EIGHTH MODIFICATION AGREEMENT (Increase)
Exhibit
10.1
EIGHTH
MODIFICATION AGREEMENT
(Increase)
THIS EIGHTH MODIFICATION AGREEMENT
(this “Agreement”),
effective as of the 17th day
of March 2010, is by and between UNITED BANK, a Virginia banking corporation
(the “Bank”);
and VERSAR, INC. a Delaware corporation (“Versar”), GEOMET
TECHNOLOGIES, LLC, a Maryland limited liability company (“Geomet”), VERSAR
GLOBAL SOLUTIONS, INC., a Virginia corporation (“VGS”), VEC CORP., a
Pennsylvania corporation and successor to Versar Environmental Company, Inc.
(“VEC”), VERSAR
INTERNATIONAL, INC., a Delaware corporation, formerly known as VIAP, Inc.
(“Versar
International”) and ADVENT ENVIRONMENTAL, INC., a Kentucky corporation
(“Advent” and,
together with Versar, Geomet, VGS, VEC and Versar International, individually
and collectively, the “Borrower”).
WITNESSETH
THAT:
WHEREAS, the Bank is the owner and
holder of that certain Revolving Commercial Note dated September 26, 2003, in
the original principal amount of Five Million and No/100 Dollars
($5,000,000.00), made by the Borrower payable to the order of the Bank and
bearing interest and being payable in accordance with the terms and conditions
therein set forth (the “Note”);
and
WHEREAS, the Note is issued pursuant
to the terms of a certain Loan and Security Agreement dated September 26, 2003,
between the Borrower and the Bank (as modified in accordance with that certain
First Modification Agreement dated as of May 12, 2004, that certain Third
Modification Agreement dated as of November 30, 2005 (a second modification
having been drafted but never executed and delivered), that certain Fourth
Modification Agreement dated as of September 28, 2006, as increased to Seven
Million Five Hundred Thousand and No/100 Dollars ($7,500,000.00) pursuant to
that certain Fifth Modification Agreement dated as of September 24, 2007, that
certain Sixth Modification Agreement dated September 30, 2009, and that certain
Seventh Modification Agreement dated January 5, 2010, and as otherwise amended,
extended, increased, replaced and supplemented from time to time, the “Loan
Agreement”);
WHEREAS, the Borrower is in violation of Section VI(C)(16) of the Loan
Agreement for failing to add Versar International as a co-borrower (the “Versar
International Default”);
WHEREAS, on or about the effective date hereof, Versar entered into that certain
Stock Purchase Agreement with Advent and the shareholders of Advent (the “Purchase Agreement”),
in which Versar, on the Closing Date (as defined in the Purchase
Agreement), will purchase and acquire from the
Shareholders (as defined in the Purchase Agreement) all or substantially all of
the share capital and voting ownership interests of Advent, free and clear of
all Liens, for the Purchase Price (as said terms are defined in the Purchase
Agreement) (the “Acquisition”). Upon the Closing Date, Advent will become
a wholly-owned subsidiary of Versar. As part of the Purchase Price of
Advent, Versar will issue Seller Notes (as defined in the Purchase Agreement) to
the Shareholders in the aggregate principal amount of One Million Seven Hundred
Fifty Thousand and No/100 Dollars ($1,750,000.00), subject to adjustment
pursuant to the Purchase Agreement. Unless consented to by the Bank,
the Acquisition would violate the provisions of Sections VI(C)(7), (12)
and (16) of the Loan Agreement; and
WHEREAS,
in furtherance of the Acquisition, the Bank and each Borrower are entering into
that certain Joinder Agreement (the “Joinder Agreement”)
dated as of the date hereof to add Versar International and Advent as
co-borrowers under the Loan Agreement. Moreover, the Borrower has requested that the Bank (i) consent to
the Acquisition, (ii) waive the Versar International Default, (iii)
increase the principal amount of the Note
and (iv) make certain other modifications to the Loan Agreement as more fully
set forth herein, and the Bank has consented to such requests subject to the
execution of this Agreement and the satisfaction of the conditions specified
herein.
NOW, THEREFORE, for Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. All
capitalized terms used in this Agreement will have the respective meanings
assigned thereto in the Loan Agreement unless otherwise defined in this
Agreement.
2. Consent and
Waiver. Subject to the satisfaction of the terms and
conditions of Sections 3 and 10 below, the Bank hereby (i) consents to the
Acquisition, the Purchase Agreement and the transactions contemplated thereby
and agrees that neither the Acquisition, nor the Purchase Agreement, nor the
transactions contemplated thereby, shall constitute a Default under Sections
VI(C)(7), (12) and (16) of the Loan Agreement and (ii) waives the Versar International
Default. Additionally, notwithstanding anything to the contrary in
the Loan Agreement, Bank hereby agrees that Advent Environmental Puerto
Rico, Inc. (the “Dissolving Puerto Rican
Subsidiary”) is not subject to the
requirements of Section VI(C)(16) of the Loan Agreement, which among other
things, requires that any Subsidiary of Versar be added as a Borrower and become
jointly and severally liable with each other Borrower for the payment in full of
the Obligations. The consent and waiver as set forth above
shall not be deemed or otherwise construed to constitute a waiver of any
provisions of the Loan Agreement in connection with any other transaction, and
the waivers contained herein are otherwise subject to Sections VIII(B) and (E)
of the Loan Agreement.
3. Dissolution of Puerto Rican
Subsidiary. The Borrower hereby acknowledges and agrees (a)
that Advent is in the process of dissolving the Dissolving Puerto Rican
Subsidiary, (b) that the Dissolving Puerto Rican Subsidiary is neither an
operating entity or owns any material property or assets, (c) that no Borrower
shall cause or permit any property or assets to be conveyed, sold or otherwise
transferred to the Dissolving Puerto Rican Subsidiary, and (d) the dissolution
of the Dissolving Puerto Rican Subsidiary shall be completed on or before May
31, 2010.
4. Amendments to Loan
Agreement. Subject to the satisfaction of the terms and
conditions of Section 10 below, from and after the date of this Agreement, the
Loan Agreement and Loan Documents are hereby amended as follows:
(a) The definition of
“Eligible Accounts” in Section I(A) of the Loan Agreement is hereby amended by
adding the following subsection after section (xi):
(xii) accounts of any
Account Debtor if 50% or more of such accounts are unpaid more than 90 days
after the date of the original ▇▇▇▇.
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(b) Section II(E) of the
Loan Agreement is hereby amended by replacing it with the
following:
(E) Fees.
(1) Administrative
Fee. During the Commitment Period, the Borrower shall pay to
the Bank an administration fee of $1,000.00 per month, commencing on the same
day of the month following the Effective Date, and on the Date of
Maturity.
(2) Letter of Credit
Fee. The Borrower shall pay to
the Bank a non-refundable letter of credit fee in the amount equal to the
greater of (a) two percent (2.0%) per annum of the outstanding amount of each
Letter of Credit or (b) $450.00. For each Letter of Credit, said fee
shall be payable in advance on the date a Letter of Credit is issued, and on
each anniversary of the issuance thereof, for the number of days the
Letter of Credit is to be outstanding (calculated on the basis of a year of 360
days).
(c) Section II(F)(1) of the
Loan Agreement is hereby amended by replacing it with the
following:
(1) As
a subfeature under the Commitment, the Bank agrees, on the terms and conditions
set forth in this Agreement and in the applicable Applications, to make loans to
the Borrower by issuing Letters of Credit for the account of any Borrower
(“Letter of Credit Loans”); provided, that the
amount allocated to the Letter of Credit Loans is a permissive use of such
amount, and not a mandatory allocation of the proceeds of the
Commitment. At no time shall the Outstanding Letter of Credit Balance
exceed the lesser of (i) $5,000,000.00 and (ii) Commitment minus the outstanding
principal balance of Advances at such time (the “Letter of Credit
Commitment”). Each Letter of Credit shall be issued for a term not to
exceed one (1) year, although any Letter of Credit may be automatically renewed
in accordance with the terms and conditions of said Letter of Credit and the
related Application. A Letter of Credit may be denominated only in
U.S. Dollars. Each draft paid by the Bank under a Letter of Credit
shall, if such amount is available under the Letter of Credit Commitment, be
deemed an Advance and shall accrue interest at the rate then applicable under
the Note. To the extent the amount of a draft paid by the Bank as
aforesaid is unavailable under the Letter of Credit Commitment, said amount
shall be payable by the Borrower ON DEMAND and until paid in full shall accrue
interest at the rate then applicable under the Note. Subject to the
foregoing, the Borrower may borrow under this Section II(F)(1), prepay and
re-borrow.
(d) Section VI(A)(4) of the
Loan Agreement is hereby amended by replacing “$22,500,000.00” with
“$17,500,000.00”.
5. Increase in Principal Sum of
Note. The maximum principal amount of the Note is hereby
increased from Seven Million Five Hundred Thousand and no/100 Dollars
($7,500,000.00) to Ten Million and no/100 Dollars
($10,000,000.00). The definition of “Principal Sum” in the Note is
hereby changed to “Ten Million and no/100 Dollars
($10,000,000.00)”.
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6. Field
Examinations. The Borrower shall allow the Bank to audit the
Borrower’s Collateral at the Borrower’s expense if required by the Bank in its
sole discretion.
7. BB&T Bank Accounts; Bank
of Deposit. On or before April
30, 2010, Advent shall close all of its accounts at Branch Banking and Trust
Company (the “BB&T Bank
Accounts”) and move all funds in such
BB&T Bank Accounts to an account maintained with Bank. Pursuant
to the terms of Section III(C)(2) of the Loan Agreement, all Account
Debtors of Advent shall be notified to make payments under Receivables directly
to the Bank, in accordance with the Bank’s standard lockbox
agreement. Each Borrower shall at all
times maintain its primary deposit accounts with Bank.
8. Post-Closing
Conditions. Bank shall have
received, in form and substance satisfactory to Bank, the
following:
(i) evidence that the insurance policies of
Advent, as required by the Loan Agreement, are in full force and effect,
together with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements in favor of the Bank on or before March 26,
2010; and
(ii) a favorable opinion of counsel for
Advent addressed to the Bank on or before April 2,
2010.
9. Purchase
Agreement. Attached hereto as Exhibit A is a true,
correct and complete copy of the Purchase Agreement, which will be executed in
connection with the Acquisition. The Purchase Agreement has not been
modified, changed, supplemented, canceled, amended or otherwise altered or
affected; and neither the Purchase Agreement nor any of the Seller Notes will be
modified, changed, supplemented, canceled, amended or otherwise altered, waived
or affected without the Bank’s prior written consent. The Acquisition
will be effected, closed and consummated pursuant to, and in accordance with,
the terms and conditions of the Purchase Agreement and with all applicable
laws. Versar promptly notify the Bank when the Purchase Agreement has
been executed and is effective.
10. Limitation of Consent,
Waiver and Amendments. The
consent, waiver and amendments set forth in Sections 2 through 6, above, are
effective for the purposes set forth herein and shall be limited precisely as
written and shall not be deemed to (a) be a waiver of any existing or
future Default or a consent to amend or modify any other term or condition of
any Loan Documents, other than as necessary to the consummation of the
transactions contemplated by the Purchase Agreement, or (b) otherwise
prejudice any right or remedy which the Bank may now have or may have in the
future under or in connection with any Loan Documents. The Bank’s
agreement to consent to the Acquisition and the consent, waiver and amendments
set forth herein shall in no way obligate the Bank to make any other
modifications to the Loan Agreement or to waive the Borrower’s continued
compliance with any other terms of the Loan Documents, and shall not limit or
impair the Bank’s right to demand strict performance of all other terms and
covenants as of any date.
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11. Representations and
Warranties of the Borrower. The Borrower represents and
warrants to the Bank that:
(a) It
has the power and authority to enter into and to perform this Agreement, to
execute and deliver all documents relating to this Agreement, and to incur the
obligations provided for in this Agreement, all of which have been duly
authorized and approved in accordance with the Borrower’s organizational
documents;
(b) This
Agreement, together with all documents executed pursuant hereto, shall
constitute when executed the valid and legally binding obligations of the
Borrower and all guarantors, if any, as the case may be, in accordance with
their respective terms;
(c) Except
with respect to events or circumstances occurring subsequent to the date thereof
and known to the Bank, all representations and warranties made in the Loan
Agreement are true and correct as of the date hereof, with the same force and
effect as if all representations and warranties were fully set forth
herein;
(d) The
Borrower’s obligations under the Loan Documents remain valid and enforceable
obligations;
(e) As
of the date hereof, the Borrower has no offsets or defenses against the payment
of any of the Obligations and no claims against the Bank; and
(f) As
of the date hereof, no Default exists, other that the Versar International
Default.
12. Waiver of
Claims. As a specific inducement to the Bank without which the
Borrower acknowledges the Bank would not enter into this Agreement and the other
documents executed in connection herewith, the Borrower hereby waives any and
all claims that it may have against the Bank, as of the date hereof, arising out
of or relating to the Loan Agreement or any Loan Document whether sounding in
contract, tort or any other basis.
13. Conditions of
Effectiveness. This Agreement shall become effective when, and
only when, the Bank shall have received:
(i) this
Agreement, executed by each Borrower;
(ii) the
Joinder Agreement substantially in the form attached hereto as Exhibit B, executed
by each Borrower;
(iii) the
Subordination Agreement substantially in the form attached hereto as Exhibit C, executed
by each Borrower and each Junior Creditor named therein;
(iv) true
and complete copies of the organizational documents and governing documents and
all recorded amendments thereto of Versar International and Advent for its
respective jurisdiction of organization;
(v) good
standing certificate of Versar International and Advent for its respective
jurisdiction of organization and for each jurisdiction in which Versar
International and Advent conducts business as of a date no earlier than thirty
(30) days prior to the date of this Agreement;
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(vi) a
certificate dated as of the date of this Agreement by the Secretary of Versar
International and Advent covering:
(A) true
and complete copies of Versar International and Advent’s organizational and
governing documents and all amendments thereto;
(B) true
and complete copies of the resolutions of its respective Board of Directors
authorizing (1) the execution, delivery and performance of the Loan Documents to
which it is a party, (2) the borrowings under the Loan Documents, and (3) the
granting of the Liens contemplated by the Loan Agreement and the Loan Documents
to which Versar International and Advent is a party;
(C) the
incumbency, authority and signatures of the officers of Versar International and
Advent authorized to sign this Agreement and the other Loan Documents to which
Vesar International and Advent is a party; and
(D) the
identity of current directors, common stock holders and other equity holders of
Versar International and Advent, as well as their respective percentage
ownership interests;
(vii) certified
copies, dated as of a recent date, of financing statement searches of Versar
International and Advent, as the Bank shall request, accompanied by written
evidence (including any termination statements) that the Liens indicated in any
such financing statements either constitute Permitted Liens or have been or,
will be terminated or released;
(viii) evidence satisfactory to
the Bank that financing statements in form and substance reasonably
satisfactory to the Bank have been properly
filed in each office where necessary to perfect the security interest of the
Bank in the Collateral of Versar International and
Advent;
(ix) evidence
satisfactory to the Bank that the insurance policies of Versar International, as
required by the Loan Agreement, are in full force and effect, together with
appropriate evidence showing loss payable and/or additional insured clauses or
endorsements in favor of the Bank;
(x) the
favorable opinion of counsel for Versar International addressed to the
Bank; and
(xi) payment
of the Bank’s attorneys’ fees and expenses regarding this Agreement, the Joinder
Agreement and the review of the Acquisition Agreement.
14. Loan
Documents. The other “Loan Documents”, as defined in the Note,
are hereby modified to the extent necessary to carry out the purposes of this
Agreement.
15. Outstanding
Balance. The Borrower hereby acknowledges and agrees that, as
of the effective date hereof, the unpaid principal balance of the Note is Zero
Dollars ($0.00) and that there are no set-offs or defenses against the Note, the
Loan Agreement, or the other Loan Documents.
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16. No
Impairment. This Agreement shall become a part of the Loan
Agreement by reference and nothing herein contained shall impair the security
now held for the Obligations, nor waive, annul, vary or affect any provision,
condition, covenant or agreement contained in the Loan Agreement except as
herein amended, nor affect or impair any rights, powers or remedies under the
Loan Agreement as hereby amended. Furthermore, the Bank does hereby
reserve all rights and remedies it may have as against all parties who may be or
may hereafter become primarily or secondarily liable for the repayment of the
Obligations.
17. No
Novation. The parties to this Agreement do not intend that
this Agreement be construed as a novation of the Note, the Loan Agreement, or
any of the other Loan Documents.
18. Ratification. Except
as hereby expressly modified, the Note and Loan Agreement shall otherwise be
unchanged, shall remain in full force and effect, and are hereby expressly
approved, ratified and confirmed. A legend shall be placed on the
face of the Note indicating that its terms have been modified hereby, and the
original of this Agreement shall be affixed to the original of the
Note.
19. Applicable Law; Binding
Effect. This Agreement shall be governed in all respects by
the laws of the Commonwealth of Virginia and shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and
assigns.
20. Counterparts; Telecopied
Signatures. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement on separate
counterparts, each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute one and the same
instrument. Any signature delivered by a party by facsimile
transmission shall be deemed to be an original signature to this
Agreement.
[Signatures
Appear on the Following Pages]
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WITNESS
the following signatures and seals.
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UNITED
BANK
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[SEAL]
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By:
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/s/ E. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||
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E.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Senior
Vice President
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[Signature Page to 8th
Modification Agreement]
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VERSAR,
INC.
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[SEAL]
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By:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |||
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Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Title:
Senior Vice President
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GEOMET
TECHNOLOGIES, LLC
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[SEAL]
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By:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |||
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Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Title:
Vice President
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VERSAR
GLOBAL SOLUTIONS, INC.
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[SEAL]
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By:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |||
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Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Title:
Vice President
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VEC
CORP.
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[SEAL]
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By:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |||
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Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Title:
Vice President
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VERSAR
INTERNATIONAL, INC.
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[SEAL]
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By:
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/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ | |||
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Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Title:
Vice President
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ADVENT
ENVIRONMENTAL, INC.
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[SEAL]
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By:
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/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ | |||
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Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title:
President
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[Signature Page to 8th
Modification Agreement]