Exhibit 10.1
SECOND AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
(this "Agreement") is made as of the 28th day of February, 2002, by and
between SENSYTECH, INC., formerly known as Sensys Technologies Inc., a
Delaware corporation, (the "Borrower") and BANK OF AMERICA, N. A., formerly
known as NationsBank, N. A., a national banking association (the "Lender").
RECITALS
A. The Borrower and the Lender have previously executed an Amended
and Restated Financing and Security Agreement dated as of February 28, 1999, as
modified by a First Amendment to Amended and Restated Financing and Security
Agreement dated as of February 28, 2001 (collectively, the "Original Financing
Agreement") pursuant to which the Lender has extended various credit facilities
to the Borrower.
B. The Borrower has requested that the Lender amend and restate the
Original Financing Agreement and extend credit facilities consisting of a
revolving credit facility in the maximum principal amount of $10,000,000 and a
letter of credit facility, as part of that revolving credit facility.
C. The Lender is willing to make the credit facilities available to
the Borrower upon the terms and subject to the conditions set forth in this
Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
ARTICLE 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,
health-care insurance receivables, 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 payment of a monetary obligation or other consideration under
present or future contracts (including, without limitation, all rights
(whether or not earned by performance) to receive payments under presently
existing or hereafter acquired or created letters of credit), or by virtue of
property that has been sold, leased, licensed, assigned or otherwise disposed
of, services rendered or to be 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 goods which gave rise to any or all of the foregoing, including
all commercial tort claims, other claims or causes of action now 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,
without limitation, real property mortgages and deeds of trust) Supporting
Obligations, letter-of-credit rights and letters of credit given by any Person
with respect to any of the foregoing, all books and records in whatever media
(paper, electronic or otherwise) recorded or stored, with respect to any or
all of the foregoing and all equipment and general intangibles necessary or
beneficial to retain, access and/or process the information contained in those
books and records, and all Proceeds of the foregoing.
"Account Debtor" means any Person who is obligated on a Receivable and
"Account Debtors" mean all Persons who are obligated on the Receivables.
"ACH Transactions" means any cash management or related services
including the automatic clearing house transfer of funds by the Lender for the
account of the Borrower pursuant to agreement or overdrafts.
"Adjustment Date" has the meaning described in Section 8.5
(Assignments by Lender).
"Administrative Fees" has the meaning described in Section 2.3.3
(Administrative Fees).
"Affiliate" means, with respect to any designated Person, any other
Person, (a) directly or indirectly controlling, directly or indirectly
controlled by, or under direct or indirect common control with the Person
designated, (b) directly or indirectly owning or holding five percent (5%) or
more of any equity interest in such designated Person, or (c) five percent
(5%) or more of whose stock or other equity interest is directly or indirectly
owned or held by such designated Person. For purposes of this definition, the
term "control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities or other equity interests or by contract or otherwise.
"Agreement" means this Second Amended and Restated Financing and
Security Agreement, as amended, restated, supplemented or otherwise modified
in writing in accordance with the provisions of Section 8.2 (Amendments;
Waivers).
"Applicable Interest Rate" means (a) the Eurodollar Rate or (b) the
Base Rate.
"Applicable Margin" means the applicable rate per annum added, as set
forth in Section 2.4.1 (Applicable Interest Rates), to the Eurodollar Base
Rate or the Prime Rate.
"Assets" means at any date all assets that, in accordance with GAAP
consistently applied, should be classified as assets on a balance sheet of the
Borrower.
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"Assignee" means any Person to which the Lender assigns all or any
portion of its interests under this Agreement, any Commitment, and any Loan,
in accordance with the provisions of Section 8.5 (Assignments by Lender),
together with any and all successors and assigns of such Person; "Assignees"
means the collective reference to all Assignees.
"Bankruptcy Code" means Title 11 of the United States Code, as amended
from time to time, and any successor Laws.
"Borrower" means the "Borrower" as defined in the preamble of this
Agreement and each Additional Borrower.
"Base Rate" the sum of (a) the Applicable Margin plus (b) the Prime
Rate.
"Base Rate Loan" means any Loan for which interest is to be computed
with reference to the Base Rate.
"Borrowing Base" has the meaning described in Section 2.1.3 (Borrowing
Base).
"Borrowing Base Deficiency" has the meaning described in Section 2.1.3
(Borrowing Base).
"Borrowing Base Report" has the meaning described in Section 2.1.4
(Borrowing Base Report).
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in the State are authorized or required to
close.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any other
law, rule or regulation, whether or not having the force of law, in each case,
regarding capital adequacy of any bank or of any corporation controlling a
bank.
"Capital Lease" means with respect to any Person any lease of real or
personal property, for which the related Lease Obligations have been or should
be, in accordance with GAAP consistently applied, capitalized on the balance
sheet of that Person..
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit
with maturities of one (1) year or less from the date of acquisition of, or
money market accounts maintained with, the Lender, any Affiliate of the
Lender, or any other domestic commercial bank having capital and surplus in
excess of One Hundred Million Dollars ($100,000,000.00) or such other domestic
financial institutions or domestic brokerage houses to the extent disclosed
to, and approved by, the Lender and (c) commercial paper of a domestic issuer
rated at least either A-1 by Standard & Poor's Corporation (or its successor)
or P-1 by Xxxxx'x Investors Service, Inc. (or its successor) with maturities
of six (6) months or less from the date of acquisition.
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"Chattel Paper" means a record or records (including, without
limitation, electronic chattel paper) that evidence both a monetary obligation
and a security interest in specific goods, a security interest in specific
goods and software used in the goods, or a lease of specific goods; all
Supporting Obligations with respect thereto; any returned, rejected or
repossessed goods and software covered by any such record or records and all
proceeds (in any form including, without limitation, accounts, contract
rights, documents, chattel paper, instruments and general intangibles) of such
returned, rejected or repossessed goods; and all Proceeds of the foregoing.
"Closing Date" means the Business Day, in any event not later than
February 28, 2002, on which the Lender shall be satisfied that the conditions
precedent set forth in Section 5.1 (Conditions to Initial Advance) have been
fulfilled or otherwise waived by the Lender.
"Collateral" means all property of the Borrower subject from time to
time to the Liens of this Agreement, any of the Security Documents and/or any
of the other Financing Documents, together with any and all Proceeds thereof.
"Collateral Account" has the meaning described in Section 2.1.8 (The
Collateral Account).
"Collateral Disclosure List" has the meaning described in 0
(Collateral Disclosure List).
"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.
"Commitment" means the Revolving Credit Commitment.
"Committed Amount" means the Revolving Credit Committed Amount.
"Compliance Certificate" means a periodic Compliance Certificate
described in Section 6.1.1 (Financial Statements).
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 414(b) or (c) of the Internal Revenue Code.
"Copyrights" means and includes, in each case whether now existing or
hereafter arising, all of the Borrower's rights, title and interest in and to
(a) all copyrights, rights and interests in copyrights, works protectable by
copyright, copyright registrations, copyright applications, and all renewals
of any of the foregoing, (b) all income, royalties, damages and payments now
or hereafter due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past, current or future infringements of
any of the foregoing, (c) the right to xxx for past, present and future
infringements of any of the foregoing, and (d) all rights corresponding to any
of the foregoing throughout the world.
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"Credit Facility" means the Revolving Credit Facility or the Letter of
Credit Facility, as the case may be, and "Credit Facilities" means
collectively the Revolving Credit Facility or the Letter of Credit Facility
and any and all other credit facilities now or hereafter extended under or
secured by this Agreement.
"Default" means an event which, with the giving of notice or lapse of
time, or both, could or would constitute an Event of Default under the
provisions of this Agreement.
"Documents" means all documents of title or receipts, whether now
existing or hereafter acquired or created, and all Proceeds of the foregoing.
"EBITDA" means as to the Borrower for any period of determination
thereof, the sum of (a) the net profit (or loss) determined in accordance with
GAAP, plus (b) interest and taxes for such period, plus (c) depreciation and
amortization of assets for such period.
"Eligible Receivable" and "Eligible Receivables" mean, at any time of
determination thereof, the unpaid portion of each account (net of any returns,
discounts, claims, credits, charges, accrued rebates or other allowances,
offsets, deductions, counterclaims, disputes or other defenses and reduced by
the aggregate amount of all reserves, limits and deductions provided for in
this definition and elsewhere in this Agreement) receivable in United States
Dollars by the Borrower, provided each account conforms and continues to
conform to the following criteria to the satisfaction of the Lender:
(a) the account arose in the ordinary course of the
Borrower's business from services performed by the Borrower;
(b) the account is a valid, legally enforceable
obligation of the Account Debtor and requires no further act on the
part of any Person under any circumstances to make the account payable
by the Account Debtor;
(c) the account is based upon an enforceable order or
contract, written or oral, for services performed, and the same were
performed in accordance with such order or contract;
(d) if the account arises from the performance of
services, such services have been fully rendered and do not relate to
any warranty claim or obligation;
(e) the account is evidenced by an invoice or other
documentation in form acceptable to the Lender, dated no later than
the date of shipment or performance and containing only terms normally
offered by the Borrower;
(f) the amount shown on the books of the Borrower and
on any invoice, certificate, schedule or statement delivered to the
Lender is owing to the Borrower and no partial payment has been
received unless reflected with that delivery;
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(g) the account is not outstanding more than ninety
(90) days from the date of the invoice therefore or past due more than
sixty (60) days after its due date, which shall not be later than
thirty (30) days after the invoice date;
(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 the
Borrower to be non-Eligible Receivables;
(i) the Account Debtor has not returned, rejected or
refused to retain, or otherwise notified the Borrower of any dispute
concerning, or claimed nonconformity of, any services from the
furnishing of which the account arose;
(j) the account is not subject to any present or
contingent (and no facts exist which are the basis for any future)
offset, claim, deduction or counterclaim, dispute or defense in law or
equity on the part of such Account Debtor, or any claim for credits,
allowances, or adjustments by the Account Debtor because of
unsatisfactory services, or for any other reason including, without
limitation, those arising on account of a breach of any express or
implied representation or warranty;
(k) the Account Debtor is not a Subsidiary or
Affiliate of the Borrower or an employee, officer, director or
shareholder of the Borrower or any Subsidiary or Affiliate of the
Borrower;
(l) the Account Debtor is not incorporated or
primarily conducting business or otherwise located in any jurisdiction
outside of the United States of America unless the account receivable
is supported by a letter of credit from a financial institution
acceptable to the Lender;
(m) the Account Debtor with respect to such account
is not insolvent or the subject of any bankruptcy or insolvency
proceedings of any kind or of any other proceeding or action,
threatened or pending;
(n) the Borrower is not indebted in any manner to the
Account Debtor (as creditor, lessor, supplier or otherwise), with the
exception of customary credits, adjustments and/or discounts given to
an Account Debtor by the Borrower in the ordinary course of its
business;
(o) the account does not arise from services under or
related to any warranty obligation of the Borrower or out of service
charges, finance charges or other fees for the time value of money;
(p) the account is not evidenced by chattel paper or
an instrument of any kind and is not secured by any letter of credit;
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(q) the title of the Borrower to the account is
absolute and is not subject to any prior assignment, claim, Lien, or
security interest, except Permitted Liens;
(r) no bond or other undertaking by a guarantor or
surety has been or is required to be obtained, supporting the
performance of the Borrower or any other obligor in respect of any of
the Borrower's agreements with the Account Debtor;
(s) no bond or other undertaking by a guarantor or
surety has been or is required to be obtained, supporting the account
and any of the Account Debtor's obligations in respect of the account;
(t) the Borrower has the full and unqualified right
and power to assign and grant a security interest in, and Lien on, the
account to the Lender as security and collateral for the payment of
the Obligations;
(u) 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 or grant of a security
interest by the Borrower to the Lender of the account arising from
such contract or order;
(v) the account is subject to a Lien in favor of the
Lender, which Lien is perfected as to the account by the filing of
financing statements and which Lien upon such filing constitutes a
first priority security interest and Lien;
(w) no part of the account represents a retainage;
(x) the Lender in the good faith exercise of its sole
and absolute 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 of such
account to the Lender to be impaired or its ability to realize such
value to be insecure; and
(y) the account does not constitute a final billing
or close out billing relating to a completed contract with
contingencies that remain to be satisfied.
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 good faith exercise of its sole and absolute
discretion shall control.
"Enforcement Costs" means all expenses, charges, costs and fees
whatsoever (including, without limitation, reasonable outside and allocated
in-house counsel attorney's fees and expenses) of any nature whatsoever paid
or incurred by or on behalf of the Lender in connection with (a) any or all of
the Obligations, this Agreement and/or any of the other Financing Documents,
(b) the
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creation, perfection, collection, maintenance, preservation, defense,
protection, realization upon, disposition, sale or enforcement of all or any
part of the Collateral, this Agreement or any of the other Financing
Documents, including, without limitation, those costs and expenses more
specifically enumerated in Section 3.6 (Costs) and/or Section 8.10
(Enforcement Costs), and (c) the monitoring, administration, processing and/or
servicing of any or all of the Obligations, the Financing Documents, and/or
the Collateral.
"Equipment" means all equipment, machinery, computers, chattels,
tools, parts, machine tools, furniture, furnishings, fixtures and supplies of
every nature, presently existing or hereafter acquired or created and wherever
located, whether or not the same shall be deemed to be affixed to real
property, and all of such types of property leased by the Borrower and all of
the Borrower's rights and interests with respect thereto under such leases
(including, without limitation, options to purchase), together with all
accessions, additions, fittings, accessories, special tools, and improvements
thereto and substitutions therefore and all parts and equipment which may be
attached to or which are necessary or beneficial for the operation, use and/or
disposition of such personal property, all licenses, warranties, franchises
and General Intangibles related thereto or necessary or beneficial for the
operation, use and/or disposition of the same, together with all Accounts,
Chattel Paper, Instruments and other consideration received by the Borrower on
account of the sale, lease or other disposition of all or any part of the
foregoing, and together with all rights under or arising out of present or
future Documents and contracts relating to the foregoing and all Proceeds of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Base Rate" means with respect to any Eurodollar Loan, the
fluctuating rate of interest (rounded upwards, if necessary to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
one (1) month London interbank offered rate for deposits in United States
Dollars at approximately 11:00 a.m. (London time) on the second preceding
business day, as adjusted from time to time in Lender's sole discretion for
then-applicable reserve requirements, deposit insurance assessment rates and
other regulatory costs. If for any reason such rate is not available, the term
"Eurodollar Base Rate" shall mean the fluctuating rate of interest equal to
the rate of interest (rounded upwards, if necessary to the nearest 1/100 of
1%) appearing on Reuters Screen LIBO Page as the one (1) month London
interbank offered rate for deposits in United States Dollars at approximately
11:00 a.m. (London time) on the second preceding day, as adjusted from time to
time in Lender's sole discretion for then-applicable reserve requirements,
deposit insurance assessment rates and other regulatory costs; provided,
however, if more than one rate is specified on Reuters Screen LIBO page, the
applicable rate shall be the arithmetic mean of all such rates.
"Eurodollar Business Day" means any Business Day on which dealings in
United States Dollar deposits are carried out on the London interbank market
and on which commercial banks are open for domestic and international business
(including dealings in Dollar deposits) in London, England.
"Eurodollar Loan" means any Loan for which interest is to be computed
with reference to the Eurodollar Rate.
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"Eurodollar Rate" means with respect to any Eurodollar Loan, (a) the
Applicable Margin, plus (b) the per annum rate of interest calculated pursuant
to the following formula:
Eurodollar Base Rate
1.00 - Reserve Percentage
"Event of Default" has the meaning described in ARTICLE VII (Default
and Rights and Remedies).
"Facilities" means the collective reference to the loan, letter of
credit, interest rate protection, foreign exchange risk, cash management, and
other credit facilities now or hereafter provided to the Borrower by the
Lender or any of its Affiliates.
"Fees" means the collective reference to each fee payable to the
Lender under the terms of this Agreement or under the terms of any of the
other Financing Documents.
"Financing Documents" means at any time collectively this Agreement,
the Notes, the Security Documents, the Letter of Credit Documents, and any
other instrument, agreement or document previously, simultaneously or
hereafter executed and delivered by the Borrower, any Guarantor and/or any
other Person, singly or jointly with another Person or Persons, evidencing,
securing, guarantying or in connection with this Agreement, any Note, any of
the Security Documents, any of the Facilities, and/or any of the Obligations.
"Funded Debt" of a Person means all outstanding liabilities for
borrowed money and other interest-bearing liabilities, including current and
long-term debt, issued letters of credit and Capitalized Leases less the
non-current portion of Subordinated Liabilities.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"General Intangibles" means all general intangibles of every nature,
whether presently existing or hereafter acquired or created, and without
implying any limitation of the foregoing, further means all books and records,
commercial tort claims, other claims (including without limitation all claims
for income tax and other refunds), payment intangibles, Supporting
Obligations, choses in action, claims, causes of action in tort or equity,
contract rights, judgments, customer lists, software, Patents, Trademarks,
licensing agreements, rights in intellectual property, goodwill (including
goodwill of the Borrower's business symbolized by and associated with any and
all Trademarks, trademark licenses, Copyrights and/or service marks), royalty
payments, licenses, letter-of-credit rights, letters of credit, contractual
rights, the right to receive refunds of unearned insurance premiums, rights as
lessee under any lease of real or personal property, literary rights,
Copyrights, service names, service marks, logos, trade secrets, amounts
received as an award in or settlement of a suit in damages, deposit accounts,
interests in joint ventures, general or limited partnerships, or limited
liability companies or partnerships, rights in applications for any of the
foregoing, books and records in whatever media (paper, electronic or
otherwise) recorded or stored, with respect to any or all of the foregoing,
all Supporting Obligations with respect to any of the foregoing, and all
Equipment and General
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Intangibles necessary or beneficial to retain, access and/or process the
information contained in those books and records, and all Proceeds 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 and any department, agency or instrumentality thereof.
"Government Contracts" means any contract with the United States or
with any state or political subdivision thereof or any department, agency or
instrumentality of the United States, or any state or political subdivision
thereof.
"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, acquired or operated by the 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 the Borrower or for
which the Borrower has responsibility, including, without limitation,
improvements, facilities, soil, ground water, air or other elements on, or of,
any property now or hereafter owned, acquired or operated by the Borrower, and
any other contamination by Hazardous Materials for which the Borrower is, or
is claimed to be, responsible.
"Indebtedness" of a Person means at any date the total liabilities of
such Person at such time determined in accordance with GAAP consistently
applied.
"Interest Rate Election Notice" has the meaning described in Section
2.4.2(e) (Selection of Interest Rate).
"Instrument" means a negotiable instrument or any other writing which
evidences a right to payment of a monetary obligation and is not itself a
security agreement or lease and is of a type that in the ordinary course of
business is transferred by delivery with any necessary endorsement or
assignment, and all Supporting Obligations with respect to any of the
foregoing and all Proceeds with respect to any of the foregoing.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the Income Tax Regulations issued and proposed
to be issued thereunder.
"Inventory" means all goods of the Borrower and all right, title and
interest of the Borrower in and to all of its now owned and hereafter acquired
goods and other personal property furnished under any contract of service or
intended for sale or lease, including, without limitation, all raw materials,
work-in-process, finished goods and materials and supplies of any
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kind, nature or description which are used or consumed in the Borrower's
business or are or might be used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods and other personal
property and all licenses, warranties, franchises, General Intangibles,
personal property and all documents of title or documents relating to the
same, together with all Accounts, Chattel Paper, Instruments and other
consideration received by any Borrower on account of the sale, lease or other
disposition of all or any part of the foregoing, and together with all rights
under or arising out of present or future Documents and contracts relating to
the foregoing and all Proceeds of the foregoing.
"Investment Property" means a security, whether certificated or
uncertificated, security entitlement, securities account, commodity contract
or commodity account and all Proceeds of, and Supporting Obligations with
respect to, the foregoing.
"Item of Payment" means each check, draft, cash, money, instrument,
item, and other remittance in payment or on account of payment of the
Receivables 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 a Receivable, and other proceeds of
Collateral; and "Items of Payment" means the collective reference to all of
the foregoing.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any Governmental Authority.
"Lease Obligations" of a Person means for any period the rental
commitments of such Person for such period under leases for real and/or
personal property (net of rent from subleases thereof, but including taxes,
insurance, maintenance and similar expenses which such Person, as the lessee,
is obligated to pay under the terms of said leases, except to the extent that
such taxes, insurance, maintenance and similar expenses are payable by
sublessees), including rental commitments under Capital Leases.
"Letter of Credit" and "Letters of Credit" shall have the meanings
described in Section 2.2.1 (Letters of Credit).
"Letter of Credit Agreement" means the collective reference to each
letter of credit application and agreement substantially in the form of the
Lender's then standard form of application for letter of credit or such other
form as may be approved by the Lender, executed and delivered by the Borrower
in connection with the issuance of a Letter of Credit, as the same may from
time to time be amended, restated, supplemented or modified and "Letter of
Credit Agreements" means all of the foregoing in effect at any time and from
time to time.
"Letter of Credit Cash Collateral Account" has the meaning described
in Section 2.2.3 (Terms of Letters of Credit).
"Letter of Credit Documents" means any and all drafts under or
purporting to be under a Letter of Credit, any Letter of Credit Agreement, and
any other instrument, document or agreement executed and/or delivered by the
Borrower or any other Person under, pursuant to or in connection with a Letter
of Credit or any Letter of Credit Agreement.
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"Letter of Credit Facility" means the facility established pursuant to
Section 2.2 (Letter of Credit Facility).
"Letter of Credit Fee" and "Letter of Credit Fees" have the meanings
described in Section 2.2.2 (Letter of Credit Fees).
"Letter of Credit Obligations" means all Obligations of the Borrower
with respect to the Letters of Credit and the Letter of Credit Agreements.
"Letter-of-credit right" means a right to payment or performance under
a letter of credit, whether or not the beneficiary has demanded or is at the
time entitled to demand payment or performance.
"Liabilities" means at any date all liabilities that in accordance
with GAAP consistently applied should be classified as liabilities on a
consolidated balance sheet of the Borrower and its Subsidiaries..
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien, financing
statement, hypothecation, provision in any instrument or other document for
confession of judgment, cognovit or other similar right or other remedy,
claim, charge, control over or interest of any kind in real or personal
property securing any indebtedness, duties, obligations, and liabilities owed
to, or claimed to be owed to, a Person, all whether perfected or unperfected,
avoidable or unavoidable, based on the common law, statute or contract or
otherwise, 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 the Revolving Loan.
"Loan Notice" has the meaning described in Section 2.1.2 (Procedure
for Making Advances).
"Lockbox" has the meaning described in Section 2.1.8 (The Collateral
Account).
"Multi-employer Plan" means a Plan that is a Multi-employer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Worth" means as to the Borrower at any date the excess of (a) the
Assets, over (b) the Liabilities less the non-current portion of Subordinated
Indebtedness".
12
"Note" means the Revolving Credit Note, and "Notes" means collectively
the Revolving Credit Note and any other promissory note which may from time to
time evidence all or any portion of the Obligations.
"Obligations" means all present and future indebtedness, duties,
obligations, and liabilities, whether now existing or contemplated or
hereafter arising, of the Borrower to the Lender under, arising pursuant to,
in connection with and/or on account of the provisions of this Agreement, each
Note, each Security Document, and/or any of the other Financing Documents, the
Loan, any Swap Contract and/or any of the Facilities including, without
limitation, the principal of, and interest on, each Note, late charges, the
Fees, Enforcement Costs, and prepayment fees (if any), letter of credit
reimbursement obligations, letter of credit fees or fees charged with respect
to any guaranty of any letter of credit; also means all other present and
future indebtedness, duties, obligations, and liabilities, whether now
existing or contemplated or hereafter arising, of the Borrower to the Lender
or its Affiliates of any nature whatsoever regardless of whether such
indebtedness, duties, obligations and liabilities be direct, indirect,
primary, secondary, joint, several, joint and several, fixed or contingent;
and also means any and all renewals, extensions, substitutions, amendments,
restatements and rearrangements of any such indebtedness, duties, obligations
and liabilities.
"Outstanding Letter of Credit Obligations" has the meaning described
in Section 2.2.3 (Terms of Letters of Credit).
"Patents" means and includes, in each case whether now existing or
hereafter arising, all of the Borrower's rights, title and interest in and to
(a) any and all patents and patent applications, (b) any and all inventions
and improvements described and claimed in such patents and patent
applications, (c) reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any patents and patent applications, (d) income,
royalties, damages, claims and payments now or hereafter due and/or payable
under and with respect to any patents or patent applications, including,
without limitation, damages and payments for past and future infringements,
(e) rights to xxx for past, present and future infringements of patents, and
(f) all rights corresponding to any of the foregoing throughout the world.
"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 and absolute
discretion (i) are being diligently contested in good faith and by appropriate
proceedings, and such contest operates to suspend collection of the contested
Taxes and enforcement of a Lien, (ii) the Borrower has the financial ability
to pay, with all penalties and interest, at all times without materially and
adversely affecting the 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 workers' compensation, social security or similar laws, or
under unemployment insurance in the ordinary course of business; (c) Liens
securing the Obligations; (d) judgment Liens to the extent the entry of such
judgment does not constitute a Default or an Event of Default under the terms
of this Agreement or result in the sale or levy of, or execution on, any of
the Collateral; and (e) such other Liens, if any, as are set forth on Schedule
4.1.19 attached hereto and made a part hereof.
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"Permitted Uses" means to finance the performance of Borrower's
Government Contracts, to support the issuance of commercial and standby
letters of credit and for Borrower's short term working capital purposes.
"Person" means and includes an individual, a corporation, a
partnership, a joint venture, a limited liability company or partnership, a
trust, an unincorporated association, a Governmental Authority, or any other
organization or entity.
"Plan" means any pension plan that is covered by Title IV of ERISA and
in respect of which the Borrower or a Commonly Controlled Entity is an
"employer" as defined in Section 3 of ERISA.
"Post-Default Rate" means the Base Rate in effect from time to time,
plus four percent (4%) per annum.
"Post-Expiration Date Letter of Credit"and "Post-Expiration Date
Letters of Credit" have the meanings described in Section 2.2.3 (Terms of
Letters of Credit).
"Prepayment" means a Revolving Loan Mandatory Prepayment, a Revolving
Loan Optional Prepayment, as the case may be, and "Prepayments" mean
collectively all Revolving Loan Mandatory Prepayments and all Revolving Loan
Optional Prepayments.
"Pricing Ratio" means the Funded Debt to EBITDA Ratio.
"Prime Rate" means the floating and fluctuating per annum prime
commercial lending rate of interest of the Lender, as established and declared
by the Lender at any time or from time to time. The Prime Rate shall be
adjusted automatically, without notice, as of the effective date of any change
in such prime commercial lending rate. The Prime Rate does not necessarily
represent the lowest rate of interest charged by the Lender to borrowers.
"Proceeds" has the meaning described in the Uniform Commercial Code as
in effect from time to time.
"Receivable" means one of the Borrower's now owned and hereafter
owned, acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments; and "Receivables" means all of the Borrower's now or hereafter
owned, acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments, and all Proceeds thereof.
"Reportable Event" means any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder.
"Registered Organization" means an organization organized solely under
the law of a single state or the United States and as to which the state or
the United States must maintain a public record showing the organization to
have been organized.
"Reserve Percentage" means, at any time, the then current maximum rate
for which reserves (including any basic, special, supplemental, marginal and
emergency reserves) are required to be maintained by member banks of the
Federal Reserve System under Regulation D
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of the Board of Governors of the Federal Reserve System against "Eurocurrency
liabilities", as that term is defined in Regulation D. Without limiting the
effect of the foregoing, the Reserve Percentage shall reflect any other
reserves required to be maintained by such member banks with respect to (i)
any category of liabilities which includes deposits by reference to which the
Eurodollar Rate is to be determined, or (ii) any category of extensions of
credit or other assets which include Eurodollar Loans. The Eurodollar Rate
shall be adjusted automatically on and as of the effective date of any change
in the Reserve Percentage.
"Responsible Officer" means the chief executive officer of the
Borrower or the president of the Borrower or, with respect to financial
matters, the chief financial officer of the Borrower.
"Revolving Credit Commitment" means the agreement of the Lender
relating to the making of the Revolving Loan and advances thereunder subject
to and in accordance with the provisions of this Agreement.
"Revolving Credit Commitment Period" means the period of time from the
Closing Date to the Business Day preceding the Revolving Credit Termination
Date.
"Revolving Credit Committed Amount" has the meaning described in
Section 2.1 (Revolving Credit Facility).
"Revolving Credit Expiration Date" means February 28, 2003.
"Revolving Credit Facility" means the facility established by the
Lender pursuant to Section 2.1 (Revolving Credit Facility).
"Revolving Credit Note" has the meaning described in Section 2.1.5
(Revolving Credit Note).
"Revolving Credit Termination Date" means the earlier of (a) the
Revolving Credit Expiration Date, or (b) the date on which the Revolving
Credit Commitment is terminated pursuant to 7.1.18 (Remedies) or otherwise.
"Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line
Fees" have the meanings described in Section 2.1.10 (Revolving Credit Unused
Line Fee).
"Revolving Loan" has the meaning described in Section 2.1 (Revolving
Credit Facility).
"Revolving Loan Account" has the meaning described in Section 2.1.9
(Revolving Loan Account).
"Revolving Loan Mandatory Prepayment" and "Revolving Loan Mandatory
Prepayments" have the meanings described in Section 2.1.6 (Mandatory
Prepayments of Revolving Loan).
"Revolving Loan Optional Prepayment" and "Revolving Loan Optional
Prepayments" have the meanings described in Section 2.1.7 (Optional Prepayment
of Revolving Loan).
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"Security Documents" means 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 real or personal property of any Person to secure all or
any portion of the Obligations, all as the same may from time to time be
amended, restated, supplemented or otherwise modified.
"Security Procedures" means the rules, policies and procedures adopted
and implemented by the Lender and its Affiliates at any time and from time to
time with respect to security procedures and measures relating to electronic
funds transfers, all as the same may be amended, restated, supplemented,
terminated, or otherwise modified at any time and from time to time by the
Lender in its sole and absolute discretion.
"State" means the Commonwealth of Virginia.
"Subordinated Indebtedness" means all Indebtedness, incurred at any
time by the Borrower, which is in amounts, subject to repayment terms, and
subordinated to the Obligations, as set forth in one or more written
agreements, all in form and substance satisfactory to the Lender in its sole
and absolute discretion.
"Subsidiary" means any corporation the majority of the voting shares
of which at the time are owned directly by the Borrower and/or by one or more
Subsidiaries of the Borrower.
"Supporting Obligation" means a letter-of-credit right, secondary
obligation or obligation of a secondary obligor or that supports the payment
or performance of an account, chattel paper, a document, a general intangible,
an instrument or investment property.
"Swap Contract" means any document, instrument or agreement between
Borrower and Lender or any affiliate of Lender, now existing or entered into
in the future, relating to an interest rate swap transaction, forward rate
transaction, interest rate cap, floor or collar transaction, any similar
transaction, any option to enter into any of the foregoing, and any
combination of the foregoing, which agreement may be oral or in writing,
including, without limitation, any master agreement relating to or governing
any or all of the foregoing and any related schedule or confirmation, each as
amended from time to time.
"Tangible Net Worth" means the value of Borrower's total assets
(including leaseholds and leasehold improvements and reserves against assets
but excluding goodwill, patents, trademarks, trade names, organization
expense, unamortized debt discount and expense, capitalized or deferred
research and development costs, deferred marketing expenses, and other like
intangibles, and monies due from affiliates, officers, directors, employees,
shareholders, members or managers of Borrower) less total liabilities,
including but not limited to accrued and deferred income taxes, but excluding
the non-current portion of Subordinated Liabilities.
"Taxes" means 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
16
Authority on the Borrower or any of its properties or assets or any part
thereof or in respect of any of its franchises, businesses, income or profits.
"Trademarks" means and includes in each case whether now existing or
hereafter arising, all of the Borrower's rights, title and interest in and to
(a) any and all trademarks (including service marks), trade names and trade
styles, and applications for registration thereof and the goodwill of the
business symbolized by any of the foregoing, (b) any and all licenses of
trademarks, service marks, trade names and/or trade styles, whether as
licensor or licensee, (c) any renewals of any and all trademarks, service
marks, trade names, trade styles and/or licenses of any of the foregoing, (d)
income, royalties, damages and payments now or hereafter due and/or payable
with respect thereto, including, without limitation, damages, claims, and
payments for past, present and future infringements thereof, (e) rights to xxx
for past, present and future infringements of any of the foregoing, including
the right to settle suits involving claims and demands for royalties owing,
and (f) all rights corresponding to any of the foregoing throughout the world.
"Uniform Commercial Code" means, unless otherwise provided in this
Agreement, the Uniform Commercial Code as adopted by and in effect from time
to time in the State or in any other jurisdiction, as applicable.
"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
Borrower and/or by one or more Wholly Owned Subsidiaries of the Borrower.
"Wire Transfer Procedures" means the rules, policies and procedures
adopted and implemented by the Lender and its Affiliates at any time and from
time to time with respect to electronic funds transfers, including, without
limitation, the Security Procedures, all as the same may be amended, restated,
supplemented, terminated or otherwise modified at any time and from time to
time by the Lender in its sole and absolute discretion.
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, as consistently applied to the applicable
Person. All terms used herein which are defined by the Uniform Commercial Code
shall have the same meanings as assigned to them by the 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 article, section, subsection, schedule and
exhibit references are references to articles, sections or subsections of, or
schedules or exhibits to, as the case may be, this Agreement unless otherwise
specified. As 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, as the context may require. Reference to any one or
more 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.
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ARTICLE II
THE CREDIT FACILITIES
Section 2.1 The Revolving Credit Facility.
2.1.1 Revolving Credit Facility.
Subject to and upon the provisions of this Agreement,
the Lender establishes a revolving credit facility in favor of the Borrower.
The aggregate of all advances under the Revolving Credit Facility is sometimes
referred to in this Agreement as the "Revolving Loan".
The principal amount of Ten Million Dollars
($10,000,000) is the "Revolving Credit Committed Amount". If at any time the
unpaid principal balance of the Revolving Loan exceeds the Revolving Credit
Committed Amount in effect from time to time, the Borrower shall pay such
excess to the Lender ON DEMAND.
During the Revolving Credit Commitment Period, the
Borrower may request advances under the Revolving Credit Facility in
accordance with the provisions of this Agreement; provided that after giving
effect to the Borrower's request the aggregate outstanding principal balance
of the Revolving Loan and all Letter of Credit Obligations would not exceed
the lesser of (a) the Revolving Credit Committed Amount or (b) the then most
current Borrowing Base.
Unless sooner paid, the unpaid Revolving Loan, together
with interest accrued and unpaid thereon, and all other Obligations shall be
due and payable in full on the Revolving Credit Expiration Date.
2.1.2 Procedure for Making Advances Under the
Revolving Loan; Lender Protection Loans.
The Borrower may borrow under the Revolving Credit
Facility on any Business Day. Advances under the Revolving Loan shall be
deposited to a demand deposit account of the Borrower with the Lender (or an
Affiliate of the Lender) or shall be otherwise applied as directed by the
Borrower, which direction the Lender may require to be in writing. Not later
than 12:00 noon. (Eastern Time) on the date of the requested borrowing, the
Borrower shall give the Lender oral or written notice (a "Loan Notice") of the
amount and (if requested by the Lender) the purpose of the requested
borrowing. Any oral Loan Notice shall be confirmed in writing by the Borrower
within three (3) Business Days after the making of the requested advance under
the Revolving Loan. Each Loan Notice shall be irrevocable.
In addition, the Borrower hereby irrevocably authorizes
the Lender at any time and from time to time, without further request from or
notice to the Borrower, to make advances under the Revolving Loan, and to
establish, without duplication, reserves against the Borrowing Base, which the
Lender, in its sole and absolute discretion, deems necessary or appropriate to
protect the interests of the Lender, including, without limitation, advances
and reserves under the Revolving Loan made to cover debit balances in the
Revolving Loan Account, principal of, and/or interest on, any Loan, the
Obligations (including, without limitation, any
18
Letter of Credit Obligations), and/or Enforcement Costs, prior to, on, or
after the termination of other advances under this Agreement, regardless of
whether the outstanding principal amount of the Revolving Loan that the Lender
may advance or reserve hereunder exceeds the Revolving Credit Committed Amount
or the Borrowing Base.
2.1.3 Borrowing Base.
As used in this Agreement, the term "Borrowing Base"
means at any time, an amount equal to the aggregate of (a) ninety percent
(90%) of the amount of Eligible Receivables derived from Government Contracts,
(b) eighty percent (80%) of the amount of Eligible Receivables derived from
contracts other than Government Contracts approved by the Lender, (c) ninety
percent (90%) of the Borrower's foreign Eligible Receivables that are
supported by a letter of credit from a financial institution acceptable to the
Lender and (d) one hundred percent (100%) of cash held in restricted accounts
as advance payments and secured by letters of credit.
The Borrowing Base shall be computed based on the
Borrowing Base Report most recently delivered to and accepted by, the Lender
in its sole and absolute discretion. In the event the Borrower fails to
furnish a Borrowing Base Report required by Section 2.1.4 (Borrowing Base
Report), or in the event the Lender believes that a Borrowing Base Report is
no longer accurate, the Lender may, in its sole and absolute discretion
exercised from time to time and without limiting its other rights and remedies
under this Agreement, suspend the making of or limit advances under the
Revolving Loan. The Borrowing Base shall be subject to reduction by amounts
credited to the Collateral Account since the date of the most recent Borrowing
Base Report and by the amount of any Receivable which was included in the
Borrowing Base but which the Lender determines fails to meet the respective
criteria applicable from time to time for Eligible Receivables.
If at any time the total of the aggregate principal
amount of the Revolving Loan and Outstanding Letter of Credit Obligations
exceeds the Borrowing Base, a borrowing base deficiency ("Borrowing Base
Deficiency") shall exist. Each time a Borrowing Base Deficiency exists, the
Borrower, at the sole and absolute discretion of the Lender exercised from
time to time, shall pay the Borrowing Base Deficiency ON DEMAND to the Lender.
Without implying any limitation on the Lender's
discretion with respect to the Borrowing Base, the criteria for Eligible
Receivables contained in the definition of Eligible Receivables are in part
based upon the business operations of the Borrower existing on or about the
Closing Date and upon information and records furnished to the Lender by the
Borrower. If at any time or from time to time hereafter, the business
operations of the Borrower change or such information and records furnished to
the Lender is materially incorrect or misleading, the Lender in its
discretion, may at any time and from time to time during the duration of this
Agreement change such criteria or add new criteria. The Lender may communicate
such changed or additional criteria to the Borrower from time to time either
orally or in writing.
2.1.4 Borrowing Base Report.
The Borrower will furnish to the Lender a report of the
Borrowing Base (each a "Borrowing Base Report"; collectively, the "Borrowing
Base Reports") in the form
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attached hereto as EXHIBIT C and made a part hereof or such other form as may
be required from time to time by the Lender, appropriately completed and duly
signed as follows: (a) if any sum is outstanding under the Revolving Loan or
any Letter of Credit is outstanding, not later than the twentieth (20th) day
after the end of each month and at such other times as may be reasonably
requested by the Lender and (b) if there is no sum outstanding under the
Revolving Loan and no Letter of Credit is outstanding, not later than the
forty fifth (45th) day after the end of each calendar quarter and at such
other times as may be reasonably requested by the Lender. The Borrowing Base
Report shall contain the amount and payments on the Receivables, and the
calculations of the Borrowing Base, all in such detail, and accompanied by
such supporting and other information, as the Lender may from time to time
request. Upon the Lender's request upon the creation of any Receivables or at
such other intervals as the Lender may require, the Borrower will provide the
Lender with: (a) confirmatory assignment schedules; (b) copies of Account
Debtor invoices; (c) such further schedules, documents and/or information
regarding any of the Receivables as the Lender may reasonably require. The
items to be provided under this subsection shall be in form satisfactory to
the Lender, and certified as true and correct by a Responsible Officer (or by
any other officers or employees of the Borrower whom a Responsible Officer
from time to time authorizes in writing to do so), and delivered to the Lender
from time to time solely for the Lender's convenience in maintaining records
of the Collateral. The failure of the Borrower to deliver any such items to
the Lender shall not affect, terminate, modify, or otherwise limit the Liens
of the Lender on the Collateral.
2.1.5 Revolving Credit Note.
The obligation of the Borrower to pay the Revolving
Loan, with interest, shall be evidenced by a promissory note (as from time to
time extended, amended, restated, supplemented or otherwise modified, the
"Revolving Credit Note") substantially in the form of EXHIBIT "A" attached
hereto and made a part hereof, with appropriate insertions. The Revolving
Credit Note shall be dated as of the Closing Date, shall be payable to the
order of the Lender at the times provided in the Revolving Credit Note, and
shall be in the principal amount of the Revolving Credit Committed Amount. The
Borrower acknowledges and agrees that, if the outstanding principal balance of
the Revolving Loan outstanding from time to time exceeds the face amount of
the Revolving Credit Note, the excess shall bear interest at the Post-Default
Rate for the Revolving Loan and shall be payable, with accrued interest, ON
DEMAND. The Revolving Credit Note shall not operate as a novation of any of
the Obligations or nullify, discharge, or release any such Obligations or the
continuing contractual relationship of the parties hereto in accordance with
the provisions of this Agreement.
2.1.6 Mandatory Prepayments of Revolving Loan.
The Borrower shall make the mandatory prepayments (each
a "Revolving Loan Mandatory Prepayment" and collectively, the "Revolving Loan
Mandatory Prepayments") of the Revolving Loan at any time and from time to
time in such amounts requested by the Lender pursuant to Section 2.1.3
(Borrowing Base) in order to cover any Borrowing Base Deficiency.
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2.1.7 Optional Prepayments of Revolving Loan.
The Borrower shall have the option, at any time and from
time to time, to prepay (each a "Revolving Loan Optional Prepayment" and
collectively the "Revolving Loan Optional Prepayments") the Revolving Loan, in
whole or in part without premium or penalty.
2.1.8 The Collateral Account.
The Borrower will deposit, or cause to be deposited, all
Items of Payment to a bank account designated by the Lender and from which the
Lender alone has power of access and withdrawal (the "Collateral Account").
Each deposit shall be made not later than the next Business Day after the date
of receipt of the Items of Payment. The Items of Payment shall be deposited in
precisely the form received, except for the endorsements of the Borrower where
necessary to permit the collection of any such Items of Payment, the Borrower
hereby agreeing to make such endorsement. In the event the Borrower fails to
do so, the Lender is hereby authorized by the Borrower to make the endorsement
in the name of the Borrower. Prior to such a deposit, the Borrower will not
commingle any Items of Payment with any of the Borrower's other funds or
property, but will hold them separate and apart in trust and for the account
of the Lender.
In addition, if so directed by the Lender, the Borrower
shall direct the mailing of all Items of Payment from its Account Debtors to a
post-office box designated by the Lender, or to such other additional or
replacement post-office boxes pursuant to the request of the Lender from time
to time (collectively, the "Lockbox"). The Lender shall have unrestricted and
exclusive access to the Lockbox.
The Borrower hereby authorizes the Lender to inspect all
Items of Payment, endorse all Items of Payment in the name of the Borrower,
and deposit such Items of Payment in the Collateral Account. The Lender
reserves the right, exercised in its sole and absolute discretion from time to
time, to provide to the Collateral Account credit prior to final collection of
an Item of Payment and to disallow credit for any Item of Payment which is
unsatisfactory to the Lender. In the event Items of Payment are returned to
the Lender for any reason whatsoever, the Lender may, in the exercise of its
discretion from time to time, forward such Items of Payment a second time. Any
returned Items of Payment shall be charged back to the Collateral Account, the
Revolving Loan Account, or other account, as appropriate.
The Lender will apply the whole or any part of the
collected funds credited to the Collateral Account against the Revolving Loan
(or with respect to Items of Payment that are not proceeds of Accounts or
after a Default or Event of Default, against any of the Obligations) or credit
such collected funds to a depository account of the Borrower with the Lender
(or an Affiliate of the Lender), the order and method of such application to
be in the reasonable discretion of the Lender.
2.1.9 Revolving Loan Account.
The Lender will establish and maintain a loan account on
its books (the "Revolving Loan Account") to which the Lender will (a) debit
(i) the principal amount of each advance of the Revolving Loan made by the
Lender hereunder as of the date made, (ii) the
21
amount of any interest accrued on the Revolving Loan as and when due, and
(iii) any other amounts due and payable by the Borrower to the Lender from
time to time under the provisions of this Agreement in connection with the
Revolving Loan, 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 Borrower to the Lender on account of
the Revolving Loan as of the date made including, without limitation, funds
credited to the Revolving Loan Account from the Collateral Account. The Lender
may debit the Revolving Loan Account for the amount of any Item of Payment
that 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. 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 final, binding and conclusive upon the
Borrower in all respects, absent manifest error, unless the Lender receives
specific written objection thereto from the Borrower within thirty (30)
Business Days after such statement or reconciliation shall have been received
by the Borrower.
2.1.10 Revolving Credit Unused Line Fee.
The Borrower shall pay to the Lender a quarterly
revolving credit facility fee (collectively, the "Revolving Credit Unused Line
Fees" and individually, a "Revolving Credit Unused Line Fee") in an amount
equal to one quarter of one percent (1/4%) per annum of the average daily
unused and undisbursed portion of the Revolving Credit Committed Amount in
effect from time to time accruing during each calendar quarter. The accrued
and unpaid portion of the Revolving Credit Unused Line Fee shall be paid by
the Borrower to the Lender on the first day of each calendar quarter,
commencing on the first such date following the date hereof, and on the
Revolving Credit Termination Date.
Section 2.2 The Letter of Credit Facility.
2.2.1 Letters of Credit.
Subject to and upon the provisions of this Agreement,
and as a part of the Revolving Credit Commitment, the Borrower, upon the prior
approval of the Lender, may obtain standby or commercial letters of credit (as
the same may from time to time be amended, supplemented or otherwise modified,
each a "Letter of Credit" and collectively the "Letters of Credit") from the
Lender from time to time from the Closing Date until the Business Day
preceding the Revolving Credit Termination Date. The Borrower will not be
entitled to obtain a Letter of Credit hereunder unless after giving effect to
the request, the outstanding principal balance of the Revolving Loan and of
the Letter of Credit Obligations would not exceed the lesser of (i) the
Revolving Credit Committed Amount, or (ii) the most current Borrowing Base.
2.2.2 Letter of Credit Fees.
Prior to or simultaneously with the opening of each
Letter of Credit, the Borrower shall pay to the Lender, a letter of credit fee
(each a "Letter of Credit Fee" and collectively the "Letter of Credit Fees")
in an amount equal to two percent (2%) per annum of the face amount of the
Letter of Credit. The Letter of Credit Fees shall be paid upon the opening of
each Letter of Credit and upon each anniversary thereof, if any. In addition,
the Borrower shall pay to the Lender any and all additional issuance,
negotiation, processing, transfer or other
22
fees to the extent and as and when required by the provisions of any Letter of
Credit Agreement. All Letter of Credit Fees and all such other additional fees
are included in and are a part of the "Fees" payable by the Borrower under the
provisions of this Agreement and are a part of the Obligations. Subsequent to
an Event of Default, the Letter of Credit Fee shall be increased to three
percent (3%) per annum of the amount of each Letter of Credit.
2.2.3 Terms of Letters of Credit; Post-Expiration Date
Letters of Credit..
Each Letter of Credit shall (a) be opened pursuant to a
Letter of Credit Agreement and (b) expire on a date not later than the
Business Day preceding the Revolving Credit Expiration Date; provided,
however, if any Letter of Credit does have an expiration date later than the
Business Day preceding the Revolving Credit Termination Date (each a
"Post-Expiration Date Letter of Credit" and collectively, the "Post-Expiration
Date Letters of Credit"), effective as of the Business Day preceding the
Revolving Credit Termination Date and without prior notice to or the consent
of the Borrower, the Lender shall make advances under the Revolving Loan for
the account of the Borrower in the aggregate face amount of all such Letters
of Credit. The Lender shall deposit the proceeds of such advances into one or
more non-interest bearing accounts with and in the name of the Lender and over
which the Lender alone shall have exclusive power of access and withdrawal
(collectively, the "Letter of Credit Cash Collateral Account"). The Letter of
Credit Cash Collateral Account is to be held by the Lender as additional
collateral and security for any Letter of Credit Obligations relating to the
Post-Expiration Date Letters of Credit. The Borrower hereby assigns, pledges,
grants and sets over to the Lender a first priority security interest in, and
Lien on, all of the funds on deposit in the Letter of Credit Cash Collateral
Account, together with any and all Proceeds and products thereof as additional
collateral and security for the Letter of Credit Obligations relating to the
Post-Expiration Date Letters of Credit. The Borrower acknowledges and agrees
that the Lender shall be entitled to fund any draw or draft on any
Post-Expiration Date Letter of Credit from the monies on deposit in the Letter
of Credit Cash Collateral Account without notice to or consent of the Borrower
or the Lender. The Borrower further acknowledges and agrees that the Lender's
election to fund any draw or draft on any Post-Expiration Date Letter of
Credit from the Letter of Credit Cash Collateral shall in no way limit,
impair, lessen, reduce, release or otherwise adversely affect the Borrower's
obligation to pay any Letter of Credit Obligations under or relating to the
Post-Expiration Date Letters of Credit. At such time as all Post-Expiration
Date Letters of Credit have expired and all Letter of Credit Obligations
relating to the Post-Expiration Date Letters of Credit have been paid in full,
the Lender agrees to apply the amount of any remaining funds on deposit in the
Letter of Credit Cash Collateral Account to the then unpaid balance of the
Obligations under the Revolving Credit Facility in such order and manner as
the Lender shall determine in its sole and absolute discretion in accordance
with the provisions of this Agreement.
The aggregate face amount of all Letters of Credit at
any one time outstanding and issued by the Lender pursuant to the provisions
of this Agreement, including, without limitation, any and all Post-Expiration
Date Letters of Credit, plus the amount of any unpaid Letter of Credit Fees
accrued or scheduled to accrue thereon, and less the aggregate amount of all
drafts issued under or purporting to have been issued under such Letters of
Credit that have been paid by the Lender and for which the Lender has been
reimbursed by the Borrower in full in accordance with Section 2.2.5 (Payments
of Letters of Credit) and the Letter
23
of Credit Agreements, and for which the Lender has no further obligation or
commitment to restore all or any portion of the amounts drawn and reimbursed,
is herein called the "Outstanding Letter of Credit Obligations".
2.2.4 Procedures for Letters of Credit.
The Borrower shall give the Lender written notice at
least five (5) Business Days prior to the date on which the Borrower desires
the Lender to issue a Letter of Credit.The Borrower shall give the Lender
written notice at least three (3) Business Days prior to the date on which a
Letter of Credit is requested to be opened of their request for a Letter of
Credit. Such notice shall be accompanied by a duly executed and delivered
Letter of Credit Agreement. Upon receipt of the Letter of Credit Agreement and
the Letter of Credit Fee, the Lender shall process such Letter of Credit
Agreement in accordance with its customary procedures and open such Letter of
Credit on the Business Day specified in such notice.
2.2.5 Payments of Letters of Credit.
The Borrower hereby promises to pay to the Lender, ON
DEMAND and in United States Dollars, the following which are herein
collectively referred to as the "Current Letter of Credit Obligations":
(a) the amount which the Lender has paid or
will be required to pay under each draft or draw on a Letter of
Credit, whether such demand be in advance of the Lender's payment or
for reimbursement for such payment;
(b) any and all reasonable charges and
expenses which the Lender may pay or incur relative to the Letter of
Credit and/or such draws or drafts; and
(c) interest on the amounts described in (a)
and (b) not paid by the Borrower as and when due and payable under the
provisions of (a) and (b) above from the day the same are due and
payable until paid in full at a rate per annum equal to the then
current highest rate of interest on the Revolving Loan.
In addition, the Borrower hereby promises to pay any and
all other Letter of Credit Obligations as and when due and payable in
accordance with the provisions of this Agreement and the Letter of Credit
Agreements. The obligation of the Borrower to pay Current Letter of Credit
Obligations and all other Letter of Credit Obligations shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower or any other account
party may have or have had against the beneficiary of such Letter of Credit,
the Lender, or any other Person, including, without limitation, any defense
based on the failure of any draft or draw to conform to the terms of such
Letter of Credit, any draft or other document proving to be forged, fraudulent
or invalid, or the legality, validity, regularity or enforceability of such
Letter of Credit, any draft or other documents presented with any draft, any
Letter of Credit Agreement, this Agreement, or any of the other Financing
Documents, all whether or not the Lender had actual or constructive
24
knowledge of the same, and irrespective of any Collateral, security or
guarantee therefore or right of offset with respect thereto and irrespective
of any other circumstances whatsoever which constitutes, or might be construed
to constitute, an equitable or legal discharge of the Borrower for any Letter
of Credit Obligations, in bankruptcy or otherwise; provided, however, that the
Borrower shall not be obligated to reimburse the Lender for any wrongful
payment under such Letter of Credit made as a result of the Lender's willful
misconduct. The obligation of the Borrower to pay the Letter of Credit
Obligations shall not be conditioned or contingent upon the pursuit by the
Lender or any other Person at any time of any right or remedy against any
Person which may be or become liable in respect of all or any part of such
obligation or against any Collateral, security or guarantee therefore or right
of offset with respect thereto.
The Letter of Credit Obligations shall continue to be
effective, or be reinstated, as the case may be, if at any time payment of all
or any portion of the Letter of Credit Obligations is rescinded or must
otherwise be restored or returned by the Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of any Person, or upon
or as a result of the appointment of a receiver, intervenor, or conservator
of, or trustee or similar officer for, any Person, or any substantial part of
such Person's property, all as though such payments had not been made.
2.2.6 Change in Law; Increased Cost.
If any change in any law or regulation or in the
interpretation thereof by any court or other Governmental Authority charged
with the administration thereof shall either (a) impose, modify or deem
applicable any reserve, special deposit or similar requirement against Letters
of Credit issued by the Lender, or (b) impose on the Lender any other
condition regarding this Agreement or any Letter of Credit, and the result of
any event referred to in clauses (a) or (b) above shall be to increase the
cost to the Lender of issuing, maintaining or extending the Letter of Credit
or the cost to Lender of funding any obligation under or in connection with
the Letter of Credit, then, upon demand by the Lender, the Borrower shall
immediately pay to the Lender from time to time as specified by the Lender,
additional amounts which shall be sufficient to compensate the Lender for such
increased cost, together with interest on each such amount from the date
demanded until payment in full thereof at a rate per annum equal to the then
highest current rate of interest on the Revolving Loan. A certificate as to
such increased cost incurred by the Lender, submitted by the Lender to the
Borrower, shall be conclusive, absent manifest error.
2.2.7 General Letter of Credit Provisions.
The Borrower hereby instructs the Lender to pay any
draft complying with the terms of any Letter of Credit irrespective of any
instructions of the Borrower to the contrary. The Borrower assumes all risks
of the acts and omissions of the beneficiary and other users of any Letter of
Credit. The Lender and its respective branches, Affiliates and/or
correspondents shall not be responsible for and the Borrower hereby
indemnifies and holds the Lender and its branches, Affiliates and/or
correspondents harmless from and against all liability, loss and expense
(including reasonable attorney's fees and costs) incurred by the Lender and/or
its respective branches, Affiliates and/or correspondents relative to and/or
as a consequence of (a) any failure by the Borrower to perform the agreements
hereunder and under any Letter of Credit
25
Agreement, (b) any Letter of Credit Agreement, this Agreement, any Letter of
Credit and any draft, draw and/or acceptance under or purported to be under
any Letter of Credit, (c) any action taken or omitted by the Lender and/or any
of its respective branches, Affiliates and/or correspondents at the request of
the Borrower, (d) any failure or inability to perform in accordance with the
terms of any Letter of Credit by reason of any control or restriction
rightfully or wrongfully exercised by any de facto or de jure Governmental
Authority, group or individual asserting or exercising governmental or
paramount powers, and/or (e) any consequences arising from causes beyond the
control of the Lender and/or any of its respective branches, Affiliates and/or
correspondents.
Except for willful misconduct, the Lender and its
respective branches, Affiliates and/or correspondents, shall not be liable or
responsible in any respect for any (a) error, omission, interruption or delay
in transmission, dispatch or delivery of any one or more messages or advices
in connection with any Letter of Credit, whether transmitted by cable,
telegraph, mail or otherwise and despite any cipher or code which may be
employed, and/or (b) action, inaction or omission which may be taken or
suffered by it or them in good faith or through inadvertence in identifying or
failing to identify any beneficiary or otherwise in connection with any Letter
of Credit.
Any Letter of Credit may be amended, modified or revoked
only upon the receipt by the Lender from the Borrower and the beneficiary
(including any transferee and/or assignee of the original beneficiary), of a
written consent and request therefore.
If any Laws, order of court and/or ruling or regulation
of any Governmental Authority of the United States (or any state thereof)
and/or any country other than the United States permits a beneficiary under a
Letter of Credit to require the Lender and/or any of its respective branches,
Affiliates and/or correspondents to pay drafts under or purporting to be under
a Letter of Credit after the expiration date of the Letter of Credit, the
Borrower shall reimburse the Lender, as appropriate, for any such payment
pursuant to provisions of Section 2.2.5 (Change in Law; Increased Cost).
Except as may otherwise be specifically provided in a
Letter of Credit or Letter of Credit Agreement, the laws of the State and the
Uniform Customs and Practice for Documentary Credits, 1993 Revision,
International Chamber of Commerce Publication No. 500 shall govern the Letters
of Credit. The Laws, rules, provisions and regulations of the Uniform Customs
and Practice for Documentary Credits are hereby incorporated by reference. In
the event of a conflict between the Uniform Customs and Practice for
Documentary Credits and the laws of the State, the Uniform Customs and
Practice for Documentary Credits shall prevail.
Section 2.3 General Financing Provisions.
2.3.1 Borrower's Representatives.
The Borrower hereby irrevocably authorizes the Lender to
make Loans, and issue or cause to be issued Letters of Credit for the account
of the Borrower, pursuant to the provisions of this Agreement upon the
written, oral or telephone request of any one or more of the Persons who is
from time to time a Responsible Officer of the Borrower under the provisions
of the most recent certificate of corporate resolutions and/or incumbency of
the Borrower on file
26
with the Lender or who is an officer or employee of the Borrower whom a
Responsible Officer from time to time authorizes in writing to do so. The
Lender does not and shall not assume any responsibility or liability for any
errors, mistakes, and/or discrepancies in the oral, telephonic, written or
other transmissions of any instructions, orders, requests and confirmations
between the Lender and the Borrower in connection with the Credit Facilities,
any Loan , any Letter of Credit or any other transaction in connection with
the provisions of this Agreement.
2.3.2 Use of Proceeds of the Loan.
The proceeds of each advance under the Loan shall be
used by the Borrower for Permitted Uses, and for no other purposes except as
may otherwise be agreed by the Lender in writing. The Borrower shall use the
proceeds of the Loan promptly.
2.3.3 Administrative Fees.
The Borrower shall pay to the Lender a quarterly
administrative fee (each an "Administrative Fee" and collectively, the
"Administrative Fees") for administrative services performed in conjunction
with the Revolving Credit Facility. The quarterly Administrative Fee shall be
$3,750 and shall be payable each quarter, in advance, on the first (1st) day
of each March, June, September and December until the Revolving Credit
Termination Date.
2.3.4 Computation of Interest and Fees.
All applicable Fees and interest shall be calculated on
the basis of a year of 360 days for the actual number of days elapsed. Any
change in the interest rate on any of the Obligations resulting from a change
in the Prime Rate shall become effective as of the opening of business on the
day on which such change in the Prime Rate is announced.
2.3.5 Payments.
All payments of the Obligations, including, without
limitation, principal, interest, Prepayments, and Fees, shall be paid by the
Borrower without setoff, recoupment or counterclaim to the Lender in
immediately available funds not later than 12:00 p.m. (Eastern Time) on the
due date of such payment. All payments received by the Lender after such time
shall be deemed to have been received by the Lender for purposes of computing
interest and Fees and otherwise as of the next Business Day. Payments shall
not be considered received by the Lender until such payments are paid to the
Lender in immediately available funds to the Lender's principal office in
McLean, Virginia or at such other location as the Lender may at any time and
from time to time notify the Borrower. Alternatively, at its sole discretion,
the Lender may charge any deposit account of the Borrower at the Lender or any
Affiliate of the Lender with all or any part of any amount due to the Lender
under this Agreement or any of the other Financing Documents to the extent
that the Borrower shall have not otherwise tendered payment to the Lender. All
payments shall be applied first to any unpaid Fees, second to any and all
accrued and unpaid late charges and Enforcement Costs, third to any and all
accrued and unpaid interest on the Obligations, and then to the then unpaid
principal balance of the Obligations, all in such order and manner as shall be
determined by the Lender in its sole and absolute discretion.
27
2.3.6 Liens; Setoff.
The Borrower hereby grants to the Lender as additional
collateral and security for all of the Obligations, a continuing Lien on any
and all monies, Investment Property, and other property of the Borrower and
the proceeds thereof, now or hereafter held or received by or in transit to,
the Lender, and/or any Affiliate of the Lender, from or for the account of,
the Borrower, and also upon any and all deposit accounts (general or special)
and credits of the Borrower, if any, with the Lender or any Affiliate of the
Lender, at any time existing, excluding any deposit accounts held by the
Borrower in its capacity as trustee for Persons who are not Affiliates of the
Borrower. Without implying any limitation on any other rights the Lender may
have under the Financing Documents or applicable Laws, during the continuance
of an Event of Default, the Lender is hereby authorized by the Borrower at any
time and from time to time, without notice to the Borrower, to set off,
appropriate and apply any or all items hereinabove referred to against all
Obligations then outstanding (whether or not then due), all in such order and
manner as shall be determined by the Lender in its sole and absolute
discretion.
2.3.7 Requirements of Law.
In the event that the Lender shall have determined in
good faith that (a) the adoption of any Capital Adequacy Regulation, or (b)
any change in any Capital Adequacy Regulation or in the interpretation or
application thereof or (c) compliance by the Lender or any corporation
controlling the Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) from any central bank or
Governmental Authority, does or shall have the effect of reducing the rate of
return on the capital of the Lender or any corporation controlling the Lender,
as a consequence of the obligations of the Lender hereunder to a level below
that which the Lender or any corporation controlling the Lender would have
achieved but for such adoption, change or compliance (taking into
consideration the policies of the Lender and the corporation controlling the
Lender, with respect to capital adequacy) by an amount deemed by the Lender,
in its discretion, to be material, then from time to time, after submission by
the Lender to the Borrower of a written request therefore and a statement of
the basis for such determination, the Borrower shall pay to the Lender such
additional amount or amounts in order to compensate the Lender or its
controlling corporation for any such reduction.
2.3.8 ACH Transactions and Swap Contracts.
The Borrower may request and the Lender or its
affiliates may, in their sole and absolute discretion, provide ACH
Transactions and Swap Contracts. In the event the Borrower requests Lender or
its affiliates to procure ACH Transactions or Swap Contracts, then the
Borrower agrees to indemnify and hold the Lender or its affiliates harmless
from any and all obligations now or hereafter owing to the Lender or its
affiliates. The Borrower agrees to pay the Lender or its affiliates all
amounts owing to the Lender or its affiliates pursuant to ACH Transactions and
Swap Contracts. In the event the Borrower shall not have paid to the Lender or
its affiliates such amounts, the Lender may cover such amounts by an advance
under the Revolving Loan, which advance shall be deemed to have been requested
by the Borrower. The Borrower acknowledges and agrees that the obtaining of
ACH Transactions and Swap Contracts from the Lender or its Affiliates (a) is
in the sole and absolute discretion of the Lender or its Affiliates and (b) is
subject to all rules and regulations of the Lender or its Affiliates.
28
Section 2.4 Interest
2.4.1 Applicable Interest Rates.
(a) Each Loan shall bear interest until
maturity (whether by acceleration, declaration, extension or otherwise) at
either the Base Rate or the Eurodollar Rate, as selected and specified by the
Borrower in an Interest Rate Election Notice furnished to the Lender in
accordance with the provisions of Section 2.4.1(e), or as otherwise determined
in accordance with the provisions of this 2.3.8, as may be adjusted from time
to time in accordance with the provisions of Section.
(b) Notwithstanding the foregoing, following
the occurrence and during the continuance of an Event of Default, at the
option of the Lender, all Loans and all other Obligations shall bear interest
at the Post-Default Rate.
(c) The Applicable Margin for (i) Eurodollar
Loans shall be 225 basis points per annum, and (ii) Base Rate Loans shall be 0
basis points per annum unless and until a change is required by the operation
of Section 2.4.1(d).
(d) Changes in the Applicable Margin shall be
made not more frequently than quarterly based on the Borrower's Pricing Ratio,
determined by the Lender in the exercise of its sole and absolute discretion
from the reports required by Section 6.1.1 (Financial Statements), except that
the first such determination shall be made based on the Borrower's quarterly
financial statements for the period ending December 31, 2002 previously
delivered to the Lender and shall be effective as of the first day of the
first month after the Lender receives such statements. The Applicable Margin
(expressed as basis points) shall vary depending upon the Borrower's Pricing
Ratio, as follows:
--------------------------------------------------------------------------------
APPLICABLE MARGIN FOR APPLICABLE MARGIN FOR
PRICING RATIO EURODOLLAR LOANS BASE RATE LOANS
--------------------------------------------------------------------------------
Less than or equal to 1.5 225 basis points 0
--------------------------------------------------------------------------------
Greater than1.5 but less
than or equal to 2.5 250 basis points 0
--------------------------------------------------------------------------------
Greater than 2.5 but less
than or equal to 3.0 275 basis points 0
--------------------------------------------------------------------------------
Greater than 3.0 285 basis points 0
--------------------------------------------------------------------------------
2.4.2 Selection of Interest Rates.
(a) The Borrower may select the initial
Applicable Interest Rate or Applicable Interest Rates to be charged on the
Loan.
(b) From time to time after the date of this
Agreement as provided in this Section, by a proper and timely Interest Rate
Election Notice furnished to the Lender in accordance with the provisions of
Section 2.4.2(e), the Borrower may select an initial
29
Applicable Interest Rate or Applicable Interest Rates for any Loans or may
convert the Applicable Interest Rate, for any existing Loan to any other
Applicable Interest Rate.
(c) The Borrower's selection of an Applicable
Interest Rate, the Borrower's election to convert an Applicable Interest Rate
to another Applicable Interest Rate, and any other adjustments in an interest
rate are subject to the following limitations:
(i) no change from the Eurodollar
Rate to the Base Rate shall become effective on a day other than a
Business Day and no change from the Base Rate to the Eurodollar Rate
shall become effective on a day other than a day which is a Eurodollar
Business Day;
(ii) any Applicable Interest Rate
change for any Loan to be effective on a date on which any principal
payment on account of such Loan is scheduled to be paid shall be made
only after such payment shall have been made;
(iii) no more than three (3) different
Eurodollar Rates may be outstanding at any time and from time to time
with respect to the Revolving Loan;
(iv) as of the effective date of a
selection, there shall not exist a Default or an Event of Default; and
(v) the minimum principal amount of a
Eurodollar Loan shall be One Hundred Thousand Dollars ($100,000).
(d) If a request for an advance under the
Loan is not accompanied by an Interest Rate Election Notice or does not
otherwise include a selection of an Applicable Interest Rate, or if, after
having made a selection of an Applicable Interest Rate, the Borrower fails or
is not otherwise entitled under the provisions of this Agreement to continue
such Applicable Interest Rate, the Borrower shall be deemed to have selected
the Base Rate as the Applicable Interest Rate until such time as the Borrower
has selected a different Applicable Interest Rate in accordance with, and
subject to, the provisions of this Section.
(e) The Lender will not be obligated to make
Loans or to convert the Applicable Interest Rate on Loans to another
Applicable Interest Rate, unless the Lender shall have received an irrevocable
written or telephonic notice (an "Interest Rate Election Notice") from the
Borrower specifying the following information:
(i) the amount to be borrowed or
converted;
(ii) a selection of the Base Rate or the
Eurodollar Rate; and
(iii) the requested date on which such
election is to be effective.
Any telephonic notice must be confirmed in writing
within three (3) Business Days. Each Interest Rate Election Notice must be
received by the Lender not later than 10:00 a.m. (Eastern Time) on the
Business Day of any requested borrowing or conversion in the
30
case of a selection of the Base Rate and not later than 10:00 a.m. (Eastern
Time) on the third Business Day before the effective date of any requested
borrowing or conversion in the case of a selection of the Eurodollar Rate.
2.4.3 Inability to Determine Eurodollar Base Rate.
In the event that (a) the Lender shall have determined
that, by reason of circumstances affecting the London interbank eurodollar
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Base Rate with respect to a Loan the Borrower has requested to be
made as or to be converted to a Eurodollar Loan or (b) the Lender shall
determine that the Eurodollar Base Rate with respect to a Loan the Borrower
has requested to be made as or to be converted to a Eurodollar Loan does not
adequately and fairly reflect the cost to the Lender of funding or converting
such Loan, the Lender shall give telephonic or written notice of such
determination to the Borrower at least one (1) day prior to the proposed date
for funding or converting such Loan. If such notice is given, any request for
a Eurodollar Loan shall be made as or converted to a Base Rate Loan. Until
such notice has been withdrawn by the Lender, the Borrower will not request
that any Loan be made as or converted to a Eurodollar Loan.
2.4.4 Payment of Interest.
(a) Unpaid and accrued interest on the Loans
shall be paid monthly, in arrears, on the first day of each calendar month,
commencing on the first such date after the date of this Agreement, and on the
first day of each calendar month thereafter, and at maturity (whether by
acceleration, declaration, extension or otherwise).
(b) Notwithstanding the foregoing, any and
all unpaid and accrued interest on any Base Rate Loan converted to a
Eurodollar Loan or prepaid shall be paid immediately upon such conversion
and/or prepayment, as appropriate.
ARTICLE III
THE COLLATERAL
Section 3.1 Debt and Obligations Secured.
All property and Liens assigned, pledged or otherwise granted under or
in connection with this Agreement (including, without limitation, those under
Section 3.2 (Grant of Liens)) or any of the Financing Documents shall secure
(a) the payment of all of the Obligations, including, without limitation, any
and all Outstanding Letter of Credit Obligations, and (b) the performance,
compliance with and observance by the Borrower of the provisions of this
Agreement and all of the other Financing Documents or otherwise under the
Obligations.
Section 3.2 Grant of Liens.
The Borrower hereby assigns, pledges and grants to the Lender, and
agrees that the Lender shall have a perfected and continuing security interest
in, and Lien on, all of the Borrower's Accounts, Government Contracts, Chattel
Paper, Inventory, Documents, Instruments, Equipment, Investment Property, and
General Intangibles and all of the Borrower's deposit accounts with any
financial institution with which the Borrower maintains deposits, whether now
owned or existing or hereafter acquired or arising, all insurance policies
relating to the foregoing,
31
all books and records in whatever media (paper, electronic or otherwise)
recorded or stored, with respect to the foregoing and all Equipment and
General Intangibles necessary or beneficial to retain, access and/or process
the information contained in those books and records, and all Proceeds and
products of the foregoing. The Borrower further agrees that the Lender, shall
have in respect thereof all of the rights and remedies of a secured party
under the Uniform Commercial Code as well as those provided in this Agreement,
under each of the other Financing Documents and under applicable Laws.
The Borrower acknowledges and agrees that, with respect to any term
used herein that is defined in either (a) Article 9 of the Uniform Commercial
Code as in force in the jurisdiction in which this financing statement was
signed by the Borrower at the time that it was signed, or (b) Article 9 as in
force at any relevant time in the jurisdiction in which this financing
statement is filed, the meaning to be ascribed thereto with respect to any
particular item of property shall be that under the more encompassing of the
two definitions. A form of assignment is attached hereto as EXHIBIT D and made
a part hereof.
The Borrower covenants and agrees that the Borrower shall provide the
Lender with all necessary information and, if requested, will execute and
deliver such documents as are required to comply with the Federal Assignment
of Claims Act of 1940 (31 U.S.C. Section 3727 and 41 U.S.C. Section 15),
excluding classified Government Contracts, with a contract value equal to or
greater than Five Hundred Thousand Dollars ($500,000) and such other
Government Contracts as the Lender may determine in its sole discretion.
Section 3.3 Collateral Disclosure List.
On or prior to the Closing Date, the Borrower shall deliver to the
Lender a list (the "Collateral Disclosure List") which shall contain such
information with respect to the Borrower's business and real and personal
property as the Lender may require and shall be certified by a Responsible
Officer of the Borrower, all in the form provided to the Borrower by the
Lender. Promptly after demand by the Lender, the Borrower shall furnish to the
Lender an update of the information contained in the Collateral Disclosure
List at any time and from time to time as may be requested by the Lender.
Section 3.4 Personal Property.
The Borrower acknowledges and agrees that it is the intention of the
parties to this Agreement that the Lender shall have a first priority,
perfected Lien, in form and substance satisfactory to the Lender and its
counsel, on all of the Borrower's assets of any kind and nature whatsoever,
whether now owned or hereafter acquired, subject only to the Permitted Liens,
if any. In furtherance of the foregoing:
3.4.1 Investment Property, Chattel Paper, Promissory
Notes, etc.
(a) On the Closing Date and without implying
any limitation on the scope of Section 3.2 (Grant of Liens), the Borrower
shall deliver to the originals of all of the Borrower's letters of credit,
Investment Property, Chattel Paper, Documents and Instruments and, if the
Lender so requires, shall execute and deliver separate pledge, assignment and
security agreements in form and content acceptable to the Lender, which
pledge, assignment and security
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agreements shall assign, pledge and xxxxx x Xxxx to the Lender on all of the
Borrower's letters of credit, Investment Property, Chattel Paper, Documents,
and Instruments.
(b) In the event that the Borrower shall
acquire after the Closing Date any letters of credit, Investment Property,
Chattel Paper, Documents, or Instruments, the Borrower shall promptly so
notify the Lender and deliver the originals of all of the foregoing to the
Lender promptly and in any event within ten (10) days of each acquisition.
(c) All letters of credit, Investment
Property, Chattel Paper, Documents and Instruments shall be delivered to the
Lender endorsed and/or assigned as required by the pledge, assignment and
security agreement and/or as the Lender may require and, if applicable, shall
be accompanied by blank irrevocable and unconditional stock or bond powers
and/or notices as the Lender may require.
3.4.2 Patents, Copyrights and Other Property Requiring
Additional Steps to Perfect.
On the Closing Date and without implying any limitation
on the scope of Section 3.2 (Grant of Liens), the Borrower shall execute and
deliver all Financing Documents and take all actions reasonably requested by
the Lender in order to perfect a first priority assignment of Patents,
Copyrights, Trademarks or any other type or kind of intellectual property
acquired by the Borrower after the Closing Date.
Section 3.5 Record Searches.
As of the Closing Date and thereafter at the time any Financing
Document is executed and delivered by the Borrower pursuant to this Section,
the Lender shall have received, in form and substance satisfactory to the
Lender, such Lien or record searches with respect to the Borrower and/or any
other Person, as appropriate, and the property covered by such Financing
Document showing that the Lien of such Financing Document will be a perfected
first priority Lien on the property covered by such Financing Document subject
only to Permitted Liens or to such other matters as the Lender may approve.
Section 3.6 Costs.
The Borrower agrees to pay, as part of the Enforcement Costs and to
the fullest extent permitted by applicable Laws, on demand all costs, fees and
expenses incurred by the Lender in connection with the taking, perfection,
preservation, protection and/or release of a Lien on the Collateral,
including, without limitation:
(a) customary fees and expenses incurred in
preparing Financing Documents from time to time (including, without
limitation, reasonable attorneys' fees incurred in connection with
preparing the Financing Documents, including, any amendments and
supplements thereto);
(b) all filing and/or recording taxes or
fees;
(c) all costs of Lien and record searches;
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(d) reasonable attorneys' fees in connection
with all legal opinions required; and
(e) all related costs, fees and expenses.
Section 3.7 Release.
Upon the indefeasible repayment in full in cash of the Obligations and
performance of all Obligations of the Borrower and all obligations and
liabilities of each other Person, other than the Lender, under this Agreement
and all other Financing Documents, the termination and/or expiration of the
Commitment and Outstanding Letter of Credit Obligations, upon the Borrower's
request and at the Borrower's sole cost and expense, the Lender shall release
and/or terminate any Financing Document but only if and provided that there is
no commitment or obligation (whether or not conditional) of the Lender to
re-advance amounts which would be secured thereby and/or no commitment or
obligation of the Lender to issue any Letter of Credit or return or restore
any payment of any Current Letter of Credit Obligations.
Section 3.8 Inconsistent Provisions.
In the event that the provisions of any Financing Document directly
conflict with any provision of this Agreement, the provisions of this
Agreement govern.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties.
The Borrower represents and warrants to the Lender, as follows:
4.1.1 Subsidiaries.
The Borrower has only those Subsidiaries listed on the
Collateral Disclosure List attached hereto and made a part hereof and no
others. Each of the Subsidiaries is a Wholly Owned Subsidiary except as shown
on the Collateral Disclosure List, which correctly indicates the nature and
amount of the Borrower's ownership interests therein.
4.1.2 Existence.
The Borrower (a) is a Registered Organization under the
laws of the jurisdiction stated in the Preamble of this Agreement, (b) is in
good standing under the laws of the jurisdiction in which it is organized, (c)
has the power to own its property and to carry on its business as now being
conducted, and (d) 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. The Borrower is organized under the laws of only one (1)
jurisdiction.
4.1.3 Power and Authority.
The Borrower has full power and authority to execute and
deliver this Agreement and, the other Financing Documents to which it is a
party, to make the borrowings
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and request Letters of Credit under this Agreement, and to incur and perform
the Obligations whether under this Agreement, the other Financing Documents or
otherwise, all of which have been duly authorized by all proper and necessary
action. No consent or approval of shareholders or any creditors of the
Borrower, and no consent, approval, filing or registration with or notice to
any Governmental Authority on the part of the Borrower, is required as a
condition to the execution, delivery, validity or enforceability of this
Agreement or any of the other Financing Documents, the performance by the
Borrower of the Obligations.
4.1.4 Binding Agreements.
This Agreement and the other Financing Documents
executed and delivered by the Borrower have been properly executed and
delivered and constitute the valid and legally binding obligations of the
Borrower and are fully enforceable against the Borrower in accordance with
their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applications affecting the rights and
remedies of creditors and secured parties, and general principles of equity
regardless of whether applied in a proceeding in equity or at law.
4.1.5 No Conflicts.
Neither the execution, delivery and performance of the
terms of this Agreement or of any of the other Financing Documents executed
and delivered by the Borrower nor the consummation of the transactions
contemplated by this Agreement will conflict with, violate or be prevented by
(a) the Borrower's organizational or governing documents, (b) any existing
mortgage, indenture, contract or agreement binding on the Borrower or
affecting its property, or (c) any Laws.
4.1.6 No Defaults, Violations.
(a) No Default or Event of Default has
occurred and is continuing.
(b) Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any obligation under any
existing mortgage, indenture, contract or agreement binding on it or affecting
its property in any respect which could be materially adverse to the business,
operations, property or financial condition of the Borrower, or which could
materially adversely affect the ability of the Borrower to perform its
obligations under this Agreement or the other Financing Documents, to which
the Borrower is a party.
4.1.7 Compliance with Laws.
Neither the Borrower nor any of its Subsidiaries is in
violation of any applicable Laws (including, without limitation, any Laws
relating to employment practices, to environmental, occupational and health
standards and controls) or order, writ, injunction, decree or demand of any
court, arbitrator, or any Governmental Authority affecting the Borrower or any
of its properties, the violation of which, considered in the aggregate, could
materially adversely affect the business, operations or properties of the
Borrower and/or its Subsidiaries.
35
4.1.8 Margin Stock.
None of the proceeds of the Loan will be used, directly
or indirectly, by the Borrower 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 stock" within the
meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the
Federal Reserve System or for any other purpose which might make the
transactions contemplated in this Agreement a "purpose credit" within the
meaning of 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.
4.1.9 Investment Company Act; Margin Stock.
Neither the Borrower nor any of its Subsidiaries is an
investment company within the meaning of the Investment Company Act of 1940,
as amended, nor is it, directly or indirectly, controlled by or acting on
behalf of any Person which is an investment company within the meaning of said
Act. Neither the Borrower nor any of its Subsidiaries is engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying "margin stock" within the meaning of
Regulation U (12 CFR Part 221), of the Board of Governors of the Federal
Reserve System.
4.1.10 Litigation.
Except as otherwise disclosed on Schedule 4.1.10
attached hereto and made a part hereof, there are no proceedings, actions or
investigations pending or, so far as the Borrower knows, threatened before or
by any court, arbitrator or any Governmental Authority which, in any one case
or in the aggregate, if determined adversely to the interests of the Borrower
or any Subsidiary, would have a material adverse effect on the business,
properties, condition (financial or otherwise) or operations, present or
prospective, of the Borrower.
4.1.11 Financial Condition.
The financial statements of the Borrower dated September
30, 2001, are complete and correct and fairly present the financial position
of the Borrower and the results of its operations and transactions in its
surplus accounts as of the date and for the period referred to and have been
prepared in accordance with GAAP applied on a consistent basis throughout the
period involved. There are no liabilities, direct or indirect, fixed or
contingent, of the Borrower as of the date of such financial statements that
are not reflected therein or in the notes thereto. There has been no adverse
change in the financial condition or operations of the Borrower since the date
of such financial statements and to the Borrower's knowledge no such adverse
change is pending or threatened. The Borrower has not guaranteed the
obligations of, or made any investment in or advances to, any Person, except
as disclosed in such financial statements.
4.1.12 Full Disclosure.
The financial statements referred to in Section 4.1.11
(Financial Condition), the Financing Documents (including, without limitation,
this Agreement), and the
36
statements, reports or certificates furnished by the Borrower in connection
with the Financing Documents (a) do not contain any untrue statement of a
material fact and (b) when taken in their entirety, do not omit any material
fact necessary to make the statements contained therein not misleading. There
is no fact known to the Borrower which the Borrower has not disclosed to the
Lender in writing prior to the date of this Agreement with respect to the
transactions contemplated by the Financing Documents that materially and
adversely affects or in the future could, in the reasonable opinion of the
Borrower materially adversely affect the condition, financial or otherwise,
results of operations, business, or assets of the Borrower.
4.1.13 Funded Debt.
Except for the Obligations and except as set forth in
Schedule 4.1.13 attached hereto and made a part hereof, the Borrower has no
Funded Debt. The Lender has received photocopies of all promissory notes
evidencing any Funded Debt set forth in Schedule 4.1.13, together with any and
all subordination agreements, other agreements, documents, or instruments
securing, evidencing, guarantying or otherwise executed and delivered in
connection therewith.
4.1.14 Taxes.
Each of the Borrower and its Subsidiaries has filed all
returns, reports and forms for Taxes that, to the knowledge of the Borrower,
are required to be filed, and has 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
proceedings by the Borrower, such Taxes are not the subject of any Liens other
than Permitted Liens, and adequate reserves therefore have been established as
required under GAAP. All tax liabilities of the Borrower were as of the date
of audited financial statements referred to in Section 4.1.11 (Financial
Condition), and are now, adequately provided for on the books of the Borrower
and its Subsidiaries, as appropriate. No tax liability has been asserted by
the Internal Revenue Service or any state or local authority against the
Borrower for Taxes in excess of those already paid.
4.1.15 ERISA.
With respect to any Plan that is maintained or
contributed to by the Borrower and/or by any Commonly Controlled Entity or as
to which the Borrower retains material liability: (a) no "accumulated funding
deficiency" as defined in Code Section 412 or ERISA Section 302 has occurred,
whether or not that accumulated funding deficiency has been waived; (b) no
Reportable Event has occurred other than events for which reporting has been
waived; (c) no termination of any plan subject to Title IV of ERISA has
occurred; (d) neither the Borrower nor any Commonly Controlled Entity has
incurred a "complete withdrawal" within the meaning of ERISA Section 4203 from
any Multi-employer Plan; (e) neither the Borrower nor any Commonly Controlled
Entity has incurred a "partial withdrawal" within the meaning of ERISA Section
4205 with respect to any Multi-employer Plan; (f) no Multi-employer Plan to
which the Borrower or any Commonly Controlled Entity has an obligation to
contribute is in "reorganization" within the meaning of ERISA Section 4241 nor
has notice been received by the Borrower or any Commonly Controlled Entity
that such a Multi-employer Plan will be placed in "reorganization".
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4.1.16 Title to Properties.
The Borrower has good and marketable title to all of its
properties, including, without limitation, the Collateral and the properties
and assets reflected in the balance sheets described in Section 4.1.11
(Financial Condition). The Borrower has legal, enforceable and uncontested
rights to use freely such property and assets.
4.1.17 Patents, Trademarks, Etc.
The Borrower owns, possesses, or has the right to use
all necessary Patents, licenses, Trademarks, Copyrights, permits and
franchises to own its properties and to conduct its business as now conducted,
without known conflict with the rights of any other Person. Any and all
obligations to pay royalties or other charges with respect to such properties
and assets are properly reflected on the financial statements described in
Section 4.1.11 (Financial Condition).
4.1.18 Presence of Hazardous Materials or Hazardous
Materials Contamination.
Except as previously disclosed to the Lender, to the
best of the Borrower's knowledge, (a) no Hazardous Materials are located on
any real property owned, controlled or operated by of the Borrower or for
which the Borrower is, or is claimed to be, responsible, except for reasonable
quantities of necessary supplies for use by the Borrower in the ordinary
course of its current line of business and stored, used and disposed in
accordance with applicable Laws; and (b) no property owned, controlled or
operated by the Borrower or for which the Borrower has, or is claimed to have,
responsibility 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.
4.1.19 Perfection and Priority of Collateral.
The Lender has, or upon execution and recording of this
Agreement and the Security Documents will have, and will continue to have as
security for the Obligations, a valid and perfected Lien on and security
interest in all Collateral, free of all other Liens, claims and rights of
third parties whatsoever except Permitted Liens, including, without
limitation, those described on Schedule 4.1.19 attached hereto and made a part
hereof..
4.1.20 No Suspension or Debarment.
Neither the Borrower nor any Affiliate nor any of their
respective directors, officers or employees has received any notice of, or
information concerning, any proposed, contemplated or initiated suspension or
debarment, be it temporary or permanent, due to an administrative or a
statutory basis, of the Borrower or any Affiliate by any Governmental
Authority. The Borrower and each Affiliate further warrants and represents
that neither the Borrower nor any Affiliate has defaulted under any Government
Contract which default would be a basis of terminating such Government
Contract.
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4.1.21 Collateral Disclosure List.
The information contained in the Collateral Disclosure
List is complete and correct. The Collateral Disclosure List completely and
accurately identifies (a) the type of entity, the state of organization and
the chief executive office of the Borrower, (b) each other place of business
of the Borrower, (c) the location of all books and records pertaining to the
Collateral, and (d) each location, other than the foregoing, where any of the
Collateral is located.
4.1.22 Business Names and Addresses.
In the five (5) years preceding the date hereof, the
Borrower has not changed its name, identity or corporate structure, has not
conducted business under any name other than its current name, and has not
conducted its business in any jurisdiction other than those disclosed on the
Collateral Disclosure List.
4.1.23 Equipment.
All Equipment is personalty and is not and will not be
affixed to real estate in such manner as to become a fixture or part of such
real estate. No equipment is held by the Borrower on a sale on approval basis.
4.1.24 Accounts.
With respect to all Accounts and to the best of the
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 bona
fide transactions completed in accordance with the terms and provisions
contained in the invoices, purchase orders and other contracts relating
thereto, and the underlying transaction therefore is in accordance with all
applicable Laws; (c) the amounts shown on the Borrower's books and records,
with respect thereto are actually and absolutely owing to the Borrower and are
not contingent or subject to reduction for any reason other than regular
discounts, credits or adjustments allowed by the Borrower in the ordinary
course of its business; (d) no payments have been or shall be made thereon
except payments turned over to the Lender by the Borrower; (e) all Account
Debtors thereon have the capacity to contract; and (f) the services furnished
giving rise thereto are not subject to any Liens except the security interest
granted to the Lender by this Agreement and Permitted Liens.
4.1.25 Compliance with Eligibility Standards.
Each Account included in the calculation of the
Borrowing Base does and will at all times meet and comply with all of the
standards for Eligible Receivables. With respect to those Accounts which the
Lender has deemed Eligible Receivables (a) there are no facts, events or
occurrences which in any way impair the validity, collectibility or
enforceability thereof or tend to reduce the amount payable thereunder; and
(b) there are no proceedings or actions known to the Borrower that are
threatened or pending against any Account Debtor which might result in any
material adverse change in the Borrowing Base.
39
Section 4.2 Survival; Updates of Representations and Warranties.
All representations and warranties contained in or made under or in
connection with this Agreement and the other Financing Documents shall survive
the Closing Date, the making of any advance under the Loan and extension of
credit made hereunder, and the incurring of any other Obligations and shall be
deemed to have been made at the time of each request for, and again at the
time of the making of, each advance under the Loan or the issuance of each
Letter of Credit, except that the representations and warranties which relate
to the financial statements which are referred to in Section 4.1.11 (Financial
Condition), shall also be deemed to cover financial statements furnished from
time to time to the Lender pursuant to Section 6.1.1 (Financial Statements).
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions to the Initial Advance and Initial Letter of
Credit.
The making of the initial advance under the Loan and the issuance of
the initial Letter of Credit is subject to the fulfillment on or before the
Closing Date of the following conditions precedent in a manner satisfactory in
form and substance to the Lender and its counsel:
5.1.1 Organizational Documents - Borrower.
The Lender shall have received:
(a) a certificate of good standing for the
Borrower certified by the Secretary of State, or other appropriate
Governmental Authority, of the state of incorporation for the
Borrower;
(b) a certificate of qualification to do
business for the Borrower certified by the Secretary of State or other
Governmental Authority of each state in which the Borrower conducts
business;
(c) a certificate dated as of the Closing
Date by the Secretary or an Assistant Secretary of the Borrower
covering:
(i) true and complete copies of the
Borrower's corporate charter, bylaws, and all amendments
thereto;
(ii) true and complete copies of the
resolutions of its Board of Directors authorizing (i) the
execution, delivery and performance of the Financing Documents
to which the Borrower is a party, (ii) the borrowings by the
Borrower hereunder, (iii) the granting of the Liens
contemplated by this Agreement and the Financing Documents to
which the Borrower is a party;
(iii) the incumbency, authority and
signatures of the officers of the Borrower authorized to sign
this
40
Agreement and the other Financing Documents to which the
Borrower is a party; and
(iv) the identity of the Borrower's
current directors.
5.1.2 Opinion of Borrower's Counsel.
The Lender shall have received the favorable opinion of
counsel for the Borrower addressed to the Lender.
5.1.3 Consents, Licenses, Approvals, Etc.
The Lender shall have received copies of all consents,
licenses and approvals, required in connection with the execution, delivery,
performance, validity and enforceability of the Financing Documents, and such
consents, licenses and approvals shall be in full force and effect.
5.1.4 Notes.
The Lender shall have received the Revolving Credit
Note, conforming to the requirements hereof and executed by a Responsible
Officer of the Borrower and attested by a duly authorized representative of
the Borrower.
5.1.5 Financing Documents and Collateral.
The Borrower shall have executed and delivered the
Financing Documents to be executed by it, and shall have delivered original
Chattel Paper, Instruments, Investment Property, and related Collateral and
all opinions, title insurance, and other documents contemplated by ARTICLE III
(The Collateral).
5.1.6 Other Financing Documents.
In addition to the Financing Documents to be delivered
by the Borrower, the Lender shall have received the Financing Documents duly
executed and delivered by Persons other than the Borrower.
5.1.7 Other Documents, Etc.
The Lender shall have received such other certificates,
opinions, documents and instruments confirmatory of or otherwise relating to
the transactions contemplated hereby as may have been reasonably requested by
the Lender.
5.1.8 Payment of Fees.
The Lender shall have received payment of any Fees due
on or before the Closing Date.
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5.1.9 Collateral Disclosure List.
The Borrower shall have delivered the Collateral
Disclosure List required under the provisions of 0 (Collateral Disclosure
List) duly executed by a Responsible Officer of the Borrower.
5.1.10 Recordings and Filings.
The Borrower shall have: (a) executed and delivered all
Financing Documents (including, without limitation, UCC-1 and UCC-3
statements) required to be filed, registered or recorded in order to create,
in favor of the Lender, a perfected Lien in the Collateral (subject only to
the Permitted Liens) in form and in sufficient number for filing,
registration, and recording in each office in each jurisdiction in which such
filings, registrations and recordations are required, and (b) delivered such
evidence as the Lender deems satisfactory that all necessary filing fees and
all recording and other similar fees, and all Taxes and other expenses related
to such filings, registrations and recordings will be or have been paid in
full.
5.1.11 Insurance Certificate.
The Lender shall have received an insurance certificate
in accordance with the provisions of Section 6.1.8 (Insurance) and Section
6.1.18 (Insurance With Respect to Equipment).
5.1.12 Field Examination.
The Lender, at its option, shall have completed a field
examination of the Borrower's business, operations and income, the results of
which field examination and audit shall be in all respects acceptable to the
Lender in its sole and absolute discretion and shall include reference
discussions with key customers and vendors.
Section 5.2 Conditions to all Extensions of Credit.
The making of all advances under the Loan and the issuance of all
Letters of Credit is subject to the fulfillment of the following conditions
precedent in a manner satisfactory in form and substance to the Lender and its
counsel:
5.2.1 Compliance.
The Borrower shall have complied and shall then be in
compliance with all terms, covenants, conditions and provisions of this
Agreement and the other Financing Documents that are binding upon it.
5.2.2 Borrowing Base.
The Borrower shall have furnished all Borrowing Base
Reports required by Section 2.1.4 (Borrowing Base Report), there shall exist
no Borrowing Base Deficiency, and as evidence thereof, the Borrower shall have
furnished to the Lender such reports, schedules, certificates, records and
other papers as may be requested by the Lender and the Borrower shall be in
compliance with the provisions of this Agreement both immediately before and
immediately after the making of the advance requested.
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5.2.3 Default.
There shall exist no Event of Default or Default
hereunder.
5.2.4 Representations and Warranties.
The representations and warranties of the Borrower
contained among the provisions of this Agreement shall be true and with the
same effect as though such representations and warranties had been made at the
time of the making of, and of the request for, each advance under the Loan or
the issuance of each Letter of Credit, except that the representations and
warranties which relate to financial statements which are referred to in
Section 4.1.11 (Financial Condition), shall also be deemed to cover financial
statements furnished from time to time to the Lender pursuant to Section 6.1.1
(Financial Statements).
5.2.5 Adverse Change.
No adverse change shall have occurred in the condition
(financial or otherwise), operations or business of the Borrower that would,
in the good faith judgment of the Lender, materially impair the ability of the
Borrower to pay or perform any of the Obligations.
5.2.6 Legal Matters.
All legal documents incident to each advance under the
Loan and each of the Letters of Credit shall be reasonably satisfactory to
counsel for the Lender.
ARTICLE VI
COVENANTS OF THE BORROWER
Section 6.1 Affirmative Covenants.
So long as any of the Obligations or the Commitment shall be
outstanding hereunder, the Borrower agrees with the Lender as follows:
6.1.1 Financial Statements.
The Borrower shall furnish to the Lender:
(a) Annual Statements and Certificates. The
Borrower shall furnish to the Lender as soon as available, but in no event
more than one hundred and twenty (120) days after the close of each fiscal
year of the Borrower, (i) a copy of the annual financial statement in
reasonable detail satisfactory to the Lender relating to the Borrower,
prepared in accordance with GAAP and examined and certified by independent
certified public accountants satisfactory to the Lender, which financial
statement shall include a balance sheet of the Borrower as of the end of such
fiscal year and statements of income, cash flows and changes in shareholders
equity of the Borrower for such fiscal year, (ii) a Compliance Certificate, in
substantially the form attached to this Agreement as EXHIBIT C, as may be
amended by the Lender from time to time, containing a detailed computation of
each financial covenant which is applicable for the period reported, a
certification that no material change has occurred to the information
contained in the Collateral Disclosure List (except as set forth in a schedule
attached to the certification), and a cash flow projection report, each
prepared by a Responsible Officer of
43
the Borrower in a format acceptable to the Lender, and (iii) a management
letter in the form prepared by the Borrower's independent certified public
accountants.
(b) Quarterly Statements and Certificates.
The Borrower shall furnish to the Lender as soon as available, but in no event
more than forty five (45) days after the close of the Borrower's fiscal
quarters, balance sheets of the Borrower as of the close of such period,
income, cash flows and changes in shareholders equity statements for such
period and a detailed computation of each financial covenant in this Agreement
which is applicable for the period reported, all as prepared and certified by
a Responsible Officer of the Borrower and accompanied by a certificate of that
officer stating whether any event has occurred which constitutes a Default or
an Event of Default hereunder, and, if so, stating the facts with respect
thereto.
(c) Quarterly Contract Backlog Reports. The
Borrower shall furnish to the Lender within forty-five (45) days after the end
of each fiscal quarter, a contract backlog report in form and substance
acceptable to the Lender. A form of Backlog Report is attached hereto as
EXHIBIT E and made a part hereof.
(d) Monthly reports. If any sum is
outstanding under the Revolving Loan or any Letter of Credit is outstanding,
not later than the twentieth (20th) day after the end of each month and if
there is no sum outstanding under the Revolving Loan and no Letter of Credit
is outstanding, not later than the forty fifth (45th) day after the end of
each calendar quarter, the Borrower shall furnish to the Lender the Borrowing
Base Report and a report containing the following information:
(i) a detailed aging schedule of all
Receivables by Account Debtor, in such detail, and accompanied by such
supporting information, as the Lender may from time to time reasonably
request; and
(ii) such other information as the
Lender may reasonably request.
(e) Annual Budget and Projections. The
Borrower shall furnish to the Lender as soon as available, but in no event
later than the one hundred and twentieth (120th) day subsequent to the end of
each fiscal year
(i) a pro forma financial statements
on a quarterly basis for the following fiscal year; and
(ii) cash flow projections on a
quarter-to-quarter basis.
(f) Additional Reports and Information. The
Borrower shall furnish to the Lender promptly, such additional information,
reports or statements as the Lender may from time to time reasonably request.
6.1.2 Reports to SEC and to Stockholders.
The Borrower will furnish to the Lender, promptly upon
the filing or making thereof, at least one (1) copy of all financial
statements, reports, notices and proxy
44
statements sent by the Borrower to its stockholders, and of all regular and
other reports filed by the Borrower with any securities exchange or with the
Securities and Exchange Commission.
6.1.3 Recordkeeping, Rights of Inspection, Audit, Etc.
(a) The Borrower shall, and shall cause each
of its Subsidiaries to, maintain (a) a standard system of accounting in
accordance with GAAP, and (b) proper books of record and account in which
full, true and correct entries are made of all dealings and transactions in
relation to its properties, business and activities.
(b) The Borrower shall, and shall cause each
of its Subsidiaries to, permit Lender or its agents to enter upon the premises
of the Borrower or any Subsidiaries at during normal business hours and other
reasonable times and as often as the Lender may reasonably request for the
purpose of conducting field examinations of the Collateral, as well as any and
all records pertaining thereto, and at any time during the continuance of an
Event of Default Lender may take possession of and remove any or all such
records. Borrower agrees to reimburse Lender for the cost of periodic field
examinations of the Collateral at such intervals as Lender may reasonably
require. The field examinations may be performed by employees of Lender or by
independent appraisers. If, as a result of such examination the Lender
determines that the Borrowing Base Deficiency exists, then Lender shall have
the right to demand payment of the Obligations, and the Lender shall have no
obligation to make any further extensions of credit to the Borrower. At all
times, Lender shall also have the right to adjust the eligibility standards
applicable to any Collateral based on field examination results.
(c) The Borrower hereby irrevocably
authorizes and directs all accountants and auditors employed by the Borrower
and/or any of its Subsidiaries at any time prior to the repayment in full of
the Obligations to exhibit and deliver to the Lender copies of any and all of
the financial statements, trial balances, management letters, or other
accounting records of any nature of the Borrower and/or any of its
Subsidiaries in the accountant's or auditor's possession, and to disclose to
the Lender any information they may have concerning the financial status and
business operations of the Borrower and/or any of its Subsidiaries . Further,
the Borrower hereby authorizes all Governmental Authorities to furnish to the
Lender copies of reports or examinations relating to the Borrower and/or any
of its Subsidiaries, whether made by the Borrower or otherwise.
(d) Any and all costs and expenses incurred
by, or on behalf of, the Lender in connection with the conduct of any of the
foregoing shall be part of the Enforcement Costs and shall be payable to the
Lender upon demand. The Borrower acknowledges and agrees that such expenses
may include, but shall not be limited to, any and all out-of-pocket costs and
expenses of the Lender's employees and agents in, and when, traveling to any
of the Borrower's facilities.
6.1.4 Existence.
The Borrower shall (a) maintain, and cause each of its
Subsidiaries to maintain, its existence in good standing in the jurisdiction
in which it is organized and in each other jurisdiction where it is required
to register or qualify to do business if the failure to do so in such other
jurisdiction might have a material adverse effect on the ability of the
Borrower to
45
perform the Obligations, on the conduct of the Borrower's operations, on the
Borrower's financial condition, or on the value of, or the ability of the
Lender to realize upon, the Collateral and (b) remain a Registered
Organization under the laws of the jurisdiction stated in the Preamble of this
Agreement.
6.1.5 Compliance with Laws.
The Borrower shall comply, and cause each of its
Subsidiaries to comply, with all applicable Laws and observe the valid
requirements of Governmental Authorities, the noncompliance with or the
nonobservance of which might have a material adverse effect on the ability of
the Borrower to perform the Obligations, the conduct of the Borrower's
operations, the Borrower's financial condition, or the value of, or the
ability of the Lender to realize upon, the Collateral.
6.1.6 Preservation of Properties.
The Borrower will, and will cause each of its
Subsidiaries to, at all times (a) maintain, preserve, protect and keep its
properties, whether owned or leased, in good operating condition, working
order and repair (ordinary wear and tear excepted), and from time to time will
make all proper repairs, maintenance, replacements, additions and improvements
thereto needed to maintain such properties in good operating condition,
working order and repair, and (b) do or cause to be done all things necessary
to preserve and to keep in full force and effect its material franchises,
leases of real and personal property, trade names, Patents, Trademarks,
Copyrights and permits which are necessary for the orderly continuance of its
business.
6.1.7 Line of Business.
The Borrower will continue to engage substantially only
in the business of electronic systems manufacturer and integrator with
associated related services.
6.1.8 Insurance.
The Borrower will, and will cause each of its
Subsidiaries to, at all times maintain with A-or better rated insurance
companies such insurance as is required by applicable Laws and such other
insurance, all in such amounts not less than the Lender shall reasonably
determine from time to time, of such types and against such risks, hazards,
liabilities, casualties and contingencies as are usually insured against in
the same geographic areas by business entities engaged in the same or similar
business. Without limiting the generality of the foregoing, the Borrower will,
and will cause each of its Subsidiaries to, keep adequately insured all of its
property against loss or damage resulting from fire or other risks insured
against by extended coverage and maintain public liability insurance against
claims for personal injury, death or property damage occurring upon, in or
about any properties occupied or controlled by it, or arising in any manner
out of the businesses carried on by it. The Borrower shall deliver to the
Lender on the Closing Date (and thereafter on each date there is a material
change in the insurance coverage) a certificate of a Responsible Officer of
the Borrower containing a detailed list of the insurance then in effect and
stating the names of the insurance companies, the types, the amounts and rates
of the insurance, dates of the expiration thereof and the properties and
46
risks covered thereby. Within thirty (30) days after notice in writing from
the Lender, the Borrower will obtain such additional insurance as the Lender
may reasonably request.
6.1.9 Taxes.
Except to the extent that the validity or amount thereof
is being contested in good faith and by appropriate proceedings, the Borrower
will, and will cause each of its Subsidiaries to, pay and discharge all Taxes
prior to the date when any interest or penalty would accrue for the nonpayment
thereof. The Borrower shall furnish to the Lender at such times as the Lender
may require proof satisfactory to the Lender of the making of payments or
deposits required by applicable Laws including, without limitation, payments
or deposits with respect to amounts withheld by the Borrower from wages and
salaries of employees and amounts contributed by the Borrower on account of
federal and other income or wage taxes and amounts due under the Federal
Insurance Contributions Act, as amended.
6.1.10 ERISA.
The Borrower will, and will cause each of its Commonly
Controlled Entities to, comply with the funding requirements of ERISA with
respect to Plans for its respective employees. The Borrower will not permit
with respect to any Plan (a) any prohibited transaction or transactions under
ERISA or the Internal Revenue Code, which results, or may result, in any
material liability of the Borrower, or (b) any Reportable Event if, upon
termination of the plan or plans with respect to which one or more such
Reportable Events shall have occurred, there is or would be any material
liability of the Borrower to the PBGC. Upon the Lender's request, the Borrower
will deliver to the Lender a copy of the most recent actuarial report,
financial statements and annual report completed with respect to any Plan.
6.1.11 Notification of Events of Default and Adverse
Developments.
The Borrower shall promptly notify the Lender upon
obtaining knowledge of the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any litigation instituted or threatened
against the Borrower or its Subsidiaries and of the entry of any
judgment or Lien (other than any Permitted Liens) against any of the
assets or properties of the Borrower or any Subsidiary where the
claims against the Borrower or any Subsidiary exceed Two Hundred Fifty
Thousand Dollars ($250,000) and are not covered by insurance;
(d) any guaranty or other actual or
potential contingent liability where the claims against the Borrower
or any Subsidiary exceed Two Hundred Fifty Thousand Dollars ($250,000)
and are not covered by insurance;
(e) any event, development or circumstance
whereby the financial statements furnished hereunder fail in any
material respect to present
47
fairly, in accordance with GAAP, the financial condition and
operational results of the Borrower;
(f) any judicial, administrative or arbitral
proceeding pending against the Borrower or any of its Subsidiaries and
any judicial or administrative proceeding known by the Borrower or any
of its Subsidiaries to be threatened against it which, if adversely
decided, could materially adversely affect its financial condition or
operations (present or prospective);
(g) the receipt by the Borrower or any of
its Subsidiaries of any notice, claim or demand from any Governmental
Authority which alleges that the Borrower or any of its Subsidiaries
is in violation of any of the terms of, or has failed to comply with
any applicable Laws regulating its operation and business, including,
but not limited to, the Occupational Safety and Health Act and the
Environmental Protection Act; and
(h) any other development in the business or
affairs of the Borrower or any of its Subsidiaries that may be
materially adverse;
in each case describing in detail satisfactory to the Lender the nature
thereof and the action the Borrower proposes to take with respect thereto.
6.1.12 Government Contracts.
The Borrower shall immediately notify the Lender of the
execution of any Government Contract with a contract value equal to or greater
than One Million Dollars ($1,000,000) and shall in accordance with Section 3.2
execute any instruments and take any steps in order that all moneys due and to
become due under such Government Contracts shall be assigned to the Lender and
notice thereof given to the Government under the Federal Assignment of Claims
Act of 1940 (31 U.S.C. Section 3727 and 41 U.S.C. Section 15) or any other
similar applicable law. On the Lender's request the Borrower shall assign such
other Government Contracts as the Lender requires in the exercise of its
reasonable discretion.
6.1.13 Hazardous Materials; Contamination.
The Borrower agrees to:
(a) give notice to the Lender immediately
upon the Borrower's acquiring knowledge of the presence of any
Hazardous Materials and of any Hazardous Materials Contamination on
any property owned or controlled by the Borrower or for which the
Borrower is, or is claimed to be, responsible (provided that such
notice shall not be required for Hazardous Materials placed or stored
on such property in accordance with applicable Laws in the ordinary
course (including, without limitation, quantity) of the Borrower's
line of business expressly described in this Agreement) or of any
Hazardous Materials Contamination, with a full description thereof;
48
(b) promptly comply with any Laws requiring
the removal, treatment or disposal of Hazardous Materials or Hazardous
Materials Contamination and provide the Lender with satisfactory
evidence of such compliance;
(c) 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 or Hazardous
Materials Contamination and discharging any Lien which may be
established as a result thereof on any property owned or controlled by
the Borrower or for which the Borrower is, or is claimed to be,
responsible; and
(d) as part of the Obligations, 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 or any Hazardous Materials Contamination on any property
owned or controlled by the Borrower or for which the Borrower is, or
is claimed to be, responsible. The Borrower acknowledges and agrees
that this indemnification shall survive the termination of this
Agreement and the Commitment and the payment and performance of all of
the other Obligations.
6.1.14 Disclosure of Significant Transactions.
The Borrower shall deliver to the Lender a written
notice describing in detail each transaction by it involving the purchase,
sale, lease, or other acquisition or loss or casualty to or disposition of an
interest in Fixed or Capital Assets which exceeds Fifty Thousand Dollars
($50,000.00), said notices to be delivered to the Lender within thirty (30)
days of the occurrence of each such transaction.
6.1.15 Financial Covenants.
(a) Tangible Net Worth. The Borrower will
at all times maintain a Tangible Net Worth of not less than $8,500,000.
(b) Funded Debt to EBITDA Ratio. The
Borrower will maintain, tested as of the last day of each of the Borrower's
fiscal quarters for the preceding four (4) fiscal quarters, a Funded Debt to
EBITDA Ratio of not more than 3.25 to 1.0 through September 29, 2002 and not
more than 3.0 to 1.0 at all times thereafter.
6.1.16 Collection of Receivables.
Until such time that the Lender shall notify the
Borrower of the revocation of such privilege, the Borrower shall at its own
expense have the privilege for the account of, and in trust for, the Lender of
collecting its Receivables and receiving in respect thereto all Items of
Payment and shall otherwise completely service all of the Receivables
including (a) the billing, posting and maintaining of complete records
applicable thereto, (b) the taking of such action
49
with respect to the Receivables as the Lender may request or in the absence of
such request, as the Borrower may deem advisable; and (c) the granting, 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 a Receivable and may take such other actions
relating to the settling of any Account Debtor's claim as may be commercially
reasonable. The Lender may, at its option, at any time or from time to time
after and during the continuance of an Event of Default hereunder, revoke the
collection privilege given in this Agreement to the Borrower 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 Borrower. The Lender shall not have
any duty to, and the 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
Receivables or to preserve any rights against any other party with an interest
in the Collateral. The Lender shall be entitled at any time and from time to
time to confirm and verify Receivables.
6.1.17 Assignments of Receivables.
The Borrower will promptly, upon request, execute and
deliver to the Lender written assignments, in form and content acceptable to
the Lender, of specific Receivables or groups of Receivables; 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 Receivables within such assignments. Receivables so assigned 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. The Borrower agrees that neither any assignment to the Lender nor
any other provision contained in this Agreement or any of the other Financing
Documents shall impose on the Lender any obligation or liability of the
Borrower with respect to that which is assigned and the Borrower hereby agrees
to indemnify the Lender and hold the Lender harmless from any and all claims,
actions, suits, losses, damages, costs, expenses, fees, obligations and
liabilities which may be incurred by or imposed upon the Lender by virtue of
the assignment of and Lien on the Borrower's rights, title and interest in,
to, and under the Collateral.
6.1.18 Insurance With Respect to Equipment.
The Borrower will (a) maintain hazard insurance with
fire and extended coverage and naming the Lender as an additional insured with
loss payable to the Lender as its respective interest may appear on the
Equipment in an amount at least equal to the lesser amount of the outstanding
principal amount of the Obligations or the fair market value of the Equipment
(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 termination of such insurance policy and that no act
or default of the Borrower shall affect the right of the Lender to recover
under such policy in the event of loss or damage; (b) 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 (c) within thirty (30) days after notice in writing from the Lender,
obtain such additional insurance as the Lender may reasonably request.
50
6.1.19 Maintenance of the Collateral.
The Borrower will maintain the Collateral in good working
order, saving and excepting ordinary wear and tear, and will not permit anything
to be done to the Collateral which may materially impair the value thereof. The
Lender, or an agent designated by the Lender, shall be permitted to enter the
premises of the Borrower and examine, audit and inspect the Collateral at any
reasonable time and from time to time without notice. The Lender agrees to act
in a commercially reasonable manner when inspecting the premises of the Borrower
and when examining, auditing and/or inspecting the Collateral. The Lender shall
not have any duty to, and the 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 Receivables or to, preserve any rights against any other party with
an interest in the Collateral.
6.1.20 Equipment.
The Borrower shall (a) maintain all Equipment as
personalty, (b) not affix any Equipment to any real estate in such manner as
to become a fixture or part of such real estate, and (c) shall hold no
Equipment on a sale on approval basis. The Borrower hereby declares its intent
that, notwithstanding the means of attachment, no goods of the Borrower
hereafter attached to any realty shall be deemed a fixture, which declaration
shall be irrevocable, without the Lender's consent, until all of the
Obligations have been paid in full and all of the Commitments and Letters of
Credit have been terminated.
6.1.21 Defense of Title and Further Assurances.
At its expense the Borrower will defend the title to the
Collateral (and any part thereof), and will immediately execute, acknowledge
and deliver any renewal, affidavit, deed, assignment, security agreement,
certificate or other document which the Lender may require in order to
perfect, preserve, maintain, continue, protect and/or extend the Lien granted
to the Lender under this Agreement or under any of the other Financing
Documents and the first priority of that Lien subject only to the Permitted
Liens. The Borrower hereby authorizes the filing of any financing statement or
continuation statement required under the Uniform Commercial Code. The
Borrower will from time to time do whatever the Lender may require by way of
obtaining, executing, delivering, and/or filing landlords', mortgagees' or
bailees' waivers, notices of assignment and other notices and amendments and
renewals thereof and the Borrower will take any and all steps and observe such
formalities as the Lender may require, in order to create and maintain a valid
Lien upon, pledge of, or paramount security interest in, the Collateral,
subject to the Permitted Liens. The Borrower shall pay to the Lender on demand
all taxes, costs and expenses incurred by the Lender in connection with the
preparation, execution, recording and filing of any such document or
instrument. To the extent that the proceeds of any of the Accounts or
Receivables of the Borrower are expected to become subject to the control of,
or in the possession of, a party other than the Borrower or the Lender, the
Borrower shall cause all such parties to execute and deliver on the Closing
Date security documents or other documents as requested by the Lender and as
may be necessary to evidence and/or perfect the security interest of the
Lender in those proceeds. The Borrower hereby irrevocably appoints the Lender
as the Borrower's attorney-in-fact, with power of substitution, in the name of
the Lender or in the name of the Borrower or otherwise, for the use and
benefit of the Lender, but at the cost and expense of the Borrower and without
notice to the Borrower, to execute and deliver any and
51
all of the instruments and other documents and take any action which the
Lender may require pursuant the foregoing provisions of this Section.
6.1.22 Business Names; Locations.
The Borrower will notify the Lender not less than thirty
(30) days prior to (a) any change in the name under which the Borrower
conducts its business, (b) any change of the location of the chief executive
office of the Borrower, (c) the opening of any new place of business or the
closing of any existing place of business, and (d) any change in the location
of the places where the Collateral, or any part thereof, or the books and
records, or any part thereof, are kept.
6.1.23 Use of Premises and Equipment.
The Borrower agrees that until the Obligations are fully
paid and the Commitment and the Letters of Credit have been terminated or have
expired, the Lender (a) after and during the continuance of an Event of
Default, may use any of the Borrower's owned or leased lifts, hoists, trucks
and other facilities or equipment for handling or removing the Collateral; and
(b) shall have, and is hereby granted, a right of ingress and egress to the
places where the Collateral is located, and may proceed over and through any
of the Borrower's owned or leased property.
6.1.24 Protection of Collateral.
The Borrower agrees that the Lender may at any time
following an Event of Default take such steps as the Lender deems reasonably
necessary to protect the Lender's interest in, and to preserve the Collateral,
including, the hiring of such security guards or the placing of other security
protection measures as the Lender deems appropriate, may employ and maintain
at any of the Borrower's premises a custodian who shall have full authority to
do all acts necessary to protect the Lender's interests in the Collateral and
may lease warehouse facilities to which the Lender may move all or any part of
the Collateral to the extent commercially reasonable. The Borrower agrees to
cooperate fully with the Lender's efforts to preserve the Collateral and will
take such actions to preserve the Collateral as the Lender may reasonably
direct. All of the Lender's expenses of preserving the Collateral, including
any reasonable expenses relating to the compensation and bonding of a
custodian, shall be part of the Enforcement Costs.
Section 6.2 Negative Covenants.
So long as any of the Obligations or the Commitment shall be
outstanding hereunder, the Borrower agrees with the Lender as follows:
6.2.1 Capital Structure, Merger, Acquisition or Sale
of Assets.
The Borrower will not alter or amend its capital
structure, authorize any additional class of equity, enter into any merger or
consolidation or amalgamation, windup or dissolve itself (or suffer any
liquidation or dissolution) or acquire all or substantially all the assets of
any Person, or sell, lease or otherwise dispose of any of its assets without
the prior
52
written consent of the Lender. Any consent of the Lender to the disposition of
any assets may be conditioned on a specified use of the proceeds of
disposition.
6.2.2 Subsidiaries.
The Borrower will not create or acquire any Subsidiaries
other than the Subsidiaries identified on the Collateral Disclosure List
without the prior written consent of the Lender.
6.2.3 Purchase or Redemption of Securities, Dividend
Restrictions.
The Borrower will not purchase, redeem or otherwise
acquire any shares of its capital stock or warrants now or hereafter
outstanding, declare or pay any dividends thereon (other than stock
dividends), apply any of its property or assets to the purchase, redemption or
other retirement of, set apart any sum for the payment of any dividends on, or
for the purchase, redemption, or other retirement of, make any distribution by
reduction of capital or otherwise in respect of, any shares of any class of
capital stock of the Borrower, or any warrants, permit any Subsidiary to
purchase or acquire any shares of any class of capital stock of, or warrants
issued by, the Borrower, make any distribution to stockholders or set aside
any funds for any such purpose, and not prepay, purchase or redeem any Funded
Debt other than the Obligations. Notwithstanding the foregoing, provided that
the purchase, redemption or acquisition of shares of capital stock does not
result in a default under the covenants contained in Section 6.1.15 (Financial
Covenants), the Borrower may purchase, redeem or acquire shares of capital
stock for the period February 1, 2001 and forward in a cumulative amount equal
to not more than $2,000,000 pursuant to the ______________ Plan dated
______________.
6.2.4 Indebtedness.
The Borrower will not create, incur, assume or suffer to
exist any Funded Debt, except:
(a) the Obligations;
(b) current accounts payable arising in the
ordinary course;
(c) Indebtedness secured by Permitted Liens;
(d) Subordinated Indebtedness;
(e) Indebtedness of the Borrower existing on
the date hereof and reflected on the financial statements furnished
pursuant to Section 4.1.11 (Financial Condition); and
(f) Capitalized Leases less than Two Hundred
and Fifty Thousand Dollars ($250,000) in the aggregate at any time.
53
6.2.5 Investments, Loans and Other Transactions.
Except as otherwise provided in this Agreement, the
Borrower will not (a) make, assume, acquire or continue to hold any investment
in any real property (unless used in connection with its business and treated
as a Fixed or Capital Asset of the Borrower) or any Person, whether by stock
purchase, capital contribution, acquisition of indebtedness of such Person or
otherwise (including, without limitation, investments in any joint venture or
partnership), (b) guaranty or otherwise become contingently liable for the
indebtedness or obligations of any Person, (c) make any loans or advances, or
otherwise extend credit to any Person except in the ordinary course of
business or (d) pay any bonuses, fees compensation, commissions, salaries,
drawing account or other payments, whether direct or indirect, to any
stockholders of the Borrower, or any Affiliate of the Borrower, other than
reasonable compensation for actual services rendered by stockholders in their
capacity as officers or employees of the Borrower, except:
(a) any advance to an officer of the
Borrower for travel or other business expenses in the ordinary course
of business;
(b) the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business;
(c) any investment in Cash Equivalents,
which are pledged to the Lender as collateral and security for the
Obligations; and
(d) trade credit extended to customers in
the ordinary course of business.
6.2.6 Operating Lease Obligations.
The Borrower will not incur or permit to exist any Lease
Obligations except Capital Leases expressly permitted by this Agreement, if
the aggregate amount of all such Lease Obligations would at any time exceed
One Million Dollars ($1,000,000) during any fiscal year of the Borrower.
6.2.7 Subordinated Indebtedness.
The Borrower will not make:
(a) any payment of principal of, or interest
on, any of the Subordinated Indebtedness, including, without
limitation, the Subordinated Debt, if a Default or an Event of Default
then exists hereunder or would result from such payment;
(b) any payment of the principal or interest
due on the Subordinated Indebtedness as a result of acceleration
thereunder or a mandatory prepayment thereunder;
(c) any amendment or modification of or
supplement to the documents evidencing or securing the Subordinated
Indebtedness; or
54
(d) payment of principal or interest on the
Subordinated Indebtedness other than when due (without giving effect
to any acceleration of maturity or mandatory prepayment).
6.2.8 Liens; Confessed Judgment.
The Borrower agrees that it (a) will not create, incur,
assume or suffer to exist any Lien upon any of its properties or assets,
whether now owned or hereafter acquired, except for Liens securing the
Obligations and Permitted Liens, (b) will not agree to, assume or suffer to
exist any provision in any instrument or other document for confession of
judgment, cognovit or other similar right or remedy, (c) will not allow or
suffer to exist any Permitted Liens to be superior to Liens securing the
Obligations, (d) will not enter into any contracts for the consignment of
goods to the Borrower, (e) will not execute or suffer the filing of any
financing statements or the posting of any signs giving notice of consignments
to the Borrower, (f) will not, as a material part of its business, engage in
the sale of goods belonging to others, and (g) will not allow or suffer to
exist the failure of any Lien described in the Security Documents to attach
to, and/or remain at all times perfected on, any of the property described in
the Security Documents.
6.2.9 Transactions with Affiliates.
The Borrower and its Subsidiaries will not enter into or
participate in any transaction with any Affiliate or, except in the ordinary
course of business, with the officers, directors, employees and other
representatives of the Borrower and/or any Subsidiary.
6.2.10 Other Businesses.
The Borrower and its Subsidiaries will not engage
directly or indirectly in any business other than its current line of business
described elsewhere in this Agreement.
6.2.11 ERISA Compliance.
Neither the Borrower nor any Commonly Controlled Entity
shall: (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 Borrower
pursuant to ERISA; (d) terminate or consent to the termination of any
Multi-employer Plan; or (e) incur a complete or partial withdrawal with
respect to any Multi-employer Plan.
6.2.12 Prohibition on Hazardous Materials.
The Borrower shall not place, manufacture or store or
permit to be placed, manufactured or stored any Hazardous Materials on any
property owned, operated or controlled by the Borrower or for which the
Borrower is responsible other than Hazardous Materials placed or stored on
such property in accordance with applicable Laws in the ordinary course.
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6.2.13 Method of Accounting; Fiscal Year.
(a) The Borrower shall not change the method
of accounting employed in the preparation of any financial statements
furnished to the Lender under the provisions of Section 6.1.1 (Financial
Statements), unless required to conform to GAAP and on the condition that the
Borrower's accountants shall furnish such information as the Lender may
request to reconcile the changes with the Borrower's prior financial
statements.
(b) The Borrower will not change its fiscal
year from a year ending on September 30.
6.2.14 Compensation.
The Borrower shall not pay any bonuses, fees,
compensation, commissions, salaries, drawing accounts, or other payments (cash
and non-cash), whether direct or indirect, to any stockholders of the
Borrower, or any Affiliate of the Borrower, other than reasonable compensation
for actual services rendered by stockholders in their capacity as officers or
employees of the Borrower.
6.2.15 Transfer of Collateral.
The Borrower will not transfer, or permit the transfer,
to another location of any of the Collateral or the books and records related
to any of the Collateral.
6.2.16 Sale and Leaseback.
The Borrower will not directly or indirectly enter into
any arrangement to sell or transfer all or any substantial part of its fixed
assets and thereupon or within one (1) year thereafter rent or lease the
assets so sold or transferred.
6.2.17 Disposition of Collateral.
The Borrower will not sell, discount, allow credits or
allowances, transfer, assign, extend the time for payment on, convey, lease,
assign, transfer or otherwise dispose of the Collateral, except, prior to an
Event of Default, dispositions expressly permitted elsewhere in this
Agreement, and the sale of unnecessary or obsolete Equipment, but only if the
proceeds of the sale of such Equipment are (a) used to purchase similar
Equipment to replace the unnecessary or obsolete Equipment or (b) immediately
turned over to the Lender for application to the Obligations.
6.2.18 Profitability.
The Borrower will not incur a net loss in any fiscal
quarter.
6.2.19 Stock of Subsidiaries.
The Borrower will not sell or otherwise dispose of any
shares of capital stock of any Subsidiary (except in connection with a merger
or consolidation of a Wholly Owned Subsidiary into the Borrower or another
Wholly Owned Subsidiary or with the dissolution of any Subsidiary) or permit
any Subsidiary to issue any additional shares of its capital stock except pro
rata to its stockholders.
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ARTICLE VII
DEFAULT AND RIGHTS AND REMEDIES
Section 7.1 Events of Default.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" under the provisions of this Agreement:
7.1.1 Failure to Pay.
The failure of the Borrower to pay any of the
Obligations as and when due and payable in accordance with the provisions of
this Agreement, the Notes and/or any of the other Financing Documents.
7.1.2 Breach of Representations and Warranties.
Any representation or warranty made in this Agreement or
in any report, statement, schedule, certificate, opinion (including any
opinion of counsel for the Borrower), financial statement or other document
furnished in connection with this Agreement, any of the other Financing
Documents, or the Obligations, shall prove to have been false or misleading
when made (or, if applicable, when reaffirmed) in any material respect.
7.1.3 Failure to Comply with Covenants.
The failure of the Borrower to perform, observe or
comply with any covenant, condition or agreement contained in this Agreement.
7.1.4 Default Under Other Financing Documents or
Obligations.
A default shall occur under any of the other Financing
Documents or under any other Obligations, and such default is not cured within
any applicable grace period provided therein.
7.1.5 Receiver; Bankruptcy.
The Borrower 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 or consenting to 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 take corporate
action for the purposes of effecting any of the foregoing, (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, or (g) by any act indicate its
consent to, approval of or acquiescence in any order, judgment or decree by
any court of competent jurisdiction or any Governmental Authority enjoining or
otherwise prohibiting the operation of a material portion of
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the Borrower's or any Subsidiary's business or the use or disposition of a
material portion of the Borrower's or any Subsidiary's assets.
7.1.6 Involuntary Bankruptcy, etc.
(a) An order for relief shall be entered in any
involuntary case brought against the Borrower or any Subsidiary under the
Bankruptcy Code, or (b) any such case shall be commenced against the Borrower
or any Subsidiary and shall not be dismissed within sixty (60) days after the
filing of the petition, or (c) an order, judgment or decree under any other
Law is entered by any court of competent jurisdiction or by any other
Governmental Authority on the application of a Governmental Authority or of a
Person other than the Borrower or any Subsidiary (i) adjudicating the Borrower
or any Subsidiary bankrupt or insolvent, or (ii) appointing a receiver,
trustee or liquidator of the Borrower or of any Subsidiary, or of a material
portion of the Borrower's or any Subsidiary's assets, or (iii) enjoining,
prohibiting or otherwise limiting the operation of a material portion of the
Borrower's or any Subsidiary's business or the use or disposition of a
material portion of the Borrower's or any Subsidiary's assets, and such order,
judgment or decree continues unstayed and in effect for a period of thirty
(30) days from the date entered.
7.1.7 Judgment.
Unless adequately insured in the opinion of the Lender,
the entry of a final judgment for the payment of money involving more than
$25,000 against the Borrower, and the failure by the Borrower 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.
7.1.8 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.
7.1.9 Default Under Other Borrowings.
Default shall be made with respect to any Funded Debt
(other than the Loan) if the effect of such default is to accelerate the
maturity of such Funded Debt or to permit the holder or obligee thereof or
other party thereto to cause any such Funded Debt to become due prior to its
stated maturity.
7.1.10 Challenge to Agreements.
The Borrower shall challenge the validity and binding
effect of any provision of any of the Financing Documents or shall state its
intention to make such a challenge of any of the Financing Documents or any of
the Financing Documents shall for any reason (except to the extent permitted
by its express terms) cease to be effective or to create a valid and perfected
first priority Lien (except for Permitted Liens) on, or security interest in,
any of the Collateral purported to be covered thereby.
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7.1.11 Material Adverse Change.
The Lender in its reasonable discretion determines in
good faith that a material adverse change has occurred in the financial
condition of the Borrower.
7.1.12 Impairment of Position.
The Lender in its reasonable discretion determines in
good faith that an event has occurred which impairs the prospect of payment of
the Obligations and/or the value of the Collateral.
7.1.13 Collateral Inadequacy.
The determination in good faith by the Lender that the
security for the Obligations is inadequate.
7.1.14 Change in Ownership.
Any change in ownership of the Borrower
7.1.15 Contract Default, Debarment or Suspension.
Default shall be made under any Government Contract, or
any Government Contract is terminated for default by any Governmental
Authority for any reason whatsoever, or if the Borrower is debarred or
suspended, whether temporarily or permanently, by any Governmental Authority.
7.1.16 Liquidation, Termination, Dissolution, Change in
Management, etc.
The Borrower shall liquidate, dissolve or terminate its
existence or shall suspend or terminate a substantial portion of its business
operations or any change occurs in the management or control of the Borrower
without the prior written consent of the Lender.
7.1.17 Advances to Subsidiaries.
The Borrower shall make any advance, loan, or extension
of credit to or any payment on behalf of or guaranty any obligation of any
Subsidiary without the Lender's prior written consent.
7.1.18 Swap Default.
An event occurs which gives the Lender the right or
option to terminate any Swap Contract which is secured by the Collateral.
Section 7.2 Remedies.
Upon the occurrence of any Default or Event of Default, the Lender may
at any time thereafter exercise any one or more of the following rights,
powers or remedies:
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7.2.1 Acceleration.
The Lender may declare the Obligations to be immediately
due and payable, notwithstanding anything contained in this Agreement or in
any of the other Financing Documents to the contrary, without presentment,
demand, protest, notice of protest or of dishonor, or other notice of any
kind, all of which the Borrower hereby waives.
7.2.2 Further Advances.
The Lender may from time to time without notice to the
Borrower suspend, terminate or limit any further loans or other extensions of
credit under this Agreement and under any of the other Financing Documents.
Further, upon the occurrence of an Event of Default or Default specified in
Section 7.1.5 (Receiver; Bankruptcy) or Section 7.1.6 (Involuntary Bankruptcy,
etc.), the Revolving Credit Commitment and any agreement in any of the
Financing Documents to provide additional credit and/or to issue Letters of
Credit shall immediately and automatically terminate and the unpaid principal
amount of the Notes (with accrued interest thereon) and all other Obligations
then outstanding, shall immediately become due and payable without further
action of any kind and without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrower.
7.2.3 Uniform Commercial Code.
The Lender shall have all of the rights and remedies of
a secured party under the applicable Uniform Commercial Code and other
applicable Laws. Upon demand by the Lender, the Borrower shall assemble the
Collateral and make it available to the Lender, at a place designated by the
Lender. The Lender or its agents may without notice from time to time enter
upon the Borrower's premises to take possession of the Collateral, to remove
it, to render it unusable, to process it or otherwise prepare it for sale, 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 Borrower at the address set forth in
Section 8.1 (Notices), or such other address of the Borrower 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 commercially
reasonable notice to the Borrower. The Lender may alternatively or
additionally give such notice in any other commercially reasonable manner.
Nothing in this Agreement shall require the Lender to give any notice not
required by applicable Laws.
If any consent, approval, or authorization of any state,
municipal or other Governmental Authority or of any other Person or of any
Person having any interest therein, should be necessary to effectuate any sale
or other disposition of the Collateral, the Borrower agrees 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.
The Borrower recognizes that the Lender may be unable to
effect a public sale of all or a part of the Collateral consisting of
Investment Property by reason of certain prohibitions contained in the
Securities Act of 1933, as amended, and other applicable Federal and state
Laws. The Lender may, therefore, in its discretion, take such steps as it may
deem
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appropriate to comply with such Laws and may, for example, at any sale of the
Collateral consisting of securities restrict the prospective bidders or
purchasers as to their number, nature of business and investment intention,
including, without limitation, a requirement that the Persons making such
purchases represent and agree to the satisfaction of the Lender that they are
purchasing such securities for their account, for investment, and not with a
view to the distribution or resale of any thereof. The Borrower covenants and
agrees to do or cause to be done promptly all such acts and things as the
Lender may request from time to time and as may be necessary to offer and/or
sell the securities or any part thereof in a manner which is valid and binding
and in conformance with all applicable Laws. Upon any such sale or
disposition, the Lender shall have the right to deliver, assign and transfer
to the purchaser thereof the Collateral consisting of securities so sold.
7.2.4 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 (but shall be under no obligation to), without notice to the Borrower, and
the Borrower hereby irrevocably appoints the Lender as its attorney-in-fact,
with power of substitution, in the name of the Lender and/or in the name of
the Borrower or otherwise, for the use and benefit of the Lender, but at the
cost and expense of the Borrower and without notice to the Borrower:
(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 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;
(d) copy, transcribe, or remove from any
place of business of the Borrower or any Subsidiary 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 Borrower's or any
Subsidiary's place(s) of business as may be reasonably necessary to
administer, control and collect the Collateral;
(e) demand, collect, receipt for and give
renewals, extensions, discharges and releases of any of the
Collateral;
(f) institute and prosecute legal and
equitable proceedings to enforce collection of, or realize upon, any
of the Collateral;
(g) settle, renew, extend, compromise,
compound, exchange or adjust claims in respect of any of the
Collateral or any legal proceedings brought in respect thereof;
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(h) endorse or sign the name of the Borrower
upon any Items of Payment, certificates of title, Instruments,
Investment Property, stock powers, documents, documents of title,
financing statements, assignments, notices or other writing relating
to or part of the Collateral and on any proof of claim in bankruptcy
against an Account Debtor;
(i) notify the Post Office authorities to
change the address for the delivery of mail to the Borrower to such
address or Post Office Box as the Lender may designate and receive and
open all mail addressed to the Borrower; and
(j) take any other action necessary or
beneficial to realize upon or dispose of the Collateral or to carry
out the terms of this Agreement.
7.2.5 Application of Proceeds.
Any proceeds of sale or other disposition of the
Collateral will be applied by the Lender to the payment first of any and all
Enforcement Costs, and any balance of such proceeds will be applied to the
Obligations in such order and manner as the Lender shall determine. If the
sale or other disposition of the Collateral fails to fully satisfy the
Obligations, the Borrower shall remain liable to the Lender for any
deficiency.
7.2.6 Performance by Lender.
Upon the occurrence and continuation of an Event of
Default, the Lender without notice to or demand upon the Borrower and without
waiving or releasing any of the Obligations or any Default or 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
Borrower, and may enter upon the premises of the Borrower for that purpose and
take all such action thereon as the Lender may consider necessary or
appropriate for such purpose and the Borrower hereby irrevocably appoints the
Lender as its attorney-in-fact to do so, with power of substitution, in the
name of the Lender or in the name of the Borrower or otherwise, for the use
and benefit of the Lender, but at the cost and expense of the Borrower and
without notice to the Borrower. All sums so paid or advanced by the Lender
together with interest thereon from the date of payment, advance or incurring
until paid in full at the Post-Default Rate and all costs and expenses, shall
be deemed part of the Enforcement Costs, shall be paid by the Borrower to the
Lender on demand, and shall constitute and become a part of the Obligations.
7.2.7 Other Remedies.
The Lender may from time to time proceed to protect or
enforce its rights by an action or actions at law or in equity or by any other
appropriate proceeding, whether for the specific performance of any of the
covenants contained in this Agreement or in any of the other Financing
Documents, or for an injunction against the violation of any of the terms of
this Agreement or any of the other Financing Documents, or in aid of the
exercise or execution of any right, remedy or power granted in this Agreement,
the Financing Documents, and/or applicable Laws. The Lender is authorized to
offset and apply to all or any part of the
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Obligations all moneys, credits and other property of any nature whatsoever of
the 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 or
any Affiliate of the Lender.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices.
All notices, requests and demands to or upon the parties to this
Agreement shall be in writing and shall be deemed to have been given or made
when delivered by hand on a Business Day, or two (2) days after the date when
deposited in the mail, postage prepaid by registered or certified mail, return
receipt requested, or when sent by overnight courier, on the Business Day next
following the day on which the notice is delivered to such overnight courier,
addressed as follows:
Borrower: SensyTech Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxx Xxxxxxx
Lender: Bank of America, N. A.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
XxXxxx, Xxxxxxxx 00000-0000
Attention: Commercial Lending
By written notice, each party to this Agreement may change the address
to which notice is given to that party, provided that such changed notice
shall include a street address to which notices may be delivered by overnight
courier in the ordinary course on any Business Day.
Section 8.2 Amendments; Waivers.
This Agreement and the other Financing Documents may not be amended,
modified, or changed in any respect except by an agreement in writing signed
by the Lender and the Borrower. No waiver of any provision of this Agreement
or of any of the other Financing Documents, nor consent to any departure by
the Borrower therefrom, shall in any event be effective unless the same shall
be in writing signed by the Lender. No course of dealing between the Borrower
and the Lender and no act or failure to act from time to time on the part of
the Lender shall constitute a waiver, amendment or modification of any
provision of this Agreement or any of the other Financing Documents or any
right or remedy under this Agreement, under any of the other Financing
Documents or under applicable Laws.
Without implying any limitation on the foregoing:
(a) Any waiver or consent shall be effective
only in the specific instance, for the terms and purpose for which given,
subject to such conditions as the Lender may specify in any such instrument.
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(b) No waiver of any Default or Event of
Default shall extend to any subsequent or other Default or Event of Default,
or impair any right consequent thereto.
(c) No notice to or demand on the Borrower in
any case shall entitle the Borrower to any other or further notice or demand
in the same, similar or other circumstance.
(d) 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, amendment or modification 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 time or times.
(e) 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 8.3 Cumulative Remedies.
The rights, powers and remedies provided in this Agreement and in the
other Financing Documents are cumulative, may be exercised concurrently or
separately, may be exercised from time to time and in such order as the Lender
shall determine, subject to the provisions of this Agreement, and are in
addition to, and not exclusive of, rights, powers and remedies provided by
existing or future applicable Laws. In order to entitle the Lender to exercise
any remedy reserved to it in this Agreement, it shall not be necessary to give
any notice, other than such notice as may be expressly required in this
Agreement. Without limiting the generality of the foregoing and subject to the
terms of this Agreement, the Lender may:
(d) proceed against the Borrower with or
without proceeding against any other Person who may be liable (by
endorsement, guaranty, indemnity or otherwise) for all or any part of
the Obligations;
(a) proceed against the Borrower with
or without proceeding under any of the other Financing Documents or
against any Collateral or other collateral and security for all or any
part of the Obligations;
(b) without reducing or impairing the
obligation of the Borrower and without notice, release or compromise
with any guarantor or other Person liable for all or any part of the
Obligations under the Financing Documents or otherwise;
(i) without reducing or
impairing the obligations of the Borrower and without notice
thereof:fail to perfect the Lien in any or all Collateral or to
release any or all the Collateral or to accept substitute
Collateral;
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(ii) approve the making of
advances under the Revolving Loan under this Agreement;
(iii) waive any provision of
this Agreement or the other Financing Documents;
(iv) exercise or fail to
exercise rights of set-off or other rights; or
(c) accept partial payments or extend
from time to time the maturity of all or any part of the Obligations.
Section 8.4 Severability.
In case one or more provisions, or part thereof, contained in this
Agreement or in the other Financing Documents shall be invalid, illegal or
unenforceable in any respect under any Law, then without need for any further
agreement, notice or action:
(a) the validity, legality and
enforceability of the remaining provisions shall remain effective and
binding on the parties thereto and shall not be affected or impaired
thereby;
(b) the obligation to be fulfilled
shall be reduced to the limit of such validity;
(c) if such provision or part thereof
pertains to repayment of the Obligations, then, at the sole and
absolute discretion of the Lender, all of the Obligations of the
Borrower to the Lender shall become immediately due and payable; and
(d) if the affected provision or part
thereof does not pertain to repayment of the Obligations, but operates
or would prospectively operate to invalidate this Agreement in whole
or in part, then such provision or part thereof only shall be void,
and the remainder of this Agreement shall remain operative and in full
force and effect.
Section 8.5 Assignments by Lender.
The Lender may, without notice to or consent of the Borrower, assign
to any Person (each an "Assignee" and collectively, the "Assignees") all or a
portion of the Lender's Commitments. The Lender and its Assignee shall notify
the Borrower in writing of the date on which the assignment is to be effective
(the "Adjustment Date"). On or before the Adjustment Date, the Lender, the
Borrower and the Assignee shall execute and deliver a written assignment
agreement in a form acceptable to the Lender, which shall constitute an
amendment to this Agreement to the extent necessary to reflect such
assignment. Upon the request of the Lender following an assignment made in
accordance with this Section 8.5, the Borrower shall issue new Notes to the
Lender and its Assignee reflecting such assignment, in exchange for the
existing Notes held by the Lender.
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In addition, notwithstanding the foregoing, the Lender may at any time
pledge all or any portion of the Lender's rights under this Agreement, any of
the Commitments or any of the Obligations to a Federal Reserve Bank.
Section 8.6 Participations by Lender.
The Lender may at any time sell to one or more financial institutions
participating interests in any of the Lender's Obligations or Commitments;
provided, however, that (a) no such participation shall relieve the Lender
from its obligations under this Agreement or under any of the other Financing
Documents to which it is a party, (b) the Lender shall remain solely
responsible for the performance of its obligations under this Agreement and
under all of the other Financing Documents to which it is a party, and (c) the
Borrower shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement and
the other Financing Documents.
Section 8.7 Disclosure of Information by Lender.
In connection with any sale, transfer, assignment or participation by
the Lender in accordance with Section 8.5 (Assignments by Lender) or Section
8.6 (Participations by Lender), the Lender shall have the right to disclose to
any actual or potential purchaser, assignee, transferee or participant all
financial records, information, reports, financial statements and documents
obtained in connection with this Agreement and/or any of the other Financing
Documents or otherwise.
Section 8.8 Successors and Assigns.
This Agreement and all other Financing Documents shall be binding upon
and inure to the benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lender.
Section 8.9 Continuing Agreements.
All covenants, agreements, representations and warranties made by the
Borrower in this Agreement, in any of the other Financing Documents, and in
any certificate delivered pursuant hereto or thereto shall survive the making
by the Lender of the Loans, the issuance of Letters of Credit and the
execution and delivery of the Notes, shall be binding upon the Borrower
regardless of how long before or after the date hereof any of the Obligations
were or are incurred, and shall continue in full force and effect so long as
any of the Obligations are outstanding and unpaid. From time to time upon the
Lender's request, and as a condition of the release of any one or more of the
Security Documents, the Borrower and other Persons obligated with respect to
the Obligations shall provide the Lender with such acknowledgments and
agreements as the Lender may require to the effect that there exists no
defenses, rights of setoff or recoupment, claims, counterclaims, actions or
causes of action of any kind or nature whatsoever against the Lender and/or
any of its agents and others, or to the extent there are, the same are waived
and released.
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Section 8.10 Enforcement Costs.
The Borrower agrees to pay to the Lender on demand all Enforcement
Costs, together with interest thereon from the date incurred or advanced until
paid in full at a per annum rate of interest equal at all times to the
Post-Default Rate. Enforcement Costs shall be immediately due and payable at
the time advanced or incurred, whichever is earlier. Without implying any
limitation on the foregoing, the Borrower agrees, as part of the Enforcement
Costs, to pay upon demand any and all stamp and other Taxes and fees payable
or determined to be payable in connection with the execution and delivery of
this Agreement and the other Financing Documents and to save the Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay any Taxes or fees referred to in
this Section. The provisions of this Section shall survive the execution and
delivery of this Agreement, the repayment of the other Obligations and shall
survive the termination of this Agreement.
Section 8.11 Applicable Law; Jurisdiction.
8.11.1 Applicable Law.
The Borrower acknowledges and agrees that the Financing
Documents, including, this Agreement, shall be governed by the Laws of the
State, as if each of the Financing Documents and this Agreement had each been
executed, delivered, administered and performed solely within the State even
though for the convenience and at the request of the Borrower, one or more of
the Financing Documents may be executed elsewhere. The Lender acknowledges,
however, that remedies under certain of the Financing Documents that relate to
property outside the State may be subject to the laws of the state in which
the property is located.
8.11.2 Submission to Jurisdiction.
The Borrower irrevocably submits to the jurisdiction of
any state or federal court sitting in the State over any suit, action or
proceeding arising out of or relating to this Agreement or any of the other
Financing Documents. The Borrower irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any such
court and any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum. Final judgment in any
such suit, action or proceeding brought in any such court shall be conclusive
and binding upon the Borrower and may be enforced in any court in which the
Borrower is subject to jurisdiction, by a suit upon such judgment, provided
that service of process is effected upon the Borrower in one of the manners
specified in this Section or as otherwise permitted by applicable Laws.
8.11.3 Appointment of Agent for Service of Process.
The Borrower hereby irrevocably designates and appoints
Xxxxxx X. Xxxxx at 0000 Xxxxxxxx Xxxx Xxxxxxxxx, Xxxxxxxx 00000, as the
Borrower's authorized agent to receive on the Borrower's behalf service of any
and all process that may be served in any suit, action or proceeding of the
nature referred to in this Section in any state or federal court sitting in
the State. If such agent shall cease so to act, the Borrower shall irrevocably
designate and appoint without delay another such agent in the State
satisfactory to the Lender and shall
67
promptly deliver to the Lender evidence in writing of such other agent's
acceptance of such appointment and its agreement that such appointment shall
be irrevocable.
8.11.4 Service of Process.
The Borrower hereby consents to process being served in
any suit, action or proceeding of the nature referred to in this Section by
(a) the mailing of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to the Borrower at the Borrower's address
designated in or pursuant to Section 8.1 (Notices), and (b) serving a copy
thereof upon the agent, if any, designated and appointed by the Borrower as
the Borrower's agent for service of process by or pursuant to this Section.
The Borrower irrevocably agrees that such service (y) shall be deemed in every
respect effective service of process upon the Borrower in any such suit,
action or proceeding, and (z) shall, to the fullest extent permitted by law,
be taken and held to be valid personal service upon the Borrower. Nothing in
this Section shall affect the right of the Lender to serve process in any
manner otherwise permitted by law or limit the right of the Lender otherwise
to bring proceedings against the Borrower in the courts of any jurisdiction or
jurisdictions.
Section 8.12 Duplicate Originals and Counterparts.
This Agreement may be executed in any number of duplicate originals or
counterparts, each of such duplicate originals or counterparts shall be deemed
to be an original and all taken together shall constitute but one and the same
instrument.
Section 8.13 Headings.
The headings in this Agreement are included herein for convenience
only, shall not constitute a part of this Agreement for any other purpose, and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
Section 8.14 No Agency.
Nothing herein contained shall be construed to constitute the Borrower
as the agent of the Lender for any purpose whatsoever or to permit the
Borrower to pledge any of the credit of the Lender. The Lender shall not be
responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof. The Lender shall not, by anything herein or
in any of the Financing Documents or otherwise, assume any of the Borrower's
obligations under any contract or agreement assigned to the Lender, and the
Lender shall not be responsible in any way for the performance by the Borrower
of any of the terms and conditions thereof.
Section 8.15 Date of Payment.
Should the principal of or interest on the Notes become due and
payable on other than a Business Day, the maturity thereof shall be extended
to the next succeeding Business Day and in the case of principal, interest
shall be payable thereon at the rate per annum specified in the Notes during
such extension.
68
Section 8.16 Entire Agreement.
This Agreement is intended by the Lender and the Borrower to be a
complete, exclusive and final expression of the agreements contained herein.
Neither the Lender nor the Borrower shall hereafter have any rights under any
prior agreements pertaining to the matters addressed by this Agreement but
shall look solely to this Agreement for definition and determination of all of
their respective rights, liabilities and responsibilities under this
Agreement.
Section 8.17 Waiver of Trial by Jury.
THE BORROWER AND THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY
BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B)
ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. 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 the
Borrower and the Lender, and the Borrower and the Lender 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 Borrower and the Lender 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 8.18 Liability of the Lender.
The Borrower hereby agrees 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 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.
By inspecting the Collateral or any other properties of the Borrower
or by accepting or approving anything required to be observed, performed or
fulfilled by the Borrower or to be given to the Lender pursuant to this
Agreement or any of the other Financing Documents, the Lender shall not be
deemed to have warranted or represented the condition, sufficiency, legality,
effectiveness or legal effect of the same, and such acceptance or approval
shall not constitute any warranty or representation with respect thereto by
the Lender.
69
IN WITNESS WHEREOF, each of the parties hereto have executed and
delivered this Agreement under their respective seals as of the day and year
first written above.
WITNESS OR ATTEST: SENSYTECH INC.
_________________________ By:____________________________(Seal)
Name:
Title:
WITNESS: BANK OF AMERICA, N. A.
_________________________ By:____________________________(Seal)
Xxxxxx Xxxxx
Senior Vice President
70
LIST OF EXHIBITS
A. Second Amended and Restated Revolving Credit Note
B. Form of Compliance Certificate and Compliance Worksheet
C. Form of Borrowing Base
D. Form of Direct Assignment
E. Form of Backlog Report
71
EXHIBIT B
FINANCING AGREEMENT COMPLIANCE CERTIFICATE
THIS CERTIFICATE is made as of __________________, 200_, by SENSYTECH
INC, a corporation organized under the laws of the State of Delaware (the
"Borrower"), to BANK OF AMERICA, N. A., a national banking association (the
"Lender"), pursuant to Section __ of the Second Amended and Restated Financing
and Security Agreement dated as of February 28, 2002, (as amended, modified,
restated, substituted, extended and renewed at any time and from time to time,
the "Financing Agreement") by and between the Borrower and the Lender.
I, ____________________, hereby certify that I am the ______________
of the Borrower and am a Responsible Officer (as that term is defined in the
Financing Agreement) authorized to certify to the Lender on behalf the
Borrower as follows:
(a) This Certificate is given to induce the
Lender to make advances to the Borrower under the Financing Agreement.
(b) This Certificate accompanies the
_____________ financial statements for the period ended ___________________,
200__ (the "Current Financials") which the Borrower is furnishing to the
Lender pursuant to Section 6.1.1(__) of the Financing Agreement. The Current
Financials have been prepared in accordance with GAAP (as that term is defined
in the Financing Agreement).
(c) As required by Section 6.1.1(__) of the
Financing Agreement, I have set forth on Schedule 1 a detailed computation of
each financial covenant in Financing Agreement and a cash flow projection
report.
(d) No change has occurred to the information
contained in the Collateral Disclosure List except as set forth on Schedule 2
to this Certificate. By way of example and not limitation, the Collateral
Disclosure List, together with Schedule 2, contains a listing of all of the
Borrower's Patents, Trademarks, Copyrights (as those terms are defined in the
Financing Agreement), all locations (owned, leased, warehouses or otherwise)
where any Collateral (as that term is defined in the Financing Agreement) is
located, all Subsidiaries (as that term is defined in the Financing
Agreement).
(e) As of the date hereof, there exists no
Default or Event of Default, as defined in the ARTICLE VII (Default and Rights
and Remedies) of the Financing Agreement, nor any event which, upon notice or
the lapse of time, or both, would constitute such an Event of Default.
(f) On the date hereof, the representations
and warranties contained in Article 4 of the Financing Agreement are true with
the same effect as though such representations and warranties had been made on
the date hereof.
WITNESS my signature this _____ day of ____________, 200_.
SENSYTECH INC.
By:______________________________
Name:
Title:
2
SCHEDULE 1
WORKSHEET - 1
Minimum Tangible Net Worth Sensytech, Inc.
Page 49 of Financing and Security Agreement - Maintain at all times Tangible
Net Worth of not less Eight Million Five Hundred Thousand Dollars
($8,500,000).
Page 21 of Financing and Security Agreement - "Tangible Net Worth" means the
value of Borrower's total assets (including leaseholds and leasehold
improvements and reserves against assets but excluding goodwill, patents,
trademarks, trade names, organization expense, unamortized debt discount and
expense, capitalized or deferred research and development costs, deferred
marketing expenses, and other like intangibles, and monies due from
affiliates, officers, directors, employees, shareholders, members or managers
of Borrower) less total liabilities, including but not limited to accrued and
deferred income taxes, but excluding the non-current portion of Subordinated
Liabilities. "Subordinated Liabilities" means liabilities subordinated to
Borrower's obligations to Lender in a manner acceptable to Lender in its sole
discretion.
Period Ending : ______________
------------------------------------------------------------------------------
(a) Total Assets
------------------------------------------------------------------------------
(b) Less Intangibles
------------------------------------------------------------------------------
(c) Equal Total Tangible Assets
------------------------------------------------------------------------------
(d) Less: Total Liabilities
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Actual Tangible Net Worth
------------------------------------------------------------------------------
--------------------------------------------------
Required Net Worth $8,500,000
--------------------------------------------------
Pass/Fail:
--------------------------------------------------
3
WORKSHEET - 2
Funded Debt to EBIDTA Sensytech, Inc.
Page 49 of Financing and Security Agreement - The Borrower will maintain,
tested as of the last day of each of the Borrower's fiscal quarters for the
preceding four (4) fiscal quarters, a Funded Indebtedness to EBITDA Ratio of
not less than 3.25 to 1.0 through September 29, 2002 and not less than 3.0 to
1.0 at all times thereafter.
Page 9 of Financing and Security Agreement - "Funded Debt," means all
outstanding liabilities for borrowed money and other interest-bearing
liabilities, including current and long-term debt issued letters of credit and
capitalized leases less the non-current portion of Subordinated Liabilities.
Page 5 of Financing and Security Agreement - "EBITDA" means as to the Borrower
for any period of determination thereof, the sum of (a) the net profit (or
loss) determined in accordance with GAAP, plus (b) interest and taxes for such
period, plus (c) depreciation and amortization of assets for such period.
Amounts in Thousands
Funded Debt
-----------------------------------------------------------------------------------
(i) Debt for Borrowed money
-----------------------------------------------------------------------------------
(ii) DEBT EVIDENCED BY FUNDS OR NOTES AND OTHER SIMILAR INSTRUMENTS
-----------------------------------------------------------------------------------
(iii) LETTERS OF CREDIT
-----------------------------------------------------------------------------------
(iv) Debt consisting of Capital Lease Obligations
-----------------------------------------------------------------------------------
Funded Debt numerator =
--------------------------------------------------------------------------------
----------------------------------------------------
(a) (b) (c ) [(b)-(a)]+(c)
Current
PY Period FYE period
/ / / / / / Totals
----------------------------------------------------
Denominator
-----------------------------------------------------------------------------------
(a) Net Income after tax
-----------------------------------------------------------------------------------
(c) + Depreciation Expense
-----------------------------------------------------------------------------------
(c) + Amortization Expense
-----------------------------------------------------------------------------------
(d) + Interest Expense
-----------------------------------------------------------------------------------
(e) + Income Taxes Paid
-----------------------------------------------------------------------------------
EBITDA denominator =
-----------------------------------------------------------------------------------
Funded Debt to EBITDA
------------
Requirement (see above):
------------
Pass/Fail:
------------
4
Schedule 2
LIST OF SCHEDULES
Schedule 4.1.10 Litigation
Schedule 4.1.13 Other Indebtedness
Schedule 4.1.19 Permitted Liens
Schedule 4.1.10
LITIGATION
Schedule 4.1.13
OTHER INDEBTEDNESS
Schedule 4.1.19
LIENS ON COLLATERAL
Asset Covered Lienholder Balance
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
Section 1.1 Certain Defined Terms. 1
Section 1.2 Accounting Terms and Other Definitional Provisions. 17
ARTICLE II THE CREDIT FACILITIES 18
Section 2.1 The Revolving Credit Facility. 18
2.1.1 Revolving Credit Facility. 18
2.1.2 Procedure for Making Advances Under the Revolving Loan; Lender Protection Loans. 18
2.1.3 Borrowing Base. 19
2.1.4 Borrowing Base Report. 19
2.1.5 Revolving Credit Note. 20
2.1.6 Mandatory Prepayments of Revolving Loan. 20
2.1.7 Optional Prepayments of Revolving Loan. 21
2.1.8 The Collateral Account. 21
2.1.9 Revolving Loan Account. 21
2.1.10 Revolving Credit Unused Line Fee. 22
Section 2.2 The Letter of Credit Facility. 22
2.2.1 Letters of Credit. 22
2.2.2 Letter of Credit Fees. 22
2.2.3 Terms of Letters of Credit; Post-Expiration Date Letters of Credit.. 23
2.2.4 Procedures for Letters of Credit. 24
2.2.5 Payments of Letters of Credit. 24
2.2.6 Change in Law; Increased Cost. 25
2.2.7 General Letter of Credit Provisions. 25
Section 2.3 General Financing Provisions. 26
2.3.1 Borrower's Representatives. 26
2.3.2 Use of Proceeds of the Loan. 27
2.3.3 Administrative Fees. 27
2.3.4 Computation of Interest and Fees. 27
2.3.5 Payments. 27
2.3.6 Liens; Setoff. 28
2.3.7 Requirements of Law. 28
2.3.8 ACH Transactions and Swap Contracts. 28
Section 2.4 Interest 29
2.4.1 Applicable Interest Rates. 29
2.4.2 Selection of Interest Rates. 29
2.4.3 Inability to Determine Eurodollar Base Rate. 31
2.4.4 Payment of Interest. 31
ARTICLE III THE COLLATERAL 31
Section 3.1 Debt and Obligations Secured. 31
Section 3.2 Grant of Liens. 31
Section 3.3 Collateral Disclosure List. 32
Section 3.4 Personal Property. 32
3.4.1 Investment Property, Chattel Paper, Promissory Notes, etc. 32
3.4.2 Patents, Copyrights and Other Property Requiring Additional Steps to Perfect. 33
Section 3.5 Record Searches. 33
Section 3.6 Costs. 33
Section 3.7 Release. 34
Section 3.8 Inconsistent Provisions. 34
ARTICLE IV REPRESENTATIONS AND WARRANTIES 34
Section 4.1 Representations and Warranties. 34
4.1.1 Subsidiaries. 34
4.1.2 Existence. 34
4.1.3 Power and Authority. 34
4.1.4 Binding Agreements. 35
4.1.5 No Conflicts. 35
4.1.6 No Defaults, Violations. 35
4.1.7 Compliance with Laws. 35
4.1.8 Margin Stock. 36
4.1.9 Investment Company Act; Margin Stock. 36
4.1.10 Litigation. 36
4.1.11 Financial Condition. 36
4.1.12 Full Disclosure. 36
4.1.13 Funded Debt. 37
4.1.14 Taxes. 37
4.1.15 ERISA. 37
4.1.16 Title to Properties. 38
4.1.17 Patents, Trademarks, Etc. 38
4.1.18 Presence of Hazardous Materials or Hazardous Materials Contamination. 38
4.1.19 Perfection and Priority of Collateral. 38
4.1.20 No Suspension or Debarment. 38
4.1.21 Collateral Disclosure List. 39
4.1.22 Business Names and Addresses. 39
4.1.23 Equipment. 39
4.1.24 Accounts. 39
4.1.25 Compliance with Eligibility Standards. 39
Section 4.2 Survival; Updates of Representations and Warranties. 40
ARTICLE V CONDITIONS PRECEDENT 40
Section 5.1 Conditions to the Initial Advance and Initial Letter of Credit. 40
5.1.1 Organizational Documents - Borrower. 40
5.1.2 Opinion of Borrower's Counsel. 41
5.1.3 Consents, Licenses, Approvals, Etc. 41
5.1.4 Notes. 41
5.1.5 Financing Documents and Collateral. 41
5.1.6 Other Financing Documents. 41
5.1.7 Other Documents, Etc. 41
5.1.8 Payment of Fees. 41
5.1.9 Collateral Disclosure List. 42
5.1.10 Recordings and Filings. 42
5.1.11 Insurance Certificate. 42
5.1.12 Field Examination. 42
Section 5.2 Conditions to all Extensions of Credit. 42
5.2.1 Compliance. 42
5.2.2 Borrowing Base. 42
5.2.3 Default. 43
5.2.4 Representations and Warranties. 43
5.2.5 Adverse Change. 43
5.2.6 Legal Matters. 43
ARTICLE VI COVENANTS OF THE BORROWER 43
Section 6.1 Affirmative Covenants. 43
6.1.1 Financial Statements. 43
6.1.2 Reports to SEC and to Stockholders. 44
6.1.3 Recordkeeping, Rights of Inspection, Audit, Etc. 45
6.1.4 Existence. 45
6.1.5 Compliance with Laws. 46
6.1.6 Preservation of Properties. 46
6.1.7 Line of Business. 46
6.1.8 Insurance. 46
6.1.9 Taxes. 47
6.1.10 ERISA. 47
6.1.11 Notification of Events of Default and Adverse Developments. 47
6.1.12 Government Contracts. 48
6.1.13 Hazardous Materials; Contamination. 48
6.1.14 Disclosure of Significant Transactions. 49
6.1.15 Financial Covenants. 49
6.1.16 Collection of Receivables. 49
6.1.17 Assignments of Receivables. 50
6.1.18 Insurance With Respect to Equipment. 50
6.1.19 Maintenance of the Collateral. 50
6.1.20 Equipment. 51
6.1.21 Defense of Title and Further Assurances. 51
6.1.22 Business Names; Locations. 52
6.1.23 Use of Premises and Equipment. 52
6.1.24 Protection of Collateral. 52
Section 6.2 Negative Covenants. 52
6.2.1 Capital Structure, Merger, Acquisition or Sale of Assets. 52
6.2.2 Subsidiaries. 53
6.2.3 Purchase or Redemption of Securities, Dividend Restrictions. 53
6.2.4 Indebtedness. 53
6.2.5 Investments, Loans and Other Transactions. 53
6.2.6 Operating Lease Obligations. 54
6.2.7 Subordinated Indebtedness. 54
6.2.8 Liens; Confessed Judgment. 55
6.2.9 Transactions with Affiliates. 55
6.2.10 Other Businesses. 55
6.2.11 ERISA Compliance. 55
6.2.12 Prohibition on Hazardous Materials. 55
6.2.13 Method of Accounting; Fiscal Year. 55
6.2.14 Compensation. 56
6.2.15 Transfer of Collateral. 56
6.2.16 Sale and Leaseback. 56
6.2.17 Disposition of Collateral. 56
6.2.18 Profitability. 56
6.2.19 Stock of Subsidiaries. 56
ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES 57
Section 7.1 Events of Default. 57
7.1.1 Failure to Pay. 57
7.1.2 Breach of Representations and Warranties. 57
7.1.3 Failure to Comply with Covenants. 57
7.1.4 Default Under Other Financing Documents or Obligations. 57
7.1.5 Receiver; Bankruptcy. 57
7.1.6 Involuntary Bankruptcy, etc. 58
7.1.7 Judgment. 58
7.1.8 Execution; Attachment. 58
7.1.9 Default Under Other Borrowings. 58
7.1.10 Challenge to Agreements. 58
7.1.11 Material Adverse Change. 59
7.1.12 Impairment of Position. 59
7.1.13 Collateral Inadequacy. 59
7.1.14 Change in Ownership. 59
7.1.15 Contract Default, Debarment or Suspension. 59
7.1.16 Liquidation, Termination, Dissolution, Change in Management, etc. 59
7.1.17 Advances to Subsidiaries. 59
7.1.18 Swap Default. 59
Section 7.2 Remedies. 59
7.2.1 Acceleration. 60
7.2.2 Further Advances. 60
7.2.3 Uniform Commercial Code. 60
7.2.4 Specific Rights With Regard to Collateral. 61
7.2.5 Application of Proceeds. 62
7.2.6 Performance by Lender. 62
7.2.7 Other Remedies. 62
ARTICLE VIII MISCELLANEOUS 63
Section 8.1 Notices. 63
Section 8.2 Amendments; Waivers. 63
Section 8.3 Cumulative Remedies. 64
Section 8.4 Severability. 65
Section 8.5 Assignments by Lender. 65
Section 8.6 Participations by Lender. 66
Section 8.7 Disclosure of Information by Lender. 66
Section 8.8 Successors and Assigns. 66
Section 8.9 Continuing Agreements. 66
Section 8.10 Enforcement Costs. 67
Section 8.11 Applicable Law; Jurisdiction. 67
8.11.1 Applicable Law. 67
8.11.2 Submission to Jurisdiction. 67
8.11.3 Appointment of Agent for Service of Process. 67
8.11.4 Service of Process. 68
Section 8.12 Duplicate Originals and Counterparts. 68
Section 8.13 Headings. 68
Section 8.14 No Agency. 68
Section 8.15 Date of Payment. 68
Section 8.16 Entire Agreement. 69
Section 8.17 Waiver of Trial by Jury. 69
Section 8.18 Liability of the Lender. 69
FINANCING AND SECURITY AGREEMENT
DATED
FEBRUARY 28, 2002
BY AND BETWEEN
SENSYTECH INC.
AND
BANK OF AMERICA, N. A.
