EXHIBIT 4.8
FINANCING AND SECURITY AGREEMENT
Dated
December _8_, 2000
By and Between
HALIFAX CORPORATION
And
BANK OF AMERICA, N. A.
FINANCING AND SECURITY AGREEMENT
THIS FINANCING AND SECURITY AGREEMENT (this "Agreement") is made
this __8__ day of December, 2000, by and between HALIFAX CORPORATION, a
corporation organized under the laws of the Commonwealth of Virginia
(the "Borrower"); and BANK OF AMERICA, N. A., a national banking
association (the "Lender").
RECITALS
A. The Borrower has applied to the Lender for certain credit
facilities consisting of a revolving credit facility in the maximum
principal amount of $8,000,000 and a letter of credit facility in the
maximum principal amount of $500,000, as part of that revolving credit
facility, to be used by the Borrower for the Permitted Uses described
in this Agreement.
B. 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.
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, contract rights, notes, drafts, instruments, acceptances,
chattel paper, leases and writings evidencing a monetary obligation or
a security interest in, or a lease of, goods, all rights to receive the
payment of money or other consideration under present or future
contracts (including, without limitation, all rights to receive
payments under presently existing or hereafter acquired or created
letters of credit), or by virtue of merchandise sold or leased,
services rendered, loans and advances made or other considerations
given, by or set forth in or arising out of any present or future
chattel paper, note, draft, lease, acceptance, writing, bond, insurance
policy, instrument, document or general intangible, and all extensions
and renewals of any thereof, all rights under or arising out of present
or future contracts, agreements or general interest in merchandise
which gave rise to any or all of the foregoing, including all goods,
all claims or causes of action now 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) 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 (cash and non-cash) 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.
"Administrative Fees" has the meaning described in Section 2.3.4
(Administrative and Audit Fees).
"Additional Borrower" means each Person that has executed and
delivered an Additional Borrower Joinder Supplement that has been
accepted and approved by the Lender.
"Additional Borrower Joinder Supplement" means an Additional
Borrower Joinder Supplement in substantially the form attached hereto
as EXHIBIT A, with the blanks appropriately completed and executed and
delivered by the Additional Borrower and accepted by the Borrower on
behalf of the Borrowers.
"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 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 LIBOR Rate or (b) the
Prime Rate.
"Applicable Margin" means the applicable rate per annum added, as
set forth in Section 2.4.1 (Applicable Interest Rates), to the LIBOR
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
consolidated balance sheet of the Borrower and its Subsidiaries.
"Bankruptcy Code" means the United States Bankruptcy Code, as
amended from time to time.
"Borrower" means each Person defined as a "Borrower" in the
preamble of this Agreement and each Additional Borrower; "Borrowers"
means the collective reference to all Persons defined as "Borrowers" in
the preamble to this Agreement and all Additional Borrowers.
"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 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.
"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 P-
1 by ▇▇▇▇▇'▇ Investors Service, Inc. with maturities of six (6) months
or less from the date of acquisition.
"Chattel Paper" means a writing or writings which evidence both a
monetary obligation and a security interest in or lease of specific
goods; any returned, rejected or repossessed goods covered by any such
writing or writings 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 (cash and non-cash) of the
foregoing.
"Closing Date" means the Business Day, in any event not later than
December __, 2000, on which the Lender shall be satisfied that the
conditions precedent set forth in Section 5.1 (Conditions to Initial
Advance) have been fulfilled.
"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
cash and non-cash proceeds and products thereof.
"Collateral Account" has the meaning described in Section 2.1.8
(The Collateral Account).
"Collateral Disclosure List" has the meaning described in Section
3.3 (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 reference to 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 ▇▇▇ for past, present and future
infringements of any of the foregoing, and (d) all rights corresponding
to any of the foregoing throughout the world.
"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, 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, whether now existing or
hereafter acquired or created, and all proceeds (cash and non-cash) of
the foregoing.
"EBITDA" means as to the Borrower and its Subsidiaries for any
period of determination thereof, the sum of (a) the net profit (or
loss) determined in accordance with GAAP consistently applied, plus (b)
interest expense and income tax provisions for such period, plus (c)
depreciation and amortization of assets.
"Eligible Receivable" and "Eligible Receivables" mean, at any time
of determination thereof, the unpaid portion of each account receivable
(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) in United States Dollars by the Borrower,
provided each account receivable 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;
(g) the account is not outstanding more than ninety (90) days from the
date of the invoice therefor 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 commercial 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) other than the account owed by the Virginia Department of
Transportation, the account is not owing by an Account Debtor or a
group of affiliated Account Debtors whose then existing accounts owing
to the Borrower exceed in aggregate face amount fifteen percent (15%)
of the Borrower's total Eligible Receivables;
(j) 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;
(k) 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;
(l) 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;
(m) the Account Debtor is not incorporated or primarily conducting
business or otherwise located in any jurisdiction outside of the United
States of America;
(n) as to which none of the following events has occurred with respect
to the Account Debtor on such Account: death or judicial declaration
of incompetency of an Account Debtor who is an individual; the filing
by or against the Account Debtor of a request or petition for
liquidation, reorganization, arrangement, adjustment of debts,
adjudication as a bankrupt, winding-up, or other relief under the
bankruptcy, insolvency, or similar laws of the United States, any state
or territory thereof, or any foreign jurisdiction, now or hereafter in
effect; the making of any general assignment by the Account Debtor for
the benefit of creditors; the appointment of a receiver or trustee for
the Account Debtor or for any of the assets of the Account Debtor,
including, without limitation, the appointment of or taking possession
by a "custodian," as defined in the Federal Bankruptcy Code; the
institution by or against the Account Debtor of any other type of
insolvency proceeding (under the bankruptcy laws of the United States
or otherwise) or of any formal or informal proceeding for the
dissolution or liquidation of, settlement of claims against, or winding
up of affairs of, the Account Debtor; the sale, assignment, or transfer
of all or any material part of the assets of the Account Debtor; the
nonpayment generally by the Account Debtor of its debts as they become
due; or the cessation of the business of the Account Debtor as a going
concern;
(o) 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;
(p) 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;
(q) the account is not evidenced by chattel paper or an instrument of
any kind and is not secured by any letter of credit;
(r) 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;
(s) 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;
(t) 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;
(u) 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;
(v) 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;
(w) 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;
(x) no part of the account represents a progress billing or a
retainage;
(y) 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;
(z) the account does not constitute a final billing or close out
billing relating to a completed contract unless all outstanding
contingencies have been resolved; and
(aa) if the Account Debtor is located in a state
requiring the filing
of a Notice of Business Activities Report or similar report in order to
permit the Borrower to seek judicial enforcement in such state of
payment of such Account, the Borrower has qualified to do business in
such state or has filed a Notice of Business Activities Report or
equivalent report for the then current year.
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 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 8.8
(Enforcement Costs), and further including, without limitation, amounts
paid to lessors, processors, bailees, warehousemen, sureties, judgment
creditors and others in possession of or with a Lien against or claimed
against the Collateral, 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 therefor 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 (cash and non-
cash) of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Event of Default" 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 whether under this Agreement or otherwise.
"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, including, without limitation, the
following: Revolving Credit Unused Line Fees, Letter of Credit Fees,
Administrative Fees and the Origination Fee.
"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.
"Fixed Charges" means for any period of determination, without
duplication, the scheduled or required payments (including, without
limitation, principal and interest) on all Indebtedness for Borrowed
Money of the Borrower and its Subsidiaries, plus interest expense,
taxes paid in cash, capitalized lease payments and non-financed capital
expenditures.
"Fixed Charge Coverage Ratio" means for the period of any
determination thereof the ratio of (a) EBITDA and, to the extent
deducted in determining EBITDA, non-cash charges and expenses for such
period to (b) Fixed Charges.
"Funded Debt" is defined as the sum of senior debt, Letter of
Credit Obligations, stockholder debt, Subordinated Indebtedness, seller
notes, the value of all capitalized leases contingent earn-out
liabilities to be paid in cash and any other interest bearing
Indebtedness.
"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, claims (including without limitation all claims for
income tax and other refunds), choses in action, claims, causes of
action in tort or equity, contract rights, judgments, customer lists,
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,
contractual rights, 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 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 (cash and non-cash) of the
foregoing..
"Government Contracts" means any contract with the United States,
whether directly or indirectly, 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.
"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.
"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.
"Hedge Transaction" means any interest rate swap transaction,
forward rate transaction, treasury lock transaction, interest rate cap,
floor or collar transaction, any similar transaction, any option to
enter into any of the foregoing, or any combination of any of the
foregoing.
"Indebtedness" of a Person means at any date the total liabilities
of such Person at such time determined in accordance with GAAP
consistently applied.
"Indebtedness for Borrowed Money" of a Person means at any time
the sum at such time of (a) indebtedness of such Person for borrowed
money or for the deferred purchase price of property or services, (b)
any obligations of such Person in respect of letters of credit,
banker's or other acceptances or similar obligations issued or created
for the account of such Person, (c) Lease Obligations of such Person
with respect to Capital Leases, (d) all liabilities secured by any Lien
on any property owned by such Person, to the extent attached to such
Person's interest in such property, even though such Person has not
assumed or become personally liable for the payment thereof, (e)
obligations of third parties which are being guarantied or indemnified
against by such Person or which are secured by the property of such
Person; (f) any obligation of such Person under a employee stock
ownership plan or other similar employee benefit plan; (g) any
obligation of such Person or a Commonly Controlled Entity to a Multi-
employer Plan; and (h) any obligations, liabilities or indebtedness,
contingent or otherwise, under or in connection with, any Hedge
Transaction; but excluding trade and other accounts payable in the
ordinary course of business in accordance with customary trade terms
and which are not overdue (as determined in accordance with customary
trade practices) or which are being disputed in good faith by such
Person and for which adequate reserves are being provided on the books
of such Person in accordance with GAAP.
"Interest Period" means as to any LIBOR Loan, the period
commencing on and including the date such LIBOR Loan is made (or on the
effective date of the Borrower's election to convert any Prime Rate
Loan to a LIBOR Loan in accordance with the provisions of this
Agreement) and ending on and including the day which is one month, two
months or three months thereafter, as selected by the Borrower in
accordance with the provisions of this Agreement, and thereafter, each
period commencing on the last day of the then preceding Interest Period
for such LIBOR Loan and ending on and including the day which is one
month, two months or three months thereafter, as selected by the
Borrower in accordance with the provisions of this Agreement; provided,
however that:
(a) the first day of any Interest Period shall be a
LIBOR Business Day;
(b) if any Interest Period would end on a day that
shall not be a
LIBOR Business Day, such Interest Period shall be extended to the next
succeeding LIBOR Business Day unless such next succeeding LIBOR
Business Day would fall in the next calendar month, in which case, such
Interest Period shall end on the next preceding LIBOR Business Day; and
(c) no Interest Period shall extend beyond the Revolving Credit
Expiration Date.
"Interest Rate Election Notice" has the meaning described in
Section 2.4.2(e).
"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.
"Instrument" means a negotiable instrument (as defined under
Article 3 of the Uniform Commercial Code), a "certificated security"
(as defined under Article 8 of the Uniform Commercial Code), or any
other writing which evidences a right to payment of money and is not
itself a security agreement or lease and is of a type which is in the
ordinary course of business transferred by delivery with any necessary
endorsement.
"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 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.
"Letter of Credit Facility" means the facility established by the
Lender pursuant to 0 (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.
"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.
"LIBOR Base Rate" means for any Interest Period with respect to
any LIBOR Loan, the per annum interest rate rounded upward, if
necessary, to the nearest 1/100 of 1%, appearing on Telerate Page 3750
(or any successor page) as the London interbank offered rate for
deposits in Dollars at or about 11:00 a.m. (London time) on the date
that is two (2) LIBOR Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period. If for
any reason such rate is not available, the term "LIBOR Base Rate" shall
mean, for any LIBOR Loan for any Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered
rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two (2) LIBOR Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period; 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 (rounded upwards, if necessary, to the nearest 1/100 of 1%).
"LIBOR 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.
"LIBOR Loan" means any Loan for which interest is to be computed
with reference to the LIBOR Rate.
"LIBOR Rate" means for any Interest Period with respect to any
LIBOR Loan, (a) the Applicable Margin, plus (b) the per annum rate of
interest calculated pursuant to the following formula:
LIBOR Base Rate
1.00 - Reserve Percentage
"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 a 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
▇▇▇▇▇▇ 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 each of 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).
"Maximum Rate" has the meaning described in Section 2.3.6 (Maximum
Interest Rate).
"Multi-employer Plan" means a Plan that is a multi-employer plan
as defined in Section 4001(a)(3) of ERISA.
"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 Hedge Transaction 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 fees or fees charged with
respect to any guaranty of any letter of credit; also means all other
present and future indebtedness, liabilities and obligations, whether
now existing or contemplated or hereafter arising, of the Borrower to
the Lender of any nature whatsoever, regardless of whether such
indebtedness, 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 debts, obligations and
liabilities.
"Origination Fee" has the meaning described in Section 2.3.3
(Origination Fee).
"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 ▇▇▇ for past,
present and future infringements of patents, and (f) all rights
corresponding to any of the foregoing throughout the world.
"Pay-Out Agreement" means the letter agreement signed and
delivered to the Lender from SunTrust Bank regarding the pay-out of
obligations owed by the Borrower to SunTrust Bank and the release of
Liens held by SunTrust Bank.
"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, (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 in favor of the
Lender; (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; (e) such other Liens, if any, as are set forth on
Schedule 4.1.19 attached hereto and made a part hereof; (f) purchase
money security interests securing Indebtedness for Borrowed Money for
the purchase of Equipment in arms-length, commercially reasonable
transactions with persons who are not Affiliates; provided, however,
that (i) the indebtedness secured shall not exceed the unpaid purchase
price of the Equipment acquired, plus reasonable finance charges and
the reasonable costs of collection (including, without limitation,
reasonable attorneys fees); (ii) each item of Equipment shall secure
only its portion of the indebtedness described in item (i) and (iii)
the aggregate of such Indebtedness at any time shall not exceed Two
Hundred and Fifty Thousand Dollars ($250,000); and (g) Liens created in
connection with the Virginia Department of Transportation contract as
previously disclosed to the Lender.
"Permitted Uses" means the financing of on going working capital
needs of the Borrower.
"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 Prime Rate in effect from time to
time, plus four percent (4%) per annum.
"Prepayment" means a Revolving Loan Mandatory Prepayment or 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 rate of interest publicly announced from
time to time by the Lender as its reference rate. It is a rate set by
the Lender based upon various factors including the Lender's costs and
desired return, general economic conditions, and other factors, and is
used as a reference point for pricing some loans. However, the Lender
may price loans at, above, or below such announced rate. Any changes
in the Prime Rate shall take effect on the day specified in the public
announcement of such change.
"Prime Rate Loan" means any Loan for which interest is to be
computed with reference to the Prime Rate.
"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 cash and non-cash proceeds and
products thereof.
"Reportable Event" means any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder.
"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 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 LIBOR Rate is to be determined, or
(ii) any category of extensions of credit or other assets which include
LIBOR Loans. The LIBOR 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 August 31, 2002.
"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 Section 7.2
(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).
"Securities" means the collective reference to each and every
certificated or uncertificated security which constitutes a "security"
under the provisions of Title 8 of the Uniform Commercial Code and to
each and every "investment property" under the provisions of Title 9 of
the Uniform Commercial Code (if that definition is included in that
Title), and all proceeds (cash and non-cash) of the foregoing.
"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.
"State" means the Commonwealth of Virginia.
"Subordinated Debt" means that certain Indebtedness for Borrowed
Money of the Borrower in favor of Research Industries, Inc., a
corporation organized and existing under the laws of the Commonwealth
of Virginia in a face principal amount of Four Million Dollars
($4,000,000).
"Subordinated Debt Loan Documents" means any and all promissory
notes, agreements, documents or instruments now or at any time
evidencing, securing, guarantying or otherwise executed and delivered
in connection with the Subordinated Debt, as the same may from time to
time be amended, restated, supplemented or modified.
"Subordinated Indebtedness" means all Indebtedness, including,
without limitation, the Subordinated Debt, 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.
"Subordination Agreement" means that certain Subordination
agreement by and among Research Industries, Inc., the Borrower and the
Lender, as the same may be from time to time amended, restated,
supplemented or modified.
"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.
"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
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 ▇▇▇ 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.
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. Unless otherwise defined herein, 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.
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 Eight Million Dollars
($8,000,000) 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
Lender agrees to make advances under the Revolving Loan requested by
the Borrower from time to time provided that after giving effect to the
Borrower's request, the outstanding principal balance of the Revolving
Loan and the 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
Commitment 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. No later than 10:00 a.m. (Eastern Standard 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 Revolving
Loan.
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 irrevocably authorizes the Lender 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 Lender's interests under this Agreement, 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, any of the Obligations, (including,
without limitation, any 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 which the Lender may make
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
federal Government Contracts, (b) eighty percent (80%) of the amount of
Eligible Receivables derived from contracts other than federal
Government Contracts approved by the Lender and (c) fifty percent (50%)
of the Borrowers' unbilled Receivables derived from Government
Contracts which otherwise qualify as Eligible Receivables (but which
shall be billed within thirty (30) days) but in no event in an amount
greater than One Million Dollars ($1,000,000).
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
shall fail to furnish a Borrowing Base Report required by Section 2.1.4
(Borrowing Base Report) or in the event the Lender believes in good
faith 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 is 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
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 no less
frequently than monthly and at such other times as may be requested by
the Lender a report of the Borrowing Base (each a "Borrowing Base
Report"; collectively, the "Borrowing Base Reports") in the form of
EXHIBIT D attached hereto and made a part hereof or such other form
required from time to time by the Lender, appropriately completed and
duly signed. 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, 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
Lender's security interests in, and Liens 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 "B" 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 2.1.4 (Borrowing Base) in order to cover any
Borrowing Base Deficiency.
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 shall
fail 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
other funds or property of the Borrower, 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 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 which are not
proceeds of accounts or inventory or after a Default or Event of
Default, against any of the Obligations) or credit such collected funds
to the 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 sole 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 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 sent by the Lender.
2.1.10 Revolving Credit Unused Line Fee.
The Borrower shall pay to the Lender a revolving credit
facility fee (collectively, the "Revolving Credit Unused Line Fees" and
individually, a "Revolving Credit Unused Line Fee") in an amount equal
to the percentage per annum indicated below for the current Pricing
Ratio multiplied by the average daily unused and undisbursed portion of
the Revolving Credit Committed Amount in effect from time to time
accruing during each 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, for the preceding
calendar quarter, commencing on the first such date following the date
hereof, and on the Revolving Credit Termination Date. The Revolving
Credit Unused Line Fee shall be calculated on the basis of a year of
360 days and the actual days elapsed.
Pricing Ratio Revolving
Credit Unused
Line Fee
Less than or equal to .25%
2.0
Less than or equal to
2.75 but greater than .30%
2.0
Greater than 2.75 .35%
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 may,
upon the prior approval of the Lender, obtain standby 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 (a) 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 and
(b) the sum of the aggregate face amount of the then outstanding
Letters of Credit (including the face amount of the requested Letter of
Credit) does not exceed Five Hundred Thousand Dollars ($500,000).
2.2.2 Letter of Credit Fees.
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 amount of the Letter of
Credit. Such Letter of Credit Fees shall be paid monthly in advance on
the date of the opening of the Letter of Credit and on the first day of
each month thereafter. In addition, the Borrower shall pay to the
Lender any and all additional issuance, negotiation, processing,
transfer or other fees to the extent and as and when required by the
provisions of any Letter of Credit Agreement; such additional fees are
included in and a part of the "Fees" payable by the Borrower under the
provisions of this Agreement. The Letter of Credit Fees shall be
calculated on the basis of a year of 360 days and the actual number of
days elapsed
2.2.3 Terms of 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,
as of the Business Day preceding the Revolving Credit Termination Date
an advance of the Revolving Credit Facility shall be made by the Lender
in the face amount of such Letter of Credit (or Letters of Credit) and
the proceeds thereof shall be deposited in an account titled in the
name of the Lender as trustee for the Borrower. The proceeds of the
trustee account referred to in the immediately preceding sentence shall
be held as collateral for the Letter of Credit (or Letters of Credit)
and in the event of a draw under the Letter of Credit (or Letters of
Credit), used to pay any such draw. 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, 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, is herein called the "Outstanding Letter of Credit
Obligations".
2.2.4 Procedure for Letters 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 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 the 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.
Section 2.3 General Financing Provisions.
2.3.1 Borrower's Representatives.
The Lender is hereby irrevocably authorized by the
Borrower to make advances under the Loan to the Borrower pursuant to
the provisions of this Agreement upon the written, oral or telephone
request of any one 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 of the Borrower on file
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 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 Origination Fee.
The Borrower shall pay to the Lender on or before the
Closing Date a loan origination fee (the "Origination Fee") in the
amount of Twenty Five Thousand Dollars ($25,000), which fee has been
fully earned and is non-refundable.
2.3.4 Administrative and Audit Fees.
The Borrower shall pay to the Lender an annual
administrative and audit fee (each an "Administrative Fee" and
collectively, the "Administrative Fees") for administrative and/or
audit services performed in conjunction with the Revolving Credit
Facility. The annual Administrative Fee shall be $25,000 and $6,250
quarterly payment shall be payable each quarter, in advance, on the
Closing Date and the first (1st) day of each March, June, September and
December thereafter until the Revolving Credit Termination Date.
2.3.5 Computation of Fees.
All applicable Fees shall be calculated on the basis of
a year of 360 days for the actual number of days elapsed.
2.3.6 Maximum Interest Rate.
In no event shall any interest rate provided for
hereunder exceed the maximum rate permissible for corporate borrowers
under applicable law for loans of the type provided for hereunder (the
"Maximum Rate"). If, in any month, any interest rate, absent such
limitation, would have exceeded the Maximum Rate, then the interest
rate for that month shall be the Maximum Rate, and, if in future
months, that interest rate would otherwise be less than the Maximum
Rate, then that interest rate shall remain at the Maximum Rate until
such time as the amount of interest paid hereunder equals the amount of
interest which would have been paid if the same had not been limited by
the Maximum Rate. In the event that, upon payment in full of the
Obligations, the total amount of interest paid or accrued under the
terms of this Agreement is less than the total amount of interest which
would, but for this Section, have been paid or accrued if the interest
rates otherwise set forth in this Agreement had at all times been in
effect, then the Borrower shall, to the extent permitted by applicable
law, pay the Lender, an amount equal to the excess of (a) the lesser of
(i) the amount of interest which would have been charged if the Maximum
Rate had, at all times, been in effect or (ii) the amount of interest
which would have accrued had the interest rates otherwise set forth in
this Agreement, at all times, been in effect over (b) the amount of
interest actually paid or accrued under this Agreement. In the event
that a court determines that the Lender has received interest and other
charges hereunder in excess of the Maximum Rate, such excess shall be
deemed received on account of, and shall automatically be applied to
reduce, the Obligations other than interest, in the inverse order of
maturity, and if there are no Obligations outstanding, the Lender shall
refund to the Borrower such excess.
2.3.7 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 noon,
Eastern Standard Time, on the due date of such payment. All such
payments shall be made 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.
2.3.8 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, Securities, and other personal property of the
Borrower and any and all proceeds thereof, now or hereafter held or
received by, or in transit to, the Lender or any Affiliate of the
Lender from, or for the account of, the Borrower, and also upon any and
all depository accounts (whether 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 depository 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 at the
Lender's option, without notice to, or consent of, the Borrower, to set
off, appropriate, seize, freeze 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.
2.3.9 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 Governmental Authority or central bank, does or shall have the
effect of reducing the rate of return on the capital of the Lender or
such controlling corporation as a consequence of the Lender's
obligations under this Agreement to a level below that which the Lender
or such corporation would have achieved but for such adoption, change
or compliance (taking into consideration the policies of the Lender and
its controlling corporation 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 therefor and a statement of the basis for the Lender's
determination, the Borrower shall pay to the Lender ON DEMAND such
additional amount or amounts in order to compensate the Lender or its
controlling corporation for any such reduction.
2.3.10 ACH Transactions and Hedge Transactions.
The Borrower may request and the Lender or its
affiliates may, in their sole and absolute discretion, provide ACH
Transactions and Hedge Transactions although the Borrower is not
required to do so. In the event the Borrower requests Lender or its
affiliates to procure ACH Transactions or Hedge Transactions, 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 Hedge Transactions. 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 Hedge Transactions 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.
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 Prime
Rate or the LIBOR 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 2.4.2(e), or as otherwise determined in
accordance with the provisions of this Section 2.4, and as may be
adjusted from time to time in accordance with the provisions of Section
2.4.3 (Inability to Determine LIBOR Base Rate).
(b) Notwithstanding the foregoing, following the occurrence and during
the continuance of an Event of Default, at the option of the Lender,
the Loan and all other Obligations shall bear interest at the Post-
Default Rate.
(c) The Applicable Margin for (i) LIBOR Loans shall be 250 basis
points per annum, and (ii) Prime 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 Pricing Ratio, determined by the Lender in
the exercise of its sole and absolute discretion from the quarterly
reports required by Section 6.1.1(c) (Quarterly Statements and
Certificates) and shall be effective as of the fifth (5th) day after
the Lender receives such statements. The Applicable Margin (expressed
as basis points) shall vary depending upon the Pricing Ratio, as
follows:
Pricing Ratio Applicable Applicable
Margin for Margin for
LIBOR Loans Prime Rate
Loans
Less than or equal to 200 basis 0 basis points
2.0 points
Less than or equal to
2.75 but greater than 225 basis 0 basis points
2.0 points
Greater than 2.75 250 basis 0 basis points
points
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 Applicable Interest Rate
or Applicable Interest Rates for any advance of the Loan or may convert
the Applicable Interest Rate and, when applicable, the Interest Period,
for any existing Loan to any other Applicable Interest Rate or, when
applicable, any other Interest Period.
(c) The Borrower's selection of an Applicable Interest Rate and/or an
Interest Period, the Borrower's election to convert an Applicable
Interest Rate and/or an Interest Period to another Applicable Interest
Rate or Interest Period, and any other adjustments in an interest rate
are subject to the following limitations:
(i) the Borrower shall not at any time select or change to an Interest
Period that extends beyond the Revolving Credit Expiration Date in the
case of the Revolving Loan;
(ii) no change from the LIBOR Rate to the Prime Rate shall become
effective on a day other than a Business Day and on a day which is the
last day of the then current Interest Period, no change of an Interest
Period shall become effective on a day other than the last day of the
then current Interest Period, and no change from the Prime Rate to the
LIBOR Rate shall become effective on a day other than a day which is a
LIBOR Business Day;
(iii) 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;
(iv) the first day of each Interest Period shall be a LIBOR Business
Day;
(v) as of the effective date of a selection, there shall not exist an
Event of Default; and
(vi) the minimum principal amount of a LIBOR Loan shall be Twenty Five
Thousand Dollars ($25,000).
(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 and, if applicable, an
Interest Period, or if, after having made a selection of an Applicable
Interest Rate and, if applicable, an Interest Period, the Borrower
fails or is not otherwise entitled under the provisions of this
Agreement to continue such Applicable Interest Rate or Interest Period,
the Borrower shall be deemed to have selected the Prime Rate as the
Applicable Interest Rate until such time as the Borrower has selected a
different Applicable Interest Rate and specified an Interest Period in
accordance with, and subject to, the provisions of this Section.
(e) The Lender will not be obligated to make an advance of the Loan,
to convert the Applicable Interest Rate on the Loan to another
Applicable Interest Rate, or to change Interest Periods, 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 Prime Rate or the LIBOR Rate;
(iii) the length of the Interest Period if the Applicable Interest
Rate selected is the LIBOR Rate; and
(iv) 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 Standard time) on the
Business Day of any requested borrowing or conversion in the case of a
selection of the Prime Rate and not later than 10:00 a.m. (Eastern
Standard time) on the third Business Day before the effective date of
any requested borrowing or conversion in the case of a selection of the
LIBOR Rate.
2.4.3 Inability to Determine LIBOR Base Rate.
In the event that (a) the Lender shall have determined
that, by reason of circumstances affecting the London interbank LIBOR
market, adequate and reasonable means do not exist for ascertaining the
LIBOR Base Rate for any requested Interest Period with respect to a
Loan the Borrower has requested to be made as or to be converted to a
LIBOR Loan or (b) the Lender shall determine that the LIBOR Base Rate
for any requested Interest Period with respect to a Loan the Borrower
has requested to be made as or to be converted to a LIBOR 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 LIBOR Loan shall be made as or
converted to a Prime Rate Loan. Until such circumstances have changed,
the Borrower will not request that any Loan be made as or converted to
a LIBOR Loan.
2.4.4 Payment of Interest.
(a) Unpaid and accrued interest on any portion of the Loan which
consists of a Prime Rate Loan shall be paid monthly, in arrears, on the
last day of each calendar month, commencing on the first such date
after the date of this Agreement, and on the last 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 Prime Rate Loan converted to a LIBOR Loan or prepaid
shall be paid immediately upon such conversion and/or prepayment, as
appropriate.
(c) Unpaid and accrued interest on any LIBOR Loan shall be paid
monthly and on the last Business Day of each Interest Period for such
LIBOR Loan and at maturity (whether by acceleration, declaration,
extension or otherwise); provided, however that any and all unpaid and
accrued interest on any LIBOR Loan prepaid prior to expiration of the
then current Interest Period for such LIBOR Loan shall be paid
immediately upon prepayment.
2.4.5 Calculation of Interest.
(a) All interest accrued at the Prime Rate shall be calculated on the
basis of a 360 day year and actual days elapsed. Any change in the
Prime Rate 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.
(b) All interest accrued at the LIBOR Rate shall be calculated on the
basis of a 360 day year and actual days elapsed. Any change in the
LIBOR Rate resulting from a change in the LIBOR Base Rate shall become
effective as of the opening of business on the day on which such change
in the LIBOR Base Rate is announced.
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, 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, (a) all of the Borrower's Accounts, Chattel
Paper, Government Contracts, Documents, Instruments, Equipment,
Securities, 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, (b) all insurance policies relating to the foregoing, (c)
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 (d) all cash and non-cash proceeds and products of the
foregoing; provided, however, notwithstanding any provision contained
herein to the contrary, the Collateral shall not include any assets or
property rights of the Borrower granted to MLC Federal, Inc. pursuant
to Section 3.01 of the Master Assignment Agreement dated May 17, 1999
by and between the Borrower and MLC Federal, Inc. 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 covenants and agrees that the Borrower shall provide
the Lender with all necessary information and will execute and deliver
such documents as are required to comply with the Federal Assignment of
Claims Act of 1940 (31 U.S.C. 3727 and 41 U.S.C. 15), to perfect the
Lender's security interest in Government Contracts with a contract
value equal to or greater than Five Hundred Thousand Dollars ($500,000)
and a remaining duration of six (6) months or more 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 personal property 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 Securities, 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 Lender all originals of all of the Borrower's letters of credit,
Securities, Chattel Paper, Documents and Instruments and, if the Lender
so requires, shall execute and deliver to the Lender separate pledges,
assignments and security agreements in form and content acceptable to
the Lender, which pledges, assignments and security agreements shall
assign, pledge and ▇▇▇▇▇ ▇ ▇▇▇▇ to the Lender on all letters of credit,
Securities (other than those covered by the Stock Pledge Agreement),
Chattel Paper, Documents, and Instruments.
(b) In the event that the Borrower shall acquire after the Closing
Date any letters of credit, Securities, 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, Securities, Chattel Paper, Documents and
Instruments shall be delivered to the Lender endorsed and/or assigned
as required by any 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
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);
(b) all filing and/or recording taxes or fees;
(c) all costs of Lien and record searches;
(d) reasonable attorneys' fees in connection with all legal opinions
required;
(e) all field examination fees; and
(f) 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.
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 the 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 Good Standing.
Each of the Borrower and its Subsidiaries (a) is a
corporation duly organized, existing and in good standing under the
laws of the jurisdiction of its incorporation, (b) has the corporate
power to own its property and to carry on its business as now being
conducted, and (c) is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties
owned by it therein or in which the transaction of its business makes
such qualification necessary.
4.1.3 Power and Authority.
The Borrower has full corporate power and authority to
execute and deliver this Agreement, the other Financing Documents to
which it is a party, to make the borrowings 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 corporate 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, 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 charter or bylaws, (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.
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 security" or "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
said 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 Securities.
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 security" or "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 to the Lender 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 consolidated financial statements of the Borrower
dated March 31, 2000, are complete and correct and fairly present the
financial position of the Borrower and its Subsidiaries and the results
of their operations and transactions in their 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 or its Subsidiaries 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 or its Subsidiaries since the
date of such financial statements and to the Borrower's knowledge no
such adverse change is pending or threatened. Neither the Borrower nor
any Subsidiary has 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 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 which 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 or of any Subsidiary.
4.1.13 Indebtedness for Borrowed Money.
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 Indebtedness for Borrowed Money. The Lender has received
photocopies of all promissory notes evidencing any Indebtedness for
Borrowed Money 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 which, 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 therefor 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 or 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 "pension plan" as defined in SECTION
3(2) of ERISA, which plan is now or previously has been maintained or
contributed to by the Borrower and/or by any commonly controlled
entity: (a) no "accumulated funding deficiency" as defined in Code 412
or ERISA 302 has occurred, whether or not that accumulated funding
deficiency has been waived; (b) no Reportable Event has occurred; (c)
no termination of any plan subject to Title IV of ERISA has occurred;
(d) neither the Borrower nor any commonly controlled entity (as defined
under ERISA) has incurred a "complete withdrawal" within the meaning of
ERISA 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 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 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".
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.
Each of the Borrower and its Subsidiaries 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.
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.
4.1.21 Places of Business and Location of Collateral.
The information contained in the Collateral Disclosure
List is complete and correct. The Collateral Disclosure List
completely and accurately identifies the address of (a) the chief
executive office of the Borrower, (b) any and 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. The proper and only
places to file financing statements with respect to the Collateral
within the meaning of the Uniform Commercial Code are the filing
offices for those jurisdictions in which the Borrower maintains a place
of business as identified on the Collateral Disclosure List.
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 therefor 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 which are threatened or pending against any Account
Debtor which might result in any material adverse change in the
Borrowing Base.
4.1.26 Subordinated Debt.
None of the Subordinated Debt Loan Documents has been
amended, supplemented, restated or otherwise modified except as
otherwise disclosed to the Lender in writing on or before the effective
date of any such amendment, supplement, restatement or other
modification. In addition, there does not exist any default or any
event which upon notice or lapse of time or both would constitute a
default under the terms of any of the Subordinated Debt Loan Documents.
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 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 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 (A) the execution, delivery and performance of
the Financing Documents to which the Borrower is a party, (B) the
borrowings by the Borrower hereunder, (C) 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 Agreement and the other Financing
Documents to which the Borrower is a party; and
(iv) the identity of the Borrower's current directors, common stock
holders holding more than ten percent (10%) of the issued and
outstanding stock, as well as their respective percentage ownership
interests.
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, delivered to the Lender
assignments of Government Contracts and all other related documents and
notices required to comply with Section 3.2 (Grant of Liens) and all
opinions 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.
5.1.9 Collateral Disclosure List.
The Borrower shall have delivered the Collateral
Disclosure List required under the provisions of (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 require 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).
5.1.12 Landlord's Waivers.
The Lender shall have received a landlord's waiver from
each landlord of each and every business premise leased by the Borrower
and on which any of the Collateral is or may hereafter be located,
which landlords' waivers must be reasonably acceptable to the Lender
and its counsel in their sole and absolute discretion.
5.1.13 Field Examination.
The Lender shall have completed a field examination and
audit 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.
5.1.14 Subordination Agreement.
The Lender shall have received the fully executed
Subordination Agreement in form and content acceptable to the Lender.
The Lender shall have received and approved copies of the fully
executed Subordinated Debt Loan Documents, all of which must be in form
and content acceptable to the Lender.
5.1.15 Pay-Out Agreement.
The Lender shall have received the fully executed Pay-
Out Agreement in form and content acceptable to the Lender.
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.
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 on hundred
and twenty (120) days after the close of each fiscal year of the
Borrower, (i) a copy of the annual audited financial statement in
reasonable detail satisfactory to the Lender relating to the Borrower
and its Subsidiaries, prepared in accordance with GAAP and examined and
certified by independent certified public accountants satisfactory to
the Lender, which financial statement shall include a consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries as of
the end of such fiscal year and consolidated and consolidating
statements of income, cash flows and changes in shareholders equity of
the Borrower and its Subsidiaries 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 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) Annual Opinion of Accountant. 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 the Borrower's fiscal years, a
letter or opinion of the accountant who examined and certified the
annual financial statement relating to the Borrower and its
Subsidiaries (i) stating whether anything in such accountant's
examination has revealed the occurrence of a Default or an Event of
Default hereunder, and, if so, stating the facts with respect thereto
and (ii) acknowledging that the Lender will rely on the statement and
that the Borrower knows of the intended reliance by the Lender.
(c) 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,
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as of the close of such period, consolidated and
consolidating income, cash flows and changes in shareholders equity
statements for such period and a Compliance Certificate, in
substantially the form attached to this Agreement as EXHIBIT C,
containing a detailed computation of each financial covenant which is
applicable for the period reported, a certification that no change has
occurred to the information contained in the Collateral Disclosure List
(except as set forth on any schedule attached to the certification),
each prepared by a Responsible Officer of the Borrower in a format
acceptable to the Lender, 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.
(d) Monthly reports. The Borrower shall furnish to the Lender within
twenty (20) days after the end of each fiscal month, a 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 one hundred and
twenty (120) days after the end of the preceding fiscal year, a
consolidated and consolidating budget and pro forma financial
statements for the current fiscal year.
(f) Contract Backlog Report. The Borrower shall furnish to the Lender
as soon as available, but in no event later than (45) days after each
quarter end, a contract backlog of the Borrower, certified by an
authorized representative of the Borrower and assignments of Government
Contracts and all other related documents and notices not previously
delivered to the Lender and required to comply with Section 3.2 (Grant
of Liens).
(g) 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 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 (i) a standard system of accounting in accordance with GAAP,
and (ii) 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 authorized representatives of the Lender to visit and inspect
the properties of the Borrower and its Subsidiaries, to review, audit,
check and inspect the Collateral at any time with or without notice, to
review, audit, check and inspect the Borrower's other books of record
at any time with or without notice and to make abstracts and
photocopies thereof, and to discuss the affairs, finances and accounts
of the Borrower and/or any Subsidiaries, with the officers, directors,
employees and other representatives of the Borrower and/or any
Subsidiaries and their respective accountants, all at such times during
normal business hours and other reasonable times and as often as the
Lender may reasonably request. The Lender shall conduct field exams as
described in this section not less frequently than semi-annually at any
time that the ratio of the outstanding principal balance of the
Obligations divided by the Borrowing Base is more than sixty percent
(60%).
(c) Any and all reasonable costs and expenses incurred by, or on
behalf of, the Lender in connection with the conduct of any of the
foregoing, including, without limitation, travel, lodging, meals, and
other expenses, 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 reasonable out-of-pocket costs and expenses of the Lender's
employees and agents in, and when, travelling to the Borrower's
facilities.
6.1.4 Corporate Existence.
The Borrower shall maintain, and cause each of its
Subsidiaries to maintain, its corporate existence in good standing in
the jurisdiction in which it is incorporated and in each 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 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.
6.1.5 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 Technology 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 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
Subsidiaries and Affiliates to, comply with the funding requirements of
ERISA with respect to employee pension benefit plans for its respective
employees. The Borrower will not permit with respect to any employee
benefit plan or plans covered by Title IV of ERISA (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
and/or any Subsidiary and/or Affiliate, 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 and/or any Subsidiary and/or
Affiliate 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
"defined benefit plan", as defined in ERISA.
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
of its Subsidiaries exceed One Hundred Thousand Dollars ($100,000) and
are not covered by insurance;
(d) any event, development or circumstance whereby the financial
statements furnished hereunder fail in any material respect to present
fairly, in accordance with GAAP, the financial condition and
operational results of the Borrower or any of its Subsidiaries;
(e) 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 to be threatened
against it or any of its Subsidiaries which, if adversely decided,
could materially adversely affect its financial condition or operations
(present or prospective);
(f) 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 Subsidiary 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
(g) any other development in the business or affairs of the Borrower
and any of its Subsidiaries which 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 on a quarterly basis notify the
Lender of the execution of any Government Contract 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. 3727 and 41 U.S.C. 15) or any other similar applicable law.
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;
(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 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. 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 Financial Covenants.
(a) Funded Debt to EBITDA. Commencing March 31, 2001, the Borrowers
shall maintain, tested as of the last day of each of the Borrower's
fiscal quarters for the four (4) quarter period ending on that date, a
ratio of Funded Debt to EBITDA equal to not more than 3.75 to 1.0
through and including March 31, 2002 and equal to not more than 3.25 to
1.0 commencing June 30, 2002 and each quarter end thereafter.
(b) Fixed Charge Coverage Ratio. The Borrower will maintain, tested
as of the last day of each of the Borrower's fiscal quarters for the
four (4) quarter period ending on that date, a Fixed Charge Coverage
Ratio of not less than 1.25 to 1.0.
6.1.15 Collection of Receivables.
Until such time that the Lender shall notify the
Borrower of the revocation of such privilege, the Borrower and each of
the Subsidiaries 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 with respect to the Receivables
as the Lender may request or in the absence of such request, as the
Borrower and each of the Subsidiaries 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 and any
one or more of the Subsidiaries 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.
6.1.16 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.
6.1.17 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
the Subsidiaries 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 the Subsidiaries 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.
6.1.18 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 have been terminated.
6.1.19 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 financing statement, renewal, affidavit,
deed, assignment, continuation statement, 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 will from time to time do whatever
the Lender may require by way of obtaining, executing, delivering,
and/or filing financing statements, 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, reasonable 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, financing statements 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 agrees that a copy of a fully executed security
agreement and/or financing statement shall be sufficient to satisfy for
all purposes the requirements of a financing statement as set forth in
Article 9 of the applicable Uniform Commercial Code. 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, if the Borrower fails to do so, to execute and deliver
any and all of the instruments and other documents and take any action
which the Lender may require pursuant the foregoing provisions of this
Section.
6.1.20 Business Names; Locations.
The Borrower will notify and cause each of the
Subsidiaries to notify the Lender not less than thirty (30) days prior
to (a) any change in the name under which the Borrower or the
applicable Subsidiary conducts its business, (b) any change of the
location of the chief executive office of the Borrower or the
applicable Subsidiary, and (c) the opening of any new place of business
or the closing of any existing place of business, and 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.
6.1.21 Subsequent Opinion of Counsel as to Recording Requirements.
In the event that the Borrower or any Subsidiary shall
transfer its principal place of business or the office where it keeps
its records pertaining to the Collateral, upon the Lender's request,
the Borrower will provide to the Lender a subsequent opinion of counsel
as to the filing, recording and other requirements with which the
Borrower and the Subsidiaries have complied to maintain the Lien and
security interest in favor of the Lender in the Collateral.
6.1.22 Use of Premises and Equipment.
The Borrower agrees that until the Obligations are fully
paid and this Agreement has been terminated, the Lender (a) after and
during the continuance of a Default or 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.
6.1.23 Protection of Collateral.
The Borrower agrees that the Lender may at any time
during the continuance 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, issue any stock or
equity of any class, 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
(except Inventory disposed of in the ordinary course of business prior
to an Event of Default). 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
unless such Subsidiaries execute an Additional Borrower Joinder
Supplement in the form attached hereto as EXHIBIT A.
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
Indebtedness for Borrowed Money other than the Obligations.
6.2.4 Indebtedness.
The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any
Indebtedness for Borrowed Money, or permit any Subsidiary so to do,
except:
(a) the Obligations;
(b) current accounts payable arising in the ordinary course;
(c) Indebtedness secured by Permitted Liens;
(d) Subordinated Indebtedness; and
(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 any refinancing thereof, limited to
the amount then outstanding.
6.2.5 Investments, Loans and Other Transactions.
Except as otherwise provided in this Agreement, the
Borrower will not, and will not permit any of its Subsidiaries to, (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 the Subsidiary) 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) unless, in
the case of Subsidiaries of the Borrower, such Subsidiary executes an
Additional Borrower Joinder Supplement, (b) guaranty or otherwise
become contingently liable for the indebtedness or obligations of any
Person, or (c) make any loans or advances, or otherwise extend credit
to any Person, except:
(a) any advance to an officer or employee of the Borrower or of any
Subsidiary 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 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.
6.2.7 Subordinated Indebtedness.
The Borrower will not, and will not permit any
Subsidiary to 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, except for
extensions of the maturity date thereof; or
(d) payment of 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, or permit any
Subsidiary so to do, 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.
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
March 31.
6.2.14 Transfer of Collateral.
The Borrower and the Subsidiaries 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.
6.2.15 Sale and Leaseback.
Neither the Borrower nor the Subsidiaries will 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 year
thereafter rent or lease the assets so sold or transferred.
6.2.16 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.
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, or
(f) by any act indicate its consent to, approval of or acquiescence in
any such proceeding or the appointment of any receiver of or trustee
for any of its property, or suffer any such receivership, trusteeship
or proceeding to continue undischarged for a period of sixty (60) days,
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 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 $100,000 against the Borrower or any Subsidiary, and the failure
by the Borrower or such Subsidiary to discharge the same, or cause it
to be discharged, within thirty (30) days from the date of the order,
decree or process under which or pursuant to which such judgment was
entered, or to secure a stay of execution pending appeal of such
judgment.
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 Indebtedness
for Borrowed Money (other than the Loan) if the effect of such default
is to accelerate the maturity of such Indebtedness for Borrowed Money
or to permit the holder or obligee thereof or other party thereto to
cause any such Indebtedness for Borrowed Money 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.
7.1.11 Material Adverse Change.
The Lender in its sole 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 sole 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 shall occur in the ownership of the Borrower
that results in Research Industries, Inc., the majority shareholder in
the Borrower as of the date hereof, owning less than thirty percent
(30%) of the issued and outstanding stock of the Borrower.
7.1.15 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.
7.1.16 Contract Default, Debarment or Suspension.
A Government Contract is terminated for default by any
Governmental Authority for any reason whatsoever and the Lender
determines in good faith that such termination is materially adverse,
or if the Borrower is debarred or suspended, whether temporarily or
permanently, by any Governmental Authority.
Section 7.2 Remedies.
Upon the occurrence of any Event of Default, the Lender may at any
time thereafter exercise any one or more of the following rights,
powers or remedies:
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 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 department, agency or authority or of
any person, or any person, corporation, partnership or other entity
having any interest therein, should be necessary to effectuate any sale
or other disposition of the Collateral, the 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
securities 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 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 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 cash and non-cash proceeds thereof;
(b) compromise, extend or renew any of the Collateral or deal with the
same as it may deem advisable;
(c) make exchanges, substitutions or surrenders of all or any part of
the Collateral;
(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;
(h) endorse or sign the name of the Borrower upon any Items of
Payment, certificates of title, Instruments, Securities, 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 of the
Enforcement Costs, and any balance of such proceeds will be applied by
the Lender to the payment of the balance of the Obligations in such
order and manner of application as the Lender may from time to time in
its sole and absolute discretion 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 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.
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: Halifax Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Lender: Bank of America, N. A.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Commercial Banking
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. 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.
(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 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, the
Lender may:
(a) proceed against the Borrower with or without proceeding against
any Person who may be liable (by endorsement, guaranty, indemnity or
otherwise) for all or any part of the Obligations;
(b) 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;
(c) 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;
(d) without reducing or impairing the obligations of the Borrower and
without notice thereof: (i) fail to perfect the Lien in any or all
Collateral or to release any or all the Collateral or to accept
substitute Collateral, (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 (v) 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,
sell, assign or transfer to or participate with any Person or Persons
all or any part of the Obligations, and each such Person or Persons
shall have the right to enforce the provisions of this Agreement and
any of the other Financing Documents as fully as the Lender, provided
that the Lender shall continue to have the unimpaired right to enforce
the provisions of this Agreement and any of the other Financing
Documents as to so much of the Obligations that the Lender has not
sold, assigned or transferred. In connection with the foregoing, the
Lender shall have the right to disclose to any such actual or potential
purchaser, assignee, transferee or participant all financial records,
information, reports, financial statements and documents obtained in
connection with this Agreement and any of the other Financing Documents
or otherwise.
Section 8.6 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 8.7 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 Loan 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, its agents and
others, or to the extent there are, the same are waived and released.
Section 8.8 Enforcement Costs.
The Borrower shall 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 shall pay, as part of the Enforcement Costs, 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 8.9 Applicable Law; Jurisdiction.
8.9.1 Applicable Law.
As a material inducement to the Lender to enter into
this Agreement, 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.
8.9.2 Appointment of Agent for Service of Process.
The Borrower hereby irrevocably designates and appoints
_________________James L. Sherwood__________, 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 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.
8.9.3 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 8.10 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 8.11 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 8.12 No Agency.
Nothing herein contained shall be construed to constitute the
Borrower as the Lender's agent for any purpose whatsoever or to permit
the Borrower to pledge any of the Lender's credit. The Lender shall
not be responsible nor 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 8.13 Date of Payment.
Should the principal of or interest on any of 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.
Section 8.14 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 8.15 Arbitration and Waiver of Jury Trial.
(a) This paragraph concerns the resolution of any controversies or
claims between the Borrower and the Lender, whether arising in
contract, tort or by statute, including but not limited to
controversies or claims that arise out of or relate to: (i) this
Agreement (including any renewals, extensions or modifications); or
(ii) any document related to this Agreement; (collectively a "Claim").
(b) At the request of the Borrower or the Lender, any Claim shall be
resolved by binding arbitration in accordance with the Federal
Arbitration Act (Title 9, U. S. Code) (the "Act"). The Act will apply
even though this Agreement provides that it is governed by the law of a
specified state.
(c) Arbitration proceedings will be determined in accordance with the
Act, the rules and procedures for the arbitration of financial services
disputes of J.A.M.S./Endispute or any successor thereof ("J.A.M.S."),
and the terms of this paragraph. In the event of any inconsistency,
the terms of this paragraph shall control.
(d) The arbitration shall be administered by J.A.M.S. and conducted in
any U. S. state where real or tangible personal property collateral for
this credit is located or if there is no such collateral, in the
Commonwealth of Virginia. All Claims shall be determined by one
arbitrator; however, if Claims exceed $5,000,000, upon the request of
any party, the Claims shall be decided by three arbitrators. All
arbitration hearings shall commence within 90 days of the demand for
arbitration and close within 90 days of commencement and the award of
the arbitrator(s) shall be issued within 30 days of the close of the
hearing. However, the arbitrator(s), upon a showing of good cause, may
extend the commencement of the hearing for up to an additional 60 days.
The arbitrator(s) shall provide a concise written statement of reasons
for the award. The arbitration award may be submitted to any court
having jurisdiction to be confirmed and enforced.
(e) The arbitrator(s) will have the authority to decide whether any
Claim is barred by the statute of limitations and, if so, to dismiss
the arbitration on that basis. For purposes of the application of the
statute of limitations, the service on J.A.M.S. under applicable
J.A.M.S. rules of a notice of Claim is the equivalent of the filing of
a lawsuit. Any dispute concerning this arbitration provision or
whether a Claim is arbitrable shall be determined by the arbitrator(s).
The arbitrator(s) shall have the power to award legal fees pursuant to
the terms of this Agreement.
(f) This paragraph does not limit the right of the Borrower or the
Lender to: (i) exercise self-help remedies, such as but not limited to,
setoff; (ii) initiate judicial or non-judicial foreclosure against any
real or personal property collateral; (iii) exercise any judicial or
power of sale rights, or (iv) act in a court of law to obtain an
interim remedy, such as but not limited to, injunctive relief, writ of
possession or appointment of a receiver, or additional or supplementary
remedies.
(g) By agreeing to binding arbitration, the parties irrevocably and
voluntarily waive any right they may have to a trial by jury in respect
of any Claim. Furthermore, without intending in any way to limit this
Agreement to arbitrate, to the extent any Claim is not arbitrated, the
parties irrevocably and voluntarily waive any right they may have to a
trial by jury in respect of such Claim. This provision is a material
inducement for the parties entering into this Agreement.
Section 8.16 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.
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: HALIFAX CORPORATION
_________________________ By:s/▇▇▇▇▇▇ Sciacca_______(Seal)
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CFO
WITNESS: BANK OF AMERICA, N. A.
_________________________ By:s/▇▇▇▇▇▇ Eaton_________(Seal)
▇▇▇▇▇▇ ▇▇▇▇▇
Title: SVP
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 2
Section 1.1 Certain Defined Terms. 2
Section 1.2Accounting Terms and Other Definitional Provisions. 18
ARTICLE II THE CREDIT FACILITIES 18
Section 2.1 The Revolving Credit Facility. 18
2.1.1 Revolving Credit Facility. 18
2.1.2Procedure for Making Advances Under the Revolving Loan;
Lender Protection Loans. 19
2.1.3 Borrowing Base. 19
2.1.4 Borrowing Base Report. 20
2.1.5 Revolving Credit Note. 21
2.1.6 Mandatory Prepayments of Revolving Loan. 21
2.1.7 Optional Prepayments of Revolving Loan. 21
2.1.8 The Collateral Account. 21
2.1.9 Revolving Loan Account. 22
2.1.10 Revolving Credit Unused Line Fee. 22
Section 2.2 The Letter of Credit Facility. 23
2.2.1 Letters of Credit. 23
2.2.2 Letter of Credit Fees. 23
2.2.3 Terms of Letters of Credit. 23
2.2.4 Procedure for Letters of Credit. 24
2.2.5 Change in Law; Increased Cost. 24
Section 2.3 General Financing Provisions. 24
2.3.1 Borrower's Representatives. 24
2.3.2 Use of Proceeds of the Loan. 24
2.3.3 Origination Fee. 25
2.3.4 Administrative and Audit Fees. 25
2.3.5 Computation of Fees. 25
2.3.6 Maximum Interest Rate. 25
2.3.7 Payments. 25
2.3.8 Liens; Setoff. 26
2.3.9 Requirements of Law. 26
2.3.10 ACH Transactions and Hedge Transactions. 26
Section 2.4 Interest 27
2.4.1 Applicable Interest Rates. 27
2.4.2 Selection of Interest Rates. 27
2.4.3 Inability to Determine LIBOR Base Rate. 29
2.4.4 Payment of Interest. 29
2.4.5 Calculation of Interest. 30
ARTICLE III THE COLLATERAL 30
Section 3.1 Debt and Obligations Secured. 30
Section 3.2 Grant of Liens. 30
Section 3.3 Collateral Disclosure List. 31
Section 3.4 Personal Property. 31
3.4.1 Securities, Chattel Paper, Promissory Notes, etc. 31
3.4.2Patents, Copyrights and Other Property Requiring
Additional Steps to Perfect. 31
Section 3.5 Record Searches. 31
Section 3.6 Costs. 32
Section 3.7 Release. 32
Section 3.8 Inconsistent Provisions. 32
ARTICLE IV REPRESENTATIONS AND WARRANTIES 32
Section 4.1 Representations and Warranties. 32
4.1.1 Subsidiaries. 33
4.1.2 Good Standing. 33
4.1.3 Power and Authority. 33
4.1.4 Binding Agreements. 33
4.1.5 No Conflicts. 33
4.1.6 No Defaults, Violations. 33
4.1.7 Compliance with Laws. 34
4.1.8 Margin Stock. 34
4.1.9 Investment Company Act; Margin Securities. 34
4.1.10 Litigation. 34
4.1.11 Financial Condition. 34
4.1.12 Full Disclosure. 35
4.1.13 Indebtedness for Borrowed Money. 35
4.1.14 Taxes. 35
4.1.15 ERISA. 35
4.1.16 Title to Properties. 36
4.1.17 Patents, Trademarks, Etc. 36
4.1.18Presence of Hazardous Materials or Hazardous Materials
Contamination. 36
4.1.19 Perfection and Priority of Collateral. 36
4.1.20 No Suspension or Debarment. 36
4.1.21 Places of Business and Location of Collateral. 37
4.1.22 Business Names and Addresses. 37
4.1.23 Equipment. 37
4.1.24 Accounts. 37
4.1.25 Compliance with Eligibility Standards. 37
4.1.26 Subordinated Debt. 38
Section 4.2Survival; Updates of Representations and Warranties. 38
ARTICLE V CONDITIONS PRECEDENT 38
Section 5.1Conditions to the Initial Advance and Initial Letter of
Credit. 38
5.1.1 Organizational Documents - Borrower. 38
5.1.2 Opinion of Borrower's Counsel. 39
5.1.3 Consents, Licenses, Approvals, Etc. 39
5.1.4 Notes. 39
5.1.5 Financing Documents and Collateral. 39
5.1.6 Other Financing Documents. 39
5.1.7 Other Documents, Etc. 39
5.1.8 Payment of Fees. 40
5.1.9 Collateral Disclosure List. 40
5.1.10 Recordings and Filings. 40
5.1.11 Insurance Certificate. 40
5.1.12 Landlord's Waivers. 40
5.1.13 Field Examination. 40
5.1.14 Subordination Agreement. 40
5.1.15 Pay-Out Agreement. 40
Section 5.2 Conditions to all Extensions of Credit. 41
5.2.1 Compliance. 41
5.2.2 Borrowing Base. 41
5.2.3 Default. 41
5.2.4 Representations and Warranties. 41
5.2.5 Adverse Change. 41
5.2.6 Legal Matters. 41
ARTICLE VI COVENANTS OF THE BORROWER 41
Section 6.1 Affirmative Covenants. 41
6.1.1 Financial Statements. 42
6.1.2 Reports to SEC and to Stockholders. 43
6.1.3 Recordkeeping, Rights of Inspection, Audit, Etc. 43
6.1.4 Corporate Existence. 44
6.1.5 Compliance with Laws. 44
6.1.6 Preservation of Properties. 44
6.1.7 Line of Business. 44
6.1.8 Insurance. 44
6.1.9 Taxes. 45
6.1.10 ERISA. 45
6.1.11Notification of Events of Default and Adverse Developments.
45
6.1.12 Government Contracts. 46
6.1.13 Hazardous Materials; Contamination. 46
6.1.14 Financial Covenants. 47
6.1.15 Collection of Receivables. 47
6.1.16 Assignments of Receivables. 47
6.1.17 Maintenance of the Collateral. 48
6.1.18 Equipment. 48
6.1.19 Defense of Title and Further Assurances. 48
6.1.20 Business Names; Locations. 49
6.1.21Subsequent Opinion of Counsel as to Recording Requirements.
49
6.1.22 Use of Premises and Equipment. 49
6.1.23 Protection of Collateral. 49
Section 6.2 Negative Covenants. 50
6.2.1Capital Structure, Merger, Acquisition or Sale of Assets. 50
6.2.2 Subsidiaries. 50
6.2.3Purchase or Redemption of Securities, Dividend Restrictions.
50
6.2.4 Indebtedness. 50
6.2.5 Investments, Loans and Other Transactions. 51
6.2.6 Stock of Subsidiaries. 51
6.2.7 Subordinated Indebtedness. 51
6.2.8 Liens; Confessed Judgment. 52
6.2.9 Transactions with Affiliates. 52
6.2.10 Other Businesses. 52
6.2.11 ERISA Compliance. 52
6.2.12 Prohibition on Hazardous Materials. 52
6.2.13 Method of Accounting; Fiscal Year. 53
6.2.14 Transfer of Collateral. 53
6.2.15 Sale and Leaseback. 53
6.2.16 Disposition of Collateral. 53
ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES 53
Section 7.1 Events of Default. 53
7.1.1 Failure to Pay. 53
7.1.2 Breach of Representations and Warranties. 53
7.1.3 Failure to Comply with Covenants. 54
7.1.4Default Under Other Financing Documents or Obligations. 54
7.1.5 Receiver; Bankruptcy. 54
7.1.6 Involuntary Bankruptcy, etc. 54
7.1.7 Judgment. 54
7.1.8 Execution; Attachment. 55
7.1.9 Default Under Other Borrowings. 55
7.1.10 Challenge to Agreements. 55
7.1.11 Material Adverse Change. 55
7.1.12 Impairment of Position. 55
7.1.13 Collateral Inadequacy. 55
7.1.14 Change in Ownership. 55
7.1.15Liquidation, Termination, Dissolution, Change in Management,
etc. 56
7.1.16 Contract Default, Debarment or Suspension. 56
Section 7.2 Remedies. 56
7.2.1 Acceleration. 56
7.2.2 Further Advances. 56
7.2.3 Uniform Commercial Code. 56
7.2.4 Specific Rights With Regard to Collateral. 57
7.2.5 Application of Proceeds. 58
7.2.6 Performance by Lender. 58
7.2.7 Other Remedies. 59
ARTICLE VIII MISCELLANEOUS 59
Section 8.1 Notices. 59
Section 8.2 Amendments; Waivers. 59
Section 8.3 Cumulative Remedies. 60
Section 8.4 Severability. 61
Section 8.5 Assignments by Lender. 61
Section 8.6 Successors and Assigns. 61
Section 8.7 Continuing Agreements. 62
Section 8.8 Enforcement Costs. 62
Section 8.9 Applicable Law; Jurisdiction. 62
8.9.1 Applicable Law. 62
8.9.2 Appointment of Agent for Service of Process. 62
8.9.3 Service of Process. 63
Section 8.10 Duplicate Originals and Counterparts. 63
Section 8.11 Headings. 63
Section 8.12 No Agency. 63
Section 8.13 Date of Payment. 63
Section 8.14 Entire Agreement. 63
Section 8.15 Arbitration and Waiver of Jury Trial. 64
Section 8.16 Liability of the Lender. 65