July 31, 2000
GP Strategies Corporation
General Physics Canada, Ltd.
0 Xxxx 00xx Xxxxxx
Suite 4170
New York, New York 10019
Ladies and Gentlemen:
Reference is made to (i) the Credit Agreement dated as of June 15, 1998
and amended as of July 21, 1998, December 31, 1998, May 7, 1999 and December 17,
1999, by and among GP Strategies Corporation, General Physics Canada Ltd., the
Lenders party thereto and Fleet Bank, National Association, as Agent, Issuing
Bank and Arranger (as so amended, the "Existing Credit Agreement"), (ii) a
commitment letter dated April 12, 2000 among the parties to the Existing Credit
Agreement (the "Prior Commitment Letter") and (iii) a letter from the Agent to
you dated June 13, 2000 (the "Supplemental Letter"). Capitalized terms appearing
herein and in the term sheet attached hereto as Exhibit A (the "Term Sheet") and
not otherwise defined herein or in the Term Sheet are used as defined in the
Existing Credit Agreement.
Pursuant to the Prior Commitment Letter, you, the Agent and the Lenders
agreed to amend the Existing Credit Agreement to restructure the credit facility
contemplated thereby on the terms and conditions set forth in the Prior
Commitment Letter. However, subsequent to the execution of the Prior Commitment
Letter you advised the Agent and the Lenders that you desired certain changes
thereto. The Agent and the Lenders are agreeable to certain changes, but solely
to the extent they are set forth in this amended and restated commitment letter
(this "Amended Commitment Letter"). Consequently, this Amended Commitment Letter
and the Term Sheet amends, restates and replaces in its entirety the Prior
Commitment Letter, the term sheet attached to the Prior Commitment Letter and
the Supplemental Letter and in connection herewith (i) the Prior Commitment
Letter, the term sheet attached thereto and the Supplemental Letter are each
hereby terminated and of no further force or effect and (ii) the Agent and the
Lenders are pleased to advise you of their commitment to enter into an Amended
and Restated Credit Agreement on the terms and conditions set forth below and in
the Term Sheet.
You agree to provide Fleet and the other Lenders, promptly upon
request, with all information reasonably deemed necessary by them to complete
successfully the Amended and Restated Credit Agreement.
You represent and warrant and covenant that (i) all information which
has been or is hereafter made available to the Agent and/or the Lenders by you
or any of your representatives in connection with the transactions contemplated
hereby is and will be complete and correct in all material respects with respect
to the matters such information purports to cover and does not and will not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements have been
or will be made and (ii) all financial projections that have been or are
hereafter prepared by you and made available to the Agent and/or the Lenders or
any other participants in the credit facilities contemplated by the Amended and
Restated Credit Agreement have been or will be prepared in good faith based upon
reasonable assumptions.
The terms and conditions of this commitment and undertaking may be
modified only by an agreement in writing signed by the Borrowers, the Required
Lenders and the Agent. Those matters that are not covered or made clear herein
or in the attached Term Sheet are subject to mutual agreement of the parties. In
addition, this commitment and undertaking is subject to: (a) the preparation,
execution and delivery of mutually acceptable loan documentation, including an
Amended and Restated Credit Agreement incorporating substantially the terms and
conditions outlined herein and in the Term Sheet (A) on or before August 31,
2000 with respect to the Amended and Restated Credit Agreement, (B) promptly
upon the Borrowers' acceptance of this Amended Commitment Letter with respect to
the collateral set forth in subparagraph (ii) of the penultimate paragraph of
this Amended Commitment Letter and (C) on or before September 15, 2000 with
respect to all other loan documentation, (b) the accuracy and completeness of
all written representations that you make to us and all information that you
furnish to us in connection with this commitment and undertaking (in the case of
projections, limited to the most recent projections delivered to the Agent prior
to the date hereof) and your compliance with the terms of this Amended
Commitment Letter, (c) no development or change occurring after the date hereof,
and no information becoming known after the date hereof, that (i) results in or
could reasonably be expected to result in a material change in, or material
deviation from, the information previously delivered by you or could reasonably
be expected to be materially adverse to you or any of your subsidiaries or to
the Agent or the Lenders or (ii) has had or could reasonably be expected to have
a material adverse change in the business, condition (financial or otherwise),
operations, performance, properties or prospects of Strategies and Physics and
their respective subsidiaries, each taken as a whole and (d) no Event of Default
occurring under the Existing Credit Agreement (but only after giving effect to
the amendments thereto that are contemplated by this Amended Commitment Letter
and Term Sheet, including, specifically, the amendments to the financial
covenants that are provided under "Financial Covenants" in the Term Sheet). If
the foregoing conditions are not satisfied to the satisfaction of the Agent,
neither this Amended Commitment Letter nor the Term Sheet shall be enforceable
against the Lenders, the Agent or the Issuing Bank.
The costs and expenses of the Agent (including, without limitation, the
reasonable fees and expenses of its counsel and other reasonable out-of-pocket
expenses) in connection with the preparation, execution and delivery of this
letter and the definitive financing agreements shall be for your account. You
further agree to indemnify and hold harmless the Agent, the Issuing Bank and
each Lender and each director, officer, employee and affiliate or control person
thereof (each an "indemnified person") from and against any and all actions,
suits, proceedings (including any investigations or inquiries), claims, losses,
damages, liabilities or expenses of any kind or nature whatsoever which may be
incurred by or asserted against or involve the Agent, the Issuing Bank, any
Lender or any such indemnified person as a result of or arising out of or in any
way related to or resulting from this letter or any extension of credit, and,
upon demand, to pay and reimburse the Agent, the Issuing Bank, each Lender and
each indemnified person for any legal or other out-of-pocket expenses incurred
in connection with investigating, defending or preparing to defend any such
action, suit, proceeding (including any inquiry or investigation) or claim
(whether or not the Agent, the Issuing Bank, any Lender or any such person is a
party to any action or proceeding out of which any such expenses arise);
provided, however, that you shall have no obligation to indemnify any
indemnified person against any loss, claim, damage, expense or liability which
resulted solely from the gross negligence or willful misconduct of such
indemnified person. Neither the Agent, the Issuing Bank, any Lender nor any of
their affiliates shall be responsible or liable to you for any other person or
any damages which may be alleged as a result of this letter.
By executing this letter, you acknowledge that this letter is the only
agreement among you, the Agent, the Issuing Bank and Lenders with respect to the
amended credit facilities and sets forth the entire understanding of the parties
with respect thereto. Neither this Amended Commitment Letter nor the Term Sheet
may be changed except pursuant to a writing signed by each of the parties
hereto.
Your obligations under this letter with respect to fees,
indemnification, costs and expenses (as set forth herein and/or in the Term
Sheet), and confidentiality shall survive the expiration or termination of this
letter.
This letter shall not be assignable by you without the prior written
consent of the Agent. The Agent may assign all or any portion of its obligations
hereunder to its affiliates. This letter may be executed in any number of
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one agreement. This letter shall be governed by, and
construed in accordance with, the laws of the State of New York.
In addition to the matters described in this Amended Commitment Letter
and the Term Sheet, you agree as follows:
(i) The Parent Commitment and the Parent Facility (as defined in the
Existing Credit Agreement) are reduced to $50,000,000 effective as of the date
hereof;
(ii) The Borrowers agree promptly, upon their execution hereof, to
execute documentation acceptable to the Agent and the Lenders that grants the
Agent, for the ratable benefit of the Lenders and the Issuing Bank, a first lien
on (A) the marketable securities (other than the shares in GS Systems owned by
SGLG), government receivables and other personal property collateral described
in the Term Sheet (B) the life insurance collateral referred to in the Term
Sheet;
(iii) The provisions in the Term Sheet set forth under the caption
"Applicable Margin and Applicable Fee Percentage" and related provisions shall
be effective as of April 1, 2000; provided, that, any amounts payable by the
Borrowers in excess of that payable pursuant to the terms of the Existing Credit
Agreement shall not be payable by the Borrowers until the earlier of (i) a
default by any Credit Party under this Amended Commitment Letter, (ii) an Event
of Default the Existing Credit Agreement (but only after giving effect to the
amendments thereto that are contemplated by this Amended Commitment Letter and
Term Sheet) or (iii) the closing of the transactions contemplated by this
Amended Commitment Letter and Term Sheet; provided, further, that, upon the
earlier of such events all accrued and unpaid such amounts shall be payable by
the Borrowers in full;
(iv) The Borrowers shall immediately, upon their execution hereof, pay
(i) to the Agent, for the pro rata benefit of the Lenders, in consideration of
the issuance of the Prior Commitment Letter and this Amended Commitment Letter,
the Amendment Fee described in the Term Sheet and (ii) to Xxxxx, Xxxxxx &
Xxxxxx, LLP, as counsel to the Agent, all of its accrued and unpaid fees and
expenses for the period through July 18, 2000 in connection with its
representation of the Agent in transactions involving the Borrowers, including
certain accrued and unpaid fees and fees in connection with its preparation and
negotiation of the Prior Commitment Letter, a consent letter relating to the
transfer of certain assets by Xxxxxx and this Amended Commitment Letter and its
preparation of initial drafts certain documents in connection with the Prior
Commitment Letter and its representation of the Agent in matters subsequent
thereto, which fees for the period through July 18, 2000 are approximately
$64,050; and
(v) With respect to the shares of stock in GSE Systems, Inc. owned by
SGLG Corp., Parent shall promptly cause such securities to be transferred into
its name and promptly upon such transfer execute such documents and take such
action that grants the Agent, for the ratable benefit of the Lenders and the
Issuing Bank, a first lien on such securities (which transfer and pledge shall
in no event occur later than the closing of the transactions contemplated by
this Amended Commitment Letter and Term Sheet).
If you are in agreement with the foregoing, please sign and return to
the Agent the enclosed copy of this letter no later than 5:00 P.M., New York
time, on July __, 2000. This offer shall terminate at such time unless prior
thereto we shall have received duly signed and completed copies of such letters.
We look forward to working with you on this transaction.
Very truly yours,
FLEET BANK, NATIONAL ASSOCIATION,
as Agent
By:___________________________
Name: __________________
Title: __________________
Accepted and agreed to as of the date first above written:
GP STRATEGIES CORPORATION
By:________________________________
Name: Xxxxx Xxxxxxxxx
Title: Chief Financial Officer
GENERAL PHYSICS CANADA LTD.
By:________________________________
Name: Xxxxx Xxxxxxxxx
Title:
EXHIBIT A
AMENDED AND RESTATED CREDIT AGREEMENT
TERM SHEET OF PROPOSED CHANGES
[THIS TERM SHEET ADDRESSES PROPOSED CHANGES TO THE JUNE 15, 1998 CREDIT
AGREEMENT (AS AMENDED). IT IS CONTEMPLATED THAT EXCEPT AS INDICATED IN
THIS TERM SHEET, THE TERMS AND CONDITIONS PROVIDED IN THE EXISTING CREDIT
AGREEMENT WOULD REMAIN UNCHANGED.]
Borrowers: GP Strategies Corporation ("Strategies") and General Physics
Canada Ltd. ("Physics").
Guarantors: Same as existing except GP Environmental Services is no
longer a Guarantor since it is no longer a subsidiary.
Administrative
Agent: Fleet Bank, N.A. (individually, "Fleet").
Revolving Credit
Facility: Subject to the Borrowing Base limitations herein provided,
the maximum amount at any time outstanding ("Maximum RC
Commitment") under the Revolving Credit Facility (the
"Revolving Facility") shall be reduced to $50,000,000. The
reduced facility amount shall be allocated to each Lender
according to their existing commitment percentages. All
advances will be made by the Lenders ratably in proportion
to their respective existing commitment percentages.
Applicable Margin
and Applicable Fee
Percentage: The Applicable Margin and Applicable Fee Percentage shall
each be replaced, subject to adjustment only as hereinbelow
provided (or as required to be adjusted in the case of an
Event of Default), with the percentage 2.75% in the case of
the Applicable Margin for Revolving Facility Eurodollar
Advances, 1.25% in the case of the Applicable Margin for
Revolving Facility ABR Advances, 2.75% in the case of the
Applicable Percentage for standby letters of credit and .50%
in the case of the Applicable Percentage for the commitment
fee. The interest rate applicable to term loan ABR Advances
shall be 1.25% per annum above the Alternate Base Rate and
the interest rate applicable to term loan Eurodollar
Advances shall be 2.75% above the Eurodollar Rate. The
interest rate applicable to the term loans shall not be
subject to further adjustment other than in the case of an
Event of Default.
If at the end of any fiscal quarter there is not Minimum
Excess Availability, each of the rates set forth above for
the Revolving Facility applicable to loans and standby
letters of credit shall immediately increase, on a
cumulative basis, by .25% from the rate that was theretofore
in effect, provided, that, if at the end of any subsequent
fiscal quarter there is such Minimum Excess Availability,
each of such interest rates applicable to loans and standby
letters of credit for the Revolving
Facility shall immediately decrease to the initial rates and
margins provided in the immediately prior paragraph, subject
to further increase (in the manner heretofore provided) at
the end of each fiscal quarter thereafter if there is not
maintained Minimum Excess Availability.
To the extent that there is Prompt Compliance, each of the
foregoing interest rates for the Revolving Facility
applicable to loans and standby letters of credit shall
decrease by .25%, which rates shall be maintained as long as
there remains Minimum Excess Availability (when and as
required); provided, that, if at any time Minimum Excess
Availability is not so maintained, each of such interest
rates shall be immediately increased to 3.00% per annum,
subject to further increase or decrease, as the case may be,
in the manner hereinabove provided, at the end of each
fiscal quarter thereafter as a result of adjustments due to
the Minimum Excess Availability requirements.
Amendment Fee: 25% of each Lender's reduced commitment amount plus .25% of
each Lender's outstanding term loans, which fee is to be
paid contemporaneously with the Borrowers' acceptance of the
Amended Commitment Letter to which this Term Sheet is
attached.
Security: Collateral will not change except there will be no lien on
any assets of the Hydro Med division and (i) Assignments of
Government Contracts will be fully perfected and formalized,
(ii) a first priority perfected security interest granted to
Fleet, as agent for the ratable benefit of the Lenders, in
all securities owned by Strategies and/or its subsidiaries,
(iii) a first mortgage in favor of Xxxxx, as agent for the
ratable benefit of the Lenders, in the following real
property (collectively the "Real Property"): all real
property owned by MXL Industries, Inc. and all real property
owned by the Parent's other direct and indirect
subsidiaries' to secure the existing guarantee of MXL
Industries, Inc and such subsidiaries, which mortgages shall
be immediately recorded except for the mortgage granted by
MXL Industries, Inc which shall not be recorded unless, with
respect to each such property, either a contract for a sale
of such property or a sale/leaseback of such property is not
executed on or before August 31, 2000 or the closing of such
sale or sale/leaseback is not consummated on or before
September 30, 2000, (iv) a first priority perfected security
interest granted to Fleet, as agent for the ratable benefit
of the Lenders, in all personal property and fixtures of the
Parent and each Subsidiary Guarantor, (v) a first priority
assignment and lien on all of the registered patents,
copyrights and trademarks of Strategies and/or its
Subsidiaries and (vi) at the option of Strategies (A) a
first priority collateral assignment of the aggregate cash
surrender value (as of the date hereof, approximately
$400,000) of two life insurance policies in the aggregate
amount of $4,000,000 on the life of Xxxxx Xxxxxxx (the
"Insurance Policy"), or (B) a first priority perfected
security interest in all the proceeds received upon the
surrender of the Insurance Policy.
Appraisals: The Agent or its designee shall be authorized to obtain an
appraisal, at the Borrowers' expense, of all the Real
Property, except that with respect to the Real Property
owned by MXL Industries, Inc. such an appraisal shall only
be obtained if either of the conditions for recording such
mortgage have occurred.
Reporting
Requirements: Separate monthly internally prepared financial statements of
Strategies, General Physics Corporation (United States),
General Physics Canada Ltd and General Physics Corporation
(UK) Limited and a monthly detailed aging and Borrowing Base
certificate for all accounts included in the Borrowing Base
in a format satisfactory to the Agent.
A monthly report in a format satisfactory to the Agent
comparing Strategies (on a consolidated and consolidating
basis) actual results against its projections, both for the
immediately preceding month and year to date.
Borrowing Base: The aggregate exposure (loans and letters of credit)
outstanding under the Revolving Facility shall not exceed
the lesser of (i) the Maximum RC Commitment (as reduced) or
(ii) the Borrowing Base, as then in effect.
Additional
Acquisitions: Availability for further acquisitions will henceforth be
prohibited.
Mandatory Prepayment
Due to Exceeding
Limitations: If at any time the aggregate amount of outstanding loans and
Letters of Credit under the Revolving Facility exceeds (i)
the Maximum Commitment (as reduced) or (ii) the Borrowing
Base, within five days of the first day there exists such
excess Strategies shall prepay the outstanding loans in an
amount sufficient to eliminate such excess (or deposit cash
collateral for Letters of Credit if there remains such
excess and all such loans outstanding have been prepaid).
Mandatory Prepayment
and Overadvance
Reduction from
Certain Sales: As long as the Overadvance Amount is greater than
zero, with respect to each Asset Sale, the Required
Reduction Amount will each be applied to immediately reduce
the Overadvance Amount (and henceforth availability) as
herein provided and to the extent that after reducing such
Overadvance Amount outstanding extensions of credit exceed
the Borrowing Base, mandatory prepayment of the Revolving
Facility shall be required.
At any time the Overadvance Amount is reduced to zero, with
respect to each Asset Sale, the Required Reduction Amount
shall at the option of Strategies, be (i) held as cash
collateral for the Revolver Facility and the term loans (but
excluded from the Borrowing Base), or (ii) applied against
the outstanding balance of the term loans until the terms
loans have been paid in full, at which time all remaining
Required Reduction Amounts shall be held as cash collateral
for the Revolver Facility.
No Asset Sale shall be permitted unless, in addition to
other conditions typically provided in credit agreements
restricting the sale of assets, the Borrowers shall have
demonstrated pro forma compliance with the Borrowing Base
after giving effect to such Asset Sale.
Financial
Covenants:
Unless otherwise indicated, all covenants are applicable to
Strategies on a consolidated basis.
a.) Total Funded Debt to EBITDA - covenant will be deleted
b.) Minimum Net Worth - 95% of Strategies Consolidated Net
Worth as at June 30, 2000 (assuming a maximum of $36,000,000
of adjustments and losses from the IT Business is taken in
full on or before June 30, 2000, presently estimated at
$67,950,000) (95% of such June 30, 2000 consolidated Net
Worth is referred to herein as the "Beginning Net Worth
Amount"), and as the last day of each fiscal quarter
thereafter, the greater of (A) the Minimum Net Worth Amount
for such fiscal quarter and (B) the sum of the Beginning Net
Worth Amount, plus (i) 80% of the Strategies' Consolidated
Net Income for each fiscal quarter commencing September 30,
2000, plus (ii) 80% of the Net Cash Proceeds (on a
cumulative basis) resulting from any equity issuance by
Strategies or any of its subsidiaries, and then minus (iii)
any IT Adjustment occurring after June 30, 2000.
c.) Minimum Fixed Charge Coverage Ratio - (Quarterly test) -
as to the fiscal quarters ending on the dates set forth
below, a proportion not less than that set forth opposite
such quarter:
Quarter Ratio
June 30, 2000 > 1.15 to 1.00
-
September 30, 2000 > 1.40 to 1.00
-
December 31, 2000 > 1.65 to 1.00
--
March 31, 2001 and thereafter > 1.75 to 1.00
--
d.) Maximum Capital Expenditure Limit - (no change)
e.) Minimum EBITDA - with respect to the fiscal quarters
ending on the dates set forth below, an amount not less than
the amount set forth opposite such quarter:
Quarter Amount
June 30, 2000 $2,895,300
September 30, 2000 $3,563,200
December 31, 2000 $4,258,300
March 31, 2001 and thereafter $4,500,000
f.) Total Consolidated Liabilities to the sum of Tangible
Net Worth plus Subordinated Debt - as to the fiscal quarters
ending on the dates set forth below, a proportion not
greater than that set forth opposite such quarter:
Quarter Ratio
June 30, 2000 5.50 to 1.00*
September 30, 2000 6.15 to 1.00
December 31, 2000 5.50 to 1.00
March 31, 2001 and thereafter 5.00 to 1.00
(*for purposes of the June 30, 2000 calculation, it shall be
assumed that all Subordinated Debt that is outstanding as at
the date hereof was outstanding as at June 30, 2000)
Hydro Med Issues: Parent shall at all times own shares in Hydro Med Sciences,
Inc. that either (A) constitute not less than 51% of the
issued and outstanding stock of Hydro Med, Inc. or (B) have
a fair market value of not less than $17,500,000.
It shall be an additional Event of Default under the Credit
Agreement if Hydro Med Sciences, Inc. incurs or permits to
exist (i) any indebtedness for borrowed money, excluding
trade payables and purchase money indebtedness incurred in
connection with capitalized leases in an aggregate amount
not in excess of $500,000 or (ii) any lien or encumbrance on
any of its assets (other than liens securing the purchase
money indebtedness permitted by (i) above).
Loans and Advances: Section 8.5 of the existing Credit Agreement shall be
revised to, among other things, prohibit any further loans
or advances to employees, except additional loans to
employees that are not officers of any Credit Party not in
excess of $250,000 with respect to all such loans in the
aggregate. Loans or advances under the existing basket for
cashless Option Loans (as defined in the amendments to the
existing Credit Agreement) shall remain.
Fees and Expenses: The Borrowers shall pay all the fees and expenses of the
Bank, including without limitation fees related to an
examination of the Borrowers' books and records, filing,
search and recording fees and the fees and expenses of,
Xxxxx, Xxxxxx & Xxxxxx, LLP, counsel to the Agent.
Definitions
Definitions will be supplemented and more fully provided in the Amendment to the
Credit Agreement, but generally will incorporate the following:
Accounts: Those accounts receivable arising out of the sale or lease of goods or
the rendition of services by Strategies, Physics MXL Industries, Inc. or General
Physics Corporation (UK) Limited.
Accounts Receivable Borrowing Base: 80% of Eligible Accounts of from time to
time outstanding, plus the lesser of $3,500,000 or 80% of the Eligible Foreign
Accounts of Strategies, Physics, MXL Industries, Inc. and General Physics
Corporation (UK) Limited from time to time outstanding.
Asset Sales: In addition to those currently applicable under the existing Credit
Agreement (i) sales of property and assets of a Borrower or any of its
subsidiaries (excluding sales of inventory in the ordinary course of business),
(ii) any and all equity offering(s) of any Borrower, Guarantor, or any of their
respective subsidiaries, and (iii) the sale of any investment securities owned
by any Borrower or its subsidiaries with a fair market value in excess of
$100,000 with respect to all such sales in the aggregate.
Availability: At any time of determination, the difference between the Borrowing
Base at such time and the aggregate amount of the total outstanding exposure
(loans and letters of credit) under the Revolving Facility at such time.
Borrowing Base: (i) Accounts Receivable Borrowing Base; plus (ii) the Marketable
Securities Borrowing Base; plus (iii) the
Overadvance Amount (as reduced from time to time).
EBITDA: EBITDA shall be amended to be calculated prior to any IT Adjustment (but
solely up to the maximum $36,000,000 provided in the definition of IT
Adjustment, it being expressly agreed that amounts in excess of such $36,000,000
(whether cash and/or non-cash) shall be included in the calculation of EBITDA).
Only cash gains from the sale of marketable securities may be included and, with
respect to the EBITDA calculation for any fiscal quarter in any calendar year,
the amount of cash gains from the sale of marketable securities that may be
included in the calculation of EBITDA shall not exceed an amount that, when
added to the amount of cash gains from the sale of marketable securities for all
other fiscal quarters in such calendar year (even if prior to the date hereof),
exceeds $3,000,000.
Eligible Accounts: Accounts (i) which result from services rendered, (ii) which
are General Eligible Accounts, (iii) which are owed by account debtors located
within the United States of America, (iv) which are due and payable within 90
days from the original date of invoice, except with respect to Government
Assigned Receivables which shall be due and payable within 120 days from the
original date of invoice and (v) which do not remain unpaid for more than 30
days past the due date stated in the original invoice.
Eligible Foreign Accounts: Accounts (i) which are owed by account debtors
located outside of the United States of America, (ii) which are General Eligible
Accounts, (iii) which are due and payable within 90 days from the original date
of invoice and (iv) which do not remain unpaid for more than 30 days past the
due date stated in the original invoice.
Eligible Securities Collateral: The following types of marketable securities
that are subject to a first priority perfected security interest in favor of the
Agent for the benefit of the Lenders and for which there can be obtained a
publicly quoted fair market value: U.S. Treasury Obligations; Municipal Bonds;
stocks and bonds listed on the New York Stock Exchange; stocks and bonds listed
on NASDAQ; and over the counter listed stocks and bonds; provided, however, that
(a) no bond shall come within this definition of "Eligible Securities
Collateral" unless it is of investment grade; which shall mean such bond has a
BBB or better rating from Standard and Poors Corporation or a BAA or better
rating from Xxxxx'x Investment Services, Inc.; and (b) no stock shall come
within this definition of "Eligible Securities Collateral" (i) unless it is
publicly traded and has a publicly reported fair market value; (ii) if it is
stock of a financial institution or stock of a securities firm (the
determination of whether the applicable stock is stock of a financial
institution or a securities firm shall be in the sole discretion of the Bank)
and (iii) if all or any part of a Loan was made for the purpose of "purchasing"
or "carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect.
Fixed Charge Coverage Ratio:: as of the last day of any fiscal quarter, the
ratio of (a) Consolidated EBITDA for such fiscal quarter to (b) Consolidated
Fixed Charges plus Capital Expenditures, for such fiscal quarter.
General Eligible Accounts: Accounts that have been validly assigned to Fleet as
Agent and in which Fleet, as Agent, has a first priority perfected security
interest and otherwise comply with all of the terms, conditions, warranties and
representations made to Fleet and the Lenders, but General Eligible Accounts
shall not include the following: (a) Accounts with respect to which the account
debtor is an officer, director, employee, or agent of Strategies or an affiliate
of Strategies; (b) Accounts with respect to which the sale is on an installment
sale, lease or other extended payment basis (c) all Accounts owing by any
account debtor if fifty percent (50%) or more of the Accounts due from such
account debtor are deemed not to be General Eligible Accounts hereunder; (d)
Accounts with respect to which the account debtor is a subsidiary of, affiliate
of, or has common officers or directors with Strategies; (e) Accounts with
respect to which Fleet, as Agent, does not for any reason have a perfected first
priority lien; (f) Accounts with respect to which Strategies is or may become
liable to the account debtor for goods sold or services rendered by the account
debtor to Strategies, to the extent of Strategies' existing or potential
liability to such account debtor; (g) Accounts with respect to which the account
debtor has disputed any liability, or the account debtor has made any claim with
respect to any other Account due to Strategies, or the Account is otherwise
subject to any right of setoff, deduction, breach of warranty or other defense,
dispute or counterclaim by the account debtor; (h) that portion of the Accounts
owed by any single account Debtor which exceeds twenty five percent (25%) of all
of the Accounts; (i) that portion of any Accounts representing late fees,
service charges or interest, but only to the extent of such portion; (j)
Accounts of an account debtor where the account debtor is located in Minnesota
or New Jersey unless the payee with respect to such account (1) with respect to
such state, has received a Certificate of Authority to do business and is in
good standing in such state, or (2) has filed a Notice of Business Activities
Report with the applicable state authority in such state, as applicable, for the
then current year; (k) Accounts owed by any account debtor which is insolvent or
is the subject of an insolvency proceeding; (l) that portion or any Accounts
represented by contract rights, documents, instruments, chattel paper or general
intangibles; (m) any and all Accounts of an account debtor whose
creditworthiness is not satisfactory to Fleet in its sole credit judgment based
on information available to Fleet; (n) Accounts that have been billed but are
not yet earned and (o) Accounts with respect to which the account debtor is a
federal, state, local or foreign governmental authority unless such Accounts are
Government Assigned Receivables. References to percentages of all Accounts are
based on dollar amount of Accounts, and not number of Accounts.
Government Assigned Receivables: Accounts where the account debtor is the United
States of America or any department, agency or instrumentality of the Untied
States and for which Strategies, Physics, MXL Industries, Inc. and General
Physics Corporation (UK) Limited, as the case may be, has complied with the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 203 et seq.).
IT Adjustment: Up to a maximum of $36,000,000 on account of reserves, charges,
asset write-offs, closure costs, ongoing operating losses and other costs and
expenses of Strategies for the fiscal quarter ending June 30, 2000 or any fiscal
period thereafter with respect to its sale or closure of the IT Business;
provided, that, such $36,000,000 limitation shall apply to all such reserves,
charges, asset write-offs, closure costs, ongoing operating losses and other
costs and expenses in the aggregate; provided further, that, during the twelve
month period from March 31, 2000 through and including March 31, 2001, of such
$36,000,000 not more than $8,500,000 shall be in cash (the fact that some
portion of the IT Adjustment is permitted to be a cash expense, however, shall
not be deemed a waiver or amendment of any other covenant that may be breached
as a result of such expense).
IT Business: The Borrowers' open enrollment information technology training
business operations in Canada and the United Kingdom.
Loan Value: Shall apply to only Eligible Securities Collateral, shall be
determined based on the publicly quoted fair market value of Eligible Securities
Collateral at the time of determination thereof and shall mean the percentages
indicated below for the applicable Eligible Securities Collateral based on such
publicly quoted fair market value:
Type Of Security Loan Value
Cash and Cash Equivalents 100%
U.S. Treasury Obligations with maturities of less than 1 year 95%
U.S. Treasury Obligations with maturities of 1 year or more 90%
Municipal Bonds 80%
A1/P1 Commercial Paper 80%
Bonds listed on the New York Stock Exchange 70%
Bonds listed on the American Stock Exchange 70%
Publicly Traded Stocks 50%
Marketable Securities Borrowing Base: The Loan Value of Eligible Securities
Collateral.
Maximum Overadvance Amount: During the Periods set forth below, the amount set
forth below opposite such period:
Period Amount
Date hereof through August 30, 2000 $ 8,000,000
August 31, 2000 through September 29, 2000 $ 7,500,000
September 30, 2000 through October 30, 2000 $ 7,000,000
October 31, 2000 through November 29, 2000 $ 6,500,000
November 30, 2000 through December 30, 2000 $ 6,000,000
December 31, 2000 through January 30, 2001 $ 4,500,000
January 31, 2001 through February 27, 2001 $ 3,500,000
February 28, 2001 through March 30, 2001 $ 1,500,000
March 31, 2001 and at all times thereafter
Minimum Excess Availability: As at the last day of each fiscal quarter of
Strategies, Availability in an amount equal to the lesser of $3,000,000 or the
Overadvance Amount (as such Overadvance Amount is reduced from time to time).
Minimum Net Worth Amount: As at (i) June 30, 2000, $70,728,000, (ii) September
30, 2000, $70,000,000 and (iii) December 31, 2000 and the last day of each
fiscal quarter thereafter, $71,000,000 plus (A) 80% of the Strategies'
Consolidated Net Income for each fiscal quarter commencing December 31, 2000
plus (B) 80% of the Net Cash Proceeds (on a cumulative basis) resulting from any
equity issuance by Strategies or any of its subsidiaries.
Overadvance Amount: The "Overadvance Amount" shall equal the amount advanced in
excess of the Accounts Receivable Borrowing Base and the Marketable Securities
Borrowing Base which shall in no event exceed the lesser of (i) $8,000,000 minus
the aggregate Required Reduction Amounts with respect to all Asset Sales on a
cumulative basis for the period from the date hereof through the date of
computation and (ii) the Maximum Overadvance Amount for the date of computation.
The Overadvance Amount shall be automatically reduced at the end of each month
and at the time of each Asset Sale.
[THE $8,000,000 BEGINNING OVERADVANCE AMOUNT IS PRESENTLY AN ESTIMATE AND MAY BE
REVISED UPON RECEIPT OF MORE CURRENT BORROWING BASE INFORMATION FROM STRATEGIES
AND ITS SUBSIDIARIES.]
Prompt Compliance: If at September 30, 2000 no Default or Event of Default then
exists and Strategies has maintained Minimum Excess Availability as of September
30, 2000 and December 31, 2000.
Required Reduction Amount: With respect to Asset Sales of assets sold that were
not included in the Borrowing Base, 75% of the Net Cash Proceeds (as defined in
the existing credit agreement), and with respect to Asset Sales of assets sold
that were included in the Borrowing Base, the amount equal to an amount that
when added to the amount of the reduction in the Borrowing Base (as a result of
the sold assets no longer being included in the Borrowing Base) equals 75% of
the total Net Cash Proceeds (as defined in the existing credit agreement) (for
the avoidance of doubt, the Required Reduction Amount is determined in
accordance with the following formula: x + reduction in Borrowing Base =
(.75)(Net Cash Proceeds)); provided, that, if same would result in a negative
number the Required Reduction Amount shall be deemed zero.
Total Consolidated Liabilities: Defined and determined in accordance with GAAP.
Tangible Net Worth: Consolidated Net Worth as defined in the existing Credit
Agreement minus deferred charges, intangibles and treasury stock, all determined
in accordance with GAAP and at any time the IT Adjustment is less than
$36,000,000, minus the difference between $36,000,000 and the aggregate amount
of the IT Adjustments occurring prior to the time of calculation.
