Exhibit 10.86
FINANCING AND SECURITY AGREEMENT
THIS FINANCING AND SECURITY AGREEMENT (the "Agreement") is made this 27th
day of March, 1997, by and between VERSAR, INC., a corporation organized and in
good standing under the laws of the State of Delaware (the "Company"), and its
subsidiary, GEOMET TECHNOLOGIES, INC., a corporation organized and in good
standing under the laws of the State of Delaware ("Geomet"; the Company,
collectively with its Subsidiaries are sometimes collectively called, the
"Borrowers" and each a "Borrower") and NATIONSBANK, N.A., a national banking
association, its successors and assigns (the "Lender").
RECITALS
A. The Borrowers have applied to the Lender for credit facilities
consisting of a guidance line of credit in the maximum principal amount of Five
Million Dollars ($5,000,000) to be used by the Borrowers to finance Acquisitions
(as hereinafter defined) and a revolving credit facility in the maximum
principal amount of Three Million Dollars ($3,000,000) to be used by the
Borrowers to finance Receivables.
B. The Lender is willing to make these credit facilities available to the
Borrowers upon the terms and subject to the conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers and the Lender
hereby agree as follows:
I. DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the terms
defined in the Preamble and Recitals hereto shall have the respective meanings
specified therein, and the following terms shall have the following meanings:
"Account" individually and "Accounts" collectively mean all presently
existing or hereafter acquired or created accounts, accounts receivable,
contract rights, notes, drafts, instruments, acceptances, chattel paper, leases
and writings evidencing a monetary obligation or a security interest in or a
lease of goods, all rights to receive the payment of money or other
consideration under present or future contracts (including, without limitation,
all monies due and to become due under any Government Contract, all rights to
receive payments under presently existing or hereafter acquired or created
letters of credit), or by virtue of merchandise sold or leased, services
rendered, loans and advances made or other considerations given, by or set forth
in or arising out of any present or future chattel paper, note, draft, lease,
acceptance, writing, bond, insurance policy, instrument, document or general
intangible, and all extensions and renewals of any thereof, all rights under or
arising out of present or future contracts, agreements or general interest in
merchandise which gave rise to any or all of the foregoing, including all goods,
all claims or causes of action now
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existing or hereafter arising in connection with or under any agreement or
document or by operation of law or otherwise, all collateral security of any
kind (including real property mortgages) given by any person with respect to any
of the foregoing and all proceeds (cash and non-cash) of the foregoing.
"Acquisition Loan" means and "Acquisition Loans" have the meanings
described in Section 2.01.
"Acquisition Note" and "Acquisition Notes" have the meanings described in
Section 2.01(d).
"Affiliate" means, with respect to the Borrowers, any Person, directly or
indirectly controlling, directly or indirectly controlled by, or under direct or
indirect common control with the Borrowers or any Subsidiary, as the case may
be.
"Agreement" means this Financing and Security Agreement and all amendments,
modifications and supplements hereto which may from time to time become
effective in accordance with the provisions of Section 11.10 hereof.
"Assets" means, at any time, all assets that should, in accordance with
GAAP consistently applied, be classified as assets on a balance sheet of the
Borrowers.
"Banking Day" shall mean any day that is not a Saturday, Sunday or banking
holiday in the Commonwealth of Virginia.
"Borrowing Base" means the sum of (a) ninety percent (90%) of Eligible
Government Receivables, eighty five percent (85%) of Eligible Subcontractor
Receivables and eighty percent (80%) Eligible Commercial Receivables, less the
sum of (a) the then outstanding balance of the Acquisitions Notes, and (b) the
then outstanding balance of the Sarnia Note.
"Collateral" shall mean all of the Borrowers' Accounts, chattel paper,
Equipment, General Intangibles, documents, instruments and Inventory (whether or
not designated with initial capital letters), as those terms are defined in the
Uniform Commercial Code as presently adopted and in effect in the State and
shall also cover, without limitation, (i) any and all property specifically
included in those respective terms in this Agreement or in the Financing
Documents and (ii) all proceeds (cash and non-cash, including, without
limitation, insurance proceeds) of the foregoing.
"Collection" means each check, draft, cash, money, instrument, item, and
other remittance in payment or on account of payment of the Accounts or
otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed goods, the sale or lease of
which gave rise to an Account, and other proceeds of Collateral; and
"Collections" means the collective reference to all of the foregoing.
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"Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 414(b) or (c) of the Internal Revenue Code.
"Current Assets" means at any date, the amount which, in conformity with
GAAP, would be set forth opposite the caption "total current assets" (or any
like caption) on a consolidated balance sheet of the Company and its
Subsidiaries.
"Current Liabilities" means at any date, the amount which, in conformity
with GAAP, would be set forth opposite the caption "total current liabilities"
(or any like caption) on a consolidated balance sheet of the Company and its
Subsidiaries.
"Current Ratio" means the ratio of (a) Current Assets to (b) Current
Liabilities, including, without, limitation, the unpaid principal balance of the
Revolving Loans outstanding at such time.
"Debt Service Coverage" shall mean as to the Borrower and its Subsidiaries
for any period of determination thereof, the ratio of (a) EBITDA minus
dividends, to (b) the sum of interest expense, and payments on Indebtedness for
Borrowed Money scheduled to be due and payable during the same period,
including, any capital leases, cash taxes and capital expenditures for such
period.
"Default" has the meaning described in Article IX.
"Default Rate" has the meaning set forth in the Notes.
"Documents" means all documents and documents of title, whether now
existing or hereafter acquired or created, and all proceeds (cash and non-cash
of the foregoing).
"EBITDA" means shall mean as to the Company and its Subsidiaries for any
period of determination thereof, the sum of (a) net profit (or loss) determined
in accordance with GAAP, plus (b) interest expense and federal and state taxes
for such period, plus (c) depreciation and amortization of assets for such
period, all as determined on a consolidated basis for the twelve (12) month
period then ending.
"Eligible Commercial Receivable" mean, at any time of determination
thereof, each Account, other than Eligible Government Receivables, which
conforms and continues to conform to the Eligibility Standards.
"Eligible Government Receivable" and "Eligible Government Receivables"
means, at any time of determination thereof, all Accounts which arise out of
Government Contracts, where the Company is the "prime" contractor, where all
monies due thereunder may have been directly assigned to the Lender in its sole
discretion in conformity with the Assignment of Claims Act of 1940, as amended
and which otherwise conform to the Eligibility Standards
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"Eligible Subcontractor Receivable" and "Eligible Subcontractor
Receivables" means, at any time of determination thereof, all Accounts which
arise out of Government Contracts, where the Company is not the "prime"
contractor and all monies due thereunder may have been directly assigned to the
Lender in its sole discretion in conformity with the Assignment of Claims Act of
1940, as amended and which otherwise conform to the Eligibility Standards
"Eligibility Standards" mean, at any time of determination thereof, each
Account which conforms and continues to the following standards (a) the Account
arose from a bona fide outright sale or lease of goods by the Borrowers, or from
services performed by the Borrowers, and (i) such goods have been delivered to
the appropriate account debtors or their respective designees, such Borrower has
in its possession shipping and delivery receipts evidencing such shipment and
delivery, no return, rejection or repossession has occurred, and such goods have
not been rejected by the account debtor, or (ii) such services have been
satisfactorily completed and accepted by the appropriate account debtor; (b) the
Account is based upon an enforceable order or contract, written or oral, for
goods delivered or for services performed, and the same were shipped, held, or
performed in accordance with such order or contract; (c) the title of each
Borrower to the Account and, except as to the account debtor and any creditor
which finances the account debtor's purchase of such goods, to any goods is
absolute and is not subject to any prior assignment, claim, Lien, or security
interest, except Permitted Liens and Liens created by the account debtors in
connection with their interests in the goods, and each Borrower otherwise has
the full and unqualified right and power to assign and grant a security interest
in it to the Lender as security and collateral for the payment of the
Obligations; (d) the amount shown on the books of each Borrower and on any
invoice, certificate, schedule or statement delivered to the Lender is owing to
such Borrower and no partial payment has been received unless reflected with
that delivery; (e) the Account is not subject to any claim of reduction,
counterclaim, setoff, recoupment, or other defense in law or equity, or any
claim for credits, allowances, or adjustments by the account debtor because of
returned, inferior, or damaged goods or unsatisfactory services, or for any
other reason; (f) the account debtor has not returned or refused to retain, or
otherwise notified either Borrower of any dispute concerning, or claimed
nonconformity of, any of the goods or services from the sale of which the
Account arose; (g) the Account is not outstanding more than ninety (90) days
from the date of the invoice therefor; (h) the Account is not owing by any
account debtor for which the Lender has deemed fifty percent (50%) or more of
such account debtor's other Accounts (or any portion thereof) due to either
Borrower to be non-Eligible Receivables; (i) the Account does not arise out of a
contract with, or order from, an account debtor that, by its terms, forbids or
makes void or unenforceable the assignment by the Borrowers to the Lender of the
Account arising with respect thereto; (j) the account debtor is not a Subsidiary
or other Affiliate of the Company; (k) the account debtor is not incorporated in
or primarily conducting business in any jurisdiction located outside of the
United States of America; (l) the Borrowers are not indebted in any manner to
the account debtor, with the exception of customary credits, adjustments and/or
discounts given to an account debtor by the Company in the ordinary course of
their businesses, (m) no part of the Account represents a retainage, (n) no bond
has been issued or is contemplated with respect to the goods or services
furnished by either Borrower or with respect to the project or contract for
which those goods or services were furnished, and (o) the
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Lender in the exercise of its sole but reasonable discretion has not deemed the
Account ineligible because of uncertainty as to the creditworthiness of the
account debtor or because the Lender otherwise considers the collateral value
thereof to the Lender to be impaired or its ability to realize such value to be
insecure. In the event of any dispute, under the foregoing criteria, as to
whether an Account is, or has ceased to be, an Eligible Receivable, the decision
of the Lender in the exercise of its sole and absolute discretion shall control.
"Enforcement Costs" shall mean all expenses, charges, costs and fees
whatsoever (including, without limitation, attorney's fees and expenses) of any
nature whatsoever paid or incurred by or on behalf of the Lender in connection
with (a) the collection or enforcement of any or all of the Obligations, (b) the
preparation of or changes to this Agreement, the Notes, the Security Documents
and/or any of the other Financing Documents, (c) the creation, perfection,
collection, maintenance, preservation, defense, protection, realization upon,
disposition, sale or enforcement of all or any part of the Collateral,
including, without limitation, those sums paid or advanced, and costs and
expenses, more specifically described in Section 10.3, and (d) the monitoring,
administration, processing, servicing of any or all of the Obligations and/or
the Collateral.
"Equipment" shall mean all equipment, machinery, furniture and fixtures and
supplies of every nature, presently existing or hereafter acquired or created
and wherever located, together with all accessions, additions, fittings,
accessories, special tools, and improvements thereto and substitutions therefor
and all parts and equipment which may be attached to or which are necessary for
the operation and use of such personal property, whether or not the same shall
be deemed to be affixed to real property, and all rights under or arising out of
present or future contracts relating to the foregoing and all proceeds (cash and
non-cash) of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" means an event which, with the giving of notice or lapse
of time, or both, could or would constitute a Default under the provisions of
this Agreement.
"Fees" means the fees described in Sections 2.06 and 2.07 hereof.
"Financing Documents" means at any time collectively and include this
Agreement, each Note, the Security Documents, and any other instrument,
agreement or document previously, simultaneously or hereafter executed and
delivered by any Borrower and/or any other Person, singly or jointly with
another Person or Persons, evidencing, securing, guarantying or in connection
with any of the Obligations and/or in connection with this Agreement, any Notes,
any of the Security Documents, any of the Loan and/or any of the Obligations,
including without limitation, the Sarnia Note and the Sarnia Financing
Documents.
"Funded Debt" shall mean for any period of determination thereof, an amount
equal to the aggregate amount of all payments in principal in respect to
Indebtedness for Borrowed Money
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scheduled to be due and payable during such period, together with all other
interest bearing Liabilities of the Borrowers.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"General Intangibles" shall mean all general intangibles of every nature,
whether presently existing or hereafter acquired or created, including without
limitation all books, correspondence, credit files, records, computer programs,
computer tapes, cards and other papers and documents in the possession or
control of either Borrower, claims (including without limitation all claims for
income tax and other refunds), choses in action, contract rights, judgments,
patents, patent licenses, trademarks, trademark licenses, licensing agreements,
rights in intellectual property, Goodwill (including all Goodwill of each
Borrower's business symbolized by and associated with any and all trademarks,
trademark licenses, copyrights and/or service marks), royalty payments,
contractual rights, rights as lessee under any lease of real or personal
property, literary rights, copyrights, service names, service marks, logos,
trade secrets, all amounts received as an award in or settlement of a suit in
damages, deposit accounts, interests in joint ventures or general or limited
partnerships, rights in applications for any of the foregoing, and all proceeds
(cash and non-cash) of the foregoing.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Government Contract" means and "Government Contracts" means contracts of
either Borrower with the United States, or any agency, department or
instrumentality thereof and on which either Borrower is either a "prime"
contractor or a subcontractor of the prime contractor.
"Hazardous Materials" means (a) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976, as amended from time to time,
and regulations promulgated thereunder; (b) any "hazardous substance" as defined
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, and regulations promulgated thereunder; (c)
any substance the presence of which on any property now or hereafter owned or
acquired by either Borrower is prohibited by any Law similar to those set forth
in this definition; and (d) any other substance which by Law requires special
handling in its collection, storage, treatment or disposal.
"Hazardous Materials Contamination" means the contamination (whether
presently existing or occurring after the date of this Agreement) by Hazardous
Materials of any property owned, operated or controlled by either Borrower or
for which either Borrower has responsibility, including, without limitation,
improvements, facilities, soil, ground water, air or other elements on, or of,
any property now or hereafter owned or acquired by either Borrower, and any
other contamination by Hazardous Materials for which either Borrower is, or is
claimed to be, responsible.
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"Indebtedness for Borrowed Money" of a Person, at any time shall mean the
sum at such time of (a) indebtedness of such Person for borrowed money or for
the deferred purchase price of property or services, (b) any obligations of such
Person in respect of letters of credit, banker's or other acceptances or similar
obligations issued or created for the account of such Person, (c) lease
obligations of such Person which have been or should be, in accordance with
GAAP, capitalized on the books of such Person, (d) all liabilities secured by
any Lien on any property owned by such Person, to the extent attached to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof, and (e) any obligation of such Person or
a commonly controlled entity to a multiemployer plan (as those terms are used
under applicable ERISA statutes and regulations).
"Inventory" means all inventory of the Borrowers, including, without
limitation all packing, shipping, advertising, and promotional materials, and
all documents of title or documents representing the same, all general
intangibles necessary or beneficial for the disposition of the same, and all
proceeds (cash and non-cash) of the foregoing.
"Items of Payment" means each check, draft, cash, money, instrument, item,
and other remittance in payment or on account of payment of the Accounts or
otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed Goods, the sale or lease of
which gave rise to an Account, and other proceeds or products of Collateral; and
"Items of Payment" means the collective reference to all of the foregoing.
"Law" or "Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any Governmental Authority or political
subdivision or agency thereof, or any court or similar entity established by any
thereof.
"Liabilities" means, at any time, all liabilities that should, in
accordance with GAAP consistently applied, be classified as liabilities on a
balance sheet of the Borrowers.
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien or charge of
any kind, whether perfected or unperfected, avoidable or unavoidable, including,
without limitation, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction,
excluding the precautionary filing of any financing statement by any lessor in a
true lease transaction, by any xxxxxx in a true bailment transaction or by any
consignor in a true consignment transaction under the Uniform Commercial Code of
any jurisdiction or the agreement to give any financing statement by any lessee
in a true lease transaction, by any bailee in a true bailment transaction or by
any consignee in a true consignment transaction.
"Loan" means a Revolving Loan or an Acquisition Loan, as the case may be,
and "Loans" mean all Revolving Loans and all Acquisition Loans.
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"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Worth" means, at any time, the excess of (a) Assets, over (b)
Liabilities.
"Note" means the Revolving Promissory Note or any Acquisition Note, as the
case may be, and "Notes" mean collectively the Revolving Promissory Note and the
Acquisition Notes, and any other promissory note which may from time to time
evidence the Obligations.
"Obligations" means all present and future debts, obligations, and
liabilities, whether now existing or contemplated or hereafter arising, of the
Borrowers to the Lender under, arising pursuant to, in connection with and/or on
account of the provisions of this Agreement, the Notes, each Security Document,
and any of the other Financing Documents, any of the Loans, and any of the Loans
including, without limitation, the principal of, and interest on, the Notes,
late charges, Enforcement Costs, and other prepayment penalties (if any), letter
of credit fees or fees charged with respect to any guaranty of any letter of
credit, and also means all other present and future indebtedness, liabilities
and obligations, whether now existing or contemplated or hereafter arising, of
the Borrowers to the Lender of any nature whatsoever regardless of whether such
debts, obligations and liabilities be direct, indirect, primary, secondary,
joint, several, joint and several, fixed or contingent; and any and all
renewals, extensions and rearrangements of any such debts, obligations and
liabilities, including, but not limited to any and all obligations of the
Company under the Sarnia Guaranty.
"Overdraft" means any excess of debit entries over collected funds on
deposit in any banking account of either Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means: (a) Liens for Taxes which are not delinquent or
which the Lender has determined in the exercise of its sole but reasonable
discretion (i) are being diligently contested in good faith and by appropriate
proceedings, (ii) the Borrowers have the financial ability to pay, with all
penalties and interest, at all times without materially and adversely affecting
any Borrower, and (iii) are not, and will not be with appropriate filing, the
giving of notice and/or the passage of time, entitled to priority over any Lien
of the Lender; (b) deposits or pledges to secure obligations under worker's
compensation, social security or similar laws, or under unemployment insurance
in the ordinary course of business; (c) Liens in favor of the Lender; (d)
judgment Liens to the extent the entry of such judgment does not constitute an
Event of Default under the terms of this Agreement or result in the sale of, or
levy of execution on, any of the Collateral; and (e) such other Liens, if any,
as are set forth on EXHIBIT __ attached hereto and made a part hereof.
"Person" shall mean and include an individual, a corporation, a
partnership, a joint venture, a trust, an unincorporated association, a
government or political subdivision or agency thereof or any other entity.
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"Prime Rate" means the prime rate charged by the Lender as announced by the
Lender. The Prime Rate is not necessarily the lowest rate of interest charged by
the Lender to borrowers.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Responsible Officer" means the chief executive officer of the Company or
the president of the Company or, with respect to financial matters, the chief
financial officer of the Company.
"Revolving Loan Committed Amount" has the meaning described in Section
2.02(a).
"Revolving Loan" and "Revolving Loans" have the meanings described in
Section 2.02(a).
"Revolving Promissory Note" has the meaning described in Section 2.02(c).
"Revolving Loan Account" has the meaning described in Section 2.04.
"Sarnia" means Sarnia Corporation, a Virginia corporation, its successors
and assigns.
"Sarnia Financing Documents" means at any time collectively and include the
Sarnia Note, and any other instrument, agreement or document previously,
simultaneously or hereafter executed and delivered by Sarnia, the Borrowers
and/or any other Person, singly or jointly with another Person or Persons,
evidencing, securing, guarantying or in connection with the Sarnia Note.
"Sarnia Note" means that certain Promissory Note of even date herewith in
the principal amount of $1,500,000 from Sarnia Corporation in favor of the
Lender, as the same may be from time to time be amended, restated, supplemented
or otherwise modified.
"Sarnia Guaranty" means that certain Guaranty of Payment Agreement of even
date herewith from the Company in favor of the Lender, as the same may be from
time to time be amended, restated, supplemented or otherwise modified, pursuant
to which, among other things, the Borrower has unconditionally guarantied
repayment of the Sarnia Note.
"Security Documents" shall mean collectively any assignment, pledge
agreement, security agreement, mortgage, deed of trust, deed to secure debt,
financing statement and any similar instrument, document or agreement under or
pursuant to which a Lien is now or hereafter granted to, or for the benefit of,
the Lender on any collateral to secure the Obligations, as the same may from
time to time be amended, restated, supplemented or otherwise modified.
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"Senior Management" shall be deemed to refer to the following executive
positions: President and Chief Executive Officer; Vice President, Treasurer and
Chief Financial Officer; and Vice President and General Counsel.
"State" means the Commonwealth of Virginia.
"Subsidiary" means any corporation the majority of the voting shares of
which at the time are owned directly by the Company and/or by one or more
Subsidiaries of the Company.
"Tangible Net Worth" means, at any time, the sum at such time of: (a) the
Net Worth less the total of (i) all assets which would be classified as
intangible assets under GAAP, including Goodwill, trademarks, trademark
applications, trade names, service marks, patent applications and licenses, and
deferred charges, (ii) leasehold improvements, (iii) applicable reserves,
allowances and other similar properly deductible items to the extent such
reserves, allowances and other similar properly deductible items have not been
previously deducted by the Lender in the calculation of Net Worth, (iv) any
revaluation or other write-up in book value of assets subsequent to the date of
the most recent financial statements delivered to the Lender, and (v) the amount
of all loans and advances to, or investments in, any Person, excluding cash
equivalents and deposit accounts maintained by the Borrowers with any financial
institution; plus (b) the principal amount of subordinated indebtedness
outstanding at any time.
"Taxes" mean all taxes and assessments whether general or special, ordinary
or extraordinary, or foreseen or unforeseen, of every character (including all
penalties or interest thereon), which at any time may be assessed, levied,
confirmed or imposed by any Governmental Authority on the Borrowers or any of
their properties or assets or any part thereof or in respect of any of its
franchises, businesses, income or profits.
"Wholly Owned Subsidiary" means any domestic United States corporation all
the shares of stock of all classes of which (other than directors' qualifying
shares) at the time are owned directly or indirectly by the Company and/or by
one or more Wholly Owned Subsidiaries of the Company.
SECTION 1.2 Accounting Terms and Other Definitional Provisions. Unless
otherwise defined herein, as used in this Agreement and in any certificate,
report or other document made or delivered pursuant hereto, accounting terms not
otherwise defined herein, and accounting terms only partly defined herein, to
the extent not defined, shall have the respective meanings given to them under
GAAP. Unless otherwise defined herein, all terms used herein which are defined
by the Virginia Uniform Commercial Code shall have the same meanings as assigned
to them by the Virginia Uniform Commercial Code unless and to the extent varied
by this Agreement. The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
subsection, schedule and exhibit references are references to sections or
subsections of, or schedules or exhibits to, as the case may be, this Agreement
unless otherwise specified. As used herein, the singular
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number shall include the plural, the plural the singular and the use of the
masculine, feminine or neuter gender shall include all genders, as the context
may require. Reference to any one or more of the Financing Documents and any of
the Financing Documents shall mean the same as the foregoing may from time to
time be amended, restated, substituted, extended, renewed, supplemented or
otherwise modified.
II. BORROWING
SECTION 2.1 (a) The Acquisition Loans. Subject to and in accordance with
the provisions of this Agreement, the Lender agrees from time to time from the
Closing Date until November 30, 1998, to lend (each an "Acquisition Loan" and
collectively the "Acquisition Loans") to the Borrowers such sums as the
Borrowers request and as the Lender approves pursuant to this Agreement, up to
the maximum aggregate principal amount of Five Million Dollars ($5,000,000) (the
"Acquisition Loan Committed Amount").
(b) Proceeds of the Acquisition Loans. The proceeds of each advance under
the Acquisition Loan shall be used by the Borrowers to make a Permitted
Acquisition in accordance with Section 8.04 of this Agreement, and for no other
purposes except as may otherwise be agreed by the Lender in writing.
(c) Procedure for Making Acquisition Loans. The Borrowers may borrow under
the Acquisition Loan on any Banking Day. The Borrowers shall notify the Lender
no later than ten (10) Banking Days prior to the date of the date of the
proposed borrowing. The Lender will not lend more than seventy five percent
(75%) of the Purchase Price of any Acquisition. The Lender shall not consider
making an advance under the Acquisition Loan unless the Lender shall have
received and approved with respect to such advance, among other things; (i) a
pro forma post acquisition balance statement, income statement, and cash flow
statement, (ii) a listing of all assets to be acquired, (iii) historical
financial statements on the Target (as hereinafter defined); (iv) the proposed
terms and conditions for the proposed acquisition; and (v) such other
information as the Lender may request.
(d) Acquisition Loan Notes. The joint and several obligation of the
Borrowers to repay with interest each advance made under the Acquisition Loan
made by the Lender from time to time shall be evidenced by an Acquisition Note
(as from time to time extended, amended, restated, supplemented or otherwise
modified, each an "Acquisition Note" and collectively, the "Acquisition Notes")
substantially in the form set forth in EXHIBIT "A-1" attached hereto and made a
part hereof, with appropriate insertions, dated as of the date of each advance.
SECTION 2.2 The Revolving Loan. (a) The Lender agrees to lend to the
Borrowers and the Borrowers agree to borrow on a revolving basis from time to
time the principal amount (the "Revolving Loan") not to exceed at any time
outstanding the lesser (the "Revolving Loan Committed Amount") of Three Million
Dollars ($3,000,000) or the Borrowing Base.
11
(b) If at any time the outstanding principal balance of the Revolving Loan
exceeds the limitations provided in subsection (a) above, the Borrowers promise
to pay to the order of the Lender, on demand, the amount of the excess.
(c) The joint and several obligation of the Borrowers to repay the advances
under the Revolving Loan shall be evidenced by the Borrowers' Revolving
Promissory Note of even date herewith (the "Revolving Promissory Note") payable
to the Lender in the form attached hereto as EXHIBIT "A-2". The Revolving
Promissory Note shall bear interest and shall be repaid by the Borrowers in the
manner and at the times set forth in the Revolving Promissory Note.
(d) The Borrowers may prepay the principal sum outstanding on the Revolving
Loan only in accordance with the terms of the Revolving Note. Sums borrowed and
repaid may be readvanced under the terms and conditions of this Agreement.
(e) The proceeds of the Revolving Loan shall be used by the Borrowers for
the purposes set forth in Recital A above, and, unless prior written consent of
the Lender is obtained, for no other purpose.
SECTION 2.3 Revolving Loan Procedure. (a) Each advance under the Revolving
Loan shall be in an amount of not less than $10,000, or a multiple thereof. The
Borrowers shall notify the Lender not late than 1:00 p.m. on the date of any
proposed advance.
(b) The Borrowers shall furnish to the Lender such schedules, certificates,
lists, records, reports, information and documents as required by the Lender
from time to time so that the Lender may, in its discretion, determine the
Borrowing Base.
(c) In addition, the Borrowers hereby irrevocably authorize the Lender to
make advances under the Revolving Loan at any time and from time to time,
without further request from or notice to the Borrowers, which the Lender, in
its sole and absolute discretion, deems necessary or appropriate to protect the
Lender's interests under this Agreement or otherwise, including, without
limitation, advances made to cover Overdrafts, principal of, and/or interest on,
any Loans, fees, and/or Enforcement Costs, prior to, on, or after the
termination of this Agreement, regardless of whether the aggregate amount of the
advances which the Lender may make hereunder exceeds the Revolving Credit
Committed Amount. The Lender shall have no obligation whatsoever to make any
advance under this subsection and the making of one or more advances under this
subsection shall not obligate the Lender to make other similar advance or
advances. Any such advances will be secured by the Collateral.
(d) The Lender is authorized to deduct any payment (including payments of
principal, interest and/or Fees as provided herein or in the Notes) from the
Borrowers' Account Number _____________ on or after the date the payment is due;
provided, however, that such authorization shall not be deemed to relieve the
Borrowers from their obligation to make such payment when it is
12
due and, further provided, that the Lender will provide the Borrowers with
notice of any such deduction.
SECTION 2.4 Revolving Loan Account. The Lender will establish and maintain
a loan account on its books (the "Revolving Loan Account") to which the Lender
will ( debit (i) the principal amount of each Revolving Loan made by the Lender
hereunder as of the date made, (ii) the amount of any interest accrued on the
Revolving Loans as and when due, and (ii) any other amounts due and payable by
the Borrowers to the Lender from time to time under the provisions of this
Agreement in connection with the Revolving Loans, including, without limitation,
Enforcement Costs, Fees, late charges, and service, collection and audit fees,
as and when due and payable, and (b) credit all payments made by the Borrowers
to the Lender on account of the Revolving Loans as of the date made including,
without limitation, funds credited to the Collateral Account and collected and
paid to the Lender, the Lender reserving the right, exercised in its sole and
absolute discretion from time to time, to provide earlier credit or to disallow
credit for any Collection which is unsatisfactory to the Lender.
The Lender may debit the Revolving Loan Account for the amount of any
Collection which is returned to the Lender unpaid. All credit entries to the
Revolving Loan Account are conditional and shall be readjusted as of the date
made if final and indefeasible payment is not received by the Lender in cash or
solvent credits. The Borrowers hereby promise to pay to the order of the Lender,
on demand, an amount equal to the excess, if any, of all debit entries over all
credit entries recorded in the Revolving Loan Account under the provisions of
this Agreement.
SECTION 2.5 Collateral Account. The Borrowers will deposit or cause to be
deposited to a bank account designated by the Lender and from which the Lender
alone has power of access and withdrawal (the "Collateral Account"), all Items
of Payment. The Borrowers shall deposit Items of Payment for credit to the
Collateral Account not later than the next Banking Day after the receipt
thereof, and in precisely the form received, except for the endorsements of the
Borrowers where necessary to permit the collection of any such Items of Payment,
which endorsement the Borrowers hereby agree to make. Pending such deposit to
the Collateral Account, endorsement and/or other delivery thereof to the Lender,
the Borrowers will not commingle any Items of Payment with any of its other
funds or property, but will hold them separate and apart therefrom in trust and
for the account of the Lender. The Lender is not, however, required to credit
the Collateral Account for the amount of any Collection which is unsatisfactory
to the Lender. In addition, the Borrowers shall, if so directed by the Lender,
establish a lock box to which Items of Payments may be sent and shall direct the
Borrowers' customers and others as the Lender may require to forward payments to
that lock box. Items of Payment received in the lock box shall be deposited in
the Collateral Account or as otherwise directed by the Lender from time to time.
SECTION 2.6 Commitment Fee. The Borrowers agree to pay to the Lender on the
first day of each calendar quarter commencing after the date of this Agreement a
commitment fee (computed on the basis of a year consisting of three hundred and
sixty (360) days for the actual
13
number of days elapsed) of one quarter of one percent (.25%) per annum on the
daily average of the unused amount of the Revolving Loan.
SECTION 2.7 Acquisition Loan Fee. The Borrowers agree to pay to the Lender
a fee in conjunction with each advance under the Acquisition Loan. The
Acquisition Loan fee will be one half of one percent (.50%) per annum of the
amount of each Acquisition Note and shall be payable on the date of each advance
under the Acquisition Loan. THE BORROWERS ACKNOWLEDGE AND AGREE THAT THE
ACQUISITION LOAN FEE IS PAID IN CONSIDERATION OF THE LENDER'S PROCESSING OF THE
BORROWERS' CREDIT APPLICATION, AND IS NOT INTENDED AS A COMMITMENT FEE FOR THE
ACQUISITION LOAN FACILITY; PAYMENT OF THE ACQUISITION LOAN FEE SHALL UNDER NO
CIRCUMSTANCES OBLIGATE THE LENDER TO MAKE ANY FUTURE ADVANCES OR APPROVE ANY
DISCRETIONARY ACQUISITIONS UNDER THE ACQUISITION LOAN FACILITY.
SECTION 2.8 Transactions under this Agreement Between the Borrowers and the
Lender. In respect to any advance and all other matters under or in connection
with this Agreement and any transactions contemplated hereby, the Borrowers
authorize the Lender to accept, rely upon, act upon and comply with, any verbal
or written instructions, requests, confirmations and orders of any employee or
representative of the Company designated by the Borrowers in writing delivered
to the Lender from time to time. The Borrowers each acknowledge that the
transmission between the Borrowers and the Lender of any such instructions,
requests, confirmations and orders involves the possibility of errors,
omissions, mistakes and discrepancies and agrees to adopt such internal measures
and operational procedures to protect its interests. By reason thereof, the
Borrowers hereby assume all risk of loss and responsibility for, releases and
discharges the Lender from any and all responsibility or liability for, and
agrees to indemnify, reimburse on demand and hold the Lender harmless from, any
and all claims, actions, damages, losses, liability and expenses by reason of,
arising out of or in any way connected with or related to, (i) the Lender's
acceptance, reliance and actions upon, compliance with or observation of any
such instructions, requests, confirmations or orders, and (ii) any such errors,
omissions, mistakes and discrepancies, except those caused by the Lender's gross
negligence or willful misconduct.
SECTION 2.9 Account Statements. Any and all periodic or other statements or
reconciliations, and the information contained in those statements or
reconciliations, of the Revolving Loan Account shall be presumed conclusively to
be correct and shall constitute an account stated between the Lender and the
Borrowers unless the Lender receives specific written objection thereto from the
Borrowers within thirty (30) Banking Days after such statement or reconciliation
shall have been sent by the Lender.
SECTION 2.10 Overdraft Advances. If, after the close of business on any
Banking Day, any banking account of either Borrower with the Lender is
determined by the Lender to have an Overdraft, the Lender, in its sole
discretion on each and any such occasion may (and is hereby irrevocably
authorized by the Borrowers to), but is not obligated to, make an advance under
the
14
Revolving Loan to the Borrowers in a principal amount equal to any such
Overdraft as of the close of business on such Banking Day. All Overdrafts shall
be secured by the Collateral.
III. COLLATERAL
As security for the payment of all of the Obligations, each Borrower hereby
assigns, grants and conveys to the Lender and agrees that the Lender shall have
a perfected, continuing security interest in all of the Collateral. Each
Borrower further agrees that the Lender shall have in respect the Collateral all
of the rights and remedies of a secured party under the Virginia Uniform
Commercial Code and under other applicable Laws and Security Documents, as well
as those provided in this Agreement. Each Borrower covenants and agrees to
execute and deliver such financing statements and other instruments and filings
as are necessary in the opinion of the Lender to perfect such security interest.
Notwithstanding the fact that the proceeds of the Collateral constitute a part
of the Collateral, neither Borrower may dispose of the Collateral, or any part
thereof, other than in the ordinary course of its business or as otherwise may
be permitted by this Agreement.
IV. UNCONDITIONAL OBLIGATIONS
The payment and performance by the Borrowers of the Obligations shall be
absolute and unconditional, irrespective of any defense or any rights of
set-off, recoupment or counterclaim they might otherwise have against the Lender
and the Borrowers shall pay absolutely net all of the Obligations, free of any
deductions and without abatement, diminution or set-off; and until payment in
full of all of the Obligations, the Borrowers: (a) will not suspend or
discontinue any payments provided for in the Notes; (b) will perform and observe
all of their other agreements contained in this Agreement, including (without
limitation) all payments required to be made to the Lender; and (c) will not
terminate or attempt to terminate this Agreement for any cause.
V. REPRESENTATIONS AND WARRANTIES
To induce the Lender to make the Loans, each Borrower represents and
warrants to the Lender and, unless the Lender is notified by either Borrower of
a change or changes effecting such representations and warranties, shall be
deemed to represent and warrant to the Lender at the time each request for an
advance under the Loans is submitted and again at the time any advance is made
under the Loans that:
SECTION 5.1 Subsidiaries. Geomet is the Company's only Subsidiary.
SECTION 5.2 Good Standing. The Company and each of its Subsidiaries (a) is
a corporation duly organized, existing and in good standing under the laws of
the jurisdiction of its incorporation, (b) has the corporate power to own its
property and to carry on its business as now being conducted, and (c) is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the properties owned by it therein or in which the transaction
of its business makes such qualification necessary.
15
SECTION 5.3 Power and Authority. The Company and each of its Subsidiaries
has full power and authority to execute and deliver this Agreement and each of
the other Financing Documents executed and delivered by it, to make the
borrowing hereunder, and to incur the Obligations, all of which have been duly
authorized by all proper and necessary corporate action. No consent or approval
of stockholders or of any public authority is required as a condition to the
validity or enforceability of this Agreement or any of the other Financing
Documents executed and delivered by the Borrowers.
SECTION 5.4 Binding Agreements. This Agreement and each of the other
Financing Documents executed and delivered by the Borrowers have been properly
executed by each Borrower, constitute valid and legally binding obligations of
the Borrowers, and are fully enforceable against the Borrowers in accordance
with their respective terms.
SECTION 5.5 Litigation. There are no proceedings pending or, so far as
either Borrower knows, threatened before any court or administrative agency
which will materially adversely affect the financial condition or operations of
the Company or any Subsidiary, or the authority of either Borrower to enter into
this Agreement or any of the other Financing Documents executed and delivered by
the Borrowers.
SECTION 5.6 No Conflicting Agreements. There is (a) no charter, by-law or
preference stock provision of either Borrower and no provision of any existing
mortgage, indenture, contract or agreement binding on either Borrower or
affecting its property, and (b) to the knowledge of each Borrower, no provision
of law or order of court binding upon the Borrowers, which would conflict with
or in any way prevent the execution, delivery, or performance of the terms of
this Agreement or of any of the other Financing Documents executed and delivered
by the Borrowers, or which would be violated as a result of such execution,
delivery or performance.
SECTION 5.7 Financial Condition. The financial statements of the Company
dated June 30, 1996 are complete and correct and, in the opinion of the Company,
fairly present the current financial condition of the Company and have been
prepared in accordance with GAAP applied on a consistent basis throughout the
period involved. There are no material liabilities, direct or indirect, fixed or
contingent, of either Borrower as of the date of such financial statements which
are not reflected therein or in the notes thereto. There has been no adverse
change in the financial condition or operations of either Borrower since the
date of such financial statements (and to each Borrower's knowledge, no such
adverse change is pending or threatened), and the Borrowers have not guaranteed
the obligations of, or made any investments in or advances to, any company,
individual or other entity except as disclosed in such financial statements.
SECTION 5.8 Taxes. Each Borrower has filed or has caused to have been filed
all federal, state and local tax returns which, to the knowledge of the
Borrowers, are required to be filed, and has paid or caused to have been paid
all taxes as shown on such returns or on any assessment received by it, to the
extent that such taxes have become due, unless and to the extent only that such
taxes, assessments and governmental charges are currently contested in good
faith and by appropriate
16
proceedings by the Borrowers and adequate reserves therefor have been
established as required under generally accepted accounting principles.
SECTION 5.10 Compliance With Law. Neither Borrower is in violation of any
law, ordinance, governmental rule or regulation to which it is subject and the
violation of which would have a material adverse effect on the conduct of its
business, and each Borrower has obtained any and all licenses, permits,
franchises or other governmental authorizations necessary for the ownership of
its properties and the conduct of its business.
SECTION 5.11 Place(s) of Business and Location of Collateral. The Borrowers
warrant that the address of each Borrower's chief executive office is as
specified in EXHIBIT C attached hereto and made a part hereof and that the
address of each other place of business of the Borrowers, if any, is as
disclosed to the Lender in EXHIBIT C. The Collateral and all books and records
pertaining to the Collateral are and will be located at the address indicated on
EXHIBIT C. Each Borrower will immediately advise the Lender in writing of the
opening of any new place of business or the closing of any of its existing
places of business, and of any change in the location of the places where the
Collateral, or any part thereof, or the books and records concerning the
Collateral, or any part thereof, are kept. The proper and only places to file
financing statements with respect to the Collateral within the meaning of the
Uniform Commercial Code are the Circuit Court for Fairfax County and the State
Corporation Commission. A copy of a fully executed financing statement shall be
sufficient to satisfy for all purposes the requirements of a financing statement
as set forth in Article 9 of the Virginia Uniform Commercial Code.
SECTION 5.12 Title to Properties. Each Borrower has good and marketable
title to all of its properties, including the Collateral, and the Collateral is
free and clear of mortgages, pledges, liens, charges and other encumbrances
other than the Permitted Liens.
SECTION 5.13 Margin Stock. None of the proceeds of the Loans will be used,
directly or indirectly, by the Company or any Subsidiary for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any "margin
security" within the meaning of Regulation G (12 CFR Part 207), or "margin
stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of
Governors of the Federal Reserve System (herein called "margin security" and
"margin stock") or for any other purpose which might make the transactions
contemplated herein a "purpose credit" within the meaning of said Regulation G
or Regulation U, or cause this Agreement to violate any other regulation of the
Board of Governors of the Federal Reserve System or the Securities Exchange Act
of 1934 or the Small Business Investment Act of 1958, as amended, or any rules
or regulations promulgated under any of such statutes.
SECTION 5.14 ERISA. With respect to any "pension plan" as defined in
Section 3(2) of ERISA, which plan is now or previously has been maintained or
contributed to by either Borrower and/or by any Commonly Controlled Entity: (a)
no "accumulated funding deficiency" as defined in Code ss.412 or ERISA ss.302
has occurred, whether or not that accumulated funding deficiency has
17
been waived; (b) no "reportable event" as defined in ERISA ss.4043 has occurred;
(c) no termination of any plan subject to Title IV of ERISA has occurred; (d)
neither any Borrower nor any Commonly Controlled Entity has incurred a "complete
withdrawal" within the meaning of ERISA ss.4203 from any multiemployer plan; (e)
neither any Borrower nor any Commonly Controlled Entity has incurred a "partial
withdrawal" within the meaning of ERISA ss.4205 with respect to any
multiemployer plan; (f) no multiemployer plan to which any Borrower or any
Commonly Controlled Entity has an obligation to contribute is in
"reorganization" within the meaning of ERISA ss.4241 nor has notice been
received by any Borrower or any Commonly Controlled Entity that such a
multiemployer plan will be placed in "reorganization".
SECTION 5.15 Governmental Consent. Neither the nature of any Borrower or of
its business or properties, nor any relationship between any Borrower and any
other entity or person, nor any circumstance in connection with the making of
the Loans, or the offer, issue, sale or delivery of the Notes is such as to
require a consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority, on the part of any Borrower, as
a condition to the execution and delivery of this Agreement or any of the other
Financing Documents, the borrowing of the principal amounts of the Loans or the
offer, issue, sale or delivery of the Notes.
SECTION 5.16 Inventory. With respect to all Inventory of each Borrower, as
reflected on the books and records of each Borrower, (a) such Inventory is of
good and merchantable quality, free from defects, and (b) such Inventory is not
stored with a bailee, warehouseman or similar party, and such Inventory is
located at the places of business indicated on EXHIBIT C.
SECTION 5.17 Full Disclosure. The financial statements referred to in this
Part V do not, nor does this Agreement, nor do any written statements furnished
by the Borrowers to the Lender in connection with the making of the Loans,
contain any untrue statement of fact or omit a fact necessary to make the
statements contained therein or herein not misleading. There is no fact which
the Borrowers have not disclosed to the Lender in writing which materially
adversely affects or, will or could prove to materially adversely affect the
properties, business, prospects, profits or condition (financial or otherwise)
of the Borrowers or the ability of either Borrower to perform this Agreement.
SECTION 5.18 Presence of Hazardous Materials or Hazardous Materials
Contamination. To the best of each Borrower's knowledge, (a) no Hazardous
Materials are located on any real property owned, controlled or operated by of
either Borrower or for which either Borrower is responsible, other than
reasonable quantities of Hazardous Materials stored or kept by either Borrower
in the ordinary course of its current line of business, which Hazardous
Materials are at all times stored, used and disposed in accordance with
applicable Laws; and (b) no property owned, controlled or operated by either
Borrower has ever been used as a manufacturing, storage, or dump site for
Hazardous Materials nor is affected by Hazardous Materials Contamination at any
other property.
18
SECTION 5.19 Intellectual Property. Each Borrower owns or possesses rights
to use all of the patents, trademarks, service marks, trade names, copyrights
and licenses and all rights with respect thereto necessary for the present and
planned future operation of its business, without any known conflict with the
rights of any other Person.
SECTION 5.20 Business Names and Addresses. In the five (5) years preceding
the date hereof, neither Borrower has conducted business under any name other
than its current name nor conducted its business in any jurisdiction other than
those disclosed on EXHIBIT C attached hereto.
SECTION 5.21 No Default. There is no Event of Default (as hereinafter
defined) and no event has occurred and no condition exists which with the giving
of notice or the passage of time would constitute an Event of Default. Neither
Borrower is in default under the terms of any other agreement or instrument to
which it may be a party or by which the Collateral or any of its properties may
be bound or subject.
SECTION 5.22 Compliance with Eligibility Standards. Unless the Lender is
advised by the Borrowers in writing to the contrary, each Account described in
any schedule, certificate, record and data furnished to the Lender for purposes
of calculating the Borrowing Base will at all times meet and comply with the
Eligibility Standards.
SECTION 5.23 Accounts. With respect to all Accounts and to the best of each
Borrower's knowledge (a) they are genuine, and in all respects what they purport
to be, and are not evidenced by a judgment, an instrument, or chattel paper
(unless such judgment has been assigned and such instrument or chattel paper has
been endorsed and delivered to the Lender); (b) they represent undisputed, bona
fide transactions completed in accordance with the terms and provisions
contained in the invoices and purchase orders relating thereto; (c) the goods
sold (or services rendered) which resulted in the creation of the Accounts have
been delivered or rendered to and accepted by the account debtor; (d) the
amounts shown on each Borrower's books and records, with respect thereto are
actually and absolutely owing to each Borrower and are not contingent for any
reason; (e) no payments have been or shall be made thereon except payments
turned over to the Lender by either Borrower; (f) there are no set-offs,
counterclaims or disputes known by either Borrower or asserted with respect
thereto, and neither Borrower has made any agreement with any account debtor
thereof for any deduction or discount of the sum payable thereunder except
regular discounts allowed by each Borrower in the ordinary course of its
business for prompt payment; (g) there are no facts, events or occurrences known
to either Borrower which in any way impair the validity or enforcement thereof
or tend to reduce the amount payable thereunder; (h) all account debtors
thereof, to the best of each Borrower's knowledge, have the capacity to
contract; (i) the goods sold or transferred or the services furnished giving
rise thereto are not subject to any liens except the security interest granted
to the Lender by this Agreement; (j) the Borrowers have no knowledge of any fact
or circumstance which would impair the validity or collectibility thereof; and
(k) there are no proceedings or actions known to either Borrower which are
threatened or pending
19
against any account debtor which might result in any material adverse change in
its financial condition.
SECTION 5.24 Government Receivables. In addition to the representations set
forth in Section 5.23 above, with respect to all Government Receivables to the
best of either Borrower's knowledge, (a) there has been no default or
cancellation with respect thereto, (b) they are not dependent on any future
appropriation, (c) the assignment of all sums due thereunder will not violate
any Laws and is permissible under said Government Contract, (d) each Borrower
has the right to assign all monies due thereunder; and (e) any prior assignments
with respect thereto have been terminated.
SECTION 5.25 Claims and Investigations. There exist no pending or
threatened claims, investigations (whether formal or informal), litigation,
disputes, protests or other controversies involving any Borrower or any
Affiliate pertaining to or arising out of any Government Contract which, if
adversely determined, would have a material adverse effect on the business,
assets, operations or condition, financial or otherwise, of any Borrower or any
Affiliate. Neither any Borrower nor any Affiliate has filed nor has any basis
for filing any claims or demands for payment against the United States or any
other party arising out of or in connection with any Government Contract, other
than progress xxxxxxxx, public vouchers, and invoices submitted in the ordinary
course of business.
VI. CONDITIONS OF LENDING
The making of the Loans and any advance thereunder is subject to the
following conditions precedent:
SECTION 6.1 Opinion of Counsel for the Borrowers. On the date hereof, the
Lender shall receive the favorable written opinion of counsel for the Borrowers
satisfactory in all respects to the Lender.
SECTION 6.2 Approval of Counsel for the Lender. All legal matters incident
to the Loans and all documents necessary in the opinion of the Lender to make
the Loans shall be satisfactory in all material respects to counsel for the
Lender.
SECTION 6.3 Supporting Documents. The Lender shall receive on the date
hereof: (a) a certificate of the Secretary of each Borrower, in a form
acceptable to the Lender in all respects, dated as of the date hereof and
certifying (i) that attached thereto is a true, complete and correct copy of
resolutions adopted by the Board of Directors of each Borrower authorizing the
execution and delivery of this Agreement, the Notes and the other Financing
Documents, and the Obligations, and (ii) as to the incumbency and specimen
signature of each officer of each Borrower executing this Agreement, the Notes
and the other Financing Documents, and a certification by the President or any
Vice President of each Borrower as to the incumbency and signature of the
Secretary of such Borrower; (b) such other documents as the Lender may
reasonably require the Borrowers to execute,
20
in form and substance acceptable to the Lender; and (c) such additional
information, instruments, opinions, documents, certificates and reports as the
Lender may reasonably deem necessary.
SECTION 6.4 Financing Documents. All of the Financing Documents required by
the Lender shall be executed, delivered and, if deemed necessary by the Lender,
recorded, all at the sole expense of the Borrowers.
SECTION 6.5 Insurance. The Borrowers shall have satisfied the Lender that
any and all insurance required by this Agreement is in effect as of the date of
this Agreement, and that, to the extent required by the Financing Documents, the
Lender has been named as an insured lienholder.
SECTION 6.6 Security Documents. In order to perfect the lien and security
interest created by this Agreement, the Borrowers shall have executed and
delivered to the Lender all financing statements and Security Documents (in form
and substance acceptable to the Lender in its sole discretion) deemed necessary
by the Lender, in a sufficient number of counterparts for recordation, and, at
the Borrowers' sole expense, shall record all such financing statements and
Security Documents, or cause them to be recorded, in all public offices deemed
necessary by the Lender.
SECTION 6.7 Termination Statements. The Lender shall have received from
creditors of each Borrower all termination statements covering the Collateral
required by the Lender. The termination statements shall be fully and properly
executed, in recordable form and sufficient, in the opinion of counsel for the
Lender, to terminate the interests of other creditors of each Borrower in the
Collateral.
SECTION 6.8 Compliance. At the time of the making of each advance hereunder
(a) the Company and each Subsidiary shall have complied and shall then be in
compliance with all the terms, covenants and conditions of this Agreement which
are binding upon it, (b) there shall exist no Event of Default and no event
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default, (c) the representations and warranties contained
in Part V shall be true with the same effect as though such representations and
warranties had been made at the time of the making of the advance.
21
VII. AFFIRMATIVE COVENANTS OF BORROWERS
Until payment in full and the performance of all of the Obligations
hereunder, the Borrowers shall:
SECTION 7.1 Financial Statements. Furnish to the Lender:
(a) Annual Statements and Certificates. As soon as available but in no
event more than one hundred twenty (120) days after the close of each of
the Company's fiscal years, a copy of the consolidated financial statement
relating to the Company and its Subsidiaries in reasonable detail
satisfactory to the Lender, prepared in accordance with GAAP and certified
by an independent certified public accountant satisfactory to the Lender in
its reasonable discretion, which financial statement shall include a
balance sheet as at the end of such fiscal year, profit and loss statement
and a statement of changes in financial condition, and which financial
statement shall be accompanied by a certificate of the principal financial
officer of the Company setting forth the calculation of all financial
covenants under this Agreement and stating whether any event has occurred
which constitutes an Event of Default or which would constitute an Event of
Default with the giving of notice or the lapse of time or both, and, if so,
stating the facts with respect thereto.
(b) Quarterly Statements and Certificates. As soon as available but in
no event more than sixty (60) days after the close of each of the Company's
fiscal quarters, (i) consolidated balance sheets of the Company and its
Subsidiaries as at the close of such period and consolidated income and
expense statements for such period, certified by the principal financial
officer of the Company and accompanied by a certificate of that officer
setting forth the calculation of all financial covenants under this
Agreement and stating whether any event has occurred which constitutes an
Event of Default or which would constitute an Event of Default with the
giving of notice or the lapse of time or both, and, if so, stating the
facts with respect thereto, and (ii) a backlog report and list of any
Government Contract having a value in excess of $500,000.
(c) Monthly reports. Within twenty five (25) days after the end of
each month deliver reports to the Lender which shall include, in such
detail as the Lender may reasonably request, data for the preceding month
with respect to aged Accounts.
(d) Borrowing Base Reports. Within twenty five (25) days after the end
of each month the Company shall deliver to the Lender a fully completed
certificate (each a "Borrowing Base Certificate" and collectively, the
"Borrowing Base Certificates") as of such date in the form of EXHIBIT E
attached hereto. Each Borrowing Base Certificate shall be effective only as
accepted by the Lender (and with such revision, if any, as the Lender may
require as a condition to such acceptance), such acceptance to be presumed
unless the Lender otherwise notifies the Company within five (5) Banking
Days after receipt of such Borrowing Base Certificate.
22
(e) Additional Reports and Information. With reasonable promptness,
such additional information, reports or statements as the Lender may from
time to time reasonably request.
SECTION 7.2 Financial Covenants.
(a) Debt Service Coverage. Maintain a Debt Service Coverage of not
less than 1.20 to 1.0 as of the last day of each fiscal quarter, based on
the four (4) quarter period ending on such date.
(b) Funded Debt to EBITDA. Maintain a ratio of Funded Debt to EBITDA
greater than the following amounts at the following times, based on the
four (4) quarter period ending on such date:
Funded Debt/EBITDA Fiscal Year Ending
------------------ ------------------
3.50 to 1.0 1997;
3.50 to 1.0 1998;
3.00 to 1.0 1999;
2.75 to 1.0 2000;
2.50 to 1.0 2001 at all times thereafter.
(c) Current Ratio. Maintain a Current Ratio of not less than 1.20 to
1.0.
(d) Liabilities to Tangible Net Worth. Maintain a ratio of liabilities
(defined in accordance with GAAP) to Tangible Net Worth not greater than
the following amounts at the following times:
Liabilities/Tangible Net Worth Fiscal Year Ending
------------------------------ ------------------
3.50 to 1.00 1997;
3.50 to 1.00 1998;
3.00 to 1.00 1999 and thereafter.
SECTION 7.3 Taxes and Claims. Pay and discharge and cause each of its
Subsidiaries to pay and discharge, all taxes, assessments and governmental
charges or levies imposed upon it or any of its income or properties prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a lien or charge upon any of its properties; provided,
however, the Company and the Subsidiaries shall not be required to pay any such
tax, assessment, charge, levy or claim, the payment of which is being contested
in good faith and by proper proceedings.
23
SECTION 7.4 Corporate Existence. Maintain, and cause each of its
Subsidiaries to maintain, its corporate existence in good standing in the
jurisdiction in which it is incorporated and in each jurisdiction where it is
required to register or qualify to do business.
SECTION 7.5 Compliance with Laws. Comply, and cause each of its
Subsidiaries to comply, with all applicable federal, state and local laws, rules
and regulations to which it is subject and the violation of which would have a
material adverse effect on the conduct of its business.
SECTION 7.6 Governmental Regulation. Promptly notify the Lender in the
event that the Company or any Subsidiary receives any notice, claim or demand
from any governmental agency which alleges that the Company or any Subsidiary is
in violation of any of the terms of, or has failed to comply with any applicable
order issued pursuant to any federal or state statute regulating its operation
and business, including, but not limited to, the Occupational Safety and Health
Act and the Environmental Protection Act which could materially affect the
financial condition or operation of the Company or its Subsidiaries.
SECTION 7.7 Litigation. Give prompt notice in writing, with a full
description to the Lender, of all litigation and of all proceedings before any
court or any governmental or regulatory agency affecting the Company or any
Subsidiary which, if adversely decided, would materially affect the conduct of
the Company's or such Subsidiary's business, the financial condition of the
Company or such Subsidiary, or in any manner affect the Collateral.
SECTION 7.8 Use of Proceeds. Use the proceeds of the Loans for the purpose
or purposes set forth in Recital A above and, without the prior written consent
of the Lender, for no other purpose or purposes.
SECTION 7.9 Maintenance of Properties. Keep, and cause the Subsidiaries to
keep and maintain, its properties, whether owned in fee or otherwise, or leased,
in good operating condition; make and, cause the Subsidiaries to make, all
proper repairs, renewals, replacements, additions and improvements thereto
needed to maintain such properties in good operating condition; comply, and
cause the Subsidiaries to comply, with the provisions of all leases to which it
is party or under which it occupies property so as to prevent any loss or
forfeiture thereof or thereunder; and comply, or cause the Subsidiaries to
comply, with all laws, rules, regulations and orders applicable to its
properties or business or any part thereof.
SECTION 7.10 Other Liens, Security Interests, etc. Keep its properties and
assets, including, without limitation, the Collateral, free from all liens,
security interests and claims of every kind and nature, other than the security
interest granted to the Lender pursuant to this Agreement and the Permitted
Liens.
SECTION 7.11 Books and Records. (a) Keep and maintain and cause the
Subsidiaries to keep and maintain accurate books and records, (b) make and cause
the Subsidiaries to make entries on such books and records in form satisfactory
to the Lender disclosing the Lender's assignment of,
24
and security interest in and lien on, the Collateral and all collections
received by the Company or any of the Subsidiaries on its Accounts, (c) furnish
and cause the Subsidiaries to furnish to the Lender promptly upon request such
information, reports, contracts, invoices, lists of purchases of Inventory
(showing names, addresses and amount owing) and other data concerning account
debtors and the Company's and Subsidiaries' Accounts and Inventory and all
contracts and collection(s) relating thereto as the Lender may from time to time
specify, (d) unless the Lender shall otherwise consent in writing, keep and
maintain and cause the Subsidiaries to keep and maintain all such books and
records mentioned in (a) above only at the addresses listed in EXHIBIT C, and
(e) permit and cause the Subsidiaries to permit any Person designated by the
Lender to enter the premises of the Company and the Subsidiaries and examine,
audit and inspect the books and records at any reasonable time and from time to
time without notice, at the Borrowers' expense.
SECTION 7.12 Business Names. Immediately notify and cause each of the
Subsidiaries to notify the Lender of any change in the name under which it
conducts its business.
SECTION 7.13 ERISA. Maintain at all times such bonding as is required by
ERISA. As soon as practicable and in any event within 15 days after it knows or
has reason to know that, with respect to any plan, a "reportable event" has
occurred, the Borrowers will deliver to the Lender a certificate signed by its
chief financial officer setting forth the details of such "reportable event".
Each Borrower shall agrees that with respect to any pension plan which any
Borrower and/or any Commonly Controlled Entity maintains or contributes to,
either now or in the future, that: (a) such bonding as is required under ERISA
will be maintained; (b) as soon as practicable and in any event within 15 days
after either Borrower or any Commonly Controlled Entity knows or has reason to
know that a "reportable event" has occurred or is likely to occur, the Borrowers
will deliver to the Lender a certificate signed by its chief financial officer
setting forth the details of such "reportable event"; (c) within 15 days after
notice is received by either Borrower or any Commonly Controlled Entity that any
multiemployer plan has been or will be placed in "reorganization" within the
meaning of ERISA ss.4241, the Borrowers will notify the Lender to that effect;
and (d) upon the Lender's request, the Borrowers will deliver to the Lender a
copy of the most recent actuarial report, financial statements and annual report
completed with respect to any "defined benefit plan", as defined in ERISA
ss.3(35).
SECTION 7.14 Management. Promptly notify the Lender of any contemplated
changes in its Senior Management subsequent to the date hereof.
SECTION 7.15 Banking Relationship. Maintain the Lender as its principal
depository.
SECTION 7.16 Notification of Events of Default and Adverse Developments.
The Borrowers will promptly notify the Lender upon obtaining knowledge of the
occurrence of:
(a) any Event of Default;
(b) any Default;
25
(c) any event, development or circumstance whereby the financial
statements furnished hereunder fail in any material respect to
present fairly, in accordance with GAAP, the financial condition
and operational results of the Company or its Subsidiaries;
(d) any default under any Government Contract or any event which if
not corrected could give rise to a default under any Government
Contract or a termination for convenience;
(e) any judicial, administrative or arbitral proceeding pending
against the Company or any of its Subsidiaries and any judicial
or administrative proceeding known by the Company to be
threatened against it or any of its Subsidiaries which, if
adversely decided, could materially adversely affect its
financial condition or operations (present or prospective); and
(f) any other development in the business or affairs of the Company
and any of its Subsidiaries which may be materially adverse;
in each case describing in detail satisfactory to the Lender the nature thereof
and, in the case of notification under clauses (i) and (ii), the action the
Borrowers propose to take with respect thereto.
SECTION 7.17 Insurance Generally. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible insurance companies on such
of its properties, in such amounts and against such risks as is customarily
maintained by similar businesses operating in the same vicinity; maintain
general public liability insurance against claims for personal injury, death or
property damage in such amounts as are satisfactory to the Lender and workmen's
compensation insurance in statutory amounts with such companies as are licensed
to do business in the state requiring the same; file, and cause each of its
Subsidiaries to file, with the Lender, upon its request, a detailed list of the
insurance then in effect and stating the names of the insurance companies, the
amounts and rates of the insurance, dates of the expiration thereof and the
properties and risks covered thereby; and, within thirty (30) days after notice
in writing from the Lender, obtain, and cause each of its Subsidiaries to
obtain, such additional insurance as the Lender may reasonably request.
SECTION 7.18 Insurance With Respect to Equipment and Inventory. In addition
to and not by way of limitation of Section 7.17 above, maintain and cause each
of its Subsidiaries to maintain hazard insurance with fire and extended coverage
and with loss payable to the Lender as its interest may appear on the Equipment
and Inventory in an amount at least equal to the lesser amount of the
outstanding principal amount of the Note or the fair market value of the
Equipment and Inventory (but in any event sufficient to avoid any co-insurance
obligations) and with a specific endorsement to each such insurance policy
pursuant to which the insurer agrees to give the Lender at least thirty (30)
days written notice before any alteration or cancellation of such insurance
policy and that no act or default of either Borrower shall affect the right of
the Lender to recover under such
26
policy in the event of loss or damage; file, and cause each of its Subsidiaries
to file, with the Lender, upon its request, a detailed list of the insurance
then in effect and stating the names of the insurance companies, the amounts and
rates of the insurance, dates of the expiration thereof and the properties and
risks covered thereby; and, within thirty (30) days after notice in writing from
the Lender, obtain, and cause each of its Subsidiaries to obtain, such
additional insurance as the Lender may reasonably request.
SECTION 7.19 Maintenance of the Collateral. Not permit anything to be done
to the Collateral which may impair the value thereof. The Lender, or an agent
designated by the Lender, shall be permitted to enter the premises of the
Company, and the Subsidiaries, and examine, audit and inspect the Collateral at
any reasonable time and from time to time without notice. The Lender shall not
have any duty to, and each Borrower hereby releases the Lender from all claims
of loss or damage caused by the delay or failure to collect or enforce any of
the Accounts or to, preserve any rights against any other party with an interest
in the Collateral.
SECTION 7.20 Inventory. With respect to the Inventory, the Company and the
Subsidiaries shall: (a) as soon as possible upon demand by the Lender, execute
and deliver to the Lender designations of Inventory specifying the Company's and
the Subsidiaries' cost of Inventory, the retail price thereof, and such other
matters and information relating to the Inventory as the Lender may reasonably
request, (b) keep correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory, the Company's and the
Subsidiaries' cost therefor and the selling price thereof, all of which records
shall be available to the officers, employees or agents of the Lender upon
demand for inspection and copying thereof, (c) not store any of its Inventory
with a bailee, warehouseman or similar person without the Lender's prior written
consent; provided, however, in the event the Lender does consent to such
storage, the Company and the Subsidiaries shall cause any such bailee,
warehouseman or similar person to issue and deliver to the Lender, in a form
acceptable to the Lender, warehouse receipts in the name of the Lender
evidencing the storage of Inventory, (d) permit the Lender and its agents or
representatives to inspect and examine the Inventory at any time or times
hereafter during the Company's and Subsidiaries' usual business hours, and to
check and test the same as to quality, quantity, value and condition, and (e)
acquire and maintain all Inventory free from all liens, except the security
interest granted to the Lender pursuant to this Agreement and the Permitted
Liens.
SECTION 7.21 Other Liens, Security Interests, etc. Keep the Collateral free
from all liens, security interests and claims of every kind and nature, other
than the security interest granted to the Lender pursuant to this Agreement and
the Permitted Liens.
SECTION 7.22 Defense of Title and Further Assurances. At its expense defend
the title to the Collateral (or any part thereof), and promptly upon request
execute, acknowledge and deliver any financing statement, renewal, affidavit,
deed, assignment, continuation statement, security agreement, certificate or
other document the Lender may require in order to perfect, preserve, maintain,
protect, continue and/or extend the lien or security interest granted to the
Lender under this Agreement and its priority. The Borrowers shall pay to the
Lender on demand all taxes, costs and
27
expenses incurred by the Lender in connection with the preparation, execution,
recording and filing of any such document or instrument.
SECTION 7.23 Subsequent Opinion of Counsel as to Recording Requirements.
Provide to the Lender a subsequent opinion of counsel as to the filing,
recording and other requirements with which the Company and the Subsidiaries
have has complied to maintain the lien and security interest in favor of the
Lender in the Collateral in the event that the Company or any Subsidiary shall
transfer its principal place of business or the office where it keeps its
records pertaining to the Accounts.
SECTION 7.24 Assignments of Accounts. Promptly, upon request, execute and
deliver to the Lender written assignments, in form and content acceptable to the
Lender, of specific Accounts or groups of Accounts; provided, however, the lien
and/or security interest granted to the Lender under this Agreement shall not be
limited in any way to or by the inclusion or exclusion of Accounts within such
assignments. Such Accounts shall secure payment of the Obligations and are not
sold to the Lender whether or not any assignment thereof, which is separate from
this Agreement, is in form absolute.
SECTION 7.25 Notice of Returned Goods, etc. Promptly notify and cause the
Subsidiaries to promptly notify the Lender of the return, rejection or
repossession of any goods sold or delivered in respect of any Accounts, and of
any claims made in regard thereto. Whenever either Borrower obtains possession
(by return, rejection, repossession or otherwise) of any goods, the sale or
lease of which gave rise to an Account, the Borrowers will (unless the Lender
shall otherwise consent in writing) physically segregate such goods from the
Borrowers' other property, and label and hold such goods as trustee for the
Lender for such disposition as the Lender may direct.
SECTION 7.26 Collections. Until such time as the Lender shall notify the
Company and each of the Subsidiaries of the revocation of such privilege, the
Company and each of the Subsidiaries (a) shall at its own expense have the
privilege for the account of and in trust for the Lender of collecting its
Accounts and receiving in respect thereto all items of payment and shall
otherwise completely service all of the Accounts including (i) the billing,
posting and maintaining of complete records applicable thereto, and (ii) the
taking of such action with respect to such Accounts as the Lender may request or
in the absence of such request, as the Company and each of the Subsidiaries may
deem advisable; and (b) may grant, in the ordinary course of business, to any
account debtor, any rebate, refund or adjustment to which the account debtor may
be lawfully entitled, and may accept, in connection therewith, the return of
goods, the sale or lease of which shall have given rise to an Account. The
Lender may, at its option, at any time or from time to time after default
hereunder, revoke the collection privilege given to the Company and each of the
Subsidiaries herein by either giving notice of its assignment of, and lien on
the Collateral to the account debtors or giving notice of such revocation to the
Company and each of the Subsidiaries.
SECTION 7.27 Notice to Account Debtors and Escrow Account. In the event (a)
an Event of Default exists, (b) an event has occurred or condition exists which,
with the giving of notice
28
or the lapse of time will constitute an Event of Default, or (c) demand has been
made for any or all of the Obligations. Promptly upon the request of the Lender
in such form and at such times as specified by the Lender, give notice of the
Lender's lien on the Accounts to the account debtors requiring the account
debtors to make payments thereon directly to the Lender.
SECTION 7.28 Government Accounts. Promptly notify the Lender if any of the
Accounts arise out of Government Contracts and execute any instruments and take
any steps required by the Lender in order that all moneys due and to become due
under such contracts with potential values in excess of $500,000 shall be
assigned to the Lender and notice thereof given to the government under the
Federal Assignment of Claims Act or any other applicable law. In addition, the
Lender may, without notice to the Borrowers, discuss the status of any
Government Contract with the contracting officer responsible for such contract,
and the Borrowers will cooperate with the Lender and its agents in connection
with such discussions.
SECTION 7.29 Hazardous Materials; Contamination. Each Borrower agrees to
(a) give notice to the Lender immediately upon either Borrower's acquiring
knowledge of the presence of any Hazardous Materials Contamination on any
property owned or leased by either Borrower or for which either Borrower is
responsible, with a full description thereof; (b) comply at all times with any
Laws governing the handling, requiring the removal, treatment or disposal of
Hazardous Materials or Hazardous Materials Contamination and provide the Lender
with satisfactory evidence of such compliance; (c) in the event of any Hazardous
Materials Contamination, provide the Lender, within thirty (30) days after a
demand by the Lender, with a bond, letter of credit or similar financial
assurance evidencing to the Lender's satisfaction that the necessary funds are
available to pay the cost of removing, treating, and disposing of such Hazardous
Materials Contamination and discharging any Lien which may be established as a
result thereof on any property owned or controlled by either Borrower or for
which either Borrower is responsible; and (d) defend, indemnify and hold
harmless the Lender and its agents, employees, trustees, successors and assigns
from any and all claims which may now or in the future (whether before or after
the termination of this Agreement) be asserted as a result of the presence of
any Hazardous Materials on any property owned or controlled by either Borrower
for which either Borrower is responsible for any Hazardous Materials
Contamination.
VIII. NEGATIVE COVENANTS OF BORROWERS
Until payment in full and the performance of all of the Obligations,
without the prior written consent of the Lender, the Company will not and will
neither cause nor permit any of its Subsidiaries to, directly or indirectly:
SECTION 8.1 Borrowings. Create, incur, assume or suffer to exist any
Indebtedness for Borrowed Money, except (a) borrowings in existence on the date
hereof and reflected on the financial statements which the Borrowers furnished
to the Lender in writing prior to the date hereof, and (b) borrowings secured by
Permitted Liens.
29
SECTION 8.2 Mortgages and Pledges. Create, incur, assume or suffer to exist
any Lien on any of its property or assets, whether now owned or hereafter
acquired, except for Permitted Liens.
SECTION 8.3 Method of Accounting. Change the method of accounting employed
in the preparation of the financial statements furnished prior to the date of
this Agreement to the Lender pursuant to Part V of this Agreement, unless
required to conform to GAAP and on the condition that the Borrowers' accountants
shall furnish such information as the Lender may request to reconcile the
changes with the Borrowers' prior financial statements.
SECTION 8.4 Merger, Acquisition or Sale of Assets. Enter into any merger or
consolidation or acquire all or substantially all the assets of any person,
firm, partnership, joint venture or corporation, or sell, lease or otherwise
dispose of any of its assets (except assets disposed of in the ordinary course
of business) provided, however, that the Company may subject to the Lender's
approval, which approval shall be in the Lender's sole and absolute discretion,
use the proceeds of the Acquisition Loan for the purpose of financing the costs
associated with the acquisition of other entities (each an "Acquisition" and
collectively, the "Acquisitions"), provided, however, that each of the following
conditions are, in the Lender's discretion, met (a) the acquired entity (the
"Target") is a going concern; (b) the Target is in a similar line of business;
(c) the Company is the controlling corporation; (f) the portion of the
Acquisition financed under the Acquisition Loan must not exceed seventy five
percent (75%) of the purchase price (based on the value of all consideration
paid for the Target, whether cash or otherwise, but not including stock); (g)
after giving affect to the Acquisition, the Borrowers' Debt Service Coverage
will be equal or greater than 1.20 to 1.00 on a pro-forma basis; (h) after
giving affect to the Acquisition, the Borrowers' ratio of Funded Debt to EBITDA
is less than or equal to 3.50 to 1.0; and (i) the Target is not an entity
headquartered or organized outside of the United States. All Targets will be
required to pledge all of their assets to secure the Loan and will be added as a
co-obligors of the Loans. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
HEREIN NOR COMPLIANCE WITH ANY AND ALL OF THE CONDITIONS PRECEDENT PROVIDED IN
THIS AGREEMENT, NO PROVISION OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING
DOCUMENTS SHALL IMPOSE UPON THE LENDER ANY OBLIGATION TO MAKE ANY ADVANCE UNDER
THE ACQUISITION LOAN TO THE BORROWERS UNDER THE PROVISIONS OF THIS AGREEMENT.
SECTION 8.5 Advances and Loans. Lend money, give credit or make advances to
any person, firm, joint venture or corporation, including, without limitation,
officers, directors, employees, Subsidiaries and Affiliates of the Company,
other than reasonable advances for travel expenses and the like incurred by
officers and employees in the ordinary course and in furtherance of the
Borrowers' business.
SECTION 8.6 Contingent Liabilities. Assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the obligation of
any person, firm, partnership, joint
30
venture or corporation, except by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business.
SECTION 8.7 Investments. Purchase or acquire the obligations or stock of,
or any other or additional interest in, any person, firm, partnership, joint
venture or corporation except (a) general obligations of, or obligations
unconditionally guaranteed as to principal and interest by, the United States of
America, (b) bonds, debentures, participation certificates or notes issued by
any agency or corporation which is or may hereafter be created by Act of the
Congress of the United States as an agency or instrumentality thereof, (c)
Public Housing Bonds, Temporary Notes or Preliminary Loan Notes, fully secured
by contracts with the United States, and (d) certificates of deposit issued by
the Lender.
SECTION 8.8 Subsidiaries. Create or acquire any Subsidiaries other than the
Subsidiaries existing as of the date hereof.
SECTION 8.9 Additional Stock. Issue any additional stock for more than ten
percent (10%) of any class, except stock of an existing class issued as a stock
dividend, stock options and to the Company's Employee Savings and Stock
Ownership Plan (the "ESSOP") approved by the Company's shareholders.
SECTION 8.10 Dividends and Purchase of Stock. Declare any dividend (other
than a dividend payable in capital stock of the Company) on any shares of any
class of its capital stock (other than preferred stock outstanding on the date
hereof or issued in a face amount of less than six million dollars) or apply any
of its property or assets to the purchase, redemption or other retirement of, or
set apart any sum for the payment of any dividend on, or for the purchase,
redemption or other retirement of, or make any other distribution by reduction
of capital or otherwise in respect of, any shares of any class of capital stock
of the Company (except pursuant to an ongoing program to purchase stock for
contribution to the Company's existing ESSOP), or permit any Subsidiary to
purchase or acquire any shares of any class of capital stock of the Company.
SECTION 8.11 ERISA Compliance. Neither the Company nor any Commonly
Controlled Entity will: (a) engage in or permit any "prohibited transaction" (as
defined in ERISA); (b) cause any "accumulated funding deficiency" as defined in
ERISA and/or the Internal Revenue Code; (c) terminate any pension plan in a
manner which could result in the imposition of a lien on the property of the
Company pursuant to ERISA; (d) terminate or consent to the termination of any
Multiemployer Plan; or (e) incur a complete or partial withdrawal with respect
to any Multiemployer Plan.
SECTION 8.12 Prohibition on Hazardous Materials. The Borrowers shall not
place, manufacture or store or permit to be placed, manufactured or stored any
Hazardous Materials on any property owned, controlled or operated by the
Borrowers or for which either Borrower is responsible, other than reasonable
quantities of Hazardous Materials stored or kept by either
31
Borrower in the ordinary course of its current line of business, which Hazardous
Materials are at all times stored, used and disposed in accordance with
applicable Laws.
SECTION 8.13 Transfer of Collateral. Transfer, or permit the transfer, to
another location of any of the Collateral or the books and records related to
any of the Collateral; provided, however, that the Borrowers may transfer the
Collateral or the books and records related thereto to another location if (a)
the Borrowers shall have provided to the Lender prior to such transfer an
opinion of counsel addressed to the Lender to the effect that the Lender's
perfected security interest shall not be affected by such move or if it shall be
affected, setting forth the steps necessary to continue the Lender's perfected
security interest together with the commencement of such steps by the Borrowers
at their expense, and (b) shall have taken such steps.
SECTION 8.14 Sale and Leaseback. Directly or indirectly enter into any
arrangement to sell or transfer all or any substantial part of its fixed assets
then owned by it and thereupon or within one year thereafter rent or lease the
assets so sold or transferred.
SECTION 8.15 Sale of Accounts. Sell, discount, transfer, assign or
otherwise dispose of any of its Accounts, notes receivable, installment or
conditional sales agreements or any other rights to receive income, revenues or
moneys, however evidenced.
SECTION 8.16 Line of Business. Enter into any lines or areas of business
that would fundamentally change the business activities in which it is presently
engaged.
IX. EVENTS OF DEFAULT
The occurrence of one or more of the following events shall be "Events of
Default" under this Agreement, and the terms "Event of Default" or "Default"
shall mean, whenever they are used in this Agreement, any one or more of the
following events:
SECTION 9.1 Failure to Pay. The Borrowers shall fail to (a) make any
payment of principal or interest on either of the Notes within five (5) days of
when due, or (b) pay any of the Obligations, within five (5) days of when and as
the same shall become due and payable.
SECTION 9.2 Breach of Representations and Warranties. Any representation or
warranty made herein or in any report, certificate, opinion (including any
opinion of counsel for the Borrowers), financial statement or other instrument
furnished in connection with the Obligations or with the execution and delivery
of any of the Financing Documents, shall prove to have been false or misleading
when made in any material respect.
SECTION 9.3 Failure to Comply with Insurance Provisions. The Borrowers
shall fail to duly and promptly perform, comply with or observe the terms,
covenants, conditions and agreements set forth in SECTIONS 7.17 and 7.18.
32
SECTION 9.4 Failure to Comply with Covenants. Default shall be made by
either Borrower in the due observance and performance of any covenant, condition
or agreement contained in SECTIONS 7.01, 7.02 7.04 or 7.16 hereof or in Part
VIII hereof.
SECTION 9.5 Other Defaults. Default shall be made by either Borrower in the
due observance or performance of any other term, covenant or agreement herein
contained, which default shall remain unremedied for thirty (30) days after
written notice thereof to the Borrowers by the Lender.
SECTION 9.6 Default Under Other Financing Documents. An event of default
shall occur under any of the other Financing Documents, and such event of
default is not cured within any applicable grace period provided therein.
SECTION 9.7 Receiver; Bankruptcy. The Company or any Subsidiary shall (a)
apply for or consent to the appointment of a receiver, trustee or liquidator of
itself or any of its property, (b) admit in writing its inability to pay its
debts as they mature, (c) make a general assignment for the benefit of
creditors, (d) be adjudicated a bankrupt or insolvent, (e) file a voluntary
petition in bankruptcy or a petition or an answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation law
or statute, or an answer admitting the material allegations of a petition filed
against it in any proceeding under any such law or if corporate action shall be
taken by the Company or any Subsidiary for the purposes of effecting any of the
foregoing, or (f) by any act indicate its consent to, approval of or
acquiescence in any such proceeding or the appointment of any receiver of or
trustee for any of its property, or suffer any such receivership, trusteeship or
proceeding to continue undischarged for a period of sixty (60) days.
SECTION 9.8 Judgment. Unless adequately insured in the opinion of the
Lender, the entry of a final judgment for the payment of money involving more
than $150,000 against the Company or any Subsidiary and the failure by the
Company or such Subsidiary to discharge the same, or cause it to be discharged,
within thirty (30) days from the date of the order, decree or process under
which or pursuant to which such judgment was entered, or to secure a stay of
execution pending appeal of such judgment.
SECTION 9.9 Execution; Attachment. Any execution or attachment shall be
levied against the Collateral, or any part thereof, and such execution or
attachment shall not be set aside, discharged or stayed within thirty (30) days
after the same shall have been levied.
SECTION 9.10 Default Under Other Borrowings. Default shall be made with
respect to any evidence of indebtedness or liability for borrowed money (other
than the Loans) if the effect of such default is to accelerate the maturity of
such evidence of indebtedness or liability.
33
SECTION 9.11 Audit Results. If the Lender concludes after examining the
results of any audits of the Borrowers' books and records or the Collateral that
the condition of the Borrowers is unsatisfactory based on the Lender's normal
and customary underwriting practices.
SECTION 9.12 Contract Default. If (i) a notice of debarment, notice of
suspension or notice of termination for default shall have been issued under any
Government Contract, (ii) either Borrower is barred or suspended from
contracting with any part of any Governmental Authority, (iii) an investigation
of any Governmental Authority shall have been commenced in connection with any
Government Contract or either Borrower which could reasonably result in criminal
or civil liability, suspension, debarment or any other adverse administrative
action arising by reason of alleged fraud, willful misconduct, neglect, default
or other wrongdoing, (iv) the actual termination of any Government Contract due
to alleged fraud, willful misconduct, neglect, default or any other wrongdoing;
or (v) a cure notice issued under any Government Contract shall remain uncured
beyond (A) the expiration of the time period available to either Borrower
pursuant to such Government Contract and/or such cure notice, to cure the
noticed default, or (B) the date on which the other contracting party is
entitled to exercise its rights and remedies under the Government Contract as a
consequence of such default, which would materially affect the conduct of the
Company's or such Subsidiary's business, the financial condition of the Company
or such Subsidiary, or in any manner affect the Collateral.
X. RIGHTS AND REMEDIES UPON DEFAULT
SECTION 10.1 Demand; Acceleration. The occurrence or non-occurrence of an
Event of Default under this Agreement shall in no way affect or condition the
right of the Lender to demand payment at any time of any of the Obligations
which are payable on demand regardless of whether or not an Event of Default has
occurred. Upon the occurrence of an Event of Default, and in every such event
and at any time thereafter, the Lender may declare the Obligations due and
payable, without presentment, demand, protest, or any notice of any kind, all of
which are hereby expressly waived, anything contained herein or in any of the
other Financing Documents to the contrary notwithstanding.
SECTION 10.2 Specific Rights With Regard to Collateral. In addition to all
other rights and remedies provided hereunder or as shall exist at law or in
equity from time to time, the Lender may, after the occurrence of an Event of
Default, without notice to the Borrowers:
(a) request any account debtor obligated on any of the Accounts to
make payments thereon directly to the Lender, with the Lender taking
control of the cash and non-cash proceeds thereof;
(b) compromise, extend or renew any of the Collateral or deal with the
same as it may deem advisable;
(c) make exchanges, substitutions or surrenders of all or any part of
the Collateral;
34
(d) remove from any of the Company's or any Subsidiary's place of
business all books, records, ledger sheets, correspondence, invoices and
documents, relating to or evidencing any of the Collateral or without cost
or expense to the Lender, make such use of the Company's or any
Subsidiary's place(s) of business as may be reasonably necessary to
administer, control and collect the Collateral;
(e) repair, alter or supply goods if necessary to fulfill in whole or
in part the purchase order of any account debtor;
(f) demand, collect, receipt for and give renewals, extensions,
discharges and releases of any of the Collateral;
(g) institute and prosecute legal and equitable proceedings to enforce
collection of, or realize upon, any of the Collateral;
(h) settle, renew, extend, compromise, compound, exchange or adjust
claims in respect of any of the Collateral or any legal proceedings brought
in respect thereof;
(i) endorse the name of either Borrower upon any items of payment
relating to the Collateral or on any proof of claim in bankruptcy against
an account debtor; and
(j) notify the post office authorities to change the address for the
delivery of mail to the Borrowers to such address or post office box as the
Lender may designate and receive and open all mail addressed to the
Borrowers.
SECTION 10.3 Performance by Lender. If either Borrower shall fail to pay
the Obligations or otherwise fail to perform, observe or comply with any of the
material conditions, covenants, terms, stipulations or agreements contained in
this Agreement or any of the other Financing Documents, the Lender without
notice to or demand upon the Borrowers and without waiving or releasing any of
the Obligations or any Event of Default, may (but shall be under no obligation
to) at any time thereafter make such payment or perform such act for the account
and at the expense of the Borrowers, and may enter upon the premises of each
Borrower for that purpose and take all such action thereon as the Lender may
consider necessary or appropriate for such purpose. All sums so paid or advanced
by the Lender and all costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred in connection therewith (the
"Expense Payments") together with interest thereon from the date of payment,
advance or incurring until paid in full at the rate of one percent (1%) per
annum in excess of the highest fluctuating interest rate payable under any of
the Notes from time to time shall be paid by the Borrowers to the Lender on
demand and shall constitute and become a part of the Obligations.
SECTION 10.4 Uniform Commercial Code and Other Remedies. Upon the
occurrence of an Event of Default (and in addition to all of its rights, powers
and remedies under this Agreement), the Lender shall have all of the rights and
remedies of a secured party under the Virginia
35
Uniform Commercial Code and other applicable laws, and the Lender is authorized
to offset and apply to all or any part of the Obligations all moneys, credits
and other property of any nature whatsoever of either Borrower now or at any
time hereafter in the possession of, in transit to or from, under the control or
custody of, or on deposit with, the Lender. Upon demand by the Lender, the
Borrowers shall assemble the Collateral and make it available to the Lender, at
a place designated by the Lender. The Lender or its agents may enter upon each
Borrower's premises to take possession of the Collateral, to remove it, to
render it unusable, or to sell or otherwise dispose of it.
Any written notice of the sale, disposition or other intended action by the
Lender with respect to the Collateral which is sent by regular mail, postage
prepaid, to the Borrowers at the address set forth in Part XI hereof, or such
other address of the Borrowers which may from time to time be shown on the
Lender's records, at least ten (10) days prior to such sale, disposition or
other action, shall constitute reasonable notice to the Borrowers. The Borrowers
shall pay on demand all costs and expenses, including, without limitation,
attorney's fees and expenses, incurred by or on behalf of the Lender in
preparing for sale or other disposition, selling, managing, collecting or
otherwise disposing of, the Collateral. All of such costs and expenses (the
"Liquidation Costs") together with interest thereon from the date incurred until
paid in full at the Default Rate, shall be paid by the Borrowers to the Lender
on demand and shall constitute and become a part of the Obligations. Any
proceeds of sale or other disposition of the Collateral will be applied by the
Lender to the payment of the Liquidation Costs and Expense Payments, and any
balance of such proceeds will be applied by the Lender to the payment of the
balance of the Obligations in such order and manner of application as the Lender
may from time to time in its sole discretion determine. After such application
of the proceeds, any balance shall be paid to the Borrowers or to any other
party entitled thereto.
XI. MISCELLANEOUS
SECTION 11.1 Notices. All notices, certificates or other communications
hereunder shall be deemed given when delivered by hand or courier, or when
mailed by certified mail, postage prepaid, return receipt requested, addressed
as follows:
if to the Lender: NATIONSBANK, N.A.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attn: Mr. Rit Amin
if to the Borrowers: VERSAR, INC.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
SECTION 11.2 Consents and Approvals. If any consent, approval, or
authorization of any state, municipal or other governmental department, agency
or authority or of any person, or
36
any person, corporation, partnership or other entity having any interest
therein, should be necessary to effectuate any sale or other disposition of the
Collateral, the Borrowers agree to execute all such applications and other
instruments, and to take all other action, as may be required in connection with
securing any such consent, approval or authorization.
SECTION 11.3 Remedies, etc. Cumulative. Each right, power and remedy of the
Lender as provided for in this Agreement or in any of the other Financing
Documents or now or hereafter existing at law or in equity or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy provided for in this Agreement or in any of the
other Financing Documents or now or hereafter existing at law or in equity, by
statute or otherwise, and the exercise or beginning of the exercise by the
Lender of any one or more of such rights, powers or remedies shall not preclude
the simultaneous or later exercise by the Lender of any or all such other
rights, powers or remedies. In order to entitle the Lender to exercise any
remedy reserved to it herein, it shall not be necessary to give any notice,
other than such notice as may be expressly required in this Agreement.
SECTION 11.4 No Waiver of Rights by the Lender. No failure or delay by the
Lender to insist upon the strict performance of any term, condition, covenant or
agreement of this Agreement or of any of the other Financing Documents, or to
exercise any right, power or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, condition, covenant or agreement or of any
such breach or preclude the Lender from exercising any such right, power or
remedy at any later time or times. By accepting payment after the due date of
any amount payable under this Agreement or under any of the other Financing
Documents, the Lender shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under this Agreement or
under any of the other Financing Documents, or to declare a default for failure
to effect such prompt payment of any such other amount.
SECTION 11.5 Entire Agreement. The Financing Documents shall completely and
fully supersede all other agreements, both written and oral, between the Lender
and the Borrowers relating to the Obligations. Neither the Lender nor the
Borrowers shall hereafter have any rights under such prior agreements but shall
look solely to the Financing Documents for definition and determination of all
of their respective rights, liabilities and responsibilities relating to the
Obligations.
SECTION 11.6 Survival of Agreement; Successors and Assigns. All covenants,
agreements, representations and warranties made by the Borrowers herein and in
any certificate, in the Financing Documents and in any other instruments or
documents delivered pursuant hereto shall survive the making by the Lender of
the Loans and the execution and delivery of the Notes, and shall continue in
full force and effect so long as any of the Obligations are outstanding and
unpaid, INCLUDING, BUT NOT LIMITED TO, REPAYMENT IN FULL OF ALL OBLIGATIONS
UNDER THE SARNIA DOCUMENTS. Whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of such party; and all covenants, promises and agreements by or on
behalf of the Borrowers, which are contained in this Agreement shall inure to
the benefit of the successors and assigns of the Lender, and all covenants,
37
promises and agreements by or on behalf of the Lender which are contained in
this Agreement shall inure to the benefit of the permitted successors and
permitted assigns of the Borrowers, but this Agreement may not be assigned by
the Borrowers without the prior written consent of the Lender.
SECTION 11.7 Expenses. Each Borrower agrees to pay all out-of-pocket
expenses of the Lender (including the reasonable fees and expenses of its legal
counsel) in connection with the preparation of this Agreement, the recordation
of all financing statements and such other instruments as may be required by the
Lender at the time of, or subsequent to, the execution of this Agreement to
secure the Obligations (including any and all recordation tax and other costs
and taxes incident to recording), the enforcement of any provision of this
Agreement and the collection of the Obligations. Each Borrower agrees to
indemnify and save harmless the Lender for any liability resulting from the
failure to pay any required recordation tax, transfer taxes, recording costs or
any other expenses incurred by the Lender in connection with the Obligations.
The provisions of this Section shall survive the execution and delivery of this
Agreement and the repayment of the Obligations. Each Borrower further agrees to
reimburse the Lender upon demand for all out-of-pocket expenses (including
reasonable attorneys' fees and legal expenses) incurred by the Lender in
enforcing any of the Obligations or any security therefor, which agreement shall
survive the termination of this Agreement and the repayment of the Obligations.
SECTION 11.8 Counterparts. This Agreement may be executed in any number of
counterparts all of which together shall constitute a single instrument.
SECTION 11.9 Governing Law. This Agreement and all of the other Financing
Documents shall be governed by, and construed in accordance with the laws of the
State.
SECTION 11.10 Modifications. No modification or waiver of any provision of
this Agreement or of any of the other Financing Documents, nor consent to any
departure by the Borrowers therefrom, shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on the Borrowers in any case shall entitle the Borrowers to any other
or further notice or demand in the same, similar or other circumstance.
SECTION 11.11 Illegality. If fulfillment of any provision hereof or any
transaction related hereto or to any of the other Financing Documents, at the
time performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provisions herein contained other than the provisions hereof pertaining to
repayment of the Obligations operates or would prospectively operate to
invalidate this Agreement in whole or in part, then such clause or provision
only shall be void, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect; and if such
provision pertains to repayment of the Obligations, then, at the option of the
Lender, all of the Obligations of the Borrowers to the Lender shall become
immediately due and payable.
38
SECTION 11.12 Extension of Maturity. Should the principal of or interest on
the Notes become due and payable on other than a Banking Day, the maturity
thereof shall be extended to the next succeeding Banking Day and in the case of
principal, interest shall be payable thereon at the rate per annum specified in
the Notes during such extension.
SECTION 11.13 Gender, etc. Whenever used herein, the singular number shall
include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders.
SECTION 11.14 Headings. The headings in this Agreement are for convenience
only and shall not limit or otherwise affect any of the terms hereof.
SECTION 11.15 Waiver of Trial by Jury. The parties hereto hereby waive
trial by jury in any action or proceeding to which both of them may be parties,
arising out of or in any way pertaining to (a) this Agreement, (b) the Loans,
Obligations, and Collateral which are the subject of this Agreement, and (c) any
and all notes, guarantees, assignments or agreements of any kind relating to the
Loans. It is agreed and understood that this waiver constitutes a waiver of
trial by jury of all claims against all parties to such actions or proceedings,
including claims against parties who are not parties to this Agreement.
This waiver is knowingly, willingly and voluntarily made by each of the
parties hereto, and the parties hereby represent that no representations of fact
or opinion have been made by any individual to induce this waiver of trial by
jury or to in any way modify or nullify its effect. The parties further
represent that they have been represented in the signing of this Agreement and
in the making of this waiver by independent legal counsel, selected of their own
free will, and that they have had the opportunity to discuss this waiver with
counsel.
SECTION 11.16 Liability of the Lender. The Borrowers hereby agree that the
Lender shall not be chargeable for any negligence, mistake, act or omission of
any accountant, examiner, agency or attorney employed by the Lender (except for
the gross negligence or willful misconduct of any person, corporation,
partnership or other entity employed by the Lender) in making examinations,
investigations or collections, or otherwise in perfecting, maintaining,
protecting or realizing upon any lien or security interest or any other interest
in the Collateral or other security for the Obligations.
SECTION 11.17 ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF THIS NOTE OR
ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON
OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN
ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE
APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR ARBITRATION OF
COMMERCIAL DISPUTES OF ENDISPUTE, INC., D/B/A J.A.M.S./ENDISPUTE ("J.A.M.S.")
39
AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF AN INCONSISTENCY, THE
SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED
IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR
DOCUMENT MAY BRING ANY ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS NOTE RELATES IN ANY
COURT HAVING JURISDICTION OVER SUCH ACTION.
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN FAIRFAX COUNTY,
VIRGINIA AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR. IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN NINETY (90) DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCING OF SUCH HEARING FOR AN ADDITIONAL SIXTY (60) DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS NOTE SHALL BE DEEMED TO: (I)
LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR
REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR DOCUMENT; OR
(II) BE A WAIVER BY THE LENDER OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C.
ss.91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE
LENDER: (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SET OFF,
OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO
OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED
TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE
LENDER MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE
PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT,
AGREEMENT OR DOCUMENT. NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE
INSTITUTION OR MAINTENANCE OF ANY ACTION FOR FORECLOSURE OR FOR PROVISIONAL OR
ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
SECTION 11.18 Right of Contribution. The Borrowers and the Lender agree
that on and after the Closing Date, each Borrower (an "Entitled Borrower") shall
be entitled to contribution from each other Borrower to the extent, if any, that
(a) an Entitled Borrower incurs any Obligations in excess of such Entitled
Borrowers Net Valuation (as hereinafter defined) or (b) the Obligations incurred
by such Entitled Borrower would leave such Entitled Borrower with an
unreasonably small
40
amount of capital to enable the Entitled Borrower to operate the business in
which it is engaged, and/or the Obligations incurred by such Entitled Borrower
prevent such Entitled Borrower from paying its debts as such debts mature;
provided, however, that such right of contribution shall be subordinated to the
payment of the Obligations and may not be exercised by any Borrower until all of
the Obligations have been paid in full. Nothing in this Section shall be deemed
to in any manner impair the joint and several liability of each Borrower for any
and all of the Obligations. The provisions of this Section shall be in addition
to and shall in no manner limit any other rights of contribution available to
any Borrower. The term "Net Valuation" as used in this Section means the amount
by which (1) an Entitled Borrower's property at a fair valuation exceeds (2)
such Entitled Borrower's debts.
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement on the day and year first above written.
WITNESS OR ATTEST: VERSAR, INC.
/s/ Xxxx Xxxxxx By: /s/ Xxxxxxxx X. Xxxxxxx (SEAL)
-------------------------- --------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: V.P. and CFO
WITNESS OR ATTEST: GEOMET TECHNOLOGIES, INC.
/s/ Xxxx Xxxxxx By: /s/ Xxxxxxxx X. Xxxxxxx (SEAL)
-------------------------- --------------------------
Name: Xxxxxxxx X. Xxxxxxx
Title: Treasurer
NATIONSBANK, N.A.
By: (SEAL)
-------------------------- --------------------------
Rit Amin
Commercial Loan Officer
41
EXHIBITS
--------
A-1. Form of Acquisition Note
A-2. Revolving Note
B. Subsidiaries
C. Places of Business
D. Liens on Collateral
E. Borrowing Base Certificate
F. Compliance Certificate
42
EXHIBIT B
SUBSIDIARIES
Chief Executive Ownership Interest
Name Officer of Company
---- ------- ----------
GEOMET TECHNOLOGIES, INC
43
EXHIBIT C
PLACES OF BUSINESS
The Borrowers' Chief Executive Office is:
6850 Versar Center
Xxxxxxxxxxx, Xxxxxxxx 00000
The Borrowers have other places of business at the following addresses:
The Collateral is located at the following address(es):
44
EXHIBIT D
LIENS ON COLLATERAL
Asset Covered Lienholder Balance Unpaid Principal
------------- ---------- ------- ----------------
45
