Exhibit 10.2
LOAN AND SECURITY AGREEMENT
between
GSE SYSTEMS, INC.,
A Delaware Corporation,
GSE PROCESS SOLUTIONS, INC.,
A Delaware Corporation
and
GSE POWER SYSTEMS, INC.,
A Delaware Corporation
Borrowers
and
NATIONAL BANK OF CANADA,
A Canadian Chartered Bank,
Lender
___________________________________________
$10,000,000.00 Revolving Credit Facility
____________________________________________
Dated: March 23, 2000
TABLE OF CONTENTS Page
ARTICLE 1DEFINITIONS.........................................................-1-
Section 1.1. Account Debtor..................................................-1-
Section 1.2. Accounts, Chattel Paper, Documents, Equipment, Fixtures,
General Intangibles, Goods, Instruments and
Investment Property .........................................................-2-
Section 1.3. Acquisition.....................................................-2-
Section 1.4. Acquisition Agreement...........................................-2-
Section 1.5. Additional Collateral Borrowing Base............................-2-
Section 1.6. Additional Collateral Credit Percentage.........................-2-
Section 1.7. Adjusted Base Rate..............................................-2-
Section 1.8. Adjusted LIBOR Rate.............................................-2-
Section 1.9. Affiliate. .....................................................-3-
Section 1.10. Agreement. ....................................................-3-
Section 1.11. Applicable Margin..............................................-3-
Section 1.12. Base Rate......................................................-3-
Section 1.13. Base Rate Borrowing............................................-3-
Section 1.14. Billed Commercial Accounts Borrowing Base......................-3-
Section 1.15. Billed Commercial Accounts Credit Percentage...................-3-
Section 1.16. Billed Government Accounts Borrowing Base......................-3-
Section 1.17. Billed Government Accounts Credit Percentage...................-4-
Section 1.18. Borrowing Base.................................................-4-
Section 1.19. Business Day. .................................................-4-
Section 1.20. Capital Adequacy Requirement. .................................-4-
Section 1.21. Capital Lease. ................................................-4-
Section 1.22. Capital Lease Obligations. ....................................-4-
Section 1.23. Capital Stock..................................................-4-
Section 1.24. Closing. ......................................................-4-
Section 1.25. Code. .........................................................-5-
Section 1.26. Collateral. ...................................................-5-
Section 1.27. Collection Account. ...........................................-5-
Section 1.28. Commercial Account. ...........................................-5-
Section 1.29. Credit Facility................................................-5-
Section 1.30. Default. ......................................................-5-
Section 1.31. Dollar Cap. ...................................................-5-
Section 1.32. Domestic Subsidiary. ..........................................-5-
Section 1.33. EBITDA.........................................................-5-
Section 1.34. Eligible Additional Collateral Value...........................-6-
Section 1.35. Eligible Billed Commercial Accounts. ..........................-6-
Section 1.36. Eligible Billed Government Accounts............................-7-
Section 1.37. Eligible Inventory. ...........................................-8-
Section 1.38. Eligible Unbilled Government Accounts..........................-9-
Section 1.39. Employee Benefit Plan. ........................................-9-
Section 1.40. Environmental Laws. ...........................................-9-
Section 1.41. EPA Permit. ..................................................-10-
Section 1.42. ERISA. .......................................................-10-
Section 1.43. ERISA Affiliate. .............................................-10-
Section 1.44. ERISA Liabilities. ...........................................-10-
Section 1.45. Event Of Default. ............................................-10-
Section 1.46. Facilities. ..................................................-10-
Section 1.47. Federal Funds Effective Rate..................................-10-
Section 1.48. Fiscal Year. .................................................-10-
Section 1.49. G.A.A.P. .....................................................-10-
Section 1.50. GSE Power Systems AB Note. ...................................-11-
Section 1.51. GSE Systems. .................................................-11-
Section 1.52. Guaranteed Pension Plan. .....................................-11-
Section 1.53. Guarantors. ..................................................-11-
Section 1.54. Guaranty Agreements. .........................................-11-
Section 1.55. Guaranty Indebtedness. .......................................-11-
Section 1.56. Government Contract...........................................-11-
Section 1.57. Indebtedness. ................................................-12-
Section 1.58. Insolvency Proceedings. ......................................-12-
Section 1.59. Intellectual Property.........................................-12-
Section 1.60. Interest Period...............................................-12-
Section 1.61. Interest Rate Protection Agreement............................-12-
Section 1.62. Inventory. ...................................................-12-
Section 1.63. Inventory Borrowing Base......................................-13-
Section 1.64. Inventory Credit Percentage...................................-13-
Section 1.65. Inventory Maximum Credit Amount...............................-13-
Section 1.66. Laws. ........................................................-13-
Section 1.67. L/C Exposure..................................................-13-
Section 1.68. Lender Expenses. .............................................-13-
Section 1.69. Letters Of Credit. ...........................................-14-
Section 1.70. LIBOR Borrowing...............................................-14-
Section 1.71. LIBOR Rate....................................................-14-
Section 1.72. Limited Guarantors............................................-14-
Section 1.73. Loan. ........................................................-14-
Section 1.74. Loan Documents. ..............................................-14-
Section 1.75. Lock Box. ....................................................-15-
Section 1.76. Material Adverse Event. ......................................-15-
Section 1.77. Maximum Credit Amount. .......................................-15-
Section 1.79. Net Profit After Taxes........................................-15-
Section 1.80. Note. ........................................................-15-
Section 1.81. Obligations. .................................................-15-
Section 1.82. Permitted Acquisitions........................................-16-
Section 1.83. Permitted Liens. .............................................-17-
Section 1.84. Person. ......................................................-17-
Section 1.85. Quarter.......................................................-17-
Section 1.86. Receivables. .................................................-17-
Section 1.87. Records. .....................................................-18-
Section 1.88. Regulated Substance. .........................................-18-
Section 1.89. Regulatory Change.............................................-18-
Section 1.90. Reimbursement Obligations.....................................-18-
Section 1.91. Release. .....................................................-18-
Section 1.92. Reserve Requirement...........................................-18-
Section 1.93. Restricted Payment. ..........................................-18-
Section 1.94. Solvent. .....................................................-19-
Section 1.95. Stated Amount.................................................-19-
Section 1.96. Subordinated Debt.............................................-19-
Section 1.97. Subsidiary. ..................................................-19-
Section 1.98. Tangible Net Worth............................................-19-
Section 1.99. Target........................................................-20-
Section 1.100. Termination Event. ..........................................-20-
Section 1.102. Total Assets.................................................-20-
Section 1.103. Total Current Assets.........................................-20-
Section 1.104. Total Current Liabilities....................................-20-
Section 1.105. Total Liabilities............................................-21-
Section 1.106. Unbilled Government Accounts Borrowing Base..................-21-
Section 1.107. Unbilled Government Accounts Credit Percentage...............-21-
Section 1.108. Unbilled Government Accounts Maximum Credit Amount...........-21-
Section 1.109. Working Capital..............................................-21-
Section 1.110. Year 2000 Compliant..........................................-21-
Section 1.111. Year 2000 Problem............................................-21-
ARTICLE 2TERMS OF THE CREDIT FACILITY.......................................-22-
Section 2.1. Agreement To Extend The Loan...................................-22-
Section 2.1.1. Note; Interest, And Lender=s Records.........................-22-
Section 2.1.2. Term.........................................................-22-
Section 2.1.3. Purpose......................................................-23-
Section 2.2. Letters Of Credit..............................................-23-
Section 2.2.1. Availability.................................................-23-
Section 2.2.2. Requests for Letters of Credit. .............................-23-
Section 2.2.3. Letter of Credit Fees And Other Charges. ....................-23-
Section 2.2.4. Payment of Reimbursement Obligations.........................-24-
Section 2.2.5. Conversion of Reimbursement Obligations to Loans.............-24-
Section 2.2.6. Payment of L/C Exposure Upon Termination Date. ..............-24-
Section 2.2.7. Payment Obligations Unconditional. ..........................-24-
Section 2.2.8. Suspension of Commitment to Issue Letters of Credit. ........-25-
Section 2.2.9. Rights And Remedies Of The Lender. ..........................-25-
Section 2.2.10. Indemnification. ...........................................-26-
Section 2.3. Interest Rates.................................................-26-
Section 2.3.1. Calculation Of Interest......................................-26-
Section 2.3.2. Adjusted Base Rate...........................................-26-
Section 2.3.3. Adjusted LIBOR Rate Option...................................-26-
Section 2.3.4. Default Rate.................................................-28-
Section 2.3.5. Maximum Rate Of Interest.....................................-28-
Section 2.4. Payments To Be Made To The Lender..............................-29-
Section 2.5. Application Of Payments........................................-29-
Section 2.6. Late Payment Charge............................................-29-
Section 2.7. Facility Fee. .................................................-29-
Section 2.8. Commitment Fee.................................................-30-
Section 2.9. Examination Fee................................................-30-
Section 2.10. Termination Fee...............................................-30-
Section 2.11. Capital Adequacy. ............................................-31-
Section 2.12. Payments. ....................................................-31-
Section 2.13. Advancements. ................................................-31-
Section 2.14. Cross-Guaranty; Waiver Of Suretyship Defenses; Subordination..-32-
Section 2.14.1. Cross-Guaranty. ............................................-32-
Section 2.14.2. Postponement of Subrogation. ...............................-32-
Section 2.14.3. Subordination. .............................................-32-
Section 2.14.4. Joint And Several Liability; Appointment Of Agent. .........-32-
ARTICLE 3SECURITY FOR THE OBLIGATIONS.......................................-33-
Section 3.1. Grant Of Security Interest. ...................................-33-
Section 3.2. Proceeds And Products. ........................................-33-
Section 3.3. Priority Of Security Interests. ...............................-33-
Section 3.4. Future Advances. ..............................................-33-
Section 3.5. Receivable Collections. .......................................-34-
Section 3.6. Collection Of Receivables By Lender. ..........................-34-
Section 3.7. Guaranty Agreements. ..........................................-35-
Section 3.8. Further Assurances. ...........................................-35-
Section 3.9. Fair Labor Standards Act. .....................................-36-
ARTICLE 4CONDITIONS PRECEDENT...............................................-36-
Section 4.1. Conditions to Closing..........................................-36-
Section 4.1.1. Organizational Documents.....................................-36-
Section 4.1.2. Opinion Of Counsel...........................................-36-
Section 4.1.3. Execution Of Loan Documents..................................-37-
Section 4.1.4. Submissions..................................................-37-
Section 4.1.5. Insurance....................................................-37-
Section 4.1.6. Record Searches..............................................-37-
Section 4.1.7. Absence Of Material Adverse Change...........................-37-
Section 4.1.8. Payment Of Closing Fees......................................-37-
Section 4.1.9. Payment Of Lender=s Closing Costs............................-37-
Section 4.1.10. Dime Commercial Corp. Facility..............................-37-
Section 4.2. Conditions Precedent To All Advances and Issuance of
Letters of Credit.........................................................-37-
Section 4.2.1. No Defaults Or Events Of Default.............................-38-
Section 4.2.2. Continuing Accuracy Of Representations And Warranties........-38-
Section 4.2.3. Receipt Of Reports...........................................-38-
Section 4.2.4. No Illegalities..............................................-38-
Section 4.2.5. No Material Adverse Event....................................-38-
ARTICLE 5REPRESENTATIONS AND WARRANTIES.....................................-38-
Section 5.1. Accuracy Of Information. ......................................-38-
Section 5.2. No Litigation. ................................................-39-
Section 5.3. No Liability Or Adverse Change. ...............................-39-
Section 5.4. Title To Collateral. ..........................................-39-
Section 5.5. Authority; Approvals And Consents. ............................-39-
Section 5.5.1. Authority. ..................................................-39-
Section 5.5.2. Approvals. ..................................................-39-
Section 5.5.3. Consents. ...................................................-39-
Section 5.6. Binding Effect Of Documents, Etc. .............................-40-
Section 5.7. Other Names. ..................................................-40-
Section 5.8. No Events Of Default. .........................................-40-
Section 5.9. Guaranty Agreements. ..........................................-40-
Section 5.10. Taxes. .......................................................-40-
Section 5.11. Compliance With Laws. ........................................-40-
Section 5.12. Chief Place Of Business. .....................................-40-
Section 5.13. Location Of Inventory. .......................................-40-
Section 5.14. No Subsidiaries. .............................................-41-
Section 5.15. No Labor Agreements. .........................................-41-
Section 5.16. Eligible Accounts. ...........................................-41-
Section 5.17. Eligible Inventory. ..........................................-41-
Section 5.18. Eligible Additional Collateral Value. ........................-41-
Section 5.19. Approvals. ...................................................-41-
Section 5.20. Financial Statements. ........................................-41-
Section 5.21. Solvency. ....................................................-42-
Section 5.22. Fair Labor Standards Act. ....................................-42-
Section 5.23. Employee Benefit Plans. ......................................-42-
Section 5.23.1. Compliance. ................................................-42-
Section 5.23.2. Absence Of Termination Event. ..............................-42-
Section 5.23.3. Actuarial Value. ...........................................-42-
Section 5.23.4. No Withdrawal Liability. ...................................-42-
Section 5.24. Environmental Conditions. ....................................-42-
Section 5.24.1. Existence Of Permits. ......................................-42-
Section 5.24.2. Compliance With Permits. ...................................-43-
Section 5.24.3. No Litigation. .............................................-43-
Section 5.24.4. No Releases. ...............................................-43-
Section 5.24.5. Transportation. ............................................-43-
Section 5.24.6. No Violation Notices. ......................................-43-
Section 5.24.7. No Notice Of Violations.....................................-43-
ARTICLE 6AFFIRMATIVE COVENANTS..............................................-43-
Section 6.1. Payment. ......................................................-43-
Section 6.2. Insurance. ....................................................-44-
Section 6.3. Books And Records. ............................................-44-
Section 6.4. Collection Of Accounts; Sale Of Inventory. ....................-44-
Section 6.5. Notice Of Litigation And Proceedings. .........................-44-
Section 6.6. Payment Of Liabilities To Third Persons. ......................-45-
Section 6.7. Change Of Business Location. ..................................-45-
Section 6.8. Payment Of Taxes. .............................................-45-
Section 6.9. Inspections Of Records. .......................................-45-
Section 6.10. Notice Of Events Affecting Collateral; Compromise Of
Receivables; Returned Or Repossessed Goods................................. -46-
Section 6.11. Documentation Of Collateral. .................................-46-
Section 6.12. Reporting Requirements. ......................................-46-
Section 6.12.1. Inventory Reports. .........................................-46-
Section 6.12.2. Receivables And Accounts Payable Reports. ..................-47-
Section 6.12.3. Government Contracts Report. ...............................-47-
Section 6.12.4. Borrowing Base Report. .....................................-47-
Section 6.12.5. Quarterly Financial Statements. ............................-47-
Section 6.12.6. Annual Financial Statements. ...............................-47-
Section 6.12.7. Annual Business Plan and Financial Projections. ............-47-
Section 6.12.8. SEC And Other Filings.......................................-48-
Section 6.12.9. Management Letters. ........................................-48-
Section 6.12.10. Certificates Of No Default. ...............................-48-
Section 6.12.11. Reports To Other Creditors. ...............................-48-
Section 6.12.12. Management Changes. .......................................-49-
Section 6.12.13. General Information........................................-49-
Section 6.13. Employee Benefit Plans And Guaranteed Pension Plans. .........-49-
Section 6.14. Maintenance Of Fixed Assets. .................................-49-
Section 6.15. Consignments. ................................................-49-
Section 6.16. Foreign Receivables...........................................-50-
Section 6.17. Federal Assignment Of Claims Act. ............................-50-
Section 6.18. Compliance With Laws. ........................................-50-
Section 6.19. Formation of Subsidiaries.....................................-51-
Section 6.19.1. Domestic Subsidiaries.......................................-51-
Section 6.19.2. Foreign Subsidiaries........................................-51-
Section 6.20. Year 2000. ...................................................-52-
Section 6.21. Minimum EBITDA................................................-52-
Section 6.22. Minimum Tangible Net Worth Plus Subordinated Debt.............-52-
Section 6.23. Minimum Working Capital.......................................-53-
Section 6.24. Ratio of Total Liabilities to Tangible Net Worth Plus
Subordinated Debt...........................................................-53-
ARTICLE 7NEGATIVE COVENANTS.................................................-53-
Section 7.1. No Change Of Name, Merger, Etc. ...............................-53-
Section 7.2. No Sale Or Transfer Of Assets. ................................-53-
Section 7.3. No Encumbrance Of Assets. .....................................-54-
Section 7.4. No Indebtedness. ..............................................-54-
Section 7.5. Restricted Payments. ..........................................-54-
Section 7.6. Transactions With Affiliates. .................................-54-
Section 7.7. Loans, Investments And Sale-Leaseback. ........................-54-
Section 7.8. No Acquisition Of Equity In Or Assets Of Third Persons. .......-55-
Section 7.9. No Assignment. ................................................-55-
Section 7.10. No Alteration Of Structure Or Operations. ....................-55-
Section 7.11. Unpermitted Uses Of Loan Proceeds. ...........................-55-
Section 7.12. Long Term Contracts. .........................................-55-
Section 7.13. Changes In Fiscal Year. ......................................-55-
Section 7.14. Limitation On Issuance Of Certain Equity Interests. ..........-55-
ARTICLE 8EVENTS OF DEFAULT..................................................-55-
Section 8.1. Failure To Pay. ...............................................-55-
Section 8.2. Representation Or Warranty. ...................................-56-
Section 8.3. Default Under Negative Covenants...............................-56-
Section 8.6. Default Under Loan Documents. .................................-56-
Section 8.7. Invalidity of any Loan Document; Failure of Lien...............-56-
Section 8.9. Judgments. ....................................................-56-
Section 8.10. Levy By Judgment Creditor. ...................................-57-
Section 8.11. Failure To Pay Liabilities. ..................................-57-
Section 8.12. Involuntary Insolvency Proceedings. ..........................-57-
Section 8.13. Voluntary Insolvency Proceedings. ............................-57-
Section 8.14. Insolvency Proceedings Pertaining To Guarantors, other
Subsidiaries or Limited Guarantors......................................... -57-
Section 8.15. Material Adverse Event. ......................................-57-
Section 8.16. Default By Guarantors. .......................................-57-
Section 8.17. Attempt To Terminate Guaranties. .............................-57-
Section 8.18. ERISA. .......................................................-57-
Section 8.19. Transfer Of Equity Interests. ................................-58-
Section 8.20. Change in Control.............................................-58-
Section 8.21. Indictment Of Borrowers, Guarantors or Limited Guarantors. ...-58-
Section 8.22. Injunction. ..................................................-58-
ARTICLE 9RIGHTS AND REMEDIES ON THE OCCURRENCEOF AN EVENT OF DEFAULT........-59-
Section 9.1. Lender=s Specific Rights And Remedies. ........................-59-
Section 9.2. Automatic Acceleration. .......................................-59-
Section 9.3. Sale Of Collateral. ...........................................-59-
Section 9.4. Letters Of Credit. ............................................-60-
Section 9.5. Remedies Cumulative. ..........................................-60-
ARTICLE 10GENERAL CONDITIONS AND TERMS......................................-60-
Section 10.1. Obligations Are Unconditional. ...............................-60-
Section 10.2. Indemnity. ...................................................-60-
Section 10.3. Lender Expenses. .............................................-61-
Section 10.4. Authorization To Obtain Financial Information. ...............-61-
Section 10.5. Incorporation; Construction Of Inconsistent Provisions. ......-61-
Section 10.6. Waivers. .....................................................-61-
Section 10.7. Continuing Obligation Of Borrowers. ..........................-61-
Section 10.8. Choice Of Law. ...............................................-61-
Section 10.9. Submission To Jurisdiction; Venue; Actions Against Lender. ...-62-
Section 10.9.1. Jurisdiction. ..............................................-62-
Section 10.9.2. Venue. .....................................................-62-
Section 10.9.3. Waiver Of Objections To Venue. .............................-62-
Section 10.10. Notices. ....................................................-63-
Section 10.12. Miscellaneous Provisions. ...................................-64-
Section 10.13. Waiver Of Trial By Jury. ....................................-64-
Schedules and Exhibits
Schedule 1.82 Permitted Liens
Schedule 5.2 Litigation
Schedule 5.7 Other Names
Schedule 5.10 Taxes
Schedule 5.12 Chief Place Of Business
Schedule 5.13 Location Of Inventory
Schedule 5.14 Foreign Subsidiaries
Schedule 5.15 Labor Agreements
Schedule 5.19 Liabilities And Obligations Not Disclosed In Financial
Statements
Schedule 7.4 Existing Indebtedness
Schedule 7.7 Loans and Investments
Exhibit 2.3.3(b) Notice of Election
Exhibit 4.1.2 Officers Certificate
Exhibit 4.1.3 Opinion of Counsel
,PAGE.
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is dated as of March 23, 2000 by and
between GSE SYSTEMS, INC., a Delaware corporation, GSE PROCESS
SOLUTIONS, INC., a Delaware corporation, and GSE POWER SYSTEMS, INC.,
a Delaware corporation (collectively, BORROWERS); and NATIONAL BANK OF
CANADA, a Canadian chartered bank (LENDER).
RECITALS
The BORROWERS have requested that the LENDER extend various credit
accommodations to the BORROWERS. The LENDER is willing to provide the
requested credit accommodations upon the terms and conditions of this
Loan And Security Agreement, and upon the granting by the BORROWERS to
the LENDER of the security interests, liens, and other assurances of
payment provided for in this Loan And Security Agreement.
The BORROWERS businesses are a mutual and collective enterprise and
the BORROWERS believe that the consolidation of their facilities and
other financial accommodations in accordance with the terms of this
Loan And Security Agreement will enhance the aggregate borrowing
powers of the BORROWERS and ease the administration of their credit
relationship with the LENDER, all to the mutual advantage of the
BORROWERS. In order to utilize the financial powers of the BORROWERS
in the most efficient and economical manner, and in order to
facilitate the administration of their financing needs, the LENDER
will, at the request of a BORROWER, extend financial accommodations to
all of the BORROWERS on a combined basis in accordance with the
provisions set forth in this Loan And Security Agreement. The LENDERS
willingness to extend credit to the BORROWERS and to administer the
collateral security therefor on a combined basis as more fully set
forth in this Loan And Security Agreement is done solely as an
accommodation to the BORROWERS and at the BORROWERS joint request and
in furtherance of the BORROWERS mutual and collective enterprise.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Loan And Security Agreement, the terms set forth in
this Article 1 have the meanings set forth below, unless the specific
context of this Loan And Security Agreement clearly requires a
different meaning. Terms defined in this Article 1 or elsewhere in
this Loan And Security Agreement are in all capital letters throughout
this Loan And Security Agreement. The singular use of any defined term
includes the plural and the plural use includes the singular.
Section 1.1. Account Debtor. The term CCOUNT DEBTOR means collectively
each PERSON: (a) to or for whom any or all of the BORROWERS has
provided or has agreed to provide any goods or services; or (b) which
owes any or all of the BORROWERS any sum of money as a result of
goods sold or services provided by any or all of the BORROWERS; or
(c) which is the maker or endorser on any INSTRUMENT payable to
any or all of the BORROWERS or otherwise owes any or all of the
BORROWERS any sum of money on account of any loan or other payment
obligation. With respect to each RECEIVABLE which is payable by any
governmental authority, ACCOUNT DEBTOR includes, without
limitation, the agency, instrumentality or official which has the
on such ACCOUNT or other RECEIVABLE.
Section 1.2. Accounts, Chattel Paper, Documents, Equipment, Fixtures,
General Intangibles, Goods, Instruments and Investment Property. The
terms ACCOUNTS, CHATTEL PAPER, DOCUMENTS, EQUIPMENT, GENERAL
INTANGIBLES, GOODS, INSTRUMENTS, and INVESTMENT PROPERTY shall have
the same respective meanings as are given to those terms in the New
York Uniform Commercial Code-Secured Transactions, Article 9, as
amended. The term FIXTURES shall have the meaning provided by the
common law of the state in which the fixtures are located.
Section 1.3. Acquisition. The term ACQUISITION means any transaction,
or any series of related transactions, consummated after the date of
this AGREEMENT, by means of which any of the BORROWERS (a) acquires
any going business or all or substantially all of the assets of any
PERSON, whether through purchase of assets, merger or otherwise, (b)
directly or indirectly acquires control of at least a majority (in
number of votes) of the securities of a corporation which have
ordinary voting power for the election of directors, or (c) directly
or indirectly acquires control of a majority ownership interest in any
PERSON that is not a corporation.
Section 1.4. Acquisition Agreement. The term ACQUISITION AGREEMENT
means the agreement between a BORROWER and a TARGET or the seller or
sellers of a TARGET, pursuant to which such BORROWER agrees to acquire
substantially all of the assets or CAPITAL STOCK of a TARGET, or merge
with a TARGET, together with all amendments to such agreement.
Section 1.5. Additional Collateral Borrowing Base. The term ADDITIONAL
COLLATERAL BORROWING BASE means, at any date of determination thereof,
the product, as at such time, of (a) ELIGIBLE ADDITIONAL COLLATERAL
VALUE and (b) the ADDITIONAL COLLATERAL CREDIT PERCENTAGE.
Section 1.6. Additional Collateral Credit Percentage. The term
ADDITIONAL COLLATERAL CREDIT PERCENTAGE means one hundred percent
(100%).
Section 1.7. Adjusted Base Rate. The term ADJUSTED BASE RATE means the
BASE RATE plus the APPLICABLE MARGIN.
Section 1.8. Adjusted LIBOR Rate. The term ADJUSTED LIBOR RATE means,
for any INTEREST PERIOD: (a) the LIBOR RATE for such INTEREST PERIOD;
plus (b) the APPLICABLE MARGIN.
Section 1.9. Affiliate. The term AFFILIATE means collectively any
PERSON: (a) that directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common
control with any or all of the BORROWERS, including, without
limitation, the officers, managers and directors of the BORROWERS; (b)
that directly or beneficially owns or holds five percent (5%) or more
of any equity interests in any or all of the BORROWERS; or (c) five
percent (5%) or more of whose equity interests are owned directly or
controlled by any or all of the BORROWERS. As used herein, the term
control (including, with correlative meanings, the terms controlled
by and under common control with) shall mean possession, directly or
indirectly, of the power to direct the management or policies of a
PERSON, whether through ownership of equity interests, by contract or
otherwise.
Section 1.10. Agreement. The term AGREEMENT means this Loan And
Security Agreement, as amended, extended, or modified from time to
time by the parties hereto, as well as all schedules, exhibits and
attachments hereto.
Section 1.11. Applicable Margin. The term APPLICABLE MARGIN means that
percentage to be added to either the BASE RATE or the LIBOR RATE in
order to determine an applicable ADJUSTED BASE RATE or ADJUSTED LIBOR
RATE, which percentage shall be determined in accordance with the
following schedule:
BASE RATE LIBOR RATE
0.00% 2.50%
Section 1.12. Base Rate. The term BASE RATE means that fluctuating
rate of interest publicly announced by National Bank of Canada, New
York, from time to time as its Prime Rate and as a base rate for
calculating interest on certain loans. If and when the BASE RATE
changes, the interest rate will change automatically without notice to
the BORROWERS, effective on the date of any such change.
Section 1.13. Base Rate Borrowing. The term BASE RATE BORROWING means
any portion of the LOAN upon which interest accrues at the ADJUSTED
BASE RATE.
Section 1.14. Billed Commercial Accounts Borrowing Base. The term
BILLED COMMERCIAL ACCOUNTS BORROWING BASE means, at any date of
determination thereof, the product, as at such time, of (a) ELIGIBLE
BILLED COMMERCIAL ACCOUNTS and (b) the BILLED COMMERCIAL ACCOUNTS
CREDIT PERCENTAGE.
Section 1.15. Billed Commercial Accounts Credit Percentage. The term
BILLED COMMERCIAL ACCOUNTS CREDIT PERCENTAGE means eighty-five percent
(85%).
Section 1.16. Billed Government Accounts Borrowing Base. The term
BILLED GOVERNMENT ACCOUNTS BORROWING BASE means, at any date of
determination thereof, the product, as at such time, of (a) ELIGIBLE
BILLED GOVERNMENT ACCOUNTS and (b) the BILLED GOVERNMENT ACCOUNTS
CREDIT PERCENTAGE.
Section 1.17. Billed Government Accounts Credit Percentage. The term
BILLED GOVERNMENT ACCOUNTS CREDIT PERCENTAGE means eighty-five (85%).
Section 1.18. Borrowing Base. The term BORROWING BASE means, at any
date of determination thereof, the sum, as at such time, of: (a) the
BILLED COMMERCIAL ACCOUNTS BORROWING BASE; (b) the BILLED GOVERNMENT
ACCOUNTS BORROWING BASE; (c) the UNBILLED GOVERNMENT ACCOUNTS
BORROWING BASE; (d) the INVENTORY BORROWING BASE; and (e) the
ADDITIONAL COLLATERAL BORROWING BASE; minus (e) such reserves as the
LENDER deems appropriate from time to time, including without
limitation, reserves determined by the LENDER to be appropriate with
respect to bankers acceptances, GUARANTY INDEBTEDNESS, INTEREST RATE
PROTECTION AGREEMENTS, risks under ENVIRONMENTAL LAWS, and other
obligations of any of the BORROWERS, provided, however, with respect
to any such reserve taken, so long as no DEFAULT or EVENT OF DEFAULT
shall have occurred, the LENDER shall release such reserve upon
receipt by the LENDER of evidence satisfactory to the LENDER in its
reasonable credit judgment that the event, circumstance, or risk
giving rise to such reserve has been cured to the satisfaction of the
LENDER.
Section 1.19. Business Day. The term BUSINESS DAY means any day other
than a Saturday, Sunday, or other day on which commercial banking
institutions in the State of New York are required to be closed and,
if the applicable BUSINESS DAY relates to any LOAN to which the LIBOR
RATE applies, such day must also be a day on which banks are open for
dealings in dollar deposits in the London interbank market.
Section 1.20. Capital Adequacy Requirement. The term CAPITAL ADEQUACY
REQUIREMENT means any LAW imposing any capital adequacy requirement or
any other similar requirement (including but not limited to the
capital adequacy regulations contained in Parts 3, 208 and 225 of
Title 12 of the Code of Federal Regulations, as amended), any change
in such LAWS or in the interpretation or application thereof, and any
request or directive regarding capital adequacy (whether or not having
the force of law) from any central bank or government authority.
Section 1.21. Capital Lease. The term CAPITAL LEASE means a lease with
respect to which the lessee's obligations thereunder should, in
accordance with G.A.A.P., be capitalized and reflected as a liability
on the balance sheet of the lessee.
Section 1.22. Capital Lease Obligations. The term CAPITAL LEASE
OBLIGATIONS means any indebtedness incurred as a lessee pursuant to a
CAPITAL LEASE.
Section 1.23. Capital Stock. The term CAPITAL STOCK means any and all
shares, participations, and other equivalents (however designated) of
capital stock of a corporation, any and all other equivalent ownership
interests in a PERSON (other than a corporation) and any and all
warrants, or options to purchase any of the foregoing.
Section 1.24. Closing. The term CLOSING means the execution and
delivery of this AGREEMENT, the NOTE, and various other LOAN
DOCUMENTS. The date of CLOSING is the date written above as the date
of this AGREEMENT.
Sectio 1.25. Code. The term CODE means the Internal Revenue Code of
1986, as amended, and all Treasury regulations, revenue rulings,
revenue procedures or announcements issued thereunder.
Section 1.26. Collateral. The term COLLATERA means all of the
tangible and intangible assets of any or all of the BORROWERS,
wherever located, whether now owned or hereafter acquired by the
BORROWERS, together with all substitutions therefor, and all
replacements and renewals thereof, and all accessions, additions,
replacement parts, manuals, warranties and packaging relating thereto,
including but not limited to the following tangible and intangible
assets and property rights of any of the BORROWERS: (a) ACCOUNTS; (b)
CHATTEL PAPER; (c) DOCUMENTS; (d) EQUIPMENT; (e) FIXTURES; (f) GENERAL
INTANGIBLES, including, but not limited to, INTELLECTUAL PROPERTY; (g)
GOODS; (h) INSTRUMENTS; (i) INVENTORY, including returned, rejected,
or repossessed INVENTORY and rights of reclamation and stoppage in
transit with respect to INVENTORY; (j) INVESTMENT PROPERTY; (k)
RECEIVABLES; (l) deposit accounts (including, without limitation, the
COLLECTION ACCOUNT); (m) letter of credit rights; and (n) all RECORDS
relating to or pertaining to any of the above listed COLLATERAL;
provided, however, the COLLATERAL shall not include CAPITAL STOCK of
any SUBSIDIARY which is not a DOMESTIC SUBSIDIARY in excess of 65% of
any series of such stock.
Section 1.27. Collection Account. The term COLLECTION ACCOUNT means a
bank account designated by the LENDER from which the LENDER alone has
power of access and withdrawal.
Section 1.28. Commercial Account. The term COMMERCIAL ACCOUNT means
the commercial checking account to be established and maintained by
any or all of the BORROWERS with the LENDER and which may be utilized
as the means of advancing funds under the LOAN.
Sectio 1.29. Credit Facility. The term CREDIT FACILITY means the
credit facility extended by the LENDER to the BORROWERS, jointly and
severally as co-obligors, pursuant to the terms and conditions of this
AGREEMENT and the other LOAN DOCUMENTS, providing for, among other
things, the LOAN and LETTERS OF CREDIT.
Section 1.30. Default. The term DEFAULT means any event, occurrence or
omission which, with the giving of notice, the passage of time, or
both, would constitute an EVENT OF DEFAULT.
Section 1.31. Dollar Cap. The term DOLLAR CAP means Ten Million
Dollars ($10,000,000.00).
Section 1.32. Domestic Subsidiary. The term DOMESTIC SUBSIDIARY means
any SUBSIDIARY organized under the laws of any State of the United
States.
Section 1.33. EBITDA. The term EBITDA means, for any period, the sum
of the following determined on a consolidated basis, without
duplication, for the BORROWERS and their consolidated SUBSIDIARIES in
accordance with G.A.A.P.: (a) net income for such period plus (b) the
sum of the following to the extent deducted in determining net income
for such period: (i) income taxes; (ii) total interest expense; (iii)
amortization and depreciation; and (iv) extraordinary losses, minus
(c) the sum of the following if not deducted in determining net income
for such period: (i) interest income; and (ii) any extraordinary
gains, including but not limited to gains arising from the sale of
assets not in the ordinary course of business.
Section 1.34. Eligible Additional Collateral Value. The term ELIGIBLE
ADDITIONAL COLLATERAL VALUE means, at any date of determination
thereof, the STATED AMOUNT of a duly issued irrevocable standby letter
of credit having an original undrawn face amount of Nine Hundred
Thousand Dollars ($900,000.00) naming the LENDER as beneficiary, which
is issued on behalf of ManTech International Corporation by Mellon
Bank, First Union National Bank or another bank acceptable to the
LENDER, has terms and provisions acceptable to the LENDER and an
expiration date acceptable to the LENDER.
Section 1.35. Eligible Billed Commercial Accounts. The term ELIGIBLE
BILLED COMMERCIAL ACCOUNTS means, at any date of determination
thereof, the aggregate amount, as at such time, of bona fide ACCOUNTS
(excluding any ACCOUNTS that arise out of a GOVERNMENT CONTRACT)
created or acquired by any BORROWER in the ordinary course of its
business which have been billed to the ACCOUNT DEBTOR thereon and
which are payable in conformity with such billing, and which are, but
only in the amounts such ACCOUNTS are, acceptable to the LENDER. The
criteria for eligibility as ELIGIBLE BILLED COMMERCIAL ACCOUNTS may be
fixed and revised from time to time by the LENDER in its reasonable
discretion in accordance with its internal credit policies, and any
such determinations by the LENDER will be promptly communicated to the
BORROWERS. An ACCOUNT in no event shall be deemed an ELIGIBLE BILLED
COMMERCIAL ACCOUNT unless: (a) the ACCOUNT is a bona fide, existing,
and legally enforceable obligation of the named ACCOUNT DEBTOR arising
from goods sold or leased or from services performed in the ordinary
course of business on terms that are normal and customary in the
business of such BORROWER, the ACCOUNT is actually and absolutely
owing to such BORROWER and is not contingent for any reason, and such
BORROWER has lawful title to such ACCOUNT; (b) the delivery of the
goods or the performance of the services has been completed; (c) no
return, rejection, or repossession, has occurred (or if a return,
rejection or repossession has occurred, only to the extent such
ACCOUNT is in excess of the maximum amount of such return, rejection
or repossession and provided the balance of such ACCOUNT otherwise
represents a valid, uncontested and legally enforceable obligation of
the ACCOUNT DEBTOR and satisfies all of the other criteria set forth
herein); (d) the goods delivered or the services performed have been
delivered or performed, as the case may be, in accordance with the
terms of the contract between the applicable BORROWER and the ACCOUNT
DEBTOR, without dispute, objection, complaint, offset, defense,
counterclaim, adjustment or allowance (including without limitation
discounts, advertising allowances, or contra accounts) (or if such
ACCOUNT is subject to any such dispute, objection, complaint, offset,
defense, counterclaim, adjustment, or allowance, only to the extent
such ACCOUNT is in excess of the maximum amount of such dispute,
objection, complaint, offset, defense, counterclaim, adjustment, or
allowance, and provided the balance of such ACCOUNT otherwise
represents a valid, uncontested and legally enforceable obligation of
the ACCOUNT DEBTOR and satisfies all of the other criteria set forth
herein); (e) the ACCOUNT is not payable by an ACCOUNT DEBTOR to whom
any or all of the BORROWERS owes money (or if so, only to the extent
that such ACCOUNT is in excess of the total amount owed by any or all
of the BORROWERS to the ACCOUNT DEBTOR and provided the balance of
such ACCOUNT otherwise represents a valid, uncontested and legally
enforceable obligation of the ACCOUNT DEBTOR and satisfies all of the
other criteria set forth herein); (f) the ACCOUNT DEBTORS obligation
to pay the ACCOUNT is not subject to any repurchase obligation or
return right, as with sales made on a xxxx-and-hold, guaranteed sale,
sale-and-return, sale on approval, or consignment basis; (g) the
ACCOUNT is not evidenced by CHATTEL PAPER or an INSTRUMENT or any
kind; (h) the ACCOUNT has not been turned over to any PERSON other
than a BORROWER for collection; (i) the ACCOUNT is evidenced by an
invoice and no more than ninety (90) days have elapsed from the
billing or invoice date; (j) no prior, contemporaneous, or subsequent
assignment, claim, lien, or security interest, other than that of the
LENDER, applies to the ACCOUNT; (k) no bankruptcy or insolvency
proceedings or payment moratoriums of any kind apply to the ACCOUNT;
(l) the ACCOUNT DEBTOR is not, in the LENDERS sole opinion, unlikely
to pay because of death, incompetency, disappearance, financial
inability, potential bankruptcy, insolvency, damage to or disposition
of the goods, default, or any other reason whatsoever; (m) no bonding
company or surety asserts or has the ability to assert any claim based
upon the legal doctrine of equitable subrogation, or under any other
right to claim a lien into or right to payment of the ACCOUNT; (n) the
ACCOUNT does not arise from or pertain to any transaction with any
employee, officer, agent, director, stockholder or other AFFILIATE
unless arising in the ordinary course of business on an arms-length
basis; (o) the ACCOUNT is not payable from any ACCOUNT DEBTOR located
outside of the geographic boundaries of the United States of America
or Canada unless such ACCOUNT (i) is credit guaranteed in full by a
policy of credit insurance insuring comprehensive (commercial and
political) risks, acceptable to the LENDER in its sole discretion, or
(ii) if approved by the LENDER, is payable in the full amount of the
face value of the ACCOUNT in U.S. Dollars and fully secured by a
perfected assignment of proceeds of an irrevocable letter of credit
acceptable to the LENDER in form and substance and issued by a United
States financial institution satisfactory to the LENDER in its sole
discretion; (p) a BORROWER is legally empowered to collect the ACCOUNT
against the ACCOUNT DEBTOR in the jurisdiction in which the ACCOUNT
DEBTOR is located; (q) the ACCOUNT is not payable by an ACCOUNT DEBTOR
with respect to which more than fifty percent (50%) of the dollar
amount of that ACCOUNT DEBTORS RECEIVABLES to any or all of the
BORROWERS are more than ninety (90) days due from the date of invoice;
(r) the ACCOUNT does not arise from any contract or agreement with any
state, local or foreign government; and (s) the LENDER has a perfected
first priority security interest therein. An ACCOUNT which otherwise
satisfies the LENDERS criteria for eligibility shall also be subject
to the following eligibility limitations: (A) if the ACCOUNT is due
from an ACCOUNT DEBTOR whose billed ACCOUNTS in the aggregate
constitute in excess of fifteen percent (15%) of all billed ACCOUNTS
of the BORROWERS, only the portion of the aggregate amount of the
billed ACCOUNTS from that ACCOUNT DEBTOR which does not exceed fifteen
percent (15%) of all billed ACCOUNTS of the BORROWERS may be eligible;
and (B) to the extent the ACCOUNT contains finance charges, delivery
charges or sales taxes, such finance charges, delivery charges or
sales taxes shall not be eligible.
Section 1.36. Eligible Billed Government Accounts. The term ELIGIBLE
BILLED GOVERNMENT ACCOUNTS means, at any date of determination
thereof, the aggregate amount, at such time, of bona fide ACCOUNTS
arising out of GOVERNMENT CONTRACTS and created or acquired by any
BORROWER in the ordinary course of its business, which have been
billed to the ACCOUNT DEBTOR thereon and which are payable in
conformity with such billing, and which are, but only in the amounts
such ACCOUNTS are, acceptable to the LENDER. The criteria for
eligibility as an ELIGIBLE BILLED GOVERNMENT ACCOUNT may be fixed and
revised from time to time by the LENDER in its reasonable discretion
in accordance with its internal credit policies, and any such
determinations by the LENDER will be promptly communicated to the
BORROWERS. An ACCOUNT shall in no event be deemed an ELIGIBLE BILLED
GOVERNMENT ACCOUNT unless: (a) the ACCOUNT and the respective
GOVERNMENT CONTRACT shall be in compliance with all applicable LAWS,
including federal procurement LAWS and regulations; (b) if so
requested by the LENDER, the applicable BORROWER shall have complied
with all provisions necessary to protect the LENDERS interest under
the Assignment of Claims Act of 1940, as amended, and all regulations
promulgated thereunder; (c) the LENDER is satisfied as to the absence
of setoffs, counterclaims, and other defenses to payment on the part
of the United States of America; (d) such ACCOUNT shall not constitute
or include any retainage; (e) the LENDER is satisfied that funds for
the payment of such ACCOUNT have been appropriated by the United
States of America or such agency, department or instrumentality
thereof, such ACCOUNT and GOVERNMENT CONTRACT are enforceable against
the full faith and credit of the United States of America, and funds
for the payment of such ACCOUNT are available; and (f) the ACCOUNT
satisfies and continues to satisfy requirements contained in the
definition of ELIGIBLE BILLED COMMERCIAL ACCOUNTS set forth in Section
1.35 of this AGREEMENT; provided, however, (i) in lieu of clause (i),
the ACCOUNT shall be evidenced by an invoice and no more than one
hundred twenty (120) days shall have elapsed from the billing or
invoice date, (ii) in lieu of clause (q), the ACCOUNT is not payable
under a GOVERNMENT CONTRACT with respect to which more than fifty
percent (50%) of the aggregate dollar amount of all ACCOUNTS payable
to any or all of the BORROWERS thereunder are more than one hundred
twenty (120) days due from the date of invoice; (iii) and in lieu of
clause (A), if the ACCOUNT is payable under a GOVERNMENT CONTRACT as
to which all billed ACCOUNTS payable to any of the BORROWERS
thereunder in the aggregate constitute in excess of fifteen percent
(15%) of all billed ACCOUNTS of the BORROWERS, only the portion of the
aggregate amount of the ACCOUNTS pursuant to such GOVERNMENT CONTRACT
which does not exceed fifteen percent (15%) of all billed ACCOUNTS of
the BORROWERS may be eligible.
Section 1.37. Eligible Inventory. The term ELIGIBLE INVENTORY means,
at any date of determination thereof, the aggregate amount, as at such
time, of INVENTORY owned by any or all of the BORROWERS which is
acceptable to the LENDER to be included in the calculation of the
BORROWING BASE. The criteria for eligibility may be fixed and revised
by the LENDER from time to time in its reasonable discretion in
accordance with its internal credit policies, and any such
determinations by the LENDER will be promptly communicated to the
BORROWERS. INVENTORY in no event shall be deemed to be ELIGIBLE
INVENTORY unless: (a) the LENDER has a first priority perfected
security interest in its INVENTORY; (b) it is normally and currently
saleable in the ordinary course of business of any or all of the
BORROWERS; (c) it is not work in process; (d) it is located on the
premises of a BORROWER; (e) it does not consist of defective, damaged,
obsolete, returned or repossessed items of INVENTORY or used goods or
goods taken in trade; (f) it does not consist of slow moving items or
items determined by the LENDER in its sole discretion to be stale or
dated merchandise; (g) it does not consist of packing or packaging
materials, general supplies, catalogs, promotion materials, specialty
inventory, inventory on loan to any PERSON, items used as
demonstrators, prototypes, or salesman's samples; (h) it does not
consist of an item consigned to any or all of the BORROWERS or with
respect to which any PERSON claims a lien; (i) it has not been
consigned by any or all of the BORROWERS to a consignee; (j) it is not
held by any PERSON (other than a BORROWER) or located upon any
premises not owned in fee simple by a BORROWER unless such PERSON or
the owner of such premises has executed a lien waiver agreement in
form and substance satisfactory to the LENDER; and (k) it has not been
deemed unmerchantable or otherwise unsatisfactory by the LENDER for
any reason, in the LENDERS sole discretion, by written notice to the
BORROWERS. The value of any INVENTORY deemed to meet the criteria for
ELIGIBLE INVENTORY shall be determined at the least of: (i) the
BORROWERS net purchase or manufacturing cost; (ii) the lowest
then-existing market price; (iii) the BORROWERS lowest selling price,
less estimated expenses for packing, selling and delivery; or (iv) any
price ceiling which may be established by governmental order,
regulation, or restriction. The LENDER shall be the discretionary
judge of the value of any INVENTORY, based upon such information as it
deems, in its reasonable discretion, to be relevant or applicable in
making that determination.
Section 1.38. Eligible Unbilled Government Accounts. The term ELIGIBLE
UNBILLED GOVERNMENT ACCOUNTS means, at any date of determination
thereof, the aggregate amount, at such time, of those bona fide
ACCOUNTS which would be ELIGIBLE BILLED GOVERNMENT ACCOUNTS, but for
the fact that such ACCOUNTS have not been invoiced as a result of
normal frequency of billing under the particular GOVERNMENT CONTRACTS,
and which ACCOUNTS are acceptable, but only in the amounts such
ACCOUNTS are acceptable to the LENDER. The criteria for eligibility as
an ELIGIBLE UNBILLED GOVERNMENT ACCOUNT may be fixed and revised by
the LENDER in its reasonable discretion in accordance with its
internal credit policies, and any such determinations by the LENDER
will be promptly communicated to the BORROWERS. An ACCOUNT shall in no
event be deemed eligible unless: (a) such ACCOUNT represents costs
incurred by or profits accrued to a BORROWER and recoverable under a
GOVERNMENT CONTRACT; (b) such ACCOUNT shall not constitute or include
any retainage; (c) no more than sixty (60) days have elapsed from the
date services were completed or goods delivered; (d) upon issuance of
an invoice therefor an ELIGIBLE BILLED GOVERNMENT ACCOUNT will arise
in favor of a BORROWER; and (e) such ACCOUNT is not simultaneously
reported as an ELIGIBLE BILLED GOVERNMENT ACCOUNT on any Borrowing
Base Certificate provided to the LENDER.
Section 1.39. Employee Benefit Plan. The term EMPLOYEE BENEFIT PLAN
means an employee benefit plans as defined in Section 3(3) of ERISA.
Section 1.40. Environmental Laws. The term ENVIRONMENTAL LAWS means
individually or collectively any local, state or federal LAW, statute,
rule, regulation, order, ordinance, common law, permit or license term
or condition, or state super-lien or environmental clean-up or
disclosure statutes pertaining to the environment or to environmental
contamination, regulation, management, control, treatment, storage,
disposal, containment, removal, clean-up, reporting, or disclosure,
including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as now or hereafter
amended (including, but not limited to, the Super-fund Amendments and
Reauthorization Act); the Resource Conservation and Recover Act, as
now or hereafter amended (including, but not limited to, the Hazardous
and Solid Waste Amendments of 1984); the Toxic Substances Control Act,
as now or hereafter amended; the Clean Water Act, as now or hereafter
amended; the Safe Drinking Water Act, as now or hereafter amended; or
the Clean Air Act, as now or hereafter amended.
Section 1.41. EPA Permit. The term EPA PERMITS has the meaning given
that term in Section 5.23 of this AGREEMENT.
Section 1.42. ERISA. The term ERISAS means the Employee Retirement
Income Security Act of 1974 and regulations issued thereunder, as
amended from time to time and any successor statute.
Section 1.43. ERISA Affiliate. The term ERISA AFFILIATE means, in
relation to any PERSON, any trade or business (whether or not
incorporated) which is a member of a group of which that PERSON is a
member and which is under common control within the meaning of the
regulations promulgated under Section 414 of the CODE.
Section 1.44. ERISA Liabilities. The term ERISA LIABILITIES means
the aggregate of all unfunded vested benefits under any employee
pension benefit plan, within the meaning of Section 3(2) of ERISA, of
any of the BORROWERS or any ERISA AFFILIATE of any of the BORROWERS
under any plan covered by ERISA that is not a MULTIEMPLOYER PLAN and
all potential withdrawal liabilities of any of the BORROWERS or any
ERISA AFFILIATE under all MULTIEMPLOYER PLANS.
Section 1.45. Event Of Default. The term EVENT OF DEFAULT means any
of the events set forth in Article 8 of this AGREEMENT, provided that
any requirement for the giving of notice, the lapse of time, or both,
or any other expressly stated condition, has been satisfied.
Section 1.46. Facilities. The term FACILITIES means all real property
and the improvements thereon used or occupied or leased by any of the
BORROWERS or otherwise used at any time by any of the BORROWERS in the
operation of its business or for the manufacture, storage, or location
of any of the COLLATERAL.
Section 1.47. Federal Funds Effective Rate. The term FEDERAL FUNDS
EFFECTIVE RATE means for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published
for such day (or, if such day is not a BUSINESS DAY, for the preceding
BUSINESS DAY) by the Federal Reserve Bank of New York or, if such rate
is not so published for any day that is a BUSINESS DAY, the average of
the quotations for such day on such transactions received by the
LENDER from three (3) Federal funds brokers of recognized standing
selected by the LENDER.
Section 1.48. Fiscal Year. The term FISCAL YEAR means the fiscal year
of each of the BORROWERS which is the twelve (12) month accounting
period commencing January 1 and ending December 31 of each calendar
year.
Section 1.49. G.A.A.P. The term G.A.A.P. means, with respect to any
date of determination, generally accepted accounting principles as
used by the Financial Accounting Standards Board and/or the American
Institute of Certified Public Accountants consistently applied and
maintained throughout the periods indicated.
Section 1.50. GSE Power Systems AB Note. The term GSE POWER SYSTEMS
AB NOTE means the Promissory Note dated May 1, 1999 from GSE SYSTEMS
and payable to the order of GSE Power Systems AB in the original
principal amount of Eleven Million, Three Hundred Twenty-Seven
Thousand, One Hundred Thirty-Four and 94/100 Swedish kronor (SEK
11.327.134,94).
Section 1.51. GSE Systems. The term GSE SYSTEMS means GSE Systems,
Inc., a Delaware corporation.
Section 1.52. Guaranteed Pension Plan. The term GUARANTEED PENSION
PLAN means any pension plan maintained by any of the BORROWERS or an
ERISA AFFILIATE of any of the BORROWERS, or to which any of the
BORROWERS or an ERISA AFFILIATE contributes, some or all of the
benefits under which are guaranteed by the United States Pension
Benefit Guaranty Corporation.
Section 1.53. Guarantors. The term GUARANTORS means collectively GSE
Systems International, Ltd., a Delaware corporation, MSHI, Inc., a
Virginia corporation, GSE Erudite Software, Inc., a Delaware
corporation, GP International Engineering & Simulation, Inc., a
Delaware corporation, GSE Services Company, LLC, a Delaware limited
liability company, and all other direct or indirect DOMESTIC
SUBSIDIARIES of any of the BORROWERS.
Section 1.54. Guaranty Agreements. The term GUARANTY AGREEMENTS
means collectively the Guaranty Agreements executed from time to time
by the GUARANTORS or the LIMITED GUARANTORS for the benefit of the
LENDER.
Section 1.55. Guaranty Indebtedness. The term GUARANTY INDEBTEDNESS
means any obligation, contingent or otherwise, of any referenced
PERSON directly or indirectly guaranteeing any debt or obligation of
any other PERSON and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or
otherwise, of such PERSON: (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such debt or obligation
(whether arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or
otherwise, other than agreements to purchase goods at an arms length
price in the ordinary course of business); or (b) entered into for the
purpose of assuring in any other manner the holder of such debt or
obligation of the payment thereof or to protect such holder against
loss in respect thereof (in whole or in part). The term GUARANTY
INDEBTEDNESS shall not include endorsements for collection or deposit
in the ordinary course of business.
Section 1.56. Government Contract. The term GOVERNMENT CONTRACT
means a contract between any BORROWER and any agency, department or
instrumentality of the United States of America where such BORROWER is
the prime contractor.
Section 1.57. Indebtedness. The term INDEBTEDNESS means, as to any
referenced PERSON (determined without duplication): (a) indebtedness
of such PERSON for borrowed money (whether by loan or the issuance and
sale of debt securities), or for the deferred purchase or acquisition
price of property or services (other than accounts payable incurred in
the ordinary course of business); (b) obligations of such PERSON in
respect of letters of credit or similar instruments issued or accepted
by financial institutions for the account of such PERSON (whether or
not such obligations are contingent); (c) CAPITAL LEASE OBLIGATIONS of
such PERSON; (d) obligations of such PERSON to redeem or otherwise
retire equity interests in such PERSON; (e) indebtedness of others of
the type described in clause (a), (b), (c) or (d) above secured by a
lien on any of the property of such PERSON, whether or not the
respective obligation so secured has been assumed by such PERSON; and
(f) GUARANTY INDEBTEDNESS.
Section 1.58. Insolvency Proceedings. The term INSOLVENCY
PROCEEDINGS means, with respect to any referenced PERSON, any case or
proceeding commenced by or against such PERSON, under any provision of
the United States Bankruptcy Code, as amended, or under any other
federal or state bankruptcy or insolvency law, or any assignments for
the benefit of creditors, formal or informal moratoriums,
receiverships, compositions or extensions with some or all creditors
with respect to any indebtedness of such PERSON.
Section 1.59. Intellectual Property. The term INTELLECTUAL PROPERTY
means all present and future designs, patents, patent rights and
applications therefor, trademarks and registrations or registrations
therefor, copyrights, software or computer programs, license rights,
trade secrets, methods, processes, know-how, drawings, specifications,
descriptions, and all memoranda, notes and records with respect to any
research and development, whether now owned or hereafter acquired, all
goodwill associated with any of the foregoing, and all proceeds of all
of the foregoing.
Section 1.60. Interest Period. The term INTEREST PERIOD means with
respect to any LIBOR BORROWING, each period commencing on the date
such LIBOR BORROWING is made or converted to a LIBOR BORROWING and
ending on the numerically corresponding date in the first, second, or
third calendar month thereafter (or, if there is no numerically
corresponding day, on the last BUSINESS DAY of such month), as the
BORROWERS may select.
Sectio 1.61. Interest Rate Protection Agreement. The term INTEREST
RATE PROTECTION AGREEMENT means, for any referenced PERSON, an
interest rate swap, cap or collar agreement or similar arrangement and
documentation between such PERSON and one or more financial
institutions providing for the transfer or mitigation of interest
risks either generally or under specific contingencies.
Section 1.62. Inventory. The term INVENTORY shall have the same
meaning as provided to such term in the New York Uniform Commercial
Code - Secured Transactions, Article 9, as amended, together with all
of the BORROWERS goods, merchandise, materials, raw materials, goods
in process, finished goods, work in progress, bindings or component
materials, packaging and shipping materials and other tangible or
intangible personal property, now owned or hereafter acquired and held
for sale or lease or furnished or to be furnished under contracts of
service or which contribute to the finished products or the sale,
promotion, storage and shipment thereof, whether located at facilities
owned or leased by any of the BORROWERS, in the course of transport to
or from ACCOUNT DEBTORS, used for demonstration, placed on
consignment, or held at storage locations.
Section 1.63. Inventory Borrowing Base. The term INVENTORY BORROWING
BASE means, at any date of determination thereof, the lesser, as at
such time, of (a) the product of (i) ELIGIBLE INVENTORY and (ii) the
INVENTORY CREDIT PERCENTAGE, and (b) the INVENTORY MAXIMUM CREDIT
AMOUNT.
Section 1.64. Inventory Credit Percentage. The termINVENTORY CREDIT
PERCENTAGE means forty percent (40%).
Section 1.65. Inventory Maximum Credit Amount. The term INVENTORY
MAXIMUM CREDIT AMOUNT means One Million Two Hundred Thousand Dollars
($1,200,000.00).
Section 1.66. Laws. The term LAWS means all ordinances, statutes,
rules, regulations, orders, injunctions, writs or decrees of any
government or political subdivision or agency thereof, or any court or
similar entity established by any thereof.
Section 1.67. L/C Exposure. The term L/C EXPOSURE means,
collectively, at any time of determination the sum, as at such time
of: (a) the STATED AMOUNT of all LETTERS OF CREDIT issued and
outstanding; and (b) all REIMBURSEMENT OBLIGATIONS.
Section 1.68. Lender Expenses. The term LENDER EXPENSES means the
out-of-pocket expenses or costs incurred by the LENDER arising out of,
pertaining to, or in any way connected with this AGREEMENT, any of the
other LOAN DOCUMENTS or the OBLIGATIONS, or any documents executed in
connection herewith or transactions hereunder. The term LENDER
EXPENSES shall include, without limitation: (a) the costs or expenses
required to be paid by any or all of the BORROWERS pursuant to this
AGREEMENT or any of the other LOAN DOCUMENTS; (b) costs and expenses
in connection with COLLECTION ACCOUNTS; (c) LETTER OF CREDIT fees and
charges; (d) taxes and insurance premiums advanced or otherwise paid
by the LENDER in connection with the COLLATERAL or on behalf of any or
all of the BORROWERS; (e) filing, recording, title insurance,
environmental and consulting fees, audit fees, search fees and other
expenses paid or incurred by the LENDER in connection with the
LENDERS transactions with any or all of the BORROWERS contemplated by
this AGREEMENT or any of the other LOAN DOCUMENTS or otherwise related
to the CREDIT FACILITY or any of the OBLIGATIONS; (f) costs and
expenses incurred by the LENDER in the collection of the ACCOUNTS
(with or without the institution of legal action), or to enforce any
provision of this AGREEMENT, or in gaining possession of, maintaining,
handling, evaluating, preserving, storing, shipping, selling,
preparing for sale and/or advertising to sell the COLLATERAL or any
other property of any of the BORROWERS whether or not a sale is
consummated; (g) costs and expenses of litigation incurred by the
LENDER, or any participant of the LENDER in any of the OBLIGATIONS, in
enforcing or defending this AGREEMENT or any portion hereof or in
collecting any of the OBLIGATIONS; (h) reasonable attorneys fees and
expenses incurred by the LENDER in obtaining advice or the services of
its attorneys with respect to the structuring, drafting, negotiating,
reviewing, amending, terminating, enforcing or defending of this
AGREEMENT, or any portion hereof or any agreement or matter related
hereto, whether or not litigation is instituted; and (i travel
expenses related to any of the foregoing.
Section 1.69. Letters Of Credit. The term LETTERS OF CREDIT means
collectively standby letters of credit issued from time to time by the
LENDER for the account or benefit of any or all of the BORROWERS.
Section 1.70. LIBOR Borrowing. The term LIBOR BORROWING means each
advance of proceeds of a LOAN which is accruing interest based upon
the ADJUSTED LIBOR RATE for a separate INTEREST PERIOD.
Section 1.71. LIBOR Rate. The term LIBOR RATE means, with respect to
any LIBOR BORROWING for any INTEREST PERIOD, the interest rate per
annum determined by the LENDER by dividing (the resulting quotient
rounded upwards, to the next whole multiple of one-sixteenth of one
percent (.0625%) (a) the rate of interest determined by the LENDER in
accordance with its usual procedures to be the weighted average
(rounded, if necessary, to the nearest one-hundredth of one percent
(.01%)) of the rate quotation offered to the LENDER by leading banks
in the London Interbank Eurodollar Market for Dollar deposits for
amounts in immediately available funds comparable to the outstanding
principal amount of the LIBOR BORROWING for which an interest rate is
then being determined and having a borrowing date and a maturity
comparable to such INTEREST PERIOD, as of 11:00 a.m. or as soon
thereafter as practicable, two (2) BUSINESS DAYS preceding the first
day of such INTEREST PERIOD by (b) a number equal to 1.00 minus the
RESERVE REQUIREMENT. In each instance, the LENDERS determination of
the LIBOR RATE shall be conclusive, absent manifest error.
Section 1.72. Limited Guarantors. The term LIMITED GUARANTORS means
collectively, GP Strategies Corporation, a Delaware corporation, and
ManTech International Corporation, a New Jersey corporation.
Section 1.73. Loan. The term LOAN means the revolving loan extended
by the LENDER to the BORROWERS as joint and several co-obligors in
accordance with the terms set forth in this AGREEMENT.
Section 1.74. Loan Documents. The term LOAN DOCUMENTS means all
agreements, instruments and documents, together with all other loan
agreements (including without limitation this AGREEMENT), notes
(including without limitation the NOTE), security agreements,
guarantees, subordination agreements, intercreditor agreements,
pledges, affidavits, powers of attorney, consents, assignments,
landlord and mortgage waivers, opinions, collateral assignments,
reimbursement agreements, contracts, notices, leases, financing
statements, mortgages, deeds of trusts, assignments of rents or
contract proceeds, intellectual property security agreements, letter
of credit applications and agreements, cash collateral account
agreements, INTEREST RATE PROTECTION AGREEMENTS, and all other written
matter, whether heretofore, now or hereafter executed by or on behalf
of any or all of the BORROWERS, any of the GUARANTORS, any of the
LIMITED GUARANTORS or by any other PERSON in connection with any of
the OBLIGATIONS.
Section 1.75. Lock Box. The term LOCK BOX has the meaning given that
term in Section 3.5 of this AGREEMENT.
Section 1.76. Material Adverse Event. The term MATERIAL ADVERSE
EVENT means the occurrence of any event, condition, or omission which
the LENDER in the good faith reasonable exercise of the LENDERS
discretion determines could be expected to have a material adverse
effect upon: (a) the condition (financial or otherwise), results of
operations, properties, assets, liabilities (including, without
limitation, tax liabilities, liabilities under ENVIRONMENTAL LAWS, and
ERISA LIABILITIES), businesses, operations, capitalization, equity,
licenses, franchises or prospects of any of the BORROWERS, any of the
GUARANTORS, or any of the LIMITED GUARANTORS; (b) the ability of any
of the BORROWERS, any of the GUARANTORS, or any of the LIMITED
GUARANTORS to perform any of the OBLIGATIONS when and as required by
the terms of the LOAN DOCUMENTS; (c) the rights and remedies of the
LENDER as provided by the LOAN DOCUMENTS; or (d) the value, condition,
use, or availability of any of the COLLATERAL or upon any of the
LENDERS liens and security interests securing the OBLIGATIONS.
Section 1.77. Maximum Credit Amount. The term MAXIMUM CREDIT AMOUNT
means the lesser of the BORROWING BASE or the DOLLAR CAP.
Section 1.78. Multiemployer Plan. The term MULTIEMPLOYER PLAN means
a multiemployer plan as defined in Section 4001(a)(3) of ERISA which
is maintained for employees of the BORROWERS, or any ERISA AFFILIATE
of the BORROWERS.
Section 1.79. Net Profit After Taxes. The term NET PROFIT AFTER
TAXES means, for any period, the aggregate net income of the
BORROWERS and their consolidated SUBSIDIARIES for such period
determined in conformity with G.A.A.P., after payment of or provision
for, or distributions with respect to, taxes applicable to such
period; provided, however, in no event shall such amount be less than
One Dollar ($1.00).
Section 1.80. Note. The term NOTE means the Promissory Note of even
date herewith from the BORROWERS as co-makers thereof which is payable
to the order of the LENDER in the stated principal amount of Ten
Million Dollars ($10,000,000.00).
Section 1.81. Obligations. The term OBLIGATIONS means collectively
all of the obligations of each of the BORROWERS to pay to the LENDER:
(a) all sums due to the LENDER arising out of or in connection with
the LOAN or otherwise pursuant to the terms of the LOAN DOCUMENTS and
all renewals, refinancings, extensions, substitutions, amendments,
restatements, modifications, supplements or replacements thereof,
whether direct or indirect, joint or several, absolute or contingent,
contemplated or uncontemplated, now existing or hereafter arising,
including, but not limited to, all amounts of principal, interest,
charges, reimbursements, advancements, escrows and fees; (b) other
indemnification obligations owed by any or all of the BORROWERS to the
LENDER in accordance with the terms of the LOAN DOCUMENTS; (c) all
LENDER EXPENSES; (d all overdrafts of any of the BORROWERS upon any
accounts with the LENDER; (e) payments, duties or obligations owed to
the LENDER arising from or with respect to INTEREST RATE PROTECTION
AGREEMENTS, foreign exchange facilities or currency transactions,
existing or arising from time to time; (f) all sums outstanding on
account of REIMBURSEMENT OBLIGATIONS and any other sums owed to the
LENDER arising out of or relating to any LETTERS OF CREDIT including,
without limitation, all indemnification obligations, obligations to
deposit cash collateral, and obligations to pay fees; (g) all duties
of payment and performance owed to the LENDER in connection with any
guaranties; (h) all other indebtedness or liability of any of the
BORROWERS to the LENDER, whether direct or indirect, joint or several,
absolute or contingent, contemplated or not presently contemplated,
now existing or hereafter arising in connection with the CREDIT
FACILITY; and (i) any indebtedness or liability which may exist or
arise as a result of any payment made by or for the benefit of any of
the BORROWERS being avoided or set aside for any reason including,
without limitation, any payment being avoided as a preference under
Sections 547 and 550 of the United States Bankruptcy Code, as amended,
or under any state law governing insolvency or creditors rights.
Section 1.82. Permitted Acquisitions. The term PERMITTED ACQUISITION
means an ACQUISITION by any BORROWER pursuant to an ACQUISITION
AGREEMENT provided: (a) no DEFAULT or EVENT OF DEFAULT shall have
occurred or shall occur after giving effect to such ACQUISITION; (b)
the BORROWERS and the consolidated SUBSIDIARIES shall have
demonstrated in a writing delivered to the LENDER full compliance with
all of the terms and provisions of this AGREEMENT (including but not
limited to the financial covenants set forth in Sections 6.21, 6.22,
6.23, and 6.24 hereof) before giving effect to such ACQUISITION and,
on a pro forma basis, after giving effect to such ACQUISITION; (c) the
BORROWERS and the consolidated SUBSIDIARIES shall have demonstrated to
the LENDER in writing that, after giving full effect to the
ACQUISITION, the TANGIBLE NET WORTH of the BORROWERS and the
consolidated SUBSIDIARIES shall not be less than their TANGIBLE NET
WORTH immediately prior to such ACQUISITION; (d) the net income
(determined in accordance with G.A.A.P.) of the TARGET for the most
12-month period most recently preceding the ACQUISITION is not less
than One Dollar ($1.00), unless the ACQUISTION is a true asset
purchase only; (e) the TARGET is a going concern (unless the
ACQUISITION is a true asset purchase only), organized under one of the
states of the United States and located solely in (or if an asset
purchase, whose assets are located solely in), the United States, and
is in substantially the same line of business as the BORROWERS or a
complementary line of business; (f) a BORROWER is the surviving,
controlling corporation upon the consummation of such ACQUISITION; (g)
such ACQUISITION was not preceded by an unsolicited tender offer for
the CAPITAL STOCK of the TARGET that was not recommended or approved
by the TARGETS board of directors or similar governing body, and the
BORROWER shall have delivered to the LENDER evidence satisfactory to
the LENDER that the board of directors or similar governing body of
the TARGET has approved such ACQUISITION; (h) the TARGET is not
subject to any material pending litigation which could reasonably be
expected to have a material adverse effect on the BORROWERS or any
SUBSIDIARY; (i) the BORROWERS have given the LENDER at least fifteen
(15) BUSINESS DAYS prior written notice of the closing of the
ACQUISITION; and (j) if the aggregate value of cash and securities
paid and issued in connection with such transaction (including the
maximum amount of any compensation or consideration which such
BORROWER is obligated to pay in connection therewith in addition to
the purchase price) is One Million Dollars ($1,000,000.00) or more,
such transaction has been approved by the LENDER, which approval shall
be subject to the review by the LENDER of all documentation and
financial analysis related to the transaction as the LENDER shall
reasonably require.
Section 1.83. Permitted Liens. The term PERMITTED LIENS means: (a)
liens for taxes, assessments, or similar charges incurred in the
ordinary course of business that are (i) not yet due and payable or
(ii) due and payable but are being contested in good faith by
appropriate proceedings in accordance with the terms and conditions of
Section 6.8 hereof, provided that, in the case of liens under this
clause (ii), a reserve against the BORROWING BASE shall have been
established in the amount of the claims for any such taxes,
assessments, or similar charges; (b) liens in favor of the LENDER; (c)
any existing liens specifically described on Schedule 1.82 hereof; (d)
any lien on specifically allocated money or securities to secure
payments under workers compensation, unemployment insurance, social
security and other similar LAWS, or to secure the performance of bids,
tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations or appeal bonds, or to secure
leases, or indemnity, performance or other similar bonds in the
ordinary course of business; (e) purchase money security interests for
EQUIPMENT not to exceed in aggregate amount outstanding at any one
time the sum of Fifty Thousand Dollars ($50,000.00), provided that
such purchase money security interests do not attach to any assets
other than the specific item(s) of EQUIPMENT acquired with the
proceeds of the loan secured by such purchase money security
interests; (f) statutory liens of landlords, carriers, warehousemen,
mechanics, materialmen and other similar liens imposed by LAW which
are incurred in the ordinary course of business for sums not more than
thirty (30) days delinquent or the validity of which is being
contested in good faith by appropriate proceedings promptly instituted
and diligently conducted, the outcome of such contest proceedings, if
adversely determined, could not have a material adverse effect on any
of the BORROWERS or the GUARANTORS, such contest proceedings have the
effect of preventing the forfeiture or sale of such property subject
to such liens, and reserves satisfactory to the LENDER against the
BORROWING BASE shall have been established for payment of such sums,
fees and expenses for which any of the BORROWERS would be liable if
unsuccessful in such contest; and provided that such liens do not, in
any case, materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of any
of the BORROWERS; (g) easements, rights-of-way, restrictions and other
similar charges or encumbrances which, in the aggregate, are not
material in amount, and which in any case do not materially detract
from the value of the property subject thereto or interfere with the
ordinary conduct of the business of any of the BORROWERS; (h) liens
securing judgments, but only to the extent, for an amount, and for a
period not resulting in a DEFAULT or an EVENT OF DEFAULT; and (i)
subsequently arising liens which are expressly approved by the LENDER
in writing in advance of the creation of any such liens.
Section 1.84. Person. The term PERSON means any individual,
corporation, partnership, limited liability company, association,
joint-stock company, trust, estate, unincorporated organization, joint
venture, court, government or political subdivision or agency thereof,
or other legal entity.
Section 1.85. Quarter. The term QUARTER means each of the periods of
three calendar months beginning on each January 1, April 1, July 1,
and October 1 of each calendar year.
Section 1.86. Receivables. The term RECEIVABLES means all of the
ACCOUNTS, INSTRUMENTS, DOCUMENTS, GENERAL INTANGIBLES, CHATTEL PAPER,
notes, notes receivable, drafts, acceptances, and choses in action, of
any or all of the BORROWERS, now existing or hereafter created or
acquired, and all proceeds and products thereof, and all rights
thereto, arising from the sale or lease of or the providing of
INVENTORY, GOODS, or services by any of the BORROWERS to ACCOUNT
DEBTORS, as well as all other rights, contingent or non-contingent, of
any kind of any of the BORROWERS to receive payment, benefit, or
credit from any PERSON, including, but not limited to contracts with
customers (including but not limited to GOVERNMENT CONTRACTS),
deposits, prepayments and any rights to receive payment under any
policy of credit insurance.
Section 1.87. Records. The term RECORDS means correspondence,
memoranda, tapes, discs, papers, books and other documents, or
transcribed information of any type, whether expressed in ordinary,
computer or machine language.
Section 1.88. Regulated Substance. The term REGULATED SUBSTANCE
means any substance which, pursuant to any ENVIRONMENTAL LAW, is
identified as a hazardous substance (or other term having similar
import) or is otherwise subject to special requirements in connection
with the use, storage, transportation, disposition or other handling
thereof.
Section 1.89. Regulatory Change. The term REGULATORY CHANGE means
any change after the CLOSING in the laws of the United States, any
state thereof, or any foreign nation or state, or the adoption or
making after such date, of any interpretations, directives or requests
applying to a class of depository institutions, including the LENDER,
of or under any law of the United States, any states thereof, or any
foreign nation or state (whether or not any such interpretation,
directive or request has the force of law) by any court or
governmental authority or monetary authority with authority with
respect to the interpretation or administration of such law.
Section 1.90. Reimbursement Obligations. The term REIMBURSEMENT
OBLIGATIONS means, at any particular time, the aggregate amount of
all drawings made under LETTERS OF CREDIT which, as at such time, have
not been reimbursed to the LENDER by the BORROWERS.
Section 1.91. Release. The term RELEASE means a release as defined
in Section 101(22) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as now or hereafter amended.
Section 1.92. Reserve Requirement. The term RESERVE REQUIREMENT
means, for any INTEREST PERIOD, the average rate at which reserves
(including any marginal, supplemental or emergency reserves) are
required to be maintained during such INTEREST PERIOD under Regulation
D of the Board of Governors of the Federal Reserve System, from time
to time in effect (or any successor or other regulation relating to
reserve requirements applicable to member banks of the Federal Reserve
System) by member banks of the Federal Reserve System with deposits
exceeding One Billion Dollars ($1,000,000,000) against Eurocurrency
Liabilities as currently defined in Regulation D.
Section 1.93. Restricted Payment. The term RESTRICTED PAYMENT means
collectively: (a) any dividend or other payment or distribution,
direct or indirect, on account of any equity interest in any of the
BORROWERS or any of their respective SUBSIDIARIES now or hereafter
outstanding, except a dividend or distribution payable solely in the
same class or type of equity interest to the holders of that class or
type; (b) any payment or prepayment of principal of, premium, if any,
or interest on, or any redemption, conversion, exchange, retirement,
sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, by any of the BORROWERS of any SUBORDINATED
DEBT, the GSE POWER SYSTEMS AB NOTE, or any equity interest in any of
the BORROWERS or any of their respective SUBSIDIARIES now or hereafter
outstanding; (c) any payment made by any of the BORROWERS or any of
their respective SUBSIDIARIES to retire, or to obtain the surrender
of, any outstanding warrants, options or other rights to acquire
equity interests in any of the BORROWERS or any of their respective
SUBSIDIARIES now or hereafter outstanding; or (d) any payment by any
of the BORROWERS or any of their respective SUBSIDIARIES to any
AFFILIATE or any other PERSON of any management, consulting or similar
fees outside the ordinary course of business or which are not in
amounts comparable to sums paid in the marketplace for similar
services.
Section 1.94. Solvent. The term SOLVENT means, as to any referenced
PERSON, that as of the date of determination both: (a) (i) the then
fair saleable value of the property of such PERSON is greater than the
total amount of liabilities (including contingent liabilities) of such
PERSON and is not less than the amount that will be required to pay
the probable liabilities on such PERSONS then existing debts as they
become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such PERSON; (ii) such
PERSONS capital is not unreasonably small in relation to its business
or any contemplated or undertaken transaction; and (iii) such PERSON
does not intend to incur, or believe (nor should it reasonably
believe) that it will incur, debts beyond its ability to pay such
debts as they become due; and (b) such PERSON is solvent within the
meaning given that term and similar terms under applicable laws
relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall
be computed as the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
Section 1.95. Stated Amount. The term STATED AMOUNT means with
respect to each LETTER OF CREDIT, the lesser of (a) the face amount
thereof, or (b) the amount remaining available for drawing thereunder
(regardless of whether any conditions for drawing could then be
satisfied).
Section 1.96. Subordinated Debt. The term SUBORDINATED DEBT means
the INDEBTEDNESS of any of the BORROWERS to any PERSON which is
expressly subordinated to the repayment and enforcement of the
OBLIGATIONS pursuant to a written agreement acceptable to the LENDER.
Section 1.97. Subsidiary. The term SUBSIDIARY means, with respect to
any PERSON, any other PERSON of which securities or other ownership
interests representing an aggregate of fifty percent (50%) or more of
the equity or the ordinary voting power are, at the time as of which
any determination is being made, owned or controlled directly, or
indirectly through one or more intermediaries, by such PERSON.
Section 1.98. Tangible Net Worth. The term TANGIBLE NET WORTH means,
as at the end of any period, the difference obtained by subtracting
(a) TOTAL LIABILITIES as at the end of such period from (b) TOTAL
ASSETS as at the end of such period, exclusive of goodwill,
trademarks, tradenames, licenses and such other assets as are properly
classified as intangible assets in accordance with G.A.A.P.
consistently applied, and exclusive of all transactions with, and all
amounts due or to become due to any of the BORROWERS or any of the
consolidated SUBSIDIARIES from, and all investments in, AFFILIATES.
For purposes of this Section 1.98, investments in AFFILIATES shall
not include the initial non-cash investment by GSE SYSTEMS in exchange
for an equity interest in Avantium International BV.
Section 1.99. Target. The term TARGET means any PERSON, a majority
of the CAPITAL STOCK of which, a division or similar business unit of
which, or all or substantially all of the assets and business of any
of the foregoing of which, are to be acquired by a BORROWER, pursuant
to the terms of an ACQUISITION AGREEMENT.
Section 1.100. Termination Event. The term TERMINATION EVENT means:
(a) a Reportable Event described in Section 4043 of ERISA and the
regulations issued thereunder, but not including any such event for
which the 30-day notice requirement has been waived by applicable
regulation; (b) the withdrawal of any of the BORROWERS or an ERISA
AFFILIATE of any of the BORROWERS from a GUARANTEED PENSION PLAN
during a plan year in which it was a substantial employer as defined
in Section 4001(a)(2) of ERISA; (c) the filing of a notice of intent
to terminate a GUARANTEED PENSION PLAN or the treatment of a
GUARANTEED PENSION PLAN amendment as a termination under Section 4041
of ERISA; (d) the institution of proceedings to terminate a GUARANTEED
PENSION PLAN by the Pension Benefit Guaranty Corporation; (e) the
withdrawal or partial withdrawal of any of the BORROWERS or an ERISA
AFFILIATE of any of the BORROWERS from a MULTIEMPLOYER PLAN; or (f)
any other event or condition which might reasonably be expected to
constitute grounds under ERISA for the termination of, or the
appointment of a trustee to administer, any GUARANTEED PENSION PLAN.
Section 1.101. Termination Date. The term TERMINATION DATE means
March 23, 2003
Section 1.102. Total Assets. The term TOTAL ASSETS means, as at the
end of any period, the aggregate amount which, in accordance with
G.A.A.P. consistently applied, would be included in a total assets or
comparable account reflected in a balance sheet of the BORROWERS and
their consolidated SUBSIDIARIES as at the end of such period.
Section 1.103. Total Current Assets. The term TOTAL CURRENT ASSETS
means, as at the end of any period, the aggregate amount which, in
accordance with G.A.A.P. consistently applied, would be included in a
total current assets or comparable account reflected in a balance
sheet of the BORROWERS and their consolidated SUBSIDIARIES as at the
end of such period, exclusive of deferred assets other than prepaid
items such as insurance, taxes, interest, commissions, rents,
royalties and the like, and exclusive of all transactions with, and
all amounts due or to become due to any of the BORROWERS and their
consolidated SUBSIDIARIES from, and all investments in, AFFILIATES.
Section 1.104. Total Current Liabilities. The term TOTAL CURRENT
LIABILITIES means, as at the end of any period, the aggregate amount
which, in accordance with G.A.A.P. consistently applied, would be
included in a total current liabilities or comparable account
reflected in a balance sheet of the BORROWERS and their consolidated
SUBSIDIARIES as at the end of such period, including all reserves,
accruals and deferred charges and the aggregate amount of current
indebtedness of persons other than the BORROWERS and their
consolidated SUBSIDIARIES for which any BORROWER or their consolidated
SUBSIDIARIES is liable, contingently or noncontingently, or which are
secured by property of any of the BORROWERS or any consolidated
SUBSIDIARIES.
Section 1.105. Total Liabilities. The term TOTAL LIABILITIES means,
as at the end of any period, the aggregate amount which, in accordance
with G.A.A.P. consistently applied, would be included in a total
liabilities or comparable account reflected in a balance sheet of the
BORROWERS and their consolidated SUBSIDIARIES as at the end of such
period, including all reserves, accruals and deferred charges and the
aggregate amount of the liabilities of PERSONS other than the
BORROWERS for which any of the BORROWERS and their consolidated
SUBSIDIARIES is liable, contingently or noncontingently, or which are
secured by property of any of the BORROWERS or any consolidated
SUBSIDIARIES.
Section 1.106. Unbilled Government Accounts Borrowing Base. The term
UNBILLED GOVERNMENT ACCOUNTS BORROWING BASE means, at any date of
determination thereof, the lesser, as at such time, of (a) the product
of (i) ELIGIBLE UNBILLED GOVERNMENT ACCOUNTS and (ii) the UNBILLED
GOVERNMENT ACCOUNTS CREDIT PERCENTAGE, and (b) UNBILLED GOVERNMENT
ACCOUNTS MAXIMUM CREDIT AMOUNT.
Section 1.107. Unbilled Government Accounts Credit Percentage. The
term UNBILLED GOVERNMENT ACCOUNTS CREDIT PERCENTAGE means fifty
percent (50%).
Section 1.108. Unbilled Government Accounts Maximum Credit Amount. The
term UNBILLED GOVERNMENT ACCOUNTS MAXIMUM CREDIT AMOUNT means Two
Million Two Hundred Fifty Thousand Dollars ($2,250,000.00).
Section 1.109. Working Capital. The term WORKING CAPITAL means, as
at the end of any period, the difference obtained by subtracting (a)
TOTAL CURRENT LIABILITIES as at the end of such period, plus the
aggregate amount of all outstanding balances under the CREDIT
FACILITY, as at the end of such period, from (b) TOTAL CURRENT ASSETS
as at the end of such period.
Section 1.110. Year 2000 Compliant. The term YEAR 2000 COMPLIANT
means, with respect to any PERSON, that all computer hardware and
software that are material to the business and operations of such
PERSON will on a timely basis be able to perform properly
date-sensitive functions for all dates before, on, and after January
1, 2000, including functions with respect to any leap year.
Section 1.111. Year 2000 Problem. The term Year 2000 PROBLEM shall
have the meaning set forth in Section 6.20 hereof.
ARTICLE 2
TERMS OF THE CREDIT FACILITY
Section 2.1. Agreement To Extend The Loan. Subject to the terms and
conditions stated in this AGREEMENT and the LOAN DOCUMENTS, the LENDER
agrees to extend the LOAN to the BORROWERS as co-obligors. The LENDER
shall advance proceeds of the LOAN to the BORROWERS by depositing into
the COMMERCIAL ACCOUNT or in accordance with such other procedures as
may be agreed to between the LENDER and the BORROWERS, such sums as
any of the BORROWERS may request during the period from and including
the date of CLOSING to but not including the TERMINATION DATE;
provided that the aggregate outstanding principal balance of the LOAN
plus the L/C EXPOSURE shall never exceed at any time the MAXIMUM
CREDIT AMOUNT. All requests for advances of proceeds of the LOAN shall
be in minimum amounts of not less than One Hundred Thousand Dollars
($100,000.00). The BORROWERS shall not request or permit any advance
of proceeds of the LOAN which would cause the aggregate amount of
advances made to or for the BORROWERS and outstanding under the LOAN
DOCUMENTS to exceed the limitations herein set forth. In the event
that the principal balance outstanding under the LOAN plus the L/C
EXPOSURE ever exceeds the MAXIMUM CREDIT AMOUNT (or any of the
percentages or sublimits set forth therein) the BORROWERS shall
immediately, upon demand of the LENDER, pay to the LENDER in cash the
amount of such excess and prior to such repayment such over advances
shall bear interest at the highest rate provided under this AGREEMENT.
Subject to the terms and conditions of the LOAN DOCUMENTS, the
BORROWERS may borrow, repay and reborrow advances under the LOAN
during the above-described period. Any termination of the CREDIT
FACILITY by the LENDER, whether on the TERMINATION DATE or upon and
after the occurrence of an EVENT OF DEFAULT, shall relieve the LENDER
of the LENDERS obligation to lend money or to make financial
accommodations to or for any or all of the BORROWERS and the
BORROWERS accounts, and shall in no way release, terminate, discharge
or excuse any of the BORROWERS from its absolute duty to pay or
perform the OBLIGATIONS. All repayments shall be credited to the
balance due from the BORROWERS pursuant to the normal and customary
practices of the LENDER. All amounts received by LENDER in payment of
RECEIVABLES shall be credited to the BORROWERS account after allowing
the LENDERS customary period of time for collection and clearance,
but shall be conditional upon final payment to the LENDER.
Section 2.1.1. Note; Interest, And Lenders Records. The obligations
of the BORROWERS, jointly and severally, to repay to the LENDER the
LOAN shall be evidenced by the NOTE. Interest shall accrue on the
unpaid principal balance of the LOAN at the rate or rates described in
Section 2.3 of this AGREEMENT. The date and amounts of each advance
made by the LENDER and each payment made by any of the BORROWERS shall
be recorded by the LENDER on the books and records of the LENDER, but
any failure to record such dates or amounts shall not relieve any of
the BORROWERS of its duties and obligations under the LOAN DOCUMENTS.
Interest accrued upon the LOAN shall be computed on outstanding
balances as reflected on the LENDERS books and records.
Section 2.1.2. Term. All sums due under the LOAN shall be paid in full
on TERMINATION DATE.
Section 2.1.3. Purpose. The proceeds of the LOAN shall be used by the
BORROWERS solely for the BORROWERS general corporate purposes,
including working capital needs.
Section 2.2. Letters Of Credit.
Section 2.2.1. Availability. Subject to the terms and conditions of
this AGREEMENT and the LOAN DOCUMENTS, including but not limited to
the terms of all reimbursement agreements, applications and other
documents required by the LENDER in the issuance of LETTERS OF CREDIT,
the CREDIT FACILITY may be used by the BORROWERS for, and the LENDER
agrees to issue, LETTERS OF CREDIT as requested by any of the
BORROWERS for the account of the BORROWERS on any BUSINESS DAY from
the date of CLOSING through but not including the TERMINATION DATE;
and provided (a) the L/C EXPOSURE (after giving effect to any
requested issuance) shall not at any time exceed Two Million Dollars
($2,000,000.00); (b) the sum of the L/C EXPOSURE (after giving effect
to the requested issuance) plus the aggregate unpaid principal balance
of the LOAN shall not exceed the MAXIMUM CREDIT AMOUNT; (c) no LETTER
OF CREDIT (including any extension or renewal thereof, whether or not
automatic) shall expire on a date which is later than one (1) year
from the date of issuance thereof; (d) no LETTER OF CREDIT (including
any extension or renewal thereof, whether or not automatic) shall
expire on a date which is on or after thirty (30) days prior to the
TERMINATION DATE, unless such LETTER OF CREDIT is secured by cash
collateral satisfactory to the LENDER in an amount equal to one
hundred percent (100%) of the STATED AMOUNT, to be applied in
accordance with Section 9.4 hereof; and (e) the issuance of any
requested LETTER OF CREDIT shall not conflict with or cause the LENDER
to exceed any limits imposed by any LAWS applicable to the LENDER. If
at any time the L/C EXPOSURE exceeds any such permitted amounts, the
BORROWERS shall furnish to the LENDER cash collateral satisfactory to
the LENDER in an amount equal to such excess to be applied in
accordance with Section 9.4 hereof.
Section 2.2.2. Requests for Letters of Credit. Each LETTER OF CREDIT
shall be issued only in accordance with the then current practices of
the LENDER relating to its issuance of standby letters of credit,
including the payment by the BORROWERS of all applicable fees and
charges in connection therewith. Each LETTER OF CREDIT shall be in
such form as may be approved from time to time by the LENDER. Each
request for a LETTER OF CREDIT shall be made to the LENDER pursuant to
a written application and agreement for letter of credit complying
with the LENDERS then current requirements, at least five (5)
BUSINESS DAYS before the proposed date of issuance of such LETTER OF
CREDIT.
Section 2.2.3. Letter of Credit Fees And Other Charges. The BORROWERS,
jointly and severally, shall pay to the LENDER a fee with respect to
each outstanding LETTER OF CREDIT computed on the face amount of such
LETTER OF CREDIT at an annual percentage rate equal to two and
one-half percent (2.5%). The aforesaid letter of credit fee shall be
payable quarterly in arrears on the last BUSINESS DAY of each QUARTER
and on the TERMINATION DATE. In addition, the BORROWERS, jointly and
severally, shall pay to the LENDER such other normal and customary
fees, costs and expenses that may be charged or incurred by the LENDER
in connection with issuing, effecting payment under, amending,
continuing, extending, or renewing or otherwise administering any
LETTER OF CREDIT including, without limitation, correspondent bank
fees, amendment fees, reissuance costs, cancellation fees and all
reasonable out-of-pocket costs and expenses. Each LETTER OF CREDIT fee
shall be non-refundable, even if the LETTER OF CREDIT is surrendered
or drawn before the expiration date thereof.
Section 2.2.4. Payment of Reimbursement Obligations. REIMBURSEMENT
OBLIGATIONS, together with any taxes, charges or other costs or
expenses incurred by LENDER in connection with such payment, shall be
due and payable by the BORROWERS, jointly and severally, immediately
upon the payment by the LENDER of the draw giving rise thereto. Each
of the BORROWERS acknowledges and agrees that it shall be jointly and
severally, irrevocably and unconditionally obligated forthwith to
reimburse the LENDER, immediately upon any drawing under any LETTER OF
CREDIT, without presentment, demand, protest or other formalities or
notices of any kind.
Section 2.2.5. Conversion of Reimbursement Obligations to Loans.
Immediately upon the payment of each drawing or acceptance under any
LETTER OF CREDIT, unless the amount of such drawing or acceptance is
immediately reimbursed to the LENDER, by one or more of the BORROWERS
from its separate funds: (a) the BORROWERS shall be deemed to have
made an irrevocable request for a BASE RATE BORROWING under the LOAN
in an amount equal to such drawing or acceptance; and (b) the
REIMBURSEMENT OBLIGATION resulting from the payment by the LENDER of
such drawing or acceptance shall be converted to a BASE RATE BORROWING
under the LOAN in a corresponding principal amount. Anything to the
contrary in this AGREEMENT notwithstanding, except as otherwise
provided above in this subsection, each advance which is to be made
pursuant to this subsection shall be made regardless of whether the
conditions precedent required of any of the BORROWERS under Section
4.2 are satisfied at the time thereof.
Section 2.2.6. Payment of L/C Exposure Upon Termination Date. If any
LETTERS OF CREDIT remain outstanding on the TERMINATION DATE, the
BORROWERS shall, without demand or the taking of any other action by
the LENDER, pay to the LENDER an amount in immediately available funds
equal to 100% of the L/C EXPOSURE, which funds shall be held by the
LENDER in a restricted collateral account maintained by the LENDER in
its own name. Such funds shall be applied in accordance with Section
9.4 hereof.
Section 2.2.7. Payment Obligations Unconditional. The payment
obligations of the BORROWERS under this Section 2.2 shall be absolute,
unconditional, and irrevocable and shall be paid strictly in
accordance with this AGREEMENT regardless of the circumstances.
Without limiting the foregoing, none of the following circumstances
shall reduce, discharge, stay, defer or impair in any other manner the
payment obligations of any of the BORROWERS under this Section 2.2:
a. any lack of validity or enforceability of any LETTER OF CREDIT or
any LOAN DOCUMENT;
b. any amendment, waiver, release or termination of or any consent to
departure from the terms of any LETTER OF CREDIT or any LOAN DOCUMENT;
c. any extension of time or other modification or the terms and
conditions governing the making and honoring of any drawing, or any
extension of time or other modification of the terms and conditions
for any other act to be performed under the terms of any LETTER OF
CREDIT;
d. the existence of any dispute, claim, set-off, defense or other
right which any of the BORROWERS may have at any time against any
beneficiary under, or any transferee of, any LETTER OF CREDIT (or any
PERSONS for whom any such beneficiary or transferee may hold a LETTER
OF CREDIT or any interest therein), or the LENDER or any other PERSON,
regardless of whether such dispute, claim, set-off, defense or other
right is held or asserted in connection with this AGREEMENT or any
unrelated transaction;
e. the surrender or impairment of any security for the OBLIGATIONS;
f. any question of form, validity, accuracy, legal effect, or
genuineness of drafts, endorsements, documents or required statements,
even if such drafts, endorsements, documents or statements should in
fact prove to be in any or all respects invalid, inaccurate,
fraudulent or forged or any failure of any draft to bear any reference
or adequate reference to any LETTER OF CREDIT;
g. payment by the LENDER under any LETTER OF CREDIT against
presentation of a draft, certificate or other documentation which does
not comply with the terms of such LETTER OF CREDIT, except to the
extent that such payment constitutes gross negligence or wilful
misconduct of the LENDER; or
h. any other circumstance or occurrence whatsoever, whether or not
similar to any of the foregoing, except to the extent resulting from
the gross negligence or wilful misconduct of the LENDER.
Section 2.2.8. Suspension of Commitment to Issue Letters of Credit. In
the event any provision of any LAW ever would prohibit or restrict the
LENDER from issuing any LETTER OF CREDIT, the agreement of the LENDER
to issue LETTERS OF CREDIT hereunder shall immediately be suspended
until such restrictions cease to be applicable. In the event of any
such suspension, the BORROWERS may continue to obtain advances under
the LOAN, subject to the terms and conditions of this AGREEMENT.
Section 2.2.9. Rights And Remedies Of The Lender. In the event that,
coincident with or subsequent to the occurrence of, and during the
continuance of, a DEFAULT or an EVENT OF DEFAULT (but without limiting
any right and remedies of the LENDER arising as a result of any such
EVENT OF DEFAULT), the LENDER becomes aware of the possibility of a
draw, or enforcement of the LENDERs obligations, under a LETTER OF
CREDIT, the LENDER, at its option, may, but shall not be required to,
make an advance (regardless of whether the conditions precedent to
advances or issuances of LETTERS OF CREDIT have been satisfied) of
proceeds of the LOAN in an amount equal to the STATED AMOUNT of such
LETTER OF CREDIT, together with any LENDER EXPENSES charged or
incurred or reasonably expected to be charged or incurred in
connection therewith in accordance with Section 2.2.2 hereof, to be
deposited in the cash collateral account described in Section 9.4
hereof and applied in accordance therewith. All such advances shall be
secured by all of the COLLATERAL and shall bear interest and be
payable at the same rate (including the default rate of interest) and
in the same manner as the LOAN. If any LETTER OF CREDIT is drawn upon
to discharge any obligation of any of the BORROWERS to the beneficiary
of such LETTER OF CREDIT, in whole or in part, the LENDER shall be
fully subrogated to the rights of such beneficiary with respect to the
obligations owed by such BORROWER to such beneficiary discharged with
the proceeds of the LETTER OF CREDIT.
Section 2.2.10. Indemnification. The BORROWERS jointly and severally
and unconditionally and irrevocably agree to indemnify the LENDER and
to hold the LENDER harmless from any and all losses, claims or
liabilities arising from any transactions or occurrences relating to
LETTERS OF CREDIT issued, established, opened or accepted for the
account of any of the BORROWERS, and any drafts or acceptances
thereunder, and all OBLIGATIONS incurred in connection therewith,
other than losses, claims or liabilities arising from the gross
negligence or willful misconduct of the LENDER.
Section 2.3. Interest Rates. Interest shall accrue on the unpaid
principal balances of the LOAN and on all REIMBURSEMENT OBLIGATIONS at
the rate or rates described in this Section 2.3.
Section 2.3.1. Calculation Of Interest. Interest shall be calculated
on the basis of a 360 days per year factor applied to actual days in
which there exists unpaid principal balances of the LOAN or
REIMBURSEMENT OBLIGATIONS.
Section 2.3.2. Adjusted Base Rate. Except as provided in
Section 2.3.3. of this AGREEMENT, the LOAN, and each advance
thereunder, shall bear interest on the unpaid principal balances at a
fluctuating annual rate which shall at all times equal the ADJUSTED
BASE RATE. Changes in the interest rate shall be made when and as
changes in the BASE RATE occur. For each BASE RATE BORROWING, all
accrued and unpaid interest shall be payable monthly in arrears on the
1st calendar day of each month, commencing on April 1, 2000. Payments
made upon the LOAN shall be first applied to BASE RATE BORROWINGS and
then to any LIBOR BORROWING outstanding under the LOAN. All
REIMBURSEMENT OBLIGATIONS shall bear interest on the unpaid balances
thereof at a fluctuating annual rate which shall at all times equal
the ADJUSTED BASE RATE. All accrued and unpaid interest on
REIMBURSEMENT OBLIGATIONS shall be payable immediately upon demand of
the LENDER.
Section 2.3.3. Adjusted LIBOR Rate Option. Subject to the terms of
this Section, interest may accrue, at the election of the BORROWERS
during INTEREST PERIODS selected by the BORROWERS on portions of the
outstanding principal balances of the LOAN for which such a rate
election is not then in effect, at a rate equal to the ADJUSTED LIBOR
RATE. Any LIBOR BORROWING or election for a LIBOR BORROWING pursuant
to the provisions of this Section shall be subject to the following
terms and conditions:
a. Repayment Of Interest. For each of the LIBOR BORROWINGS, accrued
interest shall be paid in arrears on (i) the last day of each
applicable INTEREST PERIOD, and (ii) as to any INTEREST PERIOD which
is longer than three (3) months, on the ninetieth (90th) day of each
such INTEREST PERIOD and on the last day of each such INTEREST PERIOD.
b. Notice Of Election. By 10:00 a.m. on that BUSINESS DAY which occurs
three (3) BUSINESS DAYS prior to the BUSINESS DAY on which the
BORROWERS desire that an INTEREST PERIOD commence, the BORROWERS shall
deliver written notice to the LENDER in the form attached hereto as
Exhibit 2.3.3(b) specifying: (i) the commencement date of and length
of the relevant INTEREST PERIOD, and (ii) the dollar amount of that
portion of the total aggregate principal amount of the particular LOAN
identified by the BORROWERS, which is to bear interest at the ADJUSTED
LIBOR RATE, which amount shall be not be less than Five Hundred
Thousand Dollars ($500,000). If no notice of election is received in
respect of an outstanding LIBOR BORROWING that is expiring, the
interest rate shall, at the end of the INTEREST PERIOD, accrue at the
ADJUSTED BASE RATE.
c. Interest Periods. There shall be no more than six (6) INTEREST
PERIODS outstanding at any one time. No INTEREST PERIOD may expire
after the TERMINATION DATE.
d. Availability. If the LENDER should determine at any time that a
REGULATORY CHANGE or a change in market conditions has made it
impractical for the LENDER to offer pricing based on the ADJUSTED
LIBOR RATE, the LENDER shall forthwith give notice of its
determination to the BORROWERS, and all advances which are then
accruing interest at an ADJUSTED LIBOR RATE shall, on the last day(s)
of the then applicable current INTEREST PERIOD(S) automatically and
without further notice, begin to accrue interest at the ADJUSTED BASE
RATE. Until such time as the LENDER shall determine that a REGULATORY
CHANGE or a change in market conditions has again made it practical
for the LENDER to offer pricing on the ADJUSTED LIBOR RATE, the LENDER
shall not be obligated to further offer pricing based upon the
ADJUSTED LIBOR RATE, and any notice from the BORROWERS requesting such
a rate option shall be ineffective.
e. Additional Costs. The BORROWERS, jointly and severally, shall
compensate the LENDER from time to time, upon demand, for all losses,
expenses, costs and liabilities (including, without limitation, in the
event of any repayment or prepayment described in clause (i) below,
all interest paid to lenders of funds borrowed by the LENDER to carry
LIBOR BORROWINGS) which the LENDER shall sustain if (i) any repayment
or prepayment of any LIBOR BORROWING shall occur on a date which is
not the last day of the applicable INTEREST PERIOD(S), or (ii) any
REGULATORY CHANGE (A) subjects the LENDER to additional taxes of any
kind with respect to LIBOR BORROWING, other than changes in federal
income tax rates applicable to the LENDER, (B) imposes, modifies or
deems applicable any reserve, special deposit or similar requirement
against assets held by or the deposits in or for the account of, or
loans by, the LENDER (other than such reserves as are taken into
account as of the date of CLOSING in calculating the ADJUSTED LIBOR
RATE), or (C) imposes on the LENDER, directly or indirectly, any other
conditions affecting the LIBOR BORROWINGS or the cost of U.S. dollar
deposits obtained by the LENDER in obtaining the funds to carry LIBOR
BORROWINGS; and the result of any of the foregoing is to increase the
costs to the LENDER of making or maintaining loans accruing interest
at the ADJUSTED LIBOR RATE or decrease the yields of the LENDER. The
LENDER shall, upon the request of the BORROWERS, provide the BORROWERS
with a certificate as to any amounts payable under this Section,
showing in reasonable detail the basis for the calculation thereof,
which calculation, absent manifest error, shall be presumed to be
correct.
f. Prepayment And Termination. No LIBOR BORROWING may be prepaid prior
to the expiration of the applicable INTEREST PERIOD unless the
BORROWERS have fully compensated the LENDER as provided above in
Section 2.3.3.e. of this AGREEMENT.
g. Termination Of Right To Elect LIBOR Borrowings. Notwithstanding
anything to the contrary set forth in this AGREEMENT, and without
limiting any other rights and remedies of the LENDER, upon the
occurrence of an EVENT OF DEFAULT which is then continuing, the LENDER
may suspend the right of the BORROWERS to convert any BASE RATE
BORROWING into a LIBOR BORROWING or to permit any LIBOR BORROWING to
continue as a LIBOR BORROWING, in which case (i) all BASE RATE
BORROWINGS shall be continued as BASE RATE BORROWINGS and (ii) all
LIBOR BORROWINGS having thirty (30) days or more remaining in the
respective INTEREST PERIODS may, in the sole discretion of the LENDER,
be converted immediately or at any time to BASE RATE BORROWINGS, but
shall, in any event, be converted on the last days of the respective
INTEREST PERIODS therefor, and (iii) all LIBOR BORROWINGS having less
than thirty (30) days remaining in the respective INTEREST PERIODS
shall be converted on the last days of the respective INTEREST PERIODS
therefor.
Section 2.3.4. Default Rate. Upon the occurrence of an EVENT OF
DEFAULT, and even if the LOAN or the REIMBURSEMENT OBLIGATIONS have
not been accelerated, the interest rate payable on the LOAN, the
REIMBURSEMENT OBLIGATIONS and the other OBLIGATIONS may be increased
by the LENDER to a rate equal to two percentage points (2%) above the
rate of interest otherwise in effect, until such EVENT OF DEFAULT has
been cured to the satisfaction of the LENDER or waived. The default
rate set forth in this Section shall continue to apply whether or not
judgment shall be entered on any of the OBLIGATIONS.
Section 2.3.5. Maximum Rate Of Interest. Any provision contained in
the LOAN DOCUMENTS to the contrary notwithstanding, the holder of the
NOTE shall not be entitled to receive or collect, nor shall any of the
BORROWERS be obligated to pay, interest thereunder in excess of the
maximum rate of interest permitted by the laws of any state determined
to be applicable thereto or the laws of the United States of America
applicable to loans in such applicable state or states, and if any
provision of this AGREEMENT, the NOTE or of any of the other LOAN
DOCUMENTS shall ever be construed or held to permit or require the
charging, collection or payment of any amount of interest in excess of
that permitted by such laws applicable thereto, the provisions of this
Section shall control and shall override any contrary or inconsistent
provision. The intention of the parties is to at all times conform
strictly with all applicable usury laws, and other applicable laws
limiting the maximum rates of interest which may be lawfully charged
upon the LOANS and REIMBURSEMENT OBLIGATIONS. The interest to be paid
pursuant to the NOTE shall be held subject to reduction to the amount
allowed under said usury or other laws as now or hereafter construed
by the courts having jurisdiction, and any sums of money paid in
excess of the interest rate allowed by applicable law shall be applied
in reduction of the principal amount owing pursuant to the NOTE. EACH
OF THE BORROWERS EXPRESSLY ACKNOWLEDGES AND UNCONDITIONALLY AND
IRREVOCABLY STIPULATES FOR ALL PURPOSES THAT IT HAS BEEN CONTEMPLATED
AT ALL TIMES BY THE PARTIES THAT THE LAWS OF THE STATE OF NEW YORK
WILL GOVERN THE MAXIMUM RATE OF INTEREST THAT IT IS PERMISSIBLE FOR
THE LENDER TO CHARGE THE BORROWERS.
Section 2.4. Payments To Be Made To The Lender. Except as expressly
provided to the contrary in any of the LOAN DOCUMENTS, all payments of
principal, interest, fees and other sums to be paid by the BORROWERS
to the LENDER in accordance with the terms of the LOAN DOCUMENTS shall
be made in U.S. Dollars, in immediately available funds, without
deduction, set-off or counterclaim to the LENDER not later than 10:00
a.m. (Eastern time) on the date on which such payments shall become
due (each such payment made after such time on such due date to be
deemed to be made on the next succeeding BUSINESS DAY). If the due
date of any payment under the LOAN DOCUMENTS would otherwise fall on a
day that is not a BUSINESS DAY, such date shall be extended to the
next succeeding BUSINESS DAY, and interest shall be payable for any
principal so extended from the period of such extension.
Section 2.5. Application Of Payments. All payments upon the
OBLIGATIONS shall be applied first to charges, if any, next to fees,
next to interest, and then to principal or in such other order or
proportion as the LENDER, in the discretion of the LENDER, may
determine.
Section 2.6. Late Payment Charge. Any payment of principal, interest,
or fees due from time to time upon or in connection with the LOAN or
the REIMBURSEMENT OBLIGATIONS which is received by the LENDER more
than fifteen (15) calendar days after its due date shall incur a late
payment charge equal to five percent (5%) of the amount of the payment
due. All late payment charges shall be payable upon the demand of the
LENDER. The existence of the right by the LENDER to receive a late
payment charge shall not constitute a grace period or provide any
right to any of the BORROWERS to make a payment other than on such
payments scheduled due date. Notwithstanding the foregoing, no late
charge shall be payable in connection with any delinquent payment
resulting from the failure of the LENDER to debit any COLLECTION
ACCOUNT of the BORROWERS in which sufficient collected funds were
present to satisfy any required payment, if the LENDER was authorized
to make such debit.
Section 2.7. Facility Fee. For each QUARTER or portion thereof during
which the CREDIT FACILITY is in existence and has not been terminated,
until the payment in full and termination of the CREDIT FACILITY, the
BORROWERS shall pay to the LENDER a facility fee equal to one quarter
of one percent (0.25%) per annum on that sum obtained by subtracting
the average daily disbursed principal balance of the LOAN plus the
aggregate STATED AMOUNT outstanding under all LETTERS OF CREDIT during
such QUARTER or portion thereof from the DOLLAR CAP. The facility fee
shall be payable quarterly in arrears, on the first day of each
succeeding April, July, October and January or on the last day of a
portion of a QUARTER commencing with the first of such payments to be
made on April 1, 2000. The facility fee is not to be considered a fee
being paid by the BORROWERS to the LENDER as an inducement to the
LENDER to make advances or issue LETTERS OF CREDIT, nor shall it be
considered to modify or limit the ability of the LENDER to terminate
in accordance with the provisions of this AGREEMENT the ability of the
BORROWERS to borrow under the LOAN, or obtain LETTERS OF CREDIT but is
instead intended as part of the compensation which is earned by the
LENDER for agreeing to provide the CREDIT FACILITY in accordance with
the terms of the LOAN DOCUMENTS. The facility fee shall be calculated
on the basis of three hundred sixty (360) days per year factor.
Section 2.8. Commitment Fee. The BORROWERS, jointly and severally,
shall pay to the LENDER on or before CLOSING a non-refundable and
unconditional fee of Fifty Thousand Dollars ($50,000.00), which shall
be the absolute property of the LENDER upon payment. This fee shall
not be considered to be a payment of any of the LENDERS expenses
incurred in connection with the LOAN and shall be paid independent of
the amount of proceeds of the LOAN ultimately advanced to the
BORROWERS, even if that amount is less than the stated principal
amount of the LOAN.
Section 2.9. Examination Fee. The BORROWERS, jointly and severally,
shall pay to the LENDER, as billed by the LENDER, an examination fee
equal to Two Thousand Dollars ($2,000.00) for each field examination
by the LENDER of the BORROWERS books and records. The BORROWERS shall
not be billed for more than one (1) field examination in any
consecutive ninety (90) day period, unless an EVENT OF DEFAULT has
occurred and continues for more than thirty (30) days.
Section 2.10. Termination Fee. In the event the BORROWERS terminate
the CREDIT FACILITY and repay the LOAN in full with funds derived from
any source other than revenues from the BORROWERS normal business
operations, the BORROWERS, jointly and severally, shall pay to the
LENDER termination fee equal to the following percentage of the DOLLAR
CAP: (a) one and one-half percent (1.5%) if the prepayment in full
occurs at any time on or before March 22, 2001; (b) one percent
(1.00%) if the prepayment occurs at any time after March 22, 2001 but
on or before March 22, 2002; (c) one-half of one percent (0.50%) if
the prepayment occurs at any time after March 22, 2002, but on or
before March 22, 2003; (d) zero percent (0%) if the prepayment in full
occurs after March 22, 2003. Notwithstanding the foregoing, the
termination fee described in this Section 2.10 shall not be due if the
prepayment and termination of the CREDIT FACILITY occurs in the
absence of any DEFAULT or EVENT OF DEFAULT and the BORROWERS elect to
prepay and terminate the CREDIT FACILITY as a result of (a) a
determination by the LENDER that, pursuant to 2.2.3.d. hereof, a
REGULATORY CHANGE has occurred and made it impractical for the LENDER
to offer pricing based on the ADJUSTED LIBOR RATE or (b) having been
billed by the LENDER for additional costs arising as a result of a
REGULATORY CHANGE pursuant to subsections 2.3.3.e (ii)(A), (B) or (C)
hereof, provided such REGULATORY CHANGE and the additional costs
arising as a result thereof are applicable only to the LENDER and not
to a class of lenders, banks or financial institutions including the
LENDER or any corporation controlling the LENDER, and are not
applicable to the LENDER as a result of its obligations hereunder, the
creditworthiness of any of the BORROWERS, or the occurrence of any
DEFAULT or EVENT OF DEFAULT; and provided further that nothing in this
clause (b) shall affect or alter the obligation of the BORROWERS,
jointly and severally, to pay to the LENDER the full amount of all
such additional costs.
Sectio 2.11. Capital Adequacy. If the LENDER determines at any time
that the adoption or implementation of any CAPITAL ADEQUACY
REQUIREMENT, or the compliance therewith by the LENDER or any
corporation or other PERSON controlling the LENDER, affects the amount
of capital to be maintained by the LENDER or any PERSON controlling
the LENDER as a result of its obligations hereunder, or reduces the
effective rate of return on the LENDERS or such controlling PERSONS
capital to a level below that which the LENDER or such controlling
PERSON would have achieved but for such CAPITAL ADEQUACY REQUIREMENT
as a consequence of its obligations hereunder (taking into
consideration the LENDERS or such controlling PERSONS policies with
respect to capital adequacy), then after submission by the LENDER to
the BORROWERS of a written request therefor and a statement of the
basis for such determination, the BORROWERS shall pay to the LENDER
such additional amounts as will compensate the LENDER or the
controlling PERSON for the cost of maintaining the increased capital
or for the reduction in the rate of return on capital, together with
interest thereon at the highest rate of interest then in effect under
the NOTE from the date the LENDER requests such additional amounts
until those amounts are paid in full.
Section 2.12. Payments. All payments received by the LENDER which are
to be applied to reduce the OBLIGATIONS shall be credited to the
balances due from any or all of the BORROWERS pursuant to the normal
and customary practices of the LENDER, but shall be provisional and
shall not be considered final unless and until such payment is not
subject to avoidance under any provision of the United States
Bankruptcy Code, as amended, including Sections 547 and 550, or any
state law governing insolvency or creditors rights. If any payment is
avoided or set aside under any provision of the United States
Bankruptcy Code, including Sections 547 and 550, or any state law
governing insolvency or creditors rights, the payment shall be
considered not to have been made for all purposes of this AGREEMENT
and the LENDER shall adjust its records to reflect the fact that the
avoided payment was not made and has not been credited against the
OBLIGATIONS.
Section 2.13. Advancements. If any of the BORROWERS fails to perform
any of its agreements or covenants contained in this AGREEMENT or if
any of the BORROWERS fails to protect or preserve the COLLATERAL or
the status and priority of the security interest of the LENDER in the
COLLATERAL, the LENDER may make advances to perform the same on behalf
of such BORROWER to protect or preserve the COLLATERAL or the status
and priority of the security interest of the LENDER in the COLLATERAL,
and all sums so advanced shall immediately upon advance become secured
by the security interests granted in this AGREEMENT, and shall become
part of the principal amount owed to the LENDER with interest to be
assessed at the applicable rate thereon and subject to the terms and
provisions of this AGREEMENT and all of the LOAN DOCUMENTS. The
BORROWERS shall repay on demand all sums so advanced on any BORROWERS
behalf, plus all expenses or costs incurred by the LENDER, including
reasonable legal fees, with interest thereon at the highest rate
authorized in the NOTE. The provisions of this Section shall not be
construed to prevent the institution of the rights and remedies of the
LENDER upon the occurrence of an EVENT OF DEFAULT. The authorization
contained in this Section is not intended to impose any duty or
obligation on the LENDER to perform any action or make any advancement
on behalf of any or all of the BORROWERS and is intended to be for the
sole benefit and protection of the LENDER.
Section 2.14. Cross-Guaranty; Waiver Of Suretyship Defenses;
Subordination.
Section 2.14.1. Cross-Guaranty. Each BORROWER guarantees to the LENDER
the payment in full of all of the OBLIGATIONS of the other BORROWERS
and further guarantees the due performance by the other BORROWERS of
their respective duties and covenants made in favor of the LENDER
hereunder and under the other LOAN DOCUMENTS. Each BORROWER agrees
that neither this cross guaranty nor the joint and several liability
of the BORROWERS provided in this AGREEMENT nor the LENDERs liens and
rights in any of the COLLATERAL shall be impaired or affected by any
modification, supplement, extension or amendment of any contract or
agreement to which the parties hereto may hereafter agree, nor by any
modification, release or other alteration of any of the rights of the
LENDER with respect to any of the COLLATERAL, nor by any delay,
extension of time, renewal, compromise or other indulgence granted by
the LENDER with respect to any of the OBLIGATIONS, nor by any other
agreements or arrangements whatever with the other BORROWERS or with
any other PERSON, each BORROWER hereby waiving all notice of any such
delay, extension, release, substitution, renewal, compromise or other
indulgence, and hereby consenting to be bound thereby as fully and
effectively as if it had expressly agreed thereto in advance. The
liability of each BORROWER hereunder is direct and unconditional as to
all of the OBLIGATIONS, and may be enforced without requiring the
LENDER first to resort to any other right, remedy or security.
Section 2.14.2. Postponement of Subrogation. Until all of the
OBLIGATIONS are paid in full, no BORROWER shall have any right of
subrogation, reimbursement or indemnity whatsoever, nor any right of
recourse to security for any of the OBLIGATIONS, and nothing shall
discharge or satisfy the liability of a BORROWER hereunder, until the
full, final and absolute payment and performance of all of the
OBLIGATIONS at any time after all commitments of the LENDER under this
AGREEMENT are terminated. Any and all present and future debts and
obligations of each BORROWER to each of the other BORROWERS are hereby
waived and postponed in favor of and subordinated to the full payment
and performance of all present and future OBLIGATIONS; provided,
however, so long as no DEFAULT or EVENT OF DEFAULT has occurred, each
of the BORROWERS may repay debts and obligations to any other
BORROWER.
Section 2.14.3. Subordination. Each BORROWER hereby subordinates any
claims (other than claims evidenced by notes which have been assigned
and delivered to the LENDER), including, without limitation, any other
right of payment, subrogation, contribution and indemnity that it may
have from or against the other BORROWERS, and any successor or assign
of the other BORROWERS, including, without limitation, any trustee,
receiver or debtor-in-possession, howsoever arising, due or owing and
whether heretofore, now or hereafter existing, to all of the
OBLIGATIONS of the other BORROWERS to the LENDER; provided, however,
so long as no DEFAULT or EVENT OF DEFAULT has occurred, each of the
BORROWERS may accept payments from any other BORROWER.
Section 2.14.4. Joint And Several Liability; Appointment Of Agent.
Notwithstanding anything to the contrary contained herein, the
BORROWERS shall be jointly and severally liable to the LENDER for all
OBLIGATIONS, regardless of whether such OBLIGATIONS arise as a result
of credit extensions to one BORROWER, it being stipulated and agreed
that the LOAN, the LETTERS OF CREDIT, and all of the credit extensions
hereunder to one BORROWER inure to the benefit of all BORROWERS, and
that the LENDER is relying on the joint and several liability of the
BORROWERS in extending the LOAN and in issuing any of the LETTERS OF
CREDIT and in providing credit hereunder. To facilitate the
administration of the LOAN, each of GSE Process Solutions, Inc., and
GSE Power Systems, Inc., hereby irrevocably appoints GSE SYSTEMS as
its true and lawful agent and attorney-in-fact with full power and
authority to execute, deliver and acknowledge, as appropriate, all
LOAN DOCUMENTS or certificates from time to time deemed necessary or
appropriate by the LENDER in connection with the LOAN, any LETTERS OF
CREDIT, or the issuance or administration of any of the other
OBLIGATIONS. This power-of-attorney is coupled with an interest and
cannot be revoked, modified or amended without the prior written
consent of the LENDER. Upon the request of the LENDER, GSE Process
Solutions, Inc. and GSE Power Systems, Inc., shall execute,
acknowledge and deliver to the LENDER a form of power of attorney
confirming and restating the power-of-attorney granted herein.
ARTICLE 3
URITY FOR THE OBLIGATIONS
The payment, performance and satisfaction of the OBLIGATIONS shall be
secured by the following assurances of payment and security.
Section 3.1. Grant Of Security Interest. In order to secure the
repayment and performance of all OBLIGATIONS, both currently existing
and arising in the future, each of the BORROWERS grants to the LENDER
an immediate and continuing security interest in and to the
COLLATERAL. Each of the BORROWERS further pledges, hypothecates and
grants to the LENDER a continuing security interest in and to, all
amounts that may be owing at any time and from time to time by the
LENDER to any of the BORROWERS in any capacity, including but not
limited to any balance or share belonging to any of the BORROWERS of
any deposit or other account with the LENDER, which security interest
shall be independent of and in addition to any right of set-off to
which the LENDER may be entitled.
Sectio 3.2. Proceeds And Products. The LENDERS security interests
provided for herein shall apply to the proceeds, including but not
limited to insurance proceeds, and the products of the COLLATERAL.
Section 3.3. Priority Of Security Interests. Each of the security
interests, pledges, and liens granted by each of the BORROWERS to the
LENDER pursuant to any of the LOAN DOCUMENTS shall be perfected first
priority security interests, pledges, and liens (except for security
interests in motor vehicles for which a notation of lien on a
certificate of title is required).
Section 3.4. Future Advances. The security interests, liens, and
pledges granted by each of the BORROWERS to the LENDER pursuant to the
LOAN DOCUMENTS shall secure all current and all future advances made
by the LENDER to the BORROWERS, or for the account or benefit of any
of the BORROWERS, and the LENDER may advance or readvance upon
repayment by any of the BORROWERS all or any portion of the sums
loaned to the BORROWERS and any such advance or readvance shall be
fully secured by the security interests, liens, and pledges created by
the LOAN DOCUMENTS.
Section 3.5. Receivable Collections. The BORROWERS shall establish a
COLLECTION ACCOUNT arrangement acceptable to the LENDER at a bank
acceptable to the LENDER. Each of the BORROWERS shall deposit or cause
to be deposited into the COLLECTION ACCOUNT, immediately upon receipt
thereof, all cash, checks, drafts, and other instruments for the
payment of money, properly endorsed, which have been received by it in
full or partial payment of any RECEIVABLE. Prior to any such deposit
by any of the BORROWERS into the COLLECTION ACCOUNT, none of the
BORROWERS will commingle such items of payment with any of its other
funds or property but will hold them separate and apart. Upon the
written request of the LENDER each of the BORROWERS shall instruct all
of its ACCOUNT DEBTORS to make all payments on its RECEIVABLES to a
post office box in which the LENDER alone shall have sole access
(LOCK BOX). If payment of any BORROWERS RECEIVABLES is paid into
the LOCK BOX the LENDER shall, on each BUSINESS DAY, withdraw the
items of payment from the LOCK BOX and deposit them into the
COLLECTION ACCOUNT. The LENDER, from time to time, shall apply all of
the collected funds held in the COLLECTION ACCOUNT toward payment of
all or any part of the OBLIGATIONS, whether or not then due, in such
order of application as the LENDER may determine. The LENDER shall
have no obligation to provide any provisional or other credit for any
deposited funds which are not collected funds free of any rights of
return.
Section 3.6. Collection Of Receivables By Lender. The LENDER shall
have the right during any continuing EVENT OF DEFAULT to send notices
of assignment or notices of the LENDERS security interest to any and
all ACCOUNT DEBTORS or any third party holding or otherwise concerned
with any of the COLLATERAL, and thereafter the LENDER shall have the
sole right to collect the RECEIVABLES and to take possession of the
COLLATERAL and RECORDS relating thereto. All of the LENDERS
collection expenses shall be charged to the BORROWERS accounts and
added to the OBLIGATIONS. During any continuing EVENT OF DEFAULT the
LENDER shall have the right to receive, indorse, assign and deliver in
the LENDERS name or any of the BORROWERS name any and all checks,
drafts and other instruments for the payment of money relating to the
RECEIVABLES, and each of the BORROWERS hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. If
the LENDER is collecting the RECEIVABLES, each of the BORROWERS hereby
constitutes the LENDER or the LENDERS designee as its
attorney-in-fact with power with respect to the RECEIVABLES: (a) to
indorse its name upon all notes, acceptances, checks, drafts, money
orders or other evidences of payment of COLLATERAL that may come into
the LENDERS possession; (b) to sign its name on any invoices relating
to any of the RECEIVABLES, drafts against ACCOUNT DEBTORS, assignments
and verifications of RECEIVABLES and notices to ACCOUNT DEBTORS; (c)
to send verifications of RECEIVABLES to any ACCOUNT DEBTOR; (d) to
notify the Post Office to change the address for delivery of mail
addressed to it to such address as the LENDER may designate; (e) to
receive and open all mail addressed to it and to remove therefrom all
cash, checks, drafts and other payments of money; and (f) to do all
other acts and things necessary, proper, or convenient to carry out
the terms and conditions and purposes and intent of this AGREEMENT.
All acts of such attorney or designee are hereby ratified and
approved, and such attorney or designee shall not be liable for any
acts of omission or commission, nor for any error of judgment or
mistake of fact or law in accordance with this AGREEMENT, with the
exception of acts arising from actual fraud or gross and wanton
negligence. The power of attorney hereby granted, being coupled with
an interest, is irrevocable while any of the OBLIGATIONS remain
unpaid. During any continuing EVENT OF DEFAULT, the LENDER, without
notice to or consent from any of the BORROWERS, may xxx upon or
otherwise collect, extend the time of payment of or compromise or
settle for cash, credit or otherwise upon any terms, any of the
RECEIVABLES or any securities, instruments or insurances applicable
thereto or release the obligor thereon. During any continuing EVENT OF
DEFAULT, the LENDER is authorized and empowered to accept the return
of the goods represented by any of the RECEIVABLES, without notice to
or consent by any of the BORROWERS; provided, however in no event
(whether during the continuance of an EVENT OF DEFAULT or otherwise)
shall acceptance of returned goods by the LENDER discharge or in any
way affect the liability of any of the BORROWERS under the LOAN
DOCUMENTS. The LENDER does not, by anything herein or in any
assignment or otherwise, assume any of the obligations of any of the
BORROWERS under any contract or agreement assigned to the LENDER, and
the LENDER shall not be responsible in any way for the performance by
any of the BORROWERS of any of the terms and conditions thereof.
Section 3.7. Guaranty Agreements. Each of the GUARANTORS shall execute
and deliver a GUARANTY AGREEMENT which shall guarantee, among other
things, the absolute full payment and performance by the BORROWERS of
the OBLIGATIONS. Each of the LIMITED GUARANTORS shall execute and
deliver a GUARANTY AGREEMENT which shall guarantee, among other
things, the absolute full payment and performance by the BORROWERS of
the OBLIGATIONS, subject to the limitation as to monetary amount set
forth therein.
Section 3.8. Further Assurances. Each of the BORROWERS will, at its
expense, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or
desirable or that the LENDER may reasonably request from time to time
in order: (a) to perfect and protect the security interests to be
created hereby; (b) to enable the LENDER to exercise and enforce its
rights and remedies hereunder in respect of the COLLATERAL; or (c)
otherwise to effect the purposes of this AGREEMENT, including, without
limitation: (i) upon such BORROWERS acquisition thereof, delivering
to the LENDER each item of CHATTEL PAPER of the BORROWER, (ii) if any
RECEIVABLES are evidenced by an INSTRUMENT delivering and pledging to
the LENDER such INSTRUMENT duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance
satisfactory to the LENDER, (iii) executing and filing such financing
statements or amendments thereto as may be necessary or desirable or
that the LENDER may request in order to perfect and preserve the
security interests purported to be created hereby, (iv) upon the
acquisition after the date hereof by such BORROWER of any EQUIPMENT
covered by a certificate of title or ownership, cause the LENDER to be
listed as the lienholder on such certificate of title and within sixty
(60) days of the acquisition thereof deliver evidence of the same to
the LENDER, and (v) upon the acquisition after the date hereof of any
asset for which an assignment, pledge, mortgage, or other document is
required to be filed in order to grant or perfect a lien therein for
the benefit of the LENDER, execute and deliver to the LENDER such
assignment, pledge, mortgage, or other INSTRUMENT within thirty (30)
days of the acquisition thereof. If any of the BORROWERS fails to
execute any instrument or document described above within five (5)
BUSINESS DAYS of being requested to do so by the LENDER, each of the
BORROWERS hereby appoints the LENDER or any officer of the LENDER as
such BORROWERS attorney in fact for purposes of executing such
instruments or documents in such BORROWERS name, place and stead,
which power of attorney shall be considered as coupled with an
interest and irrevocable.
Section 3.9. Fair Labor Standards Act. As further security for the
OBLIGATIONS, each of the BORROWERS shall comply in all material
respects with the Fair Labor Standards Act of 1938, as amended.
ARTICLE 4
CONDITIONS PRECEDENT
Any obligation of the LENDER to perform any duty imposed upon or
assumed by the LENDER in accordance with the terms of the LOAN
DOCUMENTS or otherwise with respect to the LOAN or LETTERS OF CREDIT
shall be conditioned upon the satisfaction by the BORROWERS of the
conditions precedent set forth in this Article 4.
Section 4.1. Conditions to Closing. Each of the following conditions
precedent shall be satisfied prior to the date of CLOSING:
Section 4.1.1. Organizational Documents. The delivery to the LENDER by
each of the BORROWERS, the GUARANTORS and the LIMITED GUARANTORS of
the following documents, each certified as indicated below: (a) a copy
of its the Articles of Incorporation or Articles of Organization, as
the case may be, as amended and in effect on the date of CLOSING,
certified as of a recent date by the Secretary of State of its
jurisdiction of formation, a certificate from such Secretary of State
dated as of a recent date as to the good standing of and charter
documents filed by each of the BORROWERS, the GUARANTORS, and the
LIMITED GUARANTORS, as applicable, and certificates of good standing
for each jurisdiction in which each of the BORROWERS and each of the
GUARANTORS is required by the nature of its business or assets qualify
to do business; (b) a certificate of the Secretary or Assistant
Secretary of each of the BORROWERS, the GUARANTORS and the LIMITED
GUARANTORS, dated as of the date of CLOSING and certifying: (i) that
attached thereto is a true and accurate copy of the Bylaws or
operating agreement (as the case may be) of each of the BORROWERS, the
GUARANTORS and the LIMITED GUARANTORS, as applicable, as amended and
in effect at all times from the date on which the resolutions referred
to in clause (ii) hereto were adopted and including the date of such
certificate; (ii) that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of each of the
BORROWERS, the GUARANTORS and the LIMITED GUARANTORS, as applicable,
authorizing the execution, delivery and performance of each of the
LOAN DOCUMENTS to which such BORROWER, GUARANTOR, or LIMITED
GUARANTOR, as applicable, is or is intended to be a party, and that
such resolutions have not been modified, rescinded, or amended and are
in full force and effect; and (iii) as to the incumbency and specimen
signature of each officer of the BORROWERS, the GUARANTORS, or the
LIMITED GUARANTORS, as applicable, executing the LOAN DOCUMENTS to
which such BORROWER, GUARANTOR, or LIMITED GUARANTOR, as applicable,
is intended to be a party.
Section 4.1.2. Opinion Of Counsel. The delivery to the LENDER of an
opinion of counsel to the BORROWERS, GUARANTORS, and LIMITED
GUARANTORS addressed to the LENDER and dated as of the date of
CLOSING, in substantially the same form as Exhibit 4.1.3. attached
hereto.
Sectio 4.1.3. Execution Of Loan Documents. The execution and delivery
of all of the LOAN DOCUMENTS.
Section 4.1.4. Submissions. The delivery to the LENDER of such
certificates, submissions, and supporting documents as have been
previously requested by the LENDER
Section 4.1.5. Insurance. The delivery to the LENDER of certificates
of insurance evidencing the existence of all insurance required to be
maintained by the BORROWERS and the GUARANTORS pursuant to the terms
and conditions of the LOAN DOCUMENTS and evidence that such insurance
is in full force and effect and that all premiums then due and payable
thereon have been paid.
Sectio 4.1.6. Record Searches. The receipt and satisfactory review by
the LENDER of such Uniform Commercial Code, tax, pending litigation
and judgment searches as have been requested by the LENDER
Section 4.1.7. Absence Of Material Adverse Change. The absence of the
occurrence of any material adverse change in the financial conditions
or business affairs of any of the BORROWERS, the GUARANTORS, or the
LIMITED GUARANTORS.
Section 4.1.8. Payment Of Closing Fees. The payment by the BORROWERS
of each of the closing fees agreed in writing to be paid by the
BORROWERS to the LENDER, which fees shall be nonrefundable upon
payment. Such closing fees paid by the BORROWERS shall not be
considered to be a payment of any of the LENDERS EXPENSES, and shall
be paid independently of the amount of proceeds of the LOAN ultimately
advanced to the BORROWERS.
Section 4.1.9. Payment Of Lenders Closing Costs. The payment by the
BORROWERS of all of the reasonable costs, fees and expenses incurred
by the LENDER in connection with the negotiation, preparation,
execution, and delivery of the LOAN DOCUMENTS, including but not
limited to reasonable attorneys fees, the cost of any public record
searches, recording costs, and other reasonable and necessary
out-of-pocket costs and expenses incurred by the LENDER.
Section4.1.10. Dime Commercial Corp. Facility. On the date of
CLOSING: (a) there shall have been paid in cash in full all
outstanding principal balances and all accrued but unpaid interest,
fees and charges due on the loans outstanding to Dime Commercial
Corp.; and (b) the LENDER shall have received an agreement
satisfactory to the LENDER from Dime Commercial Corp. to promptly
terminate all liens and security interests against the BORROWERS and
to forward to the LENDER all outstanding promissory notes issued by
the BORROWERS to Dime Commercial Corp. marked paid in full.
Section 4.2. Conditions Precedent To All Advances and Issuance of
Letters of Credit. The obligation of the LENDER to make any advances
of the proceeds of the LOAN, including the initial advance, and the
obligation of the LENDER to issue any LETTERS OF CREDIT, shall be
subject to the satisfaction, concurrently therewith, of each of the
following conditions precedent:
Section4.2.1. No Defaults Or Events Of Default. No event shall have
occurred on or prior to such date and be continuing on such date, and
no condition shall exist on such date, which constitutes a DEFAULT or
EVENT OF DEFAULT.
Section4.2.2. Continuing Accuracy Of Representations And Warranties.
Each of the representations and warranties made by or on behalf of the
BORROWERS, or by the GUARANTORS or by the LIMITED GUARANTORS to the
LENDER in the LOAN DOCUMENTS shall be true and correct in all material
respects when made and shall be deemed to be repeated as true,
accurate and complete as of the date of the BORROWERS request for
each advance of proceeds of the LOAN or issuance of a LETTER OF
CREDIT, unless otherwise agreed to by the LENDER in writing.
Section4.2.3. Receipt Of Reports. The LENDER shall be in receipt of
all reports, financial statements, financial information and financial
disclosures required by the LOAN DOCUMENTS, except to the extent that
the LENDER has waived the receipt thereof.
Section4.2.4. No Illegalities. It shall not be unlawful for the
LENDER to perform any of the agreements or obligations imposed upon
the LENDER by any of the LOAN DOCUMENTS or for any of the BORROWERS,
the GUARANTORS or the LIMITED GUARANTORS to perform any of their
respective agreements or obligations as provided by the LOAN
DOCUMENTS.
Section4.2.5. No Material Adverse Event. No MATERIAL ADVERSE EVENT
shall have occurred and be then continuing.
Each borrowing request by a BORROWER hereunder or a request for the
issuance of a LETTER OF CREDIT shall constitute a representation and
warranty by each of the BORROWERS as of the date of such LOAN or the
date of issuance of such LETTER OF CREDIT that the conditions
contained in this Section 4.2 have been satisfied.
ARTICLE 5
EPRESENTATIONS AND WARRANTIES
To induce the LENDER to extend the CREDIT FACILITY and to enter into
this AGREEMENT, each of the BORROWERS makes the representations and
warranties set forth in this Article 5. Each of the BORROWERS
acknowledges the LENDERS justifiable right to rely upon these
representations and warranties.
SectioN 5.1. Accuracy Of Information. All information submitted by or
on behalf of any of the BORROWERS, any of the GUARANTORS, or any of
the LIMITED GUARANTORS in connection with any of the OBLIGATIONS is
true, accurate and complete in all material respects as of the date
made and contains no knowingly false, incomplete or misleading
statements.
Section5.2. No Litigation. Except as specifically disclosed on
Schedule 5.2 attached hereto, there are no material actions, suits,
investigations, or proceedings pending or, to the knowledge of any of
the BORROWERS, threatened against any of the BORROWERS or the assets
of any of the BORROWERS
Section5.3. No Liability Or Adverse Change. None of the BORROWERS has
any direct or contingent liability known to any of the BORROWERS and
not previously disclosed to the LENDER, nor do any of the BORROWERS
know of or have any reason to expect any material adverse change in
any BORROWERS assets, liabilities, properties, business, or
condition, financial or otherwise.
Section5.4. Title To Collateral. Each of the BORROWERS has good and
marketable title to the COLLATERAL. The liens granted by each of the
BORROWERS to the LENDER in the COLLATERAL will have the priority
required by the LOAN DOCUMENTS.
Section 5.5. Authority; Approvals And Consents.
Section 5.5.1. Authority. Each of the BORROWERS has the legal
authority to enter into each of the LOAN DOCUMENTS and to perform,
observe and comply with all of such BORROWERS agreements and
obligations thereunder, including, without limitation the borrowings
contemplated hereby.
Section 5.5.2. Approvals. The execution and delivery by each of the
BORROWERS of each of the LOAN DOCUMENTS, the performance by each of
the BORROWERS of all of its agreements and obligations under the LOAN
DOCUMENTS, and the borrowings contemplated by this AGREEMENT, have
been duly authorized by all necessary action on the part of each
BORROWER and do not and will not (i) contravene any provision of the
organizational documents of any of the BORROWERS; (ii) conflict with,
or result in a breach of the terms, conditions or provisions of, or
constitute a default under, or result in the creation of any lien upon
any of the property of any of the BORROWERS under any material
agreement, trust deed, indenture, mortgage or other instrument to
which any of the BORROWERS is a party or by which any of the BORROWERS
or any property of any of the BORROWERS is bound or affected (except
for liens created for the benefit of the LENDER); (iii) violate or
contravene any provision of any LAW, rule or regulation (including,
without limitation, Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System) or any order, ruling or interpretation
thereunder or any decree, order of judgment of any court or
governmental or regulatory authority, bureau, agency or official (all
as from time to time in effect and applicable to any of the
BORROWERS); or (iv) require any waivers, consents or approvals by any
of the creditors of any of the BORROWERS.
Section 5.6. Binding Effect Of Documents, Etc. Each of the LOAN
DOCUMENTS which each of the BORROWERS has executed and delivered as
contemplated and required to be executed and delivered as of the date
of CLOSING by this AGREEMENT, has been duly executed and delivered by
each BORROWER and is the legal, valid and binding obligation of each
BORROWER and is enforceable against each BORROWER in accordance with
all stated terms.
Section 5.7. Other Names. None of the BORROWERS has changed its name,
been the surviving entity in a merger, or changed the location of its
chief executive office within the last twelve (12) years, except as is
disclosed on Schedule 5.7 attached hereto. No BORROWER trades under
any trade or fictitious names except as set forth on Schedule 5.7.
Sectio 5.8. No Events Of Default. There is not currently existing any
action, event, or condition which presently constitutes a DEFAULT or
an EVENT OF DEFAULT
Section 5.9. Guaranty Agreements. The GUARANTY AGREEMENTS are the
valid and binding obligation of the GUARANTORS and the LIMITED
GUARANTORS, as the case may be, and are fully enforceable against the
respective GUARANTORS and the LIMITED GUARANTORS in accordance with
their terms.
Section 5.10. Taxes. Each of the BORROWERS: (a) has filed all federal,
state and local tax returns and other reports which such BORROWER is
required by LAW to file prior to the date hereof and which are
material to the conduct of the business of such BORROWER; (b) has paid
or caused to be paid all taxes, assessments and other governmental
charges that are due and payable prior to the date hereof, except as
disclosed on Schedule 5.10 attached hereto; and (c) has made adequate
provision for the payment of such taxes, assessments or other charges
accruing but not yet payable. None of the BORROWERS has any knowledge
of any deficiency or additional assessment in connection with any
taxes, assessments or charges not provided for on such BORROWERS
books of account or reflected in such BORROWERS financial statements.
Section 5.11.
Compliance With Laws. Each of the BORROWERS has complied in all
material respects with all applicable LAWS, including, but not limited
to, all LAWS with respect to: (a) all restrictions, specifications, or
other requirements pertaining to products that it sells or to the
services it performs; (b) the conduct of its business; and (c) the
use, maintenance, and operation of the real and personal properties
owned or leased by it in the conduct of its business.
Section 5.12. Chief Place Of Business. The chief executive office,
chief place of business, and the place where each of the BORROWERS
keeps its RECORDS concerning the COLLATERAL is set forth on Schedule
5.12 attached hereto.
Section 5.13. Location Of Inventory. The INVENTORY is and shall be
kept solely at the BORROWERS locations set forth on Schedule 5.13
attached hereto, and shall not be moved, sold or otherwise disposed of
without prior notification to the LENDER, except for sales of
INVENTORY to ACCOUNT DEBTORS in the ordinary course of the BORROWERS
businesses. None of the INVENTORY is stored with or in the possession
of any bailee, warehouseman, or other similar PERSON, except as
specifically disclosed on Schedule 5.13 attached hereto.
Section 5.14. No Subsidiaries. None of the BORROWERS has any direct or
indirect DOMESTIC SUBSIDIARIES except for the GUARANTORS listed by
name in Section 1.53 of this AGREEMENT. None of the BORROWERS has any
direct or indirect SUBSIDIARIES which are not DOMESTIC SUBSIDIARIES,
except for the SUBSIDIARIES listed on Schedule 5.14 attached hereto.
Section 5.15.
No Labor Agreements. Except as described in Schedule 5.15 hereto, none
of the BORROWERS is subject to any collective bargaining agreement or
any agreement, contract, decree or order requiring it to recognize,
deal with or employ any PERSONS organized as a collective bargaining
unit or other form of organized labor
Section 5.16. Eligible Accounts. Each ACCOUNT which any of the
BORROWERS contends should be included in the calculation of the
BORROWING BASE from time to time will be an ELIGIBLE BILLED COMMERCIAL
ACCOUNT, ELIGIBLE BILLED GOVERNMENT ACCOUNT or an ELIGIBLE UNBILLED
GOVERNMENT ACCOUNT, as the case may be. At the time each is listed on
or included in (whether singularly or in the aggregate with other
eligible accounts) a schedule or report delivered to the LENDER to be
included in the calculation of the BORROWING BASE, all of such
ELIGIBLE BILLED COMMERCIAL ACCOUNTS, ELIGIBLE BILLED GOVERNMENT
ACCOUNTS or ELIGIBLE UNBILLED GOVERNMENT ACCOUNTS, as the case may be,
will have been generated in compliance with such BORROWERS normal
credit policies as historically in effect (or as modified from time to
time on prior written notice of the LENDER), or on such other
reasonable terms disclosed in writing to the LENDER in advance of the
creation of such ACCOUNTS, and such terms shall be expressly set forth
on the face of all invoices.
Section 5.17. Eligible Inventory. Each item of INVENTORY which any of
the BORROWERS from time to time contends should be included in the
calculation of the BORROWING BASE shall be ELIGIBLE INVENTORY.
Section 5.18. Eligible Additional Collateral Value. Any letter of
credit which any of the BORROWERS contend should be included in the
calculation of ELIGIBLE ADDITIONAL COLLATERAL VALUE shall have an
expiry date which is not less than one year from issuance and shall be
considered eligible only if, at the time of determination of
eligibility, there shall be no less than thirty (30) days remaining
from such date of determination to the expiry date of the letter of
credit. Failure to maintain such letter of credit as ELIGIBLE
ADDITIONAL COLLATERAL VALUE for at least one year from issuance shall
constitute an EVENT OF DEFAULT.
Section 5.19. Approvals. Each of the BORROWERS possesses all
franchises, approvals, licenses, contracts, INTELLECTUAL PROPERTY,
merchandising agreements, merchandising contracts and governmental
approvals, registrations and exemptions necessary for it lawfully to
conduct its business and operation as presently conducted and as
anticipated to be conducted after CLOSING.
Section 5.20. Financial Statements. The financial statements of each
of the BORROWERS which have been delivered to the LENDER prior to the
date of this AGREEMENT, fairly present the financial condition of the
BORROWERS as of the respective dates thereof and the results and
operations of the BORROWERS for the fiscal periods ended on such
respective dates, all in accordance with G.A.A.P. None of the
BORROWERS has any direct or contingent liability or obligation known
to any of the BORROWERS and not disclosed on the financial statements
delivered to the LENDER or disclosed on Schedule 5.19 hereto. There
has been no adverse change in the financial condition of any of the
BORROWERS since the financial statements of the BORROWERS dated
December 31, 1999, and none of the BORROWERS knows of or have any
reason to expect any material adverse change in the assets,
liabilities, properties, business, or condition, financial or
otherwise, of any of the BORROWERS.
Section 5.21. Solvency. Each of the BORROWERS will be SOLVENT both
before and after CLOSING, after giving full effect to the OBLIGATIONS
and all of the BORROWERS respective liabilities.
Section 5.22. Fair Labor Standards Act. Each of the BORROWERS has
complied in all material respects with the Fair Labor Standards Act of
1938, as amended.
Section 5.23. Employee Benefit Plans.
Section 5.23.1. Compliance. Each of the BORROWERS and its ERISA
AFFILIATES are in compliance in all material respects with all
applicable provisions of ERISA and the regulations thereunder and of
the CODE with respect to all EMPLOYEE BENEFIT PLANS.
Section 5.23.2. Absence Of Termination Event. No TERMINATION EVENT has
occurred or is reasonably expected to occur with respect to any
GUARANTEED PENSION PLAN.
Section 5.23.3. Actuarial Value. The actuarial present value (as
defined in Section 4001 of ERISA) of all benefit commitments (as
defined in Section 4001 of ERISA) under each GUARANTEED PENSION PLAN
does not exceed the assets of that plan.
Section 5.23.4. No Withdrawal Liability. None of the BORROWERS nor any
of their ERISA AFFILIATES has incurred or reasonably expects to incur
any withdrawal liability under ERISA in connection with any
MULTIEMPLOYER PLANS.
Section 5.24. Environmental Conditions.
Section 5.24.1. Existence Of Permits. Each of the BORROWERS has
obtained all legally required permits, licenses, variances, clearances
and all other necessary approvals (collectively, the EPA PERMITS)
for use of the FACILITIES and the operation and conduct of its
business from all applicable federal, state, and local governmental
authorities, utility companies or development-related entities
including, but not limited to, any and all appropriate Federal or
State environmental protection agencies and other county or city
departments, public water works and public utilities in regard to the
use of the FACILITIES, the operation and conduct of its business, and
the handling, transporting, treating, storage, disposal, discharge, or
RELEASE of REGULATED SUBSTANCES, if any, into, on or from the
environment (including, but not limited to, any air, water, or soil).
Section 5.24.2. Compliance With Permits. Each issued EPA PERMIT is in
full force and effect, has not expired or been suspended, denied or
revoked, and is not under challenge by any PERSON. Each of the
BORROWERS is in compliance in all material aspects with each issued
EPA PERMIT.
Section 5.24.3. No Litigation. None of the BORROWERS nor any of the
FACILITIES is subject to any private or governmental litigation, or to
the knowledge of any of the BORROWERS, threatened litigation, lien or
judicial or administrative notice, order or action involving any of
the BORROWERS or any of the FACILITIES relating to REGULATED
SUBSTANCES or environmental problems, impairments or liabilities
Section 5.24.4. No Releases. To the best knowledge of each of the
BORROWERS, there has been no RELEASE into, on or from any of the
FACILITIES and no REGULATED SUBSTANCES are located on or have been
treated, stored, processed, disposed of, handled or transported to or
from, any of the FACILITIES in violation of any ENVIRONMENTAL LAWS. To
the best knowledge of each of the BORROWERS, no REGULATED SUBSTANCES
have been treated, stored, disposed, RELEASED, located, discharged,
possessed, managed, processed, or otherwise handled in the operation
or conduct of any BORROWERS business in violation of any
ENVIRONMENTAL LAWS. Each of the BORROWERS has complied in all material
respects with all ENVIRONMENTAL LAWS affecting the FACILITIES and each
BORROWERS business.
Section 5.24.5. Transportation. None of the BORROWERS transports, in
any manner, any REGULATED SUBSTANCES except in the ordinary course of
such BORROWERS business in material compliance with all ENVIRONMENTAL
LAWS.
Section 5.24.6. No Violation Notices. No BORROWER has received any
notices that any REGULATED SUBSTANCES transported from any FACILITY
have been disposed of in violation of any ENVIRONMENTAL LAWS.
Section 5.24.7. No Notice Of Violations. No BORROWER has received
written notice of any circumstances which would be likely to result in
any obligation under any ENVIRONMENTAL LAW to investigate or remediate
any REGULATED SUBSTANCES in, on or under any of the FACILITIES.
ARTICLE 6
FFIRMATIVE COVENANTS
Each of the BORROWERS agrees during the term of this AGREEMENT and
while any OBLIGATIONS are outstanding and unpaid to do and perform
each of the acts and promises set forth in this Article 6:
Section 6.1. Payment. All OBLIGATIONS shall be paid in full when and
as due.
Section 6.2. Insurance. Each of the BORROWERS shall obtain and
maintain such insurance coverages as are reasonable, customary and
prudent for businesses engaged in activities similar to the business
activities of the BORROWERS. Without limitation to the foregoing, each
of the BORROWERS shall maintain for all of its assets and properties,
whether real, personal, or mixed and including but not limited to the
COLLATERAL, fire and extended coverage casualty insurance in amounts
satisfactory to the LENDER and sufficient to prevent any co-insurance
liability (which amount shall be the full insurable value of the
assets and properties insured unless the LENDER in writing agrees to a
lesser amount), naming the LENDER as loss payee with respect to the
COLLATERAL, with insurance companies and upon policy forms containing
standard loss payee and mortgagee clauses which are acceptable to and
approved by the LENDER. Each of the BORROWERS shall submit to the
LENDER, upon request, duplicate originals of the casualty insurance
policies and paid receipts evidencing payment of the premiums due on
the same. The casualty insurance policies shall be endorsed so as to
make them noncancellable unless thirty (30) days prior notice of
cancellation or material alteration is provided to the LENDER. The
proceeds of any insured loss shall be applied by the LENDER to the
OBLIGATIONS, in such order of application as determined by the LENDER,
unless the LENDER in its sole discretion permits the use thereof to
repair or replace damaged or destroyed COLLATERAL. The LENDER agrees
that the BORROWERS will be permitted to use all or such portion of the
loss proceeds as may be necessary for the purposes of repairing,
restoring, renovating or replacing the damaged property, provided: (a)
no EVENT OF DEFAULT shall exist or occur and be continuing during the
course of such repair, restoration, renovation or replacement; (b) the
amount of the loss is less than One Hundred Thousand Dollars
($100,000.00); and (c) the schedule for the repair, restoration,
renovation or replacement indicates a full and complete repair,
restoration, renovation or replacement within a reasonable period
after the date of receipt of any such loss proceeds; (d) the
applicable insurance carriers shall have waived any rights of
subrogation against the BORROWERS in connection with such loss; and
(e) the amount of the insurance proceeds and any separate funds to be
contributed by the BORROWERS are sufficient in the reasonable business
judgment of the LENDER to accomplish such repair, restoration,
replacement or renovation in a reasonably satisfactory manner. The
BORROWERS shall also maintain public liability and property damage
insurance in such amounts, with insurance companies, and upon policy
forms acceptable to and approved by the LENDER, naming the LENDER as
additional insured. In addition, the BORROWERS shall maintain workers
compensation insurance in such amounts, with insurance companies
acceptable to and approved by the LENDER. The BORROWERS shall submit
to the LENDER satisfactory evidence of all such insurance.
Section 6.3. Books And Records. Each of the BORROWERS shall notify the
LENDER in writing if any of the BORROWERS modifies or changes its
method of accounting or enters into, modifies, or terminates any
agreement presently existing, or at any time hereafter entered into
with any third party accounting firm for the preparation and/or
storage of any BORROWERS accounting records.
Section 6.4. Collection Of Accounts; Sale Of Inventory. Each of the
BORROWERS shall only collect its RECEIVABLES and sell its INVENTORY in
the ordinary course of its business.
Section 6.5. Notice Of Litigation And Proceedings. Each of the
BORROWERS shall give prompt notice to the LENDER of any action, suit,
citation, violation, direction, notice or proceeding before any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting any of the BORROWERS,
or the assets or properties thereof, which, if determined adversely to
any of the BORROWERS: (a) could require any or all of the BORROWERS to
pay more than One Hundred Thousand Dollars ($100,000.00) or deliver
assets the value of which exceeds that sum (whether or not the claim
is considered to be covered by insurance); or (b) could reasonably be
expected to have a material adverse effect upon the financial
condition or business operations of any of the BORROWERS.
Section 6.6. Payment Of Liabilities To Third Persons. Each of the
BORROWERS shall pay when and as due, or within applicable grace
periods, all liabilities due to third persons, except when the amount
thereof is being contested in good faith by appropriate proceedings
and with adequate reserves therefor being set aside
Section 6.7. Change Of Business Location. Each of the BORROWERS shall
notify the LENDER thirty (30) days in advance of: (a) any change in
the location of its existing offices or place of business; (b) the
establishment of any new, or the discontinuation of any existing,
place of business; and (c) any change in or addition to the locations
at which the COLLATERAL is kept. Prior to moving any COLLATERAL to any
location not owned by it (other than deliveries to ACCOUNT DEBTORS of
sold or leased items), each of the BORROWERS shall obtain and deliver
to the LENDER an agreement, in form and substance acceptable to the
LENDER, pursuant to which the owner of such location shall: (a)
subordinate any rights which it may have, or thereafter may obtain, in
any of the COLLATERAL to the rights and security interests of the
LENDER in the COLLATERAL; and (b) allow the LENDER access to the
COLLATERAL in order to remove the COLLATERAL from such location. In
the event any COLLATERAL is stored with a warehousemen or other
bailee, and the COLLATERAL is evidenced by a negotiable document of
title, each of the BORROWERS shall immediately deliver the document of
title to the LENDER.
Section 6.8. Payment Of Taxes. Each of the BORROWERS shall pay or
cause to be paid when and as due all taxes, assessments and charges or
levies imposed upon it or on any of its property or which it is
required to withhold and pay over to the taxing authority or which it
must pay on its income, except where contested in good faith, by
appropriate proceedings and at its own cost and expense; provided,
however, that the BORROWERS shall not be deemed to be contesting in
good faith by appropriate proceedings unless: (a) such proceedings
operate to prevent the taxing authority from attempting to collect the
taxes, assessments or charges; (b) the COLLATERAL is not subject to
sale, forfeiture or loss during such proceedings; (c) such BORROWERS
contest does not subject the LENDER to any claim by the taxing
authority or any other person; (d) such BORROWER establishes
appropriate reserves, satisfactory to the LENDER in its sole
discretion, for the payment of all taxes, assessments, charges,
levies, legal fees, court costs and other expenses for which such
BORROWER would be liable if unsuccessful in the contest; (e) such
BORROWER prosecutes the contest continuously to its final conclusion;
and (f) at the conclusion of the proceedings, such BORROWER promptly
pays all amounts determined to be payable, including but not limited
to all taxes, assessments, charges, levies, legal fees and court
costs.
Section 6.9. Inspections Of Records. Each of the BORROWERS shall
permit representatives of the LENDER access to each BORROWERS places
of business, at intervals and at such times as determined by the
LENDER, to inspect the COLLATERAL and to review and make extracts from
or photocopies of the books and records of each of the BORROWERS. Each
of the BORROWERS agrees to pay to the LENDER the examination fee set
forth in Section 2.9 hereof and shall reimburse the LENDER for any
other reasonable out-of-pocket expenses incurred by the LENDER in
connection with such examinations, audits, inspections, extractions
and verifications.expenses incurred by the LENDER in connection with
such examinations, audits, inspections, extractions and verifications.
Section 6.10. Notice Of Events Affecting Collateral; Compromise Of
Receivables; Returned Or Repossessed Goods. Each of the BORROWERS
shall promptly report to the LENDER: (a) any reclamation, return or
repossession of goods; (b) all claims or disputes asserted by any
ACCOUNT DEBTOR or other obligor involving in excess of One Hundred
Thousand Dollars ($100,000.00); provided, however, the BORROWER shall
report all claims or disputes asserted by any ACCOUNT DEBTOR affecting
COLLATERAL included in the BORROWING BASE; and (c) all matters
materially affecting the value, enforceability or collectibility of
any of the COLLATERAL. Without the LENDERS consent, none of the
BORROWERS shall compromise or adjust any of the RECEIVABLES which have
been included by any of the BORROWERS in the determination of the
BORROWING BASE, extend the time for payment thereof, or grant any
additional discounts, allowances or credits thereon; provided,
however, that any of the BORROWERS may grant, in the ordinary course
of business, to any party obligated on any of the RECEIVABLES, any
rebate, refund, or adjustment to which such party may be lawfully
entitled, and may accept, in connection therewith, the return of
goods, sale, or lease of which shall have given rise to such
RECEIVABLES. If any goods, the sale of which has resulted in
RECEIVABLES included in determining the BORROWING BASE, are returned
by the ACCOUNT DEBTOR for credit or repossessed by any of the
BORROWERS, the BORROWERS shall receive and hold such goods as trustee
for the LENDER and as additional security for the payment of the
OBLIGATIONS, and make disposition thereof as required by the LENDER.
Section 6.11. Documentation Of Collateral. Each of the BORROWERS
agrees that upon the request of the LENDER, each of the BORROWERS will
provide the LENDER with: (a) written statements or schedules
identifying and describing the COLLATERAL, and all additions,
substitutions, and replacements thereof, in such detail as the LENDER
may require; (b) copies of ACCOUNT DEBTORS invoices or billing
statements; (c) evidence of shipment or delivery of goods or
merchandise to or performance of services for ACCOUNT DEBTORS; and (d)
such other schedules and information as the LENDER reasonably may
require. The items to be provided under this Section shall be in form
satisfactory to the LENDER and are to be executed and delivered to the
LENDER from time to time solely for the LENDERS convenience in
maintaining RECORDS of the COLLATERAL. The failure of any of the
BORROWERS to give any of such items to the LENDER shall not affect,
terminate, modify or otherwise limit the LENDERS security interests
in the COLLATERAL. The LENDER shall have the right, at any time and
from time to time, to verify the eligibility of the BORROWERS
RECEIVABLES, including, in connection with its quarterly field
examinations of the BORROWERS books and records or at any time during
any continuing DEFAULT or EVENT OF DEFAULT, obtaining verification of
the RECEIVABLES directly from ACCOUNT DEBTORS.
Section 6.12. Reporting Requirements. The BORROWERS shall submit the
following items to the LENDER:
Section 6.12.1. Inventory Reports. On or before the 20th day of each
calendar month, reports of INVENTORY on such reporting forms as are
required by the LENDER from time to time, certified to be accurate and
correct by the chief financial officer of each of the BORROWERS, which
reports shall be compiled in a manner acceptable to the LENDER.
Section 6.12.2. Receivables And Accounts Payable Reports. On or before
the 20th day of each calendar month: (i) a RECEIVABLES report and
aging; and (ii) an accounts payable report and aging, both in form
reasonably acceptable to the LENDER and containing such information as
the LENDER may specify from time to time. Such reports shall be
accompanied by such reports, copies of sales journals, remittance
reports, and other documentation as the LENDER may reasonably request
from time to time.
Section 6.12.3. Government Contracts Report. On or before the 20th day
of each calendar month, a status report with respect to all GOVERNMENT
CONTRACTS of the BORROWERS, in form and substance satisfactory to the
LENDER.
Section 6.12.4. Borrowing Base Report. Once each calendar week, or
more frequently if requested by the LENDER, a collateral and loan
report in such form and context as may be specified by the LENDER from
time to time.
Sectio 6.12.5. Quarterly Financial Statements. As soon as available
and in any event within forty-five (45) calendar days after the end of
each of the first three QUARTERS of each FISCAL YEAR, the BORROWERS
shall submit to the LENDER a consolidated and consolidating balance
sheet of the BORROWERS and their SUBSIDIARIES as of the end of such
quarter, a consolidated and consolidating statement of income and
retained earnings of the BORROWERS and their SUBSIDIARIES for the
period commencing at the end of the previous FISCAL YEAR and ending
with the end of such quarter, and a consolidated statement of cash
flow of the BORROWERS and their SUBSIDIARIES for the portion of the
FISCAL YEAR ended with the last day of such quarter, all in reasonable
detail and stating in comparative form the respective consolidated and
consolidating figures for the corresponding date and period in the
prior FISCAL YEAR and all prepared in accordance with G.A.A.P. and
certified by the chief financial officer of each of the BORROWERS
(subject to year-end adjustments).
Section 6.12.6. Annual Financial Statements. As soon as available and
in any event within ninety (90) calendar days after the end of each
FISCAL YEAR of each of the BORROWERS, the BORROWERS shall submit to
the LENDER a consolidated and consolidating balance sheet of the
BORROWERS and their SUBSIDIARIES as of the end of such FISCAL YEAR and
a consolidated and consolidating statement of income and retained
earnings of the BORROWERS and their SUBSIDIARIES for such FISCAL YEAR,
and a consolidated statement of cash flow of the BORROWERS and their
SUBSIDIARIES for such FISCAL YEAR, all in reasonable detail and
stating in comparative form the respective consolidated and
consolidating figures for the corresponding date and period in the
prior FISCAL YEAR and all prepared in accordance with G.A.A.P. and, as
to the consolidated financial statements described above, accompanied
by an audited opinion thereon acceptable to the LENDER by independent
accountants selected by the BORROWERS and acceptable to the LENDER.
Section 6.12.7. Annual Business Plan and Financial Projections. As
soon as available and in any event within ninety (90) calendar days
after the beginning of each FISCAL YEAR of the BORROWERS beginning
with the 2000 FISCAL YEAR, the BORROWERS shall submit to the LENDER a
business plan of the BORROWERS and their SUBSIDIARIES for the ensuing
FISCAL YEAR, such plan to be prepared in accordance with G.A.A.P. and
to include a capital budget, projected income statement, statement of
cash flows and balance sheet, and a report containing managements
discussion and analysis of such projections, accompanied by a
certificate from the chief financial officer of each of the BORROWERS
to the effect that, to the best of such officers knowledge, such
projections are good faith estimates of the financial condition and
operations of the BORROWERS and their SUBSIDIARIES for such FISCAL
YEAR
Section 6.12.8. SEC And Other Filings. Within five (5) days after the
sending, filing, or receipt thereof, copies of: (a) all financial
statements, reports, notices and proxy statements that each of the
BORROWERS sends to its shareholders; and (b) all regular, periodic and
special reports, registration statements and prospectuses that each of
the BORROWERS renders to or files with the Securities And Exchange
Commission, the National Association of Securities Dealers, Inc. or
any national securities exchange, including without limitation each of
the Forms 10-K and 10-Q filed by each of the BORROWERS with the
Securities And Exchange Commission.
Section 6.12.9. Management Letters. Promptly upon receipt thereof,
each of the BORROWERS shall submit to the LENDER copies of any reports
submitted to any of the BORROWERS or any SUBSIDIARY by independent
certified public accountants in connection with the examination of the
financial statements of the BORROWERS or any SUBSIDIARY made by such
accountants.
Section 6.12.10. Certificates Of No Default. Within thirty (30)
calendar days after the end of each of the QUARTERS of each FISCAL
YEAR of each of the BORROWERS, each of the BORROWERS shall submit to
the LENDER certificates of the chief financial officers of each of the
BORROWERS certifying that: (i) there exists no DEFAULT or EVENT OF
DEFAULT, or if a DEFAULT or an EVENT OF DEFAULT exists, specifying the
nature thereof, the period of existence thereof and what action such
BORROWER proposes to take with respect thereto; (ii) no material
adverse change in the condition, financial or otherwise, business,
property or results of operations of such BORROWER has occurred since
the previous certificate was sent to the LENDER by such BORROWER or,
if any such change has occurred, specifying the nature thereof and
what action such BORROWER has taken or proposes to take with respect
thereto; (iii) all insurance premiums then due have been paid; (iv)
all taxes then due have been paid or, for those taxes which have not
been paid, a statement of the taxes not paid and a description of such
BORROWERS rationale therefor; (v) no litigation, investigation or
proceedings, or injunction, writ or restraining order is pending or
threatened or, if any such litigation, investigation, proceeding,
injunction, writ or order is pending, describing the nature thereof;
and (vi) stating whether or not the GUARANTORS and the BORROWERS are
in compliance with the covenants in this AGREEMENT, including a
calculation of the financial covenants in the schedule attached to
such officers certificates in form satisfactory to the LENDER.
Section 6.12.11. Reports To Other Creditors. Promptly after the
furnishing thereof, each of the BORROWERS shall submit to the LENDER
copies of any statement or report furnished to any other PERSON
pursuant to the terms of any indenture, loan, or credit or similar
agreement and not otherwise required to be furnished to the LENDER
pursuant to any other provisions of this AGREEMENT.
Section 6.12.12. Management Changes. Each of the BORROWERS shall
notify the LENDER immediately of any changes in the personnel holding
the positions of either President or Chief Financial Officer of any of
the BORROWERS
Section 6.12.13. General Information. In addition to the items set
forth in subsections 6.12.1 through 6.12.12 above, each of the
BORROWERS agrees to submit to the LENDER, or cause to be submitted to
the LENDER (a) such other information respecting the condition or
operations, financial or otherwise, of each of the BORROWERS as the
LENDER may reasonably request from time to time and (b) such financial
statements and other information respecting the condition or
operations, financial or otherwise, of each of the GUARANTORS and the
LIMITED GUARANTORS as may be required pursuant to the LOAN DOCUMENTS
Section 6.13. Employee Benefit Plans And Guaranteed Pension Plans.
Each of the BORROWERS will, and will cause each of its ERISA
AFFILIATES to: (a) comply with all requirements imposed by ERISA and
the CODE, applicable from time to time to any of its GUARANTEED
PENSION PLANS or EMPLOYEE BENEFIT PLANS; (b) make full payment when
due of all amounts which, under the provisions of EMPLOYEE BENEFIT
PLANS or under applicable LAW, are required to be paid as
contributions thereto; (c) not permit to exist any material
accumulated funding deficiency, whether or not waived; (d) file on a
timely basis all reports, notices and other filings required by any
governmental agency with respect to any of its EMPLOYEE BENEFITS
PLANS; (e) make any payments to MULTIEMPLOYER PLANS required to be
made under any agreement relating to such MULTIEMPLOYER PLANS, or
under any LAW pertaining thereto; (f) not amend or otherwise alter any
GUARANTEED PENSION PLAN if the effect would be to cause the actuarial
present value of all benefit commitments under any GUARANTEED PENSION
PLAN to be less than the current value of the assets of such
GUARANTEED PENSION PLAN allocable to such benefit commitments; (g)
furnish to all participants, beneficiaries and employees under any of
the EMPLOYEE BENEFIT PLANS, within the periods prescribed by LAW, all
reports, notices and other information to which they are entitled
under applicable LAW; and (h) take no action which would cause any of
the EMPLOYEE BENEFIT PLANS to fail to meet any qualification
requirement imposed by the CODE. As used in this Section, the term
accumulated funding deficiency has the meaning specified in Section
302 of ERISA and Section 412 of the CODE, and the terms actuarial
present value, benefit commitments and current value have the
meaning specified in Section 4001 of ERISA.
Section 6.14. Maintenance Of Fixed Assets. Each of the BORROWERS shall
maintain and preserve all of its fixed assets in a state of good and
efficient working order, normal wear and tear excepted.
Section 6.15. Consignments. Each of the BORROWERS shall advise the
LENDER of all PERSONS to whom it has consigned or assigned INVENTORY
for sale or distribution, and the location of the INVENTORY subject to
any such consignment or assignment arrangement. Each of the BORROWERS
shall: (a) duly and properly file financing statements in all
applicable places of public record with respect to each of such
consignments or assignments, which filings shall comply with Section
9-114 of the 1972 version of the Uniform Commercial Code, as amended
from time to time, and with all other requirements necessary for such
BORROWER to protect its interests therein under applicable LAWS; (b)
supply the LENDER with prior evidence of such filing and with a
financing statement, judgment and tax lien search in the name of the
consignee or assignee in all applicable places of public record; and
(c) provide written notification to any holder of any security
interests in the inventory of the consignee or assignee who has filed
a financing statement before such BORROWER files its financing
statement, which notice shall state that such BORROWER expects to
deliver goods or assignments, shall describe the goods by item or type
and which notification shall be received by any such holder within
five (5) years before the consignee receives possession of the goods
and at five (5) year intervals thereafter.
Section 6.16. Foreign Receivables. As to any RECEIVABLE from an
ACCOUNT DEBTOR not domiciled in the United States of America or which
otherwise arises in connection with INVENTORY for export sales or
export accounts receivable and contract rights, the BORROWERS shall
execute all documents and instruments and shall take all steps or
actions as may be required by the LENDER to ensure that such
RECEIVABLE is covered by export credit insurance insuring
comprehensive (commercial and political) risks as the LENDER may deem
necessary or advisable, or if approved by the LENDER, fully secured by
a perfected assignment of proceeds of an irrevocable confirmed letter
of credit issued by a United States bank fully acceptable to the
LENDER in form and substance.
Section 6.17. Federal Assignment Of Claims Act. Each of the BORROWERS
shall notify the LENDER if any RECEIVABLE arises out of a contract
with the United States of America, or any department, agency or
instrumentality thereof, and shall execute all documents or
instruments and shall take all steps or actions as may be required by
the LENDER so that all monies due or to become due under such contract
are assigned to the LENDER and notice given thereof to the United
States in accordance with the requirements of the Federal Assignment
of Claims Act, as amended.
Section 6.18. Compliance With Laws. Each of the BORROWERS shall comply
in all material respects with all applicable LAWS, including, but not
limited to, all LAWS with respect to: (a) all restrictions,
specifications, or other requirements pertaining to products that it
sells or to the services it performs; (b) the conduct of its business;
(c) the use, maintenance, and operation of the real and personal
properties owned or leased by it in the conduct of its business; and
(d) the obtaining and maintenance of all necessary licenses,
franchises, permits and governmental approvals, registrations and
exemptions necessary to engage in its business. Without limiting the
generality of the preceding Section, each of the BORROWERS shall: (i)
comply in all material respects with, and ensure such compliance by
all tenants and subtenants, if any, with, all applicable ENVIRONMENTAL
LAWS and obtain and comply in all material respects with and maintain,
and ensure that all tenants and subtenants obtain and comply with and
maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable ENVIRONMENTAL LAWS;
(ii) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
ENVIRONMENTAL LAWS, and promptly comply with all lawful orders and
directives of any governmental authority regarding ENVIRONMENTAL LAWS;
and (iii) defend, indemnify and hold harmless the LENDER, and its
employees, agents, officers and directors, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any ENVIRONMENTAL
LAWS applicable to the operations of each of the BORROWERS, or any
orders, requirements or demands of governmental authorities related
thereto, including, without limitation, reasonable attorneys and
consultants fees, investigation and laboratory fees, response costs,
court costs and litigation expenses, except to the extent that any of
the foregoing directly result from the gross negligence or willful
misconduct of the party seeking indemnification therefor. Each of the
BORROWERS agrees to promptly notify the LENDER of any RELEASE of a
REGULATED SUBSTANCE on, to or from any FACILITY in violation of any
ENVIRONMENTAL LAWS or of any notice received by such BORROWER that
such BORROWER or any FACILITY is not in compliance with any
ENVIRONMENTAL LAWS.
Section 6.19. Formation of Subsidiaries. The BORROWERS shall deliver,
or cause to be delivered to the LENDER, the following (but without
implying the LENDERS consent to the formation of same unless
specifically granted) :
Section 6.19.1. Domestic Subsidiaries. Each DOMESTIC SUBSIDIARY,
promptly upon its acquisition or creation, shall execute and deliver
to the LENDER: (a) a guaranty agreement in form and substance
satisfactory to the LENDER pursuant to which such SUBSIDIARY shall
guarantee, among other things, the absolute full payment and
performance by the BORROWERS of the OBLIGATIONS; (b) a complete copy
of such SUBSIDIARYS charter, or other organizational document filed
of public record, with all amendments thereto, certified by the
Secretary of State of the jurisdiction of formation; (c) a copy of
such SUBSIDIARYs bylaws, operating agreement, or partnership
agreement, as applicable, with all amendments thereto; (d) a
certificate of good standing dated as of a recent date from the
jurisdiction of formation and each jurisdiction in which such
SUBSIDIARY is required by the nature of its business or assets to
qualify to do business; (e) a certificate of corporate resolutions,
partnership or limited liability company certificate, as applicable,
and incumbency from the duly authorized and appropriate representative
of such SUBSIDIARY in form and substance satisfactory to the LENDER;
and (f) an opinion of counsel satisfactory to the LENDER opining as to
such matters in connection with such SUBSIDIARY as may be reasonably
requested by the LENDER. The repayment and performance of the
OBLIGATIONS and of the obligations of the SUBSIDIARY to the LENDER
shall be secured by (i) the pledge of one hundred percent (100%) of
the issued and outstanding CAPITAL STOCK of the SUBSIDIARY, pursuant
to the terms and conditions of a pledge agreement, stock powers and
financing statements, all in form and substance acceptable to the
LENDER and (ii) a first priority perfected lien and security interest
in all real and personal property (both tangible and intangible),
whether now existing or hereafter arising, of such SUBSIDIARY,
pursuant to security agreements in form and substance satisfactory to
the LENDER, subject only to PERMITTED LIENS.
Section 6.19.2. Foreign Subsidiaries. Each direct SUBSIDIARY of the
BORROWERS or of any DOMESTIC SUBSIDIARY that is not a DOMESTIC
SUBSIDIARY (FIRST TIER FOREIGN SUBSIDIARY), promptly upon its
acquisition or creation, shall execute and deliver to the LENDER: (a)
a complete copy of such FIRST TIER FOREIGN SUBSIDIARYS charter, or
other organizational document filed of public record, with all
amendments thereto, certified by the Secretary of State of the
jurisdiction of formation; (b) a copy of such FIRST TIER FOREIGN
SUBSIDIARYs bylaws, operating agreement, or partnership agreement, as
applicable, with all amendments thereto; (c) if such jurisdiction
generally issues such a certification, a certificate of good standing
dated as of a recent date from the jurisdiction of formation and each
jurisdiction in which such FIRST TIER FOREIGN SUBSIDIARY is required
by the nature of its business or assets to qualify to do business; and
(d) an opinion of counsel satisfactory to the LENDER opining as to
such matters in connection with such FIRST TIER FOREIGN SUBSIDIARY as
may be reasonably requested by the LENDER. The repayment and
performance of the OBLIGATIONS and of the obligations of the BORROWER
OR DOMESTIC SUBSIDIARY to the LENDER shall be secured by the pledge of
sixty-five percent (65%) of the issued and outstanding CAPITAL STOCK
of the FIRST TIER FOREIGN SUBSIDIARY, pursuant to the terms and
conditions of a pledge agreement, stock powers, financing statements,
registration and acknowledgment of pledge by issuer, all in form and
substance acceptable to the LENDER. The BORROWERS, DOMESTIC SUBSIDIARY
and FIRST TIER FOREIGN SUBSIDIARY shall execute all documents
necessary to effectuate the Pledge.
Section 6.20. Year 2000. Each of the BORROWERS has initiated a review
and assessment of all areas within its and each of its SUBSIDIARIES
businesses and operations that could be adversely affected by the
YEAR 2000 PROBLEM (that is, the risk that computer hardware and
software used by any of the BORROWERS or any SUBSIDIARIES may be
unable to operate, recognize, effectively process and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999 (including recognizing and performing properly
date-sensitive functions in leap years)). All computer applications
that are material to the businesses and operations of the BORROWERS
and SUBSIDIARIES are YEAR 2000 COMPLIANT. Each of the BORROWERS and
the SUBSIDIARIES has made inquiry of each of its key suppliers,
vendors and customers as to whether such persons are YEAR 2000
COMPLIANT in all material respects. Key suppliers, vendors, and
customers refers to those suppliers, vendors and customers of each of
the BORROWERS and the SUBSIDIARIES, the business failure of which
could result in a material adverse change in the financial condition
or business operations of any of the BORROWERS and/or the
SUBSIDIARIES, or harm or deterioration to the COLLATERAL. In addition,
the BORROWERS will promptly notify the LENDER in the event that any of
the BORROWERS discovers or determines that any computer hardware or
software (including that of its suppliers, vendors and customers) that
is material to any BORROWERS or any SUBSIDIARYS financial condition
or business operations is not YEAR 2000 COMPLIANT.
Section 6.21. Minimum EBITDA. The EBITDA of the BORROWERS and their
respective consolidated SUBSIDIARIES on a consolidated basis, measured
at the end of each QUARTER for the trailing four-QUARTER period ending
on the date of determination shall be: (a) as at the QUARTER ending
December 31, 1999, not less than Four Million Two Hundred Thousand
Dollars ($4,200,000.00) and (b) as at the end of each QUARTER
thereafter, not less than Four Million Five Hundred Thousand Dollars
($4,500,000.00).
Section 6.22. Minimum Tangible Net Worth Plus Subordinated Debt. As of
the end of each QUARTER set forth below, the sum of TANGIBLE NET WORTH
plus SUBORDINATED DEBT of the BORROWERS and their respective
consolidated SUBSIDIARIES on a consolidated basis shall be not less
than the respective amount set forth for such QUARTER (each such
amount, calculated as set forth in clauses (a), (b), and (c) below, a
Minimum TNW Requirement):
(a) for the QUARTER ending December 31, 1999: $8,800,000.00;
(b) for each of the QUARTERS ending March 31, 2000, June 30, 2000, and
September 30, 2000: $9,500,000.00;
(c) for the QUARTERS ending December 31, 2000, March 31, 2001, June
30, 2001, and September 30, 2001: $9,500,000.00 plus 50% of NET PROFIT
AFTER TAX of the BORROWERS for the FISCAL YEAR ending December 31,
2000;
(d) for the QUARTERS ending December 31, 2001, March 31, 2002, June
30, 2002, and September 30, 2002: the Minimum TNW Requirement
calculated in accordance with the immediately preceding clause (c),
plus 50% of NET PROFIT AFTER TAX of the BORROWERS for the FISCAL YEAR
ending December 31, 2001;
(e) for the QUARTER ending December 31, 2002: the Minimum TNW
Requirement calculated in accordance with the immediately preceding
clause (d), plus 50% of NET PROFIT AFTER TAX of the BORROWERS for the
FISCAL YEAR ending December 31, 2002.
Section 6.23. Minimum Working Capital. The BORROWERS and their
respective consolidated SUBSIDIARIES on a consolidated basis shall
maintain at all times WORKING CAPITAL of not less than One Million
Dollars ($1,000,000.00).
Section 6.24. Ratio of Total Liabilities to Tangible Net Worth Plus
Subordinated Debt. The BORROWERS and their respective consolidated
SUBSIDIARIES on a consolidated basis shall maintain as of the end of
each QUARTER a ratio of (a) TOTAL LIABILITIES to (b) TANGIBLE NET
WORTH plus SUBORDINATED DEBT of not greater than 4.50 to 1.00
Section 6.25. Notice of Existence of Default. Each of the BORROWERS
shall promptly advise the LENDER of the existence of any condition or
event of which it has knowledge, which is or which will be with notice
and/or the passage of time a DEFAULT or an EVENT OF DEFAULT.
ARTICLE 7
NEGATIVE COVENANTS
Each of the BORROWERS covenants while any OBLIGATIONS are outstanding
and unpaid not to do or to permit to be done or to occur any of the
acts or occurrences set forth in this Article 7 without the prior
written authorization of the LENDER.
Section 7.1. No Change Of Name, Merger, Etc. None of the BORROWERS
shall change its name or enter into any merger, consolidation,
reorganization or recapitalization.
Section 7.2. No Sale Or Transfer Of Assets. None of the BORROWERS
shall sell, transfer, lease or otherwise dispose of all or any part of
the COLLATERAL, or all or any part of any of its other assets, except
that (a) INVENTORY may be sold to ACCOUNT DEBTORS in the ordinary
course of a BORROWERS business and (b) provided no DEFAULT or EVENT
OF DEFAULT has occurred, INVENTORY not qualifying as ELIGIBLE
INVENTORY or included in the BORROWING BASE in an amount not to exceed
One Hundred Thousand Dollars ($100,000.00), in the aggregate, may be
sold to PERSONS other than ACCOUNT DEBTORS.
Section 7.3. No Encumbrance Of Assets. None of the BORROWERS shall
mortgage, pledge, grant or permit to exist a security interest in or
lien upon any of its assets of any kind, now owned or hereafter
acquired, except for PERMITTED LIENS.
Sectio 7.4. No Indebtedness. None of the BORROWERS shall incur,
create, assume, or permit to exist any INDEBTEDNESS except: (a) the
OBLIGATIONS; (b) INDEBTEDNESS secured by PERMITTED LIENS; (c) the GSE
POWER SYSTEMS AB NOTE; (d) INDEBTEDNESS existing on the date of
CLOSING and described on Schedule 7.4 attached hereto; (e)
intercompany INDEBTEDNESS among the BORROWERS and the GUARANTORS; (f)
indebtedness in favor of the seller thereof securing PERMITTED
ACQUISITIONS in an amount not to exceed One Million Dollars
($1,000,000.00) in the aggregate, provided the same is unsecured and
subordinated to the OBLIGATIONS in writing pursuant to a written
subordination agreement satisfactory to the LENDER in form and
substance.
Section 7.5. Restricted Payments. None of the BORROWERS shall make any
RESTRICTED PAYMENTS, except that provided no DEFAULT or EVENT OF
DEFAULT shall have occurred or shall occur after giving effect to such
RESTRICTED PAYMENT and provided the total amount of such RESTRICTED
PAYMENTS in any given FISCAL YEAR do not exceed fifty percent (50%) of
its NET PROFIT AFTER TAX for such FISCAL YEAR: (a) With respect to the
GSE POWER SYSTEMS AB NOTE, GSE SYSTEMS may (i) make regularly
scheduled payments of interest in accordance with the stated terms of
such note, or (ii) permit GSE Power Systems AB to offset dividends due
GSE SYSTEMS to repay regularly scheduled payments of interest in
accordance with the stated terms of such note or payments of principal
in accordance with the stated terms of such note, when and as any of
the same become due (but without giving effect to any acceleration or
any amendment which would have the effect of increasing such payments)
under such note; (b) GSE SYSTEMS may pay dividends to its
shareholders; (c) the other BORROWERS may pay cash dividends to GSE
SYSTEMS; and (d) a BORROWER may make payments to other BORROWERS.
Section 7.6. Transactions With Affiliates. None of the BORROWERS shall
make any contract for the purchase of any items from any AFFILIATE or
the performance of any services (including employment services) by any
AFFILIATE, unless such contract is on terms which fairly represent
generally available terms to be obtained in transactions of a similar
nature with independent third PERSONS.
Section 7.7. Loans, Investments And Sale-Leaseback. None of the
BORROWERS shall make any (i) advance, loan (except for loans to
BORROWERS or GUARANTORS provided such loans are evidenced by a note
which is pledged to the LENDER), investment (including, without
limitation any advance or loan to, or investment in, a SUBSIDIARY that
is not a DOMESTIC SUBSIDIARY), except as set forth on Schedule 7.7
hereto; (ii) material acquisition of assets other than a PERMITTED
ACQUISITION; or (iii) enter into any sale-leaseback transactions.
Section 7.8. No Acquisition Of Equity In Or Assets Of Third Persons.
None of the BORROWERS shall acquire any equity interests in, or all or
substantially all of the assets of, any PERSON except for PERMITTED
ACQUISITIONS. None of the BORROWERS shall form or acquire any
SUBSIDIARIES, without LENDERS prior written consent.
Section 7.9. No Assignment. None of the BORROWERS shall assign or
attempt to assign its rights under this AGREEMENT.
Section 7.10. No Alteration Of Structure Or Operations. None of the
BORROWERS shall amend or change materially its capital structure or
its line or scope of business, nor shall it engage in business
ventures other than those in which it is presently engaged, except for
compatible lines of business.
Section 7.11. Unpermitted Uses Of Loan Proceeds. None of the BORROWERS
shall use any part of the proceeds of the LOAN hereunder for any
purpose which constitutes a violation of, or is inconsistent with,
regulations of the Board of Governors of the Federal Reserve System,
including without limitation, the purchase or carrying of (or
refinancing of indebtedness originally incurred to purchase or carry)
margin securities.
Section 7.12. Long Term Contracts. None of the BORROWERS shall enter
into any non-competition contract having a term in excess of thirteen
(13) months or requiring the payment of any monies by any of the
BORROWERS on a date occurring more than thirteen (13) months after the
date of such contract with any AFFILIATE if such non-competition
contract would materially adversely affect the BORROWERS ability to
perform the OBLIGATIONS.
Section 7.13. Changes In Fiscal Year. None of the BORROWERS shall
change its FISCAL YEAR.
Section 7.14. Limitation On Issuance Of Certain Equity Interests. None
of the BORROWERS shall issue or sell any equity interest in such
BORROWER that, by its terms or by the terms of any security into which
it is convertible or exchangeable, is, or upon the happening of an
event or passage of time would be: (a) convertible or exchangeable
into a liability of such BORROWER; or (b) required to be redeemed or
repurchased, including at the option of the holder, in whole or in
part, or has, or upon the happening of an event or passage of time
would have, a redemption or similar payment due.
ARTICLE 8
EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an
EVENT OF DEFAULT.
Section 8.1. Failure To Pay. The failure by any or all of the
BORROWERS to pay any of the OBLIGATIONS when and as due.
Section 8.2. Representation Or Warranty. The failure of any
representation or warranty made by any or all of the BORROWERS, any of
the GUARANTORS, or any of the LIMITED GUARANTORS to be true in any
material respect, as of the date made.
Section 8.3. Default Under Negative Covenants. The failure by any of
the BORROWERS to perform, or a violation of, any of the negative
covenants set forth in Article 7 of this AGREEMENT.
Section 8.4. Default Under Certain Covenants. The failure by any of
the BORROWERS to perform or a violation of any of the covenants set
forth in Article 3, or Sections 5.18, 6.12, 6.21, 6.22, 6.23, 6.24, or
6.25 of this AGREEMENT, or the failure by any of the BORROWERS to
provide to the LENDER any notice of the existence of certain
conditions or events required pursuant to the terms of this AGREEMENT
Section 8.5. Default Under Any Other Covenant. Any failure by any of
the BORROWERS to comply with or a violation of any of the covenants or
agreements of any of the BORROWERS under this AGREEMENT not
specifically addressed in any other section or provision of this
Article 8, if such breach or failure continues for a period of thirty
(30) days after notice thereof from the LENDER to the BORROWER;
provided, that if with respect to any such event or circumstance
another provision of this AGREEMENT or another LOAN DOCUMENT
specifically provides a cure period different from that set forth in
this Section 8.5, such other, specifically provided cure period shall
be the sole cure period applicable.
Section 8.6. Default Under Loan Documents. A breach of or default by
any or all of the BORROWERS under the terms, covenants, and conditions
set forth in any other LOAN DOCUMENT which is not cured within any
applicable cure period.
Section 8.7. Invalidity of any Loan Document; Failure of Lien. Any
LOAN DOCUMENT or material provision thereof shall cease to be in full
force and effect in accordance with its terms, or any of the
BORROWERS, the LIMITED GUARANTORS, the GUARANTORS or any other
SUBSIDIARY shall, or shall purport to, terminate, revoke, repudiate,
declare voidable or void or otherwise contest the validity or
enforceability of any LOAN DOCUMENT or material provision thereof or
any of the OBLIGATIONS. Any lien or security interest created or
purported to be created by any LOAN DOCUMENT shall fail to be a valid,
enforceable and perfected lien or security interest in favor of the
LENDER securing the OBLIGATIONS.
Section 8.8. Cross-Default. A breach of or default under the terms,
covenants, or conditions of any agreement, loan, guaranty, or other
transaction of any or all of the BORROWERS, or any of the GUARANTORS
with the LENDER or with any other lender, after expiration of any
applicable notice and cure rights.
Section 8.9. Judgments. Any of the BORROWERS, any of the GUARANTORS,
or any of the LIMITED GUARANTORS shall suffer final judgments for the
payment of money aggregating in excess of One Hundred Thousand Dollars
($100,000.00) and shall not discharge the same within a period of
thirty (30) days unless, pending further proceedings, execution has
not been commenced or if commenced has been effectively stayed.
Section 8.10. Levy By Judgment Creditor. A judgment creditor of any of
the BORROWERS shall obtain possession of any of the COLLATERAL by any
means, including but not limited to levy, distraint, replevin or
self-help, and none of the BORROWERS shall remedy same within thirty
(30) days thereof; or a writ of garnishment is served on the LENDER
relating to any of the accounts of any of the BORROWERS maintained by
the LENDER.
Section 8.11. Failure To Pay Liabilities. Any of the BORROWERS shall
fail to pay any of its debts, in any material amount, due any third
PERSON and such failure shall continue beyond any applicable grace
period, unless the applicable BORROWER holds a good faith defense to
payment and has set aside reasonable reserves for the payment thereof.
Section 8.12. Involuntary Insolvency Proceedings. The institution of
involuntary INSOLVENCY PROCEEDINGS against any of the BORROWERS and
the failure of any such INSOLVENCY PROCEEDINGS to be dismissed before
the earliest to occur of: (a) the date which is ninety (90) days after
the institution of such INSOLVENCY PROCEEDINGS; (b) the entry of any
order for relief in the INSOLVENCY PROCEEDING or any order
adjudicating any or all of the BORROWERS insolvent; or (c) the
impairment (as to validity, priority or otherwise) of any security
interest or lien of the LENDER in any of the COLLATERAL.
Section 8.13. Voluntary Insolvency Proceedings. The commencement by
any of the BORROWERS of INSOLVENCY PROCEEDINGS.
Section 8.14. Insolvency Proceedings Pertaining To Guarantors, other
Subsidiaries or Limited Guarantors. The occurrence of any of the
events listed in Sections 8.12 and 8.13 above to any GUARANTOR, or any
other SUBSIDIARY, or any LIMITED GUARANTOR.
Section 8.15. Material Adverse Event. The occurrence of a MATERIAL
ADVERSE EVENT.
Section 8.16. Default By Guarantors. A breach of or default by any of
the GUARANTORS or LIMITED GUARANTORS under the terms, covenants, and
conditions set forth in any GUARANTY AGREEMENT any other LOAN DOCUMENT
to which it is a party. The failure by any of the GUARANTORS or
LIMITED GUARANTORS to satisfy any obligation imposed upon it in the
GUARANTY AGREEMENTS.
Section 8.17. Attempt To Terminate Guaranties. The receipt by the
LENDER of notice from a GUARANTOR that the GUARANTOR is attempting to
terminate or limit any portion of its obligations under a GUARANTY
AGREEMENT. The receipt by the LENDER of notice from a LIMITED
GUARANTOR that the LIMITED GUARANTOR is attempting to terminate or
limit any portion of its obligations under a GUARANTY AGREEMENT other
than in accordance with the terms thereof.
Section 8.18. ERISA. If any TERMINATION EVENT shall occur and as of
the date thereof or any subsequent date, the sum of the various
liabilities of any of the BORROWERS and its ERISA AFFILIATES (such
liabilities to include, without limitation, any liability to the
Pension Benefit Guaranty Corporation (or any successor thereto) or to
any other party under Sections 4062, 4063, or 4064 of ERISA or any
other provision of LAW and to be calculated after giving effect to the
tax consequences thereof) resulting from or otherwise associated with
such event exceeds One Hundred Thousand Dollars ($100,000.00); or any
of the BORROWERS or any of its ERISA AFFILIATES as an employer under
any MULTIEMPLOYER PLAN shall have made a complete or partial
withdrawal from such MULTIEMPLOYER PLANS and the plan sponsors of such
MULTIEMPLOYER PLANS shall have notified such withdrawing employer that
such employer has incurred a withdrawal liability requiring a payment
in an amount exceeding One Hundred Thousand Dollars ($100,000.00).
Section 8.19. Transfer Of Equity Interests. The transfer of any equity
interests in any of the BORROWERS (other than GSE SYSTEMS) or any of
the GUARANTORS from the ownership existing as of CLOSING and disclosed
on the Perfection Certificates delivered by the BORROWERS and the
GUARANTORS to the LENDER as of CLOSING, the dissolution of any of the
BORROWERS or any of the GUARANTORS, the pledge of any equity interests
of any of the BORROWERS (other than GSE SYSTEMS) or any of the
GUARANTORS except to the LENDER, or the issuance of additional equity
interests in any of the BORROWERS (other than GSE SYSTEMS) or any of
the GUARANTORS which issuance has the effect of diluting the existing
interests of the existing equity holders in any of such BORROWERS or
GUARANTORS.
Section 8.20. Change in Control. Any PERSON or group of PERSONS
(within the meaning of Section 13(d) of the Securities Exchange Act of
1934, as amended) other than GP Strategies Corporation or ManTech
International Corporation shall obtain ownership or control in one or
more series of transactions of more than twenty percent (20%) of the
common stock or twenty percent (20%) of the voting power of GSE
SYSTEMS entitled to vote in the election of members of the board of
directors of GSE SYSTEMS. Any PERSON or group of PERSONS (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended) shall obtain ownership or control in one or more series of
transactions of more than thirty percent (30%) of the common stock or
thirty percent (30%) of the voting power of GSE SYSTEMS entitled to
vote in the election of members of the board of directors of GSE
SYSTEMS. For purposes of this Section 8.20, a PERSON shall be deemed
to have ownership of all shares that any such PERSON has the right
to acquire without condition, other than passage of time, whether such
right is exercisable immediately or only after the passage of time.
Section 8.21. Indictment Of Borrowers, Guarantors or Limited
Guarantors. The indictment of any of the BORROWERS, any of the
GUARANTORS, or any of the LIMITED GUARANTORS for a felony under any
federal, state or other LAW.
Section 8.22. Injunction. The issuance of any injunction against any
of the BORROWERS which enjoins or restrains any of the BORROWERS from
continuing to conduct any material part of any BORROWERS business
affairs.
Section 8.23. Payment On Subordinated Debt. The payment by any of the
BORROWERS on the account of any SUBORDINATED DEBT which payment is not
specifically permitted by the LENDER under the terms of this AGREEMENT
or any written subordination agreements existing for the benefit of
the LENDER.
ARTICLE 9
RIGHTS AND REMEDIES ON THE OCCURRENCE
OF AN EVENT OF DEFAULT
Section 9.1. Lenders Specific Rights And Remedies. In addition to all
other rights and remedies provided by LAW and the LOAN DOCUMENTS, upon
the occurrence of any EVENT OF DEFAULT, the LENDER may: (a) accelerate
and call immediately due and payable all or any part of the
OBLIGATIONS; (b) seek specific performance or injunctive relief to
enforce performance of the undertakings, duties, and agreements
provided in the LOAN DOCUMENTS, whether or not a remedy at law exists
or is adequate; (c) exercise any rights of a secured creditor under
the Uniform Commercial Code, as adopted and amended in New York,
including the right to take possession of the COLLATERAL without the
use of judicial process or hearing of any kind and the right to
require any or all of the BORROWERS to assemble the COLLATERAL at such
place as the LENDER may specify; and (d) reduce the BILLED COMMERCIAL
ACCOUNTS BORROWING BASE, BILLED GOVERNMENT ACCOUNTS BORROWING BASE,
UNBILLED GOVERNMENT ACCOUNTS BORROWING BASE, INVENTORY BORROWING BASE,
ADDITIONAL COLLATERAL BORROWING BASE, or DOLLAR CAP.
Section 9.2. Automatic Acceleration. Upon the occurrence of an EVENT
OF DEFAULT as described in Sections 8.12 or 8.13 of this AGREEMENT,
the OBLIGATIONS shall be automatically accelerated and due and payable
without any notice, demand or action of any type on the part of the
LENDER.
Section 9.3. Sale Of Collateral. In addition to any other remedy
provided herein, upon the occurrence of an EVENT OF DEFAULT, the
LENDER, in a commercially reasonable fashion, may sell at public or
private sale or otherwise realize upon, the whole or, from time to
time, any part of all COLLATERAL which is personal property, or any
interest which any of the BORROWERS may have therein. Pending any such
action, the LENDER may collect and liquidate the COLLATERAL. After
deducting from the proceeds of sale or other disposition of such
COLLATERAL all expenses, including all expenses for legal services,
the LENDER shall apply such proceeds toward the satisfaction of the
OBLIGATIONS. Any remainder of the proceeds after satisfaction in full
of the OBLIGATIONS shall be distributed as required by applicable LAW.
Notice of any sale or other disposition (other than sales or other
dispositions of COLLATERAL which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized
market) shall be given to the BORROWERS not less than ten (10)
calendar days before the time of any intended public sale or of the
time after which any intended private sale or other disposition of the
COLLATERAL is to be made, which each of the BORROWERS hereby agrees
shall be commercially reasonable notice of such sale or other
disposition. The BORROWERS shall assemble, or shall cause to be
assembled, at the BORROWERS own expense, the COLLATERAL at such place
or places as the LENDER shall designate. At any such sale or other
disposition, the LENDER may, to the extent permissible under
applicable law, purchase the whole or any part of the COLLATERAL, free
from any right of redemption on the part of any of the BORROWERS,
which right is hereby waived and released to the extent lawfully
permitted. Without limiting the generality of any of the rights and
remedies conferred upon the LENDER under this Section, the LENDER may,
to the full extent permitted by applicable law: (a) enter upon the
premises of any of the BORROWERS, exclude therefrom any of the
BORROWERS or any PERSON connected therewith, and take immediate
possession of the COLLATERAL, either personally or by means of a
receiver appointed by a court of competent jurisdiction; (b) at the
LENDERS option, use, operate, manage, and control the COLLATERAL in
any lawful manner; (c) collect and receive all income, revenue,
earnings, issues, and profits therefrom; and (d) maintain, alter or
remove the COLLATERAL as the LENDER may determine in the LENDERS
discretion.
Section 9.4. Letters Of Credit. Upon the request of the LENDER, at any
time after the occurrence of an EVENT OF DEFAULT, the BORROWERS shall
immediately deposit in a cash collateral account at the LENDER, over
which the LENDER has sole access, an amount equal to the aggregate
then undrawn and unexpired amount of all LETTERS OF CREDIT. Amounts
held in such cash collateral account shall be applied by the LENDER to
the payment of drafts drawn under LETTERS OF CREDIT, and the unused
portion thereof after all LETTERS OF CREDIT shall have expired or been
fully drawn upon shall be applied to repay the other OBLIGATIONS.
After all LETTERS OF CREDIT shall have expired or have been fully
drawn upon and all other OBLIGATIONS shall have been paid in full, the
balance, if any, in such cash collateral account shall be returned to
the BORROWERS. In the event the BORROWERS fail to deposit into the
cash collateral account an amount equal to the then undrawn and
unexpired amount of all LETTERS OF CREDIT, the LENDER shall be
authorized to deposit into such cash collateral account proceeds from
the liquidation of the COLLATERAL until the balance in such account
equals the aggregate then undrawn and unexpired amount of all LETTERS
OF CREDIT.
Section 9.5. Remedies Cumulative. The rights and remedies provided in
this AGREEMENT and in the other LOAN DOCUMENTS or otherwise under
applicable LAWS shall be cumulative and the exercise of any particular
right or remedy shall not preclude the exercise of any other rights or
remedies in addition to, or as an alternative of, such right or
remedy.
ARTICLE 10
ENERAL CONDITIONS AND TERMS
Section 10.1. Obligations Are Unconditional. The payment and
performance of the OBLIGATIONS shall be the absolute and unconditional
joint and several duty and obligation of each of the BORROWERS, and
shall be independent of any defense or any rights of set-off,
recoupment or counterclaim which any of the BORROWERS might otherwise
have against the LENDER. The BORROWERS shall pay the payments of the
principal and interest to be made upon the OBLIGATIONS, free of any
deductions and without abatement, diminution or set-off other than
those herein expressly provided. Until such time as the OBLIGATIONS
have been fully paid and performed, none of the BORROWERS shall: (a)
suspend or discontinue any payments required by the LOAN DOCUMENTS;
and (b) fail to perform and observe all of each BORROWERS covenants
and agreements set forth in the LOAN DOCUMENTS.
Section 10.2. Indemnity. Each of the BORROWERS agrees to defend,
indemnify and hold harmless the LENDER and the entities affiliated
with the LENDER and all of the LENDERS and its affiliated entities
employees, agents, officers and directors, from and against any
losses, penalties, fines, liabilities, settlements, damages, costs and
expenses, suffered in connection with any claim, investigation,
litigation or other proceeding (whether or not the LENDER or an
affiliated entity is a party thereto) and the prosecution and defense
thereof, arising out of or in any way connected with any LOAN
DOCUMENT, including without limitation reasonable attorneys and
consultants fees, except to the extent that any of the foregoing
directly result from the gross negligence or willful misconduct of the
party seeking indemnification therefor. Notwithstanding any
termination of this AGREEMENT or payment and performance of the
OBLIGATIONS, the indemnities provided for herein shall continue in
full force and effect and shall protect all of the above-described
PERSONS against events arising after such termination, payment or
performance as well as before.
Section 10.3. Lender Expenses. All LENDER EXPENSES shall be paid by
the BORROWERS, whether incurred prior to or after CLOSING, such that
the subject transactions shall at all times be cost free to the
LENDER.
Section 10.4. Authorization To Obtain Financial Information. Each of
the BORROWERS hereby irrevocably authorizes its accounting firm to
provide the LENDER from time to time with such information as may be
requested by the LENDER, and hereby authorizes the LENDER to contact
directly such accounting firm in order to obtain such information.
Section 10.5. Incorporation; Construction Of Inconsistent Provisions.
The terms and conditions of the LOAN DOCUMENTS are incorporated by
reference and made a part hereof, as if fully set forth herein. In the
event of any inconsistency between this AGREEMENT and any other LOAN
DOCUMENT, such inconsistency shall be construed, interpreted, and
resolved so as to benefit the LENDER, independent of whether this
AGREEMENT or another LOAN DOCUMENT controls, and the LENDERS election
of which interpretation or construction is for the LENDERS benefit
shall govern.
Section 10.6. Waivers. The LENDER at any time or from time to time may
waive all or any rights under this AGREEMENT or any other LOAN
DOCUMENT, but any waiver or indulgence by the LENDER at any time or
from time to time shall not constitute a future waiver of performance
or exact performance by any of the BORROWERS.
Section 10.7. Continuing Obligation Of Borrowers. The terms,
conditions, and covenants set forth herein and in the LOAN DOCUMENTS
shall survive CLOSING and shall constitute a continuing obligation of
each of the BORROWERS during the course of the transactions
contemplated herein. The security interests, liens and other security
provided by this AGREEMENT shall remain in effect so long as any
OBLIGATION, whether direct or contingent, is outstanding, unpaid or
unsatisfied.
Section 10.8. Choice Of Law. The laws of the State of New York
(excluding, however, conflict of law principles) shall govern and be
applied to determine all issues relating to this AGREEMENT and the
rights and obligations of the parties hereto, including the validity,
construction, interpretation, and enforceability of this AGREEMENT and
its various provisions and the consequences and legal effect of all
transactions and events which resulted in the execution of this
AGREEMENT or which occurred or were to occur as a direct or indirect
result of this AGREEMENT having been executed.
Section 10.9. Submission To Jurisdiction; Venue; Actions Against
Lender. For purposes of any action, in law or in equity, which is
based directly or indirectly on this AGREEMENT, any other LOAN
DOCUMENT or any matter related to this AGREEMENT or any other LOAN
DOCUMENT, including any action for recognition or enforcement of any
of the LENDERS rights under the LOAN DOCUMENTS or any judgment
obtained by the LENDER in respect thereof, each of the BORROWERS
hereby:
Section 10.9.1. Jurisdiction. Irrevocably submits to the non-exclusive
general jurisdiction of the courts of the State of New York and the
State of Maryland and, if a basis for federal jurisdiction exists at
any time, the courts of the United States of America for the Southern
District of New York and for the District of Maryland.
Section 10.9.2. Venue. Agrees that venue shall be proper in any
circuit court in the State of New York or in the State of Maryland, as
selected by the LENDER, and, if a basis for federal jurisdiction
exists, the courts of the United States of America for the Southern
District of New York or for the District of Maryland (as selected by
the LENDER).
Section 10.9.3. Waiver Of Objections To Venue. Waives any right to
object to the maintenance of any suit in any of the courts specified
in Section 10.9.2 above on the basis of improper venue or convenience
of forum. Each of the BORROWERS further agrees that it shall not
institute any suit or other action against the LENDER, in law or in
equity, which is based directly or indirectly on this AGREEMENT, any
other LOAN DOCUMENT or any matter related to this AGREEMENT or any
other LOAN DOCUMENT, in any court other than a court specified in
Section 10.9.2 above; provided, that in any instance in which there is
then pending a suit instituted by the LENDER against any of the
BORROWERS in a court other than a court specified in Section 10.9.2
above, the BORROWERS may file in such suit any counterclaim which they
have against the LENDER. Each of the BORROWERS agrees that any suit
brought by it against the LENDER not in accordance with this paragraph
should be forthwith dismissed or transferred to a court specified in
Section 10.9.2 above.
Section 10.10. Notices. Any notice required or permitted by or in
connection with this AGREEMENT shall be in writing and shall be made
by facsimile (confirmed on the date the facsimile is sent by one of
the other methods of giving notice provided for in this Section) or by
hand delivery, by Federal Express, or other similar overnight delivery
service, or by certified mail, unrestricted delivery, return receipt
requested, postage prepaid, addressed to the LENDER or the BORROWERS
at the appropriate address set forth below or to such other address as
may be hereafter specified by written notice by the LENDER or the
BORROWERS. Notice shall be considered given as of the date of the
facsimile or the hand delivery, one (1) calendar day after delivery to
Federal Express or similar overnight delivery service, or three (3)
calendar days after the date of mailing, independent of the date of
actual delivery or whether delivery is ever in fact made, as the case
may be, provided the giver of notice can establish the fact that
notice was given as provided herein. If notice is tendered pursuant to
the provisions of this Section and is refused by the intended
recipient thereof, the notice, nevertheless, shall be considered to
have been given and shall be effective as of the date herein provided.
If to the LENDER:
NATIONAL BANK OF CANADA
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
And
x/x XXXXXXXX XXXX XX XXXXXX
000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Vice President
Facsimile: (000) 000-0000
If to the BORROWERS:
GSE SYSTEMS, INC.
GSE PROCESS SOLUTIONS, INC.
GSE POWER SYSTEMS, INC.
0000 Xxx Xxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Xx.Vice President
Facsimile: (000) 000-0000
With A Courtesy Copy To:
GOLDEN & XXXXXX, PLLC
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attn.: Xxxx X. Xxxxxx, Esquire
Facsimile No.: (000) 000-0000
The failure of the LENDER to send the above courtesy copy shall not
impair the effectiveness of notice given to the BORROWERS in the
manner provided herein.
Section 10.11. Participations. The LENDER reserves the right to assign
all or any portion of its interests in any of the OBLIGATIONS or the
LOAN DOCUMENTS or to participate with other lending institutions any
of the OBLIGATIONS and the LOAN DOCUMENTS on such terms and at such
times as the LENDER may determine from time to time, all without any
consent thereto or notice thereof to the BORROWERS. Each of the
BORROWERS hereby grants to each participating lending institution, to
the full extent of the OBLIGATIONS, the right to set off deposit
accounts maintained by the BORROWERS with such institution, and each
of the BORROWERS agrees to pay the LENDER EXPENSES of any such
participating lending institution which arise or are incurred as a
result of the occurrence of an EVENT OF DEFAULT.
Section 10.12. Miscellaneous Provisions. The parties agree that: (a)
this AGREEMENT shall be effective as of the date first above written,
independent of the date of execution or delivery hereof; (b) this
AGREEMENT shall be binding upon the parties and their successors and
assigns, contains the final and entire agreement and understanding of
the parties, and may neither be amended or altered except by a writing
signed by the parties; (c) time is strictly of the essence of this
AGREEMENT; (d) as used herein, the singular includes the plural and
the plural includes the singular, the use of any gender applies to all
genders; (e) the captions contained herein are for purposes of
convenience only and are not a part of this AGREEMENT; (f) a carbon,
photographic, photocopy or other reproduction of a security agreement
or financing statement shall be sufficient as a financing statement;
(g) this AGREEMENT may be delivered by facsimile, and a facsimile of
any partys signature to this AGREEMENT shall be deemed an original
signature for all purposes; and (h) this AGREEMENT may be executed in
several counterparts, each of which shall be an original, but all of
which, when taken together, shall constitute one and the same
document. Section 10.13. Waiver Of Trial By Jury. Each party to this
AGREEMENT agrees that any suit, action, or proceeding, whether claim
or counterclaim, brought or instituted by any party hereto or any
successor or assign of any party on or with respect to this AGREEMENT
or any other LOAN DOCUMENT or which in any way relates, directly or
indirectly, to the OBLIGATIONS or any event, transaction, or
occurrence arising out of or in any way connected with any of the
OBLIGATIONS, or the dealings of the parties with respect thereto,
shall be tried only by a court and not by a jury. EACH PARTY HEREBY
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT,
ACTION, OR PROCEEDING. [Signatures begin on next page]
IN WITNESS WHEREOF, the LENDER and the BORROWERS have duly executed
this AGREEMENT under seal as of the date first above written.
WITNESS/ATTEST: THE BORROWERS:
GSE SYSTEMS, INC.
By: (SEAL)
Xxxxxxx X. Xxxxx,
Senior Vice President
GSE PROCESS SOLUTIONS, INC.
By: (SEAL)
Xxxxxxx X. Xxxxx,
Senior Vice President
GSE POWER SYSTEMS, INC.
By: (SEAL)
Xxxxxxx X. Xxxxx,
Senior Vice President
THE LENDER:
NATIONAL BANK OF CANADA
By: (SEAL)
Xxxxxx X. Xxxxxxxxx,
Vice President
By: (SEAL)
Xxxxxxx X. Xxxxxxxx,
Vice President/Manager
