper and other evidence of indebtedness
representing any Receivables, duly endorsed to the Lender, as the Lender may
request; (2) an unbilled Receivables report in form and detail acceptable to the
Lender, and (3) a contract backlog report reflecting all contracts of the
Borrowers, the work completed and billed under such contracts, the work
remaining to be completed and billed and the type and term of each contract. A
copy of each item described in this Section Section 5.8((g)) shall be delivered
within the deadline specified to the Lender's Government Contracts
Administration Division at 0000 Xxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxxxx, Xxxxxxxx
00000-0000, Attention: Xxxxxxx X. Xxxxxx, Senior Vice President;
(h) Inventory Report. Within 20 days after the end of each
calendar month, a report, in form and detail acceptable to the Lender, listing
all Inventory of the Borrowers on hand as of the last day of such calendar
month, which reports shall specify the locations of all such Inventory and a
reconciliation of such Inventory then on hand to the Inventory on hand as of the
last day of the immediately preceding calendar month;
(i) Customer List. If required by the Lender, within 90 days
after the end of each fiscal quarter of the Company, a current Customer List;
(j) Management Changes. At least 30 days prior written notice
of any new appointments to the offices of the president, chairman or chief
financial officer of any Borrower;
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(k) Projections. At least 30 days prior to the end of each
fiscal year, consolidated and consolidating balance sheets, income statements
and cash flows of the Borrowers setting forth projections for each fiscal
quarter of the next succeeding fiscal year, and setting forth in reasonable
detail the assumptions underlying such projections;
(l) Notice of Material Adverse Effect. Prompt notice of any
change in the business, assets, liabilities, financial condition, results of
operations or business prospects of the Company or any Subsidiary which has had
or may have a Material Adverse Effect;
(m) Government Contract Audits. Promptly after a Borrower's
receipt thereof, notice of any final decision of a contracting officer
disallowing costs aggregating more than $100,000;
(n) Material Contracts. Promptly after entering into any
Material Contract or amendment thereof (other than contracts awarded to a
Borrower in the ordinary course of business and amendments thereof), a notice
containing a description of such Material Contract or amendment (with copies
thereof if requested by the Lender), and prompt written notice of the
termination or breach by any Person of a Material Contract;
(o) Additional Monthly Reports. Within 20 days after the end
of each calendar month (1) a listing and aging of accounts payable at the end
of such calendar month and (2) a written summary, in form and detail acceptable
to the Lender, of variances between the budgeted and actual results of
operations of the Borrowers, material balance sheet adjustments and material
adjustments of actual and projected cash flow needs of the Borrowers;
(p) Updated Cash Flow Forecast. On the first and the sixteenth
day of each calendar month, a written forecast, in form and detail acceptable to
the Lender, of projected cash flow of the Borrowers for the next succeeding
three-month period, including comparisons of actual cash flow to prior
projections delivered to the Lender; and
(q) General Information. Such other information respecting the
condition or operations, financial or otherwise, of the Borrowers as the Lender
from time to time reasonably may request.
SECTION 5.9. YEAR 2000 COMPLIANCE. The Borrowers shall initiate and
maintain a program to identify any Date Affected Information Technology used in
the business operations of the Borrowers that is not Fully Date Capable, and, in
connection therewith, undertake in good faith to make all material Date Affected
Information Technology used in such business operations Fully Date Capable prior
to the date that the failure to be Fully Date Capable would adversely affect the
operation thereof. The Borrowers shall advise the Lender in the event that any
Borrower has reason to believe that any material Date Affected Information
Technology will not be Fully Date Capable prior to the date that the failure to
be Fully Date Capable would adversely affect the operation thereof, and advise
the Lender in the event that any Borrower has reason to believe that it will be
adversely affected by the failure of any affiliated or nonaffiliated entity to
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have its Date Affected Information Technology Fully Date Capable. Each Borrower
agrees to provide the Lender, upon request, access to and copies of information
necessary to permit the Lender to determine whether such Borrower's Date
Affected Information Technology is, or will be, Fully Date Capable, including,
without limitation, (i) minutes, resolutions and reports to and from such
Borrower's Board of Directors or committee thereof, (ii) internally generated
reports, consultant reports or auditor's report regarding the status of such
Borrower's Date Affected Information Technology, (iii) all documents relating to
a "Year 2000" program, and (iv) officer certificates or other statements
requested by the Lender regarding the status of Date Affected Information
Technology. The Borrowers acknowledge that the Lender's right to receive, or the
Lender's receipt of, the foregoing information does not impose any obligation on
the Lender to assess the accuracy or effect of such information, or to recommend
or require remedial action of any kind. The Borrowers hereby acknowledge that
the actual or potential failure or degradation of any material Date Affected
Information Technology due to its failure to be Fully Date Capable may
constitute a Material Adverse Effect.
SECTION 6. NEGATIVE COVENANTS. The Borrowers agree that, without first
obtaining the prior written consent of the Lender:
SECTION 6.1. LIENS. The Borrowers will not create, incur, assume or
permit to exist, any Lien upon or with respect to any of their properties, now
owned or hereafter acquired, except: (a) Liens in favor of the Lender; (b) Liens
that are incidental to the conduct of the business of a Borrower, are not
incurred in connection with the obtaining of credit and do not materially impair
the value or use of assets of such Borrower; (c) purchase-money Liens, whether
now existing or hereafter arising (including those arising out of a Capital
Lease) on any fixed assets provided that (1) any property subject to a
purchase-money Lien is acquired by a Borrower in the ordinary course of its
respective business and the Lien on any such property is created
contemporaneously with such acquisition, (2) each such Lien shall attach only to
the property so acquired, (3) the Debt secured by all such Liens shall not
exceed the aggregate at any time outstanding $600,000 in the aggregate for all
of the Borrowers; and (d) Liens on the specific items of Inventory for which IBM
Credit Corporation has provided purchase money financing, provided that IBM
Credit Corporation acknowledges in writing that any such Liens in Receivables
arising out of the sale, lease or other disposition of such Inventory are
subordinate to the Lien of the Lender in such Receivables.
SECTION 6.2. DEBT. The Borrowers will not create, incur, assume or permit
to exist, any Debt, except: (a) the Obligations; (b) Subordinated Debt; (c)
ordinary trade accounts payable; (d) Debt of a Borrower (including Debt arising
out of a Capital Lease) or any Subsidiary secured by purchase-money Liens
permitted by this Agreement; and (e) Debt to IBM Credit Corporation arising out
of the Inventory floor plan financing provided by IBM Credit Corporation.
SECTION 6.3. MERGERS, ETC. No Borrower will merge or consolidate with
any Person, or permit any Subsidiary to do so, except that one Borrower may
merge into or transfer assets to any other Borrower.
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SECTION 6.4. SALE AND LEASEBACK; SYNTHETIC LEASES. No Borrower will (a)
sell, transfer or otherwise dispose of, any real or personal property to any
Person and thereafter, directly or indirectly, lease back the same or similar
property; or (b) create, incur, assume, or permit to exist any obligations under
a Synthetic Lease.
SECTION 6.5. DIVIDENDS; DISTRIBUTIONS; SUBORDINATED DEBT PAYMENTS. The
Company will not declare or pay any dividends or distributions; or make any
payments with respect to Subordinated Debt; or purchase, redeem, retire, prepay
or otherwise acquire for value any of its capital stock or Subordinated Debt now
or hereafter outstanding; or make any distribution of assets to its stockholders
as such whether in cash, assets or obligations of the Company; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption or retirement of, any shares of its capital
stock; or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock.
SECTION 6.6. SALE OF ASSETS. No Borrower will sell, lease, assign,
transfer, license or otherwise dispose of, any of its now owned or hereafter
acquired assets, except for (a) Inventory and Intellectual Property sold,
licensed or leased in the ordinary course of business, (b) the sale or other
disposition of assets other than Inventory and $100,000 in the aggregate for all
Borrowers during any fiscal year, and (c) the HTSI Sale, provided that the
prepayments required by Section Section 2.8 hereof are made contemporaneously
with the closing of the HTSI Sale.
SECTION 6.7. LOANS. No Borrower will make any loan or advance to any
Person except for (a) travel advances or other advances in an aggregate amount
not to exceed $100,000 at any one time outstanding, which are made to any
employee of any Borrower in the ordinary course of such Borrower's business and
in furtherance of such employee's performance under a contract with a Customer
and (b) loans made to a Borrower by any other Borrower, and (c) loans to
officers and employees of the Borrowers not to exceed $100,000 in the aggregate
outstanding at any time for all Borrowers, provided that, after giving effect
thereto, no Default or Event of Default shall occur.
SECTION 6.8. GUARANTIES, ETC. No Borrower will assume, guarantee, endorse
or otherwise be or become directly or contingently responsible or liable
(including, but not limited to, any liability arising out of any agreement to
purchase any obligation, stock, assets, goods or services, or to supply or
advance any funds, assets, goods or services, or to maintain or cause such
Person to maintain a minimum working capital or net worth or otherwise to assure
the creditors of any Person against loss) for obligations of any Person, or
permit any such guaranties or liabilities to exist, except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
SECTION 6.9. ACQUISITIONS. No Borrower will form a Subsidiary, become a
partner or joint venturer with any person, or purchase or acquire all or
substantially all of the assets of any Person, or any capital stock of or
ownership interest in any other Person. If the Lender consents to the
acquisition or formation of a Subsidiary by a Borrower, such Borrower will cause
such
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Subsidiary to (a) execute and deliver to the Lender an Assumption
Agreement, and (b) satisfy all of the conditions set forth in Section Section
7.3. The Lender agrees that it will not withhold its consent to a Borrower
entering into a joint venture or teaming agreement with another Person in the
ordinary course of business, provided that such Borrower does not assume any
obligations of any other Person in connection therewith.
SECTION 6.10. TRANSACTIONS WITH AFFILIATES. No Borrower will enter into
any transaction, including, without limitation, the purchase, sale or exchange
of property or the rendering of any service, with any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of such
Borrower's business and upon fair and reasonable terms no less favorable to such
Borrower than would be applicable in a comparable arm's-length transaction with
a Person not an Affiliate.
SECTION 6.11. FINANCIAL COVENANTS. The Company will not:
(a) TANGIBLE NET WORTH. Permit Tangible Net Worth to be less
than the Minimum Compliance Level as of the end of any fiscal quarter, beginning
with the fiscal quarter ended on June 30, 1999;
(b) CAPITAL EXPENDITURES. Incur Capital Expenditures of greater
than $250,000 during any fiscal quarter; or
(c) NET INCOME. Permit the consolidated Net Income of the
Company and its Subsidiaries to be less than $100,000 for any fiscal quarter,
beginning with the fiscal quarter ending on September 30, 1999.
SECTION 6.12. CLAIMS. No Borrower will assert any UCC Claim, as defined
in the Release Agreement, unless the Borrowers shall first terminate the credit
facilities provided for herein in accordance with the provisions of Section
Section 2.9 of this Agreement.
SECTION 7. CONDITIONS OF LENDING. The making of the Loans shall be
subject to the following conditions:
SECTION 7.1. CONDITIONS PRECEDENT TO CLOSING. The initial disbursement of
the Loans shall be subject to the following conditions precedent, provided,
however, that if the Lender elects to make such initial disbursement prior to
all of such conditions precedent being satisfied, the Borrowers agree that they
shall cause all such conditions to be satisfied within 30 days after such
disbursement:
(a) The Loan Documents shall have been appropriately completed,
duly executed by the parties thereto, recorded where necessary and delivered to
the Lender.
(b) No Default or Event of Default shall have occurred and be
continuing.
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(c) All representations and warranties contained herein shall
be true and correct at the Closing Date.
(d) All legal matters incident to the Loans shall be
satisfactory to counsel for the Lender, and the Borrowers agree to execute and
deliver to the Lender such additional documents and certificates relating to the
Loans as the Lender reasonably may request.
(e) Financing statements in form and substance satisfactory to
the Lender shall have been properly filed in each office where necessary to
perfect the Lender's security interest in the Collateral, termination statements
shall have been filed with respect to any other financing statements covering
all or any portion of the Collateral and all taxes and fees with respect to such
recording and filing shall have been paid by the Borrowers.
(f) All Intellectual Property subject or entitled to United
States copyright, patent or trademark protection, and such documents as are
necessary to perfect the Lender's security interest therein, shall have been
duly registered with the United States Patent and Trademarks Office or the
Register of Copyrights, as applicable, and the Lender shall have received a
search report confirming that no Liens are recorded with respect thereto.
(g) The Borrowers shall have delivered to the Lender (1)
certified copies of evidence of all corporate actions taken by the Borrowers to
authorize the execution and delivery of the Loan Documents, (2) certified copies
of the article of incorporation, and bylaws of the Borrowers, (3) a certificate
of incumbency for the officers of the Borrowers executing the Loan Documents,
(4) a good standing certificate, dated not more than 30 days prior to the
Closing Date, from the appropriate state official of any state in which the
Borrowers are incorporated or qualified to do business, and (5) such additional
supporting documents as the Lender or counsel for the Lender reasonably may
request.
(h) The Lender shall have received (1) a Borrowing Base
Certificate, (2) an Aging, and (3) a report setting forth the status of all
contracts relating to Eligible Receivables from the most recent fiscal month and
shall be in form and substance satisfactory to the Lender.
(i) The Lender shall have received a field examination report
of the Collateral in form and substance acceptable to it.
(j) The Lender shall have received the written opinion of
counsel to the Company, in form and substance satisfactory to the Lender.
(k) The Lender shall have received financing statement,
judgment and tax lien searches reflecting that there are no Liens outstanding
against the Collateral other than those permitted by the Agreement.
(l) The Lender shall have received evidence that the Borrowers
have obtained the insurance required by this Agreement.
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(m) The Lender shall have received such landlord and mortgage
waivers as it shall require.
(n) The Lender shall have received the audited financial
statements of the Company for its fiscal year ending on March 31, 1999.
(o) The Lender shall have received the Release Agreement, duly
executed by the Borrowers.
(p) The Lender shall have received such merger documents
evidencing the merger of Technology into the Company as the Lender shall
require.
SECTION 7.2. CONDITIONS PRECEDENT TO SUBSEQUENT DISBURSEMENTS. The
disbursement and issuance of subsequent Loans and Letters of Credit shall be
subject to the following conditions precedent:
(a) No Default or Event of Default shall have occurred and be
continuing.
(b) No Material Adverse Effect shall have occurred in the
financial condition of any Borrower.
(c) All representations and warranties of the Borrowers
contained in the Loan Documents shall be true and correct at the date of such
disbursement.
(d) No change shall have occurred in any law or regulations
thereunder or interpretations thereof that, in the opinion of counsel for the
Lender, would make it illegal for the Lender to make Loans hereunder.
(e) If required by the Lender, the Company shall have delivered
to the Lender a current Borrowing Base Certificate and a current Aging, duly
executed by the president or treasurer of the Company and appropriately
completed, and such other supporting data and documentation relating to the
Collateral as may be required by the Lender in its reasonable discretion.
SECTION 7.3. CONDITIONS PRECEDENT TO SUBSIDIARIES BECOMING BORROWERS. Any
Subsidiary of the Company shall become a Borrower under this Agreement, subject
to the satisfaction of the following conditions precedent:
(a) The Subsidiary shall execute and deliver to the Lender an
Assumption Agreement.
(b) No Default or Event of Default shall have occurred and be
continuing.
(c) All legal matters incident to such Subsidiary becoming a
Borrower shall be satisfactory to counsel for the Lender, and the Subsidiary
shall execute and deliver to the Lender
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such additional documents and certificates relating to the Loans as the Lender
may reasonably request.
(d) The Lender shall have received an opinion of counsel to the
Subsidiary, addressed to the Lender, covering such matters as the Lender may
request, in form and substance satisfactory to the Lender.
(e) Financing statements in form and substance satisfactory to
the Lender shall have been properly filed in each office where necessary to
perfect the security interest of the Lender in the Collateral of the Subsidiary,
termination statements shall have been filed with respect to any other financing
statements covering all or any portion of such Collateral (except with respect
to Liens or security interests permitted by this Agreement), all taxes and fees
with respect to such recording and filing shall have been paid by such
Subsidiary and the Lender shall have received such lien searches or reports as
it shall require confirming that the foregoing filings and recordings have been
completed.
(f) The Subsidiary shall have delivered the following documents
to the Lender, each of which shall be certified as of the date on which it is to
become a Borrower, by its secretary or representative performing similar
functions: (1) copies of evidence of all actions taken by the Subsidiary to
authorize the execution and delivery of the Assumption Agreement and the other
Loan Documents; (2) copies of the articles or certificate of incorporation and
bylaws (or comparable organizational documents) of the Subsidiary; and (3) a
certificate as to the incumbency and signatures of the officers executing the
Loan Documents.
(g) The Lender shall have received a certificate of good
standing and qualification (or similar instrument) issued by the appropriate
state official of the state of incorporation of the Subsidiary, dated within 30
days of the date of the applicable Loan Documents.
(h) The Lender shall have received a listing and aging of
Accounts Receivable, a Borrowing Base Certificate, an Inventory schedule, a
report setting forth the status of all contracts relating to its Eligible
Receivables and such other financial information of such Subsidiary as may be
requested by the Lender from time to time, all of which shall be of a current
date and shall be in form and substance satisfactory to the Lender.
(i) If required by the Lender, the Lender shall have received a
satisfactory field examination of the Collateral and internal control systems of
the Subsidiary performed by a consultant selected by the Lender, and the
Borrowers shall have reimbursed the Lender for the cost of such consultant.
(j) If required by the Lender, it shall have received a
landlord waiver from each landlord of the Subsidiary, which shall be in form and
substance acceptable to the Lender.
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(k) All Intellectual Property of such Subsidiary that is
subject to a Material IP Agreement shall have been duly registered with the
Register of Copyrights or the United States Patent and Trademark Office, as
applicable, all documents necessary to perfect the Lender's security interest
therein shall have been recorded in such office, and the Lender shall have
received evidence that it has a first priority perfected Lien with respect
thereto.
(l) The Borrowers agree no Receivable of a Subsidiary shall be
included in the Borrowing Base prior to the date on which all of the foregoing
conditions are satisfied.
SECTION 8. DEFAULT.
SECTION 8.1. EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
(a) Failure of a Borrower to pay any Obligation to the Lender,
including, without limitation, the principal of or interest on any Notes or the
Loans, or amounts due under a Letter of Credit Agreement, when the same shall
become due and payable, whether at maturity, or otherwise, and such failure
shall continue for a period of ten days; or
(b) If a Borrower refuses to permit the Lender to inspect,
examine, verify or audit the Collateral in accordance with the provisions of
this Agreement; or
(c) Failure of a Borrower to perform or observe any covenant
contained in Section Section 6 of this Agreement; or
(d) Failure of the Borrowers to perform their obligations under
Section Section 5.8(g) and such failure shall continue for a period of five
days; or
(e) Failure of a Borrower to perform or observe any other term,
condition, covenant, warranty, agreement or other provision contained in this
Agreement (except any such failure resulting in the occurrence of another Event
of Default described in this Section), within 30 days after the earlier of
actual knowledge thereof by such Borrower or written notice from the Lender to
the Company specifying such failure; or
(f) If any representation or warranty made or deemed made by a
Borrower in this Agreement, any Loan Document or any statement or representation
made in any certificate, report or opinion delivered pursuant to this Agreement
(including any Covenant Compliance Certificate, Borrowing Base Certificate or
financial statements) or in connection with any borrowing under this Agreement
was materially untrue or is breached in any material respect; or
(g) If, as a result of default, any other obligation of a
Borrower for the payment of any Debt becomes or is declared to be due and
payable prior to the expressed maturity thereof, unless and to the extent that
the declaration is being contested in good faith in a court of appropriate
jurisdiction; or
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(h) A Borrower makes an assignment for the benefit of
creditors, files a petition in bankruptcy, petitions or applies to any tribunal
for any receiver or any trustee of such Borrower or any substantial part of its
property, or commences any proceeding relating to such Borrower under any
reorganization, arrangement, readjustments of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or
(i) If, within 60 days after the filing of a bankruptcy
petition or the commencement of any proceeding against a Borrower seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation, the
proceeding shall not have been dismissed, or, if, within 60 days after the
appointment, without the consent or acquiescence of such Borrower, of any
trustee, receiver or liquidator of a Borrower or of all or any substantial part
of the properties of a Borrower, the appointment shall not have been vacated; or
(j) Any judgment against a Borrower in excess of $100,000 or
any attachment in excess of $100,000 against any property of a Borrower that
remains unpaid, undischarged, unbonded or undismissed for a period of 30 days,
unless and to the extent that the judgment or attachment is appealed in good
faith in a court of higher jurisdiction and the appeal remains pending; or
(k) If any of the following events shall occur or exists with
respect to any Borrower or any employee benefit or other plan established,
maintained or to which contributions have been made by any Borrower, any
Affiliate of any Borrower or any other Person that, together with the Borrower,
would be treated as a single employer under Section 4001 of ERISA, and the
Lender determines that the same would have a Material Adverse Effect: (1) any
prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of
the Code), (2) any reportable event (as defined in Section 4043 of ERISA and the
regulations issued thereunder), (3) the filing under Section 4041 of ERISA of a
notice of intent to terminate any such plan or the termination of such plan, or
(4) the institution of proceedings by the PBGC under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any such
plan; or
(l) If any Borrower, any Subsidiary or any Affiliate of any
Borrower or Subsidiary shall be debarred or suspended from any contracting with
the Government; or
(m) The Loan Documents shall for any reason cease to create a
valid and perfected first priority security interest in any of the Collateral
purported to be covered thereby or if any Loan Document ceases to be in full
force and effect; or
(n) If the Lender, in good faith, deems itself insecure in its
reasonable judgment or determines that an event has occurred that will result in
a Material Adverse Effect, and the cause for such determination is not cured to
the Lender's satisfaction within 30 days after notice from the Lender to the
Company specifying the Lender's basis therefor; or
(o) The dissolution, liquidation or termination of existence of
a Borrower; or
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(p) If a Borrower fails to give the Lender any notice required
by this Agreement within ten days after the occurrence of the event giving rise
to the obligation to give such notice, provided that such failure to give notice
shall not constitute an Event of Default if the applicable Event of Default or
breach is cured within any grace period that otherwise would have been
applicable had the notice been timely given; or
(q) The occurrence of an event of default under any other Loan
Document and the expiration of all applicable cure periods; or
(r) If:
(1) Any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), but excluding Research Industries and Arch
X. Xxxxxxxx, is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person will be
deemed to have "beneficial ownership" of all securities that such Person
has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than
25% of the total voting power of the then outstanding voting stock of the
Company; or
(2) During any twelve-month period (commencing on or
after the Agreement Date), a majority of the Board of Directors of the
Company shall no longer be composed of individuals (A) who were members
of such Board of Directors on the first date of such period, (B) whose
election or nomination to such Board of Directors was approved by
individuals referred to in clause (A) above constituting at the time of
such election or nomination at least a majority of such Board of
Directors or (C) whose election or nomination to such Board of Directors
was approved by individuals referred to in clauses (A) and (B) above
constituting at the time of such election or nomination at least a
majority of such Board of Directors; or
(s) If any Subordinated Debt holder gives written notice to the
Lender purporting to terminate the effect of the subordination thereof to the
Obligations.
SECTION 8.2. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of
Default, the following provisions shall be applicable:
(a) The Lender, at its option, may terminate its obligation to
make Loans and issue Letters of Credit under this Agreement and declare all
Obligations, whether incurred prior to, contemporaneous with or subsequent to
the date of this Agreement, and whether represented in writing or otherwise,
immediately due and payable and may exercise all of its rights and remedies
against the Borrowers and any Collateral. The Lender also may require the
Borrowers to pay, and the Borrowers agree to pay, to the Lender an amount of
cash equal to the aggregate amount of the Letters of Credit then outstanding,
and any amounts paid by the Borrowers shall be held by the Lender in a cash
collateral account, over which the Lender shall have the exclusive
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power of withdrawal, as security for the Obligations arising out of the Letters
of Credit and the Letter of Credit Agreements.
(b) The Lender may foreclose its lien and security interest in
the Collateral in any way permitted by law and shall have, without limitation,
the remedies of a secured party under the UCC. The Lender may enter the premises
of any Borrower without legal process and without incurring liability to any
Borrower and remove the Collateral to such place or places as the Lender may
deem advisable, or the Lender may require the Borrowers to assemble the
Collateral and make the Collateral available to the Lender at a convenient place
and, with or without having the Collateral at the time or place of sale, the
Lender may sell or otherwise dispose of all or any part of the Collateral
whether in its then condition or after further preparation or processing, either
at public or private sale or at any broker's board, in lots or in bulk, for cash
or for credit, at any time or place, in one or more sales and upon such terms
and conditions as the Lender may elect. The Lender shall give not less than five
Business Days' prior written notice to the Borrowers of the time and place of
any public sale of the Collateral or the time after which the Collateral may be
sold in a private sale, which each Borrower agrees constitutes commercially
reasonable notice. At any such sale the Lender may be the purchaser, subject to
the applicable provisions of the UCC.
(c) The proceeds from any sale of the Collateral by the Lender
shall first be applied to any costs and expenses in securing possession of the
Collateral and to any expenses in connection with the sale. The net proceeds
will be applied toward the payment of the Obligations. Application of the net
proceeds as to particular Obligations or as to principal, interest and fees
shall be in the Lender's absolute discretion. Any deficiency will be paid to the
Lender by the Borrowers forthwith upon demand, and any surplus will be paid to
the Borrowers, as applicable.
(d) The Lender is hereby authorized at any time or from time to
time, without notice to the Borrowers (any such notice being expressly waived by
each Borrower), to setoff and apply any deposit (general or special, time or
demand, provisional or final) or investment account at any time held, including
any certificate of deposit, and other indebtedness at any time owed by the
Lender or any of its affiliates, whether or not any such deposit or indebtedness
is then due, to or for the credit or account of any Borrower against any and all
of the Obligations. The Lender shall give prompt written notice of any setoff to
the Borrowers.
(e) EACH BORROWER, HAVING KNOWLEDGE THAT IT MAY BE ENTITLED TO
NOTICE AND A HEARING PRIOR TO REPOSSESSION OF THE COLLATERAL, WAIVES ANY RIGHT
THAT IT MAY HAVE UNDER EXISTING OR FUTURE LAW TO NOTICE OF FORECLOSURE AND ANY
OTHER ACT DESCRIBED HEREIN, TO ANY HEARING THAT MAY BE HELD RELATING TO
FORECLOSURE OR ANY OTHER SUCH ACTS, AND TO ANY NOTICE THAT MAY BE REQUIRED TO BE
GIVEN BY THE LENDER PRIOR TO SUCH HEARING, OTHER THAN THE NOTICES REQUIRED BY
THE LOAN DOCUMENTS OR THE UCC. THE LENDER AND EACH BORROWER EXPRESSLY WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY WITH RESPECT TO ANY
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LITIGATION RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(f) The Lender itself may perform or comply, or otherwise cause
performance or compliance, with the obligations of a Borrower contained in this
Agreement, including, without limitation, the obligations of each Borrower to
defend and insure the Collateral. The expenses of the Lender incurred in
connection with such performance or compliance, together with interest thereon
at the Prime Rate plus 2%, shall be payable by the Borrowers to the Lender on
demand and shall constitute Obligations.
SECTION 9. MISCELLANEOUS.
SECTION 9.1. COLLECTION COSTS. The Borrowers shall pay all of the
reasonable costs and expenses incurred by the Lender in connection with the
enforcement of this Agreement and the other Loan Documents, including, without
limitation, reasonable attorneys' fees and expenses.
SECTION 9.2. MODIFICATION AND WAIVER. Except for the other documents
expressly referred to in this Agreement, this Agreement contains the entire
agreement between the parties and supersedes all prior agreements between the
Lender and the Borrowers concerning the Loans and the Letters of Credit. No
modification or waiver of any provision of this Agreement or any other Loan
Document and no consent by the Lender to any departure therefrom by any Borrower
shall be effective unless such modification or waiver shall be in writing and
signed by an officer of the Lender with a title of vice president or any higher
office, and the same shall then be effective only for the period and on the
conditions and for the specific instances and purposes specified in such
writing. No notice to or demand on any Borrower in any case shall entitle any
Borrower to any other or further notice or demand in similar or other
circumstances. No failure or delay by the Lender in exercising any right, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies of
the Lender contained in this Agreement and the other Loan Documents are
cumulative and not exclusive of any rights or remedies otherwise provided by
law.
SECTION 9.3. NOTICES. All notices, requests, demands or other
communications provided for in this Agreement (except for requests for Loans
made by telephone as described in Section Section 2.1 above) shall be in writing
and shall be delivered by hand, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, to the Lender at 0000 Xxxxx
Xxxxxxxxx, 0xx Xxxxx, Xxxxxx, Xxxxxxxx 00000, Attention: Xx. Xxxxxxx X. Xxxxxx,
or to the Borrowers at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000,
Attention: ________________________. Any notice, request, demand or other
communication delivered or sent in the foregoing manner shall be deemed given
or made (as the case may be) upon the earliest of (a) the date it is actually
received, (b) the business day after the day on which it is delivered by hand,
(c) the business day after the day on which it is properly delivered to Federal
Express (or a comparable overnight
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delivery service), or (d) the third business day after the day on which it is
deposited in the United States mail. Any Borrower or the Lender may change its
address by notifying the other party of the new address in any manner permitted
by this Section Section 9.3. Rejection or other refusal to accept or the
inability to deliver because of a changed address of which no notice was given
shall not affect the date of such notice, election or demand sent in accordance
with the foregoing provisions.
SECTION 9.4. COUNTERPARTS. This Agreement may be executed by the parties
hereto individually or in any combination, in one or more counterparts, each of
which shall be an original and all of which together constitute one and the same
agreement.
SECTION 9.5. CAPTIONS. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
SECTION 9.6. SURVIVAL OF AGREEMENTS. All agreements, representations and
warranties made herein shall survive the delivery of this Agreement and the
making and renewal of the Loans hereunder.
SECTION 9.7. FEES AND EXPENSES. Whether or not any Loans are made
hereunder, the Borrowers shall pay on demand all out-of-pocket costs and
expenses incurred by the Lender in connection with the preparation, negotiation,
execution, delivery, filing, recording and enforcement of this Agreement and any
of the documents executed or delivered in connection herewith, including,
without limitation, the reasonable fees and expenses of counsel to the Lender,
and local counsel who may be retained by the Lender, with respect to this
Agreement and such documents and any amendments thereof and with respect to
advising the Lender as to its rights and responsibilities thereunder.
SECTION 9.8. USE OF DEFINED TERMS. All terms defined in this Agreement
shall have the defined meanings when used in certificates, reports or other
documents made or delivered pursuant to this Agreement, unless the context shall
otherwise require.
SECTION 9.9. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and bind the respective parties hereto and their successors and
assigns; provided, however, that no Borrower may assign its rights hereunder
without the prior written consent of the Lender.
SECTION 9.10. ACCOUNTING TERMS. All accounting terms used herein that are
not otherwise expressly defined in this Agreement shall have the meanings
respectively given to them in accordance with GAAP in effect on the date of this
Agreement. Except as otherwise provided herein, all financial computations made
pursuant to this Agreement shall be made in accordance with GAAP and all balance
sheets and other financial statements shall be prepared in accordance with GAAP.
Except as otherwise provided herein, whenever reference is made in any provision
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of this Agreement to a balance sheet or other financial statement or financial
computation with respect to a Borrower, such terms shall mean a consolidated
balance sheet or other financial statement or financial computation, as the case
may be, with respect to such Borrower and its Subsidiaries.
SECTION 9.11. CONFIDENTIALITY. Except as otherwise provided by applicable
law, the Lender shall utilize all non-public information obtained pursuant to
the requirements of this Agreement which has been identified as confidential or
proprietary by the Company in accordance with its customary procedure for
handling confidential information of this nature and in accordance with safe and
sound banking practices but in any event may make disclosure: (a) to any of its
affiliates (provided they shall agree to keep such information confidential in
accordance with the terms of this Section); (b) as reasonably required by any
bona fide assignee, participant or other transferee in connection with the
contemplated transfer of any Loan or participations therein (provided they shall
agree to keep such information confidential in accordance with the terms of this
Section); (c) as required by any governmental authority or representative
thereof or pursuant to legal process; (d) to the Lender's independent auditors,
counsel and other professional advisors (provided they shall be notified of the
confidential nature of the information and they agree to keep such information
confidential); and (e) after the happening and during the continuance of an
Event of Default, to any other Person, in connection with the exercise by the
Lender of rights hereunder or under any of the other Loan Documents.
SECTION 9.12. LIMITATION OF LIABILITY. Each Borrower hereby waives,
releases, and agrees not to xxx the Lender or any of the Lender's Affiliates,
officers, directors, employees, attorneys, or agents for punitive damages in
respect of any claim in connection with, arising out of, or in any way related
to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or financed hereby.
SECTION 9.13. WAIVER. EACH OF THE LENDER AND THE BORROWERS EXPRESSLY
WAIVES ITS RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION OR OTHER
DISPUTE RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
SECTION 9.14. SEVERABILITY. If any provision of any Loan Document is held
to be illegal, invalid or unenforceable under present or future laws during the
term of this Agreement, such provision shall be fully severable, such Loan
Document shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Loan Document, and
the remaining provisions of such Loan Document shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Loan Document.
SECTION 9.15. CONSENT TO JURISDICTION. Each party to this Agreement
hereby irrevocably submits generally and unconditionally for itself and in
respect of its property to the jurisdiction of the Circuit Court for Fairfax
County, Virginia, or the United States District Court for the Eastern
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District of Virginia, Alexandria Division, over any suit, action or proceeding
arising out of or relating to this Agreement, any Loan Document or the
Obligations. Each party to this Agreement hereby irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter have
to the laying of venue in any such court and any claim that any such court is an
inconvenient forum. Each Borrower hereby agrees and consents that, in addition
to any methods of service of process provided for under applicable law, all
service of process in any such suit, action or proceeding in the courts
designated above may be made by certified or registered mail, return receipt
requested, directed to such Borrower at its address for notice stated in Section
Section 9.3 above, or at a subsequent address of which the Lender received
actual notice from such Borrower in accordance with the terms hereof, and
service so made shall be complete five days after the same shall have been so
mailed. The foregoing provisions shall not limit the right of the Lender or any
other party hereto to serve process in any other manner permitted by law or
limit the right of the Lender or other party hereto to bring any suit, action or
proceeding or to obtain execution on any judgment rendered in any suit, action
or proceeding in any other appropriate jurisdiction or in any other manner.
SECTION 9.16. INTERPRETATION.
(a) This Agreement and the rights and obligations of the
parties hereunder shall be construed and interpreted in accordance with the laws
of the State, without reference to conflict of laws principles.
(b) The representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to have been given and undertaken by
the Borrowers jointly and severally.
SECTION 9.17. AMENDMENT AND RESTATEMENT. The Lender and the Borrowers
agree that the Existing Agreement is amended and restated in its entirety by
this Agreement. This Agreement is an amendment, and not a novation, of the
Existing Agreement.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Borrowers and the Lender have caused this
Agreement to be signed by their duly authorized representatives all as of the
day and year first above written.
LENDER:
CRESTAR BANK,
a Virginia banking corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BORROWERS:
HALIFAX CORPORATION,
a Virginia corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HALIFAX ENGINEERING, INC.,
a Virginia corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HALIFAX TECHNICAL SERVICES, INC.,
a Virginia corporation
By:
------------------------------------
Name:
---------------------------------
Title:
--------------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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HALIFAX REALTY, INC.,
a Virginia corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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LIST OF SCHEDULES & EXHIBITS
Exhibit A - Assumption Agreement
Exhibit B - Borrowing Base Certificate
Exhibit C - Covenant Compliance Certificate
Exhibit D - Form of Revolving Note
Exhibit E - Release Agreement
Exhibit F - Form of Term Note One
Exhibit G - Form of Term Note Two
Schedule 3.3 - Equipment and Inventory Locations
Schedule 4.10 - Corporate Names and Chief Executive Offices
Schedule 4.13 - Intellectual Property
Schedule 4.14 - Material Contracts
Schedule 4.17 - Collective Bargaining Agreements
Schedule 5.8(a) - Form of Monthly Financials
47
EXHIBIT A
FORM OF
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (as the same may be amended, modified or
supplemented from time to time, the Assumption), dated as of _____________,
_____, made by ____________________________, a _____________ corporation (the
Subsidiary), in favor of the Lender (as defined below), recites and provides:
R E C I T A L S
Pursuant to the terms of a Sixth Amended and Restated Loan and Security
Agreement, dated as of September 1, 1999 (as amended, modified or supplemented
from time to time, the Loan Agreement), between Halifax Corporation, a Virginia
corporation (the Company), Halifax Engineering, Inc., a Virginia corporation
(Engineering), Halifax Technical Services, Inc., a Virginia corporation
(Technical) and Halifax Realty, Inc., a Virginia corporation (Realty, and
together with the Company, Engineering and Technical, the Original Borrowers),
and Crestar Bank, a Virginia banking corporation (the Lender), the Lender agreed
to extend credit to the Original Borrowers. Terms defined in the Loan Agreement
shall have the same defined meanings when such terms are used in this
Assumption.
The Company owns [100%] [____%] of the capital stock of the Subsidiary.
The Original Borrowers and the Subsidiary, together with the other Subsidiaries
of the Original Borrowers, are engaged in business on a consolidated and
integrated basis, and their integrated operations include applying for and
making use of credit on a joint basis. Accordingly, the Original Borrowers have
requested that the Subsidiary become a Borrower under the Loan Agreement and the
other Loan Documents. The Lender has agreed to accept the Subsidiary as a
Borrower thereunder, and the Subsidiary has agreed to assume the Obligations.
Accordingly, the Subsidiary agrees as follows:
48
SECTION 10. The Subsidiary (a) assumes and agrees to be jointly and
severally liable with each other Borrower for all of the Obligations now
existing or hereafter arising, including, without limitation, the Obligations
arising out of the Loan Agreement, the Loans, the Notes, the Letter of Credit
Agreements and the other Loan Documents, and (b) agrees to be jointly and
severally bound by all of the terms, covenants and conditions of the Loan
Agreement, the Notes, the Letter of Credit Agreements and the other Loan
Documents, and hereby assumes all of the Obligations of the Borrowers thereunder
and agrees to be jointly and severally liable therefor.
SECTION 11. The Subsidiary represents that (a) its chief executive
office, within the meaning of Section 9.103(3)(d) of the UCC, is located at
[______________________], and (b) during the five years prior to the date of
this Assumption, the Subsidiary has not used any fictitious or corporate name
other than its current corporate name. All of the representations and warranties
set forth in the Loan Agreement are incorporated by reference in this
Assumption, and shall be deemed to have been made and given by the Subsidiary as
of the date hereof as though such representations and warranties were applicable
to it.
SECTION 12. The Subsidiary grants to the Lender, in accordance with and
subject to the provisions of the Loan Agreement, a security interest in all of
the Collateral of the Subsidiary as security for the Obligations.
SECTION 13. The Subsidiary also agrees to execute, deliver and, if
applicable, record, such additional instruments, documents and agreements as the
Lender may reasonably require for the purpose of effecting the assumption
described herein.
IN WITNESS WHEREOF, the Subsidiary has caused this Assumption to be
executed by its duly authorized representative as of the day and year first
written above.
, a
--------------------- -----------
By:
-----------------------------------
Name:
----------------------------------
Title:
--------------------------------
A-2
49
EXHIBIT B
FORM OF
BORROWING BASE CERTIFICATE
[DATE]
Crestar Bank
0000 Xxxxx Xxxxxxxxx
0xx Xxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Vice President
Ladies and Gentlemen:
In connection with the terms of the Sixth Amended and Restated Loan and
Security Agreement, dated as of September 1, 1999 (as further amended, modified
or supplemented from time to time, the Loan Agreement) between Halifax
Corporation (the Parent), Halifax Engineering, Inc. (Engineering), Halifax
Technical Services, Inc. (Technical), and Halifax Realty, Inc. (Realty, and
together with the Parent, Engineering and Technical, collectively, the
Borrowers), and Crestar Bank (the Lender), the undersigned, on behalf of the
Parent and the other Borrowers, certifies that the following is true and
correct:
--------------------------------------------------------------------------------
I. TIER ONE
A. ACCOUNTS RECEIVABLE
Billed Accounts Receivable as of last report dated
$
--------------- ---------
Additions: (a) New Xxxxxxxx
(b) Adjustments $
---------
Less: (a) Collections since last report $
---------
(b) Adjustments $
---------
1. Total Billed Accounts Receivable: $
---------
50
2. Less Ineligible Receivables:
(a) Receivables aged over 90 days-not
including bonded: $
---------
(b) Bonded Receivables $
---------
(c) "At Risk" Work $
---------
(d) Rebills $
---------
(e) Other Ineligible Receivables(1)
(VDOT/MLC/Siemens(2)) $
---------
3. Total Ineligible Receivables (Line A(2)(a)-A(2)(e)) $
---------
4. Total Eligible Billed Accounts Receivable: $
---------
5. Eligible Billed Government Accounts Receivable on
Line 4: $
---------
6. Government contribution to Borrowing Base (90% of
Line 5): $
---------
7. Eligible Billed Commercial Accounts Receivable on
Line 4: $
---------
8. Commercial contribution to Borrowing Base (85% of
Line 7): $
---------
9. Tier One Borrowing Base (A6 + A8): $
---------
II. TIER TWO CONTRIBUTION(3)
A. BONDED CONTRACT ACCOUNTS RECEIVABLE:
1. Total Billed Bonded Accounts Receivable: $
---------
2. Less $1,500,000 excess factor: $1,500,000
3. Less Ineligible Receivables:
(a) Receivables aged over 90 days: $
---------
(b) "At Risk"/Rebills: $
---------
(c) Other Ineligible Receivables: $
---------
-----------------------------
(1) Receivables arising out of any Person's obligation to purchase Receivables
of a Borrower shall not be included as a part of the Borrowing Base.
(2) All Siemens Receivables are Ineligible Receivables to the extent they exceed
$1,000,000.
(3) Upon the closing of the HTSI Sale, the Tier Two Contribution shall not be
included as a part of the Borrowing Base.
B-4
51
4. Total Ineligible Bonded Accounts Receivable (Line
A(3)(a)-A(3)(c)): $
---------
5. Total Eligible Bonded Accounts Receivable (Line 1-2-4): $
---------
6. Contribution to Borrowing Base (80% of Line 5; Not to
exceed $2,000,000 cap): $
---------
B. TOTAL BORROWING BASE (TIER I BORROWING BASE + TIER II
CONTRIBUTION) (NOT TO EXCEED $12,000,000(4)) $
=========
As of the date of this Borrowing Base Certificate, no Default or Event of
Default has occurred and is continuing.
Capitalized terms used in this Borrowing Base Certificate shall have the same
meanings as those assigned to them in the Loan Agreement. The foregoing is true
and correct as of
-------------, ----.
HALIFAX CORPORATION
By:
----------------------------------------------
Title: Vice President Finance & Accounting, CFO
Date:
------------------------------------
----------------------------------
(4) To be reduced to $10,000,000 immediately upon the closing of the HTSI Sale.
B-5
52
EXHIBIT C
FORM OF
COVENANT COMPLIANCE CERTIFICATE
In connection with the terms of the Sixth Amended and Restated Loan and
Security Agreement, dated as of September 1, 1999 (as amended, modified or
supplemented from time to time, the Loan Agreement), between Halifax
Corporation, a Virginia corporation (the Company), the Subsidiaries of the
Company that are parties to the Loan Agreement, and Crestar Bank, a Virginia
banking corporation (the Lender), the undersigned certifies that the following
information is true and correct as of the date of this Covenant Compliance
Certificate:
1. No Default or Event of Default has occurred and is continuing.
2. The Minimum Compliance Level as of _______________________ was
required to be $_____, and Tangible Net Worth as of such date was $___________
calculated as set forth in Schedule 1.
3. Net Income of the Company and its Subsidiaries for the fiscal quarter
ended on ____________ was required to be $100,000, and as of such date was
$_______________ calculated as set forth in Schedule 2.
Capitalized terms used in this Covenant Compliance Certificate shall have
the same meanings as those assigned to them in the Loan Agreement. The foregoing
is true and correct as of _______________, 19___.
Dated ______________, 19___.
------------------------------------------
Name:
-------------------------------------
Chief Financial Officer
Halifax Corporation
53
SCHEDULE 1
TANGIBLE NET WORTH
AND MINIMUM COMPLIANCE LEVEL
TANGIBLE NET WORTH
1. Tangible Net Worth: $___________
(a) Consolidated stockholder equity of the Company and its Subsidiaries
as of ________________: $___________
(b) Write-up in book value of assets of the Company and its Subsidiaries
subsequent to the date of the Agreement $___________
(c) Investments in non-marketable securities $___________
(d) Treasury stock $___________
(e) Unamortized debt discount expense $___________
(f) Costs of investments in excess of net assets acquired at time of
acquisition $___________
(g) Loans, advances and other amounts owed to the Company and its
Subsidiaries by officers, directors, shareholders, employees or
Affiliates $___________
(h) Leasehold improvements $___________
(i) Patents, patent applications, copyrights, trademarks, trade names,
goodwill, research and development costs, organizational expenses,
capitalized software costs and other like intangibles $___________
TOTAL [(a) minus (b) through (i)] $___________
C-7
54
MINIMUM COMPLIANCE LEVEL
1. Tangible Net Worth
as of __________________ *___________
2. $150,000 Step-Up $___________
3. Equity Issuances from March 31, 1999 $___________
4. Extraordinary, unusual or non-recurring losses $___________
5. Extraordinary, unusual or non-recurring gains $___________
6. Minimum Compliance Level (1 + 2 + 3 + 4 - 5)** $___________
*$_______________ as of 3/31/99, and adjusted upward by $150,000 as of June 30,
1999, and as of the end of each fiscal quarter thereafter.
**Upward adjustment arising out of items 2 through 4 to be made as of June 30,
1999, and as of the end of each fiscal quarter thereafter. Downward adjustment
arising out of item 5 to be made as of June 30, 1999 and as of the end of each
fiscal quarter thereafter.
C-8
55
SCHEDULE 2
NET INCOME
1. Net Income:
(a) Consolidated Net Income $___________
(b) Extraordinary, unusual or non-recurring gains $___________
(c) Extraordinary, unusual or non-recurring losses $___________
TOTAL ((a) minus (b) plus (c))* $__________
*Aggregate (as adjusted) amount to be calculated as of June 30, 1999 and as of
the end of each fiscal quarter thereafter.
C-9
56
EXHIBIT D
FORM OF
REVOLVING NOTE
$12,000,000 _______________, 1999
Alexandria, Virginia
FOR VALUE RECEIVED, the undersigned, each a Virginia corporation
(collectively, the Borrowers and individually, a Borrower) hereby jointly and
severally promise to pay to the order of CRESTAR BANK, a Virginia banking
corporation (the Lender), at Commercial Loan Services, X.X. Xxx 00000,
Xxxxxxxx, Xxxxxxxx 00000-0000, or such other location as the holder hereof may
in writing designate, the principal sum of TWELVE MILLION AND NO/00 DOLLARS
($12,000,000) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Revolving Loans made by the Lender to the Borrowers
under the Loan Agreement (as defined below)), in lawful money of the United
States of America in immediately available funds, on the Termination Date,
without defense, offset or counterclaim, and to pay interest on the unpaid
principal amount of the Revolving Loans, at such office, in like money and
funds, for the period commencing on the date of each Revolving Loan until such
Revolving Loan shall be paid in full, at the applicable rate per annum and on
the dates provided in the Loan Agreement. The Borrowers may borrow, prepay, and
reborrow hereunder in accordance with the provisions of the Loan Agreement.
The Lender is hereby authorized by the Borrowers to maintain records of
the amount of each Revolving Loan made by the Lender, the date such Revolving
Loan is made, and the amount of each payment or prepayment of principal of such
Revolving Loan received by the Lender. Each Borrower agrees that the amounts so
evidenced in such records, absent manifest error, shall constitute conclusive
evidence of the amount owed hereunder.
This Revolving Note is the Revolving Note referred to in the Sixth
Amended and Restated Loan and Security Agreement (as amended, modified or
supplemented from time to time, the Loan Agreement), dated as of September 1,
1999, between the Borrowers and the Lender, and evidences Revolving Loans made
by the Lender thereunder. Undefined capitalized terms used in this Revolving
Note have the respective meanings assigned to them in the Loan Agreement.
Upon the occurrence and continuation of an Event of Default, the
principal hereof and accrued interest hereon may be declared to be, or may
become, forthwith due and payable in the manner, upon the conditions and with
the effect provided in the Loan Agreement.
Each Borrower, and every guarantor and endorser hereof, hereby waive
presentment, demand, notice of dishonor, protest and all other demands and
notices in connection with the delivery, acceptance, performance and
enforcement of this Revolving Note.
57
This Revolving Note shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to conflict of laws
principles.
IN WITNESS WHEREOF, each Borrower has caused this Revolving Note to be
executed by its duly authorized representative as of the day and year first
above written.
BORROWERS:
HALIFAX CORPORATION,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
HALIFAX ENGINEERING, INC.,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
HALIFAX TECHNICAL SERVICES, INC.,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
D-2
58
HALIFAX REALTY, INC.,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
D-3
59
EXHIBIT E
FORM OF
RELEASE AGREEMENT
THIS RELEASE AGREEMENT (the Agreement), dated as of September 1, 1999, is
made by and between HALIFAX CORPORATION, a Virginia corporation (the Company),
HALIFAX ENGINEERING, INC., a Virginia corporation (Engineering), HALIFAX
TECHNICAL SERVICES, INC., a Virginia corporation (Technical), HALIFAX REALTY,
INC., a Virginia corporation (Realty, and together with the Company,
Engineering and Technical, collectively, the Borrowers), and CRESTAR BANK, a
Virginia banking corporation (the Bank).
RECITALS
The Borrowers, Halifax Technology Services Company, a Virginia
corporation, (Technology) and the Bank are parties to the Fifth Amended and
Restated Loan and Security Agreement, dated as of June 25, 1998, as amended by
the First Amendment to Fifth Amended and Restated Loan and Security Agreement,
dated as of February 23, 1999, by and between the Borrowers, Technology and the
Bank, and by the Sixth Amended and Restated Loan and Security Agreement, dated
as of September 1, 1999, by and between the Borrowers and the Bank (as further
amended, modified or supplemented from time to time, the Loan Agreement). Terms
defined in the Loan Agreement shall have the same defined meanings when such
terms are used in this Amendment. Technology was merged into the Company on the
date set forth in Section 4.1 of the Loan Agreement. The Borrowers have
requested that the Bank amend certain provisions of the Loan Agreement. The
Bank has agreed to do so, subject to its receipt of this Agreement.
Accordingly, for valuable consideration, the receipt and sufficiency of
which are acknowledged, the Borrowers and the Bank agree as follows:
1. Except for the UCC Claim (as defined below), each Borrower irrevocably
and unconditionally releases and forever discharges the Bank, its predecessors,
successors, and assigns, and its parents, affiliates, subsidiaries, divisions,
agents and subagents, if any, as well as the past, present, and future
shareholders, officers, directors, partners, employees, agents attorneys, and
insurers of each of them from all causes of action, suits, debts, liens,
contracts, agreements, obligations, promises, liabilities, claims, rights,
demands, damages, controversies, losses, costs, and expenses, specifically
including attorney's fees and costs, of any nature whatsoever, known or
unknown, suspected or unsuspected, fixed or contingent, which it has, owns,
holds, claims to have, claims to own, or claims to hold against the Bank in
connection with, relating to or arising from the Loans or the Loan Documents
and against the Bank or Bankers Trust (Delaware), or both, in connection with,
relating to or arising from the Technology Embezzlement (as defined below),
checks or other items, paid or any deposit account maintained
60
by Technology with the Bank or Bankers Trust (Delaware), or withdrawals from
any such deposit account of Technology.
2. Each Borrower represents and warrants as follows:
a. through its duly authorized representatives, it has
carefully read this Agreement and knows and understands its contents
completely;
b. it has consulted with its attorneys and is entering into
this Agreement of its own free will, act and deed;
c. in making this Agreement, it has not relied upon any
statement or representation made by the persons, firms, organizations or
corporations who are hereby released, or by any person or persons representing
them, other than as is expressly stated in this Agreement; and
d. each individual signing for and on behalf of a Borrower has
complete and full authority to act upon its behalf and has the authority to
bind it and all other persons or entities with any right, title or interest in
it.
3. As used herein:
a. "Technology Embezzlement" means the embezzlement of funds
from Technology by a perpetrator identified by the Borrowers prior to the date
hereof and any person acting in concert with such perpetrator.
b. "UCC" means the Virginia Uniform Commercial Code.
c. "UCC Claim" means the claims of any of the Borrowers
against the Bank or Bankers Trust (Delaware) under Sections 8.3A-404, 8.3A-405,
8.3A-406, 8.4-401 and 8.4-406 of the UCC with respect to checks paid by the
Bank or Bankers Trust (Delaware) and charged against any of Technology's
deposit accounts at the Bank or Bankers Trust (Delaware) after February 16,
1998. Such claims in the aggregate shall not exceed the aggregate face amount
of the checks that the Borrowers allege were not properly payable from
Technology's deposit account(s) at the Bank or Bankers Trust (Delaware) after
February 16, 1998, or were negligently paid by the Bank or Bankers Trust
(Delaware) after February 16, 1998, plus interest and costs. Such claims shall
not include punitive, consequential, incidental, special or other damages of
any nature, and shall not include attorneys' fees or expenses of any nature.
The parties agree that nothing in this Agreement shall limit the admissibility
of checks or other account records for Technology's deposit accounts at the
Bank or Bankers Trust (Delaware) created prior to February 16, 1998, at the
trial of any UCC Claim, and the parties reserve their respective rights to
introduce into evidence checks and other account records for Technology's
deposit accounts at the Bank or Bankers Trust (Delaware) created prior to
February 16, 1998.
X-0
00
0. The Borrowers agree that nothing in this Agreement shall be construed
as an admission by the Bank of any wrongdoing, liability or breach of contract,
and that the Bank reserves all of its rights to contest the UCC Claim,
including, without limitation, the right to assert that (a) checks drawn on
Technology's account bore authorized signatures, (b) Technology did not
exercise reasonable promptness in examining its statements of account in order
to discover unauthorized payments, (c) Technology's failure to exercise
ordinary care substantially contributed to any loss it suffered, and (d) the
Bank's subrogation rights, under section 8.4-407 of the UCC, have been impaired
by Technology.
5. Each Borrower agrees and understands that this Agreement shall be
binding on, and inures to the benefit of, the Borrowers and the Bank, their
legal representatives, assigns, parents, subsidiaries, successors and all who
succeed to their rights.
6. The Borrowers and the Bank agree that this Agreement is final and
incorporates all of the understandings between the parties, and that there are
no other agreements, conditions, or understanding between them that are not
incorporated into this Agreement.
7. The Borrower and the Bank agree that this Agreement shall be governed
by and construed under the laws of the Commonwealth of Virginia, and agree that
the terms of this Agreement are contractual and shall continue in full force
and effect after the date of the Agreement.
8. Any amendment to this Agreement must be in writing, and be endorsed by
all parties. This Agreement may be executed in counterparts.
[SIGNATURES ON FOLLOWING PAGES]
E-3
62
WITNESS the following signatures.
BANK:
CRESTAR BANK,
a Virginia banking corporation
By:
---------------------------
Xxxxxx X. Xxxxxx
Executive Vice President
BORROWERS:
HALIFAX CORPORATION, a Virginia
corporation
By:
---------------------------
Xxxx X. Xxxx
President and CEO
HALIFAX ENGINEERING, INC.,
a Virginia corporation
By:
---------------------------
Xxxx X. Xxxx
President and CEO
HALIFAX TECHNICAL SERVICES, INC.,
a Virginia corporation
By:
---------------------------
Xxxx X. Xxxx
President and CEO
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
X-0
00
XXXXXXX REALTY, INC.,
a Virginia corporation
By:
---------------------------
Xxxx X. Xxxx
President and CEO
X-0
00
XXXXXXX X
XXXX XX
XXXX NOTE ONE
$2,500,000 _______________, 1999
Alexandria, Virginia
FOR VALUE RECEIVED, the undersigned, each a Virginia corporation
(collectively, the Borrowers and individually, a Borrower) hereby jointly and
severally promise to pay to the order of CRESTAR BANK, a Virginia banking
corporation (the Lender), at Commercial Loan Services, X.X. Xxx 00000,
Xxxxxxxx, Xxxxxxxx 00000-0000, or such other location as the holder hereof may
in writing designate, the principal sum of TWO MILLION FIVE HUNDRED THOUSAND
AND NO/00 DOLLARS ($2,500,000), in lawful money of the United States of America
in immediately available funds, on the dates set forth below, without defense,
offset or counterclaim, and to pay interest on the unpaid principal amount
hereof, at such office, in like money and funds, for the period commencing on
the date of disbursement of Term Loan One until Term Loan One shall be paid in
full, at the applicable rate per annum and on the dates provided in the Loan
Agreement.
The principal balance hereof shall be payable in quarterly installments,
each in the amount and on the date set forth in the Loan Agreement. If not
sooner paid, the unpaid principal balance hereof, and all accrued and unpaid
interest thereon, shall be due and payable in full on the Termination Date.
This Note is Term Note One referred to in the Sixth Amended and Restated
Loan and Security Agreement (as amended, modified or supplemented from time to
time, the Loan Agreement), dated as of September 1, 1999, between the Borrowers
and the Lender, and evidences Term Loan One made by the Lender thereunder.
Undefined capitalized terms used in this Note have the respective meanings
assigned to them in the Loan Agreement.
Upon the occurrence and continuation of an Event of Default, the
principal hereof and accrued interest hereon may be declared to be, or may
become, forthwith due and payable in the manner, upon the conditions and with
the effect provided in the Loan Agreement.
Each Borrower, and every guarantor and endorser hereof, hereby waive
presentment, demand, notice of dishonor, protest and all other demands and
notices in connection with the delivery, acceptance, performance and
enforcement of this Note.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Virginia, without reference to conflict of laws
principles.
IN WITNESS WHEREOF, each Borrower has caused this Note to be executed by
its duly authorized representative as of the day and year first above written.
65
BORROWERS:
HALIFAX CORPORATION,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
HALIFAX ENGINEERING, INC.,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
HALIFAX TECHNICAL SERVICES, INC.,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
HALIFAX REALTY, INC.,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
X-0
00
XXXXXXX X
XXXX XX
XXXX NOTE TWO
$1,000,000 ________________, 1999
Alexandria, Virginia
FOR VALUE RECEIVED, the undersigned, each a Virginia corporation
(collectively, the Borrowers and individually, a Borrower) hereby jointly and
severally promise to pay to the order of CRESTAR BANK, a Virginia banking
corporation (the Lender), at Commercial Loan Services, X.X. Xxx 00000,
Xxxxxxxx, Xxxxxxxx 00000-0000, or such other location as the holder hereof may
in writing designate, the principal sum of ONE MILLION AND NO/00 DOLLARS
($1,000,000), in lawful money of the United States of America in immediately
available funds, on the dates set forth below, without defense, offset or
counterclaim, and to pay interest on the unpaid principal amount hereof, at
such office, in like money and funds, for the period commencing on the date of
disbursement of Term Loan Two until Term Loan Two shall be paid in full, at the
applicable rate per annum and on the dates provided in the Loan Agreement.
The principal balance hereof shall be payable in the respective amounts
and on the respective dates set forth in the Loan Agreement. If not sooner
paid, the unpaid principal balance hereof, and all accrued and unpaid interest
thereon, shall be due and payable in full on the Termination Date.
This Note is Term Note Two referred to in the Sixth Amended and Restated
Loan and Security Agreement (as amended, modified or supplemented from time to
time, the Loan Agreement), dated as of September 1, 1999, between the Borrowers
and the Lender, and evidences Term Loan Two made by the Lender thereunder.
Undefined capitalized terms used in this Note have the respective meanings
assigned to them in the Loan Agreement.
Upon the occurrence and continuation of an Event of Default, the
principal hereof and accrued interest hereon may be declared to be, or may
become, forthwith due and payable in the manner, upon the conditions and with
the effect provided in the Loan Agreement.
Each Borrower, and every guarantor and endorser hereof, hereby waive
presentment, demand, notice of dishonor, protest and all other demands and
notices in connection with the delivery, acceptance, performance and
enforcement of this Note.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Virginia, without reference to conflict of laws
principles.
67
IN WITNESS WHEREOF, each Borrower has caused this Note to be executed by
its duly authorized representative as of the day and year first above written.
BORROWERS:
HALIFAX CORPORATION,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
HALIFAX ENGINEERING, INC.,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
HALIFAX TECHNICAL SERVICES, INC.,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
HALIFAX REALTY, INC.,
a Virginia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
G-2
