SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number.
December 31, 1998 0-29292
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HAGLER BAILLY, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 54-1759180
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1530 Wilson Boulevard, Suite 400, Arlington, Virginia
22209
(Address of principal executive offices) (zip code)
(703) 351-0300
(Registrant's telephone number, including area code:)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
As of March 1, 1999, 16,551,994 shares of the Registrant's common stock,
par value $0.01 per share, were outstanding. The aggregate market value of the
voting stock held by non-affiliates* of the Registrant, (based upon the closing
price of such shares on the Nasdaq National Market on March 1, 1999) was
approximately $322,763,883.
The Registrant's Proxy Statement for the Annual Meeting of Stockholders
scheduled to be held May 13, 1999, is incorporated by reference into Part III of
this Annual Report on Form 10-K.
* For the purposes of this calculation, the registrant is not including stock
held by executive officers, directors and beneficial owners of more than five
percent (5%) of the registrant's outstanding common stock.
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<PAGE>
i
HAGLER BAILLY, INC. AND SUBSIDIARIES
FORM 10-K ANNUAL REPORT
FOR YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
Page
ITEM 1. BUSINESS........................................................2
ITEM 2 -PROPERTIES........................................................19
ITEM 3 -- LEGAL PROCEEDINGS...............................................20
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............20
ITEM 5 -- MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.............................................21
ITEM 6 -- SELECTED FINANCIAL DATA.........................................21
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................24
ITEM 8 -- CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTAL DATA...............................................39
ITEM 9 -- CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCUSSIONS.......................................39
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF HAGLER BAILLY..............40
ITEM 11 -- EXECUTIVE COMPENSATION.........................................40
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND............40
MANAGEMENT
ITEM 13 -CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................40
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.........41
<PAGE>
Except for any historical information contained herein, the matters
discussed in this Annual Report on Form 10-K of Hagler Bailly, Inc. and its
subsidiaries ("Hagler Bailly" or the "Company") contain forward-looking
statements. For this purpose, any statements contained herein that are not
statements of historical fact, are intended, and are hereby identified as,
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Securities Exchange Act of 1934, as amended by Public Law
104-67. Without limiting the foregoing, the words "anticipates," "believes,"
"estimates," "expects," "intends," "plans" and similar expressions are intended
to identify forward-looking statements. The important factors discussed below in
this Item 1 under the caption "Risk Factors", as well as other factors
identified in the Company's filings with the Securities and Exchange Commission
("SEC") and those presented elsewhere by management from time to time, could
cause actual results to differ materially from those indicated by
forward-looking statements made herein.
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934 and files periodic reports, including Current Reports on
Form 8-K, Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Proxy
Statements with the SEC.
The public may read and copy materials filed by the Company with the SEC
at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0300. The SEC maintains an
Internet site that contains reports, proxy and information statements and other
information regarding companies that file electronically (such as the Company)
with the SEC (http://www.sec.gov). The Company's Internet address is
http://haglerbailly.com.
PART I
ITEM 1. BUSINESS
INTRODUCTORY NOTE
On March 22, 1999, the Company announced that its Board of Directors
authorized the repurchase of up to 1,500,000 shares of the Company's common
stock. The purchases will be made from time to time in the open market or in
privately negotiated transactions.
On March 2, 1999, certain of the Company's domestic subsidiaries (Putnam,
Hayes & Bartlett, Inc., Hagler Bailly Consulting, Inc., TB&A Group, Inc., and
Theodore Barry & Associates) were merged with and into a newly incorporated
Delaware corporation, PHB Hagler Bailly, Inc., through which the Company will
provide its commercial rate consulting activities.
On February 8, 1999, the Company acquired all of the outstanding stock of
Lacuna Consulting Limited, a United Kingdom corporation, in exchange for 65,000
shares of the Company's common stock.
On November 20, 1998, the Company completed a new, three-year, $50 million
revolving credit facility with NationsBank, N.A., a subsidiary of Bank of
America. This credit facility replaced Hagler Bailly's $15 million revolving
line of credit and Putnam, Hayes & Bartlett, Inc.'s $4 million revolving line of
credit.
On November 17, 1998, the Company completed the acquisition of certain
assets of The Fieldston Company ("TFC") and all of the outstanding stock of
Fieldston Publications, Inc. ("FPI"). Total consideration of the acquisition was
approximately $2.3 million in cash and 232,558 shares of Hagler Bailly common
stock. The acquisition was accounted for using the purchase method. Accordingly,
the consolidated financial statements reflect the results of operations of TFC
and FPI since the date of acquisition. As a result of the transaction, the
Company recorded intangible assets of approximately $4.8 million.
GENERAL
The predecessor of the Company was founded in 1980 as Hagler, Bailly & Company,
Inc. In July 1984, RCG International, Inc. ("RCG"), an indirect subsidiary of
Reliance Group Holdings, Inc., acquired the Company, and in 1987 was renamed
RCG/Hagler Bailly, Inc. In May 1995, the management of RCG/Hagler Bailly, Inc.
completed the purchase of RCG/Hagler Bailly, Inc. from RCG and the successor to
RCG/Hagler Bailly, Inc. became a wholly owned subsidiary of the Company. In July
1997, the Company completed its initial public offering.
For almost 20 years the Company has maintained its industry focus,
providing consulting, research and other professional services to corporate and
government clients in energy, network industries and the environment.
The Company believes that several factors distinguish it from its
competitors. In addition to industry focus, its full service capabilities,
existing global infrastructure, established client relationships, public sector
insight, knowledge base and experienced team of management and consultants,
position it to capitalize on the growing demand for consulting services in these
industries.
BUSINESS MODEL
The Company provides solutions custom-tailored to the client's needs by
combining content, including proprietary research and industry information, with
superior consulting processes. The Company then offers resources such as
information technologies needed to implement and sustain the solution, creating
tangible long-term value for the client.
Through PHB Hagler Bailly, Inc. ("PHB Hagler Bailly"), a wholly-owned
subsidiary of the Company, it provides strategic advice and analysis that
assists decision makers in business and governments in developed countries as
they solve issues involving energy, telecommunications, transportation, water
resources, the environment, litigation and other matters. PHB Hagler Bailly's
consulting professionals have first-hand experience in developing sound
strategies and applying business principles that focus on the unique issues of
each client matter and increase enterprise value. PHB Hagler Bailly has been at
the forefront of assessing market strength, providing asset valuations and
performance measurements, analyzing competition, measuring risks, and improving
financial and operating performance.
Through Hagler Bailly Services, Inc. ("Hagler Bailly Services"), another
wholly-owned subsidiary of the Company, it provides advisory and technical
services to public sector clients worldwide in the energy and network
industries, particularly transportation, water, and telecommunications, and the
environment. In addition to U.S. federal and state governments, Hagler Bailly
Services assists multilateral and bilateral donor and financial organizations,
foreign governments, and selected private clients in emerging or developing
markets. Hagler Bailly Services' consulting experts provide public policy
assistance by advising governments and business leaders on the evolution of
specific policies in each country and construct a global view of policy reforms.
Hagler Bailly Services has been at the forefront of developing policy and
pricing frameworks, formulating national and provincial strategy and planning,
drafting laws and regulations, managing the transition to competitive markets,
promoting investment and business creation, evaluating assets, and promoting
sustainable development.
SERVICE OFFERINGS
The Company offers its clients a broad array of consulting services, from
assisting in shaping the clients' vision through strategic planning to selection
of appropriate solutions, implementation and on-going management advice. The
Company's services are delivered to clients worldwide primarily through seven
specialized practices focused on energy, including electric and gas utilities;
network industries, including fuels, water, telecommunications and
transportation; and the environment.
These seven specialized practices are:
o The Strategy practice provides strategic counsel and related services
to the executive leadership of energy and other network companies.
Hagler Bailly has carefully developed methods that increase shareholder
value in an environment of rapid industry change and new pressures on
financial performance. Each method is a discipline to help guide
executives to value creation.
o The Management and Operations practice advises utility and
telecommunications companies on all aspects of business management and
operations. Hagler Bailly is experienced in helping clients understand
and respond to both the internal operational and external customer and
market challenges that affect businesses today.
o The Economics & Analytics practice provides practical and innovative
solutions to economic problems, providing economic analysis and
analytical tools to support strategic decision making. Hagler Bailly
offers a unique combination of academic rigor and hands-on professional
experience to advise clients on regulatory economics, policy evaluation
and business strategy.
o The Market and Survey Analysis practice provides a full range of market
research and survey analysis that clients need in order to solve their
mission-critical business problems. Hagler Bailly helps clients gain
insight on their customers, competitors, and the changing dynamics of
their market through state-of-the-art study design, quantitative and
qualitative data collection, and analysis.
o The Litigation Support practice assists law firms and corporate counsel
with litigation, mediation, and arbitration matters, including
liability and causation issues, determination of damages and
prejudgment interest, litigation strategy and settlement negotiations.
Hagler Bailly provides economic and business analysis and expert
testimony on liability and damages issues in some of the largest civil
litigation cases of recent decades.
o The IT practice delivers information technology consulting services and
solutions to electric, gas and water utilities, and service providers
in the US and Canada. The Company provides these services through its
exclusive joint venture, Cap Gemini Hagler Bailly LLC, which designs
information technology frameworks that pass information efficiently
between and among organizations of all shapes and sizes.
o The Environment Management practice assists domestic and international
clients manage environmental issues and prevent environmental problems,
whether of local, regional, and/or global impact by offering
environmental economics, scientific, managerial and technical research
and services.
These specialized practices are designed to work together to provide
clients the full range of services and capabilities of the Company. From an
operational standpoint, the Company regularly reviews and, as appropriate,
restructures these practice areas and services to address the changing business
problems, strategic alternatives and policy issues of its clients.
In 1998, the Company provided its services to more than 1,150 clients in
both the private and public sectors.
COMPETITION
The market for consulting services in the energy, network industries and
the environment is intensely competitive, highly fragmented and subject to rapid
change. The market includes a large number of participants from a variety of
consulting market segments, both in the United States and internationally,
including general management consulting firms, the consulting practices of
accounting firms, consulting engineering firms, technical and economic advisory
firms and market research firms. Many information technology-consulting firms
also maintain significant energy, network industry and environmental practices
and others may enter the field in the future. Many of these companies are
national and international in scope and may have greater financial, technical
and marketing resources than the Company.
Hagler Bailly believes that it is in a strong position to compete in this
market. The Company believes that several factors distinguish it from many of
its current and potential competitors in the consulting industry.
o Industry Focus. Since its inception in 1980, the Company has maintained
its focus on providing a broad array of consulting services to the
energy, network industries and the environment. This focus
differentiates the Company from general management consulting firms
that serve a full range of industries and firms with limited skill sets
and capabilities. The Company believes that the insights gained by
working worldwide allow it to customize leading-edge-consulting
concepts and tools to specific situations and thus provide tangible
value, rather than just theories, to its clients.
o Full Service Capabilities. The Company's strategy is to partner with
its clients in conceptualizing and implementing solutions, which
significantly increase enterprise value, by building a broad range of
consulting platforms enabling it to meet its clients' consulting needs.
These include corporate strategy, marketing and sales, product
development, energy supply and logistics, operations management,
information systems and technology, economic analysis and environmental
management. In addition, the Company conducts its own market research
using a state-of-the-art survey center equipped with 26 CATI
(Computer-Assisted Telephone Interview) stations.
o Existing Global Infrastructure. The Company operates from 12 principal
offices in the United States at the following locations: Arlington,
Virginia; Boulder, Colorado; Cambridge, Massachusetts; Chicago,
Illinois; Houston, Texas; Los Angeles, California (two locations);
Madison, Wisconsin; New York, New York; Palo Alto, California; San
Francisco, California and The District of Columbia and from eleven
principal locations abroad in the following cities: Buenos Aires,
Argentina; Daventry, England; Dublin, Ireland; Jakarta, Indonesia;
Islamabad, Pakistan; Melbourne, Australia; London, England; Paris,
France; San Paulo, Brazil; Sydney, Australia; Toronto, Canada and
Wellington, New Zealand.
o Established Client Relationships. In the year ended 1998, the Company
received repeat business from approximately 42% of the clients who had
engaged the Company in the year ended 1997. Further, in the year ended
1998, revenues from clients served in the year ended 1997 were
approximately 60% of the Company's total revenues. Over the past year,
the clients have included approximately 220 electric or gas utilities
located throughout the world and four international development banks.
Relationships with clients, many of which date back over a decade, span
various levels within client organizations, ranging from corporate
boards, chief executive officers and other senior management to
functional managers.
o Public Sector Insight. The Company has worked with a number of public
sector organizations, including the United States Agency for
International Development ("USAID"), the Environmental Protection
Agency, the European Union, the U.K. Knowlton Fund, the Asian
Development Bank and the World Bank for many years. This gives the
Company a special perspective on the energy, utility and environmental
industries and enhances the Company's reputation and ability to compete
successfully for consulting business.
o Knowledge Base. The Company has developed an extensive knowledge and
information base. The Company owns several proprietary databases and
software packages -- OPECSM and NPESM, two nuclear power plant
operations databases, and IPPSM, a worldwide information database on
independent power producers. The Company has recently developed and is
aggressively marketing its proprietary database, RampUpSM, to provide
clients with unprecedented information on U.S. utility operations and
cost structure. Finally, through the Company's proprietary Business
Information and Knowledge Exchange Intranet ("BIKEnetSM"), Company
personnel have direct access to the Company's proprietary knowledge and
warehouse of information. This system is accessible from all of the
Company's offices.
o Experienced Team of Management and Consultants. The Company's
management and senior consultants have a wide range of energy,
telecommunications, transportation and environmental consulting
expertise and experience. In addition, many of the senior management
and consultants have worked extensively with one another. Management's
average tenure with the Company is approximately 13 years. This
consistency of leadership and teamwork, combined with training provided
by the Company, has fostered a strong company culture and employee
loyalty.
o Established Global Visibility. The Company's staff frequently publishes
articles and is invited to present at industry gatherings and
conferences. The staff is also active in several industry groups and
professional associations including elected or appointed positions to
the United States Energy Association (member of the Board of
Directors), the National Coal Council (member) and the Association of
Energy Services Professionals (member of the Board of Directors).
As a result of these competitive factors, the Company believes it has
emerged as one of the leading management consulting firms focused on energy, the
network and environmental industries.
MARKETING AND SALES
The Company markets its services from its headquarters in Arlington,
Virginia and through each of its subsidiaries. The Company employs a number of
business development and marketing strategies to communicate with prospective
and current clients, including, but not limited to, on-site presentations;
industry seminars featuring persentations by the Company's management and
consultants; speeches; articles in industry, business, economic, legal and
scientific journals; and through other publications and press releases regarding
the energy, network and environment industries and the Company's methodologies.
A significant portion of the new business arises from prior client
engagements. The Company often leverages the client relationships of firms it
acquires by cross-selling its existing services. Clients often expand the scope
of engagements during delivery to include follow-on complementary activities.
Also, the Company's on-site presence affords it opportunities to become
aware of, and to help define, additional project opportunities as they are
identified by the client. Strong client relationships arising out of many
engagements often facilitate the Company's ability to market additional
capabilities to its clients in the future.
The Company establishes a client development goal for each of its
consulting officers and principals and systematically reviews individual and
group performance against these goals. The Company's compensation system,
particularly in the award of bonuses and stock options, is weighted towards
success in meeting these client development goals.
o Commercial Sector Clients. In the commercial sector, client acquisition
techniques include referrals and focused presentations to boards of
directors, chief executive and operating officers and other executives
of prospective client companies. Presentations generally focus on
opportunities in the market segments most relevant to the prospective
clients, examples of the Company's previous work in related industries
and the Company's international capabilities.
o Public Sector Clients. In the public sector, contracts are awarded
primarily on the basis of competitive solicitation. The Company has
developed strong capabilities to prepare proposals that respond to
complex requests and often require the integration and coordination of
the services of several subcontractors and independent consultants.
The Company has also developed a detailed understanding of government
and other institutional procurement regulations in the United States
and internationally. In addition, in order to obtain government
contracts, consultants must adhere to stringent cost, accounting and
regulatory controls. In order to comply with such requirements, the
Company regularly holds training seminars to ensure compliance with
applicable government regulations and uses a sophisticated
computer-based accounting system that allows it to track costs in
adherence to government standards. The Company also meets public
sector clients' cost guidelines through competitive pricing.
HUMAN RESOURCES
As of December 31, 1998, the Company's personnel consisted of 780
full-time employees.
The Company supplements its consultants on certain engagements with highly
skilled independent contractors. The Company believes that its practice of
retaining independent contractors on a per-engagement basis provides it with
greater flexibility in adjusting professional personnel levels in response to
changes in demand for its services.
<PAGE>
RISK FACTORS
Attraction, Retention and Management of Professional and Administrative
Staff. The Company's business involves the delivery of professional services and
is labor intensive. The Company's future performance depends in large part upon
its ability to attract, develop, motivate and retain highly skilled consultants,
research associates and administrative staff, particularly senior professionals
with business development skills.
In connection with its recruiting efforts, the Company seeks employees
from top graduate schools with prior relevant consulting experience and strong
project management, analytic and communications skills in competitive and
regulated industries, especially those with meaningful international experience.
The Company also hires professionals with senior executive experience directly
from industry.
Qualified consultants are in great demand, and there is significant
competition for employees with these skills from other consulting and investment
banking firms, research firms, energy companies and many other related
enterprises. Although the Company attracts and motivates its professional and
administrative staff by offering competitive packages of base and incentive cash
compensation, stock options, bonuses and attractive benefits, many of these
firms have greater financial resources than the Company, which they may use to
attract and compensate qualified personnel. There can be no assurance that the
Company will be able to attract and retain sufficient numbers of highly skilled
consultants in the future. The loss of the services of a significant number of
consultants, research associates or administrative personnel could have a
material adverse effect on the Company's business, operating results and
financial condition, including its ability to secure and complete engagements.
Concentration of Revenues. Over half of the revenues of the Company are
derived from private and institutional clients involved in the energy, network
and environmental industries. As a result of this focus, the Company's business,
financial condition and results of operations are influenced by factors
affecting these industries, including, but not limited to, changing political,
economic and regulatory influences that may affect the procurement practices and
operations of such industries. In particular, many electric and gas utilities
are consolidating to create larger organizations or strategic alliances. These
consolidations and alliances will reduce the number of potential customers for
the Company and may also create conflicts of interest between clients. In
addition, these consolidations and alliances may result in the acquisition of
certain of the Company's key clients, and such clients may scale back or
terminate their relationship with the Company following their acquisition.
Similarly, cutbacks in the energy, network industries and/or environmental
budgets of the United States and other governments could result in the scale
back or termination of some of the Company's public sector contracts. The impact
of these developments in the energy, utility, transportation and environmental
industries is difficult to predict and could have a material adverse effect on
the Company's business, financial condition and results of operations.
Ability to Sustain and Manage Growth. The Company has experienced rapid
growth in recent years. The Company completed five acquisitions in 1998,
including the acquisition of Putnam, Hayes and Bartlett, Inc. The Company
believes that sustaining such growth places a strain on operational, human and
financial resources. In order to manage its growth, the Company must continue to
improve its operating and administrative systems and to attract and retain
qualified management and professional, scientific and technical-operating
personnel. Foreign operations also may involve the additional risks of
assimilating differences in foreign business practices, hiring and retaining
qualified personnel, and overcoming language barriers. Failure to manage such
growth effectively could have a material adverse effect on the Company's
business.
Risks Related to Possible Acquisitions. An element of the Company's
strategy is to expand its operations through the acquisition of complementary
businesses. There can be no assurance that the Company will be able to identify,
acquire, profitably manage or successfully integrate any acquired businesses
into the Company without substantial expenses, delays or other operational or
financial problems. Moreover, competitors of the Company are also soliciting
acquisition candidates, which could result in an increase in the price of
acquisition targets and a decrease in the number of attractive companies
available for acquisition. Further, acquisitions may involve a number of special
risks, including diversion of management's attention, failure to retain key
acquired personnel, increased costs to improve managerial, operational,
financial and administrative systems, unanticipated events or circumstances,
legal liabilities, increased interest expense and amortization of acquired
intangible assets, some or all of which could have a materially adverse impact
on the Company's business, operating results and financial condition. Client
satisfaction or performance problems at a single acquired firm could have a
materially adverse impact on the reputation of the Company as a whole. In
addition, there can be no assurance that acquired businesses, if any, will
achieve anticipated revenues and earnings. The failure of the Company to manage
its acquisition strategy successfully could have a material adverse effect on
Hagler Bailly's business, operating results and financial condition.
Dependence on Key Clients. The Company derives a significant portion of
its revenues from a relatively limited number of clients. For example, revenues
from the Company's ten most significant clients accounted for approximately 39%,
35% and 42% of its total revenues in 1998, 1997 and 1996, respectively. A U.S.
government agency, USAID, is the Company's largest client, accounting for
approximately 22%, 20% and 18% of Hagler Bailly's total revenues in 1998, 1997
and 1996, respectively. Clients typically retain the Company as needed on an
engagement basis rather than pursuant to long-term contracts, and a client can
usually terminate an engagement at any time without a significant penalty.
Moreover, there can be no assurance that the Company's existing clients will
continue to engage it for additional assignments or do so at the same revenue
levels. The loss of any significant client could have a material adverse effect
on the Company's business, results of operations and financial condition. In
addition, the level of the Company's consulting services required by an
individual client can diminish over the life of its relationship with the
Company, and there can be no assurance that the Company will be successful in
establishing relationships with new clients as this occurs.
Professional and Other Liability. The Company's services involve risks of
professional and other liability. If the Company were found to have been
negligent or to have breached its obligations to its clients, it could be
exposed to significant liabilities and its reputation could be adversely
affected. In connection with many of its public sector engagements, the Company
employs the services of local staff and uses consultants who are independent
contractors. Negligent or illegal acts, or ethical violations by these
independent contractors could adversely affect the Company.
Public Sector Market and Contracting Risks. Approximately 31% of the
Company's total revenues in 1998 and 34% in 1997 were derived from contracts or
subcontracts with public sector clients. Providing consulting services to public
sector clients is subject to detailed regulatory requirements and public
policies as well as to funding priorities. Contracts with public sector clients
may be conditioned upon the continuing availability of public funds, which in
turn depends upon lengthy and complex budgetary procedures, and may be subject
to certain pricing constraints. Moreover, public sector contracts may generally
be terminated for a variety of factors, including when it is in the best
interests of the respective government. There can be no assurance that these
factors or others unique to contracts with governmental entities will not have a
material adverse effect on the Company's business, results of operations and
financial condition.
Intense Competition. The market for consulting services in the energy,
network and the environmental industries is intensely competitive, highly
fragmented and subject to rapid change, and such competition is likely to
increase in the future. Many of the Company's competitors have greater
personnel, financial, technical and marketing resources than the Company. The
Company also competes with its clients' internal resources, particularly where
such resources represent a fixed cost to the client. This source of competition
may heighten as consolidation of electric and gas utility and other energy
industry companies creates larger organizations. There can be no assurance that
the Company will be able to compete successfully with its existing competitors
or with any new competitors.
Risk of International Operations. The Company operates either permanent or
project offices in a total of 22 foreign countries. The Company expects to
continue to expand its international operations and offices primarily in Western
Europe, Latin America and the Pacific Rim. Expansion into new geographic regions
requires considerable management and financial resources and may negatively
impact the Company's near-term results of operations. The Company's
international operations are subject to numerous potential challenges and risks,
including war, civil disturbances, other political and economic conditions in
various jurisdictions such as tariffs and other trade barriers, longer accounts
receivable collection cycles, fluctuations in currency and potentially adverse
tax consequences. There can be no assurance that such international factors will
not have a material adverse effect on the Company's business, results of
operations and financial condition.
Dependence on Key Employees. The Company's business consists primarily of
the delivery of professional services and, accordingly, its future success is
highly dependent upon the efforts, abilities, business generation capabilities
and project execution of its consultants. The Company's success is also
dependent upon the managerial, operational and administrative skills of its
officers. The loss of the services of any consultant or the failure of the
Company's consultants to generate business or otherwise perform at or above
historical levels could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company does not
have employment or non-competition agreements with many of its consultants or
officers; accordingly, such individuals may terminate their relationship with
the Company at will and without notice and immediately begin to compete with the
Company.
Concentration of Ownership. As of March 1, 1999, the directors and
executive officers of the Company beneficially owned approximately 31.3% of the
Company's outstanding shares of common stock. As a result, these stockholders
will have substantial influence over the outcome of matters requiring a
stockholder vote, including the election of the members of the Board of
Directors. Such control could adversely affect the market price of the Company's
common stock or delay or prevent a change of control of the Company at a price
which might represent a premium over the market price of its common stock.
Need to Develop New Offerings. The Company's future success will depend in
significant part on its ability to successfully develop and introduce new
service offerings and improved versions of existing service offerings. There can
be no assurance that the Company will be successful in developing, introducing
on a timely basis and marketing such service offerings, or that any service
offerings will be accepted in the market. Moreover, services offered by others
may render the Company's services non-competitive or obsolete.
Project Risks. Many of the Company's engagements involve projects which
are critical to the operations of its customers' businesses and which provide
benefits that may be difficult to quantify. The Company's failure or inability
to meet a customer's expectations in the performance of its services could
result in the incurrence by the Company of a financial loss and could damage the
Company's reputation and adversely affect its ability to attract new business.
In addition, an unanticipated difficulty in completing a project could have an
adverse effect on the Company's business and results of operations. Fees for the
Company's engagements can be based on the project schedule, the Company's
staffing requirements, the level of customer involvement and the scope of the
project as agreed upon with the customer at the project's inception. The Company
generally seeks to obtain an adjustment in its fees in the event of any
significant change in any of the assumptions upon which the original estimate
was based. However, there can be no assurance that the Company will be
successful in obtaining any such adjustment in the future.
Intellectual Property Rights. The Company's performance is in part
dependent upon its internal information and communication systems, databases,
tools, and the methods and procedures that it has developed specifically to
serve its clients. The Company relies on a combination of nondisclosure and
other contractual arrangements and copyright, trademark and trade secret laws to
protect its proprietary systems, information and procedures. There can be no
assurance that the steps taken by the Company to protect its proprietary rights
will be adequate to prevent misappropriation of such rights or that the Company
will be able to detect unauthorized use and take appropriate steps to enforce
its proprietary rights. The Company believes that its systems and procedures and
other proprietary rights do not infringe upon the rights of third parties. There
can be no assurance, however, that third parties will not assert infringement
claims against the Company in the future or that any such claims will not
require the Company to enter into costly litigation or materially adverse
settlements to litigation, regardless of the merits of such claims.
Government Regulation of Immigration. Certain of the Company's employees
are foreign nationals working in the United States under U.S. visas or work
permits. Congress and administrative agencies with jurisdiction over immigration
matters have periodically expressed concerns over the levels of legal and
illegal immigration into the U.S. These concerns have often resulted in proposed
legislation, rules and regulations aimed at reducing the number of work permits
that may be issued. Any changes in such laws making it more difficult to hire
foreign nationals or limiting the ability of the Company to retain foreign
employees could require the Company to incur additional unexpected labor costs
and expenses.
Fluctuations of Operating Results. The Company's future operating results
will continue to be subject to quarterly fluctuations based upon a wide variety
of factors, including the number and significance of client engagements
commenced and completed during a quarter, delays incurred in connection with an
engagement, the number of business days in a quarter, employee hiring and
utilization rates, the ability of clients to terminate engagements without
penalties, the size and scope of engagements, the nature of the fee arrangement,
the seasonality of the spending cycle of public sector clients (especially that
of the United States government), the timing of new office openings, return on
investment capital, and the general economy, such as recessionary periods,
political instability, changes in trade policies, fluctuations in interest or
currency exchange rates and other competitive factors. Seasonality also affects
the Company's operating results, particularly in the third and fourth quarters
of each fiscal year. In addition, the Company's operating expenses are
increasing as the Company continues to expand its operations, and future
operating results will be adversely affected if revenues do not increase
accordingly. Additionally, the Company plans to continue to evaluate and, when
appropriate, make acquisitions of complementary businesses. As part of this
process the Company will continue to evaluate the changing value of its assets,
and when necessary, make adjustments thereto. While the Company cannot predict
what effect these various factors may have on its financial results, the
aggregate effect of these and other factors could result in significant
volatility in the Company's future performance and stock price.
Fluctuations in the General Economy. The general level of economic
activity significantly affects demand for the Company's professional services.
When economic activity slows, clients may delay or cancel plans that involve the
hiring of consultants. The Company is unable to predict the level of economic
activity at any particular time, and fluctuations in the general economy could
adversely affect the Company's business, operating results and financial
condition.
Employment Liability Risks. The Company, as a provider of professional
services, employs and places individuals in the workplace of other businesses.
Inherent risks of such activity include possible claims of errors and omissions,
misuse of client proprietary information, misappropriation of funds,
discrimination and harassment, theft of client property, other criminal activity
or torts and other claims. Although historically the Company has not experienced
any material claims of these types, there can be no assurance that the Company
will not experience such claims in the future.
Certain Anti-takeover Effects. The Company's Amended and Restated
Certificate of Incorporation, By-laws, and the Delaware General Corporation Law
include provisions that may be deemed to have anti-takeover effects and may
delay, defer or prevent a takeover attempt that stockholders might consider in
their best interests. These include a Board of Directors which is divided into
three classes, each of which is elected to serve staggered three-year terms, and
by-law provisions under which only the President, a majority of the Board of
Directors or stockholders owning at least 50% of the Company's capital stock may
call meetings of the stockholders. Also, the Board of Directors of the Company
is authorized to issue up to 5,000,000 shares of preferred stock and to
determine the price, rights, preferences and privileges of such shares, without
any further stockholder action. The existence of this "blank-check" preferred
stock could render more difficult or discourage an attempt to obtain control of
the Company by means of a tender offer, merger, proxy contest or otherwise.
Furthermore, the Company is subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law that prohibits Hagler Bailly from
engaging in a "business combination" with an "interested stockholder" unless the
business combination is approved in a prescribed manner. These provisions could
also have the effect of delaying or preventing a change of control of the
Company, which could adversely affect the market price of the common stock.
Fluctuations in Stock Price. The market price of the Company's common
stock may fluctuate substantially due to a variety of factors, including
quarterly fluctuations in results of operations, announcements or terminations
of new services, offices, contracts, acquisitions or strategic alliances by the
Company or its competitors, as well as changes in the market conditions in the
energy, network and environmental industries, changes in earnings estimates by
analysts, changes in accounting principles, sales of the Company's common stock
by existing holders, loss of key personnel, a relatively small float of shares
that are freely tradable without restriction or registration under the
Securities Act of 1933 and other factors. The stock market has from time to time
experienced extreme price and volume fluctuations that have particularly
affected the market price for many companies and which, on occasion, have been
unrelated to operating performance. To the extent the Company's performance may
not meet expectations published by external sources, public reaction could
result in a sudden and significantly adverse impact on the market price of the
Company's securities, particularly on a short-term basis. In addition, such
stock price volatility may provoke the initiation of securities litigation,
which may divert substantial management resources and may have an adverse effect
on the management of business operations. Any of these results could have a
material adverse effect on the Company's business, operating results and
financial condition.
<PAGE>
EXECUTIVE OFFICERS
The Company's Executive Officers and their respective ages, positions and
biographical information is as follows:
Name Age Positions
John R. Armstrong 54 Senior Vice President and Chief Operating
Officer of Hagler Bailly Services
Henri-Claude A. Bailly 52 President and Chief Executive Officer
of Hagler Bailly
Frederick T. Baird 50 Senior Vice President of PHB Hagler Bailly
John C. Butler, III 48 Senior Vice President of PHB Hagler Bailly
Jasjeet S. Cheema 54 Executive Vice President, U.S./Canada
Operations of Hagler Bailly and of PHB
Hagler Bailly
William E. Dickenson 50 Executive Vice President and Chief Operating
Officer of Hagler Bailly, and President and
Chief Executive Officer of PHB Hagler Bailly
Glenn J. Dozier 48 Senior Vice President,Chief Financial Officer,
Treasurer and Secretary of Hagler Bailly, PHB
Hagler Bailly and Hagler Bailly Services
Neill W. Freeman, III 54 Senior Vice President of PHB Hagler Bailly
Derek W. HasBrouck 38 Senior Vice President of PHB Hagler Bailly
James N. Heller 50 Senior Vice President of PHB Hagler Bailly
and President of Fieldston Publications, Inc.
David A. Keith 48 Senior Vice President of Hagler Bailly Service
Steven A. Mitnick 46 Senior Vice President of PHB Hagler Bailly
Howard W. Pifer, III 56 Chairman of the Board of Hagler Bailly and of
PHB Hagler Bailly
James M. Speyer 54 Senior Vice President of PHB Hagler Bailly
Alain M. Streicher 50 Executive Vice President, International
Operations of Hagler Bailly, and President and
Chief Executive Officer of Hagler Bailly
Services
Walter H. A. Vandaele 54 Senior Vice President of PHB Hagler Bailly
Kent D. Van Liere 46 Senior Vice President of PHB Hagler Bailly
Stephen V.R. Whitman 52 Senior Vice President and General Counsel of
Hagler Bailly, PHB Hagler Bailly and Hagler
Bailly Services
John R. Armstrong is a senior vice president and chief operating officer of
Hagler Bailly Services, Inc., a wholly-owned subsidiary of the Company. He has
over 24 years experience in designing and implementing state and national
programs to promote energy efficiency and renewable energy in the U.S. and
developing countries. Prior to joining Hagler Bailly, Mr. Armstrong was a
director of energy conservation and development for the Minnesota Department of
Energy and Economic Development, and director of the Wisconsin Energy Office.
Henri-Claude A. Bailly has served as the Company's chief executive officer since
its founding in 1980. From 1984 to 1987 and from May 1995 to date, Mr. Bailly
has been the firm's president; he served as chairman of the board of directors
from 1984 to August 1998 and continues to serve as a member of the board. From
1984 to 1995, RCG International, Inc., the consulting arm of Reliance Group
Holdings, employed Mr. Bailly in a series of management positions culminating in
senior vice president, and chairman of the board and chief executive officer of
RCG/Hagler Bailly, Inc. Prior to founding Hagler Bailly, Mr. Bailly was employed
in successive positions from associate to managing director of Resource Planning
Associates, an international energy, utilities and environmental management
consulting firm. Mr. Bailly serves on the board of directors of the United
States Energy Association, the Alliance to Save Energy, and is a member of the
National Coal Council.
Frederick T. Baird is a senior vice president of PHB Hagler Bailly. Since 1996,
he has worked primarily in Putnam, Hayes & Bartlett - Asia Pacific Ltd, the New
Zealand subsidiary of PHB Hagler Bailly. Prior to joining Putnam, Hayes &
Bartlett, Inc. ("PHB"), the predecessor of PHB Hagler Bailly, Mr. Baird was
managing director of CORE Management System Ltd ("CORE"), which specializes in
the design and development of complex computer-based business models using
optimization and simulation and which is now part of PHB Hagler Bailly- Asia
Pacific Ltd. Mr. Baird established CORE following a joint venture with Ernst &
Young LLP in which he headed a management science practice. From 1982 to 1988,
Mr. Baird was a member of the Faculty of Commerce at the University of
Canterbury.
John C. Butler III is a senior vice president of PHB Hagler Bailly. Formerly a
managing director of PHB, he specializes in the economic, financial and
strategic analysis of environmental, product liability and insurance coverage
issues. He has extensive experience analyzing both domestic and international
environmental and insurance issues, having served as a consultant to numerous
multinational companies, law firms and government agencies. Prior to joining
PHB, he worked with the Environmental Protection Agency, the United Nations
Environment Programme and the World Health Organization.
Jasjeet S. Cheema is executive vice president, U.S/Canada operations for
Hagler Bailly and PHB Hagler Bailly. Mr. Cheema joined Hagler Bailly through its
acquisition of TB&A Group, Inc. ("TB&A") in February 1998. At TB&A, he held
various positions and served as its president since 1980. Prior to joining TB&A,
he worked for Getty Oil Company as a manager of its corporate technical
applications group. Mr. Cheema was elected to the Company's board of directors
in March 1999.
William E. Dickenson is executive vice president and chief operating officer of
Hagler Bailly and president and chief executive officer of PHB Hagler Bailly. He
served as PHB's president and chief executive officer since 1992, and was the
managing director responsible for its litigation support practice from 1983
through 1992. From 1978 to 1983, Mr. Dickenson managed major antitrust
litigation and consulting assignments at Dickenson, O'Brien & Associates, which
he founded and served as its president. Prior to that he was employed at
Cambridge Research Institute and also served in a variety of positions at the
Tennessee Valley Authority. Mr. Dickenson was elected to the Company's board of
directors in March 1999.
Glenn J. Dozier has been senior vice president, chief financial officer,
treasurer and secretary of Hagler Bailly since joining the firm in September
1998. Mr. Dozier was a financial and management consultant from September 1996
to September 1998 and from April 1990 to September 1996 he was senior vice
president and chief financial officer of Owens & Minor, Inc. From January 1987
to April 1990, he was chief financial officer of AMF. For the prior 12 years, he
was employed by Dravo Corporation where his last position was vice president,
finance for Dravo Constructors, Inc.
Neill W. Freeman, III is a senior vice president of PHB Hagler Bailly. He was a
managing director and member of the board of directors of PHB since 1994, when
the consulting firm he founded and in which he was a principal, Freeman & Mills,
combined its consulting practice with PHB. Prior to founding Freeman & Mills in
1978, Mr. Freeman was an auditor consultant at several accounting firms. From
1966 to 1969, Price Waterhouse & Co. employed Mr. Freeman; from 1969-1974, Mr.
Freeman was employed by BDO Seidman; and from 1974-1978, he was employed by
Coopers & Lybrand. Mr. Freeman was also a founder of the 1st Business Bank of
Los Angeles.
Derek W. HasBrouck is a senior vice president of PHB Hagler Bailly. Mr.
HasBrouck joined Hagler Bailly through its acquisition of TB&A in February 1998.
At TB&A, he was a managing director in charge of the firm's retail utility
management practice, as well as a member of its board of directors. Mr.
HasBrouck joined TB&A in 1987, specializing in the issues facing retail energy
providers, both in the U.S. and internationally. Prior to joining TB&A, Mr.
HasBrouck was employed at Florida Power & Light and Jones & Laughlin Steel.
James N. Heller is a senior vice president of PHB Hagler Bailly and chief
operating officer of Fieldston Publications, Inc. In 1981, Mr. Heller founded
The Fieldston Company and Fieldston Publications, Inc. Prior to founding the
Fieldston companies, Mr. Heller was the senior analyst at Teknekron, Inc. of
Berkeley, California from 1979 to 1980. From 1975 to 1979, he was the director
of Management Studies of Energy and Environmental Analysis, Inc. and from 1972
to 1975, he was the section chief for the U.S. Environmental Protection Agency,
Office of Water Quality Planning and Standards.
David A. Keith is a senior vice president of Hagler Bailly Services. He has been
involved in energy research, development and consulting projects continuously
since 1974. From 1974-1983, at Georgia Tech Research Institute, he was project
director for some of the first industrial energy conservation programs and
renewable energy projects in the U.S. In 1983, Mr. Keith joined Hagler Bailly,
and from 1983-1989 served as resident advisor for national energy development
programs in Jamaica and Indonesia. Since 1990, he has served as project director
on energy sector institutional reform projects in more than 20 countries in
Central and Eastern Europe and the former Soviet Union.
Steven A. Mitnick is Senior Vice President and since February 1999 has
served as Co-Managing Director of PHB Hagler Bailly's Strategy Practice, which
provides strategic counsel to the executive leaderships of energy companies in
the U.S. or regional markets. Since 1993, Hagler Bailly has employed Mr. Mitnick
in various positions. From 1991-1993, Mr. Mitnick served as vice president and
chief economist to Science Applications International Corporation (SAIC). From
1989-1991, Mr. Mitnick served as senior consultant to Putnam, Hayes & Bartlett,
Inc. From 1980-1989, he was president of S.A. Mitnick & Associates. From
1980-1982, Mr. Mitnick was of member of Georgetown University's faculty, where
he taught courses in microeconomics, macroeconomics and statistics. From
1976-1980, Mr. Mitnick served as a consultant to various government agencies.
Mr. Mitnick is a member of the Editorial Advisory Board of The Electricity
Journal.
Howard W. Pifer, III has served as chairman of Hagler Bailly's board of
directors since August 1998. He served as chairman of the board of directors of
PHB since 1991, having previously served as PHB's president and chief executive
officer. Dr. Pifer also serves as chairman of PHB Hagler Bailly and leads its
energy global business sector. Dr. Pifer specializes in rigorous analysis of
corporate strategies and public policies and has advised senior management,
boards of directors and governments in Australia, Canada, England and Wales,
Hong Kong, New Zealand, Norway, Scotland, Singapore and Spain, as well as
throughout the United States. Prior to founding PHB in 1976, Dr. Pifer was a
member of the Harvard Business School faculty, where he taught courses in
managerial economics, finance, public policy and strategic planning. From 1973
to 1976, Dr. Pifer was a Vice President of the Energy & Environment Group at
Temple, Barker & Sloane, Inc.
James M. Speyer is a senior vice president of PHB Hagler Bailly. Formerly a
managing director and member of the board of directors of PHB, Mr. Speyer is an
expert in the strategic analysis of energy and environmental issues,
particularly those affecting the coal, gas, electric utility and independent
power industries. Prior to joining PHB, Mr. Speyer was a principal with ICF Inc.
from 1979 to 1982. Mr. Speyer has also held various positions in the federal
government, including working on President Carter's White House Energy Staff and
at the Department of Energy and the Environmental Protection Agency.
Alain M. Streicher is executive vice president, international operations for
Hagler Bailly and president and chief executive officer of Hagler Bailly
Services. He has been employed by Hagler Bailly in various management positions
including senior vice president and acting chief operating officer. Mr.
Streicher has served as a member of the Company's board of directors since May
1995. From 1976 to 1980, Mr. Streicher was chief energy analyst at the CEREN in
Paris.
Walter H. A. Vandaele is a senior vice president of PHB Hagler Bailly. Formerly
a managing director and member of the board of directors of PHB, Dr. Vandaele is
an expert in competition and regulatory policy analysis. Prior to joining PHB,
Dr. Vandaele was assistant director for regulatory evaluation at the Bureau of
Consumer Protection and an Economic Advisor at the Bureau of Competition,
Federal Trade Commission. He taught at the Harvard Business School, the
Department of Economics at Harvard University, and the University of Chicago.
Kent D. Van Liere is a senior vice president of PHB Hagler Bailly. Over the past
15 years he has directed a wide range of value of service, customer
loyalty/satisfaction, market segmentation, and new product assessment studies
with residential, commercial and industrial customers for clients in several
industries. Prior to its acquisition by Hagler Bailly, he was President of HBRS,
a nationally recognized market research firm. Before joining HBRS in 1985, he
was an associate professor of sociology at the University of Tennessee.
Stephen V.R. Whitman is senior vice president and General Counsel of Hagler
Bailly. Prior to joining the firm in July 1997, he spent four years in private
practice in his own firm, was associated with the law firms of Kelley Drye &
Warren and White & Case and served as attorney advisor (and regional legal
advisor in Lima, Peru) for the United States Agency for International
Development. He earned his J.D. in 1975 from the University of Virginia School
of Law.
ITEM 2 - PROPERTIES
The Company's headquarters is currently located in approximately 58,402
square feet of leased office space in Arlington, Virginia. The Company leases
office space as listed below. The Company believes that its facilities are
suitable for its current needs and that additional facilities can be leased to
meet future needs.
The Company maintains principal offices in the following locations:
United States International
- ------------------------------------------------------------------------
Arlington, VA Madison, WI Buenos Aires, Argentina
Cambridge, MA New York, NY Daventry, England
Boulder, CO Palo Alto, CA Dublin, Ireland
Chicago, IL San Francisco, CA Islamabad, Pakistan
Houston, TX Washington, DC Jakarta, Indonesia
Los Angeles, CA [2] Melbourne, Australia
London, England
Paris, France
San Paulo, Brazil
Sydney, Australia
Toronto, Canada
Wellington, New Zealand
Each principal office represents a permanent location servicing multiple
clients that is run by a member of Hagler Bailly's senior management. In
addition, from time to time the Company leases a project office to enable it to
service a specific international project involving a particular individual
client, in which case the office is paid for directly by the client. All of the
Company's principal and project offices are electronically linked together and
have access to all of the Company's capabilities and core consulting tools.
ITEM 3 -- LEGAL PROCEEDINGS
Apogee Research, Inc. ("Apogee"), a wholly owned subsidiary of the
Company, received a subpoena in July 1998 from the Office of the Inspector
General of the Environmental Protection Agency (the "EPA") requesting records
from April 1993 through October 1995 pertaining to a contract between Apogee and
the EPA. Apogee has provided records in response to the subpoena. The work under
this contract has been completed. The subpoena was served in connection with an
EPA investigation relating to the submission of potential false statements and
false claims under the contract. Hagler Bailly is unable to determine at this
time what effect, if any, the investigation will have on its business, financial
condition or results of operations.
The Company and its subsidiaries are from time to time parties to
litigation arising in the ordinary course of business. Neither the Company nor
any of its subsidiaries is a party to any pending material litigation nor are
any of them aware of any pending or threatened litigation that would have a
material adverse effect on the Company or its business.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
PART II
ITEM 5 -- MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock was first offered to the public on July 3,
1997, and since that time has been traded on the Nasdaq National Market under
the symbol "HBIX." The following table sets forth the range of reported high and
low closing sales price for the Company's common stock, for the periods
indicated, as reported by the Nasdaq National Market.
1998 High Low
- ----------------------------------------------------------------------------
January - March $25.000 $18.625
April - June $30.000 $22.500
July - September $30.250 $16.750
October - December $24.000 $13.563
1997 High Low
- ----------------------------------------------------------------------------
January - March N/A N/A
April - June N/A N/A
July 3 - September $25.250 $17.000
October - January $26.375 $18.250
On November 17, 1998, the Company issued an aggregate of 232,558 shares of
its common stock to James H. Heller and Debbie G. Heller in connection with the
acquisition of assets and the assumption of liabilities of The Fieldston Company
and the acquisition of all of the outstanding stock of Fieldston Publications,
Inc. The sale of these shares was exempt from registration under Section 4(2) of
the Securities Act of 1933 and the SEC's Regulation D.
The Company had 196 holders of record of its common stock at March 1,
1999, and approximately 946 beneficial owners. The Company has never paid a cash
dividend on its common stock and does not expect to pay a cash dividend on its
common stock in the foreseeable future.
<PAGE>
ITEM 6 -- SELECTED FINANCIAL DATA
The following selected financial data as of and for the year ended
December 31, 1994, have been derived from the financial statements of RCG/Hagler
Bailly, Inc. (the "Predecessor"), a wholly-owned subsidiary of RCG International
Inc. which was acquired on May 25, 1995, by the management of RCG/Hagler Bailly,
Inc. The selected consolidated financial data for the year ended December 31,
1995, combine the financial data of the Predecessor derived from its financial
statements from January 1, 1995 to May 25, 1995, and the consolidated financial
data of the Company from May 26, 1995 to December 31, 1995, derived from the
consolidated financial statements of the Company. The selected consolidated
financial data as of December 31, 1995, is derived from the consolidated
financial statements of the Company. The selected consolidated financial data as
of and for the years ended December 31, 1996, 1997 and 1998, have been derived
from the audited consolidated financial statements of the Company. The Company's
prior years have been restated to include the historical financial information
of Apogee, TB&A, Izsak, Grapin et Associes ("IGA") and PHB as a result of
business combinations accounted for as poolings of interests.
The results of operations for prior periods are not necessarily indicative
of the results that may be expected for future years. The information set forth
below should be read in conjunction with the Company's consolidated financial
statements and the notes thereto, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this Annual
Report on Form 10-K.
<PAGE>
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------------
1994 (1) (2) 1995 (1) (2) 1996 (2) 1997 (2) 1998
------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (In thousands, except per share data)
Revenues:
Consulting revenues $97,154 $120,566 $142,701 $158,863 $173,194
Other revenues - - 440 1,752 4,268
------------- ------------- -------------- ------------- -------------
Total revenues 97,154 120,566 143,141 160,615 177,462
Cost of services 72,122 94,163 110,500 120,585 126,204
------------- ------------- -------------- ------------- -------------
Gross profit 25,032 26,403 32,641 40,030 51,258
Liquidation of subsidiary (4) - - 662 328 -
Merger related and other nonrecurring costs(5) - - - 1,235 9,382
Selling, general and administrative expenses 21,904 21,810 26,047 26,868 25,112
Stock and stock option compensation (3) 360 - 6,172 9,965 2,595
------------- ------------- -------------- ------------- -------------
Income/(loss) from operations 2,768 4,593 (240) 1,634 14,169
Other income (expense) net (7) (406) (799) (853) (400) 269
------------- ------------- -------------- ------------- -------------
Income/(loss) before equity investment in
joint venture and income tax expense 2,362 3,794 (1,093) 1,234 14,438
Income tax expense 1,162 1,907 1,786 5,460 7,275
------------- ------------- -------------- ------------- -------------
Income/(loss) before equity investment in
joint venture and extraordinary gain 1,200 1,887 (2,879) (4,226) 7,163
(Loss) from equity investment in joint venture - - - - (463)
------------- ------------- -------------- ------------- -------------
Income (loss) before extraordinary gain 1,200 1,887 (2,879) (4,226) 6,700
------------- ------------- -------------- ------------- -------------
Extraordinary gain (6) - 1,055 145 2,336 -
---------------------------------------------- ------------- ------------- -------------- ------------- -------------
Net income (loss) (8) $1,200 $2,942 $(2,734) $(1,890) $6,700
============ ======== ========== ======== ========
Net income (loss) per share
Basic
Net (loss) income before extraordinary gain * * $(0.25) $(0.32) $0.42
Extraordinary gain * * $ 0.01 $ 0.17 -
Net (loss) income * * $(0.24) $(0.14) $0.42
Dilutive
Net (loss) income before extraordinary gain * * $(0.25) $(0.32) $0.40
Extraordinary gain * * $ 0.01 $ 0.17 -
Net (loss) income * * $(0.24) $(0.14) $0.40
Weighted average shares outstanding
Basic * * 11,321 13,361 15,992
Dilutive * * 11,321 13,361 16,772
</TABLE>
* Due to the acquisition on May 25, 1995, and the change in capital
structure, earnings per share information for this period is not
meaningful and accordingly is not presented.
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
1994 1995 1996 1997 1998
BALANCE SHEET DATA (In Thousands)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 1,267 $ 1,753 $ 3,218 $ 5,261 $ 16,165
Working capital 1,644 5,054 7,382 34,122 54,294
Total assets 38,184 52,703 55,872 84,657 101,422
Total debt 6,470 20,606 16,790 2,752 1,026
Total stockholders' equity 3,538 3,772 9,958 48,849 73,599
</TABLE>
(1) The operating data for the year ended December 31, 1994, reflect the
combined results of operations of the Predecessor, Apogee, TB&A and PHB.
The operating data for the year-ended December 31, 1995 reflect the
combined results of operations of the Predecessor from January 1, 1995 to
May 24, 1995, the Company from May 25, 1995 to December 31, 1995, and the
annual results of Apogee, TB&A, IGA and PHB.
(2) The statements of operations data for the years ended December 31, 1994,
1995, 1996 and 1997 include performance incentive compensation paid to PHB
senior staff members in excess of a standard bonus set for their
respective staff levels. The excess performance incentive compensation was
included in cost of services and selling, general and administrative
expenses was $2,931, $6,260, $9,588 and $7,294 for the years ended
December 31, 1994, 1995, 1996 and 1997, respectively. In addition, the
year ended December 31, 1994, also includes $1,802 of selling, general,
and administrative expenses, representing a note receivable from a related
party, and the year ended December 31, 1996, includes approximately $500
of cost of services, representing that portion of officer compensation
that exceeded the compensation that would have been paid had the
compensation plan adopted in January 1997 been in effect for all of 1996.
(3) In connection with an amendment to the Hagler Bailly, Inc. Employee
Incentive and Non-Qualified Stock Option and Restricted Stock Plan (the
"Stock Option Plan") and a reclassification of its common stock, each
effective December 31, 1996, Hagler Bailly incurred non-recurring,
non-cash charges to operations amounting to approximately $4,600 for
options and approximately $1,600 for stock in 1996. In connection with a
stock bonus to an employee, the Company incurred a non-cash compensation
charge to operations in the first quarter of 1997 of $65. PHB common stock
issued or subject to issuance under subscriptions receivable entered into
within 12 months preceding the closing of the merger were presumed to have
been issued in contemplation of the proposed transaction and were
accounted for at their fair market value at date of issuance. Accordingly,
PHB recognized a non-recurring, non-cash, non-tax deductible compensation
charges for the years ended December 31, 1997 and 1998 of approximately
$9,900 and $2,600, respectively, representing the difference between the
fair market and book value of shares of common stock then issuable.
(4) On December 31, 1996, PHB liquidated its wholly owned subsidiary in the
U.K. Of PHB's loss of $663 in 1996, $549 represented cumulative foreign
currency translation losses that had previously been recorded as a
separate component of the PHB's shareholders' equity. In 1997, $328 was
recorded as management's estimate of the uncollectable net proceeds
resulting from the liquidation.
(5) For the year ended December 31, 1997 and 1998, the Company recorded merger
related costs of $1,235 and $9,382, respectively, as a result of business
combinations and related costs and impairment of investments and
long-lived assets (see Note 19 to the 1998 financial statements).
(6) For the years ended December 31, 1995, 1996 and 1997, the Company recorded
extraordinary gains of $1,055, $145 and $2,336, respectively, as a result
of extinguishment of debt at beneficial terms at TB&A.
(7) Other income (expenses), net includes interest income, interest expense
minority interest, other income, and other expenses.
(8) Management considers the items stated in Notes 3, 4, 5 and 6 above to
be nonrecurring. The effect of excluding these nonrecurring charges and
extraordinary gains on the Company's statement of operations, net of tax,
would increase net income by approximately $6,200, $8,600 and $9,000,
to pro forma operating net income of approximately $3,400, $6,700 and
$15,700 for the years ended December 31, 1996,1997 and 1998, respectively.
The effect of excluding the nonrecurring charges and extraordinary gains
would increase dilutive EPS by $0.54, $0.61 and $0.53, for the years
ended December 31, 1996, 1997, and 1998, respectively. For purposes of
the increase in EPS caused by the exclusion of certain nonrecurring
transactions discussed above, tax expense was applied at a combined federal
and state income tax rate of 40.0% for the year ended December 31, 1996,
47.6% for the year ended December 31, 1997, and 39.7% for the year ended
December 31, 1998.
<PAGE>
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The predecessor of the Company was founded in February 1980 as Hagler, Bailly
& Company, Inc. In July 1984, it was acquired by RCG International, Inc. ("RCG")
an indirect subsidiary of Reliance Group Holdings, Inc. and in 1987 was renamed
RCG/Hagler Bailly, Inc. In May 1995, the management of RCG/Hagler Bailly, Inc.
completed the purchase of RCG/Hagler Bailly, Inc. from RCG (the "Management
Buy-Out"), and the successor to RCG/Hagler Bailly, Inc. became a wholly-owned
subsidiary of the Company. In July 1997, the Company completed an initial public
offering (the "IPO").
Hagler Bailly, together with its wholly owned subsidiaries, PHB Hagler
Bailly, Hagler Bailly Services and several of its other domestic and foreign
wholly owned subsidiaries, is a leading worldwide provider of professional
services to corporate and government clients on energy, network industries and
the environment.
The Company's revenues consist of consulting revenues and other revenues.
Consulting revenues represent revenues associated with professional staff,
subcontractors and independent consultants, and client reimbursable expenses and
are associated with the Company's primary business of offering corporate clients
strategy and business operations consulting, economic counsel and litigation
support, and market research and survey analysis. Other revenues include those
derived from information-based product and services, financial advisory
services, and publication of newsletters, reference manuals, and data series for
the energy and transportation industries services. The Company's client base
includes both the public and private sector. Revenue from the private sector is
typically characterized by higher gross margins than the public sector, yet
generally requires a higher relative level of infrastructure support.
Consequently, the Company's operating performance is affected by its public
sector / private sector business mix. Through strategic acquisitions and
internal growth, the Company has increased its private sector client base, and
will continue to pursue such opportunities in the future.
Total revenues represent the total of all revenues related to contracts,
including revenues associated with professional staff, subcontractors and
independent consultants. Consulting revenues represent the amount of contract
revenue associated with billings by the Company's professional staff.
Subcontractor and other revenues represent revenues associated with
subcontractors and independent consultants, as well as travel and per diem
reimbursements from clients.
The Company derives substantially all of its revenues from fees for
professional services. Clients are typically invoiced on a monthly basis. The
majority of revenues are billed at standard daily rates, standard hourly rates,
or cost-plus fixed-fees. Revenues from standard daily rate contracts are
recognized at amounts represented by the agreed-upon billing amounts and costs
are recognized as incurred. Revenues from standard hourly rate engagements are
recognized as hours are recorded and costs are recognized as they are incurred.
Revenue from cost-plus fixed-fee contracts is recognized as costs are incurred
on the basis of direct costs plus allowable indirect costs and a pro rata
portion of estimated fee. The remainder of the revenues are billed on a
fixed-bid basis and by lump sum fee arrangements. Revenues from fixed-bid type
contracts are recognized on the percentage-of-completion method of accounting
with costs and estimated profits included in contract revenues based on the
relationship that contract costs incurred bear to management's estimate of total
contract costs. Losses, if any, are accrued when they become known and the
amount of the loss is reasonably determinable. The Company's most significant
expenses are project personnel costs, which consist of consultant salaries and
benefits (including bonuses), and travel-related direct project expenses.
Project personnel are typically full-time professionals employed by the Company,
although the Company often supplements its professional project staff through
the use of subcontractors and independent consultants. The Company believes that
retaining subcontractors and independent consultants on a per-engagement basis
provides it with greater flexibility and reduced risk in adjusting professional
staff levels in response to changes in demand for its services.
Compensation Charges
Effective December 31, 1996, the Company adopted an amendment to its Stock
Option Plan which changed the exercise price of future options to be granted
thereunder to the market value of the underlying common stock. In addition, in
connection with the reclassification of its common stock, the Company
substituted 0.9 shares of Class A common stock for each share of Class B common
stock underlying 971,963 options vesting on January 1, 1997. At the same time,
options to purchase 971,963 shares of Class B common stock vesting on January 1,
1998 were canceled. As a result, the Company recorded a non-recurring, non-cash
charge to operations of approximately $6.2 million in December 1996 of which
approximately $4.6 million was for options to purchase common stock and
approximately $1.6 million was for 394,160 shares of common stock sold to
employees during 1996. These charges represent the aggregate difference between
the exercise price of such outstanding options or the issuance price of common
stock sold to employees during 1996, as the case may be, and the appraised
market value of the underlying common stock at December 31, 1996.
The Company also recognized a non-recurring, non-cash charge to operations
of approximately $10.0 million in the year ended December 31, 1997, and
approximately $2.6 million in the year ended December 31, 1998. These charges
are required under generally accepted accounting principles for stock issued, or
obligated to be issued, during the twelve months preceding the closing of a
pending merger based on the presumption that such issuances were in
contemplation of the merger. Substantially all of these costs were related to
the PHB merger and represent the difference between the fair market and book
value of PHB common stock issuable under subscriptions within one year of the
merger's close.
Recent Mergers and Events
On December 1, 1997, the Company completed the merger of Apogee Research
Inc. ("Apogee"), whereby Apogee became a wholly-owned subsidiary of Hagler
Bailly. Apogee was a consulting firm specializing in the economic and financial
analysis of infrastructure, including all aspects of transportation and
environment. The Company issued 409,985 shares of its common stock in exchange
for all of the common stock of Apogee. The business combination is accounted for
as a pooling of interests. Accordingly, the Company's financial statements have
been restated to reflect the merger for all periods presented.
On January 28, 1998, the Company purchased the remaining minority interest
of its consolidated subsidiary, PT Hagler Bailly, a consulting firm located in
Jakarta, Indonesia, for $200,000 whereby PT Hagler Bailly became an indirect,
wholly-owned subsidiary of the Company. Total consideration of the acquisition
was $200,000 in cash. The acquisition was accounted for using the purchase
method. The consolidated financial statements have reflected the results of
operations of PT Hagler Bailly since its inception. As a result of the
transaction, the Company recorded intangible assets of approximately $200,000.
On February 23, 1998, the Company completed the merger of TB&A Group, Inc.
("TB&A"), whereby TB&A became a wholly-owned subsidiary of the Company. TB&A is
a management consulting firm to electric, gas and telecommunication companies.
The Company issued 454,994 shares of Hagler Bailly common stock, in exchange for
all of the common stock of TB&A. The business combination is accounted for as a
pooling of interests. Accordingly, the Company's financial statements have been
restated to reflect the merger for all periods presented.
On March 10, 1998, the Company purchased the remaining minority interest of
Hagler Bailly Indonesia, Inc., which holds all of the outstanding stock of PT
Hagler Bailly, whereby Hagler Bailly Indonesia, Inc. became an indirect
wholly-owned subsidiary of the Company. Total consideration of the acquisition
was $240,000 in cash. The acquisition was accounted for as a purchase. The
consolidated financial statements have reflected the results of operations of
Hagler Bailly Indonesia, Inc. since its inception. As a result of the
transaction, the Company recorded intangible assets of approximately $240,000.
On April 28, 1998, the Company completed the acquisition of Estudio Q
Ingenieros Asociados S.R.L., an Argentinean company ("Estudio Q"), whereby
Estudio Q became a wholly-owned subsidiary of the Company. Total consideration
for the acquisition was approximately $2.4 million in the form of $800,000 cash
and an aggregate of 64,306 shares of Hagler Bailly common stock. The acquisition
was accounted for using the purchase method. Accordingly, the consolidated
financial statements reflect the results of Estudio Q since the date of
acquisition. As a result of the transaction, the Company recorded intangible
assets of approximately $2.7 million.
On June 16, 1998, the Company and Cap Gemini S.A. and its wholly owned
subsidiary, Cap Gemini America, Inc., entered into an exclusive joint venture to
deliver information technology consulting services and solutions to electric,
gas and water utilities, and service providers in the U.S. and Canada. The
Company expects the joint venture, Cap Gemini Hagler Bailly, L.L.C., to turn
profitable sometime late in the fiscal year ending December 31, 1999. The joint
venture is owned equally by the Company and Cap Gemini America and each has
invested capital in the venture and transferred key senior professionals to it.
Concurrently with the creation of the joint venture, Cap Gemini purchased
470,975 newly issued shares of the Company's stock at the current market price
for total consideration, after commissions and fees, of $11.8 million.
On June 30, 1998, the Company completed the merger of IGA, whereby IGA
became a wholly-owned subsidiary of the Company. The Company issued 183,550
shares of its common stock in exchange for all the common stock of IGA. The
business combination was accounted for as a pooling of interests. Accordingly,
the Company's financial statements have been restated to reflect the merger for
all periods presented.
On August 28, 1998, the Company completed the merger of Putnam, Hayes &
Bartlett, Inc. ("PHB"), whereby PHB became a wholly-owned subsidiary of the
Company. Until the merger, PHB was the largest privately owned independent
economic and management consulting firm in the United States. The Company issued
6,548,953 shares of its common stock in exchange for all of the common stock of
PHB. The business combination was accounted for as a pooling of interests.
Accordingly, the Company's financial statements have been restated to reflect
the merger for all periods presented.
On September 30, 1998, the Company sold certain assets of its public sector
environmental consulting operations. As a result of the transaction, the Company
sold assets for approximately $2.9 million, resulting in a gain of approximately
$282,000.
On November 17, 1998, the Company completed the acquisition of certain
assets and the assumption of certain liabilities of The Fieldston Company
("TFC") and all of the outstanding stock of Fieldston Publications, Inc.
("FPI"). Total consideration of the acquisition was approximately $2.3 million
in cash and 232,558 shares of Hagler Bailly common stock. The acquisition was
accounted for using the purchase method. Accordingly, the consolidated financial
statements reflect the results of operations of TFC and FPI since the date of
acquisition. As a result of the transaction, the Company recorded intangible
assets of approximately $4.8 million.
In December 1998, the Company made the decision to cease operations in its
financial advisory services business, HB Capital, Inc., resulting in expenses of
approximately $1.8 million.
In connection with these and other transactions, the Company incurred
merger related and other nonrecurring costs of approximately $1.2 million and
$9.4 million in 1997 and 1998, respectively.
<PAGE>
Results of Operations
The following table presents for the periods indicated the percentage of
revenues represented by certain income and expense items:
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Revenues:
Consulting 99.7% 98.9% 97.6%
Other 0.3 1.1 2.4
---------------- --------------- ---------------
Total revenues 100.0 100.0 100.0
Cost of services 77.2 75.1 71.1
Merger related and other nonrecurring costs - 0.8 5.3
Liquidation of assets 0.5 0.2 -
Selling, general, and administrative 18.2 16.7 14.2
expenses
Stock and stock option compensation 4.3 6.2 1.4
---------------- ---------------- ---------------
Income from operations (0.2) 1.0 8.0
Interest income 0.2 0.8 0.2
Interest expense (1.0) (0.8) (0.2)
Other income (expense), net 0.2 (0.2) 0.2
Minority interest - - (0.1)
---------------- ---------------- ---------------
Income (loss) before income tax
expense, equity investment in joint
venture and extraordinary gain (0.8) 0.8 8.1
Income tax expense 1.2 3.4 4.1
(Loss) from equity investment in joint - - (0.2)
venture
---------------- ---------------- ---------------
Net income (loss) before
extraordinary gain (2.0) (2.6) 3.8
Extraordinary gain 0.1 1.4 -
---------------- ---------------- ---------------
Net income (1.9) (1.2) 3.8
================ ================ ===============
</TABLE>
1998 COMPARED TO 1997
Revenues for the year ended December 31, 1998, increased by $16.8 million,
or 10.5%, to $177.5 million from the year ended December 31, 1997. Of this
increase, $14.3 million was attributable to consulting revenues, and $2.5
million was attributable to other revenues. Consulting revenues increased 9.0%
for the year ended December 31, 1998, as compared to the year ended December 31,
1997. This increase was primarily driven by the Company's focus on the growth of
private-sector engagements resulting in an increase of $6.2 million and an
increase internationally of $8.1 million resulting from increased capacity and
capabilities through the purchase of Estudio Q, an Argentinean company, and
growth in PT Hagler Bailly Indonesia, Hagler Bailly Pakistan, Hagler Bailly
France, and IGA. Other revenues increased 143.6% for the year ended December 31,
1998, as compared to the comparable period of the prior year. This increase was
attributable to increased revenues from information-based products and services
associated with contracts the Company was awarded in the current fiscal year. In
the year ended December 31, 1998, approximately 97.6% of the Company's revenues
were derived from consulting revenues, as compared with 98.9% in the year ended
December 31, 1997.
Cost of services for the year ended December 31, 1998, increased by $5.6
million, or 4.7%, to $126.2 million from the year ended December 31, 1997. Cost
of services as a percentage of revenue decreased from 75.1 % for the year ended
December 31, 1997, to 71.1% for the year ended December 31, 1998, primarily the
result of a reduction in cash compensation resulting from the integration of the
Company's and merged firms' operations, particularly PHB.
Selling, general and administrative expenses ("SG&A") for the year ended
December 31, 1998, decreased by approximately $1.8 million, or 6.5%, to $25.1
million from the year ended December 31, 1997. Expressed as a percentage of
total revenues, SG&A expenses decreased from 16.7% for the year ended December
31, 1997, to 14.2% for the year ended December 31, 1998. This decrease is
primarily reflective of a reduction in cash compensation resulting from the
integration of the Company's and merged firms' operations, particularly PHB.
In the year ended December 31, 1998, there were no expenses related to the
liquidation of a subsidiary, compared to approximately $328,000 in expenses
related to the liquidation of a subsidiary in the year ended December 31, 1997.
Merger related and other nonrecurring costs for the year ended December 31,
1998, increased by $8.1 million to $9.4 million as compared to the comparable
period of the prior year. The majority of the merger related costs in the year
ended December 31, 1998, were associated with the merger of PHB and exiting from
the Company's financial advisory services business, as well as the business
combinations with TB&A, IGA, Apogee, FPI, TFC and Estudio Q.
Stock and stock option compensation for the year ended December 31, 1998,
decreased by $7.4 million from the year ended December 31, 1997, to $2.6
million. Substantially all of these costs in both periods related to PHB and
include non-cash, non-tax deductible compensation based on the difference
between the fair market and book values of PHB common stock issuable under
subscriptions within one year of the companies' merger.
Other income (expenses), net includes interest income, interest expense,
minority interest, and other income and expenses. Other income (expenses), net
increased by approximately $670,000 to approximately $270,000 in the year ended
December 31, 1998. The primary reasons for this increase was a gain of
approximately $282,000 from the sale of certain assets of the Company's
environmental consulting business, as well as a decrease in interest expense
from the year ended December 31, 1997, due to the use of IPO proceeds to repay
the Company's outstanding debt.
Loss from joint venture for the fiscal year ending December 31, 1998, was
approximately ($460,000), or (0.2%) expressed as a percentage of total revenues.
The joint venture, Cap Gemini Hagler Bailly LLC, was created to deliver
information technology consulting services and solutions to electric, gas and
water utilities and service providers in the U.S. and Canada. The Company
expects the joint venture to turn profitable sometime late in the fiscal year
ending December 31, 1999.
The Company's effective tax rate for the year ended December 31, 1998, was
50.4%. The 1998 provision for tax is higher than the provisional tax rate of
39.7% as a result of the non-deductibility for tax reporting purposes of the
compensation charge in connection with subscriptions for the issuance of common
stock, and certain non-deductible merger related costs.
Net income before extraordinary gains for the year ended December 31, 1998,
increased by approximately $10.9 million, to $6.7 million, as a result of a
combination of reasons discussed above.
For the year ended December 31, 1998, there were no extraordinary gains,
compared to approximately $2.3 million in extraordinary gains, net of income tax
expense, for the year ended December 31, 1997. The gains in 1997 were the result
of extinguishment of debt at beneficial terms to the Company.
Net income for the year ended December 31, 1998 increased by approximately
$8.6 million, to $6.7 million, as a result of the reasons discussed above.
1997 Compared to 1996
Revenues for the year ended December 31, 1997, increased by $17.5 million,
or 12.2%, to $160.6 million from the year ended December 31, 1996. Of this
increase, $16.2 million is attributable to consulting revenues, and $1.3 million
is attributable to other revenues. Consulting revenues increased by 11.3% for
the year ended December 31, 1997, as compared to the comparable period of the
prior year. A significant cause of this increase was the increased demand for
management consulting services associated with the restructuring and
deregulation of the electric and gas sectors outside the United States. The
overall increase was constrained by declining revenues generated from a
litigation case which represented approximately 7% of the Company's total
revenues in 1996 and approximately 1% in 1997 and the ending of two major
private sector engagements during the year. Management strategy of deploying
core-consulting staff to create and initiate sales of information-based products
and services also mitigated this growth. Other revenues increased 298.2% for the
year ended December 31, 1997, as compared to the comparable period of the prior
year. The increase in other revenues was the result of an increase in financial
advisory services, as well as the start of the Company's information-based
products and services business.
Cost of services for the year ended December 31, 1997, increased by $10.1
million, or 9.1%, to $120.6 million from the year ended December 31, 1996. Cost
of services as a percentage of revenue decreased from 77.2% in the year ended
December 31, 1996, to 75.1% in the year ended December 31, 1997. The increased
cost was primarily due to an increase from institutional clients, and the lower
percentage to sales was due to continued focus on higher margin private sector
revenues.
SG&A for the year ended December 31, 1997, increased by approximately
$820,000, or 3.2%, to $26.9 million from the year ended December 31, 1996.
Expressed as a percentage of total revenues, SG&A expenses decreased from 18.2%
in the year ended December 31, 1996, to 16.7% in the year ended December 31,
1997, primarily due to less marketing expenses relating to private sector
revenue generation as compared to the comparable period in the prior year. SG&A
expenses for the year ended December 31, 1996, were increased as the Company
focused on its marketing efforts to replace multiyear institutional contracts
which were ending during the year.
Expenses related to the liquidation of a subsidiary decreased by
approximately $334,000 in the year ended December 31, 1997, from the comparable
period in the prior year.
Merger related and other nonrecurring costs for the year ended December 31,
1997 were $1.2 million. There were no merger and related and other non-recurring
costs in the comparable period of the prior year. The majority of the merger
related costs in the year ended December 31, 1997, were associated with the
mergers with Apogee and TB&A.
Stock and stock option compensation for the year ended December 31,
1997, increased by approximately $3.8 million, from the year ended December 31,
1996, to approximately $10.0 million. Substantially all of these costs in the
year ended December 31, 1997 were related to PHB and include non-cash, non-tax
deductible compensation based on the difference between the fair market and book
values of PHB common stock issuable under subscriptions within one year of the
companies' merger. During the year ended December 31, 1996, the Company amended
its stock plan to change the exercise price of future options to be granted to
the market value of the common stock, as opposed to its book value plus an
adjustment for accretion. All of the costs in the year ended December 31, 1996,
represent the aggregate difference between the exercise price of outstanding
options, and the issuance price of common stock sold to employees during 1996,
and the appraised market value of the common stock on December 31, 1997.
Other income (expenses), net increased by approximately $450,000 to
approximately ($400,000) in the year ended December 31, 1997, primarily due to
interest income earned from the investment of IPO funds and a reduction in
interest expense resulting from use of IPO proceeds to pay off outstanding debt
in 1997.
The Company's effective tax rate for the year ended December 31, 1997, was
442.5%. The 1997 provision for tax is higher than the provisional tax rate of
40% as a result of the non-deductibility for tax reporting purposes of the
compensation charge in connection with subscriptions for the issuance of common
stock.
Net loss before extraordinary gains for the year ended December 31, 1997,
decreased by approximately $1.3 million, to ($4.2) million, as a result of the
reasons discussed above.
Extraordinary gains for the year ended December 31, 1997, increased by
approximately $2.2 million, to approximately $2.3 million, from the year ended
December 31, 1996. These gains were the result of the extinguishment of debt at
beneficial terms to the Company.
Net loss for the year ended December 31, 1997, increased by approximately
$840,000, to ($1.9) million, from the year ended December 31, 1996, for the
reasons discussed above.
<PAGE>
Liquidity and Capital Resources
As of December 31, 1998, working capital was $54.3 million as compared to
$34.1 million at December 31, 1997. The increase was primarily due to an
increase in cash from the sale of the Company's investments, an increase in
accounts receivable, and a decrease in accrued compensation and benefits.
Net cash of approximately $341,000 was used in operating activities during
the year ended December 31, 1998. Cash provided by net income, depreciation and
amortization, deferred income taxes, and stock and stock option compensation
were offset by a significant increase in accounts receivable, as well as a
decrease in accrued compensation and benefits for the year ended December 31,
1998.
Investment activities provided $1.6 million during the year ended December
31, 1998. The sale of investments for approximately $6.5 million, and proceeds
from the disposition of certain public sector assets for approximately $2.9
million were largely offset by the investment of $4.0 million in office and
computer related equipment, leasehold improvements, and other resources
necessary for the growth of the Company, as well as $3.3 million used to
purchase the assets of TFC and the stock of FPI, the stock of Estudio Q, and the
balance of the Company's interest in a previously majority owned foreign
subsidiary.
Financing activities provided $9.7 million for the year ended December 31,
1998. Cash provided by the issuance of 470,975 shares of the Company's common
stock for consideration, net of proceeds, of $11.8 million to Cap Gemini
America, Inc., and approximately $900,000 from other stock issuance, were
partially offset by payments on net borrowings on the Company's line of credit
and principal payments on debt of approximately $1.5 million and $300,000,
respectively, and a payment of approximately $1.0 million for the purchase of
common stock from a dissenting shareholder resulting from a business combination
during 1998. Net proceeds from equity financing are invested in short-term,
interest-bearing investment grade securities.
The Company's primary source of liquidity for the past 12 months has been
cash flows from sales of common stock, periodically supplemented by borrowings
under a bank line of credit. During the year ended December 31, 1998, the
Company established $50 million in revolving credit facilities with NationsBank.
The balance available under the line of credit at December 31, 1998, was $50.0
million. The Company believes that current projected levels of cash flows and
the availability of financing, including borrowings under the Company's credit
facility, will be adequate to fund its anticipated cash needs, which may include
future acquisitions of complementary businesses, for the next 12 months and
foreseeable future. The Company, depending on market conditions, may consider
other sources of financing, including equity financing.
<PAGE>
New Accounting Pronouncements
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" which established standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This statement requires that an
enterprise classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of the balance sheet. This statement is effective for fiscal
years beginning after December 15, 1997. The Company has adopted the effects of
this statement effecive January 1, 1998.
In June 1997, the FASB issued Statement No. 131, "Disclosure about
Segments of an Enterprise and Related Information" which established standards
for public business enterprises to report information about operating segments
in annual financial statements and requires those enterprises to report selected
information about operating segments. The financial information is required to
be reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources to segments. Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. This statement is effective for financial statements for periods
beginning after December 15, 1997. The Company operates in principally one
business segment and, accordingly, no additional disclosures are necessary to
comply with this statement.
In June 1998, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 standardizes the accounting for
derivative instruments by requiring that an entity recognize derivatives as
assets or liabilities in the statement of financial position and measure them at
fair value. This Statement is effective for all quarters of all fiscal years
beginning after June 15, 1999. This Statement is not expected to ahve an impact
on the Company's consolidated financial statements.
Year 2000
The Year 2000 issue is the result of computer hardware and software
being designed with the year field being set for two digits instead of four
digits. Computer programs and systems with this problem will be unable to
properly distinguish between the year 2000 and the year 1900. As a result, the
programs could fail or yield incorrect results. The Company's business, as well
of those of its principal suppliers and clients, is dependent on the ability of
its software and hardware systems to properly function. Failure of one or more
of these systems of the Company or a material client or supplier could disrupt
the Company's operations and cause a material adverse impact on the Company's
business, results of operations and financial condition.
The Company's Year 2000 Strategy
The Company has established the Year 2000 Readiness Plan (the "Plan") to
prepare for the Year 2000 issue. This Plan is comprised of the following
elements:
1. Audit, remediation, and testing of internal systems.
2. Obtaining assurance or information on the state of Year 2000 readiness
of our material clients and suppliers who exchange information electronically
with us or upon whom our work product may depend.
3. Developing contingency plans, when practical, to address potential Year
2000 failures.
The Company's goal is to complete implementation of the Plan by
September 30, 1999.
Detailed below are the status of progress and timetables for each of the phases
of the Plan.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Assessment Remediation Testing Implementation
-------------------- ---------------------- ----------------------- ----------------------
IT - Domestic 75% Complete Current Current By 3rd Quarter 1999
-------------------- ---------------------- ----------------------- ----------------------
IT - International By 2nd Quarter 1999 During 2nd Quarter During 2nd Quarter By 3rd Quarter 1999
1999 1999
-------------------- ---------------------- ----------------------- ----------------------
Business Operations Complete Complete Complete Complete
-------------------- ---------------------- ----------------------- ----------------------
Embedded 1st Quarter 1999 1st - 3rd Quarter 1st - 3rd Quarter 1999 By 3rd Quarter 1999
1999
-------------------- ---------------------- ----------------------- ----------------------
3rd Party 2nd Quarter 1999 During 2nd Quarter 2nd - 3rd Quarter 1999 By 3rd Quarter 1999
1999
</TABLE>
Year 2000 Readiness Report
The Company made several acquisitions in 1998. It undertook a
comprehensive due diligence examination that identified general Year 2000
Readiness issues for itself and the companies it acquired. The Company recently
formalized its efforts by establishing a Year 2000 Working Committee (the
"Committee") led by its Chief Information Officer to oversee the integration of
its Year 2000 efforts and to implement the Plan. The Committee includes the COO,
CFO, General Counsel, and other Company executives and outside consultants as
required. The Company has engaged a consultant to complete the assessment of its
domestic offices and to assist in the assessment of its major international
offices.
The Company's front office systems (used for the delivery of services
to clients), both hardware and software, were replaced or significantly upgraded
in 1997 and 1998 and were manufactured to be Year 2000 ready (with minor,
vendor-identified problems). The Company currently expects that the process of
updating those systems that are not Year 2000 ready will be completed by the end
of the second quarter of 1999.
The Company does not employ any significant custom programming in its
front office, work product, or back office systems. The Company's work product
is generated almost exclusively with commercially available statistical,
econometric, word processing, spreadsheet, database, or mathematical software
for which the Company has obtained Year 2000 Readiness assurances. These
software products have been audited and updated where appropriate.
The Company will implement a firm wide software application to monitor
Year 2000 compliance of new work product and to provide a testing mechanism for
the re-use of models, spreadsheets, or databases. This application is a
commercially available Year 2000 audit and remediation product specifically
designed for Microsoft Windows compliant software applications.
A conversion was undertaken in 1998 to replace a significant and
non-compliant analytic system (used to service client analysis needs), including
hardware and software, with a compliant system. The implementation is complete
and the conversion of existing analytic applications will be complete by
September 30, 1999.
Back office systems including financial accounting, project accounting,
fixed asset management, human resources, payroll, and conflict management have
been replaced, updated with vendor supplied Year 2000 fixes, or converted to
compliant versions of the software. During the second quarter 1999, the Company
plans to undertake a comprehensive test of its back office systems. Certain
models of personal computers have been identified as non-compliant and will be
replaced in 1999. The number of Year 2000 replacements will not exceed the
normal annual personal computer turnover.
The Company is contacting the vendors of its principal office systems
in order to obtain proof of Year 2000 readiness. The Company's material office
systems include its telephone, communications and networking equipment, security
and facilities systems, copiers, pagers, voicemail, and faxing systems. Because
the Company is highly decentralized with over 22 domestic and international
offices, it does not expect the audit and remediation of these office systems to
be complete before September 30, 1999. Some office systems in the Company's
international offices will not be corrected by December 31, 1999, but the
Company does not expect such systems to materially affect the Company's ability
to complete its engagements.
Clients
The Company's clients include domestic and international companies,
private law firms, the United States and state, local and foreign governments
and governmental agencies and government-owned enterprises. The Company has
responded to Year 2000 compliance surveys from over 50 of its major clients and
shared the readiness information disclosed here. The Company is planning to
survey in the second quarter its top 25 clients (measured by revenue generated
for the Company in 1998) to determine their Year 2000 readiness. The Company
plans to survey other clients if circumstances warrant and to survey new clients
upon new engagements.
Material Vendors
The Company performs analytic work on time sensitive matters. Certain
vendors have been identified as critical to implementing the Plan. These vendors
include payroll, credit, transportation, information resources, and certain
maintenance providers of mission critical hardware and software. If one or more
of the Company's principal vendors experiences significant business disruption
as a result of the Year 2000 issue, it could have a material adverse effect on
the Company's business, results of operations and financial condition. For
example, if the Company's principal suppliers of real-time electricity data are
not functioning properly, the Company may be unable to perform analytic work for
clients. Similarly, if hardware used to perform modeling cannot be supported
because of a Year 2000 issue at the vendor, the Company's ability to meet client
demands for time sensitive analysis might be jeopardized. The Committee will be
contacting the Company's principal vendors during the second quarter of 1999.
Based on the responses, the Committee may need to develop contingency plans to
replace those vendors whose ability to certify Year 2000 readiness is in doubt.
The Committee expects that the process of evaluating and working with outside
vendors will continue into the third quarter of 1999.
Contingency Planning
The Committee is developing a contingency plan in the event that any
material system or vendor will not be Year 2000 ready by December 31, 1999. This
contingency plan is scheduled to be substantially complete by the end of the
third quarter of 1999, although it will be reviewed and refined thereafter as
the Committee continues to evaluate the Company's systems and vendors.
Costs
The Company will budget $300,000 in each of the next two fiscal years,
1999 and 2000, to cover the costs of evaluating systems, acquiring Year 2000
remediation software, additional testing of hardware and software, hiring an
outside Year 2000 consultant, and administrative costs associated with
implementing the Plan. Although the Company believes this amount will be
sufficient to meet the costs of the Company's Year 2000 readiness efforts, there
can be no assurance that the costs to implement the Plan will not significantly
exceed the Company's current estimates. To date, expenditures for Year 2000
readiness have been nominal and associated with the rapid implementation of
already planned front office and back office systems upgrades.
Risks
At present, the Company perceives that its greatest Year 2000 risk is
its dependence on an external network of information providers, vendors, and
experts to complete its engagements. Even if the Company can satisfy itself that
the systems of its material suppliers and partners are Year 2000 ready, those
suppliers and partners in turn rely on a myriad of suppliers to operate their
businesses. Year 2000-related failures far removed from the Company could
trigger a chain of events that could materially harm the Company's business.
Certain clients, despite their best efforts, may suffer the effects of Year 2000
failures of others and thus delay, cancel, or substantially alter work in
progress resulting in a negative effect on the operations of the Company,
including the failure to meet financial expectations or the loss of key
personnel. Such a chain of events could also lead to litigation against the
Company. There can be no assurance that Year 2000 problems will not have a
material adverse effect on the Company's business, results of operations, or
financial condition.
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The following discussion about the Company's market risk disclosures
involves forward-looking statements. Actual results could differ materially. The
Company is exposed to market risk from changes in interest rates and foreign
exchange rates. Adverse changes in either interest rates or foreign exchange
rates can have a material effect on the Company's operations.
Interest Rate Risk: The Company is subject to risk from changes in
interest rates. The Company utilizes U.S. dollar denominated borrowings to fund
its operational needs, and as of December 31, 1998, had total outstanding debt
of approximately $1,000,000. A hypothetical 10% adverse change in interest rates
on the Company's total outstanding debt as of December 31, 1998 would not have
been material. Interest rates may move in the Company's favor. While the Company
does not expect to incur material losses as a result of this interest rate risk,
there can be no assurance that losses will not result.
Foreign Currency Exchange Risk: The Company is subject to risk from
changes in foreign exchange rates for its subsidiaries which use a foreign
currency as their functional currency and are translated into U.S. dollars. Such
changes could result in cumulative translation gains or losses that are included
in shareholders' equity.
In the year ended December 31, 1998, approximately 10.8% of the Company's
total revenues were derived from operations in foreign countries including
Argentina, Armenia, Australia, Canada, France, Ireland, Indonesia, Pakistan and
New Zealand. Exchange rate fluctuations between the U.S. dollar and the
currencies of these countries result in positive or negative fluctuations in the
amounts relating to foreign operations reported in the Company's consolidated
financial statements. None of the components of the Company's financial
statements were materially affected by exchange rate fluctuations in the years
ended December 31, 1996, 1997, or 1998.
The potential loss resulting from a hypothetical uniform 10% strengthening
in the value of the U.S. dollar relative to the foreign currencies in which some
of the Company's sales are denominated would have resulted in a decrease in
earnings of approximately $390,000. The potential impact of the same
hypothetical uniform change on the Company's cash flows would have resulted in a
decrease in cash flows of approximately $180,000. This calculation assumes that
each exchange rate would change in the same direction relative to the U.S.
dollar. Foreign exchange rates may move in the Company's favor.
The sensitivity of earnings and cash flows to fluctuations in exchange
rates is periodically assessed by management by applying an appropriate range of
potential rate fluctuations to the Company's assets, liabilities, and projected
results of operations denominated in foreign currency. Historically, the Company
has not used foreign currency options and forward contracts to hedge against the
earnings effects of such fluctuations. While the Company does not expect to
incur material losses as a result of this currency risk, there can be no
assurance that losses will not result.
ITEM 8 -- CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The Consolidated Financial Statements of Hagler Bailly are annexed to the
report as pages FS-1 through FS-28. An index to the Financial Statements is set
forth on page 40.
ITEM 9 -- CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCUSSIONS
Not applicable.
<PAGE>
PART III
The information required by Items 10 through 13 of this Part III will be
provided in the definitive proxy statement for the Company's 1999 Annual Meeting
of Stockholders to be filed pursuant to Regulation 14A of the Securities
Exchange Act of 1934 no later than April 30, 1999, and is incorporated herein by
reference to the extent provided below.
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF HAGLER BAILLY
Certain Information regarding Executive Officers of the Company is
included in Item 1 of Part I of this 1998 Annual Report on Form 10-K. Other
information in response to this item is incorporated by reference herein from
the sections of the Proxy Statement captioned "ELECTION OF DIRECTORS" and
"SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE."
ITEM 11 -- EXECUTIVE COMPENSATION
Information in response to this item is incorporated by reference herein
from the section of the Proxy Statement captioned "DIRECTOR COMPENSATION",
"COMPENSATION COMMITTEE REPORT ON COMPENSATION OF EXECUTIVE OFFICERS OF THE
COMPANY", "COMPENSATION INTERLOCKS AND INSIDER PARTICIPATION", "EXECUTIVE
COMPENSATION SUMMARY TABLE", "STOCK OPTION GRANTS DURING 1998", "STOCK OPTION
EXERCISES AND VALUES IN 1998", "EMPLOYMENT ARRANGEMENTS", "COMPARISON OF
FIVE-YEAR TOTAL RETURNS" AND "PERFORMANCE GRAPH".
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this item is incorporated by reference herein
from the section of the Proxy Statement captioned "SECURITY OWNERSHIP".
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this item is incorporated by reference herein
from the section of the Proxy Statement captioned "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS".
<PAGE>
PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
The consolidated financial statements filed as part of this report are
listed in the accompanying Index to Consolidated Financial Statements. The
exhibits filed as part of this report are listed in the accompanying Exhibit
Index, which follows the signature pages to this report.
On November 13, 1998, the Company filed with the Securities and Exchange
Commission, an interim report on Form 8-K/A showing certain optional unaudited
pro-forma combined financial information with respect to the Company and Putnam,
Hayes & Bartlett, Inc.
<PAGE>
42
HAGLER BAILLY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors..........................................FS-1
Consolidated Balance Sheets at December 31, 1997
and 1998................................................................FS-2
Consolidated Statements of Operations for the years
ended December 31, 1996, 1997 and 1998..................................FS-3
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1996, 1997 and 1998....................FS-4
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1997 and 1998..................................FS-5
Notes to Consolidated Financial Statements..............................FS-6
<PAGE>
FS-3
Report of Independent Auditors
Board of Directors and Stockholders
Hagler Bailly, Inc.
We have audited the accompanying consolidated balance sheets of Hagler Bailly,
Inc. as of December 31, 1997 and 1998, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the three years
in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Hagler
Bailly, Inc. at December 31, 1997 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles.
March 12, 1999
Vienna, Virginia
/s/ Ernst & Young LLP
<PAGE>
<TABLE>
<CAPTION>
HAGLER BAILLY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31,
1997 1998
------------------- ------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,261 $ 16,165
Investments 6,551 -
Accounts receivable, net of allowance for doubtful accounts of $3,873
and $3,888 as of December 31, 1997 and 1998, respectively 51,857 59,092
Note receivable 1,000 382
Prepaid expenses 1,502 2,620
Other current assets 1,867 304
------------------- ----------------
Total current assets 68,038 78,563
Property and equipment, net 5,513 6,463
Software development costs, net 2,463 898
Intangible assets, net 6,926 14,208
Other assets 1,598 1,290
Deferred income taxes 119 -
------------------- -----------------
Total assets $84,657 $101,422
=================== =================
Liabilities and stockholders' equity
Current liabilities:
Bank line of credit $ 1,500 $ -
Accounts payable and accrued expenses 7,969 8,476
Accrued compensation and benefits 13,467 8,713
Billings in excess of cost 3,126 2,288
Current portion of long-term debt 947 345
Deferred compensation 3,566 -
Income taxes payable 1,952 2,547
Deferred income taxes 1,389 1,900
------------------- ------------------
Total current liabilities 33,916 24,269
Long-term debt, net of current portion 305 681
Minority interest - 177
Deferred income taxes - 927
Other deferred 1,587 1,769
------------------- ------------------
Total liabilities 35,808 27,823
Stockholders' equity :
Common stock:
Class A par value $.01, 50,000 shares authorized, 15,474 and 16,483
issued and outstanding at December 31, 1997 and 1998, respectively 155 165
Additional capital 53,837 72,322
Retained (deficit) earnings (5,161) 1,206
Foreign currency translation 18 (94)
------------------- ------------------
Total stockholders' equity 48,849 73,599
------------------- ------------------
Total liabilities and stockholders' equity $ 84,657 $ 101,422
=================== ==================
See accompanying consolidated notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HAGLER BAILLY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
For the years ended December 31,
1996 1997 1998
------------------- ------------------- ------------------
<S> <C> <C> <C>
Revenues:
Consulting revenues $142,701 $ 158,863 $173,194
Other revenues 440 1,752 4,268
------------------- ------------------- ------------------
Total revenues 143,141 160,615 177,462
Cost of revenues 110,500 120,585 126,204
------------------- ------------------- ------------------
Gross profit 32,641 40,030 51,258
Merger related and other nonrecurring costs - 1,235 9,382
Liquidation of assets 662 328 -
Selling, general and administrative expenses 26,047 26,868 25,112
Stock and stock option compensation 6,172 9,965 2,595
------------------- ------------------- ------------------
(Loss) income from operations (240) 1,634 14,169
Other income (expense)
Interest income 334 1,192 349
Interest expense (1,450) (1,301) (410)
Other income (expense), net 263 (291) 411
Minority interest - - (81)
------------------- ------------------- ------------------
(Loss) income before income tax expense, equity
investment in joint venture and extraordinary gain (1,093) 1,234 14,438
Income tax expense 1,786 5,460 7,275
------------------- ------------------- ------------------
(Loss) income before equity investment in joint venture
and extraordinary gain (2,879) (4,226) 7,163
(Loss) from equity investment in joint venture - - (463)
------------------- ------------------- ------------------
(Loss) income before extraordinary gain (2,879) (4,226) 6,700
Extraordinary gain 145 2,336 -
------------------- ------------------- -----------------
Net (loss) income $ (2,734) $ (1,890) $ 6,700
=================== =================== ==================
Net income (loss) per share:
Basic
Net (loss) income per share before extraordinary gain $ (0.25) $ (0.32) $ 0.42
Net income per share extraordinary gain $ 0.01 $ 0.17 -
Net (loss) income per share $ (0.24) $ (0.14) $ 0.42
Diluted
Net (loss) income per share before extraordinary gain $ (0.25) $ (0.32) $ 0.40
Net income per share extraordinary gain $ 0.01 $ 0.17 -
Net (loss) income per share $ (0.24) $ (0.14) $ 0.40
Weighted average shares outstanding:
Basic 11,321 13,361 15,992
=================== =================== ==================
Diluted 11,321 13,361 16,772
=================== =================== ==================
See accompanying consolidated notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HAGLER BAILLY, INC
CONSOLIDATED STATEMENTS OF STOCK HOLDERS' EQUITY (in thousands)
FS-4
See accompanying notes
Retained Other Total
Shares Additional Earnings Comprehensive Stockholders'
Class A Class B Amount Capital (Deficit) Income Equity
------- ------- ------ ------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 10,893 104 $110 $5,829 $(147) $(552) $5,240
Repayments of notes receivable for common stock - - - 97 - - 97
Issuance of common stock 1,483 - 15 1,323 - - 1,338
Repurchase of common stock (849) - (8) (539) (24) - (571)
Dividends paid - IGA - - - - (133) - (133)
Compensatory stock & options 93 (104) (1) 6,172 - - 6,171
Foreign currency translation - - - - - 549 549
Net loss - - - - (2,734) - (2,734)
------------- --------- ------- ----------- ------- ---------- -------
Comprehensive income (2,185)
-------
Balance, December 31, 1996 11,620 - 116 12,882 (3,038) (3) 9,957
Issuance of common stock - IPO 2,500 - 25 30,240 - - 30,265
Issuance of common stock - other 995 - 10 698 - - 708
Repurchase of common stock (126) - (1) (81) - - (82)
Dividends paid - IGA - - - - (233) - (233)
Compensatory stock & options - - - 9,965 - - 9,965
Exercise of stock options 485 - 5 133 - - 138
Foreign currency translation - - - - - 21 21
Net loss - - - - (1,890) (1,890)
------------ --------- ------- ------------ ------- ---------- -------
Comprehensive income (1,869)
-------
Balance, December 31, 1997 15,474 - 155 53,837 (5,161) 18 48,849
Sale of common stock - Cap Gemini 471 - 5 11,828 - - 11,833
Issue of common stock for purchase of TFC 233 - 2 2,521 - - 2,523
Issue of common stock for purchase of Estudio Q 64 - 1 1,599 - - 1,600
Compensatory stock & options - - - 2,595 - - 2,595
Issuance of common stock - other 193 - 2 544 - - 546
Purchase of common stock -dissenting shareholder (51) - (1) (967) - - (968)
Dividends paid - IGA - - - - (333) - (333)
Exercise of stock options 99 - 1 365 - - 366
Foreign currency translation - - - - - (112) (112)
Net income - - - - 6,700 - 6,700
------------ --------- ------ ------------ ----- ----------- -----
Comprehensive income 6,588
-----
Balance, December 31, 1998 16,483 - $165 $72,322 $1,206 $(94) $73,599
====== ======== ==== ======== ========= ========== =======
See accompanying consolidated notes
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HAGLER BAILLY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
FS-24
For the years ended December 31,
1996 1997 1998
------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net (loss) income $ (2,734) $(1,890) $6,700
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities
Depreciation and amortization 2,360 2,908 4,320
Provision for accounts receivable allowance 2,721 2,395 1,135
Extraordinary gain (145) (2,336) -
Gain on sale of public sector assets - - (282)
Provision for deferred income taxes 1,475 (383) 1,530
Stock and stock option compensation 6,171 9,965 2,595
Impairment of loan receivable - - 1,000
Minority interest - - 177
Asset impairment - - 1,107
Loss on equity investment in joint venture - - 463
Liquidation of subsidiary 662 328 -
Changes in operating assets and liabilities:
Accounts receivable (3,016) (18,538) (10,521)
Prepaid expenses (18) (328) (1,118)
Deferred compensation 800 1,050 (3,566)
Other deferred (365) 82 182
Other current assets 332 (1,411) 1,553
Other assets (328) (519) 470
Accounts payable and accrued expenses (302) 1,741 (106)
Accrued compensation and benefits 739 670 (5,362)
Income taxes payable 21 1,908 595
Billings in excess of cost 755 (409) (1,213)
------------------------------------------------------------
Net cash provided by (used in) operating activities 9,128 (4,767) (341)
------------------------------------------------------------
Investing activities
Sale of public sector assets - - 2,855
Amount (due) paid in connection with liquidation of subsidiary (2,172) 1,684 -
Purchase of minority interest in consulting business - (531) -
Investment in note receivable - (1,000) -
(Purchase) sale of investments - (6,551) 6,551
Purchase of acquired companies, net of cash received - - (3,336)
Expenditures for software development - (2,512) -
Purchase of equity investment in joint venture - - (500)
Acquisition of property and equipment (2,034) (3,209) (3,988)
------------------------------------------------------------
Net cash (used in) provided by investing activities (4,206) (12,119) 1,582
------------------------------------------------------------
Financing activities
Sale of common stock 1,338 31,111 912
Sale of common stock - Cap Gemini - - 11,833
Repurchase of common stock (474) (82) (968)
Net payments on bank line of credit (1,166) (2,500) (1,500)
Dividends paid (133) (233) (333)
Proceeds from long-term financing 267 - -
Principal payments on long-term debt (2,846) (9,368) (281)
------------------------------------------------------------
Net cash (used in) provided by financing activities (3,014) 18,928 9,663
------------------------------------------------------------
Net increase in cash and cash equivalents 1,908 2,042 10,904
Cash and cash equivalents, beginning of year 1,311 3,219 5,261
------------------------------------------------------------
Cash and cash equivalents, end of year $3,219 $5,261 $16,165
============================================================
See accompanying consolidated notes
</TABLE>
<PAGE>
HAGLER BAILLY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except per share data)
1. Organization
Hagler Bailly, Inc. ("Hagler Bailly" or the "Company") is a worldwide
provider of management consulting and other advisory services to the private and
public sectors. The Company operates in principally one business segment. The
Company is headquartered in Arlington, Virginia and has offices in the United
States, Asia, Europe, and Latin America.
Hagler Bailly was organized under the laws of the state of Delaware and
formed for the primary purpose of facilitating the acquisition of RCG/Hagler
Bailly, Inc. ("Predecessor") by its management. The Predecessor was a
wholly-owned subsidiary of RCG International, Inc. ("RCG"). The date of
inception of the Company was May 5, 1995. The Company had no operations from May
5, 1995 to May 25, 1995. Effective on the close of business on May 25, 1995, the
Company, through a wholly-owned subsidiary, acquired all of the voting stock of
the Predecessor and the Company began operations on May 26, 1995.
On July 3, 1997, the Company consummated an initial public offering of
2,500,000 shares at an offering price of $14 per share. The offering netted the
Company $30.3 million used to pay off debt then outstanding, fund acquisitions,
and provide working capital needs.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
In 1997, the Company acquired a 7.8% minority ownership interest in a
consulting business in the United Kingdom for cash of $531. Due to the
uncertainty of recovery, the Company has established a valuation allowance for
this investment. During 1997 and 1998, the Company provided services to, and
purchased consulting services from, this consulting business of $38, $288, $405
and $2, respectively. At December 31, 1997 and 1998, the accounts receivable
from this consulting business amounted to $135 and $543, respectively.
Foreign Currency Translation
The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars using exchange rates at the balance sheet dates.
Income and expense items are translated at average exchange rates for the
respective periods. The effect of translating these amounts at
<PAGE>
different rates is included as a component of comprehensive income in
stockholders' equity. Transaction gains and losses are charged to operations in
the period in which they occur. Transaction gain (losses) in 1996, 1997 and
1998, amounted to $240, ($373) and $420, respectively.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes, in particular, estimates of revenues and
contract costs used in the earnings recognition process. Actual results could
differ from those estimates.
Cash and Cash Equivalents
Cash equivalents are short-term, highly liquid investments, which have an
original maturity when acquired of three months or less. At December 31, 1998,
cash equivalents include $6,810 in money market funds.
Marketable Securities
Marketable securities are classified as available-for-sale and are
recorded at fair market value with unrealized gains and losses, net of taxes,
reported as a component of comprehensive income in stockholders' equity, if
material.
Realized gains, losses and declines in market value judged to be other
than temporary are included in investment income. Interest and dividends are
included in investment income (see Note 5).
Property and Equipment
Property and equipment are recorded at original cost and depreciated using
a combination of straight-line and accelerated methods over their estimated
useful lives of three to ten years. Leasehold improvements are recorded at cost
and amortized over the shorter of their useful lives or the term of the related
leases by use of the straight-line method.
Revenue Recognition
Consulting revenue represents revenue generated by professional staff of
the Company, and also includes subcontractor revenue that is principally related
to services provided by subcontractors and independent consultants which are
billed by the Company to its clients. Other revenue includes those derived from
information-based products and services, financial advisory services, and
publication services.
Revenue from cost-plus fixed-fee contracts is recognized as costs are
incurred on the basis of direct costs plus allowable indirect costs and a pro
rata portion of estimated fee.
Revenue from fixed-bid type contracts is recognized on the
percentage-of-completion method of accounting with costs and estimated profits
included in revenue based on the relationship that contract costs incurred bear
to management's estimate of total contract costs. Losses, if any, are accrued
when they become known and the amount of the loss is reasonably determinable.
Revenue from time and materials contracts is recognized in the period the
work is performed. Estimated losses, if any, are provided for at the time such
losses become known.
Revenue from standard daily rate contracts is recognized at amounts
represented by the agreed-upon billing amounts and costs are recognized as
incurred. Estimated losses, if any, are provided for at the time such losses
become known.
Amounts billed or received in excess of revenue recognized in accordance
with the Company's revenue recognition policy are classified as billings in
excess of cost in the accompanying balance sheets.
Income Taxes
The Company provides for income taxes in accordance with the liability
method. Under this method, deferred tax assets and liabilities are determined
based on temporary differences between financial and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
Fair Value of Financial Instruments
The Company considers the recorded value of its financial assets and
liabilities, which consist primarily of cash and cash equivalents, accounts
receivable, accounts payable, and accrued compensation to approximate the fair
value of the respective assets and liabilities at December 31, 1997 and 1998.
Intangibles
The purchase price of acquisitions is allocated to the assets acquired and
the liabilities assumed based upon their fair values as of the acquisition date.
The excess of the purchase price over the fair value of assets acquired in the
purchase is recorded as intangible assets, including goodwill, and is amortized
over 5 to 25 years on a straight-line basis. Intangible assets at December 31,
1997 and 1998 are net of accumulated amortization of $1,753 and $2,441,
respectively. Amortization expense for the years ended December 31, 1996, 1997
and 1998, was $683, $736 and $688, respectively.
Statement of Financial Accounting Standards No. 121
The Company assesses the impairment of long-lived assets including
intangible assets in accordance with Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of ("SFAS 121"). SFAS 121 requires impairment losses to be
recognized for long-lived assets when indicators of impairment are present and
the undiscounted cash flows are not sufficient to recover the assets' carrying
amount. Intangibles are also evaluated for recoverability by estimating the
projected undiscounted cash flows, excluding interest, of the related business
activities. The impairment loss of these assets, including goodwill, is measured
by comparing the carrying amount of the asset to its fair value with any excess
of carrying value over fair value written off. Fair value is based on market
prices where available, an estimate of market value, or determined by various
valuation techniques including discounted cash flow.
Merger Related and other Nonrecurring Costs
For the years ended December 31, 1996, 1997, and 1998, merger related and
other nonrecurring costs were approximately $0, $1,235 and $9,382, respectively.
Cost of effecting mergers and subsequently integrating the operations of the
various merged companies are recorded as merger related and other nonrecurring
costs when incurred. These costs consist primarily of direct merger costs such
as investment banking, legal, accounting and filing fees, as well as related
costs incurred to realign corporate, administrative, and personnel functions,
implement efficiencies with regard to information systems and offices, change
the corporate identity for the acquired companies, and other expenses incurred
to integrate operations. Also included were nonrecurring charges including
certain asset impairments relating to software development costs and notes
receivable, and the disposition of other investment assets as discussed in Note
18.
Reclassification
Certain amounts in the prior period's financial statements have been
reclassified to conform to the 1998 presentation.
New Accounting Pronouncements
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" which established standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This statement requires that an
enterprise classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of the balance sheet. This statement is effective for fiscal
years beginning after December 15, 1997. The Company has adopted the effects of
this statement effective January 1, 1998.
In June 1997, the FASB issued Statement No. 131, "Disclosure about Segments
of an Enterprise and Related Information" which established standards for public
business enterprises to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments. The financial information is required to
be reported on the basis that it is used internally for evaluating segment
performance and deciding how to allocate resources to segments. Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. This statement is effective for financial statements for periods
beginning after December 15, 1997. The Company operates in principally one
business segment and, accordingly, no additional disclosures are necessary to
comply with this statement.
In June 1998, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 standardizes the accounting for
derivative instruments by requiring that an entity recognize derivatives as
assets or liabilities in the statement of financial position and measure them at
fair value. This Statement is effective for all quarters of all fiscal years
beginning after June 15, 1999. This Statement is not expected to have an impact
on the Company's consolidated financial statements.
3. Business Combinations and Joint Ventures
On December 1, 1997, the Company exchanged 409,985 shares of its common
stock in exchange for all of the outstanding common stock of Apogee Research
Inc. ("Apogee"). The business combination was accounted for as a pooling of
interests. Accordingly, the consolidated financial statements include the
accounts of the Company, its subsidiaries and Apogee for all periods presented.
On January 28, 1998, the Company purchased the remaining minority interest
of PT Hagler Bailly, a consulting firm located in Jakarta, Indonesia, bringing
the Company's ownership to 100 percent. Total consideration of the acquisition
was $200 in cash. Accordingly, the consolidated financial statements reflect the
results of operations of PT Hagler Bailly since the date of acquisition. As a
result of the transaction, the Company recorded intangible assets of
approximately $200.
On February 23, 1998, the Company issued 454,994 shares of its common stock
in exchange for all the stock of TB&A Group ("TB&A"). The transaction was
accounted for as a pooling of interests. Accordingly, the consolidated financial
statements include the accounts of the Company, its subsidiaries and TB&A for
all periods presented. TB&A had revenue and net income of $2,491 and $534,
respectively, for the period from January 1, 1998, to the date of combination.
On March 10, 1998, the Company purchased the remaining minority interest of
Hagler Bailly Indonesia, Inc., and consolidated the subsidiary with PT Hagler
Bailly. Total consideration of the acquisition was $240 in cash. The acquisition
was accounted for as a purchase. The consolidated financial statements have
reflected the results of operations of Hagler Bailly Indonesia, Inc., since its
inception. As a result of the transaction, the Company recorded intangible
assets of approximately $240.
On April 30, 1998, the Company completed the acquisition of Estudio Q
Ingenieros Asociados S.R.L., an Argentinean company ("Estudio Q"), whereby
Estudio Q became a wholly-owned subsidiary of the Company. Total consideration
for the acquisition was approximately $2,400 in the form of $800 cash and an
aggregate of 64,306 shares of Hagler Bailly common stock. The acquisition was
accounted for using the purchase method. Accordingly, the consolidated financial
statements reflect the results of operations of Estudio Q since the date of
acquisition. As a result of the transaction, the Company recorded intangible
assets of approximately $2,700.
On June 16, 1998, the Company and Cap Gemini S.A. and its wholly owned
subsidiary, Cap Gemini America, Inc., entered into an exclusive joint venture to
deliver information technology consulting services and solutions to electric,
gas and water utilities, and service providers in the U.S. and Canada. The
Company has committed to provide $1,000 cash under the joint venture agreements
of which approximately $500 cash and approximately $200 in software development
costs were provided during the year ended December 31, 1998. The Company
accounts for its investment under the equity method and, accordingly, recognized
a loss on equity investment of $463 for the year ended December 31, 1998.
On June 30, 1998, the Company issued 183,550 shares of its common stock in
exchange for all of the stock of Izsak, Grapin et Associes ("IGA"). The
transaction was accounted for as a pooling of interests. Accordingly, the
consolidated financial statements include the accounts of the Company, its
subsidiaries and IGA for all periods presented. IGA had revenue and net income
of $2,342 and $333, respectively, for the period from January 1, 1998, to the
date of combination.
On August 28, 1998, the Company issued 6,548,953 shares of its common stock
in exchange for all of the stock of Putnam, Hayes & Bartlett, Inc. ("PHB"). The
transaction was accounted for as a pooling of interests. Accordingly, the
consolidated financial statements include the accounts of the Company, its
subsidiaries and PHB for all periods presented. PHB had revenue and net income
of $44,903 and $1,869, respectively, for the period from January 1, 1998, to the
date of combination.
On November 17, 1998, the Company completed the acquisition of certain of
the assets and the liabilities of The Fieldston Company ("TFC") and the stock of
Fieldston Publications, Inc. ("FPI"), which became a wholly-owned subsidiary
("Fieldson") of the Company. Total consideration of the acquisition was
approximately $1,300 in cash, 232,558 shares of Hagler Bailly common stock, and
a note payable of $1,000. The acquisition was accounted for as a purchase.
Accordingly, the consolidated financial statements reflect the results of
operations of TFC since the date of acquisition. As a result of the transaction,
the Company recorded intangible assets of approximately $4,800.
Combined and separate results of business combinations accounted for as
poolings of interests during the periods preceding the merger were as follows:
<TABLE>
<CAPTION>
Hagler
Bailly Apogee TB&A PHB IGA Consolidated
------------- ------------ ----------- ------------ ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Revenues $ 61,620 $ 6,324 $ 6,531 $ 67,745 $ 921 $ 143,141
Net (loss) income (3,622) 191 102 303 292 (2,734)
Year ended December 31, 1997
Revenues $ 77,035 $ 8,021 $ 11,043 $ 62,808 $ 1,708 $ 160,615
Net income (loss) 4,906 522 2,330 (9,966) 318 (1,890)
</TABLE>
The combined financial results presented above include adjustments to
conform accounting policies of the companies.
Pro forma operating information reflecting the results of business
combinations accounted for as purchases as if these companies were acquired on
the first date of the respective periods were as follows: <TABLE> <CAPTION>
Hagler Bailly (1) Fieldston Estudio Q Adjustments (2) Consolidated
---------------- ------------ ------------ ----------------- ------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Revenues $ 160,615 $ 4,352 $1,685 $ - $ 166,652
Net (loss) income (1,890) 451 310 (301) (1,430)
Dilutive weighted average shares 13,361 13,658
Dilutive earnings per share (0.14) (0.10)
Year ended December 31, 1998
Revenues $ 174,588 $ 5,562 $2,707 $ - $182,857
Net (loss) income 6,560 1,153 240 (301) 7,652
Dilutive weighted average shares 16,772 16,987
Dilutive earnings per share 0.39 0.45
(1) Hagler Bailly balance excludes 1998 results of purchased companies.
(2) Amortization of estimated goodwill.
</TABLE>
4. Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share" ("Statement No. 128"). Statement No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where appropriate, restated to conform to
the Statement No. 128 requirements.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1997 1998
---------------- ----------------- ----------------
<S> <C> <C> <C>
Net (loss) income before extraordinary gain $ (2,879) $ (4,226) $ 6,700
Extraordinary gain 145 2,336 -
---------------- ----------------- ----------------
Net (loss) income $ (2,734) $ (1,890) $ 6,700
================ ================= ================
Weighted average shares of common stock
outstanding during the period 11,321 13,361 15,992
Effect of dilutive securities:
Stock options - - 780
---------------- ----------------- ----------------
Weighted average shares of common
stock and dilutive securities 11,321 13,361 16,772
================ ================= ================
Basic earnings per share
Net (loss) income before extraordinary gain $ (0.25) $ (0.32) $ 0.42
Extraordinary gain $ 0.01 $ 0.17 $ -
Net(loss)income $ (0.24) $ (0.14) $ 0.42
Dilutive earnings per share
Net (loss) income before extraordinary gain $ (0.25) $ (0.32) $ 0.40
Extraordinary gain $ 0.01 $ 0.17 $ -
Net (loss) income $ (0.24) $ (0.14) $ 0.40
</TABLE>
<PAGE>
5. Investments
The composition of available-for-sale investments at December 31, 1997, are
as follows:
Municipal debt security $ 1,001
Mortgage backed debt security 5,406
Equity securities 51
Other 93
-------------------
Total $ 6,551
===================
Interest income on all investments for the years ended December 31, 1996,
1997 and 1998, was approximately $334, $1,192 and $349, respectively.
6. Accounts Receivable
As of December 31 the components of accounts receivable are:
1997 1998
-------------------------------
Billed amounts $42,911 $38,914
Unbilled amounts currently billable 12,531 23,305
Retention not currently billable 288 761
Allowance for possible losses (3,873) (3,888)
------------------------------
Total $51,857 $59,092
===============================
The activity in the allowance for possible losses for years ended December
31 is as follows:
1997 1998
-----------------------------
Balance at beginning of year $2,901 $3,873
Provision for losses charged to expense 2,395 1,135
Charge-offs, net of recoveries (1,423) (1,120)
-----------------------------
Balance at end of year $3,873 $3,888
=============================
All billed and unbilled receivable amounts are expected to be collected
during the next fiscal year. Management has provided an allowance for amounts
that it believes are doubtful based on an analysis of estimated ultimate
realization. Substantially all the retention relates to contracts for which a
final invoice is submitted upon completion of indirect cost audits and contract
close-outs; therefore, it is anticipated that the retention amounts will not all
be collected within the next fiscal year.
7. Property and Equipment
Components of property and equipment at December 31 are as follows:
1997 1998
------------------------------
Office equipment and furniture $14,212 $17,100
Leasehold improvements 2,364 3,189
------------------------------
16,576 20,289
Accumulated depreciation and amortization (11,063) (13,826)
-----------------------------
$5,513 $6,463
=============================
Depreciation and amortization expense on property and equipment for the
years ended December 31, 1996, 1997 and 1998, was approximately $1,677, $2,123
and $3,121, respectively. Costs of repairs and maintenance of property and
equipment are charged to expense as incurred.
8. Software Development Costs
At December 31, 1997 and 1998, the Company had $2,463 and $898 of
capitalized software development costs net of $49 and $560 of accumulated
amortization, respectively. Amortization expense for the years ended December
31, 1996, 1997 and 1998 was approximately $0, $49 and $511, respectively. The
Company accounts for these software development costs in accordance with FASB
86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed".
Capitalized software development costs are amortized on a product by
product basis starting when the product is available for general release to
customers. Amortization is calculated using the straight-line method over the
remaining estimated economic life of the product. The Company periodically
evaluates the net realizable value of all unamortized capitalized costs. During
1998, management determined that certain software development costs were fully
impaired due to the duplication of technologies resulting from the Company's
1998 mergers and the Cap Gemini Hagler Bailly L.L.C. joint venture. As a result
of such impairment, the Company expensed approximately $1,107 as merger related
and other nonrecurring costs (see Note 18).
<PAGE>
9. Note Receivable
During 1997, the Company entered into a bridge loan agreement for $1,000
with another company. The loan was due in six equal installments beginning June
1, 1998. The loan accrued interest at 15% and was secured by all of the assets
of the borrower. The loan agreement allowed the Company to purchase an ownership
interest of this company as defined in the loan agreement.
During 1998, the borrower defaulted on its obligation under the note
receivable. Management has determined that the loan is uncollectable and has
written off the entire amount of the original loan as other nonrecurring costs
(see Note 18).
10. Bank Line of Credit
At December 31, 1997, the Company had a line of credit arrangement with a
bank which provided funds up to $15,000 subject to sufficient collateral. The
line was secured primarily by the Company's accounts receivable and contract
rights. Under the terms of the line of credit, interest was payable monthly at
the bank's prime rate with an annual fee equal to 1/4 of 1% of the unused
portion of the available line of credit. The line of credit agreement contained
certain covenants which, among other things, restricted future borrowings and
required the Company to maintain certain financial ratios. At December 31, 1997,
the Company had available borrowing capacity of $15,000 under the line of
credit.
At December 31, 1997, PHB had a line of credit arrangement with a bank
which enabled PHB to borrow up to $4,000 subject to certain restrictions which
limited the borrowing base as defined in the respective lending agreement.
Interest was payable at the bank's base rate or the Federal Funds effective rate
plus 0.5%, and required a commitment fee of 0.5% on the average daily amount of
the unborrowed portion of the commitment, payable quarterly in arrears. At
December 31, 1997, PHB had available borrowing capacity of $2,500 under the line
of credit.
On November 20, 1998, the Company entered into a new line of credit
arrangement with a bank enabling the Company to borrow up to $50,000 subject to
certain restrictions. The Company paid all outstanding balances on its previous
lines of credit, which were terminated upon commencement of the new agreement.
Under the terms of the new agreement, interest is payable at the greater of the
bank's base rate or the Federal Funds effective rate plus 0.5%, or the
applicable London Inter-Bank Offered Rate ("LIBOR") plus an additional
percentage ranging from 0.8% to 1.75% depending on certain financial ratios. The
agreement also requires a commitment fee of 0.19% plus an additional percentage
ranging from 0.01% to 0.06% depending on certain financial ratios, based on the
average daily amount of the unborrowed portion of the commitment, payable
quarterly in arrears. The line of credit matures on November 20, 2001. The line
of credit agreement contains certain covenants, which among other things
restrict future borrowings and require the Company to maintain certain financial
ratios. On December 31, 1998, the Company had available borrowing capacity of
$50,000 under the line of credit.
11. Notes Payable
During 1997, the Company renegotiated the terms of a note payable to a
financial institution resulting in an extraordinary gain. As a result of the
1997 renegotiation, the Company paid the financial institution $360 in cash and
entered into a new note payable of $180, which was outstanding at December 31,
1997. The $180 note was paid in full in December 1998.
At December 31, 1997, TB&A had notes payable to related parties, primarily
employees and directors, of $620. These notes were paid in full in October 1998.
At December 31, 1997, PHB had notes payable to former employees of $431.
These notes were paid in full in October 1998.
The Company has a note payable, related to an acquisition of certain of the
assets and liabilities of The Fieldston Company, in the amount of $1,000. The
payments are due in three annual installments beginning in November 1999, and
the note accrues interest equal to the three month LIBOR rate plus 1.5%.
For the years ended December 31, 1996 and 1997, the Company settled several
notes payable with favorable terms to the Company, resulting in extraordinary
gains of approximately $145 and $2,336, respectively.
The Company incurred interest under all indebtedness of $1,450, $1,301 and
$410 for the years ended December 31, 1996, 1997, and 1998, respectively.
12. Income Taxes
Prior to the IPO of the Company's common stock in 1997 the Company had
historically filed its consolidated federal income tax return on the cash basis,
whereby for tax purposes, revenue was recognized when received and expenses were
recognized when paid. In addition, prior to its merger with the Company, PHB had
also filed its consolidated federal income tax return on the cash basis. Under
this basis, the timing of certain transactions, primarily the collections of
accounts receivable and the payments of accounts payable and accrued expenses
were applied to different periods for financial statement and income tax
reporting purposes. Deferred federal and state income taxes were provided for
these temporary differences. Upon consummation of the IPO of the Company's
Common Stock during 1997, the Company was required to change to the accrual
method for income tax reporting.
Components of income tax expense consisted of the following:
For the years ended December 31,
1996 1997 1998
-------------- ------------- -------------
Current:
Federal $120 $4,483 $4,113
State 30 1,098 726
Foreign 161 215 879
-------------- ------------- -------------
311 5,796 5,718
Deferred 1,475 (336) 1,557
-------------- ------------- -------------
Income tax expense $1,786 $5,460 $7,275
============== ============= =============
The Company paid income taxes of $248, $3,117 and $4,995 during 1996, 1997
and 1998, respectively.
Income tax expense varies from the amount computed using statutory rates
as follows:
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1997 1998
---------------- ---------------- ----------------
<S> <C> <C> <C>
Tax computed at the Federal statutory rate $(355) $428 $4,909
State income taxes, net of Federal income tax benefit 210 35 722
Non-deductible charge for stock option compensation 1,661 4,000 1,012
Other allowances - 754 -
Non-deductible charge for merger related costs - - 876
Other 270 243 (244)
---------------- ---------------- ----------------
Income tax expense $1,786 $5,460 $7,275
================ ================ ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The components of temporary differences are as follows:
December 31,
1997 1998
----------------- ------------------
<S> <C> <C>
Current deferred tax assets (liabilities):
Billings in excess of cost $ 342 $ -
Accounts receivable (1,421) (2,116)
Valuation allowances (218) -
Other (92) 216
----------------- ------------------
Total current deferred tax assets (liabilities) (1,389) (1,900)
Non-current deferred tax assets (liabilities):
Merger related costs - 448
Provisions for losses 359 954
Accrued compensation and benefits 1,226 1,427
Deferred compensation - 1,237
Other deferred 468 454
Property, equipment and leasehold improvements 367 555
Net operating loss carry forwards 131 20
Cash to accrual adjustment (2,420) (5,941)
Other (12) (81)
----------------- ------------------
Total non-current deferred tax assets (liabilities) 119 (927)
----------------- ------------------
Net deferred tax assets (liabilities) $ (1,270) $(2,827)
================= ==================
</TABLE>
13. Stockholders' Equity
The Company in May 1995 issued 6,915,067 shares of $.01 par value Class A
common stock and 2,074,521 shares of $.01 par value Class B common stock.
Pursuant to a stockholders' agreement, all of the Company's common stock and
options had certain restrictions on ownership and were subject to a repurchase
provision. Class B shares were not eligible for dividends and had no voting
privileges.
Under the Company's Employee Incentive and Non-Qualified Stock Option and
Restricted Stock Plan (the "Stock Option Plan"), the Company may grant qualified
and non-qualified stock options to employees, consultants and non-employee
members of the board of directors to purchase common stock. Prior to December
31, 1996, the Company's Stock Option Plan was a formula based plan and was
authorized to grant options to purchase Class A and B shares. The exercise price
of options granted were based upon the book value per share at May 26, 1995,
adjusted for accretion of formula value during any interim period up to the
grant date. Under the Stock Option Plan, options to purchase Class B shares
granted did not accrue value to the option holder until date of exercise.
Options to purchase Class A shares accrued value to the option holder from the
date of grant.
The issuance of common stock and repurchase of common stock for the years
ended December 31, 1996, 1997 and 1998 is primarily the result of equity
transactions at PHB and TB&A. These transactions were made under established
Company plans and in a manner consistent with historic patterns of stock
issuance or repurchase.
Effective at December 31, 1996, the Company (a) adopted an amendment to
its Stock Option Plan which changed the exercise price of future options to be
granted thereunder to the fair value of the underlying common stock; and (b) in
connection with a reclassification of its common stock amended all outstanding
options to purchase 971,963 Class B shares vesting on January 1, 1997 to
substitute 0.9 of a Class A share for each Class B share underlying such
options. In addition, a remaining total of 971,963 options to purchase Class B
shares vesting on January 1, 1998 were canceled. As a result, the Company
recorded a non-recurring, non-cash charge to operations of $6,172 of which
$4,618 was for options to purchase common stock and $1,554 was for 394,160
shares of common stock sold to employees during 1996. These charges represent
the aggregate difference between the exercise price of such outstanding options
or the issuance price of common stock sold to employees during 1996, as the case
may be, and the appraised market value of the underlying common stock at
December 31, 1996.
In connection with the merger with the Company, PHB recognized non-cash,
non-tax deductible compensation charges as of December 31, 1997 and 1998, of
$9,885 and $2,595, respectively. These amounts reflect the difference between
the fair value and the book value of shares of common stock issuable within one
year of the mergers' close.
Options granted after 1996 vest over periods ranging from immediately to
three years and are exercisable for five years. Options issued prior to 1996
generally vest 50% after eighteen months and fully after an additional year.
Once vested, the options are exercisable for ten years.
In August of 1998, the Company's shareholders approved an amendment to the
Stock Option Plan that increased the total number of shares of common stock
reserved for issuance from 3,200,000 to 5,000,000. At December 31, 1998,
2,350,542 shares of common stock were available for grant under the Stock Option
Plan.
Pro forma information regarding net income (loss) and per share data is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its stock options under the fair value method therein. The fair
value for options granted from May 25, 1997 to July 9, 1997 was estimated at the
date of grant using a minimal valuation method with the following
weighted-average assumptions, risk free interest rate of 5.25%, no expected
dividends and an average expected life of the options of 4 years.
For all options issued subsequent to July 9, 1997, in accordance with SFAS
123, the fair value was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1997
and 1998: risk-free interest rate of 5.25%; no dividends; a volatility factor of
the expected market price of the Company's common stock of .40 and a
weighted-average expected life of the options of approximately 5 years in 1997
and 4 years in 1998.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of the pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options' vesting period.
<TABLE>
<CAPTION>
The Company's pro forma information follows:
For the years ended December 31,
1996 1997 1998
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Net (loss) income $ (2,734) $ (1,890) $ 6,700
FAS 123 expense 37 217 1,045
--------------------- --------------------- ---------------------
Pro forma net (loss) income $ (2,771) $ (2,107) $ 5,655
===================== ===================== =====================
Pro forma (loss) earnings per share:
Basic $ (0.24) $ (0.16) $ 0.35
Diluted $ (0.24) $ (0.16) $ 0.34
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The following summarizes option activity:
Class Class Weighted Average
A Options B Options Exercise Price
--------------- --------------- --------------------
<S> <C> <C> <C>
Outstanding at December 31, 1995 - 1,970,798 $0.16
1996
Granted 62,236 - 1.06
Canceled - (971,963) 0.16
Forfeited - (26,872) 0.16
Substituted 874,707 (971,963) 0.16
--------------- ---------------
Outstanding at December 31, 1996 936,943 - 0.22
1997
Granted 677,135 8.34
Exercised (484,701) 0.20
Canceled (15,000) 10.00
---------------
Outstanding at December 31, 1997 1,114,377 5.21
1998
Granted 1,149,760 20.32
Exercised (99,380) 3.49
Canceled (126,046) 12.60
---------------
Outstanding at December 31, 1998 2,038,711 13.44
===============
Exercisable at December 31, 1998 529,956 $3.04
===============
</TABLE>
The grant date weighted average fair value of options granted in 1996,
1997, and 1998 was $0.74, $1.98 and $20.32, respectively.
At December 31, 1998, the price range of options outstanding are as
follows:
<TABLE>
<CAPTION>
Weighted
Average
Options Exercise Price Average Remaining
Outstanding Per Share Contractual Life
------------------- -- --------------- -- --------------------
<S> <C> <C> <C>
Less than $0.99 370,473 $ 0.17 6.38
$1.00 - $9.99 427,285 6.21 7.16
$10.00 - $19.99 468,774 16.19 9.62
$20.00 - $29.99 763,179 22.04 9.39
$30.00 & Over 9,000 30.00 9.37
-------------------
Total 2,038,711 13.44 8.43
===================
</TABLE>
14. Operating Leases
The Company leases office space and equipment located throughout the
United States and worldwide. Substantially all office space leases provide for
the Company to pay a pro rata share of annual increases above a stated base
amount of the landlords' related real estate taxes and operating expenses.
Management expects that in the normal course of business, operating leases will
be renewed or replaced by other operating leases.
The following is a schedule of the annual minimum rental payments required
under the operating leases that have initial or remaining non-cancellable lease
terms in excess of one year as of December 31, 1998:
Years ended December 31,
1999 $ 8,131
2000 8,088
2001 8,130
2002 6,017
2003 4,469
Thereafter 20,661
-----------------
Total minimum rental payments $ 55,496
=================
Total rental expense for the years ended December 31, 1996, 1997 and 1998,
was approximately $7,672, $7,468 and $8,451, respectively.
15. Retirement Plan
The Company maintains tax-deferred savings plans under Section 401(k)
of the Internal Revenue Code to provide retirement benefits for all eligible
employees (the "Plan"). Employees may voluntarily contribute a percentage of
their annual compensation to the Plan, subject to Internal Revenue Service
limitations. The Company may, but has no obligation to, make matching
contributions. In addition, the Company may, but has no obligation to, make a
discretionary contribution to the Plan. Discretionary contributions are
allocated to participants' accounts in proportion to their compensation. Rights
to benefits provided by the Company's discretionary contributions vest as
follows: 40% after two years, 70% after three years and 100% after four years of
service. Participants are fully vested in their voluntary contributions.
PHB sponsors two defined contribution plans for its employees: the PHB
Profit Sharing Plan and the PHB 401(k) plan. The plans cover all employees of
PHB who meet the eligibility requirements. The Profit Sharing Plan permits only
employer discretionary profit sharing contributions. Eligible participants of
the 401(k) savings plan may contribute up to 15% of their qualified compensation
annually, subject to federal limitations.
The Company is currently evaluating the current retirement plans mentioned
above as well as those plans under its other subsidiaries in order to combine
those of the merged subsidiaries with their own. The Company's expenses related
to its discretionary matching and other contributions under all plans for 1996,
1997 and 1998 were approximately $2,612, $2,628 and $925, respectively.
16. Divestitures / Sale of Assets
On December 23, 1996, the Company caused Putnam, Hayes & Bartlett Limited
("PHB Ltd"), the Company's U.K. subsidiary, to cease operations and appointed a
liquidator to wind up PHB Ltd's affairs. The operating results of PHB Ltd have
been included in the Company's consolidated statements of operations until the
liquidation date. The Company recognized the net amount due as of December 31,
1996, in connection with the liquidation of PHB Ltd as a current asset of
$2,172. This amount represented management's estimate of the net proceeds
ultimately expected to be recovered upon collection of accounts receivable from
clients and payments of obligations to creditors. As of December 31, 1997, the
Company estimated that $328 of the $2,172 was not collectable. Of the Company's
loss of $663 recognized in 1996 in connection with the liquidation of PHB Ltd,
$549 represented cumulative foreign currency transaction losses which had
previously been recorded as a separate component of the Company's stockholders'
equity.
On September 30, 1998, the Company sold certain assets of a portion of its
public sector consulting practice due to conflicts of interest resulting from
the Company's business combinations (see Note 3). As a result of the
transaction, the Company sold assets for approximately $2,855 resulting in a
gain of approximately $282 which was included in other income.
In December 1998, the Company made the decision to cease operations in its
financial advisory services business, HB Capital, Inc., resulting in expenses of
approximately $1.8 million (see Note 18).
17. Commitments and Contingencies
Cost Subject to Audit
Under its United States government contracts, the Company is subject to
audit by the Defense Contract Audit Agency, whose audits could result in
adjustments of amounts previously billed. Management believes that the results
of such audits will not have a material adverse effect on the Company's
financial position or results of operations.
Financial Instruments and Risk Management
The Company operates around the world principally in United States
currency. The Company may reduce any periodic exposures to fluctuations in
foreign exchange rates by creating offsetting ("hedge") positions through the
use of derivative financial instruments. The Company currently does not use
derivative financial instruments for trading or speculative purposes, nor is the
Company a party to leverage derivatives. The Company regularly monitors any
foreign currency exposures and ensures that hedge contract amounts do not exceed
the amounts of the underlying exposures. The Company had no open hedge positions
at December 31, 1997 or 1998.
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and trade accounts receivable.
The Company maintains cash and cash equivalents with various financial
institutions. These financial institutions are located in many different
countries throughout the world, and the Company's policy is designed to limit
exposure with any one institution. As part of its cash management process, the
company performs periodic evaluations of the relative credit standing of these
financial institutions.
At December 31, 1997 and 1998, cash of approximately $2,502 and $4,087,
respectively, was located in foreign bank accounts.
Major Customers
At December 31, 1997 and 1998, included in accounts receivable was $9,143
and $12,017, respectively, due from agencies of the United States government.
Credit risk with respect to the remaining trade accounts receivable is generally
diversified due to the large number of entities comprising the Company's
customer base and their dispersion across different industries and countries.
The Company performs ongoing credit evaluations of its customers' financial
condition.
The Company generates revenues from contracts with government agencies and
private companies within the United States and worldwide. During 1996, 1997 and
1998, the Company recognized approximately $25,997, $31,792 and $38,501,
respectively, of its revenue from the United States Agency for International
Development ("USAID"), a U.S. government agency. Revenues earned from foreign
customers, both commercial and governmental, were approximately $10,479, 14,031
and $19,232 for the years ended December 31 1996, 1997 and 1998, respectively.
<PAGE>
18. Merger Related and Other Nonrecurring Costs
Merger related and other nonrecurring costs were recorded in connection
with the business combinations described in Note 2, and impairments resulting
from the Company's evaluation of certain assets. The following represents a
detail of merger related and other nonrecurring costs: <TABLE> <CAPTION>
For the years ended December 31,
1997 1998
-------------- ----------------
<S> <C> <C>
Merger related costs $ 1,235 $ 6,495
Impairment of software development costs - 1,107
Impairment of investments and related infrastructure
related to termination of financial advisory services
operations
- 1,780
--------------- -----------------
Total $ 1,235 $ 9,382
=============== =================
</TABLE>
Merger related costs consist primarily of direct costs such as investment
banking, legal, accounting, and filing fees as well as consolidation costs from
the closing of duplicate locations, realigning regional and corporate functions,
and reducing personnel. At December 31, 1998, the accompanying consolidated
balance sheet includes accrued merger related costs of $546, classified as
accrued expenses, consisting of involuntary employee termination costs of $171
and facility related expenses of $375.
Certain software development costs were impaired due to the duplication of
technologies resulting from the Company's business combinations and its joint
venture with Cap Gemini. Management determined that as a result of these
transactions certain capitalized software balances would not generate future
cash flows. Consequently, management determined that the value of the related
assets had been impaired and has recorded a write off of approximately $1,107.
During the fourth quarter of 1998, management determined that certain
investments held by the Company and the related infrastructure which managed
such investments, were impaired. Accordingly, management decided to cease
operations of its financial advisory services operations and determined that
certain investments were fully impaired and recognized a loss of $1,780, which
included the write off of a $1,000 note receivable (see Note 9). At December 31,
1998, the balance sheet included costs of $616 classified as accrued expenses,
consisting of legal expenses of $140, involuntary employee termination costs of
$170, lease termination and other facility costs of $200, and other general
accrued expenses of $106.
19. Subsequent Events
On February 8, 1999, the Company acquired all of the outstanding stock of Lacuna
Consulting Limited, a United Kingdom corporation, in exchange for 65,000 shares
of the Company's common stock. The acquisition was accounted for using the
purchase method.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Dated: March 30, 1999 By:/s/ Henri-Claude A. Bailly
------------------------------------------------
Henri-Claude A. Bailly
President and Chief Executive Officer
Dated: March 30, 1999 By:/s/ Glenn J. Dozier
------------------------------------------------
Glenn J. Dozier
Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
Dated: March 30, 1999 By:/s/ Howard W. Pifer, III
---------------------------------------------------
Howard W. Pifer, III
Chairman of the Board
Dated: March 30, 1999 By:/s/ Jasjeet S. Cheema
---------------------------------------------------
Jasjeet S. Cheema
Director
Dated: March 30, 1999 By:/s/ William E. Dickenson
---------------------------------------------------
William E. Dickenson
Director
Dated: March 30, 1999 By:/s/ R. Gene Brown
---------------------------------------------------
R. Gene Brown
Director
Dated: March 30, 1999 By:/s/ Robert W. Fri
---------------------------------------------------
Robert W. Fri
Director
Dated: March 30, 1999 By:/s/ Richard H. O'Toole
---------------------------------------------------
Richard H. O'Toole
Director
Dated: March 30, 1999 By:/s/ Fred M. Schriever
---------------------------------------------------
Fred M. Schriever
Director
Dated: March 30, 1999 By:/s/ Alain M. Streicher
---------------------------------------------------
Alain M. Streicher
Director
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
2 Sale Agreement between RCG International, Inc., and Hagler Bailly
Consulting, Inc. (1)
2.1 Agreement and Plan of Merger by and among Hagler Bailly, Inc.,
PHB Acquisition Corp. and Putnam, Hayes and Bartlett, Inc., dated
as of June 11, 1998. (5)
3.1 By-Laws of the Company, as amended. (6)
3.2 Amended Restated Certificate of Incorporation of the Company. (7)
4 Specimen Stock Certificates. (1)
4.1 Registration Rights Agreement dated November 18, 1997 by and
between Hagler Bailly, Inc. and Richard R. Mudge, acting as
Stockholders' Representation. (3)
4.2 Form of Escrow Agreement by and among the Company, PHB
Acquisition Corp., William E. Dickenson as Stockholders'
Representative and State Street Bank and Trust Company, as Escrow
Agent. (5)
4.3 Registration Rights Agreement dated February 23, 1998 by and
between Hagler Bailly, Inc. and Michael J. Beck, acting as
Stockholders' Representative.
4.4 Registration Rights Agreement dated November 17, 1998 by and
between Hagler Bailly, Inc. and the stockholders of Fieldston
Publications, Inc. and The Fieldston Company.
10.2 Form of Non-Compete, Confidentiality and Registration Rights
Agreement between the Company and each stockholder. (1)
10.3 Lease by and between Wilson Boulevard Venture and RCG/Hagler
Bailly, Inc. dated October 25, 1991. (1)
10.4 First Amendment to Lease by and between Wilson Boulevard Venture
and RCG/Hagler Bailly, Inc., dated February 26, 1993. (1)
10.5 Second Amendment to Lease by and between Wilson Boulevard Venture
and RCG/Hagler Bailly, Inc., dated December 12, 1994. (1)
10.6 Lease by and between Bresta Futura V.B.V. and Hagler Bailly
Consulting, Inc. dated May 8, 1996. (1)
10.7 Lease by and between L.C. Fulenwider, Inc., and RCG/Hagler
Bailly, Inc. dated December 14, 1994. (1)
10.8 Lease by and between University of Research Park Facilities Corp.
and RCG/Hagler Bailly, Inc., dated April 1, 1995. (1)
10.9 Credit Agreement by and between Hagler Bailly Consulting, Inc.
and State Street Bank and Trust Company, dated May 17, 1995. (1)
10.10Amendment to Credit Agreement by and between Hagler Bailly
Consulting, Inc. and State Street Bank and Trust Company, dated
as of June 20, 1996. (1)
10.11Extension Agreement by and between Hagler Bailly Consulting,
Inc. and State Street Bank and Trust Company, dated as of August
1, 1996. (1)
10.12Amendment to Credit Agreement by and between Hagler Bailly
Consulting, Inc. and State Street Bank and Trust Company, dated
as of November 12, 1996. (1)
10.13Term Note by and between Hagler Bailly Consulting, Inc., and
State Street Bank and Trust Company, dated May 26, 1995. (1)
10.14Revolving Credit Note by and between Hagler Bailly Consulting,
Inc. and State Street Bank and Trust Company dated May 26, 1995.
(1)
10.15Amendment to Credit Agreement by and between Hagler Bailly
Consulting, Inc., and State Street Bank and Trust Company, dated
as of June 12, 1997. (1)
10.16Credit Agreement by and among Hagler Bailly Consulting, Inc.,
Hagler Bailly Services, Inc. and State Street Bank and Trust
Company, dated as of September 30, 1997. (2)
10.17Promissory Note by Hagler Bailly Consulting, Inc. and Hagler
Bailly Services, Inc. to State Street Bank and Trust Company,
dated September 30, 1997. (2)
10.18Security Agreement by and between Hagler Bailly Consulting, Inc.
and State Street Bank and Trust Company, dated as of September
30, 1997. (2)
10.19Security Agreement by and between Hagler Bailly Services, Inc.
and State Street Bank and Trust Company, dated as of September
30, 1997. (2)
10.20Guaranties by Hagler Bailly, Inc. to State Street Bank and Trust
Company, dated September 30, 1997. (2)
10.21Guaranties by HB Capital, Inc. to State Street Bank and Trust
Company, dated September 30, 1997. (2)
10.22Subordination Agreement and Negative Pledge/Sale Agreement by
and between Hagler Bailly, Inc. and State Street Bank and Trust
Company for Hagler Bailly Consulting, Inc., dated September 30,
1997. (2)
10.23Subordination Agreement and Negative Pledge/Sale Agreement by
and between Hagler Bailly, Inc. and State Street Bank and Trust
Company for Hagler Bailly Services, Inc., dated September 30,
1997. (2)
10.24Guaranty of Monetary Obligations to Bresta Futura V.B.V. by
Hagler Bailly, Inc., dated July 23, 1997. (2)
10.25Amendment to Credit Agreement by and between Hagler Bailly
Consulting, Inc. and State Street Bank and Trust
Company dated May 18, 1998. (6)
10.26Sublease Agreement by and between Coopers and Lybrand L.L.P. and
Hagler Bailly, Inc. dated December 5, 1997. (6)
10.27Employment Agreement between the Company and Henri-Claude A.
Bailly, dated June 10, 1998. (7)
10.28Employment Agreement between the Company and William E.
Dickenson, dated June 10, 1998. (7)
10.29Employment Agreement between the Company and Howard W. Pifer
III, dated June 10, 1998. (7)
10.30Hagler Bailly, Inc. Amended and Restated Employee Incentive and
Non-Qualified Stock Option and Restricted Stock
Plan. (7)
10.31Credit Agreement by and between Hagler Bailly, Inc. and The
Lenders From Time to Time a Party thereto, as Lenders and
NationsBank, N.A., dated November 20, 1998.
10.32Revolving Note by and between Hagler Bailly, Inc. and
NationsBank, N.A., dated November 20, 1998.
10.33Swing Line Note by and between Hagler Bailly, Inc. and
NationsBank, N.A., dated November 20, 1998.
10.34Subsidiary Guarantee by and among Hagler Bailly Services, Inc.,
Hagler Bailly Consulting, Inc., HB Capital, Inc., Putnam, Hayes &
Bartlett, Inc., TB&A Group, Inc., Theodore Barry & Associates,
Private Label Energy Services, Inc., Fieldston Publications, Inc.
and NationsBank, N.A., dated November 20, 1998.
10.35Form of Security Agreement by and between Hagler Bailly, Inc. and
NationsBank, N.A., dated November 20, 1998.
10.36Security Agreement by and between Hagler Bailly Consulting, Inc.
and NationsBank, N.A., dated November 20, 1998.
10.37Security Agreement by and between Hagler Bailly Services, Inc.
and NationsBank, N.A., dated November 20, 1998.
10.38Security Agreement by and between HB Capital, Inc. and
NationsBank, N.A., dated November 20, 1998.
10.39Security Agreement by and between Putnam, Hayes & Bartlett, Inc.
and NationsBank, N.A., dated November 20, 1998.
10.40Security Agreement by and between TB&A Group, Inc. and
NationsBank, N.A., dated November 20, 1998.
10.41Security Agreement by and between Theodore Barry & Associates and
NationsBank, N.A., dated November 20, 1998.
10.42Security Agreement by and between PHB Hagler Bailly, Inc. and
NationsBank, N.A., dated February 22, 1999.
10.43Security Agreement by and between Private Label Energy Services,
Inc. and NationsBank, N.A., dated November 20,
1998.
10.44Security Agreement by and between Fieldston Publications, Inc.
and NationsBank, N.A., dated November 20, 1998.
10.45Lease by and between One Memorial Drive Limited Partnership and
Putnam, Hayes & Bartlett, Inc. dated January 1,
1998.
10.46Lease by and between George H. Beuchert, Jr., Trustee, Thomas J.
Egan, Trustee, Oliver T. Carr, Jr., Trustee, William Joseph H.
Smith, Trustee, and the Kiplinger Washington Editors, Inc.,
Trustee, acting collectively as trustee on behalf of the
beneficial owner, The Greystone Square 127 Associates, and
Putnam, Hayes & Bartlett, Inc. dated March 31, 1997.
10.47First Amendment to Lease by and between Greystone Square 127
Limited Liability Company, as successor in interest collectively
to The Greystone Square 127 Associates, and George H. Beuchert,
Jr., Trustee, and The Kiplinger Washington Editors, Inc.,
Trustee, the owners of record who held legal title to the
Building as trustees on behalf of the Greystone Square 127
Associates, the former beneficial owners of the Building, and
Putnam, Hayes & Bartlett, Inc. dated February 10, 1998.
21 Subsidiaries
23.1 Consent of Option Plan Amendments by Ernst & Young LLP,
independent auditors
24 Powers of Attorney (included on Signature Pages) (1)
27.1 Financial Data Schedule - December 31, 1998
27.2 Restated Financial Data Schedule - December 31, 1997
- -------------------------------------------------------------------------------
(1) Included in the Company's Registration Statement on Form S-1 (No.
333-22207) and incorporated herein by reference thereto.
(2) Included in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 and incorporated herein by
reference thereto.
(3) Included in the Company's Current Report on Form 8-K filed on
December 16, 1997 and incorporated herein by reference thereto.
(4) Included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by reference
thereto.
(5) Included in the Company's Proxy Statement for Special Meeting of
Stockholders dated July 24, 1998 on Form DEF 14A and incorporated
herein by reference thereto.
(6) Included in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated herein by reference
thereto.
(7) Included in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 and incorporated herein by
reference thereto.
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
this 23rd day of February, 1998, by and between HAGLER BAILLY, INC., a Delaware
corporation (the "Acquiror"), and Michael J. Beck, acting by virtue of the
Merger Agreement (as hereinafter defined) as the attorney-in-fact and
representative (the "Stockholders' Representative") of the stockholders (the
"Company Stockholders") of TB&A Group, Inc., a Delaware corporation (the
"Company").
WHEREAS, on or about the date hereof, the Company Stockholders have or
will have become the owners of shares of Acquiror's common stock, par value
$0.01 per share ("Acquiror Common Stock");
WHEREAS, as part of the inducement for the parties hereto to enter into
and perform the Agreement and Plan of Merger (the "Merger Agreement"), dated as
of January ___, 1998, the parties hereto have agreed to enter into this
Agreement in order to provide, among other things, for certain registration
rights;
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, agree as follows:
1. Term. This Agreement shall terminate on the date on which the Company
Stockholders could sell all of their Registerable Securities to the public in a
single transaction pursuant to the provisions of Rule 144 under the Securities
Act, provided, however, the indemnification provisions of Section 6 hereof shall
survive the termination of this Agreement.
2. Piggyback Registration Rights.
(a) If at any time or times Acquiror proposes to make a registered public
offering of any of its securities (whether for its own account or for the
account of others) under the Securities Act, Acquiror shall (i) promptly give
written notice of the proposed registration to each of the Company Stockholders
(such notice to include the number of shares the Company or other security
holders propose to register and, if known, the name of the proposed underwriter)
and (ii) use its best efforts to include in such registration (and any related
qualification under Blue Sky laws and/or other compliance) all the Registerable
Securities specified in a written request or requests made by any Company
Stockholder within 30 days after the receipt of such notice from the Company (a
"Piggyback Registration"). Such written request may specify all or a part of a
holder's Registerable Securities, provided, however, that (x) Acquiror will not
be required to effect a Piggyback Registration if it is registering securities
on Forms S-8 or S-4 (or any successor forms) or other SEC registration form not
suitable for inclusion of shares of selling stockholders for offer to the
public, and (y) Acquiror may withdraw any proposed registration statement or
offering of securities under this Section 2 at any time without liability to any
Company Stockholder, in which case Acquiror will not be required to effect a
registration.
(b) If a Piggyback Registration is an underwritten primary registration on
behalf of Acquiror, and the managing underwriter advises Acquiror in writing
that in the managing underwriter's opinion the number of securities requested to
be included in such registration exceeds the number that can be sold in such
offering without adversely affecting the marketability of the offering, Acquiror
shall include in such offering first, the securities of Acquiror proposed to be
sold by Acquiror and second, all other securities held by security holders,
including the Registerable Securities, requested to be included in such
registration by all other security holders (including the Company Stockholders),
pro rata among such security holders, based upon the number of shares requested
by each to be included in such registration. In addition, if a Piggyback
Registration is an underwritten primary registration on behalf of Acquiror, the
selling Company Stockholders agree to sell their Acquiror Common Stock, if
Acquiror so requests, on the same basis as the other securities included in such
registration are being sold and the underwriter or underwriters for such
registration shall be selected by Acquiror. If a Piggyback Registration is an
underwritten secondary registration on behalf of selling stockholders, and the
managing underwriter advises Acquiror in writing that in the managing
underwriter's opinion the number of securities requested to be included in such
registration exceeds the number that can be sold in such offering without
adversely affecting the marketability of the offering, then Acquiror shall
include in such offering first, the securities of Acquiror proposed to be sold
by the stockholders requiring or demanding that Acquiror effect such
registration and second, all other securities held by security holders,
including the Registerable Securities, requested to be included in such
registration by all other security holders (including the Company Stockholders),
pro rata among such security holders, based upon the number of shares requested
by each to be included in such registration.
3. Registration Procedures.
(a) The Company shall have no obligation to include Registerable Securities
owned by the Company Stockholders in a registration statement for a Piggyback
Registration, unless and until the Company Stockholders have furnished to
Acquiror all information and statements about or pertaining to the Company
Stockholders in such reasonable detail and on such timely basis as is reasonably
deemed by Acquiror to be necessary or appropriate for the preparation of the
registration statement.
(b) Whenever the Company Stockholders have requested that Registerable
Securities be registered in a Piggyback Registration, Acquiror shall keep each
Company Stockholder advised in writing as to the initiation of each registration
and as to the completion thereof. As expeditiously as reasonably possible,
Acquiror
shall:
(1) prepare and file with the SEC a registration statement with respect to
such Registerable Securities and use its reasonable best efforts, subject to
Section 2(a)(y), to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, Acquiror will furnish to one counsel selected
by the holders of a majority of the Registerable Securities covered by such
registration statement copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel);
(2) keep such registration statement effective for a period of not less
than nine months or until the Company Stockholders have completed the
distribution described in such registration statement, whichever occurs first,
and amend or supplement such registration statement and the prospectus contained
therein from time to time to the extent necessary to comply with the provisions
of the Securities Act and applicable state securities laws with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(3) furnish to the Company Stockholders the number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
contained in such registration statement (including each preliminary
prospectus), and such other documents as the Company Stockholders from time to
time may reasonably request;
(4) use its best efforts to register or qualify such shares under the state
blue sky or securities ("Blue Sky") laws of such jurisdictions as any Company
Stockholder reasonably requests, and to do any and all other acts and things
that may be reasonably necessary or advisable to enable the Company Stockholders
to consummate the disposition of such shares in such jurisdictions; provided,
however, that Acquiror will not be required to do any of the following: (i)
qualify generally to do business in any jurisdiction where it is not then so
qualified or otherwise required to be so qualified but for this Section 3(b), or
(ii) take any action which would subject it to the service of process in actions
other than those arising out of such registration;
(5) notify the Company Stockholders, at any time when a prospectus relating
to the Registerable Securities is required to be delivered under the Securities
Act, of the occurrence of any event as a result of which the prospectus included
in any such registration statement contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein in the light of the circumstances under
which they were made, not misleading, and prepare and furnish to such Company
Stockholders a reasonable number of copies of a supplement or amendment to the
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, the prospectus will not contain an untrue statement
of a material fact or omit to state any fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances then
existing, not misleading;
(6) cause all such Registerable Securities to be listed on each securities
exchange on which similar securities issued by Acquiror are then listed and, if
not so listed, to be listed on the National Association of Securities Dealers
("NASD") Automated Quotation ("Nasdaq") system and, if listed on the Nasdaq
system, use its reasonable best efforts to secure designation of all such
Registerable Securities covered by such registration statement as a Nasdaq
"national market system security" within the meaning of Rule 11Aa2-1 of the SEC
or, failing that, to secure Nasdaq authorization for such Registerable
Securities;
(7) provide a transfer agent and registrar for all such Registerable
Securities (if Acquiror does not already have such an agent) not later than the
effective date of such registration statement;
(8) enter into such customary agreements (including underwriting agreements
in customary form) and take all such other actions as the holders of a majority
of the Registerable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registerable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(9) make available all financial and other records, pertinent corporate
documents and properties of Acquiror for inspection by, and cause Acquiror's
officers, directors, employees and independent accountants to supply all
information reasonably requested by, any seller of Registerable Securities, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter in connection with such registration statement who
executes any reasonable confidentiality agreement that may be reasonably
requested by Acquiror or who is bound by fiduciary duty or professional
responsibility to preserve the confidentiality thereof;
(10) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least 12 months beginning with the first day of Acquiror's first
full calendar quarter after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder; and
(11) use its reasonable best efforts to cause such Registerable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
sellers thereof to consummate the disposition of such Registerable Securities.
4. Holdback Agreements.
(a) Each holder of Registerable Securities who is included in the
Registration Statement agrees not to effect any public sale or distribution
(including sales pursuant to Rule 144) of equity securities of Acquiror, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 90-day period beginning on the effective
date of any underwritten Piggyback Registration (except as part of such
underwritten registration), unless the underwriters managing the registered
public offering otherwise agree.
(b) The Acquiror agrees (i) not to effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
90-day period beginning on the effective date of any underwritten Piggyback
Registration (except as part of such underwritten registration or pursuant to
registrations on Form S-8 or Form S-4 or any successor form), unless the
underwriters managing the registered public offering otherwise agree, and (ii)
to use all reasonable efforts to cause each Person that, during the 30-day
period prior to the effective date of such Piggyback Registration, holds shares
of Acquiror Common Stock (or securities convertible into or exercisable or
exchangeable for Acquiror Common Stock) received from Acquiror in an amount
which, on a fully diluted basis, exceeds 1% of Acquiror Common Stock then
outstanding (on a fully diluted basis), to agree not to effect any public sale
or distribution (including sales pursuant to Rule 144) of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
5. Registration Expenses.
(a) If Registerable Securities are included in a registration statement for
a Piggyback Registration, then each selling Company Stockholder shall pay all
transfer taxes, if any, relating to the sale of its shares, the fees and
expenses of its own counsel, and its pro rata portion of any underwriting
discounts or commissions or the equivalent thereof.
(b) If Registerable Securities are included in a registration statement for
a Piggyback Registration, then except for the fees and expenses specified in
Section 5(a) hereof and except as provided below in this Section 5(b),
regardless of whether any registration statement becomes effective, Acquiror
shall pay all expenses incident to a Piggyback Registration, including, without
limitation, all registration, qualification and filing fees, fees and expenses
of compliance with Blue Sky laws, underwriting discounts, fees, and expenses
(other than the Company Stockholders' pro rata portion of any underwriting
discounts or commissions or the equivalent thereof), printing expenses,
messenger and delivery expenses, and fees and expenses of counsel for Acquiror
and all independent certified public accountants and other persons retained by
Acquiror.
6. Indemnification.
(a) The Acquiror agrees to indemnify, to the extent permitted by law, each
holder of Registerable Securities, each Person who controls such holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and their respective officers, directors, partners, employees, agents and
representatives, against all losses, claims, damages, liabilities and expenses
("Losses") arising out of or based upon any untrue or alleged untrue statement
of material fact contained in any registration statement, prospectus, or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to Acquiror by such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after Acquiror has furnished such holder with a sufficient number of copies of
the same and except insofar as the same are caused by or contained in any
prospectus if such holder failed to send or deliver a copy of any subsequent
prospectus or prospectus supplement which would have corrected such untrue or
alleged untrue statement of material fact or such omission or alleged omission
of a material fact with or prior to the delivery of written confirmation of the
sale by such holder after Acquiror has furnished such holder with a sufficient
number of copies of the same. In connection with an underwritten offering,
Acquiror will indemnify such underwriters, each Person who controls such
underwriters (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and their respective officers, directors, partners,
employees, agents and representatives to the same extent as provided above with
respect to the indemnification of the holders of Registerable Securities.
(b) In connection with any registration statement in which holders of
Registerable Securities are participating, each such holder will furnish to
Acquiror in writing such information and affidavits as Acquiror reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify Acquiror, each
Person who controls Acquiror (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and their respective officers, directors,
partners, employees, agents and representatives against any Losses arising out
of or based upon any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus, or form of prospectus, or
arising out of or based upon any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, to the
extent, but only to the extent, that such untrue or alleged untrue statement is
contained in, or such omission or alleged omission is required to be contained
in, any information so furnished in writing by such holder to Acquiror expressly
for use in such registration statement or prospectus and that such statement or
omission was relied upon by Acquiror in preparation of such registration
statement, prospectus or form of prospectus; provided, however, that such holder
of Registerable Securities shall not be liable in any such case to the extent
that the holder has furnished in writing to the Company prior to the filing of
any such registration statement or prospectus or amendment or supplement thereto
information expressly for use in such registration statement or prospectus or
any amendment or supplement thereto which corrected or made not misleading
information previously furnished to Acquiror, and Acquiror failed to include
such information therein. In no event shall the liability of any selling holder
of Registerable Securities hereunder be greater in amount than the dollar amount
of the proceeds (net of payment of all expenses) received by such holder upon
the sale of the Registerable Securities giving rise to such indemnification
obligation. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party.
(c) If any Person shall be entitled to indemnity hereunder, such
indemnified party shall give prompt notice to the party or parties from
which such indemnity is sought of the commencement of any action, suit,
proceeding or investigation or written threat thereof ("Proceeding") with
respect to which such indemnified party seeks indemnification or
contribution pursuant hereto; provided, however, that the failure to so
notify the indemnifying parties shall not relieve the indemnifying parties
from any obligation or liability hereunder except to the extent that the
indemnifying parties have been prejudiced by such failure. The indemnifying
parties shall have the right, exercisable by giving written notice to an
indemnified party promptly after the receipt of written notice from such
indemnified party of such Proceeding, to assume, at the indemnifying
parties' expense, the defense of any such Proceeding, with counsel
reasonably satisfactory to such indemnified party; provided, however, that
an indemnified party or parties (if more than one such indemnified party is
named in any Proceeding) shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such indemnified
party or parties unless the parties to such Proceeding include both the
indemnified party or parties and the indemnifying party or parties, and
there exists, in the opinion of the parties' counsel, a conflict between
one or more indemnifying parties and one or more indemnified parties, in
which case the indemnifying parties shall, in connection with any one such
Proceeding or separate but substantially similar or related Proceedings in
the same jurisdiction, arising out of the same general allegations or
circumstances, be liable for the fees and expenses of not more than one
separate firm of attorneys (together with appropriate local counsel) at any
time for such indemnified party or parties. If an indemnifying party
assumes the defense of such Proceeding, the indemnifying parties will not
be subject to any liability for any settlement made by the indemnified
party without its or their consent (such consent not to be unreasonably
withheld).
(d) If the indemnification provided for in this Section 6 is unavailable to
an indemnified party or is insufficient to hold such indemnified party
harmless for any Losses in respect of which this Section 6 would otherwise
apply by its terms, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the amount paid or payable by such indemnified
party as a result of such Losses, in such proportion as is appropriate to
reflect the relative fault of the indemnifying party, on the one hand, and
such indemnified party, on the other hand, in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party, on the one hand, and indemnified party, on the other hand, shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact, has been
taken by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such action,
statement or omission. The amount paid or payable by a party as a result of
any Losses shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with any Proceeding, to the extent
such party would have been indemnified for such expenses under Section 6(c)
if the indemnification provided for in Section 6(a) or 6(b) was available
to such party. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provision of this Section 6(d), an
indemnifying party that is a selling holder of Registerable Securities
shall not be required to contribute any amount in excess of the amount by
which the net proceeds received by such indemnifying party exceeds the
amount of any damages that such indemnifying party has otherwise been
required to pay by reasons of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation.
7. Information by Holder. Each holder of Registerable Securities shall
furnish to the Acquiror and to the managing underwriter such information
regarding such holder and the distribution proposed by such holder as the
Acquiror or the managing underwriter may reasonably request in writing and
as shall be reasonably required in connection with any registration,
qualification or compliance referred to in Section 3.
8. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC which may permit the sale of
restricted securities (as that term is defined in Rule 144(a)(3) under the
Securities Act) to the public without registration, Acquiror agrees to :
(a) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities
Act and the Exchange Act; and
(b) so long as any holder of Registerable Securities owns any restricted
securities, furnish to such holder upon request a written statement by the
Acquiror as to its compliance with the reporting requirements of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Acquiror, and such other reports and documents so
filed as a holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing such holder to sell any such securities
without registration.
9. Representations and Warranties of Acquiror. The Acquiror hereby
represents and warrants to the Company Stockholders, as of the date hereof,
as follows:
(a) Acquiror has the necessary corporate power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Acquiror and the consummation by Acquiror of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Acquiror
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement have been duly executed and delivered
by Acquiror and, assuming the due authorization, execution and delivery by
the Company Stockholders, constitute legal, valid and binding obligations
of Acquiror, enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
(b) The execution and delivery of this Agreement by Acquiror do not, and
the performance by Acquiror of its obligations under this Agreement will
not, (i) conflict with or violate the certificate of incorporation or
bylaws of Acquiror, (ii) conflict with or violate any law, statute,
ordinance, rule, regulation, order, judgment or decree whether national or
foreign, applicable to Acquiror or its assets and properties, or (iii)
result in any breach of or constitute a default under any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which Acquiror is a party or by which
Acquiror is bound, or by which any of its properties or Assets is subject.
10. Definitions. The following terms shall have the following meanings for
purposes of this Agreement:
"Affiliate" means, with respect to a specified Person, any Person controlling,
controlled by or under common control with such Person.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time
to time.
"Person" means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Registerable Securities" means all shares of Acquiror Common Stock held at the
relevant time by a Company Stockholder, and any other issued or issuable shares
of Acquiror Common Stock issued in connection with the Merger held by a Company
Stockholder at the relevant time, either at the time of initial issuance or
subsequently, by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Registerable Securities, such securities
will cease to be Registerable Securities when they have been transferred in a
public offering registered under the Securities Act or in a sale made through a
broker, dealer or market-maker pursuant to Rule 144 under the Securities Act.
For purposes of this Agreement, a Company Stockholder will be deemed to be a
holder of Registerable Securities whenever such Company Stockholder has the
right to acquire directly or indirectly such Registerable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has actually been effected.
"Securities Act" means the Securities Act of 1933, as amended from time to time.
"SEC" means the Securities and Exchange Commission.
"Company Stockholders" means all of the stockholders of the Company listed on
Schedule 1 hereto and any successor or permitted assignee of any of their rights
hereunder that holds Registerable Securities.
11. Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given without the written consent of Acquiror and the Company Stockholders
holding a majority in amount of the outstanding Registerable Securities.
12. Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing overnight delivery,
addressed as follows:
(i) if to Acquiror:
Hagler Bailly, Inc.
1530 Wilson Boulevard
Arlington, Virginia 22209
Telecopier No.: (703) 528-8573
Attention: Stephen V.R. Whitman, Esq.
With a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telecopier No.: (202) 637-5910
Attention: David B.H. Martin, Jr., Esq.
(ii) if to the Stockholders' Representative:
Michael J. Beck
111 Rockingham Road
Cherry Hill, New Jersey 08034
Telecopier No.: ( ) _________
Attention: __________________
All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; three (3) business days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt is acknowledged, if telecopied; or at the time
delivered, if delivered by an air courier guaranteeing overnight delivery.
13. Other Registration Rights. Except as provided in this Agreement,
Acquiror will not grant to any Persons the right to request Acquiror to
register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, which
are materially more favorable to such Persons than the rights granted to
the holders of Registerable Securities hereunder without the prior written
consent of the holders of at least a majority of the Registerable
Securities, unless Acquiror agrees to amend this Agreement to grant such
more favorable rights to the holders of Registerable Securities, in lieu of
the rights granted hereunder.
14. Transfer of Registration Rights; Successors and Assigns. A Company
Stockholder may not transfer or assign its rights hereunder, in whole or in
part, to a purchaser or other transferee of its Registerable Securities
without the prior approval of the Acquiror, except to an Affiliate of a
Company Stockholder.
15. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the
parties, including, without limitation and without the need for an express
assignment, Affiliates of the Company Stockholders. If any Company
Stockholder shall acquire Registerable Securities, in any manner, whether
by operation of law or otherwise, such Registerable Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registerable Securities such Person shall be entitled to
receive the benefits hereof and shall be conclusively deemed to have agreed
to be bound by all of the terms and provisions hereof. 16. Severability.
Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
17. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
18. Headings. The headings in this Agreement are for convenience reference
only and shall not limit or otherwise affect the meaning hereof.
19. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect
to the conflicts of laws provisions thereof.
20. Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition
to any other remedy to which it may be entitled at law or in equity, shall
be entitled to compel specific performance of the obligations of any other
party under this Agreement in accordance with the terms and conditions of
this Agreement in any court of the United States or any State thereof
having jurisdiction.
21. Entire Agreement. This Agreement is intended by the parties as a final
expression or their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This Agreement supersedes
all prior agreements and understandings between the parties with respect to
such subject matter.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Registration Rights Agreement, or caused this Registration Rights Agreement to
be duly executed on its behalf, as of the date first written above.
HAGLER BAILLY, INC.
By: /s/ Henri-Claude Bailly
Name: Henri-Claude Bailly
Title: President and Chief Executive Officer
STOCKHOLDERS' REPRESENTATIVE
By: /s/ Michael J. Beck
Name: Michael J. Beck
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement') is
entered into as of this 17th day of November, 1998, by and between HAGLER
BAILLY, INC., a Delaware corporation ("HAGLER BAILLY"), the undersigned
stockholders of FIELDSTON PUBLICATIONS, INC., a Maryland corporation and THE
FIELDSTON COMPANY, a District of Columbia corporation ("TFC" and collectively
with Fieldston Publications, Inc., the "FIELDSTON Companies") and TFC
(collectively the "FIELDSTON Stockholders").
WHEREAS, on the date hereof, the FIELDSTON Stockholders have
become the owners of shares of HAGLER BAILLY's, common stock, par value $0.01
per share ("HAGLER BAILLY Common Stock ");
WHEREAS, as part of the inducement for the parties hereto to
enter into and perform the Acquisition Agreement (the "Acquisition Agreement"),
dated as of November 17, 1998, the parties hereto have agreed to enter into this
Agreement in order to provide, among other things, for certain registration and
"tag-along" rights;
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing, the mutual covenants and agreements hereinafter set forth, and other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, agree as follows:
1. Term. This Agreement shall terminate on the date on which
the Fieldston Stockholders could sell all of their Registerable Securities to
the public in a single transaction pursuant to the provisions of Rule 144 under
the Securities Act, provided, however, the indemnification provisions of Section
6 hereof shall survive the termination of this Agreement.
2. Piggyback Registration Rights.
(a) If at any time or times HAGLER BAILLY proposes to make a
registered public offering of any of its securities (whether for its own account
or for the account of others) under the Securities Act, HAGLER BAILLY shall (i)
promptly give written notice of the proposed registration to each of the
FIELDSTON Stockholders (such notice to include the number of shares HAGLER
BAILLY or other security holders propose to register and, if known, the name of
the proposed underwriter) and (ii) use its best efforts to include in such
registration (and any related qualification under Blue Sky laws and/or other
compliance) all the Registerable Securities specified in a written request or
requests made by any FIELDSTON Stockholder within 30 days after the receipt of
such notice from HAGLER BAILLY (a "Piggyback Registration"). Such written
request may specify all or a part of a holder's Registerable Securities,
provided, however, that (x) HAGLER BAILLY will not be required to effect a
Piggyback Registration if it is registering securities on Forms S-8 or S-4 (or
any successor forms) or another SEC registration form not suitable for inclusion
of shares of selling stockholders for offer to the public, and (y) HAGLER BAILLY
may withdraw any proposed registration statement or offering of securities under
this Section 2 at any time without liability to any FIELDSTON Stockholder, in
which case HAGLER BAILLY will not be required to effect a registration.
(b) If a Piggyback Registration is an underwritten primary
registration on behalf of HAGLER BAILLY, and the managing underwriter advises
HAGLER BAILLY in writing that in the managing underwriter's opinion the number
of securities requested to be included in such registration exceeds the number
that can be sold in such offering without adversely affecting the marketability
of the offering, HAGLER BAILLY shall include in such offering first, the
securities of HAGLER BAILLY proposed to be sold by HAGLER BAILLY and second, all
other securities held by security holders, including the Registerable
Securities, requested to be included in such registration by an other security
holders (including the FIELDSTON Stockholders), pro rata among such security
holders, based upon the number of shares requested by each to be included in
such registration. If a Piggyback Registration is an underwritten primary
registration on behalf of HAGLER BAILLY, the selling FIELDSTON Stockholders
agree to sell their HAGLER BAILLY Common Stock, if HAGLER BAILLY so requests, on
the same basis as the other securities included in such registration are being
sold and the underwriter or underwriters for such registration shall be selected
by HAGLER BAILLY. If a Piggyback Registration is an underwritten secondary
registration on behalf of selling stockholders, and the managing underwriter
advises HAGLER BAILLY in writing that in the managing underwriter's opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering without adversely affecting the
marketability of the offering, then HAGLER BAILLY shall include in such offering
first, the securities of HAGLER BAILLY proposed to be sold by the stockholders
requiring or demanding that HAGLER BAILLY effect such registration and second,
all other securities held by security holders (including the Registerable,
Securities) requested to be included in such registration by all other security
holders (including the FIELDSTON Stockholders), pro rata among all such selling
stockholders and other security holders, based upon the number of shares
requested by each to be included in such registration.
3. Registration Procedures.
(a) HAGLER BAILLY shall have no obligation to include
Registerable Securities owned by the FIELDSTON Stockholders in a registration
statement for a Piggyback Registration, unless and until the FIELDSTON
Stockholders have furnished to HAGLER BAILLY all information and statements
about or pertaining to the FIELDSTON Stockholders in such reasonable detail and
on such timely basis as is reasonably deemed by HAGLER BAILLY to be necessary or
appropriate for the preparation of the registration statement.
(b) Whenever the FIELDSTON Stockholders have requested that
Registerable Securities be registered in a Piggyback Registration, HAGLER BAILLY
shall keep each FIELDSTON Stockholder promptly advised in writing as to the
initiation of each registration, the date of effectiveness of such registration
and as to the completion thereof As expeditiously as reasonably possible, HAGLER
BAILLY shall:
(1) prepare and file with the SEC a registration statement with respect to
such Registerable Securities and use its reasonable best efforts (subject
to Section 2(a)(y) with respect to a Piggyback Registration) to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements
thereto, HAGLER BAILLY will furnish to one counsel selected by the holders
of a majority of the Registerable Securities covered by such registration
statement copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel);
(2) keep such registration statement effective for a period of not less
than nine (9) months or until the FIELDSTON Stockholders have completed the
distribution described in such registration statement, whichever occurs
first, and amend or supplement such registration statement and the
prospectus contained therein from time to time to the extent necessary to
comply with the provisions of the Securities Act and applicable state
securities laws with respect to the disposition of all securities covered
by such registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;
(3) furnish to the FIELDSTON Stockholders the number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus contained in such registration statement (including each
preliminary prospectus), and such other documents as the FIELDSTON
Stockholders from time to time may reasonably request;
(4) use its best efforts to register or qualify such shares under the state
blue sky or securities ("Blue Sky") laws of such jurisdictions as any
FIELDSTON Stockholder reasonably requests, and to do any and an other acts
and things that may be reasonably necessary or advisable to enable the
FIELDSTON Stockholders to consummate the disposition of such shares in such
jurisdictions; provided, however, that HAGLER BAILLY will not be required
to do any of the following: (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or otherwise required to be
so qualified but for this Section 3(b), or (ii) take any action which would
subject it to the service of process in actions other than those arising
out of such registration;
(5) notify the FIELDSTON Stockholders, at any time when a prospectus
relating to the Registerable Securities is required to be delivered
under the Securities Act, of the occurrence of any event as a result
of which the prospectus included in any such registration statement
contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein in the light of the circumstances under which they
were made, not misleading, and promptly prepare and furnish to such
FIELDSTON Stockholders a reasonable number of copies of a supplement
or amendment to the prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, the prospectus
will not contain an untrue statement of a material fact or omit to
state any fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances then existing,
not misleading;
(6) cause all such Registerable Securities to be listed on each securities
exchange on which similar securities issued by HAGLER BAILLY are then
listed and, if not so listed, to be listed on the National Association of
Securities Dealers ("NASD") Automated Quotation ("Nasdaq") system and, if
listed on the Nasdaq system, use its reasonable best efforts to secure
designation of all such Registerable Securities covered by such
registration statement as a Nasdaq "national market system security" within
the meaning of Rule 11Aa2-1 of the SEC or, failing that, to secure Nasdaq
authorization for such Registerable Securities;
(7) provide a transfer agent and registrar for all such Registerable
Securities (if HAGLER BAILLY does not already have such an agent) not later
than the effective date of such registration statement;
(8) enter into such customary agreements (including underwriting agreements
in customary form) and take all such other actions as the holders of a
majority of the Registerable Securities being sold or the underwriters, if
any, reasonably request in order to expedite or facilitate the disposition
of such Registerable Securities (including, without limitation, effecting a
stock split or a combination of shares);
(9) make available all financial and other records, pertinent corporate
documents and properties of HAGLER BAILLY for inspection by, and cause
HAGLER BAILLY's officers, directors, employees and independent accountants
to supply all information reasonably requested by, any seller of
Registerable, Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or
other agent retained by any such seller or underwriter in connection with
such registration statement who executes any reasonable confidentiality
agreement that may be reasonably requested by HAGLER BAILLY or who is bound
by fiduciary duty or professional responsibility to preserve the
confidentiality thereof,
(10) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months beginning with the first day of
HAGLER BAILLY's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the
provisions of Section I 1(a) of the Securities Act and Rule 158 thereunder;
and
(11) use its reasonable best efforts to cause such Registerable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the sellers thereof to consummate the disposition of such
Registerable Securities.
4. Holdback Agreements.
(a) Each holder of Registerable, Securities who is included in
the Registration Statement agrees not to effect any public sale or distribution
(including sales pursuant to Rule 144) of equity securities of HAGLER BAILLY, or
any securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and the 90-day period beginning on
the effective date of any underwritten Piggyback Registration (except as part of
such underwritten registration), unless the underwriters managing the registered
public offering otherwise agree.
(b) HAGLER BAILLY agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any underwritten
Piggyback Registration (except as part of such underwritten registration or
pursuant to registrations on Form S-8 or Form S-4 or any successor form), unless
the underwriters managing the registered public offering otherwise agree, and
(ii) to use all reasonable efforts to cause each Person that, during the 30-day
period prior to the effective date of such Piggyback Registration, holds shares
of HAGLER BAILLY Common Stock (or securities convertible into or exercisable or
exchangeable for HAGLER BAILLY Common Stock) received from HAGLER BAILLY in an
amount which, on a fully diluted basis, exceeds 1% of HAGLER BAILLY Common Stock
then outstanding (on a fully diluted basis), to agree not to effect any public
sale or distribution (including sales pursuant to Rule 144) of any such
securities during such period (except as part of such underwritten registration,
if otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
5. Tag-Along Rights.
If at any time HAGLER BAILLY arranges for a sale of HAGLER
BAILLY Common Stock by security holders in a private placement transaction, then
HAGLER BAILLY shall provide the FIELDSTON Stockholders with notice and a
reasonable opportunity to participate in such intended sale on a pro rata basis
with the other selling security holders.
6. Registration Expenses.
(a) If Registerable Securities are included in a registration
statement for a Piggyback Registration, then each selling FIELDSTON Stockholder
shall pay all transfer taxes, if any, relating to the sale of its shares, the
fees and expenses of its own counsel, and its pro rata portion of any
underwriting discounts or commissions or the equivalent thereof.
(b) If Registerable Securities are included in a registration
statement for a Piggyback Registration, then except for the fees and expenses
specified in Section 6(a) hereof, regardless of whether any registration
statement becomes effective, HAGLER BAILLY shall pay all expenses incident to a
Piggyback Registration, including, without limitation, all registration,
qualification and filing fees, fees and expenses of compliance with Blue Sky
laws, underwriting discounts, fees, and expenses (other than the FIELDSTON
Stockholders' pro rata portion of any underwriting discounts or commissions or
the equivalent thereof, printing expenses, messenger and delivery expenses, and
fees and expenses of counsel for HAGLER BAILLY and all independent certified
public accountants and other persons retained by HAGLER BAILLY.
7. Indemnification.
(a) HAGLER BAILLY agrees to indemnify, to the extent permitted
by law, each holder of Registerable Securities, each Person who controls such
holder (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and their respective officers, directors, partners, employees,
agents and representatives, against all losses, claims, damages, liabilities and
expenses ("Losses') arising out of or based upon any untrue or alleged untrue
statement of material fact contained in any registration statement, prospectus,
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as any such Losses arise
out of or are based upon (i) an untrue statement or alleged untrue statement or
omission or alleged omission made in any registration statement, prospectus, or
preliminary prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with written information furnished by such
holder expressly for use therein or (ii) such holder's failure to deliver a copy
of any registration statement or prospectus or any amendments or supplements
thereto after HAGLER BAILLY has furnished such holder with a sufficient number
of copies of the same, and except insofar as any such untrue or alleged untrue
statement of material fact or such omission or alleged omission of a material
fact is caused by or contained in any prospectus if such holder failed to send
or deliver a copy of any subsequent prospectus or prospectus supplement which
would have corrected such untrue or alleged untrue statement of material fact or
such omission or alleged omission of a material fact with or prior to the
delivery of written confirmation of the sale by such holder after HAGLER BAILLY
has furnished such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, HAGLER BAILLY will indemnify such
underwriters, each Person who controls such underwriters (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and their
respective officers, directors, partners, employees, agents and representatives
to the same extent as provided above with respect to the indemnification of the
holders of Registerable Securities.
(b) In connection with any registration statement in which
holders of Registerable Securities are participating, each such holder will
furnish to HAGLER BAILLY in writing such information and affidavits as HAGLER
BAILLY reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify
HAGLER BAILLY, each Person who controls HAGLER BAILLY (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and their
respective officers, directors, partners, employees, agents and representatives
against any Losses arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in any registration statement,
prospectus, or form of prospectus, or arising out of or based upon any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, to the extent, but only to the extent,
that such untrue or alleged untrue statement is contained in, or such omission
or alleged omission is required to be contained in, any information so furnished
in writing by such holder to HAGLER BAILLY expressly for use in such
registration statement or prospectus and that such statement or omission was
relied upon by HAGLER BAILLY in preparation of such registration statement,
prospectus or form of prospectus; provided, however, that such holder of
Registerable Securities shall not be liable in any such case to the extent that
the holder has furnished in writing to HAGLER BAILLY prior to the filing of any
such registration statement or prospectus or amendment or supplement thereto
information expressly for use in such registration statement or prospectus or
any amendment or supplement thereto which corrected or made not misleading
information previously furnished to HAGLER BAILLY, and HAGLER BAILLY failed to
include such information therein. In no event shall the liability of any selling
holder of Registerable Securities hereunder be greater in amount than the dollar
amount of the proceeds (net of payment of all expenses) received by such holder
upon the sale of the Registerable Securities giving rise to such indemnification
obligation. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party.
(c) If any Person shall be entitled to indemnity hereunder,
such indemnified party shall give prompt notice to the party or parties from
which such indemnity is sought of the commencement of any action, suit,
proceeding or investigation or written threat thereof ("Proceeding") with
respect to which such indemnified party seeks indemnification or contribution
pursuant hereto; provided, however, that the failure to so notify the
indemnifying parties shall not relieve the indemnifying parties from any
obligation or liability hereunder except to the extent that the indemnifying
parties have been prejudiced by such failure. The indemnifying parties shall
have the right, exercisable by giving written notice to an indemnified party
promptly after the receipt of written notice from such indemnified party of such
Proceeding, to assume, at the indemnifying parties' expense, the defense of any
such Proceeding, with counsel reasonably satisfactory to such indemnified party;
provided, however that an indemnified party or parties (if more than one such
indemnified party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless the parties to such Proceeding include
both the indemnified party or parties and the indemnifying party or parties, and
there exists, in the opinion of the parties' counsel, a conflict between one or
more indemnifying parties and one or more indemnified parties, in which case the
indemnifying parties shall, in connection with any one such Proceeding or
separate but substantially similar or related Proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of not more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified party
or parties. If an indemnifying party assumes the defense of such Proceeding, the
indemnifying parties will not be subject to any liability for any settlement
made by the indemnified party without its or their consent (such consent not to
be unreasonably withheld).
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party or is insufficient to hold such indemnified
party harmless for any Losses in respect of which this Section 7 would otherwise
apply by its terms, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several obligation
to contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been taken by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with any Proceeding, to the extent such
party would have been indemnified for such expenses under Section 7(c) if the
indemnification provided for in Section 7(a) or 7(b) was available to such
party. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provision of this Section 7(d), an indemnifying party that
is a selling holder of Registerable Securities shall not be required to
contribute any amount in excess of the amount by which the net proceeds received
by such indemnifying party exceeds the amount of any damages that such
indemnifying party has otherwise been required to pay by reasons of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
8. Information by Holder. Each holder of Registerable
Securities shall furnish to HAGLER BAILLY and to the managing underwriter such
information regarding such holder and the distribution proposed by such holder
as HAGLER BAILLY or the managing underwriter may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in Section 3.
9. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may permit the sale
of restricted securities (as that term is defined in Rule 144(a)(3) under the
Securities Act and any successor provision thereto) to the public without
registration, HAGLER BAILLY agrees to:
(a) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of HAGLER BAILLY under the
Securities Act and the Exchange Act or necessary to satisfy the requirements of
Rule 144(c) under the Securities Act and any successor provision thereto; and
(b) so long as any holder of Registerable Securities owns any
restricted securities, furnish to such holder upon request a written statement
by HAGLER BAILLY as to its compliance with the reporting requirements of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of HAGLER BAILLY, and such other reports and documents so filed
as a holder may reasonably request in availing itself of any rule or regulation
of the SEC allowing such holder to sell any such securities without
registration.
10. Definitions. The following terms shall have the following
meanings for purposes of this Agreement:
"Affiliate" means, with respect to a specified Person, any
Person directly or indirectly through. one or more intermediaries controlling,
controlled by or under common control with such Person.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"FIELDSTON Stockholders" means all of the stockholders of
FIELDSTON who have signed this Agreement and any successor or permitted assignee
of any of their rights hereunder that holds Registerable Securities.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof
"Registerable Securities" means all shares of HAGLER BAILLY
Common Stock held at the relevant time by a FIELDSTON Stockholder, and any other
issued or issuable shares of HAGLER BAILLY Common Stock issued in connection
with the Acquisition Agreement held by a FIELDSTON Stockholder at the relevant
time, either at the time of initial issuance or subsequently, by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Registerable, Securities, such securities will cease to be
Registerable Securities when they have been transferred in a public offering
registered under the Securities Act or in a sale made through a broker, dealer
or market-maker pursuant to Rule 144 under the Securities Act. For purposes of
this Agreement, a FIELDSTON Stockholder will be deemed to be a holder of
Registerable Securities whenever such FIELDSTON Stockholder has the right to
acquire directly or indirectly such Registerable Securities (upon conversion or
exercise in connection with a transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"SEC" means the Securities and Exchange Commission.
11. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given without the written consent of HAGLER BAILLY and the FIELDSTON
Stockholders holding a majority in amount of the outstanding Registerable
Securities.
12. Notices. All notices, requests, claims, demands, and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to HAGLER BAILLY, to
Hagler Bailly, Inc.
1530 Wilson Boulevard
Arlington, Virginia 22209
Telecopier No.: (703) 528-8573
Attention: Stephen V.R. Whitman, Esq.
with a copy to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telecopier No.: (202) 637-5910
Attention: David B.H. Martin, Jr., Esq.
(ii) if to a FIELDSTON Stockholder, to
Such Stockholder's address or telecopier
number as set forth on Schedule I attached
hereto.
with a copy to:
Hunton & Williams
1751 Pinnacle Drive, Suite 1700
McLean, Virginia 22201
Telecopier No.: (703) 714-7410
Attention: Michael R. Lincoln, Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; three
(3) business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; or
at the time delivered, if delivered by an air courier guaranteeing overnight
delivery.
13. Other Registration Rights. Except as provided in this
Agreement, HAGLER BAILLY will not grant to any Persons the right to request
HAGLER BAILLY to register any equity securities of HAGLER BAILLY, or any
securities convertible or exchangeable into or exercisable for such securities,
which are materially more favorable to such Persons than the rights granted to
the holders of Registerable Securities hereunder without the prior written
consent of the holders of at least a majority of the Registerable Securities,
unless HAGLER BAILLY agrees to amend this Agreement to grant such more favorable
rights to the holders of Registerable Securities, in lieu of the rights granted
hereunder.
14. Transfer of Registration Rights. Successors and Assigns. A
FIELDSTON Stockholder may not transfer or assign its rights hereunder, in whole
or in part, to a purchaser or other transferee of its Registerable Securities
without the prior approval of HAGLER BAILLY, except to an Affiliate of a
FIELDSTON Stockholder.
15. Successors. and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties, including, without limitation and without the need for an express
assignment, Affiliates of the FIELDSTON Stockholders. If any FIELDSTON
Stockholder shall acquire Registerable Securities, in any manner, whether by
operation of law or otherwise, such Registerable Securities shall be held
subject to all of the terms of this Agreement, and by taking and holding such
Registerable Securities such Person shall be entitled to receive the benefits
hereof and shall be conclusively deemed to have agreed to be bound by all of the
terms and provisions hereof.
16. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
17. Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
18. Headings. The headings in this Agreement are for
convenience reference only and shall not limit or otherwise affect the meaning
hereof.
19 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware,
without giving effect to the conflicts of laws provisions thereof.
20. Specific Performance. The parties hereto acknowledge that
there would be no adequate remedy at law if any party falls to perform any of
its obligations hereunder, and accordingly agree that each party, in addition to
any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other party
under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
21. Entire Agreement. This Agreement is intended by the parties
as a final expression or their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
[The rest of this page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this Registration
Rights Agreement, or caused this Registration Rights Agreement to be duly
executed on its behalf, as of the date first written above.
HAGLER BAILLY, INC.
By: /s/ Stephen V.R. Whitman
Name: Stephen V.R. Whitman
Title: Senior Vice President and
General Counsel
By: /s/ James N. Heller
Name: James N. Heller
By: /s/ Debbie G.Heller
Name: Debbie Heller
THE FIELDSTON COMPANY
By: /s/ James N. Heller
Name: James N. Heller
Title: President
<PAGE>
Schedule I
James N. Heller
4803 Falstone Avenue
Chevy Chase, Maryland 20815
Telecopler No. (301) 718-1878
Debbie Heller
4803 Falstone Avenue
Chevy Chase, Maryland 20815
Telecopier No. (301) 718-1878
The Fieldston Company
1800 Massachusetts Avenue, Suite 500, N.W.
Washington, D.C. 20036
Telecopier No. (202) 872-8045
EXHIBIT 10.31
$50,000,000
REVOLVING CREDIT AGREEMENT
between
Hagler Bailly, Inc.,
as Borrower
and
The Lenders From Time
To Time a Party Hereto,
as Lenders
with
NationsBank, N.A.,
as Agent
Dated as of November 20, 1998
- ------------------------------------------------------------------------
<PAGE>
72
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT, dated as of November 20, 1998
(as amended, modified, or otherwise supplemented from time to time, the
"Agreement"), is between (i) HAGLER BAILLY, INC., a Delaware corporation (the
"Borrower"), (ii) THE LENDERS FROM TIME TO TIME A PARTY TO THIS AGREEMENT (each,
a "Lender" and, collectively, the "Lenders") and (iii) NATIONSBANK, N.A., a
national banking association and in its separate capacity as agent for the
Lenders hereunder (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Lenders to make
available to the Borrower a revolving line of credit for loans and letters of
credit up to an aggregate of $50,000,000 for general corporate purposes,
including financing the general working capital requirements and permitted
acquisitions of the Borrower (the "Permitted Uses"), in each case upon the terms
and subject to the conditions set forth herein;
WHEREAS, to induce the Lenders and the Agent to enter into
this Agreement, and as a condition to the obligations of the Lenders hereunder
becoming effective on the Effective Date, (i) the Borrower has agreed to enter
into the Borrower Security Agreement with the Agent, pursuant to which the
Borrower shall grant to the Agent, for the ratable benefit of the Lenders, a
first priority lien on and security interest in the Borrower's assets, (ii) the
Borrower has agreed to cause certain subsidiaries of the Borrower to enter into
respective Subsidiary Security Agreements with the Agent, pursuant to which such
subsidiaries shall grant to the Agent, for the ratable benefit of the Lenders, a
first priority lien on and security interest in such subsidiaries' assets, and
(iii) the Borrower has agreed to cause certain domestic subsidiaries of the
Borrower to enter into the Subsidiary Guarantee with the Agent, pursuant to
which such subsidiaries shall guarantee to the Agent, for the ratable benefit of
the Lenders, the obligations of the Borrower hereunder;
WHEREAS, as a further inducement to cause the Lenders and the
Agent to enter into this Agreement, the Borrower has agreed, subject to the
terms and conditions contained herein, to from time to time pledge or cause to
be pledged to the Agent, for the ratable benefit of the Lenders, 65% of the
outstanding shares of capital stock of certain Foreign Subsidiaries of the
Borrower;
WHEREAS, the Lenders are willing to make the loans and issue
the letters of credit to the Borrower, and the Agent is willing to act as
"Agent" in connection therewith, upon the terms and subject to the conditions
and provisions set forth herein; and
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, the Borrower, the Lenders and
the Agent hereby agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms shall have the
meanings indicated (such meanings to be, when appropriate, equally applicable to
both the singular and plural forms of the terms defined):
"ABR" means, for any day, the greater of (x) the Bank Prime
Rate as in effect on such day and (y) the Federal Funds Rate as in
effect on such day plus one-half of 1%.
"ABR Loan" shall mean any Revolving Loan bearing interest
based on the ABR.
"Accumulated Funding Deficiency" has the meaning ascribed to
that term in ERISA Section 302.
"Acquisition Consideration" shall mean the aggregate
consideration paid for any Acquisition Party, including without
limitation all cash, cash equivalents, the value of all capital stock,
the aggregate amount of all promissory notes (or other instruments of
indebtedness) issued, the amount of Acquisition Party debt assumed, or
otherwise, and whether such consideration shall be paid at closing or
be deferred or subject to earnouts or any other contingency.
"Acquisition Party" has the meaning specified in Section 6.2(e) of this
Agreement.
"Administrative Fee" shall have the meaning specified in Section 3.7(b) hereof.
"Administrative Fee Letter" shall have the meaning specified
in Section 3.7(b) hereof.
"Affiliate" means, with respect to a Person, any other Person
that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
first Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" or
"under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to vote 10% or more of
the securities having voting power for the election of directors of
such Person or otherwise to direct or cause the direction of the
management and policies of that Person, whether through the ownership
of voting securities or by contract or otherwise.
"Agent" has the meaning specified in the preamble of this
Agreement and shall include any successor Agent appointed pursuant to
Section 8.7 hereof.
"Agent Lending Office" or "Lending Office of the Agent" means
the Agent's offices at NationsBank, N.A., care of Kay Finlaw-Creel,
VA-200-05-02, 8300 Greensboro Drive, McLean, Virginia 22102, or such
other office in the United States of America of Agent as it may from
time to time designate to the Borrower or the Lenders by written
notice.
"Agreement" shall have the meaning specified in the preamble hereof.
"Applicable L/C Margin" means, for any period, in the event
the Funded Debt to EBITDA ratio calculated pursuant to Section 6.1(e)
hereof is (a) less than .50 to 1.00, then 0.80%, (b) greater than or
equal to 0.50 to 1.00 but less than 1.50 to 1.00, then 1.00%, (c)
greater than or equal to 1.50 to 1.00 but less than 2.50 to 1.00, then
1.25%, and (d) greater than or equal to 2.50 to 1.00, then 1.75%. The
Applicable L/C Margin for any Fiscal Quarter shall be determined based
on the financial statements delivered by the Borrower during the
immediately preceding Fiscal Quarter; provided, however, that if such
financial statements are not delivered when due, then the highest
Applicable L/C Margin shall apply.
"Applicable LIBOR Rate" means, for any period, in the event
the Funded Debt to EBITDA ratio calculated pursuant to Section 6.1(e)
hereof is (a) less than 0.50 to 1.00, LIBOR plus .80%, (b) greater than
or equal to 0.50 to 1.00 but less than 1.50 to 1.00, LIBOR plus 1.00%,
(c) greater than or equal to 1.50 to 1.00 but less than 2.50 to 1.00,
LIBOR plus 1.25%, and (d) greater than or equal to 2.50 to 1.00, LIBOR
plus 1.75%. The Applicable LIBOR Rate for any Fiscal Quarter shall be
determined based on the financial statements delivered by the Borrower
during the immediately preceding Fiscal Quarter; provided, however,
that if such financial statements are not delivered when due, then the
highest Applicable LIBOR Rate shall apply.
"Applicable Swing Line Rate" means, for any period, in the
event the Funded Debt to EBITDA ratio calculated pursuant to Section
6.1(e) hereof is (a) less than 0.50 to 1.00, the Base Swing Line Rate
plus 1.10%, (b) greater than or equal to 0.50 to 1.00 but less than
1.50 to 1.00, the Base Swing Line Rate plus 1.30%, (c) greater than or
equal to 1.50 to 1.00 but less than 2.50 to 1.00, the Base Swing Line
Rate plus 1.55%, and (d) greater than or equal to 2.50 to 1.00, the
Base Swing Line Rate LIBOR plus 2.05%. The Applicable Swing Line Rate
for any Fiscal Quarter shall be determined based on the financial
statements delivered by the Borrower during the immediately preceding
Fiscal Quarter; provided, however, that if such financial statements
are not delivered when due, then the highest Applicable Swing Line Rate
shall apply.
"Authorized Officer" means any of the Chief Executive Officer,
Chief Financial Officer or Treasurer of any Person which is a
corporation, partnership, or other business organization.
"Autoborrow Services Agreement" shall have the meaning
specified in Section 2.4(c) hereof.
"Bank Prime Rate" means, for any period, a fluctuating
interest rate per annum equal to the rate of interest publicly
announced by the Agent as its prime rate in effect from time to time
(which rate may not be the lowest rate of interest charged by the Agent
to commercial borrowers).
"BankBoston Credit Facility" means the credit facility made
available to Putnam, Hayes & Bartlett, Inc., a subsidiary of the
Borrower, under that certain First Amended and Restated Revolving
Credit Agreement, dated as of May 29, 1998, between BankBoston, N.A.
and Putnam, Hayes & Bartlett, Inc., as the same has been amended,
modified or supplemented from time to time.
"Bankruptcy Code" shall mean Title 11 of the United States
Code or any similar or successor federal law for the relief of debtors,
as the same may be amended from time to time.
"Base Swing Line Rate" shall have the meaning specified in
Section 2.4(c) hereof.
"Benefit Plan" means any employee benefit plan (including a
Multiemployer Plan), the funding requirements of which (under ERISA
Section 302 or Section 412 of the Code) are, or at any time within six
years immediately preceding the time in question were, in whole or in
part, the responsibility of the Borrower or an ERISA Affiliate.
"Borrower" has the meaning specified in the preamble of this Agreement.
"Borrower Account" means the bank account of the Borrower
maintained with the Agent for general purposes and assigned the account
number designated by the Agent in writing to the Borrower.
"Borrower Security Agreement" means the Security Agreement,
substantially in the form of Exhibit A hereto, executed and delivered
by the Borrower in favor of the Agent on or prior to the Effective Date
pursuant to Section 4.1(i)(B) hereof, as the same may be amended,
modified or supplemented from time to time.
"Borrowing Notice" has the meaning specified in Section 2.2(a) of this
Agreement.
"Breakage Period" has the meaning specified in Section 3.9 of this Agreement.
"Business Day" means any day on which commercial banks are
open for business (and not required or authorized by law to close) in
Fairfax County, Virginia, and Charlotte, North Carolina.
"Capital Expenditures" shall mean all expenditures classified
as capital expenditures in accordance with GAAP.
"Capital Lease" of any Person shall mean any lease of any
property (whether real, personal or mixed) by such Person (as lessee or
guarantor or other surety) which would, in accordance with GAAP, be
required to be classified and accounted for as a capital lease on a
balance sheet of such Person.
"Cash Flow" shall mean, with respect to any Person for any
period of determination, such Person's EBITDA plus rental and lease
expense less Capital Expenditures, as determined in accordance with
GAAP.
"Cash Flow Multiple" shall mean, as of any date of
determination, an amount equal to the product of (x) 300% multiplied by
(y) the EBITDA of the Borrower and its Consolidated Subsidiaries as
determined on a rolling four quarter basis and as adjusted to give
effect to the acquisition of any Acquisition Party as contemplated by,
and in accordance with the manner set forth in, the proviso to Section
6.2(e) hereof.
"Change in Control" means one or more of the following events:
(a) if any Person (including a person as defined in Section
3(a)(9), Section 13(d) or Section 14(d) of the Exchange Act) is or
becomes the owner or beneficial owner, directly or indirectly, of
securities of the Borrower representing thirty-three and one-third
percent (33-1/3%) or more of the combined voting power of the
Borrower's then outstanding securities (the term "beneficial owner" as
used herein shall include but not be limited to any person with the
attributes or interests described in Rule 13d-3 (as now in effect or as
amended) promulgated under the Exchange Act); or
(b) (i) the shareholders of the Borrower approve one or more
mergers, consolidations or combinations of the Borrower with any other
corporations or entities which, if consummated prior to the Maturity
Date, would result in (A) the voting securities of the Borrower
outstanding on the date hereof (together with any voting securities
issued by the Borrower permitted under Section 6.2(c) herein)
representing less than 50% of the combined voting power of the voting
securities of the Borrower or such surviving entity immediately after
consummation of any such merger, consolidation or combination, or (B)
after giving effect to such merger, consolidation or combination, a
change in the person holding the Office of Chief Executive Officer of
the Borrower relative to the person holding such respective office
immediately prior to giving effect to such merger, consolidation or
combination, or (ii) the shareholders of the Borrower approve a plan of
liquidation of the Borrower or an agreement for the sale, disposition
or transfer by the Borrower of all or substantially all the assets of
the Borrower.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor Federal statute.
"Commitment" shall mean, with respect to each Lender's
commitment to make Revolving Loans and to issue (or participate in the
issuance of) Standby Letters of Credit, the aggregate Dollar amount set
forth on Schedule I hereto opposite such Lender's name under the
heading "Commitment" or assigned to it in accordance with Section
9.8(c), as such amount may be reduced or otherwise adjusted from time
to time in accordance with the provisions of this Agreement.
"Contingent Obligations" means, with respect to any Person,
any obligation of such Person guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation,
any obligation of such Person, whether or not contingent (a) to
purchase any such primary obligation or any property constituting
direct or indirect security therefor, (b) to advance or supply funds
(i) for the purchase or payment of any such primary obligation or (ii)
to maintain the net worth or solvency or the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the owner of such primary
obligation against loss in respect thereof. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount (based on the maximum reasonably
anticipated net liability in respect thereof as determined by the
Borrower in good faith) of the primary obligation or portion thereof in
respect of which such Contingent Obligation is made or, if not stated
or determinable, the maximum reasonably anticipated net liability in
respect thereof (assuming such person is required to perform
thereunder) as determined by the Borrower in good faith.
"Consolidated Cash Flow" shall mean, for any period of
determination, the Cash Flow of the Borrower and its Consolidated
Subsidiaries, taken as a whole.
"Consolidated Fixed Charges" shall mean, for any period of
determination, the sum of the Borrower's and its Consolidated
Subsidiaries' interest expense contractually due, lease and rental
expenses, dividends paid, declared or accumulated on any class of
capital stock and payments of principal due (during the period as to
which such computation relates) under any Indebtedness, as determined
in accordance with GAAP, but excluding all repayments of principal in
respect of the Indebtedness outstanding during the 12 month period
occurring prior to the Effective Date under each of the State Street
Bank Credit Facility and the BankBoston Credit Facility.
"Consolidated Subsidiary" means, with respect to any Person at
any time, any Subsidiary or other Person the accounts of which would be
consolidated with those of such first Person in its consolidated
financial statements as of such time.
"Credit Agreement Related Claim" means any claim (whether
civil, criminal or administrative and whether sounding in tort,
contract or otherwise) in any way arising out of, related to, or
connected with this Agreement or any other Credit Document or the
relationships established hereunder or thereunder.
"Credit Documents" means this Agreement, the Revolving Notes,
the Swing Line Note, the Borrower Security Agreement, each Subsidiary
Security Agreement, each Pledge Agreement executed and delivered by a
Pledgor pursuant to Section 6.1(w) hereof, the Subsidiary Guarantee and
the Administrative Fee Letter.
"Credit Party" shall mean the Borrower and each Subsidiary
thereof that is a party to any Credit Document.
"Default Rate" means the rate of interest applicable under
Section 3.3 of this Agreement from time to time.
"Dollars", "U.S.$" and the sign "$" mean such coin or currency
of the United States of America as at the time shall constitute legal
tender for the payment of public and private debts.
"Domestic Subsidiary" shall mean any Subsidiary that is
created under the laws of any State of the United States of America or
the District of Columbia.
"Drawing" has the meaning specified in Section 2.3(e) of this Agreement.
"EBITDA" shall mean, with respect to any Person for any period
of determination, all of such Person's and its Consolidated
Subsidiaries' earnings before interest, taxes, depreciation and
amortization, extraordinary gains, non-cash, non-recurring compensatory
charges incurred in connection with acquisitions, and non-cash,
non-recurring charges in respect of the write-down of assets of any
Person who has been acquired by the Borrower or any Subsidiary thereof
or the write-down of assets of the Borrower or any Subsidiary thereof
on account of and in connection with the acquisition by the Borrower or
any Subsidiary thereof (as permitted hereunder) of any Acquisition
Party, as determined in accordance with GAAP; provided, however, that,
for the purposes of calculating EBITDA and solely with respect to any
Affiliate of such Person, (i) EBITDA shall include the income of such
Affiliate only to the extent such Person receives such income from such
Affiliate, and (ii) EBITDA shall exclude the losses of such Affiliate
except to the extent such Affiliate shall have received from such
Person funds in respect of such losses.
"Effective Date" has the meaning specified in Section 4.1 of this
Agreement.
"Equity Rights" means, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including without limitation any stockholders'
or voting trust agreements) for the issuance, sale, registration or
voting of, or securities convertible into, any additional shares of
capital stock of any class, or partnership or other ownership interests
of any type, in such Person.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any Person, including a Subsidiary or
other Affiliate, that is a member of any group of organizations within
the meaning of Code Sections 414(b), (c), (m) or (o) of which Borrower
is a member.
"Event of Default" has the meaning specified in Section 7.1 of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor Federal statute.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds
brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York; provided that if no such rate is so
published for any day which is a Business Day, then the Federal Funds
Rate for such day shall be the average rate quoted to the Agent for
such day on such transactions received by the Agent from three (3)
Federal funds brokers of recognized standing selected by it; and,
provided further, that if for any reason the Agent shall have
determined (which determination shall be conclusive and binding absent
manifest error) that it is unable to ascertain the Federal Funds Rate
for any reason, including the inability or failure of the Agent to
obtain sufficient quotations in accordance with the terms hereof, then
the ABR shall be determined without regard to clause (y) of the
definition of ABR until the circumstances giving rise to such inability
no longer exist.
"Fee Payment Date" means (i) in the case of the Unused Portion
Fee and the L/C Fee, the first Business Day following the end of any
Fiscal Quarter (or part thereof), and(ii) in the case of the
Administrative Fee, on the dates specified in the Administrative Fee
Letter.
"Fiscal Quarter" means the quarter, during any Fiscal Year,
ending March 31, June 30, September 30 and December 31.
"Fiscal Year" has the meaning specified in Section 6.1(a) of this
Agreement.
"Fixed Charge Coverage Ratio" means the ratio of Consolidated
Cash Flow to Consolidated Fixed Charges as contemplated by Section
6.1(g) hereof.
"Foreign Subsidiary" shall mean any Subsidiary that is not
created or organized under the laws of any State of the United States
of America or the District of Columbia.
"Form 8-K" means Form 8-K of the Exchange Act.
"Form 10-K" means Form 10-K of the Exchange Act.
"Form 10-Q" means Form 10-Q of the Exchange Act.
"Funded Debt" means, as of any date of determination, the sum of all
Indebtedness.
"Funding Date" shall mean the date on which any loan shall be
made by a Lender to the Borrower hereunder.
"GAAP" has the meaning specified in Section 1.2 of this Agreement.
"Governmental Body" means (i) the United States of America or
any State thereof or any department, agency, commission, board, bureau
or instrumentality of the United States of America or any State
thereof, and (ii) any quasi-governmental body, agency or authority
(including any central bank) exercising regulatory authority over the
Lender pursuant to applicable law in respect of the transactions
contemplated by this Agreement.
"Guarantors" means those Subsidiaries of the Borrower who have
executed the Subsidiary Guarantee on or prior to the Effective Date, or
who may thereafter become a party to the Subsidiary Guarantee in
accordance with the provisions hereof.
"Hazardous Substances" shall have the meaning specified in Section 5.11
hereof.
"Indebtedness" of any Person means, as of any date of
determination and without duplication, the sum of (i) all indebtedness,
obligations and liabilities for money borrowed by such Person, whether
or not evidenced by a note, bond, indenture or other agreement
(including in the case of the Borrower, without limitation, the
Revolving Notes and the Swing Line Note), (ii) all obligations of such
Person upon which interest charges are customarily paid, (iii) the face
amount of all letters of credit issued for the account of such Person,
(iv) all obligations of such Person as lessee under any Capital Lease,
(v) all amounts owing by such Person under purchase money mortgages or
other purchase money liens or conditional sales or other title
retention agreements, (vi) all indebtedness or liabilities secured by
purchase money mortgages, liens, security interests, conditional sales
or other title retention agreements upon property owned by such Person
(whether or not such Person has assumed or become liable for the
payment of such indebtedness or liabilities), (vii) all obligations of
such Person for the deferred purchase price of property or services
(other than current trade payables or liabilities incurred in the
ordinary and usual course of business), including any deferred or
contingent payments (including earnout payments) in connection with any
acquisition and any amounts payable under deferred compensation
agreements executed in connection with any acquisition, (viii) the net
obligations and liabilities of such Person in respect of any interest
rate swap, collar, floor or ceiling agreement or other hedging
agreement, and (ix) all Contingent Obligations of such Person in
respect of the Indebtedness of others.
"Indemnified Person" has the meaning specified in Section 9.10(b) of this
Agreement.
"Initial Fiscal Quarter" has the meaning specified in Section 6.1(e).
"Interest Payment Date" means (x) in the case of Revolving
Loans bearing interest at the ABR, the last Business Day of each Fiscal
Quarter (or part thereof) in which interest accrues on such Revolving
Loans, (y) in the case of any LIBOR Loan, the expiration of the LIBOR
Period in respect of such LIBOR Loan, and (z) in the case of any Swing
Line Loan, on the last Business Day [of each month during which such
Swing Line Loan shall be outstanding].
"Issuing Lender" shall mean the Agent.
"L/C Fee" has the meaning specified in Section 2.3(b) of this Agreement.
"Lender" or "Lenders" have the meanings specified in the preamble of this
Agreement.
"Lender Availability" shall mean, as of any date of
determination and with respect to each Lender, the amount determined by
deducting (x) the amount of such Lender's Pro Rata Share of the Total
Outstanding Amount from (y) the amount of such Lender's Pro Rata Share
of the Maximum Available Amount.
"LIBOR" means, with respect to any LIBOR Period, (x) the per
annum interest rate (rounded upward to the nearest 1/100th of 1%)
determined on the basis of the offered rates for Dollar deposits for a
term comparable to such LIBOR Period and in an amount substantially
equal to the outstanding amount of the Revolving Loans in respect of
which such determination is made which appear on the Telerate Screen
Page 3750 as of 11:00 a.m. (London time) on the day that is two LIBOR
Business Days prior to the first day of such LIBOR Period, divided by
(y) a number equal to 1.00 minus the LIBOR Reserve Rate.
"LIBOR Business Day" means any day on which commercial banks
are open for international business (including dealings in Dollar
deposits) in London or such other Euro-dollar interbank market as may
be selected by the Lender in its sole discretion.
"LIBOR Conversion" has the meaning specified in Section 3.8(a) of this
Agreement.
"LIBOR Conversion Notice" has the meaning specified in Section 3.8(a) of
this Agreement.
"LIBOR Loans" means the Revolving Loans which bear interest at
the Applicable LIBOR Rate.
"LIBOR Period" means the one month, two month, three month or
six month interest period selected by the Borrower pursuant to any
LIBOR Conversion Notice or Borrowing Notice.
"LIBOR Reserve Rate" means, for any day with respect to a
LIBOR Loan, the maximum rate (expressed as a decimal) at which a Lender
would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System, as amended from time to
time (or any successor or similar regulations relating to such reserve
requirements), against "Eurocurrency liabilities" (as that term is used
in Regulation D), if such liabilities were outstanding. The LIBOR
Reserve Rate shall be adjusted automatically on and as of the effective
date of any change in the LIBOR Reserve Rate.
"Lien" of any Person shall mean any mortgage, deed of trust,
lien, pledge, adverse interest in property, charge, security interest
or other encumbrance in or on, or any interest or title of any vendor,
lessor, Lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease
with respect to, any property or asset owned or held by such Person, or
the signing or filing of any security agreement with respect to any of
the foregoing authorizing any other party as the secured party
thereunder to file any financing statement.
"Mandatory Borrowing" shall have the meaning specified in Section 2.4(e)
hereof.
"Material Domestic Subsidiary" shall mean, as of any date of
determination, any Domestic Subsidiary of any Person if (x) the book
value of all assets (both real and personal) of such Domestic
Subsidiary equals or exceeds $250,000 or (y) such Domestic Subsidiary
has annual revenues of $250,000 or more.
"Maturity Date" means November 30, 2001.
"Maximum Available Amount" shall mean, as of any date of
determination, the lesser of (x) the Revolving Loan Commitment and (y)
the Cash Flow Multiple.
"Multiemployer Plan" means any "multiemployer plan" as defined
in ERISA Section 4001(a)(3) to which the Borrower or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding three plan years made or accrued an
obligation to make contributions.
"Obligations" shall mean all now existing or hereafter arising
indebtedness, obligations, liabilities and covenants of the Borrower to
the Lenders or the Agent, their respective Affiliates or permitted
successors and assigns or any other Indemnified Person, in each case
arising under or in connection with or evidenced by this Agreement or
any other Credit Document, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due.
"Optional Prepayment" means the optional prepayment of Swing
Line Loans pursuant to Section 2.4(f) hereof or of Revolving Loans
pursuant to Section 3.6(b) hereof.
"Permitted Investment" means each of (i) direct obligations of
the United States of America, and agencies thereof; (ii) obligations
fully guaranteed by the United States of America; (iii) certificates of
deposit issued by, or bankers' acceptance of, or time deposits with,
any bank, trust company or national banking association incorporated or
doing business under the laws of the United States of America or one of
the states thereof having combined capital and surplus and retained
earnings of at least $500,000,000; (iv) commercial paper of companies
having a rating assigned to such commercial paper by Standard & Poor's
Corporation or Moody's Investors Service, Inc. (or, if neither such
organization shall rate such commercial paper at any time, by any
nationally recognized rating organization in the United States of
America) of A-1 or P-1, respectively; (v) money-market funds or
money-market mutual funds which (a) seek to maintain a constant net
asset value, (b) maintain fund assets under management having an
aggregate market value of at least $500,000,000 and (c) invest
primarily in Permitted Investments of the type described in clauses
(i), (ii), (iii) or (iv) hereof; or (vi) any investment in any debt
security or equity security so long as the amount of all such debt or
equity investments shall not exceed, in the aggregate at any time,
$1,000,000, provided that the aggregate amount of all voting securities
(or debt securities convertible into voting securities) of any one
Person held or purchased pursuant to this clause (vi) shall not
constitute more than 20% of the outstanding shares of voting securities
of such Person.
"Permitted Uses" shall have the meaning specified in the first
Whereas clause hereof.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Pledge Agreement" means a Pledge Agreement, substantially in
the form of Exhibit B executed and delivered pursuant to Section 6.1(w)
hereof, as the same may be amended, modified or supplemented from time
to time.
"Pledgor" shall mean each Person who shall have executed and
delivered a Pledge Agreement in favor of the Agent pursuant to Section
6.1(w) hereof.
"Potential Change in Control" means one or more of the following events:
(a) the Borrower enters into an agreement, the
consummation of which would result in the occurrence of a
Change In Control; or
(b) the Board of Directors of the Borrower adopts a
resolution, the effect of which would result in the occurrence
of a Change in Control.
"Potential Event of Default" means an event, condition or
circumstance which, with the giving of notice or the lapse of time, or
both, would constitute an Event of Default.
"Prohibited Transaction" shall have the meaning ascribed to such term in
ERISA.
"Pro Rata Share" shall mean, as of any date of determination
and with respect to any Lender, a fraction (expressed as a percentage),
the numerator of which shall be the amount of such Lender's Commitment
and the denominator of which shall be the aggregate amount of
Commitments of all Lenders, as such Commitments may be reduced or
otherwise adjusted from time to time in accordance with the provisions
of this Agreement; provided, however, that if all of the Commitments
are terminated or reduced to zero hereunder, the Pro Rata Share shall
mean, as of any date of determination and with respect to any Lender, a
fraction (expressed as a percentage), the numerator of which shall be
the sum of the aggregate amount of such Lender's Revolving Loans then
outstanding plus the aggregate amount of such Lender's participation in
any outstanding Standby Letter of Credit and the denominator of which
shall be the sum of the aggregate amount of all Revolving Loans then
outstanding plus all Standby Letters of Credit then outstanding.
"Regulatory Change" means any applicable law, interpretation,
directive, request or guideline (whether or not having the force of
law), or any change therein or in the administration or enforcement
thereof, that becomes effective or is implemented or first required or
expected to be complied with after the date hereof, whether the same is
(i) the result of an enactment by a government or any agency or
political subdivision thereof, a determination of a court or regulatory
authority, or otherwise or (ii) enacted, adopted, issued or proposed
before or after the date hereof, including any such that imposes,
increases or modifies any tax, reserve requirement, insurance charge,
special deposit requirement, assessment or capital adequacy
requirement, but excluding any such that imposes, increases or modifies
any income or franchise tax imposed upon any Lender by any jurisdiction
(or any political subdivision thereof) in which any Lender or any
office is located.
"Reportable Event" means any event or condition described in
ERISA Section 4043(b), other than an event or condition with respect to
which the 30-day notice requirement has been waived.
"Required Lenders" shall mean, except as otherwise provided in
Section 8.9(i) hereof, as of any date of determination, such Lenders
whose Pro Rata Shares of the Revolving Loan Commitment, in the
aggregate, are greater than fifty percent (50%); provided, however,
that for so long as only two financial institutions constitute Lenders
hereunder (it being understood that, solely for the purposes of
determining the number of financial institutions constituting Lenders
under this proviso, each financial institution, together with its
Affiliates, shall constitute a single Lender), Required Lenders shall
mean, except as otherwise provided in Section 8.9(i) hereof, as of any
date of determination, such Lenders whose Pro Rata Shares of the
Revolving Loan Commitment, in the aggregate, constitute one hundred
percent (100%).
"Revolving Loan(s)" shall have the meaning specified in Section 2.1(a)
hereof.
"Revolving Loan Commitment" shall mean the commitment of the
Lenders to make Revolving Loans and issue (or participate in the
issuance of) Standby Letters of Credit in an aggregate amount of up to
$50,000,000, as such amount may be reduced or otherwise adjusted from
time to time in accordance with the provisions of this Agreement.
"Revolving Note" means any promissory note issued to a Lender
by the Borrower pursuant to this Agreement, substantially in the form
(appropriately completed) of Exhibit C to this Agreement, as the same
may be amended, modified or supplemented from time to time, and any
other promissory note issued in exchange or substitution thereof, and
"Revolving Notes" means, collectively, all such promissory notes so
issued.
"SEC" means the Securities and Exchange Commission or any similar Federal
agency.
"Securities Act" means the Securities Act of 1933, as amended,
and any successor Federal statute.
"Stamp Taxes" has the meaning specified in Section 9.5 of this Agreement.
"Standby Letter of Credit" has the meaning specified in Section 2.3(a) of
this Agreement.
"State Street Bank" means State Street Bank and Trust Company.
"State Street Credit Facility" shall mean the $15,000,000
credit facility made available to Hagler Bailly Consulting, Inc. and
Hagler Bailly Services, Inc., as co-borrowers, under that certain
Credit Agreement, dated as of September 30, 1997, between State Street
Bank, Hagler Bailly Consulting, Inc. and Hagler Bailly Services, Inc.,
as the same has been amended, modified or supplemented from time to
time.
"Subsidiary" shall mean any corporation, limited liability
company, partnership, trust or other entity a majority of the capital
stock (or equivalent ownership or controlling interest) of which at the
time outstanding, having ordinary voting power for the election of
directors (or equivalent controlling interest or person), is owned,
directly or indirectly, by any other corporation, limited liability
company, partnership, trust or other entity, and "Subsidiaries" means,
collectively, all such entities.
"Subsidiary Guarantee" means the Subsidiary Guarantee,
substantially in the form of Exhibit D hereto, executed and delivered
by the Guarantors in favor of the Agent on or before the Effective Date
pursuant to Section 4.1(i)(C) hereof (or by an Guarantor after the
Effective Date as required by Sections 6.2(e) and 6.2(g) hereof) as the
same may be amended, modified or supplemented from time to time.
"Subsidiary Security Agreement" shall mean each Security
Agreement, substantially in the form of Exhibit E hereto, executed and
delivered by a Subsidiary of the Borrower in favor of the Agent on or
prior to the Effective Date pursuant to Section 4.1(i)(E) hereof or
after the Effective Date as provided by Section 6.1(w) hereof, as the
same may be amended, modified or supplemented from time to time.
"Swing Line Lender" shall have the meaning specified in
Section 2.4(a) hereof.
"Swing Line Loan" shall have the meaning specified in Section
2.4(a) hereof.
"Swing Line Note" means the promissory note issued by the
Borrower to NationsBank, N.A. pursuant to this Agreement in respect of
the Swing Line Loans, substantially in the form (appropriately
completed) of Exhibit F to this Agreement, as the same may be amended,
modified or supplemented from time to time, and any other promissory
note issued in exchange or substitution therefor.
"Swing Line Subfacility" shall have the meaning specified in
Section 2.4(a) hereof.
"Termination Event" means, with respect to any Benefit Plan,
(i) any Reportable Event with respect to such Benefit Plan, (ii) the
termination of such Benefit Plan, or the filing of a notice of intent
to terminate such Benefit Plan, or the treatment of any amendment to
such Benefit Plan as a termination under ERISA Section 4041(c), (iii)
the institution of proceedings to terminate such Benefit Plan under
ERISA Section 4042 or (iv) the appointment of a trustee to administer
such Benefit Plan under ERISA Section 4042.
"Total Outstanding Amount" has the meaning specified in Section 2.1(a) of
this Agreement.
"Triggering Event" means the occurrence of any of the
following events: (a) with respect to any Foreign Subsidiary of the
Borrower and as determined from time to time, if such Foreign
Subsidiary has annual revenues of $10,000,000 or more, (b) for any
quarterly or annual period of determination, if total revenues or
profits from all Foreign Subsidiaries of the Borrower comprise more
than 20% of the total revenues or profits of the Borrower and its
Consolidated Subsidiaries, or (c) upon an Event of Default. All
determinations made with respect to the definition of Triggering Event
shall be calculated in Dollars based on the applicable exchange rate
quoted in The Wall Street Journal on any date of determination.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code in effect in the relevant jurisdiction.
"Unused Portion Fee" has the meaning specified in Section 3.7(a) of this
Agreement.
"Year 2000 Compliant" has the meaning specified in Section 5.13 of this
Agreement.
"Year 2000 Problem" has the meaning specified in Section 5.13 of this
Agreement.
Section 1.02. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistently applied in the United States ("GAAP").
Section 1.03. Time Period Computations. In the computation of a period
of time specified in this Agreement from a specified date to a subsequent date,
the word "from" means "from and including" and the words "to" and "until" mean
"to but excluding".
ARTICLE II.
GENERAL PROVISIONS OF REVOLVING CREDIT FACILITY
Section 2.01. The Revolving Loans.
Revolving Loan Borrowings. Subject to the terms and conditions of this
Agreement, each Lender severally and not jointly agrees to make revolving loans
(each, a "Revolving Loan" and, collectively, the "Revolving Loans") to the
Borrower, at any time and from time to time on and after the Effective Date
until one Business Day prior to the Maturity Date in an amount which shall not
exceed such Lender's Pro Rata Share of the Revolving Loan Commitment; provided,
however, that (i) the sum of the aggregate outstanding amount of all Revolving
Loans plus the aggregate outstanding amount of all Swing Line Loans plus the
aggregate amount then available to be drawn under all outstanding Standby
Letters of Credit (such sum, the "Total Outstanding Amount") shall at no time
exceed the Maximum Available Amount, and (ii) the aggregate outstanding amount
of all Revolving Loans made by each individual Lender pursuant to this Section
2.1 plus the aggregate amount then available to be drawn under all outstanding
Standby Letters of Credit made by or deemed made by such Lender pursuant to
Section 2.3 hereof shall at no time exceed such Lender's Pro Rata Share of the
Maximum Available Amount. Within the limits and subject to the terms and
conditions set forth in this Agreement, the Borrower may borrow pursuant to this
Section 2.1 and Section 2.2 hereof, may prepay pursuant to Section 3.6(b)
hereof, and reborrow under this Section 2.1 hereof.
Section 2.02. The Revolving Notes; Maturity. The Revolving Loans made
by each Lender pursuant hereto shall be evidenced by a separate Revolving Note.
Each Revolving Note shall be issued on or before the Effective Date and shall
bear interest, for the period from the initial Funding Date hereunder until such
Revolving Note shall be paid in full, on the unpaid principal amount thereof at
the rate specified in Section 3.1 of this Agreement. Each Lender is hereby
authorized to record in the books and records of such Lender (without making any
notation in such Lender's Revolving Note or any schedule thereto), among other
things, the amount and Funding Date of each Revolving Loan made by such Lender,
the amount and date of each payment or prepayment of any Revolving Loan and the
amount and date of any LIBOR Conversion or of any LIBOR Loan converted to an ABR
Loan, as the case may be. No failure to so record nor any error in so recording
shall affect the obligations of the Borrower to repay the actual outstanding
principal amount of the Revolving Loans, with interest thereon, as provided in
this Agreement. The aggregate principal amount of the Revolving Loans shall be
payable on the Maturity Date, unless sooner accelerated pursuant to the terms of
this Agreement.
Section 2.03. Revolving Loan Borrowing Procedures.
(a) Notice of Revolving Borrowing. Whenever the Borrower desires to borrow
Revolving Loans under Section 2.1 hereof, the Borrower shall deliver to the
Agent irrevocable written notice (each such notice, a "Borrowing Notice") no
later than 12:00 noon (Eastern time) on the Funding Date of a Revolving Loan;
provided, however, that if any Revolving Loan requested pursuant to such
Borrowing Notice is to bear interest based on LIBOR, such Borrowing Notice shall
be delivered no later than 12:00 noon (Eastern time) on the date (which must be
a Business Day) that is three (3) LIBOR Business Days prior to the Funding Date
of such Revolving Loan. The Borrowing Notice shall specify (i) that the Borrower
wishes to effect one or more Revolving Loans, (ii) the aggregate principal
amount of each Revolving Loan thereby requested (which shall not be less than
$1,000,000 and shall be in multiples of $250,000 with respect to each such
Revolving Loan), (iii) the requested Funding Date of each such Revolving Loan,
which date shall be a Business Day (whether or not any Revolving Loans are to
bear interest based on the ABR or LIBOR), (iv) whether any Revolving Loan
requested pursuant to such Borrowing Notice shall bear interest based on LIBOR,
in which case such Borrowing Notice shall specify the applicable LIBOR Period
being selected by the Borrower (it being understood and agreed that no change in
LIBOR with respect to any then outstanding LIBOR Loan may be effected during the
LIBOR Period relating thereto) and (v) the Cash Flow Multiple then in effect.
Each Borrowing Notice shall be accompanied by the officer's certificate
contemplated by Section 4.2(vi) hereof. In lieu of delivering the
above-described Borrowing Notice, and only with the consent of the Agent in its
sole discretion at such time, the Borrower may give the Agent telephonic notice
of any such proposed borrowing by the time period, as applicable, required under
this Section 2.2(a); provided that, in the event the Agent so consents, such
notice shall be confirmed in writing by delivery to the Agent promptly (but in
no event later than 12:00 noon (Eastern time) on the Funding Date of the
requested Revolving Loans) of a Borrowing Notice (it being understood that any
such telephonic notice shall be irrevocable and shall be conclusive and binding
as against the Borrower). Notwithstanding anything contained herein to the
contrary, if on any Interest Payment Date or Fee Payment Date the credit balance
in the Borrower Account is insufficient to permit the debit contemplated by the
second sentence of Section 3.4(a) of this Agreement, the Agent, without any
notice or other authorization being required, shall (and is hereby irrevocably
instructed by the Borrower to) effect Revolving Loans (which shall initially
bear interest at the ABR) in an amount sufficient to permit such debit to be
implemented or, if the amount of such debit is greater than the aggregate of the
Lender Availability of all Lenders, in the amount of the unused portion of such
Lender Availability.
(b) Making of Revolving Loans. Promptly after receipt of a Borrowing Notice
under clause (a) of this Section 2.2 (or telephonic notice if the Agent so
consents thereto), the Agent shall notify each Lender by telecopy or telex or
other customary form of teletransmission of the requested borrowing. Each Lender
shall make the amount of its Revolving Loan available to the Agent in Dollars
and in immediately available funds, not later than 3:00 P.M. (Eastern time) on
the Funding Date applicable to Revolving Loan(s) specified in the Borrowing
Notice. After the Agent's receipt of the proceeds of such Revolving Loans from
the Lenders, the Agent shall (unless it shall have learned that any of the
conditions precedent set forth in Section 4.2 hereof have not been satisfied)
make the proceeds of such Revolving Loans available to the Borrower on such
Funding Date relating thereto and shall disburse such funds in Dollars to the
Borrower in immediately available funds by crediting the Borrower Account.
(c) Failure to Fund by Lender. Unless the Agent shall have been notified by any
Lender prior to 2:00 P.M. (Eastern time) on any Funding Date in respect of
Revolving Loans requested under a Borrowing Notice that such Lender does not
intend to make available to the Agent such Lender's Revolving Loan on such
Funding Date, the Agent may assume that such Lender has made such amount
available to the Agent on such Funding Date and the Agent in its sole discretion
may, but shall not be obligated to, make available to the Borrower a
corresponding amount on such Funding Date. If such corresponding amount is not
in fact made available to the Agent by such Lender on or prior to 3:00 P.M.
(Eastern time) on a Funding Date, such Lender agrees to pay and the Borrower
agrees to repay to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is paid or repaid to the
Agent, at (i) in the case of such Lender, the Federal Funds Rate, and (ii) in
the case of the Borrower, the ABR, and no such payment by the Borrower shall
prejudice any rights which the Company or the Agent may have against such Lender
on account of such Lender's failure to so fund its Revolving Loan. If such
Lender shall pay to the Agent such corresponding amount, such amount so paid
shall constitute such Lender's Revolving Loan, and if both such Lender and the
Borrower shall have paid and repaid, respectively, such corresponding amount,
the Agent shall promptly pay over to the Borrower such corresponding amount in
same day funds, but the Borrower shall remain obligated for all interest
thereon. Nothing contained in this Section 2.2(c) shall be deemed to relieve any
Lender of its obligation hereunder to make its Revolving Loan on any Funding
Date.
(d) Maximum Number of LIBOR Loans Outstanding at Anytime. No more than six (6)
LIBOR Loans shall be permitted to be outstanding under this Agreement at any
time. In the event that the Borrower shall request (i) a Revolving Loan on any
Funding Date to bear interest based on LIBOR pursuant to this Section 2.2, (ii)
any LIBOR Conversion pursuant to a LIBOR Conversion Notice under Section 3.8(a)
hereof or (iii) to continue any LIBOR Loan pursuant to a successive LIBOR
Conversion Notice under Section 3.8(c) hereof, the Agent and the Lenders shall
have no obligation to make such Revolving Loan based on LIBOR or effect such
LIBOR Conversion or continue any LIBOR Loan if, after giving effect to any such
transaction, there shall be outstanding under this Agreement more than six (6)
LIBOR Loans, and the Agent and the Lenders shall be irrevocably authorized
without notice to the Borrower to make such Revolving Loan as an ABR Loan or
continue such ABR Loan as such or convert such expiring LIBOR Loan to an ABR
Loan.
Section 2.04. Standby Letters of Credit.
(a) Generally. Subject to and in accordance with the terms and conditions set
forth herein, the Borrower may request the Issuing Lender, from time to time
during the period commencing on the Effective Date and ending 10 Business Days
prior to the Maturity Date, to issue, and subject to the terms hereof the
Issuing Lender shall issue, for the account of the Borrower and on behalf of
itself or any Subsidiary thereof, one or more standby letters of credit (each, a
"Standby Letter of Credit") pursuant to the Issuing Lender's customary letter of
credit application. The aggregate outstanding amount at any time and from time
to time of all Standby Letters of Credit shall not exceed $5,000,000. The
Issuing Lender shall have no obligation to issue any Standby Letter of Credit
if, after giving effect to the issuance thereof, the Total Outstanding Amount
shall then exceed the Maximum Available Amount (it being understood that the
Issuing Lender shall, upon request of the Borrower, issue a Standby Letter of
Credit in an amount that would, after giving effect to the issuance thereof, not
cause the Maximum Available Amount to be exceeded).
(b) Standby Letter of Credit Fees; Maturity. The Borrower shall, among other
things, pay to the Issuing Lender for the benefit of the Lenders, pro rata, a
quarterly fee (the "L/C Fee"), payable in arrears on the Fee Payment Date. The
L/C Fee shall be computed by multiplying the Applicable L/C Margin then in
effect by the daily average of the aggregate available amount to be drawn under
all Standby Letters of Credit outstanding during the Fiscal Quarter immediately
preceding the Fee Payment Date (and shall be calculated on the basis of a 360
day year and the actual number of days elapsed). All Standby Letters of Credit
issued by the Issuing Lender as contemplated by this Section 2.3 shall expire no
later than the Maturity Date. Notwithstanding that the Issuing Lender shall have
no obligation to issue any Standby Letter of Credit the expiration date of which
shall extend beyond the Maturity Date, if the expiration date of any Standby
Letter of Credit shall in fact extend beyond the Maturity Date, then on the last
Business Day immediately preceding the Maturity Date, there shall be deemed to
have been made Revolving Loans in the aggregate amount then available to be
drawn under all Standby Letters of Credit the expiration date of which shall
occur after the Maturity Date, the proceeds of which the Issuing Lender shall
deposit in a collateral account at the Issuing Lender or an Affiliate thereof in
order to collateralize such outstanding Standby Letters of Credit, which
collateral account shall bear interest for the account of the Borrower based
upon investment of the funds as agreed between the Issuing Lender and the
Borrower.
(c) Standby Letter of Credit Request Procedure. Whenever the Borrower desires
that a Standby Letter of Credit be issued on its behalf or on behalf of any of
its Subsidiaries, the Borrower shall give the Issuing Lender (with copies to be
sent by the Issuing Lender to the Agent and each other Lender) at least five (5)
Business Days' prior written notice therefor. The execution and delivery of each
request for a Standby Letter of Credit shall be deemed to be a representation
and warranty by the Borrower that such Standby Letter of Credit may be issued in
accordance with, and will not violate the requirements of, this Section 2.3.
Unless the Issuing Lender has received notice from any Lender before it issues
the respective Standby Letter of Credit that one or more of the conditions
specified in Section 4.2 are not then satisfied, or that the issuance of such
Standby Letter of Credit would violate this Section 2.3, then the Issuing Lender
may issue the requested Standby Letter of Credit for the account of the Borrower
in accordance with the terms of this Agreement and, with respect to any matters
not specifically covered by this Agreement, in accordance with the Issuing
Lender's usual and customary practices as in effect from time to time.
(d) Letter of Credit Participations.
Immediately upon the issuance by the Issuing Lender of any Standby Letter of
Credit, the Issuing Lender shall be deemed to have sold and transferred to each
Lender (other than the Issuing Lender), and each such Lender shall be deemed
irrevocably and unconditionally to have purchased and received from the Issuing
Lender, without recourse or warranty, an undivided interest and participation,
in proportion to such Lender's Pro Rata Share, in such Standby Letter of Credit,
each drawing made thereunder and the obligations of the Borrower under this
Agreement with respect thereto, and any collateral therefor. Upon any change in
a Lender's Pro Rata Share of the Revolving Loan Commitment, it is hereby agreed
that with respect to all outstanding Standby Letters of Credit, there shall be
an automatic adjustment to the participations pursuant to this Section 2.3(d) to
reflect the new Pro Rata Share of the Revolving Loan Commitment of the assigning
and assignee Lenders.
In determining whether to pay under any Standby Letter of Credit, the Issuing
Lender shall have no obligation relative to the Lenders other than to confirm
that any documents required to be delivered under such Standby Letter of Credit
appear to have been delivered and that they appear to comply on their face with
the requirements of such Standby Letter of Credit. Any action taken or omitted
to be taken by the Issuing Lender under or in connection with any Standby Letter
of Credit, if taken or omitted in the absence of gross negligence or willful
misconduct, shall not create for the Issuing Lender any resulting liability to
any Lender.
Upon the request of any Lender, the Issuing Lender shall furnish to such Lender
copies of any Standby Letter of Credit to which the Issuing Lender is party and
such other documentation relating to such Standby Letter of Credit as may
reasonably be requested by such Lender.
As between the Borrower on the one hand and the Issuing Lender and the Lenders
on the other hand, the Borrower assumes all risks of the acts and omissions of,
or misuse of, the Standby Letters of Credit by the respective beneficiaries of
such Standby Letters of Credit. Without limiting the generality of the
foregoing, neither the Issuing Lender nor any other Lender shall be responsible
(except in the case of its gross negligence or willful misconduct) for the
following:
(A) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any documents submitted by any
party in connection with the application for and issuance of
or any drawing under such Standby Letters of Credit, even if
it should in fact prove to be in any respects invalid,
insufficient, inaccurate, fraudulent or forged;
(B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign
any such Standby Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason;
(C) failure of the beneficiary of any such Standby
Letter of Credit to comply fully with conditions required in
order to draw upon such Standby Letter of Credit, other than
material conditions or instructions that expressly appear in
such Standby Letter of Credit;
(D) errors, omissions, interruptions or delays in the
transmission or delivery of any messages by mail, cable,
telegraph, telecopier, telex or otherwise, whether or not they
are encoded;
(E) errors in interpretation of technical terms;
(F) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing
under any such Standby Letter of Credit or the proceeds
thereof;
(G) the misapplication by the beneficiary of any such
Standby Letter of Credit of the proceeds of any drawing of any
such Standby Letter of Credit; or
(H) any consequences arising from causes beyond the
control of the Issuing Lender, including without limitation
any acts of governments.
The obligations of the Lenders to make payments to the Agent for the account of
the Issuing Lender with respect to Standby Letters of Credit shall be
irrevocable and not subject to any qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(A) any lack of validity or enforceability of this Agreement or any of the
other Credit Documents;
(B) the existence of any claim, setoff, defense or
other right which the Borrower or any of its Subsidiaries may
have at any time against a beneficiary named in a Standby
Letter of Credit, any transferee of any Standby Letter of
Credit (or any Person for whom any such transferee may be
acting), the Agent, the Issuing Lender, any Lender, or any
other Person, whether in connection with this Agreement, any
Standby Letter of Credit, the transactions contemplated herein
or any unrelated transactions;
(C) any draft, certificate or any other document
presented under the Standby Letter of Credit shall prove to be
forged, fraudulent, invalid or insufficient in any respect or
any statement therein shall prove to be untrue or inaccurate
in any respect;
(D) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Credit Documents;
(E) the occurrence of any Event of Default or Potential Event of Default;
or
(F) the termination of this Agreement or any
Commitment.
(e) Standby Letter of Credit Drawings Constitute Revolving
Loans. The Issuing Lender shall promptly notify the Agent, and the Agent shall
promptly notify each Lender, in each case by telecopy or telex or other
customary form of teletransmission, of any drawing under any Standby Letter of
Credit (each drawing, a "Drawing"). Each Drawing shall immediately be deemed to
be and for all purposes of this Agreement shall constitute a Revolving Loan
hereunder in the amount of such drawing (which Revolving Loan shall, for the
avoidance of doubt, bear interest initially at the ABR). Each Lender shall
promptly and unconditionally pay to the Agent for the account of the Issuing
Lender an amount equal to such Lender's Pro Rata Share of such Drawing in same
day funds. Such payment shall be made to the Agent at the Agent Lending Office.
If the Agent delivers such notice to such Lender prior to 2:00 P.M. (Eastern
time) on any Business Day, such Lender shall make its required payment on the
same Business Day. If and to the extent such Lender shall not have made
available to the Agent for the account of the Issuing Lender such Lender's Pro
Rata Share of such Drawing, such Lender agrees to pay to the Agent for the
account of the Issuing Lender, promptly upon demand, such amount, together with
interest thereon, for each day from such date until the date such amount is paid
to the Agent for the account of the Issuing Lender at the Federal Funds Rate
plus 100 basis points. The failure of any Lender to make available to the Agent
for the account of the Issuing Lender its Pro Rata Share of any Drawing shall
not relieve any other Lender of its obligation hereunder to make available to
the Agent for the account of the Issuing Lender its Pro Rata Share of any
Drawing on the date so required; provided, however, that no Lender shall be
responsible for the failure of any other Lender to make available to the Agent
for the account of the Issuing Lender such other Lender's Pro Rata Share of such
Drawing.
Section 2.05. Swing Line Loan Subfacility.
(a) Swing Line Subfacility. Subject to the terms and
conditions hereof, NationsBank, N.A., in its individual capacity (as such, the
"Swing Line Lender"), shall, in its sole and absolute discretion from and after
the Effective Date until one Business Day prior to the Maturity Date, make swing
line loans (each, a "Swing Line Loan" and, collectively, the "Swing Line Loans")
to the Borrower; provided, however, that (i) the aggregate principal amount of
all Swing Line Loans shall at no time exceed $5,000,000.00 (such amount, the
"Swing Line Subfacility"), and (ii) the sum of the aggregate outstanding amount
of all Revolving Loans (whether bearing interest at the ABR or Applicable LIBOR
Rate) plus the aggregate outstanding amount of all Swing Line Loans plus the
aggregate amount then available to be drawn under all outstanding Standby
Letters of Credit shall at no time exceed the Maximum Available Amount.
(b) The Swing Line Note; Maturity. The Swing Line Loans made
by the Swing Line Lender pursuant to this Section 2.4 shall be evidenced by a
separate Swing Line Note. The Swing Line Note shall be issued on or before the
Effective Date and shall bear interest for the period from the date of the
initial funding of any Swing Line Loan until paid in full on the unpaid
principal amount thereof. The Swing Line Lender is hereby authorized to record
in its books and records (without making any notation on the Swing Line Note or
any schedule thereto) the amount and date of funding of each Swing Line Loan
made by it, and the amount and date of each payment or prepayment of any Swing
Line Loan. No failure to so record nor any error in so recording shall affect
the obligations of the Borrower to repay the actual outstanding principal amount
of the Swing Line Loans, with interest thereon, as provided in this Agreement.
The aggregate principal amount of the Swing Line Loans shall be payable on the
Maturity Date, unless sooner accelerated pursuant to the terms of this
Agreement.
(c) Swing Line Loan Borrowing Procedure. The Swing Line Lender
shall make Swing Line Loans to the Borrower upon the terms and subject to the
conditions contained in the autoborrow services agreement entered into by the
Borrower and the Swing Line Lender (as such agreement may be amended, modified
or supplemented from time to time, the "Autoborrow Services Agreement"), and
otherwise on the date (which shall be a Business Day), at the time and in the
amount as provided in the Autoborrow Services Agreement. The Autoborrow Services
Agreement shall specify, among other things, the base interest rate applicable
to any Swing Line Loan (such rate, the "Base Swing Line Rate"), the minimum
amount of each Swing Line Loan and the minimum and maximum period during which
any Swing Line Loan may remain outstanding. The Swing Line Lender shall have no
obligation to make available to the Borrower any Swing Line Loan until such time
as the Borrower and the Swing Line Lender shall have executed and delivered the
Autoborrow Services Agreement.
(d) Interest on Swing Line Loans. Subject to the provisions of
clause (e) of this Section 2.4, in the event that the Swing Line Lender shall
make any Swing Line Loan pursuant to this Section 2.4 the aggregate principal
amount of Swing Line Loans outstanding from time to time shall bear interest at
a rate per annum equal to the Applicable Swing Line Rate (based on a 360 day
year and the actual number of days elapsed for the period during which such
Swing Line Loan shall remain outstanding). No Swing Line Loan may be converted
into a LIBOR Loan.
(e) Repayment of Swing Line Loans. Each Swing Line Loan made
by the Swing Line Lender hereunder shall be due and payable upon the expiration
of the period for which such Swing Line Loan shall be made in accordance with
the terms of the Autoborrow Services Agreement. The Swing Line Lender may, at
any time and in its sole and absolute discretion, by written notice to the
Borrower and the Agent (which shall promptly deliver a copy thereof to the other
Lenders), demand repayment of its Swing Line Loans then outstanding by way of
the making of a Revolving Loan borrowing (a "Mandatory Borrowing"), in which
case the Borrower shall be deemed to have requested a Revolving Loan borrowing
in the amount of the then outstanding Swing Line Loans which shall bear interest
initially at the ABR and shall be applied to refund the then outstanding Swing
Line Loans; provided, however, that, in the following circumstances, any such
demand shall also be deemed to have been given one Business Day prior to each of
(i) the occurrence of the Maturity Date, (ii) the occurrence of any Event of
Default described in clause (g) or (h) of Section 7.1 hereof, (iii) upon
acceleration of the Obligations hereunder, whether on account of an Event of
Default described in clause (g) or (h) of Section 7.1 or any other Event of
Default, and (iv) the exercise of remedies in accordance with the provisions of
Section 7.1 hereof. Each Lender hereby irrevocably agrees to make such Revolving
Loans promptly upon any such request or deemed request on account of a Mandatory
Borrowing, in the amount (but in proportion to each Lender's Pro Rata Share) and
in the manner specified in the preceding sentence and on the same such date
notwithstanding that (A) the amount of the Mandatory Borrowing may not comply
with the minimum amount for borrowings of Revolving Loans otherwise required
hereunder, (B) whether any conditions specified in Section 4.2 are then
satisfied, (C) whether an Event of Default or Potential Event of Default then
exists, (D) failure of any such request or deemed request for Revolving Loans to
be made by the time otherwise required in Section 2.2 hereof, (E) the date of
such Mandatory Borrowing, or (F) any reduction in the Revolving Loan Commitment
or termination of the Commitments relating thereto immediately prior to such
Mandatory Borrowing or contemporaneously therewith. In the event that any
Mandatory Borrowing cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement of a
proceeding in bankruptcy with respect to the Borrower), then each Lender hereby
agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing
would otherwise have occurred, but adjusted for any payments received from the
Borrower on or after such date and prior to such purchase) from the Swing Line
Lender such participations in the then outstanding Swing Line Loans as shall be
necessary to cause each such Lender to share in such Swing Line Loans ratably
based upon its respective Pro Rata Share of the Revolving Loan Commitment
(determined before giving effect to any termination of the Revolving Loan
Commitments pursuant to the last paragraph of Section 7.1); provided that (1)
all interest payable on the Swing Line Loans shall be for the account of the
Swing Line Lender until the date as of which the respective participation of
each other Lender is purchased, and (2) at the time any purchase of
participations pursuant to this sentence is actually made, the purchasing Lender
shall be required to pay to the Swing Line Lender interest on the principal
amount of such participation purchased for each day from and including the day
upon which the Mandatory Borrowing would otherwise have occurred to but
excluding the date of payment for such participation, at the rate equal to, if
paid within 2 Business Days of the date of the Mandatory Borrowing, the Federal
Funds Rate, and thereafter at a rate equal to the Applicable Swing Line Rate.
(f) Optional Prepayment of Swing Line Loans. Subject to the
provisions of this clause (f), the Borrower may, at its sole option, prepay the
principal amount of the Swing Line Loans in whole or in part (and in an amount
not less than the amount provided in the Autoborrow Services Agreement) at any
time and from time to time, without premium or penalty. In respect of each
Optional Prepayment of a Swing Line Loan proposed to be made by the Borrower,
the right of the Borrower to make such Optional Prepayment is subject to the
Agent's receipt from the Borrower, no later than 12:00 P.M. on the Business Day
specified therein as the date on which such Optional Prepayment is to be made,
of a written notice (which shall be irrevocable and a copy thereof shall be
promptly delivered by the Agent to the Swing Line Lender) specifying (i) that
the Borrower desires to prepay such Swing Line Loan, (ii) the principal amount
of such Optional Prepayment, and (iii) the date (which shall be a Business Day)
on which such Optional Prepayment will be made. Any Optional Prepayment of a
Swing Line Loan, which has not been converted to a Revolving Loan, made by the
Borrower as permitted hereunder shall be paid to the Agent for the account of
the Swing Line Lender no later than 12:00 P.M. (Eastern Time) on the applicable
prepayment date.
ARTICLE III.
INTEREST, FEES AND REPAYMENT
Section 3.01. Interest on the Revolving Loans
(a) ABR. Except as provided pursuant to clause (b) of this Section 3.1, the
aggregate principal amount of the Revolving Loans outstanding from time to time
shall bear interest at a rate per annum equal to the ABR until the entire
principal amount of the Revolving Loans shall have been repaid. Any change in
the rate of interest on the Revolving Loans resulting from a change in the ABR
shall be effective as of the opening of business on the day on which such change
is effective.
(b) LIBOR Rate. In the event the Borrower shall effect a LIBOR Conversion in
accordance with the provisions of Section 3.8 of this Agreement or obtain a
Revolving Loan that shall bear interest initially at the Applicable LIBOR Rate
as provided in Section 2.2(a) hereof, the aggregate principal amount of each
Revolving Loan that is the subject of such LIBOR Conversion or Borrowing Notice,
as the case may be, shall bear interest at a rate per annum equal to the
Applicable LIBOR Rate in respect of such Revolving Loan.
(c) Regulatory Changes. If, after the date of this Agreement, any
Regulatory Change
shall subject any Lender to any tax, duty or other charge with respect to its
obligation to make or maintain any Revolving Loan or Swing Line Loan or any
Standby Letter of Credit or its Commitment, or shall change the basis of
taxation of payments to such Lender of the principal of or interest on the
Revolving Loans or Swing Line Loans or in respect of any other amounts due under
this Agreement in respect of its obligation to make any Revolving Loan or Swing
Line Loan or any Standby Letter of Credit or maintain its Commitment or maintain
any Standby Letter of Credit (except for changes in the rate of tax on the
overall net income of such Lender); or shall impose, modify or deem applicable
any reserve, assessment, special deposit, capital adequacy, capital maintenance
or similar requirement against assets of, deposits with or for the account of,
or credit extended by, such Lender or shall impose on such Lender any other
condition affecting (x) the obligation of the Lender to make or maintain the
Revolving Loans or Swing Line Loans or its Commitment or any Standby Letter of
Credit, or (y) the Revolving Notes or the Swing Line Note; and the result of any
of the foregoing is to increase the cost to such Lender of making or maintaining
any Revolving Loan or Swing Line Loan or any Standby Letter of Credit or
maintaining its Commitment or to reduce the amount of any sum received or
receivable by such Lender under, or the rate of return attributable to, this
Agreement or under the Revolving Notes or the Swing Line Note or any Standby
Letter of Credit, then such Lender shall give written notice to the Borrower if
such Regulatory Change shall impose costs in excess of those costs, or reduce
the amount of any such sum or rate of return below the amount or rate,
applicable on the date of this Agreement, and the Borrower shall pay to such
Lender for the account of such Lender, not later than 30 days following receipt
by the Borrower of such Lender's notice, such additional amount or amounts as
will compensate such Lender for such increase or reduction as reflected in a
certificate of such Lender attached to such notice setting forth the basis for
the amount of said increase or reduction, as the case may be. The Lender's
certificate attached to such notice shall be conclusive and binding on the
Borrower in the absence of manifest error.
Section 3.02. Interest after Due Date. In the event the Borrower fails
to make any payment of the principal amount of or interest on any of the
Revolving Loans or Swing Line Loans or of the Unused Portion Fee, the L/C Fee or
the Administrative Fee or any other amount owing hereunder, in each case when
due (whether by demand, acceleration or otherwise), the Borrower, shall pay to
the Agent for the account of the Lenders interest on such unpaid amount, payable
from time to time on demand, from the date such amount shall have become due to
the date of payment thereof, accruing on a daily basis, at a per annum rate (the
"Default Rate") equal to the sum of (x) the ABR plus (y) two percent (2%).
Section 3.03. Payment and Computations.
(a) Payments. All payments required or permitted to be made to the Agent, to the
Agent for the account of the Lenders, or to any Lender under this Agreement or
under any Revolving Note or the Swing Line Note shall be made in Dollars (i) if
to the Agent, at the Lending Office of the Agent in immediately available funds
and (ii) if to any Lender, to it in immediately available funds at an account
specified by such Lender in writing to the Borrower. The Borrower hereby
irrevocably instructs and authorizes the Agent to effect each payment of
interest on the Revolving Loans and the Swing Line Loans due on each Interest
Payment Date, and of each payment of the Unused Portion Fee, the L/C Fee and the
Administrative Fee due on the Fee Payment Date, by debiting the Borrower Account
on such Interest Payment Date or Fee Payment Date, as the case may be, with the
aggregate amount thereof, in each case, after giving effect to the crediting to
the Borrower Account of the proceeds of the Revolving Loan, if any, made on such
Interest Payment Date or Fee Payment Date, as the case may be, in accordance
with Section 2.2(a) of this Agreement. The Agent shall provide to the Borrower
an invoice showing the amount of such debit and the manner in which it was
calculated.
(b) Computations of Interest. Interest on the unpaid portion of the Revolving
Loans and the Swing Line Loans, and interest accruing at the Default Rate on any
amount owing hereunder, shall each be calculated for the actual number of days
(including the first day but excluding the last day) elapsed and shall be
computed on the basis of a year of 360 days.
(c) Interest on Loans. Interest on the Revolving Loans and the Swing Line Loans
shall be payable in arrears on each Interest Payment Date.
(d) Application of Payments; Apportionment.
(i) Apportionment of Payments and Prepayments. Unless
a Lender shall be in default of its obligations to advance any
Revolving Loan or reimburse the Agent as provided herein, all
payments and prepayments of principal and interest in respect
of outstanding Revolving Loans and all payments of fees (other
than any fees payable pursuant to the Administrative Fee
Letter) and all other payments in respect of any other
Obligations (other than with respect to the Swing Line Loans)
shall be allocated among (and paid over as soon as reasonably
practicable after receipt thereof to) such of the Lenders as
are entitled thereto in proportion to their respective Pro
Rata Share. All payments and prepayments of principal and
interest and other amounts in respect of the Swing Line Loans
that have not been converted to Revolving Loans shall be
allocated to the Swing Line Lender, and all fees payable
pursuant to the Administrative Fee Letter shall be allocated
only to the Agent.
(ii) Upon the occurrence and during the continuance
of an Event of Default, the Agent shall, unless otherwise
specified by the Required Lenders as provided in the last
paragraph of this clause (ii), apply all payments (including
the proceeds of any collateral obtained upon the exercise by
the Agent of any remedy specified in any Credit Document) in
respect of any Obligations:
(A) first, to pay Obligations to the Agent
in respect of reimbursement of any costs and expenses
(including reasonable attorney's fees and
disbursements) in connection with the exercise of any
remedies by the Agent under any Credit Document;
(B) second, to pay interest on and then
principal of any portion of the Revolving Loans which
the Agent may have advanced on behalf of any Lender
for which the Agent has not then been reimbursed by
such Lender or the Borrower;
(C) third, to pay Obligations in respect of
any fees, expense reimbursement or indemnities due to
the Agent other than as provided in subclause (A)
above;
(D) fourth, to pay Obligations in respect of
any fees, expense reimbursement, indemnities,
increased costs or breakage then due to the Lenders,
pro rata;
(E) fifth, to the ratable payment of overdue
interest or late charges, if any, then due the
Lenders;
(F) sixth, to the ratable payment of
interest due in respect of the Revolving Loans and
the Swing Line Loans;
(G) seventh, to the ratable payment or
prepayment of principal due in respect of the
Revolving Loans and the Swing Line Loans; and
(H) eighth, to the ratable payment of all other Obligations;
provided, however, that no Lender that shall be in default of its obligations to
fund Revolving Loans or reimburse the Agent as provided herein shall be entitled
to its ratable share of payments in respect of any Obligations prior to the
payment to all non-defaulting Lenders of all amounts due such Lenders as
provided herein.
The order of priority set forth in this Section 3.4(d)(ii) is
set forth solely to determine the rights and priorities of the Agent and the
Lenders as among themselves. The order of priority set forth in clauses (D)
through (H) of this Section 3.4(d)(ii) may at any time and from time to time be
changed by the Required Lenders without necessity of notice to or consent of or
approval by the Borrower, or any other Person. The order of priority set forth
in clauses (A) through (C) of this Section 3.4(d)(ii) may be changed only with
the prior written consent of the Agent.
Section 3.04. Payment at Maturity. Any outstanding principal amount of
the Revolving Notes and the Swing Line Note theretofore not repaid, together
with any accrued and unpaid Unused Portion Fee, Administrative Fee or L/C Fee,
any accrued and unpaid interest thereon, together with any other amounts due and
payable in accordance with the provisions hereof (including pursuant to Section
9.10 hereof), shall be due and payable in full on the Maturity Date (unless
sooner accelerated pursuant to the terms hereof), and this Agreement shall not
terminate until all Obligations shall have been paid in full.
Section 3.05. Prepayments; Certain Early Repayments.
(a) Mandatory Prepayment of Revolving Loans, Swing Line Loans and Standby
Letters of Credit. If at any time the Total Outstanding Amount shall be greater
than the Maximum Available Amount, the Borrower shall, without notice from the
Lender, prepay that portion of the Revolving Loans, Swing Line Loans and/or the
Standby Letters of Credit, as the case may be, in an amount equal to such
excess.
(b) Optional Prepayments of Revolving Loans. Subject to the terms and conditions
of clause (c) below and Section 3.9 hereof, the Borrower may, at its sole option
prepay the principal amount of the Revolving Loans (whether bearing interest at
the ABR or Applicable LIBOR Rate) in whole or in part (in an amount of
$1,000,000 or more and in multiples of $250,000) at any time and from time to
time, without premium or penalty.
(c) Optional Prepayment Procedure. In respect of each Optional Prepayment of
Revolving Loans (whether bearing interest at the ABR or Applicable LIBOR Rate)
proposed to be made by the Borrower, the right of the Borrower to make such
Optional Prepayment is subject to the Agent's receipt from the Borrower, no
later than 10:00 A.M. (Eastern Time) on the Business Day specified therein as
the date on which such Optional Prepayment is to be made (unless such Optional
Prepayment shall relate to the prepayment of any LIBOR Loan, in which case such
notice shall be given no later than 10:00 A.M. (Eastern time) at least three (3)
Business Days prior to the date of prepayment), of a written notice (which shall
be irrevocable) specifying (i) that the Borrower desires to prepay the Revolving
Loans, (ii) the principal amount of such Optional Prepayment and the extent
which any portion thereof relates the prepayment of any LIBOR Loan, and (iii)
the date (which shall be a Business Day or, if such Optional Prepayment relates
to a LIBOR Loan, a LIBOR Business Day) on which such Optional Prepayment will be
made. Any Optional Prepayment of Revolving Loans made by the Borrower as
permitted hereunder shall be paid to the Agent for the account of the Lenders no
later than 12:00 P.M. (Eastern Time) on the applicable prepayment date (except
that any prepayment of a LIBOR Loan shall be paid no later than 10:00 A.M.
(Eastern Time) on the applicable prepayment date).
Section 3.06. Unused Portion Fee and Administrative Fee.
(a) Unused Portion Fee. For each Fiscal Quarter (or part thereof) during the
period from the Effective Date until the Maturity Date, the Borrower shall pay
to the Agent, for the account of the Lenders pro rata based upon each Lender's
Pro Rata Share of the Revolving Loan Commitment, an unused portion fee (the
"Unused Portion Fee") determined by subtracting the Total Outstanding Amount
(computed on the basis of the daily average for such Fiscal Quarter) from the
Revolving Loan Commitment Amount. The Unused Portion Fee shall be computed at a
rate per annum equal to, in the event the Funded Debt to EBITDA ratio calculated
pursuant to Section 6.1(e) hereof is (i) less than 0.50 to 1.00, then 0.19%,
(ii) greater than or equal to 0.50 but less than 1.50 to 1.00, then 0.22%, (iii)
greater than or equal to 1.50 to 1.00 but less than 2.50 to 1.00, then 0.25%,
and (iv) greater than or equal to 2.50 to 1.00, then 0.25%. The Unused Portion
Fee shall be due and payable in arrears on the Fee Payment Date to which such
Unused Portion Fee relates and on the Maturity Date, and shall be calculated on
the basis of a 360 day year and the actual days elapsed. The Unused Portion Fee
for any Fiscal Quarter shall be determined based on the financial statements
delivered by the Borrower during the immediately preceding Fiscal Quarter;
provided, however, that if such financial statements are not delivered when due,
then the highest Funded Debt to EBITDA ratio shall apply.
(b) Administrative Fee. During the term of this Agreement, the Borrower shall
pay to the Agent, as compensation for the services of the Agent hereunder, a fee
(the "Administrative Fee") in an amount specified in, and subject to the terms
and conditions of, that certain letter agreement, dated the Effective Date,
between the Borrower and the Agent (as the same may from time to time be
amended, modified or supplemented, the "Administrative Fee Letter"). The
Administrative Fee shall be due and payable on each Fee Payment Date, as
provided in the Administrative Fee Letter.
Section 3.07. LIBOR Conversion.
(a) Conversion. So long as no Event of Default or Potential Event of Default
shall have occurred and be continuing, the Borrower shall have the right to
convert all or part of the outstanding ABR Loans to loans bearing interest at
the then Applicable LIBOR Rate (such conversion, a "LIBOR Conversion");
provided, however, that the LIBOR Period to which such LIBOR Conversion shall
relate will not extend beyond the Maturity Date. In order to effect a LIBOR
Conversion, the Borrower shall give the Agent irrevocable written notice (such
notice, a "LIBOR Conversion Notice") prior to 10:00 A.M. (Eastern time) on the
date (which must be a Business Day) that is at least three (3) LIBOR Business
Days prior to the first day of the LIBOR Period to which such LIBOR Conversion
shall apply, stating that (i) the Borrower wishes to effect a LIBOR Conversion,
(ii) the aggregate principal amount of outstanding ABR Loans which the Borrower
wishes to bear interest at the Applicable LIBOR Rate (it being understood and
agreed that no LIBOR Conversion shall be permitted in an amount less than
$1,000,000.00 and shall be in multiples of $250,000.00), (iii) the applicable
LIBOR Period being elected by the Borrower (it being understood that no change
in LIBOR with respect to any then outstanding LIBOR Loan may be effected during
the LIBOR Period relating thereto) and (iv) the Business Day on which the LIBOR
Period is to be effective.
(b) Notice of LIBOR to Borrower. In the event the Borrower has requested a LIBOR
Conversion, the Agent shall give written notice to the Borrower and the Lenders
of LIBOR as promptly as reasonably possible after such rate is determined. The
Agent's determination of LIBOR shall be conclusive in the absence of manifest
error.
(c) Successive Notice of LIBOR Conversion. Subject to the provisions of clause
(a) of this Section 3.8, the Borrower may, by executing a LIBOR Conversion
Notice at least three LIBOR Business Days prior to the first day of the LIBOR
Period to which such LIBOR Conversion Notice shall apply, execute successive
LIBOR Conversions with respect to any then outstanding ABR Loan together with
any then outstanding LIBOR Loans the LIBOR Period in respect of which is
scheduled to expire on or before the start of the LIBOR Period specified in such
LIBOR Conversion Notice. If, with respect to any LIBOR Loans, the Agent shall
not have received a LIBOR Conversion Notice for the next immediately succeeding
LIBOR Period which complies with the provisions of clause (a) of this Section
3.8, such LIBOR Loans shall, immediately upon the expiration of the then current
LIBOR Period and without any notice to the Borrower, bear interest at the ABR in
accordance with the provisions of Section 3.1(a) of this Agreement.
Section 3.08. Breakage, etc. In the event of the prepayment of any
LIBOR Loan (whether by way of acceleration or otherwise or due to an Optional
Prepayment of any LIBOR Loan pursuant to Section 3.6(b) hereof), the Borrower
shall pay to each Lender whose LIBOR Loan has been so prepaid any loss or
expense which such Lender may incur or sustain directly as a result of such
prepayment, including, without limitation, an amount equal to (i) an amount of
interest which would have accrued on the amount so prepaid for the period
beginning on the date of such prepayment and ending on the last day of the
applicable LIBOR Period (such period, the "Breakage Period"), at the Applicable
LIBOR Rate minus (ii) the amount of interest (as reasonably determined by each
affected Lender) which would have accrued to such Lender on such amount by
placing such amount on deposit for the Breakage Period with leading banks in the
London interbank market. All amounts owing to a Lender pursuant to this Section
3.9 shall be paid by the Borrower promptly upon written request therefor.
Section 3.09. Inability to Determine Interest Rate for LIBOR Loans. In
the event that the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that (a) by reason of circumstances
affecting the London interbank market generally, adequate and reasonable means
do not exist for ascertaining LIBOR for any LIBOR Period with respect to (i) any
proposed Revolving Loan that the Borrower has requested be made as a LIBOR Loan,
(ii) any LIBOR Loans that will result from the requested conversion of all or
part of any ABR Loans into LIBOR Loans, or (iii) the continuation of any LIBOR
Loan as such for an additional LIBOR Period, (b) LIBOR determined or to be
determined for any LIBOR Period will not adequately and fairly reflect the cost
to the Lenders of making or maintaining their affected LIBOR Loans during such
LIBOR Period by reason of circumstances affecting the London interbank market
generally or (c) dollar deposits in the relevant amount and for the relevant
period with respect to any such LIBOR Loan are not available to the Agent in the
London interbank market, then the Agent shall, prior to the requested Funding
Date or the conversion date or the last day of the then applicable LIBOR Period,
as the case may be, notify the Borrower (by telephone or otherwise, confirmed in
writing), with a copy to the Lenders, of such determination. If the Agent shall
have given such notice, then (x) any requested LIBOR Loans shall be made as ABR
Loans, (y) any ABR Loans that were to have been converted to LIBOR Loans shall
be continued as ABR Loans, and (z) any outstanding LIBOR Loans shall be
converted, on the last day of the then current LIBOR Period applicable thereto,
into ABR Loans. Until such notice has been withdrawn by the Agent, no further
LIBOR Loans shall be made and no ABR Loans shall be converted to LIBOR Loans.
ARTICLE IV.
CONDITIONS PRECEDENT
Section 4.01. Conditions Precedent to Effective Date. This Agreement,
and the Revolving Loan Commitment of the Lenders hereunder, shall become
effective at a closing at the offices of Crowell & Moring LLP, 1001 Pennsylvania
Avenue, N.W., Washington, D.C. 20004, only on the Business Day (the "Effective
Date") on which all of the following conditions precedent shall have been
fulfilled to the satisfaction of the Lenders; provided, however, that in the
event the Effective Date shall have not occurred on or prior to December 31,
1998, the Lenders shall have no further obligations hereunder:
(i) The Agent, on behalf of the Lenders, shall have received
from the Borrower the following instruments, agreements, certificates and
payments, as the case may be, on or prior to the Effective Date:
(A) Revolving Notes. A Revolving Note, dated on or prior to
the Effective Date, payable to the order of each Lender in the amount
of such Lender's Pro Rata Share of the Revolving Loan Commitment and
duly executed by the Borrower;
(B) Borrower Security Agreement. The Borrower Security
Agreement, dated on or prior to the Effective Date, duly executed by
the Borrower in favor of the Agent;
(C) Subsidiary Guarantee. The Subsidiary Guarantee, dated on
or prior to the Effective Date, duly executed in favor of the Agent by
each of Hagler Bailly Services, Inc., Hagler Bailly Consulting, Inc.,
HB Capital, Inc., Putnam, Hayes & Bartlett, Inc., TB&A Group, Inc.,
Theodore Barry and Associates, Private Label Energy Services, Inc. and
Fieldston Publications, Inc.;
(D) Swing Line Note. A Swing Line Note, dated on or prior to
the Effective Date, payable to the order of NationsBank, N.A., in the
amount of $5,000,000.00 and duly executed by the Borrower;
(E) Subsidiary Security Agreements. A separate Subsidiary
Security Agreement, dated on or prior to the Effective Date, duly
executed in favor of the Agent by each of Hagler Bailly Services, Inc.,
Hagler Bailly Consulting, Inc., HB Capital, Inc., Putnam, Hayes &
Bartlett, Inc., TB&A Group, Inc., Theodore Barry and Associates,
Private Label Energy Services, Inc. and Fieldston Publications, Inc.;
(F) Financing Statements. All uniform commercial code
financing statements shall have been filed, and all other actions
(including, without limitation, the filing of notices of assignment
with the United States government, as required by the Lenders) shall
have been taken, as shall be necessary or advisable to effect the
perfection of the Agent's security interest in the collateral pledged
or assigned under the Borrower Security Agreement and each Subsidiary
Security Agreement, as applicable;
(G) Legal Opinions. The Agent shall have received (i) an
opinion of Hogan & Hartson, L.L.P., special counsel to the Credit
Parties, dated the Effective Date and addressed to the Agent and the
Lenders, covering such matters incident to the transactions
contemplated by the Credit Documents as the Lenders shall reasonably
request and in form and substance satisfactory to the Lenders and their
counsel, and (ii) an opinion of Stephen V.R. Whitman, Esq., General
Counsel of the Borrower, dated the Effective Date, addressed to the
Agent and the Lenders, covering such matters incident to the
transactions contemplated by the Credit Documents as the Lenders shall
reasonably request and in form and substance satisfactory to the
Lenders and their counsel. Each such opinion will permit the reliance
thereon by any financial institution that becomes a party to the Credit
Documents following the execution thereof by way of assignment;
(H) Resolutions. A certified copy of the resolutions of the
Board of Directors of each Credit Party authorizing the execution and
delivery of the Credit Documents to which it is a party;
(I) Charter Documents. A copy of the charter documents and
by-laws of each Credit Party, together with all amendments thereto,
certified by the Secretary of such Credit Party as being true, complete
and correct and in effect as of the Effective Date;
(J) Incumbency Certificate. An incumbency certificate of the
Secretary, an Assistant Secretary or an Assistant Treasurer of each
Credit Party certifying the names and true signatures of each officer
of such Credit Party authorized to execute the Credit Documents to
which such Credit Party is a party;
(K) Compliance Certificate. A certificate of an Authorized
Officer of the Borrower, dated the Effective Date, certifying that the
matters contained in clauses (iii), (iv) and (v) of Section 4.2 hereof
are true and correct;
(L) Insurance. A certificate of an Authorized Officer of the
Borrower, dated the Effective Date, certifying, in form and substance
reasonably satisfactory to the Lenders, the Borrower's compliance with
Section 6.1(m) hereof, having attached to such certificate a summary in
reasonable detail of the Borrower's and its Subsidiaries' insurance
coverage. The Borrower shall deliver an insurance report, in form and
substance reasonably acceptable to the Lenders, of an independent
insurance broker as to due compliance as of the Effective Date with
Section 6.1(m) hereof; and
(M) Lien Search. The results of a recent search, upon the
records maintained with the appropriate Secretary of State and county
or city recorder offices of all jurisdictions deemed advisable by the
Lenders, regarding personal property, judgment and tax liens, if any,
on file with such offices and naming the Borrower or any Subsidiary as
a debtor, which results shall be satisfactory to the Lenders.
(ii) Financial Disclosure. The Borrower shall have disclosed
to the Lenders promptly from time to time any material developments or changes
in the Borrower and its Subsidiaries', taken as a whole, business, assets,
results of operations, condition (financial or otherwise) or prospects,
including without limitation amendments to their charter documents or the
Borrower's Form 10-K or 10-Q and the exhibits thereto, and any material
amendments, changes or terminations of any material contracts or the award of or
loss of any material bid or proposal. Any such material developments, changes or
amendments shall not have affected adversely the assumptions contained in the
credit analysis of the Borrower performed by the Lenders prior to the execution
of this Agreement or resulted in a material adverse change since September 30,
1998 in the business, assets, results of operations, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole;
(iii) Financial Statements. The Borrower shall have delivered
to the Lenders (A) the Borrower's Form 10-K for the Fiscal Year ended December
31, 1997 and Form 10-Q for the Fiscal Quarters ended March 31, June 30, 1998 and
September 30, 1998, and (B) such other unaudited consolidated financial
statements of the Borrower and its Subsidiaries as any Lender shall reasonably
request, together with, in each case, an officer's certificate, dated the
Effective Date, from each of the Borrower's Chief Financial Officer and
Treasurer, stating that, to their personal knowledge after having performed such
due diligence as would customarily be performed by a corporate officer in their
position but no additional due diligence, the Borrower's Form 10-K and Form
10-Qs and unaudited consolidated financial statements, if any, attached thereto
as of the Effective Date do not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(iv) Legal Matters. All legal matters incident to this
Agreement shall be satisfactory to counsel for the Lenders, and the Borrower
shall have reimbursed the Lenders for their fees and expenses and the fees and
expenses of the Lenders' counsel in connection with the preparation or review,
as the case may be, of the Credit Documents and all matters incident thereto (it
being understood that such statement may not reflect the final statement of fees
and expenses incurred by the Lenders' counsel in connection with such
preparation or review);
(v) Schedules. All schedules delivered hereunder by the Borrower shall be
in form and substance satisfactory to the Lenders;
(vii) Due Diligence. The Lenders shall have completed their
due diligence review of the Borrower and its Subsidiaries, including their
business, assets, results of operations, condition (financial or otherwise),
prospects, liabilities (both actual and contingent, including environmental
liabilities), management and affairs, and the results thereof shall have been
satisfactory to the Lenders in their sole discretion;
(viii) State Street Bank Credit Facility. The Lenders and
State Street Bank shall have entered into an arrangement, in form and substance
satisfactory to the Lenders, providing for the payment in full of all amounts,
if any, owing under the State Street Bank Credit Facility as of the Effective
Date with the proceeds of the Revolving Loans made to the Borrower on the
Effective Date. State Street Bank shall have (A) agreed to permit the filing of
the Uniform Commercial Code financing statements contemplated by clause (iii) of
this Section 4.1 prior to the termination of the credit facility commitment
under the State Street Bank Credit Facility and (B) delivered to the Agent on
the Effective Date a Uniform Commercial Code termination statement,
appropriately completed, in respect of each Uniform Commercial Code financing
statement filed by State Street Bank that covers property of the Borrower or any
Subsidiary thereof and that secures the indebtedness arising under the State
Street Bank Credit Facility. State Street Bank shall have agreed that, upon
payment in full of all amounts, if any, owing under the State Street Bank Credit
Facility as of the Effective Date, the Agent shall be permitted to file all such
Uniform Commercial Code termination statements on behalf of State Street Bank;
(ix) BankBoston Credit Facility. The Lenders shall have
received from BankBoston, N.A. evidence that all amounts owing under the
BankBoston Credit Facility have been repaid and that the facility provided
thereunder has been terminated. In addition, BankBoston, N.A. shall have
delivered to the Agent on the Effective Date a Uniform Commercial Code
termination statement, appropriately completed, in respect of each Uniform
Commercial Code financing statement filed by BankBoston, N.A. that covers
property of Putnam, Hayes & Bartlett, Inc. or the Borrower or any other
Subsidiary thereof and that secures the indebtedness arising under the
BankBoston Credit Facility;
(x) NationsBank, N.A. shall have received from the Borrower,
by wire transfer of immediately available funds to an account designated by
NationsBank, N.A., the syndication fee payable by the Borrower pursuant to the
Administrative Fee Letter;
(xi) Miscellaneous. The Lenders shall have received such other
documents, instruments, certificates, opinions, agreements and information as
the Lenders or their counsel shall reasonably request in their discretion in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, current consolidated and consolidating
financial statements of the Borrower and its Subsidiaries, a report describing
the aggregate amount and current age status of accounts receivable and payable
of the Borrower and its Subsidiaries, a report describing the current status of
goods or services on backlog with the Borrower or any Subsidiary thereof and a
report describing the status of pending or threatened litigation).
Section 2.01. Further Conditions Precedent to Revolving Loans and Standby
Letters of Credit. The obligation of the Agent, on behalf of the Lenders, to
make any Revolving Loan, the obligation of the Swing Line Lender to make any
Swing Line Loan, and the obligation of the Issuing Lender to issue any Standby
Letter of Credit shall be subject to the fulfillment to the satisfaction of the
Lenders, in the case of Revolving Loans and Standby Letters of Credit, and the
Swing Line Lender, in the case of Swing Line Loans, of the further conditions
precedent that, on the Funding Date for such Revolving Loan or Swing Line Loan
or the issuance date for such Standby Letter of Credit, as the case may be:
(i) Notice. In the case of any Revolving Loan or Standby
Letter of Credit, the Agent shall have received a Borrowing Notice
(except as otherwise provided in the last sentence of Section 2.2(a) of
this Agreement) in accordance with Section 2.2(a) or the Issuing Lender
shall have received a request for a Standby Letter of Credit in
accordance with Section 2.3(c), as the case may be, in each case
executed by an Authorized Officer of the Borrower (or other officer of
the Borrower designated by such Authorized Officer as having authority
to execute such notice);
(ii) Payment of Obligations. The prospect of payment of all
obligations and liabilities outstanding or to become outstanding under
this Agreement is not impaired due to acts or events materially bearing
upon the financial condition of the Borrower, as determined by the
Required Lenders in their sole discretion;
(iii) No Material Adverse Change. Since the date of the most
recent financial statements or projections provided to the Lenders,
there shall have been no material adverse change in the Borrower's and
the Guarantors' (taken as a whole) financial condition or in the
Borrower's and the Guarantors' (taken as a whole) assets or prospects,
in each case as determined by the Required Lenders in their sole
discretion;
(iv) Representations and Warranties. The representations and
warranties of each Credit Party in the Credit Documents are true and
correct as of such Funding Date (or, in the case of Standby Letters of
Credit, the date of issuance thereof) as though made on and as of such
Funding Date (or, in the case of Standby Letters of Credit, the date of
issuance thereof), except to the extent such representations and
warranties relate solely to an earlier date, in which case such
representations and warranties shall be true and correct as of such
earlier date (and, if any such representation and warranty shall not be
true and correct, the Borrower shall describe in writing to the Agent
the nature of such misrepresentation and warranty);
(v) No Event of Default. No event has occurred and is
continuing, or would result from such Revolving Loan or Swing Line Loan
after giving effect to the application of the proceeds therefrom or
from the issuance of such Standby Letter of Credit if the beneficiary
thereof were to fully draw upon such Standby Letter of Credit on the
date of issuance, which constitutes an Event of Default or would
constitute a Potential Event of Default;
(vi) Maximum Available Amount. After giving effect to the
making of such Revolving Loan or Swing Line Loan on the Funding Date
thereof or the issuance of such Standby Letter of Credit on the
issuance date thereof, the Total Outstanding Amount shall not exceed
the Maximum Available Amount; and
(vii) Officer's Certificate. In the case of any Revolving Loan
or Standby Letter of Credit, the Agent shall have received a
certificate, addressed to the Lenders, of an Authorized Officer of the
Borrower, dated the date of the Borrowing Notice, certifying that the
matters contained in clauses (iii), (iv), (v) and (vi) of this Section
4.2 are true and correct.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into
this Agreement and make the Revolving Loans and Swing Line Loans contemplated by
the terms hereof, the Borrower represents and warrants with respect to itself
and its Subsidiaries, as the context shall require, as of the date hereof and as
of the Effective Date that:
Section 5.1 Existence, Power and Authority. The Borrower and each
Subsidiary thereof is a corporation or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with full corporate or company power and
authority to carry on its business as currently conducted and to own or hold
under lease its property; the Borrower and each Subsidiary thereof is duly
qualified to do business as a foreign corporation or other entity in good
standing in each other jurisdiction in which the conduct of its business or the
maintenance of its property requires it to be so qualified and where the failure
to be so qualified would have a material adverse effect on the financial
condition, business or operation of the Borrower or such Subsidiary; and, the
Borrower and the other Credit Parties have full power and authority (corporate
or otherwise) to execute and deliver the Credit Documents to which they are a
party and to carry out the transactions contemplated thereby.
Section 5.02. Authorization; Enforceable Obligations. Each Credit
Document to which the Borrower and the other Credit Parties are a party has been
duly authorized, executed and delivered (or will, on the Effective Date, be duly
authorized, executed and delivered) by the Borrower and such other Credit
Parties and constitutes the legal, valid and binding obligation of the Borrower
and such other Credit Parties, enforceable against the Borrower and such other
Credit Parties in accordance with its terms (except as such enforceability may
be limited by general principles of the law of equity or by any applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws and laws
affecting creditors' rights generally).
Section 5.03. No Legal Bar. The execution, delivery and performance by
the Borrower and the other Credit Parties of the Credit Documents to which they
are a party (i) do not or will not violate the certificate of incorporation
(including any preferred stock designations or provisions incorporated therein
or attached thereto), by-laws or other charter or formation document of the
Borrower or such other Credit Parties, (ii) do not or will not violate or
conflict with any law, governmental rule or regulation or any judgment, writ,
order, injunction, award or decree of any court, arbitrator, administrative
agency or other governmental authority applicable to the Borrower or such other
Credit Parties, or any indenture, mortgage, contract, agreement or other
undertaking or instrument to which the Borrower or such other Credit Parties is
a party or by which their respective property may be bound and (iii) do not and
will not result in the creation or imposition of any lien, mortgage, security
interest or other encumbrance on any of its property pursuant to the provisions
of any such indenture, mortgage, contract, agreement or other undertaking or
instrument other than pursuant to the Credit Documents.
Section 5.04. Consents. The execution, delivery and performance by the
Borrower and the other Credit Parties of the Credit Documents to which they are
a party do not require any consent, which has not been obtained, of any other
Person (including, without limitation, stockholders of the Borrower or such
other Credit Parties) or any consent, license, permit, authorization or other
approval of, any giving of notice to, exemption by, any registration,
declaration or filing with, or any taking of any other action in respect of, any
court, arbitrator, administrative agency or other governmental authority.
Section 5.05. Litigation. Except as set forth on Schedule 5.5 hereto,
there is no action, suit, investigation or proceeding by or before any court,
arbitrator, administrative agency or other governmental authority pending or, to
the knowledge of the Borrower or the Subsidiaries, threatened (i) which involves
any of the transactions contemplated by this Agreement or any other Credit
Document or (ii) against or affecting the Borrower or any Subsidiary thereof
which, if adversely determined against the Borrower or such Subsidiary, would
result in a judgment of $400,000 or more or, if such action, suit, investigation
or proceeding does not seek money damages, could in the reasonable judgment of
the Borrower materially adversely affect the financial condition, business or
operation of the Borrower or such Subsidiary.
Section 5.06. No Default. Except as set forth on Schedule 5.6 hereto,
neither the Borrower nor any Subsidiary thereof is in default under any order,
writ, injunction, award or decree of any court, arbitrator, administrative
agency or other governmental authority binding upon it or its property, or any
indenture, mortgage, or other undertaking or instrument of indebtedness or any
material contract, agreement or other arrangement, to which it is a party or by
which its property may be bound, and nothing has occurred which would materially
adversely affect the ability of any of them to carry on their respective
business or perform their respective obligations under any such order, writ,
injunction, award or decree or any such indenture, mortgage, or other
undertaking or instrument of indebtedness or any material contract, agreement or
other arrangement.
Section 5.07 Financial Condition. The financial statements of the
Borrower (including the Borrower's Form 10-K and Form 10-Q) and its
Subsidiaries, copies of which have been furnished to the Lenders, were prepared
in None of the proceeds of any Revolving Loan have been or will be used to
purchase or carry, or reduce or retire or refinance any credit incurred to
purchase or carry, any margin stock (within the meaning of Regulations G, T, U
and X of the Board of Governors of the Federal Reserve system) or to extend
credit to others for the purchasing or carrying of any margin stock. Neither the
Borrower nor any of its Subsidiaries is engaged in the business of extending
credit for the purpose of purchasing or carrying any margin stock.
Section 5.08. Borrower Not an Investment Company. TC "Section 5.9
Borrower Not an Investment Company." \f C \l "2" Neither the Borrower nor any of
its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
Section 5.09 Taxes. TC "Section 5.10 Taxes." \f C \l "2" The Borrower
and its Subsidiaries have filed or caused to be filed all tax returns which are
required to be filed by them and have paid or caused to be paid all taxes which
have been shown to be due and payable by such returns or (except to the extent
being contested in good faith and for the payment of which adequate reserves
have been provided) tax assessments received by the Borrower or any Subsidiary
thereof to the extent that such taxes have become due and payable.
Section 5.10. Environmental Matters. TC "Section 5.11 Environmental
Matters." \f C \l "2" The Borrower and its Subsidiaries conduct their respective
operations in compliance with all applicable laws and regulations concerning the
discharge of substances into the environment and other environmental control
matters, except to the extent that non-compliance would not have a material
adverse effect on the business, results of operations or condition (financial or
otherwise) of the Borrower and the Guarantors (taken as a whole). Neither the
Borrower nor any Subsidiary thereof has any liability, contingent or otherwise,
under any law, ordinance or regulation relating to the storage, transport,
disposal or release of "oil", "petroleum products", "hazardous substance",
"hazardous waste", "hazardous material", "hazardous chemical substance",
"refuse" or any other term of similar import (as such terms are defined in any
such law, ordinance or regulation) (collectively, "Hazardous Substances"),
except to the extent that any such liability would not have a material adverse
effect on the business, results of operations or condition (financial or
otherwise) of the Borrower and the Guarantors (taken as a whole).
Section 5.11. Subsidiaries. TC "Section 5.12 Subsidiaries." \f C \l "2"
Set forth on Schedule 5.12 hereof is a complete and correct list of all
Subsidiaries of the Borrower as of the date hereof together with, for each such
Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each
Person holding ownership interests in such Subsidiary and (iii) the nature of
the ownership interests held by each Person and percentage of ownership of such
Subsidiary represented by such ownership interests. Except as disclosed on
Schedule 5.12 hereof, (x) each of the Borrower and its Subsidiaries owns, free
and clear of Liens (other than (A) any Liens created pursuant to the Credit
Documents and (B) Liens for taxes and assessments not yet due), and has the
unencumbered right to vote, all outstanding ownership interests in each Person
shown to be held by it on Schedule 5.12 hereof, (y) all of the issued and
outstanding shares of capital stock of each such Person organized as a
corporation is validly issued, fully paid and nonassessable, and (z) there are
no outstanding Equity Rights with respect to such Person except for such Equity
Rights as are set forth on Schedule 5.12 hereof. As of the date hereof, (i) no
Foreign Subsidiary of the Borrower has annual revenues of $10,000,000.00 or
more, and (ii) the total revenues or profits of all Foreign Subsidiaries of the
Borrower for any quarterly or annual period ended prior to the date hereof have
not comprised more than 20% of the total revenues or profits of the Borrower and
its Consolidated Subsidiaries. As of the Effective Date, no Domestic Subsidiary
of the Borrower constitutes a Material Domestic Subsidiary other than those
Subsidiaries of the Borrower listed on Schedule 5.12 and specifically identified
as Material Domestic Subsidiaries.
Section 5.12. Year 2000 Compliance. TC "Section 5.13 Year 2000
Compliance." \f C \l "2" The Borrower has (i) initiated a review and assessment
of all areas within its and each of its Subsidiaries' business and operations
(including those affected by suppliers and vendors) that could be adversely
affected by the risk that computer applications used by the Borrower or any of
its Subsidiaries (or its suppliers and vendors) may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999 (the "Year 2000 Problem"), (ii) developed a
plan and timeline for addressing the Year 2000 Problem on a timely basis, and
(iii) to date, implemented that plan in accordance with that timetable. The
Borrower reasonably believes that all computer applications (including those of
its suppliers and vendors) that are material to its or any of its Subsidiaries'
business and operations will on a timely basis be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000 (such
compliance, "Year 2000 Compliant"), except to the extent that a failure to do so
could not reasonably be expected to have a material adverse effect on the
Borrower and the Guarantors, taken as a whole.
Section 5.13. Ownership of Property; Liens. TC "Section 5.14 Ownership
of Property; Liens." \f C \l "2" Neither the Borrower nor any of its
Subsidiaries owns any real property, except as set forth on Schedule 5.14
hereof. The Borrower and each of its Subsidiaries has valid leasehold interests
in all its respective material real property purported to be leased by it, and
has good title to all its respective material other property purported to be
owned by it, and none of such property is subject to any Lien, except as
permitted by Section 6.2(a) hereof, and all of such property taken as a whole is
sufficient in all material respects for the Borrower and its Subsidiaries to
conduct their respective business as it has been and is presently being
conducted by them.
Section 5.14 Public Utility Holding Company Act. TC "Section 5.15
Public Utility Holding Company Act." \f C \l "2" Neither the Borrower nor any
Subsidiary thereof is a "holding company", or an affiliate of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
ARTICLE VI.
COVENANTS
Section 6.01. Affirmative Covenants. TC "Section 6.1 Affirmative Covenants." \f
C \l "2" The Borrower covenants and agrees for itself and its Subsidiaries (in
which case the Borrower shall cause such Subsidiaries to take or refrain from
taking the actions described below) that, so long as this Agreement shall remain
in effect or any Obligation shall remain unpaid:
(a) Audited Annual Financials. The Borrower shall deliver to the Agent and each
Lender, as soon as available but within 120 days of the end of each fiscal year
of the Borrower ending December 31 (each such year, a "Fiscal Year"), a full and
complete set of the annual audited consolidated financial statements (including
statements of financial condition, income, cash flows and changes in
shareholders' equity), together with all notes thereto, of the Borrower and its
Consolidated Subsidiaries prepared in accordance with GAAP and certified by an
independent accounting firm of national recognition reasonably acceptable to the
Required Lenders (which certificate shall be accompanied by an unqualified
opinion of such accounting firm of such statements). The audited financial
statement required to be delivered under this clause (a) shall be accompanied by
a certificate of any Authorized Officer of the Borrower to the effect that the
Borrower and the other Credit Parties are in compliance with all covenants
contained in this Agreement (including the financial ratios contained in this
Section 6.1) and the other Credit Documents and that no Event of Default or
Potential Event of Default has occurred and is continuing hereunder.
(b) Quarterly Financial Statements. The Borrower shall deliver to the Agent and
each Lender, as soon as available but within 45 days following the end of each
of the Borrower's Fiscal Quarters, internally prepared consolidated and
consolidating financial statements of the Borrower and its Consolidated
Subsidiaries (including a balance sheet (d)(ii) is set forth solely to determine
the rights and priorities of the Agent and the Lenders as among themselves. The
order the Required Lenders without necessity of notice to or consent of or
approval by the Borrower, or any other Person. The order acceptable to the
Agent, relating to the Borrower and its Consolidated Subsidiaries as the Agent
shall reasonably request, and (iii) a statement computing the ratio of Funded
Debt to EBITDA pursuant to Section 6.1(e) hereof, demonstrating that the
Borrower and its Consolidated Subsidiaries shall have not suffered a net loss
pursuant to Section 6.1(f) hereof and computing the Fixed Charge Coverage Ratio
pursuant to Section 6.1(g) hereof, in each case as of the end of such Fiscal
Quarter. The financial statements and reports required to be delivered under
this clause (b) shall be accompanied by a certificate of an Authorized Officer
of the Borrower to the effect that the information contained therein is true and
accurate as of the date of such certificate, that the Borrower and the other
Credit Parties are in compliance with all covenants contained in this Agreement
(including the financial ratios contained in this Section 6.1) and the other
Credit Documents and that no Event of Default or Potential Event of Default has
occurred and is continuing hereunder.
(c) Exchange Act and Securities Act Filings. The Borrower shall deliver to each
Lender and the Agent, within 5 days following the filing with the SEC, copies of
all filings by it or any of its Subsidiaries under the Exchange Act (including
reports on Forms 10-Q, 10-K and 8-K) and registration statements filed with the
SEC under either the Securities Act or the Exchange Act. The Borrower shall
deliver to each Lender and the Agent copies of all of the Borrower's annual
reports and proxy statements and, at the request of such Lender, any other
shareholder communication.
(d) Tax Forms. From time to time, the Borrower shall cause each of its Foreign
Subsidiaries to cooperate with each Lender and shall execute and deliver to such
Lender in a timely manner such forms (including Internal Revenue Service Forms)
and certificates as such Lender shall reasonably request, in each case for the
purpose of confirming that such Lender is capable, under the provisions of any
applicable tax treaty concluded with the United States of America or any other
applicable law, of receiving payments of interest hereunder without deduction or
withholding of any tax. In the event that any such tax shall be required to be
withheld or deducted, the Borrower shall pay to such Lender an amount that would
fully indemnify such Lender for such withheld or deducted amount.
(e) Funded Debt to EBITDA Ratio. The Borrower and its Consolidated Subsidiaries,
taken as a whole, shall maintain, for (and at all times during) each Fiscal
Quarter beginning with the Fiscal Quarter ended September 30, 1998 (the "Initial
Fiscal Quarter"), a ratio of Funded Debt to EBITDA of not greater than 3.00 to
1.00. The ratio contemplated by this clause (e) shall be computed on the basis
of a rolling four quarter period and shall include the results of operations for
the Fiscal Quarter for which such ratio shall be determined plus the immediately
preceding three Fiscal Quarters; provided, however, that to the extent that any
Acquisition Party acquired in accordance with Section 6.2(e) hereof shall not
constitute a Subsidiary for a period falling within such rolling four quarters
at the time of the determination of this ratio, then EBITDA for the purposes of
this ratio shall include, for such rolling four quarter period as it relates to
such Acquisition Party, (i) the pro forma EBITDA of such Acquisition Party for
that portion of the rolling four quarter period during which such Acquisition
Party was not a Subsidiary of the Borrower, and (ii) the actual EBITDA of such
Acquisition Party for that portion of the rolling four quarter period during
which such Acquisition Party constitutes a Subsidiary of the Borrower. For the
purposes of illustration of the proviso to the preceding sentence, if an
Acquisition Party is acquired on March 31, 2000 and the ratio contemplated by
this clause (e) shall be determined for the period ending June 30, 2000, then
such Acquisition Party's pro forma EBITDA as it existed prior to the acquisition
for the quarters ending September 30, 1999, December 31, 1999 and March 31,
2000, together with such Acquisition Party's actual EBITDA as a Subsidiary of
the Borrower for the quarter ending June 30, 2000, shall be taken into account
for the purposes of calculating this ratio.
(f) No Net Loss. The Borrower and its Consolidated Subsidiaries, taken as a
whole, shall not suffer a net loss (before (i) extraordinary gains and (ii)
non-cash, non-recurring compensatory charges incurred in connection with
acquisitions) for any Fiscal Quarter.
(g) Fixed Charge Coverage Ratio. The Borrower and its Consolidated Subsidiaries,
taken as a whole, shall at all times maintain, for (and at all times during)
each Fiscal Quarter beginning with the Initial Fiscal Quarter, a ratio of
Consolidated Cash Flow to Consolidated Fixed Charges of not less than 2.00 to
1.00. The ratio contemplated by this clause (g) shall be computed on the basis
of a rolling four quarter period and shall include the results of operations for
Fiscal Quarter for which such ratio shall be determined plus the immediately
preceding three Fiscal Quarters; provided, however, that to the extent that any
Acquisition Party acquired in accordance with Section 6.2(e) hereof shall not
constitute a Subsidiary for a period falling within such rolling four quarters
at the time of the determination of this ratio, then Consolidated Cash Flow for
the purposes of this ratio shall include, for such rolling four quarter period
as it relates to such Acquisition Party, (i) the pro forma Cash Flow of such
Acquisition Party for that portion of the rolling four quarter period during
which such Acquisition Party was not a Subsidiary of the Borrower, and (ii) the
actual Cash Flow of such Acquisition Party for that portion of the rolling four
quarter period during which such Acquisition Party constitutes a Subsidiary of
the Borrower. For the purposes of illustration of the proviso to the preceding
sentence, if an Acquisition Party is acquired on March 31, 2000 and the ratio
contemplated by this clause (g) shall be determined for the period ending June
30, 2000, then such Acquisition Party's pro forma Cash Flow as it existed prior
to the acquisition for the quarters ending September 30, 1999, December 31, 1999
and March 31, 2000, together with such Acquisition Party's actual Cash Flow as a
Subsidiary of the Borrower for the quarter ending June 30, 2000, shall be taken
into account for the purposes of calculating this ratio.
(h) Proceeds. The Borrower shall use the proceeds of the Revolving Loans, the
Swing Line Loans and the Standby Letters of Credit for the Permitted Uses and
for no other purpose.
(i) Payment of Debts and Taxes. The Borrower and its Subsidiaries shall pay all
debts, liabilities, taxes, assessments and other governmental charges when due
in the ordinary course; provided, however, that no such debt, liability, tax,
assessment or other governmental charge need be paid if such is being contested
in good faith by appropriate legal proceedings promptly initiated and diligently
conducted and if such reserves or other appropriate provision, if any, as shall
be required by GAAP shall have been made therefor.
(j) Conduct of Business. The Borrower and its Subsidiaries shall continue to
engage in business of the same general type as now conducted by the Borrower or
such Subsidiary. The Borrower and its Subsidiaries will conduct and manage their
respective business and affairs in the ordinary course, and shall take all steps
necessary and reasonable for the purpose of preserving the value of their
respective business and assets.
(k) Preservation of Corporate Existence. Except as otherwise permitted pursuant
to Section 6.2(e) hereof, the Borrower and its Subsidiaries shall at all times
preserve and keep in full force and effect their respective corporate existence
and their respective rights, privileges, licenses and franchises which are
necessary in the normal conduct of their business.
(l) Books and Records. The Borrower and its Subsidiaries shall at all times keep
and maintain complete and accurate books, accounts and records of its operations
and affairs in accordance with customary and sound business practices, and shall
permit each Lender and the Agent and their respective officers, employees,
agents and representatives to, from time to time upon reasonable notice and
during normal business hours, have access to its place of business, examine such
books, accounts and records and make copies thereof (at such Lender's and the
Agent's expense unless an Event of Default has occurred and is continuing) and
discuss of Default" shall have occurred and be continuing, the Lenders and the
Agent and their respective representatives and advisors shall be permitted to
conduct more than one such examination and audit during any annual period, as
requested by the Lenders, and the costs and expenses of such additional
examinations and audits shall be for the account of the Borrower.
(m) Insurance. The Borrower and its Subsidiaries shall carry or cause to be
carried in full force and effect, with financially sound and reputable insurance
companies and in amounts reasonably satisfactory to the Bank, policies of
insurance on all their property and general liability insurance in such amounts
and covering such risks as is consistent with sound business practice for
companies similarly situated and in the same or similar businesses. Any
insurance may be subject to deductibility or similar clauses which, in effect,
result in self-insurance of certain losses, provided that such self-insurance
under the insurance referred to above is in accord with the general practices of
companies similarly situated and adequate insurance reserves are maintained in
connection with such self-insurance. Any policies of insurance carried in
accordance with this Section 6.1(m) and any policies taken out in substitution
or replacement for any such policies shall (i) in the case of insurance against
loss or damage to property of the Borrower or its Subsidiaries, name the Agent
as loss payee (the "Loss Payee"), (ii) in the case of public liability
insurance, name the Agent as additional insured (the "Additional Insured"),
(iii) provide that in the case of any policies that contain any condition,
warranty or declaration (other than the failure to pay premiums) which, if
breached or violated prior to a loss, would void the insurance or allow the
underwriters to avoid liability under the policy, the insurance under such
policies shall not be invalidated, in respect to the respective interests of the
Loss Payee and the Additional Insured in such insurance, by any action or
inaction of the Borrower or its Subsidiaries, and shall insure the Loss Payee's
and the Additional Insured's interests, regardless of any breach or violation of
any warranty, declaration or condition contained in such policies by the
Borrower or any of its Subsidiaries, (iv) provide that, if such insurance is
cancelled for any reason whatsoever, or any substantial change is made in the
policy which affects the coverage certified to the Agent, or if such insurance
is allowed to lapse for nonpayment of premium, such cancellation, change or
lapse shall not be effective as to the Loss Payee and the Additional Insured for
30 days after receipt by the Agent of written notice from such insurer of such
cancellation, change or lapse, (v) provide that neither the Loss Payee nor the
Additional Insured shall have any obligation or liability for premiums,
commissions, assessments or calls in connection with such insurance, (vi)
provide that the insurers waive (A) any rights to set-off, counterclaims or any
other deduction, whether by attachment or otherwise, which they may have against
the Loss Payee or the Additional Insured, and (B) any rights of subrogation
against the Loss Payee or any Additional Insured, (vii) be primary without right
of contribution from any other insurance which may be carried by the Loss Payee
or any Additional Insured, and (viii) in the case of public liability policies,
provide that all provisions of such insurance, except the limits of liability
(which shall be borne solely by the Borrower) shall operate in the same manner
as if there were a separate policy covering each named insured. The Borrower
will furnish to the Agent upon request full information as to all insurance
carried by the Borrower or any Subsidiary.
(n) Compliance with Laws. The Borrower and its Subsidiaries shall comply with
all applicable laws, rules, regulations and orders of any governmental or
regulatory body or authority, a breach of which could have a material adverse
effect on the financial condition or business of the Borrower and its
Subsidiaries taken as a whole.
(o) Lending Relationship with the Agent. The Borrower shall maintain its
principal banking relationship with the Agent and shall maintain with the Agent
the Borrower Account.
(p) Borrower Ownership of Subsidiaries. The Borrower will, at all times, either
directly or indirectly own all of the outstanding shares of each class of
capital stock (or other equity interests) of each Subsidiary thereof; provided,
however, that (i) as of the date hereof in the case of Hagler Bailly Services
(India) Ltd., the Borrower may own, directly or indirectly, not less than 74% of
such capital stock (or other equity interests) thereof and (ii) in the case of
any Foreign Subsidiary of the Borrower, not more than 5% of the capital stock
(or other equity interests) of such Foreign Subsidiary may be owned by directors
of such Foreign Subsidiary. So long as any Obligation remains outstanding, the
Borrower shall continue to consolidate the accounts of each its Foreign and
Domestic Subsidiaries on the consolidated financial statements of the Borrower.
(q) Notice of Default. The Borrower shall, promptly after becoming aware
thereof, deliver to each Lender and the Agent notice of any Event of Default and
Potential Event of Default, and such notice shall contain an express reference
to this Agreement and that such notice is a "notice of an Event of Default" or
"notice of Potential Event of Default," as the case may be.
(r) Notice of Environmental Claims. The Borrower shall deliver to each Lender
and the Agent a copy of any notice or other communication (i) alleging any
violation by the Borrower or its Subsidiaries of any laws or regulations
concerning the discharge of substances into the environment and other
environmental control matters or (ii) under which the Borrower or its
Subsidiaries shall admit to any such violation. Each copy of any such notice
shall be delivered to the Lenders and the Agent promptly following the receipt
or issuance thereof by the Borrower or such Subsidiary.
(s) Seniority. Under applicable laws in force from time to time, the claims and
rights of the Lenders and the Agent against each Credit Party under the Credit
Documents will not be subordinate to, and will rank senior in right of payment
to, the claims and rights of each other creditor of each Credit Party.
(t) Year 2000 Compliance. The Borrower will promptly notify the Agent in the
event the Borrower discovers or determines that any computer application
(including those of its suppliers and vendors) that is material to its or any of
its Subsidiaries' business and operations will not be Year 2000 Compliant on a
timely basis, except to the extent that such failure could not reasonably be
expected to have a material adverse effect upon the Borrower or such Subsidiary
taken as a whole.
(u) Maximum Available Amount. The Total Outstanding Amount shall not at any
time exceed the Maximum Available Amount.
(v) Pledge of Stock of Foreign Subsidiaries. (i) Upon the occurrence of any
Triggering Event pursuant to clause (a) thereof or (ii) at the written request
of the Agent to the Borrower upon the occurrence of any Triggering Event
pursuant to clause (b) or (c) thereof, the Borrower shall pledge or cause its
Subsidiary to pledge, as the case may be, within five (5) Business Days of the
occurrence of such Triggering Event or the Agent's request, as the case may be,
sixty-five percent (65%) of the outstanding shares of capital stock (or other
equity interests) of each Foreign Subsidiary as to which such Triggering Event
relates pursuant to one or more Pledge Agreements in favor of the Agent and for
the ratable benefit of the Lenders, which Pledge Agreements shall be accompanied
by such resolutions, incumbency certificates, stock powers and legal opinions as
are reasonably requested by the Agent and its counsel; provided, however, (A)
that if a Triggering Event pursuant to clause (b) thereof shall have occurred,
the Borrower shall, at the written request of the Agent, pledge or cause to be
pledged to the Agent sixty-five percent (65%) of the outstanding shares of
capital stock (or other equity interests) of such Foreign Subsidiaries which,
after giving effect to the pledge thereof, will result in Agent having a pledge
of such shares in respect of Foreign Subsidiaries of the Borrower selected by
the Agent whose revenues or profits comprise at least eighty percent (80%) of
the revenues or profits of all Foreign Subsidiaries of the Borrower, and (B)
that if a Triggering Event pursuant to clause (c) thereof shall have occurred,
the Borrower shall, at the written request of the Agent, pledge or cause to be
pledged to the Agent sixty-five percent (65%) of the outstanding shares of
capital stock (or other equity interests) of all Foreign Subsidiaries of the
Borrower.
(w) Execution of Subsidiary Security Agreements After the Effective Date. With
respect to each Domestic Subsidiary of the Borrower not a party to a Subsidiary
Security Agreement, at the written request of the Agent at any time following
the occurrence and continuance of an Event of Default or such Domestic
Subsidiary constituting a Material Domestic Subsidiary, the Borrower shall from
time to time cause each Domestic Subsidiary identified in the Agent's request to
execute and deliver in favor of the Agent, for the ratable benefit of the
Lenders, a Subsidiary Security Agreement not later than five (5) Business Days
following such request, which Subsidiary Security Agreement shall be accompanied
by such resolutions, incumbency certificates, financing statements (and other
documents or instruments as shall be reasonably required to perfect the security
interest created thereby) and legal opinions as are reasonably requested by the
Agent and its counsel.
Section 6.02. Negative Covenants. TC "Section 6.2Negative Covenants." \f C \l
"2" The Borrower covenants and agrees for itself and its Subsidiaries (in which
case the Borrower shall cause such Subsidiaries to take or refrain from taking
the actions described below), that, so long as this Agreement shall remain in
effect or any Obligation shall remain unpaid:
(x) Liens. The Borrower and its Subsidiaries shall not, directly or indirectly,
create, incur, assume, grant, pledge or permit to exist any Lien on the property
or assets of the Borrower and its Subsidiaries, taken as a whole, whether now
owned or hereafter acquired, or any income or profits therefrom, other than:
(i) any Lien (other than a Lien arising out of a purchase
money security interest) which, together with all such other similar
Liens, are no greater than $250,000;
(ii) any Lien which shall constitute a purchase money security
interest (excluding, for the purpose of this clause (ii), any purchase
money security interest Lien assumed in connection with the acquisition
of any Acquisition Party) which, together with all such other similar
Liens, are no greater than $1,000,000;
(iii) any Lien which shall constitute a purchase money
security interest and that is assumed in connection with the
acquisition of any Acquisition Party which, together with all such
other Liens, are no greater than $4,000,000.00 less the amount of all
unsecured indebtedness assumed, and all unsecured promissory notes (or
similar instruments) issued, by the Borrower or any Subsidiary thereof
in connection with the acquisition of any Acquisition Party permitted
hereunder; and
(iv) the Liens granted by or created under the Credit
Documents.
(b) Indebtedness. Neither the Borrower nor its Subsidiaries shall, directly or
indirectly, create, incur or assume, or otherwise become or remain directly or
indirectly liable with respect to, any indebtedness (including any
Indebtedness), other than:
(i) the Indebtedness incurred by the Borrower hereunder and
evidenced by the Revolving Notes, and the Swing Line Note and the
Indebtedness of the Guarantors under the Subsidiary Guarantee;
(ii) trade debt, operating leases, accounts payable and other
similar indebtedness incurred in the ordinary course of the Borrower's
or its Subsidiaries' business;
(iii) the Indebtedness evidenced by the Standby Letters of
Credit, if any, issued by the Issuing Lender in accordance with Section
2.3 hereof;
(iv) indebtedness of the type described in clause (ii) of
Section 6.2(a) which does not exceed (in the aggregate and as to the
Borrower and its Subsidiaries, taken as a whole) the amount set forth
in clause (ii) of Section 6.2(a);
(v) any guarantee, suretyship agreement or other similar
arrangement entered into by the Borrower or any Guarantor effecting the
assumption or guarantee of a debt or obligation of or the endorsement
of any promissory note or other instrument or obligation of, any
Guarantor or the Borrower, in each case provided the underlying
obligation so guaranteed is entered into in the ordinary course of the
Borrower's or such Guarantor's business and is necessary and beneficial
in connection with the operation thereof;
(vi) the indebtedness described on Schedule 6.2(b) hereof;
(vii) indebtedness of the type described in clause (iii) of
Section 6.2(a) hereof which does not exceed (in the aggregate and as to
the Borrower and its Subsidiaries, taken as a whole) $4,000,000.00 less
the amount of all unsecured indebtedness assumed, and all unsecured
promissory notes (or similar instruments) issued, by the Borrower or
any Subsidiary thereof in connection with the acquisition of any
Acquisition Party permitted hereunder; and
(viii) unsecured indebtedness assumed, and all unsecured
promissory notes (or similar instruments) issued, by the Borrower or
any Subsidiary thereof in connection with the acquisition of any
Acquisition Party permitted hereunder provided all such unsecured
indebtedness and unsecured promissory notes (or similar instruments) do
not exceed $4,000,000 less all purchase money security indebtedness
assumed by the Borrower or any Subsidiary thereof in connection with
the acquisition of any Acquisition Party permitted hereunder.
(c) Capital Stock. Without the prior written consent of the Required Lenders,
neither the Borrower nor any Subsidiary thereof shall, directly or indirectly,
repurchase, redeem or retire any of their capital stock, create new classes of
capital stock, issue any capital stock or Equity Rights in respect thereof,
declare or pay any dividends (whether in cash or property) on their capital
stock, except that the Borrower may:
(i) repurchase from time to time the capital stock of the
Borrower provided such repurchases do not, throughout the term of this
Agreement, exceed in the aggregate $5,000,000 and, provided further,
that after giving effect to any such repurchase, the Borrower shall be
in compliance with all provisions of this Agreement (including, without
limitation, all financial ratios contained in Section 6.1 hereof based
on the financial statements most recently provided by the Borrower to
the Lenders);
(ii) any Subsidiary of the Borrower may declare and pay
dividends or make other distributions on its capital stock provided the
proceeds thereof are received by the Borrower or any Guarantor;
(iii) issue securities authorized under stock incentive plans
described in the Borrower's Form 10-K or Proxy Statement; and
(iv) issue shares of common stock of the Borrower at fair
market value (or an average fair market value as determined by
reference to not more than a 30-day period prior to the date of
issuance of such common stock) pursuant to any registration statement
filed under the Securities Act or an exemption therefrom, except as
otherwise contemplated by clause (iii) above.
(d) Loan. Neither the Borrower nor any Subsidiary thereof shall, directly or
indirectly, make any loans or advances to any corporate officers or directors,
or any employees, or any insiders or affiliates (as defined in the Exchange Act)
or to any Subsidiary of the Borrower not a party to the Subsidiary Guarantee or
to any other Person, other than:
(i) travel, relocation and other salary advances made in the
ordinary course of the Borrower's or its Subsidiaries' business;
(ii) loans of the proceeds of the Revolving Loans and the
Swing Line Loans to any Domestic Subsidiary of the Borrower that is not
a party to the Subsidiary Guarantee for the purpose of financing the
acquisition of any Acquisition Party as contemplated by, and in
accordance with the limitations contained in, Section 6.2(e) hereof
(provided such Subsidiary shall have become a party to the Subsidiary
Guarantee in accordance with Section 6.2(g) hereof);
(iii) loans to any officer of the Borrower; provided that the
aggregate amount of all loans made pursuant to this clause and
outstanding from time to time shall not exceed $1,000,000.00;
(iv) loans to any Foreign Subsidiary of the Borrower if such
loans, together with all such other Foreign Subsidiary loans by the
Borrower and all other advances made by the Borrower to any Foreign
Subsidiary pursuant to Section 6.2(g) hereof, do not at any time exceed
$8,000,000.00; and
(v) loans or advances to any domestic joint venture company in
which the Borrower or any Subsidiary thereof owns at least one-third of
the equity interests therein provided the aggregate amount of all such
loans does not exceed $5,000,000.00.
(e) No Merger or Acquisition. Without the prior written consent of the Required
Lenders, neither the Borrower nor any Subsidiary thereof shall acquire, whether
by stock or asset purchase, merger, consolidation or other business combination,
any corporation, partnership, joint venture or other business organization (any
such entity, an "Acquisition Party"); provided, however, that the Borrower or
any direct or indirect Consolidated Subsidiary thereof may acquire, either by
way of stock or asset acquisition, merger, consolidation or otherwise, one or
more Acquisition Parties involved in a line of business similar to the line of
business of the Borrower if:
(i) the cash component of the Acquisition Consideration (which
shall consist of all cash, cash equivalents, promissory notes (or other
similar instruments) issued and the assumption of debt, as provided
therein) paid for all Acquisition Parties (including foreign
Acquisition Parties permitted pursuant to clause (vi) below) (A) during
the 12-month period commencing from the Effective Date shall not
exceed, in the aggregate, $40,000,000.00, and (B) during the period
commencing from the Effective Date and ending on the date on which all
of the Obligations hereunder shall have been paid in full shall not
exceed, in the aggregate, $50,000,000.00;
(ii) the cash component of the Acquisition Consideration
(which shall consist of all cash, cash equivalents, promissory notes
(or other similar instruments) issued and the assumption of debt, as
provided therein) paid for any individual Acquisition Party (whether in
one transaction or a series of related transactions) shall not exceed
$10,000,000.00;
(iii) the corporate headquarters of such Acquisition Party
shall be located in the continental United States of America unless
such Acquisition Party is a foreign Person and the acquisition thereof
is permitted by the terms of this Agreement;
(iv) such Acquisition Party's EBITDA shall, for the 12-month
period immediately preceding the acquisition of such Acquisition Party,
be greater than $0.00;
(v) the Borrower and its Subsidiaries shall, after giving
effect to the acquisition of any such Acquisition Party as provided
herein, be in compliance with all of the terms of this Agreement
including the financial covenants described in Sections 6.1(e), 6.1(f)
and 6.1(g) hereof, as determined on a pro-forma basis;
(vi) such acquisition, merger, consolidation (or otherwise) is
not hostile or pursued by way of tender offer, proxy contest or other
contested manner (unless the Required Lenders shall have waived in
writing compliance with this clause (vi));
(vii) during the term of this Agreement, Acquisition Parties
that are not organized under the laws of a state of the United States
of America or the District of Columbia may not be so acquired except to
the extent that the cash component of Acquisition Consideration (which
shall consist of all cash, cash equivalents, promissory notes (or other
similar instruments) issued and the assumption of debt, as provided
therein) paid for all such Acquisition Parties does not exceed
$8,000,000.00 (it being understood and agreed that such $8,000,000.00
shall at any time of determination be reduced by the amount of any loan
or advance made by the Borrower to any Foreign Subsidiary as permitted
by the provisions of Sections 6.2(d)(iv) and 6.2(g) hereof,
respectively);
(viii) such Acquisition Party shall have become a party to the
Subsidiary Guarantee pursuant to an instrument in writing satisfactory
to the Agent (unless such Acquisition Party shall, after giving effect
to the acquisition thereof, (A) constitute a Foreign Subsidiary, in
which case the entity acquiring the capital stock or other equity
interests of such Acquisition Party shall pledge to the Agent for the
benefit of the Lenders, pursuant to a pledge agreement satisfactory to
the Agent, not more than 65% of the issued and outstanding shares of
capital stock or other equity interests of such Acquisition Party to
the extent required by Section 6.1(v) hereof or (B) not constitute a
Material Domestic Subsidiary); and
(ix) five (5) Business Days prior to consummation thereof, the
Borrower shall have delivered to the Agent (which shall promptly
deliver a copy to the Lenders) a certificate, executed by an Authorized
Officer of the Borrower, demonstrating in sufficient detail compliance
with the financial covenants contained in this Section 6.2(e) and,
further, certifying that, after giving effect to the consummation of
such acquisition, merger, consolidation (or otherwise), the
representations and warranties of the Borrower contained herein will be
true and correct and that the Borrower, as of the date of such
consummation, will be in compliance with all other terms and conditions
contained herein.
Notwithstanding anything to the contrary contained in this Section 6.2(e), any
Subsidiary of the Borrower may merge with and into or consolidate with the
Borrower or any other Subsidiary of the Borrower, or the Borrower may cause the
dissolution or liquidation of any of its Subsidiaries; provided, that, after
giving effect to such merger, consolidation, dissolution or liquidation, (w) in
the case of any merger or consolidation with the Borrower, the Borrower shall be
the surviving entity, (x) in the case of any merger or consolidation of any
Subsidiary of the Borrower with any other such Subsidiary, the surviving entity
resulting therefrom shall have succeeded, by operation of law, contract or
otherwise, to all of the rights, properties, both real and personal, privileges
and franchises of the disappearing Subsidiary, (y) in the event such merged or
consolidated Subsidiary shall be a party to any Credit Document, the surviving
Subsidiary resulting from such merger or consolidation shall, by operation or
law, contract or otherwise and, at the request of any Lender, pursuant to an
agreement in writing, be bound by the agreements, covenants and other provisions
contained in each such Credit Document. to which the disappearing Subsidiary was
a party, and (z) in the event of the dissolution or liquidation of a Subsidiary,
the rights, properties, both real and personal, privileges and franchises
thereof shall be distributed or otherwise conveyed and transferred to the
Borrower or another Domestic Subsidiary thereof (unless the dissolved or
liquidating Subsidiary is a Foreign Subsidiary, in which case such rights,
properties, both real and personal, privileges and franchises may be distributed
or otherwise conveyed and transferred to another Foreign Subsidiary of the
Borrower).
(f) Fiscal Year. The Borrower and its Subsidiaries shall not, without the prior
written consent of the Required Lenders, make any material change in accounting
policies or reporting practices, including a change in their Fiscal Year.
(g) Advances to Subsidiaries and Affiliates. The Borrower shall not, without the
prior written consent of the Required Lenders, make any advances (either
directly or indirectly), whether such advances are made from the proceeds of the
Revolving Loans or Swing Line Loans or Standby Letters of Credit or otherwise,
to any of its Subsidiaries or Affiliates not a party to the Subsidiary Guarantee
unless such Subsidiary or Affiliate shall have entered into an agreement or
instrument (in form and substance acceptable to the Required Lenders) pursuant
to which such Subsidiary or Affiliate shall have agreed to be bound by all of
the terms, conditions, covenants and agreements contained in the Subsidiary
Guarantee and such Subsidiary or Affiliate shall have delivered such documents,
certificates and opinions as any Lender may reasonably request to implement such
agreement or instrument; provided, however, that the Borrower may make advances
to any Foreign Subsidiary without such Foreign Subsidiary being a party to the
Subsidiary Guarantee so long as the aggregate amount of all such advances to
such Foreign Subsidiaries, together with all loans made to such Foreign
Subsidiaries, do not exceed at any time $8,000,000.00; and, provided, further,
that the Borrower may make loans or advances to any joint venture in which the
Borrower or any Subsidiary thereof owns at least one-third of the equity
interests to the extent permitted by Section 6.2(d)(v) hereof. (h) Creation of
Subsidiaries. Neither the Borrower nor any Subsidiary thereof shall create or
cause to be formed any Subsidiary without the consent of the Required Lenders
unless such Subsidiary is a Consolidated Subsidiary of the Borrower and agrees
to be bound by the terms and conditions of the Subsidiary Guarantee pursuant to
an agreement of the type and to the extent described in clause (g) of this
Section 6.2 or such Subsidiary does not constitute a Material Domestic
Subsidiary; provided, however, that no Foreign Subsidiary so created or formed
shall be required to be a party to the Subsidiary Guarantee except to the extent
required by Sections 6.2(e)(viii) and 6.2(g) hereof.
(i) Disposition of Assets. Neither the Borrower nor any Subsidiary thereof
shall, without the prior written consent of the Required Lenders, sell, transfer
or otherwise dispose of (including by way of a sale and leaseback transaction)
any of its assets (whether real or personal) other than (i) in the ordinary and
usual course of its business for fair value in arm's-length transactions and, so
long as no Event of Default or Potential Event of Default has occurred and is
continuing, dispositions in a commercially reasonable manner of equipment which
has become redundant, worn out or obsolete or which should be replaced so as to
improve productivity, so long as the proceeds of any such disposition are (A)
used to acquire replacement equipment which has comparable or better utility and
equivalent or better value or (B) applied to repay the Obligations, and (ii) as
otherwise permitted by any other Credit Document.
(j) Permitted Investments. Neither the Borrower nor any Subsidiary thereof
shall, without the prior written consent of the Required Lenders, make any
investment in any security (whether consisting of debt or equity or a
partnership, limited liability company or other interest) or like instrument
except for Permitted Investments (it being understood and agreed that this
clause (j) shall not prohibit the acquisition of the securities of any
Acquisition Party to the extent permitted by the provisions of Section 6.2(e)
hereof).
ARTICLE VII.
EVENTS OF DEFAULT
Section 7.01. Events of Default. TC "Section 7.1 Events of Default." \f C \l "2"
If one or more of the following events or conditions (each, an "Event of
Default") shall occur and be continuing, that is to say:
(a) the Borrower defaults in the payment of principal of any Revolving Note when
due, or any Guarantor defaults in the observance or performance of any agreement
contained in Section 2 of the Subsidiary Guarantee; or
(b) the Borrower defaults in the payment of interest on any Revolving Loan or
Swing Line Loan, or of the Unused Portion Fee, the L/C Fee, the Administrative
Fee or of any other fee, expense or other amount payable hereunder after the
same becomes due and payable for more than two (2) Business Days after notice
thereof has been given by the Agent to the Borrower (which notice may be
telephonic); or
(c) the Borrower or any Subsidiary thereof defaults in any payment of principal
of or interest on, or fees and expenses relating to any other obligation for
borrowed money beyond any period of grace provided with respect thereto or in
the performance of any other agreement, term or condition contained in any
instrument or agreement evidencing, securing, guaranteeing or otherwise relating
to any such obligation and shall not have cured such default within any period
of grace provided by such agreement and such obligation, either individually or
in the aggregate, is for an amount in excess of $100,000.00; or
(d) any written representation or warranty made by any Credit Party in or
pursuant to this Agreement or any other Credit Document or in any other
documents, certificates, financial statements or reports furnished by any Credit
Party in connection with the transactions contemplated hereby shall prove to
have been false or misleading in any material respect as of the time made or
furnished; or
(e) the Borrower shall default in the performance or observance of any covenant,
condition or agreement contained in clause (c), (d), (i), (j), (k), (l), (m),
(r), (s) or (t) of Section 6.1 and such default shall remain unremedied for more
than ten (10) Business Days, or (ii) the Borrower shall default in the
performance or observance of any other covenant, condition or agreement
contained in Section 6.1 or any covenant, condition or agreement contained in
Section 6.2; or
(f) the Borrower shall default in the performance or observance of any other
covenant, condition or provision hereof or in any other Credit Document or any
other Credit Party shall default in the performance or observance of any
covenant, condition or provision in any other Credit Document (other than the
Subsidiary Guarantee) or any Guarantor shall default in the performance or
observance of any covenant, condition or provision in the Subsidiary Guarantee
(other than Section 2 thereof, as to which clause (a) of this Section 7.1
relates), as the case may be, and such default shall not be remedied within
thirty (30) days after written notice thereof is received by the Borrower or any
other Credit Party, as the case may be, from any Lender or the Agent; or
(g) a proceeding (other than a proceeding commenced by the Borrower or any
Subsidiary thereof, as the case may be) shall have been instituted in a court
having jurisdiction in the premises seeking a decree or order for relief in
respect of the Borrower or such Subsidiary in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or for the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Borrower or such Subsidiary
or for any substantial part of its total assets, or for the winding-up or
liquidation of its affairs and such proceedings shall remain undismissed or
unstayed and in effect for a period of thirty (30) consecutive days or such
court shall enter a decree or order granting the relief sought in such
proceeding; or
(h) the Borrower or any Subsidiary thereof, as the case may be, shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, shall consent to the entry of an order for relief in
an involuntary case under any such law, or shall consent to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Borrower or such Subsidiary or
for any substantial part of its total assets, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action in furtherance of any of the
foregoing; or
(i) a judgment or order shall be entered against the Borrower or any Subsidiary
thereof, by any court, and (i) in the case of a judgment or order for the
payment of money that has not been vacated, stayed or appealed (and bonded, if
required) within the time required by the terms of such judgment or order,
either (A) such judgment or order shall continue undischarged for a period of
fifteen (15) days in which the aggregate amount of all such judgments and orders
exceeds $100,000 or (B) enforcement proceedings shall have been commenced upon
such judgment or order, and (ii) in the case of any judgment or order for other
than the payment of money, such judgment or order could, in the reasonable
judgment of any Lender, together with all other such judgments or orders, have a
materially adverse effect on the Borrower and its Subsidiaries taken as a whole;
or
(j) the occurrence of a material adverse change in the financial condition,
properties, assets or results of operations of the Borrower and its Consolidated
Subsidiaries, taken as a whole; or
(k) any Termination Event shall occur with respect to any Benefit Plan, (ii) any
Accumulated Funding Deficiency, whether or not waived, shall exist with respect
to any Benefit Plan, (iii) any Person shall engage in any Prohibited Transaction
involving any Benefit Plan, (iv) the Borrower or any ERISA Affiliate shall be in
"default" (as defined in ERISA Section 4219(c)(5)) with respect to payments
owing to a Multiemployer Plan as a result of the Borrower's or any ERISA
Affiliate's complete or partial withdrawal (as described in ERISA Section 4203
or 4205) from such Multiemployer Plan, (v) the Borrower or any ERISA Affiliate
shall fail to pay when due an amount that is payable by it to the Pension
Benefit Guaranty Corporation or to a Benefit Plan under Title IV of ERISA, or
(vi) a proceeding shall be instituted by a fiduciary of any Benefit Plan against
the Borrower or any ERISA Affiliate to enforce ERISA Section 515 and such
proceeding shall not have been dismissed within 30 days thereafter, except that
no event or condition referred to in clauses (i) through (vi) shall constitute
an Event of Default if it, together with all other such events or conditions at
the time existing, has not had, and in the reasonable determination of the
Required Lenders will not have, a materially adverse effect on the Borrower and
its Subsidiaries, taken as whole; or
(l) if (i) the Borrower or any Subsidiary thereof shall be suspended or debarred
from contracting with the United States Government and such suspension or
debarment shall not have been lifted within fifteen (15) Business Days after the
imposition thereof, or (ii) the United States Government shall have terminated
any contract to which the Borrower or any Subsidiary thereof is a party and such
termination would have a material adverse effect upon the financial condition or
prospects of the Borrower and its Consolidated Subsidiaries, taken as a whole;
(m) the occurrence of a Change in Control or a Potential Change in Control;
(n) the Borrower Security Agreement, any Subsidiary Security Agreement or any
Pledge Agreement shall cease for any reason to be in full force and effect,
shall cease to be effective to grant a perfected security interest in the
collateral pledged thereunder with the priority stated to be created thereby or
shall be declared null and void by any Governmental Body, or the validity or
enforceability thereof shall be contested by any party thereto (other than the
Agent or any Lender) or any Credit Party shall deny that it has any further
liability or obligation thereunder; or
(o) the Subsidiary Guaranty shall cease for any reason to be in full force and
effect or shall be declared null and void by any Governmental Body, or the
validity or enforceability thereof shall be contested by any Guarantor, or any
Guarantor shall deny that it has any further liability or obligation under the
Subsidiary Guaranty; or
(p) any creditor of any Credit Party shall obtain possession of any of the
collateral pledged by any Credit Party in favor of the Agent by any means,
including, without limitation, levy, distraint, replevin or self-help, or any
such creditor shall establish or obtain any right in such which is equal to or
senior to the security interests of the Agent in such collateral; or
(q) the Agent or any Lender shall allege in writing that one or more Events of
Default have occurred and the Borrower shall have failed, after 15 [Business
Days] notice thereof from the Agent or such Lender, to provide reasonably
satisfactory evidence to the Agent and the Lenders that such Events of Default
have not in fact occurred;
then, and upon any such event, the Agent, with the consent of the Required
Lenders, may (1) upon notice to the Borrower, declare the entire outstanding
principal amount, if any, of the Revolving Notes, the Swing Line Note, any and
all accrued and unpaid interest thereon, the aggregate amount outstanding under
all Standby Letters of Credit, any and all accrued and unpaid Unused Portion Fee
and L/C Fee, and any and all other amounts payable by the Borrower to the
Lenders or the Agent under this Agreement or the Revolving Notes or the Swing
Line Note to be forthwith due and payable, whereupon the entire outstanding
principal amount, if any, of the Revolving Notes or the Swing Line Note,
together with any and all accrued and unpaid interest thereon, the aggregate
amount outstanding under all Standby Letters of Credit, any and all accrued and
unpaid Unused Portion Fee and L/C Fee, and any and all other such amounts, shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that in the event of the entry of an order for
relief with respect to the Borrower or any of its Subsidiaries under the
Bankruptcy Code, any principal amount of the Revolving Notes and the Swing Line
Note then outstanding, together with any and all accrued and unpaid interest
thereon, the aggregate amount outstanding under all Standby Letters of Credit,
any and all accrued and unpaid Unused Portion Fee and L/C Fee, and any and all
such other amounts shall thereupon automatically become and be due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by the Borrower; (2) terminate or reduce the Revolving
Loan Commitment and the Swing Line Subfacility; and (3) exercise any rights and
remedies available to it under any Credit Document or under applicable laws,
including without limitation any rights and remedies of a secured party under
the Uniform Commercial Code in effect in the Commonwealth of Virginia and under
any other applicable laws.
ARTICLE VIII.
THE AGENT
Section 8.01. Appointment of Agent. TC "Section 8.1 Appointment of Agent."
\f C \l "2"
(a) Appointment Generally. Each of the Lenders hereby designates and appoints
NationsBank, N.A. as the Agent of such Lender under this Agreement and the other
Credit Documents, and each of the Lenders hereby irrevocably authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and the other Credit Documents and to exercise such powers as are set forth
herein and therein, together with such other powers as are incidental thereto.
The Agent agrees to act as such on the express conditions contained in this
Article VIII.
(b) Agent Acts for Lenders. The provisions of this Article VIII are solely for
the benefit of the Agent and the Lenders, and the Borrower shall have no right
(including as third party beneficiary) to rely on or enforce any of the
provisions hereof. In performing its functions and other duties under this
Agreement and the other Credit Documents, the Agent shall act solely as agent
for the Lenders and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for the Borrower or
any of its Affiliates.
Section 8.02. Nature of Duties; Non-Reliance on Agent and other Lenders. TC
"Section 8.2 Nature of Duties; Non-Reliance on Agent and other Lenders." \f
C \l "2"
(a) The Agent shall not have any duties or responsibilities except those
expressly set forth in this Agreement or in the other Credit Documents. The
duties of the Agent shall be mechanical and administrative in nature. The Agent
shall not have, by reason of this Agreement or any other Credit Document, a
fiduciary relationship in respect of any Lender and is not a trustee for the
Lenders. Nothing in this Agreement or any of the other Credit Documents,
expressed or implied, is intended to or shall be construed to impose upon the
Agent any obligations in respect of this Agreement or any of the other Credit
Documents except as expressly set forth herein and therein. If the Agent seeks
the consent or approval of the Lenders to the taking or refraining from taking
of any action hereunder, the Agent shall send notice thereof to each Lender. The
Agent shall promptly notify each Lender at any time the Required Lenders or all
of the Lenders, as the case may be, have instructed the Agent to act or refrain
from acting pursuant hereto. The Agent may execute any of its duties hereunder
or under any other Credit Document by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.
(b) Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by the Agent or any
Affiliate thereof hereinafter taken, including any review of the affairs of the
Borrower or any Subsidiary thereof, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower and its Subsidiaries and made its own decision
to make its Revolving Loans and issue or participate in the issuance of Standby
Letters of Credit hereunder and enter into this Agreement and the other Credit
Documents to which it is a party. Each Lender covenants that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement or any other Credit Document to which it
is a party, and to make such investigations as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
conditions, prospects and creditworthiness of the Borrower and its Subsidiaries.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial and
other conditions, prospects or creditworthiness of the Borrower and its
Subsidiaries which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
Section 8.03. Rights, Exculpation, Etc. TC "Section 8.3 Rights, Exculpation,
Etc." \f C \l "2" Neither the Agent nor any of its Affiliates nor any of their
respective officers, directors, employees, agents, attorneys or consultants
shall be liable to any Lender for any action taken or omitted by it or such
Person hereunder or under any of the other Credit Documents, or in connection
herewith or therewith, except that (i) the Agent shall be obligated on the terms
set forth herein for performance of its express obligations hereunder, and (ii)
neither the Agent nor any such other Person shall have any liability hereunder
or under any other Credit Document except to the extent arising out of its own
gross negligence or willful misconduct (as determined by the final judgment of a
court of competent jurisdiction). The Agent shall not be liable for any
apportionment or distribution of payments made by it in good faith pursuant to
the terms of this Agreement and if any such apportionment or distribution is
subsequently determined to have been made in error the sole recourse of any
Lender to whom payment was due, but not made, shall be to recover from other
Lenders any payment in excess of the amount to which they are determined to have
been entitled. The Agent shall not be responsible to any Lender for any
recitals, statements, representations or warranties made by the Borrower or any
Subsidiary thereof in this Agreement or in any other Credit Document or in any
other document, certificate, report or financial statement delivered by the
Borrower or any Subsidiary thereof in connection herewith or therewith or for
the execution, effectiveness, genuineness, validity, enforceability,
collectibility, or sufficiency of this Agreement or any of the other Credit
Documents, or any of the transactions contemplated thereby, or for the financial
condition of the Borrower or any of its Subsidiaries. The Agent shall not be
required to make any inquiry concerning conditions of this Agreement or any of
the Credit Documents or the financial condition of the Borrower or its
Subsidiaries or the existence or possible existence of any Potential Event of
Default or Event of Default. The Agent may at any time request instructions from
the Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the other Credit Documents the Agent is permitted or
required to take or to grant, and if such instructions are promptly requested,
the Agent shall be absolutely entitled to refrain from taking any action or to
withhold any approval and shall not incur any liability whatsoever to any Person
for refraining from any action or withholding any approval under any of the
Credit Documents until it shall have received such instructions from the
Required Lenders or, to the extent specifically provided herein, all the Lenders
or unless it shall first be indemnified by the Lenders against any and all
liability and expense which may be incurred by it by reason of refraining to
take any action or withholding any approval. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting under this Agreement or any of the
other Credit Documents in accordance with the instructions of the Required
Lenders or, to the extent specifically provided herein, all the Lenders, and
such instructions shall be binding upon all Lenders (including their successors
and assigns).
Section 8.04. Reliance; Notice of Default. TC "Section 8.4 Reliance; Notice
of Default." \f C \l "2"
(a) The Agent shall be entitled to rely upon any written notice, statement,
certificate, order, letter, cablegram, telegram, telecopy, telex or teletype
message, statement or other document or any telephone message believed by it in
good faith to be genuine and correct and to have been signed or made by the
proper Person, and with respect to all matters pertaining to this Agreement or
any of the other Credit Documents and its duties hereunder or thereunder, upon
advice of legal counsel (including counsel for any Credit Party), independent
public accountants and other experts selected by it with reasonable care. The
Agent may deem and treat each Lender as the owner of its interests hereunder for
all purposes unless and until the Agent shall have received a duly executed
instrument of assignment as contemplated by Section 9.8(c) hereof and the other
conditions to assignment, to the extent applicable, shall have been satisfied.
(b) The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Event of Default or Potential Event of Default unless the Agent has
received notice from a Lender or the Borrower referring to this Agreement,
describing such Event of Default or Potential Event of Default and stating that
such notice is a "notice of Event of Default" of "notice of Potential Event of
Default", as the case may be. The Agent shall take such action with respect to
such Event of Default or Potential Event of Default as shall be reasonably
directed by the Required Lenders.
Section 8.05. Indemnification. TC "Section 8.5 Indemnification." \f C \l "2" To
the extent that the Agent is not reimbursed and indemnified by the Borrower or
the Borrower fails upon demand by the Agent to perform its obligations to
reimburse or indemnify the Agent, the Lenders will severally reimburse and
indemnify the Agent for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of this
Agreement or any of the other Credit Documents or any action taken or omitted by
the Agent under this Agreement or any of the other Credit Documents, in
proportion to each Lender's Pro Rata Share; provided, that no Lender shall be
liable for (i) any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct (as determined by the
final judgment of a court of competent jurisdiction) or (ii) the legal fees and
expenses incurred by the Agent in connection with the execution and delivery of
this Agreement and the other Credit Documents (to the extent not reimbursed by
the Borrower). The obligations of the Lenders under this Section 8.5 shall
survive the payment in full of the Revolving Loans and the termination of this
Agreement.
Section 8.06. The Agent Individually. TC "Section 8.6 The Agent Individually."
\f C \l "2" With respect to its Pro Rata Share hereunder and the Revolving
Loans, Standby Letters of Credit and any Swing Line Loan made by it, the Agent
shall have and may exercise the same rights and powers hereunder and is subject
to the same obligations and liabilities as and to the extent set forth herein
for any other Lender. The term "Lenders" or "Required Lenders" or any similar
terms shall, unless the context clearly otherwise indicates, include the Agent
in its individual capacity as a Lender. The Agent and its Affiliates may accept
deposits from, lend money to, and generally engage in any kind of banking, trust
or other business with the Borrower and its Subsidiaries as if it were not
acting as Agent pursuant hereto.
Section 8.07. Successor Agent; Resignation of Agent. TC "Section 8.7
Successor Agent; Resignation of Agent." \f C \l "2"
(a) The Agent may resign from the performance of its functions and duties
hereunder at any time by giving at least thirty (30) days' prior written notice
to the Lenders and the Borrower. In the event that the Agent gives notice of its
desire to resign from the performance of its functions and duties as Agent, any
such resignation shall take effect only upon the acceptance by a successor Agent
of appointment pursuant to clause (b) or (c) below.
(b) The Required Lenders shall jointly appoint a successor Agent, which shall be
a Lender hereunder.
(c) If a successor Agent shall not have been so appointed within said twenty
(20) day period, the retiring Agent shall then appoint a successor Agent who
shall serve as Agent until such time, if any, as the Lenders appoint a successor
Agent as provided above, it being understood and agreed that any successor Agent
so appointed by the retiring Agent pursuant to this clause (c) need not be,
notwithstanding the provisions of clause (b) above, a Lender hereunder so long
as such successor Agent is a commercial bank organized under the laws of the
United States of America or of any State thereof or of the District of Columbia
and has a combined capital and surplus of at least $400,000,000.00.
Upon the appointment of a successor Agent, the term "Agent" shall, for all
purposes of this Agreement and the other Credit Documents, thereafter include
such successor Agent, the retiring Agent shall be discharged from its duties and
obligations as Agent, as appropriate, under this Agreement and the other Credit
Documents and the successor Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent, except
that the retiring Agent shall reserve all rights as to obligations accrued or
due to it, in its capacity as such, at the time of such succession and all
rights (whenever arising) under Section 9.10 hereof.
Section 8.08. Certain Matters Requiring the Consent of all Lenders. TC "Section
8.8 Certain Matters Requiring the Consent of all Lenders." \f C \l "2" Subject
to the provisions of Section 8.9(ii) hereof, the consent of all the Lenders
shall be required for taking any of the following required or permitted actions
hereunder:
(i) any decrease or increase in any interest rate or margin
applicable to any Revolving Loan or Swing Line Loan or in any fee
payable hereunder, or change in the method of computing the interest
rate or margin applicable to any Revolving Loan or Swing Line Loan or
in any fee payable hereunder;
(ii) any change in the Maturity Date;
(iii) any increase in the Revolving Loan Commitment;
(iv) any change in the definition of Required Lenders;
(v) any assignment or delegation of the Borrower's Obligations and rights
hereunder;
(vi) any postponement of the date of payment of any principal,
interest or fees (other than any fee, if any, payable solely to the
Agent, which may be postponed or waived at the sole discretion of the
Agent) due hereunder;
(vii) the release of any collateral pledged by any Credit
Party under the Borrower Security Agreement, any Subsidiary Security
Agreement or any Pledge Agreement;
(viii) the release of any Guarantor from its obligations under the
Subsidiary Guarantee; and
(ix) any amendment, modification or waiver of this Section
8.8.
For the avoidance of doubt, all other actions, consents, waivers and amendments
permitted or required hereunder by the Lenders shall be by the Required Lenders
(unless such action, consent, waiver or amendment shall relate only to an
individual Lender, in which case such action may be taken by such Lender
individually).
Section 8.09. Defaulting Lenders Vote Not Counted. TC "Section 8.9 Defaulting
Lenders Vote Not Counted." \f C \l "2" Whenever the "Required Lenders" or "all
the Lenders" shall be required or permitted to take any action pursuant to the
provisions of any Credit Document, for so long as a Lender shall be in default
of its obligation to advance its Pro Rata Share of any Revolving Loan or, if
applicable, any Swing Line Loan or advance any other funds to the Agent or any
other Lender as required hereunder:
(i) until the earlier of the cure of such default and the
termination of the Revolving Loan Commitment, the term Required Lenders
for purposes of this Agreement shall mean Lenders (excluding all
Lenders whose default shall have not been cured) whose Pro Rata Shares
represent more than fifty percent (50%) of the aggregate Pro Rata
Shares of such Lenders; and
(ii) until the earlier of the cure of such default and the
termination of the Revolving Loan Commitment, the term "all the
Lenders" for purposes of this Agreement shall mean Lenders (excluding
all Lenders whose default shall have not been cured) whose Pro Rata
Shares represent one hundred percent (100%) of the aggregate Pro Rata
Shares of such Lenders.
ARTICLE IX.
MISCELLANEOUS
Section 9.01. Amendments and Waivers; Cumulative Remedies. TC "Section 9.1
Amendments and Waivers; Cumulative Remedies." \f C \l "2" No delay or failure of
any Lender or the Agent or the holder of any the Revolving Notes or the Swing
Line Note in exercising any right, power or privilege hereunder or under any
other Credit Document shall affect such right, power or privilege; nor shall any
single or partial exercise thereof or any abandonment or discontinuance of steps
to enforce such a right, power or privilege preclude any further exercise
thereof or of any other right, power or privilege. The rights and remedies of
any Lender or the Agent or any other holder of the Revolving Notes or the Swing
Line Note are cumulative and not exclusive of any rights or remedies which any
of them would otherwise have. Neither this Agreement or any other Credit
Document, nor any term, condition, representation, warranty, covenant or
agreement hereof or thereof, may be changed, waived, discharged or terminated
orally but only by an instrument in writing executed by the party against whom
such change, waiver, discharge or termination is sought. Any waiver, permit,
consent or approval of any kind or character (whether involving a breach,
default, provision, condition or term hereof or otherwise) on the part of any
Lender or the Agent or any other holder of any Revolving Note, the Swing Line
Note, or of the Borrower under this Agreement, or under any other Credit
Document shall be effective only in the specific instance and for the purpose
for which given and only to the extent set forth specifically in writing. No
notice or demand given hereunder shall entitle the recipient thereof to any
other or further notice or demand in similar or other circumstances.
Section 9.02. Survival of Representations and Warranties. TC "Section 9.2
Survival of Representations and Warranties." \f C \l "2" All representations,
warranties, covenants and agreements of the Borrower and the other Credit
Parties contained herein or made in writing in connection herewith shall survive
the execution and delivery of this Agreement and the other Credit Documents, the
making of Revolving Loans or Swing Line Loans hereunder and the issuance of the
Revolving Notes and the Swing Line Note.
Section 9.03. Supervening Illegality TC "Section 9.3 Supervening Illegality" \f
C \l "2" . If, after the date hereof, as the result of (i) the adoption of any
law, rule or regulation by any Governmental Body, (ii) any change in the
existing laws, rules and regulations of any Governmental Body, (iii) the
issuance of any order or decree by any Governmental Body, (iv) any change in the
interpretation or administration of any applicable law, rule, regulation, order
or decree by any Governmental Body (including any central bank or similar
agency) charged with the interpretations or administration thereof, or (v)
compliance by any Lender with any request or directive (whether or not having
the force of law) of any Governmental Body, it shall be unlawful or impossible
for such Lender to maintain or make any LIBOR Loan, then the obligation of such
Lender to maintain or make any LIBOR Loan or convert any ABR Loan to a LIBOR
Loan shall forthwith be cancelled and such Lender shall automatically convert
any outstanding LIBOR Loan to an ABR Loan. The Borrower shall pay to such
Lender, promptly upon demand, any additional amounts necessary to compensate
such Lender for any costs incurred by such Lender in making any conversion in
accordance with this Section 9.3 including, but not limited to, any interest or
fees payable by such Lender to lenders of funds obtained by it in order to make
or maintain the LIBOR Loans hereunder, and such Lender's notice to the Borrower
of such costs shall be conclusive and binding absent manifest error.
Section 9.04. No Reduction in Payments. TC "Section 9.4 No Reduction in
Payments." \f C \l "2" All payments due to the Lenders hereunder, and all other
terms, conditions, covenants and agreements to be observed and performed by the
Borrower hereunder, shall be made, observed or performed by the Borrower without
any reduction or deduction whatsoever, including any reduction or deduction for
any set-off, recoupment, counterclaim (whether sounding in tort, contract or
otherwise) or tax.
Section 9.05. Stamp Taxes. TC "Section 9.5 Stamp Taxes." \f C \l "2" The
Borrower, on behalf of itself and the other Credit Parties, agrees to pay, and
to save each Lender harmless from all liability for, any State or Federal stamp,
transfer, documentary or similar taxes, assessments or charges (herein "Stamp
Taxes"), and any penalties or interest with respect thereto, which may be
assessed, levied, collected or imposed by or upon such Lender, or otherwise
become payable by such Lender, in connection with the execution and delivery of
this Agreement or the other Credit Documents.
Section 9.06. Notices TC "Section 9.6 Notices" \f C \l "2" . Any notice,
statement, request or demand required or permitted hereunder to be in writing
may be given by telecopy, telex, cable or other customary means of electronic
communication or by registered or certified mail (return receipt requested) or
express courier, postage prepaid. All notices, statements, requests and demands
given to or made upon any party hereto in accordance with the provisions of this
Agreement shall be deemed to have been given or made(i) in the case of
telephonic notice (to the extent expressly permitted hereunder), when made, (ii)
in the case of notice delivered by overnight express courier, one Business Day
after the Business Day such notice was delivered to such courier, (iii) in the
case of notice delivered by first class mail, three Business Days after being
deposited in the mail, postage prepaid, return receipt requested, (iv) in the
case of notice by hand, when delivered, or (v) in the case of notice by any
customary means of telecommunication, when sent provided confirmation of receipt
or answer back has been received, in each case if addressed:
to the Borrower, to it at:
Hagler Bailly, Inc.
1530 Wilson Boulevard
Suite 400
Arlington, Virginia 22209
Attention: Glenn J. Dozier
Telephone: (703) 351-0338
Telecopy: (703) 528-3786
to the Agent, to it at:
NationsBank, N.A.
8300 Greensboro Drive
Suite 550
McLean, VA 22102
Attention: James W. Gaittens
Telephone: (703) 761-8022
Telecopy:(703) 761-8059
and if to any Lender, to it at its
address specified opposite its name
on the signature pages hereto.
or such other address for notice as any party hereto may designate for itself in
a notice to the other party, except in cases where it is expressly provided
herein that such notice, statement, request or demand shall not be effective
until received by the party to whom it is addressed.
Section 9.07. Governing Law. TC "Section 9.7 Governing Law." \f C \l "2" THIS
AGREEMENT AND THE OTHER CREDIT DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS UNDER
THE LAWS OF THE COMMONWEALTH OF VIRGINIA AND, FOR ALL PURPOSES, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
VIRGINIA WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES.
Section 9.08. Successors and Assigns; Participations; Assignments. TC
"Section 9.8 Successors and Assigns; Participations; Assignments." \f C \l
"2"
(a) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective permitted successors and
assigns of the parties hereto, provided that the Borrower may not assign or
transfer any of its interest hereunder without the prior written consent of all
the Lenders and the Agent.
(b) Participations. Any Lender may sell participation in all or any part of the
Revolving Loans made by it or its Commitment or any other interest herein or in
its Revolving Note or in any other document delivered or instrument delivered in
connection herewith to another bank or other entity. In the case of such
participation by a Lender, (i) the participant shall not have any rights under
this Agreement or the applicable Revolving Note or any other document or
instrument delivered in connection herewith (the participant's rights against
such Lender in respect of such participation to be those set forth in the
agreement executed by such Lender in favor of the participant relating thereto),
(ii) all amounts payable by the Borrower shall be determined as if such Lender
had not sold such participation and (iii) the Borrower shall continue to deal
directly with such Lender with respect to the transactions contemplated hereby.
(c) Assignments. Each Lender may assign any of its rights or interests under the
Credit Documents to one or more financial institutions, provided that:
(i) each such assignment shall be in an amount not less than
$10,000,000.00 (or such lesser amount if, after giving effect to such
assignment and all other assignments by such Lender occurring
substantially simultaneously therewith, such assigning Lender shall
hold no Commitment or any Revolving Loan or Swing Line Loan);
(ii) each such assignment by a Lender of its Commitment or
Revolving Loans or Swing Line Loans shall be made in such manner so
that the same portion of such Lender's Commitment, Revolving Loans,
Revolving Note, Swing Line Loans and Swing Line Note and obligations in
respect of any Standby Letter of Credit is assigned to the respective
assignee Lender;
(iii) the assigning Lender shall pay to the Agent a one-time fee in the
amount of $3,500.00; and
(iv) the Agent and, so long as no Event of Default shall have
occurred and be continuing, the Borrower shall have consented to such
assignment, which consent shall not be unreasonably withheld or
delayed.
Upon execution and delivery by the assignee to the Borrower and the Agent of an
instrument in writing pursuant to which such assignee agrees to be a "Lender"
hereunder (if not already a Lender) having the Commitment and Revolving Loans
and Swing Line Loans specified in such assignment, and upon the consent of the
Agent and, if applicable, the Borrower as provided above, the assignee shall
have, to the extent of such assignment, the rights, benefits and obligations of
a Lender hereunder holding the Commitment, Revolving Loans and Swing Line Loans
(or portions thereof) and Standby Letters of Credit or deemed participations
therein, as applicable, assigned to it pursuant to such assignment (in addition
to the Commitment, Revolving Loans and Swing Line Loans (or portions thereof)
and Standby Letters of Credit or deemed participations therein, as applicable,
theretofore held by such assignee), and the assigning Lender shall, to the
extent of such assignment, be relieved from its Commitment (or portion thereof)
and other obligations hereunder so assigned.
Section 9.09. Affirmative Rate of Interest Permitted by Law. TC "Section 9.9
Affirmative Rate of Interest Permitted by Law." \f C \l "2" Nothing in this
Agreement or in any Revolving Note or Swing Line Note shall require the Borrower
to pay interest to the Agent for the account of the Lenders at a rate exceeding
the maximum rate permitted by applicable law to be charged or received by the
Lenders, it being understood that this Section 9.9 is not intended to make the
criminal laws of any jurisdiction applicable in circumstances in which they
would not otherwise apply. If the rate of interest specified herein or in any
Revolving Note would otherwise exceed the maximum rate so permitted to be
charged or received with respect to any amounts outstanding hereunder or under
such Revolving Note, or Swing Line Note, the rate of interest required to be
paid to the Agent for the account of the Lenders shall be automatically reduced
to such maximum rate.
Section 9.10. Costs and Expenses; Indemnification. TC "Section 9.10 Costs and
Expenses; Indemnification." \f C \l "2" Without regard to whether the Effective
Date shall have come into existence or whether any Revolving Loan or Swing Line
Loan or Standby Letter of Credit shall have been made or issued hereunder, the
Borrower shall pay to each Lender and the Agent, as the case may be, and
reimburse each Lender and the Agent for, as the case may be, and save each
Lender and the Agent, as the case may be, harmless from, and indemnify each
Lender and the Agent, as the case may be, against, losses from:
(i) in the case of the Agent, (x) all out-of-pocket cost and
expenses of the Agent in connection with the preparation, execution,
delivery, waiver, modification, amendment, filing and recording of this
Agreement and any other Credit Document (to the extent applicable) and
any other document or instrument delivered in connection with the
transactions contemplated hereby, including, without limitation, the
reasonable fees and expenses of counsel for the Agent with respect
thereto, and (y) all out-of-pocket costs and expenses, if any
(including without limitation, reasonable counsel and advisor fees and
expenses), of such Agent in such capacity in connection with the
enforcement (whether through negotiations, legal proceedings or
otherwise) of or exercise of remedies under this Agreement and any
other Credit Document and any other document or instrument delivered in
connection with the transactions contemplated hereby, including, for
the avoidance of doubt and without limitation, reasonable counsel fees
and expenses in connection with the enforcement of rights under this
clause (i); and
(ii) in the case of any Lender, all out-of-pocket costs and
expenses, if any (including without limitation, reasonable counsel fees
and expenses), of such Lender in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of or
exercise of remedies under this Agreement and any other Credit Document
and any other document or instrument delivered in connection with the
transactions contemplated hereby, including, for the avoidance of doubt
and without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this clause (ii).
(a) The Borrower shall indemnify and hold harmless each Lender, the Agent and
their respective affiliates, officers, directors, employees, agents and advisors
(each, an "Indemnified Person") from and against, and pay and reimburse each
Indemnified Person for, any and all claims, damages, fines, penalties, losses,
liabilities, costs and expenses (including, without limitation, reasonable fees
and disbursements of counsel) which may be incurred by or asserted or awarded
against any Indemnified Person (i) arising out of or in connection with or by
reason of any investigation, litigation or proceeding (of whatever nature), or
the preparation of a defense of any investigation, litigation or proceeding,
relating to this Agreement, any other Credit Document, any other document or
instrument delivered in connection with the transactions contemplated hereby,
the proceeds of the Revolving Loans or Swing Line Loans any other transaction
contemplated hereby or thereby, and (ii) with respect to any environmental
matters, any environmental compliance expenses and remediation expenses, to the
extent required under any environmental law (whether statutory or common law) in
connection with the presence or suspected presence of any Hazardous Substance in
or into the air, soil, groundwater, surface water or improvements at, on, about,
under, or within any of the Borrower's or its current or former Subsidiaries'
present, past or future properties, or any portion thereof, or elsewhere in
connection with the transportation of Hazardous Substances to or from such
properties, and in the case of clause (i) or (ii) whether or not an Indemnified
Person is a party hereto or thereto and whether or not the Effective Date shall
have come into existence or any Revolving Loan or any Standby Letter of Credit
has been made or issued under this Agreement; provided, however, that the
Borrower shall have no obligation to indemnify or hold harmless any Indemnified
Person under this Section 9.10(b) to the extent arising out of such Indemnified
Person's gross negligence or willful misconduct.
(b) All amounts payable by the Borrower under this Section 9.10 shall be
immediately due upon written request by a Lender or the Agent, as the case may
be, for the payment thereof. The obligations of the Borrower under this Section
9.10 shall survive the repayment of the Revolving Notes and the Swing Line Note
and reimbursement for any Drawing under any Standby Letter of Credit.
Section 9.11. Set-Off; Suspension of Payment and Performance. TC "Section 9.11
Set-Off; Suspension of Payment and Performance." \f C \l "2" Each Lender and the
Agent is hereby authorized by the Borrower, at any time and from time to time,
without notice (a) to set off against, and to appropriate and apply to the
payment of, the liabilities of the Borrower then due under this Agreement and
any other Credit Document any and all liabilities owing by any Lender or the
Agent or any of their Affiliates to the Borrower (whether payable in Dollars or
any other currency, whether matured or unmatured and, in the case of liabilities
that are deposits (including, without limitation, any funds from time to time on
deposit in the Borrower Account or other account maintained with any Lender or
the Agent, whether general or special, time or demand and however evidenced and
whether maintained at a branch or office located within or without the United
States), and (b) during any Event of Default, to suspend the payment and
performance of such liabilities owing by such Person or its Affiliates and, in
the case of liabilities that are deposits, to return as unpaid for insufficient
funds any and all checks and other items drawn against such deposits.
Section 9.12. Judicial Proceedings; Waiver of Jury Trial. TC "Section 9.12
Judicial Proceedings; Waiver of Jury Trial." \f C \l "2" Any judicial proceeding
brought against the Borrower with respect to any Credit Agreement Related Claim
may be brought in any court of competent jurisdiction in the Commonwealth of
Virginia, and, by execution and delivery of this Agreement, the Borrower (a)
accepts, generally and unconditionally, the nonexclusive jurisdiction of such
courts and any related appellate court and irrevocably agrees to be bound by any
judgment rendered thereby in connection with any Credit Agreement Related Claim
and (b) irrevocably waives any objection it may now or hereafter have as to the
venue of any such proceeding brought in such a court or that such a court is an
inconvenient forum. The Borrower hereby waives personal service of process and
consents that service of process upon it may be made by certified or registered
mail, return receipt requested, at its address specified or determined in
accordance with the provisions of Section 9.6 of this Agreement, and service so
made shall be deemed completed on the earlier of (x) the receipt thereof and (y)
if sent by registered or certified mail (return receipt requested), the fifth
(5th) Business Day after such service is deposited in the mail. Nothing herein
shall affect the right of any Lender, the Agent or any other Indemnified Person
to serve process in any other manner permitted by law or shall limit the right
of any Lender, the Agent or any other Indemnified Person to bring proceedings
against the Borrower in the courts of any other jurisdiction. Any judicial
proceeding by the Borrower against any Lender or the Agent involving any Credit
Agreement Related Claim shall be brought only in a court located in the
Commonwealth of Virginia. THE BORROWER AND THE LENDERS AND THE AGENT HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING ANY CREDIT AGREEMENT RELATED CLAIM.
Section 9.13. Integration. TC "Section 9.13 Integration." \f C \l "2" This
Agreement and the other Credit Documents and, when executed, the Autoborrow
Services Agreement constitute the entire agreement of the Agent, the Lenders,
the Borrower and the other Credit Parties with respect to the subject matter
hereof and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Credit
Documents.
Section 9.14. Further Acts and Assurances. TC "Section 9.14 Further Acts and
Assurances." \f C \l "2" The Borrower shall, and shall cause the Credit Parties
to promptly and duly execute and deliver to a Lender or the Agent, as the case
may be, and to such other persons as such Lender or the Agent shall reasonably
designate, such further instruments and shall take such further action as may be
required by law or as such Lender or the Agent may from time to time request in
order more effectively to carry out and accomplish the intent and purpose of
this Agreement and the other Credit Documents and to establish and protect the
rights and remedies created or intended to be created in favor of the Agent or
any Lender hereunder or under any other Credit Document.
Section 9.15. No Fiduciary Relationship. TC "Section 9.15 No Fiduciary
Relationship." \f C \l "2" The Borrower acknowledges that no provision of this
Agreement or in any of the other Credit Documents, and no course of dealing
between any Lender or the Agent and the Borrower, or any other Credit Party,
shall be deemed to create any fiduciary duty by the Agent or any Lender to the
Borrower or any other Credit Party.
Section 9.16. Severability. TC "Section 9.16 Severability." \f C \l "2" The
provisions of this Agreement are severable, and if any clause or provision of
this Agreement shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such clause or provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability of such clause or provision in
any other jurisdiction or the remaining provisions hereof in any jurisdiction.
Section 9.17. Counterparts. TC "Section 9.17 Counterparts." \f C \l "2" This
Agreement may be executed in any number of counterparts and by different parties
hereto on separate counterparts, each complete set of which, when so executed
and delivered by all parties, shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 9.18. Headings, Bold Type and Table of Contents. TC "Section 9.18
Headings, Bold Type and Table of Contents." \f C \l "2" The section headings,
subsection headings, and bold type used herein and the Table of Contents hereto
have been inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed this Agreement as of the day and year
first above written.
BORROWER
HAGLER BAILLY, INC.
By:_/s/ Glenn J. Dozier_______________
Name: Glenn J. Dozier
Title: Senior Vice President
and Chief Financial Officer
AGENT
Address: NATIONSBANK, N.A.
8300 Greensboro Drive By:_____________________________
Fifth Floor Name: James W. Gaittens
McLean, Virginia 22102 Title: Senior Vice President
Attention: Mr. James W. Gaittens
Telephone: (703) 761-8022
Telecopier: (703) 761-8059
LENDERS
NATIONSBANK, N.A.
By: /s/ James W. Gaittens__________
Name: James W. Gaittens
Title: Senior Vice President
Address:
8300 Greensboro Drive
Fifth Floor
McLean, Virginia 22102
Attention: Mr. James W. Gaittens
Telephone: (703) 761-8022
Telecopier: (703) 761-8059
<PAGE>
Exhibit A to Revolving Credit Agreement
Form of Borrower Security Agreement has
been intentionally omitted. See Security Agreement executed by Hagler
Bailly, Inc. in the form of the Borrower Security Agreement attached to
the Revolving Credit Agreement as Exhibit A
<PAGE>
Exhibit B to
Revolving Credit Agreement
INTENTIONALLY DELETED
<PAGE>
Exhibit C to
Revolving Credit Agreement
Form of Revolving Note has been
intentionally omitted. See Revolving Note
executed by Hagler Bailly, Inc. in the form
of the Revolving
<PAGE>
Exhibit D to
Revolving Credit Agreement
Form of Subsidiary Guarantee has
been intentionally omitted. See Subsidiary Guarantee
by those Domestic Subsidiaries of Hagler Bailly, Inc.
constituting, as of November 20, 1998,
Material Domestic Subsidiaries in the
form of the Subsidiary Guarantee attached
to the Revolving Credit Agreement as Exhibit D
<PAGE>
Schedule I to
The Revolving Credit Agreement
Name of Lender Commitment (in Dollars)
NationsBank, N.A. $50,000,000.00
<PAGE>
Schedule 5.5
Litigation
1. Hagler Bailly's indirect subsidiary, Theodore Barry & Associates, is a
defendant in a lawsuit brought in the United States District Court for the
Northern District of Illinois, Michael A. Laros v. Theodore Barry &
Associates, No. 95-C4175, by one of its former executives seeking payment
of a bonus and salary allegedly due him and payment of principal and
interest on a subordinated note of TB&A held by him, prejudgment interest
and costs and fees.
2. Apogee Research, Inc. ("Apogee"), one of Hagler Bailly's wholly owned
subsidiaries, has received a subpoena from the Office of the Inspector
General of the Environmental Protection Agency (the "EPA") requesting
records from April 1993 through October 1995 pertaining to a contract
between Apogee and the EPA. The work under this contract has been
completed. The subpoena was served in connection with an EPA investigation
relating to the submission of potential false statements and false claims
under the contract.
3. A former employee of Hagler Bailly, Inc. has filed a claim with the
Arlington County Human Rights Commission against the Company alleging
discrimination in relation to her termination.
4. HB Capital, Inc., a wholly owned subsidiary of the Company, is seeking the
payment of approximately $133,000 in fees and a success fee from
Engineering Power Systems Group, Inc. ("EPS") in connection with the
financing of a barge mounted power system in Case No. 1998 ST.J. No. 3233,
Supreme Court of Newfoundland, Trial Division. EPS has filed a
counterclaim against HB Capital, Inc. in this case. No specific dollar
amount of damages is claimed in the counterclaim.
<PAGE>
Schedule 5.6
Defaults
None.
<PAGE>
<TABLE>
<CAPTION>
Schedule 5.12
Subsidiaries
Book Value
of Total Shares of Cap Incorporation
Name Assets of Stock O/S Ownership
Material
Domestic
Type Subsidiaries
of as of
Subsidiary 9/30/98
<S> <C> <C> <C> <C> <C> <C>
1. Hagler Bailly Texas, Inc. Domestic -0- Texas 100 100% (4)
2. Hagler Bailly Consulting France, S.A. Foreign $1,314,547 France 10,000 100% (1)*
3. Hagler Bailly Indonesia, Inc. Foreign $1,346,828 Delaware 100 100% (1)
4. PT Hagler Bailly Indonesia Foreign -0- Indonesia 150,000 100% (2)
5. Hagler Bailly Consulting, Ltd. Foreign 522,883 Ireland 1,000,000 100% (1)
6. TB&A Group, Inc. Material Domestic $7,005,623 Delaware 1,000 100% (3)
7. Theodore Barry & Associates Material Domestic $9,203.368 California 10,648 100% (7)
8. Apogee Research, Inc. Domestic -0- Maryland 1,000 100% (3)
9. Apogee Research International Ltd. Foreign $704,285 Canada 100 100% (6)
10. Izsak, Grapin et Associes, S.A.R.L. Foreign $2,386,985 France 2,500 100% (3)
11. Hagler Bailly, S.A. Foreign $518,163 Argentina 12,000 100% (1&8)
12. Estudio Q Ingenieros Asociados S.R.L. Foreign -0- Argentina 12,000 100% (3)
13. Estudio Q S.A. Foreign $430,788 Argentina 12,000 100% (3)
14. Hagler Bailly Services, Inc. Material Domestic $20,962,178 Delaware 100 100% (3)
15. Hagler Bailly Consulting, Inc. Material Domestic $6,939,134 Delaware 100 100% (3)
16. HB Capital, Inc. Material Domestic $387,450 Delaware 100 100% (3)
17. HB Capital Securities, Inc. Material Domestic -0- Delaware 1,000 100% (9)
18. Private Label Energy Services, Inc. Material Domestic $1,000,000 Delaware 100 100% (9)
19. Hagler Bailly Services (India) Ltd. Foreign -0- India 125,000 74% (1)
20. Hagler Bailly Armenia Foreign $34,359 Delaware 0 100% (1)
21. Hagler Bailly Pakistan (Private) Ltd. Foreign -0- Pakistan 40,000 25% (1)+
22. Putnam, Hayes & Bartlett, Inc. Material Domestic $29,238,015 Massachusetts 1,000 100% (3)
23. Putnam, Hayes & Bartlett - Asia Pacific Ltd Foreign $3,951,522 New Zealand 20,000 100% (5)
24. Putnam, Hayes & Bartlett - Asia Pacific Foreign $1,804,506 Australia 150,000 100% (5)
Pty Ltd
25. Hagler Bailly International S.A. Foreign -0- Belgium 2,000 50% (1)++
26. ZAO Hagler Bailly Foreign -0- Russia 0 100% (1)
27. Core Management Systems Ltd Foreign -0- New Zealand 100 100% (10)
28. Fieldston Publications, Inc. Domestic $189,656 Maryland 100 100% (3)
- --------------------------------------------------
Shares owned by six (6) individuals
+ Seventy-five percent (75%) of shares owned by three (3) individuals ++ Fifty
percent (50%) of shares owned by RCG International, Inc .
</TABLE>
<PAGE>
(1) Hagler Bailly Services, Inc.
(2) Hagler Bailly Indonesia, Inc.
(3) Hagler Bailly, Inc.
(4) Hagler Bailly Consulting, Inc.
(5) Putnam, Hayes & Bartlett, Inc.
(6) Apogee Research, Inc.
(7) TB&A Group, Inc.
(8) Estudio Q Ingenieros Asociados S.R.L.
(9) HB Capital, Inc
(10) Putnam, Hayes & Bartlett - Asia Pacific Ltd
<PAGE>
Schedule 5.14
Real Property
None.
<PAGE>
Schedule 6.2(b)
Certain Indebtedness
1. A Standby letter of credit issued in the amount of $12,121.00 by State
Street Bank and Trust Company in favor of Superintencia De Electricita,
Government of Bolivia.
<PAGE>
SCHEDULES
Schedule I -- Commitments TC "Schedule I -- Commitments" \f C \l "1"
Schedule 5.5 -- Litigation TC "Schedule 5.5 -- Litigation" \f C \l "1"
Schedule 5.6 -- Defaults TC "Schedule 5.6 -- Defaults" \f C \l "1"
Schedule 5.12 -- Subsidiaries TC "Schedule 5.12 -- Subsidiaries" \f C \l
"1"
Schedule 5.14 -- Real Property TC "Schedule 5.14 -- Real Property" \f C \l
"1"
Schedule 6.2(b) -- Certain Indebtedness TC "Schedule 6.2(b) -- Certain
Indebtedness" \f C \l "1"
EXHIBIT 10.32
REVOLVING NOTE
U.S.$50,000,000.00 Dated: November 20, 1998
FOR VALUE RECEIVED, the undersigned, HAGLER BAILLY, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay on
the Maturity Date to the order of NATIONSBANK, N.A. (the "Lender"), and its
successors and assigns, the principal amount of the lesser of (x) FIFTY MILLION
UNITED STATES DOLLARS ($50,000,000.00) and (y) the aggregate amount of Revolving
Loans made by the Lender to the Borrower pursuant to the Agreement (as
hereinafter defined) and remaining outstanding on such date. Capitalized terms
used (but not defined) in this Revolving Note shall have the meanings given to
them in the Agreement (as hereinafter defined).
The Borrower promises to pay interest from the initial Funding
Date of such Revolving Loans until the Maturity Date on the principal amount of
this Revolving Note from time to time outstanding at the rate, and in the
manner, prescribed in the Agreement. Any principal amount of, or any interest
accrued on, this Revolving Note which is not paid on the date due shall bear
interest from such due date until paid in full at the Default Rate. In no event
shall the rate of interest borne by this Revolving Note at any time exceed the
maximum rate of interest permitted at that time under applicable law.
Payments of the principal amount of and interest on this
Revolving Note shall be made in lawful money of the United States of America to
the Lending Office of the Agent on behalf of the Lender as provided in the
Agreement.
This Revolving Note is one of the Revolving Notes referred to
in the Revolving Credit Agreement, dated as of November 20, 1998 (as the same
may from time to time be amended, modified or supplemented, the "Agreement"),
between the Lender, the other lenders from time to time a party thereto, if any,
the Borrower and NationsBank, N.A., as Agent. The Lender is entitled to the
rights and benefits of the Agreement and the other Credit Documents, and the
Agent, for the benefit of the Lender, is entitled to the benefits provided under
the Borrower Security Agreement, the Subsidiary Security Agreements, any Pledge
Agreement and the Subsidiary Guarantee. The Agreement, among other things,
contains provisions for optional and mandatory prepayments on account of the
principal of this Revolving Note by the Borrower and for acceleration of the
maturity of this Revolving Note upon the terms and conditions therein specified.
THIS REVOLVING NOTE IS BEING ISSUED IN THE COMMONWEALTH OF
VIRGINIA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO THE CONFLICTS OF
LAWS PRINCIPLES.
HAGLER BAILLY, INC.
By:_/s/ Glenn J. Dozier_______________
Name: Glenn J. Dozier
Title: Senior Vice President
and Chief Financial Officer
EXHIBIT 10.33
1
SWING LINE NOTE
U.S.$5,000,000.00 Dated: November 20, 1998
FOR VALUE RECEIVED, the undersigned, HAGLER BAILLY, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay on
the Maturity Date to the order of NATIONSBANK, N.A. (the "Lender"), and its
successors and assigns, the principal amount of the lesser of (x) FIVE MILLION
UNITED STATES DOLLARS ($5,000,000.00) and (y) the aggregate amount of Swing Line
Loans made by the Lender to the Borrower pursuant to the Agreement (as
hereinafter defined) and remaining outstanding on such date. Capitalized terms
used (but not defined) in this Swing Line Note shall have the meanings given to
them in the Agreement (as hereinafter defined).
The Borrower promises to pay interest from the initial Funding
Date of such Swing Line Loans until the Maturity Date on the principal amount of
this Swing Line Note from time to time outstanding at the rate, and in the
manner, prescribed in the Agreement. Any principal amount of, or any interest
accrued on, this Swing Line Note which is not paid on the date due shall bear
interest from such due date until paid in full at the Default Rate. In no event
shall the rate of interest borne by this Swing Line Note at any time exceed the
maximum rate of interest permitted at that time under applicable law.
Payments of the principal amount of and interest on this Swing
Line Note shall be made in lawful money of the United States of America to the
Lending Office of the Agent on behalf of the Lender as provided in the
Agreement.
This Swing Line Note is the Swing Line Note referred to in the
Revolving Credit Agreement, dated as of November 20, 1998 (as the same may from
time to time be amended, modified or supplemented, the "Agreement"), between the
Lender, the other lenders from time to time a party thereto, if any, the
Borrower and NationsBank, N.A., as Agent. The Lender is entitled to the rights
and benefits of the Agreement and the other Credit Documents, and the Agent, for
the benefit of the Lender, is entitled to the benefits provided under the
Borrower Security Agreement, the Subsidiary Security Agreements, any Pledge
Agreement and the Subsidiary Guarantee. The Agreement, among other things,
contains provisions for optional and mandatory prepayments on account of the
principal of this Swing Line Note by the Borrower and for acceleration of the
maturity of this Swing Line Note upon the terms and conditions therein
specified.
<PAGE>
THIS SWING LINE NOTE IS BEING ISSUED IN THE COMMONWEALTH OF
VIRGINIA AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO THE CONFLICTS OF
LAWS PRINCIPLES.
HAGLER BAILLY, INC.
By: /s/ Glenn J. Dozier
Name: Glenn J. Dozier
Title: Senior Vice President
and Chief Financial Officer
<PAGE>
EXHIBIT 10.34
<PAGE>
1565244
SUBSIDIARY GUARANTEE
SUBSIDIARY GUARANTEE, dated as of November 20, 1998 (this "Guarantee"),
is made by each of the entities that are signatories hereto (the "Guarantors")
in favor of NATIONSBANK, N.A., as Agent (in such capacity, the "Agent") for the
lenders and other financial institutions (the "Lenders") that are from time to
time parties to the Revolving Credit Agreement described below.
W I T N E S S E T H:
WHEREAS, HAGLER BAILLY, INC., a Delaware corporation (the "Company"),
is party to the Revolving Credit Agreement, dated as of November 20, 1998, among
the Company, the Lenders and the Agent (as amended, supplemented or otherwise
modified from time to time, the "Revolving Credit Agreement");
WHEREAS, pursuant to the terms of the Revolving Credit Agreement and
the other Credit Documents, the Lenders have severally agreed to make extensions
of credit in the form of Revolving Loans, Swing Line Loans and Standby Letters
of Credit to or for the benefit of the Company;
WHEREAS, except as set forth in the Revolving Credit Agreement or the
schedules attached thereto, the Company owns, directly or indirectly, all of the
issued and outstanding shares of capital of stock of, or other equity interests
in, each of the Guarantors;
WHEREAS, the proceeds of such Revolving Loans, Swing Line Loans and
Standby Letters of Credit may be used to enable the Company to make valuable
transfers to any or all of the Guarantors in connection with the operation of
their respective businesses and for the Permitted Uses;
WHEREAS, each Guarantor will derive substantial direct and indirect
benefit from such Revolving Loans, Swing Line Loans and Standby Letters of
Credit; and
WHEREAS, the obligation of the Lenders to make the Revolving Loans,
Swing Line Loans and issue the Standby Letters of Credit is conditioned upon,
among other things, the execution and delivery by each of the Guarantors of a
guarantee to the Agent for the benefit of the Agent and for the ratable benefit
of the Lenders;
NOW, THEREFORE, in consideration of the premises, the commercial
benefits accruing to each Guarantor and to induce the Lenders to enter into the
Revolving Credit Agreement and to make the Revolving Loans and the Swing Line
Loans and to issue the Standby Letters of Credit, each Guarantor hereby agrees
with and for the benefit of the Agent and the Lenders as follows:
SECTION 1. Defined Terms. As used in this Guarantee, terms defined in
the Revolving Credit Agreement (unless otherwise defined herein) are used herein
as therein defined, and the following terms shall have the following meanings
(such meanings to be, when appropriate, equally applicable to both the singular
and plural forms of the terms defined):
"Agent" shall have the meaning specified in the preamble hereof.
"Guarantee" shall have the meaning specified in the preamble hereof.
"Guarantors" shall have the meaning specified in the preamble hereof.
"Lenders" shall have the meaning specified in the preamble hereof.
"Maximum Guaranteed Amount" for any Guarantor shall mean the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating to
the insolvency of debtors.
"Revolving Credit Agreement" shall have the meaning specified in the first
whereas clause hereof.
SECTION 2. Guarantee.
(a) Each of the Guarantors hereby, jointly and severally, absolutely,
unconditionally and irrevocably guarantees to the Agent and the Lenders and
their respective successors, indorsees, transferees and assigns the prompt and
complete payment by the Company when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, and each Guarantor further agrees
to pay any and all expenses (including, without limitation, all reasonable fees
and disbursements of counsel) which may be paid or incurred by the Agent or any
Lender in enforcing, or obtaining advice of counsel in respect of, any rights
with respect to, or collecting, any or all of the Obligations and/or enforcing
any rights with respect to, or collecting against, such Guarantor under this
Guarantee; provided, however, that, notwithstanding anything to the contrary
contained herein or in any other Credit Document, the maximum liability of each
Guarantor hereunder and under the other Credit Documents shall in no event
exceed such Guarantor's Maximum Guaranteed Amount. This Guarantee constitutes a
present and continuing guarantee of payment and performance when due and not of
collection, and each of the Guarantors, as a primary obligor and not as a
surety, specifically agrees that no Guarantor shall be entitled to require that
the Agent or any Lender exercise any right, assert any claim or demand,
foreclose against or enforce any remedy whatsoever against the Company (or any
other Person) before or as a condition to the obligations of such Guarantor
hereunder. Each Guarantor hereby acknowledges that it is fully aware of the
terms and conditions and has received a copy of each Credit Document to which it
or any other Credit Party is a party and is fully aware of the transactions
contemplated thereby.
(b) Each Guarantor agrees that the Obligations may at any time and from time to
time exceed the Maximum Guaranteed Amount of such Guarantor or of all of the
Guarantors without impairing this Guarantee or affecting the rights and remedies
of the Agent and the Lenders hereunder.
(c) No payment or payments made by the Company, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Agent or any
Lender from the Company, any of the Guarantors, any other guarantor or any other
Person by virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Obligations shall be deemed to modify, reduce, release or otherwise affect
the liability of any Guarantor hereunder which shall, notwithstanding any such
payment or payments other than payments made by such Guarantor in respect of the
Obligations or payments received or collected from such Guarantor in respect of
the Obligations, remain liable for the Obligations up to its Maximum Guaranteed
Amount until such time as the Obligations are paid in full, no Standby Letters
of Credit are outstanding or not fully cash collateralized and the Commitments
are terminated.
(d) Each Guarantor agrees that whenever, at any time or from time to time, it
shall make any payment to the Agent or any Lender on account of its liability
hereunder, it will notify the Agent in writing that such payment is made under
this Guarantee for such purpose.
SECTION 3. Right of Contribution. Each Guarantor hereby agrees
that to the extent that a Guarantor shall have paid more than its proportionate
share of any payment made hereunder, such Guarantor shall be entitled to seek
and receive contribution from and against any other Guarantor hereunder who has
not paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 5 hereof.
The provisions of this Section 3 shall in no respect limit the obligations and
liabilities of any Guarantor to the Agent and the Lenders, and each Guarantor
shall remain liable to the Agent and the Lenders for the full amount guaranteed
by such Guarantor hereunder.
SECTION 4. Right of Set-off. Upon the occurrence and during
the continuance of any Event of Default specified in the Revolving Credit
Agreement, each Guarantor hereby irrevocably authorizes each Lender at any time
and from time to time without notice to such Guarantor or any other Guarantor,
any such notice being expressly waived by each Guarantor, to set-off and
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender to or
for the credit or the account of such Guarantor, or any part thereof, in such
amounts as such Lender may elect, against and on account of the obligations and
liabilities of such Guarantor to such Lender hereunder and claims of every
nature and description of such Lender against such Guarantor, in any currency,
whether arising hereunder, under the Revolving Credit Agreement, the Revolving
Notes, the Swing Line Note, the Standby Letters of Credit or otherwise under any
other Credit Document, as such Lender may elect, whether or not the Agent or any
Lender has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. Each Lender agrees to
notify such Guarantor promptly of any such set-off and the application made by
such Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may have.
SECTION 5. Subrogation, etc. Notwithstanding any payment or
payments made by any of the Guarantors hereunder or any set-off or application
of funds of any of the Guarantors by any Lender, no Guarantor shall exercise any
of the rights of the Agent or any Lender which the Guarantor may acquire by way
of subrogation, by any payment made hereunder, by reason of such set-off or
application of funds or otherwise, against the Company or any other Guarantor or
any collateral security or guarantee or right of set-off held by any Lender for
the payment of the Obligations, nor shall any Guarantor seek or be entitled to
seek any contribution or reimbursement from the Company or any other Guarantor
in respect of payments made by such Guarantor hereunder, until all amounts owing
to the Agent and the Lenders by the Company on account of the Obligations are
paid in full, no Standby Letters of Credit are outstanding or not fully cash
collateralized and the Commitments are terminated. If any amount shall be paid
to any Guarantor on account of such subrogation or reimbursement rights at any
time when all of the Obligations shall not have been paid in full, any Standby
Letter of Credit shall be outstanding or not fully cash collateralized or the
Commitments shall not have been terminated, such amount shall be held by such
Guarantor in trust for the Agent and the Lenders, segregated from other funds of
such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned
over to the Agent in the exact form received by such Guarantor (duly indorsed by
such Guarantor to the Agent, if required), to be applied against the
Obligations, whether matured or unmatured, in such order as required by the
applicable Credit Documents.
SECTION 6. Amendments, etc. with respect to the Obligations;
Waiver of Rights. Each Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of rights against any Guarantor
and without notice to or further assent by any Guarantor, (i) any demand for
payment of any of the Obligations made by the Agent or any Lender may be
rescinded by such party and any of the Obligations continued, (ii) the
Obligations, or the liability of any other party upon or for any part thereof,
may, from time to time, in whole or in part, be renewed, extended, amended,
modified, accelerated, compromised, waived, surrendered or released by the Agent
or any Lender, (iii) the Revolving Credit Agreement, the Revolving Notes, the
Swing Line Note, the other Credit Documents, any Standby Letter of Credit and
any other collateral security document or other guarantee or document in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Agent and/or any Lender may deem advisable from time to
time, and (iv) any collateral security, guarantee or right of set-off at any
time held by the Agent or any Lender for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. Neither the Agent nor any
Lender shall have any obligation to protect, secure, perfect or insure any Lien
at any time held by it as security for the Obligations or for this Guarantee or
any property subject thereto. When making any demand hereunder against any of
the Guarantors, the Agent or any Lender may, but shall be under no obligation
to, make a similar demand on the Company or any other Guarantor or guarantor,
and any failure by the Agent or any Lender to make any such demand or to collect
any payments from the Company or any such other Guarantor or guarantor or any
release of the Company or such other Guarantor or guarantor shall not relieve
any of the Guarantors in respect of which a demand or collection is not made or
any of the Guarantors not so released of their several obligations or
liabilities hereunder, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Agent or any Lender against
any of the Guarantors. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings. EACH GUARANTOR EXPRESSLY
AND IRREVOCABLY WAIVES THE BENEFITS AFFORDED TO IT UNDER SECTIONS 49-25 AND
49-26 OF THE CODE OF VIRGINIA (1950), AS AMENDED, OR ANY SIMILAR STATUTE OR
COMMON LAW.
SECTION 7. Guarantee Absolute and Unconditional. Each
Guarantor waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of reliance by the
Agent or any Lender upon this Guarantee or acceptance of this Guarantee. The
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, annexed or waived, in reliance
upon this Guarantee, and all dealings between the Company or any of the
Guarantors and the Agent or any Lender shall likewise be conclusively presumed
to have been had or consummated in reliance upon this Guarantee. Each Guarantor
waives diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon the Company or any of the Guarantors with respect to
the Obligations or this Guarantee. Each Guarantor understands and agrees that
this Guarantee shall be construed as a continuing, absolute and unconditional
guarantee of payment, and not of collection, without regard to (whether or not
the Guarantor or the Company shall have any knowledge or notice of any of the
following) (a) the validity, regularity or enforceability of the Revolving
Credit Agreement, the Revolving Notes, the Swing Line Note, the Standby Letters
of Credit, any of the other Credit Documents, any of the Obligations or any
other collateral security therefore or guarantee or right of set-off with
respect thereto at any time or from time to time held by the Agent or any
Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
the Company against the Agent or any Lender, (c) any termination, amendment or
modification of, or deletion from, or addition or supplement to, or other change
in any of the Credit Documents or any other instrument or agreement applicable
to any of the parties to such agreements, or any furnishing or acceptance of
additional security, or any release of, exchange or action with respect to any
security, for the obligations of the Company under the Credit Documents, or the
failure of any security or the failure of any Person to perfect any interest in
any collateral security; (d) any exercise, nonexercise or waiver of any right,
remedy, power or privilege under or in respect of any Credit Document or any
obligation or liability contained therein or any failure to mitigate damages
under any Credit Document or any waiver of any such right, remedy, power or
privilege or any failure to give any notice (including notice of an Event of
Default) to any Credit Party; (e) any extension of time for payment of any
Obligation, or of the time for performance of any other obligations, covenants
or agreements under or arising out of any Credit Document, or the extension or
the renewal of any thereof; and (f) any other law, rule, regulation, event,
condition or circumstance whatsoever (with or without notice to or knowledge of
the Company or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Company for the Obligations,
or of such Guarantor under this Guarantee (or of a guarantor or surety in
general), in bankruptcy or in any other instance. When pursuing its rights and
remedies hereunder against any Guarantor, the Agent and any Lender may, but
shall be under no obligation to, pursue such rights and remedies as it may have
against the Company or any other Person or against any collateral security or
guarantee for the Obligations or any right of set-off with respect thereto, and
any failure by the Agent or any Lender to pursue such other rights or remedies
or to collect any payments from the Company or any such other Person or to
realize upon any such collateral security or guarantee or to exercise any such
right of set-off, or any release of the Company or any such other Person or any
such collateral security, guarantee or right of set-off, shall not relieve such
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
Agent or any Lender against such Guarantor. This Guarantee shall remain in full
force and effect and be binding in accordance with and to the extent of its
terms upon each Guarantor and the successors and assigns thereof, and shall
inure to the benefit of the Agent and the Lenders, and their respective
successors, indorsees, transferees and assigns, until all the Obligations and
the obligations of each Guarantor under this Guarantee shall have been satisfied
by payment in full, no Standby Letter of Credit shall remain outstanding or not
fully cash collateralized and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Revolving Credit
Agreement the Company may be free from any Obligations.
SECTION 8. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated automatically, as the case maybe, if at any time
payment, or any part thereof, of any of the Obligations is rescinded or must
otherwise be restored or returned by the Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Company or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made. If an event permitting the
declaration of default under a Credit Document shall at any time have occurred
and be continuing, and such declaration of default shall at such time be
prevented by reason of the pendency against the Company or any other Person of a
case or proceeding under a bankruptcy or insolvency law, each Guarantor agrees
that, for purposes of this Guarantee and its obligations hereunder, such Credit
Document shall be deemed to have been declared in default with the same effect
as if such Credit Document had been enforceable in accordance with the terms
thereof, and each Guarantor shall forthwith pay the amounts specified by the
Agent or any Lenders to be paid thereunder, any interest thereon and any other
amounts guaranteed hereunder without further notice or demand.
SECTION 9. Payments; Execution and Delivery Taxes. Each
Guarantor hereby guarantees that payments hereunder will be paid to the Agent
without set-off or counterclaim in U.S. Dollars at the office of the Agent
located at NationsBank, N.A., Kay Finlaw-Creel, VA-200-05-02, 8300 Greensboro
Drive, Suite 550, McLean, VA 22102, or such other office of the Agent in the
United States of America as the Agent may from time to time designate to the
Guarantors by written notice.
SECTION 10. Representations and Warranties. Each Guarantor hereby
represents and warrants that:
(a) such Guarantor is a corporation, limited liability company
or partnership, as the case may be, duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
corporate, limited liability company or partnership power and authority and the
legal right to own and operate its property, to lease the property it operates
and to conduct the business in which it is currently engaged;
(b) such Guarantor has the corporate, limited liability
company or partnership power and authority and the legal right to execute and
deliver, and to perform its obligations under this Guarantee, and has taken all
necessary corporate, limited liability company or partnership action to
authorize its execution, delivery and performance of this Guarantee;
(c) this Guarantee constitutes the legal, valid and binding
obligations of such Guarantor enforceable against such Guarantor in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law);
(d) the execution, delivery and performance by such Guarantor
of this Guarantee will not violate any certificate of incorporation, by-laws or
other charter or formation documents, or any applicable law, rule or regulation
or any contract, agreement or instrument (including agreements or instruments of
indebtedness) applicable to or binding upon such Guarantor;
(e) no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Body and no consent of any
other Person (including, without limitation, any stockholder or creditor of such
Guarantor) is required in connection with the execution, delivery, performance,
validity or enforceability by or against such Guarantor of this Guarantee; and
(f) there is no action, suit, investigation or proceeding by
or before any court, administrative agency or other governmental authority
pending or, to the knowledge of such Guarantor, threatened which involves any of
the transactions contemplated by this Guarantee or would affect materially the
ability (financial or otherwise) of such Guarantor to perform its obligations
hereunder.
Each Guarantor agrees that the foregoing representations and warranties
shall be deemed to have been made by such Guarantor on each Funding Date by the
Company under the Revolving Credit Agreement on and as of such Funding Date as
though made hereunder on and as of such Funding Date.
SECTION 11. Severability. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 12. Section Headings. The Section headings used in this Guarantee
are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
SECTION 13. No Waiver; Cumulative Remedies. Neither the Agent nor any
Lender shall, by any act (except by a written instrument pursuant to Section 14
hereof), delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any default or Event of
Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Agent or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Agent or any Lender of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Agent or such Lender would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
SECTION 14. Integration; Waivers and Amendments; Successors and
Assigns; Governing Law. This Guarantee represents the agreement of each
Guarantor with respect to the subject matter hereof and there are no promises or
representations by the Agent or any Lender relative to the subject matter hereof
not reflected herein. None of the terms or provisions of this Guarantee may be
waived, amended or supplemented or otherwise modified except by a written
instrument executed by each Guarantor and the Agent, provided that any provision
of this Guarantee may be waived by the Agent in a letter or agreement executed
by the Agent or by telex or facsimile transmission from the Agent. This
Guarantee shall be binding upon the successors and permitted assigns of each
Guarantor and shall inure to the benefit of the Agent and the Lenders and their
respective successors and assigns. THIS GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
VIRGINIA, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 15. Notices. All notices, requests and demands to or upon the
Guarantors or the Agent or any Lender to be effective shall be in writing or by
telecopy and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made (i) in the case of telephonic notice (to the extent
expressly permitted hereunder), when made, (ii) in the case of notice delivered
by overnight express courier, one Business Day after the Business Day such
notice was delivered to such courier, (iii) in the case of notice delivered by
first class mail, three Business Days after being deposited in the mail, postage
prepaid, return receipt requested, (iv) in the case of notice by hand, when
delivered, or (v) in the case of notice by any customary means of
telecommunication, when sent provided confirmation of receipt or answer back has
been received, in each case if addressed, in the case of the Agent and the
Lenders, to such party at the address provided for such party in section 9.6 of
the Revolving Credit Agreement or, in the case of the Guarantors, addressed to
such party as specified in Schedule I hereto.
SECTION 16. Counterparts. This Guarantee may be executed by one or more of
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
SECTION 17. Acknowledgement. Each Guarantor hereby confirms its agreement
with sections 9.15 and 9.13 of the Revolving Credit Agreement.
SECTION 18. Submission To Jurisdiction; Waivers. Any judicial
proceeding brought against any Guarantor with respect to this Guarantee or the
transactions contemplated hereby may be brought in any court of competent
jurisdiction in the Commonwealth of Virginia, and, by execution and delivery of
this Guarantee, each Guarantor (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Guarantee or the transactions contemplated hereby and (b) irrevocably
waives any objection it may now or hereafter have as to the venue of any such
proceeding brought in such a court or that such a court is an inconvenient
forum. Each Guarantor hereby waives personal service of process and consents
that service of process upon it may be made by certified or registered mail,
return receipt requested, at its address specified or determined in accordance
with the provisions of Section 15 hereof, and service so made shall be deemed
completed on the earlier of (x) the receipt thereof and (y) if sent by
registered or certified mail (return receipt requested), the fifth (5th)
Business Day after such service is deposited in the mail. Nothing herein shall
affect the right of any Lender or the Agent to serve process in any other manner
permitted by law or shall limit the right of any Lender or the Agent to bring
proceedings against any Guarantor in the courts of any other jurisdiction. Any
judicial proceeding by any Guarantor against any Lender or the Agent involving
this Guarantee or the transactions contemplated hereby shall be brought only in
a court located in the Commonwealth of Virginia. THE GUARANTORS AND THE LENDERS
AND THE AGENT HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH
THEY ARE PARTIES INVOLVING THIS GUARANTEE OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 19. Authority of Agent. Each Guarantor acknowledges that the
rights and responsibilities of the Agent under this Guarantee with respect to
any action taken by the Agent or the exercise or non-exercise by the Agent of
any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Guarantee shall, as between the Agent
and the Lenders, be governed by the Revolving Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Agent and such Guarantor, the Agent shall be conclusively
presumed to be acting as Agent for the Lenders with full and valid authority so
to act or refrain from acting, and neither such Guarantor, the Company nor any
other Guarantor shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.
Hagler Bailly Services, Inc.
By: /s/ Glenn J. Dozier
Name: Glenn J. Dozier
Title: Senior Vice President
and Chief Financial Officer
Hagler Bailly Consulting, Inc.
By: /s/ Glenn J. Dozier
Name: Glenn J. Dozier
Title: Senior Vice President
and Chief Financial Officer
HB Capital, Inc.
By: /s/ Glenn J. Dozier
Name: Glenn J. Dozier
Title: Senior Vice President
and Chief Financial Officer
Putnam, Hayes & Bartlett, Inc.
By: /s/ W. Robson Googins
Name: W. Robson Googins
Title: Senior Vice President
And Treasurer
TB&A Group, Inc.
By: /s/ Glenn J. Dozier
Name: Glenn J. Dozier
Title: Senior Vice President
and Chief Financial Officer
Theodore Barry & Associates
By: /s/ Karin Cropper
Name: Karin Cropper
Title: Secretary and Treasurer
Private Label Energy Services, Inc.
By: /s/ Glenn J. Dozier
Name: Glenn J. Dozier
Title: Senior Vice President
and Chief Financial Officer
Fieldston Publications, Inc.
By: /s/ Glenn J. Dozier
Name: Glenn J. Dozier
Title: President
<PAGE>
SCHEDULE I TO
SUBSIDIARY GUARANTEE
Addresses of Guarantors
Notices may be provided to each Guarantor by Addressing the Guarantor
by its name, care of:
HAGLER BAILLY, INC.
1530 Wilson Boulevard
Suite 400
Arlington, Virginia 22209
Attn: Glenn J. Dozier
Telephone: 703-351-0338
Telecopier: 703-528-3786
EXHIBIT 10.35
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FORM OF
SECURITY AGREEMENT
dated as of November 20, 1998
between
HAGLER BAILLY, INC.,
as Debtor
and
NATIONSBANK, N.A.,
as Agent
-------------------------------------------------------------------------
<PAGE>
25
FORM OF
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of November 20, 1998 (as
amended, supplemented or modified from time to time, the "Security Agreement"),
is made by HAGLER BAILLY, INC., a Delaware corporation (the "Debtor"), and
NATIONSBANK, N.A., a national banking association (the "Agent") in its capacity
as Agent for the lenders (the "Lenders") from time to time a party to the
Revolving Credit Agreement, dated as of November 20, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Revolving Credit
Agreement"), by and among the Debtor, the Agent, in its capacity as such
thereunder, and the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Revolving Credit Agreement, the
Lenders have severally agreed to make available to the Debtor a revolving line
of credit for Revolving Loans, Swing Line Loans and Standby Letters of Credit in
an aggregate principal amount at any time not to exceed the Maximum Available
Amount, subject to the terms and conditions contained therein; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective Revolving Loans and Swing Line Loans to, and
the Issuing Lender to issue the Standby Letters of Credit for the account of,
the Debtor under the Revolving Credit Agreement that the Debtor shall have
executed and delivered this Security Agreement to the Agent for the ratable
benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and to induce the Lenders to make their
respective Revolving Loans and Swing Line Loans to, and the Issuing Lender to
issue the Standby Letters of Credit for the account of, the Debtor under the
Revolving Credit Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Debtor hereby
agrees with the Agent, for the ratable benefit of the Lenders, as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions Generally. Capitalized terms used herein
without definition shall have the respective meanings specified in the Revolving
Credit Agreement, and the following terms shall have the following meanings
(such meanings to be, when appropriate, equally applicable to both the singular
and plural forms of the terms defined):
"Account Debtor" shall mean, with respect to any Receivable or
Other Intangible, any Person obligated to make payment thereunder, including
without limitation any account debtor thereon.
"Assignment of Claims Act" shall mean the Assignment of Claims Act of 1940,
31 U.S.C. 3727, 41 U.S.C. 15 (1986), as the same may be
amended and any successor statute of similar import.
"Assignment of Federal Contract" shall have the meaning
specified in Section 4.21 hereof.
"Cash Collateral Account" shall have the meaning specified in
Section 2.4 hereof.
"Collateral" shall have the meaning set forth in Section 2.1.
"Debtor" shall have the meaning specified in the preamble hereof.
"Equipment" shall mean all equipment now owned or hereafter
acquired by the Debtor, including all items of machinery, equipment, furnishings
and fixtures of every kind, whether affixed to real property or not, as well as
all automobiles, trucks and vehicles of every description, trailers, handling
and delivery equipment, fittings, special tools, all additions to, substitutions
for, replacements of or accessions to any of the foregoing, all attachments,
components, parts (including spare parts) and accessories whether installed
thereon or affixed thereto and all fuel for any thereof.
"Federal Contract" means any contract or agreement with,
involving or for the benefit of the United States of America or any department,
agency or instrumentality thereof (collectively, the "U.S. Government"), whether
now existing or hereafter arising, in each case as the same may be amended,
modified or otherwise supplemented from time to time.
"Inventory" shall mean all inventory now owned or hereafter
acquired by the Debtor, including (i) all goods and other personal property
which are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
(ii) all inventory, wherever located, evidenced by negotiable and non-negotiable
documents of title, warehouse receipts and bills of lading, (iii) all of the
Debtor's rights in, to and under all purchase orders now owned or hereafter
received or acquired by it for goods or services and (iv) all rights of the
Debtor as an unpaid seller, including rescission, replevin, reclamation and
stopping in transit.
"Lenders" shall have the meaning specified in the preamble hereof
"Obligations" shall mean any and all now existing or hereafter
arising indebtedness, obligations, liabilities and covenants of each Credit
Party to any Lender, the Agent, their respective Affiliates, successors and
assigns and any other Indemnified Person under or arising out of any Credit
Document, including without limitation (i) all Revolving Loans and all Swing
Line Loans together with interest thereon and all Standby Letters of Credit,
(ii) all fees, expenses, indemnity payments and other amounts due or to become
due under the Revolving Credit Agreement, the Revolving Notes, the Swing Line
Note or any other Credit Document, (iii) all liabilities and obligations under
the Subsidiary Guarantee and any other agreement executed by any Credit Party
guarantying the obligations of the Borrower under the Revolving Credit Agreement
or any other Credit Document, (iv) all liabilities and obligations under any
agreement providing collateral for any of the foregoing (including any Pledge
Agreement and the Subsidiary Security Agreements), and (v) and any agreement or
instrument refinancing or restructuring all or any portion of the obligations
and liabilities under any of foregoing or under any successor agreement or note,
in each case whether direct or indirect, absolute or contingent or due or to
become due.
"Other Intangibles" shall mean all accounts, accounts
receivable, contract rights, documents, instruments, notes, chattel paper,
money, indemnities, warranties and general intangibles now owned or hereafter
acquired by the Debtor including, without limitation, all goodwill, customer
lists, permits, federal and state tax refunds, reversionary interests in pension
plan assets, Patents, Trademarks, licenses, copyrights and other rights in
intellectual property, other than Receivables.
"Patents" shall mean all letters patent of the United States
or any other country, and all applications for letters patent of the United
States or any other country, in which the Debtor may now or hereafter have any
right, title or interest and all reissues, continuations, continuations-in-part
or extensions thereof.
"Proceeds" shall mean all proceeds, including (i) whatever is
received upon any collection, exchange, sale or other disposition of any of the
Collateral and any property into which any of the Collateral is converted,
whether cash or non-cash, (ii) any and all payments or other property (in any
form whatsoever) made or due and payable on account of any insurance, indemnity,
warranty or guaranty payable to the Debtor with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever) made or due and
payable in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person, corporation, agency, authority or
other entity acting under color of any governmental authority) and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables" shall mean all accounts now or hereafter owing
to the Debtor, and all accounts receivable, contract rights, documents,
instruments or chattel paper representing amounts payable or monies due or to
become due to the Debtor, arising from the sale of Inventory or the rendition of
services in the ordinary course of business or otherwise (whether or not earned
by performance), together with all Inventory returned by or reclaimed from
customers wherever such Inventory is located, and all guaranties, securities and
liens held for the payment of any such account, account receivable, contract
right, document, instrument or chattel paper.
"Security Agreement" shall have the meaning specified in the preamble hereof.
"Trademarks" shall mean all right, title or interest which the
Debtor may now or hereafter have in any or all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source of business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and all applications in
connection therewith, including without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or political subdivision thereof and all reissues, extensions or
renewals thereof.
"UCC" shall mean the Uniform Commercial Code in effect on the
date hereof in the Commonwealth of Virginia.
"U.S. Government" has the meaning specified in the definition of Federal
Contract contained herein.
Section 1.02. UCC Definitions. The uncapitalized terms "account",
"account debtor", "chattel paper", "contract right", "document", "warehouse
receipt", "bill of lading", "document of title", "instrument", "inventory",
"general intangible", "money", "security", "certificated security",
"uncertificated security", "financial asset" and "proceeds" as used in Section
1.1 or elsewhere in this Security Agreement shall have the respective meanings
set forth in the UCC.
ARTICLE II.
SECURITY INTERESTS
Section 2.01. Grant of Security Interests. To secure the due and punctual
payment of all Obligations, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing or due or
to become due, whether at maturity or upon acceleration or otherwise, in
accordance with the terms thereof and to secure the due and punctual performance
of all of the Obligations and in order to induce the Agent and the Lenders to
enter into the Revolving Credit Agreement and the other Credit Documents, the
Debtor hereby pledges, assigns, delivers, conveys and transfers to the Agent,
for the ratable benefit of the Lenders, and grants to the Agent, for the ratable
benefit of the Lenders, a first priority and continuing security interest in and
lien on, all of the Debtor's right, title and interest in, to and under the
following, whether now existing or hereafter acquired (the "Collateral"):
(i) all Receivables;
(ii) all Other Intangibles;
(iii) all Equipment;
(iv) all Inventory;
(v) to the extent not included in the foregoing, all securities (whether
certificated or uncertificated) and all financial assets, whether now existing
or hereafter arising, including, without limitation, all capital stock issued by
any Person and held by Debtor, and all partnership interests, whether in the
nature of a joint venture, limited liability company member's interest, master
limited partnership, teaming arrangement or otherwise;
(vi) to the extent not included in the foregoing, all other personal property,
whether tangible or intangible, and wherever located whether within or outside
of the United States, including, but not limited to, the balance of every
deposit account now or hereafter existing of the Debtor with any bank or other
financial institution and all monies of the Debtor and all rights to payment of
money of the Debtor;
(vii) to the extent not included in the foregoing, all books, ledgers and
records and all computer programs, tapes, discs, punch cards, data processing
software, transaction files, master files and related property and rights
(including computer and peripheral equipment) necessary or helpful in enforcing,
identifying or establishing any item of Collateral; and
(viii) to the extent not otherwise included, all Proceeds and products of any or
all of the foregoing, whether existing on the date hereof or arising hereafter;
provided, however, notwithstanding anything to the contrary contained herein,
the Debtor is not assigning, pledging or otherwise encumbering under this
Security Agreement its interests in any Federal Contract to which it is a party,
or in accounts or receivables due to Debtor under such Federal Contract, to the
extent, but only to the extent, such assignment, pledge or other encumbrance
would breach or violate or would cause Debtor to breach or violate such Federal
Contract or statutes or regulations applicable thereto, it being understood that
this proviso does not apply to, or in any way limit, Debtor's assignment, pledge
or encumbrance of Proceeds of all Federal Contracts to which it is a party.
Section 2.02. Continuing Liability of the Debtor. Anything herein to the
contrary notwithstanding, the Debtor shall remain liable to observe and perform
all the terms and conditions to be observed and performed by it under any
contract, agreement, warranty or other obligation with respect to the
Collateral; and shall do nothing to impair the security interests herein
granted. The Agent shall not have any obligation or liability under any such
contract, agreement, warranty or obligation by reason of or arising out of this
Security Agreement or the receipt by the Agent of any payment relating to any
Collateral, nor shall the Agent be required to perform or fulfill any of the
obligations of the Debtor with respect to the Collateral, to make any inquiry as
to the nature or sufficiency of any payment received by it or the sufficiency of
the performance of any party's obligations with respect to any Collateral.
Furthermore, the Agent shall not be required to file any claim or demand to
collect any amount due or to enforce the performance of any party's obligations
with respect to, the Collateral.
Section 2.03. Sales and Collections.
(a) Sales of Inventory in the Ordinary Course of Business. The Debtor is
authorized (i) to sell in the ordinary course of its business for fair value and
on an arm's-length basis any of its Inventory normally held by it for such
purpose and (ii) to use and consume, in the ordinary course of its business, any
raw materials, supplies and materials normally held by it for such purpose. The
Agent may, upon the occurrence of any Event of Default, without cause or notice,
curtail or terminate such authority at any time.
(b) Collection of Receivables. The Debtor is authorized to collect amounts owing
to it with respect to the Collateral, except as otherwise provided in connection
with the Assignment of Federal Contract, if any as provided herein. However, the
Agent may, upon and during the continuance of an Event of Default or a Potential
Event of Default, notify Account Debtors obligated to make payments under any or
all Receivables or Other Intangibles that the Agent has a security interest in
such Collateral and that payments shall be made directly to the Agent. Upon the
request of the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default, as the case may be, the Debtor will so notify such
Account Debtors and will execute such contract assignments, notices of
assignment or other documents as may be required by such Account Debtors. The
Debtor will use all reasonable efforts to cause each Account Debtor to comply
with the foregoing instruction. In furtherance of the foregoing, the Debtor
authorizes the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default (i) to ask for, demand, collect, receive and give
acquittances and receipts for any and all amounts due and to become due under
any Collateral and in the name of the Debtor or its own name or otherwise, (ii)
to take possession of, endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under any
Collateral and (iii) to file any claim or take any other action in any court of
law or equity or otherwise which it may deem appropriate for the purpose of
collecting any amounts due under any Collateral. The Agent shall have no
obligation to obtain or record any information relating to the source of such
funds or the obligations in respect of which payments have been made.
Section 2.04. Segregation of Proceeds.
(a) Cash Collateral Account Maintained by Agent. Upon an Event of Default or a
Potential Event of Default, the Agent shall have the right at any time during
the continuance thereof to cause to be opened and maintained at the office of
the Agent in McLean, Virginia a non-interest bearing bank account (the "Cash
Collateral Account") which will contain only Proceeds. Any "cash proceeds" (as
such term is defined in Section 9-306(1) of the UCC) received by the Agent
directly from Account Debtors obligated to make payments under Receivables or
Other Intangibles pursuant to Section 2.3 hereof or from the Debtor pursuant to
clause (b) of this Section 2.4, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper or other Proceeds received on
account of any Collateral, shall be promptly deposited in the Cash Collateral
Account, and until so deposited shall be held in trust for the Agent as property
of the Agent and shall not be commingled with any funds of the Debtor not
constituting Proceeds of Collateral. The name in which the Cash Collateral
Account is carried shall clearly indicate that the funds deposited therein are
the property of the Debtor, subject to the security interest of the Agent
hereunder. Such Proceeds, when deposited, shall continue to be security for the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Agent shall have sole dominion and control over the
funds deposited in the Cash Collateral Account, and such funds may be withdrawn
therefrom only by the Agent.
(b) Deposit of Proceeds by the Debtor. Upon notice by the Agent to the Debtor
that the Cash Collateral Account has been opened, the Debtor shall cause all
cash Proceeds collected by it to be delivered to the Agent forthwith upon
receipt, in the original form in which received (with such endorsements or
assignments as may be necessary to permit collection thereof by the Agent), and
for such purpose the Debtor hereby irrevocably authorizes and empowers the
Agent, its officers, employees and authorized agents to endorse and sign the
name of the Debtor on all checks, drafts, money orders or other media of payment
so delivered, and such endorsements or assignments shall, for all purposes, be
deemed to have been made by the Debtor prior to any endorsement or assignment
thereof by the Agent. The Agent may use any convenient or customary means for
the purpose of collecting such checks, drafts, money orders or other media of
payment.
Section 2.05. Verification of Receivables. The Agent shall have the right to
make test verifications of Receivables in any reasonable manner and through any
medium that it considers advisable, and the Debtor agrees to furnish all such
assistance and information as the Agent may reasonable require in connection
therewith. The Debtor at its expense will cause its chief financial officer to
furnish to the Agent at any reasonable time and from time to time promptly upon
the Agent's reasonable request, the following reports: (i) a reconciliation of
all Receivables, (ii) an aging of all Receivables, (iii) trial balances and (iv)
a test verification of such Receivables as the Agent may request.
Section 2.06. Release of Collateral.
(a) Security Interest of Agent Ceases Upon Permitted Dispositions. The Debtor
may sell or realize upon or transfer or otherwise dispose of Collateral only to
the extent permitted by Section 4.13, and the security interests of the Agent in
such Collateral so sold, realized upon or disposed of (but not in the Proceeds
arising from such sale, realization or disposition) shall cease immediately upon
such sale, realization or disposition, without any further action on the part of
the Agent. The Agent, if requested in writing by the Debtor but at the expense
of the Debtor, is hereby authorized and instructed to deliver to the Account
Debtor or the purchaser or other transferee of any such Collateral a certificate
stating that the Agent no longer has a security interest therein, and such
Account Debtor or such purchaser or other transferee shall be entitled to rely
conclusively on such certificate for any and all purposes.
(b) Filing of Termination Statements. Upon the payment in full of all of the
Obligations and if there is no commitment by any Lender to make further
advances, incur obligations or otherwise give value, the Agent will (as soon as
reasonably practicable after receipt of notice from the Debtor requesting the
same but at the expense of the Debtor) deliver to the Debtor (i) for each
jurisdiction in which a UCC financing statement is on file to perfect the
security interests granted to the Agent hereunder, a termination statement
(appropriately completed) to the effect that the Agent no longer claims a
security interest under such financing statement, and (ii) such other documents
as the Debtor shall reasonably request evidencing satisfaction of the
Obligations and the release of the security interests granted to the Agent
hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants that:
Section 3.01. Title to Collateral. Except for the security interests granted to
the Agent pursuant to this Security Agreement and as otherwise permitted by
Section 6.2(a) of the Revolving Credit Agreement, the Debtor is the sole owner
of each item of the Collateral, having good and marketable title thereto, free
and clear of any and all Liens.
Section 3.02. Validity, Perfection and Priority of Security Interests.
(a) By complying with Section 4.1 hereof, the Debtor will have created a valid
security interest in favor of the Agent in all existing Collateral and in all
identifiable Proceeds of such Collateral, which security interest (except in
respect of Collateral not located at a facility identified on Schedule 3.7
hereto and motor vehicles for which the exclusive manner of perfecting a
security interest therein is by noting such security interest in the certificate
of title in accordance with local law) would be prior to the claims of a trustee
in bankruptcy under Section 544(a) of the Bankruptcy Code. Continuing compliance
by the Debtor with the provisions of Section 4.2 hereof will also (i) create
valid security interests in all Collateral acquired after the date hereof and in
all identifiable Proceeds of such Collateral and (ii) cause such security
interests in all Collateral and in all Proceeds which are (A) identifiable cash
Proceeds of Collateral covered by financing statements required to be filed
hereunder, (B) identifiable Proceeds in which a security interest may be
perfected by such filing under the UCC and (C) any Proceeds in the Cash
Collateral Account to be duly perfected under the UCC, in each case prior to the
claims of a trustee in bankruptcy under the Bankruptcy Code (except in respect
of Collateral not located at a facility identified on Schedule 3.5 hereto).
(b) The security interests of the Agent in the Collateral located at the
facilities identified on Schedule 3.5 hereto rank first in priority. Other than
financing statements or other similar documents perfecting the security
interests in favor of the Agent, no financing statements, deeds of trust,
mortgages or similar documents covering all or any part of the Collateral are on
file or of record in any government office in any jurisdiction in which such
filing or recording would be effective to perfect a security interest in such
Collateral, nor is any of the Collateral in the possession of any Person (other
than the Debtor) asserting any claim thereto or security interest therein.
Section 3.03. Enforceability of Receivables and Other Intangibles. To the best
knowledge of the Debtor, each Receivable and Other Intangible is a valid and
binding obligation of the related Account Debtor in respect thereof, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
provisions of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and complies with any applicable legal
requirements.
Section 3.04. Place of Business. Schedule 3.4 correctly sets forth the chief
executive office and principal place of business of the Debtor and the offices
of the Debtor where records concerning Receivables and Other Intangibles are
kept.
Section 3.05. Location of Collateral. Schedule 3.5 correctly sets forth the
location of all Equipment and Inventory, other than rolling stock, aircraft and
goods in transit. Except as otherwise specified in Schedule 3.5, all Inventory
and Equipment has been located at the address specified on Schedule 3.5 at all
times during the four-month period prior to the date hereof while owned by the
Debtor. All Inventory has been and will be produced in compliance with the Fair
Labor Standards Act, 29 U.S.C. ss.ss. 201-219, except for such non-compliance
which could not reasonably be expected to have a material adverse effect on the
Debtor. No Inventory is evidenced by a negotiable document of title, warehouse
receipt or bill of lading. No non-negotiable document of title, warehouse
receipt or bill of lading has been issued to any person other than the Debtor,
and the Debtor has retained possession of all of such non-negotiable documents,
warehouse receipts and bills of lading. No amount payable under or in connection
with any of the Collateral is evidenced by promissory notes or other
instruments.
Section 3.06. Trade Names. Schedule 3.6 correctly sets forth any and all trade
names, division names, assumed names or other names under which the Debtor
currently transacts business or has transacted business within the four-month
period prior to the date hereof.
Section 3.07. Patents and Trademarks. Schedule 3.7 correctly sets forth all
Patents, Patent licenses, Trademarks and Trademark licenses now owned by
the Debtor.
ARTICLE IV.
COVENANTS
The Debtor covenants and agrees that until all obligations and
liabilities in respect of the Obligations shall have performed and paid in full
and until no Standby Letters of Credit are outstanding or fully cash
collateralized and the Commitments are terminated:
Section 4.01. Perfection of Security Interests. The Debtor will, at its expense,
cause all filings and recordings and other actions specified on Schedule 4.1 to
have been completed on or prior to the Effective Date.
Section 4.02. Further Actions.
(a) At all times after the date hereof, the Debtor will, at its expense, comply
with the following:
(i) as to all Receivables, Other Intangibles, Equipment and Inventory, it will
cause UCC financing statements and continuation statements to be filed and to be
on file in all applicable jurisdictions as required to perfect the security
interests granted to the Agent hereunder, to the extent that applicable law
permits perfection of a security interest by filing under the UCC;
(ii) as to all Proceeds, it will cause all UCC financing statements and
continuation statements filed in accordance with clause (i) above to include a
statement or a checked box indicating that Proceeds of all items of Collateral
described herein are covered;
(iii) as to any amount payable under or in connection with any of the Collateral
which shall be or shall become evidenced by any promissory note or other
instrument, the Debtor will promptly (but in no event later than ten (10)
Business Days after receipt of such note or instrument), pledge and deliver such
note or other instrument to the Agent as part of the Collateral, duly endorsed
in a manner reasonably satisfactory to the Agent;
(iv) at the request of the Agent, the Debtor shall deliver all other Collateral
consisting of certificated securities, endorsed for transfer in a manner
reasonably satisfactory to the Agent (or execute a securities intermediary
account control agreement to the extent possession by the Agent of such
securities is not feasible); and
(v) as to all Patents, Patent licenses, Trademarks or Trademark licenses, the
Debtor will effect the recordation or renewal of the recordation of the security
interests of the Agent therein so as to maintain valid and perfected security
interests therein under all applicable state and federal laws.
(b) Further Assurances. The Debtor will, from time to time and at its expense,
execute, deliver, file or record such UCC financing statements, applications for
certificates of title and such other statements, assignments, instruments,
documents, agreements or other papers and take any other action that may be
necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect, confirm or validate the security interest of the
Agent in the Collateral, to enable the Agent to obtain the full benefits of this
Security Agreement or to enable it to exercise and enforce any of its rights,
powers and remedies hereunder, including, without limitation, its right to take
possession of the Collateral.
(c) Signature. To the fullest extent permitted by law, the Debtor authorizes the
Agent to sign and file financing and continuation statements and amendments
thereto with respect to the Collateral without its signature thereon.
Section 4.03. Change of Name, Identity or Structure. The Debtor will not change
its name, identity or corporate structure in any manner and, except as set forth
on Schedule 3.6, will not conduct its business under any trade, assumed or
fictitious name unless it shall have given the Agent at least forty-five (45)
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend any financing statement or continuation
statement relating to the security interests granted hereby in order to preserve
such security interests and to effectuate or maintain the priority thereof
against all Persons.
Section 4.04. Place of Business and Collateral. The Debtor will not change the
location of (i) its places of business, (ii) its chief executive office or (iii)
the office or other locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location listed on Schedule 3.4 or
3.5 unless, prior to such change, it notifies the Agent forty-five (45) days in
advance of such change, makes all UCC filings required by Section 4.2 and takes
all other action necessary or that the Agent may reasonably request to preserve,
perfect, confirm and protect the security interests granted hereby. The Debtor
will in no event change the location of any Collateral if such change would
cause the security interest granted hereby in such Collateral to lapse or cease
to be perfected. The Debtor will at all times maintain its chief executive
office within one of the forty-eight contiguous states in which Article 9 of the
uniform commercial code is in effect.
Section 4.05. Fixtures. The Debtor will not permit any Equipment to become a
fixture unless it shall have given the Agent at least ten (10) days' prior
written notice thereof and shall have taken all such action and delivered or
caused to be delivered to the Agent all instruments and documents, including,
without limitation, waivers and subordination agreements by any landlords and
mortgagees, and filed all financing statements necessary or reasonably requested
by the Agent, to preserve and protect the security interest granted herein and
to effectuate or maintain the priority thereof against all Persons; provided,
however, that, so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing, the Debtor shall not be obligated to
comply with the provisions of this Section 4.5 with respect to the first $50,000
of Equipment (determined based on the then fair market value thereof).
Section 4.06. Maintenance of Records. The Debtor will keep and maintain at its
own cost and expense complete books and records relating to the Collateral which
are satisfactory to the Agent including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral and all
of its other dealings with the Collateral. The Debtor will mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Agent' further security, the Debtor
agrees that the Agent shall have a special property interest in all of the
Debtor's books and records pertaining to the Collateral and the Debtor shall
deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent.
Section 4.07. Compliance with Laws The Debtor will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any government or any state or local government applicable to the Collateral or
any part thereof or to the operation of the Debtor's business except to the
extent that the failure to comply would not have a material adverse effect on
the financial or other condition of the Debtor; provided, however, that the
Debtor may contest any act, rule, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the Agent, adversely
affect the Agent's rights or, in the case of Collateral located at a facility
identified on Schedule 3.7 hereto, the first priority of its security interest
in the Collateral.
Section 4.08. Payment of Taxes. The Debtor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no such charge
need be paid if (i) the validity thereof is being contested in good faith by
appropriate proceedings and (ii) such charge is adequately reserved against in
accordance with generally accepted accounting principles, as consistently
applied.
Section 4.09. Compliance with Terms of Accounts and Contracts. The Debtor will
perform and comply in all material respects with all of its obligations under
all agreements relating to the Collateral to which it is a party or by which it
is bound.
Section 4.10. Limitation on Liens on Collateral. The Debtor will not create,
permit or suffer to exist, and will defend the Collateral and the Debtor's
rights with respect thereto against and take such other action as is necessary
to remove any Lien, security interest, encumbrance, or claim in or to the
Collateral other than the security interests created hereunder and such Liens to
the extent permitted pursuant to Section 6.2(a) of the Revolving Credit
Agreement.
Section 4.11. Limitations on Modifications of Receivables and Other Intangibles;
No Waivers or Extensions. The Debtor will not (i) amend, modify, terminate or
waive any provisions of any material Receivable or Other Intangible in any
manner which might, when taken together with all such other Receivables or Other
Intangibles, respectively, materially reduce the value of all Receivables or
Other Intangibles, respectively, in the Collateral, (ii) fail to exercise
promptly and diligently each and every material right which it may have under
each Receivable and Other Intangible or (iii) fail to deliver to the Agent a
copy of each material demand, notice or document received by it relating in any
way to any Receivable or Other Intangible.
Section 4.12. Maintenance of Insurance. The Debtor will maintain with
financially sound insurance companies licensed to do business in the
jurisdictions in which the Collateral is located insurance policies on the
Inventory and Equipment in accordance with the provisions of Section 6.1(m) of
the Revolving Credit Agreement.
Section 4.13. Limitations on Dispositions of Collateral. The Debtor will not
directly or indirectly (through the sale of stock, merger or otherwise), without
the prior written consent of the Agent, sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (i) sales of Inventory in the ordinary course of its business for fair value
in arm's-length transactions and (ii) so long as no Event of Default (or
Potential Event of Default) has occurred and is continuing, dispositions in a
commercially reasonable manner of Equipment which has become redundant, worn out
or obsolete or which should be replaced so as to improve productivity, so long
as the proceeds of any such disposition are (x) used to acquire replacement
equipment which has comparable or better utility and equivalent or better value
and which is subject to a first priority security interest in favor of the Agent
therein, except as permitted by Section 6.2(a) of the Revolving Credit
Agreement, or (y) applied to repay the Obligations. The inclusion of Proceeds of
the Collateral under the security interests granted hereby shall not be deemed a
consent by the Agent to any sale or disposition of any Collateral other than as
permitted by this Section 4.13.
Section 4.14. Further Identification of Collateral. The Debtor will furnish to
the Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request. The Debtor shall promptly notify
the Agent if the value of the Collateral located at the facilities identified on
Schedule 3.7 hereto is less than 80% of the value of all of the Collateral.
Section 4.15. Notices. The Debtor will advise the Agent promptly and in
reasonable detail (i) of any Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, other than, unless reasonably
requested by the Agent, Liens permitted by Section 6.2(a) of the Revolving
Credit Agreement, (ii) of any material change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
security interests granted to the Agent in this Security Agreement.
Section 4.16. Change of Law. The Debtor shall promptly notify the Agent of any
change in law known to it which (i) adversely affects or will adversely affect
the validity, perfection or priority of the security interests granted hereby,
(ii) requires or will require a change in the proceedings to be followed in
order to maintain and protect such validity, perfection and priority or (iii)
could result in the Agent not having a perfected security interest in any of the
Collateral.
Section 4.17. Right of Inspection.
(a) Access to Books and Records. The Debtor shall, following any request by the
Agent and upon reasonable notice, permit the Agent or its representatives to
have full and free access during normal business hours to all the books,
correspondence and records of the Debtor, and the Agent or its representatives
may examine the same, take extracts therefrom, make photocopies thereof and have
such discussions with officers, employees and public accountants of the Debtor
as the Agent may deem reasonably necessary, and the Debtor agrees to render to
the Agent, at the Debtor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Agent and its
representatives shall upon reasonable notice and during normal business hours
also have the right to enter into and upon any premises where any of the
Inventory or the Equipment is located for the purpose of inspecting the same,
observing its use or protecting the interests of the Agent therein.
(b) Audits. The Debtor shall permit the Lenders, the Agent and their
representatives and advisors to review the operations of the Debtor and perform
the audits and examinations as provided in Section 6.1(l) of the Credit
Agreement.
Section 4.18. Maintenance of Equipment. The Debtor will, at its expense,
maintain the Equipment in good operating condition, ordinary wear and tear
excepted.
Section 4.19. Covenants Regarding Patent and Trademark Collateral.
(a) Generally. At such time as the Debtor shall acquire any Patents or
Trademarks, it will comply with the terms, covenants and warranties of this
Section 4.19.
(b) Continued Use of Trademark. The Debtor (either itself or through licensees)
will, unless the Debtor shall reasonably determine, after consultation with the
Agent, that a Trademark is of negligible economic value to the Debtor, (i)
continue to use each Trademark on each and every Trademark class of goods
applicable to its current products and services as reflected in its current
catalogs, brochures and price lists in order to maintain each Trademark in full
force and free from any claim of abandonment for non-use, (ii) maintain as in
the past the quality of products and services offered under each Trademark,
(iii) employ each Trademark with the appropriate notice of registration, (iv)
not adopt or use any mark which is confusingly similar to a colorable imitation
of any Trademark and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(c) No Abandonment. The Debtor will not, unless the Debtor shall reasonably
determine, after consultation with the Agent, that a Patent is of negligible
economic value to the Debtor, do any act, or knowingly omit to do any act,
whereby any Patent may be abandoned or dedicated.
(d) Notice of Abandonment or Adverse Determinations. The Debtor shall notify the
Agent immediately if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in any
proceeding in the United States Patent and Trademark Office or any court of
tribunal in any country) regarding the Debtor's ownership of any Patent or
Trademark, its right to register the same or keep and maintain the same.
(e) Filings After Notice to Agent. In no event shall the Debtor, either itself
or through any agent, employee, licensee or designee, file an application for
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the Agent and, upon
request of the Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's security
interest in such Patent or Trademark and the goodwill and general intangibles of
the Debtor relating thereto or represented thereby, and the Debtor hereby
constitutes the Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all such acts of such attorney being hereby ratified
and confirmed.
(f) Pursuit of Applications and Maintenance of Registrations. The Debtor will
take all necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability; provided, however, that no such Patent or Trademark shall
be required to be maintained or pursued to the extent such Patent or Trademark
is determined by the Debtor, after consultation with the Agent, to be of
negligible economic value to the Debtor.
(g) Notice of Infringement. If any of the Patent and Trademark Collateral is
infringed, misappropriated or diluted by a third party, the Debtor shall
promptly notify the Agent after it learns thereof and shall, unless the Debtor
shall reasonably determine, after consultation with the Agent, that such Patent
and Trademark Collateral is of negligible economic value to the Debtor, promptly
sue for infringement, misappropriation of dilution, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation or dilution, or take such other action as the Debtor shall
reasonably deem appropriate under the circumstances to protect such Patent and
Trademark Collateral.
Section 4.20. Termination of Federal Contracts. With respect to each Federal
Contract in respect of which the Debtor is required to execute an Assignment of
Federal Contract in accordance with Section 4.21 hereof, the Debtor shall give
prompt written notice to the Agent if the U.S. Government shall terminate or
threaten to terminate (whether for convenience or default) any such Federal
Contract with the Debtor having a value (including unexercised options) of
$100,000 or more. In addition, the Debtor shall give prompt written notice to
the Agent if the U.S. Government shall terminate or threaten to terminate any
contract between the U.S. Government and any other prime contractor under which
the Debtor is a subcontractor if the value of such subcontract (including
unexercised options) is $100,000 or more.
Section 4.21. Federal Contracts. The Debtor shall provide to the Agent, as soon
as reasonably practicable but not later than forty-five (45) days following the
end of each Fiscal Quarter, a report identifying each Federal Contract to which
it is a party, having attached thereto a copy of the first two pages of such
Federal Contract and any amendment thereto, to the extent not previously
provided to the Agent. At the request of the Agent (unless an Event of Default
shall have occurred and be continuing, in which case no such request shall be
required), the Debtor shall execute and deliver to the Agent an Assignment of
Federal Contract, in substantially the form of Exhibit A hereto (the "Assignment
of Federal Contract"), and execute any other instruments or take any other steps
required by the Agent in order that all moneys due or to become due under such
Federal Contracts shall be assigned to the Agent and notice thereof given under
the Assignment of Claims Act, including without limitation delivery of Notices
of Assignments with respect to each Federal Contract as contemplated by Appendix
A to Exhibit A hereto.
Section 4.22. Reimbursement Obligation. Should the Debtor fail to comply with
the provisions of this Security Agreement, the Revolving Credit Agreement or any
other agreement relating to the Collateral such that the value of any Collateral
or the validity, perfection, rank or value of any security interest granted to
the Agent hereunder or thereunder is thereby diminished or potentially
diminished or put at risk (as reasonably determined by the Agent), the Agent on
behalf of the Debtor may, but shall not be required to, effect such compliance
on behalf of the Debtor, and the Debtor shall reimburse the Agent for the cost
thereof on demand, and interest shall accrue on such reimbursement obligation
from the date the relevant costs are incurred until reimbursement thereof in
full at the Default Rate.
ARTICLE V.
REMEDIES; RIGHTS UPON DEFAULT
Section 5.01. UCC Rights. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the Revolving Credit
Agreement or other Credit Documents and such Obligations have not been paid in
full, the Agent may in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
guarantying, evidencing or relating to the Obligations, exercise (i) all rights
and remedies of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and (ii) all other rights
available to the Agent at law or in equity.
Section 5.02. Payments on Collateral. Without limiting the rights of the
Agent under any other provision of this Security Agreement, if an Event of
Default shall occur and be continuing:
(i) all payments received by the Debtor under or in connection with any of the
Collateral shall be held by the Debtor in trust for the Agent, shall be
segregated from other funds of the Debtor and shall forthwith upon receipt by
the Debtor be turned over to the Agent, in the same form as received by the
Debtor (duly indorsed by the Debtor to the Agent, if required to permit
collection thereof by the Agent); and
(ii) all such payments received by the Agent (whether from the Debtor or
otherwise) may, in the sole discretion of the Agent, be held by the Agent as
collateral security for, and/or then or at any time thereafter applied in whole
or in part by the Agent to the payment of, the expenses and the Obligations as
set forth in Section 5.11 hereof.
Section 5.03. Possession of Collateral. In furtherance of the foregoing, the
Debtor expressly agrees that, if an Event of Default shall occur and be
continuing, the Agent may (i) by judicial powers, or without judicial process if
it can be done without breach of the peace, enter any premises where any of such
Collateral is or may be located and, without charge or liability to the Agent,
seize and remove such Collateral from such premises and (ii) have access to and
use of the Debtor's books and records relating to such Collateral.
Section 5.04. Sale of Collateral; Notice.
(a) Sale of Collateral. The Debtor expressly agrees that if an Event of Default
shall occur and be continuing, the Agent, without demand of performance or other
demand or notice of any kind (except the notice specified below of the time and
place of any public or private sale) to or upon the Debtor or any other Person
(all of which demands and/or notices are hereby waived by the Debtor), may
forthwith (i) apply the cash, if any, then held by it as collateral as specified
in Section 5.11 hereof and (ii) if there shall be no cash or such cash shall be
insufficient to pay the Obligations in full, collect, receive, appropriate and
realize upon the Collateral, and/or sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral (or contract to do
so) or any part thereof in one or more parcels (which need not be in round lots)
at public or private sale, at any office of the Agent or elsewhere in such
manner as is commercially reasonable and, as the Agent may deem best, for cash
or on credit or for future delivery without assumption of any credit risk. The
Agent shall have the right upon any such public sale, and, if the Collateral is
of a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Debtor waives all claims,
damages and demands against the Agent arising out of the foreclosure,
repossession, retention or sale of the Collateral.
(b) Notice of Sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent shall give
the Debtor ten (10) days' written notice of its intention to make any such
public or private sale or sale at a broker's board or on a securities exchange.
Such notice shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof being sold,
will first be offered for sale and (iii) in the case of a private sale, state
the day after which such sale may be consummated. The Agent shall not obligated
to make any such sale pursuant to any such notice. The Agent may adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In the case of any
sale of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling price is paid
by the purchaser thereof, but the Agent shall not incur any liability in case of
the failure of such purchase to take up and pay for the Collateral so sold and,
in the case of such failure, such Collateral may again be sold upon like notice.
(c) Special Provisions Relating to Sales of Securities. The Debtor recognizes
that the Agent may be unable to effect a public sale of any or all the
Collateral constituting a "security" (as such term is defined in the Securities
Act) by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers that will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. The Debtor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Agent
shall be under no obligation to delay a sale of any of Collateral constituting a
security for the period of time necessary to permit the issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such issuer would agree to do so.
Section 5.05. Rights of Purchasers. Upon any sale of the Collateral (whether
public or private), the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agent) at any such sale shall hold the Collateral so sold
absolutely, free from any claim or right of whatever kind, including any equity
or right of redemption of the Debtor who, to the extent permitted by law, hereby
specifically waives all rights of redemption, including, without limitation, any
right to redeem the Collateral under Section 9-506 of the UCC, and any right to
a judicial or other stay or approval which it has or may have under any law now
existing or hereafter adopted.
Section 5.06. Additional Rights of the Agent.
(a) Right to Maintain Proceedings. The Agent (i) shall have the right and power
to institute and maintain such suits and proceedings as it may deem appropriate
to protect and enforce the rights vested in it by this Security Agreement and
(ii) may proceed by suit or suits at law or in equity to enforce such rights and
to foreclose upon the Collateral and to sell all or, from time to time, any of
the Collateral under the judgment or decree of a court of competent
jurisdiction.
(b) Appointment of Receiver. The Agent shall, to the extent permitted by
applicable law, without notice to the Debtor to any party claiming through the
Debtor, without regard to the solvency or insolvency at such time of any Person
then liable for the payment of any of the Obligations, without regard to the
then value of the Collateral and without requiring any bond from any complainant
in such proceedings, be entitled as a matter of right to the appointment of a
receiver or receivers (who may be the Agent) of the Collateral or any part
thereof, pending such proceedings, with such powers as the court making such
appointment shall confer, and to the entry of an order directing that the
profits, revenues and other income of the property constituting the whole or any
part of the Collateral be segregated, sequestered and impounded for the benefit
of the Agent, and the Debtor irrevocably consents to the appointment of such
receiver or receivers and to the entry of such order.
(c) No Duty to Exercise Rights. In no event shall the Agent have any duty to
exercise any rights or take any steps to preserve the rights of the Agent in the
Collateral, nor shall the Agent be liable to the Debtor or any other Person for
any loss caused by the Agent's failure to meet any obligation imposed by Section
9-207 of the UCC or any successor provision. Without limiting the foregoing, the
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have any duty or responsibility for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
Section 5.07. Remedies Not Exclusive, etc.
(a) Remedies Not Exclusive. No remedy conferred upon or reserved to the Agent in
this Security Agreement is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law, in
equity or by statute.
(b) Restoration of Rights. If the Agent shall have proceeded to enforce any
right, remedy or power under this Security Agreement and the proceeding for the
enforcement thereof shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Agent, the Debtor and the Agent
shall, subject to any determination in such proceeding, severally and
respectively be restored to their former positions and rights under this
Security Agreement, and thereafter all rights, remedies and powers of the Agent
shall continue as though no such proceedings had been taken.
(c) Enforcement. All rights of action under this Security Agreement may be
enforced by the Agent without the possession of any instrument evidencing any
Obligation or the production thereof at any trial or other proceeding relative
thereto, and any suit or proceeding instituted by the Agent shall be brought in
its name and any judgment shall be held as part of the Collateral.
Section 5.08. Waiver and Estoppel.
(a) No Actions to Impede Sale of Collateral. The Debtor agrees, to the extent it
may lawfully do so, that it will not at any time in any manner whatsoever claim
or take the benefit or advantage of any appraisal, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force which may delay, prevent or otherwise affect the performance or
enforcement of this Security Agreement, and hereby waives all benefit or
advantage of all such laws. The Debtor covenants that it will not hinder, delay
or impede the execution of any power granted to the Agent in this Security
Agreement, any Assignment of Federal Contract or any other Credit Document.
(b) Collateral Sold As An Entirety. The Debtor, to the extent it may lawfully do
so, on behalf of itself and all who claim through or under it, including without
limitation any and all subsequent creditors, vendees, assignees and lienors,
waives and releases all rights to demand or to have any marshalling of the
Collateral upon any sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or under any foreclosure or any enforcement of
this Security Agreement, and consents and agrees that all of the Collateral may
at any such sale be offered and sold as an entirety.
(c) Waiver of Notices. The Debtor waives, to the extent permitted by law,
presentment, demand, protest and any notice of any kind (except the notices
expressly required hereunder) in connection with this Security Agreement and any
action taken by the Agent with respect to the Collateral.
Section 5.09. Power of Attorney; Powers Coupled With An Interest.
(a) Power of Attorney. Without limiting any other right granted hereunder, the
Debtor hereby irrevocably constitutes and appoints the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Agent's reasonable
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purpose of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives the Agent the power and right, on behalf of the Debtor,
without notice to or assent by the Debtor, to do the following:
(i) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(ii) to effect any repairs or any insurance called for by the terms of this
Security Agreement or any other Credit Document, and to pay all or any part
of the premiums therefor and the costs thereof;
(iii) upon the occurrence and continuance of any Event of Default and
otherwise to the extent provided in this Security Agreement, (A) to direct
any party liable for any payment under any of the Collateral to make
payment of any and all moneys due and to come due thereunder directly to
the Agent or as the Agent shall direct, (B) to receive payment of and
receipt for, and to demand and sue for, any and all moneys, claims and
other amounts due and to become due at any time in respect of or arising
out of the Collateral, (C) to sign and indorse and receive, take, assign
and deliver, any checks, notes, drafts, negotiable and non-negotiable
instruments, any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral, (D) to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding with
respect to, or in connection with, the Collateral, (E) to sell, transfer,
assign or otherwise deal in or with the Collateral or any part thereof, as
fully and effectively as if the Agent were the absolute owner thereof and
(F) to do, at its option, but at the expense of the Debtor, at any time or
from time to time, all acts and things which the Agent deems necessary to
protect, preserve or realize upon the Collateral and the Agent's security
interest therein, in order to effect the intent of this Security Agreement,
all as fully and effectively as the Debtor might do.
(b) Powers Coupled With an Interest. All authorizations and agencies granted or
provided herein with respect to the Collateral, including the powers granted
under clause (a) of this Section 5.9, are irrevocable and powers coupled with an
interest.
Section 5.10. Certain Provisions Relating to Securities. Solely with respect to
any Collateral constituting a "security" (as defined in the Securities Act), if
an Event of Default shall have occurred and be continuing, all such securities
(as defined in the Securities Act) constituting a part of the Collateral shall,
at the request of the Agent, be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (i) all voting,
corporate and other rights, powers and privileges pertaining to such Collateral
at any meeting of shareholders of the issuer thereof or otherwise, and (ii) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all such Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the structure of
any such issuer, or upon the exercise by the Debtor or the Agent of any right,
privilege or option pertaining to such Collateral, and in connection therewith,
the right to deposit and deliver any and all such Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine), all without liability except to account for
property actually received by it and except as provided in Section 5.6(c)
hereof, but the Agent shall have no duty to the Debtor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
Section 5.11. Application of Monies. The proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Agent in the following order of priority:
first, to payment of the expenses of such sale or other realization,
including reasonable compensation to the Agent and its agents and counsel,
and all expenses, liabilities and advances incurred or made by the Agent,
its agents and counsel in connection therewith or in connection with the
care, safekeeping or otherwise of any or all of the Collateral;
second, to payment of the Obligations, in such order as the Agent may
elect; and
third, any surplus then remaining shall be paid to the Debtor, or its
successors or assigns, or to whomsoever may be lawfully entitled to receive
the same (including pursuant to Section 9-504(1)(C) of the UCC) or as a
court of competent jurisdiction may direct.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Notices. All notices, requests and other communications to a party
hereunder shall be in writing and shall be given to such party at its address
set forth on the signature page hereof or such other address as such party may
hereafter specify for that purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) in the case of telephonic
notice (to the extent expressly permitted hereunder), when made, (ii) in the
case of notice delivered by overnight express courier, one Business Day after
the Business Day such notice was delivered to such courier, (iii) in the case of
notice delivered by first class mail, three Business Days after being deposited
in the mail, postage prepaid, return receipt requested, (iv) in the case of
notice by hand, when delivered, or (v) in the case of notice by any customary
means of telecommunication, when sent provided confirmation of receipt or answer
back has been received, in each case if addressed to any party hereto as
provided herein. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect the
validity of notice given in accordance with this section.
Section 6.02. No Waiver; Cumulative Remedies. The Agent shall not by any act
(except by a written instrument pursuant to Section 6.3 hereof) be deemed to
have waived any right or remedy hereunder. No failure to exercise, nor any delay
in exercising, on the part of the Agent any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
Section 6.03. Amendments and Waivers. None of the terms or provisions of this
Security Agreement may be amended, supplemented or otherwise modified except by
a written instrument executed by the Debtor and the Agent; provided that any
provision of this Security Agreement may be waived by the Agent in a letter or
agreement executed by the Agent or by telex or facsimile transmission from the
Agent.
Section 6.04. Successors and Assigns. The provisions of this Security Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Debtor may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Agent.
Section 6.05. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA,
OTHER THAN ITS LAWS RESPECTING CHOICE OF LAW OTHER THAN THOSE CONTAINED IN
THE UCC.
Section 6.06. Limitation by Law; Severability.
(a) All rights, remedies and powers provided in this Security Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Security Agreement invalid, unenforceable in whole or in part,
or not entitled to be recorded, registered or filed upon the provisions of any
applicable law.
(b) If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
Section 6.07. Counterparts. This Security Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each complete set of which, when so executed and delivered by all parties, shall
be an original, but all such counterparts shall together constitute but one and
the same instrument.
Section 6.08. Expenses of the Agent. The Debtor shall pay to the Agent from time
to time upon demand, all of the costs and expenses incurred by the Agent or any
Lender (including, without limitation, the reasonable fees and disbursements of
counsel and any amounts payable by the Agent or any Lender to any of their
respective agents) (i) arising in connection with the administration,
modification, amendment, waiver or termination of this Security Agreement or any
document or agreement contemplated hereby or any consent or waiver hereunder or
thereunder or (ii) incurred in connection with the administration of this
Security Agreement, or any document or agreement contemplated hereby, or in
connection with the administration, sale or other disposition of Collateral
hereunder or under any document or agreement contemplated hereby or the
preservation, protection or defense of the rights of the Agent or any Lender in
and to the Collateral.
Section 6.09. Termination; Survival. This Security Agreement shall terminate
when the security interests granted hereunder have terminated and the Collateral
has been released as provided in Section 2.6; provided, however, that the
obligations of the Debtor under Section 4.22 and the provisions of this Article
6 shall survive any such termination.
Section 6.10. Integration. This Security Agreement and the other Credit
Documents constitute the entire agreement of the Agent, the Lenders, the
Borrower and the other Credit Parties with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Credit
Documents.
Section 6.11. Authority of Agent. The Debtor acknowledges that the rights and
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Security Agreement shall, as between
the Agent and the Lenders, be governed by the Revolving Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Debtor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and the Debtor shall not be under any obligation,
or entitlement, to make any inquiry respecting such authority.
Section 6.12. Headings, Bold Type and Table of Contents. The section headings,
subsection headings, and bold type used herein and the Table of Contents hereto
have been inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Security Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
Address: HAGLER BAILLY, INC.
1530 Wilson Boulevard
Suite 400
Arlington, Virginia 22209 By: ________________________________
Attention: Glenn Dozier Name: Glenn J. Dozier
Phone: 703-351-0338 Title: Senior Vice President
Fax: 703-528-3786 and Chief Financial Officer
Address: NATIONSBANK, N.A.
8300 Greensboro Drive
Suite 550 By: ____________________
McLean, Virginia 22102 Name: James W. Gaittens
Attention: James W. Gaittens Title: Senior Vice President
Phone: (703) 761-8405
Fax: (703) 917-0519
<PAGE>
33
Schedule 3.4
Place of Business
<PAGE>
Schedule 3.5
Location of Collateral
<PAGE>
Schedule 3.6
Trade Names, Division Names, etc.
<PAGE>
Schedule 3.7
Patents and Trademarks
<PAGE>
Schedule 4.1
UCC Filings
1. Office of the State Corporation Commission of the
Commonwealth of Virginia.
2. Arlington County, Virginia.
3. [Others to follow]
<PAGE>
7
Exhibit A to
Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __
(the "Agreement"), is made by HAGLER BAILLY, INC., a Delaware corporation (the
"Assignor"), in favor of NATIONSBANK, N.A., a national banking association (the
"Agent"), in its capacity as Agent for the lenders from time to time a party to
the Revolving Credit Agreement (as defined in the Security Agreement referred to
below).
W I T N E S S E T H:
WHEREAS, the Assignor has secured certain obligations
undertaken by it pursuant to the provisions of a Security Agreement, dated as of
___________________, ____ (as the same may be amended, supplemented or otherwise
modified from time to time, the "Security Agreement"), by and between the
Assignor and the Agent; and
WHEREAS, the Assignor is a party to, and from time to time
will become entitled to receive moneys under and by virtue of, a certain
contract with, involving or for the benefit of the United States of America or
any department, agency or instrumentality thereof (herein referred to as the
"Government"), designated as Contract Number _______ entered into by the
Assignor and the Government on ________ __, 19__ (which contract, together with
all additions, change orders, supplements, amendments, renewals, extensions, and
modifications thereto now or hereafter in effect, are hereinafter collectively
called the "Contract"); and
WHEREAS, pursuant to the Security Agreement, the Assignor has
undertaken to effectuate the assignment(s) and other actions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Assignor covenants and agrees as follows:
1. Incorporation By Reference. The provisions of the Security Agreement
are incorporated herein by reference, and the terms defined in the Security
Agreement are used herein with the same meanings.
2. Representations. The Assignor represents and warrants to the Agent
that (a) the Contract is legal, valid and binding on the Assignor and, to its
knowledge, the other parties thereto, is in full force and effect, and is not
evidenced by any chattel paper or instrument, (b) upon due filing of this
Agreement, together with a Notice of Assignment substantially in the form of
Appendix A hereto with the authorized representative, the execution and delivery
of this Agreement does not violate and is not in conflict with the provisions of
the Contract, (c) there has been no default on the part of the Assignor or any
other party to the Contract, (d) the Assignor has made no previous assignment of
the Contract to any person and knows of no fact or defense that will render the
moneys due or to be due thereunder uncollectible, (e) no financing statement
covering the Contract is on file in any public office except financing
statements in favor of the Agent, (f) no set-off or counterclaim to any moneys
due or to become due under the Contract exists on the date hereof, and no
agreement has been made with any person under which any deduction or discount
may be claimed, and (g) the address of the office where the Assignor keeps its
records concerning the Contract is ____________________.
3. Collateral. As security and collateral for the payment of all of the
Obligations (defined in the Security Agreement) and for performance of, and
compliance with, by the Assignor, all of the terms, covenants, conditions,
stipulations, and agreements contained in this Agreement and in the Security
Agreement, the Assignor hereby assigns to the Agent, and grants to the Agent a
lien on and security interest in, all moneys and claims for moneys now and
hereafter due and to become due to the Assignor under or by reason of the
Contract, together with all cash and non-cash proceeds thereof; provided,
however, that nothing contained herein shall impose upon the Agent any of the
obligations or liabilities of the Assignor under the Contract.
4. Covenants. Until payment and performance in full of the Obligations,
the Assignor covenants as follows:
(c) The Assignor shall place on any and all vouchers, invoices, or other
instruments demanding payment under the Contract the direction that such payment
is to be made to the Agent in accordance with Section 5 of this Agreement.
(d) The Assignor shall promptly upon request execute, acknowledge, and deliver
any notice, financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate, or other document as
the Agent may require in order to perfect, preserve, maintain, protect,
continue, and/or extend the assignment, lien, and security interest of the Agent
under this Agreement and its priority. The Assignor shall pay to the Agent on
demand all taxes, costs, and expenses incurred by the Agent in connection with
the preparation, execution, recording, and filing of any such document or
instrument mentioned aforesaid, and such taxes, costs, and expenses shall
constitute and become a part of the Obligations. A carbon, photographic, or
other reproduction of a security agreement or a financing statement is
sufficient as a financing statement.
(e) The Assignor shall fully, promptly, and faithfully comply with and perform
its obligations and duties under the Contract in accordance with the terms
thereof and will make no changes or amendments to the Contract or terminate or
cancel the Contract without the prior written consent of the Agent except as
permitted by the Security Agreement. In the event that any change, amendment,
termination or cancellation of the Contract is made or effected by the
Government, the Assignor will promptly notify the Agent thereof and promptly
furnish to the Agent a copy of any document or agreement evidencing any such
change, amendment, termination, or cancellation.
(f) The Assignor will promptly
(i) furnish to the Agent all information received by the Assignor affecting
the moneys due and to become due under the Contract,
(ii) inform the Agent of any delay in performance of, or claims made in
regard to, the Contract, and
(iii) notify the Agent in writing of the failure of any party to the Contract to
perform any of its obligations thereunder and any rejection of any performance
rendered by the Assignor under or in connection with the Contract.
(g) The Assignor will at all times keep accurate and complete records of
performance by the Assignor under the Contract, and the Agent and its agents
shall have the right, during normal business hours and upon reasonable advance
notice, to call at the place or places of business of the Assignor at intervals
to be determined by the Agent, and without hindrance or delay, to inspect,
audit, check, and make extracts from the books, records, journals, orders,
receipts, correspondence, and other data relating to the Contract or to any
other transactions between the parties hereto related to the Contract.
5. Payments. The Assignor hereby authorizes, empowers, and directs the
Government to draw all checks, drafts, or other instruments representing the
payments of money due the Assignor under the Contract (herein called the "Items
of Payment") to the order of NationsBank, N.A., assignee of Assignor, and to
send the same (i) if by mail, to , (ii) if by electronic transfer, to
NationsBank, N.A. for the account of ________________, Bank Account #__________,
Agent ABA#_________, or (iii) if by wire transfer, to NationsBank, N.A. for the
account of _________________________, Bank Account #_______, ABA#___________.
If, despite this direction, any instruments or checks representing payments
should be delivered to the Assignor, the Assignor will immediately endorse and
deliver such instruments or checks to the order of the Agent. The Assignor does
hereby irrevocably (subject to revocation with the consent of the Agent)
designate and appoint (which appointment is coupled with an interest) the Agent,
and the Agent's successors in interest by operation of law, the Assignor's true
and lawful attorney with power irrevocable for the Assignor and in the
Assignor's name, place, and stead, but at the sole cost and expense of the
Assignor, to receive, endorse, and collect all Items of Payment, and to ask,
demand, receive, receipt, and give acquittances for any and all amounts which
may be payable or which become due and payable by the Government under the
Contract, and in the Agent's discretion to file any claim or to take any other
action or proceeding, either in the Agent's own name or in the name of the
Assignor or otherwise, which to the Agent or any successor in interest thereof
may seem necessary or desirable in order to collect or endorse the payment of
any and all amounts now due or owing or which may hereafter be or become due or
owing on account of the Contract. All Items of Payment received by the Agent
pursuant hereto which are finally paid in cash or solvent credits shall be
applied against the Obligations as provided in the Security Agreement. Any
portion of the Items of Payment which the Agent elects not to so apply shall be
paid over to the Assignor or to whomsoever shall be entitled thereto under
applicable law, including pursuant to Section 9-504(1)(C) of the Uniform
Commercial Code of the Commonwealth of Virginia.
6. No Waiver. Neither this Agreement nor any term, condition,
representation, warranty, covenant, or agreement hereof may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing by the
party against whom such change, waiver, discharge, or termination is sought.
7. Governing law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
8. Gender. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders.
9. Counterparts. This Agreement may be executed in any number of
duplicate originals, each of which shall be an original but all of which
together shall constitute one and the same instrument.
10. Paragraph Headings. The paragraph headings of this Agreement are
for convenience only and shall not limit or define the provisions of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, Assignor and the Agent have caused this Agreement
to be duly executed and delivered by their respective representatives thereunto
duly authorized as of the date first above written.
HAGLER BAILLY, INC.
ATTEST:
, Secretary
By:
Title:
WITNESS:
NATIONSBANK, N.A.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
<PAGE>
Appendix A To
Assignment of Federal Contract
Notice of Assignment
Date: ____________
To: Contracting Officer
[Address]
Re: CONTRACT NUMBER ___________ (the "Contract") MADE BY THE UNITED STATES
OF AMERICA
By: Department of the [Applicable U.S. Government Agency]
[Address]
with [Name of Subsidiary] (the "Contractor')
[Address]
for manufacture and support of a [Brief description of
Subject of Contract]
dated _______________
PLEASE TAKE NOTICE that moneys due or to become due under the
Contract have been assigned to NationsBank, N.A. pursuant to the provisions of
the Assignment of Claims Act of 1940, as amended (31 USC ss. 3727 and 41 USC ss.
15). A true copy of the Assignment executed by the Contractor on the date hereof
(the "Assignment") is attached to the original of this Notice of Assignment.
Please file this original Notice of Assignment along with the copy of the
Assignment in the contract file for the Contract and forward one of the enclosed
copies of this Notice of Assignment to the current disbursing office for the
Contract.
Payments due or to become due under the Contract should be
made (i) if by mail, to NationsBank, N.A., ____________________, (ii) if by
electronic transfer, to NationsBank, N.A. for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to NationsBank, N.A. for the account of
__________________________, Bank Account #_________, ABA#_________.
Please return enclosed copies of this Notice of Assignment
with appropriate notations showing the date and hour of receipt, and duly signed
by the person acknowledging receipt on behalf of the addressee, to NationsBank,
N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102, Attention: James
W. Gaittens.
Very truly yours,
HAGLER BAILLY, INC.
By: ________________________________
Name:
Title:
Receipt is hereby acknowledged of the above notice and a copy
of the above mentioned instrument of assignment. These were received at
_________[A.M.] [P.M.] on ______________________, 199__.
------------------------------------
Name:
Title:
on behalf of Contracting Officer
[Address]
<PAGE>
EXHIBIT 10.36
--------------------------------------------------------------------------
SECURITY AGREEMENT
dated as of November 20, 1998
between
HAGLER BAILLY CONSULTING, INC.,
as Debtor
and
NATIONSBANK, N.A.,
as Agent
-------------------------------------------------------------------------
<PAGE>
27
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of November 20, 1998 (as
amended, supplemented or modified from time to time, the "Security Agreement"),
is made by HAGLER BAILLY CONSULTING, INC., a Delaware corporation (the
"Debtor"), and NATIONSBANK, N.A., a national banking association (the "Agent")
in its capacity as Agent for the lenders (the "Lenders") from time to time a
party to the Revolving Credit Agreement, dated as of November 20, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Revolving
Credit Agreement"), by and among the Hagler Bailly, Inc., a Delaware corporation
(the "Company"), the Agent, in its capacity as such thereunder, and the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Revolving Credit Agreement, the
Lenders have severally agreed to make available to the Company a revolving line
of credit for Revolving Loans, Swing Line Loans and Standby Letters of Credit in
an aggregate principal amount at any time not to exceed the Maximum Available
Amount, subject to the terms and conditions contained therein;
WHEREAS, the Company owns, directly or indirectly, [all] of
the issued and outstanding shares of capital of stock of, or other equity
interests in, the Debtor;
WHEREAS, the proceeds of such Revolving Loans, Swing Line
Loans and Standby Letters of Credit may be used to enable the Company to make
valuable transfers to the Debtor in connection with the operation of its
business and for the Permitted Uses;
WHEREAS, the Debtor will derive substantial direct and
indirect benefit from such Revolving Loans, Swing Line Loans and Standby Letters
of Credit; and
WHEREAS, the Company is required to cause the Debtor to
execute this Agreement pursuant to the provisions of the Revolving Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and to induce the Lenders to make or maintain
their respective Revolving Loans and Swing Line Loans to, and the Issuing Lender
to issue or maintain the Standby Letters of Credit under the Revolving Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor hereby agrees with the
Agent, for the ratable benefit of the Lenders, as follows:
ARTICLE VII.
DEFINITIONS
Section 7.01. Definitions Generally. Capitalized terms used herein without
definition shall have the respective meanings specified in the Revolving Credit
Agreement, and the following terms shall have the following meanings (such
meanings to be, when appropriate, equally applicable to both the singular and
plural forms of the terms defined):
"Account Debtor" shall mean, with respect to any Receivable or
Other Intangible, any Person obligated to make payment thereunder, including
without limitation any account debtor thereon.
"Assignment of Claims Act" shall mean the Assignment of Claims Act of 1940,
31 U.S.C. 3727, 41 U.S.C. 15 (1986), as the same may be
amended and any successor statute of similar import.
"Assignment of Federal Contract" shall have the meaning
specified in Section 4.21 hereof.
"Cash Collateral Account" shall have the meaning specified in
Section 2.4 hereof.
"Collateral" shall have the meaning set forth in Section 2.1.
"Debtor" shall have the meaning specified in the preamble hereof.
"Equipment" shall mean all equipment now owned or hereafter
acquired by the Debtor, including all items of machinery, equipment, furnishings
and fixtures of every kind, whether affixed to real property or not, as well as
all automobiles, trucks and vehicles of every description, trailers, handling
and delivery equipment, fittings, special tools, all additions to, substitutions
for, replacements of or accessions to any of the foregoing, all attachments,
components, parts (including spare parts) and accessories whether installed
thereon or affixed thereto and all fuel for any thereof.
"Federal Contract" means any contract or agreement with,
involving or for the benefit of the United States of America or any department,
agency or instrumentality thereof (collectively, the "U.S. Government"), whether
now existing or hereafter arising, in each case as the same may be amended,
modified or otherwise supplemented from time to time.
"Inventory" shall mean all inventory now owned or hereafter
acquired by the Debtor, including (i) all goods and other personal property
which are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
(ii) all inventory, wherever located, evidenced by negotiable and non-negotiable
documents of title, warehouse receipts and bills of lading, (iii) all of the
Debtor's rights in, to and under all purchase orders now owned or hereafter
received or acquired by it for goods or services and (iv) all rights of the
Debtor as an unpaid seller, including rescission, replevin, reclamation and
stopping in transit.
"Lenders" shall have the meaning specified in the preamble hereof.
"Obligations" shall mean any and all now existing or hereafter
arising indebtedness, obligations, liabilities and covenants of each Credit
Party to any Lender, the Agent, their respective Affiliates, successors and
assigns and any other Indemnified Person under or arising out of any Credit
Document, including without limitation (i) all Revolving Loans and all Swing
Line Loans together with interest thereon and all Standby Letters of Credit,
(ii) all fees, expenses, indemnity payments and other amounts due or to become
due under the Revolving Credit Agreement, the Revolving Notes, the Swing Line
Note or any other Credit Document, (iii) all liabilities and obligations under
the Subsidiary Guarantee and any other agreement executed by any Credit Party
guarantying the obligations of the Borrower under the Revolving Credit Agreement
or any other Credit Document, (iv) all liabilities and obligations under any
agreement providing collateral for any of the foregoing (including any Pledge
Agreement and the Subsidiary Security Agreements), and (v) and any agreement or
instrument refinancing or restructuring all or any portion of the obligations
and liabilities under any of foregoing or under any successor agreement or note,
in each case whether direct or indirect, absolute or contingent or due or to
become due.
"Other Intangibles" shall mean all accounts, accounts
receivable, contract rights, documents, instruments, notes, chattel paper,
money, indemnities, warranties and general intangibles now owned or hereafter
acquired by the Debtor including, without limitation, all goodwill, customer
lists, permits, federal and state tax refunds, reversionary interests in pension
plan assets, Patents, Trademarks, licenses, copyrights and other rights in
intellectual property, other than Receivables.
"Patents" shall mean all letters patent of the United States
or any other country, and all applications for letters patent of the United
States or any other country, in which the Debtor may now or hereafter have any
right, title or interest and all reissues, continuations, continuations-in-part
or extensions thereof.
"Proceeds" shall mean all proceeds, including (i) whatever is
received upon any collection, exchange, sale or other disposition of any of the
Collateral and any property into which any of the Collateral is converted,
whether cash or non-cash, (ii) any and all payments or other property (in any
form whatsoever) made or due and payable on account of any insurance, indemnity,
warranty or guaranty payable to the Debtor with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever) made or due and
payable in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person, corporation, agency, authority or
other entity acting under color of any governmental authority) and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables" shall mean all accounts now or hereafter owing
to the Debtor, and all accounts receivable, contract rights, documents,
instruments or chattel paper representing amounts payable or monies due or to
become due to the Debtor, arising from the sale of Inventory or the rendition of
services in the ordinary course of business or otherwise (whether or not earned
by performance), together with all Inventory returned by or reclaimed from
customers wherever such Inventory is located, and all guaranties, securities and
liens held for the payment of any such account, account receivable, contract
right, document, instrument or chattel paper.
"Security Agreement" shall have the meaning specified in the preamble hereof.
"Trademarks" shall mean all right, title or interest which the
Debtor may now or hereafter have in any or all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source of business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and all applications in
connection therewith, including without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or political subdivision thereof and all reissues, extensions or
renewals thereof.
"UCC" shall mean the Uniform Commercial Code in effect on the
date hereof in the Commonwealth of Virginia.
"U.S. Government" has the meaning specified in the definition of Federal
Contract contained herein.
Section 7.02. UCC Definitions. The uncapitalized terms "account", "account
debtor", "chattel paper", "contract right", "document", "warehouse receipt",
"bill of lading", "document of title", "instrument", "inventory", "general
intangible", "money", "security", "certificated security", "uncertificated
security", "financial asset" and "proceeds" as used in Section 1.1 or elsewhere
in this Security Agreement shall have the respective meanings set forth in the
UCC.
ARTICLE VIII.
SECURITY INTERESTS
Section 8.01. Grant of Security Interests. To secure the due and punctual
payment of all Obligations, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing or due or
to become due, whether at maturity or upon acceleration or otherwise, in
accordance with the terms thereof and to secure the due and punctual performance
of all of the Obligations and in order to induce the Agent and the Lenders to
enter into the Revolving Credit Agreement and the other Credit Documents, the
Debtor hereby pledges, assigns, delivers, conveys and transfers to the Agent,
for the ratable benefit of the Lenders, and grants to the Agent, for the ratable
benefit of the Lenders, a first priority and continuing security interest in and
lien on, all of the Debtor's right, title and interest in, to and under the
following, whether now existing or hereafter acquired (the "Collateral"):
(i) all Receivables;
(ii) all Other Intangibles;
(iii) all Equipment;
(iv) all Inventory;
(v) to the extent not included in the foregoing, all securities (whether
certificated or uncertificated) and all financial assets, whether now existing
or hereafter arising, including, without limitation, all capital stock issued by
any Person and held by Debtor, and all partnership interests, whether in the
nature of a joint venture, limited liability company member's interest, master
limited partnership, teaming arrangement or otherwise;
(vi) to the extent not included in the foregoing, all other personal property,
whether tangible or intangible, and wherever located whether within or outside
of the United States, including, but not limited to, the balance of every
deposit account now or hereafter existing of the Debtor with any bank or other
financial institution and all monies of the Debtor and all rights to payment of
money of the Debtor;
(vii) to the extent not included in the foregoing, all books, ledgers and
records and all computer programs, tapes, discs, punch cards, data processing
software, transaction files, master files and related property and rights
(including computer and peripheral equipment) necessary or helpful in enforcing,
identifying or establishing any item of Collateral; and
(viii) to the extent not otherwise included, all Proceeds and products of any or
all of the foregoing, whether existing on the date hereof or arising hereafter;
provided, however, notwithstanding anything to the contrary contained herein,
the Debtor is not assigning, pledging or otherwise encumbering under this
Security Agreement its interests in any Federal Contract to which it is a party,
or in accounts or receivables due to Debtor under such Federal Contract, to the
extent, but only to the extent, such assignment, pledge or other encumbrance
would breach or violate or would cause Debtor to breach or violate such Federal
Contract or statutes or regulations applicable thereto, it being understood that
this proviso does not apply to, or in any way limit, Debtor's assignment, pledge
or encumbrance of Proceeds of all Federal Contracts to which it is a party.
Section 8.02. Continuing Liability of the Debtor. Anything herein to the
contrary notwithstanding, the Debtor shall remain liable to observe and perform
all the terms and conditions to be observed and performed by it under any
contract, agreement, warranty or other obligation with respect to the
Collateral; and shall do nothing to impair the security interests herein
granted. The Agent shall not have any obligation or liability under any such
contract, agreement, warranty or obligation by reason of or arising out of this
Security Agreement or the receipt by the Agent of any payment relating to any
Collateral, nor shall the Agent be required to perform or fulfill any of the
obligations of the Debtor with respect to the Collateral, to make any inquiry as
to the nature or sufficiency of any payment received by it or the sufficiency of
the performance of any party's obligations with respect to any Collateral.
Furthermore, the Agent shall not be required to file any claim or demand to
collect any amount due or to enforce the performance of any party's obligations
with respect to, the Collateral.
Section 8.03. Sales and Collections.
(a) Sales of Inventory in the Ordinary Course of Business. The Debtor is
authorized (i) to sell in the ordinary course of its business for fair value and
on an arm's-length basis any of its Inventory normally held by it for such
purpose and (ii) to use and consume, in the ordinary course of its business, any
raw materials, supplies and materials normally held by it for such purpose. The
Agent may, upon the occurrence of any Event of Default, without cause or notice,
curtail or terminate such authority at any time.
(b) Collection of Receivables. The Debtor is authorized to collect amounts owing
to it with respect to the Collateral, except as otherwise provided in connection
with the Assignment of Federal Contract, if any as provided herein. However, the
Agent may, upon and during the continuance of an Event of Default or a Potential
Event of Default, notify Account Debtors obligated to make payments under any or
all Receivables or Other Intangibles that the Agent has a security interest in
such Collateral and that payments shall be made directly to the Agent. Upon the
request of the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default, as the case may be, the Debtor will so notify such
Account Debtors and will execute such contract assignments, notices of
assignment or other documents as may be required by such Account Debtors. The
Debtor will use all reasonable efforts to cause each Account Debtor to comply
with the foregoing instruction. In furtherance of the foregoing, the Debtor
authorizes the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default (i) to ask for, demand, collect, receive and give
acquittances and receipts for any and all amounts due and to become due under
any Collateral and in the name of the Debtor or its own name or otherwise, (ii)
to take possession of, endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under any
Collateral and (iii) to file any claim or take any other action in any court of
law or equity or otherwise which it may deem appropriate for the purpose of
collecting any amounts due under any Collateral. The Agent shall have no
obligation to obtain or record any information relating to the source of such
funds or the obligations in respect of which payments have been made.
Section 8.04. Segregation of Proceeds.
(a) Cash Collateral Account Maintained by Agent. Upon an Event of Default or a
Potential Event of Default, the Agent shall have the right at any time during
the continuance thereof to cause to be opened and maintained at the office of
the Agent in McLean, Virginia a non-interest bearing bank account (the "Cash
Collateral Account") which will contain only Proceeds. Any "cash proceeds" (as
such term is defined in Section 9-306(1) of the UCC) received by the Agent
directly from Account Debtors obligated to make payments under Receivables or
Other Intangibles pursuant to Section 2.3 hereof or from the Debtor pursuant to
clause (b) of this Section 2.4, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper or other Proceeds received on
account of any Collateral, shall be promptly deposited in the Cash Collateral
Account, and until so deposited shall be held in trust for the Agent as property
of the Agent and shall not be commingled with any funds of the Debtor not
constituting Proceeds of Collateral. The name in which the Cash Collateral
Account is carried shall clearly indicate that the funds deposited therein are
the property of the Debtor, subject to the security interest of the Agent
hereunder. Such Proceeds, when deposited, shall continue to be security for the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Agent shall have sole dominion and control over the
funds deposited in the Cash Collateral Account, and such funds may be withdrawn
therefrom only by the Agent.
(b) Deposit of Proceeds by the Debtor. Upon notice by the Agent to the Debtor
that the Cash Collateral Account has been opened, the Debtor shall cause all
cash Proceeds collected by it to be delivered to the Agent forthwith upon
receipt, in the original form in which received (with such endorsements or
assignments as may be necessary to permit collection thereof by the Agent), and
for such purpose the Debtor hereby irrevocably authorizes and empowers the
Agent, its officers, employees and authorized agents to endorse and sign the
name of the Debtor on all checks, drafts, money orders or other media of payment
so delivered, and such endorsements or assignments shall, for all purposes, be
deemed to have been made by the Debtor prior to any endorsement or assignment
thereof by the Agent. The Agent may use any convenient or customary means for
the purpose of collecting such checks, drafts, money orders or other media of
payment.
Section 8.05. Verification of Receivables. The Agent shall have the right to
make test verifications of Receivables in any reasonable manner and through any
medium that it considers advisable, and the Debtor agrees to furnish all such
assistance and information as the Agent may reasonable require in connection
therewith. The Debtor at its expense will cause its chief financial officer to
furnish to the Agent at any reasonable time and from time to time promptly upon
the Agent's reasonable request, the following reports: (i) a reconciliation of
all Receivables, (ii) an aging of all Receivables, (iii) trial balances and (iv)
a test verification of such Receivables as the Agent may request.
Section 8.06. Release of Collateral.
(a) Security Interest of Agent Ceases Upon Permitted Dispositions. The Debtor
may sell or realize upon or transfer or otherwise dispose of Collateral only to
the extent permitted by Section 4.13, and the security interests of the Agent in
such Collateral so sold, realized upon or disposed of (but not in the Proceeds
arising from such sale, realization or disposition) shall cease immediately upon
such sale, realization or disposition, without any further action on the part of
the Agent. The Agent, if requested in writing by the Debtor but at the expense
of the Debtor, is hereby authorized and instructed to deliver to the Account
Debtor or the purchaser or other transferee of any such Collateral a certificate
stating that the Agent no longer has a security interest therein, and such
Account Debtor or such purchaser or other transferee shall be entitled to rely
conclusively on such certificate for any and all purposes.
(b) Filing of Termination Statements. Upon the payment in full of all of the
Obligations and if there is no commitment by any Lender to make further
advances, incur obligations or otherwise give value, the Agent will (as soon as
reasonably practicable after receipt of notice from the Debtor requesting the
same but at the expense of the Debtor) deliver to the Debtor (i) for each
jurisdiction in which a UCC financing statement is on file to perfect the
security interests granted to the Agent hereunder, a termination statement
(appropriately completed) to the effect that the Agent no longer claims a
security interest under such financing statement, and (ii) such other documents
as the Debtor shall reasonably request evidencing satisfaction of the
Obligations and the release of the security interests granted to the Agent
hereunder.
ARTICLE IX.
REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants that:
Section 9.01. Title to Collateral. Except for the security interests granted to
the Agent pursuant to this Security Agreement and as otherwise permitted by
Section 6.2(a) of the Revolving Credit Agreement, the Debtor is the sole owner
of each item of the Collateral, having good and marketable title thereto, free
and clear of any and all Liens.
Section 9.02. Validity, Perfection and Priority of Security Interests.
(a) By complying with Section 4.1 hereof, the Debtor will have created a valid
security interest in favor of the Agent in all existing Collateral and in all
identifiable Proceeds of such Collateral, which security interest (except in
respect of Collateral not located at a facility identified on Schedule 3.7
hereto and motor vehicles for which the exclusive manner of perfecting a
security interest therein is by noting such security interest in the certificate
of title in accordance with local law) would be prior to the claims of a trustee
in bankruptcy under Section 544(a) of the Bankruptcy Code. Continuing compliance
by the Debtor with the provisions of Section 4.2 hereof will also (i) create
valid security interests in all Collateral acquired after the date hereof and in
all identifiable Proceeds of such Collateral and (ii) cause such security
interests in all Collateral and in all Proceeds which are (A) identifiable cash
Proceeds of Collateral covered by financing statements required to be filed
hereunder, (B) identifiable Proceeds in which a security interest may be
perfected by such filing under the UCC and (C) any Proceeds in the Cash
Collateral Account to be duly perfected under the UCC, in each case prior to the
claims of a trustee in bankruptcy under the Bankruptcy Code (except in respect
of Collateral not located at a facility identified on Schedule 3.5 hereto).
(b) The security interests of the Agent in the Collateral located at the
facilities identified on Schedule 3.5 hereto rank first in priority. Other than
financing statements or other similar documents perfecting the security
interests in favor of the Agent, no financing statements, deeds of trust,
mortgages or similar documents covering all or any part of the Collateral are on
file or of record in any government office in any jurisdiction in which such
filing or recording would be effective to perfect a security interest in such
Collateral, nor is any of the Collateral in the possession of any Person (other
than the Debtor) asserting any claim thereto or security interest therein.
Section 9.03. Enforceability of Receivables and Other Intangibles. To the best
knowledge of the Debtor, each Receivable and Other Intangible is a valid and
binding obligation of the related Account Debtor in respect thereof, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
provisions of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and complies with any applicable legal
requirements.
Section 9.04. Place of Business. Schedule 3.4 correctly sets forth the chief
executive office and principal place of business of the Debtor and the offices
of the Debtor where records concerning Receivables and Other Intangibles are
kept.
Section 9.05. Location of Collateral. Schedule 3.5 correctly sets forth the
location of all Equipment and Inventory, other than rolling stock, aircraft and
goods in transit. Except as otherwise specified in Schedule 3.5, all Inventory
and Equipment has been located at the address specified on Schedule 3.5 at all
times during the four-month period prior to the date hereof while owned by the
Debtor. All Inventory has been and will be produced in compliance with the Fair
Labor Standards Act, 29 U.S.C. ss.ss. 201-219, except for such non-compliance
which could not reasonably be expected to have a material adverse effect on the
Debtor. No Inventory is evidenced by a negotiable document of title, warehouse
receipt or bill of lading. No non-negotiable document of title, warehouse
receipt or bill of lading has been issued to any person other than the Debtor,
and the Debtor has retained possession of all of such non-negotiable documents,
warehouse receipts and bills of lading. No amount payable under or in connection
with any of the Collateral is evidenced by promissory notes or other
instruments.
Section 9.06. Trade Names. Schedule 3.6 correctly sets forth any and all trade
names, division names, assumed names or other names under which the Debtor
currently transacts business or has transacted business within the four-month
period prior to the date hereof.
Section 9.07. Patents and Trademarks. Schedule 3.7 correctly sets forth all
Patents, Patent licenses, Trademarks and Trademark licenses now owned by
the Debtor.
ARTICLE X.
COVENANTS
The Debtor covenants and agrees that until all obligations and
liabilities in respect of the Obligations shall have performed and paid in full
and until no Standby Letters of Credit are outstanding or fully cash
collateralized and the Commitments are terminated:
Section 10.01. Perfection of Security Interests. The Debtor will, at its
expense, cause all filings and recordings and other actions specified on
Schedule 4.1 to have been completed on or prior to the Effective Date.
Section 10.02. Further Actions.
(a) At all times after the date hereof, the Debtor will, at its expense, comply
with the following:
(i) as to all Receivables, Other Intangibles, Equipment and Inventory, it will
cause UCC financing statements and continuation statements to be filed and to be
on file in all applicable jurisdictions as required to perfect the security
interests granted to the Agent hereunder, to the extent that applicable law
permits perfection of a security interest by filing under the UCC;
(ii) as to all Proceeds, it will cause all UCC financing statements and
continuation statements filed in accordance with clause (i) above to include a
statement or a checked box indicating that Proceeds of all items of Collateral
described herein are covered;
(iii) as to any amount payable under or in connection with any of the Collateral
which shall be or shall become evidenced by any promissory note or other
instrument, the Debtor will promptly (but in no event later than ten (10)
Business Days after receipt of such note or instrument), pledge and deliver such
note or other instrument to the Agent as part of the Collateral, duly endorsed
in a manner reasonably satisfactory to the Agent;
(iv) at the request of the Agent, the Debtor shall deliver all other Collateral
consisting of certificated securities, endorsed for transfer in a manner
reasonably satisfactory to the Agent (or execute a securities intermediary
account control agreement to the extent possession by the Agent of such
securities is not feasible); and
(v) as to all Patents, Patent licenses, Trademarks or Trademark licenses, the
Debtor will effect the recordation or renewal of the recordation of the security
interests of the Agent therein so as to maintain valid and perfected security
interests therein under all applicable state and federal laws.
(b) Further Assurances. The Debtor will, from time to time and at its expense,
execute, deliver, file or record such UCC financing statements, applications for
certificates of title and such other statements, assignments, instruments,
documents, agreements or other papers and take any other action that may be
necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect, confirm or validate the security interest of the
Agent in the Collateral, to enable the Agent to obtain the full benefits of this
Security Agreement or to enable it to exercise and enforce any of its rights,
powers and remedies hereunder, including, without limitation, its right to take
possession of the Collateral.
(c) Signature. To the fullest extent permitted by law, the Debtor authorizes the
Agent to sign and file financing and continuation statements and amendments
thereto with respect to the Collateral without its signature thereon.
Section 10.03. Change of Name, Identity or Structure. The Debtor will not change
its name, identity or corporate structure in any manner and, except as set forth
on Schedule 3.6, will not conduct its business under any trade, assumed or
fictitious name unless it shall have given the Agent at least forty-five (45)
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend any financing statement or continuation
statement relating to the security interests granted hereby in order to preserve
such security interests and to effectuate or maintain the priority thereof
against all Persons.
Section 10.04. Place of Business and Collateral. The Debtor will not change the
location of (i) its places of business, (ii) its chief executive office or (iii)
the office or other locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location listed on Schedule 3.4 or
3.5 unless, prior to such change, it notifies the Agent forty-five (45) days in
advance of such change, makes all UCC filings required by Section 4.2 and takes
all other action necessary or that the Agent may reasonably request to preserve,
perfect, confirm and protect the security interests granted hereby. The Debtor
will in no event change the location of any Collateral if such change would
cause the security interest granted hereby in such Collateral to lapse or cease
to be perfected. The Debtor will at all times maintain its chief executive
office within one of the forty-eight contiguous states in which Article 9 of the
uniform commercial code is in effect.
Section 10.05. Fixtures. The Debtor will not permit any Equipment to become a
fixture unless it shall have given the Agent at least ten (10) days' prior
written notice thereof and shall have taken all such action and delivered or
caused to be delivered to the Agent all instruments and documents, including,
without limitation, waivers and subordination agreements by any landlords and
mortgagees, and filed all financing statements necessary or reasonably requested
by the Agent, to preserve and protect the security interest granted herein and
to effectuate or maintain the priority thereof against all Persons; provided,
however, that, so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing, the Debtor shall not be obligated to
comply with the provisions of this Section 4.5 with respect to the first $50,000
of Equipment (determined based on the then fair market value thereof).
Section 10.06. Maintenance of Records. The Debtor will keep and maintain at its
own cost and expense complete books and records relating to the Collateral which
are satisfactory to the Agent including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral and all
of its other dealings with the Collateral. The Debtor will mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Agent' further security, the Debtor
agrees that the Agent shall have a special property interest in all of the
Debtor's books and records pertaining to the Collateral and the Debtor shall
deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent.
Section 10.07. Compliance with Laws The Debtor will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any government or any state or local government applicable to the Collateral or
any part thereof or to the operation of the Debtor's business except to the
extent that the failure to comply would not have a material adverse effect on
the financial or other condition of the Debtor; provided, however, that the
Debtor may contest any act, rule, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the Agent, adversely
affect the Agent's rights or, in the case of Collateral located at a facility
identified on Schedule 3.7 hereto, the first priority of its security interest
in the Collateral.
Section 10.08. Payment of Taxes. The Debtor will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as all
claims of any kind (including claims for labor, materials and supplies), except
that no such charge need be paid if (i) the validity thereof is being contested
in good faith by appropriate proceedings and (ii) such charge is adequately
reserved against in accordance with generally accepted accounting principles, as
consistently applied.
Section 10.09. Compliance with Terms of Accounts and Contracts. The Debtor will
perform and comply in all material respects with all of its obligations under
all agreements relating to the Collateral to which it is a party or by which it
is bound.
Section 10.10. Limitation on Liens on Collateral. The Debtor will not create,
permit or suffer to exist, and will defend the Collateral and the Debtor's
rights with respect thereto against and take such other action as is necessary
to remove any Lien, security interest, encumbrance, or claim in or to the
Collateral other than the security interests created hereunder and such Liens to
the extent permitted pursuant to Section 6.2(a) of the Revolving Credit
Agreement.
Section 10.11. Limitations on Modifications of Receivables and Other
Intangibles; No Waivers or Extensions. The Debtor will not (i) amend, modify,
terminate or waive any provisions of any material Receivable or Other Intangible
in any manner which might, when taken together with all such other Receivables
or Other Intangibles, respectively, materially reduce the value of all
Receivables or Other Intangibles, respectively, in the Collateral, (ii) fail to
exercise promptly and diligently each and every material right which it may have
under each Receivable and Other Intangible or (iii) fail to deliver to the Agent
a copy of each material demand, notice or document received by it relating in
any way to any Receivable or Other Intangible.
Section 10.12. Maintenance of Insurance. The Debtor will maintain with
financially sound insurance companies licensed to do business in the
jurisdictions in which the Collateral is located insurance policies on the
Inventory and Equipment in accordance with the provisions of Section 6.1(m) of
the Revolving Credit Agreement.
Section 10.13. Limitations on Dispositions of Collateral. The Debtor will not
directly or indirectly (through the sale of stock, merger or otherwise), without
the prior written consent of the Agent, sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (i) sales of Inventory in the ordinary course of its business for fair value
in arm's-length transactions and (ii) so long as no Event of Default (or
Potential Event of Default) has occurred and is continuing, dispositions in a
commercially reasonable manner of Equipment which has become redundant, worn out
or obsolete or which should be replaced so as to improve productivity, so long
as the proceeds of any such disposition are (x) used to acquire replacement
equipment which has comparable or better utility and equivalent or better value
and which is subject to a first priority security interest in favor of the Agent
therein, except as permitted by Section 6.2(a) of the Revolving Credit
Agreement, or (y) applied to repay the Obligations. The inclusion of Proceeds of
the Collateral under the security interests granted hereby shall not be deemed a
consent by the Agent to any sale or disposition of any Collateral other than as
permitted by this Section 4.13.
Section 10.14. Further Identification of Collateral. The Debtor will furnish to
the Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request. The Debtor shall promptly notify
the Agent if the value of the Collateral located at the facilities identified on
Schedule 3.7 hereto is less than 80% of the value of all of the Collateral.
Section 10.15. Notices. The Debtor will advise the Agent promptly and in
reasonable detail (i) of any Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, other than, unless reasonably
requested by the Agent, Liens permitted by Section 6.2(a) of the Revolving
Credit Agreement, (ii) of any material change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
security interests granted to the Agent in this Security Agreement.
Section 10.16. Change of Law. The Debtor shall promptly notify the Agent of any
change in law known to it which (i) adversely affects or will adversely affect
the validity, perfection or priority of the security interests granted hereby,
(ii) requires or will require a change in the proceedings to be followed in
order to maintain and protect such validity, perfection and priority or (iii)
could result in the Agent not having a perfected security interest in any of the
Collateral.
Section 10.17. Right of Inspection.
(a) Access to Books and Records. The Debtor shall, following any request by the
Agent and upon reasonable notice, permit the Agent or its representatives to
have full and free access during normal business hours to all the books,
correspondence and records of the Debtor, and the Agent or its representatives
may examine the same, take extracts therefrom, make photocopies thereof and have
such discussions with officers, employees and public accountants of the Debtor
as the Agent may deem reasonably necessary, and the Debtor agrees to render to
the Agent, at the Debtor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Agent and its
representatives shall upon reasonable notice and during normal business hours
also have the right to enter into and upon any premises where any of the
Inventory or the Equipment is located for the purpose of inspecting the same,
observing its use or protecting the interests of the Agent therein.
(b) Audits. The Debtor shall permit the Lenders, the Agent and their
representatives and advisors to review the operations of the Debtor and perform
the audits and examinations as provided in Section 6.1(l) of the Revolving
Credit Agreement.
Section 10.18. Maintenance of Equipment. The Debtor will, at its expense,
maintain the Equipment in good operating condition, ordinary wear and tear
excepted.
Section 10.19. Covenants Regarding Patent and Trademark Collateral.
(a) Generally. At such time as the Debtor shall acquire any Patents or
Trademarks, it will comply with the terms, covenants and warranties of this
Section 4.19.
(b) Continued Use of Trademark. The Debtor (either itself or through licensees)
will, unless the Debtor shall reasonably determine, after consultation with the
Agent, that a Trademark is of negligible economic value to the Debtor, (i)
continue to use each Trademark on each and every Trademark class of goods
applicable to its current products and services as reflected in its current
catalogs, brochures and price lists in order to maintain each Trademark in full
force and free from any claim of abandonment for non-use, (ii) maintain as in
the past the quality of products and services offered under each Trademark,
(iii) employ each Trademark with the appropriate notice of registration, (iv)
not adopt or use any mark which is confusingly similar to a colorable imitation
of any Trademark and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(c) No Abandonment. The Debtor will not, unless the Debtor shall reasonably
determine, after consultation with the Agent, that a Patent is of negligible
economic value to the Debtor, do any act, or knowingly omit to do any act,
whereby any Patent may be abandoned or dedicated.
(d) Notice of Abandonment or Adverse Determinations. The Debtor shall notify the
Agent immediately if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in any
proceeding in the United States Patent and Trademark Office or any court of
tribunal in any country) regarding the Debtor's ownership of any Patent or
Trademark, its right to register the same or keep and maintain the same.
(e) Filings After Notice to Agent. In no event shall the Debtor, either itself
or through any agent, employee, licensee or designee, file an application for
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the Agent and, upon
request of the Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's security
interest in such Patent or Trademark and the goodwill and general intangibles of
the Debtor relating thereto or represented thereby, and the Debtor hereby
constitutes the Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all such acts of such attorney being hereby ratified
and confirmed.
(f) Pursuit of Applications and Maintenance of Registrations. The Debtor will
take all necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability; provided, however, that no such Patent or Trademark shall
be required to be maintained or pursued to the extent such Patent or Trademark
is determined by the Debtor, after consultation with the Agent, to be of
negligible economic value to the Debtor.
(g) Notice of Infringement. If any of the Patent and Trademark Collateral is
infringed, misappropriated or diluted by a third party, the Debtor shall
promptly notify the Agent after it learns thereof and shall, unless the Debtor
shall reasonably determine, after consultation with the Agent, that such Patent
and Trademark Collateral is of negligible economic value to the Debtor, promptly
sue for infringement, misappropriation of dilution, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation or dilution, or take such other action as the Debtor shall
reasonably deem appropriate under the circumstances to protect such Patent and
Trademark Collateral.
Section 10.20. Termination of Federal Contracts. With respect to each Federal
Contract in respect of which the Debtor is required to execute an Assignment of
Federal Contract in accordance with Section 4.21 hereof, the Debtor shall give
prompt written notice to the Agent if the U.S. Government shall terminate or
threaten to terminate (whether for convenience or default) any such Federal
Contract with the Debtor having a value (including unexercised options) of
$100,000 or more. In addition, the Debtor shall give prompt written notice to
the Agent if the U.S. Government shall terminate or threaten to terminate any
contract between the U.S. Government and any other prime contractor under which
the Debtor is a subcontractor if the value of such subcontract (including
unexercised options) is $100,000 or more.
Section 10.21. Federal Contracts. The Debtor shall provide to the Agent, as soon
as reasonably practicable but not later than forty-five (45) days following the
end of each Fiscal Quarter, a report identifying each Federal Contract to which
it is a party, having attached thereto a copy of the first two pages of such
Federal Contract and any amendment thereto, to the extent not previously
provided to the Agent. At the request of the Agent (unless an Event of Default
shall have occurred and be continuing, in which case no such request shall be
required), the Debtor shall execute and deliver to the Agent an Assignment of
Federal Contract, in substantially the form of Exhibit A hereto (the "Assignment
of Federal Contract"), and execute any other instruments or take any other steps
required by the Agent in order that all moneys due or to become due under such
Federal Contracts shall be assigned to the Agent and notice thereof given under
the Assignment of Claims Act, including without limitation delivery of Notices
of Assignments with respect to each Federal Contract as contemplated by Appendix
A to Exhibit A hereto.
Section 10.22. Reimbursement Obligation. Should the Debtor fail to comply with
the provisions of this Security Agreement, the Revolving Credit Agreement or any
other agreement relating to the Collateral such that the value of any Collateral
or the validity, perfection, rank or value of any security interest granted to
the Agent hereunder or thereunder is thereby diminished or potentially
diminished or put at risk (as reasonably determined by the Agent), the Agent on
behalf of the Debtor may, but shall not be required to, effect such compliance
on behalf of the Debtor, and the Debtor shall reimburse the Agent for the cost
thereof on demand, and interest shall accrue on such reimbursement obligation
from the date the relevant costs are incurred until reimbursement thereof in
full at the Default Rate.
ARTICLE XI.
REMEDIES; RIGHTS UPON DEFAULT
Section 11.01. UCC Rights. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the Revolving Credit
Agreement or other Credit Documents and such Obligations have not been paid in
full, the Agent may in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
guarantying, evidencing or relating to the Obligations, exercise (i) all rights
and remedies of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and (ii) all other rights
available to the Agent at law or in equity.
Section 11.02. Payments on Collateral. Without limiting the rights of the Agent
under any other provision of this Security Agreement, if an Event of Default
shall occur and be continuing:
(i) all payments received by the Debtor under or in connection with any of the
Collateral shall be held by the Debtor in trust for the Agent, shall be
segregated from other funds of the Debtor and shall forthwith upon receipt by
the Debtor be turned over to the Agent, in the same form as received by the
Debtor (duly indorsed by the Debtor to the Agent, if required to permit
collection thereof by the Agent); and
(ii) all such payments received by the Agent (whether from the Debtor or
otherwise) may, in the sole discretion of the Agent, be held by the Agent as
collateral security for, and/or then or at any time thereafter applied in whole
or in part by the Agent to the payment of, the expenses and the Obligations as
set forth in Section 5.11 hereof.
Section 11.03. Possession of Collateral. In furtherance of the foregoing, the
Debtor expressly agrees that, if an Event of Default shall occur and be
continuing, the Agent may (i) by judicial powers, or without judicial process if
it can be done without breach of the peace, enter any premises where any of such
Collateral is or may be located and, without charge or liability to the Agent,
seize and remove such Collateral from such premises and (ii) have access to and
use of the Debtor's books and records relating to such Collateral.
Section 11.04. Sale of Collateral; Notice.
(a) Sale of Collateral. The Debtor expressly agrees that if an Event of Default
shall occur and be continuing, the Agent, without demand of performance or other
demand or notice of any kind (except the notice specified below of the time and
place of any public or private sale) to or upon the Debtor or any other Person
(all of which demands and/or notices are hereby waived by the Debtor), may
forthwith (i) apply the cash, if any, then held by it as collateral as specified
in Section 5.11 hereof and (ii) if there shall be no cash or such cash shall be
insufficient to pay the Obligations in full, collect, receive, appropriate and
realize upon the Collateral, and/or sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral (or contract to do
so) or any part thereof in one or more parcels (which need not be in round lots)
at public or private sale, at any office of the Agent or elsewhere in such
manner as is commercially reasonable and, as the Agent may deem best, for cash
or on credit or for future delivery without assumption of any credit risk. The
Agent shall have the right upon any such public sale, and, if the Collateral is
of a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Debtor waives all claims,
damages and demands against the Agent arising out of the foreclosure,
repossession, retention or sale of the Collateral.
(b) Notice of Sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent shall give
the Debtor ten (10) days' written notice of its intention to make any such
public or private sale or sale at a broker's board or on a securities exchange.
Such notice shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof being sold,
will first be offered for sale and (iii) in the case of a private sale, state
the day after which such sale may be consummated. The Agent shall not obligated
to make any such sale pursuant to any such notice. The Agent may adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In the case of any
sale of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling price is paid
by the purchaser thereof, but the Agent shall not incur any liability in case of
the failure of such purchase to take up and pay for the Collateral so sold and,
in the case of such failure, such Collateral may again be sold upon like notice.
(c) Special Provisions Relating to Sales of Securities. The Debtor recognizes
that the Agent may be unable to effect a public sale of any or all the
Collateral constituting a "security" (as such term is defined in the Securities
Act) by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers that will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. The Debtor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Agent
shall be under no obligation to delay a sale of any of Collateral constituting a
security for the period of time necessary to permit the issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such issuer would agree to do so.
Section 11.05. Rights of Purchasers. Upon any sale of the Collateral (whether
public or private), the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agent) at any such sale shall hold the Collateral so sold
absolutely, free from any claim or right of whatever kind, including any equity
or right of redemption of the Debtor who, to the extent permitted by law, hereby
specifically waives all rights of redemption, including, without limitation, any
right to redeem the Collateral under Section 9-506 of the UCC, and any right to
a judicial or other stay or approval which it has or may have under any law now
existing or hereafter adopted.
Section 11.06. Additional Rights of the Agent.
(a) Right to Maintain Proceedings. The Agent (i) shall have the right and power
to institute and maintain such suits and proceedings as it may deem appropriate
to protect and enforce the rights vested in it by this Security Agreement and
(ii) may proceed by suit or suits at law or in equity to enforce such rights and
to foreclose upon the Collateral and to sell all or, from time to time, any of
the Collateral under the judgment or decree of a court of competent
jurisdiction.
(b) Appointment of Receiver. The Agent shall, to the extent permitted by
applicable law, without notice to the Debtor to any party claiming through the
Debtor, without regard to the solvency or insolvency at such time of any Person
then liable for the payment of any of the Obligations, without regard to the
then value of the Collateral and without requiring any bond from any complainant
in such proceedings, be entitled as a matter of right to the appointment of a
receiver or receivers (who may be the Agent) of the Collateral or any part
thereof, pending such proceedings, with such powers as the court making such
appointment shall confer, and to the entry of an order directing that the
profits, revenues and other income of the property constituting the whole or any
part of the Collateral be segregated, sequestered and impounded for the benefit
of the Agent, and the Debtor irrevocably consents to the appointment of such
receiver or receivers and to the entry of such order.
(c) No Duty to Exercise Rights. In no event shall the Agent have any duty to
exercise any rights or take any steps to preserve the rights of the Agent in the
Collateral, nor shall the Agent be liable to the Debtor or any other Person for
any loss caused by the Agent's failure to meet any obligation imposed by Section
9-207 of the UCC or any successor provision. Without limiting the foregoing, the
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have any duty or responsibility for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
Section 11.07. Remedies Not Exclusive, etc.
(a) Remedies Not Exclusive. No remedy conferred upon or reserved to the Agent in
this Security Agreement is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law, in
equity or by statute.
(b) Restoration of Rights. If the Agent shall have proceeded to enforce any
right, remedy or power under this Security Agreement and the proceeding for the
enforcement thereof shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Agent, the Debtor and the Agent
shall, subject to any determination in such proceeding, severally and
respectively be restored to their former positions and rights under this
Security Agreement, and thereafter all rights, remedies and powers of the Agent
shall continue as though no such proceedings had been taken.
(c) Enforcement. All rights of action under this Security Agreement may be
enforced by the Agent without the possession of any instrument evidencing any
Obligation or the production thereof at any trial or other proceeding relative
thereto, and any suit or proceeding instituted by the Agent shall be brought in
its name and any judgment shall be held as part of the Collateral.
Section 11.08. Waiver and Estoppel.
(a) No Actions to Impede Sale of Collateral. The Debtor agrees, to the extent it
may lawfully do so, that it will not at any time in any manner whatsoever claim
or take the benefit or advantage of any appraisal, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force which may delay, prevent or otherwise affect the performance or
enforcement of this Security Agreement, and hereby waives all benefit or
advantage of all such laws. The Debtor covenants that it will not hinder, delay
or impede the execution of any power granted to the Agent in this Security
Agreement, any Assignment of Federal Contract or any other Credit Document.
(b) Collateral Sold As An Entirety. The Debtor, to the extent it may lawfully do
so, on behalf of itself and all who claim through or under it, including without
limitation any and all subsequent creditors, vendees, assignees and lienors,
waives and releases all rights to demand or to have any marshalling of the
Collateral upon any sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or under any foreclosure or any enforcement of
this Security Agreement, and consents and agrees that all of the Collateral may
at any such sale be offered and sold as an entirety.
(c) Waiver of Notices. The Debtor waives, to the extent permitted by law,
presentment, demand, protest and any notice of any kind (except the notices
expressly required hereunder) in connection with this Security Agreement and any
action taken by the Agent with respect to the Collateral.
Section 11.09. Power of Attorney; Powers Coupled With An Interest.
(a) Power of Attorney. Without limiting any other right granted hereunder, the
Debtor hereby irrevocably constitutes and appoints the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Agent's reasonable
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purpose of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives the Agent the power and right, on behalf of the Debtor,
without notice to or assent by the Debtor, to do the following:
(i) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(ii) to effect any repairs or any insurance called for by the terms of this
Security Agreement or any other Credit Document, and to pay all or any part of
the premiums therefor and the costs thereof;
(iii) upon the occurrence and continuance of any Event of Default and otherwise
to the extent provided in this Security Agreement, (A) to direct any party
liable for any payment under any of the Collateral to make payment of any and
all moneys due and to come due thereunder directly to the Agent or as the Agent
shall direct, (B) to receive payment of and receipt for, and to demand and sue
for, any and all moneys, claims and other amounts due and to become due at any
time in respect of or arising out of the Collateral, (C) to sign and indorse and
receive, take, assign and deliver, any checks, notes, drafts, negotiable and
non-negotiable instruments, any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral, (D) to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding with respect
to, or in connection with, the Collateral, (E) to sell, transfer, assign or
otherwise deal in or with the Collateral or any part thereof, as fully and
effectively as if the Agent were the absolute owner thereof and (F) to do, at
its option, but at the expense of the Debtor, at any time or from time to time,
all acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in order
to effect the intent of this Security Agreement, all as fully and effectively as
the Debtor might do.
(b) Powers Coupled With an Interest. All authorizations and agencies granted or
provided herein with respect to the Collateral, including the powers granted
under clause (a) of this Section 5.9, are irrevocable and powers coupled with an
interest.
Section 11.10. Certain Provisions Relating to Securities. Solely with respect to
any Collateral constituting a "security" (as defined in the Securities Act), if
an Event of Default shall have occurred and be continuing, all such securities
(as defined in the Securities Act) constituting a part of the Collateral shall,
at the request of the Agent, be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (i) all voting,
corporate and other rights, powers and privileges pertaining to such Collateral
at any meeting of shareholders of the issuer thereof or otherwise, and (ii) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all such Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the structure of
any such issuer, or upon the exercise by the Debtor or the Agent of any right,
privilege or option pertaining to such Collateral, and in connection therewith,
the right to deposit and deliver any and all such Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine), all without liability except to account for
property actually received by it and except as provided in Section 5.6(c)
hereof, but the Agent shall have no duty to the Debtor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
Section 11.11. Application of Monies. The proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Agent in the following order of priority:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Agent and its agents and
counsel, and all expenses, liabilities and advances incurred or made by the
Agent, its agents and counsel in connection therewith or in connection with the
care, safekeeping or otherwise of any or all of the Collateral;
second, to payment of the Obligations, in such order as the Agent may
elect; and
third, any surplus then remaining shall be paid to the Debtor,
or its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same (including pursuant to Section 9-504(1)(C) of the UCC) or as a
court of competent jurisdiction may direct.
ARTICLE XII.
MISCELLANEOUS
Section 12.01. Notices. All notices, requests and other communications to a
party hereunder shall be in writing and shall be given to such party at its
address set forth on the signature page hereof or such other address as such
party may hereafter specify for that purpose by notice to the other. Each such
notice, request or other communication shall be effective (i) in the case of
telephonic notice (to the extent expressly permitted hereunder), when made, (ii)
in the case of notice delivered by overnight express courier, one Business Day
after the Business Day such notice was delivered to such courier, (iii) in the
case of notice delivered by first class mail, three Business Days after being
deposited in the mail, postage prepaid, return receipt requested, (iv) in the
case of notice by hand, when delivered, or (v) in the case of notice by any
customary means of telecommunication, when sent provided confirmation of receipt
or answer back has been received, in each case if addressed to any party hereto
as provided herein. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect the
validity of notice given in accordance with this section.
Section 12.02. No Waiver; Cumulative Remedies. The Agent shall not by any act
(except by a written instrument pursuant to Section 6.3 hereof) be deemed to
have waived any right or remedy hereunder. No failure to exercise, nor any delay
in exercising, on the part of the Agent any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
Section 12.03. Amendments and Waivers. None of the terms or provisions of this
Security Agreement may be amended, supplemented or otherwise modified except by
a written instrument executed by the Debtor and the Agent; provided that any
provision of this Security Agreement may be waived by the Agent in a letter or
agreement executed by the Agent or by telex or facsimile transmission from the
Agent.
Section 12.04. Successors and Assigns. The provisions of this Security Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Debtor may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Agent.
Section 12.05. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, OTHER
THAN ITS LAWS RESPECTING CHOICE OF LAW OTHER THAN THOSE CONTAINED IN THE UCC.
Section 12.06. Limitation by Law; Severability.
(a) All rights, remedies and powers provided in this Security Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Security Agreement invalid, unenforceable in whole or in part,
or not entitled to be recorded, registered or filed upon the provisions of any
applicable law.
(b) If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
Section 12.07. Counterparts. This Security Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each complete set of which, when so executed and delivered by all parties, shall
be an original, but all such counterparts shall together constitute but one and
the same instrument.
Section 12.08. Expenses of the Agent. The Debtor shall pay to the Agent from
time to time upon demand, all of the costs and expenses incurred by the Agent or
any Lender (including, without limitation, the reasonable fees and disbursements
of counsel and any amounts payable by the Agent or any Lender to any of their
respective agents) (i) arising in connection with the administration,
modification, amendment, waiver or termination of this Security Agreement or any
document or agreement contemplated hereby or any consent or waiver hereunder or
thereunder or (ii) incurred in connection with the administration of this
Security Agreement, or any document or agreement contemplated hereby, or in
connection with the administration, sale or other disposition of Collateral
hereunder or under any document or agreement contemplated hereby or the
preservation, protection or defense of the rights of the Agent or any Lender in
and to the Collateral.
Section 12.09. Indemnification. The Debtor shall at all times hereafter
indemnify, hold harmless and, on demand, reimburse the Agent and the Lenders and
their respective subsidiaries, affiliates, successors, assigns, officers,
directors, employees and agents, and their respective heirs, executors,
administrators, successors and assigns (all of the foregoing parties, including,
but not limited to, the Agent, being hereinafter collectively referred to as the
"Indemnities" and individually as an "Indemnitee") from, against and for any and
all liabilities, obligations, claims, damages, actions, penalties, causes of
action, losses, judgments, suits, costs, expenses and disbursements, including,
without limitation, attorney's fees (any and all of the foregoing being
hereinafter collectively referred to as the "Liabilities" and individually as a
"Liability") which the Indemnitees, or any of them, might be or become
subjected, by reason of, or arising out of the preparation, execution, delivery,
modification, administration or enforcement of, or performance of the Agent's
rights under, this Security Agreement or any other document, instrument or
agreement contemplated hereby or executed in connection herewith; provided,
however, that the Debtor shall not be liable to any Indemnitee for any Liability
caused solely by the gross negligence or willful misconduct of such Indemnitee.
In no event shall any Indemnitee, as a condition to enforcing its rights under
this Section 6.9 or otherwise, be obligated to make a claim against any other
Person (including, without limitation, the Agent) to enforce its rights under
this Section 6.9.
Section 12.10. Termination; Survival. This Security Agreement shall terminate
when the security interests granted hereunder have terminated and the Collateral
has been released as provided in Section 2.6; provided, however, that the
obligations of the Debtor under Section 4.22 and the provisions of this Article
6 shall survive any such termination.
Section 12.11. Judicial Proceedings; Waiver of Jury Trial. Any judicial
proceeding brought against the Debtor with respect to any Credit Agreement
Related Claim hereby may be brought in any court of competent jurisdiction in
the Commonwealth of Virginia, County of Fairfax, or any Federal court in the
Eastern District of Virginia, and, by execution and delivery of this Security
Agreement, the Debtor (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with any Credit Agreement Related Claim and (b) irrevocably waives any objection
it may now or hereafter have as to the venue of any such proceeding brought in
such a court or that such a court is an inconvenient forum. The Debtor hereby
waives personal service of process and consents that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of Section 6.1
hereof, and service so made shall be deemed completed on the earlier of (x) the
receipt thereof and (y) if sent by registered or certified mail (return receipt
requested), the fifth (5th) Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the Agent to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Debtor in the courts of any other jurisdiction. Any
judicial proceeding by the Debtor against the Agent relating to or involving any
Credit Agreement Related Claim hereby shall be brought only in a court located
in the Commonwealth of Virginia, County of Fairfax, or the Federal court in the
Eastern District of Virginia. THE DEBTOR AND THE AGENT HEREBY UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING ANY CREDIT AGREEMENT RELATED CLAIM.
Section 12.12. Integration. This Security Agreement and the other Credit
Documents constitute the entire agreement of the Agent, the Lenders, the
Borrower and the other Credit Parties with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Credit
Documents.
Section 12.13. Authority of Agent. The Debtor acknowledges that the rights and
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Security Agreement shall, as between
the Agent and the Lenders, be governed by the Revolving Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Debtor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and the Debtor shall not be under any obligation,
or entitlement, to make any inquiry respecting such authority.
Section 12.14. Headings, Bold Type and Table of Contents. The section headings,
subsection headings, and bold type used herein and the Table of Contents hereto
have been inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Security Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
Address: HAGLER BAILLY CONSULTING, INC.
1530 Wilson Boulevard
Suite 400
Arlington, VA 22209 By: /s/Glenn J. Dozier_____________
Attention: Glenn J. Dozier Name: Glenn J. Dozier
Phone: (703) 351-0338 Title: Senior Vice President
Fax: (703) 528-3786 and Chief Financial Officer
Address: NATIONSBANK, N.A.
8300 Greensboro Drive
Suite 550 By: James W. Gaittens_____
McLean, Virginia 22102 Name: James W. Gaittens
Attention: James W. Gaittens Title: Senior Vice President
Phone: (703) 761-8405
Fax: (703) 917-0519
<PAGE>
1565246
31
Schedule 3.4
Place of Business
<PAGE>
Schedule 3.5
Location of Collateral
<PAGE>
Schedule 3.6
Trade Names, Division Names, etc.
<PAGE>
Schedule 3.7
Patents and Trademarks
<PAGE>
Schedule 4.1
UCC Filings
<PAGE>
7
Exhibit A to
Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __
(the "Agreement"), is made by HAGLER BAILLY CONSULTING, INC., a Delaware
corporation (the "Assignor"), in favor of NATIONSBANK, N.A., a national banking
association (the "Agent"), in its capacity as Agent for the lenders from time to
time a party to the Revolving Credit Agreement (as defined in the Security
Agreement referred to below).
W I T N E S S E T H:
WHEREAS, the Assignor has secured certain obligations
undertaken by Hagler Bailly, Inc. pursuant to the provisions of a Security
Agreement, dated as of ___________________, ____ (as the same may be amended,
supplemented or otherwise modified from time to time, the "Security Agreement"),
by and between the Assignor and the Agent; and
WHEREAS, the Assignor is a party to, and from time to time
will become entitled to receive moneys under and by virtue of, a certain
contract with, involving or for the benefit of the United States of America or
any department, agency or instrumentality thereof (herein referred to as the
"Government"), designated as Contract Number _______ entered into by the
Assignor and the Government on ________ __, 19__ (which contract, together with
all additions, change orders, supplements, amendments, renewals, extensions, and
modifications thereto now or hereafter in effect, are hereinafter collectively
called the "Contract"); and
WHEREAS, pursuant to the Security Agreement, the Assignor has
undertaken to effectuate the assignment(s) and other actions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Assignor covenants and agrees as follows:
1. Incorporation By Reference. The provisions of the Security Agreement
are incorporated herein by reference, and the terms defined in the Security
Agreement are used herein with the same meanings.
2. Representations. The Assignor represents and warrants to the Agent
that (a) the Contract is legal, valid and binding on the Assignor and, to its
knowledge, the other parties thereto, is in full force and effect, and is not
evidenced by any chattel paper or instrument, (b) upon due filing of this
Agreement, together with a Notice of Assignment substantially in the form of
Appendix A hereto with the authorized representative, the execution and delivery
of this Agreement does not violate and is not in conflict with the provisions of
the Contract, (c) there has been no default on the part of the Assignor or any
other party to the Contract, (d) the Assignor has made no previous assignment of
the Contract to any person and knows of no fact or defense that will render the
moneys due or to be due thereunder uncollectible, (e) no financing statement
covering the Contract is on file in any public office except financing
statements in favor of the Agent, (f) no set-off or counterclaim to any moneys
due or to become due under the Contract exists on the date hereof, and no
agreement has been made with any person under which any deduction or discount
may be claimed, and (g) the address of the office where the Assignor keeps its
records concerning the Contract is ____________________.
3. Collateral. As security and collateral for the payment of all of the
Obligations (defined in the Security Agreement) and for performance of, and
compliance with, by the Assignor, all of the terms, covenants, conditions,
stipulations, and agreements contained in this Agreement and in the Security
Agreement, the Assignor hereby assigns to the Agent, and grants to the Agent a
lien on and security interest in, all moneys and claims for moneys now and
hereafter due and to become due to the Assignor under or by reason of the
Contract, together with all cash and non-cash proceeds thereof; provided,
however, that nothing contained herein shall impose upon the Agent any of the
obligations or liabilities of the Assignor under the Contract.
4. Covenants. Until payment and performance in full of the Obligations,
the Assignor covenants as follows:
(c) The Assignor shall place on any and all vouchers, invoices, or other
instruments demanding payment under the Contract the direction that such payment
is to be made to the Agent in accordance with Section 5 of this Agreement.
(d) The Assignor shall promptly upon request execute, acknowledge, and deliver
any notice, financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate, or other document as
the Agent may require in order to perfect, preserve, maintain, protect,
continue, and/or extend the assignment, lien, and security interest of the Agent
under this Agreement and its priority. The Assignor shall pay to the Agent on
demand all taxes, costs, and expenses incurred by the Agent in connection with
the preparation, execution, recording, and filing of any such document or
instrument mentioned aforesaid, and such taxes, costs, and expenses shall
constitute and become a part of the Obligations. A carbon, photographic, or
other reproduction of a security agreement or a financing statement is
sufficient as a financing statement.
(e) The Assignor shall fully, promptly, and faithfully comply with and perform
its obligations and duties under the Contract in accordance with the terms
thereof and will make no changes or amendments to the Contract or terminate or
cancel the Contract without the prior written consent of the Agent except as
permitted by the Security Agreement. In the event that any change, amendment,
termination or cancellation of the Contract is made or effected by the
Government, the Assignor will promptly notify the Agent thereof and promptly
furnish to the Agent a copy of any document or agreement evidencing any such
change, amendment, termination, or cancellation.
(f) The Assignor will promptly
(i) furnish to the Agent all information received by the Assignor affecting
the moneys due and to become due under the Contract,
(ii) inform the Agent of any delay in performance of, or claims made in
regard to, the Contract, and
(iii) notify the Agent in writing of the failure of any party to the Contract to
perform any of its obligations thereunder and any rejection of any performance
rendered by the Assignor under or in connection with the Contract.
(g) The Assignor will at all times keep accurate and complete records of
performance by the Assignor under the Contract, and the Agent and its agents
shall have the right, during normal business hours and upon reasonable advance
notice, to call at the place or places of business of the Assignor at intervals
to be determined by the Agent, and without hindrance or delay, to inspect,
audit, check, and make extracts from the books, records, journals, orders,
receipts, correspondence, and other data relating to the Contract or to any
other transactions between the parties hereto related to the Contract.
5. Payments. The Assignor hereby authorizes, empowers, and directs the
Government to draw all checks, drafts, or other instruments representing the
payments of money due the Assignor under the Contract (herein called the "Items
of Payment") to the order of NationsBank, N.A., assignee of Assignor, and to
send the same (i) if by mail, to , (ii) if by electronic transfer, to
NationsBank, N.A. for the account of ________________, Bank Account #__________,
Agent ABA#_________, or (iii) if by wire transfer, to NationsBank, N.A. for the
account of _________________________, Bank Account #_______, ABA#___________.
If, despite this direction, any instruments or checks representing payments
should be delivered to the Assignor, the Assignor will immediately endorse and
deliver such instruments or checks to the order of the Agent. The Assignor does
hereby irrevocably (subject to revocation with the consent of the Agent)
designate and appoint (which appointment is coupled with an interest) the Agent,
and the Agent's successors in interest by operation of law, the Assignor's true
and lawful attorney with power irrevocable for the Assignor and in the
Assignor's name, place, and stead, but at the sole cost and expense of the
Assignor, to receive, endorse, and collect all Items of Payment, and to ask,
demand, receive, receipt, and give acquittances for any and all amounts which
may be payable or which become due and payable by the Government under the
Contract, and in the Agent's discretion to file any claim or to take any other
action or proceeding, either in the Agent's own name or in the name of the
Assignor or otherwise, which to the Agent or any successor in interest thereof
may seem necessary or desirable in order to collect or endorse the payment of
any and all amounts now due or owing or which may hereafter be or become due or
owing on account of the Contract. All Items of Payment received by the Agent
pursuant hereto which are finally paid in cash or solvent credits shall be
applied against the Obligations as provided in the Security Agreement. Any
portion of the Items of Payment which the Agent elects not to so apply shall be
paid over to the Assignor or to whomsoever shall be entitled thereto under
applicable law, including pursuant to Section 9-504(1)(C) of the Uniform
Commercial Code of the Commonwealth of Virginia.
6. No Waiver. Neither this Agreement nor any term, condition,
representation, warranty, covenant, or agreement hereof may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing by the
party against whom such change, waiver, discharge, or termination is sought.
7. Governing law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
8. Gender. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders.
9. Counterparts. This Agreement may be executed in any number of
duplicate originals, each of which shall be an original but all of which
together shall constitute one and the same instrument.
10. Paragraph Headings. The paragraph headings of this Agreement are
for convenience only and shall not limit or define the provisions of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, Assignor and the Agent have caused this Agreement
to be duly executed and delivered by their respective representatives thereunto
duly authorized as of the date first above written.
HAGLER BAILLY CONSULTING, INC.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
NATIONSBANK, N.A.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
<PAGE>
Appendix A To
Assignment of Federal Contract
Notice of Assignment
Date: ____________
To: Contracting Officer
[Address]
Re: CONTRACT NUMBER ___________ (the "Contract") MADE BY THE UNITED STATES
OF AMERICA
By: Department of the [Applicable U.S. Government Agency]
[Address]
with [Name of Subsidiary] (the "Contractor")
[Address]
for manufacture and support of a [Brief description of
Subject of Contract]
dated _______________
PLEASE TAKE NOTICE that moneys due or to become due under the
Contract have been assigned to NationsBank, N.A. pursuant to the provisions of
the Assignment of Claims Act of 1940, as amended (31 USC ss. 3727 and 41 USC ss.
15). A true copy of the Assignment executed by the Contractor on the date hereof
(the "Assignment") is attached to the original of this Notice of Assignment.
Please file this original Notice of Assignment along with the copy of the
Assignment in the contract file for the Contract and forward one of the enclosed
copies of this Notice of Assignment to the current disbursing office for the
Contract.
Payments due or to become due under the Contract should be
made (i) if by mail, to NationsBank, N.A., ____________________, (ii) if by
electronic transfer, to NationsBank, N.A. for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to NationsBank, N.A. for the account of
__________________________, Bank Account #_________, ABA#_________.
Please return enclosed copies of this Notice of Assignment
with appropriate notations showing the date and hour of receipt, and duly signed
by the person acknowledging receipt on behalf of the addressee, to NationsBank,
N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102, Attention: James
W. Gaittens.
Very truly yours,
HAGLER BAILLY CONSULTING, INC.
By: ________________________________
Name:
Title:
Receipt is hereby acknowledged of the above notice and a copy
of the above mentioned instrument of assignment. These were received at
_________[A.M.] [P.M.] on ______________________, 199__.
- ------------------------------------
Name:
Title:
on behalf of Contracting Officer
[Address]
EXHIBIT 10.37
--------------------------------------------------------------------------
SECURITY AGREEMENT
dated as of November 20, 1998
between
HAGLER BAILLY SERVICES, INC.,
as Debtor
and
NATIONSBANK, N.A.,
as Agent
-------------------------------------------------------------------------
<PAGE>
27
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of November 20, 1998 (as
amended, supplemented or modified from time to time, the "Security Agreement"),
is made by HAGLER BAILLY SERVICES, INC., a Delaware corporation (the "Debtor"),
and NATIONSBANK, N.A., a national banking association (the "Agent") in its
capacity as Agent for the lenders (the "Lenders") from time to time a party to
the Revolving Credit Agreement, dated as of November 20, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Revolving Credit
Agreement"), by and among the Hagler Bailly, Inc., a Delaware corporation (the
"Company"), the Agent, in its capacity as such thereunder, and the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Revolving Credit Agreement, the
Lenders have severally agreed to make available to the Company a revolving line
of credit for Revolving Loans, Swing Line Loans and Standby Letters of Credit in
an aggregate principal amount at any time not to exceed the Maximum Available
Amount, subject to the terms and conditions contained therein;
WHEREAS, the Company owns, directly or indirectly, [all] of
the issued and outstanding shares of capital of stock of, or other equity
interests in, the Debtor;
WHEREAS, the proceeds of such Revolving Loans, Swing Line
Loans and Standby Letters of Credit may be used to enable the Company to make
valuable transfers to the Debtor in connection with the operation of its
business and for the Permitted Uses;
WHEREAS, the Debtor will derive substantial direct and
indirect benefit from such Revolving Loans, Swing Line Loans and Standby Letters
of Credit; and
WHEREAS, the Company is required to cause the Debtor to
execute this Agreement pursuant to the provisions of the Revolving Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and to induce the Lenders to make or maintain
their respective Revolving Loans and Swing Line Loans to, and the Issuing Lender
to issue or maintain the Standby Letters of Credit under the Revolving Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor hereby agrees with the
Agent, for the ratable benefit of the Lenders, as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions Generally. Capitalized terms used herein without
definition shall have the respective meanings specified in the Revolving Credit
Agreement, and the following terms shall have the following meanings (such
meanings to be, when appropriate, equally applicable to both the singular and
plural forms of the terms defined):
"Account Debtor" shall mean, with respect to any Receivable or
Other Intangible, any Person obligated to make payment thereunder, including
without limitation any account debtor thereon.
"Assignment of Claims Act" shall mean the Assignment of Claims Act of 1940,
31 U.S.C. 3727, 41 U.S.C. 15 (1986), as the same may be
amended and any successor statute of similar import.
"Assignment of Federal Contract" shall have the meaning specified in
Section 4.21 hereof.
"Cash Collateral Account" shall have the meaning specified in Section
2.4 hereof.
"Collateral" shall have the meaning set forth in Section 2.1.
"Debtor" shall have the meaning specified in the preamble hereof.
"Equipment" shall mean all equipment now owned or hereafter
acquired by the Debtor, including all items of machinery, equipment, furnishings
and fixtures of every kind, whether affixed to real property or not, as well as
all automobiles, trucks and vehicles of every description, trailers, handling
and delivery equipment, fittings, special tools, all additions to, substitutions
for, replacements of or accessions to any of the foregoing, all attachments,
components, parts (including spare parts) and accessories whether installed
thereon or affixed thereto and all fuel for any thereof.
"Federal Contract" means any contract or agreement with,
involving or for the benefit of the United States of America or any department,
agency or instrumentality thereof (collectively, the "U.S. Government"), whether
now existing or hereafter arising, in each case as the same may be amended,
modified or otherwise supplemented from time to time.
"Inventory" shall mean all inventory now owned or hereafter
acquired by the Debtor, including (i) all goods and other personal property
which are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
(ii) all inventory, wherever located, evidenced by negotiable and non-negotiable
documents of title, warehouse receipts and bills of lading, (iii) all of the
Debtor's rights in, to and under all purchase orders now owned or hereafter
received or acquired by it for goods or services and (iv) all rights of the
Debtor as an unpaid seller, including rescission, replevin, reclamation and
stopping in transit.
"Lenders" shall have the meaning specified in the preamble hereof.
"Obligations" shall mean any and all now existing or hereafter
arising indebtedness, obligations, liabilities and covenants of each Credit
Party to any Lender, the Agent, their respective Affiliates, successors and
assigns and any other Indemnified Person under or arising out of any Credit
Document, including without limitation (i) all Revolving Loans and all Swing
Line Loans together with interest thereon and all Standby Letters of Credit,
(ii) all fees, expenses, indemnity payments and other amounts due or to become
due under the Revolving Credit Agreement, the Revolving Notes, the Swing Line
Note or any other Credit Document, (iii) all liabilities and obligations under
the Subsidiary Guarantee and any other agreement executed by any Credit Party
guarantying the obligations of the Borrower under the Revolving Credit Agreement
or any other Credit Document, (iv) all liabilities and obligations under any
agreement providing collateral for any of the foregoing (including any Pledge
Agreement and the Subsidiary Security Agreements), and (v) and any agreement or
instrument refinancing or restructuring all or any portion of the obligations
and liabilities under any of foregoing or under any successor agreement or note,
in each case whether direct or indirect, absolute or contingent or due or to
become due.
"Other Intangibles" shall mean all accounts, accounts
receivable, contract rights, documents, instruments, notes, chattel paper,
money, indemnities, warranties and general intangibles now owned or hereafter
acquired by the Debtor including, without limitation, all goodwill, customer
lists, permits, federal and state tax refunds, reversionary interests in pension
plan assets, Patents, Trademarks, licenses, copyrights and other rights in
intellectual property, other than Receivables.
"Patents" shall mean all letters patent of the United States
or any other country, and all applications for letters patent of the United
States or any other country, in which the Debtor may now or hereafter have any
right, title or interest and all reissues, continuations, continuations-in-part
or extensions thereof.
"Proceeds" shall mean all proceeds, including (i) whatever is
received upon any collection, exchange, sale or other disposition of any of the
Collateral and any property into which any of the Collateral is converted,
whether cash or non-cash, (ii) any and all payments or other property (in any
form whatsoever) made or due and payable on account of any insurance, indemnity,
warranty or guaranty payable to the Debtor with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever) made or due and
payable in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person, corporation, agency, authority or
other entity acting under color of any governmental authority) and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables" shall mean all accounts now or hereafter owing
to the Debtor, and all accounts receivable, contract rights, documents,
instruments or chattel paper representing amounts payable or monies due or to
become due to the Debtor, arising from the sale of Inventory or the rendition of
services in the ordinary course of business or otherwise (whether or not earned
by performance), together with all Inventory returned by or reclaimed from
customers wherever such Inventory is located, and all guaranties, securities and
liens held for the payment of any such account, account receivable, contract
right, document, instrument or chattel paper.
"Security Agreement" shall have the meaning specified in the preamble hereof.
"Trademarks" shall mean all right, title or interest which the
Debtor may now or hereafter have in any or all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source of business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and all applications in
connection therewith, including without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or political subdivision thereof and all reissues, extensions or
renewals thereof.
"UCC" shall mean the Uniform Commercial Code in effect on the
date hereof in the Commonwealth of Virginia.
"U.S. Government" has the meaning specified in the definition of Federal
Contract contained herein.
Section 1.02. UCC Definitions. The uncapitalized terms "account", "account
debtor", "chattel paper", "contract right", "document", "warehouse receipt",
"bill of lading", "document of title", "instrument", "inventory", "general
intangible", "money", "security", "certificated security", "uncertificated
security", "financial asset" and "proceeds" as used in Section 1.1 or elsewhere
in this Security Agreement shall have the respective meanings set forth in the
UCC.
ARTICLE II.
SECURITY INTERESTS
Section 2.01. Grant of Security Interests. To secure the due and punctual
payment of all Obligations, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing or due or
to become due, whether at maturity or upon acceleration or otherwise, in
accordance with the terms thereof and to secure the due and punctual performance
of all of the Obligations and in order to induce the Agent and the Lenders to
enter into the Revolving Credit Agreement and the other Credit Documents, the
Debtor hereby pledges, assigns, delivers, conveys and transfers to the Agent,
for the ratable benefit of the Lenders, and grants to the Agent, for the ratable
benefit of the Lenders, a first priority and continuing security interest in and
lien on, all of the Debtor's right, title and interest in, to and under the
following, whether now existing or hereafter acquired (the "Collateral"):
(i) all Receivables;
(ii) all Other Intangibles;
(iii) all Equipment;
(iv) all Inventory;
(v) to the extent not included in the foregoing, all securities (whether
certificated or uncertificated) and all financial assets, whether now existing
or hereafter arising, including, without limitation, all capital stock issued by
any Person and held by Debtor, and all partnership interests, whether in the
nature of a joint venture, limited liability company member's interest, master
limited partnership, teaming arrangement or otherwise;
(vi) to the extent not included in the foregoing, all other personal property,
whether tangible or intangible, and wherever located whether within or outside
of the United States, including, but not limited to, the balance of every
deposit account now or hereafter existing of the Debtor with any bank or other
financial institution and all monies of the Debtor and all rights to payment of
money of the Debtor;
(vii) to the extent not included in the foregoing, all books, ledgers and
records and all computer programs, tapes, discs, punch cards, data processing
software, transaction files, master files and related property and rights
(including computer and peripheral equipment) necessary or helpful in enforcing,
identifying or establishing any item of Collateral; and
(viii) to the extent not otherwise included, all Proceeds and products of any or
all of the foregoing, whether existing on the date hereof or arising hereafter;
provided, however, notwithstanding anything to the contrary contained herein,
the Debtor is not assigning, pledging or otherwise encumbering under this
Security Agreement its interests in any Federal Contract to which it is a party,
or in accounts or receivables due to Debtor under such Federal Contract, to the
extent, but only to the extent, such assignment, pledge or other encumbrance
would breach or violate or would cause Debtor to breach or violate such Federal
Contract or statutes or regulations applicable thereto, it being understood that
this proviso does not apply to, or in any way limit, Debtor's assignment, pledge
or encumbrance of Proceeds of all Federal Contracts to which it is a party.
Section 2.02. Continuing Liability of the Debtor. Anything herein to the
contrary notwithstanding, the Debtor shall remain liable to observe and perform
all the terms and conditions to be observed and performed by it under any
contract, agreement, warranty or other obligation with respect to the
Collateral; and shall do nothing to impair the security interests herein
granted. The Agent shall not have any obligation or liability under any such
contract, agreement, warranty or obligation by reason of or arising out of this
Security Agreement or the receipt by the Agent of any payment relating to any
Collateral, nor shall the Agent be required to perform or fulfill any of the
obligations of the Debtor with respect to the Collateral, to make any inquiry as
to the nature or sufficiency of any payment received by it or the sufficiency of
the performance of any party's obligations with respect to any Collateral.
Furthermore, the Agent shall not be required to file any claim or demand to
collect any amount due or to enforce the performance of any party's obligations
with respect to, the Collateral.
Section 2.03. Sales and Collections.
(a) Sales of Inventory in the Ordinary Course of Business. The Debtor is
authorized (i) to sell in the ordinary course of its business for fair value and
on an arm's-length basis any of its Inventory normally held by it for such
purpose and (ii) to use and consume, in the ordinary course of its business, any
raw materials, supplies and materials normally held by it for such purpose. The
Agent may, upon the occurrence of any Event of Default, without cause or notice,
curtail or terminate such authority at any time.
(b) Collection of Receivables. The Debtor is authorized to collect amounts owing
to it with respect to the Collateral, except as otherwise provided in connection
with the Assignment of Federal Contract, if any as provided herein. However, the
Agent may, upon and during the continuance of an Event of Default or a Potential
Event of Default, notify Account Debtors obligated to make payments under any or
all Receivables or Other Intangibles that the Agent has a security interest in
such Collateral and that payments shall be made directly to the Agent. Upon the
request of the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default, as the case may be, the Debtor will so notify such
Account Debtors and will execute such contract assignments, notices of
assignment or other documents as may be required by such Account Debtors. The
Debtor will use all reasonable efforts to cause each Account Debtor to comply
with the foregoing instruction. In furtherance of the foregoing, the Debtor
authorizes the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default (i) to ask for, demand, collect, receive and give
acquittances and receipts for any and all amounts due and to become due under
any Collateral and in the name of the Debtor or its own name or otherwise, (ii)
to take possession of, endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under any
Collateral and (iii) to file any claim or take any other action in any court of
law or equity or otherwise which it may deem appropriate for the purpose of
collecting any amounts due under any Collateral. The Agent shall have no
obligation to obtain or record any information relating to the source of such
funds or the obligations in respect of which payments have been made.
Section 2.04. Segregation of Proceeds.
(a) Cash Collateral Account Maintained by Agent. Upon an Event of Default or a
Potential Event of Default, the Agent shall have the right at any time during
the continuance thereof to cause to be opened and maintained at the office of
the Agent in McLean, Virginia a non-interest bearing bank account (the "Cash
Collateral Account") which will contain only Proceeds. Any "cash proceeds" (as
such term is defined in Section 9-306(1) of the UCC) received by the Agent
directly from Account Debtors obligated to make payments under Receivables or
Other Intangibles pursuant to Section 2.3 hereof or from the Debtor pursuant to
clause (b) of this Section 2.4, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper or other Proceeds received on
account of any Collateral, shall be promptly deposited in the Cash Collateral
Account, and until so deposited shall be held in trust for the Agent as property
of the Agent and shall not be commingled with any funds of the Debtor not
constituting Proceeds of Collateral. The name in which the Cash Collateral
Account is carried shall clearly indicate that the funds deposited therein are
the property of the Debtor, subject to the security interest of the Agent
hereunder. Such Proceeds, when deposited, shall continue to be security for the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Agent shall have sole dominion and control over the
funds deposited in the Cash Collateral Account, and such funds may be withdrawn
therefrom only by the Agent.
(b) Deposit of Proceeds by the Debtor. Upon notice by the Agent to the Debtor
that the Cash Collateral Account has been opened, the Debtor shall cause all
cash Proceeds collected by it to be delivered to the Agent forthwith upon
receipt, in the original form in which received (with such endorsements or
assignments as may be necessary to permit collection thereof by the Agent), and
for such purpose the Debtor hereby irrevocably authorizes and empowers the
Agent, its officers, employees and authorized agents to endorse and sign the
name of the Debtor on all checks, drafts, money orders or other media of payment
so delivered, and such endorsements or assignments shall, for all purposes, be
deemed to have been made by the Debtor prior to any endorsement or assignment
thereof by the Agent. The Agent may use any convenient or customary means for
the purpose of collecting such checks, drafts, money orders or other media of
payment.
Section 2.05. Verification of Receivables. The Agent shall have the right to
make test verifications of Receivables in any reasonable manner and through any
medium that it considers advisable, and the Debtor agrees to furnish all such
assistance and information as the Agent may reasonable require in connection
therewith. The Debtor at its expense will cause its chief financial officer to
furnish to the Agent at any reasonable time and from time to time promptly upon
the Agent's reasonable request, the following reports: (i) a reconciliation of
all Receivables, (ii) an aging of all Receivables, (iii) trial balances and (iv)
a test verification of such Receivables as the Agent may request.
Section 2.06. Release of Collateral.
(a) Security Interest of Agent Ceases Upon Permitted Dispositions. The Debtor
may sell or realize upon or transfer or otherwise dispose of Collateral only to
the extent permitted by Section 4.13, and the security interests of the Agent in
such Collateral so sold, realized upon or disposed of (but not in the Proceeds
arising from such sale, realization or disposition) shall cease immediately upon
such sale, realization or disposition, without any further action on the part of
the Agent. The Agent, if requested in writing by the Debtor but at the expense
of the Debtor, is hereby authorized and instructed to deliver to the Account
Debtor or the purchaser or other transferee of any such Collateral a certificate
stating that the Agent no longer has a security interest therein, and such
Account Debtor or such purchaser or other transferee shall be entitled to rely
conclusively on such certificate for any and all purposes.
(b) Filing of Termination Statements. Upon the payment in full of all of the
Obligations and if there is no commitment by any Lender to make further
advances, incur obligations or otherwise give value, the Agent will (as soon as
reasonably practicable after receipt of notice from the Debtor requesting the
same but at the expense of the Debtor) deliver to the Debtor (i) for each
jurisdiction in which a UCC financing statement is on file to perfect the
security interests granted to the Agent hereunder, a termination statement
(appropriately completed) to the effect that the Agent no longer claims a
security interest under such financing statement, and (ii) such other documents
as the Debtor shall reasonably request evidencing satisfaction of the
Obligations and the release of the security interests granted to the Agent
hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants that:
Section 3.01. Title to Collateral. Except for the security interests granted to
the Agent pursuant to this Security Agreement and as otherwise permitted by
Section 6.2(a) of the Revolving Credit Agreement, the Debtor is the sole owner
of each item of the Collateral, having good and marketable title thereto, free
and clear of any and all Liens.
Section 3.02. Validity, Perfection and Priority of Security Interests.
(a) By complying with Section 4.1 hereof, the Debtor will have created a valid
security interest in favor of the Agent in all existing Collateral and in all
identifiable Proceeds of such Collateral, which security interest (except in
respect of Collateral not located at a facility identified on Schedule 3.7
hereto and motor vehicles for which the exclusive manner of perfecting a
security interest therein is by noting such security interest in the certificate
of title in accordance with local law) would be prior to the claims of a trustee
in bankruptcy under Section 544(a) of the Bankruptcy Code. Continuing compliance
by the Debtor with the provisions of Section 4.2 hereof will also (i) create
valid security interests in all Collateral acquired after the date hereof and in
all identifiable Proceeds of such Collateral and (ii) cause such security
interests in all Collateral and in all Proceeds which are (A) identifiable cash
Proceeds of Collateral covered by financing statements required to be filed
hereunder, (B) identifiable Proceeds in which a security interest may be
perfected by such filing under the UCC and (C) any Proceeds in the Cash
Collateral Account to be duly perfected under the UCC, in each case prior to the
claims of a trustee in bankruptcy under the Bankruptcy Code (except in respect
of Collateral not located at a facility identified on Schedule 3.5 hereto).
(b) The security interests of the Agent in the Collateral located at the
facilities identified on Schedule 3.5 hereto rank first in priority. Other than
financing statements or other similar documents perfecting the security
interests in favor of the Agent, no financing statements, deeds of trust,
mortgages or similar documents covering all or any part of the Collateral are on
file or of record in any government office in any jurisdiction in which such
filing or recording would be effective to perfect a security interest in such
Collateral, nor is any of the Collateral in the possession of any Person (other
than the Debtor) asserting any claim thereto or security interest therein.
Section 3.03. Enforceability of Receivables and Other Intangibles. To the best
knowledge of the Debtor, each Receivable and Other Intangible is a valid and
binding obligation of the related Account Debtor in respect thereof, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
provisions of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and complies with any applicable legal
requirements.
Section 3.04. Place of Business. Schedule 3.4 correctly sets forth the chief
executive office and principal place of business of the Debtor and the offices
of the Debtor where records concerning Receivables and Other Intangibles are
kept.
Section 3.05. Location of Collateral. Schedule 3.5 correctly sets forth the
location of all Equipment and Inventory, other than rolling stock, aircraft and
goods in transit. Except as otherwise specified in Schedule 3.5, all Inventory
and Equipment has been located at the address specified on Schedule 3.5 at all
times during the four-month period prior to the date hereof while owned by the
Debtor. All Inventory has been and will be produced in compliance with the Fair
Labor Standards Act, 29 U.S.C. ss.ss. 201-219, except for such non-compliance
which could not reasonably be expected to have a material adverse effect on the
Debtor. No Inventory is evidenced by a negotiable document of title, warehouse
receipt or bill of lading. No non-negotiable document of title, warehouse
receipt or bill of lading has been issued to any person other than the Debtor,
and the Debtor has retained possession of all of such non-negotiable documents,
warehouse receipts and bills of lading. No amount payable under or in connection
with any of the Collateral is evidenced by promissory notes or other
instruments.
Section 3.06. Trade Names. Schedule 3.6 correctly sets forth any and all trade
names, division names, assumed names or other names under which the Debtor
currently transacts business or has transacted business within the four-month
period prior to the date hereof.
Section 3.07. Patents and Trademarks. Schedule 3.7 correctly sets forth all
Patents, Patent licenses, Trademarks and Trademark licenses now owned by
the Debtor.
ARTICLE IV.
COVENANTS
The Debtor covenants and agrees that until all obligations and
liabilities in respect of the Obligations shall have performed and paid in full
and until no Standby Letters of Credit are outstanding or fully cash
collateralized and the Commitments are terminated:
Section 4.01. Perfection of Security Interests. The Debtor will, at its expense,
cause all filings and recordings and other actions specified on Schedule 4.1 to
have been completed on or prior to the Effective Date.
Section 4.02. Further Actions.
(a) At all times after the date hereof, the Debtor will, at its expense, comply
with the following:
(i) as to all Receivables, Other Intangibles, Equipment and Inventory, it will
cause UCC financing statements and continuation statements to be filed and to be
on file in all applicable jurisdictions as required to perfect the security
interests granted to the Agent hereunder, to the extent that applicable law
permits perfection of a security interest by filing under the UCC;
(ii) as to all Proceeds, it will cause all UCC financing statements and
continuation statements filed in accordance with clause (i) above to include a
statement or a checked box indicating that Proceeds of all items of Collateral
described herein are covered;
(iii) as to any amount payable under or in connection with any of the Collateral
which shall be or shall become evidenced by any promissory note or other
instrument, the Debtor will promptly (but in no event later than ten (10)
Business Days after receipt of such note or instrument), pledge and deliver such
note or other instrument to the Agent as part of the Collateral, duly endorsed
in a manner reasonably satisfactory to the Agent;
(iv) at the request of the Agent, the Debtor shall deliver all other Collateral
consisting of certificated securities, endorsed for transfer in a manner
reasonably satisfactory to the Agent (or execute a securities intermediary
account control agreement to the extent possession by the Agent of such
securities is not feasible); and
(v) as to all Patents, Patent licenses, Trademarks or Trademark licenses, the
Debtor will effect the recordation or renewal of the recordation of the security
interests of the Agent therein so as to maintain valid and perfected security
interests therein under all applicable state and federal laws. (b) Further
Assurances. The Debtor will, from time to time and at its expense, execute,
deliver, file or record such UCC financing statements, applications for
certificates of title and such other statements, assignments, instruments,
documents, agreements or other papers and take any other action that may be
necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect, confirm or validate the security interest of the
Agent in the Collateral, to enable the Agent to obtain the full benefits of this
Security Agreement or to enable it to exercise and enforce any of its rights,
powers and remedies hereunder, including, without limitation, its right to take
possession of the Collateral.
(c) Signature. To the fullest extent permitted by law, the Debtor authorizes the
Agent to sign and file financing and continuation statements and amendments
thereto with respect to the Collateral without its signature thereon.
Section 4.03. Change of Name, Identity or Structure. The Debtor will not change
its name, identity or corporate structure in any manner and, except as set forth
on Schedule 3.6, will not conduct its business under any trade, assumed or
fictitious name unless it shall have given the Agent at least forty-five (45)
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend any financing statement or continuation
statement relating to the security interests granted hereby in order to preserve
such security interests and to effectuate or maintain the priority thereof
against all Persons.
Section 4.04. Place of Business and Collateral. The Debtor will not change the
location of (i) its places of business, (ii) its chief executive office or (iii)
the office or other locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location listed on Schedule 3.4 or
3.5 unless, prior to such change, it notifies the Agent forty-five (45) days in
advance of such change, makes all UCC filings required by Section 4.2 and takes
all other action necessary or that the Agent may reasonably request to preserve,
perfect, confirm and protect the security interests granted hereby. The Debtor
will in no event change the location of any Collateral if such change would
cause the security interest granted hereby in such Collateral to lapse or cease
to be perfected. The Debtor will at all times maintain its chief executive
office within one of the forty-eight contiguous states in which Article 9 of the
uniform commercial code is in effect.
Section 4.05. Fixtures. The Debtor will not permit any Equipment to become a
fixture unless it shall have given the Agent at least ten (10) days' prior
written notice thereof and shall have taken all such action and delivered or
caused to be delivered to the Agent all instruments and documents, including,
without limitation, waivers and subordination agreements by any landlords and
mortgagees, and filed all financing statements necessary or reasonably requested
by the Agent, to preserve and protect the security interest granted herein and
to effectuate or maintain the priority thereof against all Persons; provided,
however, that, so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing, the Debtor shall not be obligated to
comply with the provisions of this Section 4.5 with respect to the first $50,000
of Equipment (determined based on the then fair market value thereof).
Section 4.06. Maintenance of Records. The Debtor will keep and maintain at its
own cost and expense complete books and records relating to the Collateral which
are satisfactory to the Agent including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral and all
of its other dealings with the Collateral. The Debtor will mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Agent' further security, the Debtor
agrees that the Agent shall have a special property interest in all of the
Debtor's books and records pertaining to the Collateral and the Debtor shall
deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent.
Section 4.07. Compliance with Laws The Debtor will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any government or any state or local government applicable to the Collateral or
any part thereof or to the operation of the Debtor's business except to the
extent that the failure to comply would not have a material adverse effect on
the financial or other condition of the Debtor; provided, however, that the
Debtor may contest any act, rule, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the Agent, adversely
affect the Agent's rights or, in the case of Collateral located at a facility
identified on Schedule 3.7 hereto, the first priority of its security interest
in the Collateral.
Section 4.08. Payment of Taxes. The Debtor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no such charge
need be paid if (i) the validity thereof is being contested in good faith by
appropriate proceedings and (ii) such charge is adequately reserved against in
accordance with generally accepted accounting principles, as consistently
applied.
Section 4.09. Compliance with Terms of Accounts and Contracts. The Debtor will
perform and comply in all material respects with all of its obligations under
all agreements relating to the Collateral to which it is a party or by which it
is bound.
Section 4.10. Limitation on Liens on Collateral. The Debtor will not create,
permit or suffer to exist, and will defend the Collateral and the Debtor's
rights with respect thereto against and take such other action as is necessary
to remove any Lien, security interest, encumbrance, or claim in or to the
Collateral other than the security interests created hereunder and such Liens to
the extent permitted pursuant to Section 6.2(a) of the Revolving Credit
Agreement.
Section 4.11. Limitations on Modifications of Receivables and Other Intangibles;
No Waivers or Extensions. The Debtor will not (i) amend, modify, terminate or
waive any provisions of any material Receivable or Other Intangible in any
manner which might, when taken together with all such other Receivables or Other
Intangibles, respectively, materially reduce the value of all Receivables or
Other Intangibles, respectively, in the Collateral, (ii) fail to exercise
promptly and diligently each and every material right which it may have under
each Receivable and Other Intangible or (iii) fail to deliver to the Agent a
copy of each material demand, notice or document received by it relating in any
way to any Receivable or Other Intangible.
Section 4.12. Maintenance of Insurance. The Debtor will maintain with
financially sound insurance companies licensed to do business in the
jurisdictions in which the Collateral is located insurance policies on the
Inventory and Equipment in accordance with the provisions of Section 6.1(m) of
the Revolving Credit Agreement.
Section 4.13. Limitations on Dispositions of Collateral. The Debtor will not
directly or indirectly (through the sale of stock, merger or otherwise), without
the prior written consent of the Agent, sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (i) sales of Inventory in the ordinary course of its business for fair value
in arm's-length transactions and (ii) so long as no Event of Default (or
Potential Event of Default) has occurred and is continuing, dispositions in a
commercially reasonable manner of Equipment which has become redundant, worn out
or obsolete or which should be replaced so as to improve productivity, so long
as the proceeds of any such disposition are (x) used to acquire replacement
equipment which has comparable or better utility and equivalent or better value
and which is subject to a first priority security interest in favor of the Agent
therein, except as permitted by Section 6.2(a) of the Revolving Credit
Agreement, or (y) applied to repay the Obligations. The inclusion of Proceeds of
the Collateral under the security interests granted hereby shall not be deemed a
consent by the Agent to any sale or disposition of any Collateral other than as
permitted by this Section 4.13.
Section 4.14. Further Identification of Collateral. The Debtor will furnish to
the Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request. The Debtor shall promptly notify
the Agent if the value of the Collateral located at the facilities identified on
Schedule 3.7 hereto is less than 80% of the value of all of the Collateral.
Section 4.15. Notices. The Debtor will advise the Agent promptly and in
reasonable detail (i) of any Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, other than, unless reasonably
requested by the Agent, Liens permitted by Section 6.2(a) of the Revolving
Credit Agreement, (ii) of any material change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
security interests granted to the Agent in this Security Agreement.
Section 4.16. Change of Law. The Debtor shall promptly notify the Agent of any
change in law known to it which (i) adversely affects or will adversely affect
the validity, perfection or priority of the security interests granted hereby,
(ii) requires or will require a change in the proceedings to be followed in
order to maintain and protect such validity, perfection and priority or (iii)
could result in the Agent not having a perfected security interest in any of the
Collateral.
Section 4.17. Right of Inspection.
(a) Access to Books and Records. The Debtor shall, following any request by the
Agent and upon reasonable notice, permit the Agent or its representatives to
have full and free access during normal business hours to all the books,
correspondence and records of the Debtor, and the Agent or its representatives
may examine the same, take extracts therefrom, make photocopies thereof and have
such discussions with officers, employees and public accountants of the Debtor
as the Agent may deem reasonably necessary, and the Debtor agrees to render to
the Agent, at the Debtor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Agent and its
representatives shall upon reasonable notice and during normal business hours
also have the right to enter into and upon any premises where any of the
Inventory or the Equipment is located for the purpose of inspecting the same,
observing its use or protecting the interests of the Agent therein.
(b) Audits. The Debtor shall permit the Lenders, the Agent and their
representatives and advisors to review the operations of the Debtor and perform
the audits and examinations as provided in Section 6.1(l) of the Revolving
Credit Agreement.
Section 4.18. Maintenance of Equipment. The Debtor will, at its expense,
maintain the Equipment in good operating condition, ordinary wear and tear
excepted.
Section 4.19. Covenants Regarding Patent and Trademark Collateral.
(a) Generally. At such time as the Debtor shall acquire any Patents or
Trademarks, it will comply with the terms, covenants and warranties of this
Section 4.19.
(b) Continued Use of Trademark. The Debtor (either itself or through licensees)
will, unless the Debtor shall reasonably determine, after consultation with the
Agent, that a Trademark is of negligible economic value to the Debtor, (i)
continue to use each Trademark on each and every Trademark class of goods
applicable to its current products and services as reflected in its current
catalogs, brochures and price lists in order to maintain each Trademark in full
force and free from any claim of abandonment for non-use, (ii) maintain as in
the past the quality of products and services offered under each Trademark,
(iii) employ each Trademark with the appropriate notice of registration, (iv)
not adopt or use any mark which is confusingly similar to a colorable imitation
of any Trademark and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(c) No Abandonment. The Debtor will not, unless the Debtor shall reasonably
determine, after consultation with the Agent, that a Patent is of negligible
economic value to the Debtor, do any act, or knowingly omit to do any act,
whereby any Patent may be abandoned or dedicated.
(d) Notice of Abandonment or Adverse Determinations. The Debtor shall notify the
Agent immediately if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in any
proceeding in the United States Patent and Trademark Office or any court of
tribunal in any country) regarding the Debtor's ownership of any Patent or
Trademark, its right to register the same or keep and maintain the same.
(e) Filings After Notice to Agent. In no event shall the Debtor, either itself
or through any agent, employee, licensee or designee, file an application for
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the Agent and, upon
request of the Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's security
interest in such Patent or Trademark and the goodwill and general intangibles of
the Debtor relating thereto or represented thereby, and the Debtor hereby
constitutes the Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all such acts of such attorney being hereby ratified
and confirmed.
(f) Pursuit of Applications and Maintenance of Registrations. The Debtor will
take all necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability; provided, however, that no such Patent or Trademark shall
be required to be maintained or pursued to the extent such Patent or Trademark
is determined by the Debtor, after consultation with the Agent, to be of
negligible economic value to the Debtor.
(g) Notice of Infringement. If any of the Patent and Trademark Collateral is
infringed, misappropriated or diluted by a third party, the Debtor shall
promptly notify the Agent after it learns thereof and shall, unless the Debtor
shall reasonably determine, after consultation with the Agent, that such Patent
and Trademark Collateral is of negligible economic value to the Debtor, promptly
sue for infringement, misappropriation of dilution, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation or dilution, or take such other action as the Debtor shall
reasonably deem appropriate under the circumstances to protect such Patent and
Trademark Collateral.
Section 4.20. Termination of Federal Contracts. With respect to each Federal
Contract in respect of which the Debtor is required to execute an Assignment of
Federal Contract in accordance with Section 4.21 hereof, the Debtor shall give
prompt written notice to the Agent if the U.S. Government shall terminate or
threaten to terminate (whether for convenience or default) any such Federal
Contract with the Debtor having a value (including unexercised options) of
$100,000 or more. In addition, the Debtor shall give prompt written notice to
the Agent if the U.S. Government shall terminate or threaten to terminate any
contract between the U.S. Government and any other prime contractor under which
the Debtor is a subcontractor if the value of such subcontract (including
unexercised options) is $100,000 or more.
Section 4.21. Federal Contracts. The Debtor shall provide to the Agent, as soon
as reasonably practicable but not later than forty-five (45) days following the
end of each Fiscal Quarter, a report identifying each Federal Contract to which
it is a party, having attached thereto a copy of the first two pages of such
Federal Contract and any amendment thereto, to the extent not previously
provided to the Agent. At the request of the Agent (unless an Event of Default
shall have occurred and be continuing, in which case no such request shall be
required), the Debtor shall execute and deliver to the Agent an Assignment of
Federal Contract, in substantially the form of Exhibit A hereto (the "Assignment
of Federal Contract"), and execute any other instruments or take any other steps
required by the Agent in order that all moneys due or to become due under such
Federal Contracts shall be assigned to the Agent and notice thereof given under
the Assignment of Claims Act, including without limitation delivery of Notices
of Assignments with respect to each Federal Contract as contemplated by Appendix
A to Exhibit A hereto.
Section 4.22. Reimbursement Obligation. Should the Debtor fail to comply with
the provisions of this Security Agreement, the Revolving Credit Agreement or any
other agreement relating to the Collateral such that the value of any Collateral
or the validity, perfection, rank or value of any security interest granted to
the Agent hereunder or thereunder is thereby diminished or potentially
diminished or put at risk (as reasonably determined by the Agent), the Agent on
behalf of the Debtor may, but shall not be required to, effect such compliance
on behalf of the Debtor, and the Debtor shall reimburse the Agent for the cost
thereof on demand, and interest shall accrue on such reimbursement obligation
from the date the relevant costs are incurred until reimbursement thereof in
full at the Default Rate.
ARTICLE V.
REMEDIES; RIGHTS UPON DEFAULT
Section 5.01. UCC Rights. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the Revolving Credit
Agreement or other Credit Documents and such Obligations have not been paid in
full, the Agent may in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
guarantying, evidencing or relating to the Obligations, exercise (i) all rights
and remedies of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and (ii) all other rights
available to the Agent at law or in equity.
Section 5.02. Payments on Collateral. Without limiting the rights of the
Agent under any other provision of this Security Agreement, if an Event of
Default shall occur and be continuing:
(i) all payments received by the Debtor under or in connection with any of the
Collateral shall be held by the Debtor in trust for the Agent, shall be
segregated from other funds of the Debtor and shall forthwith upon receipt by
the Debtor be turned over to the Agent, in the same form as received by the
Debtor (duly indorsed by the Debtor to the Agent, if required to permit
collection thereof by the Agent); and
(ii) all such payments received by the Agent (whether from the Debtor or
otherwise) may, in the sole discretion of the Agent, be held by the Agent as
collateral security for, and/or then or at any time thereafter applied in whole
or in part by the Agent to the payment of, the expenses and the Obligations as
set forth in Section 5.11 hereof.
Section 5.03. Possession of Collateral. In furtherance of the foregoing, the
Debtor expressly agrees that, if an Event of Default shall occur and be
continuing, the Agent may (i) by judicial powers, or without judicial process if
it can be done without breach of the peace, enter any premises where any of such
Collateral is or may be located and, without charge or liability to the Agent,
seize and remove such Collateral from such premises and (ii) have access to and
use of the Debtor's books and records relating to such Collateral.
Section 5.04. Sale of Collateral; Notice.
(a) Sale of Collateral. The Debtor expressly agrees that if an Event of Default
shall occur and be continuing, the Agent, without demand of performance or other
demand or notice of any kind (except the notice specified below of the time and
place of any public or private sale) to or upon the Debtor or any other Person
(all of which demands and/or notices are hereby waived by the Debtor), may
forthwith (i) apply the cash, if any, then held by it as collateral as specified
in Section 5.11 hereof and (ii) if there shall be no cash or such cash shall be
insufficient to pay the Obligations in full, collect, receive, appropriate and
realize upon the Collateral, and/or sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral (or contract to do
so) or any part thereof in one or more parcels (which need not be in round lots)
at public or private sale, at any office of the Agent or elsewhere in such
manner as is commercially reasonable and, as the Agent may deem best, for cash
or on credit or for future delivery without assumption of any credit risk. The
Agent shall have the right upon any such public sale, and, if the Collateral is
of a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Debtor waives all claims,
damages and demands against the Agent arising out of the foreclosure,
repossession, retention or sale of the Collateral.
(b) Notice of Sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent shall give
the Debtor ten (10) days' written notice of its intention to make any such
public or private sale or sale at a broker's board or on a securities exchange.
Such notice shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof being sold,
will first be offered for sale and (iii) in the case of a private sale, state
the day after which such sale may be consummated. The Agent shall not obligated
to make any such sale pursuant to any such notice. The Agent may adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In the case of any
sale of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling price is paid
by the purchaser thereof, but the Agent shall not incur any liability in case of
the failure of such purchase to take up and pay for the Collateral so sold and,
in the case of such failure, such Collateral may again be sold upon like notice.
(c) Special Provisions Relating to Sales of Securities. The Debtor recognizes
that the Agent may be unable to effect a public sale of any or all the
Collateral constituting a "security" (as such term is defined in the Securities
Act) by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers that will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. The Debtor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Agent
shall be under no obligation to delay a sale of any of Collateral constituting a
security for the period of time necessary to permit the issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such issuer would agree to do so.
Section 5.05. Rights of Purchasers. Upon any sale of the Collateral (whether
public or private), the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agent) at any such sale shall hold the Collateral so sold
absolutely, free from any claim or right of whatever kind, including any equity
or right of redemption of the Debtor who, to the extent permitted by law, hereby
specifically waives all rights of redemption, including, without limitation, any
right to redeem the Collateral under Section 9-506 of the UCC, and any right to
a judicial or other stay or approval which it has or may have under any law now
existing or hereafter adopted.
Section 5.06. Additional Rights of the Agent.
(a) Right to Maintain Proceedings. The Agent (i) shall have the right and power
to institute and maintain such suits and proceedings as it may deem appropriate
to protect and enforce the rights vested in it by this Security Agreement and
(ii) may proceed by suit or suits at law or in equity to enforce such rights and
to foreclose upon the Collateral and to sell all or, from time to time, any of
the Collateral under the judgment or decree of a court of competent
jurisdiction.
(b) Appointment of Receiver. The Agent shall, to the extent permitted by
applicable law, without notice to the Debtor to any party claiming through the
Debtor, without regard to the solvency or insolvency at such time of any Person
then liable for the payment of any of the Obligations, without regard to the
then value of the Collateral and without requiring any bond from any complainant
in such proceedings, be entitled as a matter of right to the appointment of a
receiver or receivers (who may be the Agent) of the Collateral or any part
thereof, pending such proceedings, with such powers as the court making such
appointment shall confer, and to the entry of an order directing that the
profits, revenues and other income of the property constituting the whole or any
part of the Collateral be segregated, sequestered and impounded for the benefit
of the Agent, and the Debtor irrevocably consents to the appointment of such
receiver or receivers and to the entry of such order.
(c) No Duty to Exercise Rights. In no event shall the Agent have any duty to
exercise any rights or take any steps to preserve the rights of the Agent in the
Collateral, nor shall the Agent be liable to the Debtor or any other Person for
any loss caused by the Agent's failure to meet any obligation imposed by Section
9-207 of the UCC or any successor provision. Without limiting the foregoing, the
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have any duty or responsibility for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
Section 5.07. Remedies Not Exclusive, etc.
(a) Remedies Not Exclusive. No remedy conferred upon or reserved to the Agent in
this Security Agreement is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law, in
equity or by statute.
(b) Restoration of Rights. If the Agent shall have proceeded to enforce any
right, remedy or power under this Security Agreement and the proceeding for the
enforcement thereof shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Agent, the Debtor and the Agent
shall, subject to any determination in such proceeding, severally and
respectively be restored to their former positions and rights under this
Security Agreement, and thereafter all rights, remedies and powers of the Agent
shall continue as though no such proceedings had been taken.
(c) Enforcement. All rights of action under this Security Agreement may be
enforced by the Agent without the possession of any instrument evidencing any
Obligation or the production thereof at any trial or other proceeding relative
thereto, and any suit or proceeding instituted by the Agent shall be brought in
its name and any judgment shall be held as part of the Collateral.
Section 5.08. Waiver and Estoppel.
(a) No Actions to Impede Sale of Collateral. The Debtor agrees, to the extent it
may lawfully do so, that it will not at any time in any manner whatsoever claim
or take the benefit or advantage of any appraisal, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force which may delay, prevent or otherwise affect the performance or
enforcement of this Security Agreement, and hereby waives all benefit or
advantage of all such laws. The Debtor covenants that it will not hinder, delay
or impede the execution of any power granted to the Agent in this Security
Agreement, any Assignment of Federal Contract or any other Credit Document.
(b) Collateral Sold As An Entirety. The Debtor, to the extent it may lawfully do
so, on behalf of itself and all who claim through or under it, including without
limitation any and all subsequent creditors, vendees, assignees and lienors,
waives and releases all rights to demand or to have any marshalling of the
Collateral upon any sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or under any foreclosure or any enforcement of
this Security Agreement, and consents and agrees that all of the Collateral may
at any such sale be offered and sold as an entirety.
(c) Waiver of Notices. The Debtor waives, to the extent permitted by law,
presentment, demand, protest and any notice of any kind (except the notices
expressly required hereunder) in connection with this Security Agreement and any
action taken by the Agent with respect to the Collateral.
Section 5.09. Power of Attorney; Powers Coupled With An Interest.
(a) Power of Attorney. Without limiting any other right granted hereunder, the
Debtor hereby irrevocably constitutes and appoints the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Agent's reasonable
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purpose of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives the Agent the power and right, on behalf of the Debtor,
without notice to or assent by the Debtor, to do the following:
(i) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(ii) to effect any repairs or any insurance called for by the terms of this
Security Agreement or any other Credit Document, and to pay all or any part of
the premiums therefor and the costs thereof;
(iii) upon the occurrence and continuance of any Event of Default and otherwise
to the extent provided in this Security Agreement, (A) to direct any party
liable for any payment under any of the Collateral to make payment of any and
all moneys due and to come due thereunder directly to the Agent or as the Agent
shall direct, (B) to receive payment of and receipt for, and to demand and sue
for, any and all moneys, claims and other amounts due and to become due at any
time in respect of or arising out of the Collateral, (C) to sign and indorse and
receive, take, assign and deliver, any checks, notes, drafts, negotiable and
non-negotiable instruments, any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral, (D) to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding with respect
to, or in connection with, the Collateral, (E) to sell, transfer, assign or
otherwise deal in or with the Collateral or any part thereof, as fully and
effectively as if the Agent were the absolute owner thereof and (F) to do, at
its option, but at the expense of the Debtor, at any time or from time to time,
all acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in order
to effect the intent of this Security Agreement, all as fully and effectively as
the Debtor might do.
(b) Powers Coupled With an Interest. All authorizations and agencies granted or
provided herein with respect to the Collateral, including the powers granted
under clause (a) of this Section 5.9, are irrevocable and powers coupled with an
interest.
Section 5.10. Certain Provisions Relating to Securities. Solely with respect to
any Collateral constituting a "security" (as defined in the Securities Act), if
an Event of Default shall have occurred and be continuing, all such securities
(as defined in the Securities Act) constituting a part of the Collateral shall,
at the request of the Agent, be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (i) all voting,
corporate and other rights, powers and privileges pertaining to such Collateral
at any meeting of shareholders of the issuer thereof or otherwise, and (ii) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all such Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the structure of
any such issuer, or upon the exercise by the Debtor or the Agent of any right,
privilege or option pertaining to such Collateral, and in connection therewith,
the right to deposit and deliver any and all such Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine), all without liability except to account for
property actually received by it and except as provided in Section 5.6(c)
hereof, but the Agent shall have no duty to the Debtor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
Section 5.11. Application of Monies. The proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Agent in the following order of priority:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Agent and its agents and
counsel, and all expenses, liabilities and advances incurred or made by the
Agent, its agents and counsel in connection therewith or in connection with the
care, safekeeping or otherwise of any or all of the Collateral;
second, to payment of the Obligations, in such order as the Agent may
elect; and
third, any surplus then remaining shall be paid to the Debtor,
or its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same (including pursuant to Section 9-504(1)(C) of the UCC) or as a
court of competent jurisdiction may direct.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Notices. All notices, requests and other communications to a party
hereunder shall be in writing and shall be given to such party at its address
set forth on the signature page hereof or such other address as such party may
hereafter specify for that purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) in the case of telephonic
notice (to the extent expressly permitted hereunder), when made, (ii) in the
case of notice delivered by overnight express courier, one Business Day after
the Business Day such notice was delivered to such courier, (iii) in the case of
notice delivered by first class mail, three Business Days after being deposited
in the mail, postage prepaid, return receipt requested, (iv) in the case of
notice by hand, when delivered, or (v) in the case of notice by any customary
means of telecommunication, when sent provided confirmation of receipt or answer
back has been received, in each case if addressed to any party hereto as
provided herein. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect the
validity of notice given in accordance with this section.
Section 6.02. No Waiver; Cumulative Remedies. The Agent shall not by any act
(except by a written instrument pursuant to Section 6.3 hereof) be deemed to
have waived any right or remedy hereunder. No failure to exercise, nor any delay
in exercising, on the part of the Agent any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
Section 6.03. Amendments and Waivers. None of the terms or provisions of this
Security Agreement may be amended, supplemented or otherwise modified except by
a written instrument executed by the Debtor and the Agent; provided that any
provision of this Security Agreement may be waived by the Agent in a letter or
agreement executed by the Agent or by telex or facsimile transmission from the
Agent.
Section 6.04. Successors and Assigns. The provisions of this Security Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Debtor may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Agent.
Section 6.05. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA,
OTHER THAN ITS LAWS RESPECTING CHOICE OF LAW OTHER THAN THOSE CONTAINED IN
THE UCC.
Section 6.06. Limitation by Law; Severability.
(a) All rights, remedies and powers provided in this Security Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Security Agreement invalid, unenforceable in whole or in part,
or not entitled to be recorded, registered or filed upon the provisions of any
applicable law.
(b) If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
Section 6.07. Counterparts. This Security Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each complete set of which, when so executed and delivered by all parties, shall
be an original, but all such counterparts shall together constitute but one and
the same instrument.
Section 6.08. Expenses of the Agent. The Debtor shall pay to the Agent from time
to time upon demand, all of the costs and expenses incurred by the Agent or any
Lender (including, without limitation, the reasonable fees and disbursements of
counsel and any amounts payable by the Agent or any Lender to any of their
respective agents) (i) arising in connection with the administration,
modification, amendment, waiver or termination of this Security Agreement or any
document or agreement contemplated hereby or any consent or waiver hereunder or
thereunder or (ii) incurred in connection with the administration of this
Security Agreement, or any document or agreement contemplated hereby, or in
connection with the administration, sale or other disposition of Collateral
hereunder or under any document or agreement contemplated hereby or the
preservation, protection or defense of the rights of the Agent or any Lender in
and to the Collateral.
Section 6.09. Indemnification. The Debtor shall at all times hereafter
indemnify, hold harmless and, on demand, reimburse the Agent and the Lenders and
their respective subsidiaries, affiliates, successors, assigns, officers,
directors, employees and agents, and their respective heirs, executors,
administrators, successors and assigns (all of the foregoing parties, including,
but not limited to, the Agent, being hereinafter collectively referred to as the
"Indemnities" and individually as an "Indemnitee") from, against and for any and
all liabilities, obligations, claims, damages, actions, penalties, causes of
action, losses, judgments, suits, costs, expenses and disbursements, including,
without limitation, attorney's fees (any and all of the foregoing being
hereinafter collectively referred to as the "Liabilities" and individually as a
"Liability") which the Indemnitees, or any of them, might be or become
subjected, by reason of, or arising out of the preparation, execution, delivery,
modification, administration or enforcement of, or performance of the Agent's
rights under, this Security Agreement or any other document, instrument or
agreement contemplated hereby or executed in connection herewith; provided,
however, that the Debtor shall not be liable to any Indemnitee for any Liability
caused solely by the gross negligence or willful misconduct of such Indemnitee.
In no event shall any Indemnitee, as a condition to enforcing its rights under
this Section 6.9 or otherwise, be obligated to make a claim against any other
Person (including, without limitation, the Agent) to enforce its rights under
this Section 6.9.
Section 6.10. Termination; Survival. This Security Agreement shall terminate
when the security interests granted hereunder have terminated and the Collateral
has been released as provided in Section 2.6; provided, however, that the
obligations of the Debtor under Section 4.22 and the provisions of this Article
6 shall survive any such termination.
Section 6.11. Judicial Proceedings; Waiver of Jury Trial. Any judicial
proceeding brought against the Debtor with respect to any Credit Agreement
Related Claim hereby may be brought in any court of competent jurisdiction in
the Commonwealth of Virginia, County of Fairfax, or any Federal court in the
Eastern District of Virginia, and, by execution and delivery of this Security
Agreement, the Debtor (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with any Credit Agreement Related Claim and (b) irrevocably waives any objection
it may now or hereafter have as to the venue of any such proceeding brought in
such a court or that such a court is an inconvenient forum. The Debtor hereby
waives personal service of process and consents that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of Section 6.1
hereof, and service so made shall be deemed completed on the earlier of (x) the
receipt thereof and (y) if sent by registered or certified mail (return receipt
requested), the fifth (5th) Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the Agent to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Debtor in the courts of any other jurisdiction. Any
judicial proceeding by the Debtor against the Agent relating to or involving any
Credit Agreement Related Claim hereby shall be brought only in a court located
in the Commonwealth of Virginia, County of Fairfax, or the Federal court in the
Eastern District of Virginia. THE DEBTOR AND THE AGENT HEREBY UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING ANY CREDIT AGREEMENT RELATED CLAIM.
Section 6.12. Integration. This Security Agreement and the other Credit
Documents constitute the entire agreement of the Agent, the Lenders, the
Borrower and the other Credit Parties with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Credit
Documents.
Section 6.13. Authority of Agent. The Debtor acknowledges that the rights and
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Security Agreement shall, as between
the Agent and the Lenders, be governed by the Revolving Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Debtor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and the Debtor shall not be under any obligation,
or entitlement, to make any inquiry respecting such authority.
Section 6.14. Headings, Bold Type and Table of Contents. The section headings,
subsection headings, and bold type used herein and the Table of Contents hereto
have been inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Security Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
Address: HAGLER BAILLY SERVICES, INC.
1530 Wilson Boulevard
Suite 400
Arlington, VA 22209 By: /s/ Glenn J. Dozier________
Attention: Glenn J. Dozier Name: Glenn J. Dozier
Phone: (703) 351-0338 Title: Senior Vice President
Fax: (703) 528-3786 and Chief Financial Officer
Address: NATIONSBANK, N.A.
8300 Greensboro Drive
Suite 550 By: /s/ James W. Gaittens_____
McLean, Virginia 22102 Name: James W. Gaittens
Attention: James W. Gaittens Title: Senior Vice President
Phone: (703) 761-8405
Fax: (703) 917-0519
<PAGE>
Schedule 3.4
HAGLER BAILLY SERVICES, INC.
Place of Business
1530 Wilson Boulevard
Suite 400
Arlington, Virginia 22209
<PAGE>
Schedule 3.5
HAGLER BAILLY SERVICES, INC.
Location of Collateral
1. 1530 Wilson Boulevard
Suite 400
Arlington, Virginia 22209
2. 1881 Ninth Street
Suite 201
Boulder, Colorado 80306
3. 200 South Board Street
Philadelphia, Pennsylvania 19102
4. 455 Market Street
Suite 1420
San Francisco, California 94105
5. University Research Park
455 Science Drive
Madison, Wisconsin 53711
<PAGE>
Schedule 3.6
HAGLER BAILLY SERVICES, INC.
Trade/Division Names
Hagler Bailly Services, Inc.
Hagler Bailly Services
<PAGE>
Schedule 3.7
HAGLER BAILLY SERVICES, INC.
Primary Collateral Locations
1530 Wilson Boulevard
Suite 400
Arlington, VA
<PAGE>
Schedule 3.8
HAGLER BAILLY SERVICES, INC.
Patents and Trademarks
None.
<PAGE>
Schedule 4.1
HAGLER BAILLY SERVICES, INC.
UCC FILINGS
INTENTIONALLY DELETED
<PAGE>
5
Exhibit A to
Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __
(the "Agreement"), is made by HAGLER BAILLY SERVICES, INC., a Delaware
corporation (the "Assignor"), in favor of NATIONSBANK, N.A., a national banking
association (the "Agent"), in its capacity as Agent for the lenders from time to
time a party to the Revolving Credit Agreement (as defined in the Security
Agreement referred to below).
W I T N E S S E T H:
WHEREAS, the Assignor has secured certain obligations
undertaken by Hagler Bailly, Inc. pursuant to the provisions of a Security
Agreement, dated as of ___________________, ____ (as the same may be amended,
supplemented or otherwise modified from time to time, the "Security Agreement"),
by and between the Assignor and the Agent; and
WHEREAS, the Assignor is a party to, and from time to time
will become entitled to receive moneys under and by virtue of, a certain
contract with, involving or for the benefit of the United States of America or
any department, agency or instrumentality thereof (herein referred to as the
"Government"), designated as Contract Number _______ entered into by the
Assignor and the Government on ________ __, 19__ (which contract, together with
all additions, change orders, supplements, amendments, renewals, extensions, and
modifications thereto now or hereafter in effect, are hereinafter collectively
called the "Contract"); and
WHEREAS, pursuant to the Security Agreement, the Assignor has
undertaken to effectuate the assignment(s) and other actions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Assignor covenants and agrees as follows:
1. Incorporation By Reference. The provisions of the Security Agreement
are incorporated herein by reference, and the terms defined in the Security
Agreement are used herein with the same meanings.
2. Representations. The Assignor represents and warrants to the Agent
that (a) the Contract is legal, valid and binding on the Assignor and, to its
knowledge, the other parties thereto, is in full force and effect, and is not
evidenced by any chattel paper or instrument, (b) upon due filing of this
Agreement, together with a Notice of Assignment substantially in the form of
Appendix A hereto with the authorized representative, the execution and delivery
of this Agreement does not violate and is not in conflict with the provisions of
the Contract, (c) there has been no default on the part of the Assignor or any
other party to the Contract, (d) the Assignor has made no previous assignment of
the Contract to any person and knows of no fact or defense that will render the
moneys due or to be due thereunder uncollectible, (e) no financing statement
covering the Contract is on file in any public office except financing
statements in favor of the Agent, (f) no set-off or counterclaim to any moneys
due or to become due under the Contract exists on the date hereof, and no
agreement has been made with any person under which any deduction or discount
may be claimed, and (g) the address of the office where the Assignor keeps its
records concerning the Contract is ____________________.
3. Collateral. As security and collateral for the payment of all of the
Obligations (defined in the Security Agreement) and for performance of, and
compliance with, by the Assignor, all of the terms, covenants, conditions,
stipulations, and agreements contained in this Agreement and in the Security
Agreement, the Assignor hereby assigns to the Agent, and grants to the Agent a
lien on and security interest in, all moneys and claims for moneys now and
hereafter due and to become due to the Assignor under or by reason of the
Contract, together with all cash and non-cash proceeds thereof; provided,
however, that nothing contained herein shall impose upon the Agent any of the
obligations or liabilities of the Assignor under the Contract.
4. Covenants. Until payment and performance in full of the Obligations,
the Assignor covenants as follows:
(c) The Assignor shall place on any and all vouchers, invoices, or other
instruments demanding payment under the Contract the direction that such payment
is to be made to the Agent in accordance with Section 5 of this Agreement.
(d) The Assignor shall promptly upon request execute, acknowledge, and deliver
any notice, financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate, or other document as
the Agent may require in order to perfect, preserve, maintain, protect,
continue, and/or extend the assignment, lien, and security interest of the Agent
under this Agreement and its priority. The Assignor shall pay to the Agent on
demand all taxes, costs, and expenses incurred by the Agent in connection with
the preparation, execution, recording, and filing of any such document or
instrument mentioned aforesaid, and such taxes, costs, and expenses shall
constitute and become a part of the Obligations. A carbon, photographic, or
other reproduction of a security agreement or a financing statement is
sufficient as a financing statement.
(e) The Assignor shall fully, promptly, and faithfully comply with and perform
its obligations and duties under the Contract in accordance with the terms
thereof and will make no changes or amendments to the Contract or terminate or
cancel the Contract without the prior written consent of the Agent except as
permitted by the Security Agreement. In the event that any change, amendment,
termination or cancellation of the Contract is made or effected by the
Government, the Assignor will promptly notify the Agent thereof and promptly
furnish to the Agent a copy of any document or agreement evidencing any such
change, amendment, termination, or cancellation.
(f) The Assignor will promptly
(i) furnish to the Agent all information received by the Assignor affecting
the moneys due and to become due under the Contract,
(ii) inform the Agent of any delay in performance of, or claims made in
regard to, the Contract, and
(iii) notify the Agent in writing of the failure of any party to the Contract to
perform any of its obligations thereunder and any rejection of any performance
rendered by the Assignor under or in connection with the Contract.
(g) The Assignor will at all times keep accurate and complete records of
performance by the Assignor under the Contract, and the Agent and its agents
shall have the right, during normal business hours and upon reasonable advance
notice, to call at the place or places of business of the Assignor at intervals
to be determined by the Agent, and without hindrance or delay, to inspect,
audit, check, and make extracts from the books, records, journals, orders,
receipts, correspondence, and other data relating to the Contract or to any
other transactions between the parties hereto related to the Contract.
5. Payments. The Assignor hereby authorizes, empowers, and directs the
Government to draw all checks, drafts, or other instruments representing the
payments of money due the Assignor under the Contract (herein called the "Items
of Payment") to the order of NationsBank, N.A., assignee of Assignor, and to
send the same (i) if by mail, to , (ii) if by electronic transfer, to
NationsBank, N.A. for the account of ________________, Bank Account #__________,
Agent ABA#_________, or (iii) if by wire transfer, to NationsBank, N.A. for the
account of _________________________, Bank Account #_______, ABA#___________.
If, despite this direction, any instruments or checks representing payments
should be delivered to the Assignor, the Assignor will immediately endorse and
deliver such instruments or checks to the order of the Agent. The Assignor does
hereby irrevocably (subject to revocation with the consent of the Agent)
designate and appoint (which appointment is coupled with an interest) the Agent,
and the Agent's successors in interest by operation of law, the Assignor's true
and lawful attorney with power irrevocable for the Assignor and in the
Assignor's name, place, and stead, but at the sole cost and expense of the
Assignor, to receive, endorse, and collect all Items of Payment, and to ask,
demand, receive, receipt, and give acquittances for any and all amounts which
may be payable or which become due and payable by the Government under the
Contract, and in the Agent's discretion to file any claim or to take any other
action or proceeding, either in the Agent's own name or in the name of the
Assignor or otherwise, which to the Agent or any successor in interest thereof
may seem necessary or desirable in order to collect or endorse the payment of
any and all amounts now due or owing or which may hereafter be or become due or
owing on account of the Contract. All Items of Payment received by the Agent
pursuant hereto which are finally paid in cash or solvent credits shall be
applied against the Obligations as provided in the Security Agreement. Any
portion of the Items of Payment which the Agent elects not to so apply shall be
paid over to the Assignor or to whomsoever shall be entitled thereto under
applicable law, including pursuant to Section 9-504(1)(C) of the Uniform
Commercial Code of the Commonwealth of Virginia.
6. No Waiver. Neither this Agreement nor any term, condition,
representation, warranty, covenant, or agreement hereof may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing by the
party against whom such change, waiver, discharge, or termination is sought.
7. Governing law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
8. Gender. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders.
9. Counterparts. This Agreement may be executed in any number of
duplicate originals, each of which shall be an original but all of which
together shall constitute one and the same instrument.
10. Paragraph Headings. The paragraph headings of this Agreement are
for convenience only and shall not limit or define the provisions of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, Assignor and the Agent have caused this Agreement
to be duly executed and delivered by their respective representatives thereunto
duly authorized as of the date first above written.
HAGLER BAILLY SERVICES, INC
ATTEST:
, Secretary
By:
Title:
WITNESS:
NATIONSBANK, N.A.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
<PAGE>
Appendix A To
Assignment of Federal Contract
Notice of Assignment
Date: ____________
To: Contracting Officer
[Address]
Re: CONTRACT NUMBER ___________ (the "Contract") MADE BY THE UNITED STATES
OF AMERICA
By: Department of the [Applicable U.S. Government Agency]
[Address]
with [Name of Subsidiary] (the "Contractor")
[Address]
for manufacture and support of a [Brief description of
Subject of Contract]
dated _______________
PLEASE TAKE NOTICE that moneys due or to become due under the
Contract have been assigned to NationsBank, N.A. pursuant to the provisions of
the Assignment of Claims Act of 1940, as amended (31 USC ss. 3727 and 41 USC ss.
15). A true copy of the Assignment executed by the Contractor on the date hereof
(the "Assignment") is attached to the original of this Notice of Assignment.
Please file this original Notice of Assignment along with the copy of the
Assignment in the contract file for the Contract and forward one of the enclosed
copies of this Notice of Assignment to the current disbursing office for the
Contract.
Payments due or to become due under the Contract should be
made (i) if by mail, to NationsBank, N.A., ____________________, (ii) if by
electronic transfer, to NationsBank, N.A. for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to NationsBank, N.A. for the account of
__________________________, Bank Account #_________, ABA#_________.
Please return enclosed copies of this Notice of Assignment
with appropriate notations showing the date and hour of receipt, and duly signed
by the person acknowledging receipt on behalf of the addressee, to NationsBank,
N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102, Attention: James
W. Gaittens.
Very truly yours,
HAGLER BAILLY SERVICES, INC.
By: ________________________________
Name:
Title:
Receipt is hereby acknowledged of the above notice and a copy
of the above mentioned instrument of assignment. These were received at
_________[A.M.] [P.M.] on ______________________, 199__.
- ------------------------------------
Name:
Title:
on behalf of Contracting Officer
[Address]
EXHIBIT 10.38
--------------------------------------------------------------------------
SECURITY AGREEMENT
dated as of November 20, 1998
between
HB CAPITAL, INC.,
as Debtor
and
NATIONSBANK, N.A.,
as Agent
-------------------------------------------------------------------------
<PAGE>
27
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of November 20, 1998 (as
amended, supplemented or modified from time to time, the "Security Agreement"),
is made by HB CAPITAL, INC., a Delaware corporation (the "Debtor"), and
NATIONSBANK, N.A., a national banking association (the "Agent") in its capacity
as Agent for the lenders (the "Lenders") from time to time a party to the
Revolving Credit Agreement, dated as of November 20, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Revolving Credit
Agreement"), by and among the Hagler Bailly, Inc., a Delaware corporation (the
"Company"), the Agent, in its capacity as such thereunder, and the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Revolving Credit Agreement, the
Lenders have severally agreed to make available to the Company a revolving line
of credit for Revolving Loans, Swing Line Loans and Standby Letters of Credit in
an aggregate principal amount at any time not to exceed the Maximum Available
Amount, subject to the terms and conditions contained therein;
WHEREAS, the Company owns, directly or indirectly, [all] of
the issued and outstanding shares of capital of stock of, or other equity
interests in, the Debtor;
WHEREAS, the proceeds of such Revolving Loans, Swing Line
Loans and Standby Letters of Credit may be used to enable the Company to make
valuable transfers to the Debtor in connection with the operation of its
business and for the Permitted Uses;
WHEREAS, the Debtor will derive substantial direct and
indirect benefit from such Revolving Loans, Swing Line Loans and Standby Letters
of Credit; and
WHEREAS, the Company is required to cause the Debtor to
execute this Agreement pursuant to the provisions of the Revolving Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and to induce the Lenders to make or maintain
their respective Revolving Loans and Swing Line Loans to, and the Issuing Lender
to issue or maintain the Standby Letters of Credit under the Revolving Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor hereby agrees with the
Agent, for the ratable benefit of the Lenders, as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions Generally. Capitalized terms used herein without
definition shall have the respective meanings specified in the Revolving Credit
Agreement, and the following terms shall have the following meanings (such
meanings to be, when appropriate, equally applicable to both the singular and
plural forms of the terms defined):
"Account Debtor" shall mean, with respect to any Receivable or
Other Intangible, any Person obligated to make payment thereunder, including
without limitation any account debtor thereon.
"Assignment of Claims Act" shall mean the Assignment of Claims Act of 1940,
31 U.S.C. 3727, 41 U.S.C. 15 (1986), as the same may be
amended and any successor statute of similar import.
"Assignment of Federal Contract" shall have the meaning
specified in Section 4.21 hereof.
"Cash Collateral Account" shall have the meaning specified in
Section 2.4 hereof.
"Collateral" shall have the meaning set forth in Section 2.1.
"Debtor" shall have the meaning specified in the preamble hereof.
"Equipment" shall mean all equipment now owned or hereafter
acquired by the Debtor, including all items of machinery, equipment, furnishings
and fixtures of every kind, whether affixed to real property or not, as well as
all automobiles, trucks and vehicles of every description, trailers, handling
and delivery equipment, fittings, special tools, all additions to, substitutions
for, replacements of or accessions to any of the foregoing, all attachments,
components, parts (including spare parts) and accessories whether installed
thereon or affixed thereto and all fuel for any thereof.
"Federal Contract" means any contract or agreement with,
involving or for the benefit of the United States of America or any department,
agency or instrumentality thereof (collectively, the "U.S. Government"), whether
now existing or hereafter arising, in each case as the same may be amended,
modified or otherwise supplemented from time to time.
"Inventory" shall mean all inventory now owned or hereafter
acquired by the Debtor, including (i) all goods and other personal property
which are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
(ii) all inventory, wherever located, evidenced by negotiable and non-negotiable
documents of title, warehouse receipts and bills of lading, (iii) all of the
Debtor's rights in, to and under all purchase orders now owned or hereafter
received or acquired by it for goods or services and (iv) all rights of the
Debtor as an unpaid seller, including rescission, replevin, reclamation and
stopping in transit.
"Lenders" shall have the meaning specified in the preamble hereof.
"Obligations" shall mean any and all now existing or hereafter
arising indebtedness, obligations, liabilities and covenants of each Credit
Party to any Lender, the Agent, their respective Affiliates, successors and
assigns and any other Indemnified Person under or arising out of any Credit
Document, including without limitation (i) all Revolving Loans and all Swing
Line Loans together with interest thereon and all Standby Letters of Credit,
(ii) all fees, expenses, indemnity payments and other amounts due or to become
due under the Revolving Credit Agreement, the Revolving Notes, the Swing Line
Note or any other Credit Document, (iii) all liabilities and obligations under
the Subsidiary Guarantee and any other agreement executed by any Credit Party
guarantying the obligations of the Borrower under the Revolving Credit Agreement
or any other Credit Document, (iv) all liabilities and obligations under any
agreement providing collateral for any of the foregoing (including any Pledge
Agreement and the Subsidiary Security Agreements), and (v) and any agreement or
instrument refinancing or restructuring all or any portion of the obligations
and liabilities under any of foregoing or under any successor agreement or note,
in each case whether direct or indirect, absolute or contingent or due or to
become due.
"Other Intangibles" shall mean all accounts, accounts
receivable, contract rights, documents, instruments, notes, chattel paper,
money, indemnities, warranties and general intangibles now owned or hereafter
acquired by the Debtor including, without limitation, all goodwill, customer
lists, permits, federal and state tax refunds, reversionary interests in pension
plan assets, Patents, Trademarks, licenses, copyrights and other rights in
intellectual property, other than Receivables.
"Patents" shall mean all letters patent of the United States
or any other country, and all applications for letters patent of the United
States or any other country, in which the Debtor may now or hereafter have any
right, title or interest and all reissues, continuations, continuations-in-part
or extensions thereof.
"Proceeds" shall mean all proceeds, including (i) whatever is
received upon any collection, exchange, sale or other disposition of any of the
Collateral and any property into which any of the Collateral is converted,
whether cash or non-cash, (ii) any and all payments or other property (in any
form whatsoever) made or due and payable on account of any insurance, indemnity,
warranty or guaranty payable to the Debtor with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever) made or due and
payable in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person, corporation, agency, authority or
other entity acting under color of any governmental authority) and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables" shall mean all accounts now or hereafter owing
to the Debtor, and all accounts receivable, contract rights, documents,
instruments or chattel paper representing amounts payable or monies due or to
become due to the Debtor, arising from the sale of Inventory or the rendition of
services in the ordinary course of business or otherwise (whether or not earned
by performance), together with all Inventory returned by or reclaimed from
customers wherever such Inventory is located, and all guaranties, securities and
liens held for the payment of any such account, account receivable, contract
right, document, instrument or chattel paper.
"Security Agreement" shall have the meaning specified in the preamble hereof.
"Trademarks" shall mean all right, title or interest which the
Debtor may now or hereafter have in any or all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source of business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and all applications in
connection therewith, including without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or political subdivision thereof and all reissues, extensions or
renewals thereof.
"UCC" shall mean the Uniform Commercial Code in effect on the
date hereof in the Commonwealth of Virginia.
"U.S. Government" has the meaning specified in the
definition of Federal Contract contained herein.
Section 1.02. UCC Definitions. The uncapitalized terms "account", "account
debtor", "chattel paper", "contract right", "document", "warehouse receipt",
"bill of lading", "document of title", "instrument", "inventory", "general
intangible", "money", "security", "certificated security", "uncertificated
security", "financial asset" and "proceeds" as used in Section 1.1 or elsewhere
in this Security Agreement shall have the respective meanings set forth in the
UCC.
ARTICLE II.
SECURITY INTERESTS
Section 2.01. Grant of Security Interests. To secure the due and punctual
payment of all Obligations, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing or due or
to become due, whether at maturity or upon acceleration or otherwise, in
accordance with the terms thereof and to secure the due and punctual performance
of all of the Obligations and in order to induce the Agent and the Lenders to
enter into the Revolving Credit Agreement and the other Credit Documents, the
Debtor hereby pledges, assigns, delivers, conveys and transfers to the Agent,
for the ratable benefit of the Lenders, and grants to the Agent, for the ratable
benefit of the Lenders, a first priority and continuing security interest in and
lien on, all of the Debtor's right, title and interest in, to and under the
following, whether now existing or hereafter acquired (the "Collateral"):
(i) all Receivables;
(ii) all Other Intangibles;
(iii) all Equipment;
(iv) all Inventory;
(v) to the extent not included in the foregoing, all securities (whether
certificated or uncertificated) and all financial assets, whether now existing
or hereafter arising, including, without limitation, all capital stock issued by
any Person and held by Debtor, and all partnership interests, whether in the
nature of a joint venture, limited liability company member's interest, master
limited partnership, teaming arrangement or otherwise;
(vi) to the extent not included in the foregoing, all other personal property,
whether tangible or intangible, and wherever located whether within or outside
of the United States, including, but not limited to, the balance of every
deposit account now or hereafter existing of the Debtor with any bank or other
financial institution and all monies of the Debtor and all rights to payment of
money of the Debtor;
(vii) to the extent not included in the foregoing, all books, ledgers and
records and all computer programs, tapes, discs, punch cards, data processing
software, transaction files, master files and related property and rights
(including computer and peripheral equipment) necessary or helpful in enforcing,
identifying or establishing any item of Collateral; and
(viii) to the extent not otherwise included, all Proceeds and products of any or
all of the foregoing, whether existing on the date hereof or arising hereafter;
provided, however, notwithstanding anything to the contrary contained herein,
the Debtor is not assigning, pledging or otherwise encumbering under this
Security Agreement its interests in any Federal Contract to which it is a party,
or in accounts or receivables due to Debtor under such Federal Contract, to the
extent, but only to the extent, such assignment, pledge or other encumbrance
would breach or violate or would cause Debtor to breach or violate such Federal
Contract or statutes or regulations applicable thereto, it being understood that
this proviso does not apply to, or in any way limit, Debtor's assignment, pledge
or encumbrance of Proceeds of all Federal Contracts to which it is a party.
Section 2.02. Continuing Liability of the Debtor. Anything herein to the
contrary notwithstanding, the Debtor shall remain liable to observe and perform
all the terms and conditions to be observed and performed by it under any
contract, agreement, warranty or other obligation with respect to the
Collateral; and shall do nothing to impair the security interests herein
granted. The Agent shall not have any obligation or liability under any such
contract, agreement, warranty or obligation by reason of or arising out of this
Security Agreement or the receipt by the Agent of any payment relating to any
Collateral, nor shall the Agent be required to perform or fulfill any of the
obligations of the Debtor with respect to the Collateral, to make any inquiry as
to the nature or sufficiency of any payment received by it or the sufficiency of
the performance of any party's obligations with respect to any Collateral.
Furthermore, the Agent shall not be required to file any claim or demand to
collect any amount due or to enforce the performance of any party's obligations
with respect to, the Collateral.
Section 2.03. Sales and Collections.
(a) Sales of Inventory in the Ordinary Course of Business. The Debtor is
authorized (i) to sell in the ordinary course of its business for fair value and
on an arm's-length basis any of its Inventory normally held by it for such
purpose and (ii) to use and consume, in the ordinary course of its business, any
raw materials, supplies and materials normally held by it for such purpose. The
Agent may, upon the occurrence of any Event of Default, without cause or notice,
curtail or terminate such authority at any time.
(b) Collection of Receivables. The Debtor is authorized to collect amounts owing
to it with respect to the Collateral, except as otherwise provided in connection
with the Assignment of Federal Contract, if any as provided herein. However, the
Agent may, upon and during the continuance of an Event of Default or a Potential
Event of Default, notify Account Debtors obligated to make payments under any or
all Receivables or Other Intangibles that the Agent has a security interest in
such Collateral and that payments shall be made directly to the Agent. Upon the
request of the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default, as the case may be, the Debtor will so notify such
Account Debtors and will execute such contract assignments, notices of
assignment or other documents as may be required by such Account Debtors. The
Debtor will use all reasonable efforts to cause each Account Debtor to comply
with the foregoing instruction. In furtherance of the foregoing, the Debtor
authorizes the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default (i) to ask for, demand, collect, receive and give
acquittances and receipts for any and all amounts due and to become due under
any Collateral and in the name of the Debtor or its own name or otherwise, (ii)
to take possession of, endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under any
Collateral and (iii) to file any claim or take any other action in any court of
law or equity or otherwise which it may deem appropriate for the purpose of
collecting any amounts due under any Collateral. The Agent shall have no
obligation to obtain or record any information relating to the source of such
funds or the obligations in respect of which payments have been made.
Section 2.04. Segregation of Proceeds.
(a) Cash Collateral Account Maintained by Agent. Upon an Event of Default or a
Potential Event of Default, the Agent shall have the right at any time during
the continuance thereof to cause to be opened and maintained at the office of
the Agent in McLean, Virginia a non-interest bearing bank account (the "Cash
Collateral Account") which will contain only Proceeds. Any "cash proceeds" (as
such term is defined in Section 9-306(1) of the UCC) received by the Agent
directly from Account Debtors obligated to make payments under Receivables or
Other Intangibles pursuant to Section 2.3 hereof or from the Debtor pursuant to
clause (b) of this Section 2.4, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper or other Proceeds received on
account of any Collateral, shall be promptly deposited in the Cash Collateral
Account, and until so deposited shall be held in trust for the Agent as property
of the Agent and shall not be commingled with any funds of the Debtor not
constituting Proceeds of Collateral. The name in which the Cash Collateral
Account is carried shall clearly indicate that the funds deposited therein are
the property of the Debtor, subject to the security interest of the Agent
hereunder. Such Proceeds, when deposited, shall continue to be security for the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Agent shall have sole dominion and control over the
funds deposited in the Cash Collateral Account, and such funds may be withdrawn
therefrom only by the Agent.
(b) Deposit of Proceeds by the Debtor. Upon notice by the Agent to the Debtor
that the Cash Collateral Account has been opened, the Debtor shall cause all
cash Proceeds collected by it to be delivered to the Agent forthwith upon
receipt, in the original form in which received (with such endorsements or
assignments as may be necessary to permit collection thereof by the Agent), and
for such purpose the Debtor hereby irrevocably authorizes and empowers the
Agent, its officers, employees and authorized agents to endorse and sign the
name of the Debtor on all checks, drafts, money orders or other media of payment
so delivered, and such endorsements or assignments shall, for all purposes, be
deemed to have been made by the Debtor prior to any endorsement or assignment
thereof by the Agent. The Agent may use any convenient or customary means for
the purpose of collecting such checks, drafts, money orders or other media of
payment.
Section 2.05. Verification of Receivables. The Agent shall have the right to
make test verifications of Receivables in any reasonable manner and through any
medium that it considers advisable, and the Debtor agrees to furnish all such
assistance and information as the Agent may reasonable require in connection
therewith. The Debtor at its expense will cause its chief financial officer to
furnish to the Agent at any reasonable time and from time to time promptly upon
the Agent's reasonable request, the following reports: (i) a reconciliation of
all Receivables, (ii) an aging of all Receivables, (iii) trial balances and (iv)
a test verification of such Receivables as the Agent may request.
Section 2.06. Release of Collateral.
(a) Security Interest of Agent Ceases Upon Permitted Dispositions. The Debtor
may sell or realize upon or transfer or otherwise dispose of Collateral only to
the extent permitted by Section 4.13, and the security interests of the Agent in
such Collateral so sold, realized upon or disposed of (but not in the Proceeds
arising from such sale, realization or disposition) shall cease immediately upon
such sale, realization or disposition, without any further action on the part of
the Agent. The Agent, if requested in writing by the Debtor but at the expense
of the Debtor, is hereby authorized and instructed to deliver to the Account
Debtor or the purchaser or other transferee of any such Collateral a certificate
stating that the Agent no longer has a security interest therein, and such
Account Debtor or such purchaser or other transferee shall be entitled to rely
conclusively on such certificate for any and all purposes.
(b) Filing of Termination Statements. Upon the payment in full of all of the
Obligations and if there is no commitment by any Lender to make further
advances, incur obligations or otherwise give value, the Agent will (as soon as
reasonably practicable after receipt of notice from the Debtor requesting the
same but at the expense of the Debtor) deliver to the Debtor (i) for each
jurisdiction in which a UCC financing statement is on file to perfect the
security interests granted to the Agent hereunder, a termination statement
(appropriately completed) to the effect that the Agent no longer claims a
security interest under such financing statement, and (ii) such other documents
as the Debtor shall reasonably request evidencing satisfaction of the
Obligations and the release of the security interests granted to the Agent
hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants that:
Section 3.01. Title to Collateral. Except for the security interests granted to
the Agent pursuant to this Security Agreement and as otherwise permitted by
Section 6.2(a) of the Revolving Credit Agreement, the Debtor is the sole owner
of each item of the Collateral, having good and marketable title thereto, free
and clear of any and all Liens.
Section 3.02. Validity, Perfection and Priority of Security Interests.
(a) By complying with Section 4.1 hereof, the Debtor will have created a valid
security interest in favor of the Agent in all existing Collateral and in all
identifiable Proceeds of such Collateral, which security interest (except in
respect of Collateral not located at a facility identified on Schedule 3.7
hereto and motor vehicles for which the exclusive manner of perfecting a
security interest therein is by noting such security interest in the certificate
of title in accordance with local law) would be prior to the claims of a trustee
in bankruptcy under Section 544(a) of the Bankruptcy Code. Continuing compliance
by the Debtor with the provisions of Section 4.2 hereof will also (i) create
valid security interests in all Collateral acquired after the date hereof and in
all identifiable Proceeds of such Collateral and (ii) cause such security
interests in all Collateral and in all Proceeds which are (A) identifiable cash
Proceeds of Collateral covered by financing statements required to be filed
hereunder, (B) identifiable Proceeds in which a security interest may be
perfected by such filing under the UCC and (C) any Proceeds in the Cash
Collateral Account to be duly perfected under the UCC, in each case prior to the
claims of a trustee in bankruptcy under the Bankruptcy Code (except in respect
of Collateral not located at a facility identified on Schedule 3.5 hereto).
(b) The security interests of the Agent in the Collateral located at the
facilities identified on Schedule 3.5 hereto rank first in priority. Other than
financing statements or other similar documents perfecting the security
interests in favor of the Agent, no financing statements, deeds of trust,
mortgages or similar documents covering all or any part of the Collateral are on
file or of record in any government office in any jurisdiction in which such
filing or recording would be effective to perfect a security interest in such
Collateral, nor is any of the Collateral in the possession of any Person (other
than the Debtor) asserting any claim thereto or security interest therein.
Section 3.03. Enforceability of Receivables and Other Intangibles. To the best
knowledge of the Debtor, each Receivable and Other Intangible is a valid and
binding obligation of the related Account Debtor in respect thereof, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
provisions of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and complies with any applicable legal
requirements.
Section 3.04. Place of Business. Schedule 3.4 correctly sets forth the chief
executive office and principal place of business of the Debtor and the offices
of the Debtor where records concerning Receivables and Other Intangibles are
kept.
Section 3.05. Location of Collateral. Schedule 3.5 correctly sets forth the
location of all Equipment and Inventory, other than rolling stock, aircraft and
goods in transit. Except as otherwise specified in Schedule 3.5, all Inventory
and Equipment has been located at the address specified on Schedule 3.5 at all
times during the four-month period prior to the date hereof while owned by the
Debtor. All Inventory has been and will be produced in compliance with the Fair
Labor Standards Act, 29 U.S.C. ss.ss. 201-219, except for such non-compliance
which could not reasonably be expected to have a material adverse effect on the
Debtor. No Inventory is evidenced by a negotiable document of title, warehouse
receipt or bill of lading. No non-negotiable document of title, warehouse
receipt or bill of lading has been issued to any person other than the Debtor,
and the Debtor has retained possession of all of such non-negotiable documents,
warehouse receipts and bills of lading. No amount payable under or in connection
with any of the Collateral is evidenced by promissory notes or other
instruments.
Section 3.06. Trade Names. Schedule 3.6 correctly sets forth any and all trade
names, division names, assumed names or other names under which the Debtor
currently transacts business or has transacted business within the four-month
period prior to the date hereof.
Section 3.07. Patents and Trademarks. Schedule 3.7 correctly sets forth all
Patents, Patent licenses, Trademarks and Trademark licenses now owned by
the Debtor.
ARTICLE IV.
COVENANTS
The Debtor covenants and agrees that until all obligations and
liabilities in respect of the Obligations shall have performed and paid in full
and until no Standby Letters of Credit are outstanding or fully cash
collateralized and the Commitments are terminated:
Section 4.01. Perfection of Security Interests. The Debtor will, at its expense,
cause all filings and recordings and other actions specified on Schedule 4.1 to
have been completed on or prior to the Effective Date.
Section 4.02. Further Actions.
(a) At all times after the date hereof, the Debtor will, at its expense, comply
with the following:
(i) as to all Receivables, Other Intangibles, Equipment and Inventory, it will
cause UCC financing statements and continuation statements to be filed and to be
on file in all applicable jurisdictions as required to perfect the security
interests granted to the Agent hereunder, to the extent that applicable law
permits perfection of a security interest by filing under the UCC;
(ii) as to all Proceeds, it will cause all UCC financing statements and
continuation statements filed in accordance with clause (i) above to include a
statement or a checked box indicating that Proceeds of all items of Collateral
described herein are covered;
(iii) as to any amount payable under or in connection with any of the Collateral
which shall be or shall become evidenced by any promissory note or other
instrument, the Debtor will promptly (but in no event later than ten (10)
Business Days after receipt of such note or instrument), pledge and deliver such
note or other instrument to the Agent as part of the Collateral, duly endorsed
in a manner reasonably satisfactory to the Agent;
(iv) at the request of the Agent, the Debtor shall deliver all other Collateral
consisting of certificated securities, endorsed for transfer in a manner
reasonably satisfactory to the Agent (or execute a securities intermediary
account control agreement to the extent possession by the Agent of such
securities is not feasible); and
(v) as to all Patents, Patent licenses, Trademarks or Trademark licenses, the
Debtor will effect the recordation or renewal of the recordation of the security
interests of the Agent therein so as to maintain valid and perfected security
interests therein under all applicable state and federal laws. (b) Further
Assurances. The Debtor will, from time to time and at its expense, execute,
deliver, file or record such UCC financing statements, applications for
certificates of title and such other statements, assignments, instruments,
documents, agreements or other papers and take any other action that may be
necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect, confirm or validate the security interest of the
Agent in the Collateral, to enable the Agent to obtain the full benefits of this
Security Agreement or to enable it to exercise and enforce any of its rights,
powers and remedies hereunder, including, without limitation, its right to take
possession of the Collateral.
(c) Signature. To the fullest extent permitted by law, the Debtor authorizes the
Agent to sign and file financing and continuation statements and amendments
thereto with respect to the Collateral without its signature thereon.
Section 4.03. Change of Name, Identity or Structure. The Debtor will not change
its name, identity or corporate structure in any manner and, except as set forth
on Schedule 3.6, will not conduct its business under any trade, assumed or
fictitious name unless it shall have given the Agent at least forty-five (45)
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend any financing statement or continuation
statement relating to the security interests granted hereby in order to preserve
such security interests and to effectuate or maintain the priority thereof
against all Persons.
Section 4.04. Place of Business and Collateral. The Debtor will not change the
location of (i) its places of business, (ii) its chief executive office or (iii)
the office or other locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location listed on Schedule 3.4 or
3.5 unless, prior to such change, it notifies the Agent forty-five (45) days in
advance of such change, makes all UCC filings required by Section 4.2 and takes
all other action necessary or that the Agent may reasonably request to preserve,
perfect, confirm and protect the security interests granted hereby. The Debtor
will in no event change the location of any Collateral if such change would
cause the security interest granted hereby in such Collateral to lapse or cease
to be perfected. The Debtor will at all times maintain its chief executive
office within one of the forty-eight contiguous states in which Article 9 of the
uniform commercial code is in effect.
Section 4.05. Fixtures. The Debtor will not permit any Equipment to become a
fixture unless it shall have given the Agent at least ten (10) days' prior
written notice thereof and shall have taken all such action and delivered or
caused to be delivered to the Agent all instruments and documents, including,
without limitation, waivers and subordination agreements by any landlords and
mortgagees, and filed all financing statements necessary or reasonably requested
by the Agent, to preserve and protect the security interest granted herein and
to effectuate or maintain the priority thereof against all Persons; provided,
however, that, so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing, the Debtor shall not be obligated to
comply with the provisions of this Section 4.5 with respect to the first $50,000
of Equipment (determined based on the then fair market value thereof).
Section 4.06. Maintenance of Records. The Debtor will keep and maintain at its
own cost and expense complete books and records relating to the Collateral which
are satisfactory to the Agent including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral and all
of its other dealings with the Collateral. The Debtor will mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Agent' further security, the Debtor
agrees that the Agent shall have a special property interest in all of the
Debtor's books and records pertaining to the Collateral and the Debtor shall
deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent.
Section 4.07. Compliance with Laws The Debtor will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any government or any state or local government applicable to the Collateral or
any part thereof or to the operation of the Debtor's business except to the
extent that the failure to comply would not have a material adverse effect on
the financial or other condition of the Debtor; provided, however, that the
Debtor may contest any act, rule, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the Agent, adversely
affect the Agent's rights or, in the case of Collateral located at a facility
identified on Schedule 3.7 hereto, the first priority of its security interest
in the Collateral.
Section 4.08. Payment of Taxes. The Debtor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no such charge
need be paid if (i) the validity thereof is being contested in good faith by
appropriate proceedings and (ii) such charge is adequately reserved against in
accordance with generally accepted accounting principles, as consistently
applied.
Section 4.09. Compliance with Terms of Accounts and Contracts. The Debtor will
perform and comply in all material respects with all of its obligations under
all agreements relating to the Collateral to which it is a party or by which it
is bound.
Section 4.10. Limitation on Liens on Collateral. The Debtor will not create,
permit or suffer to exist, and will defend the Collateral and the Debtor's
rights with respect thereto against and take such other action as is necessary
to remove any Lien, security interest, encumbrance, or claim in or to the
Collateral other than the security interests created hereunder and such Liens to
the extent permitted pursuant to Section 6.2(a) of the Revolving Credit
Agreement.
Section 4.11. Limitations on Modifications of Receivables and Other Intangibles;
No Waivers or Extensions. The Debtor will not (i) amend, modify, terminate or
waive any provisions of any material Receivable or Other Intangible in any
manner which might, when taken together with all such other Receivables or Other
Intangibles, respectively, materially reduce the value of all Receivables or
Other Intangibles, respectively, in the Collateral, (ii) fail to exercise
promptly and diligently each and every material right which it may have under
each Receivable and Other Intangible or (iii) fail to deliver to the Agent a
copy of each material demand, notice or document received by it relating in any
way to any Receivable or Other Intangible.
Section 4.12. Maintenance of Insurance. The Debtor will maintain with
financially sound insurance companies licensed to do business in the
jurisdictions in which the Collateral is located insurance policies on the
Inventory and Equipment in accordance with the provisions of Section 6.1(m) of
the Revolving Credit Agreement.
Section 4.13. Limitations on Dispositions of Collateral. The Debtor will not
directly or indirectly (through the sale of stock, merger or otherwise), without
the prior written consent of the Agent, sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (i) sales of Inventory in the ordinary course of its business for fair value
in arm's-length transactions and (ii) so long as no Event of Default (or
Potential Event of Default) has occurred and is continuing, dispositions in a
commercially reasonable manner of Equipment which has become redundant, worn out
or obsolete or which should be replaced so as to improve productivity, so long
as the proceeds of any such disposition are (x) used to acquire replacement
equipment which has comparable or better utility and equivalent or better value
and which is subject to a first priority security interest in favor of the Agent
therein, except as permitted by Section 6.2(a) of the Revolving Credit
Agreement, or (y) applied to repay the Obligations. The inclusion of Proceeds of
the Collateral under the security interests granted hereby shall not be deemed a
consent by the Agent to any sale or disposition of any Collateral other than as
permitted by this Section 4.13.
Section 4.14. Further Identification of Collateral. The Debtor will furnish to
the Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request. The Debtor shall promptly notify
the Agent if the value of the Collateral located at the facilities identified on
Schedule 3.7 hereto is less than 80% of the value of all of the Collateral.
Section 4.15. Notices. The Debtor will advise the Agent promptly and in
reasonable detail (i) of any Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, other than, unless reasonably
requested by the Agent, Liens permitted by Section 6.2(a) of the Revolving
Credit Agreement, (ii) of any material change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
security interests granted to the Agent in this Security Agreement.
Section 4.16. Change of Law. The Debtor shall promptly notify the Agent of any
change in law known to it which (i) adversely affects or will adversely affect
the validity, perfection or priority of the security interests granted hereby,
(ii) requires or will require a change in the proceedings to be followed in
order to maintain and protect such validity, perfection and priority or (iii)
could result in the Agent not having a perfected security interest in any of the
Collateral.
Section 4.17. Right of Inspection.
(a) Access to Books and Records. The Debtor shall, following any request by the
Agent and upon reasonable notice, permit the Agent or its representatives to
have full and free access during normal business hours to all the books,
correspondence and records of the Debtor, and the Agent or its representatives
may examine the same, take extracts therefrom, make photocopies thereof and have
such discussions with officers, employees and public accountants of the Debtor
as the Agent may deem reasonably necessary, and the Debtor agrees to render to
the Agent, at the Debtor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Agent and its
representatives shall upon reasonable notice and during normal business hours
also have the right to enter into and upon any premises where any of the
Inventory or the Equipment is located for the purpose of inspecting the same,
observing its use or protecting the interests of the Agent therein.
(b) Audits. The Debtor shall permit the Lenders, the Agent and their
representatives and advisors to review the operations of the Debtor and perform
the audits and examinations as provided in Section 6.1(l) of the Revolving
Credit Agreement.
Section 4.18. Maintenance of Equipment. The Debtor will, at its expense,
maintain the Equipment in good operating condition, ordinary wear and tear
excepted.
Section 4.19. Covenants Regarding Patent and Trademark Collateral.
(a) Generally. At such time as the Debtor shall acquire any Patents or
Trademarks, it will comply with the terms, covenants and warranties of this
Section 4.19.
(b) Continued Use of Trademark. The Debtor (either itself or through licensees)
will, unless the Debtor shall reasonably determine, after consultation with the
Agent, that a Trademark is of negligible economic value to the Debtor, (i)
continue to use each Trademark on each and every Trademark class of goods
applicable to its current products and services as reflected in its current
catalogs, brochures and price lists in order to maintain each Trademark in full
force and free from any claim of abandonment for non-use, (ii) maintain as in
the past the quality of products and services offered under each Trademark,
(iii) employ each Trademark with the appropriate notice of registration, (iv)
not adopt or use any mark which is confusingly similar to a colorable imitation
of any Trademark and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(c) No Abandonment. The Debtor will not, unless the Debtor shall reasonably
determine, after consultation with the Agent, that a Patent is of negligible
economic value to the Debtor, do any act, or knowingly omit to do any act,
whereby any Patent may be abandoned or dedicated.
(d) Notice of Abandonment or Adverse Determinations. The Debtor shall notify the
Agent immediately if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in any
proceeding in the United States Patent and Trademark Office or any court of
tribunal in any country) regarding the Debtor's ownership of any Patent or
Trademark, its right to register the same or keep and maintain the same.
(e) Filings After Notice to Agent. In no event shall the Debtor, either itself
or through any agent, employee, licensee or designee, file an application for
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the Agent and, upon
request of the Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's security
interest in such Patent or Trademark and the goodwill and general intangibles of
the Debtor relating thereto or represented thereby, and the Debtor hereby
constitutes the Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all such acts of such attorney being hereby ratified
and confirmed.
(f) Pursuit of Applications and Maintenance of Registrations. The Debtor will
take all necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability; provided, however, that no such Patent or Trademark shall
be required to be maintained or pursued to the extent such Patent or Trademark
is determined by the Debtor, after consultation with the Agent, to be of
negligible economic value to the Debtor.
(g) Notice of Infringement. If any of the Patent and Trademark Collateral is
infringed, misappropriated or diluted by a third party, the Debtor shall
promptly notify the Agent after it learns thereof and shall, unless the Debtor
shall reasonably determine, after consultation with the Agent, that such Patent
and Trademark Collateral is of negligible economic value to the Debtor, promptly
sue for infringement, misappropriation of dilution, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation or dilution, or take such other action as the Debtor shall
reasonably deem appropriate under the circumstances to protect such Patent and
Trademark Collateral.
Section 4.20. Termination of Federal Contracts. With respect to each Federal
Contract in respect of which the Debtor is required to execute an Assignment of
Federal Contract in accordance with Section 4.21 hereof, the Debtor shall give
prompt written notice to the Agent if the U.S. Government shall terminate or
threaten to terminate (whether for convenience or default) any such Federal
Contract with the Debtor having a value (including unexercised options) of
$100,000 or more. In addition, the Debtor shall give prompt written notice to
the Agent if the U.S. Government shall terminate or threaten to terminate any
contract between the U.S. Government and any other prime contractor under which
the Debtor is a subcontractor if the value of such subcontract (including
unexercised options) is $100,000 or more. Section 4.21. Federal Contracts. The
Debtor shall provide to the Agent, as soon as reasonably practicable but not
later than forty-five (45) days following the end of each Fiscal Quarter, a
report identifying each Federal Contract to which it is a party, having attached
thereto a copy of the first two pages of such Federal Contract and any amendment
thereto, to the extent not previously provided to the Agent. At the request of
the Agent (unless an Event of Default shall have occurred and be continuing, in
which case no such request shall be required), the Debtor shall execute and
deliver to the Agent an Assignment of Federal Contract, in substantially the
form of Exhibit A hereto (the "Assignment of Federal Contract"), and execute any
other instruments or take any other steps required by the Agent in order that
all moneys due or to become due under such Federal Contracts shall be assigned
to the Agent and notice thereof given under the Assignment of Claims Act,
including without limitation delivery of Notices of Assignments with respect to
each Federal Contract as contemplated by Appendix A to Exhibit A hereto.
Section 4.22. Reimbursement Obligation. Should the Debtor fail to comply with
the provisions of this Security Agreement, the Revolving Credit Agreement or any
other agreement relating to the Collateral such that the value of any Collateral
or the validity, perfection, rank or value of any security interest granted to
the Agent hereunder or thereunder is thereby diminished or potentially
diminished or put at risk (as reasonably determined by the Agent), the Agent on
behalf of the Debtor may, but shall not be required to, effect such compliance
on behalf of the Debtor, and the Debtor shall reimburse the Agent for the cost
thereof on demand, and interest shall accrue on such reimbursement obligation
from the date the relevant costs are incurred until reimbursement thereof in
full at the Default Rate.
ARTICLE V.
REMEDIES; RIGHTS UPON DEFAULT
Section 5.01. UCC Rights. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the Revolving Credit
Agreement or other Credit Documents and such Obligations have not been paid in
full, the Agent may in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
guarantying, evidencing or relating to the Obligations, exercise (i) all rights
and remedies of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and (ii) all other rights
available to the Agent at law or in equity.
Section 5.02. Payments on Collateral. Without limiting the rights of the
Agent under any other provision of this Security Agreement, if an Event of
Default shall occur and be continuing:
(i) all payments received by the Debtor under or in connection with any of the
Collateral shall be held by the Debtor in trust for the Agent, shall be
segregated from other funds of the Debtor and shall forthwith upon receipt by
the Debtor be turned over to the Agent, in the same form as received by the
Debtor (duly indorsed by the Debtor to the Agent, if required to permit
collection thereof by the Agent); and
(ii) all such payments received by the Agent (whether from the Debtor or
otherwise) may, in the sole discretion of the Agent, be held by the Agent as
collateral security for, and/or then or at any time thereafter applied in whole
or in part by the Agent to the payment of, the expenses and the Obligations as
set forth in Section 5.11 hereof.
Section 5.03. Possession of Collateral. In furtherance of the foregoing, the
Debtor expressly agrees that, if an Event of Default shall occur and be
continuing, the Agent may (i) by judicial powers, or without judicial process if
it can be done without breach of the peace, enter any premises where any of such
Collateral is or may be located and, without charge or liability to the Agent,
seize and remove such Collateral from such premises and (ii) have access to and
use of the Debtor's books and records relating to such Collateral.
Section 5.04. Sale of Collateral; Notice.
(a) Sale of Collateral. The Debtor expressly agrees that if an Event of Default
shall occur and be continuing, the Agent, without demand of performance or other
demand or notice of any kind (except the notice specified below of the time and
place of any public or private sale) to or upon the Debtor or any other Person
(all of which demands and/or notices are hereby waived by the Debtor), may
forthwith (i) apply the cash, if any, then held by it as collateral as specified
in Section 5.11 hereof and (ii) if there shall be no cash or such cash shall be
insufficient to pay the Obligations in full, collect, receive, appropriate and
realize upon the Collateral, and/or sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral (or contract to do
so) or any part thereof in one or more parcels (which need not be in round lots)
at public or private sale, at any office of the Agent or elsewhere in such
manner as is commercially reasonable and, as the Agent may deem best, for cash
or on credit or for future delivery without assumption of any credit risk. The
Agent shall have the right upon any such public sale, and, if the Collateral is
of a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Debtor waives all claims,
damages and demands against the Agent arising out of the foreclosure,
repossession, retention or sale of the Collateral.
(b) Notice of Sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent shall give
the Debtor ten (10) days' written notice of its intention to make any such
public or private sale or sale at a broker's board or on a securities exchange.
Such notice shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof being sold,
will first be offered for sale and (iii) in the case of a private sale, state
the day after which such sale may be consummated. The Agent shall not obligated
to make any such sale pursuant to any such notice. The Agent may adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In the case of any
sale of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling price is paid
by the purchaser thereof, but the Agent shall not incur any liability in case of
the failure of such purchase to take up and pay for the Collateral so sold and,
in the case of such failure, such Collateral may again be sold upon like notice.
(c) Special Provisions Relating to Sales of Securities. The Debtor recognizes
that the Agent may be unable to effect a public sale of any or all the
Collateral constituting a "security" (as such term is defined in the Securities
Act) by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers that will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. The Debtor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Agent
shall be under no obligation to delay a sale of any of Collateral constituting a
security for the period of time necessary to permit the issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such issuer would agree to do so.
Section 5.05. Rights of Purchasers. Upon any sale of the Collateral (whether
public or private), the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agent) at any such sale shall hold the Collateral so sold
absolutely, free from any claim or right of whatever kind, including any equity
or right of redemption of the Debtor who, to the extent permitted by law, hereby
specifically waives all rights of redemption, including, without limitation, any
right to redeem the Collateral under Section 9-506 of the UCC, and any right to
a judicial or other stay or approval which it has or may have under any law now
existing or hereafter adopted.
Section 5.06. Additional Rights of the Agent.
(a) Right to Maintain Proceedings. The Agent (i) shall have the right and power
to institute and maintain such suits and proceedings as it may deem appropriate
to protect and enforce the rights vested in it by this Security Agreement and
(ii) may proceed by suit or suits at law or in equity to enforce such rights and
to foreclose upon the Collateral and to sell all or, from time to time, any of
the Collateral under the judgment or decree of a court of competent
jurisdiction.
(b) Appointment of Receiver. The Agent shall, to the extent permitted by
applicable law, without notice to the Debtor to any party claiming through the
Debtor, without regard to the solvency or insolvency at such time of any Person
then liable for the payment of any of the Obligations, without regard to the
then value of the Collateral and without requiring any bond from any complainant
in such proceedings, be entitled as a matter of right to the appointment of a
receiver or receivers (who may be the Agent) of the Collateral or any part
thereof, pending such proceedings, with such powers as the court making such
appointment shall confer, and to the entry of an order directing that the
profits, revenues and other income of the property constituting the whole or any
part of the Collateral be segregated, sequestered and impounded for the benefit
of the Agent, and the Debtor irrevocably consents to the appointment of such
receiver or receivers and to the entry of such order.
(c) No Duty to Exercise Rights. In no event shall the Agent have any duty to
exercise any rights or take any steps to preserve the rights of the Agent in the
Collateral, nor shall the Agent be liable to the Debtor or any other Person for
any loss caused by the Agent's failure to meet any obligation imposed by Section
9-207 of the UCC or any successor provision. Without limiting the foregoing, the
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have any duty or responsibility for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
Section 5.07. Remedies Not Exclusive, etc.
(d) Remedies Not Exclusive. No remedy conferred upon or reserved to the Agent in
this Security Agreement is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law, in
equity or by statute.
(e) Restoration of Rights. If the Agent shall have proceeded to enforce any
right, remedy or power under this Security Agreement and the proceeding for the
enforcement thereof shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Agent, the Debtor and the Agent
shall, subject to any determination in such proceeding, severally and
respectively be restored to their former positions and rights under this
Security Agreement, and thereafter all rights, remedies and powers of the Agent
shall continue as though no such proceedings had been taken.
(f) Enforcement. All rights of action under this Security Agreement may be
enforced by the Agent without the possession of any instrument evidencing any
Obligation or the production thereof at any trial or other proceeding relative
thereto, and any suit or proceeding instituted by the Agent shall be brought in
its name and any judgment shall be held as part of the Collateral.
Section 5.08. Waiver and Estoppel.
(a) No Actions to Impede Sale of Collateral. The Debtor agrees, to the extent it
may lawfully do so, that it will not at any time in any manner whatsoever claim
or take the benefit or advantage of any appraisal, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force which may delay, prevent or otherwise affect the performance or
enforcement of this Security Agreement, and hereby waives all benefit or
advantage of all such laws. The Debtor covenants that it will not hinder, delay
or impede the execution of any power granted to the Agent in this Security
Agreement, any Assignment of Federal Contract or any other Credit Document.
(b) Collateral Sold As An Entirety. The Debtor, to the extent it may lawfully do
so, on behalf of itself and all who claim through or under it, including without
limitation any and all subsequent creditors, vendees, assignees and lienors,
waives and releases all rights to demand or to have any marshalling of the
Collateral upon any sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or under any foreclosure or any enforcement of
this Security Agreement, and consents and agrees that all of the Collateral may
at any such sale be offered and sold as an entirety.
(c) Waiver of Notices. The Debtor waives, to the extent permitted by law,
presentment, demand, protest and any notice of any kind (except the notices
expressly required hereunder) in connection with this Security Agreement and any
action taken by the Agent with respect to the Collateral.
Section 5.09. Power of Attorney; Powers Coupled With An Interest.
(a) Power of Attorney. Without limiting any other right granted hereunder, the
Debtor hereby irrevocably constitutes and appoints the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Agent's reasonable
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purpose of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives the Agent the power and right, on behalf of the Debtor,
without notice to or assent by the Debtor, to do the following:
(i) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(ii) to effect any repairs or any insurance called for by the terms of this
Security Agreement or any other Credit Document, and to pay all or any part of
the premiums therefor and the costs thereof;
(iii) upon the occurrence and continuance of any Event of Default and otherwise
to the extent provided in this Security Agreement, (A) to direct any party
liable for any payment under any of the Collateral to make payment of any and
all moneys due and to come due thereunder directly to the Agent or as the Agent
shall direct, (B) to receive payment of and receipt for, and to demand and sue
for, any and all moneys, claims and other amounts due and to become due at any
time in respect of or arising out of the Collateral, (C) to sign and indorse and
receive, take, assign and deliver, any checks, notes, drafts, negotiable and
non-negotiable instruments, any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral, (D) to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding with respect
to, or in connection with, the Collateral, (E) to sell, transfer, assign or
otherwise deal in or with the Collateral or any part thereof, as fully and
effectively as if the Agent were the absolute owner thereof and (F) to do, at
its option, but at the expense of the Debtor, at any time or from time to time,
all acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in order
to effect the intent of this Security Agreement, all as fully and effectively as
the Debtor might do.
(b) Powers Coupled With an Interest. All authorizations and agencies granted or
provided herein with respect to the Collateral, including the powers granted
under clause (a) of this Section 5.9, are irrevocable and powers coupled with an
interest.
Section 5.10. Certain Provisions Relating to Securities. Solely with respect to
any Collateral constituting a "security" (as defined in the Securities Act), if
an Event of Default shall have occurred and be continuing, all such securities
(as defined in the Securities Act) constituting a part of the Collateral shall,
at the request of the Agent, be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (i) all voting,
corporate and other rights, powers and privileges pertaining to such Collateral
at any meeting of shareholders of the issuer thereof or otherwise, and (ii) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all such Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the structure of
any such issuer, or upon the exercise by the Debtor or the Agent of any right,
privilege or option pertaining to such Collateral, and in connection therewith,
the right to deposit and deliver any and all such Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine), all without liability except to account for
property actually received by it and except as provided in Section 5.6(c)
hereof, but the Agent shall have no duty to the Debtor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
Section 5.11. Application of Monies. The proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Agent in the following order of priority:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Agent and its agents and
counsel, and all expenses, liabilities and advances incurred or made by the
Agent, its agents and counsel in connection therewith or in connection with the
care, safekeeping or otherwise of any or all of the Collateral;
second, to payment of the Obligations, in such order as the Agent may
elect; and
third, any surplus then remaining shall be paid to the Debtor,
or its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same (including pursuant to Section 9-504(1)(C) of the UCC) or as a
court of competent jurisdiction may direct.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Notices. All notices, requests and other communications to a party
hereunder shall be in writing and shall be given to such party at its address
set forth on the signature page hereof or such other address as such party may
hereafter specify for that purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) in the case of telephonic
notice (to the extent expressly permitted hereunder), when made, (ii) in the
case of notice delivered by overnight express courier, one Business Day after
the Business Day such notice was delivered to such courier, (iii) in the case of
notice delivered by first class mail, three Business Days after being deposited
in the mail, postage prepaid, return receipt requested, (iv) in the case of
notice by hand, when delivered, or (v) in the case of notice by any customary
means of telecommunication, when sent provided confirmation of receipt or answer
back has been received, in each case if addressed to any party hereto as
provided herein. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect the
validity of notice given in accordance with this section.
Section 6.02. No Waiver; Cumulative Remedies. The Agent shall not by any act
(except by a written instrument pursuant to Section 6.3 hereof) be deemed to
have waived any right or remedy hereunder. No failure to exercise, nor any delay
in exercising, on the part of the Agent any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
Section 6.03. Amendments and Waivers. None of the terms or provisions of this
Security Agreement may be amended, supplemented or otherwise modified except by
a written instrument executed by the Debtor and the Agent; provided that any
provision of this Security Agreement may be waived by the Agent in a letter or
agreement executed by the Agent or by telex or facsimile transmission from the
Agent.
Section 6.04. Successors and Assigns. The provisions of this Security Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Debtor may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Agent.
Section 6.05. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA,
OTHER THAN ITS LAWS RESPECTING CHOICE OF LAW OTHER THAN THOSE CONTAINED IN
THE UCC.
Section 6.06. Limitation by Law; Severability.
(a) All rights, remedies and powers provided in this Security Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Security Agreement invalid, unenforceable in whole or in part,
or not entitled to be recorded, registered or filed upon the provisions of any
applicable law.
(b) If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
Section 6.07. Counterparts. This Security Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each complete set of which, when so executed and delivered by all parties, shall
be an original, but all such counterparts shall together constitute but one and
the same instrument.
Section 6.08. Expenses of the Agent. The Debtor shall pay to the Agent from time
to time upon demand, all of the costs and expenses incurred by the Agent or any
Lender (including, without limitation, the reasonable fees and disbursements of
counsel and any amounts payable by the Agent or any Lender to any of their
respective agents) (i) arising in connection with the administration,
modification, amendment, waiver or termination of this Security Agreement or any
document or agreement contemplated hereby or any consent or waiver hereunder or
thereunder or (ii) incurred in connection with the administration of this
Security Agreement, or any document or agreement contemplated hereby, or in
connection with the administration, sale or other disposition of Collateral
hereunder or under any document or agreement contemplated hereby or the
preservation, protection or defense of the rights of the Agent or any Lender in
and to the Collateral.
Section 6.09. Indemnification. The Debtor shall at all times hereafter
indemnify, hold harmless and, on demand, reimburse the Agent and the Lenders and
their respective subsidiaries, affiliates, successors, assigns, officers,
directors, employees and agents, and their respective heirs, executors,
administrators, successors and assigns (all of the foregoing parties, including,
but not limited to, the Agent, being hereinafter collectively referred to as the
"Indemnities" and individually as an "Indemnitee") from, against and for any and
all liabilities, obligations, claims, damages, actions, penalties, causes of
action, losses, judgments, suits, costs, expenses and disbursements, including,
without limitation, attorney's fees (any and all of the foregoing being
hereinafter collectively referred to as the "Liabilities" and individually as a
"Liability") which the Indemnitees, or any of them, might be or become
subjected, by reason of, or arising out of the preparation, execution, delivery,
modification, administration or enforcement of, or performance of the Agent's
rights under, this Security Agreement or any other document, instrument or
agreement contemplated hereby or executed in connection herewith; provided,
however, that the Debtor shall not be liable to any Indemnitee for any Liability
caused solely by the gross negligence or willful misconduct of such Indemnitee.
In no event shall any Indemnitee, as a condition to enforcing its rights under
this Section 6.9 or otherwise, be obligated to make a claim against any other
Person (including, without limitation, the Agent) to enforce its rights under
this Section 6.9.
Section 6.10. Termination; Survival. This Security Agreement shall terminate
when the security interests granted hereunder have terminated and the Collateral
has been released as provided in Section 2.6; provided, however, that the
obligations of the Debtor under Section 4.22 and the provisions of this Article
6 shall survive any such termination.
Section 6.11. Judicial Proceedings; Waiver of Jury Trial. Any judicial
proceeding brought against the Debtor with respect to any Credit Agreement
Related Claim hereby may be brought in any court of competent jurisdiction in
the Commonwealth of Virginia, County of Fairfax, or any Federal court in the
Eastern District of Virginia, and, by execution and delivery of this Security
Agreement, the Debtor (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with any Credit Agreement Related Claim and (b) irrevocably waives any objection
it may now or hereafter have as to the venue of any such proceeding brought in
such a court or that such a court is an inconvenient forum. The Debtor hereby
waives personal service of process and consents that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of Section 6.1
hereof, and service so made shall be deemed completed on the earlier of (x) the
receipt thereof and (y) if sent by registered or certified mail (return receipt
requested), the fifth (5th) Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the Agent to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Debtor in the courts of any other jurisdiction. Any
judicial proceeding by the Debtor against the Agent relating to or involving any
Credit Agreement Related Claim hereby shall be brought only in a court located
in the Commonwealth of Virginia, County of Fairfax, or the Federal court in the
Eastern District of Virginia. THE DEBTOR AND THE AGENT HEREBY UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING ANY CREDIT AGREEMENT RELATED CLAIM.
Section 6.12. Integration. This Security Agreement and the other Credit
Documents constitute the entire agreement of the Agent, the Lenders, the
Borrower and the other Credit Parties with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Credit
Documents.
Section 6.13. Authority of Agent. The Debtor acknowledges that the rights and
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Security Agreement shall, as between
the Agent and the Lenders, be governed by the Revolving Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Debtor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and the Debtor shall not be under any obligation,
or entitlement, to make any inquiry respecting such authority.
Section 6.14. Headings, Bold Type and Table of Contents. The section headings,
subsection headings, and bold type used herein and the Table of Contents hereto
have been inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Security Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
Address: HB CAPITAL, INC.
77 Franklin Street
Suite 600
Boston, MA 02110 By: /s/ Glenn J. Dozier______________
Attention: Glenn J. Dozier Name: Glenn J. Dozier
Phone: (617) 423-0545 Title: Senior Vice President
Fax: (617) 422-0694 and Chief Financial Officer
Address: NATIONSBANK, N.A.
8300 Greensboro Drive
Suite 550 By: /s/ James W. Gaittens________
McLean, Virginia 22102 Name: James W. Gaittens
Attention: James W. Gaittens Title: Senior Vice President
Phone: (703) 761-8405
Fax: (703) 917-0519
<PAGE>
Schedule 3.4
HB CAPITAL, INC.
Place of Business
77 Franklin Suite
Suite 600
Boston, Massachusetts 02110
<PAGE>
Schedule 3.5
HB CAPITAL, INC.
Location of Collateral
77 Franklin Street
Suite 600
Boston, Massachusetts 02110
<PAGE>
Schedule 3.6
Trade/Division Names
HB Capital, Inc.
HB Capital
<PAGE>
Schedule 3.7
Primary Collateral Locations
Location at which all Receivables now owing to the Debtor were originated:
77 Franklin Street
Suite 600
Boston, Massachusetts 02110
See Schedule 3.5 for locations at which Equipment and Inventory now owned by the
Debtor.
<PAGE>
Schedule 3.8
HB CAPITAL, INC.
Patents and Trademarks
None.
<PAGE>
Schedule 4.1
HB CAPITAL, INC.
UCC FILINGS
None.
<PAGE>
7
Exhibit A to
Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __
(the "Agreement"), is made by HB CAPITAL, INC., a Delaware corporation (the
"Assignor"), in favor of NATIONSBANK, N.A., a national banking association (the
"Agent"), in its capacity as Agent for the lenders from time to time a party to
the Revolving Credit Agreement (as defined in the Security Agreement referred to
below).
W I T N E S S E T H:
WHEREAS, the Assignor has secured certain obligations
undertaken by Hagler Bailly, Inc. pursuant to the provisions of a Security
Agreement, dated as of ___________________, ____ (as the same may be amended,
supplemented or otherwise modified from time to time, the "Security Agreement"),
by and between the Assignor and the Agent; and
WHEREAS, the Assignor is a party to, and from time to time
will become entitled to receive moneys under and by virtue of, a certain
contract with, involving or for the benefit of the United States of America or
any department, agency or instrumentality thereof (herein referred to as the
"Government"), designated as Contract Number _______ entered into by the
Assignor and the Government on ________ __, 19__ (which contract, together with
all additions, change orders, supplements, amendments, renewals, extensions, and
modifications thereto now or hereafter in effect, are hereinafter collectively
called the "Contract"); and
WHEREAS, pursuant to the Security Agreement, the Assignor has
undertaken to effectuate the assignment(s) and other actions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Assignor covenants and agrees as follows:
1. Incorporation By Reference. The provisions of the Security Agreement
are incorporated herein by reference, and the terms defined in the Security
Agreement are used herein with the same meanings.
2. Representations. The Assignor represents and warrants to the Agent
that (a) the Contract is legal, valid and binding on the Assignor and, to its
knowledge, the other parties thereto, is in full force and effect, and is not
evidenced by any chattel paper or instrument, (b) upon due filing of this
Agreement, together with a Notice of Assignment substantially in the form of
Appendix A hereto with the authorized representative, the execution and delivery
of this Agreement does not violate and is not in conflict with the provisions of
the Contract, (c) there has been no default on the part of the Assignor or any
other party to the Contract, (d) the Assignor has made no previous assignment of
the Contract to any person and knows of no fact or defense that will render the
moneys due or to be due thereunder uncollectible, (e) no financing statement
covering the Contract is on file in any public office except financing
statements in favor of the Agent, (f) no set-off or counterclaim to any moneys
due or to become due under the Contract exists on the date hereof, and no
agreement has been made with any person under which any deduction or discount
may be claimed, and (g) the address of the office where the Assignor keeps its
records concerning the Contract is ____________________.
3. Collateral. As security and collateral for the payment of all of the
Obligations (defined in the Security Agreement) and for performance of, and
compliance with, by the Assignor, all of the terms, covenants, conditions,
stipulations, and agreements contained in this Agreement and in the Security
Agreement, the Assignor hereby assigns to the Agent, and grants to the Agent a
lien on and security interest in, all moneys and claims for moneys now and
hereafter due and to become due to the Assignor under or by reason of the
Contract, together with all cash and non-cash proceeds thereof; provided,
however, that nothing contained herein shall impose upon the Agent any of the
obligations or liabilities of the Assignor under the Contract.
4. Covenants. Until payment and performance in full of the Obligations,
the Assignor covenants as follows:
(c) The Assignor shall place on any and all vouchers, invoices, or other
instruments demanding payment under the Contract the direction that such payment
is to be made to the Agent in accordance with Section 5 of this Agreement.
(d) The Assignor shall promptly upon request execute, acknowledge, and deliver
any notice, financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate, or other document as
the Agent may require in order to perfect, preserve, maintain, protect,
continue, and/or extend the assignment, lien, and security interest of the Agent
under this Agreement and its priority. The Assignor shall pay to the Agent on
demand all taxes, costs, and expenses incurred by the Agent in connection with
the preparation, execution, recording, and filing of any such document or
instrument mentioned aforesaid, and such taxes, costs, and expenses shall
constitute and become a part of the Obligations. A carbon, photographic, or
other reproduction of a security agreement or a financing statement is
sufficient as a financing statement.
(e) The Assignor shall fully, promptly, and faithfully comply with and perform
its obligations and duties under the Contract in accordance with the terms
thereof and will make no changes or amendments to the Contract or terminate or
cancel the Contract without the prior written consent of the Agent except as
permitted by the Security Agreement. In the event that any change, amendment,
termination or cancellation of the Contract is made or effected by the
Government, the Assignor will promptly notify the Agent thereof and promptly
furnish to the Agent a copy of any document or agreement evidencing any such
change, amendment, termination, or cancellation.
(f) The Assignor will promptly
(i) furnish to the Agent all information received by the Assignor affecting
the moneys due and to become due under the Contract,
(ii) inform the Agent of any delay in performance of, or claims made in
regard to, the Contract, and
(iii) notify the Agent in writing of the failure of any party to the Contract to
perform any of its obligations thereunder and any rejection of any performance
rendered by the Assignor under or in connection with the Contract.
(g) The Assignor will at all times keep accurate and complete records of
performance by the Assignor under the Contract, and the Agent and its agents
shall have the right, during normal business hours and upon reasonable advance
notice, to call at the place or places of business of the Assignor at intervals
to be determined by the Agent, and without hindrance or delay, to inspect,
audit, check, and make extracts from the books, records, journals, orders,
receipts, correspondence, and other data relating to the Contract or to any
other transactions between the parties hereto related to the Contract.
5. Payments. The Assignor hereby authorizes, empowers, and directs the
Government to draw all checks, drafts, or other instruments representing the
payments of money due the Assignor under the Contract (herein called the "Items
of Payment") to the order of NationsBank, N.A., assignee of Assignor, and to
send the same (i) if by mail, to , (ii) if by electronic transfer, to
NationsBank, N.A. for the account of ________________, Bank Account #__________,
Agent ABA#_________, or (iii) if by wire transfer, to NationsBank, N.A. for the
account of _________________________, Bank Account #_______, ABA#___________.
If, despite this direction, any instruments or checks representing payments
should be delivered to the Assignor, the Assignor will immediately endorse and
deliver such instruments or checks to the order of the Agent. The Assignor does
hereby irrevocably (subject to revocation with the consent of the Agent)
designate and appoint (which appointment is coupled with an interest) the Agent,
and the Agent's successors in interest by operation of law, the Assignor's true
and lawful attorney with power irrevocable for the Assignor and in the
Assignor's name, place, and stead, but at the sole cost and expense of the
Assignor, to receive, endorse, and collect all Items of Payment, and to ask,
demand, receive, receipt, and give acquittances for any and all amounts which
may be payable or which become due and payable by the Government under the
Contract, and in the Agent's discretion to file any claim or to take any other
action or proceeding, either in the Agent's own name or in the name of the
Assignor or otherwise, which to the Agent or any successor in interest thereof
may seem necessary or desirable in order to collect or endorse the payment of
any and all amounts now due or owing or which may hereafter be or become due or
owing on account of the Contract. All Items of Payment received by the Agent
pursuant hereto which are finally paid in cash or solvent credits shall be
applied against the Obligations as provided in the Security Agreement. Any
portion of the Items of Payment which the Agent elects not to so apply shall be
paid over to the Assignor or to whomsoever shall be entitled thereto under
applicable law, including pursuant to Section 9-504(1)(C) of the Uniform
Commercial Code of the Commonwealth of Virginia.
6. No Waiver. Neither this Agreement nor any term, condition,
representation, warranty, covenant, or agreement hereof may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing by the
party against whom such change, waiver, discharge, or termination is sought.
7. Governing law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
8. Gender. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders.
9. Counterparts. This Agreement may be executed in any number of
duplicate originals, each of which shall be an original but all of which
together shall constitute one and the same instrument.
10. Paragraph Headings. The paragraph headings of this Agreement are
for convenience only and shall not limit or define the provisions of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, Assignor and the Agent have caused this Agreement
to be duly executed and delivered by their respective representatives thereunto
duly authorized as of the date first above written.
HB CAPITAL, INC.
ATTEST:
, Secretary
By:
Title:
WITNESS:
NATIONSBANK, N.A.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
<PAGE>
Appendix A To
Assignment of Federal Contract
Notice of Assignment
Date: ____________
To: Contracting Officer
[Address]
Re: CONTRACT NUMBER ___________ (the "Contract") MADE BY THE UNITED STATES
OF AMERICA
By: Department of the [Applicable U.S. Government Agency]
[Address]
with [Name of Subsidiary] (the "Contractor")
[Address]
for manufacture and support of a [Brief description of
Subject of Contract]
dated _______________
PLEASE TAKE NOTICE that moneys due or to become due under the
Contract have been assigned to NationsBank, N.A. pursuant to the provisions of
the Assignment of Claims Act of 1940, as amended (31 USC ss. 3727 and 41 USC ss.
15). A true copy of the Assignment executed by the Contractor on the date hereof
(the "Assignment") is attached to the original of this Notice of Assignment.
Please file this original Notice of Assignment along with the copy of the
Assignment in the contract file for the Contract and forward one of the enclosed
copies of this Notice of Assignment to the current disbursing office for the
Contract.
Payments due or to become due under the Contract should be
made (i) if by mail, to NationsBank, N.A., ____________________, (ii) if by
electronic transfer, to NationsBank, N.A. for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to NationsBank, N.A. for the account of
__________________________, Bank Account #_________, ABA#_________.
Please return enclosed copies of this Notice of Assignment
with appropriate notations showing the date and hour of receipt, and duly signed
by the person acknowledging receipt on behalf of the addressee, to NationsBank,
N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102, Attention: James
W. Gaittens.
Very truly yours,
HB CAPITAL, INC.
By: _________________
Name:
Title:
Receipt is hereby acknowledged of the above notice and a copy
of the above mentioned instrument of assignment. These were received at
_________[A.M.] [P.M.] on ______________________, 199__.
-----------------
Name:
Title:
on behalf of Contracting Officer
[Address]
EXHIBIT 10.39
--------------------------------------------------------------------------
SECURITY AGREEMENT
dated as of November 20, 1998
between
PUTNAM, HAYES & BARTLETT, INC.,
as Debtor
and
NATIONSBANK, N.A.,
as Agent
-------------------------------------------------------------------------
<PAGE>
27
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of November 20, 1998 (as
amended, supplemented or modified from time to time, the "Security Agreement"),
is made by PUTNAM, HAYES & BARTLETT, INC., a Massachusetts corporation (the
"Debtor"), and NATIONSBANK, N.A., a national banking association (the "Agent")
in its capacity as Agent for the lenders (the "Lenders") from time to time a
party to the Revolving Credit Agreement, dated as of November 20, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Revolving
Credit Agreement"), by and among the Hagler Bailly, Inc., a Delaware corporation
(the "Company"), the Agent, in its capacity as such thereunder, and the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Revolving Credit Agreement, the
Lenders have severally agreed to make available to the Company a revolving line
of credit for Revolving Loans, Swing Line Loans and Standby Letters of Credit in
an aggregate principal amount at any time not to exceed the Maximum Available
Amount, subject to the terms and conditions contained therein;
WHEREAS, the Company owns, directly or indirectly, [all] of
the issued and outstanding shares of capital of stock of, or other equity
interests in, the Debtor;
WHEREAS, the proceeds of such Revolving Loans, Swing Line
Loans and Standby Letters of Credit may be used to enable the Company to make
valuable transfers to the Debtor in connection with the operation of its
business and for the Permitted Uses;
WHEREAS, the Debtor will derive substantial direct and
indirect benefit from such Revolving Loans, Swing Line Loans and Standby Letters
of Credit; and
WHEREAS, the Company is required to cause the Debtor to
execute this Agreement pursuant to the provisions of the Revolving Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and to induce the Lenders to make or maintain
their respective Revolving Loans and Swing Line Loans to, and the Issuing Lender
to issue or maintain the Standby Letters of Credit under the Revolving Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor hereby agrees with the
Agent, for the ratable benefit of the Lenders, as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions Generally. Capitalized terms used herein without
definition shall have the respective meanings specified in the Revolving Credit
Agreement, and the following terms shall have the following meanings (such
meanings to be, when appropriate, equally applicable to both the singular and
plural forms of the terms defined):
"Account Debtor" shall mean, with respect to any Receivable or
Other Intangible, any Person obligated to make payment thereunder, including
without limitation any account debtor thereon.
"Assignment of Claims Act" shall mean the Assignment of Claims Act of 1940,
31 U.S.C. 3727, 41 U.S.C. 15 (1986), as the same may be
amended and any successor statute of similar import.
"Assignment of Federal Contract" shall have the meaning
specified in Section 4.21 hereof.
"Cash Collateral Account" shall have the meaning specified in
Section 2.4 hereof.
"Collateral" shall have the meaning set forth in Section 2.1.
"Debtor" shall have the meaning specified in the preamble hereof.
"Equipment" shall mean all equipment now owned or hereafter
acquired by the Debtor, including all items of machinery, equipment, furnishings
and fixtures of every kind, whether affixed to real property or not, as well as
all automobiles, trucks and vehicles of every description, trailers, handling
and delivery equipment, fittings, special tools, all additions to, substitutions
for, replacements of or accessions to any of the foregoing, all attachments,
components, parts (including spare parts) and accessories whether installed
thereon or affixed thereto and all fuel for any thereof.
"Federal Contract" means any contract or agreement with,
involving or for the benefit of the United States of America or any department,
agency or instrumentality thereof (collectively, the "U.S. Government"), whether
now existing or hereafter arising, in each case as the same may be amended,
modified or otherwise supplemented from time to time.
"Inventory" shall mean all inventory now owned or hereafter
acquired by the Debtor, including (i) all goods and other personal property
which are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
(ii) all inventory, wherever located, evidenced by negotiable and non-negotiable
documents of title, warehouse receipts and bills of lading, (iii) all of the
Debtor's rights in, to and under all purchase orders now owned or hereafter
received or acquired by it for goods or services and (iv) all rights of the
Debtor as an unpaid seller, including rescission, replevin, reclamation and
stopping in transit.
"Lenders" shall have the meaning specified in the preamble hereof.
"Obligations" shall mean any and all now existing or hereafter
arising indebtedness, obligations, liabilities and covenants of each Credit
Party to any Lender, the Agent, their respective Affiliates, successors and
assigns and any other Indemnified Person under or arising out of any Credit
Document, including without limitation (i) all Revolving Loans and all Swing
Line Loans together with interest thereon and all Standby Letters of Credit,
(ii) all fees, expenses, indemnity payments and other amounts due or to become
due under the Revolving Credit Agreement, the Revolving Notes, the Swing Line
Note or any other Credit Document, (iii) all liabilities and obligations under
the Subsidiary Guarantee and any other agreement executed by any Credit Party
guarantying the obligations of the Borrower under the Revolving Credit Agreement
or any other Credit Document, (iv) all liabilities and obligations under any
agreement providing collateral for any of the foregoing (including any Pledge
Agreement and the Subsidiary Security Agreements), and (v) and any agreement or
instrument refinancing or restructuring all or any portion of the obligations
and liabilities under any of foregoing or under any successor agreement or note,
in each case whether direct or indirect, absolute or contingent or due or to
become due.
"Other Intangibles" shall mean all accounts, accounts
receivable, contract rights, documents, instruments, notes, chattel paper,
money, indemnities, warranties and general intangibles now owned or hereafter
acquired by the Debtor including, without limitation, all goodwill, customer
lists, permits, federal and state tax refunds, reversionary interests in pension
plan assets, Patents, Trademarks, licenses, copyrights and other rights in
intellectual property, other than Receivables.
"Patents" shall mean all letters patent of the United States
or any other country, and all applications for letters patent of the United
States or any other country, in which the Debtor may now or hereafter have any
right, title or interest and all reissues, continuations, continuations-in-part
or extensions thereof.
"Proceeds" shall mean all proceeds, including (i) whatever is
received upon any collection, exchange, sale or other disposition of any of the
Collateral and any property into which any of the Collateral is converted,
whether cash or non-cash, (ii) any and all payments or other property (in any
form whatsoever) made or due and payable on account of any insurance, indemnity,
warranty or guaranty payable to the Debtor with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever) made or due and
payable in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person, corporation, agency, authority or
other entity acting under color of any governmental authority) and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables" shall mean all accounts now or hereafter owing
to the Debtor, and all accounts receivable, contract rights, documents,
instruments or chattel paper representing amounts payable or monies due or to
become due to the Debtor, arising from the sale of Inventory or the rendition of
services in the ordinary course of business or otherwise (whether or not earned
by performance), together with all Inventory returned by or reclaimed from
customers wherever such Inventory is located, and all guaranties, securities and
liens held for the payment of any such account, account receivable, contract
right, document, instrument or chattel paper.
"Security Agreement" shall have the meaning specified in the
preamble hereof.
"Trademarks" shall mean all right, title or interest which the
Debtor may now or hereafter have in any or all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source of business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and all applications in
connection therewith, including without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or political subdivision thereof and all reissues, extensions or
renewals thereof.
"UCC" shall mean the Uniform Commercial Code in effect on the
date hereof in the Commonwealth of Virginia.
"U.S. Government" has the meaning specified in the
definition of Federal Contract contained herein.
Section 1.02. UCC Definitions. The uncapitalized terms "account", "account
debtor", "chattel paper", "contract right", "document", "warehouse receipt",
"bill of lading", "document of title", "instrument", "inventory", "general
intangible", "money", "security", "certificated security", "uncertificated
security", "financial asset" and "proceeds" as used in Section 1.1 or elsewhere
in this Security Agreement shall have the respective meanings set forth in the
UCC.
ARTICLE II.
SECURITY INTERESTS
Section 2.01. Grant of Security Interests. To secure the due and punctual
payment of all Obligations, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing or due or
to become due, whether at maturity or upon acceleration or otherwise, in
accordance with the terms thereof and to secure the due and punctual performance
of all of the Obligations and in order to induce the Agent and the Lenders to
enter into the Revolving Credit Agreement and the other Credit Documents, the
Debtor hereby pledges, assigns, delivers, conveys and transfers to the Agent,
for the ratable benefit of the Lenders, and grants to the Agent, for the ratable
benefit of the Lenders, a first priority and continuing security interest in and
lien on, all of the Debtor's right, title and interest in, to and under the
following, whether now existing or hereafter acquired (the "Collateral"):
(i) all Receivables;
(ii) all Other Intangibles;
(iii) all Equipment;
(iv) all Inventory;
(v) to the extent not included in the foregoing, all securities (whether
certificated or uncertificated) and all financial assets, whether now existing
or hereafter arising, including, without limitation, all capital stock issued by
any Person and held by Debtor, and all partnership interests, whether in the
nature of a joint venture, limited liability company member's interest, master
limited partnership, teaming arrangement or otherwise;
(vi) to the extent not included in the foregoing, all other personal property,
whether tangible or intangible, and wherever located whether within or outside
of the United States, including, but not limited to, the balance of every
deposit account now or hereafter existing of the Debtor with any bank or other
financial institution and all monies of the Debtor and all rights to payment of
money of the Debtor;
(vii) to the extent not included in the foregoing, all books, ledgers and
records and all computer programs, tapes, discs, punch cards, data processing
software, transaction files, master files and related property and rights
(including computer and peripheral equipment) necessary or helpful in enforcing,
identifying or establishing any item of Collateral; and
(viii) to the extent not otherwise included, all Proceeds and products of any or
all of the foregoing, whether existing on the date hereof or arising hereafter;
provided, however, notwithstanding anything to the contrary contained herein,
the Debtor is not assigning, pledging or otherwise encumbering under this
Security Agreement its interests in any Federal Contract to which it is a party,
or in accounts or receivables due to Debtor under such Federal Contract, to the
extent, but only to the extent, such assignment, pledge or other encumbrance
would breach or violate or would cause Debtor to breach or violate such Federal
Contract or statutes or regulations applicable thereto, it being understood that
this proviso does not apply to, or in any way limit, Debtor's assignment, pledge
or encumbrance of Proceeds of all Federal Contracts to which it is a party.
Section 2.02. Continuing Liability of the Debtor. Anything herein to the
contrary notwithstanding, the Debtor shall remain liable to observe and perform
all the terms and conditions to be observed and performed by it under any
contract, agreement, warranty or other obligation with respect to the
Collateral; and shall do nothing to impair the security interests herein
granted. The Agent shall not have any obligation or liability under any such
contract, agreement, warranty or obligation by reason of or arising out of this
Security Agreement or the receipt by the Agent of any payment relating to any
Collateral, nor shall the Agent be required to perform or fulfill any of the
obligations of the Debtor with respect to the Collateral, to make any inquiry as
to the nature or sufficiency of any payment received by it or the sufficiency of
the performance of any party's obligations with respect to any Collateral.
Furthermore, the Agent shall not be required to file any claim or demand to
collect any amount due or to enforce the performance of any party's obligations
with respect to, the Collateral.
Section 2.03. Sales and Collections.
(a) Sales of Inventory in the Ordinary Course of Business. The Debtor is
authorized (i) to sell in the ordinary course of its business for fair value and
on an arm's-length basis any of its Inventory normally held by it for such
purpose and (ii) to use and consume, in the ordinary course of its business, any
raw materials, supplies and materials normally held by it for such purpose. The
Agent may, upon the occurrence of any Event of Default, without cause or notice,
curtail or terminate such authority at any time.
(b) Collection of Receivables. The Debtor is authorized to collect amounts owing
to it with respect to the Collateral, except as otherwise provided in connection
with the Assignment of Federal Contract, if any as provided herein. However, the
Agent may, upon and during the continuance of an Event of Default or a Potential
Event of Default, notify Account Debtors obligated to make payments under any or
all Receivables or Other Intangibles that the Agent has a security interest in
such Collateral and that payments shall be made directly to the Agent. Upon the
request of the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default, as the case may be, the Debtor will so notify such
Account Debtors and will execute such contract assignments, notices of
assignment or other documents as may be required by such Account Debtors. The
Debtor will use all reasonable efforts to cause each Account Debtor to comply
with the foregoing instruction. In furtherance of the foregoing, the Debtor
authorizes the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default (i) to ask for, demand, collect, receive and give
acquittances and receipts for any and all amounts due and to become due under
any Collateral and in the name of the Debtor or its own name or otherwise, (ii)
to take possession of, endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under any
Collateral and (iii) to file any claim or take any other action in any court of
law or equity or otherwise which it may deem appropriate for the purpose of
collecting any amounts due under any Collateral. The Agent shall have no
obligation to obtain or record any information relating to the source of such
funds or the obligations in respect of which payments have been made.
Section 2.04. Segregation of Proceeds.
(a) Cash Collateral Account Maintained by Agent. Upon an Event of Default or a
Potential Event of Default, the Agent shall have the right at any time during
the continuance thereof to cause to be opened and maintained at the office of
the Agent in McLean, Virginia a non-interest bearing bank account (the "Cash
Collateral Account") which will contain only Proceeds. Any "cash proceeds" (as
such term is defined in Section 9-306(1) of the UCC) received by the Agent
directly from Account Debtors obligated to make payments under Receivables or
Other Intangibles pursuant to Section 2.3 hereof or from the Debtor pursuant to
clause (b) of this Section 2.4, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper or other Proceeds received on
account of any Collateral, shall be promptly deposited in the Cash Collateral
Account, and until so deposited shall be held in trust for the Agent as property
of the Agent and shall not be commingled with any funds of the Debtor not
constituting Proceeds of Collateral. The name in which the Cash Collateral
Account is carried shall clearly indicate that the funds deposited therein are
the property of the Debtor, subject to the security interest of the Agent
hereunder. Such Proceeds, when deposited, shall continue to be security for the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Agent shall have sole dominion and control over the
funds deposited in the Cash Collateral Account, and such funds may be withdrawn
therefrom only by the Agent.
(b) Deposit of Proceeds by the Debtor. Upon notice by the Agent to the Debtor
that the Cash Collateral Account has been opened, the Debtor shall cause all
cash Proceeds collected by it to be delivered to the Agent forthwith upon
receipt, in the original form in which received (with such endorsements or
assignments as may be necessary to permit collection thereof by the Agent), and
for such purpose the Debtor hereby irrevocably authorizes and empowers the
Agent, its officers, employees and authorized agents to endorse and sign the
name of the Debtor on all checks, drafts, money orders or other media of payment
so delivered, and such endorsements or assignments shall, for all purposes, be
deemed to have been made by the Debtor prior to any endorsement or assignment
thereof by the Agent. The Agent may use any convenient or customary means for
the purpose of collecting such checks, drafts, money orders or other media of
payment.
Section 2.05. Verification of Receivables. The Agent shall have the right to
make test verifications of Receivables in any reasonable manner and through any
medium that it considers advisable, and the Debtor agrees to furnish all such
assistance and information as the Agent may reasonable require in connection
therewith. The Debtor at its expense will cause its chief financial officer to
furnish to the Agent at any reasonable time and from time to time promptly upon
the Agent's reasonable request, the following reports: (i) a reconciliation of
all Receivables, (ii) an aging of all Receivables, (iii) trial balances and (iv)
a test verification of such Receivables as the Agent may request.
Section 2.06. Release of Collateral.
(a) Security Interest of Agent Ceases Upon Permitted Dispositions. The Debtor
may sell or realize upon or transfer or otherwise dispose of Collateral only to
the extent permitted by Section 4.13, and the security interests of the Agent in
such Collateral so sold, realized upon or disposed of (but not in the Proceeds
arising from such sale, realization or disposition) shall cease immediately upon
such sale, realization or disposition, without any further action on the part of
the Agent. The Agent, if requested in writing by the Debtor but at the expense
of the Debtor, is hereby authorized and instructed to deliver to the Account
Debtor or the purchaser or other transferee of any such Collateral a certificate
stating that the Agent no longer has a security interest therein, and such
Account Debtor or such purchaser or other transferee shall be entitled to rely
conclusively on such certificate for any and all purposes.
(b) Filing of Termination Statements. Upon the payment in full of all of the
Obligations and if there is no commitment by any Lender to make further
advances, incur obligations or otherwise give value, the Agent will (as soon as
reasonably practicable after receipt of notice from the Debtor requesting the
same but at the expense of the Debtor) deliver to the Debtor (i) for each
jurisdiction in which a UCC financing statement is on file to perfect the
security interests granted to the Agent hereunder, a termination statement
(appropriately completed) to the effect that the Agent no longer claims a
security interest under such financing statement, and (ii) such other documents
as the Debtor shall reasonably request evidencing satisfaction of the
Obligations and the release of the security interests granted to the Agent
hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants that:
Section 3.01. Title to Collateral. Except for the security interests granted to
the Agent pursuant to this Security Agreement and as otherwise permitted by
Section 6.2(a) of the Revolving Credit Agreement, the Debtor is the sole owner
of each item of the Collateral, having good and marketable title thereto, free
and clear of any and all Liens.
Section 3.02. Validity, Perfection and Priority of Security Interests.
(a) By complying with Section 4.1 hereof, the Debtor will have created a valid
security interest in favor of the Agent in all existing Collateral and in all
identifiable Proceeds of such Collateral, which security interest (except in
respect of Collateral not located at a facility identified on Schedule 3.7
hereto and motor vehicles for which the exclusive manner of perfecting a
security interest therein is by noting such security interest in the certificate
of title in accordance with local law) would be prior to the claims of a trustee
in bankruptcy under Section 544(a) of the Bankruptcy Code. Continuing compliance
by the Debtor with the provisions of Section 4.2 hereof will also (i) create
valid security interests in all Collateral acquired after the date hereof and in
all identifiable Proceeds of such Collateral and (ii) cause such security
interests in all Collateral and in all Proceeds which are (A) identifiable cash
Proceeds of Collateral covered by financing statements required to be filed
hereunder, (B) identifiable Proceeds in which a security interest may be
perfected by such filing under the UCC and (C) any Proceeds in the Cash
Collateral Account to be duly perfected under the UCC, in each case prior to the
claims of a trustee in bankruptcy under the Bankruptcy Code (except in respect
of Collateral not located at a facility identified on Schedule 3.5 hereto).
(b) The security interests of the Agent in the Collateral located at the
facilities identified on Schedule 3.5 hereto rank first in priority. Other than
financing statements or other similar documents perfecting the security
interests in favor of the Agent, no financing statements, deeds of trust,
mortgages or similar documents covering all or any part of the Collateral are on
file or of record in any government office in any jurisdiction in which such
filing or recording would be effective to perfect a security interest in such
Collateral, nor is any of the Collateral in the possession of any Person (other
than the Debtor) asserting any claim thereto or security interest therein.
Section 3.03. Enforceability of Receivables and Other Intangibles. To the best
knowledge of the Debtor, each Receivable and Other Intangible is a valid and
binding obligation of the related Account Debtor in respect thereof, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
provisions of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and complies with any applicable legal
requirements.
Section 3.04. Place of Business. Schedule 3.4 correctly sets forth the chief
executive office and principal place of business of the Debtor and the offices
of the Debtor where records concerning Receivables and Other Intangibles are
kept.
Section 3.05. Location of Collateral. Schedule 3.5 correctly sets forth the
location of all Equipment and Inventory, other than rolling stock, aircraft and
goods in transit. Except as otherwise specified in Schedule 3.5, all Inventory
and Equipment has been located at the address specified on Schedule 3.5 at all
times during the four-month period prior to the date hereof while owned by the
Debtor. All Inventory has been and will be produced in compliance with the Fair
Labor Standards Act, 29 U.S.C. ss.ss. 201-219, except for such non-compliance
which could not reasonably be expected to have a material adverse effect on the
Debtor. No Inventory is evidenced by a negotiable document of title, warehouse
receipt or bill of lading. No non-negotiable document of title, warehouse
receipt or bill of lading has been issued to any person other than the Debtor,
and the Debtor has retained possession of all of such non-negotiable documents,
warehouse receipts and bills of lading. No amount payable under or in connection
with any of the Collateral is evidenced by promissory notes or other
instruments.
Section 3.06. Trade Names. Schedule 3.6 correctly sets forth any and all trade
names, division names, assumed names or other names under which the Debtor
currently transacts business or has transacted business within the four-month
period prior to the date hereof.
Section 3.07. Patents and Trademarks. Schedule 3.7 correctly sets forth all
Patents, Patent licenses, Trademarks and Trademark licenses now owned by
the Debtor.
ARTICLE IV.
COVENANTS
The Debtor covenants and agrees that until all obligations and
liabilities in respect of the Obligations shall have performed and paid in full
and until no Standby Letters of Credit are outstanding or fully cash
collateralized and the Commitments are terminated:
Section 4.01. Perfection of Security Interests. The Debtor will, at its expense,
cause all filings and recordings and other actions specified on Schedule 4.1 to
have been completed on or prior to the Effective Date.
Section 4.02. Further Actions.
(a) At all times after the date hereof, the Debtor will, at its expense, comply
with the following:
(i) as to all Receivables, Other Intangibles, Equipment and Inventory, it will
cause UCC financing statements and continuation statements to be filed and to be
on file in all applicable jurisdictions as required to perfect the security
interests granted to the Agent hereunder, to the extent that applicable law
permits perfection of a security interest by filing under the UCC;
(ii) as to all Proceeds, it will cause all UCC financing statements and
continuation statements filed in accordance with clause (i) above to include a
statement or a checked box indicating that Proceeds of all items of Collateral
described herein are covered;
(iii) as to any amount payable under or in connection with any of the Collateral
which shall be or shall become evidenced by any promissory note or other
instrument, the Debtor will promptly (but in no event later than ten (10)
Business Days after receipt of such note or instrument), pledge and deliver such
note or other instrument to the Agent as part of the Collateral, duly endorsed
in a manner reasonably satisfactory to the Agent;
(iv) at the request of the Agent, the Debtor shall deliver all other Collateral
consisting of certificated securities, endorsed for transfer in a manner
reasonably satisfactory to the Agent (or execute a securities intermediary
account control agreement to the extent possession by the Agent of such
securities is not feasible); and
(v) as to all Patents, Patent licenses, Trademarks or Trademark licenses, the
Debtor will effect the recordation or renewal of the recordation of the security
interests of the Agent therein so as to maintain valid and perfected security
interests therein under all applicable state and federal laws.
(b) Further Assurances. The Debtor will, from time to time and at its expense,
execute, deliver, file or record such UCC financing statements, applications for
certificates of title and such other statements, assignments, instruments,
documents, agreements or other papers and take any other action that may be
necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect, confirm or validate the security interest of the
Agent in the Collateral, to enable the Agent to obtain the full benefits of this
Security Agreement or to enable it to exercise and enforce any of its rights,
powers and remedies hereunder, including, without limitation, its right to take
possession of the Collateral.
(c) Signature. To the fullest extent permitted by law, the Debtor authorizes the
Agent to sign and file financing and continuation statements and amendments
thereto with respect to the Collateral without its signature thereon.
Section 4.03. Change of Name, Identity or Structure. The Debtor will not change
its name, identity or corporate structure in any manner and, except as set forth
on Schedule 3.6, will not conduct its business under any trade, assumed or
fictitious name unless it shall have given the Agent at least forty-five (45)
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend any financing statement or continuation
statement relating to the security interests granted hereby in order to preserve
such security interests and to effectuate or maintain the priority thereof
against all Persons.
Section 4.04. Place of Business and Collateral. The Debtor will not change the
location of (i) its places of business, (ii) its chief executive office or (iii)
the office or other locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location listed on Schedule 3.4 or
3.5 unless, prior to such change, it notifies the Agent forty-five (45) days in
advance of such change, makes all UCC filings required by Section 4.2 and takes
all other action necessary or that the Agent may reasonably request to preserve,
perfect, confirm and protect the security interests granted hereby. The Debtor
will in no event change the location of any Collateral if such change would
cause the security interest granted hereby in such Collateral to lapse or cease
to be perfected. The Debtor will at all times maintain its chief executive
office within one of the forty-eight contiguous states in which Article 9 of the
uniform commercial code is in effect.
Section 4.05. Fixtures. The Debtor will not permit any Equipment to become a
fixture unless it shall have given the Agent at least ten (10) days' prior
written notice thereof and shall have taken all such action and delivered or
caused to be delivered to the Agent all instruments and documents, including,
without limitation, waivers and subordination agreements by any landlords and
mortgagees, and filed all financing statements necessary or reasonably requested
by the Agent, to preserve and protect the security interest granted herein and
to effectuate or maintain the priority thereof against all Persons; provided,
however, that, so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing, the Debtor shall not be obligated to
comply with the provisions of this Section 4.5 with respect to the first $50,000
of Equipment (determined based on the then fair market value thereof).
Section 4.06. Maintenance of Records. The Debtor will keep and maintain at its
own cost and expense complete books and records relating to the Collateral which
are satisfactory to the Agent including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral and all
of its other dealings with the Collateral. The Debtor will mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Agent' further security, the Debtor
agrees that the Agent shall have a special property interest in all of the
Debtor's books and records pertaining to the Collateral and the Debtor shall
deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent.
Section 4.07. Compliance with Laws The Debtor will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any government or any state or local government applicable to the Collateral or
any part thereof or to the operation of the Debtor's business except to the
extent that the failure to comply would not have a material adverse effect on
the financial or other condition of the Debtor; provided, however, that the
Debtor may contest any act, rule, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the Agent, adversely
affect the Agent's rights or, in the case of Collateral located at a facility
identified on Schedule 3.7 hereto, the first priority of its security interest
in the Collateral.
Section 4.08. Payment of Taxes. The Debtor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no such charge
need be paid if (i) the validity thereof is being contested in good faith by
appropriate proceedings and (ii) such charge is adequately reserved against in
accordance with generally accepted accounting principles, as consistently
applied.
Section 4.09. Compliance with Terms of Accounts and Contracts. The Debtor will
perform and comply in all material respects with all of its obligations under
all agreements relating to the Collateral to which it is a party or by which it
is bound.
Section 4.10. Limitation on Liens on Collateral. The Debtor will not create,
permit or suffer to exist, and will defend the Collateral and the Debtor's
rights with respect thereto against and take such other action as is necessary
to remove any Lien, security interest, encumbrance, or claim in or to the
Collateral other than the security interests created hereunder and such Liens to
the extent permitted pursuant to Section 6.2(a) of the Revolving Credit
Agreement.
Section 4.11. Limitations on Modifications of Receivables and Other Intangibles;
No Waivers or Extensions. The Debtor will not (i) amend, modify, terminate or
waive any provisions of any material Receivable or Other Intangible in any
manner which might, when taken together with all such other Receivables or Other
Intangibles, respectively, materially reduce the value of all Receivables or
Other Intangibles, respectively, in the Collateral, (ii) fail to exercise
promptly and diligently each and every material right which it may have under
each Receivable and Other Intangible or (iii) fail to deliver to the Agent a
copy of each material demand, notice or document received by it relating in any
way to any Receivable or Other Intangible.
Section 4.12. Maintenance of Insurance. The Debtor will maintain with
financially sound insurance companies licensed to do business in the
jurisdictions in which the Collateral is located insurance policies on the
Inventory and Equipment in accordance with the provisions of Section 6.1(m) of
the Revolving Credit Agreement.
Section 4.13. Limitations on Dispositions of Collateral. The Debtor will not
directly or indirectly (through the sale of stock, merger or otherwise), without
the prior written consent of the Agent, sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (i) sales of Inventory in the ordinary course of its business for fair value
in arm's-length transactions and (ii) so long as no Event of Default (or
Potential Event of Default) has occurred and is continuing, dispositions in a
commercially reasonable manner of Equipment which has become redundant, worn out
or obsolete or which should be replaced so as to improve productivity, so long
as the proceeds of any such disposition are (x) used to acquire replacement
equipment which has comparable or better utility and equivalent or better value
and which is subject to a first priority security interest in favor of the Agent
therein, except as permitted by Section 6.2(a) of the Revolving Credit
Agreement, or (y) applied to repay the Obligations. The inclusion of Proceeds of
the Collateral under the security interests granted hereby shall not be deemed a
consent by the Agent to any sale or disposition of any Collateral other than as
permitted by this Section 4.13.
Section 4.14. Further Identification of Collateral. The Debtor will furnish to
the Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request. The Debtor shall promptly notify
the Agent if the value of the Collateral located at the facilities identified on
Schedule 3.7 hereto is less than 80% of the value of all of the Collateral.
Section 4.15. Notices. The Debtor will advise the Agent promptly and in
reasonable detail (i) of any Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, other than, unless reasonably
requested by the Agent, Liens permitted by Section 6.2(a) of the Revolving
Credit Agreement, (ii) of any material change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
security interests granted to the Agent in this Security Agreement.
Section 4.16. Change of Law. The Debtor shall promptly notify the Agent of any
change in law known to it which (i) adversely affects or will adversely affect
the validity, perfection or priority of the security interests granted hereby,
(ii) requires or will require a change in the proceedings to be followed in
order to maintain and protect such validity, perfection and priority or (iii)
could result in the Agent not having a perfected security interest in any of the
Collateral.
Section 4.17. Right of Inspection.
(a) Access to Books and Records. The Debtor shall, following any request by the
Agent and upon reasonable notice, permit the Agent or its representatives to
have full and free access during normal business hours to all the books,
correspondence and records of the Debtor, and the Agent or its representatives
may examine the same, take extracts therefrom, make photocopies thereof and have
such discussions with officers, employees and public accountants of the Debtor
as the Agent may deem reasonably necessary, and the Debtor agrees to render to
the Agent, at the Debtor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Agent and its
representatives shall upon reasonable notice and during normal business hours
also have the right to enter into and upon any premises where any of the
Inventory or the Equipment is located for the purpose of inspecting the same,
observing its use or protecting the interests of the Agent therein.
(b) Audits. The Debtor shall permit the Lenders, the Agent and their
representatives and advisors to review the operations of the Debtor and perform
the audits and examinations as provided in Section 6.1(l) of the Revolving
Credit Agreement.
Section 4.18. Maintenance of Equipment. The Debtor will, at its expense,
maintain the Equipment in good operating condition, ordinary wear and tear
excepted.
Section 4.19. Covenants Regarding Patent and Trademark Collateral.
(a) Generally. At such time as the Debtor shall acquire any Patents or
Trademarks, it will comply with the terms, covenants and warranties of this
Section 4.19.
(b) Continued Use of Trademark. The Debtor (either itself or through licensees)
will, unless the Debtor shall reasonably determine, after consultation with the
Agent, that a Trademark is of negligible economic value to the Debtor, (i)
continue to use each Trademark on each and every Trademark class of goods
applicable to its current products and services as reflected in its current
catalogs, brochures and price lists in order to maintain each Trademark in full
force and free from any claim of abandonment for non-use, (ii) maintain as in
the past the quality of products and services offered under each Trademark,
(iii) employ each Trademark with the appropriate notice of registration, (iv)
not adopt or use any mark which is confusingly similar to a colorable imitation
of any Trademark and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(c) No Abandonment. The Debtor will not, unless the Debtor shall reasonably
determine, after consultation with the Agent, that a Patent is of negligible
economic value to the Debtor, do any act, or knowingly omit to do any act,
whereby any Patent may be abandoned or dedicated.
(d) Notice of Abandonment or Adverse Determinations. The Debtor shall notify the
Agent immediately if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in any
proceeding in the United States Patent and Trademark Office or any court of
tribunal in any country) regarding the Debtor's ownership of any Patent or
Trademark, its right to register the same or keep and maintain the same.
(e) Filings After Notice to Agent. In no event shall the Debtor, either itself
or through any agent, employee, licensee or designee, file an application for
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the Agent and, upon
request of the Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's security
interest in such Patent or Trademark and the goodwill and general intangibles of
the Debtor relating thereto or represented thereby, and the Debtor hereby
constitutes the Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all such acts of such attorney being hereby ratified
and confirmed.
(f) Pursuit of Applications and Maintenance of Registrations. The Debtor will
take all necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability; provided, however, that no such Patent or Trademark shall
be required to be maintained or pursued to the extent such Patent or Trademark
is determined by the Debtor, after consultation with the Agent, to be of
negligible economic value to the Debtor.
(g) Notice of Infringement. If any of the Patent and Trademark Collateral is
infringed, misappropriated or diluted by a third party, the Debtor shall
promptly notify the Agent after it learns thereof and shall, unless the Debtor
shall reasonably determine, after consultation with the Agent, that such Patent
and Trademark Collateral is of negligible economic value to the Debtor, promptly
sue for infringement, misappropriation of dilution, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation or dilution, or take such other action as the Debtor shall
reasonably deem appropriate under the circumstances to protect such Patent and
Trademark Collateral.
Section 4.20. Termination of Federal Contracts. With respect to each Federal
Contract in respect of which the Debtor is required to execute an Assignment of
Federal Contract in accordance with Section 4.21 hereof, the Debtor shall give
prompt written notice to the Agent if the U.S. Government shall terminate or
threaten to terminate (whether for convenience or default) any such Federal
Contract with the Debtor having a value (including unexercised options) of
$100,000 or more. In addition, the Debtor shall give prompt written notice to
the Agent if the U.S. Government shall terminate or threaten to terminate any
contract between the U.S. Government and any other prime contractor under which
the Debtor is a subcontractor if the value of such subcontract (including
unexercised options) is $100,000 or more.
Section 4.21. Federal Contracts. The Debtor shall provide to the Agent, as soon
as reasonably practicable but not later than forty-five (45) days following the
end of each Fiscal Quarter, a report identifying each Federal Contract to which
it is a party, having attached thereto a copy of the first two pages of such
Federal Contract and any amendment thereto, to the extent not previously
provided to the Agent. At the request of the Agent (unless an Event of Default
shall have occurred and be continuing, in which case no such request shall be
required), the Debtor shall execute and deliver to the Agent an Assignment of
Federal Contract, in substantially the form of Exhibit A hereto (the "Assignment
of Federal Contract"), and execute any other instruments or take any other steps
required by the Agent in order that all moneys due or to become due under such
Federal Contracts shall be assigned to the Agent and notice thereof given under
the Assignment of Claims Act, including without limitation delivery of Notices
of Assignments with respect to each Federal Contract as contemplated by Appendix
A to Exhibit A hereto.
Section 4.22. Reimbursement Obligation. Should the Debtor fail to comply with
the provisions of this Security Agreement, the Revolving Credit Agreement or any
other agreement relating to the Collateral such that the value of any Collateral
or the validity, perfection, rank or value of any security interest granted to
the Agent hereunder or thereunder is thereby diminished or potentially
diminished or put at risk (as reasonably determined by the Agent), the Agent on
behalf of the Debtor may, but shall not be required to, effect such compliance
on behalf of the Debtor, and the Debtor shall reimburse the Agent for the cost
thereof on demand, and interest shall accrue on such reimbursement obligation
from the date the relevant costs are incurred until reimbursement thereof in
full at the Default Rate.
ARTICLE V.
REMEDIES; RIGHTS UPON DEFAULT
Section 5.01. UCC Rights. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the Revolving Credit
Agreement or other Credit Documents and such Obligations have not been paid in
full, the Agent may in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
guarantying, evidencing or relating to the Obligations, exercise (i) all rights
and remedies of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and (ii) all other rights
available to the Agent at law or in equity.
Section 5.02. Payments on Collateral. Without limiting the rights of the
Agent under any other provision of this Security Agreement, if an Event of
Default shall occur and be continuing:
(i) all payments received by the Debtor under or in connection with any of the
Collateral shall be held by the Debtor in trust for the Agent, shall be
segregated from other funds of the Debtor and shall forthwith upon receipt by
the Debtor be turned over to the Agent, in the same form as received by the
Debtor (duly indorsed by the Debtor to the Agent, if required to permit
collection thereof by the Agent); and
(ii) all such payments received by the Agent (whether from the Debtor or
otherwise) may, in the sole discretion of the Agent, be held by the Agent as
collateral security for, and/or then or at any time thereafter applied in whole
or in part by the Agent to the payment of, the expenses and the Obligations as
set forth in Section 5.11 hereof.
Section 5.03. Possession of Collateral. In furtherance of the foregoing, the
Debtor expressly agrees that, if an Event of Default shall occur and be
continuing, the Agent may (i) by judicial powers, or without judicial process if
it can be done without breach of the peace, enter any premises where any of such
Collateral is or may be located and, without charge or liability to the Agent,
seize and remove such Collateral from such premises and (ii) have access to and
use of the Debtor's books and records relating to such Collateral.
Section 5.04. Sale of Collateral; Notice.
(a) Sale of Collateral. The Debtor expressly agrees that if an Event of Default
shall occur and be continuing, the Agent, without demand of performance or other
demand or notice of any kind (except the notice specified below of the time and
place of any public or private sale) to or upon the Debtor or any other Person
(all of which demands and/or notices are hereby waived by the Debtor), may
forthwith (i) apply the cash, if any, then held by it as collateral as specified
in Section 5.11 hereof and (ii) if there shall be no cash or such cash shall be
insufficient to pay the Obligations in full, collect, receive, appropriate and
realize upon the Collateral, and/or sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral (or contract to do
so) or any part thereof in one or more parcels (which need not be in round lots)
at public or private sale, at any office of the Agent or elsewhere in such
manner as is commercially reasonable and, as the Agent may deem best, for cash
or on credit or for future delivery without assumption of any credit risk. The
Agent shall have the right upon any such public sale, and, if the Collateral is
of a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Debtor waives all claims,
damages and demands against the Agent arising out of the foreclosure,
repossession, retention or sale of the Collateral.
(b) Notice of Sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent shall give
the Debtor ten (10) days' written notice of its intention to make any such
public or private sale or sale at a broker's board or on a securities exchange.
Such notice shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof being sold,
will first be offered for sale and (iii) in the case of a private sale, state
the day after which such sale may be consummated. The Agent shall not obligated
to make any such sale pursuant to any such notice. The Agent may adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In the case of any
sale of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling price is paid
by the purchaser thereof, but the Agent shall not incur any liability in case of
the failure of such purchase to take up and pay for the Collateral so sold and,
in the case of such failure, such Collateral may again be sold upon like notice.
(c) Special Provisions Relating to Sales of Securities. The Debtor recognizes
that the Agent may be unable to effect a public sale of any or all the
Collateral constituting a "security" (as such term is defined in the Securities
Act) by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers that will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. The Debtor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Agent
shall be under no obligation to delay a sale of any of Collateral constituting a
security for the period of time necessary to permit the issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such issuer would agree to do so.
Section 5.05. Rights of Purchasers. Upon any sale of the Collateral (whether
public or private), the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agent) at any such sale shall hold the Collateral so sold
absolutely, free from any claim or right of whatever kind, including any equity
or right of redemption of the Debtor who, to the extent permitted by law, hereby
specifically waives all rights of redemption, including, without limitation, any
right to redeem the Collateral under Section 9-506 of the UCC, and any right to
a judicial or other stay or approval which it has or may have under any law now
existing or hereafter adopted.
Section 5.06. Additional Rights of the Agent.
(a) Right to Maintain Proceedings. The Agent (i) shall have the right and power
to institute and maintain such suits and proceedings as it may deem appropriate
to protect and enforce the rights vested in it by this Security Agreement and
(ii) may proceed by suit or suits at law or in equity to enforce such rights and
to foreclose upon the Collateral and to sell all or, from time to time, any of
the Collateral under the judgment or decree of a court of competent
jurisdiction.
(b) Appointment of Receiver. The Agent shall, to the extent permitted by
applicable law, without notice to the Debtor to any party claiming through the
Debtor, without regard to the solvency or insolvency at such time of any Person
then liable for the payment of any of the Obligations, without regard to the
then value of the Collateral and without requiring any bond from any complainant
in such proceedings, be entitled as a matter of right to the appointment of a
receiver or receivers (who may be the Agent) of the Collateral or any part
thereof, pending such proceedings, with such powers as the court making such
appointment shall confer, and to the entry of an order directing that the
profits, revenues and other income of the property constituting the whole or any
part of the Collateral be segregated, sequestered and impounded for the benefit
of the Agent, and the Debtor irrevocably consents to the appointment of such
receiver or receivers and to the entry of such order.
(c) No Duty to Exercise Rights. In no event shall the Agent have any duty to
exercise any rights or take any steps to preserve the rights of the Agent in the
Collateral, nor shall the Agent be liable to the Debtor or any other Person for
any loss caused by the Agent's failure to meet any obligation imposed by Section
9-207 of the UCC or any successor provision. Without limiting the foregoing, the
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have any duty or responsibility for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
Section 5.07. Remedies Not Exclusive, etc.
(a) Remedies Not Exclusive. No remedy conferred upon or reserved to the Agent in
this Security Agreement is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law, in
equity or by statute.
(b) Restoration of Rights. If the Agent shall have proceeded to enforce any
right, remedy or power under this Security Agreement and the proceeding for the
enforcement thereof shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Agent, the Debtor and the Agent
shall, subject to any determination in such proceeding, severally and
respectively be restored to their former positions and rights under this
Security Agreement, and thereafter all rights, remedies and powers of the Agent
shall continue as though no such proceedings had been taken.
(c) Enforcement. All rights of action under this Security Agreement may be
enforced by the Agent without the possession of any instrument evidencing any
Obligation or the production thereof at any trial or other proceeding relative
thereto, and any suit or proceeding instituted by the Agent shall be brought in
its name and any judgment shall be held as part of the Collateral.
Section 5.08. Waiver and Estoppel.
(a) No Actions to Impede Sale of Collateral. The Debtor agrees, to the extent it
may lawfully do so, that it will not at any time in any manner whatsoever claim
or take the benefit or advantage of any appraisal, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force which may delay, prevent or otherwise affect the performance or
enforcement of this Security Agreement, and hereby waives all benefit or
advantage of all such laws. The Debtor covenants that it will not hinder, delay
or impede the execution of any power granted to the Agent in this Security
Agreement, any Assignment of Federal Contract or any other Credit Document.
(b) Collateral Sold As An Entirety. The Debtor, to the extent it may lawfully do
so, on behalf of itself and all who claim through or under it, including without
limitation any and all subsequent creditors, vendees, assignees and lienors,
waives and releases all rights to demand or to have any marshalling of the
Collateral upon any sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or under any foreclosure or any enforcement of
this Security Agreement, and consents and agrees that all of the Collateral may
at any such sale be offered and sold as an entirety.
(c) Waiver of Notices. The Debtor waives, to the extent permitted by law,
presentment, demand, protest and any notice of any kind (except the notices
expressly required hereunder) in connection with this Security Agreement and any
action taken by the Agent with respect to the Collateral.
Section 5.09. Power of Attorney; Powers Coupled With An Interest.
(a) Power of Attorney. Without limiting any other right granted hereunder, the
Debtor hereby irrevocably constitutes and appoints the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Agent's reasonable
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purpose of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives the Agent the power and right, on behalf of the Debtor,
without notice to or assent by the Debtor, to do the following:
(i) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(ii) to effect any repairs or any insurance called for by the terms of this
Security Agreement or any other Credit Document, and to pay all or any part of
the premiums therefor and the costs thereof;
(iii) upon the occurrence and continuance of any Event of Default and otherwise
to the extent provided in this Security Agreement, (A) to direct any party
liable for any payment under any of the Collateral to make payment of any and
all moneys due and to come due thereunder directly to the Agent or as the Agent
shall direct, (B) to receive payment of and receipt for, and to demand and sue
for, any and all moneys, claims and other amounts due and to become due at any
time in respect of or arising out of the Collateral, (C) to sign and indorse and
receive, take, assign and deliver, any checks, notes, drafts, negotiable and
non-negotiable instruments, any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral, (D) to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding with respect
to, or in connection with, the Collateral, (E) to sell, transfer, assign or
otherwise deal in or with the Collateral or any part thereof, as fully and
effectively as if the Agent were the absolute owner thereof and (F) to do, at
its option, but at the expense of the Debtor, at any time or from time to time,
all acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in order
to effect the intent of this Security Agreement, all as fully and effectively as
the Debtor might do.
(b) Powers Coupled With an Interest. All authorizations and agencies granted or
provided herein with respect to the Collateral, including the powers granted
under clause (a) of this Section 5.9, are irrevocable and powers coupled with an
interest.
Section 5.10. Certain Provisions Relating to Securities. Solely with respect to
any Collateral constituting a "security" (as defined in the Securities Act), if
an Event of Default shall have occurred and be continuing, all such securities
(as defined in the Securities Act) constituting a part of the Collateral shall,
at the request of the Agent, be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (i) all voting,
corporate and other rights, powers and privileges pertaining to such Collateral
at any meeting of shareholders of the issuer thereof or otherwise, and (ii) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all such Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the structure of
any such issuer, or upon the exercise by the Debtor or the Agent of any right,
privilege or option pertaining to such Collateral, and in connection therewith,
the right to deposit and deliver any and all such Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine), all without liability except to account for
property actually received by it and except as provided in Section 5.6(c)
hereof, but the Agent shall have no duty to the Debtor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
Section 5.11. Application of Monies. The proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Agent in the following order of priority:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Agent and its agents and
counsel, and all expenses, liabilities and advances incurred or made by the
Agent, its agents and counsel in connection therewith or in connection with the
care, safekeeping or otherwise of any or all of the Collateral;
second, to payment of the Obligations, in such order as the Agent may
elect; and
third, any surplus then remaining shall be paid to the Debtor,
or its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same (including pursuant to Section 9-504(1)(C) of the UCC) or as a
court of competent jurisdiction may direct.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Notices. All notices, requests and other communications to a party
hereunder shall be in writing and shall be given to such party at its address
set forth on the signature page hereof or such other address as such party may
hereafter specify for that purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) in the case of telephonic
notice (to the extent expressly permitted hereunder), when made, (ii) in the
case of notice delivered by overnight express courier, one Business Day after
the Business Day such notice was delivered to such courier, (iii) in the case of
notice delivered by first class mail, three Business Days after being deposited
in the mail, postage prepaid, return receipt requested, (iv) in the case of
notice by hand, when delivered, or (v) in the case of notice by any customary
means of telecommunication, when sent provided confirmation of receipt or answer
back has been received, in each case if addressed to any party hereto as
provided herein. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect the
validity of notice given in accordance with this section.
Section 6.02. No Waiver; Cumulative Remedies. The Agent shall not by any act
(except by a written instrument pursuant to Section 6.3 hereof) be deemed to
have waived any right or remedy hereunder. No failure to exercise, nor any delay
in exercising, on the part of the Agent any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
Section 6.03. Amendments and Waivers. None of the terms or provisions of this
Security Agreement may be amended, supplemented or otherwise modified except by
a written instrument executed by the Debtor and the Agent; provided that any
provision of this Security Agreement may be waived by the Agent in a letter or
agreement executed by the Agent or by telex or facsimile transmission from the
Agent.
Section 6.04. Successors and Assigns. The provisions of this Security Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Debtor may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Agent.
Section 6.05. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA,
OTHER THAN ITS LAWS RESPECTING CHOICE OF LAW OTHER THAN THOSE CONTAINED IN
THE UCC.
Section 6.06. Limitation by Law; Severability.
(a) All rights, remedies and powers provided in this Security Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Security Agreement invalid, unenforceable in whole or in part,
or not entitled to be recorded, registered or filed upon the provisions of any
applicable law.
(b) If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
Section 6.07. Counterparts. This Security Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each complete set of which, when so executed and delivered by all parties, shall
be an original, but all such counterparts shall together constitute but one and
the same instrument.
Section 6.08. Expenses of the Agent. The Debtor shall pay to the Agent from time
to time upon demand, all of the costs and expenses incurred by the Agent or any
Lender (including, without limitation, the reasonable fees and disbursements of
counsel and any amounts payable by the Agent or any Lender to any of their
respective agents) (i) arising in connection with the administration,
modification, amendment, waiver or termination of this Security Agreement or any
document or agreement contemplated hereby or any consent or waiver hereunder or
thereunder or (ii) incurred in connection with the administration of this
Security Agreement, or any document or agreement contemplated hereby, or in
connection with the administration, sale or other disposition of Collateral
hereunder or under any document or agreement contemplated hereby or the
preservation, protection or defense of the rights of the Agent or any Lender in
and to the Collateral.
Section 6.09. Indemnification. The Debtor shall at all times hereafter
indemnify, hold harmless and, on demand, reimburse the Agent and the Lenders and
their respective subsidiaries, affiliates, successors, assigns, officers,
directors, employees and agents, and their respective heirs, executors,
administrators, successors and assigns (all of the foregoing parties, including,
but not limited to, the Agent, being hereinafter collectively referred to as the
"Indemnities" and individually as an "Indemnitee") from, against and for any and
all liabilities, obligations, claims, damages, actions, penalties, causes of
action, losses, judgments, suits, costs, expenses and disbursements, including,
without limitation, attorney's fees (any and all of the foregoing being
hereinafter collectively referred to as the "Liabilities" and individually as a
"Liability") which the Indemnitees, or any of them, might be or become
subjected, by reason of, or arising out of the preparation, execution, delivery,
modification, administration or enforcement of, or performance of the Agent's
rights under, this Security Agreement or any other document, instrument or
agreement contemplated hereby or executed in connection herewith; provided,
however, that the Debtor shall not be liable to any Indemnitee for any Liability
caused solely by the gross negligence or willful misconduct of such Indemnitee.
In no event shall any Indemnitee, as a condition to enforcing its rights under
this Section 6.9 or otherwise, be obligated to make a claim against any other
Person (including, without limitation, the Agent) to enforce its rights under
this Section 6.9.
Section 6.10. Termination; Survival. This Security Agreement shall terminate
when the security interests granted hereunder have terminated and the Collateral
has been released as provided in Section 2.6; provided, however, that the
obligations of the Debtor under Section 4.22 and the provisions of this Article
6 shall survive any such termination.
Section 6.11. Judicial Proceedings; Waiver of Jury Trial. Any judicial
proceeding brought against the Debtor with respect to any Credit Agreement
Related Claim hereby may be brought in any court of competent jurisdiction in
the Commonwealth of Virginia, County of Fairfax, or any Federal court in the
Eastern District of Virginia, and, by execution and delivery of this Security
Agreement, the Debtor (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with any Credit Agreement Related Claim and (b) irrevocably waives any objection
it may now or hereafter have as to the venue of any such proceeding brought in
such a court or that such a court is an inconvenient forum. The Debtor hereby
waives personal service of process and consents that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of Section 6.1
hereof, and service so made shall be deemed completed on the earlier of (x) the
receipt thereof and (y) if sent by registered or certified mail (return receipt
requested), the fifth (5th) Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the Agent to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Debtor in the courts of any other jurisdiction. Any
judicial proceeding by the Debtor against the Agent relating to or involving any
Credit Agreement Related Claim hereby shall be brought only in a court located
in the Commonwealth of Virginia, County of Fairfax, or the Federal court in the
Eastern District of Virginia. THE DEBTOR AND THE AGENT HEREBY UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING ANY CREDIT AGREEMENT RELATED CLAIM.
Section 6.12. Integration. This Security Agreement and the other Credit
Documents constitute the entire agreement of the Agent, the Lenders, the
Borrower and the other Credit Parties with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Credit
Documents.
Section 6.13. Authority of Agent. The Debtor acknowledges that the rights and
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Security Agreement shall, as between
the Agent and the Lenders, be governed by the Revolving Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Debtor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and the Debtor shall not be under any obligation,
or entitlement, to make any inquiry respecting such authority.
Section 6.14. Headings, Bold Type and Table of Contents. The section headings,
subsection headings, and bold type used herein and the Table of Contents hereto
have been inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Security Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
Address: PUTNAM, HAYES & BARTLETT, INC.
One Memorial Drive
Cambridge, MA 02142
Attention: W. Robson Googins By: /s/ W. Robson Googins_________
Phone: (617) 225-2700 Name: W. Robson Googins
Fax: (617) 225-2631___ Title: Senior Vice President & Treasurer
Address: NATIONSBANK, N.A.
8300 Greensboro Drive
Suite 550 By: /s/James W. Gaittens__________
McLean, Virginia 22102 Name: James W. Gaittens
Attention: James W. Gaittens Title: Senior Vice President
Phone: (703) 761-8405
Fax: (703) 917-0519
<PAGE>
Schedule 3.4
PUTNAM, HAYES & BARTLETT, INC.
Place of Business
One Memorial Drive
Cambridge, MA 02142
<PAGE>
Schedule 3.5
PUTNAM, HAYES & BARTLETT, INC.
Location of Collateral
1. One Memorial Drive
Cambridge, Massachusetts 02142
2. Biltmore Court
520 South Grand Avenue
Suite 500
Los Angeles, California 90071
3. 100 Hamilton Avenue
Suite 200
Palo Alto, CA 94301
4. 1776 Eye Street, NW
Fifth Floor
Washington, DC 20006
<PAGE>
Schedule 3.6
PUTNAM, HAYES & BARTLETT, INC.
Trade/Division Names
Putnam, Hayes & Bartlett
CORE Management Systems
<PAGE>
Schedule 3.7
PUTNAM, HAYES & BARTLETT, INC.
Primary Collateral Locations
Location at which all Receivables now owing to the Debtor were originated:
One Memorial Drive
Cambridge, Massachusetts 02142
See Schedule 3.5 for locations at which Equipment and Inventory now owned by the
Debtor.
<PAGE>
Schedule 3.8
PUTNAM, HAYES & BARTLETT, INC.
Patents and Trademarks
None.
<PAGE>
Schedule 4.1
PUTNAM, HAYES & BARTLETT, INC.
UCC FILINGS
INTENTIONALLY DELETED
<PAGE>
7
Exhibit A to
Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __
(the "Agreement"), is made by PUTNAM, HAYES & BARTLETT, INC., a Massachusetts
corporation (the "Assignor"), in favor of NATIONSBANK, N.A., a national banking
association (the "Agent"), in its capacity as Agent for the lenders from time to
time a party to the Revolving Credit Agreement (as defined in the Security
Agreement referred to below).
W I T N E S S E T H:
WHEREAS, the Assignor has secured certain obligations
undertaken by Hagler Bailly, Inc. pursuant to the provisions of a Security
Agreement, dated as of ___________________, ____ (as the same may be amended,
supplemented or otherwise modified from time to time, the "Security Agreement"),
by and between the Assignor and the Agent; and
WHEREAS, the Assignor is a party to, and from time to time
will become entitled to receive moneys under and by virtue of, a certain
contract with, involving or for the benefit of the United States of America or
any department, agency or instrumentality thereof (herein referred to as the
"Government"), designated as Contract Number _______ entered into by the
Assignor and the Government on ________ __, 19__ (which contract, together with
all additions, change orders, supplements, amendments, renewals, extensions, and
modifications thereto now or hereafter in effect, are hereinafter collectively
called the "Contract"); and
WHEREAS, pursuant to the Security Agreement, the Assignor has
undertaken to effectuate the assignment(s) and other actions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Assignor covenants and agrees as follows:
1. Incorporation By Reference. The provisions of the Security Agreement
are incorporated herein by reference, and the terms defined in the Security
Agreement are used herein with the same meanings.
2. Representations. The Assignor represents and warrants to the Agent
that (a) the Contract is legal, valid and binding on the Assignor and, to its
knowledge, the other parties thereto, is in full force and effect, and is not
evidenced by any chattel paper or instrument, (b) upon due filing of this
Agreement, together with a Notice of Assignment substantially in the form of
Appendix A hereto with the authorized representative, the execution and delivery
of this Agreement does not violate and is not in conflict with the provisions of
the Contract, (c) there has been no default on the part of the Assignor or any
other party to the Contract, (d) the Assignor has made no previous assignment of
the Contract to any person and knows of no fact or defense that will render the
moneys due or to be due thereunder uncollectible, (e) no financing statement
covering the Contract is on file in any public office except financing
statements in favor of the Agent, (f) no set-off or counterclaim to any moneys
due or to become due under the Contract exists on the date hereof, and no
agreement has been made with any person under which any deduction or discount
may be claimed, and (g) the address of the office where the Assignor keeps its
records concerning the Contract is ____________________.
3. Collateral. As security and collateral for the payment of all of the
Obligations (defined in the Security Agreement) and for performance of, and
compliance with, by the Assignor, all of the terms, covenants, conditions,
stipulations, and agreements contained in this Agreement and in the Security
Agreement, the Assignor hereby assigns to the Agent, and grants to the Agent a
lien on and security interest in, all moneys and claims for moneys now and
hereafter due and to become due to the Assignor under or by reason of the
Contract, together with all cash and non-cash proceeds thereof; provided,
however, that nothing contained herein shall impose upon the Agent any of the
obligations or liabilities of the Assignor under the Contract.
4. Covenants. Until payment and performance in full of the Obligations,
the Assignor covenants as follows:
(c) The Assignor shall place on any and all vouchers, invoices, or other
instruments demanding payment under the Contract the direction that such payment
is to be made to the Agent in accordance with Section 5 of this Agreement.
(d) The Assignor shall promptly upon request execute, acknowledge, and deliver
any notice, financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate, or other document as
the Agent may require in order to perfect, preserve, maintain, protect,
continue, and/or extend the assignment, lien, and security interest of the Agent
under this Agreement and its priority. The Assignor shall pay to the Agent on
demand all taxes, costs, and expenses incurred by the Agent in connection with
the preparation, execution, recording, and filing of any such document or
instrument mentioned aforesaid, and such taxes, costs, and expenses shall
constitute and become a part of the Obligations. A carbon, photographic, or
other reproduction of a security agreement or a financing statement is
sufficient as a financing statement.
(e) The Assignor shall fully, promptly, and faithfully comply with and perform
its obligations and duties under the Contract in accordance with the terms
thereof and will make no changes or amendments to the Contract or terminate or
cancel the Contract without the prior written consent of the Agent except as
permitted by the Security Agreement. In the event that any change, amendment,
termination or cancellation of the Contract is made or effected by the
Government, the Assignor will promptly notify the Agent thereof and promptly
furnish to the Agent a copy of any document or agreement evidencing any such
change, amendment, termination, or cancellation.
(f) The Assignor will promptly
(i) furnish to the Agent all information received by the Assignor affecting
the moneys due and to become due under the Contract,
(ii) inform the Agent of any delay in performance of, or claims made in
regard to, the Contract, and
(iii) notify the Agent in writing of the failure of any party to the Contract to
perform any of its obligations thereunder and any rejection of any performance
rendered by the Assignor under or in connection with the Contract.
(g) The Assignor will at all times keep accurate and complete records of
performance by the Assignor under the Contract, and the Agent and its agents
shall have the right, during normal business hours and upon reasonable advance
notice, to call at the place or places of business of the Assignor at intervals
to be determined by the Agent, and without hindrance or delay, to inspect,
audit, check, and make extracts from the books, records, journals, orders,
receipts, correspondence, and other data relating to the Contract or to any
other transactions between the parties hereto related to the Contract.
5. Payments. The Assignor hereby authorizes, empowers, and directs the
Government to draw all checks, drafts, or other instruments representing the
payments of money due the Assignor under the Contract (herein called the "Items
of Payment") to the order of NationsBank, N.A., assignee of Assignor, and to
send the same (i) if by mail, to , (ii) if by electronic transfer, to
NationsBank, N.A. for the account of ________________, Bank Account #__________,
Agent ABA#_________, or (iii) if by wire transfer, to NationsBank, N.A. for the
account of _________________________, Bank Account #_______, ABA#___________.
If, despite this direction, any instruments or checks representing payments
should be delivered to the Assignor, the Assignor will immediately endorse and
deliver such instruments or checks to the order of the Agent. The Assignor does
hereby irrevocably (subject to revocation with the consent of the Agent)
designate and appoint (which appointment is coupled with an interest) the Agent,
and the Agent's successors in interest by operation of law, the Assignor's true
and lawful attorney with power irrevocable for the Assignor and in the
Assignor's name, place, and stead, but at the sole cost and expense of the
Assignor, to receive, endorse, and collect all Items of Payment, and to ask,
demand, receive, receipt, and give acquittances for any and all amounts which
may be payable or which become due and payable by the Government under the
Contract, and in the Agent's discretion to file any claim or to take any other
action or proceeding, either in the Agent's own name or in the name of the
Assignor or otherwise, which to the Agent or any successor in interest thereof
may seem necessary or desirable in order to collect or endorse the payment of
any and all amounts now due or owing or which may hereafter be or become due or
owing on account of the Contract. All Items of Payment received by the Agent
pursuant hereto which are finally paid in cash or solvent credits shall be
applied against the Obligations as provided in the Security Agreement. Any
portion of the Items of Payment which the Agent elects not to so apply shall be
paid over to the Assignor or to whomsoever shall be entitled thereto under
applicable law, including pursuant to Section 9-504(1)(C) of the Uniform
Commercial Code of the Commonwealth of Virginia.
6. No Waiver. Neither this Agreement nor any term, condition,
representation, warranty, covenant, or agreement hereof may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing by the
party against whom such change, waiver, discharge, or termination is sought.
7. Governing law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
8. Gender. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders.
9. Counterparts. This Agreement may be executed in any number of
duplicate originals, each of which shall be an original but all of which
together shall constitute one and the same instrument.
10. Paragraph Headings. The paragraph headings of this Agreement are
for convenience only and shall not limit or define the provisions of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, Assignor and the Agent have caused this Agreement
to be duly executed and delivered by their respective representatives thereunto
duly authorized as of the date first above written.
PUTNAM, HAYES & BARTLETT, INC.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
NATIONSBANK, N.A.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
<PAGE>
Appendix A To
Assignment of Federal Contract
Notice of Assignment
Date: ____________
To: Contracting Officer
[Address]
Re: CONTRACT NUMBER ___________ (the "Contract") MADE BY THE UNITED STATES
OF AMERICA
By: Department of the [Applicable U.S. Government Agency]
[Address]
with [Name of Subsidiary] (the "Contractor")
[Address]
for manufacture and support of a [Brief description of
Subject of Contract]
dated _______________
PLEASE TAKE NOTICE that moneys due or to become due under the
Contract have been assigned to NationsBank, N.A. pursuant to the provisions of
the Assignment of Claims Act of 1940, as amended (31 USC ss. 3727 and 41 USC ss.
15). A true copy of the Assignment executed by the Contractor on the date hereof
(the "Assignment") is attached to the original of this Notice of Assignment.
Please file this original Notice of Assignment along with the copy of the
Assignment in the contract file for the Contract and forward one of the enclosed
copies of this Notice of Assignment to the current disbursing office for the
Contract.
Payments due or to become due under the Contract should be
made (i) if by mail, to NationsBank, N.A., ____________________, (ii) if by
electronic transfer, to NationsBank, N.A. for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to NationsBank, N.A. for the account of
__________________________, Bank Account #_________, ABA#_________.
Please return enclosed copies of this Notice of Assignment
with appropriate notations showing the date and hour of receipt, and duly signed
by the person acknowledging receipt on behalf of the addressee, to NationsBank,
N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102, Attention: James
W. Gaittens.
Very truly yours,
PUTNAM, HAYES & BARTLETT, INC.
By: ________________________________
Name:
Title:
Receipt is hereby acknowledged of the above notice and a copy
of the above mentioned instrument of assignment. These were received at
_________[A.M.] [P.M.] on ______________________, 199__.
- ------------------------------------
Name:
Title:
on behalf of Contracting Officer
[Address]
EXHIBIT 10.40
--------------------------------------------------------------------------
SECURITY AGREEMENT
dated as of November 20, 1998
between
TB&A GROUP, INC.,
as Debtor
and
NATIONSBANK, N.A.,
as Agent
-------------------------------------------------------------------------
<PAGE>
27
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of November 20, 1998 (as
amended, supplemented or modified from time to time, the "Security Agreement"),
is made by TB&A GROUP, INC., a Delaware corporation (the "Debtor"), and
NATIONSBANK, N.A., a national banking association (the "Agent") in its capacity
as Agent for the lenders (the "Lenders") from time to time a party to the
Revolving Credit Agreement, dated as of November 20, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Revolving Credit
Agreement"), by and among the Hagler Bailly, Inc., a Delaware corporation (the
"Company"), the Agent, in its capacity as such thereunder, and the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Revolving Credit Agreement, the
Lenders have severally agreed to make available to the Company a revolving line
of credit for Revolving Loans, Swing Line Loans and Standby Letters of Credit in
an aggregate principal amount at any time not to exceed the Maximum Available
Amount, subject to the terms and conditions contained therein;
WHEREAS, the Company owns, directly or indirectly, [all] of
the issued and outstanding shares of capital of stock of, or other equity
interests in, the Debtor;
WHEREAS, the proceeds of such Revolving Loans, Swing Line
Loans and Standby Letters of Credit may be used to enable the Company to make
valuable transfers to the Debtor in connection with the operation of its
business and for the Permitted Uses;
WHEREAS, the Debtor will derive substantial direct and
indirect benefit from such Revolving Loans, Swing Line Loans and Standby Letters
of Credit; and
WHEREAS, the Company is required to cause the Debtor to
execute this Agreement pursuant to the provisions of the Revolving Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and to induce the Lenders to make or maintain
their respective Revolving Loans and Swing Line Loans to, and the Issuing Lender
to issue or maintain the Standby Letters of Credit under the Revolving Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor hereby agrees with the
Agent, for the ratable benefit of the Lenders, as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions Generally. Capitalized terms used herein without
definition shall have the respective meanings specified in the Revolving Credit
Agreement, and the following terms shall have the following meanings (such
meanings to be, when appropriate, equally applicable to both the singular and
plural forms of the terms defined):
"Account Debtor" shall mean, with respect to any Receivable or
Other Intangible, any Person obligated to make payment thereunder, including
without limitation any account debtor thereon.
"Assignment of Claims Act" shall mean the Assignment of Claims Act of 1940,
31 U.S.C. 3727, 41 U.S.C. 15 (1986), as the same may be
amended and any successor statute of similar import.
"Assignment of Federal Contract" shall have the meaning
specified in Section 4.21 hereof.
"Cash Collateral Account" shall have the meaning specified in
Section 2.4 hereof.
"Collateral" shall have the meaning set forth in Section 2.1.
"Debtor" shall have the meaning specified in the preamble hereof.
"Equipment" shall mean all equipment now owned or hereafter
acquired by the Debtor, including all items of machinery, equipment, furnishings
and fixtures of every kind, whether affixed to real property or not, as well as
all automobiles, trucks and vehicles of every description, trailers, handling
and delivery equipment, fittings, special tools, all additions to, substitutions
for, replacements of or accessions to any of the foregoing, all attachments,
components, parts (including spare parts) and accessories whether installed
thereon or affixed thereto and all fuel for any thereof.
"Federal Contract" means any contract or agreement with,
involving or for the benefit of the United States of America or any department,
agency or instrumentality thereof (collectively, the "U.S. Government"), whether
now existing or hereafter arising, in each case as the same may be amended,
modified or otherwise supplemented from time to time.
"Inventory" shall mean all inventory now owned or hereafter
acquired by the Debtor, including (i) all goods and other personal property
which are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
(ii) all inventory, wherever located, evidenced by negotiable and non-negotiable
documents of title, warehouse receipts and bills of lading, (iii) all of the
Debtor's rights in, to and under all purchase orders now owned or hereafter
received or acquired by it for goods or services and (iv) all rights of the
Debtor as an unpaid seller, including rescission, replevin, reclamation and
stopping in transit.
"Lenders" shall have the meaning specified in the preamble hereof.
"Obligations" shall mean any and all now existing or hereafter
arising indebtedness, obligations, liabilities and covenants of each Credit
Party to any Lender, the Agent, their respective Affiliates, successors and
assigns and any other Indemnified Person under or arising out of any Credit
Document, including without limitation (i) all Revolving Loans and all Swing
Line Loans together with interest thereon and all Standby Letters of Credit,
(ii) all fees, expenses, indemnity payments and other amounts due or to become
due under the Revolving Credit Agreement, the Revolving Notes, the Swing Line
Note or any other Credit Document, (iii) all liabilities and obligations under
the Subsidiary Guarantee and any other agreement executed by any Credit Party
guarantying the obligations of the Borrower under the Revolving Credit Agreement
or any other Credit Document, (iv) all liabilities and obligations under any
agreement providing collateral for any of the foregoing (including any Pledge
Agreement and the Subsidiary Security Agreements), and (v) and any agreement or
instrument refinancing or restructuring all or any portion of the obligations
and liabilities under any of foregoing or under any successor agreement or note,
in each case whether direct or indirect, absolute or contingent or due or to
become due.
"Other Intangibles" shall mean all accounts, accounts
receivable, contract rights, documents, instruments, notes, chattel paper,
money, indemnities, warranties and general intangibles now owned or hereafter
acquired by the Debtor including, without limitation, all goodwill, customer
lists, permits, federal and state tax refunds, reversionary interests in pension
plan assets, Patents, Trademarks, licenses, copyrights and other rights in
intellectual property, other than Receivables.
"Patents" shall mean all letters patent of the United States
or any other country, and all applications for letters patent of the United
States or any other country, in which the Debtor may now or hereafter have any
right, title or interest and all reissues, continuations, continuations-in-part
or extensions thereof.
"Proceeds" shall mean all proceeds, including (i) whatever is
received upon any collection, exchange, sale or other disposition of any of the
Collateral and any property into which any of the Collateral is converted,
whether cash or non-cash, (ii) any and all payments or other property (in any
form whatsoever) made or due and payable on account of any insurance, indemnity,
warranty or guaranty payable to the Debtor with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever) made or due and
payable in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person, corporation, agency, authority or
other entity acting under color of any governmental authority) and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables" shall mean all accounts now or hereafter owing
to the Debtor, and all accounts receivable, contract rights, documents,
instruments or chattel paper representing amounts payable or monies due or to
become due to the Debtor, arising from the sale of Inventory or the rendition of
services in the ordinary course of business or otherwise (whether or not earned
by performance), together with all Inventory returned by or reclaimed from
customers wherever such Inventory is located, and all guaranties, securities and
liens held for the payment of any such account, account receivable, contract
right, document, instrument or chattel paper.
"Security Agreement" shall have the meaning specified in the preamble
hereof.
"Trademarks" shall mean all right, title or interest which the
Debtor may now or hereafter have in any or all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source of business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and all applications in
connection therewith, including without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or political subdivision thereof and all reissues, extensions or
renewals thereof.
"UCC" shall mean the Uniform Commercial Code in effect on the
date hereof in the Commonwealth of Virginia.
"U.S. Government" has the meaning specified in the definition of Federal
Contract contained
herein.
Section 1.02. UCC Definitions. The uncapitalized terms "account", "account
debtor", "chattel paper", "contract right", "document", "warehouse receipt",
"bill of lading", "document of title", "instrument", "inventory", "general
intangible", "money", "security", "certificated security", "uncertificated
security", "financial asset" and "proceeds" as used in Section 1.1 or elsewhere
in this Security Agreement shall have the respective meanings set forth in the
UCC.
ARTICLE II.
SECURITY INTERESTS
Section 2.01. Grant of Security Interests. To secure the due and punctual
payment of all Obligations, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing or due or
to become due, whether at maturity or upon acceleration or otherwise, in
accordance with the terms thereof and to secure the due and punctual performance
of all of the Obligations and in order to induce the Agent and the Lenders to
enter into the Revolving Credit Agreement and the other Credit Documents, the
Debtor hereby pledges, assigns, delivers, conveys and transfers to the Agent,
for the ratable benefit of the Lenders, and grants to the Agent, for the ratable
benefit of the Lenders, a first priority and continuing security interest in and
lien on, all of the Debtor's right, title and interest in, to and under the
following, whether now existing or hereafter acquired (the "Collateral"):
(i) all Receivables;
(ii) all Other Intangibles;
(iii) all Equipment;
(iv) all Inventory;
(v) to the extent not included in the foregoing, all securities (whether
certificated or uncertificated) and all financial assets, whether now existing
or hereafter arising, including, without limitation, all capital stock issued by
any Person and held by Debtor, and all partnership interests, whether in the
nature of a joint venture, limited liability company member's interest, master
limited partnership, teaming arrangement or otherwise;
(vi) to the extent not included in the foregoing, all other personal property,
whether tangible or intangible, and wherever located whether within or outside
of the United States, including, but not limited to, the balance of every
deposit account now or hereafter existing of the Debtor with any bank or other
financial institution and all monies of the Debtor and all rights to payment of
money of the Debtor;
(vii) to the extent not included in the foregoing, all books, ledgers and
records and all computer programs, tapes, discs, punch cards, data processing
software, transaction files, master files and related property and rights
(including computer and peripheral equipment) necessary or helpful in enforcing,
identifying or establishing any item of Collateral; and
(viii) to the extent not otherwise included, all Proceeds and products of any or
all of the foregoing, whether existing on the date hereof or arising hereafter;
provided, however, notwithstanding anything to the contrary contained herein,
the Debtor is not assigning, pledging or otherwise encumbering under this
Security Agreement its interests in any Federal Contract to which it is a party,
or in accounts or receivables due to Debtor under such Federal Contract, to the
extent, but only to the extent, such assignment, pledge or other encumbrance
would breach or violate or would cause Debtor to breach or violate such Federal
Contract or statutes or regulations applicable thereto, it being understood that
this proviso does not apply to, or in any way limit, Debtor's assignment, pledge
or encumbrance of Proceeds of all Federal Contracts to which it is a party.
Section 2.02. Continuing Liability of the Debtor. Anything herein to the
contrary notwithstanding, the Debtor shall remain liable to observe and perform
all the terms and conditions to be observed and performed by it under any
contract, agreement, warranty or other obligation with respect to the
Collateral; and shall do nothing to impair the security interests herein
granted. The Agent shall not have any obligation or liability under any such
contract, agreement, warranty or obligation by reason of or arising out of this
Security Agreement or the receipt by the Agent of any payment relating to any
Collateral, nor shall the Agent be required to perform or fulfill any of the
obligations of the Debtor with respect to the Collateral, to make any inquiry as
to the nature or sufficiency of any payment received by it or the sufficiency of
the performance of any party's obligations with respect to any Collateral.
Furthermore, the Agent shall not be required to file any claim or demand to
collect any amount due or to enforce the performance of any party's obligations
with respect to, the Collateral.
Section 2.03. Sales and Collections.
(a) Sales of Inventory in the Ordinary Course of Business. The Debtor is
authorized (i) to sell in the ordinary course of its business for fair value and
on an arm's-length basis any of its Inventory normally held by it for such
purpose and (ii) to use and consume, in the ordinary course of its business, any
raw materials, supplies and materials normally held by it for such purpose. The
Agent may, upon the occurrence of any Event of Default, without cause or notice,
curtail or terminate such authority at any time.
(b) Collection of Receivables. The Debtor is authorized to collect amounts owing
to it with respect to the Collateral, except as otherwise provided in connection
with the Assignment of Federal Contract, if any as provided herein. However, the
Agent may, upon and during the continuance of an Event of Default or a Potential
Event of Default, notify Account Debtors obligated to make payments under any or
all Receivables or Other Intangibles that the Agent has a security interest in
such Collateral and that payments shall be made directly to the Agent. Upon the
request of the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default, as the case may be, the Debtor will so notify such
Account Debtors and will execute such contract assignments, notices of
assignment or other documents as may be required by such Account Debtors. The
Debtor will use all reasonable efforts to cause each Account Debtor to comply
with the foregoing instruction. In furtherance of the foregoing, the Debtor
authorizes the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default (i) to ask for, demand, collect, receive and give
acquittances and receipts for any and all amounts due and to become due under
any Collateral and in the name of the Debtor or its own name or otherwise, (ii)
to take possession of, endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under any
Collateral and (iii) to file any claim or take any other action in any court of
law or equity or otherwise which it may deem appropriate for the purpose of
collecting any amounts due under any Collateral. The Agent shall have no
obligation to obtain or record any information relating to the source of such
funds or the obligations in respect of which payments have been made.
Section 2.04. Segregation of Proceeds.
(a) Cash Collateral Account Maintained by Agent. Upon an Event of Default or a
Potential Event of Default, the Agent shall have the right at any time during
the continuance thereof to cause to be opened and maintained at the office of
the Agent in McLean, Virginia a non-interest bearing bank account (the "Cash
Collateral Account") which will contain only Proceeds. Any "cash proceeds" (as
such term is defined in Section 9-306(1) of the UCC) received by the Agent
directly from Account Debtors obligated to make payments under Receivables or
Other Intangibles pursuant to Section 2.3 hereof or from the Debtor pursuant to
clause (b) of this Section 2.4, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper or other Proceeds received on
account of any Collateral, shall be promptly deposited in the Cash Collateral
Account, and until so deposited shall be held in trust for the Agent as property
of the Agent and shall not be commingled with any funds of the Debtor not
constituting Proceeds of Collateral. The name in which the Cash Collateral
Account is carried shall clearly indicate that the funds deposited therein are
the property of the Debtor, subject to the security interest of the Agent
hereunder. Such Proceeds, when deposited, shall continue to be security for the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Agent shall have sole dominion and control over the
funds deposited in the Cash Collateral Account, and such funds may be withdrawn
therefrom only by the Agent.
(b) Deposit of Proceeds by the Debtor. Upon notice by the Agent to the Debtor
that the Cash Collateral Account has been opened, the Debtor shall cause all
cash Proceeds collected by it to be delivered to the Agent forthwith upon
receipt, in the original form in which received (with such endorsements or
assignments as may be necessary to permit collection thereof by the Agent), and
for such purpose the Debtor hereby irrevocably authorizes and empowers the
Agent, its officers, employees and authorized agents to endorse and sign the
name of the Debtor on all checks, drafts, money orders or other media of payment
so delivered, and such endorsements or assignments shall, for all purposes, be
deemed to have been made by the Debtor prior to any endorsement or assignment
thereof by the Agent. The Agent may use any convenient or customary means for
the purpose of collecting such checks, drafts, money orders or other media of
payment.
Section 2.05. Verification of Receivables. The Agent shall have the right to
make test verifications of Receivables in any reasonable manner and through any
medium that it considers advisable, and the Debtor agrees to furnish all such
assistance and information as the Agent may reasonable require in connection
therewith. The Debtor at its expense will cause its chief financial officer to
furnish to the Agent at any reasonable time and from time to time promptly upon
the Agent's reasonable request, the following reports: (i) a reconciliation of
all Receivables, (ii) an aging of all Receivables, (iii) trial balances and (iv)
a test verification of such Receivables as the Agent may request.
Section 2.06. Release of Collateral.
(a) Security Interest of Agent Ceases Upon Permitted Dispositions. The Debtor
may sell or realize upon or transfer or otherwise dispose of Collateral only to
the extent permitted by Section 4.13, and the security interests of the Agent in
such Collateral so sold, realized upon or disposed of (but not in the Proceeds
arising from such sale, realization or disposition) shall cease immediately upon
such sale, realization or disposition, without any further action on the part of
the Agent. The Agent, if requested in writing by the Debtor but at the expense
of the Debtor, is hereby authorized and instructed to deliver to the Account
Debtor or the purchaser or other transferee of any such Collateral a certificate
stating that the Agent no longer has a security interest therein, and such
Account Debtor or such purchaser or other transferee shall be entitled to rely
conclusively on such certificate for any and all purposes.
(b) Filing of Termination Statements. Upon the payment in full of all of the
Obligations and if there is no commitment by any Lender to make further
advances, incur obligations or otherwise give value, the Agent will (as soon as
reasonably practicable after receipt of notice from the Debtor requesting the
same but at the expense of the Debtor) deliver to the Debtor (i) for each
jurisdiction in which a UCC financing statement is on file to perfect the
security interests granted to the Agent hereunder, a termination statement
(appropriately completed) to the effect that the Agent no longer claims a
security interest under such financing statement, and (ii) such other documents
as the Debtor shall reasonably request evidencing satisfaction of the
Obligations and the release of the security interests granted to the Agent
hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants that:
Section 3.01. Title to Collateral. Except for the security interests granted to
the Agent pursuant to this Security Agreement and as otherwise permitted by
Section 6.2(a) of the Revolving Credit Agreement, the Debtor is the sole owner
of each item of the Collateral, having good and marketable title thereto, free
and clear of any and all Liens.
Section 3.02. Validity, Perfection and Priority of Security Interests.
(a) By complying with Section 4.1 hereof, the Debtor will have created a valid
security interest in favor of the Agent in all existing Collateral and in all
identifiable Proceeds of such Collateral, which security interest (except in
respect of Collateral not located at a facility identified on Schedule 3.7
hereto and motor vehicles for which the exclusive manner of perfecting a
security interest therein is by noting such security interest in the certificate
of title in accordance with local law) would be prior to the claims of a trustee
in bankruptcy under Section 544(a) of the Bankruptcy Code. Continuing compliance
by the Debtor with the provisions of Section 4.2 hereof will also (i) create
valid security interests in all Collateral acquired after the date hereof and in
all identifiable Proceeds of such Collateral and (ii) cause such security
interests in all Collateral and in all Proceeds which are (A) identifiable cash
Proceeds of Collateral covered by financing statements required to be filed
hereunder, (B) identifiable Proceeds in which a security interest may be
perfected by such filing under the UCC and (C) any Proceeds in the Cash
Collateral Account to be duly perfected under the UCC, in each case prior to the
claims of a trustee in bankruptcy under the Bankruptcy Code (except in respect
of Collateral not located at a facility identified on Schedule 3.5 hereto).
(b) The security interests of the Agent in the Collateral located at the
facilities identified on Schedule 3.5 hereto rank first in priority. Other than
financing statements or other similar documents perfecting the security
interests in favor of the Agent, no financing statements, deeds of trust,
mortgages or similar documents covering all or any part of the Collateral are on
file or of record in any government office in any jurisdiction in which such
filing or recording would be effective to perfect a security interest in such
Collateral, nor is any of the Collateral in the possession of any Person (other
than the Debtor) asserting any claim thereto or security interest therein.
Section 3.03. Enforceability of Receivables and Other Intangibles. To the best
knowledge of the Debtor, each Receivable and Other Intangible is a valid and
binding obligation of the related Account Debtor in respect thereof, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
provisions of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and complies with any applicable legal
requirements.
Section 3.04. Place of Business. Schedule 3.4 correctly sets forth the chief
executive office and principal place of business of the Debtor and the offices
of the Debtor where records concerning Receivables and Other Intangibles are
kept.
Section 3.05. Location of Collateral. Schedule 3.5 correctly sets forth the
location of all Equipment and Inventory, other than rolling stock, aircraft and
goods in transit. Except as otherwise specified in Schedule 3.5, all Inventory
and Equipment has been located at the address specified on Schedule 3.5 at all
times during the four-month period prior to the date hereof while owned by the
Debtor. All Inventory has been and will be produced in compliance with the Fair
Labor Standards Act, 29 U.S.C. ss.ss. 201-219, except for such non-compliance
which could not reasonably be expected to have a material adverse effect on the
Debtor. No Inventory is evidenced by a negotiable document of title, warehouse
receipt or bill of lading. No non-negotiable document of title, warehouse
receipt or bill of lading has been issued to any person other than the Debtor,
and the Debtor has retained possession of all of such non-negotiable documents,
warehouse receipts and bills of lading. No amount payable under or in connection
with any of the Collateral is evidenced by promissory notes or other
instruments.
Section 3.06. Trade Names. Schedule 3.6 correctly sets forth any and all trade
names, division names, assumed names or other names under which the Debtor
currently transacts business or has transacted business within the four-month
period prior to the date hereof.
Section 3.07. Patents and Trademarks. Schedule 3.7 correctly sets forth all
Patents, Patent licenses, Trademarks and Trademark licenses now owned by
the Debtor.
ARTICLE IV.
COVENANTS
The Debtor covenants and agrees that until all obligations and
liabilities in respect of the Obligations shall have performed and paid in full
and until no Standby Letters of Credit are outstanding or fully cash
collateralized and the Commitments are terminated:
Section 4.01. Perfection of Security Interests. The Debtor will, at its expense,
cause all filings and recordings and other actions specified on Schedule 4.1 to
have been completed on or prior to the Effective Date.
Section 4.02. Further Actions.
(a) At all times after the date hereof, the Debtor will, at its expense, comply
with the following:
(i) as to all Receivables, Other Intangibles, Equipment and Inventory, it will
cause UCC financing statements and continuation statements to be filed and to be
on file in all applicable jurisdictions as required to perfect the security
interests granted to the Agent hereunder, to the extent that applicable law
permits perfection of a security interest by filing under the UCC;
(ii) as to all Proceeds, it will cause all UCC financing statements and
continuation statements filed in accordance with clause (i) above to include a
statement or a checked box indicating that Proceeds of all items of Collateral
described herein are covered;
(iii) as to any amount payable under or in connection with any of the Collateral
which shall be or shall become evidenced by any promissory note or other
instrument, the Debtor will promptly (but in no event later than ten (10)
Business Days after receipt of such note or instrument), pledge and deliver such
note or other instrument to the Agent as part of the Collateral, duly endorsed
in a manner reasonably satisfactory to the Agent;
(iv) at the request of the Agent, the Debtor shall deliver all other Collateral
consisting of certificated securities, endorsed for transfer in a manner
reasonably satisfactory to the Agent (or execute a securities intermediary
account control agreement to the extent possession by the Agent of such
securities is not feasible); and
(v) as to all Patents, Patent licenses, Trademarks or Trademark licenses, the
Debtor will effect the recordation or renewal of the recordation of the security
interests of the Agent therein so as to maintain valid and perfected security
interests therein under all applicable state and federal laws. (b) Further
Assurances. The Debtor will, from time to time and at its expense, execute,
deliver, file or record such UCC financing statements, applications for
certificates of title and such other statements, assignments, instruments,
documents, agreements or other papers and take any other action that may be
necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect, confirm or validate the security interest of the
Agent in the Collateral, to enable the Agent to obtain the full benefits of this
Security Agreement or to enable it to exercise and enforce any of its rights,
powers and remedies hereunder, including, without limitation, its right to take
possession of the Collateral.
(c) Signature. To the fullest extent permitted by law, the Debtor authorizes the
Agent to sign and file financing and continuation statements and amendments
thereto with respect to the Collateral without its signature thereon.
Section 4.03. Change of Name, Identity or Structure. The Debtor will not change
its name, identity or corporate structure in any manner and, except as set forth
on Schedule 3.6, will not conduct its business under any trade, assumed or
fictitious name unless it shall have given the Agent at least forty-five (45)
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend any financing statement or continuation
statement relating to the security interests granted hereby in order to preserve
such security interests and to effectuate or maintain the priority thereof
against all Persons.
Section 4.04. Place of Business and Collateral. The Debtor will not change the
location of (i) its places of business, (ii) its chief executive office or (iii)
the office or other locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location listed on Schedule 3.4 or
3.5 unless, prior to such change, it notifies the Agent forty-five (45) days in
advance of such change, makes all UCC filings required by Section 4.2 and takes
all other action necessary or that the Agent may reasonably request to preserve,
perfect, confirm and protect the security interests granted hereby. The Debtor
will in no event change the location of any Collateral if such change would
cause the security interest granted hereby in such Collateral to lapse or cease
to be perfected. The Debtor will at all times maintain its chief executive
office within one of the forty-eight contiguous states in which Article 9 of the
uniform commercial code is in effect.
Section 4.05. Fixtures. The Debtor will not permit any Equipment to become a
fixture unless it shall have given the Agent at least ten (10) days' prior
written notice thereof and shall have taken all such action and delivered or
caused to be delivered to the Agent all instruments and documents, including,
without limitation, waivers and subordination agreements by any landlords and
mortgagees, and filed all financing statements necessary or reasonably requested
by the Agent, to preserve and protect the security interest granted herein and
to effectuate or maintain the priority thereof against all Persons; provided,
however, that, so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing, the Debtor shall not be obligated to
comply with the provisions of this Section 4.5 with respect to the first $50,000
of Equipment (determined based on the then fair market value thereof).
Section 4.06. Maintenance of Records. The Debtor will keep and maintain at its
own cost and expense complete books and records relating to the Collateral which
are satisfactory to the Agent including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral and all
of its other dealings with the Collateral. The Debtor will mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Agent' further security, the Debtor
agrees that the Agent shall have a special property interest in all of the
Debtor's books and records pertaining to the Collateral and the Debtor shall
deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent.
Section 4.07. Compliance with Laws The Debtor will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any government or any state or local government applicable to the Collateral or
any part thereof or to the operation of the Debtor's business except to the
extent that the failure to comply would not have a material adverse effect on
the financial or other condition of the Debtor; provided, however, that the
Debtor may contest any act, rule, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the Agent, adversely
affect the Agent's rights or, in the case of Collateral located at a facility
identified on Schedule 3.7 hereto, the first priority of its security interest
in the Collateral.
Section 4.08. Payment of Taxes. The Debtor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no such charge
need be paid if (i) the validity thereof is being contested in good faith by
appropriate proceedings and (ii) such charge is adequately reserved against in
accordance with generally accepted accounting principles, as consistently
applied.
Section 4.09. Compliance with Terms of Accounts and Contracts. The Debtor will
perform and comply in all material respects with all of its obligations under
all agreements relating to the Collateral to which it is a party or by which it
is bound.
Section 4.10. Limitation on Liens on Collateral. The Debtor will not create,
permit or suffer to exist, and will defend the Collateral and the Debtor's
rights with respect thereto against and take such other action as is necessary
to remove any Lien, security interest, encumbrance, or claim in or to the
Collateral other than the security interests created hereunder and such Liens to
the extent permitted pursuant to Section 6.2(a) of the Revolving Credit
Agreement.
Section 4.11. Limitations on Modifications of Receivables and Other Intangibles;
No Waivers or Extensions. The Debtor will not (i) amend, modify, terminate or
waive any provisions of any material Receivable or Other Intangible in any
manner which might, when taken together with all such other Receivables or Other
Intangibles, respectively, materially reduce the value of all Receivables or
Other Intangibles, respectively, in the Collateral, (ii) fail to exercise
promptly and diligently each and every material right which it may have under
each Receivable and Other Intangible or (iii) fail to deliver to the Agent a
copy of each material demand, notice or document received by it relating in any
way to any Receivable or Other Intangible.
Section 4.12. Maintenance of Insurance. The Debtor will maintain with
financially sound insurance companies licensed to do business in the
jurisdictions in which the Collateral is located insurance policies on the
Inventory and Equipment in accordance with the provisions of Section 6.1(m) of
the Revolving Credit Agreement.
Section 4.13. Limitations on Dispositions of Collateral. The Debtor will not
directly or indirectly (through the sale of stock, merger or otherwise), without
the prior written consent of the Agent, sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (i) sales of Inventory in the ordinary course of its business for fair value
in arm's-length transactions and (ii) so long as no Event of Default (or
Potential Event of Default) has occurred and is continuing, dispositions in a
commercially reasonable manner of Equipment which has become redundant, worn out
or obsolete or which should be replaced so as to improve productivity, so long
as the proceeds of any such disposition are (x) used to acquire replacement
equipment which has comparable or better utility and equivalent or better value
and which is subject to a first priority security interest in favor of the Agent
therein, except as permitted by Section 6.2(a) of the Revolving Credit
Agreement, or (y) applied to repay the Obligations. The inclusion of Proceeds of
the Collateral under the security interests granted hereby shall not be deemed a
consent by the Agent to any sale or disposition of any Collateral other than as
permitted by this Section 4.13.
Section 4.14. Further Identification of Collateral. The Debtor will furnish to
the Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request. The Debtor shall promptly notify
the Agent if the value of the Collateral located at the facilities identified on
Schedule 3.7 hereto is less than 80% of the value of all of the Collateral.
Section 4.15. Notices. The Debtor will advise the Agent promptly and in
reasonable detail (i) of any Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, other than, unless reasonably
requested by the Agent, Liens permitted by Section 6.2(a) of the Revolving
Credit Agreement, (ii) of any material change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
security interests granted to the Agent in this Security Agreement.
Section 4.16. Change of Law. The Debtor shall promptly notify the Agent of any
change in law known to it which (i) adversely affects or will adversely affect
the validity, perfection or priority of the security interests granted hereby,
(ii) requires or will require a change in the proceedings to be followed in
order to maintain and protect such validity, perfection and priority or (iii)
could result in the Agent not having a perfected security interest in any of the
Collateral.
Section 4.17. Right of Inspection.
(a) Access to Books and Records. The Debtor shall, following any request by the
Agent and upon reasonable notice, permit the Agent or its representatives to
have full and free access during normal business hours to all the books,
correspondence and records of the Debtor, and the Agent or its representatives
may examine the same, take extracts therefrom, make photocopies thereof and have
such discussions with officers, employees and public accountants of the Debtor
as the Agent may deem reasonably necessary, and the Debtor agrees to render to
the Agent, at the Debtor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Agent and its
representatives shall upon reasonable notice and during normal business hours
also have the right to enter into and upon any premises where any of the
Inventory or the Equipment is located for the purpose of inspecting the same,
observing its use or protecting the interests of the Agent therein.
(b) Audits. The Debtor shall permit the Lenders, the Agent and their
representatives and advisors to review the operations of the Debtor and perform
the audits and examinations as provided in Section 6.1(l) of the Revolving
Credit Agreement.
Section 4.18. Maintenance of Equipment. The Debtor will, at its expense,
maintain the Equipment in good operating condition, ordinary wear and tear
excepted.
Section 4.19. Covenants Regarding Patent and Trademark Collateral.
(c) Generally. At such time as the Debtor shall acquire any Patents or
Trademarks, it will comply with the terms, covenants and warranties of this
Section 4.19.
(d) Continued Use of Trademark. The Debtor (either itself or through licensees)
will, unless the Debtor shall reasonably determine, after consultation with the
Agent, that a Trademark is of negligible economic value to the Debtor, (i)
continue to use each Trademark on each and every Trademark class of goods
applicable to its current products and services as reflected in its current
catalogs, brochures and price lists in order to maintain each Trademark in full
force and free from any claim of abandonment for non-use, (ii) maintain as in
the past the quality of products and services offered under each Trademark,
(iii) employ each Trademark with the appropriate notice of registration, (iv)
not adopt or use any mark which is confusingly similar to a colorable imitation
of any Trademark and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(e) No Abandonment. The Debtor will not, unless the Debtor shall reasonably
determine, after consultation with the Agent, that a Patent is of negligible
economic value to the Debtor, do any act, or knowingly omit to do any act,
whereby any Patent may be abandoned or dedicated.
(f) Notice of Abandonment or Adverse Determinations. The Debtor shall notify the
Agent immediately if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in any
proceeding in the United States Patent and Trademark Office or any court of
tribunal in any country) regarding the Debtor's ownership of any Patent or
Trademark, its right to register the same or keep and maintain the same.
(g) Filings After Notice to Agent. In no event shall the Debtor, either itself
or through any agent, employee, licensee or designee, file an application for
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the Agent and, upon
request of the Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's security
interest in such Patent or Trademark and the goodwill and general intangibles of
the Debtor relating thereto or represented thereby, and the Debtor hereby
constitutes the Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all such acts of such attorney being hereby ratified
and confirmed.
(h) Pursuit of Applications and Maintenance of Registrations. The Debtor will
take all necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability; provided, however, that no such Patent or Trademark shall
be required to be maintained or pursued to the extent such Patent or Trademark
is determined by the Debtor, after consultation with the Agent, to be of
negligible economic value to the Debtor.
(i) Notice of Infringement. If any of the Patent and Trademark Collateral is
infringed, misappropriated or diluted by a third party, the Debtor shall
promptly notify the Agent after it learns thereof and shall, unless the Debtor
shall reasonably determine, after consultation with the Agent, that such Patent
and Trademark Collateral is of negligible economic value to the Debtor, promptly
sue for infringement, misappropriation of dilution, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation or dilution, or take such other action as the Debtor shall
reasonably deem appropriate under the circumstances to protect such Patent and
Trademark Collateral.
Section 4.20. Termination of Federal Contracts. With respect to each Federal
Contract in respect of which the Debtor is required to execute an Assignment of
Federal Contract in accordance with Section 4.21 hereof, the Debtor shall give
prompt written notice to the Agent if the U.S. Government shall terminate or
threaten to terminate (whether for convenience or default) any such Federal
Contract with the Debtor having a value (including unexercised options) of
$100,000 or more. In addition, the Debtor shall give prompt written notice to
the Agent if the U.S. Government shall terminate or threaten to terminate any
contract between the U.S. Government and any other prime contractor under which
the Debtor is a subcontractor if the value of such subcontract (including
unexercised options) is $100,000 or more. Section 4.21. Federal Contracts. The
Debtor shall provide to the Agent, as soon as reasonably practicable but not
later than forty-five (45) days following the end of each Fiscal Quarter, a
report identifying each Federal Contract to which it is a party, having attached
thereto a copy of the first two pages of such Federal Contract and any amendment
thereto, to the extent not previously provided to the Agent. At the request of
the Agent (unless an Event of Default shall have occurred and be continuing, in
which case no such request shall be required), the Debtor shall execute and
deliver to the Agent an Assignment of Federal Contract, in substantially the
form of Exhibit A hereto (the "Assignment of Federal Contract"), and execute any
other instruments or take any other steps required by the Agent in order that
all moneys due or to become due under such Federal Contracts shall be assigned
to the Agent and notice thereof given under the Assignment of Claims Act,
including without limitation delivery of Notices of Assignments with respect to
each Federal Contract as contemplated by Appendix A to Exhibit A hereto.
Section 4.22. Reimbursement Obligation. Should the Debtor fail to comply with
the provisions of this Security Agreement, the Revolving Credit Agreement or any
other agreement relating to the Collateral such that the value of any Collateral
or the validity, perfection, rank or value of any security interest granted to
the Agent hereunder or thereunder is thereby diminished or potentially
diminished or put at risk (as reasonably determined by the Agent), the Agent on
behalf of the Debtor may, but shall not be required to, effect such compliance
on behalf of the Debtor, and the Debtor shall reimburse the Agent for the cost
thereof on demand, and interest shall accrue on such reimbursement obligation
from the date the relevant costs are incurred until reimbursement thereof in
full at the Default Rate.
ARTICLE V.
REMEDIES; RIGHTS UPON DEFAULT
Section 5.01. UCC Rights. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the Revolving Credit
Agreement or other Credit Documents and such Obligations have not been paid in
full, the Agent may in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
guarantying, evidencing or relating to the Obligations, exercise (i) all rights
and remedies of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and (ii) all other rights
available to the Agent at law or in equity.
Section 5.02. Payments on Collateral. Without limiting the rights of the
Agent under any other provision of this Security Agreement, if an Event of
Default shall occur and be continuing:
(i) all payments received by the Debtor under or in connection with any of the
Collateral shall be held by the Debtor in trust for the Agent, shall be
segregated from other funds of the Debtor and shall forthwith upon receipt by
the Debtor be turned over to the Agent, in the same form as received by the
Debtor (duly indorsed by the Debtor to the Agent, if required to permit
collection thereof by the Agent); and
(ii) all such payments received by the Agent (whether from the Debtor or
otherwise) may, in the sole discretion of the Agent, be held by the Agent as
collateral security for, and/or then or at any time thereafter applied in whole
or in part by the Agent to the payment of, the expenses and the Obligations as
set forth in Section 5.11 hereof.
Section 5.03. Possession of Collateral. In furtherance of the foregoing, the
Debtor expressly agrees that, if an Event of Default shall occur and be
continuing, the Agent may (i) by judicial powers, or without judicial process if
it can be done without breach of the peace, enter any premises where any of such
Collateral is or may be located and, without charge or liability to the Agent,
seize and remove such Collateral from such premises and (ii) have access to and
use of the Debtor's books and records relating to such Collateral.
Section 5.04. Sale of Collateral; Notice.
(a) Sale of Collateral. The Debtor expressly agrees that if an Event of Default
shall occur and be continuing, the Agent, without demand of performance or other
demand or notice of any kind (except the notice specified below of the time and
place of any public or private sale) to or upon the Debtor or any other Person
(all of which demands and/or notices are hereby waived by the Debtor), may
forthwith (i) apply the cash, if any, then held by it as collateral as specified
in Section 5.11 hereof and (ii) if there shall be no cash or such cash shall be
insufficient to pay the Obligations in full, collect, receive, appropriate and
realize upon the Collateral, and/or sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral (or contract to do
so) or any part thereof in one or more parcels (which need not be in round lots)
at public or private sale, at any office of the Agent or elsewhere in such
manner as is commercially reasonable and, as the Agent may deem best, for cash
or on credit or for future delivery without assumption of any credit risk. The
Agent shall have the right upon any such public sale, and, if the Collateral is
of a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Debtor waives all claims,
damages and demands against the Agent arising out of the foreclosure,
repossession, retention or sale of the Collateral.
(b) Notice of Sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent shall give
the Debtor ten (10) days' written notice of its intention to make any such
public or private sale or sale at a broker's board or on a securities exchange.
Such notice shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof being sold,
will first be offered for sale and (iii) in the case of a private sale, state
the day after which such sale may be consummated. The Agent shall not obligated
to make any such sale pursuant to any such notice. The Agent may adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In the case of any
sale of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling price is paid
by the purchaser thereof, but the Agent shall not incur any liability in case of
the failure of such purchase to take up and pay for the Collateral so sold and,
in the case of such failure, such Collateral may again be sold upon like notice.
(c) Special Provisions Relating to Sales of Securities. The Debtor recognizes
that the Agent may be unable to effect a public sale of any or all the
Collateral constituting a "security" (as such term is defined in the Securities
Act) by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers that will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. The Debtor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Agent
shall be under no obligation to delay a sale of any of Collateral constituting a
security for the period of time necessary to permit the issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such issuer would agree to do so.
Section 5.05. Rights of Purchasers. Upon any sale of the Collateral (whether
public or private), the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agent) at any such sale shall hold the Collateral so sold
absolutely, free from any claim or right of whatever kind, including any equity
or right of redemption of the Debtor who, to the extent permitted by law, hereby
specifically waives all rights of redemption, including, without limitation, any
right to redeem the Collateral under Section 9-506 of the UCC, and any right to
a judicial or other stay or approval which it has or may have under any law now
existing or hereafter adopted.
Section 5.06. Additional Rights of the Agent.
(a) Right to Maintain Proceedings. The Agent (i) shall have the right and power
to institute and maintain such suits and proceedings as it may deem appropriate
to protect and enforce the rights vested in it by this Security Agreement and
(ii) may proceed by suit or suits at law or in equity to enforce such rights and
to foreclose upon the Collateral and to sell all or, from time to time, any of
the Collateral under the judgment or decree of a court of competent
jurisdiction.
(b) Appointment of Receiver. The Agent shall, to the extent permitted by
applicable law, without notice to the Debtor to any party claiming through the
Debtor, without regard to the solvency or insolvency at such time of any Person
then liable for the payment of any of the Obligations, without regard to the
then value of the Collateral and without requiring any bond from any complainant
in such proceedings, be entitled as a matter of right to the appointment of a
receiver or receivers (who may be the Agent) of the Collateral or any part
thereof, pending such proceedings, with such powers as the court making such
appointment shall confer, and to the entry of an order directing that the
profits, revenues and other income of the property constituting the whole or any
part of the Collateral be segregated, sequestered and impounded for the benefit
of the Agent, and the Debtor irrevocably consents to the appointment of such
receiver or receivers and to the entry of such order.
(c) No Duty to Exercise Rights. In no event shall the Agent have any duty to
exercise any rights or take any steps to preserve the rights of the Agent in the
Collateral, nor shall the Agent be liable to the Debtor or any other Person for
any loss caused by the Agent's failure to meet any obligation imposed by Section
9-207 of the UCC or any successor provision. Without limiting the foregoing, the
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have any duty or responsibility for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
Section 5.07. Remedies Not Exclusive, etc.
(a) Remedies Not Exclusive. No remedy conferred upon or reserved to the Agent in
this Security Agreement is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law, in
equity or by statute.
(b) Restoration of Rights. If the Agent shall have proceeded to enforce any
right, remedy or power under this Security Agreement and the proceeding for the
enforcement thereof shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Agent, the Debtor and the Agent
shall, subject to any determination in such proceeding, severally and
respectively be restored to their former positions and rights under this
Security Agreement, and thereafter all rights, remedies and powers of the Agent
shall continue as though no such proceedings had been taken.
(c) Enforcement. All rights of action under this Security Agreement may be
enforced by the Agent without the possession of any instrument evidencing any
Obligation or the production thereof at any trial or other proceeding relative
thereto, and any suit or proceeding instituted by the Agent shall be brought in
its name and any judgment shall be held as part of the Collateral.
Section 5.08. Waiver and Estoppel.
(a) No Actions to Impede Sale of Collateral. The Debtor agrees, to the extent it
may lawfully do so, that it will not at any time in any manner whatsoever claim
or take the benefit or advantage of any appraisal, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force which may delay, prevent or otherwise affect the performance or
enforcement of this Security Agreement, and hereby waives all benefit or
advantage of all such laws. The Debtor covenants that it will not hinder, delay
or impede the execution of any power granted to the Agent in this Security
Agreement, any Assignment of Federal Contract or any other Credit Document.
(b) Collateral Sold As An Entirety. The Debtor, to the extent it may lawfully do
so, on behalf of itself and all who claim through or under it, including without
limitation any and all subsequent creditors, vendees, assignees and lienors,
waives and releases all rights to demand or to have any marshalling of the
Collateral upon any sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or under any foreclosure or any enforcement of
this Security Agreement, and consents and agrees that all of the Collateral may
at any such sale be offered and sold as an entirety.
(c) Waiver of Notices. The Debtor waives, to the extent permitted by law,
presentment, demand, protest and any notice of any kind (except the notices
expressly required hereunder) in connection with this Security Agreement and any
action taken by the Agent with respect to the Collateral.
Section 5.09. Power of Attorney; Powers Coupled With An Interest.
(a) Power of Attorney. Without limiting any other right granted hereunder, the
Debtor hereby irrevocably constitutes and appoints the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Agent's reasonable
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purpose of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives the Agent the power and right, on behalf of the Debtor,
without notice to or assent by the Debtor, to do the following:
(i) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(ii) to effect any repairs or any insurance called for by the terms of this
Security Agreement or any other Credit Document, and to pay all or any part of
the premiums therefor and the costs thereof;
(iii) upon the occurrence and continuance of any Event of Default and otherwise
to the extent provided in this Security Agreement, (A) to direct any party
liable for any payment under any of the Collateral to make payment of any and
all moneys due and to come due thereunder directly to the Agent or as the Agent
shall direct, (B) to receive payment of and receipt for, and to demand and sue
for, any and all moneys, claims and other amounts due and to become due at any
time in respect of or arising out of the Collateral, (C) to sign and indorse and
receive, take, assign and deliver, any checks, notes, drafts, negotiable and
non-negotiable instruments, any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral, (D) to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding with respect
to, or in connection with, the Collateral, (E) to sell, transfer, assign or
otherwise deal in or with the Collateral or any part thereof, as fully and
effectively as if the Agent were the absolute owner thereof and (F) to do, at
its option, but at the expense of the Debtor, at any time or from time to time,
all acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in order
to effect the intent of this Security Agreement, all as fully and effectively as
the Debtor might do.
(b) Powers Coupled With an Interest. All authorizations and agencies granted or
provided herein with respect to the Collateral, including the powers granted
under clause (a) of this Section 5.9, are irrevocable and powers coupled with an
interest.
Section 5.10. Certain Provisions Relating to Securities. Solely with respect to
any Collateral constituting a "security" (as defined in the Securities Act), if
an Event of Default shall have occurred and be continuing, all such securities
(as defined in the Securities Act) constituting a part of the Collateral shall,
at the request of the Agent, be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (i) all voting,
corporate and other rights, powers and privileges pertaining to such Collateral
at any meeting of shareholders of the issuer thereof or otherwise, and (ii) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all such Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the structure of
any such issuer, or upon the exercise by the Debtor or the Agent of any right,
privilege or option pertaining to such Collateral, and in connection therewith,
the right to deposit and deliver any and all such Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine), all without liability except to account for
property actually received by it and except as provided in Section 5.6(c)
hereof, but the Agent shall have no duty to the Debtor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
Section 5.11. Application of Monies. The proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Agent in the following order of priority:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Agent and its agents and
counsel, and all expenses, liabilities and advances incurred or made by the
Agent, its agents and counsel in connection therewith or in connection with the
care, safekeeping or otherwise of any or all of the Collateral;
second, to payment of the Obligations, in such order as the Agent may
elect; and
third, any surplus then remaining shall be paid to the Debtor,
or its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same (including pursuant to Section 9-504(1)(C) of the UCC) or as a
court of competent jurisdiction may direct.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Notices. All notices, requests and other communications to a party
hereunder shall be in writing and shall be given to such party at its address
set forth on the signature page hereof or such other address as such party may
hereafter specify for that purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) in the case of telephonic
notice (to the extent expressly permitted hereunder), when made, (ii) in the
case of notice delivered by overnight express courier, one Business Day after
the Business Day such notice was delivered to such courier, (iii) in the case of
notice delivered by first class mail, three Business Days after being deposited
in the mail, postage prepaid, return receipt requested, (iv) in the case of
notice by hand, when delivered, or (v) in the case of notice by any customary
means of telecommunication, when sent provided confirmation of receipt or answer
back has been received, in each case if addressed to any party hereto as
provided herein. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect the
validity of notice given in accordance with this section.
Section 6.02. No Waiver; Cumulative Remedies. The Agent shall not by any act
(except by a written instrument pursuant to Section 6.3 hereof) be deemed to
have waived any right or remedy hereunder. No failure to exercise, nor any delay
in exercising, on the part of the Agent any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
Section 6.03. Amendments and Waivers. None of the terms or provisions of this
Security Agreement may be amended, supplemented or otherwise modified except by
a written instrument executed by the Debtor and the Agent; provided that any
provision of this Security Agreement may be waived by the Agent in a letter or
agreement executed by the Agent or by telex or facsimile transmission from the
Agent.
Section 6.04. Successors and Assigns. The provisions of this Security Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Debtor may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Agent.
Section 6.05. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA,
OTHER THAN ITS LAWS RESPECTING CHOICE OF LAW OTHER THAN THOSE CONTAINED
IN THE UCC.
Section 6.06. Limitation by Law; Severability.
(a) All rights, remedies and powers provided in this Security Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Security Agreement invalid, unenforceable in whole or in part,
or not entitled to be recorded, registered or filed upon the provisions of any
applicable law.
(b) If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
Section 6.07. Counterparts. This Security Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each complete set of which, when so executed and delivered by all parties, shall
be an original, but all such counterparts shall together constitute but one and
the same instrument.
Section 6.08. Expenses of the Agent. The Debtor shall pay to the Agent from time
to time upon demand, all of the costs and expenses incurred by the Agent or any
Lender (including, without limitation, the reasonable fees and disbursements of
counsel and any amounts payable by the Agent or any Lender to any of their
respective agents) (i) arising in connection with the administration,
modification, amendment, waiver or termination of this Security Agreement or any
document or agreement contemplated hereby or any consent or waiver hereunder or
thereunder or (ii) incurred in connection with the administration of this
Security Agreement, or any document or agreement contemplated hereby, or in
connection with the administration, sale or other disposition of Collateral
hereunder or under any document or agreement contemplated hereby or the
preservation, protection or defense of the rights of the Agent or any Lender in
and to the Collateral.
Section 6.09. Indemnification. The Debtor shall at all times hereafter
indemnify, hold harmless and, on demand, reimburse the Agent and the Lenders and
their respective subsidiaries, affiliates, successors, assigns, officers,
directors, employees and agents, and their respective heirs, executors,
administrators, successors and assigns (all of the foregoing parties, including,
but not limited to, the Agent, being hereinafter collectively referred to as the
"Indemnities" and individually as an "Indemnitee") from, against and for any and
all liabilities, obligations, claims, damages, actions, penalties, causes of
action, losses, judgments, suits, costs, expenses and disbursements, including,
without limitation, attorney's fees (any and all of the foregoing being
hereinafter collectively referred to as the "Liabilities" and individually as a
"Liability") which the Indemnitees, or any of them, might be or become
subjected, by reason of, or arising out of the preparation, execution, delivery,
modification, administration or enforcement of, or performance of the Agent's
rights under, this Security Agreement or any other document, instrument or
agreement contemplated hereby or executed in connection herewith; provided,
however, that the Debtor shall not be liable to any Indemnitee for any Liability
caused solely by the gross negligence or willful misconduct of such Indemnitee.
In no event shall any Indemnitee, as a condition to enforcing its rights under
this Section 6.9 or otherwise, be obligated to make a claim against any other
Person (including, without limitation, the Agent) to enforce its rights under
this Section 6.9.
Section 6.10. Termination; Survival. This Security Agreement shall terminate
when the security interests granted hereunder have terminated and the Collateral
has been released as provided in Section 2.6; provided, however, that the
obligations of the Debtor under Section 4.22 and the provisions of this Article
6 shall survive any such termination.
Section 6.11. Judicial Proceedings; Waiver of Jury Trial. Any judicial
proceeding brought against the Debtor with respect to any Credit Agreement
Related Claim hereby may be brought in any court of competent jurisdiction in
the Commonwealth of Virginia, County of Fairfax, or any Federal court in the
Eastern District of Virginia, and, by execution and delivery of this Security
Agreement, the Debtor (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with any Credit Agreement Related Claim and (b) irrevocably waives any objection
it may now or hereafter have as to the venue of any such proceeding brought in
such a court or that such a court is an inconvenient forum. The Debtor hereby
waives personal service of process and consents that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of Section 6.1
hereof, and service so made shall be deemed completed on the earlier of (x) the
receipt thereof and (y) if sent by registered or certified mail (return receipt
requested), the fifth (5th) Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the Agent to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Debtor in the courts of any other jurisdiction. Any
judicial proceeding by the Debtor against the Agent relating to or involving any
Credit Agreement Related Claim hereby shall be brought only in a court located
in the Commonwealth of Virginia, County of Fairfax, or the Federal court in the
Eastern District of Virginia. THE DEBTOR AND THE AGENT HEREBY UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING ANY CREDIT AGREEMENT RELATED CLAIM.
Section 6.12. Integration. This Security Agreement and the other Credit
Documents constitute the entire agreement of the Agent, the Lenders, the
Borrower and the other Credit Parties with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Credit
Documents.
Section 6.13. Authority of Agent. The Debtor acknowledges that the rights and
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Security Agreement shall, as between
the Agent and the Lenders, be governed by the Revolving Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Debtor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and the Debtor shall not be under any obligation,
or entitlement, to make any inquiry respecting such authority.
Section 6.14. Headings, Bold Type and Table of Contents. The section headings,
subsection headings, and bold type used herein and the Table of Contents hereto
have been inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Security Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
Address: TB&A GROUP, INC.
515 S. Figueroa Street
Suite 1500
Los Angeles, CA 90071 By: /s/ Glenn J. Dozier_______________
Attention: Karin Cropper Name: Glenn J. Dozier
Phone: (213) 689-0770 Title: Senior Vice President
Fax: (213) 629-7580 and Chief Financial Officer
Address: NATIONSBANK, N.A.
8300 Greensboro Drive
Suite 550 By: /s/ James W. Gaittens_________
McLean, Virginia 22102 Name: James W. Gaittens
Attention: James W. Gaittens Title: Senior Vice President
Phone: (703) 761-8405
Fax: (703) 917-0519
<PAGE>
Schedule 3.4
TB&A GROUP, INC.
Place of Business
515 South Figueroa Street
Suite 1500
Los Angeles, California 90071
<PAGE>
Schedule 3.5
TB&A GROUP, INC.
Location of Collateral
1. 515 South Figueroa Street
Suite 1500
Los Angeles, California 90071
2. 50 Rockefeller Plaza
Suite 1035
New York, New York 10020
3. 6133 North River Road
Suite 310
Rosemont, Illinois 60018
<PAGE>
Schedule 3.6
TB&A GROUP, INC.
Trade/Division Names
TB&A
TB&A Group
TB&A Group, Inc.
Theodore Barry & Associates
TB&A Consulting
<PAGE>
Schedule 3.7
TB&A GROUP, INC.
Primary Collateral Locations
1. 515 South Figueroa Street
Suite 1500
Los Angeles, California 90071
2. 50 Rockefeller Plaza
Suite 1035
Los Angeles, California 90071
3. 6133 North River Road
Suite 310
Rosemont, Illinois 60018
<PAGE>
Schedule 3.8
TB&A GROUP, INC.
Patents and Trademarks
None.
<PAGE>
Schedule 4.1
TB&A GROUP, INC.
UCC FILINGS
INTENTIONALLY DELETED
<PAGE>
5
Exhibit A to
Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __
(the "Agreement"), is made by TB&A GROUP, INC., a Delaware corporation (the
"Assignor"), in favor of NATIONSBANK, N.A., a national banking association (the
"Agent"), in its capacity as Agent for the lenders from time to time a party to
the Revolving Credit Agreement (as defined in the Security Agreement referred to
below).
W I T N E S S E T H:
WHEREAS, the Assignor has secured certain obligations
undertaken by Hagler Bailly, Inc. pursuant to the provisions of a Security
Agreement, dated as of ___________________, ____ (as the same may be amended,
supplemented or otherwise modified from time to time, the "Security Agreement"),
by and between the Assignor and the Agent; and
WHEREAS, the Assignor is a party to, and from time to time
will become entitled to receive moneys under and by virtue of, a certain
contract with, involving or for the benefit of the United States of America or
any department, agency or instrumentality thereof (herein referred to as the
"Government"), designated as Contract Number _______ entered into by the
Assignor and the Government on ________ __, 19__ (which contract, together with
all additions, change orders, supplements, amendments, renewals, extensions, and
modifications thereto now or hereafter in effect, are hereinafter collectively
called the "Contract"); and
WHEREAS, pursuant to the Security Agreement, the Assignor has
undertaken to effectuate the assignment(s) and other actions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Assignor covenants and agrees as follows:
1. Incorporation By Reference. The provisions of the Security Agreement
are incorporated herein by reference, and the terms defined in the Security
Agreement are used herein with the same meanings.
2. Representations. The Assignor represents and warrants to the Agent
that (a) the Contract is legal, valid and binding on the Assignor and, to its
knowledge, the other parties thereto, is in full force and effect, and is not
evidenced by any chattel paper or instrument, (b) upon due filing of this
Agreement, together with a Notice of Assignment substantially in the form of
Appendix A hereto with the authorized representative, the execution and delivery
of this Agreement does not violate and is not in conflict with the provisions of
the Contract, (c) there has been no default on the part of the Assignor or any
other party to the Contract, (d) the Assignor has made no previous assignment of
the Contract to any person and knows of no fact or defense that will render the
moneys due or to be due thereunder uncollectible, (e) no financing statement
covering the Contract is on file in any public office except financing
statements in favor of the Agent, (f) no set-off or counterclaim to any moneys
due or to become due under the Contract exists on the date hereof, and no
agreement has been made with any person under which any deduction or discount
may be claimed, and (g) the address of the office where the Assignor keeps its
records concerning the Contract is ____________________.
3. Collateral. As security and collateral for the payment of all of the
Obligations (defined in the Security Agreement) and for performance of, and
compliance with, by the Assignor, all of the terms, covenants, conditions,
stipulations, and agreements contained in this Agreement and in the Security
Agreement, the Assignor hereby assigns to the Agent, and grants to the Agent a
lien on and security interest in, all moneys and claims for moneys now and
hereafter due and to become due to the Assignor under or by reason of the
Contract, together with all cash and non-cash proceeds thereof; provided,
however, that nothing contained herein shall impose upon the Agent any of the
obligations or liabilities of the Assignor under the Contract.
4. Covenants. Until payment and performance in full of the Obligations,
the Assignor covenants as follows:
(c) The Assignor shall place on any and all vouchers, invoices, or other
instruments demanding payment under the Contract the direction that such payment
is to be made to the Agent in accordance with Section 5 of this Agreement.
(d) The Assignor shall promptly upon request execute, acknowledge, and deliver
any notice, financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate, or other document as
the Agent may require in order to perfect, preserve, maintain, protect,
continue, and/or extend the assignment, lien, and security interest of the Agent
under this Agreement and its priority. The Assignor shall pay to the Agent on
demand all taxes, costs, and expenses incurred by the Agent in connection with
the preparation, execution, recording, and filing of any such document or
instrument mentioned aforesaid, and such taxes, costs, and expenses shall
constitute and become a part of the Obligations. A carbon, photographic, or
other reproduction of a security agreement or a financing statement is
sufficient as a financing statement.
(e) The Assignor shall fully, promptly, and faithfully comply with and perform
its obligations and duties under the Contract in accordance with the terms
thereof and will make no changes or amendments to the Contract or terminate or
cancel the Contract without the prior written consent of the Agent except as
permitted by the Security Agreement. In the event that any change, amendment,
termination or cancellation of the Contract is made or effected by the
Government, the Assignor will promptly notify the Agent thereof and promptly
furnish to the Agent a copy of any document or agreement evidencing any such
change, amendment, termination, or cancellation.
(f) The Assignor will promptly
(i) furnish to the Agent all information received by the Assignor affecting
the moneys due and to become due under the Contract,
(ii) inform the Agent of any delay in performance of, or claims made in
regard to, the Contract, and
(iii) notify the Agent in writing of the failure of any party to the Contract to
perform any of its obligations thereunder and any rejection of any performance
rendered by the Assignor under or in connection with the Contract.
(g) The Assignor will at all times keep accurate and complete records of
performance by the Assignor under the Contract, and the Agent and its agents
shall have the right, during normal business hours and upon reasonable advance
notice, to call at the place or places of business of the Assignor at intervals
to be determined by the Agent, and without hindrance or delay, to inspect,
audit, check, and make extracts from the books, records, journals, orders,
receipts, correspondence, and other data relating to the Contract or to any
other transactions between the parties hereto related to the Contract.
5. Payments. The Assignor hereby authorizes, empowers, and directs the
Government to draw all checks, drafts, or other instruments representing the
payments of money due the Assignor under the Contract (herein called the "Items
of Payment") to the order of NationsBank, N.A., assignee of Assignor, and to
send the same (i) if by mail, to , (ii) if by electronic transfer, to
NationsBank, N.A. for the account of ________________, Bank Account #__________,
Agent ABA#_________, or (iii) if by wire transfer, to NationsBank, N.A. for the
account of _________________________, Bank Account #_______, ABA#___________.
If, despite this direction, any instruments or checks representing payments
should be delivered to the Assignor, the Assignor will immediately endorse and
deliver such instruments or checks to the order of the Agent. The Assignor does
hereby irrevocably (subject to revocation with the consent of the Agent)
designate and appoint (which appointment is coupled with an interest) the Agent,
and the Agent's successors in interest by operation of law, the Assignor's true
and lawful attorney with power irrevocable for the Assignor and in the
Assignor's name, place, and stead, but at the sole cost and expense of the
Assignor, to receive, endorse, and collect all Items of Payment, and to ask,
demand, receive, receipt, and give acquittances for any and all amounts which
may be payable or which become due and payable by the Government under the
Contract, and in the Agent's discretion to file any claim or to take any other
action or proceeding, either in the Agent's own name or in the name of the
Assignor or otherwise, which to the Agent or any successor in interest thereof
may seem necessary or desirable in order to collect or endorse the payment of
any and all amounts now due or owing or which may hereafter be or become due or
owing on account of the Contract. All Items of Payment received by the Agent
pursuant hereto which are finally paid in cash or solvent credits shall be
applied against the Obligations as provided in the Security Agreement. Any
portion of the Items of Payment which the Agent elects not to so apply shall be
paid over to the Assignor or to whomsoever shall be entitled thereto under
applicable law, including pursuant to Section 9-504(1)(C) of the Uniform
Commercial Code of the Commonwealth of Virginia.
6. No Waiver. Neither this Agreement nor any term, condition,
representation, warranty, covenant, or agreement hereof may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing by the
party against whom such change, waiver, discharge, or termination is sought.
7. Governing law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
8. Gender. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders.
9. Counterparts. This Agreement may be executed in any number of
duplicate originals, each of which shall be an original but all of which
together shall constitute one and the same instrument.
10. Paragraph Headings. The paragraph headings of this Agreement are
for convenience only and shall not limit or define the provisions of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, Assignor and the Agent have caused this Agreement
to be duly executed and delivered by their respective representatives thereunto
duly authorized as of the date first above written.
TB&A GROUP, INC.
ATTEST:
, Secretary
By:
Title:
WITNESS:
NATIONSBANK, N.A.
ATTEST:
, Secretary
By:
Title:
WITNESS:
<PAGE>
Appendix A To
Assignment of Federal Contract
Notice of Assignment
Date: ____________
To: Contracting Officer
[Address]
Re: CONTRACT NUMBER ___________ (the "Contract") MADE BY THE UNITED STATES
OF AMERICA
By: Department of the [Applicable U.S. Government Agency]
[Address]
with [Name of Subsidiary] (the "Contractor")
[Address]
for manufacture and support of a [Brief description of
Subject of Contract]
dated _______________
PLEASE TAKE NOTICE that moneys due or to become due under the
Contract have been assigned to NationsBank, N.A. pursuant to the provisions of
the Assignment of Claims Act of 1940, as amended (31 USC ss. 3727 and 41 USC ss.
15). A true copy of the Assignment executed by the Contractor on the date hereof
(the "Assignment") is attached to the original of this Notice of Assignment.
Please file this original Notice of Assignment along with the copy of the
Assignment in the contract file for the Contract and forward one of the enclosed
copies of this Notice of Assignment to the current disbursing office for the
Contract.
Payments due or to become due under the Contract should be
made (i) if by mail, to NationsBank, N.A., ____________________, (ii) if by
electronic transfer, to NationsBank, N.A. for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to NationsBank, N.A. for the account of
__________________________, Bank Account #_________, ABA#_________.
Please return enclosed copies of this Notice of Assignment
with appropriate notations showing the date and hour of receipt, and duly signed
by the person acknowledging receipt on behalf of the addressee, to NationsBank,
N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102, Attention: James
W. Gaittens.
Very truly yours,
TB&A GROUP, INC.
By: ________________________________
Name:
Title:
Receipt is hereby acknowledged of the above notice and a copy
of the above mentioned instrument of assignment. These were received at
_________[A.M.] [P.M.] on ______________________, 199__.
- ------------------------------------
Name:
Title:
on behalf of Contracting Officer
[Address]
EXHIBIT 10.41
--------------------------------------------------------------------------
SECURITY AGREEMENT
dated as of November 20, 1998
between
THEODORE BARRY AND ASSOCIATES,
as Debtor
and
NATIONSBANK, N.A.,
as Agent
-------------------------------------------------------------------------
<PAGE>
27
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of November 20, 1998 (as
amended, supplemented or modified from time to time, the "Security Agreement"),
is made by THEODORE BARRY AND ASSOCIATES, a California corporation (the
"Debtor"), and NATIONSBANK, N.A., a national banking association (the "Agent")
in its capacity as Agent for the lenders (the "Lenders") from time to time a
party to the Revolving Credit Agreement, dated as of November 20, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Revolving
Credit Agreement"), by and among the Hagler Bailly, Inc., a Delaware corporation
(the "Company"), the Agent, in its capacity as such thereunder, and the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Revolving Credit Agreement, the
Lenders have severally agreed to make available to the Company a revolving line
of credit for Revolving Loans, Swing Line Loans and Standby Letters of Credit in
an aggregate principal amount at any time not to exceed the Maximum Available
Amount, subject to the terms and conditions contained therein;
WHEREAS, the Company owns, directly or indirectly, [all] of
the issued and outstanding shares of capital of stock of, or other equity
interests in, the Debtor;
WHEREAS, the proceeds of such Revolving Loans, Swing Line
Loans and Standby Letters of Credit may be used to enable the Company to make
valuable transfers to the Debtor in connection with the operation of its
business and for the Permitted Uses;
WHEREAS, the Debtor will derive substantial direct and
indirect benefit from such Revolving Loans, Swing Line Loans and Standby Letters
of Credit; and
WHEREAS, the Company is required to cause the Debtor to
execute this Agreement pursuant to the provisions of the Revolving Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and to induce the Lenders to make or maintain
their respective Revolving Loans and Swing Line Loans to, and the Issuing Lender
to issue or maintain the Standby Letters of Credit under the Revolving Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor hereby agrees with the
Agent, for the ratable benefit of the Lenders, as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions Generally. Capitalized terms used herein without
definition shall have the respective meanings specified in the Revolving Credit
Agreement, and the following terms shall have the following meanings (such
meanings to be, when appropriate, equally applicable to both the singular and
plural forms of the terms defined):
"Account Debtor" shall mean, with respect to any Receivable or
Other Intangible, any Person obligated to make payment thereunder, including
without limitation any account debtor thereon.
"Assignment of Claims Act" shall mean the Assignment of Claims Act of 1940, 31
U.S.C.3727, 41 U.S.C.15(1986), as the same may be amended and any successor
statute of similar import.
"Assignment of Federal Contract" shall have the meaning
specified in Section 4.21 hereof.
"Cash Collateral Account" shall have the meaning specified in
Section 2.4 hereof.
"Collateral" shall have the meaning set forth in Section 2.1.
"Debtor" shall have the meaning specified in the preamble hereof.
"Equipment" shall mean all equipment now owned or hereafter
acquired by the Debtor, including all items of machinery, equipment, furnishings
and fixtures of every kind, whether affixed to real property or not, as well as
all automobiles, trucks and vehicles of every description, trailers, handling
and delivery equipment, fittings, special tools, all additions to, substitutions
for, replacements of or accessions to any of the foregoing, all attachments,
components, parts (including spare parts) and accessories whether installed
thereon or affixed thereto and all fuel for any thereof.
"Federal Contract" means any contract or agreement with,
involving or for the benefit of the United States of America or any department,
agency or instrumentality thereof (collectively, the "U.S. Government"), whether
now existing or hereafter arising, in each case as the same may be amended,
modified or otherwise supplemented from time to time.
"Inventory" shall mean all inventory now owned or hereafter
acquired by the Debtor, including (i) all goods and other personal property
which are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
(ii) all inventory, wherever located, evidenced by negotiable and non-negotiable
documents of title, warehouse receipts and bills of lading, (iii) all of the
Debtor's rights in, to and under all purchase orders now owned or hereafter
received or acquired by it for goods or services and (iv) all rights of the
Debtor as an unpaid seller, including rescission, replevin, reclamation and
stopping in transit.
"Lenders" shall have the meaning specified in the preamble hereof.
"Obligations" shall mean any and all now existing or hereafter
arising indebtedness, obligations, liabilities and covenants of each Credit
Party to any Lender, the Agent, their respective Affiliates, successors and
assigns and any other Indemnified Person under or arising out of any Credit
Document, including without limitation (i) all Revolving Loans and all Swing
Line Loans together with interest thereon and all Standby Letters of Credit,
(ii) all fees, expenses, indemnity payments and other amounts due or to become
due under the Revolving Credit Agreement, the Revolving Notes, the Swing Line
Note or any other Credit Document, (iii) all liabilities and obligations under
the Subsidiary Guarantee and any other agreement executed by any Credit Party
guarantying the obligations of the Borrower under the Revolving Credit Agreement
or any other Credit Document, (iv) all liabilities and obligations under any
agreement providing collateral for any of the foregoing (including any Pledge
Agreement and the Subsidiary Security Agreements), and (v) and any agreement or
instrument refinancing or restructuring all or any portion of the obligations
and liabilities under any of foregoing or under any successor agreement or note,
in each case whether direct or indirect, absolute or contingent or due or to
become due.
"Other Intangibles" shall mean all accounts, accounts
receivable, contract rights, documents, instruments, notes, chattel paper,
money, indemnities, warranties and general intangibles now owned or hereafter
acquired by the Debtor including, without limitation, all goodwill, customer
lists, permits, federal and state tax refunds, reversionary interests in pension
plan assets, Patents, Trademarks, licenses, copyrights and other rights in
intellectual property, other than Receivables.
"Patents" shall mean all letters patent of the United States
or any other country, and all applications for letters patent of the United
States or any other country, in which the Debtor may now or hereafter have any
right, title or interest and all reissues, continuations, continuations-in-part
or extensions thereof.
"Proceeds" shall mean all proceeds, including (i) whatever is
received upon any collection, exchange, sale or other disposition of any of the
Collateral and any property into which any of the Collateral is converted,
whether cash or non-cash, (ii) any and all payments or other property (in any
form whatsoever) made or due and payable on account of any insurance, indemnity,
warranty or guaranty payable to the Debtor with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever) made or due and
payable in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person, corporation, agency, authority or
other entity acting under color of any governmental authority) and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables" shall mean all accounts now or hereafter owing
to the Debtor, and all accounts receivable, contract rights, documents,
instruments or chattel paper representing amounts payable or monies due or to
become due to the Debtor, arising from the sale of Inventory or the rendition of
services in the ordinary course of business or otherwise (whether or not earned
by performance), together with all Inventory returned by or reclaimed from
customers wherever such Inventory is located, and all guaranties, securities and
liens held for the payment of any such account, account receivable, contract
right, document, instrument or chattel paper.
"Security Agreement" shall have the meaning specified in the preamble hereof.
"Trademarks" shall mean all right, title or interest which the
Debtor may now or hereafter have in any or all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source of business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and all applications in
connection therewith, including without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or political subdivision thereof and all reissues, extensions or
renewals thereof.
"UCC" shall mean the Uniform Commercial Code in effect on the
date hereof in the Commonwealth of Virginia.
"U.S. Government" has the meaning specified in the definition of Federal
Contract contained herein.
Section 1.02. UCC Definitions. The uncapitalized terms "account", "account
debtor", "chattel paper", "contract right", "document", "warehouse receipt",
"bill of lading", "document of title", "instrument", "inventory", "general
intangible", "money", "security", "certificated security", "uncertificated
security", "financial asset" and "proceeds" as used in Section 1.1 or elsewhere
in this Security Agreement shall have the respective meanings set forth in the
UCC.
ARTICLE II.
SECURITY INTERESTS
Section 2.01. Grant of Security Interests. To secure the due and punctual
payment of all Obligations, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing or due or
to become due, whether at maturity or upon acceleration or otherwise, in
accordance with the terms thereof and to secure the due and punctual performance
of all of the Obligations and in order to induce the Agent and the Lenders to
enter into the Revolving Credit Agreement and the other Credit Documents, the
Debtor hereby pledges, assigns, delivers, conveys and transfers to the Agent,
for the ratable benefit of the Lenders, and grants to the Agent, for the ratable
benefit of the Lenders, a first priority and continuing security interest in and
lien on, all of the Debtor's right, title and interest in, to and under the
following, whether now existing or hereafter acquired (the "Collateral"):
(i) all Receivables;
(ii) all Other Intangibles;
(iii) all Equipment;
(iv) all Inventory;
(v) to the extent not included in the foregoing, all securities (whether
certificated or uncertificated) and all financial assets, whether now existing
or hereafter arising, including, without limitation, all capital stock issued by
any Person and held by Debtor, and all partnership interests, whether in the
nature of a joint venture, limited liability company member's interest, master
limited partnership, teaming arrangement or otherwise;
(vi) to the extent not included in the foregoing, all other personal property,
whether tangible or intangible, and wherever located whether within or outside
of the United States, including, but not limited to, the balance of every
deposit account now or hereafter existing of the Debtor with any bank or other
financial institution and all monies of the Debtor and all rights to payment of
money of the Debtor;
(vii) to the extent not included in the foregoing, all books, ledgers and
records and all computer programs, tapes, discs, punch cards, data processing
software, transaction files, master files and related property and rights
(including computer and peripheral equipment) necessary or helpful in enforcing,
identifying or establishing any item of Collateral; and
(viii) to the extent not otherwise included, all Proceeds and products of any or
all of the foregoing, whether existing on the date hereof or arising hereafter;
provided, however, notwithstanding anything to the contrary contained herein,
the Debtor is not assigning, pledging or otherwise encumbering under this
Security Agreement its interests in any Federal Contract to which it is a party,
or in accounts or receivables due to Debtor under such Federal Contract, to the
extent, but only to the extent, such assignment, pledge or other encumbrance
would breach or violate or would cause Debtor to breach or violate such Federal
Contract or statutes or regulations applicable thereto, it being understood that
this proviso does not apply to, or in any way limit, Debtor's assignment, pledge
or encumbrance of Proceeds of all Federal Contracts to which it is a party.
Section 2.02. Continuing Liability of the Debtor. Anything herein to the
contrary notwithstanding, the Debtor shall remain liable to observe and perform
all the terms and conditions to be observed and performed by it under any
contract, agreement, warranty or other obligation with respect to the
Collateral; and shall do nothing to impair the security interests herein
granted. The Agent shall not have any obligation or liability under any such
contract, agreement, warranty or obligation by reason of or arising out of this
Security Agreement or the receipt by the Agent of any payment relating to any
Collateral, nor shall the Agent be required to perform or fulfill any of the
obligations of the Debtor with respect to the Collateral, to make any inquiry as
to the nature or sufficiency of any payment received by it or the sufficiency of
the performance of any party's obligations with respect to any Collateral.
Furthermore, the Agent shall not be required to file any claim or demand to
collect any amount due or to enforce the performance of any party's obligations
with respect to, the Collateral.
Section 2.03. Sales and Collections.
(a) Sales of Inventory in the Ordinary Course of Business. The Debtor is
authorized (i) to sell in the ordinary course of its business for fair value and
on an arm's-length basis any of its Inventory normally held by it for such
purpose and (ii) to use and consume, in the ordinary course of its business, any
raw materials, supplies and materials normally held by it for such purpose. The
Agent may, upon the occurrence of any Event of Default, without cause or notice,
curtail or terminate such authority at any time.
(b) Collection of Receivables. The Debtor is authorized to collect amounts owing
to it with respect to the Collateral, except as otherwise provided in connection
with the Assignment of Federal Contract, if any as provided herein. However, the
Agent may, upon and during the continuance of an Event of Default or a Potential
Event of Default, notify Account Debtors obligated to make payments under any or
all Receivables or Other Intangibles that the Agent has a security interest in
such Collateral and that payments shall be made directly to the Agent. Upon the
request of the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default, as the case may be, the Debtor will so notify such
Account Debtors and will execute such contract assignments, notices of
assignment or other documents as may be required by such Account Debtors. The
Debtor will use all reasonable efforts to cause each Account Debtor to comply
with the foregoing instruction. In furtherance of the foregoing, the Debtor
authorizes the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default (i) to ask for, demand, collect, receive and give
acquittances and receipts for any and all amounts due and to become due under
any Collateral and in the name of the Debtor or its own name or otherwise, (ii)
to take possession of, endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under any
Collateral and (iii) to file any claim or take any other action in any court of
law or equity or otherwise which it may deem appropriate for the purpose of
collecting any amounts due under any Collateral. The Agent shall have no
obligation to obtain or record any information relating to the source of such
funds or the obligations in respect of which payments have been made.
Section 2.04. Segregation of Proceeds.
(a) Cash Collateral Account Maintained by Agent. Upon an Event of Default or a
Potential Event of Default, the Agent shall have the right at any time during
the continuance thereof to cause to be opened and maintained at the office of
the Agent in McLean, Virginia a non-interest bearing bank account (the "Cash
Collateral Account") which will contain only Proceeds. Any "cash proceeds" (as
such term is defined in Section 9-306(1) of the UCC) received by the Agent
directly from Account Debtors obligated to make payments under Receivables or
Other Intangibles pursuant to Section 2.3 hereof or from the Debtor pursuant to
clause (b) of this Section 2.4, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper or other Proceeds received on
account of any Collateral, shall be promptly deposited in the Cash Collateral
Account, and until so deposited shall be held in trust for the Agent as property
of the Agent and shall not be commingled with any funds of the Debtor not
constituting Proceeds of Collateral. The name in which the Cash Collateral
Account is carried shall clearly indicate that the funds deposited therein are
the property of the Debtor, subject to the security interest of the Agent
hereunder. Such Proceeds, when deposited, shall continue to be security for the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Agent shall have sole dominion and control over the
funds deposited in the Cash Collateral Account, and such funds may be withdrawn
therefrom only by the Agent.
(b) Deposit of Proceeds by the Debtor. Upon notice by the Agent to the Debtor
that the Cash Collateral Account has been opened, the Debtor shall cause all
cash Proceeds collected by it to be delivered to the Agent forthwith upon
receipt, in the original form in which received (with such endorsements or
assignments as may be necessary to permit collection thereof by the Agent), and
for such purpose the Debtor hereby irrevocably authorizes and empowers the
Agent, its officers, employees and authorized agents to endorse and sign the
name of the Debtor on all checks, drafts, money orders or other media of payment
so delivered, and such endorsements or assignments shall, for all purposes, be
deemed to have been made by the Debtor prior to any endorsement or assignment
thereof by the Agent. The Agent may use any convenient or customary means for
the purpose of collecting such checks, drafts, money orders or other media of
payment.
Section 2.05. Verification of Receivables. The Agent shall have the right to
make test verifications of Receivables in any reasonable manner and through any
medium that it considers advisable, and the Debtor agrees to furnish all such
assistance and information as the Agent may reasonable require in connection
therewith. The Debtor at its expense will cause its chief financial officer to
furnish to the Agent at any reasonable time and from time to time promptly upon
the Agent's reasonable request, the following reports: (i) a reconciliation of
all Receivables, (ii) an aging of all Receivables, (iii) trial balances and (iv)
a test verification of such Receivables as the Agent may request.
Section 2.06. Release of Collateral.
(a) Security Interest of Agent Ceases Upon Permitted Dispositions. The Debtor
may sell or realize upon or transfer or otherwise dispose of Collateral only to
the extent permitted by Section 4.13, and the security interests of the Agent in
such Collateral so sold, realized upon or disposed of (but not in the Proceeds
arising from such sale, realization or disposition) shall cease immediately upon
such sale, realization or disposition, without any further action on the part of
the Agent. The Agent, if requested in writing by the Debtor but at the expense
of the Debtor, is hereby authorized and instructed to deliver to the Account
Debtor or the purchaser or other transferee of any such Collateral a certificate
stating that the Agent no longer has a security interest therein, and such
Account Debtor or such purchaser or other transferee shall be entitled to rely
conclusively on such certificate for any and all purposes.
(b) Filing of Termination Statements. Upon the payment in full of all of the
Obligations and if there is no commitment by any Lender to make further
advances, incur obligations or otherwise give value, the Agent will (as soon as
reasonably practicable after receipt of notice from the Debtor requesting the
same but at the expense of the Debtor) deliver to the Debtor (i) for each
jurisdiction in which a UCC financing statement is on file to perfect the
security interests granted to the Agent hereunder, a termination statement
(appropriately completed) to the effect that the Agent no longer claims a
security interest under such financing statement, and (ii) such other documents
as the Debtor shall reasonably request evidencing satisfaction of the
Obligations and the release of the security interests granted to the Agent
hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants that:
Section 3.01. Title to Collateral. Except for the security interests granted to
the Agent pursuant to this Security Agreement and as otherwise permitted by
Section 6.2(a) of the Revolving Credit Agreement, the Debtor is the sole owner
of each item of the Collateral, having good and marketable title thereto, free
and clear of any and all Liens.
Section 3.02. Validity, Perfection and Priority of Security Interests.
(a) By complying with Section 4.1 hereof, the Debtor will have created a valid
security interest in favor of the Agent in all existing Collateral and in all
identifiable Proceeds of such Collateral, which security interest (except in
respect of Collateral not located at a facility identified on Schedule 3.7
hereto and motor vehicles for which the exclusive manner of perfecting a
security interest therein is by noting such security interest in the certificate
of title in accordance with local law) would be prior to the claims of a trustee
in bankruptcy under Section 544(a) of the Bankruptcy Code. Continuing compliance
by the Debtor with the provisions of Section 4.2 hereof will also (i) create
valid security interests in all Collateral acquired after the date hereof and in
all identifiable Proceeds of such Collateral and (ii) cause such security
interests in all Collateral and in all Proceeds which are (A) identifiable cash
Proceeds of Collateral covered by financing statements required to be filed
hereunder, (B) identifiable Proceeds in which a security interest may be
perfected by such filing under the UCC and (C) any Proceeds in the Cash
Collateral Account to be duly perfected under the UCC, in each case prior to the
claims of a trustee in bankruptcy under the Bankruptcy Code (except in respect
of Collateral not located at a facility identified on Schedule 3.5 hereto).
(b) The security interests of the Agent in the Collateral located at the
facilities identified on Schedule 3.5 hereto rank first in priority. Other than
financing statements or other similar documents perfecting the security
interests in favor of the Agent, no financing statements, deeds of trust,
mortgages or similar documents covering all or any part of the Collateral are on
file or of record in any government office in any jurisdiction in which such
filing or recording would be effective to perfect a security interest in such
Collateral, nor is any of the Collateral in the possession of any Person (other
than the Debtor) asserting any claim thereto or security interest therein.
Section 3.03. Enforceability of Receivables and Other Intangibles. To the best
knowledge of the Debtor, each Receivable and Other Intangible is a valid and
binding obligation of the related Account Debtor in respect thereof, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
provisions of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and complies with any applicable legal
requirements.
Section 3.04. Place of Business. Schedule 3.4 correctly sets forth the chief
executive office and principal place of business of the Debtor and the offices
of the Debtor where records concerning Receivables and Other Intangibles are
kept.
Section 3.05. Location of Collateral. Schedule 3.5 correctly sets forth the
location of all Equipment and Inventory, other than rolling stock, aircraft and
goods in transit. Except as otherwise specified in Schedule 3.5, all Inventory
and Equipment has been located at the address specified on Schedule 3.5 at all
times during the four-month period prior to the date hereof while owned by the
Debtor. All Inventory has been and will be produced in compliance with the Fair
Labor Standards Act, 29 U.S.C. ss.ss. 201-219, except for such non-compliance
which could not reasonably be expected to have a material adverse effect on the
Debtor. No Inventory is evidenced by a negotiable document of title, warehouse
receipt or bill of lading. No non-negotiable document of title, warehouse
receipt or bill of lading has been issued to any person other than the Debtor,
and the Debtor has retained possession of all of such non-negotiable documents,
warehouse receipts and bills of lading. No amount payable under or in connection
with any of the Collateral is evidenced by promissory notes or other
instruments.
Section 3.06. Trade Names. Schedule 3.6 correctly sets forth any and all trade
names, division names, assumed names or other names under which the Debtor
currently transacts business or has transacted business within the four-month
period prior to the date hereof.
Section 3.07. Patents and Trademarks. Schedule 3.7 correctly sets forth all
Patents, Patent licenses, Trademarks and Trademark licenses now owned by
the Debtor.
ARTICLE IV.
COVENANTS
The Debtor covenants and agrees that until all obligations and
liabilities in respect of the Obligations shall have performed and paid in full
and until no Standby Letters of Credit are outstanding or fully cash
collateralized and the Commitments are terminated:
Section 4.01. Perfection of Security Interests. The Debtor will, at its expense,
cause all filings and recordings and other actions specified on Schedule 4.1 to
have been completed on or prior to the Effective Date.
Section 4.02. Further Actions.
(a) At all times after the date hereof, the Debtor will, at its expense, comply
with the following:
(i) as to all Receivables, Other Intangibles, Equipment and Inventory, it will
cause UCC financing statements and continuation statements to be filed and to be
on file in all applicable jurisdictions as required to perfect the security
interests granted to the Agent hereunder, to the extent that applicable law
permits perfection of a security interest by filing under the UCC;
(ii) as to all Proceeds, it will cause all UCC financing statements and
continuation statements filed in accordance with clause (i) above to include a
statement or a checked box indicating that Proceeds of all items of Collateral
described herein are covered;
(iii) as to any amount payable under or in connection with any of the Collateral
which shall be or shall become evidenced by any promissory note or other
instrument, the Debtor will promptly (but in no event later than ten (10)
Business Days after receipt of such note or instrument), pledge and deliver such
note or other instrument to the Agent as part of the Collateral, duly endorsed
in a manner reasonably satisfactory to the Agent;
(iv) at the request of the Agent, the Debtor shall deliver all other Collateral
consisting of certificated securities, endorsed for transfer in a manner
reasonably satisfactory to the Agent (or execute a securities intermediary
account control agreement to the extent possession by the Agent of such
securities is not feasible); and
(v) as to all Patents, Patent licenses, Trademarks or Trademark licenses, the
Debtor will effect the recordation or renewal of the recordation of the security
interests of the Agent therein so as to maintain valid and perfected security
interests therein under all applicable state and federal laws. (b) Further
Assurances. The Debtor will, from time to time and at its expense, execute,
deliver, file or record such UCC financing statements, applications for
certificates of title and such other statements, assignments, instruments,
documents, agreements or other papers and take any other action that may be
necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect, confirm or validate the security interest of the
Agent in the Collateral, to enable the Agent to obtain the full benefits of this
Security Agreement or to enable it to exercise and enforce any of its rights,
powers and remedies hereunder, including, without limitation, its right to take
possession of the Collateral.
(c) Signature. To the fullest extent permitted by law, the Debtor authorizes the
Agent to sign and file financing and continuation statements and amendments
thereto with respect to the Collateral without its signature thereon.
Section 4.03. Change of Name, Identity or Structure. The Debtor will not change
its name, identity or corporate structure in any manner and, except as set forth
on Schedule 3.6, will not conduct its business under any trade, assumed or
fictitious name unless it shall have given the Agent at least forty-five (45)
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend any financing statement or continuation
statement relating to the security interests granted hereby in order to preserve
such security interests and to effectuate or maintain the priority thereof
against all Persons.
Section 4.04. Place of Business and Collateral. The Debtor will not change the
location of (i) its places of business, (ii) its chief executive office or (iii)
the office or other locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location listed on Schedule 3.4 or
3.5 unless, prior to such change, it notifies the Agent forty-five (45) days in
advance of such change, makes all UCC filings required by Section 4.2 and takes
all other action necessary or that the Agent may reasonably request to preserve,
perfect, confirm and protect the security interests granted hereby. The Debtor
will in no event change the location of any Collateral if such change would
cause the security interest granted hereby in such Collateral to lapse or cease
to be perfected. The Debtor will at all times maintain its chief executive
office within one of the forty-eight contiguous states in which Article 9 of the
uniform commercial code is in effect.
Section 4.05. Fixtures. The Debtor will not permit any Equipment to become a
fixture unless it shall have given the Agent at least ten (10) days' prior
written notice thereof and shall have taken all such action and delivered or
caused to be delivered to the Agent all instruments and documents, including,
without limitation, waivers and subordination agreements by any landlords and
mortgagees, and filed all financing statements necessary or reasonably requested
by the Agent, to preserve and protect the security interest granted herein and
to effectuate or maintain the priority thereof against all Persons; provided,
however, that, so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing, the Debtor shall not be obligated to
comply with the provisions of this Section 4.5 with respect to the first $50,000
of Equipment (determined based on the then fair market value thereof).
Section 4.06. Maintenance of Records. The Debtor will keep and maintain at its
own cost and expense complete books and records relating to the Collateral which
are satisfactory to the Agent including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral and all
of its other dealings with the Collateral. The Debtor will mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Agent' further security, the Debtor
agrees that the Agent shall have a special property interest in all of the
Debtor's books and records pertaining to the Collateral and the Debtor shall
deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent.
Section 4.07. Compliance with Laws The Debtor will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any government or any state or local government applicable to the Collateral or
any part thereof or to the operation of the Debtor's business except to the
extent that the failure to comply would not have a material adverse effect on
the financial or other condition of the Debtor; provided, however, that the
Debtor may contest any act, rule, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the Agent, adversely
affect the Agent's rights or, in the case of Collateral located at a facility
identified on Schedule 3.7 hereto, the first priority of its security interest
in the Collateral.
Section 4.08. Payment of Taxes. The Debtor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no such charge
need be paid if (i) the validity thereof is being contested in good faith by
appropriate proceedings and (ii) such charge is adequately reserved against in
accordance with generally accepted accounting principles, as consistently
applied.
Section 4.09. Compliance with Terms of Accounts and Contracts. The Debtor will
perform and comply in all material respects with all of its obligations under
all agreements relating to the Collateral to which it is a party or by which it
is bound.
Section 4.10. Limitation on Liens on Collateral. The Debtor will not create,
permit or suffer to exist, and will defend the Collateral and the Debtor's
rights with respect thereto against and take such other action as is necessary
to remove any Lien, security interest, encumbrance, or claim in or to the
Collateral other than the security interests created hereunder and such Liens to
the extent permitted pursuant to Section 6.2(a) of the Revolving Credit
Agreement.
Section 4.11. Limitations on Modifications of Receivables and Other Intangibles;
No Waivers or Extensions. The Debtor will not (i) amend, modify, terminate or
waive any provisions of any material Receivable or Other Intangible in any
manner which might, when taken together with all such other Receivables or Other
Intangibles, respectively, materially reduce the value of all Receivables or
Other Intangibles, respectively, in the Collateral, (ii) fail to exercise
promptly and diligently each and every material right which it may have under
each Receivable and Other Intangible or (iii) fail to deliver to the Agent a
copy of each material demand, notice or document received by it relating in any
way to any Receivable or Other Intangible.
Section 4.12. Maintenance of Insurance. The Debtor will maintain with
financially sound insurance companies licensed to do business in the
jurisdictions in which the Collateral is located insurance policies on the
Inventory and Equipment in accordance with the provisions of Section 6.1(m) of
the Revolving Credit Agreement.
Section 4.13. Limitations on Dispositions of Collateral. The Debtor will not
directly or indirectly (through the sale of stock, merger or otherwise), without
the prior written consent of the Agent, sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (i) sales of Inventory in the ordinary course of its business for fair value
in arm's-length transactions and (ii) so long as no Event of Default (or
Potential Event of Default) has occurred and is continuing, dispositions in a
commercially reasonable manner of Equipment which has become redundant, worn out
or obsolete or which should be replaced so as to improve productivity, so long
as the proceeds of any such disposition are (x) used to acquire replacement
equipment which has comparable or better utility and equivalent or better value
and which is subject to a first priority security interest in favor of the Agent
therein, except as permitted by Section 6.2(a) of the Revolving Credit
Agreement, or (y) applied to repay the Obligations. The inclusion of Proceeds of
the Collateral under the security interests granted hereby shall not be deemed a
consent by the Agent to any sale or disposition of any Collateral other than as
permitted by this Section 4.13.
Section 4.14. Further Identification of Collateral. The Debtor will furnish to
the Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request. The Debtor shall promptly notify
the Agent if the value of the Collateral located at the facilities identified on
Schedule 3.7 hereto is less than 80% of the value of all of the Collateral.
Section 4.15. Notices. The Debtor will advise the Agent promptly and in
reasonable detail (i) of any Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, other than, unless reasonably
requested by the Agent, Liens permitted by Section 6.2(a) of the Revolving
Credit Agreement, (ii) of any material change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
security interests granted to the Agent in this Security Agreement.
Section 4.16. Change of Law. The Debtor shall promptly notify the Agent of any
change in law known to it which (i) adversely affects or will adversely affect
the validity, perfection or priority of the security interests granted hereby,
(ii) requires or will require a change in the proceedings to be followed in
order to maintain and protect such validity, perfection and priority or (iii)
could result in the Agent not having a perfected security interest in any of the
Collateral.
Section 4.17. Right of Inspection.
(a) Access to Books and Records. The Debtor shall, following any request by the
Agent and upon reasonable notice, permit the Agent or its representatives to
have full and free access during normal business hours to all the books,
correspondence and records of the Debtor, and the Agent or its representatives
may examine the same, take extracts therefrom, make photocopies thereof and have
such discussions with officers, employees and public accountants of the Debtor
as the Agent may deem reasonably necessary, and the Debtor agrees to render to
the Agent, at the Debtor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Agent and its
representatives shall upon reasonable notice and during normal business hours
also have the right to enter into and upon any premises where any of the
Inventory or the Equipment is located for the purpose of inspecting the same,
observing its use or protecting the interests of the Agent therein.
(b) Audits. The Debtor shall permit the Lenders, the Agent and their
representatives and advisors to review the operations of the Debtor and perform
the audits and examinations as provided in Section 6.1(l) of the Revolving
Credit Agreement.
Section 4.18. Maintenance of Equipment. The Debtor will, at its expense,
maintain the Equipment in good operating condition, ordinary wear and tear
excepted.
Section 4.19. Covenants Regarding Patent and Trademark Collateral.
(a) Generally. At such time as the Debtor shall acquire any Patents or
Trademarks, it will comply with the terms, covenants and warranties of this
Section 4.19.
(b) Continued Use of Trademark. The Debtor (either itself or through licensees)
will, unless the Debtor shall reasonably determine, after consultation with the
Agent, that a Trademark is of negligible economic value to the Debtor, (i)
continue to use each Trademark on each and every Trademark class of goods
applicable to its current products and services as reflected in its current
catalogs, brochures and price lists in order to maintain each Trademark in full
force and free from any claim of abandonment for non-use, (ii) maintain as in
the past the quality of products and services offered under each Trademark,
(iii) employ each Trademark with the appropriate notice of registration, (iv)
not adopt or use any mark which is confusingly similar to a colorable imitation
of any Trademark and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(c) No Abandonment. The Debtor will not, unless the Debtor shall reasonably
determine, after consultation with the Agent, that a Patent is of negligible
economic value to the Debtor, do any act, or knowingly omit to do any act,
whereby any Patent may be abandoned or dedicated.
(d) Notice of Abandonment or Adverse Determinations. The Debtor shall notify the
Agent immediately if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in any
proceeding in the United States Patent and Trademark Office or any court of
tribunal in any country) regarding the Debtor's ownership of any Patent or
Trademark, its right to register the same or keep and maintain the same.
(e) Filings After Notice to Agent. In no event shall the Debtor, either itself
or through any agent, employee, licensee or designee, file an application for
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the Agent and, upon
request of the Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's security
interest in such Patent or Trademark and the goodwill and general intangibles of
the Debtor relating thereto or represented thereby, and the Debtor hereby
constitutes the Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all such acts of such attorney being hereby ratified
and confirmed.
(f) Pursuit of Applications and Maintenance of Registrations. The Debtor will
take all necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability; provided, however, that no such Patent or Trademark shall
be required to be maintained or pursued to the extent such Patent or Trademark
is determined by the Debtor, after consultation with the Agent, to be of
negligible economic value to the Debtor.
(g) Notice of Infringement. If any of the Patent and Trademark Collateral is
infringed, misappropriated or diluted by a third party, the Debtor shall
promptly notify the Agent after it learns thereof and shall, unless the Debtor
shall reasonably determine, after consultation with the Agent, that such Patent
and Trademark Collateral is of negligible economic value to the Debtor, promptly
sue for infringement, misappropriation of dilution, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation or dilution, or take such other action as the Debtor shall
reasonably deem appropriate under the circumstances to protect such Patent and
Trademark Collateral.
Section 4.20. Termination of Federal Contracts. With respect to each Federal
Contract in respect of which the Debtor is required to execute an Assignment of
Federal Contract in accordance with Section 4.21 hereof, the Debtor shall give
prompt written notice to the Agent if the U.S. Government shall terminate or
threaten to terminate (whether for convenience or default) any such Federal
Contract with the Debtor having a value (including unexercised options) of
$100,000 or more. In addition, the Debtor shall give prompt written notice to
the Agent if the U.S. Government shall terminate or threaten to terminate any
contract between the U.S. Government and any other prime contractor under which
the Debtor is a subcontractor if the value of such subcontract (including
unexercised options) is $100,000 or more. Section 4.21. Federal Contracts. The
Debtor shall provide to the Agent, as soon as reasonably practicable but not
later than forty-five (45) days following the end of each Fiscal Quarter, a
report identifying each Federal Contract to which it is a party, having attached
thereto a copy of the first two pages of such Federal Contract and any amendment
thereto, to the extent not previously provided to the Agent. At the request of
the Agent (unless an Event of Default shall have occurred and be continuing, in
which case no such request shall be required), the Debtor shall execute and
deliver to the Agent an Assignment of Federal Contract, in substantially the
form of Exhibit A hereto (the "Assignment of Federal Contract"), and execute any
other instruments or take any other steps required by the Agent in order that
all moneys due or to become due under such Federal Contracts shall be assigned
to the Agent and notice thereof given under the Assignment of Claims Act,
including without limitation delivery of Notices of Assignments with respect to
each Federal Contract as contemplated by Appendix A to Exhibit A hereto.
Section 4.22. Reimbursement Obligation. Should the Debtor fail to comply with
the provisions of this Security Agreement, the Revolving Credit Agreement or any
other agreement relating to the Collateral such that the value of any Collateral
or the validity, perfection, rank or value of any security interest granted to
the Agent hereunder or thereunder is thereby diminished or potentially
diminished or put at risk (as reasonably determined by the Agent), the Agent on
behalf of the Debtor may, but shall not be required to, effect such compliance
on behalf of the Debtor, and the Debtor shall reimburse the Agent for the cost
thereof on demand, and interest shall accrue on such reimbursement obligation
from the date the relevant costs are incurred until reimbursement thereof in
full at the Default Rate.
ARTICLE V.
REMEDIES; RIGHTS UPON DEFAULT
Section 5.01. UCC Rights. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the Revolving Credit
Agreement or other Credit Documents and such Obligations have not been paid in
full, the Agent may in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
guarantying, evidencing or relating to the Obligations, exercise (i) all rights
and remedies of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and (ii) all other rights
available to the Agent at law or in equity.
Section 5.02. Payments on Collateral. Without limiting the rights of the
Agent under any other provision of this Security Agreement, if an Event of
Default shall occur and be continuing:
(i) all payments received by the Debtor under or in connection with any of the
Collateral shall be held by the Debtor in trust for the Agent, shall be
segregated from other funds of the Debtor and shall forthwith upon receipt by
the Debtor be turned over to the Agent, in the same form as received by the
Debtor (duly indorsed by the Debtor to the Agent, if required to permit
collection thereof by the Agent); and
(ii) all such payments received by the Agent (whether from the Debtor or
otherwise) may, in the sole discretion of the Agent, be held by the Agent as
collateral security for, and/or then or at any time thereafter applied in whole
or in part by the Agent to the payment of, the expenses and the Obligations as
set forth in Section 5.11 hereof.
Section 5.03. Possession of Collateral. In furtherance of the foregoing, the
Debtor expressly agrees that, if an Event of Default shall occur and be
continuing, the Agent may (i) by judicial powers, or without judicial process if
it can be done without breach of the peace, enter any premises where any of such
Collateral is or may be located and, without charge or liability to the Agent,
seize and remove such Collateral from such premises and (ii) have access to and
use of the Debtor's books and records relating to such Collateral.
Section 5.04. Sale of Collateral; Notice.
(a) Sale of Collateral. The Debtor expressly agrees that if an Event of Default
shall occur and be continuing, the Agent, without demand of performance or other
demand or notice of any kind (except the notice specified below of the time and
place of any public or private sale) to or upon the Debtor or any other Person
(all of which demands and/or notices are hereby waived by the Debtor), may
forthwith (i) apply the cash, if any, then held by it as collateral as specified
in Section 5.11 hereof and (ii) if there shall be no cash or such cash shall be
insufficient to pay the Obligations in full, collect, receive, appropriate and
realize upon the Collateral, and/or sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral (or contract to do
so) or any part thereof in one or more parcels (which need not be in round lots)
at public or private sale, at any office of the Agent or elsewhere in such
manner as is commercially reasonable and, as the Agent may deem best, for cash
or on credit or for future delivery without assumption of any credit risk. The
Agent shall have the right upon any such public sale, and, if the Collateral is
of a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Debtor waives all claims,
damages and demands against the Agent arising out of the foreclosure,
repossession, retention or sale of the Collateral.
(b) Notice of Sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent shall give
the Debtor ten (10) days' written notice of its intention to make any such
public or private sale or sale at a broker's board or on a securities exchange.
Such notice shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof being sold,
will first be offered for sale and (iii) in the case of a private sale, state
the day after which such sale may be consummated. The Agent shall not obligated
to make any such sale pursuant to any such notice. The Agent may adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In the case of any
sale of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling price is paid
by the purchaser thereof, but the Agent shall not incur any liability in case of
the failure of such purchase to take up and pay for the Collateral so sold and,
in the case of such failure, such Collateral may again be sold upon like notice.
(c) Special Provisions Relating to Sales of Securities. The Debtor recognizes
that the Agent may be unable to effect a public sale of any or all the
Collateral constituting a "security" (as such term is defined in the Securities
Act) by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers that will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. The Debtor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Agent
shall be under no obligation to delay a sale of any of Collateral constituting a
security for the period of time necessary to permit the issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such issuer would agree to do so.
Section 5.05. Rights of Purchasers. Upon any sale of the Collateral (whether
public or private), the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agent) at any such sale shall hold the Collateral so sold
absolutely, free from any claim or right of whatever kind, including any equity
or right of redemption of the Debtor who, to the extent permitted by law, hereby
specifically waives all rights of redemption, including, without limitation, any
right to redeem the Collateral under Section 9-506 of the UCC, and any right to
a judicial or other stay or approval which it has or may have under any law now
existing or hereafter adopted.
Section 5.06. Additional Rights of the Agent.
(a) Right to Maintain Proceedings. The Agent (i) shall have the right and power
to institute and maintain such suits and proceedings as it may deem appropriate
to protect and enforce the rights vested in it by this Security Agreement and
(ii) may proceed by suit or suits at law or in equity to enforce such rights and
to foreclose upon the Collateral and to sell all or, from time to time, any of
the Collateral under the judgment or decree of a court of competent
jurisdiction.
(b) Appointment of Receiver. The Agent shall, to the extent permitted by
applicable law, without notice to the Debtor to any party claiming through the
Debtor, without regard to the solvency or insolvency at such time of any Person
then liable for the payment of any of the Obligations, without regard to the
then value of the Collateral and without requiring any bond from any complainant
in such proceedings, be entitled as a matter of right to the appointment of a
receiver or receivers (who may be the Agent) of the Collateral or any part
thereof, pending such proceedings, with such powers as the court making such
appointment shall confer, and to the entry of an order directing that the
profits, revenues and other income of the property constituting the whole or any
part of the Collateral be segregated, sequestered and impounded for the benefit
of the Agent, and the Debtor irrevocably consents to the appointment of such
receiver or receivers and to the entry of such order.
(c) No Duty to Exercise Rights. In no event shall the Agent have any duty to
exercise any rights or take any steps to preserve the rights of the Agent in the
Collateral, nor shall the Agent be liable to the Debtor or any other Person for
any loss caused by the Agent's failure to meet any obligation imposed by Section
9-207 of the UCC or any successor provision. Without limiting the foregoing, the
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have any duty or responsibility for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
Section 5.07. Remedies Not Exclusive, etc.
(a) Remedies Not Exclusive. No remedy conferred upon or reserved to the Agent in
this Security Agreement is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law, in
equity or by statute.
(b) Restoration of Rights. If the Agent shall have proceeded to enforce any
right, remedy or power under this Security Agreement and the proceeding for the
enforcement thereof shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Agent, the Debtor and the Agent
shall, subject to any determination in such proceeding, severally and
respectively be restored to their former positions and rights under this
Security Agreement, and thereafter all rights, remedies and powers of the Agent
shall continue as though no such proceedings had been taken.
(c) Enforcement. All rights of action under this Security Agreement may be
enforced by the Agent without the possession of any instrument evidencing any
Obligation or the production thereof at any trial or other proceeding relative
thereto, and any suit or proceeding instituted by the Agent shall be brought in
its name and any judgment shall be held as part of the Collateral.
Section 5.08. Waiver and Estoppel.
(a) No Actions to Impede Sale of Collateral. The Debtor agrees, to the extent it
may lawfully do so, that it will not at any time in any manner whatsoever claim
or take the benefit or advantage of any appraisal, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force which may delay, prevent or otherwise affect the performance or
enforcement of this Security Agreement, and hereby waives all benefit or
advantage of all such laws. The Debtor covenants that it will not hinder, delay
or impede the execution of any power granted to the Agent in this Security
Agreement, any Assignment of Federal Contract or any other Credit Document.
(b) Collateral Sold As An Entirety. The Debtor, to the extent it may lawfully do
so, on behalf of itself and all who claim through or under it, including without
limitation any and all subsequent creditors, vendees, assignees and lienors,
waives and releases all rights to demand or to have any marshalling of the
Collateral upon any sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or under any foreclosure or any enforcement of
this Security Agreement, and consents and agrees that all of the Collateral may
at any such sale be offered and sold as an entirety.
(c) Waiver of Notices. The Debtor waives, to the extent permitted by law,
presentment, demand, protest and any notice of any kind (except the notices
expressly required hereunder) in connection with this Security Agreement and any
action taken by the Agent with respect to the Collateral.
Section 5.09. Power of Attorney; Powers Coupled With An Interest.
(a) Power of Attorney. Without limiting any other right granted hereunder, the
Debtor hereby irrevocably constitutes and appoints the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Agent's reasonable
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purpose of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives the Agent the power and right, on behalf of the Debtor,
without notice to or assent by the Debtor, to do the following:
(i) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(ii) to effect any repairs or any insurance called for by the terms of this
Security Agreement or any other Credit Document, and to pay all or any part of
the premiums therefor and the costs thereof;
(iii) upon the occurrence and continuance of any Event of Default and otherwise
to the extent provided in this Security Agreement, (A) to direct any party
liable for any payment under any of the Collateral to make payment of any and
all moneys due and to come due thereunder directly to the Agent or as the Agent
shall direct, (B) to receive payment of and receipt for, and to demand and sue
for, any and all moneys, claims and other amounts due and to become due at any
time in respect of or arising out of the Collateral, (C) to sign and indorse and
receive, take, assign and deliver, any checks, notes, drafts, negotiable and
non-negotiable instruments, any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral, (D) to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding with respect
to, or in connection with, the Collateral, (E) to sell, transfer, assign or
otherwise deal in or with the Collateral or any part thereof, as fully and
effectively as if the Agent were the absolute owner thereof and (F) to do, at
its option, but at the expense of the Debtor, at any time or from time to time,
all acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in order
to effect the intent of this Security Agreement, all as fully and effectively as
the Debtor might do.
(b) Powers Coupled With an Interest. All authorizations and agencies granted or
provided herein with respect to the Collateral, including the powers granted
under clause (a) of this Section 5.9, are irrevocable and powers coupled with an
interest.
Section 5.10. Certain Provisions Relating to Securities. Solely with respect to
any Collateral constituting a "security" (as defined in the Securities Act), if
an Event of Default shall have occurred and be continuing, all such securities
(as defined in the Securities Act) constituting a part of the Collateral shall,
at the request of the Agent, be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (i) all voting,
corporate and other rights, powers and privileges pertaining to such Collateral
at any meeting of shareholders of the issuer thereof or otherwise, and (ii) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all such Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the structure of
any such issuer, or upon the exercise by the Debtor or the Agent of any right,
privilege or option pertaining to such Collateral, and in connection therewith,
the right to deposit and deliver any and all such Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine), all without liability except to account for
property actually received by it and except as provided in Section 5.6(c)
hereof, but the Agent shall have no duty to the Debtor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
Section 5.11. Application of Monies. The proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Agent in the following order of priority:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Agent and its agents and
counsel, and all expenses, liabilities and advances incurred or made by the
Agent, its agents and counsel in connection therewith or in connection with the
care, safekeeping or otherwise of any or all of the Collateral;
second, to payment of the Obligations, in such order as the Agent may
elect; and
third, any surplus then remaining shall be paid to the Debtor,
or its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same (including pursuant to Section 9-504(1)(C) of the UCC) or as a
court of competent jurisdiction may direct.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Notices. All notices, requests and other communications to a party
hereunder shall be in writing and shall be given to such party at its address
set forth on the signature page hereof or such other address as such party may
hereafter specify for that purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) in the case of telephonic
notice (to the extent expressly permitted hereunder), when made, (ii) in the
case of notice delivered by overnight express courier, one Business Day after
the Business Day such notice was delivered to such courier, (iii) in the case of
notice delivered by first class mail, three Business Days after being deposited
in the mail, postage prepaid, return receipt requested, (iv) in the case of
notice by hand, when delivered, or (v) in the case of notice by any customary
means of telecommunication, when sent provided confirmation of receipt or answer
back has been received, in each case if addressed to any party hereto as
provided herein. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect the
validity of notice given in accordance with this section.
Section 6.02. No Waiver; Cumulative Remedies. The Agent shall not by any act
(except by a written instrument pursuant to Section 6.3 hereof) be deemed to
have waived any right or remedy hereunder. No failure to exercise, nor any delay
in exercising, on the part of the Agent any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
Section 6.03. Amendments and Waivers. None of the terms or provisions of this
Security Agreement may be amended, supplemented or otherwise modified except by
a written instrument executed by the Debtor and the Agent; provided that any
provision of this Security Agreement may be waived by the Agent in a letter or
agreement executed by the Agent or by telex or facsimile transmission from the
Agent.
Section 6.04. Successors and Assigns. The provisions of this Security Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Debtor may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Agent.
Section 6.05. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA,
OTHER THAN ITS LAWS RESPECTING CHOICE OF LAW OTHER THAN THOSE CONTAINED IN
THE UCC.
Section 6.06. Limitation by Law; Severability.
(a) All rights, remedies and powers provided in this Security Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Security Agreement invalid, unenforceable in whole or in part,
or not entitled to be recorded, registered or filed upon the provisions of any
applicable law.
(b) If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
Section 6.07. Counterparts. This Security Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each complete set of which, when so executed and delivered by all parties, shall
be an original, but all such counterparts shall together constitute but one and
the same instrument.
Section 6.08. Expenses of the Agent. The Debtor shall pay to the Agent from time
to time upon demand, all of the costs and expenses incurred by the Agent or any
Lender (including, without limitation, the reasonable fees and disbursements of
counsel and any amounts payable by the Agent or any Lender to any of their
respective agents) (i) arising in connection with the administration,
modification, amendment, waiver or termination of this Security Agreement or any
document or agreement contemplated hereby or any consent or waiver hereunder or
thereunder or (ii) incurred in connection with the administration of this
Security Agreement, or any document or agreement contemplated hereby, or in
connection with the administration, sale or other disposition of Collateral
hereunder or under any document or agreement contemplated hereby or the
preservation, protection or defense of the rights of the Agent or any Lender in
and to the Collateral.
Section 6.09. Indemnification. The Debtor shall at all times hereafter
indemnify, hold harmless and, on demand, reimburse the Agent and the Lenders and
their respective subsidiaries, affiliates, successors, assigns, officers,
directors, employees and agents, and their respective heirs, executors,
administrators, successors and assigns (all of the foregoing parties, including,
but not limited to, the Agent, being hereinafter collectively referred to as the
"Indemnities" and individually as an "Indemnitee") from, against and for any and
all liabilities, obligations, claims, damages, actions, penalties, causes of
action, losses, judgments, suits, costs, expenses and disbursements, including,
without limitation, attorney's fees (any and all of the foregoing being
hereinafter collectively referred to as the "Liabilities" and individually as a
"Liability") which the Indemnitees, or any of them, might be or become
subjected, by reason of, or arising out of the preparation, execution, delivery,
modification, administration or enforcement of, or performance of the Agent's
rights under, this Security Agreement or any other document, instrument or
agreement contemplated hereby or executed in connection herewith; provided,
however, that the Debtor shall not be liable to any Indemnitee for any Liability
caused solely by the gross negligence or willful misconduct of such Indemnitee.
In no event shall any Indemnitee, as a condition to enforcing its rights under
this Section 6.9 or otherwise, be obligated to make a claim against any other
Person (including, without limitation, the Agent) to enforce its rights under
this Section 6.9.
Section 6.10. Termination; Survival. This Security Agreement shall terminate
when the security interests granted hereunder have terminated and the Collateral
has been released as provided in Section 2.6; provided, however, that the
obligations of the Debtor under Section 4.22 and the provisions of this Article
6 shall survive any such termination.
Section 6.11. Judicial Proceedings; Waiver of Jury Trial. Any judicial
proceeding brought against the Debtor with respect to any Credit Agreement
Related Claim hereby may be brought in any court of competent jurisdiction in
the Commonwealth of Virginia, County of Fairfax, or any Federal court in the
Eastern District of Virginia, and, by execution and delivery of this Security
Agreement, the Debtor (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with any Credit Agreement Related Claim and (b) irrevocably waives any objection
it may now or hereafter have as to the venue of any such proceeding brought in
such a court or that such a court is an inconvenient forum. The Debtor hereby
waives personal service of process and consents that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of Section 6.1
hereof, and service so made shall be deemed completed on the earlier of (x) the
receipt thereof and (y) if sent by registered or certified mail (return receipt
requested), the fifth (5th) Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the Agent to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Debtor in the courts of any other jurisdiction. Any
judicial proceeding by the Debtor against the Agent relating to or involving any
Credit Agreement Related Claim hereby shall be brought only in a court located
in the Commonwealth of Virginia, County of Fairfax, or the Federal court in the
Eastern District of Virginia. THE DEBTOR AND THE AGENT HEREBY UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING ANY CREDIT AGREEMENT RELATED CLAIM.
Section 6.12. Integration. This Security Agreement and the other Credit
Documents constitute the entire agreement of the Agent, the Lenders, the
Borrower and the other Credit Parties with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Credit
Documents.
Section 6.13. Authority of Agent. The Debtor acknowledges that the rights and
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Security Agreement shall, as between
the Agent and the Lenders, be governed by the Revolving Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Debtor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and the Debtor shall not be under any obligation,
or entitlement, to make any inquiry respecting such authority.
Section 6.14. Headings, Bold Type and Table of Contents. The section headings,
subsection headings, and bold type used herein and the Table of Contents hereto
have been inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Security Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
Address: THEODORE BARRY AND ASSOCIATES
515 S. Figueroa Street
Suite 1500
Los Angeles, CA 90071-3332 by: /s/ Karin Cropper__________________
Attention: Karin Cropper Name: Karin Cropper
Phone: (213) 689-0770 Title: Secretary and Treasurer
Fax: (213) 629-7580
Address: NATIONSBANK, N.A.
8300 Greensboro Drive
Suite 550 By: /s/ James W. Gaittens____
McLean, Virginia 22102 Name: James W. Gaittens
Attention: James W. Gaittens Title: Senior Vice President
Phone: (703) 761-8405
Fax: (703) 917-0519
<PAGE>
Schedule 3.4
THEODORE BARRY & ASSOCIATES
Place of Business
515 South Figueroa Street
Suite 1500
Los Angeles, California 90071-3332
<PAGE>
Schedule 3.5
THEODORE BARRY & ASSOCIATES
Location of Collateral
1. 515 South Figueroa Street
Suite 1500
Los Angeles, California 90071-3332
2. 50 Rockefeller Plaza
Suite 1035
New York, New York 10020-1605
3. 6133 North River Road
Suite 310
Rosemont, Illinois 60018-5178
<PAGE>
Schedule 3.6
THEODORE BARRY & ASSOCIATES
Trade/Division Names
TB&A
TB&A Consulting
Theodore Barry
Theodore Barry & Associates
<PAGE>
Schedule 3.7
THEODORE BARRY & ASSOCIATES
Primary Collateral Locations
Location at which all Receivables now owing to the Debtor were originated:
515 South Figueroa Street
Suite 1500
Los Angeles, California 90071-3332
See Schedule 3.5 for locations at which Equipment and Inventory now owned by the
Debtor.
<PAGE>
Schedule 3.8
THEODORE BARRY & ASSOCIATES
Patents and Trademarks
Benchmarking Studies and Associated Database
TB&A Utility SurveySM
<PAGE>
Schedule 4.1
THEODORE BARRY & ASSOCIATES
UCC FILINGS
INTENTIONALLY DELETED
<PAGE>
7
Exhibit A to
Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __
(the "Agreement"), is made by THEODORE BARRY AND ASSOCIATES, a California
corporation (the "Assignor"), in favor of NATIONSBANK, N.A., a national banking
association (the "Agent"), in its capacity as Agent for the lenders from time to
time a party to the Revolving Credit Agreement (as defined in the Security
Agreement referred to below).
W I T N E S S E T H:
WHEREAS, the Assignor has secured certain obligations
undertaken by Hagler Bailly, Inc. pursuant to the provisions of a Security
Agreement, dated as of ___________________, ____ (as the same may be amended,
supplemented or otherwise modified from time to time, the "Security Agreement"),
by and between the Assignor and the Agent; and
WHEREAS, the Assignor is a party to, and from time to time
will become entitled to receive moneys under and by virtue of, a certain
contract with, involving or for the benefit of the United States of America or
any department, agency or instrumentality thereof (herein referred to as the
"Government"), designated as Contract Number _______ entered into by the
Assignor and the Government on ________ __, 19__ (which contract, together with
all additions, change orders, supplements, amendments, renewals, extensions, and
modifications thereto now or hereafter in effect, are hereinafter collectively
called the "Contract"); and
WHEREAS, pursuant to the Security Agreement, the Assignor has
undertaken to effectuate the assignment(s) and other actions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Assignor covenants and agrees as follows:
1. Incorporation By Reference. The provisions of the Security Agreement
are incorporated herein by reference, and the terms defined in the Security
Agreement are used herein with the same meanings.
2. Representations. The Assignor represents and warrants to the Agent
that (a) the Contract is legal, valid and binding on the Assignor and, to its
knowledge, the other parties thereto, is in full force and effect, and is not
evidenced by any chattel paper or instrument, (b) upon due filing of this
Agreement, together with a Notice of Assignment substantially in the form of
Appendix A hereto with the authorized representative, the execution and delivery
of this Agreement does not violate and is not in conflict with the provisions of
the Contract, (c) there has been no default on the part of the Assignor or any
other party to the Contract, (d) the Assignor has made no previous assignment of
the Contract to any person and knows of no fact or defense that will render the
moneys due or to be due thereunder uncollectible, (e) no financing statement
covering the Contract is on file in any public office except financing
statements in favor of the Agent, (f) no set-off or counterclaim to any moneys
due or to become due under the Contract exists on the date hereof, and no
agreement has been made with any person under which any deduction or discount
may be claimed, and (g) the address of the office where the Assignor keeps its
records concerning the Contract is ____________________.
3. Collateral. As security and collateral for the payment of all of the
Obligations (defined in the Security Agreement) and for performance of, and
compliance with, by the Assignor, all of the terms, covenants, conditions,
stipulations, and agreements contained in this Agreement and in the Security
Agreement, the Assignor hereby assigns to the Agent, and grants to the Agent a
lien on and security interest in, all moneys and claims for moneys now and
hereafter due and to become due to the Assignor under or by reason of the
Contract, together with all cash and non-cash proceeds thereof; provided,
however, that nothing contained herein shall impose upon the Agent any of the
obligations or liabilities of the Assignor under the Contract.
4. Covenants. Until payment and performance in full of the Obligations,
the Assignor covenants as follows:
(c) The Assignor shall place on any and all vouchers, invoices, or other
instruments demanding payment under the Contract the direction that such payment
is to be made to the Agent in accordance with Section 5 of this Agreement.
(d) The Assignor shall promptly upon request execute, acknowledge, and deliver
any notice, financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate, or other document as
the Agent may require in order to perfect, preserve, maintain, protect,
continue, and/or extend the assignment, lien, and security interest of the Agent
under this Agreement and its priority. The Assignor shall pay to the Agent on
demand all taxes, costs, and expenses incurred by the Agent in connection with
the preparation, execution, recording, and filing of any such document or
instrument mentioned aforesaid, and such taxes, costs, and expenses shall
constitute and become a part of the Obligations. A carbon, photographic, or
other reproduction of a security agreement or a financing statement is
sufficient as a financing statement.
(e) The Assignor shall fully, promptly, and faithfully comply with and perform
its obligations and duties under the Contract in accordance with the terms
thereof and will make no changes or amendments to the Contract or terminate or
cancel the Contract without the prior written consent of the Agent except as
permitted by the Security Agreement. In the event that any change, amendment,
termination or cancellation of the Contract is made or effected by the
Government, the Assignor will promptly notify the Agent thereof and promptly
furnish to the Agent a copy of any document or agreement evidencing any such
change, amendment, termination, or cancellation.
(f) The Assignor will promptly
(i) furnish to the Agent all information received by the Assignor affecting
the moneys due and to become due under the Contract,
(ii) inform the Agent of any delay in performance of, or claims made in
regard to, the Contract, and
(iii) notify the Agent in writing of the failure of any party to the Contract to
perform any of its obligations thereunder and any rejection of any performance
rendered by the Assignor under or in connection with the Contract.
(g) The Assignor will at all times keep accurate and complete records of
performance by the Assignor under the Contract, and the Agent and its agents
shall have the right, during normal business hours and upon reasonable advance
notice, to call at the place or places of business of the Assignor at intervals
to be determined by the Agent, and without hindrance or delay, to inspect,
audit, check, and make extracts from the books, records, journals, orders,
receipts, correspondence, and other data relating to the Contract or to any
other transactions between the parties hereto related to the Contract.
5. Payments. The Assignor hereby authorizes, empowers, and directs the
Government to draw all checks, drafts, or other instruments representing the
payments of money due the Assignor under the Contract (herein called the "Items
of Payment") to the order of NationsBank, N.A., assignee of Assignor, and to
send the same (i) if by mail, to , (ii) if by electronic transfer, to
NationsBank, N.A. for the account of ________________, Bank Account #__________,
Agent ABA#_________, or (iii) if by wire transfer, to NationsBank, N.A. for the
account of _________________________, Bank Account #_______, ABA#___________.
If, despite this direction, any instruments or checks representing payments
should be delivered to the Assignor, the Assignor will immediately endorse and
deliver such instruments or checks to the order of the Agent. The Assignor does
hereby irrevocably (subject to revocation with the consent of the Agent)
designate and appoint (which appointment is coupled with an interest) the Agent,
and the Agent's successors in interest by operation of law, the Assignor's true
and lawful attorney with power irrevocable for the Assignor and in the
Assignor's name, place, and stead, but at the sole cost and expense of the
Assignor, to receive, endorse, and collect all Items of Payment, and to ask,
demand, receive, receipt, and give acquittances for any and all amounts which
may be payable or which become due and payable by the Government under the
Contract, and in the Agent's discretion to file any claim or to take any other
action or proceeding, either in the Agent's own name or in the name of the
Assignor or otherwise, which to the Agent or any successor in interest thereof
may seem necessary or desirable in order to collect or endorse the payment of
any and all amounts now due or owing or which may hereafter be or become due or
owing on account of the Contract. All Items of Payment received by the Agent
pursuant hereto which are finally paid in cash or solvent credits shall be
applied against the Obligations as provided in the Security Agreement. Any
portion of the Items of Payment which the Agent elects not to so apply shall be
paid over to the Assignor or to whomsoever shall be entitled thereto under
applicable law, including pursuant to Section 9-504(1)(C) of the Uniform
Commercial Code of the Commonwealth of Virginia.
6. No Waiver. Neither this Agreement nor any term, condition,
representation, warranty, covenant, or agreement hereof may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing by the
party against whom such change, waiver, discharge, or termination is sought.
7. Governing law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
8. Gender. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders.
9. Counterparts. This Agreement may be executed in any number of
duplicate originals, each of which shall be an original but all of which
together shall constitute one and the same instrument.
10. Paragraph Headings. The paragraph headings of this Agreement are
for convenience only and shall not limit or define the provisions of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, Assignor and the Agent have caused this Agreement
to be duly executed and delivered by their respective representatives thereunto
duly authorized as of the date first above written.
THEODORE BARRY AND ASSOCIATES
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
NATIONSBANK, N.A.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
<PAGE>
Appendix A To
Assignment of Federal Contract
Notice of Assignment
Date: ____________
To: Contracting Officer
[Address]
Re: CONTRACT NUMBER ___________ (the "Contract") MADE BY THE UNITED STATES OF
AMERICA
By: Department of the [Applicable U.S. Government Agency]
[Address]
with [Name of Subsidiary] (the "Contractor")
[Address]
for manufacture and support of a [Brief description of
Subject of Contract]
dated _______________
PLEASE TAKE NOTICE that moneys due or to become due under the
Contract have been assigned to NationsBank, N.A. pursuant to the provisions of
the Assignment of Claims Act of 1940, as amended (31 USC ss. 3727 and 41 USC ss.
15). A true copy of the Assignment executed by the Contractor on the date hereof
(the "Assignment") is attached to the original of this Notice of Assignment.
Please file this original Notice of Assignment along with the copy of the
Assignment in the contract file for the Contract and forward one of the enclosed
copies of this Notice of Assignment to the current disbursing office for the
Contract.
Payments due or to become due under the Contract should be
made (i) if by mail, to NationsBank, N.A., ____________________, (ii) if by
electronic transfer, to NationsBank, N.A. for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to NationsBank, N.A. for the account of
__________________________, Bank Account #_________, ABA#_________.
Please return enclosed copies of this Notice of Assignment
with appropriate notations showing the date and hour of receipt, and duly signed
by the person acknowledging receipt on behalf of the addressee, to NationsBank,
N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102, Attention: James
W. Gaittens.
Very truly yours,
THEODORE BARRY AND ASSOCIATES
By: ________________________________
Name:
Title:
Receipt is hereby acknowledged of the above notice and a copy
of the above mentioned instrument of assignment. These were received at
_________[A.M.] [P.M.] on ______________________, 199__.
- ------------------------------------
Name:
Title:
on behalf of Contracting Officer
[Address]
EXHIBIT 10.42
- -------------------------------------------------------------------------------
SECURITY AGREEMENT
dated as of February 22, 1999
between
PHB HAGLER BAILLY, INC.,
as Debtor
and
NATIONSBANK, N.A.,
as Agent
------------------------------------------------------------------------
<PAGE>
27
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of February 22, 1999 (as
amended, supplemented or modified from time to time, the "Security Agreement"),
is made by PHB HAGLER BAILLY, INC., a Delaware corporation (the "Debtor"), and
NATIONSBANK, N.A., a national banking association (the "Agent") in its capacity
as Agent for the lenders (the "Lenders") from time to time a party to the
Revolving Credit Agreement, dated as of November 20, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Revolving Credit
Agreement"), by and among the Hagler Bailly, Inc., a Delaware corporation (the
"Company"), the Agent, in its capacity as such thereunder, and the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Revolving Credit Agreement, the
Lenders have severally agreed to make available to the Company a revolving line
of credit for Revolving Loans, Swing Line Loans and Standby Letters of Credit in
an aggregate principal amount at any time not to exceed the Maximum Available
Amount, subject to the terms and conditions contained therein;
WHEREAS, the Company has formed the Debtor for the purpose of
merging into the Debtor certain Domestic Subsidiaries of the Company, and the
Debtor shall be the surviving entity;
WHEREAS, the Company owns, directly or indirectly, all of the issued
and outstanding shares of capital of stock of the Debtor;
WHEREAS, upon the merger of certain Domestic Subsidiaries of
the Company into the Debtor, the Debtor shall constitute a Material Domestic
Subsidiary under the Revolving Credit Agreement;
WHEREAS, pursuant to the provisions of the Revolving Credit
Agreement, the Company is required to cause each of its Material Domestic
Subsidiaries to execute and deliver to the Agent, for the ratable benefit of the
Lenders, a Subsidiary Security Agreement, as more fully provided therein;
WHEREAS, the proceeds of such Revolving Loans, Swing Line
Loans and Standby Letters of Credit may be used to enable the Company to make
valuable transfers to the Debtor in connection with the operation of its
business and for the Permitted Uses;
WHEREAS, the Debtor will derive substantial direct and
indirect benefit from such Revolving Loans, Swing Line Loans and Standby Letters
of Credit; and
WHEREAS, the Debtor desires to enter into this Security Agreement for
the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and to induce the Lenders to make or maintain
their respective Revolving Loans and Swing Line Loans to, and the Issuing Lender
to issue or maintain the Standby Letters of Credit under the Revolving Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor hereby agrees with the
Agent, for the ratable benefit of the Lenders, as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions Generally. Capitalized terms used herein without
definition shall have the respective meanings specified in the Revolving Credit
Agreement, and the following terms shall have the following meanings (such
meanings to be, when appropriate, equally applicable to both the singular and
plural forms of the terms defined):
"Account Debtor" shall mean, with respect to any Receivable or
Other Intangible, any Person obligated to make payment thereunder, including
without limitation any account debtor thereon.
"Assignment of Claims Act" shall mean the Assignment of Claims Act of
1940, 31 U.S.C. 3727, 41 U.S.C. 15 (1986), as the same
may be amended and any successor statute of similar import.
"Assignment of Federal Contract" shall have the meaning
specified in Section 4.21 hereof.
"Cash Collateral Account" shall have the meaning specified in
Section 2.4 hereof.
"Collateral" shall have the meaning set forth in Section 2.1.
"Company" shall have the meaning specified in the preamble hereof.
"Debtor" shall have the meaning specified in the preamble hereof.
"Equipment" shall mean all equipment now owned or hereafter
acquired by the Debtor, including all items of machinery, equipment, furnishings
and fixtures of every kind, whether affixed to real property or not, as well as
all automobiles, trucks and vehicles of every description, trailers, handling
and delivery equipment, fittings, special tools, all additions to, substitutions
for, replacements of or accessions to any of the foregoing, all attachments,
components, parts (including spare parts) and accessories whether installed
thereon or affixed thereto and all fuel for any thereof.
"Federal Contract" means any contract or agreement with,
involving or for the benefit of the United States of America or any department,
agency or instrumentality thereof (collectively, the "U.S. Government"), whether
now existing or hereafter arising, in each case as the same may be amended,
modified or otherwise supplemented from time to time.
"Inventory" shall mean all inventory now owned or hereafter
acquired by the Debtor, including (i) all goods and other personal property
which are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
(ii) all inventory, wherever located, evidenced by negotiable and non-negotiable
documents of title, warehouse receipts and bills of lading, (iii) all of the
Debtor's rights in, to and under all purchase orders now owned or hereafter
received or acquired by it for goods or services and (iv) all rights of the
Debtor as an unpaid seller, including rescission, replevin, reclamation and
stopping in transit.
"Lenders" shall have the meaning specified in the preamble hereof.
"Obligations" shall mean any and all now existing or hereafter
arising indebtedness, obligations, liabilities and covenants of each Credit
Party to any Lender, the Agent, their respective Affiliates, successors and
assigns and any other Indemnified Person under or arising out of any Credit
Document, including without limitation (i) all Revolving Loans and all Swing
Line Loans together with interest thereon and all Standby Letters of Credit,
(ii) all fees, expenses, indemnity payments and other amounts due or to become
due under the Revolving Credit Agreement, the Revolving Notes, the Swing Line
Note or any other Credit Document, (iii) all liabilities and obligations under
the Subsidiary Guarantee and any other agreement executed by any Credit Party
guarantying the obligations of the Borrower under the Revolving Credit Agreement
or any other Credit Document, (iv) all liabilities and obligations under any
agreement providing collateral for any of the foregoing (including any Pledge
Agreement and the Subsidiary Security Agreements), and (v) and any agreement or
instrument refinancing or restructuring all or any portion of the obligations
and liabilities under any of foregoing or under any successor agreement or note,
in each case whether direct or indirect, absolute or contingent or due or to
become due.
"Other Intangibles" shall mean all accounts, accounts
receivable, contract rights, documents, instruments, notes, chattel paper,
money, indemnities, warranties and general intangibles now owned or hereafter
acquired by the Debtor including, without limitation, all goodwill, customer
lists, permits, federal and state tax refunds, reversionary interests in pension
plan assets, Patents, Trademarks, licenses, copyrights and other rights in
intellectual property, other than Receivables.
"Patents" shall mean all letters patent of the United States
or any other country, and all applications for letters patent of the United
States or any other country, in which the Debtor may now or hereafter have any
right, title or interest and all reissues, continuations, continuations-in-part
or extensions thereof.
"Proceeds" shall mean all proceeds, including (i) whatever is
received upon any collection, exchange, sale or other disposition of any of the
Collateral and any property into which any of the Collateral is converted,
whether cash or non-cash, (ii) any and all payments or other property (in any
form whatsoever) made or due and payable on account of any insurance, indemnity,
warranty or guaranty payable to the Debtor with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever) made or due and
payable in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person, corporation, agency, authority or
other entity acting under color of any governmental authority) and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables" shall mean all accounts now or hereafter owing
to the Debtor, and all accounts receivable, contract rights, documents,
instruments or chattel paper representing amounts payable or monies due or to
become due to the Debtor, arising from the sale of Inventory or the rendition of
services in the ordinary course of business or otherwise (whether or not earned
by performance), together with all Inventory returned by or reclaimed from
customers wherever such Inventory is located, and all guaranties, securities and
liens held for the payment of any such account, account receivable, contract
right, document, instrument or chattel paper.
"Security Agreement" shall have the meaning specified in the preamble
hereof.
"Trademarks" shall mean all right, title or interest which the
Debtor may now or hereafter have in any or all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source of business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and all applications in
connection therewith, including without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or political subdivision thereof and all reissues, extensions or
renewals thereof.
"UCC" shall mean the Uniform Commercial Code in effect on the
date hereof in the Commonwealth of Virginia.
"U.S. Government" has the meaning specified in the definition of
Federal Contract contained herein.
Section 1.02. UCC Definitions. The uncapitalized terms "account", "account
debtor", "chattel paper", "contract right", "document", "warehouse receipt",
"bill of lading", "document of title", "instrument", "inventory", "general
intangible", "money", "security", "certificated security", "uncertificated
security", "financial asset" and "proceeds" as used in Section 1.1 or elsewhere
in this Security Agreement shall have the respective meanings set forth in the
UCC.
ARTICLE II.
SECURITY INTERESTS
Section 2.01. Grant of Security Interests. To secure the due and punctual
payment of all Obligations, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing or due or
to become due, whether at maturity or upon acceleration or otherwise, in
accordance with the terms thereof and to secure the due and punctual performance
of all of the Obligations and in order to induce the Lenders to continue to make
or maintain the extensions of credit under and pursuant to the Revolving Credit
Agreement, the Debtor hereby pledges, assigns, delivers, conveys and transfers
to the Agent, for the ratable benefit of the Lenders, and grants to the Agent,
for the ratable benefit of the Lenders, a first priority and continuing security
interest in and lien on, all of the Debtor's right, title and interest in, to
and under the following, whether now existing or hereafter acquired (the
"Collateral"):
(i) all Receivables;
(ii) all Other Intangibles;
(iii) all Equipment;
(iv) all Inventory;
(v) to the extent not included in the foregoing, all securities (whether
certificated or uncertificated) and all financial assets, whether now existing
or hereafter arising, including, without limitation, all capital stock issued by
any Person and held by Debtor, and all partnership interests, whether in the
nature of a joint venture, limited liability company member's interest, master
limited partnership, teaming arrangement or otherwise;
(vi) to the extent not included in the foregoing, all other personal property,
whether tangible or intangible, and wherever located whether within or outside
of the United States, including, but not limited to, the balance of every
deposit account now or hereafter existing of the Debtor with any bank or other
financial institution and all monies of the Debtor and all rights to payment of
money of the Debtor;
(vii) to the extent not included in the foregoing, all books, ledgers and
records and all computer programs, tapes, discs, punch cards, data processing
software, transaction files, master files and related property and rights
(including computer and peripheral equipment) necessary or helpful in enforcing,
identifying or establishing any item of Collateral; and
(viii) to the extent not otherwise included, all Proceeds and products of any or
all of the foregoing, whether existing on the date hereof or arising hereafter;
provided, however, notwithstanding anything to the contrary contained herein,
the Debtor is not assigning, pledging or otherwise encumbering under this
Security Agreement its interests in any Federal Contract to which it is a party,
or in accounts or receivables due to Debtor under such Federal Contract, to the
extent, but only to the extent, such assignment, pledge or other encumbrance
would breach or violate or would cause Debtor to breach or violate such Federal
Contract or statutes or regulations applicable thereto, it being understood that
this proviso does not apply to, or in any way limit, Debtor's assignment, pledge
or encumbrance of Proceeds of all Federal Contracts to which it is a party.
Section 2.02. Continuing Liability of the Debtor. Anything herein to the
contrary notwithstanding, the Debtor shall remain liable to observe and perform
all the terms and conditions to be observed and performed by it under any
contract, agreement, warranty or other obligation with respect to the
Collateral; and shall do nothing to impair the security interests herein
granted. The Agent shall not have any obligation or liability under any such
contract, agreement, warranty or obligation by reason of or arising out of this
Security Agreement or the receipt by the Agent of any payment relating to any
Collateral, nor shall the Agent be required to perform or fulfill any of the
obligations of the Debtor with respect to the Collateral, to make any inquiry as
to the nature or sufficiency of any payment received by it or the sufficiency of
the performance of any party's obligations with respect to any Collateral.
Furthermore, the Agent shall not be required to file any claim or demand to
collect any amount due or to enforce the performance of any party's obligations
with respect to, the Collateral.
Section 2.03. Sales and Collections.
(a) Sales of Inventory in the Ordinary Course of Business. The Debtor is
authorized (i) to sell in the ordinary course of its business for fair value and
on an arm's-length basis any of its Inventory normally held by it for such
purpose and (ii) to use and consume, in the ordinary course of its business, any
raw materials, supplies and materials normally held by it for such purpose. The
Agent may, upon the occurrence of any Event of Default, without cause or notice,
curtail or terminate such authority at any time.
(b) Collection of Receivables. The Debtor is authorized to collect amounts owing
to it with respect to the Collateral, except as otherwise provided in connection
with the Assignment of Federal Contract, if any as provided herein. However, the
Agent may, upon and during the continuance of an Event of Default or a Potential
Event of Default, notify Account Debtors obligated to make payments under any or
all Receivables or Other Intangibles that the Agent has a security interest in
such Collateral and that payments shall be made directly to the Agent. Upon the
request of the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default, as the case may be, the Debtor will so notify such
Account Debtors and will execute such contract assignments, notices of
assignment or other documents as may be required by such Account Debtors. The
Debtor will use all reasonable efforts to cause each Account Debtor to comply
with the foregoing instruction. In furtherance of the foregoing, the Debtor
authorizes the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default (i) to ask for, demand, collect, receive and give
acquittances and receipts for any and all amounts due and to become due under
any Collateral and in the name of the Debtor or its own name or otherwise, (ii)
to take possession of, endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under any
Collateral and (iii) to file any claim or take any other action in any court of
law or equity or otherwise which it may deem appropriate for the purpose of
collecting any amounts due under any Collateral. The Agent shall have no
obligation to obtain or record any information relating to the source of such
funds or the obligations in respect of which payments have been made.
Section 2.04. Segregation of Proceeds.
(a) Cash Collateral Account Maintained by Agent. Upon an Event of Default or a
Potential Event of Default, the Agent shall have the right at any time during
the continuance thereof to cause to be opened and maintained at the office of
the Agent in McLean, Virginia a non-interest bearing bank account (the "Cash
Collateral Account") which will contain only Proceeds. Any "cash proceeds" (as
such term is defined in Section 9-306(1) of the UCC) received by the Agent
directly from Account Debtors obligated to make payments under Receivables or
Other Intangibles pursuant to Section 2.3 hereof or from the Debtor pursuant to
clause (b) of this Section 2.4, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper or other Proceeds received on
account of any Collateral, shall be promptly deposited in the Cash Collateral
Account, and until so deposited shall be held in trust for the Agent as property
of the Agent and shall not be commingled with any funds of the Debtor not
constituting Proceeds of Collateral. The name in which the Cash Collateral
Account is carried shall clearly indicate that the funds deposited therein are
the property of the Debtor, subject to the security interest of the Agent
hereunder. Such Proceeds, when deposited, shall continue to be security for the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Agent shall have sole dominion and control over the
funds deposited in the Cash Collateral Account, and such funds may be withdrawn
therefrom only by the Agent.
(b) Deposit of Proceeds by the Debtor. Upon notice by the Agent to the Debtor
that the Cash Collateral Account has been opened, the Debtor shall cause all
cash Proceeds collected by it to be delivered to the Agent forthwith upon
receipt, in the original form in which received (with such endorsements or
assignments as may be necessary to permit collection thereof by the Agent), and
for such purpose the Debtor hereby irrevocably authorizes and empowers the
Agent, its officers, employees and authorized agents to endorse and sign the
name of the Debtor on all checks, drafts, money orders or other media of payment
so delivered, and such endorsements or assignments shall, for all purposes, be
deemed to have been made by the Debtor prior to any endorsement or assignment
thereof by the Agent. The Agent may use any convenient or customary means for
the purpose of collecting such checks, drafts, money orders or other media of
payment.
Section 2.05. Verification of Receivables. The Agent shall have the right to
make test verifications of Receivables in any reasonable manner and through any
medium that it considers advisable, and the Debtor agrees to furnish all such
assistance and information as the Agent may reasonably require in connection
therewith. The Debtor at its expense will cause its chief financial officer to
furnish to the Agent at any reasonable time and from time to time, promptly upon
the Agent's reasonable request, the following reports: (i) a reconciliation of
all Receivables, (ii) an aging of all Receivables, (iii) trial balances and (iv)
a test verification of such Receivables as the Agent may request.
Section 2.06. Release of Collateral.
(a) Security Interest of Agent Ceases Upon Permitted Dispositions. The Debtor
may sell or realize upon or transfer or otherwise dispose of Collateral only to
the extent permitted by Section 4.13, and the security interests of the Agent in
such Collateral so sold, realized upon or disposed of (but not in the Proceeds
arising from such sale, realization or disposition) shall cease immediately upon
such sale, realization or disposition, without any further action on the part of
the Agent. The Agent, if requested in writing by the Debtor but at the expense
of the Debtor, is hereby authorized and instructed to deliver to the Account
Debtor or the purchaser or other transferee of any such Collateral a certificate
stating that the Agent no longer has a security interest therein, and such
Account Debtor or such purchaser or other transferee shall be entitled to rely
conclusively on such certificate for any and all purposes.
(b) Filing of Termination Statements. Upon the payment in full of all of the
Obligations and if there is no commitment by any Lender to make further
advances, incur obligations or otherwise give value, the Agent will (as soon as
reasonably practicable after receipt of notice from the Debtor requesting the
same but at the expense of the Debtor) deliver to the Debtor (i) for each
jurisdiction in which a UCC financing statement is on file to perfect the
security interests granted to the Agent hereunder, a termination statement
(appropriately completed) to the effect that the Agent no longer claims a
security interest under such financing statement, and (ii) such other documents
as the Debtor shall reasonably request evidencing satisfaction of the
Obligations and the release of the security interests granted to the Agent
hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants that:
Section 3.01. Title to Collateral. Except for the security interests granted to
the Agent pursuant to this Security Agreement and as otherwise permitted by
Section 6.2(a) of the Revolving Credit Agreement, the Debtor is the sole owner
of each item of the Collateral, having good and marketable title thereto, free
and clear of any and all Liens.
Section 3.02. Validity, Perfection and Priority of Security Interests.
(a) By complying with Section 4.1 hereof, the Debtor will have created a valid
security interest in favor of the Agent in all existing Collateral and in all
identifiable Proceeds of such Collateral, which security interest (except in
respect of Collateral not located at a facility identified on Schedule 3.7
hereto and motor vehicles for which the exclusive manner of perfecting a
security interest therein is by noting such security interest in the certificate
of title in accordance with local law) would be prior to the claims of a trustee
in bankruptcy under Section 544(a) of the Bankruptcy Code. Continuing compliance
by the Debtor with the provisions of Section 4.2 hereof will also (i) create
valid security interests in all Collateral acquired after the date hereof and in
all identifiable Proceeds of such Collateral and (ii) cause such security
interests in all Collateral and in all Proceeds which are (A) identifiable cash
Proceeds of Collateral covered by financing statements required to be filed
hereunder, (B) identifiable Proceeds in which a security interest may be
perfected by such filing under the UCC and (C) any Proceeds in the Cash
Collateral Account to be duly perfected under the UCC, in each case prior to the
claims of a trustee in bankruptcy under the Bankruptcy Code (except in respect
of Collateral not located at a facility identified on Schedule 3.5 hereto).
(b) The security interests of the Agent in the Collateral located at the
facilities identified on Schedule 3.5 hereto rank first in priority. Other than
financing statements or other similar documents perfecting the security
interests in favor of the Agent, no financing statements, deeds of trust,
mortgages or similar documents covering all or any part of the Collateral are on
file or of record in any government office in any jurisdiction in which such
filing or recording would be effective to perfect a security interest in such
Collateral, nor is any of the Collateral in the possession of any Person (other
than the Debtor) asserting any claim thereto or security interest therein.
Section 3.03. Enforceability of Receivables and Other Intangibles. To the best
knowledge of the Debtor, each Receivable and Other Intangible is a valid and
binding obligation of the related Account Debtor in respect thereof, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
provisions of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and complies with any applicable legal
requirements.
Section 3.04. Place of Business. Schedule 3.4 correctly sets forth the chief
executive office and principal place of business of the Debtor and the offices
of the Debtor where records concerning Receivables and Other Intangibles are
kept.
Section 3.05. Location of Collateral. Schedule 3.5 correctly sets forth the
location of all Equipment and Inventory, other than rolling stock, aircraft and
goods in transit. Except as otherwise specified in Schedule 3.5, all Inventory
and Equipment has been located at the address specified on Schedule 3.5 at all
times during the four-month period prior to the date hereof while owned by the
Debtor. All Inventory has been and will be produced in compliance with the Fair
Labor Standards Act, 29 U.S.C. ss.ss. 201-219, except for such non-compliance
which could not reasonably be expected to have a material adverse effect on the
Debtor. No Inventory is evidenced by a negotiable document of title, warehouse
receipt or bill of lading. No non-negotiable document of title, warehouse
receipt or bill of lading has been issued to any person other than the Debtor,
and the Debtor has retained possession of all of such non-negotiable documents,
warehouse receipts and bills of lading. No amount payable under or in connection
with any of the Collateral is evidenced by promissory notes or other
instruments.
Section 3.06. Trade Names. Schedule 3.6 correctly sets forth any and all trade
names, division names, assumed names or other names under which the Debtor
currently transacts business or has transacted business within the four-month
period prior to the date hereof.
Section 3.07. Patents and Trademarks. Schedule 3.7 correctly sets
forth all Patents, Patent licenses, Trademarks and Trademark licenses
now owned by the Debtor.
ARTICLE IV.
COVENANTS
The Debtor covenants and agrees that until all obligations and
liabilities in respect of the Obligations shall have performed and paid in full
and until no Standby Letters of Credit are outstanding or fully cash
collateralized and the Commitments are terminated:
Section 4.01. Perfection of Security Interests. The Debtor will, at its expense,
cause all filings and recordings and other actions specified on Schedule 4.1 to
have been completed on or prior to the Effective Date.
Section 4.02. Further Actions.
(a) At all times after the date hereof, the Debtor will, at its expense, comply
with the following:
(i) as to all Receivables, Other Intangibles, Equipment and Inventory, it will
cause UCC financing statements and continuation statements to be filed and to be
on file in all applicable jurisdictions as required to perfect the security
interests granted to the Agent hereunder, to the extent that applicable law
permits perfection of a security interest by filing under the UCC;
(ii) as to all Proceeds, it will cause all UCC financing statements and
continuation statements filed in accordance with clause (i) above to include a
statement or a checked box indicating that Proceeds of all items of Collateral
described herein are covered;
(iii) as to any amount payable under or in connection with any of the Collateral
which shall be or shall become evidenced by any promissory note or other
instrument, the Debtor will promptly (but in no event later than ten (10)
Business Days after receipt of such note or instrument), pledge and deliver such
note or other instrument to the Agent as part of the Collateral, duly endorsed
in a manner reasonably satisfactory to the Agent;
(iv) at the request of the Agent, the Debtor shall deliver all other Collateral
consisting of certificated securities, endorsed for transfer in a manner
reasonably satisfactory to the Agent (or execute a securities intermediary
account control agreement to the extent possession by the Agent of such
securities is not feasible); and
(v) as to all Patents, Patent licenses, Trademarks or Trademark licenses, the
Debtor will effect the recordation or renewal of the recordation of the security
interests of the Agent therein so as to maintain valid and perfected security
interests therein under all applicable state and federal laws.
(b) Further Assurances. The Debtor will, from time to time and at its expense,
execute, deliver, file or record such UCC financing statements, applications for
certificates of title and such other statements, assignments, instruments,
documents, agreements or other papers and take any other action that may be
necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect, confirm or validate the security interest of the
Agent in the Collateral, to enable the Agent to obtain the full benefits of this
Security Agreement or to enable it to exercise and enforce any of its rights,
powers and remedies hereunder, including, without limitation, its right to take
possession of the Collateral.
(c) Signature. To the fullest extent permitted by law, the Debtor authorizes the
Agent to sign and file financing and continuation statements and amendments
thereto with respect to the Collateral without its signature thereon.
Section 4.03. Change of Name, Identity or Structure. The Debtor will not change
its name, identity or corporate structure in any manner and, except as set forth
on Schedule 3.6, will not conduct its business under any trade, assumed or
fictitious name unless it shall have given the Agent at least forty-five (45)
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend any financing statement or continuation
statement relating to the security interests granted hereby in order to preserve
such security interests and to effectuate or maintain the priority thereof
against all Persons.
Section 4.04. Place of Business and Collateral. The Debtor will not change the
location of (i) its places of business, (ii) its chief executive office or (iii)
the office or other locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location listed on Schedule 3.4 or
3.5 unless, prior to such change, it notifies the Agent forty-five (45) days in
advance of such change, makes all UCC filings required by Section 4.2 and takes
all other action necessary or that the Agent may reasonably request to preserve,
perfect, confirm and protect the security interests granted hereby. The Debtor
will in no event change the location of any Collateral if such change would
cause the security interest granted hereby in such Collateral to lapse or cease
to be perfected. The Debtor will at all times maintain its chief executive
office within one of the forty-eight contiguous states in which Article 9 of the
uniform commercial code is in effect.
Section 4.05. Fixtures. The Debtor will not permit any Equipment to become a
fixture unless it shall have given the Agent at least ten (10) days' prior
written notice thereof and shall have taken all such action and delivered or
caused to be delivered to the Agent all instruments and documents, including,
without limitation, waivers and subordination agreements by any landlords and
mortgagees, and filed all financing statements necessary or reasonably requested
by the Agent, to preserve and protect the security interest granted herein and
to effectuate or maintain the priority thereof against all Persons; provided,
however, that, so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing, the Debtor shall not be obligated to
comply with the provisions of this Section 4.5 with respect to the first $50,000
of Equipment (determined based on the then fair market value thereof).
Section 4.06. Maintenance of Records. The Debtor will keep and maintain at its
own cost and expense complete books and records relating to the Collateral which
are satisfactory to the Agent including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral and all
of its other dealings with the Collateral. The Debtor will mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Agent' further security, the Debtor
agrees that the Agent shall have a special property interest in all of the
Debtor's books and records pertaining to the Collateral and the Debtor shall
deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent.
Section 4.07. Compliance with Laws The Debtor will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any government or any state or local government applicable to the Collateral or
any part thereof or to the operation of the Debtor's business except to the
extent that the failure to comply would not have a material adverse effect on
the financial or other condition of the Debtor; provided, however, that the
Debtor may contest any act, rule, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the Agent, adversely
affect the Agent's rights or, in the case of Collateral located at a facility
identified on Schedule 3.7 hereto, the first priority of its security interest
in the Collateral.
Section 4.08. Payment of Taxes. The Debtor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no such charge
need be paid if (i) the validity thereof is being contested in good faith by
appropriate proceedings and (ii) such charge is adequately reserved against in
accordance with generally accepted accounting principles, as consistently
applied.
Section 4.09. Compliance with Terms of Accounts and Contracts. The Debtor will
perform and comply in all material respects with all of its obligations under
all agreements relating to the Collateral to which it is a party or by which it
is bound.
Section 4.10. Limitation on Liens on Collateral. The Debtor will not create,
permit or suffer to exist, and will defend the Collateral and the Debtor's
rights with respect thereto against and take such other action as is necessary
to remove any Lien, security interest, encumbrance, or claim in or to the
Collateral other than the security interests created hereunder and such Liens to
the extent permitted pursuant to Section 6.2(a) of the Revolving Credit
Agreement.
Section 4.11. Limitations on Modifications of Receivables and Other Intangibles;
No Waivers or Extensions. The Debtor will not (i) amend, modify, terminate or
waive any provisions of any material Receivable or Other Intangible in any
manner which might, when taken together with all such other Receivables or Other
Intangibles, respectively, materially reduce the value of all Receivables or
Other Intangibles, respectively, in the Collateral, (ii) fail to exercise
promptly and diligently each and every material right which it may have under
each Receivable and Other Intangible or (iii) fail to deliver to the Agent a
copy of each material demand, notice or document received by it relating in any
way to any Receivable or Other Intangible.
Section 4.12. Maintenance of Insurance. The Debtor will maintain with
financially sound insurance companies licensed to do business in the
jurisdictions in which the Collateral is located insurance policies on the
Inventory and Equipment in accordance with the provisions of Section 6.1(m) of
the Revolving Credit Agreement.
Section 4.13. Limitations on Dispositions of Collateral. The Debtor will not
directly or indirectly (through the sale of stock, merger or otherwise), without
the prior written consent of the Agent, sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (i) sales of Inventory in the ordinary course of its business for fair value
in arm's-length transactions and (ii) so long as no Event of Default (or
Potential Event of Default) has occurred and is continuing, dispositions in a
commercially reasonable manner of Equipment which has become redundant, worn out
or obsolete or which should be replaced so as to improve productivity, so long
as the proceeds of any such disposition are (x) used to acquire replacement
equipment which has comparable or better utility and equivalent or better value
and which is subject to a first priority security interest in favor of the Agent
therein, except as permitted by Section 6.2(a) of the Revolving Credit
Agreement, or (y) applied to repay the Obligations. The inclusion of Proceeds of
the Collateral under the security interests granted hereby shall not be deemed a
consent by the Agent to any sale or disposition of any Collateral other than as
permitted by this Section 4.13.
Section 4.14. Further Identification of Collateral. The Debtor will furnish to
the Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request. The Debtor shall promptly notify
the Agent if the value of the Collateral located at the facilities identified on
Schedule 3.7 hereto is less than 80% of the value of all of the Collateral.
Section 4.15. Notices. The Debtor will advise the Agent promptly and in
reasonable detail (i) of any Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, other than, unless reasonably
requested by the Agent, Liens permitted by Section 6.2(a) of the Revolving
Credit Agreement, (ii) of any material change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
security interests granted to the Agent in this Security Agreement.
Section 4.16. Change of Law. The Debtor shall promptly notify the Agent of any
change in law known to it which (i) adversely affects or will adversely affect
the validity, perfection or priority of the security interests granted hereby,
(ii) requires or will require a change in the proceedings to be followed in
order to maintain and protect such validity, perfection and priority or (iii)
could result in the Agent not having a perfected security interest in any of the
Collateral.
Section 4.17. Right of Inspection.
(a) Access to Books and Records. The Debtor shall, following any request by the
Agent and upon reasonable notice, permit the Agent or its representatives to
have full and free access during normal business hours to all the books,
correspondence and records of the Debtor, and the Agent or its representatives
may examine the same, take extracts therefrom, make photocopies thereof and have
such discussions with officers, employees and public accountants of the Debtor
as the Agent may deem reasonably necessary, and the Debtor agrees to render to
the Agent, at the Debtor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Agent and its
representatives shall upon reasonable notice and during normal business hours
also have the right to enter into and upon any premises where any of the
Inventory or the Equipment is located for the purpose of inspecting the same,
observing its use or protecting the interests of the Agent therein.
(b) Audits. The Debtor shall permit the Lenders, the Agent and their
representatives and advisors to review the operations of the Debtor and perform
the audits and examinations as provided in Section 6.1(l) of the Revolving
Credit Agreement.
Section 4.18. Maintenance of Equipment. The Debtor will, at its
expense, maintain the Equipment in good operating condition, ordinary
wear and tear excepted.
Section 4.19. Covenants Regarding Patent and Trademark Collateral.
(c) Generally. At such time as the Debtor shall acquire any Patents or
Trademarks, it will comply with the terms, covenants and warranties of this
Section 4.19.
(d) Continued Use of Trademark. The Debtor (either itself or through licensees)
will, unless the Debtor shall reasonably determine, after consultation with the
Agent, that a Trademark is of negligible economic value to the Debtor, (i)
continue to use each Trademark on each and every Trademark class of goods
applicable to its current products and services as reflected in its current
catalogs, brochures and price lists in order to maintain each Trademark in full
force and free from any claim of abandonment for non-use, (ii) maintain as in
the past the quality of products and services offered under each Trademark,
(iii) employ each Trademark with the appropriate notice of registration, (iv)
not adopt or use any mark which is confusingly similar to a colorable imitation
of any Trademark and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(e) No Abandonment. The Debtor will not, unless the Debtor shall reasonably
determine, after consultation with the Agent, that a Patent is of negligible
economic value to the Debtor, do any act, or knowingly omit to do any act,
whereby any Patent may be abandoned or dedicated.
(f) Notice of Abandonment or Adverse Determinations. The Debtor shall notify the
Agent immediately if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in any
proceeding in the United States Patent and Trademark Office or any court of
tribunal in any country) regarding the Debtor's ownership of any Patent or
Trademark, its right to register the same or keep and maintain the same.
(g) Filings After Notice to Agent. In no event shall the Debtor, either itself
or through any agent, employee, licensee or designee, file an application for
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the Agent and, upon
request of the Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's security
interest in such Patent or Trademark and the goodwill and general intangibles of
the Debtor relating thereto or represented thereby, and the Debtor hereby
constitutes the Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all such acts of such attorney being hereby ratified
and confirmed.
(h) Pursuit of Applications and Maintenance of Registrations. The Debtor will
take all necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability; provided, however, that no such Patent or Trademark shall
be required to be maintained or pursued to the extent such Patent or Trademark
is determined by the Debtor, after consultation with the Agent, to be of
negligible economic value to the Debtor.
(i) Notice of Infringement. If any of the Patent and Trademark Collateral is
infringed, misappropriated or diluted by a third party, the Debtor shall
promptly notify the Agent after it learns thereof and shall, unless the Debtor
shall reasonably determine, after consultation with the Agent, that such Patent
and Trademark Collateral is of negligible economic value to the Debtor, promptly
sue for infringement, misappropriation of dilution, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation or dilution, or take such other action as the Debtor shall
reasonably deem appropriate under the circumstances to protect such Patent and
Trademark Collateral.
Section 4.20. Termination of Federal Contracts. With respect to each Federal
Contract in respect of which the Debtor is required to execute an Assignment of
Federal Contract in accordance with Section 4.21 hereof, the Debtor shall give
prompt written notice to the Agent if the U.S. Government shall terminate or
threaten to terminate (whether for convenience or default) any such Federal
Contract with the Debtor having a value (including unexercised options) of
$100,000 or more. In addition, the Debtor shall give prompt written notice to
the Agent if the U.S. Government shall terminate or threaten to terminate any
contract between the U.S. Government and any other prime contractor under which
the Debtor is a subcontractor if the value of such subcontract (including
unexercised options) is $100,000 or more.
Section 4.21. Federal Contracts. The Debtor shall provide to the Agent, as soon
as reasonably practicable but not later than forty-five (45) days following the
end of each Fiscal Quarter, a report identifying each Federal Contract to which
it is a party, having attached thereto a copy of the first two pages of such
Federal Contract and any amendment thereto, to the extent not previously
provided to the Agent. At the request of the Agent (unless an Event of Default
shall have occurred and be continuing, in which case no such request shall be
required), the Debtor shall execute and deliver to the Agent an Assignment of
Federal Contract, in substantially the form of Exhibit A hereto (the "Assignment
of Federal Contract"), and execute any other instruments or take any other steps
required by the Agent in order that all moneys due or to become due under such
Federal Contracts shall be assigned to the Agent and notice thereof given under
the Assignment of Claims Act, including without limitation delivery of Notices
of Assignments with respect to each Federal Contract as contemplated by Appendix
A to Exhibit A hereto.
Section 4.22. Reimbursement Obligation. Should the Debtor fail to comply with
the provisions of this Security Agreement, the Revolving Credit Agreement or any
other agreement relating to the Collateral such that the value of any Collateral
or the validity, perfection, rank or value of any security interest granted to
the Agent hereunder or thereunder is thereby diminished or potentially
diminished or put at risk (as reasonably determined by the Agent), the Agent on
behalf of the Debtor may, but shall not be required to, effect such compliance
on behalf of the Debtor, and the Debtor shall reimburse the Agent for the cost
thereof on demand, and interest shall accrue on such reimbursement obligation
from the date the relevant costs are incurred until reimbursement thereof in
full at the Default Rate.
ARTICLE V.
REMEDIES; RIGHTS UPON DEFAULT
Section 5.01. UCC Rights. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the Revolving Credit
Agreement or other Credit Documents and such Obligations have not been paid in
full, the Agent may in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
guarantying, evidencing or relating to the Obligations, exercise (i) all rights
and remedies of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and (ii) all other rights
available to the Agent at law or in equity.
Section 5.02. Payments on Collateral. Without limiting the rights of
the Agent under any other provision of this Security Agreement, if an
Event of Default shall occur and be continuing:
(i) all payments received by the Debtor under or in connection with any of the
Collateral shall be held by the Debtor in trust for the Agent, shall be
segregated from other funds of the Debtor and shall forthwith upon receipt by
the Debtor be turned over to the Agent, in the same form as received by the
Debtor (duly indorsed by the Debtor to the Agent, if required to permit
collection thereof by the Agent); and
(ii) all such payments received by the Agent (whether from the Debtor or
otherwise) may, in the sole discretion of the Agent, be held by the Agent as
collateral security for, and/or then or at any time thereafter applied in whole
or in part by the Agent to the payment of, the expenses and the Obligations as
set forth in Section 5.11 hereof.
Section 5.03. Possession of Collateral. In furtherance of the foregoing, the
Debtor expressly agrees that, if an Event of Default shall occur and be
continuing, the Agent may (i) by judicial powers, or without judicial process if
it can be done without breach of the peace, enter any premises where any of such
Collateral is or may be located and, without charge or liability to the Agent,
seize and remove such Collateral from such premises and (ii) have access to and
use of the Debtor's books and records relating to such Collateral.
Section 5.04. Sale of Collateral; Notice.
(a) Sale of Collateral. The Debtor expressly agrees that if an Event of Default
shall occur and be continuing, the Agent, without demand of performance or other
demand or notice of any kind (except the notice specified below of the time and
place of any public or private sale) to or upon the Debtor or any other Person
(all of which demands and/or notices are hereby waived by the Debtor), may
forthwith (i) apply the cash, if any, then held by it as collateral as specified
in Section 5.11 hereof and (ii) if there shall be no cash or such cash shall be
insufficient to pay the Obligations in full, collect, receive, appropriate and
realize upon the Collateral, and/or sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral (or contract to do
so) or any part thereof in one or more parcels (which need not be in round lots)
at public or private sale, at any office of the Agent or elsewhere in such
manner as is commercially reasonable and, as the Agent may deem best, for cash
or on credit or for future delivery without assumption of any credit risk. The
Agent shall have the right upon any such public sale, and, if the Collateral is
of a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Debtor waives all claims,
damages and demands against the Agent arising out of the foreclosure,
repossession, retention or sale of the Collateral.
(b) Notice of Sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent shall give
the Debtor ten (10) days' written notice of its intention to make any such
public or private sale or sale at a broker's board or on a securities exchange.
Such notice shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof being sold,
will first be offered for sale and (iii) in the case of a private sale, state
the day after which such sale may be consummated. The Agent shall not obligated
to make any such sale pursuant to any such notice. The Agent may adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In the case of any
sale of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling price is paid
by the purchaser thereof, but the Agent shall not incur any liability in case of
the failure of such purchase to take up and pay for the Collateral so sold and,
in the case of such failure, such Collateral may again be sold upon like notice.
(c) Special Provisions Relating to Sales of Securities. The Debtor recognizes
that the Agent may be unable to effect a public sale of any or all the
Collateral constituting a "security" (as such term is defined in the Securities
Act) by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers that will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. The Debtor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Agent
shall be under no obligation to delay a sale of any of Collateral constituting a
security for the period of time necessary to permit the issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such issuer would agree to do so.
Section 5.05. Rights of Purchasers. Upon any sale of the Collateral (whether
public or private), the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agent) at any such sale shall hold the Collateral so sold
absolutely, free from any claim or right of whatever kind, including any equity
or right of redemption of the Debtor who, to the extent permitted by law, hereby
specifically waives all rights of redemption, including, without limitation, any
right to redeem the Collateral under Section 9-506 of the UCC, and any right to
a judicial or other stay or approval which it has or may have under any law now
existing or hereafter adopted.
Section 5.06. Additional Rights of the Agent.
(a) Right to Maintain Proceedings. The Agent (i) shall have the right and power
to institute and maintain such suits and proceedings as it may deem appropriate
to protect and enforce the rights vested in it by this Security Agreement and
(ii) may proceed by suit or suits at law or in equity to enforce such rights and
to foreclose upon the Collateral and to sell all or, from time to time, any of
the Collateral under the judgment or decree of a court of competent
jurisdiction.
(b) Appointment of Receiver. The Agent shall, to the extent permitted by
applicable law, without notice to the Debtor to any party claiming through the
Debtor, without regard to the solvency or insolvency at such time of any Person
then liable for the payment of any of the Obligations, without regard to the
then value of the Collateral and without requiring any bond from any complainant
in such proceedings, be entitled as a matter of right to the appointment of a
receiver or receivers (who may be the Agent) of the Collateral or any part
thereof, pending such proceedings, with such powers as the court making such
appointment shall confer, and to the entry of an order directing that the
profits, revenues and other income of the property constituting the whole or any
part of the Collateral be segregated, sequestered and impounded for the benefit
of the Agent, and the Debtor irrevocably consents to the appointment of such
receiver or receivers and to the entry of such order.
(c) No Duty to Exercise Rights. In no event shall the Agent have any duty to
exercise any rights or take any steps to preserve the rights of the Agent in the
Collateral, nor shall the Agent be liable to the Debtor or any other Person for
any loss caused by the Agent's failure to meet any obligation imposed by Section
9-207 of the UCC or any successor provision. Without limiting the foregoing, the
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have any duty or responsibility for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
Section 5.07. Remedies Not Exclusive, etc.
(a) Remedies Not Exclusive. No remedy conferred upon or reserved to the Agent in
this Security Agreement is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law, in
equity or by statute.
(b) Restoration of Rights. If the Agent shall have proceeded to enforce any
right, remedy or power under this Security Agreement and the proceeding for the
enforcement thereof shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Agent, the Debtor and the Agent
shall, subject to any determination in such proceeding, severally and
respectively be restored to their former positions and rights under this
Security Agreement, and thereafter all rights, remedies and powers of the Agent
shall continue as though no such proceedings had been taken.
(c) Enforcement. All rights of action under this Security Agreement may be
enforced by the Agent without the possession of any instrument evidencing any
Obligation or the production thereof at any trial or other proceeding relative
thereto, and any suit or proceeding instituted by the Agent shall be brought in
its name and any judgment shall be held as part of the Collateral.
Section 5.08. Waiver and Estoppel.
(a) No Actions to Impede Sale of Collateral. The Debtor agrees, to the extent it
may lawfully do so, that it will not at any time in any manner whatsoever claim
or take the benefit or advantage of any appraisal, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force which may delay, prevent or otherwise affect the performance or
enforcement of this Security Agreement, and hereby waives all benefit or
advantage of all such laws. The Debtor covenants that it will not hinder, delay
or impede the execution of any power granted to the Agent in this Security
Agreement, any Assignment of Federal Contract or any other Credit Document.
(b) Collateral Sold As An Entirety. The Debtor, to the extent it may lawfully do
so, on behalf of itself and all who claim through or under it, including without
limitation any and all subsequent creditors, vendees, assignees and lienors,
waives and releases all rights to demand or to have any marshalling of the
Collateral upon any sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or under any foreclosure or any enforcement of
this Security Agreement, and consents and agrees that all of the Collateral may
at any such sale be offered and sold as an entirety.
(c) Waiver of Notices. The Debtor waives, to the extent permitted by law,
presentment, demand, protest and any notice of any kind (except the notices
expressly required hereunder) in connection with this Security Agreement and any
action taken by the Agent with respect to the Collateral.
Section 5.09. Power of Attorney; Powers Coupled With An Interest.
(a) Power of Attorney. Without limiting any other right granted hereunder, the
Debtor hereby irrevocably constitutes and appoints the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Agent's reasonable
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purpose of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives the Agent the power and right, on behalf of the Debtor,
without notice to or assent by the Debtor, to do the following:
(i) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(ii) to effect any repairs or any insurance called for by the terms of this
Security Agreement or any other Credit Document, and to pay all or any part of
the premiums therefor and the costs thereof;
(iii) upon the occurrence and continuance of any Event of Default and otherwise
to the extent provided in this Security Agreement, (A) to direct any party
liable for any payment under any of the Collateral to make payment of any and
all moneys due and to come due thereunder directly to the Agent or as the Agent
shall direct, (B) to receive payment of and receipt for, and to demand and sue
for, any and all moneys, claims and other amounts due and to become due at any
time in respect of or arising out of the Collateral, (C) to sign and indorse and
receive, take, assign and deliver, any checks, notes, drafts, negotiable and
non-negotiable instruments, any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral, (D) to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding with respect
to, or in connection with, the Collateral, (E) to sell, transfer, assign or
otherwise deal in or with the Collateral or any part thereof, as fully and
effectively as if the Agent were the absolute owner thereof and (F) to do, at
its option, but at the expense of the Debtor, at any time or from time to time,
all acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in order
to effect the intent of this Security Agreement, all as fully and effectively as
the Debtor might do.
(b) Powers Coupled With an Interest. All authorizations and agencies granted or
provided herein with respect to the Collateral, including the powers granted
under clause (a) of this Section 5.9, are irrevocable and powers coupled with an
interest.
Section 5.10. Certain Provisions Relating to Securities. Solely with respect to
any Collateral constituting a "security" (as defined in the Securities Act), if
an Event of Default shall have occurred and be continuing, all such securities
(as defined in the Securities Act) constituting a part of the Collateral shall,
at the request of the Agent, be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (i) all voting,
corporate and other rights, powers and privileges pertaining to such Collateral
at any meeting of shareholders of the issuer thereof or otherwise, and (ii) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all such Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the structure of
any such issuer, or upon the exercise by the Debtor or the Agent of any right,
privilege or option pertaining to such Collateral, and in connection therewith,
the right to deposit and deliver any and all such Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine), all without liability except to account for
property actually received by it and except as provided in Section 5.6(c)
hereof, but the Agent shall have no duty to the Debtor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
Section 5.11. Application of Monies. The proceeds of any sale of, or
other realization upon, all or any part of the Collateral shall be
applied by the Agent in the following order of priority:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Agent and its agents and
counsel, and all expenses, liabilities and advances incurred or made by the
Agent, its agents and counsel in connection therewith or in connection with the
care, safekeeping or otherwise of any or all of the Collateral;
second, to payment of the Obligations, in such order as the Agent may
elect; and
third, any surplus then remaining shall be paid to the Debtor,
or its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same (including pursuant to Section 9-504(1)(C) of the UCC) or as a
court of competent jurisdiction may direct.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Notices. All notices, requests and other communications to a party
hereunder shall be in writing and shall be given to such party at its address
set forth on the signature page hereof or such other address as such party may
hereafter specify for that purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) in the case of telephonic
notice (to the extent expressly permitted hereunder), when made, (ii) in the
case of notice delivered by overnight express courier, one Business Day after
the Business Day such notice was delivered to such courier, (iii) in the case of
notice delivered by first class mail, three Business Days after being deposited
in the mail, postage prepaid, return receipt requested, (iv) in the case of
notice by hand, when delivered, or (v) in the case of notice by any customary
means of telecommunication, when sent provided confirmation of receipt or answer
back has been received, in each case if addressed to any party hereto as
provided herein. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect the
validity of notice given in accordance with this section.
Section 6.02. No Waiver; Cumulative Remedies. The Agent shall not by any act
(except by a written instrument pursuant to Section 6.3 hereof) be deemed to
have waived any right or remedy hereunder. No failure to exercise, nor any delay
in exercising, on the part of the Agent any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
Section 6.03. Amendments and Waivers. None of the terms or provisions of this
Security Agreement may be amended, supplemented or otherwise modified except by
a written instrument executed by the Debtor and the Agent; provided that any
provision of this Security Agreement may be waived by the Agent in a letter or
agreement executed by the Agent or by telex or facsimile transmission from the
Agent.
Section 6.04. Successors and Assigns. The provisions of this Security Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Debtor may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Agent.
Section 6.05. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
VIRGINIA, OTHER THAN ITS LAWS RESPECTING CHOICE OF LAW OTHER THAN
THOSE CONTAINED IN THE UCC.
Section 6.06. Limitation by Law; Severability.
(a) All rights, remedies and powers provided in this Security Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Security Agreement invalid, unenforceable in whole or in part,
or not entitled to be recorded, registered or filed upon the provisions of any
applicable law.
(b) If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
Section 6.07. Counterparts. This Security Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each complete set of which, when so executed and delivered by all parties, shall
be an original, but all such counterparts shall together constitute but one and
the same instrument.
Section 6.08. Expenses of the Agent. The Debtor shall pay to the Agent from time
to time upon demand, all of the costs and expenses incurred by the Agent or any
Lender (including, without limitation, the reasonable fees and disbursements of
counsel and any amounts payable by the Agent or any Lender to any of their
respective agents) (i) arising in connection with the administration,
modification, amendment, waiver or termination of this Security Agreement or any
document or agreement contemplated hereby or any consent or waiver hereunder or
thereunder or (ii) incurred in connection with the administration of this
Security Agreement, or any document or agreement contemplated hereby, or in
connection with the administration, sale or other disposition of Collateral
hereunder or under any document or agreement contemplated hereby or the
preservation, protection or defense of the rights of the Agent or any Lender in
and to the Collateral.
Section 6.09. Indemnification. The Debtor shall at all times hereafter
indemnify, hold harmless and, on demand, reimburse the Agent and the Lenders and
their respective subsidiaries, affiliates, successors, assigns, officers,
directors, employees and agents, and their respective heirs, executors,
administrators, successors and assigns (all of the foregoing parties, including,
but not limited to, the Agent, being hereinafter collectively referred to as the
"Indemnities" and individually as an "Indemnitee") from, against and for any and
all liabilities, obligations, claims, damages, actions, penalties, causes of
action, losses, judgments, suits, costs, expenses and disbursements, including,
without limitation, attorney's fees (any and all of the foregoing being
hereinafter collectively referred to as the "Liabilities" and individually as a
"Liability") which the Indemnitees, or any of them, might be or become
subjected, by reason of, or arising out of the preparation, execution, delivery,
modification, administration or enforcement of, or performance of the Agent's
rights under, this Security Agreement or any other document, instrument or
agreement contemplated hereby or executed in connection herewith; provided,
however, that the Debtor shall not be liable to any Indemnitee for any Liability
caused solely by the gross negligence or willful misconduct of such Indemnitee.
In no event shall any Indemnitee, as a condition to enforcing its rights under
this Section 6.9 or otherwise, be obligated to make a claim against any other
Person (including, without limitation, the Agent) to enforce its rights under
this Section 6.9.
Section 6.10. Termination; Survival. This Security Agreement shall terminate
when the security interests granted hereunder have terminated and the Collateral
has been released as provided in Section 2.6; provided, however, that the
obligations of the Debtor under Section 4.22 and the provisions of this Article
6 shall survive any such termination.
Section 6.11. Judicial Proceedings; Waiver of Jury Trial. Any judicial
proceeding brought against the Debtor with respect to any Credit Agreement
Related Claim hereby may be brought in any court of competent jurisdiction in
the Commonwealth of Virginia, County of Fairfax, or any Federal court in the
Eastern District of Virginia, and, by execution and delivery of this Security
Agreement, the Debtor (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with any Credit Agreement Related Claim and (b) irrevocably waives any objection
it may now or hereafter have as to the venue of any such proceeding brought in
such a court or that such a court is an inconvenient forum. The Debtor hereby
waives personal service of process and consents that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of Section 6.1
hereof, and service so made shall be deemed completed on the earlier of (x) the
receipt thereof and (y) if sent by registered or certified mail (return receipt
requested), the fifth (5th) Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the Agent to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Debtor in the courts of any other jurisdiction. Any
judicial proceeding by the Debtor against the Agent relating to or involving any
Credit Agreement Related Claim hereby shall be brought only in a court located
in the Commonwealth of Virginia, County of Fairfax, or the Federal court in the
Eastern District of Virginia. THE DEBTOR AND THE AGENT HEREBY UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING ANY CREDIT AGREEMENT RELATED CLAIM.
Section 6.12. Integration. This Security Agreement and the other Credit
Documents constitute the entire agreement of the Agent, the Lenders, the
Borrower and the other Credit Parties with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Credit
Documents.
Section 6.13. Authority of Agent. The Debtor acknowledges that the rights and
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Security Agreement shall, as between
the Agent and the Lenders, be governed by the Revolving Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Debtor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and the Debtor shall not be under any obligation,
or entitlement, to make any inquiry respecting such authority.
Section 6.14. Headings, Bold Type and Table of Contents. The section headings,
subsection headings, and bold type used herein and the Table of Contents hereto
have been inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Security Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
Address: PHB HAGLER BAILLY, INC.
1530 Wilson Boulevard
Suite 400
Arlington, Virginia 22209 By: /s/ Glenn J. Dozier_________________
Attention: Glenn J. Dozier Name: Glenn J. Dozier
Phone: (703) 351-0338 Title: Senior Vice President
Fax: (703) 528-3786 and Chief Financial Officer
Address: NATIONSBANK, N.A.
8300 Greensboro Drive
Suite 550 By: /s/ James W. Gaittens____________
McLean, Virginia 22102 Name: James W. Gaittens
Attention: James W. Gaittens Title: Senior Vice President
Phone: (703) 761-8405
Fax: (703) 917-0519
<PAGE>
1565246
30
Schedule 3.4
Place of Business
<PAGE>
Schedule 3.5
Location of Collateral
<PAGE>
Schedule 3.6
Trade Names, Division Names, etc.
<PAGE>
Schedule 3.7
Patents and Trademarks
<PAGE>
Schedule 4.1
UCC Filings
<PAGE>
32
Exhibit A to
Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __
(the "Agreement"), is made by PHB HAGLER BAILLY, INC., a Delaware corporation
(the "Assignor"), in favor of NATIONSBANK, N.A., a national banking association
(the "Agent"), in its capacity as Agent for the lenders from time to time a
party to the Revolving Credit Agreement (as defined in the Security Agreement
referred to below).
W I T N E S S E T H:
WHEREAS, the Assignor has secured certain obligations
undertaken by Hagler Bailly, Inc. pursuant to the provisions of a Security
Agreement, dated as of ___________________, ____ (as the same may be amended,
supplemented or otherwise modified from time to time, the "Security Agreement"),
by and between the Assignor and the Agent; and
WHEREAS, the Assignor is a party to, and from time to time
will become entitled to receive moneys under and by virtue of, a certain
contract with, involving or for the benefit of the United States of America or
any department, agency or instrumentality thereof (herein referred to as the
"Government"), designated as Contract Number _______ entered into by the
Assignor and the Government on ________ __, 19__ (which contract, together with
all additions, change orders, supplements, amendments, renewals, extensions, and
modifications thereto now or hereafter in effect, are hereinafter collectively
called the "Contract"); and
WHEREAS, pursuant to the Security Agreement, the Assignor has
undertaken to effectuate the assignment(s) and other actions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Assignor covenants and agrees as follows:
1. Incorporation By Reference. The provisions of the Security Agreement
are incorporated herein by reference, and the terms defined in the Security
Agreement are used herein with the same meanings.
2. Representations. The Assignor represents and warrants to the Agent
that (a) the Contract is legal, valid and binding on the Assignor and, to its
knowledge, the other parties thereto, is in full force and effect, and is not
evidenced by any chattel paper or instrument, (b) upon due filing of this
Agreement, together with a Notice of Assignment substantially in the form of
Appendix A hereto with the authorized representative, the execution and delivery
of this Agreement does not violate and is not in conflict with the provisions of
the Contract, (c) there has been no default on the part of the Assignor or any
other party to the Contract, (d) the Assignor has made no previous assignment of
the Contract to any person and knows of no fact or defense that will render the
moneys due or to be due thereunder uncollectible, (e) no financing statement
covering the Contract is on file in any public office except financing
statements in favor of the Agent, (f) no set-off or counterclaim to any moneys
due or to become due under the Contract exists on the date hereof, and no
agreement has been made with any person under which any deduction or discount
may be claimed, and (g) the address of the office where the Assignor keeps its
records concerning the Contract is ____________________.
3. Collateral. As security and collateral for the payment of all of the
Obligations (defined in the Security Agreement) and for performance of, and
compliance with, by the Assignor, all of the terms, covenants, conditions,
stipulations, and agreements contained in this Agreement and in the Security
Agreement, the Assignor hereby assigns to the Agent, and grants to the Agent a
lien on and security interest in, all moneys and claims for moneys now and
hereafter due and to become due to the Assignor under or by reason of the
Contract, together with all cash and non-cash proceeds thereof; provided,
however, that nothing contained herein shall impose upon the Agent any of the
obligations or liabilities of the Assignor under the Contract.
4. Covenants. Until payment and performance in full of the Obligations,
the Assignor covenants as follows:
(c) The Assignor shall place on any and all vouchers, invoices, or other
instruments demanding payment under the Contract the direction that such payment
is to be made to the Agent in accordance with Section 5 of this Agreement.
(d) The Assignor shall promptly upon request execute, acknowledge, and deliver
any notice, financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate, or other document as
the Agent may require in order to perfect, preserve, maintain, protect,
continue, and/or extend the assignment, lien, and security interest of the Agent
under this Agreement and its priority. The Assignor shall pay to the Agent on
demand all taxes, costs, and expenses incurred by the Agent in connection with
the preparation, execution, recording, and filing of any such document or
instrument mentioned aforesaid, and such taxes, costs, and expenses shall
constitute and become a part of the Obligations. A carbon, photographic, or
other reproduction of a security agreement or a financing statement is
sufficient as a financing statement.
(e) The Assignor shall fully, promptly, and faithfully comply with and perform
its obligations and duties under the Contract in accordance with the terms
thereof and will make no changes or amendments to the Contract or terminate or
cancel the Contract without the prior written consent of the Agent except as
permitted by the Security Agreement. In the event that any change, amendment,
termination or cancellation of the Contract is made or effected by the
Government, the Assignor will promptly notify the Agent thereof and promptly
furnish to the Agent a copy of any document or agreement evidencing any such
change, amendment, termination, or cancellation.
(f) The Assignor will promptly
(i) furnish to the Agent all information received by the Assignor
affecting the moneys due and to become due under the Contract, (ii)
inform the Agent of any delay in performance of, or claims made in
regard to, the Contract, and
(iii) notify the Agent in writing of the failure of any party to the Contract to
perform any of its obligations thereunder and any rejection of any performance
rendered by the Assignor under or in connection with the Contract.
(g) The Assignor will at all times keep accurate and complete records of
performance by the Assignor under the Contract, and the Agent and its agents
shall have the right, during normal business hours and upon reasonable advance
notice, to call at the place or places of business of the Assignor at intervals
to be determined by the Agent, and without hindrance or delay, to inspect,
audit, check, and make extracts from the books, records, journals, orders,
receipts, correspondence, and other data relating to the Contract or to any
other transactions between the parties hereto related to the Contract.
5. Payments. The Assignor hereby authorizes, empowers, and directs the
Government to draw all checks, drafts, or other instruments representing the
payments of money due the Assignor under the Contract (herein called the "Items
of Payment") to the order of NationsBank, N.A., assignee of Assignor, and to
send the same (i) if by mail, to , (ii) if by electronic transfer, to
NationsBank, N.A. for the account of ________________, Bank Account #__________,
Agent ABA#_________, or (iii) if by wire transfer, to NationsBank, N.A. for the
account of _________________________, Bank Account #_______, ABA#___________.
If, despite this direction, any instruments or checks representing payments
should be delivered to the Assignor, the Assignor will immediately endorse and
deliver such instruments or checks to the order of the Agent. The Assignor does
hereby irrevocably (subject to revocation with the consent of the Agent)
designate and appoint (which appointment is coupled with an interest) the Agent,
and the Agent's successors in interest by operation of law, the Assignor's true
and lawful attorney with power irrevocable for the Assignor and in the
Assignor's name, place, and stead, but at the sole cost and expense of the
Assignor, to receive, endorse, and collect all Items of Payment, and to ask,
demand, receive, receipt, and give acquittances for any and all amounts which
may be payable or which become due and payable by the Government under the
Contract, and in the Agent's discretion to file any claim or to take any other
action or proceeding, either in the Agent's own name or in the name of the
Assignor or otherwise, which to the Agent or any successor in interest thereof
may seem necessary or desirable in order to collect or endorse the payment of
any and all amounts now due or owing or which may hereafter be or become due or
owing on account of the Contract. All Items of Payment received by the Agent
pursuant hereto which are finally paid in cash or solvent credits shall be
applied against the Obligations as provided in the Security Agreement. Any
portion of the Items of Payment which the Agent elects not to so apply shall be
paid over to the Assignor or to whomsoever shall be entitled thereto under
applicable law, including pursuant to Section 9-504(1)(C) of the Uniform
Commercial Code of the Commonwealth of Virginia.
6. No Waiver. Neither this Agreement nor any term, condition,
representation, warranty, covenant, or agreement hereof may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing by the
party against whom such change, waiver, discharge, or termination is sought.
7. Governing law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
8. Gender. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders.
9. Counterparts. This Agreement may be executed in any number of
duplicate originals, each of which shall be an original but all of which
together shall constitute one and the same instrument.
10. Paragraph Headings. The paragraph headings of this Agreement are
for convenience only and shall not limit or define the provisions of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, Assignor and the Agent have caused this Agreement
to be duly executed and delivered by their respective representatives thereunto
duly authorized as of the date first above written.
PHB HAGLER BAILLY, INC.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
NATIONSBANK, N.A.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
<PAGE>
Appendix A To
Assignment of Federal Contract
Notice of Assignment
Date: ____________
To: Contracting Officer
[Address]
Re: CONTRACT NUMBER ___________ (the "Contract") MADE BY THE UNITED STATES OF
AMERICA
By: Department of the [Applicable U.S. Government Agency]
[Address]
with [Name of Subsidiary] (the "Contractor")
[Address]
for manufacture and support of a [Brief description of
Subject of Contract]
dated _______________
PLEASE TAKE NOTICE that moneys due or to become due under the
Contract have been assigned to NationsBank, N.A. pursuant to the provisions of
the Assignment of Claims Act of 1940, as amended (31 USC ss. 3727 and 41 USC ss.
15). A true copy of the Assignment executed by the Contractor on the date hereof
(the "Assignment") is attached to the original of this Notice of Assignment.
Please file this original Notice of Assignment along with the copy of the
Assignment in the contract file for the Contract and forward one of the enclosed
copies of this Notice of Assignment to the current disbursing office for the
Contract.
Payments due or to become due under the Contract should be
made (i) if by mail, to NationsBank, N.A., ____________________, (ii) if by
electronic transfer, to NationsBank, N.A. for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to NationsBank, N.A. for the account of
__________________________, Bank Account #_________, ABA#_________.
Please return enclosed copies of this Notice of Assignment
with appropriate notations showing the date and hour of receipt, and duly signed
by the person acknowledging receipt on behalf of the addressee, to NationsBank,
N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102, Attention: James
W. Gaittens.
Very truly yours,
PHB HAGLER BAILLY, INC.
By: _________________
Name: Title:
Receipt is hereby acknowledged of the above notice and a copy
of the above mentioned instrument of assignment. These were received at
_________[A.M.] [P.M.] on ______________________, 199__.
----------------
Name:
Title:
on behalf of Contracting Officer
[Address]
EXHIBIT 10.43
--------------------------------------------------------------------------
SECURITY AGREEMENT
dated as of November 20, 1998
between
PRIVATE LABEL ENERGY SERVICES, INC.,
as Debtor
and
NATIONSBANK, N.A.,
as Agent
-------------------------------------------------------------------------
<PAGE>
1565253
<PAGE>
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of November 20, 1998 (as
amended, supplemented or modified from time to time, the "Security Agreement"),
is made by PRIVATE LABEL ENERGY SERVICES, INC., a Delaware corporation (the
"Debtor"), and NATIONSBANK, N.A., a national banking association (the "Agent")
in its capacity as Agent for the lenders (the "Lenders") from time to time a
party to the Revolving Credit Agreement, dated as of November 20, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Revolving
Credit Agreement"), by and among the Hagler Bailly, Inc., a Delaware corporation
(the "Company"), the Agent, in its capacity as such thereunder, and the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Revolving Credit Agreement, the
Lenders have severally agreed to make available to the Company a revolving line
of credit for Revolving Loans, Swing Line Loans and Standby Letters of Credit in
an aggregate principal amount at any time not to exceed the Maximum Available
Amount, subject to the terms and conditions contained therein;
WHEREAS, the Company owns, directly or indirectly, [all] of
the issued and outstanding shares of capital of stock of, or other equity
interests in, the Debtor;
WHEREAS, the proceeds of such Revolving Loans, Swing Line
Loans and Standby Letters of Credit may be used to enable the Company to make
valuable transfers to the Debtor in connection with the operation of its
business and for the Permitted Uses;
WHEREAS, the Debtor will derive substantial direct and
indirect benefit from such Revolving Loans, Swing Line Loans and Standby Letters
of Credit; and
WHEREAS, the Company is required to cause the Debtor to
execute this Agreement pursuant to the provisions of the Revolving Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and to induce the Lenders to make or maintain
their respective Revolving Loans and Swing Line Loans to, and the Issuing Lender
to issue or maintain the Standby Letters of Credit under the Revolving Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor hereby agrees with the
Agent, for the ratable benefit of the Lenders, as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions Generally. Capitalized terms used herein without
definition shall have the respective meanings specified in the Revolving Credit
Agreement, and the following terms shall have the following meanings (such
meanings to be, when appropriate, equally applicable to both the singular and
plural forms of the terms defined):
"Account Debtor" shall mean, with respect to any Receivable or
Other Intangible, any Person obligated to make payment thereunder, including
without limitation any account debtor thereon.
"Assignment of Claims Act" shall mean the Assignment of Claims Act of
1940, 31 U.S.C. 3727, 41 U.S.C. 15 (1986), as the same
may be amended and any successor statute of similar import.
"Assignment of Federal Contract" shall have the meaning
specified in Section 4.21 hereof.
"Cash Collateral Account" shall have the meaning specified in
Section 2.4 hereof.
"Collateral" shall have the meaning set forth in Section 2.1.
"Debtor" shall have the meaning specified in the preamble hereof.
"Equipment" shall mean all equipment now owned or hereafter
acquired by the Debtor, including all items of machinery, equipment, furnishings
and fixtures of every kind, whether affixed to real property or not, as well as
all automobiles, trucks and vehicles of every description, trailers, handling
and delivery equipment, fittings, special tools, all additions to, substitutions
for, replacements of or accessions to any of the foregoing, all attachments,
components, parts (including spare parts) and accessories whether installed
thereon or affixed thereto and all fuel for any thereof.
"Federal Contract" means any contract or agreement with,
involving or for the benefit of the United States of America or any department,
agency or instrumentality thereof (collectively, the "U.S. Government"), whether
now existing or hereafter arising, in each case as the same may be amended,
modified or otherwise supplemented from time to time.
"Inventory" shall mean all inventory now owned or hereafter
acquired by the Debtor, including (i) all goods and other personal property
which are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
(ii) all inventory, wherever located, evidenced by negotiable and non-negotiable
documents of title, warehouse receipts and bills of lading, (iii) all of the
Debtor's rights in, to and under all purchase orders now owned or hereafter
received or acquired by it for goods or services and (iv) all rights of the
Debtor as an unpaid seller, including rescission, replevin, reclamation and
stopping in transit.
"Lenders" shall have the meaning specified in the preamble hereof.
"Obligations" shall mean any and all now existing or hereafter
arising indebtedness, obligations, liabilities and covenants of each Credit
Party to any Lender, the Agent, their respective Affiliates, successors and
assigns and any other Indemnified Person under or arising out of any Credit
Document, including without limitation (i) all Revolving Loans and all Swing
Line Loans together with interest thereon and all Standby Letters of Credit,
(ii) all fees, expenses, indemnity payments and other amounts due or to become
due under the Revolving Credit Agreement, the Revolving Notes, the Swing Line
Note or any other Credit Document, (iii) all liabilities and obligations under
the Subsidiary Guarantee and any other agreement executed by any Credit Party
guarantying the obligations of the Borrower under the Revolving Credit Agreement
or any other Credit Document, (iv) all liabilities and obligations under any
agreement providing collateral for any of the foregoing (including any Pledge
Agreement and the Subsidiary Security Agreements), and (v) and any agreement or
instrument refinancing or restructuring all or any portion of the obligations
and liabilities under any of foregoing or under any successor agreement or note,
in each case whether direct or indirect, absolute or contingent or due or to
become due.
"Other Intangibles" shall mean all accounts, accounts
receivable, contract rights, documents, instruments, notes, chattel paper,
money, indemnities, warranties and general intangibles now owned or hereafter
acquired by the Debtor including, without limitation, all goodwill, customer
lists, permits, federal and state tax refunds, reversionary interests in pension
plan assets, Patents, Trademarks, licenses, copyrights and other rights in
intellectual property, other than Receivables.
"Patents" shall mean all letters patent of the United States
or any other country, and all applications for letters patent of the United
States or any other country, in which the Debtor may now or hereafter have any
right, title or interest and all reissues, continuations, continuations-in-part
or extensions thereof.
"Proceeds" shall mean all proceeds, including (i) whatever is
received upon any collection, exchange, sale or other disposition of any of the
Collateral and any property into which any of the Collateral is converted,
whether cash or non-cash, (ii) any and all payments or other property (in any
form whatsoever) made or due and payable on account of any insurance, indemnity,
warranty or guaranty payable to the Debtor with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever) made or due and
payable in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person, corporation, agency, authority or
other entity acting under color of any governmental authority) and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables" shall mean all accounts now or hereafter owing
to the Debtor, and all accounts receivable, contract rights, documents,
instruments or chattel paper representing amounts payable or monies due or to
become due to the Debtor, arising from the sale of Inventory or the rendition of
services in the ordinary course of business or otherwise (whether or not earned
by performance), together with all Inventory returned by or reclaimed from
customers wherever such Inventory is located, and all guaranties, securities and
liens held for the payment of any such account, account receivable, contract
right, document, instrument or chattel paper.
"Security Agreement" shall have the meaning specified in the preamble
hereof.
"Trademarks" shall mean all right, title or interest which the
Debtor may now or hereafter have in any or all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source of business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and all applications in
connection therewith, including without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or political subdivision thereof and all reissues, extensions or
renewals thereof.
"UCC" shall mean the Uniform Commercial Code in effect on the
date hereof in the Commonwealth of Virginia.
"U.S. Government" has the meaning specified in the definition of
Federal Contract contained herein.
Section 1.02. UCC Definitions. The uncapitalized terms "account", "account
debtor", "chattel paper", "contract right", "document", "warehouse receipt",
"bill of lading", "document of title", "instrument", "inventory", "general
intangible", "money", "security", "certificated security", "uncertificated
security", "financial asset" and "proceeds" as used in Section 1.1 or elsewhere
in this Security Agreement shall have the respective meanings set forth in the
UCC.
ARTICLE II.
SECURITY INTERESTS
Section 2.01. Grant of Security Interests. To secure the due and punctual
payment of all Obligations, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing or due or
to become due, whether at maturity or upon acceleration or otherwise, in
accordance with the terms thereof and to secure the due and punctual performance
of all of the Obligations and in order to induce the Agent and the Lenders to
enter into the Revolving Credit Agreement and the other Credit Documents, the
Debtor hereby pledges, assigns, delivers, conveys and transfers to the Agent,
for the ratable benefit of the Lenders, and grants to the Agent, for the ratable
benefit of the Lenders, a first priority and continuing security interest in and
lien on, all of the Debtor's right, title and interest in, to and under the
following, whether now existing or hereafter acquired (the "Collateral"):
(i) all Receivables;
(ii) all Other Intangibles;
(iii) all Equipment;
(iv) all Inventory;
(v) to the extent not included in the foregoing, all securities (whether
certificated or uncertificated) and all financial assets, whether now existing
or hereafter arising, including, without limitation, all capital stock issued by
any Person and held by Debtor, and all partnership interests, whether in the
nature of a joint venture, limited liability company member's interest, master
limited partnership, teaming arrangement or otherwise;
(vi) to the extent not included in the foregoing, all other personal property,
whether tangible or intangible, and wherever located whether within or outside
of the United States, including, but not limited to, the balance of every
deposit account now or hereafter existing of the Debtor with any bank or other
financial institution and all monies of the Debtor and all rights to payment of
money of the Debtor;
(vii) to the extent not included in the foregoing, all books, ledgers and
records and all computer programs, tapes, discs, punch cards, data processing
software, transaction files, master files and related property and rights
(including computer and peripheral equipment) necessary or helpful in enforcing,
identifying or establishing any item of Collateral; and
(viii) to the extent not otherwise included, all Proceeds and products of any or
all of the foregoing, whether existing on the date hereof or arising hereafter;
provided, however, notwithstanding anything to the contrary contained herein,
the Debtor is not assigning, pledging or otherwise encumbering under this
Security Agreement its interests in any Federal Contract to which it is a party,
or in accounts or receivables due to Debtor under such Federal Contract, to the
extent, but only to the extent, such assignment, pledge or other encumbrance
would breach or violate or would cause Debtor to breach or violate such Federal
Contract or statutes or regulations applicable thereto, it being understood that
this proviso does not apply to, or in any way limit, Debtor's assignment, pledge
or encumbrance of Proceeds of all Federal Contracts to which it is a party.
Section 2.02. Continuing Liability of the Debtor. Anything herein to the
contrary notwithstanding, the Debtor shall remain liable to observe and perform
all the terms and conditions to be observed and performed by it under any
contract, agreement, warranty or other obligation with respect to the
Collateral; and shall do nothing to impair the security interests herein
granted. The Agent shall not have any obligation or liability under any such
contract, agreement, warranty or obligation by reason of or arising out of this
Security Agreement or the receipt by the Agent of any payment relating to any
Collateral, nor shall the Agent be required to perform or fulfill any of the
obligations of the Debtor with respect to the Collateral, to make any inquiry as
to the nature or sufficiency of any payment received by it or the sufficiency of
the performance of any party's obligations with respect to any Collateral.
Furthermore, the Agent shall not be required to file any claim or demand to
collect any amount due or to enforce the performance of any party's obligations
with respect to, the Collateral.
Section 2.03. Sales and Collections.
(a) Sales of Inventory in the Ordinary Course of Business. The Debtor is
authorized (i) to sell in the ordinary course of its business for fair value and
on an arm's-length basis any of its Inventory normally held by it for such
purpose and (ii) to use and consume, in the ordinary course of its business, any
raw materials, supplies and materials normally held by it for such purpose. The
Agent may, upon the occurrence of any Event of Default, without cause or notice,
curtail or terminate such authority at any time.
(b) Collection of Receivables. The Debtor is authorized to collect amounts owing
to it with respect to the Collateral, except as otherwise provided in connection
with the Assignment of Federal Contract, if any as provided herein. However, the
Agent may, upon and during the continuance of an Event of Default or a Potential
Event of Default, notify Account Debtors obligated to make payments under any or
all Receivables or Other Intangibles that the Agent has a security interest in
such Collateral and that payments shall be made directly to the Agent. Upon the
request of the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default, as the case may be, the Debtor will so notify such
Account Debtors and will execute such contract assignments, notices of
assignment or other documents as may be required by such Account Debtors. The
Debtor will use all reasonable efforts to cause each Account Debtor to comply
with the foregoing instruction. In furtherance of the foregoing, the Debtor
authorizes the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default (i) to ask for, demand, collect, receive and give
acquittances and receipts for any and all amounts due and to become due under
any Collateral and in the name of the Debtor or its own name or otherwise, (ii)
to take possession of, endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under any
Collateral and (iii) to file any claim or take any other action in any court of
law or equity or otherwise which it may deem appropriate for the purpose of
collecting any amounts due under any Collateral. The Agent shall have no
obligation to obtain or record any information relating to the source of such
funds or the obligations in respect of which payments have been made.
Section 2.04. Segregation of Proceeds.
(a) Cash Collateral Account Maintained by Agent. Upon an Event of Default or a
Potential Event of Default, the Agent shall have the right at any time during
the continuance thereof to cause to be opened and maintained at the office of
the Agent in McLean, Virginia a non-interest bearing bank account (the "Cash
Collateral Account") which will contain only Proceeds. Any "cash proceeds" (as
such term is defined in Section 9-306(1) of the UCC) received by the Agent
directly from Account Debtors obligated to make payments under Receivables or
Other Intangibles pursuant to Section 2.3 hereof or from the Debtor pursuant to
clause (b) of this Section 2.4, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper or other Proceeds received on
account of any Collateral, shall be promptly deposited in the Cash Collateral
Account, and until so deposited shall be held in trust for the Agent as property
of the Agent and shall not be commingled with any funds of the Debtor not
constituting Proceeds of Collateral. The name in which the Cash Collateral
Account is carried shall clearly indicate that the funds deposited therein are
the property of the Debtor, subject to the security interest of the Agent
hereunder. Such Proceeds, when deposited, shall continue to be security for the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Agent shall have sole dominion and control over the
funds deposited in the Cash Collateral Account, and such funds may be withdrawn
therefrom only by the Agent.
(b) Deposit of Proceeds by the Debtor. Upon notice by the Agent to the Debtor
that the Cash Collateral Account has been opened, the Debtor shall cause all
cash Proceeds collected by it to be delivered to the Agent forthwith upon
receipt, in the original form in which received (with such endorsements or
assignments as may be necessary to permit collection thereof by the Agent), and
for such purpose the Debtor hereby irrevocably authorizes and empowers the
Agent, its officers, employees and authorized agents to endorse and sign the
name of the Debtor on all checks, drafts, money orders or other media of payment
so delivered, and such endorsements or assignments shall, for all purposes, be
deemed to have been made by the Debtor prior to any endorsement or assignment
thereof by the Agent. The Agent may use any convenient or customary means for
the purpose of collecting such checks, drafts, money orders or other media of
payment.
Section 2.05. Verification of Receivables. The Agent shall have the right to
make test verifications of Receivables in any reasonable manner and through any
medium that it considers advisable, and the Debtor agrees to furnish all such
assistance and information as the Agent may reasonable require in connection
therewith. The Debtor at its expense will cause its chief financial officer to
furnish to the Agent at any reasonable time and from time to time promptly upon
the Agent's reasonable request, the following reports: (i) a reconciliation of
all Receivables, (ii) an aging of all Receivables, (iii) trial balances and (iv)
a test verification of such Receivables as the Agent may request.
Section 2.06. Release of Collateral.
(a) Security Interest of Agent Ceases Upon Permitted Dispositions. The Debtor
may sell or realize upon or transfer or otherwise dispose of Collateral only to
the extent permitted by Section 4.13, and the security interests of the Agent in
such Collateral so sold, realized upon or disposed of (but not in the Proceeds
arising from such sale, realization or disposition) shall cease immediately upon
such sale, realization or disposition, without any further action on the part of
the Agent. The Agent, if requested in writing by the Debtor but at the expense
of the Debtor, is hereby authorized and instructed to deliver to the Account
Debtor or the purchaser or other transferee of any such Collateral a certificate
stating that the Agent no longer has a security interest therein, and such
Account Debtor or such purchaser or other transferee shall be entitled to rely
conclusively on such certificate for any and all purposes.
(b) Filing of Termination Statements. Upon the payment in full of all of the
Obligations and if there is no commitment by any Lender to make further
advances, incur obligations or otherwise give value, the Agent will (as soon as
reasonably practicable after receipt of notice from the Debtor requesting the
same but at the expense of the Debtor) deliver to the Debtor (i) for each
jurisdiction in which a UCC financing statement is on file to perfect the
security interests granted to the Agent hereunder, a termination statement
(appropriately completed) to the effect that the Agent no longer claims a
security interest under such financing statement, and (ii) such other documents
as the Debtor shall reasonably request evidencing satisfaction of the
Obligations and the release of the security interests granted to the Agent
hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants that:
Section 3.01. Title to Collateral. Except for the security interests granted to
the Agent pursuant to this Security Agreement and as otherwise permitted by
Section 6.2(a) of the Revolving Credit Agreement, the Debtor is the sole owner
of each item of the Collateral, having good and marketable title thereto, free
and clear of any and all Liens.
Section 3.02. Validity, Perfection and Priority of Security Interests.
(a) By complying with Section 4.1 hereof, the Debtor will have created a valid
security interest in favor of the Agent in all existing Collateral and in all
identifiable Proceeds of such Collateral, which security interest (except in
respect of Collateral not located at a facility identified on Schedule 3.7
hereto and motor vehicles for which the exclusive manner of perfecting a
security interest therein is by noting such security interest in the certificate
of title in accordance with local law) would be prior to the claims of a trustee
in bankruptcy under Section 544(a) of the Bankruptcy Code. Continuing compliance
by the Debtor with the provisions of Section 4.2 hereof will also (i) create
valid security interests in all Collateral acquired after the date hereof and in
all identifiable Proceeds of such Collateral and (ii) cause such security
interests in all Collateral and in all Proceeds which are (A) identifiable cash
Proceeds of Collateral covered by financing statements required to be filed
hereunder, (B) identifiable Proceeds in which a security interest may be
perfected by such filing under the UCC and (C) any Proceeds in the Cash
Collateral Account to be duly perfected under the UCC, in each case prior to the
claims of a trustee in bankruptcy under the Bankruptcy Code (except in respect
of Collateral not located at a facility identified on Schedule 3.5 hereto).
(b) The security interests of the Agent in the Collateral located at the
facilities identified on Schedule 3.5 hereto rank first in priority. Other than
financing statements or other similar documents perfecting the security
interests in favor of the Agent, no financing statements, deeds of trust,
mortgages or similar documents covering all or any part of the Collateral are on
file or of record in any government office in any jurisdiction in which such
filing or recording would be effective to perfect a security interest in such
Collateral, nor is any of the Collateral in the possession of any Person (other
than the Debtor) asserting any claim thereto or security interest therein.
Section 3.03. Enforceability of Receivables and Other Intangibles. To the best
knowledge of the Debtor, each Receivable and Other Intangible is a valid and
binding obligation of the related Account Debtor in respect thereof, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
provisions of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and complies with any applicable legal
requirements.
Section 3.04. Place of Business. Schedule 3.4 correctly sets forth the chief
executive office and principal place of business of the Debtor and the offices
of the Debtor where records concerning Receivables and Other Intangibles are
kept.
Section 3.05. Location of Collateral. Schedule 3.5 correctly sets forth the
location of all Equipment and Inventory, other than rolling stock, aircraft and
goods in transit. Except as otherwise specified in Schedule 3.5, all Inventory
and Equipment has been located at the address specified on Schedule 3.5 at all
times during the four-month period prior to the date hereof while owned by the
Debtor. All Inventory has been and will be produced in compliance with the Fair
Labor Standards Act, 29 U.S.C. ss.ss. 201-219, except for such non-compliance
which could not reasonably be expected to have a material adverse effect on the
Debtor. No Inventory is evidenced by a negotiable document of title, warehouse
receipt or bill of lading. No non-negotiable document of title, warehouse
receipt or bill of lading has been issued to any person other than the Debtor,
and the Debtor has retained possession of all of such non-negotiable documents,
warehouse receipts and bills of lading. No amount payable under or in connection
with any of the Collateral is evidenced by promissory notes or other
instruments.
Section 3.06. Trade Names. Schedule 3.6 correctly sets forth any and all trade
names, division names, assumed names or other names under which the Debtor
currently transacts business or has transacted business within the four-month
period prior to the date hereof.
Section 3.07. Patents and Trademarks. Schedule 3.7 correctly sets
forth all Patents, Patent licenses, Trademarks and Trademark licenses
now owned by the Debtor.
ARTICLE IV.
COVENANTS
The Debtor covenants and agrees that until all obligations and
liabilities in respect of the Obligations shall have performed and paid in full
and until no Standby Letters of Credit are outstanding or fully cash
collateralized and the Commitments are terminated:
Section 4.01. Perfection of Security Interests. The Debtor will, at its expense,
cause all filings and recordings and other actions specified on Schedule 4.1 to
have been completed on or prior to the Effective Date.
Section 4.02. Further Actions.
(a) At all times after the date hereof, the Debtor will, at its expense, comply
with the following:
(i) as to all Receivables, Other Intangibles, Equipment and Inventory, it will
cause UCC financing statements and continuation statements to be filed and to be
on file in all applicable jurisdictions as required to perfect the security
interests granted to the Agent hereunder, to the extent that applicable law
permits perfection of a security interest by filing under the UCC;
(ii) as to all Proceeds, it will cause all UCC financing statements and
continuation statements filed in accordance with clause (i) above to include a
statement or a checked box indicating that Proceeds of all items of Collateral
described herein are covered;
(iii) as to any amount payable under or in connection with any of the Collateral
which shall be or shall become evidenced by any promissory note or other
instrument, the Debtor will promptly (but in no event later than ten (10)
Business Days after receipt of such note or instrument), pledge and deliver such
note or other instrument to the Agent as part of the Collateral, duly endorsed
in a manner reasonably satisfactory to the Agent;
(iv) at the request of the Agent, the Debtor shall deliver all other Collateral
consisting of certificated securities, endorsed for transfer in a manner
reasonably satisfactory to the Agent (or execute a securities intermediary
account control agreement to the extent possession by the Agent of such
securities is not feasible); and
(v) as to all Patents, Patent licenses, Trademarks or Trademark licenses, the
Debtor will effect the recordation or renewal of the recordation of the security
interests of the Agent therein so as to maintain valid and perfected security
interests therein under all applicable state and federal laws.
(b) Further Assurances. The Debtor will, from time to time and at its expense,
execute, deliver, file or record such UCC financing statements, applications for
certificates of title and such other statements, assignments, instruments,
documents, agreements or other papers and take any other action that may be
necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect, confirm or validate the security interest of the
Agent in the Collateral, to enable the Agent to obtain the full benefits of this
Security Agreement or to enable it to exercise and enforce any of its rights,
powers and remedies hereunder, including, without limitation, its right to take
possession of the Collateral. (c) Signature. To the fullest extent permitted by
law, the Debtor authorizes the Agent to sign and file financing and continuation
statements and amendments thereto with respect to the Collateral without its
signature thereon.
Section 4.03. Change of Name, Identity or Structure. The Debtor will not change
its name, identity or corporate structure in any manner and, except as set forth
on Schedule 3.6, will not conduct its business under any trade, assumed or
fictitious name unless it shall have given the Agent at least forty-five (45)
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend any financing statement or continuation
statement relating to the security interests granted hereby in order to preserve
such security interests and to effectuate or maintain the priority thereof
against all Persons.
Section 4.04. Place of Business and Collateral. The Debtor will not change the
location of (i) its places of business, (ii) its chief executive office or (iii)
the office or other locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location listed on Schedule 3.4 or
3.5 unless, prior to such change, it notifies the Agent forty-five (45) days in
advance of such change, makes all UCC filings required by Section 4.2 and takes
all other action necessary or that the Agent may reasonably request to preserve,
perfect, confirm and protect the security interests granted hereby. The Debtor
will in no event change the location of any Collateral if such change would
cause the security interest granted hereby in such Collateral to lapse or cease
to be perfected. The Debtor will at all times maintain its chief executive
office within one of the forty-eight contiguous states in which Article 9 of the
uniform commercial code is in effect.
Section 4.05. Fixtures. The Debtor will not permit any Equipment to become a
fixture unless it shall have given the Agent at least ten (10) days' prior
written notice thereof and shall have taken all such action and delivered or
caused to be delivered to the Agent all instruments and documents, including,
without limitation, waivers and subordination agreements by any landlords and
mortgagees, and filed all financing statements necessary or reasonably requested
by the Agent, to preserve and protect the security interest granted herein and
to effectuate or maintain the priority thereof against all Persons; provided,
however, that, so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing, the Debtor shall not be obligated to
comply with the provisions of this Section 4.5 with respect to the first $50,000
of Equipment (determined based on the then fair market value thereof).
Section 4.06. Maintenance of Records. The Debtor will keep and maintain at its
own cost and expense complete books and records relating to the Collateral which
are satisfactory to the Agent including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral and all
of its other dealings with the Collateral. The Debtor will mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Agent' further security, the Debtor
agrees that the Agent shall have a special property interest in all of the
Debtor's books and records pertaining to the Collateral and the Debtor shall
deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent.
Section 4.07. Compliance with Laws The Debtor will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any government or any state or local government applicable to the Collateral or
any part thereof or to the operation of the Debtor's business except to the
extent that the failure to comply would not have a material adverse effect on
the financial or other condition of the Debtor; provided, however, that the
Debtor may contest any act, rule, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the Agent, adversely
affect the Agent's rights or, in the case of Collateral located at a facility
identified on Schedule 3.7 hereto, the first priority of its security interest
in the Collateral.
Section 4.08. Payment of Taxes. The Debtor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no such charge
need be paid if (i) the validity thereof is being contested in good faith by
appropriate proceedings and (ii) such charge is adequately reserved against in
accordance with generally accepted accounting principles, as consistently
applied.
Section 4.09. Compliance with Terms of Accounts and Contracts. The Debtor will
perform and comply in all material respects with all of its obligations under
all agreements relating to the Collateral to which it is a party or by which it
is bound.
Section 4.10. Limitation on Liens on Collateral. The Debtor will not create,
permit or suffer to exist, and will defend the Collateral and the Debtor's
rights with respect thereto against and take such other action as is necessary
to remove any Lien, security interest, encumbrance, or claim in or to the
Collateral other than the security interests created hereunder and such Liens to
the extent permitted pursuant to Section 6.2(a) of the Revolving Credit
Agreement.
Section 4.11. Limitations on Modifications of Receivables and Other Intangibles;
No Waivers or Extensions. The Debtor will not (i) amend, modify, terminate or
waive any provisions of any material Receivable or Other Intangible in any
manner which might, when taken together with all such other Receivables or Other
Intangibles, respectively, materially reduce the value of all Receivables or
Other Intangibles, respectively, in the Collateral, (ii) fail to exercise
promptly and diligently each and every material right which it may have under
each Receivable and Other Intangible or (iii) fail to deliver to the Agent a
copy of each material demand, notice or document received by it relating in any
way to any Receivable or Other Intangible.
Section 4.12. Maintenance of Insurance. The Debtor will maintain with
financially sound insurance companies licensed to do business in the
jurisdictions in which the Collateral is located insurance policies on the
Inventory and Equipment in accordance with the provisions of Section 6.1(m) of
the Revolving Credit Agreement.
Section 4.13. Limitations on Dispositions of Collateral. The Debtor will not
directly or indirectly (through the sale of stock, merger or otherwise), without
the prior written consent of the Agent, sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (i) sales of Inventory in the ordinary course of its business for fair value
in arm's-length transactions and (ii) so long as no Event of Default (or
Potential Event of Default) has occurred and is continuing, dispositions in a
commercially reasonable manner of Equipment which has become redundant, worn out
or obsolete or which should be replaced so as to improve productivity, so long
as the proceeds of any such disposition are (x) used to acquire replacement
equipment which has comparable or better utility and equivalent or better value
and which is subject to a first priority security interest in favor of the Agent
therein, except as permitted by Section 6.2(a) of the Revolving Credit
Agreement, or (y) applied to repay the Obligations. The inclusion of Proceeds of
the Collateral under the security interests granted hereby shall not be deemed a
consent by the Agent to any sale or disposition of any Collateral other than as
permitted by this Section 4.13.
Section 4.14. Further Identification of Collateral. The Debtor will furnish to
the Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request. The Debtor shall promptly notify
the Agent if the value of the Collateral located at the facilities identified on
Schedule 3.7 hereto is less than 80% of the value of all of the Collateral.
Section 4.15. Notices. The Debtor will advise the Agent promptly and in
reasonable detail (i) of any Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, other than, unless reasonably
requested by the Agent, Liens permitted by Section 6.2(a) of the Revolving
Credit Agreement, (ii) of any material change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
security interests granted to the Agent in this Security Agreement.
Section 4.16. Change of Law. The Debtor shall promptly notify the Agent of any
change in law known to it which (i) adversely affects or will adversely affect
the validity, perfection or priority of the security interests granted hereby,
(ii) requires or will require a change in the proceedings to be followed in
order to maintain and protect such validity, perfection and priority or (iii)
could result in the Agent not having a perfected security interest in any of the
Collateral.
Section 4.17. Right of Inspection.
(a) Access to Books and Records. The Debtor shall, following any request by the
Agent and upon reasonable notice, permit the Agent or its representatives to
have full and free access during normal business hours to all the books,
correspondence and records of the Debtor, and the Agent or its representatives
may examine the same, take extracts therefrom, make photocopies thereof and have
such discussions with officers, employees and public accountants of the Debtor
as the Agent may deem reasonably necessary, and the Debtor agrees to render to
the Agent, at the Debtor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Agent and its
representatives shall upon reasonable notice and during normal business hours
also have the right to enter into and upon any premises where any of the
Inventory or the Equipment is located for the purpose of inspecting the same,
observing its use or protecting the interests of the Agent therein.
(b) Audits. The Debtor shall permit the Lenders, the Agent and their
representatives and advisors to review the operations of the Debtor and perform
the audits and examinations as provided in Section 6.1(l) of the Revolving
Credit Agreement.
Section 4.18. Maintenance of Equipment. The Debtor will, at its
expense, maintain the Equipment in good operating condition, ordinary
wear and tear excepted.
Section 4.19. Covenants Regarding Patent and Trademark Collateral.
(a) Generally. At such time as the Debtor shall acquire any Patents or
Trademarks, it will comply with the terms, covenants and warranties of this
Section 4.19.
(b) Continued Use of Trademark. The Debtor (either itself or through licensees)
will, unless the Debtor shall reasonably determine, after consultation with the
Agent, that a Trademark is of negligible economic value to the Debtor, (i)
continue to use each Trademark on each and every Trademark class of goods
applicable to its current products and services as reflected in its current
catalogs, brochures and price lists in order to maintain each Trademark in full
force and free from any claim of abandonment for non-use, (ii) maintain as in
the past the quality of products and services offered under each Trademark,
(iii) employ each Trademark with the appropriate notice of registration, (iv)
not adopt or use any mark which is confusingly similar to a colorable imitation
of any Trademark and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(c) No Abandonment. The Debtor will not, unless the Debtor shall reasonably
determine, after consultation with the Agent, that a Patent is of negligible
economic value to the Debtor, do any act, or knowingly omit to do any act,
whereby any Patent may be abandoned or dedicated.
(d) Notice of Abandonment or Adverse Determinations. The Debtor shall notify the
Agent immediately if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in any
proceeding in the United States Patent and Trademark Office or any court of
tribunal in any country) regarding the Debtor's ownership of any Patent or
Trademark, its right to register the same or keep and maintain the same.
(e) Filings After Notice to Agent. In no event shall the Debtor, either itself
or through any agent, employee, licensee or designee, file an application for
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the Agent and, upon
request of the Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's security
interest in such Patent or Trademark and the goodwill and general intangibles of
the Debtor relating thereto or represented thereby, and the Debtor hereby
constitutes the Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all such acts of such attorney being hereby ratified
and confirmed.
(f) Pursuit of Applications and Maintenance of Registrations. The Debtor will
take all necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability; provided, however, that no such Patent or Trademark shall
be required to be maintained or pursued to the extent such Patent or Trademark
is determined by the Debtor, after consultation with the Agent, to be of
negligible economic value to the Debtor.
(g) Notice of Infringement. If any of the Patent and Trademark Collateral is
infringed, misappropriated or diluted by a third party, the Debtor shall
promptly notify the Agent after it learns thereof and shall, unless the Debtor
shall reasonably determine, after consultation with the Agent, that such Patent
and Trademark Collateral is of negligible economic value to the Debtor, promptly
sue for infringement, misappropriation of dilution, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation or dilution, or take such other action as the Debtor shall
reasonably deem appropriate under the circumstances to protect such Patent and
Trademark Collateral.
Section 4.20. Termination of Federal Contracts. With respect to each Federal
Contract in respect of which the Debtor is required to execute an Assignment of
Federal Contract in accordance with Section 4.21 hereof, the Debtor shall give
prompt written notice to the Agent if the U.S. Government shall terminate or
threaten to terminate (whether for convenience or default) any such Federal
Contract with the Debtor having a value (including unexercised options) of
$100,000 or more. In addition, the Debtor shall give prompt written notice to
the Agent if the U.S. Government shall terminate or threaten to terminate any
contract between the U.S. Government and any other prime contractor under which
the Debtor is a subcontractor if the value of such subcontract (including
unexercised options) is $100,000 or more.
Section 4.21. Federal Contracts. The Debtor shall provide to the Agent, as soon
as reasonably practicable but not later than forty-five (45) days following the
end of each Fiscal Quarter, a report identifying each Federal Contract to which
it is a party, having attached thereto a copy of the first two pages of such
Federal Contract and any amendment thereto, to the extent not previously
provided to the Agent. At the request of the Agent (unless an Event of Default
shall have occurred and be continuing, in which case no such request shall be
required), the Debtor shall execute and deliver to the Agent an Assignment of
Federal Contract, in substantially the form of Exhibit A hereto (the "Assignment
of Federal Contract"), and execute any other instruments or take any other steps
required by the Agent in order that all moneys due or to become due under such
Federal Contracts shall be assigned to the Agent and notice thereof given under
the Assignment of Claims Act, including without limitation delivery of Notices
of Assignments with respect to each Federal Contract as contemplated by Appendix
A to Exhibit A hereto.
Section 4.22. Reimbursement Obligation. Should the Debtor fail to comply with
the provisions of this Security Agreement, the Revolving Credit Agreement or any
other agreement relating to the Collateral such that the value of any Collateral
or the validity, perfection, rank or value of any security interest granted to
the Agent hereunder or thereunder is thereby diminished or potentially
diminished or put at risk (as reasonably determined by the Agent), the Agent on
behalf of the Debtor may, but shall not be required to, effect such compliance
on behalf of the Debtor, and the Debtor shall reimburse the Agent for the cost
thereof on demand, and interest shall accrue on such reimbursement obligation
from the date the relevant costs are incurred until reimbursement thereof in
full at the Default Rate.
ARTICLE V.
REMEDIES; RIGHTS UPON DEFAULT
Section 5.01. UCC Rights. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the Revolving Credit
Agreement or other Credit Documents and such Obligations have not been paid in
full, the Agent may in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
guarantying, evidencing or relating to the Obligations, exercise (i) all rights
and remedies of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and (ii) all other rights
available to the Agent at law or in equity.
Section 5.02. Payments on Collateral. Without limiting the rights of
the Agent under any other provision of this Security Agreement, if an
Event of Default shall occur and be continuing:
(i) all payments received by the Debtor under or in connection with any of the
Collateral shall be held by the Debtor in trust for the Agent, shall be
segregated from other funds of the Debtor and shall forthwith upon receipt by
the Debtor be turned over to the Agent, in the same form as received by the
Debtor (duly indorsed by the Debtor to the Agent, if required to permit
collection thereof by the Agent); and
(ii) all such payments received by the Agent (whether from the Debtor or
otherwise) may, in the sole discretion of the Agent, be held by the Agent as
collateral security for, and/or then or at any time thereafter applied in whole
or in part by the Agent to the payment of, the expenses and the Obligations as
set forth in Section 5.11 hereof.
Section 5.03. Possession of Collateral. In furtherance of the foregoing, the
Debtor expressly agrees that, if an Event of Default shall occur and be
continuing, the Agent may (i) by judicial powers, or without judicial process if
it can be done without breach of the peace, enter any premises where any of such
Collateral is or may be located and, without charge or liability to the Agent,
seize and remove such Collateral from such premises and (ii) have access to and
use of the Debtor's books and records relating to such Collateral.
Section 5.04. Sale of Collateral; Notice.
(a) Sale of Collateral. The Debtor expressly agrees that if an Event of Default
shall occur and be continuing, the Agent, without demand of performance or other
demand or notice of any kind (except the notice specified below of the time and
place of any public or private sale) to or upon the Debtor or any other Person
(all of which demands and/or notices are hereby waived by the Debtor), may
forthwith (i) apply the cash, if any, then held by it as collateral as specified
in Section 5.11 hereof and (ii) if there shall be no cash or such cash shall be
insufficient to pay the Obligations in full, collect, receive, appropriate and
realize upon the Collateral, and/or sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral (or contract to do
so) or any part thereof in one or more parcels (which need not be in round lots)
at public or private sale, at any office of the Agent or elsewhere in such
manner as is commercially reasonable and, as the Agent may deem best, for cash
or on credit or for future delivery without assumption of any credit risk. The
Agent shall have the right upon any such public sale, and, if the Collateral is
of a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Debtor waives all claims,
damages and demands against the Agent arising out of the foreclosure,
repossession, retention or sale of the Collateral.
(b) Notice of Sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent shall give
the Debtor ten (10) days' written notice of its intention to make any such
public or private sale or sale at a broker's board or on a securities exchange.
Such notice shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof being sold,
will first be offered for sale and (iii) in the case of a private sale, state
the day after which such sale may be consummated. The Agent shall not obligated
to make any such sale pursuant to any such notice. The Agent may adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In the case of any
sale of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling price is paid
by the purchaser thereof, but the Agent shall not incur any liability in case of
the failure of such purchase to take up and pay for the Collateral so sold and,
in the case of such failure, such Collateral may again be sold upon like notice.
(c) Special Provisions Relating to Sales of Securities. The Debtor recognizes
that the Agent may be unable to effect a public sale of any or all the
Collateral constituting a "security" (as such term is defined in the Securities
Act) by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers that will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. The Debtor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Agent
shall be under no obligation to delay a sale of any of Collateral constituting a
security for the period of time necessary to permit the issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such issuer would agree to do so.
Section 5.05. Rights of Purchasers. Upon any sale of the Collateral (whether
public or private), the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agent) at any such sale shall hold the Collateral so sold
absolutely, free from any claim or right of whatever kind, including any equity
or right of redemption of the Debtor who, to the extent permitted by law, hereby
specifically waives all rights of redemption, including, without limitation, any
right to redeem the Collateral under Section 9-506 of the UCC, and any right to
a judicial or other stay or approval which it has or may have under any law now
existing or hereafter adopted.
Section 5.06. Additional Rights of the Agent.
(a) Right to Maintain Proceedings. The Agent (i) shall have the right and power
to institute and maintain such suits and proceedings as it may deem appropriate
to protect and enforce the rights vested in it by this Security Agreement and
(ii) may proceed by suit or suits at law or in equity to enforce such rights and
to foreclose upon the Collateral and to sell all or, from time to time, any of
the Collateral under the judgment or decree of a court of competent
jurisdiction.
(b) Appointment of Receiver. The Agent shall, to the extent permitted by
applicable law, without notice to the Debtor to any party claiming through the
Debtor, without regard to the solvency or insolvency at such time of any Person
then liable for the payment of any of the Obligations, without regard to the
then value of the Collateral and without requiring any bond from any complainant
in such proceedings, be entitled as a matter of right to the appointment of a
receiver or receivers (who may be the Agent) of the Collateral or any part
thereof, pending such proceedings, with such powers as the court making such
appointment shall confer, and to the entry of an order directing that the
profits, revenues and other income of the property constituting the whole or any
part of the Collateral be segregated, sequestered and impounded for the benefit
of the Agent, and the Debtor irrevocably consents to the appointment of such
receiver or receivers and to the entry of such order.
(c) No Duty to Exercise Rights. In no event shall the Agent have any duty to
exercise any rights or take any steps to preserve the rights of the Agent in the
Collateral, nor shall the Agent be liable to the Debtor or any other Person for
any loss caused by the Agent's failure to meet any obligation imposed by Section
9-207 of the UCC or any successor provision. Without limiting the foregoing, the
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have any duty or responsibility for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
Section 5.07. Remedies Not Exclusive, etc.
(a) Remedies Not Exclusive. No remedy conferred upon or reserved to the Agent in
this Security Agreement is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law, in
equity or by statute.
(b) Restoration of Rights. If the Agent shall have proceeded to enforce any
right, remedy or power under this Security Agreement and the proceeding for the
enforcement thereof shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Agent, the Debtor and the Agent
shall, subject to any determination in such proceeding, severally and
respectively be restored to their former positions and rights under this
Security Agreement, and thereafter all rights, remedies and powers of the Agent
shall continue as though no such proceedings had been taken.
(c) Enforcement. All rights of action under this Security Agreement may be
enforced by the Agent without the possession of any instrument evidencing any
Obligation or the production thereof at any trial or other proceeding relative
thereto, and any suit or proceeding instituted by the Agent shall be brought in
its name and any judgment shall be held as part of the Collateral.
Section 5.08. Waiver and Estoppel.
(a) No Actions to Impede Sale of Collateral. The Debtor agrees, to the extent it
may lawfully do so, that it will not at any time in any manner whatsoever claim
or take the benefit or advantage of any appraisal, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force which may delay, prevent or otherwise affect the performance or
enforcement of this Security Agreement, and hereby waives all benefit or
advantage of all such laws. The Debtor covenants that it will not hinder, delay
or impede the execution of any power granted to the Agent in this Security
Agreement, any Assignment of Federal Contract or any other Credit Document.
(b) Collateral Sold As An Entirety. The Debtor, to the extent it may lawfully do
so, on behalf of itself and all who claim through or under it, including without
limitation any and all subsequent creditors, vendees, assignees and lienors,
waives and releases all rights to demand or to have any marshalling of the
Collateral upon any sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or under any foreclosure or any enforcement of
this Security Agreement, and consents and agrees that all of the Collateral may
at any such sale be offered and sold as an entirety.
(c) Waiver of Notices. The Debtor waives, to the extent permitted by law,
presentment, demand, protest and any notice of any kind (except the notices
expressly required hereunder) in connection with this Security Agreement and any
action taken by the Agent with respect to the Collateral.
Section 5.09. Power of Attorney; Powers Coupled With An Interest.
(a) Power of Attorney. Without limiting any other right granted hereunder, the
Debtor hereby irrevocably constitutes and appoints the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Agent's reasonable
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purpose of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives the Agent the power and right, on behalf of the Debtor,
without notice to or assent by the Debtor, to do the following:
(i) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(ii) to effect any repairs or any insurance called for by the terms of this
Security Agreement or any other Credit Document, and to pay all or any part of
the premiums therefor and the costs thereof;
(iii) upon the occurrence and continuance of any Event of Default and otherwise
to the extent provided in this Security Agreement, (A) to direct any party
liable for any payment under any of the Collateral to make payment of any and
all moneys due and to come due thereunder directly to the Agent or as the Agent
shall direct, (B) to receive payment of and receipt for, and to demand and sue
for, any and all moneys, claims and other amounts due and to become due at any
time in respect of or arising out of the Collateral, (C) to sign and indorse and
receive, take, assign and deliver, any checks, notes, drafts, negotiable and
non-negotiable instruments, any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral, (D) to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding with respect
to, or in connection with, the Collateral, (E) to sell, transfer, assign or
otherwise deal in or with the Collateral or any part thereof, as fully and
effectively as if the Agent were the absolute owner thereof and (F) to do, at
its option, but at the expense of the Debtor, at any time or from time to time,
all acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in order
to effect the intent of this Security Agreement, all as fully and effectively as
the Debtor might do.
(b) Powers Coupled With an Interest. All authorizations and agencies granted or
provided herein with respect to the Collateral, including the powers granted
under clause (a) of this Section 5.9, are irrevocable and powers coupled with an
interest.
Section 5.10. Certain Provisions Relating to Securities. Solely with respect to
any Collateral constituting a "security" (as defined in the Securities Act), if
an Event of Default shall have occurred and be continuing, all such securities
(as defined in the Securities Act) constituting a part of the Collateral shall,
at the request of the Agent, be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (i) all voting,
corporate and other rights, powers and privileges pertaining to such Collateral
at any meeting of shareholders of the issuer thereof or otherwise, and (ii) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all such Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the structure of
any such issuer, or upon the exercise by the Debtor or the Agent of any right,
privilege or option pertaining to such Collateral, and in connection therewith,
the right to deposit and deliver any and all such Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine), all without liability except to account for
property actually received by it and except as provided in Section 5.6(c)
hereof, but the Agent shall have no duty to the Debtor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
Section 5.11. Application of Monies. The proceeds of any sale of, or
other realization upon, all or any part of the Collateral shall be
applied by the Agent in the following order of priority:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Agent and its agents and
counsel, and all expenses, liabilities and advances incurred or made by the
Agent, its agents and counsel in connection therewith or in connection with the
care, safekeeping or otherwise of any or all of the Collateral;
second, to payment of the Obligations, in such order as the Agent may
elect; and
third, any surplus then remaining shall be paid to the Debtor,
or its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same (including pursuant to Section 9-504(1)(C) of the UCC) or as a
court of competent jurisdiction may direct.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Notices. All notices, requests and other communications to a party
hereunder shall be in writing and shall be given to such party at its address
set forth on the signature page hereof or such other address as such party may
hereafter specify for that purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) in the case of telephonic
notice (to the extent expressly permitted hereunder), when made, (ii) in the
case of notice delivered by overnight express courier, one Business Day after
the Business Day such notice was delivered to such courier, (iii) in the case of
notice delivered by first class mail, three Business Days after being deposited
in the mail, postage prepaid, return receipt requested, (iv) in the case of
notice by hand, when delivered, or (v) in the case of notice by any customary
means of telecommunication, when sent provided confirmation of receipt or answer
back has been received, in each case if addressed to any party hereto as
provided herein. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect the
validity of notice given in accordance with this section.
Section 6.02. No Waiver; Cumulative Remedies. The Agent shall not by any act
(except by a written instrument pursuant to Section 6.3 hereof) be deemed to
have waived any right or remedy hereunder. No failure to exercise, nor any delay
in exercising, on the part of the Agent any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
Section 6.03. Amendments and Waivers. None of the terms or provisions of this
Security Agreement may be amended, supplemented or otherwise modified except by
a written instrument executed by the Debtor and the Agent; provided that any
provision of this Security Agreement may be waived by the Agent in a letter or
agreement executed by the Agent or by telex or facsimile transmission from the
Agent.
Section 6.04. Successors and Assigns. The provisions of this Security Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Debtor may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Agent.
Section 6.05. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
VIRGINIA, OTHER THAN ITS LAWS RESPECTING CHOICE OF LAW OTHER THAN
THOSE CONTAINED IN THE UCC.
Section 6.06. Limitation by Law; Severability.
(a) All rights, remedies and powers provided in this Security Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Security Agreement invalid, unenforceable in whole or in part,
or not entitled to be recorded, registered or filed upon the provisions of any
applicable law.
(b) If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
Section 6.07. Counterparts. This Security Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each complete set of which, when so executed and delivered by all parties, shall
be an original, but all such counterparts shall together constitute but one and
the same instrument.
Section 6.08. Expenses of the Agent. The Debtor shall pay to the Agent from time
to time upon demand, all of the costs and expenses incurred by the Agent or any
Lender (including, without limitation, the reasonable fees and disbursements of
counsel and any amounts payable by the Agent or any Lender to any of their
respective agents) (i) arising in connection with the administration,
modification, amendment, waiver or termination of this Security Agreement or any
document or agreement contemplated hereby or any consent or waiver hereunder or
thereunder or (ii) incurred in connection with the administration of this
Security Agreement, or any document or agreement contemplated hereby, or in
connection with the administration, sale or other disposition of Collateral
hereunder or under any document or agreement contemplated hereby or the
preservation, protection or defense of the rights of the Agent or any Lender in
and to the Collateral.
Section 6.09. Indemnification. The Debtor shall at all times hereafter
indemnify, hold harmless and, on demand, reimburse the Agent and the Lenders and
their respective subsidiaries, affiliates, successors, assigns, officers,
directors, employees and agents, and their respective heirs, executors,
administrators, successors and assigns (all of the foregoing parties, including,
but not limited to, the Agent, being hereinafter collectively referred to as the
"Indemnities" and individually as an "Indemnitee") from, against and for any and
all liabilities, obligations, claims, damages, actions, penalties, causes of
action, losses, judgments, suits, costs, expenses and disbursements, including,
without limitation, attorney's fees (any and all of the foregoing being
hereinafter collectively referred to as the "Liabilities" and individually as a
"Liability") which the Indemnitees, or any of them, might be or become
subjected, by reason of, or arising out of the preparation, execution, delivery,
modification, administration or enforcement of, or performance of the Agent's
rights under, this Security Agreement or any other document, instrument or
agreement contemplated hereby or executed in connection herewith; provided,
however, that the Debtor shall not be liable to any Indemnitee for any Liability
caused solely by the gross negligence or willful misconduct of such Indemnitee.
In no event shall any Indemnitee, as a condition to enforcing its rights under
this Section 6.9 or otherwise, be obligated to make a claim against any other
Person (including, without limitation, the Agent) to enforce its rights under
this Section 6.9.
Section 6.10. Termination; Survival. This Security Agreement shall terminate
when the security interests granted hereunder have terminated and the Collateral
has been released as provided in Section 2.6; provided, however, that the
obligations of the Debtor under Section 4.22 and the provisions of this Article
6 shall survive any such termination.
Section 6.11. Judicial Proceedings; Waiver of Jury Trial. Any judicial
proceeding brought against the Debtor with respect to any Credit Agreement
Related Claim hereby may be brought in any court of competent jurisdiction in
the Commonwealth of Virginia, County of Fairfax, or any Federal court in the
Eastern District of Virginia, and, by execution and delivery of this Security
Agreement, the Debtor (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with any Credit Agreement Related Claim and (b) irrevocably waives any objection
it may now or hereafter have as to the venue of any such proceeding brought in
such a court or that such a court is an inconvenient forum. The Debtor hereby
waives personal service of process and consents that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of Section 6.1
hereof, and service so made shall be deemed completed on the earlier of (x) the
receipt thereof and (y) if sent by registered or certified mail (return receipt
requested), the fifth (5th) Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the Agent to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Debtor in the courts of any other jurisdiction. Any
judicial proceeding by the Debtor against the Agent relating to or involving any
Credit Agreement Related Claim hereby shall be brought only in a court located
in the Commonwealth of Virginia, County of Fairfax, or the Federal court in the
Eastern District of Virginia. THE DEBTOR AND THE AGENT HEREBY UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING ANY CREDIT AGREEMENT RELATED CLAIM.
Section 6.12. Integration. This Security Agreement and the other Credit
Documents constitute the entire agreement of the Agent, the Lenders, the
Borrower and the other Credit Parties with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Credit
Documents.
Section 6.13. Authority of Agent. The Debtor acknowledges that the rights and
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Security Agreement shall, as between
the Agent and the Lenders, be governed by the Revolving Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Debtor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and the Debtor shall not be under any obligation,
or entitlement, to make any inquiry respecting such authority.
Section 6.14. Headings, Bold Type and Table of Contents. The section headings,
subsection headings, and bold type used herein and the Table of Contents hereto
have been inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Security Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
Address: PRIVATE LABEL ENERGY
77 Franklin Street SERVICES, INC.
Suite 600
Boston, MA 02110 By: /s/ Glenn J. Dozier___________
Attention: Glenn J. Dozier Name: Glenn J. Dozier
Phone: (617) 423-0545 Title: Senior Vice President
Fax: (617) 422-0694 and Chief Financial Officer
Address: NATIONSBANK, N.A.
8300 Greensboro Drive
Suite 550 By: /s/ James W. Gaittens_____
McLean, Virginia 22102 Name: James W. Gaittens
Attention: James W. Gaittens Title: Senior Vice President
Phone: (703) 761-8405
Fax: (703) 917-0519
<PAGE>
Schedule 3.4
PRIVATE LABEL ENERGY SERVICES, INC.
Place of Business
77 Franklin Street
Suite 600
Boston, Massachusetts 02110
<PAGE>
Schedule 3.5
PRIVATE LABEL ENERGY SERVICES
Location of Collateral
77 Franklin Street
Suite 600
Boston, Massachusetts 02110
<PAGE>
Schedule 3.6
PRIVATE LABEL ENERGY SERVICES, INC.
Trade/Division Names
Private Label Energy Services, Inc.
Private Label Energy Services
PLES f/k/a HB Energy, Inc.
<PAGE>
Schedule 3.7
PRIVATE LABEL ENERGY SERVICES, INC.
Primary Collateral Locations
77 Franklin Street
Suite 600
Boston, Massachusetts 02110
<PAGE>
Schedule 3.8
PRIVATE LABEL ENERGY SERVICES, INC.
Patents and Trademarks
None.
<PAGE>
Schedule 4.1
PRIVATE ENERGY SERVICES, INC.
UCC FILINGS
None.
EXHIBIT 10.44
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SECURITY AGREEMENT
dated as of November 20, 1998
between
FIELDSTON PUBLICATIONS, INC.,
as Debtor
and
NATIONSBANK, N.A.,
as Agent
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<PAGE>
29
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of November 20, 1998 (as
amended, supplemented or modified from time to time, the "Security Agreement"),
is made by FIELDSTON PUBLICATIONS, INC., a Maryland corporation (the "Debtor"),
and NATIONSBANK, N.A., a national banking association (the "Agent") in its
capacity as Agent for the lenders (the "Lenders") from time to time a party to
the Revolving Credit Agreement, dated as of November 20, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Revolving Credit
Agreement"), by and among the Hagler Bailly, Inc., a Delaware corporation (the
"Company"), the Agent, in its capacity as such thereunder, and the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Revolving Credit Agreement, the
Lenders have severally agreed to make available to the Company a revolving line
of credit for Revolving Loans, Swing Line Loans and Standby Letters of Credit in
an aggregate principal amount at any time not to exceed the Maximum Available
Amount, subject to the terms and conditions contained therein;
WHEREAS, the Company owns, directly or indirectly, [all] of
the issued and outstanding shares of capital of stock of, or other equity
interests in, the Debtor;
WHEREAS, the proceeds of such Revolving Loans, Swing Line
Loans and Standby Letters of Credit may be used to enable the Company to make
valuable transfers to the Debtor in connection with the operation of its
business and for the Permitted Uses;
WHEREAS, the Debtor will derive substantial direct and
indirect benefit from such Revolving Loans, Swing Line Loans and Standby Letters
of Credit; and
WHEREAS, the Company is required to cause the Debtor to
execute this Agreement pursuant to the provisions of the Revolving Credit
Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and to induce the Lenders to make or maintain
their respective Revolving Loans and Swing Line Loans to, and the Issuing Lender
to issue or maintain the Standby Letters of Credit under the Revolving Credit
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor hereby agrees with the
Agent, for the ratable benefit of the Lenders, as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions Generally. Capitalized terms used herein without
definition shall have the respective meanings specified in the Revolving Credit
Agreement, and the following terms shall have the following meanings (such
meanings to be, when appropriate, equally applicable to both the singular and
plural forms of the terms defined):
"Account Debtor" shall mean, with respect to any Receivable or
Other Intangible, any Person obligated to make payment thereunder, including
without limitation any account debtor thereon.
"Assignment of Claims Act" shall mean the Assignment of Claims Act of
1940, 31 U.S.C. 3727, 41 U.S.C. 15 (1986), as the same
may be amended and any successor statute of similar import.
"Assignment of Federal Contract" shall have the meaning
specified in Section 4.21 hereof.
"Cash Collateral Account" shall have the meaning specified in
Section 2.4 hereof.
"Collateral" shall have the meaning set forth in Section 2.1.
"Debtor" shall have the meaning specified in the preamble hereof.
"Equipment" shall mean all equipment now owned or hereafter
acquired by the Debtor, including all items of machinery, equipment, furnishings
and fixtures of every kind, whether affixed to real property or not, as well as
all automobiles, trucks and vehicles of every description, trailers, handling
and delivery equipment, fittings, special tools, all additions to, substitutions
for, replacements of or accessions to any of the foregoing, all attachments,
components, parts (including spare parts) and accessories whether installed
thereon or affixed thereto and all fuel for any thereof.
"Federal Contract" means any contract or agreement with,
involving or for the benefit of the United States of America or any department,
agency or instrumentality thereof (collectively, the "U.S. Government"), whether
now existing or hereafter arising, in each case as the same may be amended,
modified or otherwise supplemented from time to time.
"Inventory" shall mean all inventory now owned or hereafter
acquired by the Debtor, including (i) all goods and other personal property
which are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in the Debtor's business,
(ii) all inventory, wherever located, evidenced by negotiable and non-negotiable
documents of title, warehouse receipts and bills of lading, (iii) all of the
Debtor's rights in, to and under all purchase orders now owned or hereafter
received or acquired by it for goods or services and (iv) all rights of the
Debtor as an unpaid seller, including rescission, replevin, reclamation and
stopping in transit.
"Lenders" shall have the meaning specified in the preamble hereof.
"Obligations" shall mean any and all now existing or hereafter
arising indebtedness, obligations, liabilities and covenants of each Credit
Party to any Lender, the Agent, their respective Affiliates, successors and
assigns and any other Indemnified Person under or arising out of any Credit
Document, including without limitation (i) all Revolving Loans and all Swing
Line Loans together with interest thereon and all Standby Letters of Credit,
(ii) all fees, expenses, indemnity payments and other amounts due or to become
due under the Revolving Credit Agreement, the Revolving Notes, the Swing Line
Note or any other Credit Document, (iii) all liabilities and obligations under
the Subsidiary Guarantee and any other agreement executed by any Credit Party
guarantying the obligations of the Borrower under the Revolving Credit Agreement
or any other Credit Document, (iv) all liabilities and obligations under any
agreement providing collateral for any of the foregoing (including any Pledge
Agreement and the Subsidiary Security Agreements), and (v) and any agreement or
instrument refinancing or restructuring all or any portion of the obligations
and liabilities under any of foregoing or under any successor agreement or note,
in each case whether direct or indirect, absolute or contingent or due or to
become due.
"Other Intangibles" shall mean all accounts, accounts
receivable, contract rights, documents, instruments, notes, chattel paper,
money, indemnities, warranties and general intangibles now owned or hereafter
acquired by the Debtor including, without limitation, all goodwill, customer
lists, permits, federal and state tax refunds, reversionary interests in pension
plan assets, Patents, Trademarks, licenses, copyrights and other rights in
intellectual property, other than Receivables.
"Patents" shall mean all letters patent of the United States
or any other country, and all applications for letters patent of the United
States or any other country, in which the Debtor may now or hereafter have any
right, title or interest and all reissues, continuations, continuations-in-part
or extensions thereof.
"Proceeds" shall mean all proceeds, including (i) whatever is
received upon any collection, exchange, sale or other disposition of any of the
Collateral and any property into which any of the Collateral is converted,
whether cash or non-cash, (ii) any and all payments or other property (in any
form whatsoever) made or due and payable on account of any insurance, indemnity,
warranty or guaranty payable to the Debtor with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever) made or due and
payable in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any person, corporation, agency, authority or
other entity acting under color of any governmental authority) and (iv) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables" shall mean all accounts now or hereafter owing
to the Debtor, and all accounts receivable, contract rights, documents,
instruments or chattel paper representing amounts payable or monies due or to
become due to the Debtor, arising from the sale of Inventory or the rendition of
services in the ordinary course of business or otherwise (whether or not earned
by performance), together with all Inventory returned by or reclaimed from
customers wherever such Inventory is located, and all guaranties, securities and
liens held for the payment of any such account, account receivable, contract
right, document, instrument or chattel paper.
"Security Agreement" shall have the meaning specified in the preamble
hereof.
"Trademarks" shall mean all right, title or interest which the
Debtor may now or hereafter have in any or all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source of business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof and all applications in
connection therewith, including without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or political subdivision thereof and all reissues, extensions or
renewals thereof.
"UCC" shall mean the Uniform Commercial Code in effect on the
date hereof in the Commonwealth of Virginia.
"U.S. Government" has the meaning specified in the definition of
Federal Contract contained herein.
Section 1.02. UCC Definitions. The uncapitalized terms "account", "account
debtor", "chattel paper", "contract right", "document", "warehouse receipt",
"bill of lading", "document of title", "instrument", "inventory", "general
intangible", "money", "security", "certificated security", "uncertificated
security", "financial asset" and "proceeds" as used in Section 1.1 or elsewhere
in this Security Agreement shall have the respective meanings set forth in the
UCC.
ARTICLE II.
SECURITY INTERESTS
Section 2.01. Grant of Security Interests. To secure the due and punctual
payment of all Obligations, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing or due or
to become due, whether at maturity or upon acceleration or otherwise, in
accordance with the terms thereof and to secure the due and punctual performance
of all of the Obligations and in order to induce the Agent and the Lenders to
enter into the Revolving Credit Agreement and the other Credit Documents, the
Debtor hereby pledges, assigns, delivers, conveys and transfers to the Agent,
for the ratable benefit of the Lenders, and grants to the Agent, for the ratable
benefit of the Lenders, a first priority and continuing security interest in and
lien on, all of the Debtor's right, title and interest in, to and under the
following, whether now existing or hereafter acquired (the "Collateral"):
(i) all Receivables;
(ii) all Other Intangibles;
(iii) all Equipment;
(iv) all Inventory;
(v) to the extent not included in the foregoing, all securities (whether
certificated or uncertificated) and all financial assets, whether now existing
or hereafter arising, including, without limitation, all capital stock issued by
any Person and held by Debtor, and all partnership interests, whether in the
nature of a joint venture, limited liability company member's interest, master
limited partnership, teaming arrangement or otherwise;
(vi) to the extent not included in the foregoing, all other personal property,
whether tangible or intangible, and wherever located whether within or outside
of the United States, including, but not limited to, the balance of every
deposit account now or hereafter existing of the Debtor with any bank or other
financial institution and all monies of the Debtor and all rights to payment of
money of the Debtor;
(vii) to the extent not included in the foregoing, all books, ledgers and
records and all computer programs, tapes, discs, punch cards, data processing
software, transaction files, master files and related property and rights
(including computer and peripheral equipment) necessary or helpful in enforcing,
identifying or establishing any item of Collateral; and
(viii) to the extent not otherwise included, all Proceeds and products of any or
all of the foregoing, whether existing on the date hereof or arising hereafter;
provided, however, notwithstanding anything to the contrary contained herein,
the Debtor is not assigning, pledging or otherwise encumbering under this
Security Agreement its interests in any Federal Contract to which it is a party,
or in accounts or receivables due to Debtor under such Federal Contract, to the
extent, but only to the extent, such assignment, pledge or other encumbrance
would breach or violate or would cause Debtor to breach or violate such Federal
Contract or statutes or regulations applicable thereto, it being understood that
this proviso does not apply to, or in any way limit, Debtor's assignment, pledge
or encumbrance of Proceeds of all Federal Contracts to which it is a party.
Section 2.02. Continuing Liability of the Debtor. Anything herein to the
contrary notwithstanding, the Debtor shall remain liable to observe and perform
all the terms and conditions to be observed and performed by it under any
contract, agreement, warranty or other obligation with respect to the
Collateral; and shall do nothing to impair the security interests herein
granted. The Agent shall not have any obligation or liability under any such
contract, agreement, warranty or obligation by reason of or arising out of this
Security Agreement or the receipt by the Agent of any payment relating to any
Collateral, nor shall the Agent be required to perform or fulfill any of the
obligations of the Debtor with respect to the Collateral, to make any inquiry as
to the nature or sufficiency of any payment received by it or the sufficiency of
the performance of any party's obligations with respect to any Collateral.
Furthermore, the Agent shall not be required to file any claim or demand to
collect any amount due or to enforce the performance of any party's obligations
with respect to, the Collateral.
Section 2.03. Sales and Collections.
(a) Sales of Inventory in the Ordinary Course of Business. The Debtor is
authorized (i) to sell in the ordinary course of its business for fair value and
on an arm's-length basis any of its Inventory normally held by it for such
purpose and (ii) to use and consume, in the ordinary course of its business, any
raw materials, supplies and materials normally held by it for such purpose. The
Agent may, upon the occurrence of any Event of Default, without cause or notice,
curtail or terminate such authority at any time.
(b) Collection of Receivables. The Debtor is authorized to collect amounts owing
to it with respect to the Collateral, except as otherwise provided in connection
with the Assignment of Federal Contract, if any as provided herein. However, the
Agent may, upon and during the continuance of an Event of Default or a Potential
Event of Default, notify Account Debtors obligated to make payments under any or
all Receivables or Other Intangibles that the Agent has a security interest in
such Collateral and that payments shall be made directly to the Agent. Upon the
request of the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default, as the case may be, the Debtor will so notify such
Account Debtors and will execute such contract assignments, notices of
assignment or other documents as may be required by such Account Debtors. The
Debtor will use all reasonable efforts to cause each Account Debtor to comply
with the foregoing instruction. In furtherance of the foregoing, the Debtor
authorizes the Agent upon and during the continuance of an Event of Default or a
Potential Event of Default (i) to ask for, demand, collect, receive and give
acquittances and receipts for any and all amounts due and to become due under
any Collateral and in the name of the Debtor or its own name or otherwise, (ii)
to take possession of, endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of monies due under any
Collateral and (iii) to file any claim or take any other action in any court of
law or equity or otherwise which it may deem appropriate for the purpose of
collecting any amounts due under any Collateral. The Agent shall have no
obligation to obtain or record any information relating to the source of such
funds or the obligations in respect of which payments have been made.
Section 2.04. Segregation of Proceeds.
(a) Cash Collateral Account Maintained by Agent. Upon an Event of Default or a
Potential Event of Default, the Agent shall have the right at any time during
the continuance thereof to cause to be opened and maintained at the office of
the Agent in McLean, Virginia a non-interest bearing bank account (the "Cash
Collateral Account") which will contain only Proceeds. Any "cash proceeds" (as
such term is defined in Section 9-306(1) of the UCC) received by the Agent
directly from Account Debtors obligated to make payments under Receivables or
Other Intangibles pursuant to Section 2.3 hereof or from the Debtor pursuant to
clause (b) of this Section 2.4, whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper or other Proceeds received on
account of any Collateral, shall be promptly deposited in the Cash Collateral
Account, and until so deposited shall be held in trust for the Agent as property
of the Agent and shall not be commingled with any funds of the Debtor not
constituting Proceeds of Collateral. The name in which the Cash Collateral
Account is carried shall clearly indicate that the funds deposited therein are
the property of the Debtor, subject to the security interest of the Agent
hereunder. Such Proceeds, when deposited, shall continue to be security for the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. The Agent shall have sole dominion and control over the
funds deposited in the Cash Collateral Account, and such funds may be withdrawn
therefrom only by the Agent.
(b) Deposit of Proceeds by the Debtor. Upon notice by the Agent to the Debtor
that the Cash Collateral Account has been opened, the Debtor shall cause all
cash Proceeds collected by it to be delivered to the Agent forthwith upon
receipt, in the original form in which received (with such endorsements or
assignments as may be necessary to permit collection thereof by the Agent), and
for such purpose the Debtor hereby irrevocably authorizes and empowers the
Agent, its officers, employees and authorized agents to endorse and sign the
name of the Debtor on all checks, drafts, money orders or other media of payment
so delivered, and such endorsements or assignments shall, for all purposes, be
deemed to have been made by the Debtor prior to any endorsement or assignment
thereof by the Agent. The Agent may use any convenient or customary means for
the purpose of collecting such checks, drafts, money orders or other media of
payment.
Section 2.05. Verification of Receivables. The Agent shall have the right to
make test verifications of Receivables in any reasonable manner and through any
medium that it considers advisable, and the Debtor agrees to furnish all such
assistance and information as the Agent may reasonable require in connection
therewith. The Debtor at its expense will cause its chief financial officer to
furnish to the Agent at any reasonable time and from time to time promptly upon
the Agent's reasonable request, the following reports: (i) a reconciliation of
all Receivables, (ii) an aging of all Receivables, (iii) trial balances and (iv)
a test verification of such Receivables as the Agent may request.
Section 2.06. Release of Collateral.
(a) Security Interest of Agent Ceases Upon Permitted Dispositions. The Debtor
may sell or realize upon or transfer or otherwise dispose of Collateral only to
the extent permitted by Section 4.13, and the security interests of the Agent in
such Collateral so sold, realized upon or disposed of (but not in the Proceeds
arising from such sale, realization or disposition) shall cease immediately upon
such sale, realization or disposition, without any further action on the part of
the Agent. The Agent, if requested in writing by the Debtor but at the expense
of the Debtor, is hereby authorized and instructed to deliver to the Account
Debtor or the purchaser or other transferee of any such Collateral a certificate
stating that the Agent no longer has a security interest therein, and such
Account Debtor or such purchaser or other transferee shall be entitled to rely
conclusively on such certificate for any and all purposes.
(b) Filing of Termination Statements. Upon the payment in full of all of the
Obligations and if there is no commitment by any Lender to make further
advances, incur obligations or otherwise give value, the Agent will (as soon as
reasonably practicable after receipt of notice from the Debtor requesting the
same but at the expense of the Debtor) deliver to the Debtor (i) for each
jurisdiction in which a UCC financing statement is on file to perfect the
security interests granted to the Agent hereunder, a termination statement
(appropriately completed) to the effect that the Agent no longer claims a
security interest under such financing statement, and (ii) such other documents
as the Debtor shall reasonably request evidencing satisfaction of the
Obligations and the release of the security interests granted to the Agent
hereunder.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
The Debtor represents and warrants that:
Section 3.01. Title to Collateral. Except for the security interests granted to
the Agent pursuant to this Security Agreement and as otherwise permitted by
Section 6.2(a) of the Revolving Credit Agreement, the Debtor is the sole owner
of each item of the Collateral, having good and marketable title thereto, free
and clear of any and all Liens.
Section 3.02. Validity, Perfection and Priority of Security Interests.
(a) By complying with Section 4.1 hereof, the Debtor will have created a valid
security interest in favor of the Agent in all existing Collateral and in all
identifiable Proceeds of such Collateral, which security interest (except in
respect of Collateral not located at a facility identified on Schedule 3.7
hereto and motor vehicles for which the exclusive manner of perfecting a
security interest therein is by noting such security interest in the certificate
of title in accordance with local law) would be prior to the claims of a trustee
in bankruptcy under Section 544(a) of the Bankruptcy Code. Continuing compliance
by the Debtor with the provisions of Section 4.2 hereof will also (i) create
valid security interests in all Collateral acquired after the date hereof and in
all identifiable Proceeds of such Collateral and (ii) cause such security
interests in all Collateral and in all Proceeds which are (A) identifiable cash
Proceeds of Collateral covered by financing statements required to be filed
hereunder, (B) identifiable Proceeds in which a security interest may be
perfected by such filing under the UCC and (C) any Proceeds in the Cash
Collateral Account to be duly perfected under the UCC, in each case prior to the
claims of a trustee in bankruptcy under the Bankruptcy Code (except in respect
of Collateral not located at a facility identified on Schedule 3.5 hereto).
(b) The security interests of the Agent in the Collateral located at the
facilities identified on Schedule 3.5 hereto rank first in priority. Other than
financing statements or other similar documents perfecting the security
interests in favor of the Agent, no financing statements, deeds of trust,
mortgages or similar documents covering all or any part of the Collateral are on
file or of record in any government office in any jurisdiction in which such
filing or recording would be effective to perfect a security interest in such
Collateral, nor is any of the Collateral in the possession of any Person (other
than the Debtor) asserting any claim thereto or security interest therein.
Section 3.03. Enforceability of Receivables and Other Intangibles. To the best
knowledge of the Debtor, each Receivable and Other Intangible is a valid and
binding obligation of the related Account Debtor in respect thereof, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
provisions of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law), and complies with any applicable legal
requirements.
Section 3.04. Place of Business. Schedule 3.4 correctly sets forth the chief
executive office and principal place of business of the Debtor and the offices
of the Debtor where records concerning Receivables and Other Intangibles are
kept.
Section 3.05. Location of Collateral. Schedule 3.5 correctly sets forth the
location of all Equipment and Inventory, other than rolling stock, aircraft and
goods in transit. Except as otherwise specified in Schedule 3.5, all Inventory
and Equipment has been located at the address specified on Schedule 3.5 at all
times during the four-month period prior to the date hereof while owned by the
Debtor. All Inventory has been and will be produced in compliance with the Fair
Labor Standards Act, 29 U.S.C. ss.ss. 201-219, except for such non-compliance
which could not reasonably be expected to have a material adverse effect on the
Debtor. No Inventory is evidenced by a negotiable document of title, warehouse
receipt or bill of lading. No non-negotiable document of title, warehouse
receipt or bill of lading has been issued to any person other than the Debtor,
and the Debtor has retained possession of all of such non-negotiable documents,
warehouse receipts and bills of lading. No amount payable under or in connection
with any of the Collateral is evidenced by promissory notes or other
instruments.
Section 3.06. Trade Names. Schedule 3.6 correctly sets forth any and all trade
names, division names, assumed names or other names under which the Debtor
currently transacts business or has transacted business within the four-month
period prior to the date hereof.
Section 3.07. Patents and Trademarks. Schedule 3.7 correctly sets
forth all Patents, Patent licenses, Trademarks and Trademark licenses
now owned by the Debtor.
ARTICLE IV.
COVENANTS
The Debtor covenants and agrees that until all obligations and
liabilities in respect of the Obligations shall have performed and paid in full
and until no Standby Letters of Credit are outstanding or fully cash
collateralized and the Commitments are terminated:
Section 4.01. Perfection of Security Interests. The Debtor will, at its expense,
cause all filings and recordings and other actions specified on Schedule 4.1 to
have been completed on or prior to the Effective Date.
Section 4.02. Further Actions.
(a) At all times after the date hereof, the Debtor will, at its expense, comply
with the following:
(i) as to all Receivables, Other Intangibles, Equipment and Inventory, it will
cause UCC financing statements and continuation statements to be filed and to be
on file in all applicable jurisdictions as required to perfect the security
interests granted to the Agent hereunder, to the extent that applicable law
permits perfection of a security interest by filing under the UCC;
(ii) as to all Proceeds, it will cause all UCC financing statements and
continuation statements filed in accordance with clause (i) above to include a
statement or a checked box indicating that Proceeds of all items of Collateral
described herein are covered;
(iii) as to any amount payable under or in connection with any of the Collateral
which shall be or shall become evidenced by any promissory note or other
instrument, the Debtor will promptly (but in no event later than ten (10)
Business Days after receipt of such note or instrument), pledge and deliver such
note or other instrument to the Agent as part of the Collateral, duly endorsed
in a manner reasonably satisfactory to the Agent;
(iv) at the request of the Agent, the Debtor shall deliver all other Collateral
consisting of certificated securities, endorsed for transfer in a manner
reasonably satisfactory to the Agent (or execute a securities intermediary
account control agreement to the extent possession by the Agent of such
securities is not feasible); and
(v) as to all Patents, Patent licenses, Trademarks or Trademark licenses, the
Debtor will effect the recordation or renewal of the recordation of the security
interests of the Agent therein so as to maintain valid and perfected security
interests therein under all applicable state and federal laws.
(b) Further Assurances. The Debtor will, from time to time and at its expense,
execute, deliver, file or record such UCC financing statements, applications for
certificates of title and such other statements, assignments, instruments,
documents, agreements or other papers and take any other action that may be
necessary or desirable, or that the Agent may reasonably request, in order to
create, preserve, perfect, confirm or validate the security interest of the
Agent in the Collateral, to enable the Agent to obtain the full benefits of this
Security Agreement or to enable it to exercise and enforce any of its rights,
powers and remedies hereunder, including, without limitation, its right to take
possession of the Collateral.
(c) Signature. To the fullest extent permitted by law, the Debtor authorizes the
Agent to sign and file financing and continuation statements and amendments
thereto with respect to the Collateral without its signature thereon.
Section 4.03. Change of Name, Identity or Structure. The Debtor will not change
its name, identity or corporate structure in any manner and, except as set forth
on Schedule 3.6, will not conduct its business under any trade, assumed or
fictitious name unless it shall have given the Agent at least forty-five (45)
days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by the Agent to amend any financing statement or continuation
statement relating to the security interests granted hereby in order to preserve
such security interests and to effectuate or maintain the priority thereof
against all Persons.
Section 4.04. Place of Business and Collateral. The Debtor will not change the
location of (i) its places of business, (ii) its chief executive office or (iii)
the office or other locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location listed on Schedule 3.4 or
3.5 unless, prior to such change, it notifies the Agent forty-five (45) days in
advance of such change, makes all UCC filings required by Section 4.2 and takes
all other action necessary or that the Agent may reasonably request to preserve,
perfect, confirm and protect the security interests granted hereby. The Debtor
will in no event change the location of any Collateral if such change would
cause the security interest granted hereby in such Collateral to lapse or cease
to be perfected. The Debtor will at all times maintain its chief executive
office within one of the forty-eight contiguous states in which Article 9 of the
uniform commercial code is in effect.
Section 4.05. Fixtures. The Debtor will not permit any Equipment to become a
fixture unless it shall have given the Agent at least ten (10) days' prior
written notice thereof and shall have taken all such action and delivered or
caused to be delivered to the Agent all instruments and documents, including,
without limitation, waivers and subordination agreements by any landlords and
mortgagees, and filed all financing statements necessary or reasonably requested
by the Agent, to preserve and protect the security interest granted herein and
to effectuate or maintain the priority thereof against all Persons; provided,
however, that, so long as no Event of Default or Potential Event of Default
shall have occurred and be continuing, the Debtor shall not be obligated to
comply with the provisions of this Section 4.5 with respect to the first $50,000
of Equipment (determined based on the then fair market value thereof).
Section 4.06. Maintenance of Records. The Debtor will keep and maintain at its
own cost and expense complete books and records relating to the Collateral which
are satisfactory to the Agent including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral and all
of its other dealings with the Collateral. The Debtor will mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Agent' further security, the Debtor
agrees that the Agent shall have a special property interest in all of the
Debtor's books and records pertaining to the Collateral and the Debtor shall
deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent.
Section 4.07. Compliance with Laws The Debtor will comply in all material
respects with all acts, rules, regulations, orders, decrees and directions of
any government or any state or local government applicable to the Collateral or
any part thereof or to the operation of the Debtor's business except to the
extent that the failure to comply would not have a material adverse effect on
the financial or other condition of the Debtor; provided, however, that the
Debtor may contest any act, rule, regulation, order, decree or direction in any
reasonable manner which shall not, in the sole opinion of the Agent, adversely
affect the Agent's rights or, in the case of Collateral located at a facility
identified on Schedule 3.7 hereto, the first priority of its security interest
in the Collateral.
Section 4.08. Payment of Taxes. The Debtor will pay promptly when due all taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no such charge
need be paid if (i) the validity thereof is being contested in good faith by
appropriate proceedings and (ii) such charge is adequately reserved against in
accordance with generally accepted accounting principles, as consistently
applied.
Section 4.09. Compliance with Terms of Accounts and Contracts. The Debtor will
perform and comply in all material respects with all of its obligations under
all agreements relating to the Collateral to which it is a party or by which it
is bound.
Section 4.10. Limitation on Liens on Collateral. The Debtor will not create,
permit or suffer to exist, and will defend the Collateral and the Debtor's
rights with respect thereto against and take such other action as is necessary
to remove any Lien, security interest, encumbrance, or claim in or to the
Collateral other than the security interests created hereunder and such Liens to
the extent permitted pursuant to Section 6.2(a) of the Revolving Credit
Agreement.
Section 4.11. Limitations on Modifications of Receivables and Other Intangibles;
No Waivers or Extensions. The Debtor will not (i) amend, modify, terminate or
waive any provisions of any material Receivable or Other Intangible in any
manner which might, when taken together with all such other Receivables or Other
Intangibles, respectively, materially reduce the value of all Receivables or
Other Intangibles, respectively, in the Collateral, (ii) fail to exercise
promptly and diligently each and every material right which it may have under
each Receivable and Other Intangible or (iii) fail to deliver to the Agent a
copy of each material demand, notice or document received by it relating in any
way to any Receivable or Other Intangible.
Section 4.12. Maintenance of Insurance. The Debtor will maintain with
financially sound insurance companies licensed to do business in the
jurisdictions in which the Collateral is located insurance policies on the
Inventory and Equipment in accordance with the provisions of Section 6.1(m) of
the Revolving Credit Agreement.
Section 4.13. Limitations on Dispositions of Collateral. The Debtor will not
directly or indirectly (through the sale of stock, merger or otherwise), without
the prior written consent of the Agent, sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so except
for (i) sales of Inventory in the ordinary course of its business for fair value
in arm's-length transactions and (ii) so long as no Event of Default (or
Potential Event of Default) has occurred and is continuing, dispositions in a
commercially reasonable manner of Equipment which has become redundant, worn out
or obsolete or which should be replaced so as to improve productivity, so long
as the proceeds of any such disposition are (x) used to acquire replacement
equipment which has comparable or better utility and equivalent or better value
and which is subject to a first priority security interest in favor of the Agent
therein, except as permitted by Section 6.2(a) of the Revolving Credit
Agreement, or (y) applied to repay the Obligations. The inclusion of Proceeds of
the Collateral under the security interests granted hereby shall not be deemed a
consent by the Agent to any sale or disposition of any Collateral other than as
permitted by this Section 4.13.
Section 4.14. Further Identification of Collateral. The Debtor will furnish to
the Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Agent may reasonably request. The Debtor shall promptly notify
the Agent if the value of the Collateral located at the facilities identified on
Schedule 3.7 hereto is less than 80% of the value of all of the Collateral.
Section 4.15. Notices. The Debtor will advise the Agent promptly and in
reasonable detail (i) of any Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, other than, unless reasonably
requested by the Agent, Liens permitted by Section 6.2(a) of the Revolving
Credit Agreement, (ii) of any material change in the composition of the
Collateral, and (iii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or on the
security interests granted to the Agent in this Security Agreement.
Section 4.16. Change of Law. The Debtor shall promptly notify the Agent of any
change in law known to it which (i) adversely affects or will adversely affect
the validity, perfection or priority of the security interests granted hereby,
(ii) requires or will require a change in the proceedings to be followed in
order to maintain and protect such validity, perfection and priority or (iii)
could result in the Agent not having a perfected security interest in any of the
Collateral.
Section 4.17. Right of Inspection.
(a) Access to Books and Records. The Debtor shall, following any request by the
Agent and upon reasonable notice, permit the Agent or its representatives to
have full and free access during normal business hours to all the books,
correspondence and records of the Debtor, and the Agent or its representatives
may examine the same, take extracts therefrom, make photocopies thereof and have
such discussions with officers, employees and public accountants of the Debtor
as the Agent may deem reasonably necessary, and the Debtor agrees to render to
the Agent, at the Debtor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. The Agent and its
representatives shall upon reasonable notice and during normal business hours
also have the right to enter into and upon any premises where any of the
Inventory or the Equipment is located for the purpose of inspecting the same,
observing its use or protecting the interests of the Agent therein.
(b) Audits. The Debtor shall permit the Lenders, the Agent and their
representatives and advisors to review the operations of the Debtor and perform
the audits and examinations as provided in Section 6.1(l) of the Revolving
Credit Agreement.
Section 4.18. Maintenance of Equipment. The Debtor will, at its
expense, maintain the Equipment in good operating condition, ordinary
wear and tear excepted.
Section 4.19. Covenants Regarding Patent and Trademark Collateral.
(a) Generally. At such time as the Debtor shall acquire any Patents or
Trademarks, it will comply with the terms, covenants and warranties of this
Section 4.19.
(b) Continued Use of Trademark. The Debtor (either itself or through licensees)
will, unless the Debtor shall reasonably determine, after consultation with the
Agent, that a Trademark is of negligible economic value to the Debtor, (i)
continue to use each Trademark on each and every Trademark class of goods
applicable to its current products and services as reflected in its current
catalogs, brochures and price lists in order to maintain each Trademark in full
force and free from any claim of abandonment for non-use, (ii) maintain as in
the past the quality of products and services offered under each Trademark,
(iii) employ each Trademark with the appropriate notice of registration, (iv)
not adopt or use any mark which is confusingly similar to a colorable imitation
of any Trademark and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(c) No Abandonment. The Debtor will not, unless the Debtor shall reasonably
determine, after consultation with the Agent, that a Patent is of negligible
economic value to the Debtor, do any act, or knowingly omit to do any act,
whereby any Patent may be abandoned or dedicated.
(d) Notice of Abandonment or Adverse Determinations. The Debtor shall notify the
Agent immediately if it knows, or has reason to know, that any application or
registration relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in any
proceeding in the United States Patent and Trademark Office or any court of
tribunal in any country) regarding the Debtor's ownership of any Patent or
Trademark, its right to register the same or keep and maintain the same.
(e) Filings After Notice to Agent. In no event shall the Debtor, either itself
or through any agent, employee, licensee or designee, file an application for
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the Agent and, upon
request of the Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's security
interest in such Patent or Trademark and the goodwill and general intangibles of
the Debtor relating thereto or represented thereby, and the Debtor hereby
constitutes the Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all such acts of such attorney being hereby ratified
and confirmed.
(f) Pursuit of Applications and Maintenance of Registrations. The Debtor will
take all necessary steps, including, without limitation, in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Patents and Trademarks, including without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability; provided, however, that no such Patent or Trademark shall
be required to be maintained or pursued to the extent such Patent or Trademark
is determined by the Debtor, after consultation with the Agent, to be of
negligible economic value to the Debtor.
(g) Notice of Infringement. If any of the Patent and Trademark Collateral is
infringed, misappropriated or diluted by a third party, the Debtor shall
promptly notify the Agent after it learns thereof and shall, unless the Debtor
shall reasonably determine, after consultation with the Agent, that such Patent
and Trademark Collateral is of negligible economic value to the Debtor, promptly
sue for infringement, misappropriation of dilution, seek injunctive relief where
appropriate and recover any and all damages for such infringement,
misappropriation or dilution, or take such other action as the Debtor shall
reasonably deem appropriate under the circumstances to protect such Patent and
Trademark Collateral.
Section 4.20. Termination of Federal Contracts. With respect to each Federal
Contract in respect of which the Debtor is required to execute an Assignment of
Federal Contract in accordance with Section 4.21 hereof, the Debtor shall give
prompt written notice to the Agent if the U.S. Government shall terminate or
threaten to terminate (whether for convenience or default) any such Federal
Contract with the Debtor having a value (including unexercised options) of
$100,000 or more. In addition, the Debtor shall give prompt written notice to
the Agent if the U.S. Government shall terminate or threaten to terminate any
contract between the U.S. Government and any other prime contractor under which
the Debtor is a subcontractor if the value of such subcontract (including
unexercised options) is $100,000 or more. Section 4.21. Federal Contracts. The
Debtor shall provide to the Agent, as soon as reasonably practicable but not
later than forty-five (45) days following the end of each Fiscal Quarter, a
report identifying each Federal Contract to which it is a party, having attached
thereto a copy of the first two pages of such Federal Contract and any amendment
thereto, to the extent not previously provided to the Agent. At the request of
the Agent (unless an Event of Default shall have occurred and be continuing, in
which case no such request shall be required), the Debtor shall execute and
deliver to the Agent an Assignment of Federal Contract, in substantially the
form of Exhibit A hereto (the "Assignment of Federal Contract"), and execute any
other instruments or take any other steps required by the Agent in order that
all moneys due or to become due under such Federal Contracts shall be assigned
to the Agent and notice thereof given under the Assignment of Claims Act,
including without limitation delivery of Notices of Assignments with respect to
each Federal Contract as contemplated by Appendix A to Exhibit A hereto.
Section 4.22. Reimbursement Obligation. Should the Debtor fail to comply with
the provisions of this Security Agreement, the Revolving Credit Agreement or any
other agreement relating to the Collateral such that the value of any Collateral
or the validity, perfection, rank or value of any security interest granted to
the Agent hereunder or thereunder is thereby diminished or potentially
diminished or put at risk (as reasonably determined by the Agent), the Agent on
behalf of the Debtor may, but shall not be required to, effect such compliance
on behalf of the Debtor, and the Debtor shall reimburse the Agent for the cost
thereof on demand, and interest shall accrue on such reimbursement obligation
from the date the relevant costs are incurred until reimbursement thereof in
full at the Default Rate.
ARTICLE V.
REMEDIES; RIGHTS UPON DEFAULT
Section 5.01. UCC Rights. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the Revolving Credit
Agreement or other Credit Documents and such Obligations have not been paid in
full, the Agent may in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
guarantying, evidencing or relating to the Obligations, exercise (i) all rights
and remedies of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and (ii) all other rights
available to the Agent at law or in equity.
Section 5.02. Payments on Collateral. Without limiting the rights of
the Agent under any other provision of this Security Agreement, if an
Event of Default shall occur and be continuing:
(i) all payments received by the Debtor under or in connection with any of the
Collateral shall be held by the Debtor in trust for the Agent, shall be
segregated from other funds of the Debtor and shall forthwith upon receipt by
the Debtor be turned over to the Agent, in the same form as received by the
Debtor (duly indorsed by the Debtor to the Agent, if required to permit
collection thereof by the Agent); and
(ii) all such payments received by the Agent (whether from the Debtor or
otherwise) may, in the sole discretion of the Agent, be held by the Agent as
collateral security for, and/or then or at any time thereafter applied in whole
or in part by the Agent to the payment of, the expenses and the Obligations as
set forth in Section 5.11 hereof.
Section 5.03. Possession of Collateral. In furtherance of the foregoing, the
Debtor expressly agrees that, if an Event of Default shall occur and be
continuing, the Agent may (i) by judicial powers, or without judicial process if
it can be done without breach of the peace, enter any premises where any of such
Collateral is or may be located and, without charge or liability to the Agent,
seize and remove such Collateral from such premises and (ii) have access to and
use of the Debtor's books and records relating to such Collateral.
Section 5.04. Sale of Collateral; Notice.
(a) Sale of Collateral. The Debtor expressly agrees that if an Event of Default
shall occur and be continuing, the Agent, without demand of performance or other
demand or notice of any kind (except the notice specified below of the time and
place of any public or private sale) to or upon the Debtor or any other Person
(all of which demands and/or notices are hereby waived by the Debtor), may
forthwith (i) apply the cash, if any, then held by it as collateral as specified
in Section 5.11 hereof and (ii) if there shall be no cash or such cash shall be
insufficient to pay the Obligations in full, collect, receive, appropriate and
realize upon the Collateral, and/or sell, assign, give an option or options to
purchase or otherwise dispose of and deliver the Collateral (or contract to do
so) or any part thereof in one or more parcels (which need not be in round lots)
at public or private sale, at any office of the Agent or elsewhere in such
manner as is commercially reasonable and, as the Agent may deem best, for cash
or on credit or for future delivery without assumption of any credit risk. The
Agent shall have the right upon any such public sale, and, if the Collateral is
of a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Debtor waives all claims,
damages and demands against the Agent arising out of the foreclosure,
repossession, retention or sale of the Collateral.
(b) Notice of Sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, the Agent shall give
the Debtor ten (10) days' written notice of its intention to make any such
public or private sale or sale at a broker's board or on a securities exchange.
Such notice shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof being sold,
will first be offered for sale and (iii) in the case of a private sale, state
the day after which such sale may be consummated. The Agent shall not obligated
to make any such sale pursuant to any such notice. The Agent may adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be made
at any time or place to which the same may be so adjourned. In the case of any
sale of all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Agent until the selling price is paid
by the purchaser thereof, but the Agent shall not incur any liability in case of
the failure of such purchase to take up and pay for the Collateral so sold and,
in the case of such failure, such Collateral may again be sold upon like notice.
(c) Special Provisions Relating to Sales of Securities. The Debtor recognizes
that the Agent may be unable to effect a public sale of any or all the
Collateral constituting a "security" (as such term is defined in the Securities
Act) by reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to resort to
one or more private sales thereof to a restricted group of purchasers that will
be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale
thereof. The Debtor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Agent
shall be under no obligation to delay a sale of any of Collateral constituting a
security for the period of time necessary to permit the issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such issuer would agree to do so.
Section 5.05. Rights of Purchasers. Upon any sale of the Collateral (whether
public or private), the Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser
(including the Agent) at any such sale shall hold the Collateral so sold
absolutely, free from any claim or right of whatever kind, including any equity
or right of redemption of the Debtor who, to the extent permitted by law, hereby
specifically waives all rights of redemption, including, without limitation, any
right to redeem the Collateral under Section 9-506 of the UCC, and any right to
a judicial or other stay or approval which it has or may have under any law now
existing or hereafter adopted.
Section 5.06. Additional Rights of the Agent.
(a) Right to Maintain Proceedings. The Agent (i) shall have the right and power
to institute and maintain such suits and proceedings as it may deem appropriate
to protect and enforce the rights vested in it by this Security Agreement and
(ii) may proceed by suit or suits at law or in equity to enforce such rights and
to foreclose upon the Collateral and to sell all or, from time to time, any of
the Collateral under the judgment or decree of a court of competent
jurisdiction.
(b) Appointment of Receiver. The Agent shall, to the extent permitted by
applicable law, without notice to the Debtor to any party claiming through the
Debtor, without regard to the solvency or insolvency at such time of any Person
then liable for the payment of any of the Obligations, without regard to the
then value of the Collateral and without requiring any bond from any complainant
in such proceedings, be entitled as a matter of right to the appointment of a
receiver or receivers (who may be the Agent) of the Collateral or any part
thereof, pending such proceedings, with such powers as the court making such
appointment shall confer, and to the entry of an order directing that the
profits, revenues and other income of the property constituting the whole or any
part of the Collateral be segregated, sequestered and impounded for the benefit
of the Agent, and the Debtor irrevocably consents to the appointment of such
receiver or receivers and to the entry of such order.
(c) No Duty to Exercise Rights. In no event shall the Agent have any duty to
exercise any rights or take any steps to preserve the rights of the Agent in the
Collateral, nor shall the Agent be liable to the Debtor or any other Person for
any loss caused by the Agent's failure to meet any obligation imposed by Section
9-207 of the UCC or any successor provision. Without limiting the foregoing, the
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall not have any duty or responsibility for
(i) ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Agent has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.
Section 5.07. Remedies Not Exclusive, etc.
(a) Remedies Not Exclusive. No remedy conferred upon or reserved to the Agent in
this Security Agreement is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law, in
equity or by statute.
(b) Restoration of Rights. If the Agent shall have proceeded to enforce any
right, remedy or power under this Security Agreement and the proceeding for the
enforcement thereof shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Agent, the Debtor and the Agent
shall, subject to any determination in such proceeding, severally and
respectively be restored to their former positions and rights under this
Security Agreement, and thereafter all rights, remedies and powers of the Agent
shall continue as though no such proceedings had been taken.
(c) Enforcement. All rights of action under this Security Agreement may be
enforced by the Agent without the possession of any instrument evidencing any
Obligation or the production thereof at any trial or other proceeding relative
thereto, and any suit or proceeding instituted by the Agent shall be brought in
its name and any judgment shall be held as part of the Collateral.
Section 5.08. Waiver and Estoppel.
(d) No Actions to Impede Sale of Collateral. The Debtor agrees, to the extent it
may lawfully do so, that it will not at any time in any manner whatsoever claim
or take the benefit or advantage of any appraisal, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting it to direct the
order in which the Collateral shall be sold, now or at any time hereafter in
force which may delay, prevent or otherwise affect the performance or
enforcement of this Security Agreement, and hereby waives all benefit or
advantage of all such laws. The Debtor covenants that it will not hinder, delay
or impede the execution of any power granted to the Agent in this Security
Agreement, any Assignment of Federal Contract or any other Credit Document.
(e) Collateral Sold As An Entirety. The Debtor, to the extent it may lawfully do
so, on behalf of itself and all who claim through or under it, including without
limitation any and all subsequent creditors, vendees, assignees and lienors,
waives and releases all rights to demand or to have any marshalling of the
Collateral upon any sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or under any foreclosure or any enforcement of
this Security Agreement, and consents and agrees that all of the Collateral may
at any such sale be offered and sold as an entirety.
(f) Waiver of Notices. The Debtor waives, to the extent permitted by law,
presentment, demand, protest and any notice of any kind (except the notices
expressly required hereunder) in connection with this Security Agreement and any
action taken by the Agent with respect to the Collateral.
Section 5.09. Power of Attorney; Powers Coupled With An Interest.
(g) Power of Attorney. Without limiting any other right granted hereunder, the
Debtor hereby irrevocably constitutes and appoints the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Debtor and in the name of the
Debtor or in its own name, from time to time in the Agent's reasonable
discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purpose of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives the Agent the power and right, on behalf of the Debtor,
without notice to or assent by the Debtor, to do the following:
(i) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral;
(ii) to effect any repairs or any insurance called for by the terms of this
Security Agreement or any other Credit Document, and to pay all or any part of
the premiums therefor and the costs thereof;
(iii) upon the occurrence and continuance of any Event of Default and otherwise
to the extent provided in this Security Agreement, (A) to direct any party
liable for any payment under any of the Collateral to make payment of any and
all moneys due and to come due thereunder directly to the Agent or as the Agent
shall direct, (B) to receive payment of and receipt for, and to demand and sue
for, any and all moneys, claims and other amounts due and to become due at any
time in respect of or arising out of the Collateral, (C) to sign and indorse and
receive, take, assign and deliver, any checks, notes, drafts, negotiable and
non-negotiable instruments, any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral, (D) to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding with respect
to, or in connection with, the Collateral, (E) to sell, transfer, assign or
otherwise deal in or with the Collateral or any part thereof, as fully and
effectively as if the Agent were the absolute owner thereof and (F) to do, at
its option, but at the expense of the Debtor, at any time or from time to time,
all acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the Agent's security interest therein, in order
to effect the intent of this Security Agreement, all as fully and effectively as
the Debtor might do.
(h) Powers Coupled With an Interest. All authorizations and agencies granted or
provided herein with respect to the Collateral, including the powers granted
under clause (a) of this Section 5.9, are irrevocable and powers coupled with an
interest.
Section 5.10. Certain Provisions Relating to Securities. Solely with respect to
any Collateral constituting a "security" (as defined in the Securities Act), if
an Event of Default shall have occurred and be continuing, all such securities
(as defined in the Securities Act) constituting a part of the Collateral shall,
at the request of the Agent, be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (i) all voting,
corporate and other rights, powers and privileges pertaining to such Collateral
at any meeting of shareholders of the issuer thereof or otherwise, and (ii) any
and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all such Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the structure of
any such issuer, or upon the exercise by the Debtor or the Agent of any right,
privilege or option pertaining to such Collateral, and in connection therewith,
the right to deposit and deliver any and all such Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine), all without liability except to account for
property actually received by it and except as provided in Section 5.6(c)
hereof, but the Agent shall have no duty to the Debtor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
Section 5.11. Application of Monies. The proceeds of any sale of, or
other realization upon, all or any part of the Collateral shall be
applied by the Agent in the following order of priority:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to the Agent and its agents and
counsel, and all expenses, liabilities and advances incurred or made by the
Agent, its agents and counsel in connection therewith or in connection with the
care, safekeeping or otherwise of any or all of the Collateral;
second, to payment of the Obligations, in such order as the Agent may
elect; and
third, any surplus then remaining shall be paid to the Debtor,
or its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same (including pursuant to Section 9-504(1)(C) of the UCC) or as a
court of competent jurisdiction may direct.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Notices. All notices, requests and other communications to a party
hereunder shall be in writing and shall be given to such party at its address
set forth on the signature page hereof or such other address as such party may
hereafter specify for that purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) in the case of telephonic
notice (to the extent expressly permitted hereunder), when made, (ii) in the
case of notice delivered by overnight express courier, one Business Day after
the Business Day such notice was delivered to such courier, (iii) in the case of
notice delivered by first class mail, three Business Days after being deposited
in the mail, postage prepaid, return receipt requested, (iv) in the case of
notice by hand, when delivered, or (v) in the case of notice by any customary
means of telecommunication, when sent provided confirmation of receipt or answer
back has been received, in each case if addressed to any party hereto as
provided herein. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given, shall not affect the
validity of notice given in accordance with this section.
Section 6.02. No Waiver; Cumulative Remedies. The Agent shall not by any act
(except by a written instrument pursuant to Section 6.3 hereof) be deemed to
have waived any right or remedy hereunder. No failure to exercise, nor any delay
in exercising, on the part of the Agent any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Agent of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
Section 6.03. Amendments and Waivers. None of the terms or provisions of this
Security Agreement may be amended, supplemented or otherwise modified except by
a written instrument executed by the Debtor and the Agent; provided that any
provision of this Security Agreement may be waived by the Agent in a letter or
agreement executed by the Agent or by telex or facsimile transmission from the
Agent.
Section 6.04. Successors and Assigns. The provisions of this Security Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Debtor may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Agent.
Section 6.05. Governing Law. THIS SECURITY AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
VIRGINIA, OTHER THAN ITS LAWS RESPECTING CHOICE OF LAW OTHER THAN
THOSE CONTAINED IN THE UCC.
Section 6.06. Limitation by Law; Severability.
(i) All rights, remedies and powers provided in this Security Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Security Agreement invalid, unenforceable in whole or in part,
or not entitled to be recorded, registered or filed upon the provisions of any
applicable law.
(j) If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (i) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Agent in order to carry out the intentions
of the parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
Section 6.07. Counterparts. This Security Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each complete set of which, when so executed and delivered by all parties, shall
be an original, but all such counterparts shall together constitute but one and
the same instrument.
Section 6.08. Expenses of the Agent. The Debtor shall pay to the Agent from time
to time upon demand, all of the costs and expenses incurred by the Agent or any
Lender (including, without limitation, the reasonable fees and disbursements of
counsel and any amounts payable by the Agent or any Lender to any of their
respective agents) (i) arising in connection with the administration,
modification, amendment, waiver or termination of this Security Agreement or any
document or agreement contemplated hereby or any consent or waiver hereunder or
thereunder or (ii) incurred in connection with the administration of this
Security Agreement, or any document or agreement contemplated hereby, or in
connection with the administration, sale or other disposition of Collateral
hereunder or under any document or agreement contemplated hereby or the
preservation, protection or defense of the rights of the Agent or any Lender in
and to the Collateral.
Section 6.09. Indemnification. The Debtor shall at all times hereafter
indemnify, hold harmless and, on demand, reimburse the Agent and the Lenders and
their respective subsidiaries, affiliates, successors, assigns, officers,
directors, employees and agents, and their respective heirs, executors,
administrators, successors and assigns (all of the foregoing parties, including,
but not limited to, the Agent, being hereinafter collectively referred to as the
"Indemnities" and individually as an "Indemnitee") from, against and for any and
all liabilities, obligations, claims, damages, actions, penalties, causes of
action, losses, judgments, suits, costs, expenses and disbursements, including,
without limitation, attorney's fees (any and all of the foregoing being
hereinafter collectively referred to as the "Liabilities" and individually as a
"Liability") which the Indemnitees, or any of them, might be or become
subjected, by reason of, or arising out of the preparation, execution, delivery,
modification, administration or enforcement of, or performance of the Agent's
rights under, this Security Agreement or any other document, instrument or
agreement contemplated hereby or executed in connection herewith; provided,
however, that the Debtor shall not be liable to any Indemnitee for any Liability
caused solely by the gross negligence or willful misconduct of such Indemnitee.
In no event shall any Indemnitee, as a condition to enforcing its rights under
this Section 6.9 or otherwise, be obligated to make a claim against any other
Person (including, without limitation, the Agent) to enforce its rights under
this Section 6.9.
Section 6.10. Termination; Survival. This Security Agreement shall terminate
when the security interests granted hereunder have terminated and the Collateral
has been released as provided in Section 2.6; provided, however, that the
obligations of the Debtor under Section 4.22 and the provisions of this Article
6 shall survive any such termination.
Section 6.11. Judicial Proceedings; Waiver of Jury Trial. Any judicial
proceeding brought against the Debtor with respect to any Credit Agreement
Related Claim hereby may be brought in any court of competent jurisdiction in
the Commonwealth of Virginia, County of Fairfax, or any Federal court in the
Eastern District of Virginia, and, by execution and delivery of this Security
Agreement, the Debtor (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with any Credit Agreement Related Claim and (b) irrevocably waives any objection
it may now or hereafter have as to the venue of any such proceeding brought in
such a court or that such a court is an inconvenient forum. The Debtor hereby
waives personal service of process and consents that service of process upon it
may be made by certified or registered mail, return receipt requested, at its
address specified or determined in accordance with the provisions of Section 6.1
hereof, and service so made shall be deemed completed on the earlier of (x) the
receipt thereof and (y) if sent by registered or certified mail (return receipt
requested), the fifth (5th) Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the Agent to serve process in any
other manner permitted by law or shall limit the right of the Agent to bring
proceedings against the Debtor in the courts of any other jurisdiction. Any
judicial proceeding by the Debtor against the Agent relating to or involving any
Credit Agreement Related Claim hereby shall be brought only in a court located
in the Commonwealth of Virginia, County of Fairfax, or the Federal court in the
Eastern District of Virginia. THE DEBTOR AND THE AGENT HEREBY UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING ANY CREDIT AGREEMENT RELATED CLAIM.
Section 6.12. Integration. This Security Agreement and the other Credit
Documents constitute the entire agreement of the Agent, the Lenders, the
Borrower and the other Credit Parties with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to the subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Credit
Documents.
Section 6.13. Authority of Agent. The Debtor acknowledges that the rights and
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Security Agreement shall, as between
the Agent and the Lenders, be governed by the Revolving Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Debtor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and the Debtor shall not be under any obligation,
or entitlement, to make any inquiry respecting such authority.
Section 6.14. Headings, Bold Type and Table of Contents. The section headings,
subsection headings, and bold type used herein and the Table of Contents hereto
have been inserted for convenience of reference only and do not constitute
matters to be considered in interpreting this Security Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed by their respective authorized officers as of the
day and year first written above.
Address: FIELDSTON PUBLICATIONS, INC.
1800 Massachusetts Ave., N.W.
Suite 500
Washington, D.C. 20036-1883 By: /s/ Glenn J. Dozier______________
Attention: James Heller Name: Glenn J. Dozier
Phone: (202) 775-0240 Title: President and
Fax: (202) 872-8040 Chief Executive Officer
Address: NATIONSBANK, N.A.
8300 Greensboro Drive
Suite 550 By: /s/ James W. Gaittens___________
McLean, Virginia 22102 Name: James W. Gaittens
Attention: James W. Gaittens Title: Senior Vice President
Phone: (703) 761-8405
Fax: (703) 917-0519
<PAGE>
1565253
31
Schedule 3.4
Place of Business
<PAGE>
Schedule 3.5
Location of Collateral
<PAGE>
Schedule 3.6
Trade Names, Division Names, etc.
<PAGE>
Schedule 3.7
Patents and Trademarks
<PAGE>
Schedule 4.1
UCC Filings
<PAGE>
2
Exhibit A to
Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __
(the "Agreement"), is made by FIELDSTON PUBLICATIONS, INC., a Maryland
corporation (the "Assignor"), in favor of NATIONSBANK, N.A., a national banking
association (the "Agent"), in its capacity as Agent for the lenders from time to
time a party to the Revolving Credit Agreement (as defined in the Security
Agreement referred to below).
W I T N E S S E T H:
WHEREAS, the Assignor has secured certain obligations
undertaken by Hagler Bailly, Inc. pursuant to the provisions of a Security
Agreement, dated as of ___________________, ____ (as the same may be amended,
supplemented or otherwise modified from time to time, the "Security Agreement"),
by and between the Assignor and the Agent; and
WHEREAS, the Assignor is a party to, and from time to time
will become entitled to receive moneys under and by virtue of, a certain
contract with, involving or for the benefit of the United States of America or
any department, agency or instrumentality thereof (herein referred to as the
"Government"), designated as Contract Number _______ entered into by the
Assignor and the Government on ________ __, 19__ (which contract, together with
all additions, change orders, supplements, amendments, renewals, extensions, and
modifications thereto now or hereafter in effect, are hereinafter collectively
called the "Contract"); and
WHEREAS, pursuant to the Security Agreement, the Assignor has
undertaken to effectuate the assignment(s) and other actions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Assignor covenants and agrees as follows:
1. Incorporation By Reference. The provisions of the Security Agreement
are incorporated herein by reference, and the terms defined in the Security
Agreement are used herein with the same meanings.
2. Representations. The Assignor represents and warrants to the Agent
that (a) the Contract is legal, valid and binding on the Assignor and, to its
knowledge, the other parties thereto, is in full force and effect, and is not
evidenced by any chattel paper or instrument, (b) upon due filing of this
Agreement, together with a Notice of Assignment substantially in the form of
Appendix A hereto with the authorized representative, the execution and delivery
of this Agreement does not violate and is not in conflict with the provisions of
the Contract, (c) there has been no default on the part of the Assignor or any
other party to the Contract, (d) the Assignor has made no previous assignment of
the Contract to any person and knows of no fact or defense that will render the
moneys due or to be due thereunder uncollectible, (e) no financing statement
covering the Contract is on file in any public office except financing
statements in favor of the Agent, (f) no set-off or counterclaim to any moneys
due or to become due under the Contract exists on the date hereof, and no
agreement has been made with any person under which any deduction or discount
may be claimed, and (g) the address of the office where the Assignor keeps its
records concerning the Contract is ____________________.
3. Collateral. As security and collateral for the payment of all of the
Obligations (defined in the Security Agreement) and for performance of, and
compliance with, by the Assignor, all of the terms, covenants, conditions,
stipulations, and agreements contained in this Agreement and in the Security
Agreement, the Assignor hereby assigns to the Agent, and grants to the Agent a
lien on and security interest in, all moneys and claims for moneys now and
hereafter due and to become due to the Assignor under or by reason of the
Contract, together with all cash and non-cash proceeds thereof; provided,
however, that nothing contained herein shall impose upon the Agent any of the
obligations or liabilities of the Assignor under the Contract.
4. Covenants. Until payment and performance in full of the Obligations,
the Assignor covenants as follows:
(k) The Assignor shall place on any and all vouchers, invoices, or other
instruments demanding payment under the Contract the direction that such payment
is to be made to the Agent in accordance with Section 5 of this Agreement.
(l) The Assignor shall promptly upon request execute, acknowledge, and deliver
any notice, financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate, or other document as
the Agent may require in order to perfect, preserve, maintain, protect,
continue, and/or extend the assignment, lien, and security interest of the Agent
under this Agreement and its priority. The Assignor shall pay to the Agent on
demand all taxes, costs, and expenses incurred by the Agent in connection with
the preparation, execution, recording, and filing of any such document or
instrument mentioned aforesaid, and such taxes, costs, and expenses shall
constitute and become a part of the Obligations. A carbon, photographic, or
other reproduction of a security agreement or a financing statement is
sufficient as a financing statement.
(m) The Assignor shall fully, promptly, and faithfully comply with and perform
its obligations and duties under the Contract in accordance with the terms
thereof and will make no changes or amendments to the Contract or terminate or
cancel the Contract without the prior written consent of the Agent except as
permitted by the Security Agreement. In the event that any change, amendment,
termination or cancellation of the Contract is made or effected by the
Government, the Assignor will promptly notify the Agent thereof and promptly
furnish to the Agent a copy of any document or agreement evidencing any such
change, amendment, termination, or cancellation.
(n) The Assignor will promptly
(i) furnish to the Agent all information received by the Assignor
affecting the moneys due and to become due under the Contract,
(ii) inform the Agent of any delay in performance of, or claims made
in regard to, the Contract, and
(iii) notify the Agent in writing of the failure of any party to the Contract to
perform any of its obligations thereunder and any rejection of any performance
rendered by the Assignor under or in connection with the Contract.
(o) The Assignor will at all times keep accurate and complete records of
performance by the Assignor under the Contract, and the Agent and its agents
shall have the right, during normal business hours and upon reasonable advance
notice, to call at the place or places of business of the Assignor at intervals
to be determined by the Agent, and without hindrance or delay, to inspect,
audit, check, and make extracts from the books, records, journals, orders,
receipts, correspondence, and other data relating to the Contract or to any
other transactions between the parties hereto related to the Contract.
5. Payments. The Assignor hereby authorizes, empowers, and directs the
Government to draw all checks, drafts, or other instruments representing the
payments of money due the Assignor under the Contract (herein called the "Items
of Payment") to the order of NationsBank, N.A., assignee of Assignor, and to
send the same (i) if by mail, to , (ii) if by electronic transfer, to
NationsBank, N.A. for the account of ________________, Bank Account #__________,
Agent ABA#_________, or (iii) if by wire transfer, to NationsBank, N.A. for the
account of _________________________, Bank Account #_______, ABA#___________.
If, despite this direction, any instruments or checks representing payments
should be delivered to the Assignor, the Assignor will immediately endorse and
deliver such instruments or checks to the order of the Agent. The Assignor does
hereby irrevocably (subject to revocation with the consent of the Agent)
designate and appoint (which appointment is coupled with an interest) the Agent,
and the Agent's successors in interest by operation of law, the Assignor's true
and lawful attorney with power irrevocable for the Assignor and in the
Assignor's name, place, and stead, but at the sole cost and expense of the
Assignor, to receive, endorse, and collect all Items of Payment, and to ask,
demand, receive, receipt, and give acquittances for any and all amounts which
may be payable or which become due and payable by the Government under the
Contract, and in the Agent's discretion to file any claim or to take any other
action or proceeding, either in the Agent's own name or in the name of the
Assignor or otherwise, which to the Agent or any successor in interest thereof
may seem necessary or desirable in order to collect or endorse the payment of
any and all amounts now due or owing or which may hereafter be or become due or
owing on account of the Contract. All Items of Payment received by the Agent
pursuant hereto which are finally paid in cash or solvent credits shall be
applied against the Obligations as provided in the Security Agreement. Any
portion of the Items of Payment which the Agent elects not to so apply shall be
paid over to the Assignor or to whomsoever shall be entitled thereto under
applicable law, including pursuant to Section 9-504(1)(C) of the Uniform
Commercial Code of the Commonwealth of Virginia.
6. No Waiver. Neither this Agreement nor any term, condition,
representation, warranty, covenant, or agreement hereof may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing by the
party against whom such change, waiver, discharge, or termination is sought.
7. Governing law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
8. Gender. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders.
9. Counterparts. This Agreement may be executed in any number of
duplicate originals, each of which shall be an original but all of which
together shall constitute one and the same instrument.
10. Paragraph Headings. The paragraph headings of this Agreement are
for convenience only and shall not limit or define the provisions of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, Assignor and the Agent have caused this Agreement
to be duly executed and delivered by their respective representatives thereunto
duly authorized as of the date first above written.
FIELDSTON PUBLICATIONS, INC
ATTEST:
, Secretary
By:
Title:
WITNESS:
NATIONSBANK, N.A.
ATTEST:
, Secretary
By:
Title:
WITNESS:
<PAGE>
Appendix A To Assignment of Federal Contract Notice of Assignment
Date: ____________ To: Contracting Officer
[Address]
Re: CONTRACT NUMBER ___________ (the "Contract") MADE BY THE UNITED
STATES OF AMERICA By: Department of the [Applicable U.S. Government
Agency] [Address] with [Name of Subsidiary] (the "Contractor")
[Address] for manufacture and support of a [Brief description of
Subject of Contract] dated _______________
PLEASE TAKE NOTICE that moneys due or to become due under the
Contract have been assigned to NationsBank, N.A. pursuant to the provisions of
the Assignment of Claims Act of 1940, as amended (31 USC ss. 3727 and 41 USC ss.
15). A true copy of the Assignment executed by the Contractor on the date hereof
(the "Assignment") is attached to the original of this Notice of Assignment.
Please file this original Notice of Assignment along with the copy of the
Assignment in the contract file for the Contract and forward one of the enclosed
copies of this Notice of Assignment to the current disbursing office for the
Contract.
Payments due or to become due under the Contract should be
made (i) if by mail, to NationsBank, N.A., ____________________, (ii) if by
electronic transfer, to NationsBank, N.A. for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to NationsBank, N.A. for the account of
__________________________, Bank Account #_________, ABA#_________.
Please return enclosed copies of this Notice of Assignment
with appropriate notations showing the date and hour of receipt, and duly signed
by the person acknowledging receipt on behalf of the addressee, to NationsBank,
N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102, Attention: James
W. Gaittens.
Very truly yours,
FIELDSTON PUBLICATIONS, INC.
By: ________________________________
Name:
Title:
Receipt is hereby acknowledged of the above notice and a copy
of the above mentioned instrument of assignment. These were received at
_________[A.M.] [P.M.] on ______________________, 199__.
- ------------------------------------
Name:
Title:
on behalf of Contracting Officer
[Address]
<PAGE>
1565250
31
Schedule 3.4
Place of Business
<PAGE>
Schedule 3.5
Location of Collateral
<PAGE>
Schedule 3.6
Trade Names, Division Names, etc.
<PAGE>
Schedule 3.7
Patents and Trademarks
<PAGE>
Schedule 4.1
UCC Filings
<PAGE>
2
Exhibit A to
Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __
(the "Agreement"), is made by PRIVATE LABEL ENERGY SERVICES, INC., a Delaware
corporation (the "Assignor"), in favor of NATIONSBANK, N.A., a national banking
association (the "Agent"), in its capacity as Agent for the lenders from time to
time a party to the Revolving Credit Agreement (as defined in the Security
Agreement referred to below).
W I T N E S S E T H:
WHEREAS, the Assignor has secured certain obligations
undertaken by Hagler Bailly, Inc. pursuant to the provisions of a Security
Agreement, dated as of ___________________, ____ (as the same may be amended,
supplemented or otherwise modified from time to time, the "Security Agreement"),
by and between the Assignor and the Agent; and
WHEREAS, the Assignor is a party to, and from time to time
will become entitled to receive moneys under and by virtue of, a certain
contract with, involving or for the benefit of the United States of America or
any department, agency or instrumentality thereof (herein referred to as the
"Government"), designated as Contract Number _______ entered into by the
Assignor and the Government on ________ __, 19__ (which contract, together with
all additions, change orders, supplements, amendments, renewals, extensions, and
modifications thereto now or hereafter in effect, are hereinafter collectively
called the "Contract"); and
WHEREAS, pursuant to the Security Agreement, the Assignor has
undertaken to effectuate the assignment(s) and other actions contemplated by
this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Assignor covenants and agrees as follows:
1. Incorporation By Reference. The provisions of the Security Agreement
are incorporated herein by reference, and the terms defined in the Security
Agreement are used herein with the same meanings.
2. Representations. The Assignor represents and warrants to the Agent
that (a) the Contract is legal, valid and binding on the Assignor and, to its
knowledge, the other parties thereto, is in full force and effect, and is not
evidenced by any chattel paper or instrument, (b) upon due filing of this
Agreement, together with a Notice of Assignment substantially in the form of
Appendix A hereto with the authorized representative, the execution and delivery
of this Agreement does not violate and is not in conflict with the provisions of
the Contract, (c) there has been no default on the part of the Assignor or any
other party to the Contract, (d) the Assignor has made no previous assignment of
the Contract to any person and knows of no fact or defense that will render the
moneys due or to be due thereunder uncollectible, (e) no financing statement
covering the Contract is on file in any public office except financing
statements in favor of the Agent, (f) no set-off or counterclaim to any moneys
due or to become due under the Contract exists on the date hereof, and no
agreement has been made with any person under which any deduction or discount
may be claimed, and (g) the address of the office where the Assignor keeps its
records concerning the Contract is ____________________.
3. Collateral. As security and collateral for the payment of all of the
Obligations (defined in the Security Agreement) and for performance of, and
compliance with, by the Assignor, all of the terms, covenants, conditions,
stipulations, and agreements contained in this Agreement and in the Security
Agreement, the Assignor hereby assigns to the Agent, and grants to the Agent a
lien on and security interest in, all moneys and claims for moneys now and
hereafter due and to become due to the Assignor under or by reason of the
Contract, together with all cash and non-cash proceeds thereof; provided,
however, that nothing contained herein shall impose upon the Agent any of the
obligations or liabilities of the Assignor under the Contract.
4. Covenants. Until payment and performance in full of the Obligations,
the Assignor covenants as follows:
(p) The Assignor shall place on any and all vouchers, invoices, or other
instruments demanding payment under the Contract the direction that such payment
is to be made to the Agent in accordance with Section 5 of this Agreement.
(q) The Assignor shall promptly upon request execute, acknowledge, and deliver
any notice, financing statement, renewal, affidavit, deed, assignment,
continuation statement, security agreement, certificate, or other document as
the Agent may require in order to perfect, preserve, maintain, protect,
continue, and/or extend the assignment, lien, and security interest of the Agent
under this Agreement and its priority. The Assignor shall pay to the Agent on
demand all taxes, costs, and expenses incurred by the Agent in connection with
the preparation, execution, recording, and filing of any such document or
instrument mentioned aforesaid, and such taxes, costs, and expenses shall
constitute and become a part of the Obligations. A carbon, photographic, or
other reproduction of a security agreement or a financing statement is
sufficient as a financing statement.
(r) The Assignor shall fully, promptly, and faithfully comply with and perform
its obligations and duties under the Contract in accordance with the terms
thereof and will make no changes or amendments to the Contract or terminate or
cancel the Contract without the prior written consent of the Agent except as
permitted by the Security Agreement. In the event that any change, amendment,
termination or cancellation of the Contract is made or effected by the
Government, the Assignor will promptly notify the Agent thereof and promptly
furnish to the Agent a copy of any document or agreement evidencing any such
change, amendment, termination, or cancellation.
(s) The Assignor will promptly
(i) furnish to the Agent all information received by the Assignor
affecting the moneys due and to become due under the Contract,
(ii) inform the Agent of any delay in performance of, or claims made
in regard to, the Contract, and
(iii) notify the Agent in writing of the failure of any party to the Contract to
perform any of its obligations thereunder and any rejection of any performance
rendered by the Assignor under or in connection with the Contract.
(t) The Assignor will at all times keep accurate and complete records of
performance by the Assignor under the Contract, and the Agent and its agents
shall have the right, during normal business hours and upon reasonable advance
notice, to call at the place or places of business of the Assignor at intervals
to be determined by the Agent, and without hindrance or delay, to inspect,
audit, check, and make extracts from the books, records, journals, orders,
receipts, correspondence, and other data relating to the Contract or to any
other transactions between the parties hereto related to the Contract.
5. Payments. The Assignor hereby authorizes, empowers, and directs the
Government to draw all checks, drafts, or other instruments representing the
payments of money due the Assignor under the Contract (herein called the "Items
of Payment") to the order of NationsBank, N.A., assignee of Assignor, and to
send the same (i) if by mail, to , (ii) if by electronic transfer, to
NationsBank, N.A. for the account of ________________, Bank Account #__________,
Agent ABA#_________, or (iii) if by wire transfer, to NationsBank, N.A. for the
account of _________________________, Bank Account #_______, ABA#___________.
If, despite this direction, any instruments or checks representing payments
should be delivered to the Assignor, the Assignor will immediately endorse and
deliver such instruments or checks to the order of the Agent. The Assignor does
hereby irrevocably (subject to revocation with the consent of the Agent)
designate and appoint (which appointment is coupled with an interest) the Agent,
and the Agent's successors in interest by operation of law, the Assignor's true
and lawful attorney with power irrevocable for the Assignor and in the
Assignor's name, place, and stead, but at the sole cost and expense of the
Assignor, to receive, endorse, and collect all Items of Payment, and to ask,
demand, receive, receipt, and give acquittances for any and all amounts which
may be payable or which become due and payable by the Government under the
Contract, and in the Agent's discretion to file any claim or to take any other
action or proceeding, either in the Agent's own name or in the name of the
Assignor or otherwise, which to the Agent or any successor in interest thereof
may seem necessary or desirable in order to collect or endorse the payment of
any and all amounts now due or owing or which may hereafter be or become due or
owing on account of the Contract. All Items of Payment received by the Agent
pursuant hereto which are finally paid in cash or solvent credits shall be
applied against the Obligations as provided in the Security Agreement. Any
portion of the Items of Payment which the Agent elects not to so apply shall be
paid over to the Assignor or to whomsoever shall be entitled thereto under
applicable law, including pursuant to Section 9-504(1)(C) of the Uniform
Commercial Code of the Commonwealth of Virginia.
6. No Waiver. Neither this Agreement nor any term, condition,
representation, warranty, covenant, or agreement hereof may be changed, waived,
discharged, or terminated orally, but only by an instrument in writing by the
party against whom such change, waiver, discharge, or termination is sought.
7. Governing law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
8. Gender. Whenever used herein, the singular number shall include the
plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders.
9. Counterparts. This Agreement may be executed in any number of
duplicate originals, each of which shall be an original but all of which
together shall constitute one and the same instrument.
10. Paragraph Headings. The paragraph headings of this Agreement are
for convenience only and shall not limit or define the provisions of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, Assignor and the Agent have caused this Agreement
to be duly executed and delivered by their respective representatives thereunto
duly authorized as of the date first above written.
PRIVATE LABEL ENERGY
SERVICES, INC.
ATTEST:
, Secretary
By:
Title:
WITNESS:
NATIONSBANK, N.A.
ATTEST:
, Secretary
By:
Title:
WITNESS:
<PAGE>
Appendix A To Assignment of Federal Contract Notice of Assignment
Date: ____________
To: Contracting Officer
[Address]
Re: CONTRACT NUMBER ___________ (the "Contract") MADE BY THE UNITED
STATES OF AMERICA By: Department of the [Applicable U.S. Government
Agency] [Address] with [Name of Subsidiary] (the "Contractor")
[Address] for manufacture and support of a [Brief description of
Subject of Contract] dated _______________
PLEASE TAKE NOTICE that moneys due or to become due under the
Contract have been assigned to NationsBank, N.A. pursuant to the provisions of
the Assignment of Claims Act of 1940, as amended (31 USC ss. 3727 and 41 USC ss.
15). A true copy of the Assignment executed by the Contractor on the date hereof
(the "Assignment") is attached to the original of this Notice of Assignment.
Please file this original Notice of Assignment along with the copy of the
Assignment in the contract file for the Contract and forward one of the enclosed
copies of this Notice of Assignment to the current disbursing office for the
Contract.
Payments due or to become due under the Contract should be
made (i) if by mail, to NationsBank, N.A., ____________________, (ii) if by
electronic transfer, to NationsBank, N.A. for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to NationsBank, N.A. for the account of
__________________________, Bank Account #_________, ABA#_________.
Please return enclosed copies of this Notice of Assignment
with appropriate notations showing the date and hour of receipt, and duly signed
by the person acknowledging receipt on behalf of the addressee, to NationsBank,
N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102, Attention: James
W. Gaittens.
Very truly yours, PRIVATE LABEL ENERGY SERVICES, INC. By:
________________________________ Name: Title:
Receipt is hereby acknowledged of the above notice and a copy
of the above mentioned instrument of assignment. These were received at
_________[A.M.] [P.M.] on ______________________, 199__.
------------------------------------ Name: Title:
on behalf of Contracting Officer
[Address]
EXHIBIT 10.45
5
ONE MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS
AMENDED AND RESTATED LEASE
dated as of January 1, 1998
By and Between
ONE MEMORIAL DRIVE LIMITED PARTNERSHIP
and
PUTNAM, HAYES & BARTLETT, INCORPORATED
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
REFERENCE DATA ...................................................1
1.1 Subjects referred to............................1
1.2 Exhibits .......................................3
ARTICLE II
PREMISES AND TERM ................................................3
2.1 Premises ......................................... 3
2.2 Common Facilities ..................................4
2.3 Landlord's Reservations ............................4
2.4 Term ...............................................4
2.5 Additional Terms ...................................4
2.6 Determination of Fair Rental Value..................5
ARTICLE III
CONSTRUCTION.......5
3.1 Intention Ily Deleted ..............................5
3.2 Tenant Changes and Additions ..........................5
3.3 Landlord's Construction Contribution ...............7
3.4 General Provisions Applicable to Construction ......8
3.5 Construction Representatives .......................8
ARTICLE IV
RENT .............................................................8
4.1 Fixed Rent .........................................8
4.2 Additional Rent ....................................9
ARTICLE V
LANDLORD'S COVENANTS ...........................................15
5.1 Landlord's Covenants .........................15
5.2 Interruptions ................................15
ARTICLE VI
TENANT'S COVENANTS ..............................................16
6.1 Tenant's Covenants ............................16
ARTICLE VII
CASUALTY AND TAKING .............................................22
7.1 Casualty and Taking ...........................22
7.2 Reservation of Award ..........................24
ARTICLE VIII
RIGHTS OF MORTGAGE ..............................................24
8.1 Superiority of Leas ...............................24
8.2 No Prepayment Payment ............................25
8.3 No Release or Termination ........................25
8.4 No Modification, et ..............................26
8.5 Continuing Offer .................................26
8.6 Subordination ....................................26
8.7 Implementation ...................................26
ARTICLE IX
DEFAULTS........................................................27
9.1Events of Default .............................27
9.2 Remedies .....................................28
ARTICLE X
MISCELLANEOUS ..................................................29
10.1 Intentionally Deleted .......................29
10.2 Titles ......................................29
10.3 Notice of Lease .............................30
10.4 Holding Over ................................30
10.5 Notice .....................................30
10.6 Bind and Inure ..............................30
10.7 No Surrender ................................31
10.8 No Waiver, Etc ..............................31
10.9 No Accord and Satisfaction ..................31
10.10 Cumulative Remedies ........................31
10.11 Partial Invalidity and Applicable Law ......32
10.12 Landlord's Right to Cure Tenant's Default ..32
10.13 Estoppel Certificates ......................32
10.14 Waiver of Subrogation ............ 33
10.15 Brokerage ........................... 33
10.16 Force Majeure ....................... 33
10.17 Authority ........................... 34
10.18 Parking ............................. 34
10.19 Building Directory .................. 34
10.20 Tenant's Right to Cure .............. 35
10.21 Certain Other Matters ............... 35
10.22 Prior Lease ......................... 36
<PAGE>
ONE MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS
AMENDED AND RESTATED LEASE
dated as of January 1, 1998
ARTICLE I
REFERENCE DATA
1.1......Subjects referred to:
Each reference in this Amended and Restated Lease (this "Lease") to any
of the following subjects shall be construed to incorporate the data stated for
that subject in this Section 1. 1:
Landlord:......... One Memorial Drive Limited Partnership, a
Massachusetts limited partnership
Original Address
of Landlord:...... One Memorial Drive
......... Cambridge, Massachusetts 02142
Landlord's
Construction
Representative:... Karen A. Stitt
Tenant: ......... Putnam, Hayes & Bartlett, Incorporated
Original Address of
Tenant: ......... One Memorial Drive
......... Cambridge, Massachusetts 02142
Tenant's
Construction
Representative:... Barbara J. Levine
Tenant's Space: 55,763 rentable square feet ("p.s.f.") of the building
(the "Building") located on the land more particularly described in
Exhibit A attached hereto consisting of 21,422 p.s.f. on Floor 15;
20,986 p.s.f. on Floor 16; and 13,355 p.s.f. on Floor 17. As used in
this Lease, all p.s.f. figures include proportionate shares of all
common areas of the Building. A plan showing the Tenant's Space the
"Premises") is attached hereto as Exhibit B.
Total Rentable
Floor Area of the
Building:......... 351,680 p.s.f.
Term: ......... Eleven (11) years, eleven (11) months.
Term Commencement
Date: ......... January 1, 1998.
Rent Commencement
Date: ......... January 1, 1998.
Term Expiration Date: November 30, 2009.
Annual Fixed Rent: See chart below:
Rental Period..... Annual Base Rent Monthly Base Rent P/S/F
1/1/98 - 11/30/99 $2,230,520.00 $185,876.77 $40.00
12/1/99 - 11/30/04 $2,174,757.00 $181,229.75 $39.00
12/1/04 - 11/30/09 $2,453,572.00 $204,464.33 $44.00
Extension Options: Tenant may elect to extend the Term hereof for up
to two (2) Additional Terms of five (5) years each, subject to the
provisions of Section 2.5.
Tenant's Included
Share of Real
Estate Taxes:
(i) For the period commencing on January 1, 1998 and continuing
through November 30, 1999, $3.00 per p.s.f. of the Premises.
(ii) For the period commencing on December 1, 1999 and continuing
through November 30, 2009, $5.50 per p.s.f. of the Premises.
Tenant's Included
Share of Operating
Expenses: (i) For the period commencing on January 1, 1998 and
continuing through November 30, 1999, $4.50 p.s.f. of the Premises.
(ii) For the period commencing on December
1, 1999 and continuing through November 30,
2009, $5.60 per p.s.f. of the Premises.
Permitted Uses: General business office use.
Parking Spaces: As provided in Section 10.18, up to fifty-six (56)
spaces in the garage serving the Building. The monthly fee for each
such parking space shall be at such rates as shall be set forth in
Section 10. 18.
1.2 Exhibits.
The Exhibits listed below in this section are incorporated in the Lease
by reference and are to be construed as part of this Lease:
Exhibit A - Legal Description of the Land.
Exhibit B - Plan Showing Tenant's Space.
Exhibit C - Determination of Fair Rental Value
Exhibit D - Intentionally Deleted.
Exhibit E - Intentionally Deleted.
Exhibit F - Intentionally Deleted.
Exhibit G - Landlord's Services.
Exhibit H - Rules and Regulations.
ARTICLE II
PREMISES AND TERM
2.1 Premises.
Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, for the Term, subject to and with the benefit of the provisions of
this Lease, Tenant's Space in the building (the "Building") located on the land
described in Exhibit A attached hereto, excluding exterior faces of exterior
walls, the common stairways, stairwells, elevators and elevator wells, and
pipes, ducts, conduits, wire and appurtenant fixtures serving exclusively or in
common other parts of the Building, and if Tenant's Space includes less than the
entire rentable area of any floor, excluding the central core area of such
floor. Tenant's Space, with said exclusions, is hereinafter sometimes referred
to as the "Premises".
2.2 Common Facilities.
Tenant shall have, as appurtenant to the Premises, the right to use in
common with others entitled thereto, subject to rules of general applicability
to tenants of the Building from time to time made by Landlord of which Tenant is
given notice: (a) the common facilities in the Building or on the land on which
it is located (the "Land"), including common walkways, driveways, lobbies,
hallways, ramps, stairways, elevators and loading platforms; (b) the common
pipes, ducts, conduits, wires and appurtenant equipment serving the Premises;
and (c) if the Premises include less than the entire rentable area of any floor,
the common toilets and other common facilities.
2.3 Landlord's Reservations.
Upon reasonable prior notice (except in the event of emergency constituting an
imminent threat to persons or property), Landlord reserves the right from time
to time, without unreasonable interference with Tenant's Permitted Uses, to
install, repair, replace, use, maintain and relocate for service to the Premises
and to other parts of the Building, pipes, ducts, conduits, wires and
appurtenant fixtures wherever located in the Building, and to alter or relocate
any other common facility, provided that the substitutions are substantially
equivalent or better. Installations, replacements and relocations referred to in
this Section 2.3 shall be located in the central core area, above ceiling
surfaces, below floor surfaces or within the perimeter walls of the Premises to
the extent practicable, and in all events shall not materially reduce rentable
area or floor to ceiling height. Except to the extent required by emergencies,
Landlord will use reasonable efforts to perform all such work at such times and
in such manner as will minimize any disruption of the conduct of Tenant's
business.
2.4 Term.
To have and to hold the Premises for a period commencing with the
Commencement Date, and continuing for the Term unless sooner terminated as
provided elsewhere in this Lease.
2.5 Additional Terms.
Provided that Tenant is not then in default after any applicable grace
periods (a) in the payment of the Annual Fixed Rent, or Additional Rent, or (b)
of any other obligation of Tenant under this Lease, pursuant to any outstanding
notice thereof referred to in Section 9. 1, Tenant shall have the right to
extend the Term hereof for up to two (2) successive periods of five (5) years
each, such options to extend to be exercised by the giving of notice by Tenant
to Landlord at least twelve (12) months prior to the expiration of the then
current term. Upon the giving of each such notice, this Lease and the Term
hereof shall be extended, for an additional term of five (5) years, without the
necessity for the execution of any additional documents. Time is of the essence
in the giving of such notice. In no event shall the Term hereof be extended for
more than ten (10) years after the expiration of the Initial Term, nor shall
Tenant have the right to exercise succeeding extension options unless it has
duly and validly exercised the extension option next preceding the extension
option being currently exercised by Tenant. The Extension Term shall be upon all
the terms, conditions and provisions of this Lease except that the Annual Fixed
Rent during each of the Extension Terms shall be ninety-five percent (95 %) of
the Fair Rental Value (as agreed between the parties or as determined by
appraisal of the Premises for such Extension Term, but in no event less than
$44.00 p.s.f. for all floors, which, if not agreed upon by Landlord and Tenant
within three (3) months of the date on which the applicable Extension Term is to
commence, shall be determined by appraisal as provided in Section 2.7.
Notwithstanding the foregoing, Tenant may advance said three (3) months period
to a fifteen (15) month period upon written notice to Landlord prior to the
commencement of such fifteen (15) month period to the end that any rental to be
determined by appraisal shall have been determined and made known to Tenant
prior to the last date on which Tenant is required to give notice of its
intention to exercise its next arising extension option. For purposes of Section
2.7, the day following expiration of the Original Term or an immediately
preceding Extension Term shall be deemed the relevant Available Date.
2.6 Determination of Fair Rental Value.
In the event the Fair Rental Value of the Premises during any
Additional Term must be determined by appraisal, the determination of Fair
Rental Value shall be made as provided in Exhibit C hereto.
ARTICLE III
CONSTRUCTION
3.1 Intentionally Deleted.
3.2 Tenant Changes and Additions.
Tenant may, from time to time after commencement of the Term, make changes and
additions to the Premises in accordance with plans and specifications therefor
first approved by Landlord. Non-structural changes within the Premises costing
$25,000.00 or less in any one instance and aggregating no more than $200,000.00
during the entire term hereof may be made by Tenant without the need for
Landlord's approval; however, in any such instance Tenant shall give written
notice thereof to Landlord prior to commencing any such change and otherwise
shall be bound by the remaining provisions hereof. Tenant shall have the right
to make structural changes to the Premises with the written consent of the
Landlord which shall ,not be unreasonably withheld or delayed. No structural
change of any nature may be made, however, if the same affects the appearance of
the Building aesthetically; is visible from outside the Building; materially and
adversely affects the operation of the Building or the rights of other tenants
thereof; adversely affects any structural member of the Building; and unless
notice of such intended change together with a complete set of plans and
specifications therefor is delivered to the Landlord at least 30 days prior
commencement of the installation of such change. Tenant may make non-structural
changes in excess of the above amounts upon receiving Landlord's prior written
consent, which consent shall not be unreasonably withheld or delayed. Without
limiting Landlord's rights to disapprove any such changes and additions,
Landlord need not approve such plans and specifications if the proposed changes
and additions will require significant expense to readapt the Premises to normal
office use on lease termination (unless Tenant pays such increased costs), or
will increase the cost of insurance or taxes on the Building or of Landlord's
services called for by Section 5.1 or will violate any other provision of this
Lease. All fixtures and all paneling, partitions, railings and like
installations, installed in the Premises at any time, either by Tenant or by
Landlord o n Tenant's behalf, shall, subject to Tenant's right to make
alterations, become the property of Landlord and shall remain upon and be
surrendered with the Premises, unless Landlord grants its permission to the
removal of same, within twenty (20) days after the receipt of written notice
from Tenant requesting such permission. Nothing in this Section shall be
construed to prevent Tenant's removal of trade fixtures, but upon removal of any
such trade fixtures from the Premises or upon removal of other installations as
may be required by Landlord, Tenant shall immediately and at its expense, repair
and restore the Premises to the condition existing prior to installation and
repair any damage to the Premises or the Building due to such removal. All
property permitted or required to be removed by Tenant at the end of the term
remaining in the Premises after Tenant's removal shall be deemed abandoned and
may, at the election of Landlord, either be retained as Landlord's property or
may be removed from the Premises by Landlord at Tenant's expense. All of
Tenant's changes and additions shall be coordinated with any work being
performed by Landlord and in such manner as to maintain harmonious labor
relations and not to damage the Building or Land or interfere with Building
operation, and shall be performed by Landlord's general contractor or by
contractors or workmen first approved by Landlord which approval shall not be
unreasonably withheld or delayed. Except with respect to work by Landlord's
general contractor, Tenant, before its work is started, shall: secure all
licenses and permits necessary therefor; deliver to Landlord a statement of the
names of all its contractors and subcontractors and the estimated cost of all
labor and material to be furnished by them; cause each contractor to carry
workmen's compensation insurance in statutory amounts covering all of the
contractor's and subcontractor's employees, commercial general liability
insurance, including broad form property damage and contractual liability with
the following minimum limits: general aggregate $2,000,000, Products/completed
operations aggregate $2,000,000, each occurrence $1,000,000, personal &
advertising injury $1,000,000 and medical payments $5,000 per person. In
addition Tenant shall cause each contractor and subcontractor to carry
employer's liability insurance covering bodily injury by disease with such limit
not less than $1,000,000 for each person and a 1,000,000 policy limit, bodily
injury by accident with limits of not less than $1,000,000; automobile liability
insurance with a combined single limit of not less than $1,000,000 which shall
cover all owned, non-owned and hired motor vehicles which are operated on behalf
of the contractor and/or subcontractor, and an umbrella/excess liability policy
with minimum limits of $5,000,000 in the aggregate and $5,000,000 per
occurrence. All policies shall be written by companies rated not less than A -
VIII by Best's Insurance Reports (all such insurance to name Landlord, Tenant
and any mortgagee o f Landlord as additional insureds) and contain a minimum of
thirty (30) days notice of cancellation. Tenant shall deliver or cause to be
delivered to Landlord certificates of all such insurance prior to the
commencement of any work on the Premises and shall provide upon Landlord's
request certified copies of the insurance policies. Tenant agrees to pay
promptly when due the entire cost of any work done on the Premises by, or on
behalf of Tenant, and not to cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Premises, the
Building or any interest of Landlord therein. Tenant agrees promptly upon notice
or knowledge thereof to discharge or bond over any such liens which may so
attach in accordance with Section 6.1.13 hereof, and agrees to indemnify
Landlord for, from and against any and all loss, cost or expense (including, but
not limited to, reasonable attorneys'. fees and costs) incurred by Landlord as a
result of Tenant's work. The payment by Landlord of Landlord's Contribution (as
defined in Section 3.3 below) shall not be construed as a "cost or expense" from
which Tenant must indemnify Landlord pursuant to the preceding sentence.
Each contractor and subcontractor must agree in their respective
contracts to defend, save, indemnify and hold harmless Landlord, its
subsidiaries, officers, agents and employees from any and all claims, demands,
damages, losses, costs, expenses, judgements, or liabilities arising out of or
resulting from the relevant contractor, contractor's employees, agents,
performance of its work in, on or about the Premises. Such contracts must also
contain a mutual waiver of subrogation to the effect that the Landlord,
contractors and subcontractors waive all rights against each other, any of their
agents and employees for damages caused by fire or any other perils covered by a
standard special causes of loss form property policy. All property insurance
policies shall contain a waiver of subrogation by endorsement or otherwise, and
the aforesaid contracts shall provide that Landlord agrees, and the contractor
and its subcontractors will have agreed in their contracts as aforesaid that
property insurance represents the sole recourse for loss or damage to property
and each will have waived rights to recover for property damage from each other.
3.3 Landlord's Construction Contribution. Landlord agrees to pay up to the sum
of Six Hundred Thousand Dollars ($600,000.00) ("Landlord's Contribution") to
Tenant to reimburse Tenant, in part, for the cost of improvements made to the
Premises after the date hereof, including, but not limited to, soft costs
incurred such as architectural design fees, other professional fees and cabling
costs. Fifty percent (50%) (the "First Fifty Percent") of the Landlord's
Contribution shall be made available to Tenant on or after January 1, 1998 and
must be requisitioned by Tenant on or prior to December 31, 2000. The remaining
fifty percent (50%) (the "Second Fifty Percent") of the Landlord's Contribution
shall be made available to Tenant on or after December 1, 1999 and must be
requisitioned by Tenant on or prior to December 31, 2003. For the overlapping
time period from December 1, 1999 until December 31, 2000, Tenant shall first
requisition contributions available from the First Fifty Percent, but if the
First Fifty Percent has been fully requisitioned by Tenant, the Second Fifty
Percent shall be available to Tenant. Each request for an advance of Landlord's
Contribution (a "Requisition") submitted by Tenant to Landlord shall be made no
more frequently than once in any calendar month, shall bear the certification of
Tenant's architect as to the nature of the portion of the Tenant Improvements
installed and the amount actually disbursed by Tenant thereagainst. Each such
Requisition shall be accompanied by copies of partial lien waivers or final lien
waivers (in the case of the final installment) from all contractors and
subcontractors, shall be in such detail and contain such supporting
documentation as Landlord reasonably may require and shall be subject to the
approval of Landlord and/or its professional consultants acting reasonably.
Within twenty-five (25) days of the receipt of each Requisition, Landlord shall
disburse to Tenant a sum equal to ninety percent (90%) of the amount set forth
therein, the remaining ten percent (10%) of each Requisition to be disbursed
only upon full completion of the Tenant Improvements with respect to which such
portions of Landlord's Contribution is being applied (including all "punch list"
items), provided that Landlord is reasonably satisfied that such Tenant
Improvements have been constructed in accordance with Tenant's Plans and upon
the reasonable satisfaction of Landlord that no mechanics or other liens
relating to such Tenant Improvements will thereafter arise against the Land, the
Building or the Premises. At Landlord's election, payments under any Requisition
may be made jointly to Tenant and Tenant's general contractor in such manner
(such as joint payees on a check), as to require acknowledgment of receipt of
the amount of such payment by both parties.
3.4 General Provisions Applicable to Construction.
All construction work required or permitted by this Lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of governmental authority and insurance industry standards, and meet or
exceed the building standard, as same may change from time to time.
3.5 Construction Representatives.
Each party authorizes the other to rely in connection with the original
design and construction upon a written approval on the party's behalf by any
Construction Representative of the party named in Article I above or any person
hereafter designated in substitution or addition by notice to the party relying.
ARTICLE IV
RENT
4.1 Fixed Rent.
Tenant agrees to pay, without any offset or deduction whatever except
only, to the extent applicable, as specifically provided pursuant to the
provisions of Articles III, V and VII hereof, Annual Fixed Rent to Landlord at
the appropriate rate set forth in Section 1. 1 hereof, in equal installments of
1/12th of the Annual Fixed Rent in advance on the first day of each calendar
month included in the Term, commencing on the Rent Commencement Date and for any
portion of a calendar month at the beginning or end of the Term, at that rate
payable in advance for such portion. Tenant shall pay all rent when due; and no
invoice for rent due or to become due or notice of rent past due shall be
required.
4.2 Additional Rent.
4.2.1 Taxes.
Tenant shall pay to Landlord as additional rent a proportionate share
(as defined in Section 4.2.4) of all real estate taxes (as defined in Section
4.2.2) imposed against the Building and the Land attributable to the period
commencing twelve (12) months after the Term Commencement Date, prorated with
respect to any portion of a fiscal year in which the first anniversary of the
Term of this Lease occurs or the Tenn ends. Such payments shall be due and
payable ten (10) days after notice is given to Tenant by Landlord, which notice
is intended to be given during the period thirty (30) days just prior to the due
date of each half fiscal year's taxes. If Landlord shall receive any refund of
real estate taxes of which Tenant has paid a portion pursuant to this Section,
then, out of any balance remaining after deducting Landlord's expenses incurred
in obtaining such refund, Landlord shall pay to Tenant the same proportionate
share of said balance, prorated as set forth above. Tenant shall with each
monthly installment of Annual Fixed Rent, make tax fund payments to Landlord.
The term "tax fund payments refers to such payments as Landlord shall reasonably
determine to be sufficient to provide in the aggregate a fund adequate to pay,
when they become due and payable, all payments required from Tenant under this
Section. In the event that said tax fund payments are not adequate to pay
Tenant's share of such taxes, Tenant shall pay to Landlord the amount by which
such aggregate of tax fund payments is less than the amount of said share, such
payment to be due and payable at the time set forth above. Any surplus tax fund
payment to Landlord shall be accounted for to Tenant after payment by Landlord
of the taxes on account of which they were made, and shall be credited by
Landlord against future tax fund payments except that if such surplus tax fund
payment exceeds $1,500.00, it shall, on Tenant's demand, be refunded to Tenant.
If such surplus fund payment exceeds the amount that should have been paid by
more than ten percent (10 %), Landlord shall pay to, or credit Tenant (as the
case may be) with interest on such surplus at an annual rate of interest equal
to two percent (2 %) greater than the prime rate of interest, so-called, of
BankBoston, N.A. in effect at the time. Subject to the provisions of this
Section, Landlord shall be responsible for payment of all real estate taxes (as
hereinabove defined) imposed against the Building and the Land. If the size of
the Building changes, the same shall be equitably reflected hereunder.
4.2.2 Real Estate Taxes.
The term "real estate taxes" as used herein shall mean all real estate
taxes, assessments, and other governmental impositions and charges of every kind
and nature whatsoever not included in Operating Expenses, extraordinary as well
as ordinary, foreseen and unforeseen, and each and every installment thereof,
which shall or may during the Term as it may be extended be assessed, imposed,
become due and payable or be levied by the lawful taxing authorities against the
Land, the Building, and all other improvements located on the Land
(collectively, the "Property") or liens upon or arising in connection with the
use or occupancy or possession of, or becoming due or payable out of or for, the
Property or any part thereof, including all costs and fees incurred by Landlord
in contesting same or in negotiating with the appropriate governmental
authorities as to the same. Betterments and other charges payable over a period
in excess of one year shall with the interest charges thereon be treated as
being paid over the longest possible period.
Except to the extent the same are generally considered to be in lieu of
real estate taxes, nothing herein contained shall be construed to include as a
real estate tax any inheritance, estate, succession, transfer, gift, franchise,
corporation, income or profit tax or capital levy that is or may be imposed upon
Landlord; provided, however, that, if at any time during the Term as it may be
extended the methods of taxation prevailing at the Term Commencement Date shall
be altered so that in lieu of or as a substitute for the whole or any part of
the taxes now levied, assessed or imposed, there shall be levied, assessed or
imposed an income or other tax of whatever nature, then the same shall be
included in the computation of real estate taxes hereunder.
Real estate taxes shall include any excise, transaction, sales or
privilege tax now or hereafter imposed by any government or governmental agency
upon Landlord on account of, attributed to, or measured by rent or other charges
payable by Tenant, or levied by reason of the parking made available by Landlord
on the Property, and shall be repaid by Tenant to Landlord in addition to and
together with the Rent and other charges otherwise payable hereunder; provided,
that any tax levied by reason of the parking shall be apportioned so that Tenant
shall reimburse Landlord for that portion of such parking tax in proportion to
the number of parking spaces provided to Tenant under subparagraph 10. 18
hereof.
4.2.3 Operating Expenses.
Tenant shall pay to Landlord as additional rent a proportionate share
(as defined in Section 4.2.4) of all costs and expenses incurred by Landlord
from and after the period commencing twelve (12) months after the Tenn
Commencement Date in the operation and maintenance of the Building and the Land
in accordance with generally accepted operational and maintenance procedures
(but applied in a manner consistent with generally accepted accounting
principals consistently applied), including, without limiting the generality of
the foregoing, all such costs and expenses in connection with (1) insurance,
(including without limitation rent insurance), license fees, janitorial service,
landscaping, and snow removal, (2) wages, salaries, management fees (which shall
be comparable to those fees for similar buildings), employee benefits, payroll
taxes, on-site office expenses, administrative and auditing expenses,
professional fees (including, without limitation, legal, accounting and
consulting fees but excluding legal fees relating to disputes with tenants and
excluding consulting fees not relating to the efficient operation of the
Building), and equipment and materials for the operation, management, and
maintenance of said Property, (3) the furnishing of heat, air conditioning,
utilities, and any other service to the extent to which Landlord is not entitled
to be reimbursed by tenants, (4) water and sewer rents, and (5) expenses
incurred in complying with all zoning and fire regulations as they may apply to
the Property (except for structural changes and capital expenditures) (the
foregoing being hereinafter referred to as "operating expenses"). The following
shall be excluded from the definition of operating expenses:
(a) costs of special services rendered to
tenants for which a separate charge is made
or which is not an obligation of Landlord
under this Lease;
(b) costs incurred for the exclusive benefit of a specific tenant or
group of tenants or of a space occupied by Landlord;
(c) salaries of officers and executives of Landlord not connected with
the operation of the Property;
(d) any costs incurred by the negligent acts or omissions of Landlord,
its agents or employees;
(e) leasing fees or commissions and advertising costs;
(f) interest, mortgage charges, taxes,
depreciation, ground rent and capital
expenditures (including (as part of such
exclusion) amortization of the costs and the
cost of the financing thereof);
(g) costs of reconstruction or other work
incurred in connection with any fire or
other casualty insured or required to be
insured against hereunder;
(h) the cost of repair of damage caused by third
parties if reimbursement is received
therefor, Landlord agreeing to use
reasonable efforts to collect the same; if
such damage is caused by a tenant (other
than Tenant) which Landlord, acting
reasonably, has been able to identify, then
such cost shall not be included in this
subsection h, of this Lease;
(i) expenses related to parking operations associated with the Building other
than after hours security;
(j) the cost of installing, operating and
maintaining any specialty service, such as
an observatory, broadcasting facility,
luncheon club, retail store, sundry shop,
newsstand, concession, or athletic or
recreational club;
(k) the cost of correcting defects in base building construction (i.e. excluding
normal maintenance and repair expenses);
(1) insurance premiums to the extent any
tenant's particular use causes Landlord's
existing insurance premiums to increase or
require Landlord to purchase additional
insurance;
(m) any advertising or promotional expenses and objects of art;
(n) any costs representing an amount paid to an
entity related to Landlord which is in
excess of the amount which would have been
paid in the absence of such relationship;
(o) payments for rented equipment, the cost of
which equipment would constitute a capital
expenditure if the equipment were purchased;
(p) costs incurred due to violation by Landlord
or any tenant of the Building of any lease
or any laws, rules, regulations or
ordinances applicable to the Building;
(q) any expenditure which due to warranty, was
not made, or for which Landlord was
reimbursed, in the year establishing the
base amount of operating expenses; and
(r) Expenditures for capital items other than an
amount equal on a per annum basis to the
operating expenses that would have been
incurred for such period absent the
installation of any such capital item.
Operating expenses shall be reduced by the amount of insurance
proceeds, reimbursements, discounts or allowances received by Landlord in
connection with such costs.
As soon as Tenant's share of operating expenses with respect to any calendar
year can be determined, a statement of Tenant's share will be sent to Tenant at
which time said amount shall become payable to Landlord within thirty (30) days
following the date of said statement, subject to proration with respect to any
portion of a calendar year in which the Term of this Lease begins or ends.
Landlord's records of operating expenses with respect to each calendar year
shall be available for inspection by Tenant for six (6) months following
delivery by Landlord of its statements of operating, expenses for such year.
Tenant may, at reasonable time and after notice to Landlord, inspect all
invoices and other supporting material relevant to the computation of said
operating expenses. Tenant shall with each monthly installment of Annual Fixed
Rent, make operating fund payments to Landlord. The term "operating fund
payments" shall refer to such payments as Landlord shall reasonably determine to
be sufficient to provide in the aggregate a fund adequate to pay, when they
become due and payable, all payments required from Tenant under this Section. In
calculating operating fund payments, Landlord shall take into account the
operating expenses incurred in the previous year. In the event that the
aggregate of said operating fund payments is not adequate to pay Tenant's share
of operating expenses, Tenant shall pay to Landlord the amount by which such
aggregate is less than the amount of said share, such payment to be due and
payable at the time set forth above. Any surplus operating fund payments shall
be accounted for to Tenant after such surplus has been determined, and shall be
credited by Landlord against future operating fund payments except that if such
surplus operating fund payment exceeds $1,500.00, it shall on Tenant's demand be
refunded to Tenant. If such surplus fund payment exceeds the amount that should
have been paid by more than ten percent (10%), Landlord shall pay to, or credit
Tenant (as the case may be) with interest on such surplus at an annual rate of
interest equal to two percent (2%) greater than the prime rate of interest,
so-called, of the BankBoston, N.A., in effect at the time. In the event of a
dispute between Landlord and Tenant as to the propriety in the amount or nature
of any operating expense Landlord has requested Tenant to. pay, Tenant shall pay
the same at the time called for hereunder as if the same were properly due, but
upon notice from Tenant to Landlord, the matter shall be submitted to
arbitration in a manner reasonably consistent with the provisions of Exhibit C,
hereto.
4.2.4 Tenant's Proportionate Share.
Tenant's proportionate share of taxes payable pursuant to Section 4.2.1
shall be the excess of real estate taxes allocable to the Premises over Tenant's
Included Share of Real Estate Taxes, where real estate taxes allocable to the
Premises means the real estate taxes for the Property multiplied by a fraction,
the numerator of which is the number of p.s.f. of the Premises, and the
denominator of which is the number of p.s.f. in the Total Rentable Floor Area of
the Building. Tenant's proportionate share of operating expenses payable
pursuant to Section 4.2.3 shall be the excess of operating expenses allocable to
the Premises over Tenant's Included Share of Operating Expenses, where operating
expenses allocable to the Premises means the operating expenses for the Property
multiplied by a fraction, the numerator of which is the number of p.s.f. of the
Premises and the denominator of which is the number of p.s.f. in the Total
Rentable Floor Area of the Building.
Reference is hereby made to that portion of Article I of this Lease
which defines Tenant's Included Share of Real Estate Taxes and Tenant's Included
Share of Operating Expenses for the purposes of the calculations called for in
this Paragraph 4.2.4:
(a) For the period commencing January 1,
1998 and continuing through November 30, 1999, to the extent
that the operating expenses allocable to the Premises amount
to less than $4.50 per p.s.f., the amount of such difference
shall be added to the $3.00 per p.s.f. figure of Tenant's
Included Share of Real Estate Taxes. Thus by way of
hypothetical example, if during any period within the Term of
this Lease the operating expenses allocable to the Premises
are $4.15 per p.s.f., then during the period during which said
$4.15 per p.s.f. figure is applicable, Tenant's Included Share
of Real Estate Taxes shall be treated as if it were $3.35 per
p.s.f.; and
(b) For the period commencing December 1,
1999 and continuing through November 30, 2009, to the extent
that the operating expenses allocable to the Premises amount
to less than $5.60 per p.s.f., the amount of such difference
shall be added to the $5.50 per p.s.f. figure of Tenant's
Included Share of Real Estate Taxes. Thus by way of
hypothetical example, if during any period within the Term of
this Lease the operating expenses allocable to the Premises
are $5.00 per p.s.f., then during the period during which said
$5.00 per p.s.f. figure is applicable, Tenant's Included Share
of Real Estate Taxes shall be treated as if it were $6.10 per
p.s.f.; and
(c) For the period commencing January 1,
1998 and continuing through November 30, 1999, to the extent
that the real estate taxes allocable to the Premises amount to
less than $3.00 per p.s.f., the amount of such difference
shall be added to the $4.50 per p.s.f. figure of Tenant's
Included Share of Operating Expenses. Thus by way of
hypothetical example, if the real estate taxes allocable to
the Premises are $2.70 per p.s.f., then during the period
during which said $2.70 per p.s.f. figure is applicable,
Tenant's Included Share of Operating Expenses shall be treated
as if it were $4.80 per p.s.f., and
(d) For the period commencing December 1,
1999 and continuing through November 30, 2009, to the extent
that the real estate taxes allocable to the Premises amount to
less than $5.50 per p.s.f., the amount of such difference
shall be added to the $5.60 per p.s.f. figure of Tenant's
Included Share of Operating Expenses. Thus by way of
hypothetical example, if the real estate taxes allocable to
the Premises are $5.25 per p.s.f., then during the period
during which said $5.25 per p.s.f. figure is applicable,
Tenant's Included Share of Operating Expenses shall be treated
as if it were $5.85 per p.s.f.
Notwithstanding the forgoing, at no time during the term of this Lease
shall Tenant's Included Share of Real Estate Taxes and Tenant's Included Share
of Operating Expenses, taken together, exceed the aggregate figure of $7.50 per
p.s.f. of the Premises for the period commencing January 1, 1998 and continuing
through November 30, 1999, and $11. 10 for the period commencing December 1,
1999 and continuing through November 30, 2009.
4.2.5 Tenant's Electricity Usage.
Tenant shall utilize metered electricity directly from the public
utility providing such to Tenant's Space ("Tenant's Electricity") for Tenant's
use for all purposes for which Tenant uses electricity including lighting,
electrical outlets and "HVAC", so-called. Landlord shall allow its vaults,
wires, risers and conduits to be used by Tenant, acting reasonably, for such
purposes. Such facilities shall be stubbed to a central service area on each
floor. Tenant shall pay the cost of the same directly to such utility. Landlord
shall furnish electricity for use in common areas, Tenant's use of which, if
consumed during other than normal Building Hours (as defined in Exhibit G), and
to the extent of what otherwise would have been supplied (and then only upon
request of Tenant may be separately charged to Tenant, provided that such
charges shall be fairly allocated among all tenants using such electricity.
Tenant shall not, without Landlord's prior consent in each instance, connect
anything to the Building's electric system which would constitute a use
inconsistent with the electrical system servicing the Premises. Should Landlord
grant such consent, all additional risers or other equipment therefor shall be
provided by Landlord at the Tenant's expense. Landlord shall make arrangements
regarding replacement of lighting tubes, lamps, bulbs and ballasts for Tenant's
Space at Tenant's expense, -but to be billed to Tenant at Landlord's cost,
reasonably calculated.
ARTICLE V
LANDLORD'S COVENANTS
5.1 Landlord's Covenants.
Landlord covenants:
5. 1. 1 to furnish, through Landlord's
employees or independent contractors, the services listed in
Exhibit G, all of the same to be equivalent to those
customarily supplied to first class office buildings in the
Boston and Cambridge areas.
5.1.2 except as otherwise provided with
respect to Landlord's Building restoration obligations set
forth in Article VII, to make such repairs to the roof,
structural elements,
foundation, insulation, caulking, exterior walls and glass, floor slabs and all
parts of the common areas and facilities of the Building, Garage, and
landscaping as may be necessary to keep them in condition suitable for a
first-class office building.
5.1.3 that Landlord has the right to make this Lease and that
Tenant, on paying the rent and performing its obligations in this Lease, shall
peacefully and quietly have, hold and enjoy the Premises throughout the Term,
subject to all terms and provisions hereof.
5.1.4 to keep the Property free of liens for unpaid real
estate taxes and to the extent required by the terms of this Lease to maintain
insurance on the common areas.
5.2 Interruptions.
Landlord shall not be liable to Tenant for any compensation or
reduction of rent by reason of inconvenience or annoyance or for loss of
business arising from power and other utility losses and shortages, the
necessity of Landlord's entering the Premises for any of the purposes in this
Lease authorized, or for repairing the Premises or any portion of the Property
however the necessity may occur. In case Landlord is prevented or delayed from
making any repairs, alterations or improvements, or furnishing any services or
performing any other covenant or duty to be performed on Landlord's part, by
reason of any cause reasonably beyond Landlord's control, Landlord shall not be
liable to Tenant therefor, nor, except as expressly otherwise provided in
Section 7. 1, shall Tenant be entitled to any abatement or reduction of rent by
reason thereof, nor shall the same give rise to a claim in Tenant's favor that
such failure constitutes actual or constructive, total or partial, eviction from
the Premises.
Upon reasonable prior notice (except in the event of emergency
constituting an imminent threat to persons or property), Landlord reserves the
right to stop any service or utility system, when necessary by reason of
accident or emergency, or until necessary repairs have been completed, provided,
however, that in each instance of stoppage or interruption, Landlord shall
exercise reasonable diligence to minimize any inconvenience to Tenant.
The foregoing provisions hereof to the contrary notwithstanding, in the
event any power or other utility failure or service failure (other than office
cleaning) which is an obligation of Landlord under this Lease (including failure
of elevator service and failure to repair any structural element of the Building
which Landlord is obligated to repair hereunder) results in Tenant's inability
to conduct its business on the Premises substantially as permitted hereunder
(herein, a "Shutdown"), and in the event such Shutdown continues for more than
fifteen business days or for more than five consecutive business days (in each
case) in any calendar year, then the Annual Fixed Rent hereunder shall be abated
for each additional business day in such calendar year during which such
Shutdown continues. Further, if a Shutdown continues for twelve consecutive
months, Tenant shall have the right thereafter, by written notice given to
Landlord while such Shutdown continues, to terminate this Lease.
ARTICLE VI
TENANT'S COVENANTS
6.1 Tenant's Covenants.
Tenant covenants, and with respect to the provisions of Subsection
6.1.3, below, Landlord covenants, during the Term and such further time as
Tenant occupies any part of the Premises:
6.1.1 to pay when due all fixed rent and
additional rent; a late charge of two percent (2%) on all
fixed and additional rent not paid within three (3) days of
the date written notice is given to Tenant that such rent has
not been paid, which notice shall not be given earlier than
five (5) days after the day such rent is due; all taxes which
may be imposed on Tenant's personal property on the Premises
(including without limitation, Tenant's fixtures and
equipment) regardless to whomever assessed, and to the extent
the nonpayment of the same would be a lien on any property, or
an obligation of the Landlord, all charges by Landlord or
public utilities for electricity, telephone, and gas services
and service inspections therefor, and all charges by public
utilities for installation of metering devices (which charges
shall be apportioned on a floor area basis for multi-tenanted
floors). Any charge by Landlord in connection with the
provision of utilities or the servicing thereof shall be at
the cost billed to Landlord for the same;
6.1.2 except as otherwise provided in
Article VII and Sections 5. 1. 1 and 5.1.2, to keep the
Premises, including all interior glass, clean and in good
order, repair and condition, reasonable wear and damage by
fire and casualty only excepted, and at the expiration or
termination of this Lease peaceably to yield up the Premises
and all changes and additions therein in such order, repair
and condition, first removing all goods, effects, and fixtures
of Tenant and any items the removal of which is required by
any agreement given pursuant to Sections 3.1 or 3.2 hereof, or
specified therein to be removed at Tenant's election and which
Tenant elects to remove, and repairing all damage caused by
such removal and restoring the Premises and leaving them clean
and neat;
6.1.3 not to injure or deface the Premises,
Building, Land, or Property, nor to permit in the Premises any
auction sale, or nuisance, or the emission from the Premises
of any objectionable noise or odor, nor to commit or permit
any waste in or with respect to the Premises, nor to use or
devote the Premises or any part thereof for any purpose other
than the Permitted Uses, nor any use thereof which is
improper, offensive, contrary to law or ordinance, or liable
to invalidate, or (unless Tenant pays the same, or if caused
by more than one party, its equitable share thereof) increase
the premiums for, any insurance on the Building or the
Property or its contents or liable to render necessary any
alteration or addition to the Building or the Property;
6.1.4 not to obstruct in any manner any
portion of the Building not hereby leased or any portion
thereof or of the Property used by Tenant in common with
others; not without prior consent of Landlord (which consent
shall not be unreasonably withheld or delayed) to permit the
painting or placing of any signs or the placing of any
curtains, blinds, shades, awnings, aerials or flagpoles, or
the like, visible from outside the Premises; and to comply
with the Rules and Regulations set forth in Exhibit H and all
other reasonable Rules and Regulations of general
applicability to all tenants in the Building hereafter made by
Landlord which Landlord shall use reasonable efforts to apply
in a nondiscriminatory manner, of which Tenant has been given
notice. Landlord shall not be liable to Tenant for the failure
of other tenants of the Building to conform to such Rules and
Regulations. In the event of any inconsistency between any of
said Rules and Regulations and the terms of this Lease, the
terms of this Lease shall prevail;
6.1.5 to keep the Premises equipped with all safety appliances required
by law or ordinance or any other regulation of any public authority because of
any use made by Tenant other than the Permitted Uses, and to procure all
licenses and permits so required because of such use and, if requested by
Landlord, to do any work so required because of such use, it being understood
that the foregoing provisions shall not be construed to broaden in any way
Tenant's Permitted Uses;
6.1.6
(a) That in the event Tenant proposes to
assign this Lease or sublet the Premises or any part thereof,
Tenant shall give Landlord written notice thereof sixty (60)
days prior thereto which notice shall specify the date on
which such assignment or subletting is to occur or commence.
Landlord shall then have a period of thirty (30) days
following receipt of such notice within which to notify Tenant
in writing that Landlord elects (1) to terminate this Lease as
to the space so affected as of the date so specified by Tenant
but only for the term so specified in which event Tenant will
be relieved of all further obligations hereunder as to such
space on that date for the term so specified, or (2) to permit
Tenant subject to all the remaining terms and provisions of
this Lease to assign this Lease or sublet such space,
provided, however, that in the case of such later election by
Landlord, such subletting or assignment shall be permitted
only to a party with a general reputation in the business
community comparable to that of Tenant and of comparable
creditworthiness (but, with respect to any subletting, taking
into account the amount of space sublet and the term thereof).
If Landlord shall fail to notify Tenant in writing of such
election within said thirty (30) day period, Landlord shall be
deemed to have elected option (2) above. If Landlord elects to
exercise option (2) above, Tenant agrees to provide at its
expense, reasonable, proper and legal direct access from the
assignment or subleased space to a public corridor of the
Building.
(b) If Landlord consents to any subletting
or assignment by Tenant as hereinabove provided, and
subsequently any rents received by Tenant under any such
sublease are in excess of the rent payable by Tenant under
this lease, or any additional consideration is paid to Tenant
by the assignee under any such assignment, then fifty percent
(50%) of the excess rents (after deduction for actual and
reasonable "out of pocket" cash expenses) under any such
sublease or the additional consideration for any such
assignment shall be due and payable by Tenant to Landlord as
additional rent hereunder when received by Tenant, Tenant
agreeing to use reasonable efforts to collect the same.
(c) Notwithstanding anything to the contrary
contained herein, Tenant shall have the absolute right to
assign its interest in this Lease or sublet the Premises
without Landlord's consent (and in such cases the foregoing
subparagraphs (a) and (b) shall not apply) in connection with
any assignment or sublease to any parent, subsidiary, or other
entity controlled by or under common control with Tenant; any
assignment or sublease occurring by operation of law; and any
assignment or sublease occurring in connection with a sale of
all or substantially all of the assets or capital or common
stock of Tenant or a consolidation or merger of Tenant.
(d) No assignment shall be deemed permitted
hereunder unless Tenant shall deliver to Landlord an
instrument in recordable form which contains a covenant of
assumption by the assignee running to Landlord and all persons
claiming by through or under Landlord, but the failure or
refusal of such assignee to execute such instrument of
assumption shall not release or discharge such assignee from
its liability hereunder nor shall execution of such instrument
of assumption affect the continuing primary liability of
Tenant.
(e) No subletting or assignment of any
nature by Tenant shall relieve Tenant of any obligations under
this I-ease.
(f) Tenant shall have no right to assign
this Lease or sublet all, or any portion of the Premises while
any default exists hereunder beyond any applicable grace
period.
(g) No assignment or sublease of any nature
may be made to any party who then is a tenant or occupant of
the Building unless Landlord, itself, is unable to satisfy the
need of such proposed assignee or sublessee.
In the event of any subletting under this Lease pursuant to the terms
hereof, upon the request of Tenant, Landlord will provide the subtenant
thereunder (the "Subtenant") with an agreement binding upon Landlord providing
that in the event of termination of the Lease by virtue of Tenant's default,
Landlord will continue to recognize and accept the Subtenant as a tenant in the
sublet premises for the term of the Subtenant's (sub) tenancy provided (a) the
terms of such subtenancy are identical to the provisions of the Lease (or at
least no less favorable to Landlord) other than (i) the rental, tax escalation
and operation expense payments and the parking space allocation under the
sublease may be reduced in proportion to the amount of floor space so subleased;
(H) the Subtenant shall have no rights to extend the term of the sublease past
the original term of the Lease or have any rights to expand its premises or take
advantage of any options or first refusal on any space in the Building
(including the space leased under the Lease but not demised under the sublease);
(iii) the term of such sublease shall not commence until after the Commencement
date under the Lease with the result that Tenant shall have no construction
obligations to the Subtenant under paragraph 3.1 of the lease; and (b) the floor
space covered by such sublease shall cover the entire amount (and no less than
the entire amount) of one or more "Sublease Sections" of the Premises as
referred to on Exhibit I hereto;
6.1.7 To the maximum extent this agreement may be made effective
according, damages, losses, injuries or claims of whatever nature arising from
any act, omission or negligence of Tenant, or Tenant's contractors, licensees,
invitees, agents, servants or employees, or arising from any accident, injury or
damage whatsoever caused to any person or property, occurring after the date
that possession of the Premises is first delivered to Tenant and until the end
of the Term and thereafter, in or about the Premises or arising from any
accident, injury or damage occurring outside the Premises but within the
Building, on the Land or with respect to the parking facilities provided
pursuant to the Lease, in each of the foregoing instances where such accident,
injury or damage results, or is claimed to have resulted, from an act or
omission on the part of Tenant or Tenant's agents or employees, licensees,
invitees, servants or contractors. This indemnity and hold harmless agreement
shall include indemnity against all costs, expenses and liabilities incurred or
in connection with any such claim or proceeding brought thereon, and the defense
thereof.
Tenant agrees to maintain in full force from the date upon which Tenant
first enters the Premises for any reason, throughout the Term, and thereafter,
so long as Tenant is in occupancy of any part of the Premises, a policy of
liability insurance more particularly described below in this Section 6.1.7
under which Landlord (and any ground lessor and holder of a mortgage on the
Property of whom Tenant has knowledge) and Tenant are named as insureds, and
under which the insurer provides a contractual liability endorsement insuring
against all cost, expense and liability arising out of or based upon any and all
claims, accidents, injuries and damages described in Section 7. 1, in the
broadest form of such coverage, from time to time available. Each such policy
shall be non-cancelable and non-amendable (to the extent that any proposed
amendment reduces the limits or the scope of the insurance required in this
Lease) with respect to Landlord and such ground lessors and mortgagees without
thirty (30) days' prior written notice to Landlord and such ground lessors and
mortgagees and a duplicate original thereof shall be delivered to Landlord.
Without limitation of the foregoing, the scope of such insurance shall include,
and the minimum limits of liability of such insurance for each year shall be:
commercial general liability insurance, including broad form property damage and
contractual liability: general aggregate $2,000,000, each occurrence $1,000,000,
personal & advertising injury $1,000,000 and medical payments $5,000 per person;
employer's liability insurance covering bodily injury by disease with such limit
not less than $1,000,000 for each person and a 1,000,000 policy limit; bodily
injury by accident with limits of not less than $1,000,000; and an
umbrella/excess liability policy with minimum limits of $5,000,000 in the
aggregate and $5,000,000 per occurrence. All policies shall be written by
companies rated not less than A - VIII by Best's Insurance Reports. Landlord may
from time to time during the Term hereof, require higher limits, if such higher
limits are carried customarily in the Boston-Cambridge area with respect to
similar premises in similar properties, provided such provision is uniformly
enforced within the Building;
6.1.8 To keep all Tenant's employees working
in the Premises covered by workmen's compensation insurance in
statutory amounts and to furnish Landlord with certificates
thereof;
6.1.9 Upon reasonable prior notice other than in the event of
emergency constituting a threat to life or property to permit Landlord and
Landlord's agents to examine the Premises and, if Landlord shall so elect, to
make any repairs or replacements Landlord may deem necessary to avert an
emergency, to remove, at Tenant's expense, any changes, additions, signs,
curtains, blinds, shades, awnings, aerials, flagpoles, or the like, not
consented to in writing (if such consent is required hereunder), and to show the
Premises to prospective tenants during the last twelve (12) months of the Term
or at any time after any notice of termination of this Lease, and to prospective
purchasers and prospective mortgagees at any time during the term of this Lease;
6.1.10 Not to place a load upon the Premises exceeding an
average rate of 50 pounds of live load per square foot of floor area; and not to
move any safe, vault or other heavy equipment in, about or out of the Premises
except in such manner and at such times as Landlord shall in each instance
authorize; Tenant's business machines and mechanical equipment which cause
vibration or noise that may be transmitted to the Building structure or to any
other leased space in the Building shall be placed and maintained by Tenant in
settings of cork, rubber, spring, or other type of vibration eliminators
sufficient to eliminate such vibration or noise;
6.1.11 All the furnishings, fixtures,
equipment, effects and property of every kind, nature and
description of Tenant and of all persons claiming by, through
or under Tenant which, during the continuance of this Lease or
any occupancy of the Premises by Tenant or anyone claiming
under Tenant, may be on the Premises or elsewhere in the
Building, shall be at the sole risk and hazard of Tenant, and
if the whole or any part thereof shall be destroyed or damaged
by fire, water or otherwise, or by the leakage or bursting of
water pipes, steam pipes, or other pipes, by theft or from any
other cause, no part of said loss or damage is to be charged
to or to be borne by Landlord unless caused by the negligence
or willful misconduct of Landlord or its agents or employees;
6.1.12 Not to suffer or permit any liens to
stand against the Premises by reason of work done, labor
services performed or materials provided for or at the request
of Tenant. Tenant shall cause any such liens to be discharged
within thirty (30) days after the date of notice to Tenant or
Tenant's knowledge of the filing thereof, but nothing herein
shall prevent Tenant from contesting any such lien, provided
that Tenant shall first provide a surety bond or other
security therefor satisfactory to Landlord;
6.1.13 In case Landlord or Tenant shall,
without any fault on its part, be made party to any litigation
commenced by or against the other or by or against any parties
in possession of the Premises or any party thereof claiming
under the other, to pay, all costs, including without
limitation, reasonable counsel fees incurred by or imposed
upon the other in connection with such litigation; and also to
pay all such costs and fees incurred by the other in
connection with the successful enforcement by the other of any
obligations of the other under this Lease. Any such payments
due from Tenant shall be deemed Additional Rent under this
Lease; and
6.1.14 Upon the expiration of this Lease or
should this Lease terminate for any cause, and at the time of
such expiration or termination, the Tenant or Tenant's agents,
subtenants or any other person should leave any property of
any kind or character on or in the premises, the fact of such
leaving of property on or in the Leased Premises shall be
conclusive evidence of intent by the Tenant, Tenant's agents
or subtenants, to abandon such property so left in or upon the
Premises, and such leaving shall constitute abandonment of the
property.
Landlord, its agents or attorneys, shall have the right and authority
without notice to Tenant, Tenant's agent or subtenants, or anyone else, to
remove and destroy, or to sell or authorize disposal of such property, or any
part thereof, without being in any way liable to the Tenant or any other party
therefore. The proceeds received therefor shall belong to the Landlord as
compensation for the removal and disposition of said property.
It is understood and agreed by and between the parties hereto that none
of Landlord's servants, agents or employees, have or shall have the actual or
apparent authority to waive any portion of this paragraph, and the Tenant shall
have no right to leave any such property upon the Premises without the written
consent of Landlord.
ARTICLE VII
CASUALTY AND TAKING
.7.1 Casualty and Taking.
(a) If, during the Term, the Building or
Premises shall be partially damaged (as distinguished from
"substantially damaged," as that term is hereinafter defined)
by fire or casualty, Landlord shall proceed promptly to
restore the Building or Premises (consistent, however, with
governmental laws and codes then in existence) to
substantially the condition thereof at the time of such
damage, but Landlord shall not be responsible for delay in
such restoration which may result from any cause beyond the
reasonable control of Landlord.
(b) If during the Term the Building or
Premises shall be substantially damaged (as that term is
hereinafter defined) by fire or casualty, the risk of which is
covered by Landlord's insurance and the holder of any
outstanding mortgage which includes the Building as part of
the mortgaged premises (whose actions shall, to the extent
Landlord acting reasonably can effect the same, be in good
faith) allows the insurance proceeds to be applied to the
restoration of the Building, Landlord shall, promptly after
such damage and the determination of the net amount of
insurance proceeds available to Landlord, expend so much as
may be necessary of such net amount to restore (consistent,
however, with governmental laws and codes then in existence)
the Building and Premises to substantially the condition
thereof at the time of such damage, but Landlord shall not be
responsible for delay in such restoration which may result
from any cause beyond the reasonable control of Landlord. If
the Building or the Premises shall be substantially damaged by
fire or casualty (a) as the result of a risk not covered by
the forms of casualty insurance at the time maintained by
Landlord, or (b) such holder of an outstanding mortgage (whose
actions shall, to the extent Landlord acting reasonably can
effect the same, be in good faith) will not allow the
insurance proceeds to be applied to the restoration of the
Building, or (e) the net amount of insurance proceeds
available to Landlord are insufficient to cover the cost of
restoring the Building in the reasonable estimate of Landlord,
then in any such case, Landlord may, but shall have no
obligation to, restore (consistent, however, with governmental
laws and codes then in existence) the Building and the
Premises to substantially the condition thereof at the time of
such damage or Landlord may terminate this Lease by giving
notice to Tenant within forty-five (45) days after the
occurrence of such fire or casualty, which notice shall recite
the reason among those set forth above for such termination.
Landlord shall not exercise such right of termination,
however, unless, Landlord terminates all other leases then in
effect in the Building, which Landlord has the right to
terminate by virtue of such casualty.
(c) If Landlord shall notify Tenant that
Landlord does not intend to restore the Building and Premises
by reason of the unavailability or insufficiency of insurance
proceeds, Tenant shall have the right to contribute to
Landlord the amount of such insufficiency, and if Tenant shall
promptly notify Landlord of Tenant's desire to contribute such
insufficiency and provide Landlord with security for Tenant's
undertaking in this respect satisfactory to Landlord, Landlord
shall promptly commence and thereafter diligently pursue to
completion the restoration of the Building and Premises unless
otherwise excused by some other provision of this Article VII.
(d) If Landlord does not within forty-five
(45) days after such fire or casualty, advise Tenant of the
status of Landlord's obligations with respect to
reconstruction, i.e., whether the net amount of proceeds
available to cover the cost of restoration are sufficient for
restoration which is expected to be completed within six (6)
months; or that Landlord reasonably expects to restore within
six (6) months regardless of the sufficiency or availability
of proceeds; or that Landlord intends to terminate, Tenant
itself shall have the right until Landlord intends to
terminate, Tenant itself shall have the right until Landlord
shall have notified Tenant of Landlord's intentions, to
terminate this Lease, such termination to take effect as of
the date of such Tenant's notice.
(e) If the Premises shall be substantially
damaged by fire or casualty within the last eighteen (18)
months of the Term (as the same may theretofore have been, as
may thereafter be (by written notice given within ten (10)
days of any such notice by Landlord) extended hereunder),
either party shall have the right, by giving notice to the
other not later than sixty (60) days after such damage, to
terminate this Lease, whereupon this Lease shall terminate as
of the date of such notice.
(f) The term "substantially damaged as used
in this Article VII, shall refer to damage of such a character
that the same cannot, in ordinary course, reasonably be
expected to be repaired within ninety (90) days from the time
that repair work would commence.
(g) Except as hereinafter provided, if the
Premises, or such portion thereof as to render the balance (if
reconstructed to the maximum extent practicable in the
circumstances) unsuitable for Tenant's purposes, shall be
taken by condemnation or right of eminent domain, Tenant shall
have the right to terminate this Lease by notice to Landlord
of its desire to do so, provided that such notice is given not
later than thirty (30) days after the effective date of such
taking. If so much of the Building shall be so taken that
continued operation of the Building would be uneconomic,
Landlord shall have the right to terminate this Lease by
giving notice to Tenant of Landlord's desire to do so not
later than thirty (30) days after the effective date of such
taking.
(h) Should any part of the Premises be so
taken or condemned during, the Tenn, and should this Lease be
not terminated in accordance with the foregoing provisions,
Landlord agrees to use due diligence to put what may remain of
the Premises (consistent, however, with governmental laws and
codes then in existence) and common areas of the Building
servicing the Premises into proper condition for use and
occupation as nearly like the condition of the Premises prior
to such taking as shall be practicable.
(i) If the Premises shall be damaged by fire
or other casualty, the Annual Fixed Rent and Additional Rent
shall be justly and equitably abated and reduced according to
the nature and extent of the loss of use thereof suffered by
Tenant; and in case of a taking which temporarily or
permanently reduces the area of the Premises, a just
proportion of the Annual Fixed Rent and Additional Rent shall
be abated for the applicable portion or remainder, as the case
may be, of the Term. In both cases, above, if any space not
damaged or taken nevertheless becomes unusable, such fact
shall be taken into account when calculating the rent for the
remaining space.
(ii) In the event the Premises or Building
are damaged by fire or casualty and Landlord either elects or
is obligated to restore the same pursuant to any of the
foregoing provisions of this Article VII, if Landlord has not
substantially completed (as that term is defined in Section
3.1 hereof) such restoration within six months of the date of
the occurrence of the fire or casualty that has caused such
damage, Tenant may terminate this lease by written notice to
Landlord given within ten business days after the end of such
six-month period but in all events prior to the time of such
substantial completion.
7.2 Reservation of Award.
Landlord reserves to itself any and all rights to receive awards made
for damages to the Premises and Building and Property and the leasehold hereby
created, or any one or more of them, accruing by reason of exercise of eminent
domain or by reason of anything lawfully done in pursuance of public or other
authority. Tenant hereby releases and assigns to Landlord all Tenant's rights to
such awards, and covenants to deliver such further assignments and assurances
thereof as Landlord may from time to time request. It is agreed and understood,
however, that Landlord does not reserve to itself, and Tenant does not assign to
Landlord, any damages payable for (i) movable trade fixtures installed by Tenant
or anybody claiming under Tenant at its own expense or fixtures, items or
leasehold improvements, whether deemed realty or not, the removal of which is
required or permitted by any agreement given pursuant to Sections 3.1 or 3.2,
and for which Tenant has paid the entire cost thereof, or (ii) relocation
expenses recoverable by Tenant from such authority in a separate action.
ARTICLE VIII
RIGHTS OF MORTGAGEE
8.1 Superiority of Lease.
Except as otherwise provided in Section 8.6 below, this Lease shall be
superior to and shall not be subordinated to any mortgage or other voluntary
lien or other encumbrance arising after the date hereof on the Land or Building,
or both, which are separately and together hereinafter in this Article VIII
referred to as "the mortgaged premises." The word "mortgagee" as used in this
Lease shall include the holder for the time being and any ground lessor or
sublessor whenever the context permits.
8.2 No Prepayment Payment.
No fixed rent, additional rent, or any other charge shall be paid prior
to the due dates thereof and payments made in violation of this provision shall
(except to the extent that such payments are actually received by a mortgagee in
possession or in the process of foreclosing its mortgage) be void as against
such mortgagee and Tenant shall be liable for the amount of such payments to
such mortgagee.
8.3 No Release or Termination.
No act or failure to act on the part of Landlord which would entitle
Tenant under the terms of this Lease, or by law, to be relieved of Tenant's
obligations hereunder or to terminate this Lease, shall result in a release or
termination of such obligations or a termination of this Lease unless (i) Tenant
shall have first given written notice of Landlord's act or failure to act to
Landlord's mortgagees of record, if any, specifying the act or failure to act on
the part of Landlord which could or would give basis to Tenant's rights; and
(ii) such mortgagees, after receipt of such notice, have failed or refused to
correct or cure the condition complained of within a reasonable time thereafter;
but nothing contained in this Section 8.3 shall be deemed to impose any
obligation on any such mortgagee to correct or cure any such condition.
Reasonable times as used above means and includes a reasonable time to obtain
possession of the mortgaged premises, if the mortgagee elects to do so, and a
reasonable time, not less than thirty (30) days, to correct or cure the
condition if such condition is determined to exist.
Notwithstanding the foregoing, the period of time during which
Landlord's mortgagees shall have to cure the following defaults or failures of
Landlord (should they occur):
(i) failure to provide power or other utility services or repairs required of
Landlord hereunder for a period in excess of twelve consecutive months as and to
the extent referred to in the last paragraph of subparagraph 5.2 above; and
(ii) failure to substantially complete restoration of the Building or
Premises after fire or casualty as and within the time prescribed in
subparagraph 7. 10) hereof;
shall not be any longer than the period of time allotted to Landlord
therefor under this Lease provided that (without derogating from any
other obligations or Tenant under this Lease) Tenant promptly deliver
to each such mortgagee of record a copy of all notices and other
communications received from and which it gives to Landlord with
respect to any of the three foregoing enumerated matters.
8.4 No Modification, etc.
No assignment of this Lease and no agreement to make or accept any
surrender, termination or cancellation of this Lease and no agreement to modify
so as to reduce the rent, change the Term, or otherwise materially change the
rights of Landlord under this Lease, or to relieve Tenant of any obligations or
liability under this Lease, shall be valid unless consented to in writing by
Landlord's mortgagees of record, if any.
8.5 Continuing Offer.
The covenants and agreements contained in this Lease with respect to
the rights, powers and benefits of a mortgagee (particularly, without limitation
thereby, the covenants and agreement contained in this Article VIII) constitute
a continuing offer to any person, corporation or other entity, which by
accepting or requiring an assignment of this Lease or by entry or foreclosure
assumes the obligations herein set forth with respect to such mortgagee; such
mortgagee is hereby constituted a party to this Lease as an obligee hereunder to
the same extent as though its name were written hereon as such, and such
mortgagee shall be entitled to enforce such provisions in its own name.
8.6 Subordination.
This Lease shall be subject and subordinate to any first mortgage on
the Building, now or at any time hereafter in effect, and to any and all
advances hereafter made thereunder, and, in addition, Landlord shall have the
option to subordinate this Lease to any other mortgage which includes the
Premises as part of the mortgaged premises, provided that the holder of any
mortgage of the nature referred to in this Section 8.6 enters into an agreement
with Tenant by the terms of which (a) in the event of acquisition of title by
such holder through foreclosure proceedings or otherwise, and provided Tenant is
not in default hereunder to the extent that Landlord has the right to terminate
this Lease, the holder will agree to recognize the rights of Tenant under this
Lease and to accept Tenant as tenant of the Premises under the terms and
conditions of this Lease, subject to any rights of the Tenant regarding defaults
of the Landlord of which Tenant has given notice pursuant to Section 8.3, and
(b) Tenant will agree to recognize the holder of such mortgage as Landlord in
such event. This agreement shall be made to expressly bind and inure to the
benefit of the successors and assigns of Tenant and of the holder and upon
anyone purchasing said Premises at any foreclosure sale.
8.7 Implementation.
Tenant agrees on request of Landlord to execute, acknowledge and
deliver from time to time any agreement which may reasonably be deemed necessary
to effectuate the provisions of this Article VIII.
ARTICLE IX
DEFAULTS
9.1 Events of Default.
Each of the following shall be an Event of Default hereunder:
(a) If Tenant shall default in the performance of any of its
obligations to pay the Annual Fixed Rent or any Additional Rent
hereunder (a "monetary default") and if such monetary default shall
continue for ten (10) days after written notice thereof (which notice
for the purposes of this paragraph may be given prior to the
expiration of the five (5) day period referred to in Section 6. 1. 1,
above); (b) if within thirty (30) days after written notice from
Landlord to Tenant specifying any other default or defaults Tenant has
not commenced diligently to correct the default or defaults so
specified or has not thereafter diligently pursued such correction to
completion; in the event (i) more than two written notices of default
of the same type of obligation are given in any calendar year or (ii)
in the event more than five written notices of default of any nature
are given in any calendar year, then in either such event, Tenant
shall pay to Landlord as rent and at the time the next rental payment
hereunder is due, the sum of One Thousand Dollars ($1,000.00) for each
such notice in each such calendar year in excess of either two or five
such notices as the case may be.
(c) if any assignment shall be made by tenant or any guarantor of
Tenant for the benefit of creditors;
(d) if Tenant's leasehold interest shall be taken on execution;
(e) if a petition is filed by Tenant for adjudication as a bankrupt,
or for reorganization or an arrangement under any provision of the
Bankruptcy Act as then in force and effect, or if an involuntary
petition under any of the provisions of said Bankruptcy Act is filed
against Tenant and such involuntary petition is not dismissed within
ninety (90) days thereafter.
Upon the occurrence of any Event of Default then remaining
uncured, Landlord may terminate this Lease by notice to Tenant, specifying a
date not less than ten (10) days after the giving of such notice on which this
Lease shall terminate and this Lease shall come to an end on the date specified
therein as fully and completely as if such date were the date herein originally
fixed for the expiration of the Term of this Lease (Tenant hereby waiving any
rights of redemption under MGLA c. 186, ss.11), and Tenant will then quit and
surrender the Premises to Landlord, but Tenant shall remain liable as
hereinafter provided.
9.2 Remedies.
(a) If this Lease shall have been terminated as provided in this
Article, or if any execution or attachment shall be issued
against Tenant or any of Tenant's property whereupon the Premises
shall be taken or occupied by someone other than Tenant, then
Landlord may, without notice, re-enter the Premises, either by
force, summary proceedings, ejectment or otherwise, and remove
and dispossess Tenant and all other persons and any and all
property from the same, as if this Lease had not been made, and
Tenant hereby waives the service of notice by Landlord of its
intention to re-enter or to institute legal proceedings to that
end.
(b) In the event of any termination, Tenant shall pay the Annual
Fixed Rent, Additional Rent and all other sums payable hereunder
up to the time of such termination, and thereafter Tenant, until
the end of what would have been the Term of this Lease in the
absence of such termination, and whether or not the Premises
shall have been relet, shall be liable to Landlord for, and shall
pay to Landlord, as liquidated current damages, the Annual Fixed
Rent, Additional Rent and other sums which would be payable
hereunder if such termination had not occurred, less the net
proceeds, if any, of any reletting of the Premises, after
deducting all reasonable expenses in connection with such
reletting, including, without limitation, all reasonable
repossession costs, brokerage commissions, legal expenses,
attorneys, fees, advertising, expenses of employees, alteration
costs and expenses of preparation for such reletting. Tenant
shall pay such current damages to Landlord monthly on the days
which the Annual Fixed Rent, Additional Rent and other sums would
have been payable hereunder if this Lease had not been
terminated.
(c) At any time after such termination, whether or not
Landlord shall have collected any such current damages, as
liquidated final damages and in lieu of all such current
damages beyond the date of such demand, at the election of
Landlord exercisable at any time, Tenant shall pay to
Landlord an amount equal to the excess, if any, of the
Annual Rent,. Additional Rent and other sums as hereinbefore
provided which would be payable hereunder from the date of
such demand (assuming that, for the purposes of this
paragraph, annual payments by Tenant on account of Real
Estate Taxes and operating Expenses would be the same as the
payments required for the immediately preceding Operating or
Tax Year) for the remainder of the Term of this Lease had
the same remained in effect, over the then fair net rental
value of the Premises for the same period.
(d) In case of any Default by Tenant, re-entry, expiration
and dispossession by summary proceedings or otherwise,
Landlord may (i) acting, reasonably relet the Premises or
any part or parts thereof, notwithstanding that this Lease
may not have been terminated, for a term or terms which may
at Landlord's option be equal to or less than or exceed the
period which would otherwise have constituted the balance of
the Term of this Lease and may grant concessions or free
rent to the extent that Landlord considers advisable and
necessary to relet the same and (ii) may make such
reasonable alterations, repairs and decorations in the
Premises as Landlord in its sole judgment considers
advisable and necessary for, the purpose of reletting the
Premises; and the making of such alterations, repairs and
decorations shall not operate or be construed to release
Tenant from liability hereunder as aforesaid. Landlord shall
in no event be liable in any way whatsoever for failure to
relet the Premises, or, in the event that the Premises are
relet, for failure to collect the rent under such reletting.
Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in
the event of Tenant being evicted or dispossessed, or in the
event of Landlord obtaining possession of the Premises, by
reason of the violation by Tenant of any of the covenants
and conditions of this Lease.
(e) Landlord may invoke any remedy (including the remedy of
specific performance) allowed at law or in equity as if
specific remedies were not herein provided for.
(f) Upon the occurrence of an Event of Default which is a
monetary default (as defined in Paragraph 9. 1 (a), above)
and notwithstanding that any other Event of Default which is
not a monetary default shall have occurred and remain
uncured at the time; or upon the termination of this Lease
for the occurrence of an Event of Default which is a
monetary default, notwithstanding that such termination may
also have been effected because of the occurrence of a
default other than a monetary default, then and in either
such event, in addition to having the rights and remedies
set forth in Paragraph 9.1 hereof and 9.2 hereof, Landlord
may invoke any other remedy and seek any other damages not
specifically provided for in said Paragraphs 9.1 and 9.2.
Upon the occurrence of one or more Events of Default, none
of which is a monetary default (as defined in Paragraph 9. 1
(a) above); or upon the termination of this Lease for the
occurrence of one or more Events of Default, none of which
is a monetary default, then and in either such event,
Landlord's rights, remedies and damages on account of such
Event of Default or termination shall be limited to those
set forth in Paragraph 9.1 and in Subparagraphs 9.2(a), (b),
(c), (d) and, to the extent of injunctive relief, (e) above.
ARTICLE X
MISCELLANEOUS
10.1 Intentionally Deleted.
10.2 Titles.
The titles of the Articles are for convenience only and are not to be
considered in construing this Lease.
10.3 Notice of Lease.
Landlord and Tenant agree that neither party shall record this Lease.
Upon request of either party, both parties shall execute and deliver a notice of
this Lease in form appropriate for recording or registration, and if this Lease
is terminated before the Lease Term expires, an instrument in such form
acknowledging the date of termination.
10.4 Holding Over.
Any holding over of the Premises by Tenant after the expiration or
earlier termination of the Term or any extension or renewal thereof shall,
subject to the application of the provisions of Paragraph 10. 16, below,
constitute Tenant a trespasser of the Premises unless prior to such expiration
or termination Landlord has executed a written instrument with Tenant in which
Landlord agrees to an extension of the term of this I-ease. If Tenant so holds
over, Landlord by a written notice to Tenant may declare the Tenant a tenant at
will and the tenancy so created may be terminated by not less than ten (10)
days, written notice by either party to the other. In the event Landlord makes
such declaration, the tenancy shall be subject to all of the terms and
provisions of this Lease except that it shall be terminable as above provided
and the rent during such tenancy shall be 150% of the total average monthly
rental payable by Tenant to Landlord for the immediately preceding lease year
including but not limited to Annual Fixed Rent, and Additional Rent as provided
in this Lease.
10.5 Notice.
Whenever any notice, approval, consent, request or election is given or
made pursuant to this Lease it shall be in writing, notwithstanding that certain
references in this Lease to requirements for notice may not call for the same to
be in writing. Communications and payments shall be addressed if to Landlord at
Landlord's Original Address or at such other address as may have been specified
by prior notice to Tenant, and if to Tenant, at Tenant's Original Address prior
to the commencement date and thereafter at the Premises or at such other address
as may have been specified by prior notice to Landlord with a copy sent in the
case of notices to Tenant in the same manner and to the same address addressed
to "Corporate Counsel". Any communication or notice so addressed shall be deemed
duly served when delivered in hand or upon delivery or attempted delivery
following deposit in the U.S. mail, registered mail, return receipt requested.
10.6 Bind and Inure.
The obligations of this Lease shall run with the land, and this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that only the original Landlord named
herein shall be liable for obligations accruing before the beginning of the
Term, and thereafter the original Landlord named herein and each successive
owner of the Premises shall be liable only for the obligations accruing during
the period of its ownership. Whenever the Premises are owned by a trustee or
trustees, the obligations of Landlord shall be binding upon Landlord's trust
estate, but not upon any trustee or beneficiary of the trust individually.
10.7 No Surrender.
The delivery of keys to any employee of Landlord or to Landlord's agent
or any employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
10.8 No Waiver, Etc.
The failure of Landlord or of Tenant to seek redress for violation of,
or to insist upon the strict performance of, any covenant or condition of this
Lease or any of the Rules and Regulations referred to in Section 6.1.4 shall not
be deemed a waiver of such violation nor prevent a subsequent act, which would
have originally constituted a violation, from having all the force and effect of
an original violation. The failure of Landlord to enforce any of said Rules and
Regulations against any tenant in the Building shall not be deemed a waiver of
any such rules or regulations, but Landlord shall not enforce such Rules and
Regulations inconsistently or adopt any new rules or regulations which are
unreasonable. The receipt by Landlord of fixed rent or additional rent with
knowledge of the breach of any covenant of this Lease shall not be deemed to be
a waiver of such breach by Landlord, unless such waiver be in writing signed by
Landlord. No consent or waiver, express or implied, by Landlord or Tenant to or
of any breach of any agreement or duty shall be construed as a waiver or consent
to or of any other breach of the same or any other agreement or duty.
10.9 No Accord and Satisfaction.
No acceptance by Landlord of a lesser sum than the fixed rent and
additional rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy provided in this Lease. Notwithstanding anything to the
contrary herein, in the event of a dispute, Tenant may make any payment of rent
when due under protest but nothing shall relieve Tenant of its obligations to
punctually and duly perform its obligations hereunder.
10.10 Cumulative Remedies.
The specific remedies to which either Landlord or Tenant may resort under the
terms of this Lease are cumulative and are not intended to be exclusive of any
other remedies or means of redress to which it may be lawfully entitled in case
of any breach or threatened breach by the other party of any provisions of this
Lease. In addition to the other remedies provided in this Lease, Landlord and
Tenant shall be entitled to the restraint by injunction of the violation or
attempted or threatened violation of any of the covenants, conditions or
provisions of this Lease or to a decree compelling specific performance of any
such covenants, conditions or provisions.
10.11 Partial Invalidity and Applicable Law.
This Lease shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts and, if any provisions of this Lease
shall to any extent be invalid, the remainder of this Lease shall not be
affected thereby. There are no oral or written agreements between Landlord and
Tenant affecting this Lease. This Lease may be amended, and the provisions
hereof nay be waived or modified, only by instruments in writing. executed by
Landlord and Tenant.
10.12 Landlord's Right to Cure Tenant's Default.
If Tenant shall at any time default in the performance of any
obligation under this Lease, Landlord shall have the right, but shall not be
obligated, to enter upon the Premises and to perform such obligation
notwithstanding the fact that no specific provisions for such substituted
performance by Landlord are made in this Lease with respect to such default.
Except in case of emergency, these rights shall be exercised only after ten (10)
days prior written notice from Landlord to Tenant of Landlord's intention to do
so. In performing such obligation, Landlord may make any payment of money or
perform any other act. All sums so paid by Landlord (together with interest at
an annual rate equal to the prime rate of interest announced from time to time
by BankBoston, N.A., plus two percentage points (2%) and all necessary
incidental costs and expenses in connection with the performance of any such act
by Landlord shall be deemed to be additional rent under this Lease and shall be
payable to Landlord immediately on demand. Landlord may exercise the foregoing
rights without waiving any other of its rights or releasing Tenant from any of
its obligations under this Lease.
10.13 Estoppel Certificates.
Tenant shall from time to time, upon request by Landlord, execute, acknowledge
and deliver to Landlord or Landlord's designee a statement in writing certifying
that this Lease is unmodified and in full force and effect and that Tenant has
no defenses, offsets or counterclaims against its obligations to pay the fixed
rent and additional rent and to perform its other covenants under this Lease and
that there are no uncured defaults of Landlord or Tenant under this Lease (or,
if there have been any modifications, that the same is in full force and effect
as modified and stating the modifications and, if there are any defenses,
offsets, counterclaims or defaults, setting them forth in reasonable detail),
and the dates to which the fixed rent, additional rent and other charges have
been paid. Any such statement delivered pursuant to this Section 10. 13 may be
relied upon by any prospective purchaser or mortgagee of the Building or
Property.
Landlord shall from time to time upon request of Tenant, execute,
acknowledge and deliver to Tenant, or Tenant's designee, a statement in writing
reciting (to the extent Landlord acting reasonably considers the same to be
accurate) that this Lease is unmodified and in full force and effect; that no
moneys are due from Tenant to Landlord hereunder; that Tenant has not asserted
in writing any offsets against payment of the rent or other sums due hereunder,
and that no notice of default given by Landlord to Tenant remain outstanding.
10.14 Waiver of Subrogation.
Any insurance carried by either party with respect to the Premises and
property therein or occurrences thereon shall, if the other party so requests
and if it can be so written without additional premium, or with an additional
premium which the other party agrees to pay, include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrence of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury or loss due to
hazards covered by insurance containing such clause or endorsement to the extent
of the greater of indemnification received thereunder or the full insurable
value of the portion of the Premises so damaged.
10. 15 Brokerage.
Tenant warrants and represents that, except as hereinafter set forth,
it has not dealt with any real estate broker or agent in connection with this
Lease or its negotiation. Tenant represents that it has employed Spaulding &
Slye as its broker at its own expense. Tenant shall indemnify Landlord and hold
Landlord harmless from any cost, expense or liability (including costs of suit
and reasonable attorney's fees) for any compensation, commission or fees claimed
by Spaulding & Slye or any other real estate broker or agent in connection with
this Lease or its negotiation by reason of any act of Tenant. Landlord warrants
and represents that it has not dealt with any real estate broker or agent in
connection with this Lease or its negotiation, and shall indemnify Tenant and
hold Tenant harmless from any costs, expense or liability (including costs of
suit and reasonable attorney's fees) for any compensation, commission or fees
claimed by any real estate broker or agent other than Spaulding & Slye in
connection with this Lease or its negotiation by reason of any act of Landlord.
10.16 Force Majeure.
Except to the extent, if any, otherwise specifically provided in
Articles III, V and VII, above, in any case where either party hereto is
required to do any act, and is prevented or delayed in its performance thereof
by or resulting, from an act of God, war, civil commotion, fire or other
casualty, labor difficulties, shortages of labor, materials or equipment,
governmental regulations, act of the other party, or other causes beyond such
party's reasonable control (other than financial inability), the period of time
during, which it is so prevented or delayed shall not be counted in determining
the time during which such act is to be performed, whether such time be
designated by a fixed date, a fixed time or a "reasonable time" and such party
shall have no liability by reason thereof.
10.17 Authority.
If Tenant is a corporation, Tenant warrants that it has legal authority
to operate and is authorized to do business in The Commonwealth of
Massachusetts. Tenant also warrants that the person or persons executing this
Lease on behalf of Tenant has or have authority to do so and fully to obligate
Tenant to all terms and provisions of this Lease. Tenant shall, upon request
from Landlord, furnish Landlord with a clerk's certificate of votes of its Board
of Directors authorizing this Lease and granting authority to execute it to the
person or persons who have executed it on Tenant's behalf.
Landlord warrants that it has legal authority to operate and is
authorized to do business in The Commonwealth of Massachusetts. Landlord also
warrants that the person or persons executing this Lease on behalf of Landlord
has or have authority to do so and fully to obligate Landlord to all terms and
provisions of this Lease.
10. 18 Parking.
Landlord shall provide Tenant with parking, as hereinafter set forth,
upon payment of the then monthly rate for parking spaces in the area(s) on the
property designated by the Landlord for parking. The monthly rate for each
parking space shall be $190.00 per month for the one year period beginning on
the Term Commencement Date and shall thereafter be the prevailing market rate
for parking spaces in garages in comparable buildings located in the area of
Cambridge, Massachusetts where the Building is located. Tenant shall abide by
any and all reasonable parking regulations and rules established by Landlord or
Landlord's parking operator. Tenant shall be provided with one (1) parking space
for every 1,000 p.s.f. of the Premises. A fraction of 1/2 or greater shall
entitle Tenant to a full parking space. Tenant shall specify the number of
spaces required from time to time, up to its permissible maximum, upon thirty
(30) days' advance written notice to Landlord and shall pay the charge therefor
from and after the date of delivery of such space. In the event Tenant does not
require the use of all of its permissible maximum number of parking, spaces,
Landlord may allocate unused parking spaces to other users, provided such
parking spaces shall be made available to Tenant within thirty (30) days of
Tenant's notice that such parking spaces are required.
10.19 Building Directory. Tenant shall have the right to not more than
Tenant's then percentage of the rentable area of the Building, calculated as in
Section 4.2.4, above, of the listings on the lobby directory of the Building.
The listing of one or more names of persons other than Tenant on such lobby
directory shall not be construed as a consent by Landlord to an assignment or a
subletting by Tenant to such person or persons. Landlord agrees while this Lease
is in effect (i) not (of its own initiative) to change the present address of
the Building, and (ii) not to name the Building after a business competitor of
Tenant.
10.20 Tenant's Right to Cure.
If Landlord defaults in the performance or observance of any of its
covenants or obligations set forth in this Lease, Tenant shall give Landlord
notice specifying in what manner Landlord has defaulted and if Landlord shall
not within twenty (20) days of such notice commence and thereafter diligently
pursue to completion the cure of such default (except that if such default shall
render the Premises or any part thereof exceeding twenty percent (20%) thereof
unusable for the Permitted Uses or shall constitute an immediate danger to life
or property the initial twenty (20) day period described above shall, for
purposes of this paragraph, be deemed to be three (3) days), Tenant may
forthwith cure the same and invoice Landlord for costs and expenses (including
reasonable attorneys' fees and court costs) incurred by Tenant in curing the
same, together with interest from the date Landlord receives Tenant's invoice,
at a rate equal to the lesser of two percent (2 %) over the base rate in effect
from time to time at BankBoston, N.A. or the maximum rate allowed by law. In no
event, however, shall such right to reimbursement give rise to any right of
setoff or other reduction of the rent or any other sum due from Tenant to
Landlord hereunder, Tenant's sole remedy being the right to bring a separate,
independent suit against Landlord for such reimbursement.
10.21 Certain Other Matters.
(a) Insofar as the same relate to the Premises or the
Building, Tenant agrees to comply at all times at its own
expense with all Federal, State and local environmental
protection laws, so-called, and all rules, regulations and
ordinances relating thereto, including without limitation,
Massachusetts General Laws c. 21E, the Federal Comprehensive
Environmental Response Compensation and Liability Act, the
Federal Resource Conservation and Recovery Act and all
amendments thereto.
(b) Tenant will neither permit nor suffer the presence of
any hazardous materials (as that term is defined in any of
the foregoing statutes) on the premises at any time except
only for reasonable amounts of customarily used office
supplies and cleaning materials and, upon request of
Landlord, will deliver to Landlord a list reciting the
identity and quantity of all such hazardous materials on the
premises. Tenant will make no unlawful use of any hazardous
materials and will neither suffer nor permit any threat of
release, release or any other improper discharge thereof. If
any threat of release or release occurs, Tenant will
promptly remediate the same at its own expense and in
accordance with all applicable law. In the event Tenant
receives any notice from any regulatory agency or other such
party requiring any action with respect to the remediation
of any threat of release or release of any hazardous
materials, Tenant will promptly fully notify Landlord
thereof. Tenant will indemnify and save Landlord harmless
from all loss, cost and expense Landlord may suffer or incur
in connection with the failure of Tenant to perform any of
its obligations hereunder, the provisions of this paragraph
to survive and remain operative after termination of this
Lease for any reason.
(c) Landlord agrees to indemnify and save Tenant harmless
from all loss, cost and expense Tenant may suffer or incur
by virtue of any violation by Landlord of any law, rule,
regulations or ordinance referred to in (a) above to the
extent of any personal injury or property damage or cost to
Tenant of any remediation activity Tenant by law is required
to perform. In the event Tenant suffers any such loss by
virtue of the activity of any other tenant in the Building,
Landlord at Tenant expense will enforce such rights as it
has against such Tenant, the result of which will be to
indemnify Tenant from and against all such loss. Landlord
further agrees to indemnify and save Tenant harmless from
all loss, cost and expense Tenant may suffer or incur in
connection with the Premises by reason of the violation by
Landlord of any other law, ordinance or regulation relating
to the Building or the Premises.
(d) This Lease may be executed by the
parties hereto by means of multiple counterparts which, when
taken together, shall constitute one document.
10.22 Prior Lease. Reference is made to the lease dated as of June 15,
1989, as amended by that certain Amendment to Lease dated as of May 31, 1990,
that certain Second Amendment to Lease dated as of December 31, 1992 and that
certain Settlement Agreement dated as of June 23, 1992, between Landlord and
Tenant (collectively, the "Prior Lease"), pursuant to which the Premises are
currently demised by Landlord to Tenant. This Lease shall constitute an
amendment and restatement in whole of the Prior Lease, provided that such
amendment and restatement shall not be construed as relieving either party from
any undischarged obligations arising under the Prior Lease.
EXECUTED as a sealed instrument as of the day and year first above written.
Landlord:
ONE MEMORIAL DRIVE LIMITED
PARTNERSHIP
By: One Memorial Drive Property
Management, Inc., its agent
By:_____________________________
Dean F. Stratouly,
President
Tenant:
PUTNAM, HAYES & BARTLETT,
INCORPORATED
By:/s/ Barbara J. Levine____________
Name: Barbara J. Levine
Title: Corporate Counsel
hereunto duly authorized
<PAGE>
CERTIFICATE OF VOTE
OF
PUTNAM, HAYES & BARTLETT, INCORPORATED
I, the undersigned, hereby certify that I am the Clerk of Putnam, Hayes
& Bartlett, Incorporated, a Massachusetts corporation, duly elected, qualified
and acting as such; that as such Clerk I have custody of the minutes of the
meetings of the Board of Directors of said corporation; that at a meeting of
said Board of Directors duly called and held on_________, 199_, at which a
quorum of the Directors was present and voted throughout, it was unanimously
VOTED: That this corporation lease from One Memorial Drive
Limited Partnership an area of approximately 55,763
square feet of floor space in the building located at
One Memorial Drive, Cambridge, Massachusetts, at such
rental, for such period of time, and upon such other
terms and conditions as_________________,
of this corporation may in his sole
discretion deem advisable; that the said , be and he
hereby is authorized and directed to execute and
deliver on behalf of this corporation a form of
lease, Notice of Lease, Subordination,
Non-Disturbance and Attornment Agreement and such
other documents, all in such form and upon such terms
and conditions as the said in his sole discretion
shall deem appropriate in the circumstances; and that
the execution and delivery of each thereof by the
said shall be conclusive evidence that each of the
sane shall have been authorized hereby.
I further certify that ___________________ presently is Clerk of said
corporation, that the foregoing vote presently is in full force and effect and
has not been modified or amended, and that the passage of the same was
consistent with and not in violation of the bylaws, charter and other governing
documents of said corporation.
Dated: January, _ 1998 __________________________________
Clerk, Putnam, Hayes & Bartlett, Incorporated
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
A parcel of land, partly registered and partly unregistered shown as
containing 74,283 + square feet according to a plan entitled "Plan of and in
Cambridge, Mass", dated April 8, 1974 by William S. Crocker, Inc. and recorded
with the Middlesex South Registry of Deeds in Book 12634, Page 63, and bounded
and described according to that plan as follows:
NORTHERLY by Main Street, five hundred forty-one and 35/100 feet;
SOUTHEASTERLY by the Esplanade, so called, four hundred seventy-six and
11/100 feet;
SOUTHWESTERLY one hundred twenty-feet;
NORTHWESTERLY nineteen and 85/100;
SOUTHERLY seventy-six and 34/100 feet; and
NORTHWESTERLY one hundred twenty-five and 118/1000 feet, this and said
last three courses being by land now or formerly of
Arthur D. Little, Inc. (although not so marked on said
plan).
Together with the buildings, improvements, and fixtures located thereon.
There are included in the land conveyed hereby the following two
parcels of registered land:
The first registered parcel is shown as Lot F on Land Court Plan 2090C,
filed with Certificate 8538 in Registration Book 58, Page 309, in the Middlesex
South Registry District of the Land Court, bounded and described as follows:
Northerly by the Southerly line of Main Street, two hundred
seventy-one and 37/100 feet;
Southeasterly by the Northwesterly line of the Esplanade,
one hundred thirty and 39/100 feet;
Southwesterly by land now or formerly of George C. Crocker,
et al., Trustees, one hundred seventy-eight and 68/100 feet;
and
Westerly by Lot E as shown on plan hereinafter mentioned, eight and
83/100 feet (Lot E being part of the second registered parcel below identified).
The second registered parcel is that shown on Land Court Plan 6615B
filed with the Certificate filed in Registration Book 60, Page 301. in the
Middlesex South Registry District of the Land Court, bounded and described as
follows:
Northerly by the Southerly line of Main Street, two hundred
and thirty feet;
Easterly, seventy-two and 28/100 feet;
Southeasterly, two hundred and 70/100 feet, by land now or
formerly of Frederick D. Fisk, et al., Trustees;
Southerly by land now or formerly of Arthur D. Little, Inc.,
thirty-six and 34/100 feet; and
Westerly by other land now or formerly of Frederick D. Fisk,
et al, Trustees, one hundred and twenty-five feet.
For Mortgagor's title see transfer Certificate of Title No.
170276 and deed recorded at Middlesex Registry of Deeds at
Book 15494, Page 554.
<PAGE>
EXHIBIT C
DETERMINATION OF FAIR RENTAL VALUE
In the event the Fair Rental Value of the Additional Premises or the
Premises during any Additional Term must be determined by appraisal, the
determination of Fair Rental value shall be made:
(i) by an appraiser chosen by agreement between the
parties; or
(ii) if the parties shall not agree on an appraiser within
thirty (30) days after the period for agreement on Fair
Rental Value has elapsed, by taking the arithmetic
average of the value assigned by three appraisers, one
selected by each of the parties, and the third selected
by agreement of the two appraisers so selected;
provided that, if the appraised value assigned by any
appraiser selected by a party shall be less than ninety
percent (90%), or more than one hundred ten percent
(110 %) of the appraised value assigned by the third
appraiser, then such first value shall, for purposes of
this subparagraph, be increased to ninety percent (90%)
or decreased to one hundred ten percent (110 %), as
applicable, of the appraised value assigned by such
third appraiser. All appraisers referred to in this
Exhibit shall be M.A.I. appraisers with at least 10
years of experience appraising commercial real estate
in the greater Boston area. The costs of each appraiser
shall be borne by the party appointing him, or in the
case of a third appraiser, shall be shared equally by
the parties. In the event that either party fails to
appoint an appraiser pursuant to this subparagraph
within thirty (30) days after the period for agreement
of Fair Rental Value has elapsed, then the appraiser,
if any, appointed by the other parties shall, acting
singularly, make the determination of Fair Rental
Value. If the two appraisers appointed by the parties
do not within a period of fifteen (15) days after the
appointment of the later of them, appoint a third
appraiser willing so to act, then either party may
designate instead that the third appraiser be appointed
by the American Arbitration Association (pursuant to
its then applicable rules) or a successor organization
thereto (unless any party or business associate thereof
holds such a position, in which event said third
appraiser shall be appointed by the person holding the
next highest position on said Board who is not a
business associate of any party) and the individual so
appointed shall for all purposes have the same standing
and powers as though he had been seasonably appointed
by the appraisers first appointed. The appraisers shall
be instructed that the foregoing appraisals shall
reflect any anticipated increase in the rental payable
between the date of the appraisers, report and the
first day of the extended term and that in determining
the same they may (but need not) take into account any
appropriate nationally recognized consumer Price Index.
Such appraisals shall also take into account the fact
that the portion of the rental subject to appraisal
which is included in Tenants Included Share of Real
Estate Taxes and Operating Expenses (referred to on
page 3 above) by their own terms are subject to
increase. The appraisers shall also considers all other
relevant factor . No rental increase shall be
attributable to the value of or the right to use any
improvements paid for by Tenant (and not reimbursed by
Landlord) and installed after commencement of the term
of the Prior Lease. Each appraiser appointed hereunder
shall acknowledge in writing an obligation hereunder to
reach a decision no later than 30 days after their
appointment.
<PAGE>
EXHIBIT D
INTENTIONALLY DELETED
<PAGE>
EXHIBIT E
INTENTIONALLY DELETED
<PAGE>
EXHIBIT F
INTENTIONALLY DELETED
EXHIBIT 10.46
OFFICE LEASE FOR
PUTNAM, HAYES & BARTLETT, INC.
Suite Nos. 500, 575 & 600
1776 Eye Street, N.W.
Washington, D.C. 20006
<PAGE>
155
OFFICE LEASE
THIS LEASE (the "Lease") is made, entered into and effective as of the
31st day of March, 1997, between George H. Beuchert, Jr., Trustee, Thomas J.
Egan, Trustee, Oliver T. Carr, Jr., Trustee, William Joseph H. Smith, Trustee,
and The Kiplinger Washington Editors, Inc., Trustee, acting collectively as
trustees on behalf of the beneficial owner, The Greystone Square 127 Associates,
a District of Columbia limited partnership, (collectively the "Lessor") and
Putnam, Hayes & Bartlett, Inc., a Massachusetts corporation, (hereinafter called
"Lessee").
WITNESSETH, That, for and in consideration of the rents, mutual
covenants, and agreements hereinafter set forth, the parties hereto do hereby
mutually agree as follows:
1. DEMISED PREMISES
(A) Lessor does hereby lease to Lessee, and Lessee does hereby lease
from Lessor, for the term and upon the conditions hereinafter provided, the
following spaces:
(i) a space identified as approximately 36,265 rentable square
feet on the fifth and sixth (5th & 6th) floors of the office
building situated at 1776 Eye Street, N.W., Washington, D.C.
20006 (such building being hereinafter referred to as the
"Building"), having been previously assigned Suite Nos. 500
and 600 respectively (collectively referred to as the
"Original Premises"); and,
(ii) a space identified as approximately 8,851 rentable square
feet on the fifth (5th) floor of the Building, previously
identified as Suite No. 575 (hereinafter the "Additional
Premises").
(B) The Original Premises and the Additional Premises are outlined on
the floor plans attached hereto and made a part hereof as Exhibit A-1. The
Original Premises and the Additional Premises are hereinafter sometimes
collectively referred to as the "Demised Premises," and have a combined rentable
area of approximately 45,116 square feet. As otherwise provided for in this
Lease, the term "Demised Premises" may be modified to include other spaces in
the Building as leased by Lessee from time to time, in which case the combined
rentable area of the Demised Premises may change. The Original Premises and the
Additional Premises have been measured in accordance with the Washington, D.C.,
Association of Realtors Standard Method of Measurement, 1983 Version. As of the
date of this Lease first hereinabove stated the Building contains approximately
212,582 square feet of rentable area of office and retail spaces and
approximately 199,552 square feet of rentable area of office spaces. Lessee
recognizes that the statement of rentable area for any space and of the Building
given above are approximate, but that for the purposes of this Lease are an
accurate statement of such areas; by executing this Lease, Lessee recognizes
that it has had the opportunity to measure the Original Premises and that it
waives any right to challenge subsequently this statement of measurement of
rentable areas of the Original Premises and the Building. Lessor agrees to
afford to Lessee the opportunity to measure the area of the Additional Demised
Premises prior to Commencement Date 2 (as hereinafter defined), provided that
when Lessee executes and delivers Exhibit D-1 related to the Additional Premises
it shall be deemed Lessee's acceptance of the area of the Additional Premises as
stated in that Exhibit. As and to the extent that Lessee can reasonably
demonstrate to Lessor that Lessor's determination of the rentable area of the
Additional Premises hereinabove stated is incorrect at that time, Lessor agrees
to modify the Lease. to reflect the agreed upon rentable area of the Additional
Premises.
(C) Lessor agrees to deliver and Lessee agrees to accept possession of
the Demised Premises in its "as is" condition existing on the date possession is
delivered to Lessee, without requiring Lessor to make any modifications,
alterations, repairs, improvements, or decorations to be made to or demolition
of existing improvements within the Demised Premises, provided that the
Additional Premises shall be delivered in broom clean condition with any base
building operating equipment in the Additional Premises being in normal
operating condition as and when delivered by Lessor to Lessee. Lessor shall have
no obligation to deliver any supplemental air conditioning, heating ventilation
package units and kitchen equipment in working order and condition. Lessor has
agreed to provide to Lessee the Allowance for the Initial Alterations as
provided for and identified in the Section of this Lease entitled "ALTERATIONS."
(D) Subject to the provisions of the Section of this Lease entitled
"DAMAGE TO THE BUILDING AND/OR THE DEMISED PREMISES," Lessor agrees that it will
deliver and keep from and after the Commencement Date 1 (as hereinafter defined)
all common and public areas of the Building, the base building systems of the
Building and all external and structural elements thereof in safe and sanitary
condition, in good working order and condition, and in accordance with the
standards customarily employed by other landlords of comparable first-class
office buildings located within the central business district of Washington,
D.C., including, as provided for in the Section of this Lease entitled
"COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT," ensuring compliance of
common and public areas of the Building with ADA (as hereinafter defined).
(E) (i) Lessor furthers agrees that, if prior to the date Lessee
receives the right to lawfully occupy the Original Premises and the Additional
Premises for its regular business operations upon substantial completion of
Initial Alterations (as hereinafter defined), District of Columbia plans
reviewing officials ("Reviewing Officials"), District of Columbia inspecting
officials ("Inspecting Officials"), or both, determine that the base building
fire and life safety systems of the Building are in noncompliance with
applicable codes of the District of Columbia in effect as of January 1, 1997
(the "Codes"), and that such condition (a) prevents Lessee from obtaining
permits and approvals from the District of Columbia necessary to permit Lessee
to undertake Initial Alterations, (b) prevents Lessee from subsequently
occupying the Additional Premises after completion of Initial Alterations for
Lessee's regular business operations, or (c) prevents Lessee from continuing to
use and occupy the Original Premises for Lessee's regular business operations
from and after the date of commencement of Initial Alterations, then Lessor
shall be responsible for those modifications to the base building fire and life
safety systems of the Building which are required to bring those systems into a
condition which, in accordance with the Codes, would permit Lessee to obtain the
necessary permits and approvals so that Lessee may undertake Initial
Alterations, would lawfully permit Lessee to lawfully occupy the Original
Premises for Lessee's regular business operation during construction of Initial
Alterations, and would subsequently permit Lessee to lawfully occupy for
Lessee's regular business operations the Demised Premises upon substantial
completion of Initial Alterations (such necessary and required modifications to
base building fire and life safety systems being hereinafter referred to as
"Fire/Life Safety Modifications").
(ii) If at the time Lessee submits to the District of Columbia
applications for permits and licenses to undertake Initial Alterations
(collectively "Permits"), Reviewing Officials determine that Fire/Life Safety
Modifications are required to be made, then Lessor agrees to use commercially
reasonable efforts to (a) complete the then identified Fire/Life Safety
Modifications, or in lieu thereof (b) reach agreement with the Reviewing
Officials binding upon Lessor regarding Lessor undertaking and completing
Fire/Life Safety Modifications which permit the issuance of the Permits. Lessor
shall notify Lessee in writing when Lessor has either completed those Fire/Life
Safety Modifications in accordance with the applicable codes of the District of
Columbia and has obtained all necessary governmental inspections and approvals
of such Fire/Life Safety Modifications, or when Lessor has reached an agreement
with the Reviewing Officials binding upon Lessor permitting the issuance of the
Permits (the "Completion Notice 1").
(iii) If after the commencement of construction of Initial
Alterations, Inspecting Officials determine that certain Fire/Life Safety
Modifications are required to be made in order to permit Lessee to continue to
occupy the Original Premises for Lessee's regular business operations or permit
Lessee to lawfully occupy the Additional Premises and/or the Original Premises
upon substantial completion of Initial Alterations, then Lessor agrees to use
commercially reasonable efforts to (a) complete those identified Fire/Life
Safety Modifications or in lieu thereof (b) reach agreement with the Inspecting
Officials binding upon Lessor regarding Lessor undertaking and completing
Fire/Life Safety Modifications so that Lessee can continue to lawfully occupy
the Original Premises or so that Lessee can obtain, upon substantial completion
of Initial Alterations. the right to lawfully occupy the Additional Premises,
and if applicable the Original Premises. Lessor shall notify Lessee in writing
when Lessor has completed in accordance with the Codes those Fire/Life Safety
Modifications identified by the Inspecting Officials and has obtained all
necessary governmental inspections and approvals for such Fire/Life Safety
Modifications or when Lessor has reached an agreement with the Inspecting
Officials binding upon Lessor permitting Lessee to lawfully occupy Original
Premises, the Additional Premises or both for Lessee's regular business
operations (the "Completion Notice 2"). Completion Notice 2 shall only be
required to be given by Lessor if Lessor has been advised by Lessee that
Fire/Life Safety Modifications have been required by Inspecting Officials in
order to permit Lessee to lawfully occupy, or continue to lawfully occupy, the
Additional Premises, the Original Premises or both.
(F) Notwithstanding Lessor's obligations to make any Fire/Life Safety
Modifications identified by Reviewing Officials or Inspecting Officials in
connection with the Initial Alterations as specified in Subsection (E) of this
Section, Lessor shall have no obligation to undertake any fire and life safety
improvements to or within the Demised Premises. If however (i) Lessor undertakes
any fire and life safety improvements to or within any premises leased to any
other office tenant(s) of the Building prior to January 1, 2002 and such
improvements are of a nature similar or comparable to the fire and life safety
improvements undertaken by Lessee as part of Initial Alterations, (ii) the cost
of such improvements is not paid for by the tenant in question, and (iii) the
aggregate of the rentable areas of all premises in the Building leased for
office uses in which Lessor has undertaken such improvements, at other than a
tenant's cost, exceeds twenty-five percent (25 %) of the rentable area of the
Building dedicated to office uses, Lessor shall reimburse Lessee for the direct
costs actually incurred by Lessee at the time it undertook Initial Alterations
to per-form its fire and life safety improvements which are similar or
comparable to those undertaken by Lessor for other office tenants of the
Building thereafter.
(G) Lessee represents that it has thoroughly examined the Building and
the Original Premises and is aware of and accepts the existing condition of the
Original Premises and the Building, subject to Lessor's obligations for
Fire/Life Safety Modifications as specified in Subsection (E) of this Section.
2. TERM
(A) Subject to and upon the covenants, agreements and conditions of
Lessor and Lessee set forth herein, or in any Exhibit or Addendum hereto, the
term of this Lease with regard to the Demised Premises shall commence as
follows:
(i) With regard to the Original Premises, on the 1st day of
January, 1997 (hereinafter called the "Commencement Date I");
and,
(ii) With regard to the Additional Premises, on the later of
(a) April 21, 1997, or (b) the date thereafter that Lessor
delivers the Additional Premises to Lessee in Delivery
Condition (either to occur of (a) or (b) being hereinafter
called the "Commencement Date 2").
To effect delivery and trigger the occurrence of Commencement Date 2, Lessor
must deliver the Additional Premises free and clear of all occupancies and
tenancies, must have brought all base building operating equipment in the
Additional Premises (and specifically. not including supplemental air
conditioning, heating and ventilation package units and kitchen equipment) to
normal operating condition and must deliver the Additional Premises in broom
clean condition (the "Delivery Condition").
(B) The term of this Lease with regard to the Demised
Premises shall expire on the
31st day of December, 2006.
(C) In the event Lessor is unable to deliver possession of the
Additional Premises to Lessee in the Delivery Condition by April 21, 1997,
Lessor shall not be liable or responsible for any claims, damages or liabilities
arising in connection therewith or by reason thereof, nor shall Lessee be
excused or released from this Lease, because of Lessor's inability to deliver
the Additional Premises to Lessee by such date. Commencement Date 2 shall be
extended to and become the date that Lessor delivers possession of the
Additional Premises to Lessee in the Delivery Condition. If Commencement Date 2
does not occur until a date after May 31, 1997 due to Lessor's inability to
deliver possession of the Additional Premises to Lessee in the Delivery
Condition, then, as provided in Subsection (F) of the Section of this Lease
entitled "RENT, " Lessee shall be entitled to and Lessor shall recognize as a
credit to Monthly Rent 2 (as hereinafter defined) accruing after Rent
Commencement Date 2.
(D) Notwithstanding the provisions of Subsection (C) of this Section,
if Lessor is unable to deliver the Additional Premises to Lessee in the Delivery
Condition by August 31, 1997, Lessee shall have the option to cancel this Lease,
provided written notice thereof is delivered to Lessor prior to the time that
Lessor delivers the Additional Premises to Lessee in the Delivery Condition.
This Lease shall be deemed canceled as of the date of receipt by Lessor of
Lessee's notice of cancellation to Lessor. If Lessor tenders delivery of the
Additional Premises to Lessee in the Delivery Condition prior to the time that
Lessee delivers a written notice of cancellation to Lessor, this Subsection (D)
shall be deemed automatically null and void and Lessee shall have no right to
refuse to accept delivery of the Additional Premises or further right to seek to
cancel this Lease.
(E) (i) In the event that (a) Lessee cannot obtain Permits from the
Reviewing Officials due to the failure of Lessor to complete Fire/Life Safety
Modifications or Lessor's failure to reach agreement with Reviewing Officials
binding upon Lessor regarding Lessor's undertaking and completing those
Fire/Life Safety Modifications, as provided for in Subsection (E) of the Section
of this Lease, entitled "DEMISED PREMISES," (b) Lessee cannot continue to
lawfully occupy and use all or a substantial portion of the Original Premises
from and after the date that construction of Initial Alterations is commenced,
or (c) Lessee cannot lawfully occupy, as of the date of substantial completion
of the Initial Alterations,. the Additional Premises and, if applicable the
Original Premises, due to the failure of Lessor to complete the Fire/Life Safety
Modifications or reach agreement with the District of Columbia binding upon
Lessee regarding Lessor's undertaking and completing Fire/Life Safety
Modifications, as provided for in Subsection (E) of the Section of this Lease,
entitled "DEMISED PREMISES," then in addition to any abatement of certain rent
as provided for in Subsection (G) of the Section of this Lease entitled "MONTHLY
RENT," Lessee shall have the right to cancel this Lease as hereinafter provided
in this Subsection.
(ii) If (a) Lessee is legally prevented from obtaining the
Permits solely due to the fact that Lessor has not previously undertaken the
Fire/Life Safety Modifications identified by Reviewing Officials, or that Lessor
has not agreed with Reviewing Officials on Fire/Life Safety Modifications to be
made, and the delay in issuance of Permits extends for more than sixty (60) days
after the date that Lessee has advised Lessor that the Reviewing Officials are
requiring Lessor to undertake Fire/Life Safety Modifications as a condition to
issuance of the Permits, (b) Lessee is legally prevented by the Inspecting
Officials from lawfully occupying the Additional Premises for its regular
business operations solely due to the fact that Lessor has not undertaken the
Fire/Life Safety Modifications identified by Reviewing Officials or the
Inspecting Officials, or that Lessor has not reached agreement with Inspecting
Officials on Fire/Life Safety Modifications to be made, and thus Lessee's lawful
occupancy for its regular business operations is delayed for a period of more
than sixty (60) days following the date Lessor receives Lessee's notice advising
Lessor that Inspecting Officials have identified Fire/Life Safety Modifications
that must be undertaken as a condition to the issuance of a certificate of
occupancy for the Additional Premises (or the Demised Premises, if applicable),
or (c) Lessee's lawful occupancy of the Original Premises for its regular
business operations is disrupted by Inspecting Officials after commencement of
Initial Alterations solely due to the fact that Lessor has not undertaken, as
and when required, the Fire/Life Safety Modifications identified by Reviewing
Officials or the Inspecting Officials, or that Lessor has not reached agreement
with Inspecting Officials on Fire/Life Safety Modifications to be made, and
this-disruption continues for a period of more than fifteen (15) consecutive
business days following the date that Lessor receives Lessee's notice that the
Inspecting Officials have ordered that Lessee cease to occupy all or a
substantial portion of the Original Premises for Lessee's regular business
operations, then Lessee may elect to cancel this Lease as hereinafter provided.
(iii)Lessee may exercise this right to cancel only by delivering to Lessor
written notice of such election to cancel this Lease, which notice must be
received by Lessor within fifteen (15) business days after the date that
Lessee is first entitled to exercise this right to cancel and in any case
such notice to be effective must be delivered to Lessor prior to the date
that Lessor delivers to Lessee Completion Notice 1 or Completion Notice 2,
as applicable. If Lessee has not delivered its notice of cancellation by
the earlier of (a) the time Lessee receives Completion Notice 1 or
Completion Notice 2, as applicable, or (b) the expiration of the fifteen
(15) day period, then this option to cancel this Lease shall become null
and void. If Lessee timely and properly exercises its right to cancel this
Lease as provided above, Lessee shall be entitled to be reimbursed by
Lessor for all costs, direct and indirect, incurred by Lessee related to
this transaction, including the costs and expenses of the Initial
Alterations incurred by Lessee, less, however, the amount of any Allowance
paid over by Lessor to Lessee or to Lessee's contractors, suppliers and
vendors on Lessee's behalf. As consideration for such payment, Lessee shall
assign over to Lessor all right, title and interest in and to any and all
of the Initial Alterations, including any furniture, fixtures and equipment
purchased by or for Lessee with the Allowance, all of which shall become
Lessor's property as of the effective date of cancellation.
(F) (i) In the event that Lessee timely and properly exercises one of
the its rights to cancel this Lease afforded in Subsection (D) or Subsection (E)
of this Section above, and except where Lessee cancels this Lease due to the
fact that it is legally prohibited from lawfully occupying the Original Premises
or a substantial portion thereof (as such term "substantial portion" is
hereinafter defined -in Subsection (G) of the Section of this Lease entitled
"RENT") for its regular business operations due the lack of completion, or
agreement on completion, of Fire/Life Safety Modifications, Lessor and Lessee
shall recognize that certain office lease for the Original Premises, dated July
8, 1988, by and between Lessor and Lessee, as amended to the date of this Lease,
(the "Original Lease"), and the Original Lease shall be reinstated as if it had
continued in full force and effect through Commencement Date 1, and Lessee shall
be permitted to continue to lease the Original Premises through October 31,
1998, as and to the extent provided for in the Original Lease. Lessee shall have
no rights thereafter to the Additional Premises, nor to any rights arising under
this Lease, this Lease being deemed null and void as of the date of receipt by
Lessor of Lessee's notice of cancellation to Lessor. If this Lease is so
canceled, Lessor, by such cancellation action, shall be liable under the
Original Lease for all Monthly Rent and additional rent arising under the
Section of the Original Lease entitled "RENTAL ESCALATION FOR INCREASES IN
EXPENSES," which would have accrued from and after January 1, 1997, but for the
termination of the Original Lease. Against that accrued liability, Lessee shall
be given credit for any Monthly Rent paid by Lessee to Lessor pursuant to this
Lease. Lessee shall pay any deficiency within thirty (30) days after the date of
receipt of Lessor's notice to Lessee advising Lessee of the amount of any such
deficiency. In the event that this Lease is cancelled and the Original Lease
reinstated due to Lessee's inability to have access to the Additional Premises,
Lessor agrees thereafter to cooperate with Lessee to seek to provide Lessee, at
Lessee's sole option, with interim office space in the Building of rentable area
approximately the rentable area of the Additional Premises to meet Lessee's
needs as of the applicable cancellation date. If such space is provided, Lessee
agrees to lease such space upon the terms of the Original Lease, with the
monthly rent for such area being based upon the effective rental rate per square
foot per month then in effect under the Original Lease for the Original
Premises. Lessee will lease such space in its "as is" condition without
requiring any changes or modifications by Lessor.
(ii) Where Lessee is prevented from lawfully occupying the Original
Premises for its regular business purposes due to Lessor's failure to complete,
or in lieu thereof failure to reach agreement to complete Fire/Life Safety
Modifications, the cancellation of this Lease by Lessee through the exercise of
its rights under Subsection (E) of this Section shall also serve to cancel the
Original Lease. In that instance and within thirty (30) days after the timely
delivery to Lessor of the notice of cancellation arising due to Lessee's lose of
its lawful right to occupy the Original Premises because of the absence of, or
lack of agreement upon Fire/Life Safety Modifications, Lessee shall vacate the
Original Premises and the Additional Premises as if the Lease had naturally
expired at the end of its initial term and any ongoing obligations of Lessor and
Lessee shall be governed solely by the provisions of this Lease.
(G) When Lessee and Lessor have executed this Lease and Lessee holds
possession of the Original Premises pursuant to this Lease, Lessor and Lessee
shall execute the "Declaration as to Date of Delivery and Acceptance of
Possession of Original Premises, " attached hereto as Exhibit D. When Lessee
accepts possession of the Additional Premises, Lessor and Lessee shall execute
the "Declaration as to Date of Delivery and Acceptance of Possession of
Additional Premises, " attached hereto as Exhibit D-1, which shall specify
Commencement Date 2. Execution of this document shall not be deemed a condition
to the occurrence of Commencement Date 2.
(H) If Lessee has the right to cancel this Lease pursuant to Subsection (E) of
this Section, and if the Codes would permit Lessee to construct the Initial
Alterations and subsequently to lawfully occupy the Demised Premises if
interim fire and life safety devices were installed in the Demised
Premises, then Lessee may, in lieu of cancellation of this Lease, and with
Lessor's prior approval, which approval may not be unreasonably withheld or
delayed, modify the Initial Alterations to include installation of the
interim fire and life safety devices in the Demised Premises permitted by
the Codes so that Lessee can construct Initial Alternations and
subsequently lawfully use and occupy the Demised Premises, without Lessor
first having completed the Fire/Life Safety Modifications or alternately
reached an agreement with the District of Columbia binding upon Lessor
related to Fire/Life Safety Modifications. By Lessee undertaking such work
and installing as applicable such interim devices, Lessee automatically
waives its right to cancel this Lease as otherwise afforded to Lessee
pursuant to Subsection (E) above of this Section. If Lessee does modify the
Initial Alterations to include approved interim devices that will permit it
to lawfully occupy the Demised Premises, then at such time as Lessor
completes the Fire/Life Safety Modifications, Lessor shall pay for the
costs of (i) connection to base building fire and life safety systems and
(ii) any retrofitting of the fire and life safety improvements installed by
Lessee in the Demised Premises as part of the Initial Alterations, which
are necessary for Lessee's continued lawful occupancy of the Demised
Premises for Lessee's regular business operations. Lessor shall also pay
for the reasonable costs of patching and repairing damage to tenant
improvements in the Demised Premises including the Initial Alterations,
caused by removal, if necessary, of the fire and life safety interim
devices.
3. USE
Lessee shall use and occupy the Demised Premises solely for general
office purposes in accordance with the applicable zoning regulations. The
Demised Premises shall not be used for any other purpose without the prior
written consent of Lessor. Lessee shall not use or occupy the Demised Premises
for any unlawful purpose, and will comply with all present and future laws,
ordinances, regulations, and orders of all governments, government agencies and
any other public authority having jurisdiction over the Demised Premises. Lessee
may not use, store or dispose of any hazardous materials on or about the Demised
Premises, except as necessary to the normal and ordinary operation of its
business in the Demised Premises, and then such use, storage and disposal shall
only be in accordance with applicable environmental rules and regulations.
4. RENT
(A) Lessee covenants and agrees to pay to Lessor rent of any kind or
nature, including Monthly Rent 1 (as hereinafter defined), Monthly Rent 2 (as
hereinafter defined) and any sums, charges, expenses and costs identified in
this Lease as additional rent to be paid by Lessee to Lessor. Lessee's
obligation to pay rent for the Original Premises shall begin on the Commencement
Date I (hereinafter the "Rent Commencement Date I "); Lessee's obligation to pay
rent for the Additional Premises shall begin on the date that is three hundred
(300) calendar days after Commencement Date 2 (hereinafter such later date being
referred to as the "Rent Commencement Date 2"). All rent obligations stated in
this Lease shall continue to remain an obligation of Lessee until completely
satisfied.
Lessee shall make all payments of rent by check, payable to "The
Greystone Square 127 Associates," and delivered to P.O. Box 91852, Washington,
DC 20090-1852, or to such other party or to such other address as Lessor may
designate from time to time by written notice to Lessee, without demand and
without deduction, set-off or counterclaim. If Lessor shall at any time or times
accept rent after it shall become due and payable, such acceptance shall not
excuse delay upon subsequent occasions, or constitute, or be construed as, a
waiver of any or all of Lessor's rights hereunder.
(B) The initial monthly rent for the Original Premises (hereinafter
referred to as "Monthly Rent 1") as of Rent Commencement Date 1, which Lessee
hereby agrees to pay in advance to Lessor and Lessor hereby agrees to accept,
shall be One Hundred Two Thousand Seven Hundred Fifty and 83/100ths Dollars
($102,750.83). The initial monthly rent for the Additional Premises (hereinafter
referred to as "Monthly Rent 2") as of Rent Commencement Date 2, which Lessee
hereby agrees to pay in advance to Lessor and Lessor hereby agrees to accept,
shall be Twenty-five Thousand Seventy-seven and 83/100ths Dollars ($25,077.83).
(C) Monthly Rent 1 and Monthly Rent 2 shall each be subject to
adjustment as provided in the Section of this Lease entitled "ANNUAL ESCALATION
OF MONTHLY RENT." The term "Monthly Rent" shall mean collectively Monthly Rent 1
and Monthly Rent 2 as specified above and as subsequently adjusted pursuant to
the operation of that Section of this Lease or as otherwise modified in response
to Lessee's exercise of any rights to lease other space in the Building pursuant
to this Lease.
(D) Monthly Rent as specified above shall be payable in advance on the
first day of each calendar month during the term of this Lease following the
applicable Rent Commencement Date. Additionally, Lessee shall be credited toward
the payment of Monthly Rent first due and owing under this Lease with any
payment of Monthly Rent and additional rent arising under the Section of the
Original Lease entitled "RENTAL ESCALATIONS FOR INCREASES IN EXPENSES" of the
Original Lease made by Lessee for those rent obligations arising under the
Original Lease from and after January 1, 1997. Lessee shall also pay to Lessor
with the payment of Monthly Rent such payments of additional rent provided for
in the Section of the Lease entitled, "OPERATING EXPENSES, OPERATING COSTS AND
REAL ESTATE TAXES."
(E) If Rent Commencement Date 1, and therefore the obligation under
this Lease to pay Monthly Rent 1, begins on a day other than the first day of a
calendar month, then Monthly Rent I from such date until the first day of the
following calendar month shall be prorated at the rate of one-thirtieth (1/30th)
of Monthly Rent I for each day of that month from and including the Rent
Commencement Date 1, payable in advance, as specified above. If Rent
Commencement Date 2, and therefore the obligation under the Lease to pay Monthly
Rent 2, begins on a day other than the first day of a calendar month, then
Monthly Rent 2 from such date until the first day of the following calendar
month shall be prorated at the rate of one-thirtieth (1/30th) of Monthly Rent 2
for each day of that month from and including the Rent Commencement Date 2,
payable in advance, as specified above.
(F) If Lessor was unable to deliver the Additional Premises in Delivery
Condition by May 31, 1997, and the Commencement Date 2 is a date after such
date, then provided Lessee has not exercised any right to cancel this Lease as
provided in the Section of this Lease entitled "TERM," Lessee shall be entitled
to and Lessor shall recognize as a credit to Monthly Rent 2 (as hereinafter
defined) applicable after Rent Commencement Date 2 an amount equal to the
product of (i) the amount of Monthly Rent 2 per calendar day (calculated on a
thirty (30) day month), times (b) the number of calendar days after May 31, 1997
that Lessor is delayed in the delivery of the Additional Premises to Lessee in
the Delivery Condition.
(G) (i) In the event that Lessor has not completed the Fire/Life Safety
Modifications or alternatively reached agreement with the District of Columbia
binding upon Lessor concerning undertaking the Fire/Life Safety Modifications
and such failure (a) results in the District of Columbia causing Lessee to cease
use of all or a portion of the Original Premises for Lessee's regular business
operations at some point in time after Commencement Date 1, (b) delays Lessee's
right to lawfully occupy the Additional Premises for Lessee's regular business
operations, or (c) both, then for so long as Lessee is prevented from occupying
some or all of the Demised Premises for it regular business operations Lessee
will be entitled to an abatement of Monthly Rent, but only as hereinafter
provided in this Subsection.
(ii) (a) Where Lessee is notified by the Reviewing Officials
that the issuance of Permits will be delayed solely due to the absence of, or
alternatively the failure of Lessor to agree with the District of Columbia upon
the completion of, the Fire/Life Safety Modifications and such delay in the
issuance of Permits continues for a period of more than thirty (30) calendar
days, (b) where Lessee is delayed in the installation, fabrication or
construction of Initial Alterations for more than thirty (30) calendar days and
such delay is due solely to the absence of, or alternatively to the failure of
Lessor to agree with the District of Columbia upon the completion of the
Fire/Life Safety Modifications, or (c) where Lessee's lawful occupancy of the
Additional Premises is delayed for more than thirty (30) calendar days after
substantial completion of Initial Alterations and such delay is due solely to
the absence of, or alternatively the failure of Lessor to agree with the
District of Columbia upon the completion of, the Fire/Life Safety Modifications,
and in any case Lessee has- not cancelled this Lease as provided in Subsection
(E) of the Section of this Lease entitled "TERM", Lessee shall be entitled an
abatement of Monthly Rent 2. The amount of abatement of Monthly Rent 2 shall be
equal-to one thirtieth (1/30th) of the amount of Monthly Rent 2 for each day
that Lessee is so delayed after the expiration of the applicable thirty (30) day
period from occupying the Additional Demised Premises for Lessee's regular
business operations. Any abatement of Monthly Rent 2 herein provided shall be
applied to Lessee's obligation for Monthly Rent 2 otherwise arising from and
after the Rent Commencement Date 2. Any accrual of abated Monthly Rent 2 under
this Subsection shall cease as of the earlier of (x) the date that Lessee
obtains the Permits for Initial Alterations, (y) the date that Lessor delivers
to Lessee the last of any required Completion Notices specified in Subsection
(D) of the Section of this Lease entitled "DEMISED PREMISES," or (z) the date
Lessee completes installation of interim fire and life safety devices which
permit Lessee to lawfully occupy the Demised Premises.
(iii)Where Lessee's lawful occupancy of the Original Premises or a substantial
portion thereof for Lessee's regular business operations is prevented by
order of an Inspecting Official from and after the commencement of
construction of Initial Alterations, and such interruption in occupancy is
solely due to the absence of, or alternatively the failure of Lessor to
agree with the District of Columbia upon the completion of, the Fire/Life
Safety Modifications, then Monthly Rent 1 shall be abated from the date
that Lessee's occupancy of the Original Premises or the substantial portion
thereof for its regular business operations is required by the District of
Columbia to cease. The amount of Monthly Rent I to be abated from time to
time and day for day shall be equal to one-thirtieth (1/30th) of an amount
equal to the product of Monthly Rent 1 times a fraction the numerator or
which is the area of the Original Premises that Lessee cannot lawfully be
occupied on that day for Lessee's regular business operations and the
denominator of which is the area of the Original Premises. Any abatement of
Monthly Rent I under this Subsection shall cease as of the earlier of (a)
the date that Lessee receives notice from the District of Columbia that it
may lawfully re-occupy the Original Premises or the portion thereof, (b)
the date that Lessor delivers to Lessee the last of any required Completion
Notices specified in Subsection (D) of the Section of this Lease entitled
"DEMISED PREMISES", (c) the date Lessee completes installation of interim
fire and life safety devices which permit Lessee to lawfully occupy the
Demised Premises, or (d) the effective date of cancellation of this Lease.
For the purposes of this Lease the phrase "substantial portion" shall mean in
excess of twenty percent (20%) of the rentable area of the Original
Premises. As and to the extent that lawful occupancy of less than all of
the Original Premises is involved and there is a disagreement between
Lessor and Lessee as to whether a substantial portion of the Original
Premises is effected, and the determination by the District of Columbia is
not dispositive on the matter, then Lessor and Lessee agree that such
determination shall be made by Lessee's architect, applying -professional
standards to its evaluation of what portion of the Original Premises cannot
be lawfully used for Lessee's regular business operations due to the
District of Columbia's determination.,
5. OPERATING EXPENSES, OPERATING COSTS AND REAL ESTATE TAXES
(A) If the Operating Expenses (as defined below) of the Building
increase during any calendar year after calendar year 1997 (hereafter called the
"Base Year"), Lessee shall pay to Lessor, as additional rent, Lessee's
proportionate share of the increase in such Operating Expenses. Lessee's
proportionate share shall be the percentage which the total rentable square feet
of the Demised Premises bears to the total rentable square feet of office and
retail areas in the Building, which percentage as of the Commencement Date 1
shall be 17.04%, and which percentage as of the Rent Commencement Date 2 shall
be 21.20%. The amount of such percentage to be paid by Lessee for any calendar
year shall be the percentage of the calendar year that the Demised Premises were
leased by Lessee.
(B) The term "Operating Expenses" shall mean (i) any and all expenses,
charges and fees incurred in connection with managing, operating, maintaining,
servicing, insuring and repairing the Building, atrium (if any) and related
exterior appurtenances, and (ii) the costs and expenses of capital improvements
made subsequent to the Base Year and (a) reasonably intended to reduce Operating
Expenses or Operating Costs (as hereinafter defined) or (b) required by public
authorities to bring the Building or the Land in compliance with applicable laws
or regulations, enacted or amended after the date of this Lease (but
specifically excluding the cost and expenses incurred by Lessor for Fire/Life
Safety Modifications), with the costs and expenses of those capital improvements
(with interest at (1) Lessor's reasonable, actual cost of funds, or (2) if the
improvement is not financed, the prime rate reported in the Wall Street Journal
being amortized over the Approved. Period (as hereinbelow defined) and with only
the amortized amount of the costs and expenses of those improvements
attributable to a calendar year being an element of Operating Expenses in that
particular calendar year). The "Approved Period" shall mean the economic useful
life of the improvement, except that, with respect to an improvement made for
the purpose of reducing Operating Expenses or Operating Costs, Lessor may
amortize the expense over the period such that the yearly amortization amount is
equal to the projected annual savings as reasonably estimated by Lessor.
(C) Operating Expenses shall not include the following: (i) the costs
and expenses of painting or decorating of other than public or common areas of
the Land (as' hereinafter defined) and the Building and costs and expenses of
capital improvements, except those specifically permitted and provided for in
Subsection (B) of this Section of the Lease; (ii) interest and amortization of
mortgages, financing costs, including points, commitment fees and broker fees;
(iii) base ground rent, if any (i.e., exclusive of real estate taxes, utilities,
insurance and other "net" elements constituting rent under a ground lease); (iv)
depreciation of the Building; (v) compensation paid to officers or executives of
Lessor or Agent above the grade of a general manager; (vi) leasing commissions;
(vii) income or franchise taxes; (viii) the cost of correcting structural or any
other latent defects in the initial construction or subsequent renovation of the
Building; (ix) any cost for which Lessor is reimbursed in full by insurance,
warranty or similar third party proceeds (except for reimbursements made by
tenants pursuant to lease provisions similar to the provisions of this Section);
(x) those marketing and advertising costs relate d to the marketing and leasing
of the Building (including allowances, abatements and other rent concessions
granted to a tenant); (xi) expenses in connection with services or other
benefits of a type or quantity beyond the scope of this Lease which are not made
available to Lessee but which are provided to one or more other tenants or
occupants of the Building (it being the intent of the par-ties that Lessee not
"subsidize" services made available to other tenants of the Building at no
additional charge to such tenants); (xii) attorney's fees and other costs
incurred by Lessor (a) in the preparation or negotiation of leases in the
Building and amendments thereto, (b) in the enforcement of any such lease or in
connection with a tenant dispute, and (c) in connection with disputes with
prospective tenants, employees, purchasers or mortgagees of the Building; (xiii)
any governmental fines or penalties incurred by Lessor due to violations by
Lessor of any governmental rules or regulations; (xiv) costs, including permits,
licenses, and inspection costs, incurred with respect to the installation of
tenant improvements for new tenants in the Building; (xv) rentals and other
related expenses (including late fees, penalties and interest) incurred in
leasing air conditioning systems, elevators or other equipment ordinarily
considered to be of a capital nature, except equipment not affixed to the
Building which is used in providing janitorial or similar services; (xvi)
electrical power costs for which any tenant directly contracts with the local
public service company; (xvii) overhead and profit increment paid to Lessor or
to subsidiaries or affiliates of Lessor for services in the Building to the
extent the same exceeds the market costs of such services rendered by comparable
unaffiliated third parties on a competitive basis; (xviii) charitable, political
and civic contributions of Lessor; (xix) costs of purchasing paintings,
sculptures or other art work for display in the Building; (xx) for the initial
term of this Lease only, management fees in excess of three percent (3 %) of the
aggregate of all gross receipts derived from the Building; provided, however,
that for any period of time that Building gross receipts fall below the
applicable minimum threshold level for purposes for calculating the gross
receipts for the Building under the Building management contract (and as a
result thereof a "minimum management fee" shall be payable in lieu of a flat
percentage of gross receipts of the Building), the cap on management fees shall
be three percent (3 %) of the aggregate of all gross receipts derived from the
Building as if it were fully leased for such period; (xxi) professional
accounting expenses other than those accounting expenses incurred by Lessor (a)
in accordance the provisions of this Section concerning the audit of Lessor's
books and records, but not including the cost of Lessor's response to a tenant's
request to audit Lessor's books and records, or (b) in connection with the
completion of forms or other documents required by any state, county, federal
government or other governmental or quasi-governmental entity which relate
solely to the ownership and operation of the Building and the Land (and
specifically excluding Lessor's income tax returns); (xxii) general corporate
overhead and administrative expenses of Lessor (including salaries and general
corporate overhead and administrative expenses of Lessor (including salaries and
other compensation paid to officers and executives of Lessor )) unless otherwise
provided herein; (xxiii) late charges incurred by Lessor for its failure to pay
timely any mortgage installment, any Operating Expense, any Operating Cost, or
Real Estate Taxes; (xxiv) costs and expenses paid by the parking garage operator
or otherwise related to the operation of the Building garage (other than
electricity and water, Real Estate Taxes and insurance premiums payable for the
Building (as it includes the garage), all of which shall be included as an
Operating Expenses, Operating Costs, or in Real Estate Taxes as applicable);
(xxv) reserves for repairs, maintenance and replacements; (xxvi) costs incurred
in connection with the sale, financing, refinancing, mortgaging, selling or
change of ownership of the Building or the Land; (xxvii) any compensation paid
to clerks, attendants or other persons in commercial concessions operated for
profit by Lessor; (xxviii) costs of cleanup of any Materials (as hereinafter
defined) in, on or under the Building or Land (other than in the normal course
of business, such as de minimis oil or gasoline leaks from vehicles or the
spills of oil used in the chillers or back-up generator), except that
notwithstanding the foregoing, Lessor shall not be required to exclude from
Operating Expenses any costs incurred by Lessor as a result of Materials
resulting from any acts or omissions of Lessee, its employees, agents,
contractors, guests, licensees, or invitees (xxix) moving expense costs of
tenants of the Building; (xxx) the costs of overtime HVAC service payable by any
tenant to Lessor; (xxxi) costs of repairs or replacements incurred by reason of
fire or other insured casualty or condemnation (provided Lessor has paid the
insurance premiums for any such insurance required to be maintained by Lessor
pursuant to this Lease, and in the event Lessor fails to so pay any insurance
premiums as and when required, Lessee shall not be liable for the cost of such
repairs or replacements); (xxxii) bad debt loss, rent loss, or reserves for
either of them; and (xxxiii) costs of improving, altering constructing or
redecorating any space leased to tenants of the Building; (collectively the
"Excluded Items"). Operating Expenses shall also not include Operating Costs (as
defined in (E) below) or Real Estate Taxes (as defined in (G) below). Rent for
the off-site management office and salaries or other compensation paid by Lessor
to persons who are engaged in the management, repair, maintenance or operation
of the Building (at the level of a "general manager" or below) as well as other
buildings in the surrounding area ("Other Buildings") shall be included as
Operating Expenses, but such off-site management office rent and salary or other
compensation shall be allocated equitably to the Building based upon the square
footage of the Building and the total square footage of all Other Buildings to
which such persons provide management, repair, maintenance or operational
services, unless in Lessor's reasonable judgment, extenuating circumstances
apply which warrant the determination of such allocation on a different basis.
(D) If the Operating Costs (as defined below) of the Building increase
during any calendar year after the Base Year, Lessee shall pay to Lessor, as
additional rent, Lessee's proportionate share of the increase in such Operating
Costs. Lessee's proportionate share shall be the percentage which the total
rentable square feet of the Demised Premises bears to the total rentable square
feet of all office area in the Building, which percentage as of the Commencement
Date 1 shall be 18.17 %, and which percentage as of Rent Commencement Date 2
shall be 22.66%. The amount of such percentage to be paid by Lessee for any
calendar year shall be the percentage of the calendar year that the Demised
Premises were leased by Lessee.
(E) The term "Operating Costs" shall mean the costs of (i) the cleaning
contract(s) and cleaning supplies, (ii) electricity and water, and (iii)
elevator maintenance contracts. Operating Costs shall not include Operating
Expenses, Excluded Items, or Real Estate Taxes.
(F) If the Real Estate Taxes increase during any calendar year after
the Base Year, Lessee shall pay to Lessor, as additional rent, Lessee's
proportionate share of the increases in such Real Estate Taxes. Lessee's
proportionate share shall be the percentage which the total rentable square feet
of the Demised Premises bears to the total rentable square feet of all office
and retail areas in the Building, which percentage as of the Commencement Date 1
shall be 17.04%, and which percentage as of Rent Commencement Date 2 shall be
21.20%. The amount of such percentage to be paid by Lessee for any calendar year
shall be the percentage of the calendar year that the Demised Premises were
leased by Lessee.
(G) The term "Real Estate Taxes" shall mean (i) any and all real estate
taxes and ad valorem taxes, surcharges, special assessments and impositions,
general and special, ordinary and extraordinary, foreseen or unforeseen, of any
kind levied, assessed, or imposed against the Building or land upon which the
Building is located (the "Land"), (ii) vault rental, (iii) expenses (including
reasonable attorneys' fees, appraisers' fees and expert witness fees) incurred
in reviewing, protesting or seeking a reduction of Real Estate Taxes or any
assessment related thereto, (iv) personal property taxes based upon Lessor's
on-site property used in the operation of the Building, (v) transit taxes,
public project support, rental, sales, service transfer or value added tax, or
any other applicable taxes based upon the receipt of rent and any other federal,
state or local governmental charge (but not including income or franchise taxes,
capital stock, inheritance, estate, gift, or any other taxes imposed based upon
or measured by Lessor's gross income or profits, unless the same is imposed in
lieu of real estate taxes or other ad valorem taxes, and (vi) any assessment for
a business improvement district established pursuant to applicable District of
Columbia law.
(H) If there is any change by the taxing body in the period for which
any of the Real Estate Taxes are levied, assessed or imposed, Lessor shall have
the right, in its sole but reasonable discretion, to make appropriate
adjustments with respect to computing Real Estate Taxes for the Base Year and
increases in Real Estate Taxes.
(I) Lessor shall notify Lessee prior to the beginning of calendar year.
1998 and each calendar year thereafter of Lessor's good faith estimate of the
amount of Operating Expenses (the "Estimated Operating Expenses"), the amount of
Operating Costs (the "Estimated Operating Costs") and the amount of Real Estate
Taxes (the "Estimated Real Estate Taxes") that Lessor likely will incur for the
Building during the coming calendar year. and pursuant to Paragraph (I) hereof,
shall advise Lessee of the amount of its Estimated Payments (as defined below)
for the coming calendar year.
(J) Lessee shall pay to Lessor, as additional rent, an amount equal to
the sum of (i) one-twelfth (1/12th) of Lessee's proportionate share of the
amount by which the Estimated Operating Expenses exceed the Operating Expenses
for the Base Year, (ii) one-twelfth (1/12th) of Lessee's proportionate share of
the amount by which the Estimated Operating Costs exceed the Operating Costs for
the Base Year, and (iii) one-twelfth (1/12th) of Lessee's proportionate share of
the amount by which Estimated Real Estate Taxes exceed the Real Estate Taxes for
the Base Year (collectively the "Estimated Payments"). The components of the
Estimated Payments described in items (i), (ii) and (iii) of the preceding
sentence shall be calculated independently without reference to one another.
Lessee shall commence to make its first Estimated Payments on the first day of
January, 1998. Thereafter, Lessee shall make its Estimated Payments on the first
day of each calendar month. Lessee shall pay the same amount of the Estimated
Payments until the amount is adjusted, effective the next succeeding January 1,
based upon Lessor's good faith determination of the Estimated Operating
Expenses, Estimated Operating Costs and Estimated Real Estate Taxes for the
following calendar year.
(K) Within ninety (90) days after the expiration of each calendar year
(including the calendar years in which the Commencement Date and expiration or
earlier termination of this Lease occurs), a firm of certified public
accountants selected by Lessor shall audit Lessor's books and records for the
Building. Thereafter, Lessor shall determine any increase in the Operating
Expenses. Operating Costs and Real Estate Taxes for such calendar year over the
Operating Expenses, Operating Costs and Real Estate Taxes for the Base Year. The
Operating Expenses, Operating Costs and Real Estate Taxes for each calendar year
shall be those actually incurred, provided, however, that if the Building was
not at least ninety-five percent (95%) occupied during the entire calendar year
on a monthly weighted average basis, then those components of Operating Expenses
and of Operating Costs identified below as Variable le Components shall be
adjusted to project those components of Operating Expenses and of Operating
Costs would have been if the Building had been ninety-five percent (95 %)
occupied on a monthly weighted average basis during that entire calendar year.
The Variable Components of Operating Costs shall be:
(i) the costs related to consumption of electricity to
the extent standard levels of power are not to be
consumed in unoccupied tenant areas of the Building;
(ii) the costs of char services to the extent standard
levels of such services are not being provided to
unoccupied office areas and provided that the
cleaning contract for the Building provides for a
cost reduction in direct proportion to the occupied
office areas of the Building being serviced;
(iii) the costs related to consumption of water services to
the extent such utility is not being consumed with
respect to the unoccupied areas of the Building; and,
(iv) the costs related to consumption of sewer services to
the extent such utility is not being consumed with
respect to the unoccupied areas of the Building.
The Variable Component of Operating Expenses shall be management fees to the
extent that rental income is not being received. by Lessor on unoccupied areas
of the Building.
(L) Lessor shall submit to Lessee a statement setting forth Lessor's
determination of (i) any increases in Operating Expenses, Operating Costs and
Real Estate Taxes over the Operating Expenses, Operating Costs and Real Estate
Taxes, respectively for the Base Year; (ii) Lessee's proportionate share of such
increases; and (iii) Lessee's net obligation for such Operating Expenses,
Operating Costs and Real Estate Taxes for the calendar year ("Lessee's Net
Obligation") which reflects the credit of Lessee's Estimated Payments for
Estimated Operating Expenses, Estimated Operating Costs and Estimated Real
Estate Taxes during the prior calendar year. In computing Lessee's Net
Obligation, increases in Operating Expenses and Operating Costs, and increases
in Real Estate Taxes shall be computed independently without reference to one
another. Within thirty (30) days after the delivery of such statement (including
any statement delivered after the expiration or earlier termination of this
Lease), Lessee shall pay Lessor the full stated amount of Lessee's Net
Obligation. If the aggregate amount of Lessee's Estimated Payments during the
prior calendar year exceeds Lessee's proportionate share of (i) the increases in
Operating Expenses, (ii) the increases in. Operating Costs, and (iii) the
increases in Real Estate Taxes, the excess, at Lessor's option, shall be
refunded to Lessee or credited to Lessee's next arising payment of Monthly Rent,
until such excess is fully refunded to Lessee or credited to Lessee as provided
above.
(M) Lessee, and/or a reputable agent of Lessee retained by Lessee may,
at Lessee's expense, at reasonable times, audit Lessor's books and records for
the Building relating to Lessor's determination of any increase or decrease in
the Operating Expenses, Operating Costs and Real Estate Taxes for the calendar
year for which Lessor's current determination is being made. In conjunction with
that audit of the current year's determination, Lessee or its agent may audit
the two (2) immediately preceding calendar years. Any audit must be undertaken
and completed no later than twelve (12) full calendar months after the date that
Lessee receives notice of Lessor's current determination. Notwithstanding the
foregoing Lessee may audit, except for the Base Year, a calendar year only once;
Lessee may audit the Base Year twice provided that all audits of the Base Year
must be completed prior to December 31, 2002.
(N) Lessor shall compute the Operating Expenses, Operating Costs and
Real Estate Taxes on the accrual basis. Any refund of Real Estate Taxes received
by Lessor with respect to any period during the term of this Lease shall be
credited to the year to which the refund accrued and not to the year in which
any such refund is received by Lessor; thereafter the Lessee's obligations for
additional rent for Real Estate Taxes for that year shall be recalculated and a
refund made or credit given to Lessee, provided that if a refund of Real Estate
Taxes received is applicable to the Base Year, then Lessee's obligation for
additional rent pertinent to Real Estate Taxes for each year after the Base Year
shall be recalculated and any additional rent obligation arising therefrom shall
be noticed to Lessee and shall become due and payable by Lessee within thirty
(30) days of receipt of Lessor's notice. Such additional amounts shall be deemed
to be for the purposes of this Lease additional rent.
6. ANNUAL ESCALATION OF MONTHLY RENT
(A) Monthly Rent for the Demised Premises shall be subject to
adjustment and escalation as of January 1 of each calendar year during the term
of this Lease, beginning on January 1, 1998. As of each January 1st, Monthly
Rent for the calendar year beginning January I shall be equal to the Monthly
Rent in effect for the immediately preceding calendar month of December
increased by an amount equal to (i) 1.5% times (H) the Monthly Rent in effect
for that immediately preceding calendar month of December. This increase in
Monthly Rent shall become effective as of January I and shall remain in effect
until the next adjustment to Monthly Rent is made in accordance with this
Section of the Lease, subject however to any adjustment as may occur by Lessee's
exercise of its rights to lease other spaces of the Building as provided in this
Lease.
(B) Notwithstanding the forgoing, and in lieu of any adjustment to
Monthly Rent on January 1, 2002 pursuant to Subsection (A) above of this
Section, Monthly Rent as of January 1, 2002 shall be equal to Monthly Rent in
effect for the calendar month of December 2001 adjusted and increased by an
amount equal to one-twelfth (1/12th) of the product of (i) the then rentable
area of the Demised Premises, times (ii) Two and 00/ 1 00ths Dollars per
rentable square foot of the Demised Premises., This Monthly Rent, subject to any
adjustment as may occur by Lessee's exercise of any rights to lease other spaces
of the Building as provided in this Lease, shall remain in effect through
December 2002. As of January 1, 2003, Monthly Rent shall be adjusted and
increased as provided in (A) above of this Section during the remainder of the
initial term of this Lease.
7. PARKING
(A) In connection with Lessee's leasing of the Original Premises
pursuant to this Lease, Lessor guarantees that it shall assure the availability
to Lessee of twenty-two (22) parking contracts for the parking garage serving
the Building. In connection with Lessee's leasing of the Additional Premises,
Lessor guarantees that it shall assure the availability to Lessee of an
allocation of up to five (5) additional parking contracts in the parking garage
serving the Building. All of said allocation of said parking contracts shall be
for the use by Lessee and its employees. The rights to parking contracts
allocated to the Original Premises shall be deemed vested by the execution of
this Lease by Lessor and Lessee. To vest the rights to parking contracts in that
parking garage related to the Additional Premises, Lessee must notify Lessor in
writing of the number of parking contracts it desires, and Lessee must enter
into said contracts with the parking garage operator or manager within sixty
(60) days following the Rent Commencement Date 2 with regard to parking
contracts related to the Additional Premises. Lessee shall be directly
responsible to the parking garage operator for the payment of any and all fees
or charges thereunder. Lessor shall be under no obligation to pay for any
parking contracts. These parking contracts shall contain the same terms and
conditions as are usually contained in such contracts with other monthly parking
customers of the parking garage operator, and the monthly rate to be paid by
Lessee shall be the prevailing monthly rate charged to other monthly parking
customers, said rate to increase and decrease as the prevailing monthly parking
rate for other monthly parking customers increases and decreases from time to
time.
In the event Lessee fails to execute with the parking garage operator or manager
all or a portion of the monthly parking contracts allocated to the Additional
Premises within applicable sixty (60) day period, or subsequently relinquishes
in any manner after vesting any parking contract (whether arising with regard to
the Original Premises, the Additional Premises or any other space leased in the
Building by Lessee pursuant to this Lease), Lessor shall be under no obligation
to seek restoration of the relinquished contracts or waive Lessee's failure to
execute said contracts.
(B) As and when Lessee leases additional spaces in the Building
pursuant to this Lease, Lessee shall be entitled to and Lessor shall have made
available to Lessee one (1) additional parking contract for the parking spaces
serving the Building for each seventeen hundred fifty (1750) rentable square
feet of additional rentable area so leased by Lessee. Lessee must (i) notify
Lessor in writing within sixty (60) days following the commencement date of this
Lease with regard to such space of its desire for all or a portion of such
additional parking contracts, and (ii) enter into said number of parking
contracts with the parking garage operator or manager within such sixty (60) day
period. All other provisions of this Section shall be applicable to Lessee's
rights to such contracts and Lessor's obligation to have such contracts
delivered to Lessee.
8. OPTION TO TERMINATE
(A) Lessor grants to Lessee one (1) option to terminate the term of
this Lease with regard to the entire Demised Premises only, with such
termination to be effective as of 11:59 p.m., December 31, 2003 (the
"Termination Date"), provided that Lessee exercises such option as set forth
below, and further provided that Lessee is not in default under this Lease (i)
due to its failure to timely make any payment of Monthly Rent, of any additional
rent arising under and pursuant to the provisions of the Section of this Lease
entitled "OPERATING EXPENSES, OPERATING COSTS AND REAL ESTATE TAXES", or both,
in any case after notice of such failure has been given to Lessee by Lessor as
hereinafter provided in this Lease and Lessee has not timely exercised its
opportunity to cure such failure as so provided, (ii) due to Lessee's bankruptcy
or insolvency, (iii) due to Lessee's assignment of this Lease in contravention
of the provisions of the Section of this Lease entitled "ASSIGNMENT AND
SUBLETTING", and Lessee's failure to timely cure or correct such matter after
notice has been given thereof by Lessor, (iv) due to Lessee's subleasing of
areas within the Demised Premises to any party, other than a Permitted Licensee
(as hereinafter defined), in contravention of the provisions of the Section of
this Lease entitled "ASSIGNMENT AND SUBLETTING", and Lessee's failure to timely
cure or correct such matter after notice has been given thereof by Lessor, or
(v) due to Lessee's having undertaken Alterations of the Demised Premises from
and after January 1, 2001 in contravention of the provisions of the Section of
this Lease entitled "ALTERATIONS", the value of which Alterations as reasonably
estimated by Lessor are in excess Seventy Five Thousand and 00/ 100ths Dollars
($75,000.00) and Lessee's failure to timely cure or correct such matter after
notice has been given thereof by Lessor (collectively items (i) through (v)
being hereinafter referred to as a "Material Default"), either on the date
Lessee notifies Lessor of its intent to exercise this option or at any time
thereafter up to and including the Termination Date. Lessee may exercise this
option only by serving on Lessor written notice of its intent to exercise this
option no later than 5:00 p.m. on June 30, 2002.
(B) As consideration for Lessor granting to Lessee this option to
terminate the term of this Lease with regard to the Original Premises and the
Additional Premises., and provided that Lessee subsequently exercises such
option to terminate, Lessee shall pay to Lessor on or before thirty (30) days
prior to the Termination Date a termination fee in an amount equal to the sum of
(i) Four Hundred Forty-five Thousand and 00/100ths Dollars ($445,000.00) (being
equal to approximately thirty percent (30%) of (a) the unamortized value of the
Allowance using a straight line amortization schedule and (b) the unamortized
value of leasing commissions incurred and paid by Lessor to Lessee's real estate
broker in conjunction with the making of this Lease (using a straight line
amortization schedule based upon a lease term of ten (10) calendar years) and
(ii) the product of (a) three (3) times (b) the sum of the then applicable
Monthly Rent for the Original Premises and the Additional Premises, and Lessee's
then current obligation for Estimated Payments (collectively such amounts due
and owing to Lessor under (i) and (ii) above being defined in the aggregate as
the "Termination Payment"). The Termination Payment shall be delivered to Lessor
in immediately available funds, United States of America currency.
(C) If Lessee (i) is in Material Default of
this Lease, (ii) fails to timely and properly give to Lessor
notice of Lessee's exercise of this option to terminate as
hereinabove provided, or (iii) fails to deliver the
Termination Payment to Lessor no later than thirty (30)
calendar days prior to the Termination Date, then Lessee shall
be deemed to have waived its rights to exercise this option to
terminate and the Lease shall continue in full force and
effect. Lessee shall have no further option to terminate the
term of this Lease before the expiration of its natural term.
(D) If Lessee timely, properly and fully complies with all provisions
of this Section of the Lease, then the term of this Lease shall expire as of
11:59 p.m. on the Termination Date, as if the Lease had naturally expired on
such date, with each party being equally released and discharged from any
obligations to observe the terms and conditions if this Lease accruing after the
Termination Date. Lessee shall continue to be liable for all rent, including
Monthly Rent and additional rent accrued, including additional rent arising
through application of the provisions of the Section of this Lease entitled
"OPERATING EXPENSES, OPERATING COSTS AND REAL ESTATE TAXES", and accruing
through the Termination Date. Lessee shall deliver possession of the Demised
Premises to Lessor as of the Termination Date free of any existing tenancies,
subtenancies and occupancies, free and clear of personal property of Lessee and
such others and in broom clean condition, and with no claims (or threats of
claims) of liens of any kind.
(E) The Termination Penalty provided for in Section (B) of this Section shall
apply only with regard to the termination of this Lease with regard to the
Original Premises and the Additional Premises. If Lessee shall have leased
any spaces in the Building pursuant to the provisions of this Lease, and
subsequently gives its notice of termination of this Lease to Lessor
pursuant to this Section, Lessee shall be obligated to pay to Lessor, with
the Termination Penalty, as additional consideration related to the
termination of this Lease with. regard to such additional space(s). The
consideration for termination of this Lease with regard to such spaces
shall be determined at the time Lessor and Lessee reach agreement on the
terms under which Lessee shall lease such space from Lessor and the amount
of such termination penalty with regard to such space shall be recited in
any addendum to this Lease reflecting such transaction. The termination
penalty fixed for and applicable to any space so leased by Lessee shall be
the sum of (i) the unamortized value of any tenant concessions (e.g.
buildout allowances, rent abatement, etc.) granted to Lessee in conjunction
with the leasing of such space (using a straight line amortization
schedule), (h) the unamortized value of any leasing commissions incurred
and paid by Lessor in conjunction with the leasing of such space to Lessee
(using a straight line amortization schedule based upon a lease term
equivalent to the remainder of the term of this Lease with regard to such
space, without consideration of any option to extend available), and
(iii) the product of three (3) times the applicable rent for such space or
spaces (e.g. Expansion Space On Monthly Rent (as hereinafter defined), etc.).
9. OPTION TO EXTEND
(A) Lessor grants to Lessee one (1) option to extend the term of the
Lease for a period of five (5) years (the "Extension Period"), provided Lessee
exercises such option as set forth below, and provided further that Lessee is
not in Material Default under this Lease either on the date Lessee notifies
Lessor of its intent to exercise this option or at any time thereafter up to and
including the date upon which the Extension Period is to commence. Lessee may
exercise this option to extend only by serving on Lessor written notice of its
intent to exercise this option no later than June 30, 2005, nor earlier than
January 1, 2005.
(B) Within thirty (30) days after the date Lessor receives Lessee's
notice, if such notice is timely and properly given, Lessor shall deliver to
Lessee Lessor's determination of what Monthly Rent under the Lease should be as
of the commencement of the Extension Period as well as any escalation formula of
Monthly Rent applicable during the Extension Period; Lessor's statement of the
initial Monthly Rent shall be based upon Lessor's reasonable determination of
what the Net Effective Market Rental Rate (as hereinafter defined) will be as of
the commencement of the Extension Period as well as its determination of the
then applicable Market Escalator (as hereinafter defined). For sixty (60) days
following the date Lessor delivers its determination of these business terms to
Lessee, Lessor and Lessee will attempt in good faith to reach mutual agreement
on the these business terms under which Lessor is willing to lease to Lessee and
Lessee is willing to lease from Lessor the Demised Premises for the Extension
Period. The initial Monthly Rent for the Extension Period shall be based upon
one hundred percent (100%) of the Net Effective Market Rental Rate for the
Demised Premises as of the commencement of the Extension Period.
The Monthly Rent during the Extension Period shall continue to be
subject to annual adjustment and escalation, but such adjustment and escalation
shall be based upon the then prevailing mechanism for effectuating periodic
escalation of base rent in the market place for office leases in the central
business district of the District of Columbia (the "Market Escalator").
Additional rent for Operating Expenses, Operating Costs and Real Estate Taxes as
set forth in the Section of this Lease entitled, "OPERATING EXPENSES, OPERATING
COSTS AND REAL ESTATE TAXES, " shall continue uninterrupted from the initial
term of the I-ease through the Extension Period, except that the Base Year (as
such term is defined in that Section) shall become calendar year 2007. All other
terms and provisions of the Lease shall remain in full force and effect during
the Extension Period, except that Lessee shall have no further option to extend
the term of the Lease.
(C) In the event Lessor and Lessee are unable to agree within said
sixty (60) day period upon the Net Effective Market Rental Rate for the Demised
Premises as of the commencement of the Extension Period in order to determine
the initial Monthly Rent for the Extension Period or upon the then prevailing
Market Escalator, then the Net Effective Market Rental Rate as of the
commencement of the Extension Period upon which the initial Monthly Rent for the
Extension Period will be based, the Market Escalator, or both shall be
determined by a board of three (3) licensed real estate brokers. Lessor and
Lessee shall each appoint one (1) broker within ten (10) days after expiration
of the sixty (60) day period, or sooner if mutually agreed upon. The two so
appointed shall select a third within fifteen (15) days after they both have
been appointed. Each broker on said board shall be licensed in the District of
Columbia as a Real Estate Broker, specializing in the field of commercial
leasing in the central business district having no less than ten (10) years
experience in such field, and recognized as ethical and reputable within his or
her field. Each broker, within fifteen (15) days after the third broker is
selected, shall submit his or her determination of the Net Effective Market
Rental Rate as of the commencement of the Extension Period. -Net Effective
Market Rental Rate shall be the mean of the two closest rental rate
determinations, and the initial Monthly Rent for the Extension Period shall be
based upon the Net Effective Market Rental Rate. If the three broker method is
used to determine the Market Escalator, then the method identified by a majority
of the brokers as the prevailing method of effectuating escalation of base rent
in the market place shall become the Market Escalator during the Extension
Period.
"Net Effective Market Rental Rate" shall mean the net effective annual
base rental rate, taking into account delivery of full building services by a
landlord, that would be received by a landlord renting space of quality, size
and location comparable to the Demised Premises in a building of comparable
size, age and quality (taking into account any significant renovation) and
location to the Building in the central business district of Washington, D.C.
for a comparable transaction which is to be effective on or about the effective
date of the transaction in question between Lessor and Lessee, adjusted to
reflect that the provisions of the Section of the Lease entitled, "OPERATING
EXPENSES, OPERATING COSTS AND REAL ESTATE TAXES" shall remain in full force and
effect (except for any change in the identification of the Base Year as and when
specified by the applicable Section of this Lease), and that Monthly Rent shall
be subject to annual adjustment and escalation by a Market Escalator. "Net
effective annual base rental rate" shall mean the stated or quoted annual base
rental rate, based upon full service delivery by a landlord, adjusted to reflect
and include, on a present value basis, the value of landlord costs, landlord
savings and tenant concessions, such as but not limited to, rent abatement, and
cash allowances or credits for tenant fitout or refurbishment, then being
generally experienced or offered in the marketplace by landlords of comparable
buildings for comparable space for comparable lease transactions.
Lessor and Lessee shall each pay the fee of the broker selected by it
and they shall share the payment of the fee of the third broker.
(D) Lessor shall have prepared an addendum setting forth the term of
the Extension Period, the initial Monthly Rent and other appropriate terms and
conditions upon which the Demised Premises will be leased during the Extension
Period. Lessor and Lessee agree in good faith to proceed to diligently negotiate
and execute such addendum with intent of having such addendum executed by Lessor
and Lessee within sixty (60) days after the date Lessor and Lessee agree upon
the business terms for the extension of the term of this Lease, or alternatively
if applicable the date that the brokers present their determinations of Net
Effective Market Rental Rate for the Extension Period.
(E) This Section of the Lease shall become null and void and of no
force and effect if Lessee assigns this Lease or has subleased at any one time
in excess of thirty percent (30%) of the area of the Demised Premises as then
leased by Lessee, to any party other than to a qualified party identified in
Subsection (D) of the Section of this Lease entitled "ASSIGNMENT AND
SUBLETTING".
10. OPTIONS TO EXPAND
(A) Lessor grants to Lessee two (2) options to expand the Demised
Premises during the term of this Lease. The first option to expand the Demised
Premises (the "First Expansion Option") shall apply at Lessee's election either
to (i) the premises currently leased by Phillips Petroleum Company containing
approximately 8,548 square feet of rentable area on the seventh (7th) floor of
the Building (the "Minimum Area"), or (ii) the Minimum Area plus the premises
currently leased to Fiat Washington, Inc. containing approximately 3,347 square
feet of rentable area contiguous to the Minimum Area on the seventh (7th) floor
of the Building (the Minimum Area and the additional premises being referred to
as the "Expanded Area"). Either the Minimum Area or the Expanded Area as
selected by Lessee shall hereinafter be referred to as the "Expansion Space
One". The Minimum Area and the Expanded Area are outlined on Exhibit A-2
attached hereto and made a part hereof. The second option to expand the Demised
Premises (the "Second Expansion Option") shall apply to space on the seventh
(7th) floor of the Building, having a rentable area of approximately 2,399
square feet (said area being hereinafter referred to as the "Expansion Space
Two"). Expansion Space Two is roughly indicated on Exhibit A-3 attached hereto
and made a part hereof. Expansion Space One and the Expansion Space Two, are
hereinafter sometimes, singularly or collectively, referred to as "Expansion
Space. " Lessee's entitlement to each option to expand shall be conditioned upon
Lessee exercising the applicable option to expand as set forth below. If Lessee
shall be in Material Default under this Lease either on the date Lessee notifies
Lessor of its intent to exercise the applicable option to expand or at any time
thereafter up to and including the commencement date of the term of this Lease
with respect to the applicable Expansion Space, then the option to expand the
Demised Premises with regard to the applicable Expansion Space shall become null
and void and of no further force and effect.
(B) (i) Lessee may exercise the First Expansion Option only by
delivering written notice to Lessor, not later than April 1, 1998, nor earlier
than October 1, 1997, specifying (i) its exercise of the First Expansion Option,
and (ii) stating whether the Minimum Area or the Expanded Area is to be the
space defined as Expansion Space One. If Lessee timely and properly gives notice
of its exercise of this First Expansion Option, the commencement date of this
Lease with regard to the Expansion Space One, and the date Lessor shall deliver
possession of the Expansion Space One to Lessee, shall be April 1, 1999 (the
"Expansion Space One Lease Commencement Date"). In the event Lessor is unable to
deliver possession of the Expansion Space One to Lessee by April 1, 1999,
Lessor, its agents and employees, shall not be liable or (i) Lessee shall accept
the applicable Expansion Space, as part of the Demised Premises, in its then "as
is" condition, existing on the date that possession of the applicable Expansion
Space is delivered to Lessee by Lessor, without Lessor being required to
undertake any demolition, removals, alternations, improvements, decorations,
repairs or modifications of that Expansion Space, except that Lessor shall take
such steps as reasonably necessary to ensure that building standard services
specified in the Section of this Lease entitled "SERVICES AND UTILITIES" are
readily available to that Expansion Space, that that Expansion Space is fit out
to a condition no less than building standard condition as specified in Exhibit
B to this Lease, and that base building fire and life safety systems of the
Building are sufficiently in compliance with applicable local codes and
ordinances such that Lessee may obtain a certificate of occupancy for use of
that Expansion Space for Lessee's business purposes and that Lessee may obtain
all necessary permits and licenses to permit Lessee to make Alterations to the
Expansion Space, which Alterations by their nature fall generally within the
scope and kind of building standard improvements identified in Exhibit B to this
Lease.
(ii) The term of the I-ease with respect to the Expansion
Space One shall commence on the Expansion Space One Lease Commencement Date, and
said term shall be coterminous with the initial term of this Lease and any
extension thereof duly exercised by Lessee; the term of the Lease with respect
to the Expansion Space Two shall commence on the Expansion Space Two Lease
Commencement Date, and said term shall be coterminous with the term of this
Lease as duly extended by Lessee.
(iii) Lessee shall pay to Lessor, as the initial monthly rent
for the Expansion Space One (hereinafter "Expansion Space One Monthly Rent"), an
amount equal to one-twelfth (1/12th) of the product of the number of square feet
of rentable area attributable to the Expansion Space One multiplied by one
hundred percent (100%) of the Net Effective Market Rental Rate projected to be
in effect as of the Expansion Space One Commencement Date and further to pay
Expansion Space One Monthly Rent to Lessor with Monthly Rent; Lessee shall pay
to Lessor, as the initial monthly rent for the Expansion Space Two ("Expansion
Space Two Monthly Rent"), an amount equal to one-twelfth (1 / l2th) of the
product of the number of square feet of rentable area attributable to the
Expansion Space Two, multiplied by one hundred percent (100%) of the Net
Effective Market Rental Rate projected to be in effect as of the Expansion Space
Two Commencement Date and further to pay Expansion Space Two Monthly Rent to
Lessor with Monthly Rent. If Lessor and Lessee cannot reach agreement on the Net
Effective Market Rental Rate within sixty (60) days after the date Lessor
receives Lessee's notice of election to exercise the applicable Expansion
Option, Net Effective Market Rental Rate for the applicable Expansion Space
shall be determined in accordance with the procedure set forth in Subsection (C)
of the Section of this Lease entitled "OPTION TO EXTEND." Net Effective Market
Rental Rate shall take into account that (i) any such Monthly Rent of an
Expansion Space shall be subject to periodic escalation during the term of this
Lease as provided in Subsection (C)(vii) below of this Section, and (ii) Lessee
shall be paying to Lessor with regard to such Expansion Space additional rent
arising under the provisions of the Section of this I-ease entitled "OPERATING
EXPENSES, OPERATING COSTS AND REAL ESTATE TAXES" and that the calendar year
fixed as the Base Year for the calculations under that Section of the Lease with
regard to the applicable Expansion Space shall be the calendar year in which the
appropriate Commencement Date of this Lease with regard to that Expansion Space
occurs.
(iv) Lessee shall commence to pay Expansion Space One Monthly
Rent, in advance, from and after the Expansion Space One Commencement Date.
(v) Lessee shall commence to pay Expansion Space Two Monthly
Rent, in advance, from and after the Expansion Space Two Commencement Date.
(vi) Lessee shall commence to pay, with regard to the
applicable Expansion Space, additional rent arising under the provisions of the
Section of this Lease entitled "OPERATING EXPENSES, OPERATING COSTS AND REAL
ESTATE TAXES" as of the applicable Expansion Space Commencement Date, except
that the calendar year fixed as the Base Year for the purposes of making the
calculations under that Section shall be, with regard to the applicable
Expansion Space, the calendar year in which the appropriate Commencement Date
fixed under the applicable provisions of Subsection (B) above occurs. The
percentages of Lessee's proportionate shares of Operating Expenses, Operating
Costs and Real Estate Taxes with regard to the applicable Expansion Space shall
be determined by comparing the applicable rentable area of the Expansion Space
in question to the stated rentable area of the office spaces of the Building or
the stated rentable area of the office and retail spaces of the Building as
given in that Section of this Lease.
(vii) During the initial term of this Lease, each of Expansion
Space One Monthly Rent and Expansion Space Two Monthly Rent as initially fixed
shall be subject to adjustment and increase as and when Monthly Rent is subject
to adjustment pursuant to the provisions of Section of this Lease entitled
"ANNUAL ESCALATION OF MONTHLY RENT," and in accordance with the formula fixed
therein for increase and escalation of Monthly Rent, provided that any such
increase in either Expansion Space One Monthly Rent or Expansion Space Two
Monthly Rent shall be abated during the period from the Expansion Space One
Commencement Date or the Expansion Space Two Commencement Date, as applicable,
through the last day of the calendar month that is twelve (12) full calendar
months following the applicable Commencement Date. During the Extension Period,
each of Expansion Space One Monthly Rent and Expansion Space Two Monthly Rent
shall be subject to adjustment and increase by the prevailing mechanism for
effectuating an escalation of Monthly Rent agreed upon by Lessor and Lessee, or
as otherwise determined pursuant to the provisions of Subsection (C) of the
Section of this Lease entitled "OPTION TO EXTEND".
(viii) All rent accruing or related to any Expansion Space,
including but not limited to Expansion Space One Monthly Rent, Expansion Space
Two Monthly Rent and any additional rent attributable thereto, shall be treated
as part of rent due and owing by Lessee to Lessor under this Lease.
(ix) All other terms and conditions of this Lease shall apply
to each Expansion Space, except as the same are specifically modified by the
mutual written agreement of Lessor and Lessee, with the applicable Expansion
Space being deemed to become and be treated as part of the Demised Premises from
and after the applicable Expansion Space Commencement Date.
(D) If Lessee duly and properly exercises the option to terminate the
term of this Lease as provided in the Section of this Lease entitled "OPTION TO
TERMINATE", then Lessee by giving such notice of its election to terminate shall
be deemed to have waived thereafter any further rights under this Section.
Additionally Lessee shall be obligated to pay to Lessor as consideration for the
right to exercise such right of termination with regard to any Expansion Space
leased by Lessee pursuant to this Section of the Lease, a termination payment
calculated as provided in Subsection (E) of the Section of this Lease entitled
"OPTION TO TERMINATE" Such termination payment shall be due and payable to
Lessor with the Termination Payment provided for in that Section of this Lease.
(E) Lessor shall have prepared an addendum setting forth the terms and
conditions for Lessee's leasing of the applicable Expansion Space. Thereafter
Lessor and Lessee agree in good faith to proceed to diligently negotiate and
execute such addendum with intent of having such addendum executed by Lessor and
Lessee within sixty (60) days after the date Lessor and Lessee agree upon the
business terms for the leasing of the applicable Expansion Space, or
alternatively if applicable the date that the brokers present their
determinations of Net Effective Market Rental Rate applicable to that Expansion
Space.
(F) As appropriate, when Lessor delivers possession of an Expansion
Space to Lessee, Lessor and Lessee shall execute a document in the form of the
Declaration, attached hereto as Exhibit D-2, which shall specify the Expansion
Space One Commencement Date, or a document in the form of the Declaration,
attached hereto as Exhibit D-3, which shall specify the Expansion Space Two
Commencement Date.
In each case, execution of such document shall not be deemed a condition to the
occurrence of the applicable commencement date of this Lease with regard to the
applicable Expansion Space.
(G) This Section of the Lease shall become null and void and of no
force and effect if Lessee assigns this Lease, or has subleased at any one time
in excess of thirty percent (30%) of the area of the Demised Premises as then
lease by Lessee, to any party other than a qualified party identified in
Subsection (D) of the Section of this. Lease entitled "ASSIGNMENT AND
SUBLETTING.
11. FIRST RIGHT TO NEGOTIATE
(A) Subject to the conditions subsequently set forth in this Section of the
Lease, Lessor grants to Lessee and Lessee shall have during the term of
this Lease the first right to negotiate to lease additional spaces on the
seventh (7th) floor of the Building (each of such areas hereinafter
referred to as a "Negotiation Area"), provided that (i) Lessee is not in
Material Default of this Lease either on the date Lessee notifies Lessor of
its intent to lease the applicable Negotiation Area or at any time t
hereafter up to and including the date upon which the term of the Lease
with respect to such Negotiation Area is to commence, and (ii) Lessee shall
not have the benefit of this first right to negotiate (a) within the period
twenty four (24) calendar months prior to the calendar month in which
Lessee has the right to terminate the term of this Lease as provided in the
Section of this Lease entitled "OPTION TO TERMINATE" unless and until
Lessee waives, in a written document delivered to Lessor, Lessee's right to
terminate the term of this Lease, (b) within the period January 1, 2004
through December 31, 2006, unless and until Lessee exercises its option to
extend the term of this Lease pursuant to the provisions of the Section of
this Lease entitled "OPTION TO EXTEND", and (c) within the period January
1, 2010 through December 31, 2011.
(B) Lessee's right to exercise this first right to negotiate with
respect to any specific Negotiation Area granted to Lessee pursuant to
Subsection (A) of this Section shall be subordinate to and shall arise -only
upon the expiration of (i) the term of the lease for such Negotiation Area,
including any options to extend, held by the tenant of such Negotiation Area as
of the date first hereinabove stated, (ii) options to expand and first rights to
negotiate for such Negotiation Area, held by any tenant of the Building as of
the date of this Lease first hereinabove stated, including options to extend the
term of any lease therefor, and (iii) options to expand applicable to such
Negotiation Area, extend the term of any lease or both held by any tenant
leasing spaces on the seventh (7th) floor of the Building after the date of this
Lease first hereinabove stated (such subsequent tenant of the seventh (7th)
floor being hereinafter referred to as a "Generic Tenant"), provided that in the
case of item (iii) either such space was offered to Lessee pursuant to the
provisions of the Section of this Lease entitled "OPTIONS TO EXPAND" or such
space was first offered to Lessee pursuant to this Section of the Lease and
Lessee did not elect to exercise such option to expand, or did not elect to
exercise such first right to negotiate, or if Lessee elected to exercise such
first right to negotiate, Lessor and Lessee were unable to agree upon the
business terms under which Lessee would lease the offered Negotiation Area from
Lessor. The failure of Lessee to lease a Negotiation Area shall not serve to
permit Lessor to grant to any Generic Tenant an option to expand or a first
right to negotiate for such space which would be in conflict with or superior to
Lessee's right to such space under the Section of this Lease entitled "OPTIONS
TO EXPAND," including any date of delivery of an Expansion Space as specified in
that Section of this Lease. Any first right to negotiate for any space on the
seventh (7th) floor of the Building granted to any Generic Tenant shall be
inferior to Lessee's rights to such space as Negotiation Area under this Section
of the Lease. Lessor advises Lessee that, as of the date of this Lease first
hereinabove stated, no tenant in the Building as of the date of this Lease has
any rights under paragraphs (i) and (ii) above of this Subsection with regard to
any spaces on the seventh (7th) floor of the Building.
(C) Provided that all other superior rights for a Negotiation Area have
expired or been waived, Lessor shall advise Lessee, at such time as Lessor
determines that a Negotiation Area is or will become available for leasing to
Lessee, of the availability of such Negotiation Area and the business terms upon
which Lessor is willing to lease that Negotiation Area to Lessee. Lessor may not
give such notice of availability more than twelve (12) full calendar months
prior to the scheduled date of expiration of any then existing lease for that
Negotiation Area. Within fifteen (15) business days after receipt of Lessor's
notice, Lessee shall deliver written notice to Lessor indicating whether Lessee
desires to lease such Negotiation Area or not. If Lessee indicates its desire to
lease an offered Negotiation Area, Lessor and Lessee shall seek to negotiate the
business terms upon which Lessee would lease such Negotiation Area from Lessor.
The business terms offered by Lessor related to the leasing of a Negotiation
Area shall provide that (i) the monthly rent attributable to such Negotiation
Area shall be based upon one hundred percent (100%) of the Net Effective Market
Rental Rate for such Negotiation Area projected to be applicable as of the
commencement date of this Lease with regard to such Negotiation Area, such Net
Effective Market Rental Rate for such Negotiation Area being determined based
upon the formula and procedure set forth in Subsection (C) of the Section of
this Lease entitled "OPTION TO EXTEND", substituting the Negotiation Area for
the Demised Premises as then defined, (ii) any such monthly rent of a
Negotiation Area shall be subject to periodic escalation during the term of this
Lease as provided in the Section of this Lease entitled "ANNUAL ESCALATION OF
MONTHLY RENT", (iii) Lessee shall be paying to Lessor with regard to such
Negotiation Area additional rent arising under the provisions of the Section of
this Lease entitled "OPERATING EXPENSES, OPERATING COSTS AND REAL ESTATE TAXES"
and that the calendar year fixed as the Base Year for the calculations under
that Section of the Lease with regard to the Negotiation Area shall be the
calendar year in which the commencement date of this Lease with regard to that
Negotiation Area occurs, (iv) Lessee shall accept the applicable Negotiation
Area as part of the Demised Premises, in its then "as is" condition, existing on
the date that possession of the Negotiation Area is delivered to Lessee by
Lessor, without Lessor being required to undertake any demolition, removals,
alternations, improvements, decorations, repairs or modifications of that
Negotiation Area, except that Lessor shall take such steps a reasonably
necessary to ensure that building 'standard services specified in the Section of
this Lease entitled "SERVICES AND UTILITIES" are readily available to that
Negotiation Area, that that Negotiation Area is fit out to a condition no less
than building standard condition as specified in Exhibit B to this Lease, and
that base building fire and life safety systems of the Building are sufficiently
in compliance with applicable local codes and ordinances such that Lessee may
obtain a certificate of occupancy for use of that Negotiation Area for Lessee's
business purposes, and (v) the term of this Lease with regard to such
Negotiation Area shall commence no later than sixty (60) days after the later of
(a) the date that the Negotiation Area is vacated by any existing tenant or
tenants, or (b) the date that agreement is reached on all of the salient
business terms for the leasing of the Negotiation Area by Lessee. The term of
this Lease with regard to any Negotiation Area leased by Lessee shall be
coterminous with the term of this Lease with regard to the Demised Premises. If
Lessor and Lessee are unable to agree upon the amount of the Net Effective
Market Rental Rate for the leasing of the offered Negotiation Area pursuant to
this Lease within thirty (30) business days after the date of receipt by Lessor
of Lessee's notice of election to lease a Negotiation Area offered by Lessor,
then the determination of Net Effective Market Rental Rate for that Negotiation
Area shall be made by a three (3) broker panel in accordance with the procedure
set forth in Subsection (C) of the Section of this Lease entitled "OPTION TO
EXTEND." Any determination of Net Effective Market Rental Rate with regard to a
Negotiation Area shall take into account that Lessee's leasing of the
Negotiation Area shall be subject to the provisions of items (ii) through (v)
above of this Subsection.
(D) Lessor and Lessee specifically recognize that the space described as
Expansion Space Two became available for leasing in 1996, that such space was
offered to Lessee for leasing in conjunction with this transaction as part of
the Demised Premises, and that Lessee declined to lease such space. Lessor is
specifically granted the right to lease such space to a Generic Tenant or to any
existing tenant of the Building provided that by such transaction Lessee's
rights to such space as and when provided for under the Section of this Lease
entitled "OPTIONS TO EXPAND" are preserved without variance. Furthermore Lessee
confirms that the space on the seventh (7th) floor of the Building, containing
approximately 3,063 square feet of rentable area, currently identified as Suite
725 and previously leased to the Thomas Cook Partnership, has become available
to Lessor, that Lessor has offered this space to Lessee in conjunction with this
transaction, and that Lessee has elected not to lease such space from Lessor.
Lessor is specifically granted the right to lease such space to a Generic Tenant
or to another tenant of the Building, with rights to extend the term of any
lease or the right to expand their respective leased premises to include the
space identified as. a Negotiation Area have expired, been earlier terminated or
been waived, provided that if and when such space again becomes available to
Lessor for leasing (after the expiration or waiver of all rights granted to
other tenants of the Building in accordance with the provisions of Subsection
(A) of this Section) that Lessee shall be offered such space as a Negotiation
Area pursuant to this Section of the Lease.
(E) In the event Lessee does not deliver a written notice of exercise
of its rights to such Negotiation Area, or Lessor and Lessee are unable to reach
agreement upon the business terms and conditions for the leasing of such
Negotiation Area(s) within said thirty (30) day period, then Lessee's first
right to negotiate with respect to such Negotiation Area shall be null and void
for the remaining term of this Lease. Furthermore, in no event shall Lessor be
required to negotiate for the leasing of only a portion of any Negotiation Area
offered by Lessor.
(F) If Lessee duly and properly exercises the option to terminate the
term of this Lease as provided in the Section of this Lease entitled "OPTION TO
TERMINATE", then Lessee by giving such notice of its election to terminate shall
be deemed to have waived thereafter any further rights under this Section, and
Lessor shall no longer be obligated to afford to Lessee the first right to
negotiate for any Negotiation Areas that subsequently become available after the
date of Lessee's notice of its election to terminate this Lease. Additionally
Lessee shall be obligated to pay to Lessor as consideration for the right to
exercise such right of termination with regard to any Negotiation Area leased by
Lessee a termination payment calculated as provided in Subsection (E) of the
Section of this Lease entitled "OPTION TO TERMINATE." Such termination payment
shall be due and payable to Lessor with the termination Payment provided for in
that Section of this Lease.
(G) Lessor shall have prepared an addendum setting forth the terms and
conditions for Lessee's leasing of a Negotiation Area. Thereafter Lessor and
Lessee agree in good faith to proceed to diligently negotiate and execute such
addendum with intent of having such addendum executed by Lessor and Lessee
within sixty (60) days after the date Lessor and Lessee agree upon the business
terms for the leasing of that Negotiation Area.
(H) At the time Lessor delivers the Negotiation Area to Lessee, Lessee
and Lessor shall also enter into a document similar in form and substance to the
document attached to this Lease as Exhibit D-4, noting the date of delivery of
Negotiation Area to Lessee and related matters. Execution of a document in the
form of the document appearing as Exhibit D-4 shall not be deemed a condition to
the occurrence of the commencement date of this Lease with regard to that
Negotiation Area.
(I) This Section of the Lease shall become null and void and of no
further force and effect if Lessee assigns this Lease or has subleased at any
one time in excess of thirty percent (30%) of the Demised Premises, to any party
other than a qualified party identified in Subsection (D) of the Section of this
Lease entitled "ASSIGNMENT AND SUBLETTING. "
12. ASSIGNMENT AND SUBLETTING
(A) Lessee may not assign or otherwise transfer this Lease, or sublet
(including permitting occupancy or use by another party) the Demised Premises,
or any part thereof, without first giving Lessor thirty (30) days prior written
notice of Lessee's intention to assign this Lease or sublet all or a portion of
the Demised Premises and obtaining Lessor's prior consent to Lessee's intention
to assign or sublet. Notwithstanding the foregoing, Lessee will not be required
to give Lessor prior notice of any occupancy by a Permitted Licensee (as
hereinafter defined), unless such occupancy when viewed in light of Lessee's
then current overall pattern of subleasing will cause Lessee to be then
occupying for its regular business operations (and exclusive of any area
occupied by any Permitted Licensee) less than seventy percent (70%) of the then
rentable area of the Demised Premises. Where Lessee is required by the foregoing
to give prior notice of Lessee's intention to sublet, Lessee shall also identify
the area of the Demised Premises Lessee intends to sublet. Within thirty (30)
days after receipt of said notice of intent to assign or sublet, Lessor shall
have the option (i) to elect to terminate the Lease, if Lessee desires to assign
this Lease, (ii) to terminate the Lease with regard to that portion of the
Demised Premises which Lessee intends to sublet, if Lessee will then be
subletting to all parties, including all Permitted Licensees, in excess of
thirty percent (30%) of the Demised Premises, or (iii) to sublet from Lessee
that portion of the Demised Premises Lessee intends to sublet for the term of
years that Lessee desires to sublet, at the rate and upon the same terms and
conditions as Lessee is leasing the Demised Premises from Lessor if Lessee will
then be subletting to all parties, including all Permitted Licensees, in excess
of thirty percent (30%) of the Demised Premises. Lessor may exercise the
applicable option only by giving Lessee written notice of its election to
exercise the option within said thirty (30) day period.
Where Lessor fails to timely exercise any applicable option to
terminate or sublet as provided above, or Lessor affirmatively consents to
Lessee's intention to assign this Lease or sublet space within the Demised
Premises, then Lessee may thereafter assign this Lease or sublet the identified
portion of the Demised Premised, but shall be required to obtain Lessor's prior
written consent to (i) any assignee or any sublessee (which consent to the
proposed assignee or sublessee may not be unreasonably withheld, contingent upon
the proposed assignee or sublessee being similar in kind and character to Lessee
and financially reliable), and (ii) the form of documentation implementing such
assignment or subletting.
Lessor shall have thirty (30) days after receipt of a request from
Lessee to approve or disapprove a proposed assignee or sublessee. If Lessor
shall fail to approve any assignee or sublessee within said thirty (30) day
period, then such assignee or sublessee shall be deemed approved by Lessor.
Lessor shall have thirty (30) days after receipt of a proposed assignment
agreement or sublease from Lessee, to approve or disapprove such instrument. If
Lessor shall fail to approve or disapprove such instrument, then such instrument
shall be deemed approved by Lessor.
In the event that Lessor has approved a proposed assignee or proposed
sublease, and approved the instrument accomplishing an assignment of this Lease
or a sublease of the identified space in the Demised Premises, and Lessee
thereafter fails to present to Lessor any assignment agreement or any sublease
(including occupancy agreement), fully executed by the parties hereto, within
one hundred eighty (180) days after the date that Lessor is deemed to have
approved Lessee's intention to assign or sublet, Lessee may not assign this
Lease or sublet (or permit the occupancy of) all or any portion of the Demised
Premises to said party without again affording Lessor the option to terminate or
sublease as afforded in the first paragraph of this subsection (A).
Notwithstanding the foregoing concerning the need for Lessee to obtain
Lessor's prior consent to Lessee's intent to sublet (or permit the occupancy of)
a portion of the Demised Premises, and Lessor's prior consent to a proposed
sublessee (or occupant), Lessee shall not be required to obtain Lessor's consent
to permit a party identified as a Permitted Licensee to use and occupy (but not
sublease) any portion of the Demised Premises, unless Lessee would then at that
time be subleasing (including permitting occupancy of) in excess of thirty
percent (30%) of the then rentable area of the Demised Premises. If Lessee would
be subletting to such party or would then be subleasing more than thirty (30%)
of the then rentable area of the Demised Premises, the provisions of this
subsection related to the need for Lessee to obtain Lessor's various consents
will apply. For the purposes of this Lease, a "Permitted Licensee" shall mean a
retired officer or employee of Lessee, any party that is a client or a
consultant of Lessee or an officer or employee thereof, and any party that is a
client or consultant of any client or consultant or an officer or employee
thereof, which party uses or occupies, but does not sublease, a portion of the
Demised Premises either in conjunction with or to support the carrying on of
Lessee's regular business or as a result of an ongoing business relationship
between Lessee and any client or consultant of Lessee.
WhereLessor is permitted to terminate or, as applicable, sublet, then, if
Lessor does so elect to terminate or sublet, the effective date of
termination, or the effective date of commencement of the sublease to
Lessor, shall be mutually agreed upon by Lessor and Lessee. If the parties
cannot agree upon a termination date or upon a sublease commencement date,
the termination date or sublease commencement date shall be the date that
is sixty (60) days after the date Lessor received the notice that Lessee
desired to assign the Lease or sublet all or any portion of the Demised
Premises. Upon termination, all of the rights and obligations of Lessor and
Lessee under the terms of this Lease shall be terminated, or terminated
with regard to that portion of the Demised Premises that Lessee notified
Lessor that Lessee desired to sublet, except that Lessee shall continue to
be obligated to pay rent and all other charges for the Demised Premises
which accrue to the date of termination.
(B) Lessee shall reimburse to Lessor, as additional rent, all costs and
expenses, including reasonable attorney's fees in an amount not to exceed Two
Thousand and 00/100ths Dollars ($2,000.00), which Lessor incurs by reason of or
in connection with any assignment, sublease, or leasehold mortgage proposed or
granted by Lessee (whether or not permitted under this Lease), and all
negotiations and actions with respect thereto, such additional rent to be due
and payable within fifteen (15) days of receipt of a statement of such costs and
expenses from Lessor.
(C) No assignment of this Lease shall be effectuated by operation of law or
otherwise without the prior written consent of Lessor. For the purposes of
this Lease, (i) the transfer of fifty percent (50%) or more of the
ownership interest of Lessee or the transfer and/or issuance of more than
fifty percent (50%) of the authorized voting stock of Lessee, if Lessee is
not a publicly held corporation, to any persons or entities that are not
owners or stockholders of Lessee on the date of execution of this Lease, or
(ii) the sale, transfer or other conveyance of all or substantially all of
Lessee's assets, shall be deemed an assignment of this Lease thereby giving
Lessor the right to consent to such transaction and/or the option to
terminate this Lease as provided above. Notwithstanding the foregoing, in
the event of a transfer under (i) above, or a sale, transfer or other
conveyance under (ii) above, and where Lessee, in the case of (i) above or
the new entity or its controlling partner in the case of (ii) above, can
demonstrate to Lessor to Lessor's reasonable satisfaction that such party's
ability to fulfill its obligations under the Lease immediately after such
event is substantially equal to or better than Lessee's ability to fulfill
those obligations during the full calendar year immediately preceding such
event under (i) or (ii), then, provided the foregoing financial test has
been satisfied, Lessor shall not have the right to terminate this Lease,
but Lessee shall be obligated to notify Lessor of such transfer, or such
sale, transfer or conveyance and shall be required to obtain Lessor's
consent as otherwise provided for in this Lease with regard to approval of
parties who may become assignees of this Lease or sublessees of all or a
portion of the Demised Premises.
(D) Notwithstanding the foregoing provisions of this Section, Lessee
has the right to assign this Lease or sublet the Demised Premises in whole or in
part to any subsidiary or affiliate upon giving Lessor ten (10) days prior
written notice of such assignment or subleasing. Such an assignment or sublease
shall not trigger Lessor's right to terminate the Lease or subsequently require
Lessor's consent to any assignee or sublessee. A "subsidiary" of Lessee shall
mean any corporation not less than fifty percent (50%) of whose outstanding
voting stock shall, at the time, be owned, directly or indirectly, by Lessee. An
"affiliate" of Lessee shall mean any corporation which, directly or indirectly,
controls or is controlled by or is under common control with Lessee. For purpose
of the definition of "affiliate," the word "control" (including "controlled by"
and "under common control with"), as used with respect to any corporation,
partnership, or association, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policy of a
particular corporation, partnership or association, whether through the
ownership of voting securities or by contract or otherwise.
(E) Notwithstanding any other provision of this Lease to the contrary,
Lessee shall have no right to transfer, assign, sublet, enter into license or
concession agreements, or mortgage or hypothecate this Lease or Lessee's
interest in the Demised Premises or any part thereof to a foreign government or
to any individual or entity whereby enforcement of the obligations of the Lessee
under this Lease might be limited by sovereign immunity. Any such attempted
transfer, assignment, subletting, license or concession agreement, mortgage or
hypothecation shall be void and confer no rights on such foreign government or
individual or entity.
(F) The consent by Lessor to any assignment or subletting to any party
other than Lessor, including a subsidiary or affiliate, shall not be construed
as a waiver or release of Lessee from the terms of any covenant or obligation
under this Lease. Lessor's collection or acceptance of rent from any assignee of
Lessee shall not constitute a waiver or release of Lessee of any covenant or
obligation contained in this Lease, nor shall any such assignment or subletting
be construed to relieve Lessee from giving Lessor said thirty (30) days notice
or from obtaining the consent in writing of Lessor to any further assignment or
subletting. In the event that Lessee is in default of any term or provision of
this Lease, Lessee hereby assigns to Lessor the rent due from any subtenant of
Lessee and hereby authorizes and directs each such subtenant, upon notice from
Lessor, to pay said rent directly to Lessor, the collection or acceptance of
rent from any subtenant in such instance not to constitute a waiver or release
of Lessee of any covenant or obligation contained in this Lease.
(G) Lessee may not mortgage or encumber this Lease without the prior
written consent of Lessor.
13. ALTERATIONS
(A) Without first obtaining Lessor's prior written consent as
hereinafter provided, Lessee shall make no alterations, installation, additions
or improvements in or to the Demised Premises or the Building, except that
Lessee may make changes of a cosmetic nature to the tenant improvements within
the Demised Premises (e.g. painting, installation of wall covering, installation
of carpeting, etc.), but only where such changes by their nature will not impact
the base building structure or base building systems or will not be readily
apparent and visible from the exterior of or the common areas of the Building,
(hereinafter collectively such alterations, installations, additions or
improvements, other than cosmetic changes, being called "Alterations"). Consent
by Lessor to Alterations shall not be unreasonably withheld, except that Lessor
may withhold its consent for any reason with regard to requested Alterations by
Lessee which could, in Lessor's reasonable opinion, (i) adversely affect the
structure of the Building or the mechanical, plumbing or electrical systems of
the Building, (ii) cause the imposition of additional costs or obligations on
Lessor, including but not limited to adversely affecting the insurance rating of
the Building, or (iii) affect the quiet enjoyment of other tenant(s) of the
Building. For all Alterations, Lessee, at its sole cost and expense, shall
provide Lessor with a copy of the original or revised full floor mechanical and
electrical plans for the floor or floors on which the Alterations are to be
made, revised by Lessee's architect and Lessor's engineers to show Lessee's
proposed Alterations. In the event Lessor becomes aware of any Alterations that
were made by Lessee without the written consent of Lessor, then Lessor shall
promptly inform Lessee of such in writing and Lessor shall inspect such
Alterations. Lessee shall then have thirty (30) days to provide Lessor with
architectural, mechanical and electrical plans, as applicable, supporting such
Alterations and to receive Lessor's consent to the Alterations, which consent
shall not be unreasonably withheld. However, Lessor may condition such consent
upon Lessee making certain corrections or modifications to such Alterations to
bring the Alterations into compliance with Building standards or applicable
codes. If Lessee makes any Alterations and does not obtain Lessor's consent to
such Alterations, or if Lessee refuses to timely make corrections or
modifications to Alterations previously made by Lessee that are subsequently
discovered by Lessor, then Lessor shall have the right, but not the obligation,
to require that such Alterations be removed or modified. If Lessee fails to
remove or modify the Alterations as required by Lessor within thirty (30) days
after Lessee's receipt of Lessor's written request, Lessor may correct or remove
the same, and Lessee shall be liable for any and all reasonable expenses
incurred by Lessor in the performance of this work. All Alterations shall be
made at Lessee's sole expense, at such times and in such manner as Lessor may
designate, and only by such contractors or mechanics as are approved in writing
by Lessor. All Alterations and other work undertaken by Lessee and by any
contractor or mechanic shall be in accordance with construction rules and
regulations promulgated from time to time by Lessor. Lessor reserves the right
to require that Alterations be performed at a time other than during normal
business hours if Lessor, in its reasonable discretion, determines that the
performance of such Alterations is likely to disturb, disrupt or otherwise
inconvenience other tenant(s) or occupants(s) of the Building (such as, but not
limited to, those Alterations requiring core drilling, hammering, etc. Approval
of contractors or mechanics by Lessor, which approval may not be unreasonably
withheld, shall be based upon the contractors or mechanics being properly
licensed, their financial posture, experience and past job performance.
(B) Alterations proposed by Lessee and approved by Lessor during the
period from the Commencement Date 1 to Rent Commencement Date 2 are hereinafter
called the "Initial Alterations, ' which Initial Alterations shall also be
deemed "Alterations" for all purposes under this Lease, except as otherwise
provided in this Subsection.
(i) Subject to the grant and application of the Allowance (as
hereinafter defined) by Lessor as herein provided, the Initial Alterations shall
be undertaken by Lessee at its sole cost and expense. Lessee, at its sole cost
and expense, shall cause its architect to prepare, on Lessee's behalf, an
initial set of architectural working drawings for the Initial Alterations (the
"Architectural Drawings"), which Architectural Drawings shall reflect in
sufficient detail Lessee's space plans and specifications for the Initial
Alterations to be made in or to the Demised Premises in connection with Lessee's
initial occupancy of the Demised Premises, and shall include among other things
dimensioned partition plans, electrical, data and telephone requirements,
reflected ceiling plan and lighting requirements, ceiling details, Lessee's
requirements and specifications for additional HVAC, if any, interior office
door requirements, environmental and electrical specifications and requirements
for all of Lessee's equipment, fixtures and kitchen appliances, its millwork
details and other millwork requirements, final finish selections and its
complete and detailed space plan drawings for the Initial Alterations for the
Demised Premises. Lessee shall have the Architectural Drawings delivered to
Lessor for the review and approval of Lessor and Lessor's architect or
supervising engineer. Within ten (10) business days following Lessor's receipt
of the Architectural Drawings, Lessor shall review and approve in writing the
Architectural Drawings and finish selections. In the event that Lessor fails to
review and approve the Architectural Drawings within the ten (10) business day
period, then Lessor's approval of the same shall be deemed given. Lessor's
approval may not be unreasonably withheld or delayed, but may be conditioned in
the reasonable discretion of Lessor. Any changes or revisions to the
Architectural Drawings made at the request of Lessor shall be made by Lessee's
architect at Lessee's sole cost and expense, which costs and expenses shall be
paid out of the Allowance. Lessee shall retain and enter into a separate
agreement with the engineering firm of General Engineering, Inc. (the
"Engineer") to prepare a set of mechanical, electrical and plumbing engineering
drawings for Initial Alterations for the Demised Premises (the "Engineering
Drawings") at Lessee's sole cost and expense. All revisions to the Engineering
Drawings, including those caused by Lessee's revisions to the Architectural
Drawings once approved by Lessor, shall be made by the Engineer at Lessee's sole
cost and expense, which costs and expenses shall be paid out of the Allowance.
Lessee shall submit the Engineering Drawings (and all revisions thereto) to
Lessor for prior review and written approval by Lessor, its architect and
supervising engineer. Lessor shall respond to the Engineering Drawings (and any
revisions thereto) within ten (10) business days of its receipt thereof. In the
event that Lessor fails to review and approve the Engineering Drawings within
the ten (10) business day period, then Lessor's approval of the same shall be
deemed given. Lessor's approval may not be unreasonably withheld or delayed, but
which may be conditioned in Lessor's reasonable discretion. Upon receipt of
Lessor's approval of the Engineering Drawings, Lessee shall cause its architect
to affix its architectural stamp to four (4) sets of the Architectural Drawings
for Lessee's use in filing its building permit application for the Initial
Alterations.
(ii) Prior to the commencement of construction, installation or fabrication of
the Initial Alterations, Lessee shall furnish to Lessor copies of any and
all building or other construction permits required for the performance of
the Initial Alterations. Upon completion of its Initial Alterations, Lessee
shall also furnish to Lessor a complete set of "as built" drawings for the
Demised Premises. The Initial Alterations shall be performed by one (1) of
the following general contractors to be retained by Lessee pursuant to a
separate agreement ("Lessee's General Contractor"): Hitt Construction,
Inc., G & F Associates, Inc., Turner Construction Company, and Clark
Construction Company. Lessee shall manage the construction process of all
Initial Alterations directly or hire at its sole cost and expense a
construction manager, reasonably acceptable to Lessor. All Initial
Alterations shall be undertaken by Lessee and Lessee's General Contractor
in accordance with the construction rules and regulations promulgated by
Lessor from time to time. On the Initial Alterations, Lessee recognizes
that Lessor shall incur substantial oversight obligations, and thus agrees
to pay to Lessor a management oversight fee, billed at an hourly rate,
which in the aggregate may not exceed Three Thousand and 00/100ths Dollars
($3,000.00). Any construction management fees and the management oversight
fee shall be paid from the Allowance.
(iii)Lessee hereby designates and authorizes (the "Lessee's Designee") to
receive all approvals from Lessor, to make all decisions and grant all
approvals on behalf of Lessee with respect to design, installation and
construction of the Initial Alterations, and to furnish to Lessor or its
architect such information as they may request or require in connection
with the review and approval of each of the Architectural Drawings, the
finish selections, and the Engineering Drawings. Lessor may contact
Lessee's Designee at the following address and numbers:
[To be designated later].
Tel. No. _____________________________
Fax No. _____________________________
In the event of the inability or unwillingness of Lessee's Designee to act on
behalf of Lessee hereunder, Lessee shall immediately designate a substitute
individual or individuals as Lessee's Designee to make all decisions and grant
all approvals on behalf of Lessee with respect to design, installation and
construction of the Initial Alterations.
(iv) Lessor hereby designates and authorizes Carr
Development & Construction, Inc.
(the "Lessor's Designee") to issue all approvals from Lessor, to make all
decisions and grant all approvals on behalf of Lessor with respect to design,
installation and construction of the Initial Alterations, and to furnish to
Lessee or its architect such information as they may request or require in
connection with the design and/or construction, installation or fabrication of
the Initial Alterations. Lessee may contact Lessor's Designee at the following
address and numbers:
Carr Development & Construction, Inc.
Suite 700, 1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: Kenneth F. Simmons
Tel. No. (202) 624-1700
Fax No. (202) 393-1353
In the event of the inability or unwillingness of Lessor's Designee to act on
behalf of Lessor hereunder, Lessor shall immediately designate a substitute
individual or individuals to make all decisions and grant all approvals on
behalf of Lessor with respect to design, and installation, construction and/or
fabrication of the Initial Alterations.
(v) In connection with Lessee's leasing of the Demised Premises and
construction of the Initial Alterations, Lessor shall provide to Lessee an
improvements allowance (the "Allowance") of One Million Three Hundred Thirty
Thousand Nine Hundred Twenty-Two and 00/100ths Dollars ($1,330,922.00), for (a)
the hard construction costs incurred by Lessee to construct and install its
Initial Alterations in the Demised Premises, (b) any construction related items
(including but not limited to, architectural and other consulting fees, permit
fees, computer, telephone and communications facilities, and construction
management fees), and (c) the costs of office personal property of Lessee,-
including equipment and furniture. This Allowance has been calculated at the
rate of Twenty-Nine and 50/100ths Dollars ($29.50) multiplied by the rentable
area of the Demised Premises. Up to One Hundred Thirty-five Thousand Three
Hundred Forty-eight and 00/100ths Dollars ($135,348.00) of the Allowance may be
used for the acquisition of furniture and other office personal property of
Lessee. Lessee shall submit to Lessor (but on a monthly basis only) invoices for
the costs incurred by Lessee in performing its Initial Alterations, together
with signed partial waivers and partial releases of mechanic's liens executed,
as applicable, by Lessee's architect, and by Lessee's General Contractor and the
subcontractors who performed such work, as reflected on such invoices. After
inspection and approval of the portion(s) of the Initial Alterations as
reflected by such invoices and verification of the invoices and waivers
submitted, Lessor shall pay to Lessee (or if directed in writing by Lessee or
Lessee's architect, Lessor shall pay to Lessee's General Contractor) or, as
applicable, Lessor shall reimburse to Lessee, the appropriate amounts requested
by the invoices within thirty (30) days of Lessee's request therefor. In
connection with any final disbursement of the Allowance and in addition to the
invoices and partial lien waivers and partial lien releases required above,
Lessee shall also submit to Lessor final lien releases and final lien waivers of
mechanic's liens executed, as applicable, by Lessee's architect, and by Lessee's
General Contractor and all other contractors and subcontractors which performed
the Initial Alterations, and such other documentation or information that Lessor
may reasonably require for any final disbursement of the Allowance, such as a
copy of the certificate of occupancy of the Demised Premises or a certificate of
completion of the Initial Alterations from Lessee's architect. In no event,
however, shall Lessor be obligated to reimburse Lessee for any amount in excess
of the total amount of the Allowance. Lessee shall submit all such invoices and
requests for reimbursement to Lessor on or before December 31, 1997. The
Allowance shall be used first to reimburse Lessee for all costs arising under
item (a) above. After reimbursement for those costs arising under item (a) above
in this Subsection, any remaining portion of the Allowance shall be available
for reimbursement of items arising under items (b) and (c) above in this
Subsection. After the reimbursement of all costs arising under items (a), (b)
and (c) above in this Subsection, Lessee may elect to have Lessor apply any
unused portion of the remaining Allowance to Monthly Rent next due and owing by
providing written notice of its election to Lessor on or before December 31,
1997.
(vi) Notwithstanding the foregoing of this Subsection, Lessor shall
have no obligation to credit any unused portion of the Allowance to Monthly Rent
or to reimburse Lessee for any costs under items (a), (b) and (c) of Subsection
(B)(v) above of this Section if (a) Lessee fails to submit the invoices and
requests for reimbursement to Lessor on or before December 31, 1997, or (b) if,
at the time the unused portion of the Allowance would otherwise be available
from crediting to such monetary obligation of Lessee or at the time Lessee makes
a request for reimbursement or at any time thereafter up to and including the
date Lessor makes any such reimbursement to Lessee or credit to Monthly Rent,
Lessee is in default, after the giving notice and the passage of the applicable
period to cure, of its obligation to pay Monthly Rent.
(C) All Alterations to the Demised Premises, whether made by Lessor or
Lessee, and whether at Lessor's or Lessee's expense, or the joint expense of
Lessor and Lessee, shall be and remain the property of Lessor. Any replacements
of any property or improvements of Lessor, whether made at Lessee's expense or
otherwise, shall be and remain the property of Lessor.
(D) At the expiration or earlier termination of the term of the Lease,
Lessor may elect to require Lessee to remove all or any part of the Alterations
made by Lessee subsequent to the Commencement Date, provided that Lessor, at the
time of its consent and approval of Alterations, specifies to Lessee, in
writing, that certain elements of the Alterations would have to be removed at
the expiration or earlier termination of the term of this Lease. Notwithstanding
the foregoing, if Lessor will require the removal of any of the Initial
Alternations, Lessor shall note on the Architectural Drawings and/or the
Engineering Drawings any portion or element of Initial Alterations which Lessor
will require Lessee to remove at the expiration or earlier termination of the
term of this Lease. Removal of Alterations, whether at Lessor's determination as
provided for above or at Lessee's election, shall be at Lessee's cost and
expense, and Lessee agrees, at Lessor's election, (i) to repair any damage to
the Building caused by said removal and to restore the Demised Premises to a
condition no less than the Building standard level as identified in Exhibit B,
or (ii) pay Lessor, as additional rent, for all costs incurred by Lessor to
undertake such repairs and restoration.
(E) Lessee shall remove all of Lessee's property at the expiration or
earlier termination of the Lease. In the event Lessee does not remove Lessee's
property at the expiration or earlier termination of the Lease, such property
shall become the property of Lessor.
(F) In the event Lessee fails to remove its property or the Alterations
requested to be removed by Lessor on or before the expiration or earlier
termination of the term of the Lease, then Lessor may remove such property and
Alterations from the Demised Premises at Lessee's expense, and Lessee hereby
agrees to pay to Lessor, as additional rent, the reasonable cost of such removal
together with any and all damages which Lessor may suffer and sustain by reason
of the failure of Lessee to remove the same. Lessor shall provide Lessee with
supporting invoices and related documentation reasonably evidencing such costs
of removal and of damages resulting from the same. Said amount of additional
rent shall be due and payable upon receipt by Lessee of a written statement of
costs and damages from Lessor.
14. LIENS
(A) If any mechanic's or other lien is filed against the Demised
Premises, or the Building of which the Demised Premises are a part, for work,
labor, services, or materials, done for or supplied to or claimed to have been
done or supplied to Lessee, such lien shall be discharged by Lessee, at its sole
cost and expense, within ten (10) days from the date Lessee receives written
demand from Lessor to discharge said lien, by the payment thereof or by filing
any bond required by law. If Lessee shall fail to discharge any such lien,
Lessor may, at its option, discharge the same and treat the cost thereof as
additional rent, due and payable upon receipt by Lessee of a written statement
of costs from Lessor. It is hereby expressly covenanted and agreed that such
discharge of any lien by Lessor shall not be deemed to waive or release Lessee
from its default under the Lease for failing to discharge the same.
(B) Lessee will indemnify and hold harmless Lessor from and against any
and all claims, damages and expenses incurred by Lessor, arising from any liens
placed against the Demised Premises or the Building and the land upon which it
is situated, as a result of Lessee undertaking construction work in the Demised
Premises at its own cost and under its own control and direction, or making any
Alterations to the Demised Premises.
15. MAINTENANCE BY LESSEE
(A) Lessee shall keep the Demised Premises and the fixtures and
equipment therein in clean, safe and sanitary condition, shall take good care
thereof, and shall suffer no waste or injury thereto. At the expiration or
earlier termination of the term of this Lease, Lessee shall surrender the
Demised Premises broom clean and in the same order and condition in which they
were on the Commencement Date, ordinary wear and tear and damage by the
elements, fire and other insured casualty excepted.
(B) To the extent that Lessee's use or uses of the Demised Premises or
Lessee's manner of operation creates a need or requirement under applicable
statute, ordinance or regulation of any governmental authority to modify or
alter the Demised Premises, supporting facilities, or access thereto, or the
manner of operation, maintenance and repair thereof, Lessee shall be fully
responsible for the costs to undertake such changes, and to obtain approval from
Lessor pursuant to the Section of this Lease entitled "ALTERATIONS" to undertake
such changes.
16. SIGNS AND ADVERTISEMENTS
(A) No sign, advertisement or notice shall be inscribed, painted,
affixed or displayed on any part of the outside or the inside of the Building,
except with Lessor's prior written consent and then only in such place, number,
size, color and style (i.e., Building standard lettering) as is authorized by
Lessor. If any such sign, advertisement or notice is exhibited without first
obtaining Lessor's written consent, Lessor shall have the right to remove the
same. and Lessee shall be liable for any and all expenses incurred by Lessor by
said removal, as additional rent. Notwithstanding the foregoing, Lessor
recognizes Lessee's existing signage in place related to the Original Premises
as acceptable and approved under this Subsection of the Lease.
(B) Lessor agrees to display Lessee's name on the Building directory in
the size and style of lettering used by Lessor, at Lessee's expense. Lessee may
display its name on the main entry door of the Demised Premises in Building
standard color, size and style of lettering, at Lessee's expense.
(C) Lessor shall have the right to prohibit any published advertisement
of Lessee which in its opinion tends to impair the reputation of the Building or
its desirability as a high quality office building, and, upon written notice
from Lessor, Lessee shall immediately refrain from and discontinue any such
advertisement.
17. DELIVERIES AND MOVING OF LESSEE'S PROPERTY
No furniture, equipment or other bulky matter of any description shall be
received into the Building or carried in the elevators except in the manner
and during the times approved by Lessor. Lessee shall obtain Lessor's
determination prior to moving said property into the Building. All moving
of furniture, equipment and other material within the public and common
areas in and about the Building shall be in and manner and during those
times reasonably determined by Lessor and shall be accomplished in
accordance with reasonable policies and procedures established by Lessor
from time to time uniformly applied. Lessor shall have the right to monitor
compliance by Lessee and its agents with such policies and procedures, but
Lessor who shall, however, not be responsible for any damage to such
equipment or other bulky matter, or for the charges for moving such
equipment or other bulky matter in accordance with such policies and
procedures. Lessor shall have the sole right to determine the load
capacities of the elevators of the Building and to determine if Lessee's
property can be safely transported in the elevators, applying commercially
reasonable standards that would be applied by landlords and managers of
other office buildings comparable to the Building. Lessee agrees promptly
to remove from the sidewalks adjacent to the Building any of the Lessee's
furniture, equipment or other material there delivered or deposited.
18. LESSEE'S EQUIPMENT
(A) Lessee will not install or operate in the Demised Premises any
electrically operated equipment or other machinery, other than typewriters, word
processing machines, personal desk top computers, adding machines, radios,
televisions, tape recorders, dictaphones, bookkeeping machines, copying
machines, clocks, and other business machines and equipment normally employed
for general office use which do not require high electricity consumption for
operation, without first obtaining the prior written consent of Lessor, who may
condition such consent upon payment by Lessee of additional rent as compensation
for additional consumption of electricity and/or other utility services. Such
additional rent shall be in addition to Lessee's obligations, pursuant to the
Section of this Lease entitled. "OPERATING EXPENSES, OPERATING COSTS AND REAL
ESTATE TAXES," to pay its proportionate share of increases in Operating Costs.
If any or all of Lessee's equipment requires electricity consumption in
excess of the capacity of the electrical system installed by Lessor in the
Demised Premises, all additional transformers, distribution panels and wiring
that may be required to provide the amount of electricity required for Lessee's
equipment shall be installed by Lessor at the cost and expense of Lessee. If
Lessee's equipment causes Lessee's consumption of electricity to exceed an
average of five (5) watts per rentable square foot, or if such equipment is to
be consistently operated beyond the normal Building hours of 8: 00 a. m. to 8:
00 p. in., Monday through Friday, and 9:00 a.m. to 6:00 p.m. on Saturday, Lessor
may install at its option (i) a separate electric meter for the Demised Premises
at Lessee's sole cost and expense, or (ii) a separate meter for the specific
equipment that is causing Lessee's excessive consumption of electricity at
Lessee's sole cost and expense. In the event Lessor installs a separate meter
for the Demised Premises, Lessee shall then pay the cost of electricity it
consumes as recorded by such meter directly to the electric company, and an
appropriate adjustment shall be made to Lessee's proportionate share of
Operating Costs to reflect Lessee's reduced consumption of electricity because
of such separate metering of the Demised Premises. In the event Lessor
separately meters the specific equipment, Lessee shall be billed periodically by
Lessor based upon such consumption and no adjustment shall be made to Lessee's
proportionate share of Operating Costs.
(B) Lessee shall not install any equipment of any kind or nature whatsoever
which will or may necessitate any changes, replacements or additions to, or
in the use of, the water system, heating system, plumbing system,
air-conditioning system, or electrical system of the Demised Premises or
the Building without first obtaining the prior written consent of Lessor.
Business machines and mechanical equipment belonging to Lessee which cause
noise or vibration that may be transmitted to the structure of the Building
or to any space therein to such a degree as to be objectionable to Lessor
or to any tenant in the Building shall be installed and maintained by
Lessee, at Lessee's expense, on vibration eliminators or other devices
sufficient to eliminate such noise and vibration.
(C) Lessor shall have the right to prescribe the weight and position of
all heavy equipment and fixtures, including, but not limited to, data processing
equipment, record and file systems, and safes which Lessee intends to install or
locate within the Demised Premises. Lessee shall obtain Lessor's prior review
and approval before installing or locating heavy equipment and fixtures in the
Demised Premises, and if installation or location of such equipment or fixtures,
in Lessor's reasonable opinion, requires structural modifications or
reinforcement of any portion of the Demised Premises or the Building, Lessee
agrees to reimburse Lessor, as additional rent, for any and all reasonable costs
incurred by Lessor to make such required modifications or reinforcements, and
such modifications or reinforcements shall be completed prior to Lessee
installing or locating such equipment or fixtures in the Demised Premises.
Lessee shall reimburse Lessor within thirty (30) days of receipt of any
statement setting forth those costs.
19. SERVICES AND UTILITIES
(A) From and after the Commencement Date 1 with regard to the Original
Premises, from and after Commencement Date 2 with regard to the Additional
Premises, and from and after the respective commencement date of this Lease
with regard to any other space in the Building leased by Lessee pursuant to
this Lease, Lessor shall provide the following utilities and services:
(i) Hot and cold water and lavatory supplies, it being
understood and agreed that hot and cold water shall be furnished by Lessor only
at those points of supply provided for general use of other tenants in the
Building.
(ii) Automatically operated elevator service at all times.
(iii) Cleaning and char services, as specified in Exhibit E,
after normal business hours, Monday through Friday of each week, except on the
holidays listed in subparagraph (iv) below (and with regard to the Additional
Premises, only from after that point in time at which Lessee commences to occupy
the Additional Premises for its business purposes).
(iv) Heat and air-conditioning in season, Monday through
Friday from 8:00 a.m. to 8:00 p.m., and on Saturday from 9:00 a.m. to 6:00 p.m.,
except for the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Memorial Day, Fourth of July, Labor Day, Columbus Day, Veterans
Day, Thanksgiving Day, and Christmas Day, and any other national holiday
promulgated by a Presidential Executive Order or Congressional Act. Lessor shall
provide heat and air-conditioning at times in addition to those specified in the
preceding sentence at Lessee's expense. provided Lessee gives Lessor notice
prior to 1:00 p.m. on a business day in the case of after-hours service on that
business day and prior to 3:00 p.m. on the immediately preceding business day in
the case of after-hours service on a Saturday, a Sunday or a holiday. Lessor
shall charge Lessee for said after-hours services the same rate it charges other
tenants, which is $35.00 per hour on the date of execution of this Lease. Lessor
reserves the right, in its sole discretion, to increase the hourly charge for
said after-hours service from time to time, with any such increase being
reasonably related to actual cost increases incurred by Lessor to deliver such
services, but in no event shall the rate per hour charged Lessee be more than
the rate per hour charged other tenants. In the event the same after-hours
service is also requested by other tenants of the Building in addition to
Lessee, the charge therefor to each tenant requesting such after-hours service
shall be prorated among all requesting tenants based upon the respective square
footages of each of the demised premises of the tenants requesting such
after-hours service.
(v) Maintenance, painting and electric lighting service for
all public areas and special service areas in the Building.
(vi) Security comparable to other first-class office buildings
in the city of county where the Building is located.
(vii) Electricity and proper electrical facilities to furnish
sufficient electricity for equipment of Lessee installed pursuant to the Section
of this Lease entitled, "LESSEE'S EQUIPMENT."
(B) In the event any public utility supplying energy requires, or
government law, regulation, executive or administrative order results in a
requirement, that Lessor or Lessee must reduce, or maintain at a certain level,
the consumption of electricity for the Demised Premises or Building, which
affects the heating, air-conditioning, lighting, or hours of operation of the
Demised Premises or Building, Lessor and Lessee shall each adhere to and abide
by said laws, regulations or executive orders without any reduction in rent.
(C) Lessor's inability to furnish, to any extent, these defined
services, or any cessation thereof, resulting from, but not limited to, any
causes including entry for inspections, repairs, alterations, improvements and
installations by Lessor, its agents, employees or contractors pursuant to the
Section of this Lease entitled "ENTRY FOR INSPECTIONS, REPAIRS AND
INSTALLATION," or from renovation, redecoration or rehabilitation of any area of
the Building, including the lobby, or any of the surrounding public spaces,
shall not render Lessor liable for damages to either person or property, nor be
construed as an eviction of Lessee, nor work an abatement of any portion of
rent, nor relieve Lessee from fulfillment of any covenant or agreement hereof.
Should any of the Building equipment or machinery cease to function properly for
any cause, Lessor shall use reasonable diligence to repair the same promptly,
but, except as provided for in Subsection (D) below of this Section, Lessee
shall have no claim for damages or for a rebate of any portion of rent on
account of any interruptions in any services occasioned thereby or resulting
therefrom.
(D) Notwithstanding the provisions of Subsection (C) above of this
Section, where (i) such failure to provide such services causes the Demised
Premises to be not reasonably usable for Lessee's business purposes, (ii) Lessee
substantially ceases operation of its business therein and (iii) such
circumstances continue for at least thirty (30) consecutive days following the
date on which Lessee gives Lessor written notice of such circumstances, or,
where the failure of service is a failure or electrical power to the Building,
not caused by a general power failure affecting the surrounding area, and such
circumstances continue for fifteen (15) consecutive days, then commencing on the
date which is thirty-one (31) days (or sixteen (16) days in the event of such
power failure, as applicable) after Lessor has received such notice and
continuing until the earlier of (a) the date Lessee is no longer substantially
not using the Demised Premises for the operation of its business, or (b) the
date on which the Demised Premises are again reasonably usable for Lessee's
business purposes, Lessee shall be entitled to an abatement of Monthly Rent and
additional rent arising from increases in Operating Expenses, Operating Costs,
and/or Real Estate Tax es. However, in the event Lessor denies Lessee access to
the Demised Premises during such initial thirty (30) day period (or fifteen (15)
day period, as applicable), such abatement shall also apply during such period
in which Lessee has been denied access by Lessor.
20. LESSEE'S RESPONSIBILITY FOR DAMAGE
Except as provided for in the Section of this Lease entitled, "ALL RISK
COVERAGE INSURANCE, " any and all injury, breakage or damage to the Demised
Premises or the Building to the extent caused by Lessee or its agents,
subtenants, licensees, contractors, servants, employees and visitors, or by
individuals and persons making deliveries to or from the Demised Premises shall
be repaired by Lessor at the sole expense of Lessee. Payment of the cost of such
repairs by Lessee shall be due as additional rent with the next installment of
Monthly Rent after Lessee receives a bill for such repairs from Lessor. This
provision shall not be in limitation of any other rights and remedies which
Lessor has or may have in such circumstances.
21. ENTRY FOR INSPECTIONS, REPAIRS AND INSTALLATIONS
(A) Lessee shall permit Lessor, or its agent, employees or contractors,
without notice to Lessee, to enter the Demised Premises at all reasonable times
and in a reasonable manner, without charge to Lessor or diminution of Monthly
Rent payable by Lessee, to examine, inspect and protect the Building, and, upon
one (1) day written notice, to make such repairs as in the judgment of Lessor
may be deemed necessary to maintain or protect the Building, or to exhibit the
Demised Premises to prospective tenants during the last one hundred twenty (120)
days of the term of this Lease. Lessor shall use reasonable efforts to minimize
interference to Lessee's business when making repairs, but Lessor shall not be
required to perform the repairs at a time other than during normal working
hours.
(B) In the event of an emergency, Lessor may enter the Demised Premises
without notice and make whatever repairs are necessary to protect the Building.
(C) Lessee shall permit Lessor, or its agents, employees or contractors, upon no
less than ten (10) days prior written notice to Lessee, to enter the Demised
Premises at reasonable times and in a reasonable manner, without charge to
Lessor or diminution of Monthly Rent payable by Lessee, to make installations
related to the construction of pre-occupancy tenant work being performed by
Lessor for other tenants of the Building, to make repairs, alterations and
improvements arising due to repairs, alterations and improvements to any areas
adjoining the Demised Premises, to erect, use and maintain pipes and conduits in
and through the Demised Premises, or to make installations, improvements and
repairs to utility services of the Building located in or about the Demised
Premises. Lessor shall use reasonable efforts to minimize interferences with
Lessee's business operations, and, except in an emergency, will seek to schedule
its activities so as to reasonably accommodate Lessee undertaking its normal and
ordinary business operations. If, except in the case of an emergency, Lessee's
business operations cannot be reasonably accommodated so as to permit Lessor to
undertake such work during Lessee's normal working hours, Monday through Friday,
then Lessor will undertake such work beyond those normal working hours. Lessor
shall always be permitted to undertake such work after 8:00 p.m. on weekdays,
after 6:00 p.m. on Saturdays and all day on Sundays and legal holidays
recognized under this Lease.
22. INSURANCE RATING
Lessee shall not conduct or permit to be conducted any activity, or
place any equipment or property in or about the Demised Premises that will
increase in any way the rate of All Risk Coverage insurance or other insurance
on the Building, unless consented to by Lessor. Lessor's consent may be
conditioned upon Lessee's payment of any costs arising directly or indirectly
from such increase. If any increase in the rate of All Risk Coverage insurance
or other insurance on the Building is stated by any insurance company or by the
applicable Insurance Rating Bureau to be due to Lessee's activity, equipment or
property in or about the Demised Premises, said statement shall be conclusive
evidence that the increase in such rate is due to such activity, equipment or
property. In such case, Lessor shall notify Lessee of -such fact and, unless
Lessee's ceases such activity within five (5) business days after the date of
receipt by Lessee of Lessor's notice, Lessee shall be liable for such increase.
Any such rate increase and related costs incurred by Lessor shall be deemed
additional rent due and payable by Lessee to Lessor upon receipt by Lessee of a
written statement of the rate increase and costs. Lessee may contest, at its
sole cost and expense, any insurance rate increase, provided such action by
Lessee will not adversely affect the insurance coverage of Lessor.
23. INDEMNITY AND PUBLIC LIABILITY INSURANCE
(A) Lessee shall indemnify and save harmless Lessor and its Agent from
any and all liability, damage, expense, cause of action, suits, claims,
judgments and cost of defense arising from injury to person or personal property
in and on the Demised Premises, or upon any adjoining sidewalks or public areas
of the Building, which arise out of the act, failure to act or negligence of
Lessee, its subtenants, licensees, agents or employees.
(B) In order to assure such indemnity, Lessee shall, at its sole cost,
carry and keep in full force and effect at all times during the term of this
Lease, a commercial comprehensive general liability policy with a single limit
of at least One Million Dollars ($1,000,000.00) including coverage for bodily
injury, property damage and personal injury liability.
24. WORKER'S COMPENSATION INSURANCE
Lessee shall carry and keep in MI force and effect at all times during
the term of this Lease, at its sole cost, worker's compensation or similar
insurance in form and amounts required by law. Such insurance shall contain
waiver of subrogation provisions in favor of Lessor and its Agent.
25. ALL RISK COVERAGE INSURANCE
(A) Lessor shall obtain and maintain All Risk Coverage insurance
covering the Building and the building standard tenant improvements to the level
specified in Exhibit B.
(B) Lessee shall obtain and maintain throughout the term of this Lease
and any extension periods All Risk Coverage insurance insuring against damage to
and loss of tenant improvements and fixtures in and about the Demised Premises
in excess of the level and nature of building standard improvements and fixtures
specified in Exhibit B attached hereto and made a part hereof, and all of its
equipment, furniture, and all other personal property in and about the Demised
Premises.
(C) Lessor and Lessee hereby release each other and waive any claims
they may have against the other for loss or damage to the Building, Demised
Premises, tenant improvements, fixtures, equipment and/or any other personal
property arising from a risk insured against under the All Risk Coverage
insurance policies to be carried by Lessor and Lessee, as required above, even
though such loss or damage was caused by the negligence of Lessor, or Lessee, or
their respective agents or employees (or any combination thereof), except for
the amount of the deductible under said policies.
(D) Lessor and Lessee agree to obtain and maintain throughout the term
of this Lease endorsements to their respective All Risk Coverage policies
waiving the right of subrogation of their insurance companies against the other
party and its agents and employees. Except to the extent expressly provided
herein, nothing contained in this Lease shall relieve Lessor or Lessee of any
liability to each other or to their insurance carriers which Lessor or Lessee
may have under law or the provisions of this Lease in connection with any damage
to the Building, Demised Premises, tenant improvements, fixtures, equipment,
furniture, and all other personal property, by fire or other casualty.
26. LESSEE'S CONTRACTOR'S INSURANCE
Lessee shall require any contractor of Lessee performing work on the
Demised Premises to carry and maintain, at no expense to Lessor:
(A) commercial comprehensive general liability insurance, rice,
including contractor's liability coverage, contractual liability coverage,
completed operations coverage, broad form property damage endorsement and
contractor's protective liability coverage, to afford protection with limits,
for each occurrence, of not less than One Million Dollars ($1.000,000.00) with
respect to personal injury, death, or property damage; and
(B) worker's compensation or similar insurance in form and amounts
required by law.
27. REQUIREMENTS FOR LESSEE'S INSURANCE POLICIES
(A) The company or companies writing any insurance which Lessee is
required to carry and maintain or cause to be carried or maintained pursuant to
this Lease as well as the form of such insurance shall at all times be subject
to Lessor's approval and any such company or companies shall be a good and
responsible insurance company, licensed to do business in the District of
Columbia. Lessee's public liability and All Risk Coverage insurance policies and
certificates evidencing such insurance shall name Lessor and its Agent as
additional insured and shall also contain a provision by which the insurer
agrees that such policy shall not be canceled except after thirty (30) days
prior written notice to Lessor, unless such event of cancellation is due to a
failure of Lessee to pay any premium due thereunder, in which case the insurer
shall only be required to provide to Lessor no less than ten (10) days prior
written notice of cancellation. Lessee agrees to provide to Lessor prior to
taking possession of the Demised Premises the certificates evidencing such
insurance; Lessor may withhold delivery of the Demised Premises without delaying
the Commencement Date, or triggering any abatement of rent, if Lessee fails to
provide Lessor with these certificates.
(B) Any insurance carried or to be carried by Lessee hereunder shall be
primary over any policy that might be carried by Lessor. If Lessee shall fail to
perform any of its obligations regarding the acquisition and maintenance of
insurance, Lessor may perform the same and the cost of same shall be deemed
additional rent, payable upon Lessor's demand.
28. LIABILITY FOR DAMAGE TO PERSONAL PROPERTY AND PERSON
(A) All personal property of Lessee, its employees, agents, subtenants,
business invitees, licensees, customers, clients, family members, guests or
trespassers, in and on the Demised Premises shall be and remain in and on
the Demised Premises and the Building at the sole risk of said parties and
Lessor shall not be liable to any such person or party for any damage to,
or loss of personal property thereof, including loss or damage arising
from, (i) any act, including theft, or any failure to act, of any other
persons, (ii) the leaking of the roof, (iii) the bursting, rupture, leaking
or overflowing of water, sewer or steam pipes, (iv) the rupture or leaking
of heating or plumbing fixtures, including security and protective systems,
(v) short circuiting or malfunction of electrical wires or fixtures.
including security and protective systems or (vi) the failure of the
heating or air-conditioning systems. Lessee specifically agrees to save
Lessor harmless in all such cases. Additionally Lessor shall not be deemed
liable for the interruption or loss- to Lessee's business due to the loss
or damage of or to Lessee's fixtures, equipment and personal property or
such property of the other covered parties caused by or arising from any of
the above-described acts or causes.
(B) Lessor shall not be liable for any personal injury to Lessee,
Lessee's employees, agents. subtenants, business invitees, licensees, customers,
clients, family members, guests or trespassers arising from the use, occupancy
and condition of the Demised Premises or the Building, unless such party
establishes that there has been negligence or a willful act or failure to act on
the part of Lessor, its agents or employees.
29 DAMAGE TO THE BUILDING AND/OR THE DEMISED PREMISES
(A) If the Demised Premises is damaged by fire, casualty or other event insured
against by Lessor's All Risk Coverage insurance policy covering the Building,
and the Demised Premises can be fully repaired, in the professional opinion of
an independent registered architect licensed to practice in the District of
Columbia selected by Lessor, within 180 days from the date of the insured fire,
casualty or other event, Lessor, at Lessor's expense, shall repair such damage,
provided, however, Lessor shall have no obligation to repair any damage to, or
to replace, (i) tenant improvements in and about the Demised Premises that are
of a non building standard nature specified in Exhibit B or are of a building
standard nature, but in excess of the level or quantity of building standard
improvements and fixtures specified in Exhibit B, (H) all of Lessee's equipment,
furniture, and all other personal property in and about the Demised Premises,
and (iii) any other property located in the Demised Premises. Except as
otherwise provided herein, if the entire Demised Premises is rendered
untenantable by reason of the insured fire, casualty or other event, then
Monthly Rent shall abate for the period from the date of such damage to the date
when Lessor has completed repairs to the Demised Premises as specified above,
and if only a portion of the Demised Premises is so rendered untenantable, then
Monthly Rent shall abate for such period in the proportion which the area of the
portion of the Demised Premises so rendered untenantable bears to the total area
of the Demised Premises, provided, however, if, prior to the date when such
repairs have been completed, any portion of the Demised Premises so damaged
shall be rendered tenantable and shall be used or occupied by Lessee or any
person claiming through or under Lessee, then the amount by which the Monthly
Rent shall abate shall be equitably apportioned for the period from the date of
any such use or occupancy to the date when such repairs are completed. No
compensation or claim or reduction of rent will be allowed or paid by Lessor by
reason of inconvenience, annoyance, or injury to business arising from the
necessity of repairing the Demised Premises or any portion of the Building of
which they are a part.
(B) Notwithstanding the foregoing, if, within sixty (60) days after
such fire or casualty, whether prior to or during the term of this Lease, (i) an
independent registered architect licensed to practice in the District of
Columbia selected by Lessor determines in his/her/its professional opinion that
the Demised Premises is so damaged that the Demised Premises cannot be fully
repaired within 180 days from the date the damage occurred, or (ii) an
independent registered architect licensed to practice in the District of
Columbia selected by Lessor determines in his/her/its professional opinion that
the Building is so damaged by fire or other casualty insured against by Lessor's
All Risk Coverage policy that substantial repair or reconstruction of the
Building shall be required (whether or not the Demised Premises is damaged or
rendered untenantable), then, in any of such events:
(a) Lessor, at its option, may give to Lessee, within sixty
(60) days of a determination made under (i) or (ii) above of this Subsection (B)
as applicable a thirty (30) day notice of termination of this Lease and, in the
event that such notice is given, this Lease shall terminate (whether or not the
term shall have commenced) upon the expiration of such thirty (30) days with the
same effect as if the date of expiration of such thirty (30) days were the date
definitely fixed for the expiration of the term of this Lease, and the
then-applicable Monthly Rent shall be apportioned as of such date, including any
rent abatement as provided above.
(b) Provided Lessor, under the terms of the instruments
documenting from time to time financing secured by the Building, is not deprived
of the use of insurance proceeds as a result of the granting to a tenant of a
right to terminate its lease in the case of a fire or casualty, or do not cause
a diminution in the amount of insurance proceeds as a result of the granting to
a tenant of such right, Lessee shall have the right to terminate this Lease upon
thirty (30) days' prior written notice to Lessor, said notice to be given within
sixty (60) days after the date either determination under (i) or (ii) above of
this Subsection (B) is rendered. In the event Lessee gives such notice, this
Lease shall terminate (whether or not the term shall have commenced) upon the
expiration of such thirty (30) days with the same effect as if the date of
expiration of such thirty (30) days were the date definitely fixed for
expiration of the term of the Lease, and the then applicable Monthly Rent shall
be apportioned as of such date, including any rent abatement as provided in
Subsection (A) above of this Section.
(C) Except where Lessee shall have the right to terminate the
term of this Lease under Subsection (B) of this Section, if Lessor has not
elected to terminate this Lease, and thus thereafter becomes obligated to repair
and/or reconstruct the Demised Premises and the Building, then Lessee may
terminate the term of this Lease in the event the Demised Premises are not
substantially restored to the extent of Lessor's obligations under Subsection
(A) of this Section within two hundred seventy (270) days from the date of the
fire or casualty. To exercise this right to terminate, Lessee must deliver to
Lessor written notice of Lessee's election to terminate not later than five (5)
business days after the expiration of the two hundred seventy (270) day period.
(D) For the purposes of this Section of the Lease, the term
"untenantable" means not reasonably usable by Lessee for its business purposes.
30. DEFAULT OF LESSEE
This Lease shall, at the, option of Lessor, cease and terminate if (i) Lessee
fails to pay rent, including any installment of Monthly Rent or any
additional rent, although no legal or formal demand has been made, and such
failure to pay rent continues for a period of ten (10) days after written
notice addressed to Lessee has been delivered by Lessor to the Demised
Premises, or (ii) Lessee violates or fails to perform any of the other
conditions, covenants or agreements of this Lease made by Lessee, and any
violation or failure to perform any of those conditions, covenants or
agreements continues for a period of thirty (30) days after written notice
thereof has been delivered by Lessor to Lessee, or, in cases where the
violation or failure to perform cannot be corrected within thirty (30)
days, Lessee does not begin to correct the violation or failure to perform
within thirty (30) days after receiving Lessor's written notice and/or
Lessee thereafter does not diligently pursue the correction of the
violation or failure to perform. Any said violation or failure to perform
or to pay any rent, if left uncorrected, shall operate as a notice to quit,
any further notice to quit or notice of Lessor's intention to re-enter
being hereby expressly waived. Lessor may thereafter proceed to recover
possession under and by virtue of the provisions of the laws of the
jurisdiction in which the Building is located or by such other proceedings,
including re-entry and possession, as may be applicable. If Lessor elects
to terminate this Lease, everything herein contained on the part of Lessor
to be done and performed shall cease without prejudice to the right of
Lessor to recover from Lessee all rent accruing up to and through the date
of termination of this Lease or the date of recovery of possession of the
Demised Premises by Lessor, whichever is later. Should this Lease be
terminated before the expiration of the term of this Lease by reason of
Lessee's default as hereinabove provided, or if Lessee abandons the Demised
Premises before the expiration or termination of the term of this Lease,
the Demised Premises may be relet by Lessor for such rent and upon such
terms as are not unreasonable under the circumstances, and, if the full
rent hereinabove provided is not realized by Lessor, Lessee shall be liable
for all damages sustained by Lessor, including, without limitation,
deficiency in rent, reasonable attorneys' fees, brokerage fees, and
expenses of placing the Demised Premises in first-class rentable condition.
Any damage or loss of rent sustained by Lessor (including any deficiency
between the rent reserved pursuant to the reletting and the rent reserved
under this Lease, accelerated to the date of reletting) may be recovered by
Lessor, at Lessor's 'option, at the time of the reletting, or in separate
actions, from time to time. as said damage shall have been made more easily
ascertainable by successive relettings, or, at Lessor's option, may be
deferred until the expiration of the term of this Lease, in which event the
cause of action shall not be deemed to have accrued until the date of
expiration of said term. The provisions contained in this Section shall be
in addition to and shall not prevent the enforcement of any claim Lessor
may have against Lessee for anticipatory breach of the unexpired term of
this Lease.
31. REPEATED DEFAULTS
If Lessee has committed a Material Default more than twice during any
twelve (12) month period during the term of this Lease, then, at Lessor's
election, Lessee shall not have any right to cure such repeated failure default,
the terms and conditions of the Section of this Lease entitled, "DEFAULT OF
LESSEE," notwithstanding. In the event of Lessor's election not to allow a cure
of a repeated default. Lessor shall have all of the rights provided for in that
Section of this Lease for an uncured default.
32. WAIVER
If Lessor institutes legal or administrative proceedings against Lessee and a
compromise or settlement thereof is made, the same shall not constitute a waiver
of Lessee's obligations to comply with any covenant, agreement or condition, nor
of any of Lessor's rights hereunder. No waiver by Lessor of any breach of any
covenant, condition, or agreement specified herein shall operate as an
invalidation or as a continual waiver of such covenant, condition or agreement
itself, or of any subsequent breach thereof. No payment by Lessee or receipt by
Lessor (or any party designated by Lessor to receive any payments of rent) of a
lesser amount than the amount of rent due Lessor shall be deemed to be other
than payment on account of the earliest stipulated rent. In addition, no
endorsement or statement on any check or letter accompanying a check for payment
of such rent be deemed an accord and satisfaction. Lessor, or any party
designated by Lessor, may accept such check or payment without prejudice to
Lessor's right to recover the balance of such rent or to pursue any other remedy
provided for in this Lease or in the governing law of the jurisdiction in which
the Building is located. No re-entry by Lessor, and no acceptance by Lessor of
keys from Lessee, shall be considered an acceptance of a surrender of the Lease.
33. SUBORDINATION
(A) This Lease is subject and subordinate to the lien of all and any
mortgages (which term "mortgages" shall include both construction and permanent
financing and shall include deeds of trust and similar security instruments)
which may now or hereafter encumber or otherwise affect the real estate
(including the Building) of which the Demised Premises is a part, or Lessor's
leasehold interest therein, and to all and any renewals, extensions,
modifications, recastings or refinancings thereof. In confirmation of such
subordination, Lessee shall. at Lessor's request, promptly execute any requisite
or appropriate certificate or other document. Lessee hereby constitutes and
appoints Lessor as Lessee's attorney-in-fact to execute any such certificate for
or on behalf of Lessee if Lessee does not execute said certificate or document
within ten (10) business days after receipt thereof.
(B) Lessee agrees that in the event any proceedings are brought for the
foreclosure of any such mortgage, Lessee shall attorn to the purchaser at such
foreclosure sale and recognize such purchaser as the party identified as Lessor
under this Lease, provided that such party shall have no obligations for or
responsibility to correct any past violations or failures of the party
previously identified as Lessor. Lessee waives the provisions of any statute or
rule of law, now or hereafter in effect, which may give or purport to give
Lessee any right to terminate or otherwise adversely affect this Lease and the
obligations of Lessee hereunder in the event that any such foreclosure
proceeding is prosecuted or completed.
(C) Notwithstanding Lessee's agreement to subordinate this Lease to any
mortgages as set forth in Subsection (A) of this Section, Lessor agrees to the
following:
(i) Subject to the provisions of Subsection (C)(iii) below of
this Section, Lessor shall have the affirmative obligation to obtain a
nondisturbance agreement for Lessee (a) from the holder of the current mortgage
secured by the Building and the Land and (b) from the holder of any successor
mortgage placed by Lessor in calendar years 1997, 1998 and 1999, provided Lessee
is not, at the time Lessor seeks to place a new mortgage secured by the Building
and/or the Land during the term of this Lease, in default of any obligation or
covenant of Lessee specified in this Lease after any period to cure or correct
such default specified in this Lease has expired.
(ii) Lessor shall use its commercially reasonable efforts to obtain
(but without any obligation to pay a premium for) a nondisturbance agreement
from any holder of any successive mortgage secured by the Building and/or the
Land placed by Lessor after calendar year 1999.
(iii) The form of nondisturbance agreement shall either be in the form
attached as Exhibit F, or in the usual and customary form of any holder of a
mortgage, upon terms reasonably acceptable to Lessee. The terms of such holder's
form shall be deemed reasonable to Lessee if its terms do not in any substantive
manner alter, change or modify any of the rights and benefits granted to Lessee
by this Lease, and specifically do not cause any change or modification in
Lessee's rent obligations as fixed by the provisions of this Lease. Lessee may
not require as a condition to its acceptance of any form of nondisturbance that
the holder of such mortgage (a) recognize such nondisturbance protection
afforded to Lessee at any time that the holder becomes vested with control of
the Building and/or the Land by foreclosure or otherwise and Lessee is then in
default under this Lease and notice thereof has been given and cure or
correction of such noted default has not been made by Lessee, (b) cure or
correct any default of Lessor arising prior to the date that the holder of such
mortgage becomes vested with -control over the Building and/or the Land, whether
by foreclosure or otherwise, or (c) become responsible for any monies paid by
Lessee to Lessor in advance of when required to be paid pursuant to this Lease,
where such payment occurs prior to the date that the holder of such mortgage is
vested with control over the Building, whether by foreclosure or otherwise. Any
nondisturbance agreement shall specifically provide that Lessee will not be
disturbed in its possession of the Demised Premises or of its rights under this
Lease by the holder of such mortgage in the event of a foreclosure, provided
however Lessee is then not in default of its obligations and covenants under
this Lease. after the giving of applicable notice and the expiration of
applicable periods to cure or correct without cure or correction being made.
(D) If the Building, the Demised Premises or any part respectively
thereof is at any time subject to a mortgage or a deed of trust or other similar
instrument, and this Lease or the rents are assigned to such mortgagee, trustee
or beneficiary, and Lessee is given written notice thereof, including the post
office address of such assignee, then Lessee may not terminate this Lease for
any default on the part of Lessor without first giving written notice by
certified or registered mail, return receipt requested, to such Assignee,
Attention: Mortgage Loan Department. The notice shall specify the default in
reasonable detail, and afford such assignee a reasonable opportunity to make
performance, at its election, for and on behalf of Lessor.
34. CONDEMNATION
(A) If the whole or a substantial part of the Demised Premises
or the Building is condemned or acquired in lieu of condemnation by any
governmental authority for any public or quasi-public use or purpose, then the
term of this Lease shall cease and terminate as of the date when title vests in
such governmental authority. Lessee shall have no claim against Lessor or the
condemning authority for any portion of the amount of the condemnation award or
settlement that Lessee claims as its damages arising from such condemnation or
acquisition, or for the value of any unexpired term of the Lease. Lessee may
make a separate claim against the condemning authority for a separate award for
the value of any of Lessee's tangible personal property and trade fixtures, for
moving and relocation expenses and for such business damages and/or
consequential damages as may be allowed by law, provided the same shall not
diminish the amount of Lessor's award.
(B) If less than a substantial part of the Demised Premises is
condemned or acquired in lieu of condemnation by any governmental authority for
any public or quasi-public use or purpose, the rent shall be equitably adjusted
on the date when title vests in such governmental authority and the Lease shall
otherwise continue in full force and effect. For purposes of this Section, a
"substantial part of the Demised Premises" shall be considered to have been
taken if twenty-five percent (25 %) or more of the Demised Premises is condemned
or acquired in lieu of condemnation, or if less than twenty-five percent (25 %)
of the Demised Premises is taken and the portion of the Demised Premises taken
renders the entire Demised Premises untenantable for the conduct of Lessee's
business..
(C) If twenty-five percent (25%) or more of the Building is condemned (whether
or not the Demised Premises shall have been condemned) and Lessor elects to
demolish the remainder of the Building, Lessor shall terminate this Lease.
35. RULES AND REGULATIONS
Lessee, its agents and employees, shall abide by and observe the rules
and regulations attached hereto as Exhibit C and such other reasonable rules and
regulations as may be promulgated from time to time by Lessor for the operation
and maintenance of the Building, provided a copy thereof is sent to Lessee. Any
failure to comply with any rule or regulation may become a basis under which
Lessor may claim a default by Lessee, after the giving of notice and the
expiration of the thirty (30) day period to cure or correct afforded by the
Section of this Lease entitled "DEFAULT OF LESSEE." Nothing contained in this
Lease shall be construed to impose upon Lessor any duty or obligation to enforce
such rules and regulations, or the terms, conditions or covenants contained in
any other lease as against any other tenant, and Lessor shall not be liable to
Lessee for violation of the same by any other tenant, any other tenant's
employees, agents, business invitees, licensees, customers, clients, family
members or guests. Lessor shall not discriminate against Lessee in the
enforcement of any rule or regulation.
36. RIGHT OF LESSOR TO CURE LESSEE'S DEFAULT
If Lessee defaults in the making of any payment to any third party, or
doing any act required to be made or done by Lessee relating to the Demised
Premises (including the performance of Lessee's obligations under this Lease),
then Lessor may, but shall not be required to, make such payment or do such act,
and the amount of the expense thereof, if made or done by Lessor, with interest
thereon at a rate equal to two (2) percentage points above the then applicable
base rate of interest (or comparable rate of interest) per annum as fixed by a
federally chartered financial institution as reasonably selected by Lessor,
accruing from the date paid by Lessor, shall be paid by Lessee to Lessor and
shall constitute additional rent hereunder due and payable by Lessee upon
receipt of a written statement of costs from Lessor. The making of such payment
or the doing of such act by Lessor shall not operate as a waiver or cure of
Lessee's default. nor shall it prevent Lessor from the pursuit of any remedy to
which Lessor would otherwise be entitled.
37. LATE CHARGES
Any installments of Monthly Rent, additional rent, or other charges to
be paid by Lessee pursuant to this Lease which are not paid by Lessee within ten
(10) days after the same becomes due and payable shall bear interest at a rate
equal to two (2) percentage points above the then base rate of interest (or
comparable rate of interest) per annum as fixed by a federally chartered
financial institution as reasonably selected by Lessor, accruing from the date
such installment or payment became due and payable to the date of payment
thereof by Lessee. As and to the extent that no time for payment is specified in
this Lease with regard to any charge or payment, such payment shall be deemed
due an payable to Lessor within thirty (30) days of receipt of Lessor's notice
to Lessee requesting payment, with any late charge rising ten (10) days after
the expiration of such payment period. Such interest shall constitute additional
rent due and payable to Lessor by Lessee upon the date of payment of the
delinquent payment referenced above.
38. NO PARTNERSHIP
Nothing contained in this Lease shall be deemed or construed to create a
partnership or joint venture of or between Lessor and Lessee, or to create
any other relationship between the parties hereto other than that of lessor
and lessee.
39. NO REPRESENTATIONS BY LESSOR
As of the date of this Lease first hereinabove stated, neither Lessor
nor any agent or employee of Lessor has made any representations or promises
with respect to the Original Premises, the Additional Premises or both, and with
respect to the Building except as herein expressly set forth in this Lease or in
that certain Conditional Termination of Lease Agreement, dated April___ , 1997.
By entering into this Lease, Lessee specifically recognizes that no rights,
privileges, easements or licenses have been acquired by Lessee except as herein
expressly set forth in this Lease and the Conditional Termination of Lease
Agreement.
40. BROKER AND AGENT
(A) Lessor and Lessee each represent and warrant one to another that,
except as hereinafter set forth, neither of them has employed any broker in
carrying on the negotiations, or had any dealings with any broker, relating to
this Lease. Lessee represents that it has employed I-arson, Ball & Gould, Inc.
as its broker; Lessor represents that it has employed Carr Real Estate Services,
Inc. as its broker, and further agrees to pay the commissions accruing to each
identified broker pursuant to certain outside agreement(s). Lessor shall
indemnify and hold Lessee harmless, and Lessee shall indemnify and hold Lessor
harmless, from and against any claim or claims for brokerage or other commission
arising from or out of any breach of the foregoing representation and warranty
by the respective indemnitor.
(B) Lessor appoints and Lessee recognizes, until such time as Lessor
otherwise notifies Lessee in writing, Randall Hagner Company, 1321 Connecticut
Avenue, N.W. Washington, D.C. 20036 as Lessor's exclusive, agent (referred to in
this Lease as "Agent") for the management and operations of the Building and for
the service of process, issuance and receipt of all notices, and instituting and
processing all legal actions on behalf of Lessor under this Lease.
41. WAIVER OF JURY TRIAL
Lessor and Lessee hereby waive trial by jury in any action, proceeding or
counterclaim brought by either of the parties hereto against the other on
or with respect to any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Lessor and Lessee hereunder,
Lessee's use or occupancy of the Demised Premises, and/or any claim of
injury or damage.
42. ENFORCEMENT OF LEASE
In the event Lessor is required or elects to take legal action to
enforce against Lessee the performance of Lessee's obligations under this Lease,
then Lessee shall immediately reimburse Lessor for all costs and expenses
including, without limitation, reasonable attorneys' fees, incurred by Lessor in
its successful prosecution of that legal action.
43. NOTICES
All notices or other communications hereunder shall be in writing and
shall be deemed duly given if delivered in person; by certified mail, return
receipt requested, or by registered mail, postage prepaid: (A) if to Lessor, in
duplicate to Agent at 1321 Connecticut Avenue, N.W., Washington, D.C. 20036,
Attention: Property Management and to Greystone Realty Corporation, 100 First
Stamford Place, Stamford, Connecticut 06902, Attention: Asset Management; and
(B) if to Lessee, in duplicate at I Memorial Drive, Cambridge, MA 02142,
Attention: Corporate Counsel, and at Suite 600, 1776 Eye Street, N.W.,
Washington, DC 20006, Attention: Office Director.
The party to receive notices and the place notices are to be sent for
either Lessor or Lessee may be changed by notice given pursuant to the
provisions of this Section.
44. ESTOPPEL CERTIFICATES
Lessee agrees, at any time and from time to time, upon not less than seven (7)
business days prior written notice by Lessor, to execute, acknowledge and
deliver to Lessor a statement in writing (A) certifying that this Lease is
unmodified and in full force and effect (or, if there have been
modifications, that the Lease is in full force and effect as modified and
stating the modifications), (B) stating the dates to which the rent and
other charges hereunder have been paid by Lessee, (C) stating whether or
not, to the best knowledge of Lessee, Lessor is in default in the
performance of any covenant, agreement or condition contained in this
Lease, and, if so, specifying each such default of which Lessee may have
knowledge, (D) stating the address to which notices to Lessee should be
sent and, if Lessee is a corporation, the name and address of its
registered agent in the jurisdiction in which the Building is located, and
(E) agreeing not to pay Monthly Rent more than thirty (30) days in advance
or to amend the Lease without the consent of any mortgage lender having a
security interest in the Building. Any such statement delivered pursuant
hereto may be relied upon by any owner of the Building, any prospective
purchaser of the Building, any prospective purchaser of any interest in the
party identified as Lessor in this Lease from time to time, any mortgagee
or prospective mortgagee of the Building or of Lessor's interest, or any
prospective assignee of any such mortgage.
45. HOLDING OVER
(A) In the event Lessee does not immediately surrender the Demised
Premises on the date of expiration of the term of this Lease or any extension
period thereof, Lessee shall, by virtue of this Section of the Lease, become a
lessee by the month and hereby agrees to pay to Lessor a Monthly Rent equal to
one hundred fifty percent (150%) of the amount of (A) the Monthly Rent in effect
during the last month of the term of this Lease as it may have been extended,
plus (B) the one-twelfth (1/12th) payment made with Monthly Rent pursuant to the
Section of this Lease entitled, "OPERATING EXPENSES, OPERATING COSTS AND REAL
ESTATE TAXES." The month-to-month tenancy shall commence with the first day next
after the expiration of the term of this Lease. Lessee as a month-to-month
tenant shall continue to be subject to all of the conditions and covenants of
this Lease. Lessee shall give to Lessor at least thirty (30) days written notice
of any intention to quit the Demised Premises. Lessee shall be entitled to
thirty (30) days written notice to quit the Demised Premises, except in the
event of nonpayment of the modified Monthly Rent in advance, in which event
Lessee shall not be entitled to any notice to quit, the usual thirty (30) days
notice to quit being hereby expressly waived.
(B) In the event Lessee holds over after the expiration of the term of
the Lease or extension period thereof, and Lessor desires to' regain possession
of the Demised Premises promptly at the expiration of the term of this Lease or
extension period thereof, then at any time prior to Lessor's acceptance of
modified Monthly Rent from Lessee as a month to month tenant hereunder, Lessor,
at its option, may forthwith reenter and take possession of the Demised Premises
without process, or by any legal process in force in the jurisdiction in which
the Building is located.
46. RIGHTS RESERVED BY LESSOR
Lessor shall have the following rights, exercisable without notice to
Lessee, without liability for damage or injury to property, person or business
and without effecting an eviction, constructive or actual, or disturbances or
Lessee's use or possession of the Demised Premises or giving rise to any claim
for set-off, abatement of rent or otherwise:
(A) To change the Building's name or street address;
(B) To affix, maintain and remove any and all signs on the exterior and
interior of the Building, excluding Lessee's signage permitted or approved
pursuant to the provisions of the Section of this Lease entitled "SIGNS AND
ADVERTISEMENTS";
(C) To designate and approve, prior to installation, all window shades, blinds,
drapes, awnings, window ventilators, lighting and other similar equipment
to be installed by Lessee that may be visible from the exterior of the
Demised Premises or the Building;
(D) To decorate and make repairs, alterations, additions and
improvements, whether structural or otherwise, in, to and about the Building and
any part thereof, and, during the continuance of any of such work, but otherwise
subject to the provisions of Subsection (C) of the Section of this Lease
entitled "SERVICES AND UTILITIES", to temporarily close doors, entry ways, and
common areas in the Building and to interrupt or temporarily suspend Building
services and facilities, all without affecting Lessee's obligations hereunder,
so long as the Demised Premises remain tenantable;
(E) To grant to anyone the exclusive right to conduct any business or render
any service in the Building, provided Lessee is not thereby excluded from
uses expressly permitted herein;
(F) To alter, relocate, reconfigure and reduce the common areas of the
Building, as long as the Demised Premises remains reasonably accessible, the
resulting condition does not reduce availability to Lessee of off street parking
in the Building, and any such action affecting a common area located within the
Building does not materially, adversely and permanently affect or alter the
Building's image as a first class office building situated within the central
business district of Washington, D.C.; and
(G) To alter, relocate, reconfigure, reduce and withdraw the common
areas located outside the Building, as long as the Building, including the off
street parking facility within the Building, remains reasonably accessible and
any such action affecting a common area located outside the Building does not
materially, adversely and materially affect or alter the Building's image as a
first class office building situated within the central business district of
Washington, D. C.
47. COVENANTS OF LESSOR
Lessor covenants that it has the right to make this Lease for the term
of the I-ease aforesaid. Further Lessor covenants that if Lessee shall pay the
rent and shall perform all of the covenants, agreements and conditions specified
in this Lease to be performed by Lessee , Lessee shall, for the term of the
Lease, freely, peaceably and quietly occupy and enjoy the full possession of the
Demised Premises without molestation or hindrance by Lessor, its agents or
employees. Entry in the Demised Premises for inspections, repairs, alterations,
improvements and installations by Lessor, its agents, employees or contractors
pursuant to the Section of this Lease entitled "INSPECTIONS, REPAIRS AND
INSTALLATIONS" and the exercise by Lessor of Lessor's rights reserved in the
Section of this Lease entitled "RIGHTS RESERVED BY LESSOR" shall not constitute
a breach by Lessor of this covenant. In addition, planned activities of Lessor,
whether in the form of renovation, redecoration or rehabilitation of any area of
the Building, including the lobby, and any of the surrounding public spaces by
Lessor or in the form of organized activities, public or private, shall not be
deemed violation by Lessor of Lessor's covenant of quiet enjoyment benefitting
Lessee.
48. LIEN FOR RENT
In consideration of the mutual benefits arising under this Lease, Lessee hereby
grants to Lessor a lien on all property of Lessee now or hereafter placed in or
upon the Demised Premises (except such part of any property as may be exchanged,
replaced, or sold from time to time in the ordinary course of business
operations or trade of Lessee), and such property shall be. and remain subject
to such lien of Lessor for payment of all rent and other sums agreed to be paid
by Lessee herein. Said lien shall be in addition to and cumulative upon Lessor's
liens provided by law. Said lien shall be second in priority to the rights of
any lessor of, or the mortgagee of, any equipment or personal property under any
equipment lease or mortgage, the rights of the seller under any conditional
sales contract, or the rights of the lender under any leasehold mortgage
consented to by Lessor. Lessee shall reimburse to Lessor, as additional rent,
all costs and expenses, including reasonable attorney's fees, which Lessor
incurs by reason of or in connection with any request for waiver of Lessor's
lien hereunder or enforcement of Lessor's rights hereunder, such costs and
expenses to be due and payable within fifteen (15) days of receipt of a
statement of such costs and expenses from Lessor.
49. RULE AGAINST PERPETUITIES
If and to the extent that this Lease would, in the absence of the limitation
imposed by this Section, be invalid or unenforceable as being in violation
of the rule against perpetuity or any other rule of law relating to the
vesting of interests in property or the suspension of the power of
alienation of property, then it is agreed that notwithstanding any other
provision of this Lease, this Lease and any and all options, rights and
privileges granted to Lessee thereunder, or in connection therewith shall
terminate if not previously terminated, on the date which is twenty-one
(21) years after the death of the last heir or issue, who are lives in
being as of the date of this Lease, of the following named persons: Oliver
T. Carr, Jr. and George H. Beuchert, Jr.
50. GENDER
Feminine or neuter pronouns shall be substituted for those of the
masculine form, and the plural shall be substituted for the singular number, in
any place or places herein in which the context may require such substitution or
substitutions.
51. BENEFIT AND BURDEN
(A) The terms and provisions of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and each of their respective
representatives, successors and permitted assigns. Lessor may freely and fully
assign its interest hereunder. In the event of any sale or transfer of the
Building by operation of law or otherwise by the party named as Lessor hereunder
(or any subsequent successor, transferee or assignee), then said party, whose
interest is thus sold or transferred shall be and is completely released and
forever discharged from and with respect to all covenants, obligations and
liabilities as Lessor hereunder after the date of such sale or transfer. It
being understood and agreed in such event that the person succeeding to Lessor's
ownership shall thereupon and thereafter assume, perform and observe any and all
of such covenants and obligations of Lessor.
(B) In the event Lessor shall be in default under this Lease, and if as a
consequence of such default, Lessee shall recover a money judgment against
Lessor, such judgment shall be satisfied only out of the proceeds of sale
received upon execution of such judgment against the right, title and
interest of Lessor in the Building as the same may then be constituted and
encumbered and Lessor shall not be liable for any deficiency. In no event
shall Lessee have the right to levy execution against any property of
Lessor other than its interests in the Building.
52. BANKRUPTCY
If Lessee or any guarantor of this Lease becomes bankrupt or insolvent,
or files any debtor proceedings, or if Lessee or any guarantor takes or has
taken against it in any court pursuant to any statute either of the United
States or of any State a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of Lessee's or any such guarantor's property, or if Lessee or any such
guarantor makes an assignment for the benefit of creditors, or petitions for or
enters into an arrangement, then this Lease shall terminate and Lessor, in
addition to any other rights or remedies it may have, shall have the immediate
right of reentry and may remove all persons and property from the Demised
Premises and such property may be removed and stored in a public warehouse or
elsewhere at the cost of, and for the account of Lessee, all without service of
notice or resort to legal process and without being deemed guilty of trespass,
or becoming liable for any loss or damage which may be occasioned thereby.
53. SAVINGS CLAUSE
If any provision of this Lease or the application thereof to any person
or circumstance is to any extent held invalid, then the remainder of this Lease
or the application of such provision to persons or circumstances other than
those as to which it is held invalid shall not be affected thereby, and each
provision of the Lease shall be valid and enforced to the fullest extent
permitted by law.
54. CORPORATE LESSEE
If Lessee is or will be a corporation, the persons executing this Lease
on behalf of Lessee hereby consent, represent and warrant that Lessee is a duly
incorporated or a duly qualified (if a foreign corporation) corporation and
authorized to do business in the District of Columbia; and that the person or
persons executing this Lease on behalf of Lessee is an officer or are officers
of Lessee, and that he or they as such officers are duly authorized to sign and
execute this Lease. Upon request of Lessor to Lessee, Lessee shall deliver to
Lessor documentation satisfactory to Lessor evidencing Lessee's compliance with
the provisions of this Section. Further, Lessee agrees to promptly execute all
necessary and reasonable applications or documents confirming such registration
as requested by Lessor or its representatives, required by the jurisdiction in
which the Building is located to permit the issuance of necessary permits and
certificates for Lessee's use and occupancy of the Demised Premises. Any delay
or failure by Lessee in submitting such application or document so executed
shall not serve to delay the Commencement Date or delay or waive Lessee's
obligations to pay rent hereunder.
55. JOINT AND SEVERAL LIABILITY
If two or more individuals, corporations, partnerships or other
business associations (or any combination of two or more thereof ) shall sign
this Lease as Lessee, the liability of each of them shall be joint and several.
In like manner, if Lessee is a partnership or other business association the
members of which are, by virtue of statute or general law, subject to personal
liability, the liability of each individual who was, is or becomes a member of
such partnership or association at any time from the date of execution of this
Lease to and' including the expiration or earlier termination of the term of
this Lease, shall be joint and several.
56. FINANCIAL INFORMATION
In connection with the sale of the Building by Lessor and in connection
with the placement of financing to be secured by Lessor's interest in the
Building, Lessee agrees (a) that Lessor shall be permitted to obtain from time
to time current Dunn & Bradstreet report on Lessee, and (b) to provide to Lessor
within fifteen (15) days after receipt of written notice from Lessor, a list of
Lessee's present references for financial institutions in which Lessee maintains
its operating accounts, which list shall contain a reference to at least one (1)
of Lessee's primary banking relationships in the United States, and gross
revenue statements for Lessee's two (2) immediately preceding completed fiscal
years, as well as a statement of estimated gross revenues for the current fiscal
year. All financial information of Lessee shall be certified by a corporate
officer of Lessee or managing partner of Lessee, as applicable, as true and
correct in all material respects.
57. COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT OF 1990
(A) Except as noted in Subsection (B) of this Section below, Lessor
shall be generally responsible for ensuring, throughout the term of the Lease
and any extension thereof, that all common areas of the Building, all elevators
(including elevator call buttons, lights and bells), all bathrooms in the
Building located within the perimeter of core area on each floor (exclusive of
any private bathrooms within premises leased to tenants including within the
Demised Premises) and all suite entrance doors opening into the Demised Premises
satisfy the requirements of the Americans with Disabilities Act of 1990, 42
U.S.C. ss. 12101 et seq. ("ADA"). Except as noted in Subsection (B) below of
this Section. Lessor shall indemnify Lessee and hold Lessee harmless from and
against any loss, cost or damage (including reasonable attorneys' fees)
resulting from any claim, complaint, action, order, directive, decree or finding
that any of the common areas of the Building, any bathroom in the Building
including those within the Demised Premises, or any suite entrance door opening
into the Demised Premises does not satisfy the requirements of the ADA.
(B) Lessee shall be responsible for ensuring that in making any
Alterations these Alterations are constructed, installed or fabricated in a
manner that satisfies the requirements of the ADA. Alterations made by Lessee to
areas or facilities of the Building otherwise falling under the responsibility
of Lessor as noted in Subsection (A) above shall be made in accordance with ADA
and Lessor shall have no obligation to subsequently retrofit or correct any
Alterations not in compliance with ADA. Construction, installation or
fabrication of Alterations by Lessee shall not serve to obligate Lessee to
undertake modifications to common areas of the Building or base building systems
unless as part of such Alterations Lessee modifies such common areas or base
building systems as part of its Alterations. By example, if Lessee elects to
install wall coverings in an elevator lobby serving a floor within or on which a
portion of the Demised Premises is located, Lessee shall have no obligation to
modify base building hardware, elevator calls, buttons and the like. If however
Lessee elects to replace base building hardware, then any replacement equipment
installed by Lessee must be compliant with ADA. Lessee shall indemnify Lessor
and hold Lessor harmless from and against any loss, cost or damage (including
reasonable attorneys' fees) resulting from any claim, complaint, action, order,
directive, decree or finding that any Alterations do not satisfy the
requirements of the ADA. Where any of Lessor's activities within the Building or
any of Lessee's activities in or about. the Demised Premises trigger "path of
travel" requirements under the ADA, the party whose activities trigger such
requirements shall be responsible for satisfying such requirements.
58. GOVERNING LAW
This Lease and the rights and obligations of Lessor and Lessee hereunder shall
be governed by the laws of the jurisdiction in which the Building is
located.
59. BUSINESS DAY/WORKING DAY
The terms "business day" and "working day" are terms describing each
calendar day Monday through Friday except any holiday identified specifically or
generically in the Section of this Lease entitled, "SERVICES AND UTILITIES"
falling on one of such calendar days:
60. ENTIRE AGREEMENT
This Lease, together with Exhibits A-1, A-2, A-3. B C, D. D-1, D-2,
D-3, D-4, E and F attached hereto and made a part hereof, and the Conditional
Termination of Lease Agreement, contain and embody the entire agreement of the
parties hereto. No representations, inducements, or agreements, oral or
otherwise, between the parties not contained and embodied in this Lease.
including said Exhibits and the Conditional Termination of Lease Agreement shall
be of any force or effect, and the same may not be modified, changed or
terminated in whole or in part in any manner other than by an agreement in
writing duly signed by all parties hereto.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be
signed in their names by their duly authorized representatives and delivered as
their act and deed, intending to be legally bound by its terms and provisions.
(Signatures Appear on Following Pages)
<PAGE>
LESSOR:
By: /sig/ George H. Beuchert Jr. (SEAL)
George Beuchert, Jr., Trustee
with respect to Lot 833
DISTRICT OF COLUMBIA, to wit:
I, , a Notary Public in and for the aforesaid District, do hereby
certify that George H. Beuchert, Jr., Trustee, who is personally well known to
me as the person who executed the foregoing and annexed Lease, dated the 31st
day of March, 1997, as Lessor, personally appeared before me in said District
and acknowledged said Lease to be his act and deed, and delivered the same as
such.
GIVEN under my hand and seal this 31st day of March 1997.
/sig/
Notary Public, D.C.
[SEAL]
My commission expires: 8/31/97
<PAGE>
LESSOR:
By: /s/ Thomas J. Egan (SEAL)
Thomas J. Egan, Trustee
with respect to Lot 833
DISTRICT OF COLUMBIA, to wit:
I, _______________________, a Notary Public in and for the aforesaid District,
do hereby certify that Thomas J. Egan, Trustee, who is personally well known to
me as the person who executed the foregoing and annexed Lease, dated the 31st,
day of March, 1997, as Lessor, personally appeared before me in said District
and acknowledged said Lease to be his act and deed, and delivered the same as
such.
GIVEN under my hand and seal this 31st day of March, 1997.
Notary Public, D.C.
[SEAL ]
My commission expires:
<PAGE>
LESSOR:
By: (SEAL)
Oliver T. Carr, Jr., Trustee
with respect to Lot 835, 836, 852
and 856
DISTRICT OF COLUMBIA, to wit:
I, Olivia M. Kerr , a Notary Public in and for the aforesaid District,
do hereby certify that Oliver T. Carr, Jr., Trustee, who is personally well
known to me as the person who executed the foregoing and annexed Lease, dated
the,31st day of March , 1997, as Lessor, personally appeared before me in said
District and acknowledged said- Lease to be his act and deed, and delivered the
same as such.
GIVEN under my hand and seal this 31st day of April, 1997.
/si/ Olivia M. Kerr
Notary Public, D.C.
[SEAL]
My commission expires: MY COMMISSION EXPIRES
NOVEMBER 30, 2001
<PAGE>
LESSOR:
By:
William Joseph H. Smith, Trustee
with respect to Lot 835, 836,
852 and 856
DISTRICT OF COLUMBIA, to wit:
I, , a Notary Public in and for the aforesaid District, do hereby
certify that William Joseph H. Smith, Trustee, who is personally well known to
me as the person who executed the foregoing and annexed Lease, dated the 31st
day of March, 1997, as Lessor, personally appeared before me in said District
and acknowledged said I-ease to be his act and deed, and delivered the same as
such.
GIVEN under my hand and seal this 31st day of March, 1997.
/sig/
Notary Public, D.C.
[SEAL]
My commission expires: 8/31/97
<PAGE>
LESSOR:
THE KIPLINGER WASHINGTON EDITORS, INC.,
Attest: Trustee, with respect to Lot 855
/s/ Janice K. By:/s/ Corbin M. Wilkes (SEAL)
Name: Janice K. Name: Corbin M. Wilkes
Title: Asst. Secretary Title: Vice President for Finance
(Corporate Seal)
DISTRICT OF COLUMBIA, to wit:
I, Sharon S. Tucker, a Notary Public in and for the aforesaid District,
do hereby certify thatCorbin M. Wilkes, who is personally well known to me as
the person who executed the foregoing and annexed Lease, dated the 31st day of
March, 1997, as Lessor, personally appeared before me in said District and
acknowledged said Lease to be his act and deed, and delivered the same as such.
GIVEN under my hand and seal this 31st day of March , 1997.
Notary Public, D.C.
[SEAL]
My commission expires: 8/31/01
<PAGE>
LESSEE:
Attest: PUTNAM, HAYES & BARTLETT, INC.
_________________________ By: /s/ William E. Dickenson
Name: Name: William E. Dickenson
Title: Title: President & CEO
(Corporate Seal)
District of Columbia )_
) ss:
--)-
I, Elizabeth W. Trimber, a Notary Public in and for the jurisdiction
aforesaid, do hereby certify that.William E. Dickenson, who is personally well
known to be the person who executed the foregoing and Lease, dated the 31st day
of March, 1997 on behalf of Lessee, to acknowledge the same, personally appeared
before me in said jurisdiction and acknowledged said Lease to be the act and
deed of Putnam, Hayes & Bartlett, Inc., and delivered the same as such.
GIVEN under my hand and seal this 7th day of April, 1997.
/s/ Elizabeth W. Trimber
Notary Public
My commission expires: Elizabeth W. Trimber
Notary Public
District of Columbia
My Commission Expires Dec 14, 1997
[SEAL]
<PAGE>
LESSEE;
Attest: PUTNAM, HAYES & BARTLETT, INC.
By: /s/ William E. Dickenson
Name: Name: William E. Dickenson
Title: Title: President & CEO
I, Elizabeth W. Trimber, a Notary Public in and for the jurisdiction
aforesaid, do hereby certify that.William E. Dickenson, who is personally well
known to be the person who executed the foregoing and Lease, dated the 31st day
of March, 1997 on behalf of Lessee, to acknowledge the same, personally appeared
before me in said jurisdiction and acknowledged said Lease to be the act and
deed of Putnam, Hayes & Bartlett, Inc., and delivered the same as such.
GIVEN under my hand and seal this 7th day of April, 1997.
/s/ Elizabeth W. Trimber
Notary Public
My commission expires: Elizabeth W. Trimber
Notary Public
District of Columbia
My Commission Expires Dec 14, 1997
[SEAL]
<PAGE>
EXHIBIT "A-1"
FLOOR PLAN, DEMISED PREMISES
<PAGE>
Exhibit A-1:
1. Diagram of floorplan of sixth floor of 1776 Eye Street, NW
indicating that there is 22,558 square feet or rentable space.
2. Diagram of floorplan of fifth floor of 1776 Eye Street, NW
indicating that there is 22,558 square feet or rentable space.
<PAGE>
EXHIBIT "A-2"
FLOOR PLAN, EXPANSION SPACE ONE
<PAGE>
Exhibit A-2:
1. Diagram of floorplan of seveth floor of 1776 Eye Street, NW
indicating that there is 22,558 square feet or rentable space.
<PAGE>
EXHIBIT "A-3"
FLOOR PLAN, EXPANSION SPACE TWO
<PAGE>
Exhibit A-3:
1. Diagram of floor plan of seventh floor of 1776 Eye Street, NW
indicating that there is 22,558 square feet or rentable space.
<PAGE>
EXHIBIT "B"
SPECIFICATIONS FOR OFFICE SPACE
The following items are considered Building Standard for insurance
purposes and for purposes of any restoration obligations of Lessee at the end of
the term.
1. Partitioning: Adequate interior partitioning to replace
Lessee's existing design. This partitioning is to be
constructed of 21/2" steel studs, and 1/2" gypsum wallboard,
floor to ceiling.
2. Painting: Standard latex paint in standard building colors.
3. Ceiling: Acoustical tile ceiling.
4. Doors: One exterior door and frame per suite, to be
constructed of solid wood. One complete interior door and
frame with hardware will be provided on a ratio
of one door per 150 square feet of rentable area. Interior
doors will be wood with a painted finish, with painted metal
frames.
5. Window Covering: Building standard blinds substantially
similar to those theretofore in use.
6. Floor Covering: Building standard floor coverings
substantially similar to those theretofore in use.
7. Lighting: Fully recessed fluorescent light fixtures with glare
reducing diffusers, in amounts to provide adequate lighting at
desk level.
8. Telephone and Electrical Outlets: One 120 V duplex wall
electrical outlet per 150 square feet of rentable space, and
one telephone wall outlet per 200 square feet of rentable
space.
9. Heating and Cooling System: Lessor will provide base-building
standard heating and cooling equipment for normal office use.
<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
(1) The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls or other parts of the Building not occupied by any
Lessee shall not be obstructed or encumbered by any Lessee or used for any
purpose other than ingress and egress to and from the Demised Premises. Lessor
shall have the right to control and operate the public portions of the Building,
and the facilities furnished for the common use of the Lessees, in such a manner
as Lessor reasonably deems best for the benefit of the Lessees generally. No
Lessee shall permit the visit to the Demised Premises of persons in such numbers
'or under such conditions as to interfere with the use and enjoyment by other
Lessees of the entrances, corridors, elevators and other public portions or
facilities of the Building.
(2) No awnings or other projections shall be attached to the outside
walls of the Building without the prior written consent of the Lessor. No
drapes, blinds, shades or screens shall be attached to or hung in, or used in
connection with any window or door of the Demised Premises, without the prior
written consent of the Lessor. Such awnings, projections, curtains, blinds,
shades, screens or other fixtures must be of a quality, type, design and color,
and attached in the manner approved by Lessor.
(3) Except as otherwise provided for in the body of this Lease, no
sign, advertisement, notice or other lettering shall be exhibited, inscribed,
painted or affixed by Lessee on any part of the outside or inside of the Demised
Premises or Building without the prior written consent of the Lessor.
(4) No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the halls, corridors
or vestibules without the prior written consent of the Lessor.
(5) The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by the Lessee
who, or whose servants, employees, agents, visitors or licensees, have caused
the same.
(6) Except as otherwise provided for in the body of this Lease, there shall be
no marking, painting, drilling into or in any way defacing any part of the
Demised Premises or the Building. No boring, cutting or stringing of wires
shall be permitted without the prior written consent of Lessor, which shall
not be unreasonably withheld. Lessee shall not construct, maintain, use or
operate within the Demised Premises or elsewhere within or on the outside
of the Building, any electrical device, wiring or apparatus in connection
with a loud speaker system or other sound system.
(7) No bicycles, vehicles or animals other than those assisting
disabled persons, birds or pets of any kind shall be brought into or kept in or
about the Demised Premises, and no cooking shall cause or permit any unusual or
objectionable odors to permeate from the Demised Premises.
(8) No space in the Building shall be used for manufacturing, for the
storage of merchandise, or for the sale of merchandise, goods or property of any
kind at auction.
(9) No Lessee shall make. or permit to be made. any unseemly or disturbing
noises or disturb or interfere with occupants of this or neighboring
buildings or premises of those having business with them whether by the use
of any musical instrument, radio, talking machine, whistling, singing, or
in any other way. No Lessee shall throw anything out of the doors or
windows or down the corridors or stairs.
(10) No inflammable, combustible or explosive fluid, chemical or
substance shall be brought or kept upon the Demised Premises, except in such
quantities and for such purposes as customary in general office use.
(11) Except with Lessor's prior written consent, but subject to governmental
restrictions applicable to Lessee and the operation of its business in the
Demised Premises, no additional locks or bolts of any kind shall be placed
upon any of the doors, or windows by any Lessee, nor shall any changes be
made in existing locks or the mechanism thereof. The doors leading to the
corridors or main halls shall be kept closed during business hours except
as they may be used for ingress or egress. Each Lessee shall, upon the
termination of its tenancy, restore to Lessor all keys to stores, offices,
storage and toilet rooms either furnished to or otherwise procured by such
Lessee, and in the event of the loss of any keys, so furnished, such Lessee
shall pay to the Lessor the cost thereof.
(12) All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place during the hours
which the Lessor or its agent may reasonably determine from time to time. The
Lessor reserves the right to inspect all freight to be brought into the Building
and to exclude from the Building all freight which violates any of these Rules
and Regulations or the Lease of which these Rules and Regulations are a part.
(13) Any person employed by any Lessee to do janitor work within the
Demised Premises must obtain Lessor's consent and such person shall, while in
the Building and outside of said Demised Premises, comply with all instructions
issued by the Superintendent of the Building. Lessee shall not independently
engage or pay. any employees of Landlord or Landlord's agent to perform work in
the Demised Premises.
(14) The Lessor reserves the right to exclude from the Building at all
times any person who is not known or does not properly identify himself to the
building management or watchman on duty. Lessor may at his option require all
persons admitted to or leaving the Building between the hours of 6:00 p.m. and
8:00 a.m., Monday through Saturday, Sundays and legal holidays to register. Each
Lessee shall be responsible for all persons for whom he authorizes entry into or
exit out of the Building, and shall be liable to the Lessor for ail acts of such
persons.
(15) The premises shall not be used for lodging or for any immoral or
illegal purpose.
(16) Each Lessee, before closing and leaving the Demised Premises at
any time, shall make reasonable efforts to see that all lights are turned off.
(17) The requirements of Lessee will be attended to only upon
application at the office of the Building. Employees shall not perform any work
or do anything outside of the regular duties, unless under special instruction
from the management of the Building.
(18) Canvassing, soliciting and peddling in the Building is prohibited
and each Lessee shall cooperate to prevent the same.
(19) No plumbing or electrical fixtures shall be installed by any
Lessee.
(20) There shall not be used in any space, or in the public halls of
the Building, either by any Lessee or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sole guards.
(21) Access plates to underfloor conduits shall be left exposed. Where
carpet is installed, carpet shall be cut around access plates. Where Lessee
elects not to provide removable plates in their carpet for access into the
underfloor duct system, it shall be the Lessee's responsibility to pay for the
removal and replacement of the carpet for any access needed into the duct system
at any time in the future.
(22) Mats, trash or other objects shall not be placed in the public
corridors.
(23) Except as otherwise noted in Exhibit "E", the Lessor does not
maintain or clean suite finishes which are non-standard, such as kitchens,
bathrooms, wallpaper, special lights, etc. However, should the need for repairs
arise, the Lessor will arrange for the work to be done at the Lessee's expense.
(24) Drapes installed by the Lessee for their use which are visible
from the exterior of the Building must be approved by Lessor in writing and be
cleaned by the Lessee.
(25) The Lessor will furnish and install light bulbs for the Building
standard fluorescent or incandescent fixtures only. For special fixtures, the
Lessee will stock his own bulbs. which will be installed by the Lessor when so
requested by the Lessee.
(26) The Lessor may upon request by any lessee, waive the compliance by
such lessee of any of the foregoing Rules and Regulations, provided that (i) no
waiver shall be effective unless signed by Lessor or Lessor's authorized agent;
(ii) any such waiver shall not relieve such lessee from the obligation to comply
with such rule or regulation in the future unless expressly consented to by
Lessor; and (iii) no waiver granted to any lessee shall relieve any other lessee
from the obligation of complying with the foregoing Rules and Regulations unless
such other lessee has received a similar waiver in writing from Lessor.
<PAGE>
EXHIBIT "D"
DECLARATION AS TO DATE OF LEASE WITH REGARD TO
ORIGINAL PREMISES
Attached to and made a part of the Lease, dated the 31st day of March, 1997,
entered into by and between George H. Beuchert, Jr., Trustee, Thomas J.
Egan, Trustee, Oliver T. Carr, Jr., Trustee, William Joseph H. Smith,
Trustee, and The Kiplinger Washington Editors, Inc., Trustee, acting
collectively as trustees on behalf of the beneficial owner, The Greystone
Square 127 Associates, a District of Columbia limited partnership,
(collectively the "Lessor") and Putnam, Hayes & Bartlett, Inc., a
Massachusetts corporation, hereinafter called "Lessee.
Lessor and Lessee do hereby declare and evidence that possession of the
Original Premises was accepted by Lessee in its "as is" condition on the 7th day
of April, 1997. The Lease is now in full force and effect with regard to the
Additional Premises. For the purpose of this Lease, Commencement Date 1 is
established as beginning on the 1st day of January, 1997, and the Rent
Commencement Date I is established as the lst day of January, 1997. As of the
date of delivery and acceptance of possession of the Original Premises as herein
set forth, there is no right of set off against rents claimed by Lessee against
Lessor.
Lessee, if a corporation, states that its registered agent in the District of
Columbia is M. E. Burton, having an address at Suite 500, 1776 Eye Street,
N.W., Washington, D.C. 20006, and that it is a corporation in good standing
in the District of Columbia.
LESSOR:
____________________(SEAL) /s/ George H. Beuchert, Jr.
George H. Beuchert, Jr.,
Trustee
with respect to Lot 833
<PAGE>
_______________________(SEAL) /s/ Thomas J. Egan_______
Thomas J. Egan, Trustee
with respect to Lot 833
_______________________(SEAL) /s/ Oliver T. Carr, Jr.________
Oliver T. Carr, Jr., Trustee
with respect to Lots 835, 836, 852
:
_______________________(SEAL) /s/ William Joseph H. Smith___
William Joseph H. Smith, Trustee
with respect to Lot 835, 836, 852 and 856
Attest: THE KIPLINGER WASHINGTON
EDITORS, INC., Trustee, with
respect to Lot 855
/s/ /s/ Corbin M. Wilkes
Name: Name: Corbin M. Wilkes
Title: Title: Vice President for Finance
(Corporate Seal)
<PAGE>
LESSEE:
Attest: Putnam, Hayes & Bartlett, Inc.
By: /s/ William E. Dickenson
Name: Name: William E. Dickenson
Title: Title: President & CEO
(Corporate Seal)
<PAGE>
LESSEE:
Attest: Putnam, Hayes & Bartlett, Inc.
/s/ Barbara J. Levine By: /s/ William E. Dickenson
Name: Barbara J. Levine Name: William E. Dickenson
Title: Corporate Counsel Title: President & CEO
and Clerk
(Corporate Seal)
<PAGE>
EXHIBIT "D-1"
DECLARATION AS TO DATE OF DELIVERY
AND ACCEPTANCE OF POSSESSION OF
ADDITIONAL PREMISES
Attached to and made a part of the Lease, dated the 31st day of March,
1997, entered into by and between George H. Beuchert, Jr., Trustee, Thomas J.
Egan, Trustee, Oliver T. Carr, Jr., Trustee, William Joseph H. Smith, Trustee,
and The Kiplinger Washington Editors, Inc., Trustee, acting collectively as
trustees on behalf of the beneficial owner, The Greystone Square 127 Associates,
a District of Columbia limited partnership, (collectively the "Lessor") and
Putnam, Hayes & Bartlett, Inc., a Massachusetts corporation, hereinafter called
"Lessee."
Lessor and Lessee do hereby declare and evidence that possession of the
Additional Premises was accepted by Lessee in its "as is" condition on the day
of 19 . The Lease is now in full force and effect with regard to the Additional
Premises. For the purpose of this Lease, Commencement Date 2 is established as
beginning on the _ day of ____19 , and the Rent Commencement Date 2 is
established as_________, 19__. As of the date of delivery and acceptance of
possession of the Additional Premises as herein set forth, there is no right of
set off against rents claimed by Lessee against Lessor.
Lessee, if a corporation, states that its registered agent in the District of
Columbia is ________________________________________, having an address at
and that it is a corporation in good standing in the District of Columbia.
LESSOR:
____________________(SEAL) _____________________________
George H. Beuchert, Jr.,
Trustee
with respect to Lot 833
<PAGE>
___________________________(SEAL) _______________________
Thomas J. Egan, Trustee
with respect to Lot 833
___________________________(SEAL) ________________________________
Oliver T. Carr, Jr.. Trustee
with respect to Lots 835, 836. 852 and 856
___________________________(SEAL) ________________________________
William Joseph H. Smith, Trustee
with respect to Lot 835, 836, 852 and 856
Attest: THE KIPLINGER WASHINGTON
EDITORS, INC., Trustee, with
respect to Lot 855
- --------------------------- ------------------------------
Name: Name:
Title: Title:
(Corporate Seal)
<PAGE>
LESSEE:
Attest: Putnam, Hayes & Bartlett, Inc.
_______________________ By:___________________________
Name: Name:
Title: Title:
(Corporate Seal)
<PAGE>
EXHIBIT "D-2"
DECLARATION AS TO DATE OF DELIVERY
AND ACCEPTANCE OF POSSESSION OF
EXPANSION SPACE ONE
Attached to and made a part of the Lease, dated the 31st day of March, 1997,
entered into by and between George H. Beuchert, Jr., Trustee, Thomas J.
Egan, Trustee, Oliver T. Carr, Jr., Trustee, William Joseph H. Smith,
Trustee, and The Kiplinger Washington Editors, Inc., Trustee, acting
collectively as trustees on behalf of the beneficial owner, The Greystone
Square 127 Associates, a District of Columbia limited partnership,
(collectively the "Lessor") and Putnam, Hayes & Bartlett, Inc., a
Massachusetts corporation, hereinafter called "Lessee."
Lessor and Lessee do hereby declare and evidence that possession of the
Expansion Space One, containing approximately square feet of rentable area, was
accepted by Lessee in its "as is" condition on the_________ day
of_______________ , 19____. The Lease is now in full force and effect with
regard to Expansion Space One. For the purpose of this Lease, Expansion Space
One Commencement Date is established as beginning on the_____________day of
__________, 19____. As of the date of delivery and acceptance of possession of
the Expansion Space One as herein set forth, there is no right of set off
against rents claimed by Lessee against Lessor.
Lessee, if a corporation, states that its registered agent in the District of
Columbia is _______________________________________________________________
having an address at________________________________, and that it is a
corporation in good standing in the District of Columbia.
LESSOR:
____________________________(SEAL) ______________________________
George H. Beuchert, Jr., trustee
with respect to Lot 833
<PAGE>
___________________________(SEAL) ________________________________
Thomas J. Egan, Trustee
with respect to Lot 833
___________________________(SEAL) ________________________________
Oliver T. Carr, Jr.. Trustee
with respect to Lots 835, 836. 852 and 856
___________________________(SEAL) ________________________________
William Joseph H. Smith, Trustee
with respect to Lot 835, 836, 852 and 856
Attest: THE KIPLINGER WASHINGTON
EDITORS, INC., Trustee, with
respect to Lot 855
- --------------------------- ------------------------------
Name: Name:
Title: Title:
(Corporate Seal)
<PAGE>
LESSEE:
Attest: Putnam, Hayes & Bartlett, Inc.
_________________________ By:_________________________________
Name: Name:
Title: Title:
(Corporate Seal)
<PAGE>
EXHIBIT "D-3"
DECLARATION AS TO DATE OF DELIVERY
AND ACCEPTANCE OF POSSESSION OF
EXPANSION SPACE TWO
Attached to and made a part of the Lease, dated the 31st day of March,
1997, entered into by and between George H. Beuchert, Jr., Trustee, Thomas J.
Egan, Trustee, Oliver T. Carr, Jr., Trustee, William Joseph H. Smith, Trustee,
and The Kiplinger Washington Editors, Inc., Trustee, acting collectively as
trustees on behalf of the beneficial owner, The Greystone Square 127 Associates,
a District of Columbia limited partnership, (collectively 'the "Lessor") and
Putnam, Hayes & Bartlett, Inc., a Massachusetts corporation, hereinafter called
" Lessee. "
Lessor and Lessee do hereby declare and evidence that possession of the
Expansion SpaceTwo was accepted by Lessee in its "as is" condition on
the_______day of___________, 20___. The Lease is now in full force and
effect with regard to Expansion Space Two. For the purpose of this Lease,
Expansion Space Two Commencement Date is established as beginning on the
day of__________, 20___. As of the date of delivery and acceptance of
possession of the Expansion Space -Two as -herein set forth, there is no
right of set off against rents claimed by Lessee against Lessor.
Lessee, if a corporation, states that its registered agent in the District of
Columbia is _____________________________________________, having an
address at ______________________________________, and that it is a
corporation in good standing in the District of Columbia.
LESSOR:
______________________(SEAL) ___________________________
George H. Beuchert, Jr.,
Trustee
with respect to Lot 833
<PAGE>
___________________________(SEAL) ________________________________
Thomas J. Egan, Trustee
with respect to Lot 833
___________________________(SEAL) ________________________________
Oliver T. Carr, Jr.. Trustee
with respect to Lots 835, 836. 852 and 856
___________________________(SEAL) ________________________________
William Joseph H. Smith, Trustee
with respect to Lot 835, 836, 852 and 856
Attest: THE KIPLINGER WASHINGTON
EDITORS, INC., Trustee, with
respect to Lot 855
- --------------------------- ------------------------------
Name: Name:
Title: Title:
(Corporate Seal)
<PAGE>
LESSEE:
Attest: Putnam, Hayes & Bartlett, Inc.
_________________________ By:_________________________________
Name: Name:
Title: Title:
(Corporate Seal)
<PAGE>
EXHIBIT "D-4"
DECLARATION AS TO DATE OF DELIVERY
AND ACCEPTANCE OF POSSESSION OF
A NEGOTIATION AREA
Attached to and made a part of the Lease, dated the 31st day of March,
1997, entered into by and between George H. Beuchert, Jr., Trustee, Thomas J.
Egan, Trustee, Oliver T. Carr, Jr., Trustee, William Joseph H. Smith, Trustee,
and The Kiplinger Washington Editors, Inc., Trustee, acting collectively as
trustees on behalf of the beneficial owner, The Greystone Square 127 Associates,
a District of Columbia limited partnership, (collectively -the "Lessor") and
Putnam, Hayes & Bartlett, Inc., a Massachusetts corporation, hereinafter called
"Lessee."
Lessor and Lessee do hereby declare and evidence that possession of a
Negotiation Area One, containing approximately ________ square feet of rentable
area, was accepted by Lessee in its "as is" condition on the______ day of
____________, _______. The Lease is now in full force and effect with regard to
this Negotiation Area. For the purpose of this Lease, the commencement date of
this Lease with regard to this Negotiation Area of this Lease with regard to
this Negotiation Area is established as beginning on the __________ day of
___________, ___. As of the date of delivery and acceptance of possession of
this Negotiation Area as herein set forth, there is no right of set off against
rents claimed by Lessee against Lessor.
Lessee, if a corporation, states that its registered agent in the
District of Columbia is,
__________________________________________________________, having an address
__________________________________ at and that it is a corporation in good
standing in the District of Columbia.
LESSOR:
______________________(SEAL) ___________________________
George H. Beuchert, Jr.,
Trustee
with respect to Lot 833
<PAGE>
___________________________(SEAL) ________________________________
Thomas J. Egan, Trustee
with respect to Lot 833
___________________________(SEAL) ________________________________
Oliver T. Carr, Jr.. Trustee
with respect to Lots 835, 836. 852 and 856
___________________________(SEAL) ________________________________
William Joseph H. Smith, Trustee
with respect to Lot 835, 836, 852 and 856
Attest: THE KIPLINGER WASHINGTON
EDITORS, INC., Trustee, with
respect to Lot 855
- --------------------------- ------------------------------
Name: Name:
Title: Title:
(Corporate Seal)
<PAGE>
LESSEE:
Attest: Putnam, Hayes & Bartlett, Inc.
_________________________ By:_________________________________
Name: Name:
Title: Title:
(Corporate Seal)
<PAGE>
EXHIBIT F
SUBORDINATION, ATTORNMENT NON-DISTURBANCE AGREEMENT
THIS SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT (the "Agreement")
is made as of the ___ day of______________19__, by and among AID
ASSOCIATION FOR LUTHERANS, a Wisconsin corporation,
("Lender"),____________________, a ________________ ("Landlord"),
and_______________ a __________________("Tenant").
RECITALS
A. Tenant has entered into that certain Lease dated__________, 19___,
(the "Lease"), with the I Landlord, leasing certain office Space (the "Premises
in the building located at____________(the "Building") and more particularly
described in Exhibit A attached hereto.
B. Leader is the holder of a certain Promissory Note in the amount of
(the "Notes"), which Note is secured by a certain Deed of Trust and Security
Agreement dated , 19 (as the- same may have been and may hereafter be amended
from time to time (the "Deed of Trust") an the property described therein (the
"Property"), and recorded on , 19___, in the land records of (the *Land
Records'), as Instrument No. ___________ [or in Deed Book_________ at
Page_________].
C. Tenant desires to be assured of the continued use and occupancy of the
Premises under the terms of the Lease.
D. Lender agrees to such continued use and occupancy by Tenant provided
that by these presents Tenant agrees to recognize and attorn to Lender or a
purchaser in the event of foreclosure or delivery of a deed in lieu of
foreclosure and to subordinate any and all rights or interest of Tenant in the
Property pursuant to the terms of the Lease to the lien of the Deed of Trust.
NOW, THEREFORE, in consideration of the premises herein and the sum of
Ten Dollars ($10.00), the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
1. Actions and Proceedings and Quiet Enjoyment. In the event an action
is commenced to foreclose the Deed of trust or to pursue any of the remedies
under the Deed of Trust or other Loan Documents (as such term is defined in the
Deed of Trust) or Lender should otherwise come into possession of the Property
(such actions, proceedings, or events, collectively, the 'Proceedings'). Lender
will not join Tenant in such Proceedings, unless required by statute, and will
not disturb the use and occupancy of Tenant under the Lease so long as Tenant is
not in, default or does not default under any of the terms covenants, or
conditions of the Lease and has not paid any rent more than one month in
advance, except as required by the Lease.
2. Subordination of Lease. Tenant covenants and agrees with Lender that
the Lease shall at all times be and remain. subject and subordinate in ties and
in right to the lien of the Deed of Trust. all modifications and extensions of
the Deed of Trust and all of the rights of Lender thereunder.
3. Subordination of Rights to Insurance Proceeds and Condemnation
Awards. Tenant hereby agrees to and hereby does subordinate all rights it may
have as Tenant to all insurance proceeds and condemnation awards with respect to
the Property and hereby assigns to Under all its right, title and Interest, if
any, in and to such proceeds and awards.
4. Attornment If Lender or any future beneficiary of the Deed of Trust
becomes the owner of the Property or any part thereof by reason of the
enforcement of the Deed of Trust or otherwise, or if the Property is sold as a
result of any action or proceeding to enforce the Deed of Trust, the Lease shall
continue in full force and effect (without necessity for executing any new
lease) as a direct lease between Tenant and the then owner of the Property (die
then owner of the Property being hereinafter called *Substitute Landlord"), upon
all of the same terms, covenants and provisions as those contained in the Lease,
and in such event:
(a) Tenant shall be bound to Substitute Landlord under all of
the terms covenants and provisions of the Lease and Tenant hereby agrees to
attorn to Substitute Landlord and to recognize Substitute I Landlord as landlord
under the Lease, such attornment to be self-operative and self-executing; and
(b) Substitute Landlord shall be bound co Tenant under all of
the terms, covenants and provisions of the Lease, and by acquiring title to
the Property hereby agrees to assume and perform the landlord's obligation
under the Lease until the resale or other disposition of its interest by
Substitute Landlord; and Tenant shall. from and after the date Substitute
Landlord succeeds to the interest of Landlord under the Lease have the same
rights and remedies against Substitute Landlord for the breach of any covenant
contained in the Lease that Tenant would have had under the Lease against
Landlord if Substitute Landlord had not succeeded to the interest of Landlord,
provided, however, chat Substitute landlord shall not be:
(i) liable for any act or omission of any prior landlord (including Landlord);
or
(ii) bound by any fixed annual rent which Tenant might have paid for more than
the
current month to any prior landlord (including Landlord), or
(iii) bound by any amendment or modification of the Lease made
without its consent (unless made with thc consent of Landlord, Lender and/or its
successor or assign prior to Substitute Landlord's acquisition of the Property).
(c) Tenant hereby that any entity or person which at any time
hereafter becomes the landlord under the Lease (including, without limitation,
Lender or any other Substitute Landlord) shall be liable only for the
performance of the obligations of landlord under the Lease which arise during
the period of such entity's ownership of the Property. and shall not be liable
for any obligations of the, Landlord under the Lease which arise prior to or
subsequent to Lender's or any other Substitute Landlord's acquisition of
ownership.
(d) Tenant waives the provisions of any statute or rule of law
now or hereafter in effect which may give or purport to give it any right or
election to terminate or otherwise adversely affect the Lease and the
obligations of Tenant thereunder by reason of any such Proceedings.
5. Right to Cure. So long as the Deed of Trust or any modifications or
extensions thereof. shall remain unsatisfied of record, if Tenant shall give
Landlord any notice with respect to a default of Landlord under die Lease which.
if not cured, would permit Tenant either (a) to terminate the Lease or (b) to
reduce or deduct any sums from the fixed annual rent or additional rents
reserved under the Lease, Tenant agrees to give to Lender a copy of any such
notice of Landlord's default and Lender shall have the right, but not the
obligation, to cure any such default of Landlord as to which Tenant shall have
given such notice within the same period of time, if any, as is afforded to
Landlord under the Lease, and Tenant agrees not to terminate the Lease pending
Lender's right to cure Landlord's default. In the event that Lender cures
Landlord's default, Tenant agrees not to terminate the Lease.
6. Non-Assumption. Tenant, by its execution hereof, is not assuming any
Liability or obligation under the Deed of Trust or with respect to the
indebtedness secured thereby. and Lender is not assuming any obligation under
the Lease except as expressly set forth in this Agreement.
7. Notice. All notices, demands, requests and other communications
required under this Agreement shall be in writing and shall be deemed to have
been property given if personally delivered or sent by a nationally recognized
overnight courier or by United States certified or registered mail. return
receipt requested. postage prepaid, addressed to the parry for which it is
intended at its address hereinafter set forth:
If to Lender:
Aid Association for Lutherans
4321 North Ballard Road
Appleton, Wisconsin 54919
Attention: Investment Division
If to Landlord:
If to Tenant:
8. Construction and Enforcement This Agreement shall be governed by and
construed in accordance with the laws of the jurisdiction in which the Building
is located.
9. Successors and Assigns. This Agreement shall bind, and inure to the
benefit of and be enforceable by, the parties hereto and their respective
successors and assigns.
10. Modification. This Agreement contains the entire agreement between
the parties and cannot be changed, modified, waved or canceled except by an
agreement in writing
executed by the party against whom enforcement of such modification, change
waiver or cancellation is sought.
11. Effective Date. The effective date of this Agreement shall be the
date on the first page hereof notwithstanding that this Agreement may have been
executed on a date -nor to such date.
12. Counterpart Originals. This Agreement may be signed in one or more
counterparts, which shall constitute one document as if all parties had executed
the same page.
IN WITNESS WHEREOF, the parties hereto have executed this
Subordination, Attornment and Non-disturbance Agreement effective as of the date
first above written
(Signatures are on following pages)
<PAGE>
LENDER:
Attest or Witness: AID ASSOCIATION FOR LUTHERANS,
a Wisconsin corporation
_________________________ By:_________________________
Name:
(SEAL] Title:
Attest or Witness: LANDLORD:
________________________ By:_________________________
Name:
Title:
(SEAL)
Attest or Witness: TENANT:
_______________________ By:________________________
Name:
(SEAL) Title:
<PAGE>
Lender hereby directs the undersigned trustees under the Deed of Trust
to join in the execution hereof to acknowledge the terms hereof.
Trustee
Trustee
<PAGE>
LENDER'S ACKNOWLEDGEMENT
STATE OF
COUNTY OF
The foregoing Subordination, Attornment and Non-disturbance Agreement
was acknowledged before me on the day of_____________19_,
by_____________________ of
____________________________of_______________________________________.
GIVEN under my hand and seal this ______ of __________________,19______.
-------------------------
Notary Public
[SEAL)
My commission expires:
LANDLORD'S ACKNOWLEDGEMENT
DISTRICT OF COLUMBIA to wit:
The foregoing Subordination, Attornment and Non-disturbance Agreement was
acknowledgement before me on the______day of__________19_,
by________________, __________ of _______________________________,
________________of _______________
GIVEN under my hand and seal this day of , 19 .
---------------------
Notary Public
[SEAL]
My commission expires:
<PAGE>
TENANT'S ACKNOWLEDGMENT
STATE OF
COUNTY OF
The foregoing Subordination, Attornment and Non-disturbance Agreement
was acknowledged before me on the day of_____________19_,
by_____________________ of
____________________________of_______________________________________.
GIVEN under my hand and seal this ______ of
__________________,19______.
---------------------
Notary Public
[SEAL)
My commission expires
<PAGE>
EXHIBIT A
PREMISES
(TO BE PROVIDED)
<PAGE>
CONDITIONAL TERMINATION OF LEASE AGREEMENT
This Conditional Termination of Lease Agreement (the "Agreement") is
made and entered into this 31st day of March, 1997, by and between George H.
Beuchert, Jr., Trustee, Thomas J. Egan, Trustee, Oliver T. Carr, Jr., Trustee,
William Joseph H. Smith, Trustee, and The Kiplinger Washington Editors, Inc.,
Trustee, acting collectively as trustees on behalf of the beneficial owner, The
Greystone Square 127 Associates, a District of Columbia limited partnership,
collectively, hereinafter referred to as "Lessor," and Putnam, Hayes & Bartlett,
Inc., a Massachusetts corporation, hereinafter referred to as "Lessee."
WITNESSETH:
WHEREAS, by Lease Agreement dated the 8th day of July, 1988 as amended
by Addendum No. 1 to Lease Agreement dated November 3, 1988 (hereinafter
referred to as the "Lease"), Lessor leased to Lessee approximately 36,265 square
feet of rentable area on the fifth (5th) and sixth (6th) floors of the office
building situated at 1776 Eye Street, N.W., Washington, D.C. 20006 (such
building hereinafter referred to as the "Building" and said rentable area
hereinafter referred to as the "Demised Premises");
WHEREAS, Lessor and Lessee have agreed to provide for the earlier
termination of the term of the Lease based upon (i) Lessee's agreement to enter
into a new lease with Lessor for the Demised Premises and certain additional
premises located on the fifth (5th) floor of the Building (the "Additional
Premises"), and (ii) the terms and conditions of this Agreement set forth below;
WHEREAS, Lessor and Lessee desire to formally reflect the terms and
conditions under which the Lease will be terminated;
NOW, THEREFORE, in consideration of mutual covenants contained herein,
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
1. Lessor and Lessee have as of the date of this Agreement entered into
a lease dated the 31st day of March, 1997 (the "Successor Lease") for the
leasing by Lessee of the Demised Premises and the Additional Premises.
2. The Lease shall be and is hereby terminated effective as of 11:59
P.M. on December 31, 1996, (such day being hereinafter referred to as the
"Termination Date"). Except as otherwise provided in this Agreement, as of the
Termination Date, the Lease shall be deemed to be of no further force and effect
thereafter, subject to the conditions otherwise set forth herein. Lessor and
Lessee, as of the Termination Date, shall be and are hereby equally released and
discharged from any obligations to observe the terms and conditions of the Lease
accruing after the Termination Date; provided, however, that Lessee complies
with the conditions otherwise set forth herein.
<PAGE>
3. (A) Lessee shall remain fully obligated for all Monthly Rent (as
defined in the Lease) accruing through the Termination Date under the terms of
the Lease. To the extent that Lessee has paid to Lessor, pursuant to the Lease,
Monthly Rent (as defined in the Lease) in excess of Monthly Rent 1 (as defined
in the Successor Lease) due under the Successor Lease for any period from and
after January 1, 1997, then from and after January 1, 1997, Lessor shall credit
to Lessee an amount-equal to the difference between (i) the amount of Monthly
Rent actually paid by Lessee for the Demised Premises pursuant to the Lease and
(ii) the amount of Monthly Rent 1 which otherwise would have been paid for the
Demised Premises pursuant to the Successor Lease, with such credit being applied
to the Monthly Rent 1 first due from Lessee under the Successor Lease until
exhausted.
(B) Lessee shall remain obligated for the full amount of its
proportionate share of increases in Operating Expenses and Operating Costs, as
defined and set forth in the Section of the Lease entitled "RENTAL ESCALATION
FOR INCREASES IN EXPENSES," accruing with respect to the entire calendar year
1996.
4. All notices or other communications to be delivered to Lessee under
the Lease or this Agreement, after the Termination Date, shall be delivered to:
(A) if to Lessor, c/o Carr Real Estate Services, Inc., Suite 700, 1700
Pennsylvania Avenue, N.W., Washington, D.C. 20006; and (B) if to Lessee, at 1
Memorial Drive, Cambridge, Massachusetts 02142, Attention: Corporate Counsel,
with a courtesy copy sent to Suite 600, 1776 Eye Street, N.W., Washington, DC
20006. Lessor's failure to deliver a courtesy copy of any notice or other
communication to the Demised Premises shall not serve to void or waive the
validity of any notice or communications, if such notice or communications was
otherwise properly delivered to the principal address of Lessor noted alone for
receipt of notices and other communications by Lessee. The party to receive
notices and the place notices are to be sent for either Lessor or Lessee may be
changed by notice given pursuant to the provisions of this Section.
5. Lessor and Lessee agree to waive trial by jury in any action,
proceeding or counterclaim brought by either party against the other or with
respect to any matter whatsoever arising out of or in any way connected with
this Agreement.
6. The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and each of their respective successors and
assigns.
7. Notwithstanding anything to the contrary in this Agreement, if
Lessee cancels the Successor Lease in accordance with the provisions of
Subsections (D) or (E) of the Section of the Successor Lease entitled "TERM,"
then this Agreement and the termination of the Lease intended to be accomplished
by this Agreement shall be deemed null and void, and of no further force and
effect between Lessor and Lessee, as of the date of cancellation by Lessee of
the Successor Lease, except that this Agreement shall be deemed to survive for
the limited purpose of confirming Lessee's agreement and recognition that Lessee
shall be liable to Lessor for the payment of any rent accruing under the Lease
from and after January 1, 1997, subject however to the recognition by Lessor of
a credit toward Lessee's obligation for the payment of rent under the Lease in
the amount of rent paid to Lessor as "Monthly Rent" under the Successor Lease.
The cancellation of the Successor Lease shall be deemed without further action
to revive the Lease, as if it had never been terminated by this Agreement, and
the Lease shall be deemed to continue in full force and effect. Lessee shall pay
to Lessor any underpayment of Monthly Rent, Operating Expenses and Operating
Costs or both which are due and owing under the Lease within thirty (30) days
after receipt of notice from Lessor of the amount of rent due and owing under
the Lease, subject to any credit for "Monthly Rent" paid under the Successor
Lease.
IN WITNESS WHEREOF, the parties hereto have caused this Conditional
Termination of Lease Agreement to be signed and sealed in their names by their
duly authorized representatives, intending to be legally bound by its terms and
provisions.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
<PAGE>
LESSOR: By:/s/George H. Buchert (SEAL) George H .
Beuchert, Jr., Trustee with respect to Lot 833
DISTRICT OF COLUMBIA, to wit:
I, ____________, a Notary Public in and for the aforesaid District, do hereby
certify that George H. Beuchert, Jr., Trustee, who is personally well known
to me as the person who executed the foregoing and annexed Agreement, dated
the day of March, 1997, as Lessor, personally appeared before me in said
District and acknowledged said Agreement to be his act and deed, and
delivered the same as such.
GIVEN under my hand and seal this 31st day of March, 1997.
-----------------
Notary Public, D.C
[SEAL]
My commission expires: 8/31/97
<PAGE>
LESSOR:
By:/s/Thomas J. Egan (SEAL)
Thomas J. Egan, Trustee
with respect to Lot 833
DISTRICT OF COLUMBIA, to wit:
I, ____________, a Notary Public in and for the aforesaid District, do hereby
certify that Thomas J. Egan, Trustee, who is personally well known to me as
the person who executed the foregoing and annexed Agreement, dated the day
of March, 1997, as Lessor, personally appeared before me in said District
and acknowledged said Agreement to be his act and deed, and delivered the
same as such.
GIVEN under my hand and seal this 31st day of March, 1997.
-----------------
Notary Public, D.C
[SEAL]
My commission expires: 8/31/97
LESSOR:
By:/s/ Oliver T. Carr, Jr. (SEAL)
Oliver T. Carr, Jr., Trustee
with respect to Lots
835, 836, 852 and
856
DISTRICT OF COLUMBIA, to wit:
I, Olivia M. Kerr, a Notary Public in and for the aforesaid District, do
hereby certify that Oliver T. Carr, Jr., Trustee, who is personally well
known to me as the person who executed the foregoing and annexed Agreement,
dated the 31st day of March, 1997, as Lessor, personally appeared before me
in said District and acknowledged said Agreement to be his act and deed,
and delivered the same as such.
GIVEN under my hand and seal this 3rdt day of April, 1997.
/s/ Olivia M. Kerr______________
Notary Public, D.C.
[SEAL]
My commission expires: MY COMMISSION EXPIRES
NOVEMBER 30, 2001
<PAGE>
LESSOR: By:/s/ William Joseph H. Smith (SEAL) William Joseph
H. Smith, Trustee with respect to Lots 835, 836, 852 and 856
DISTRICT OF COLUMBIA, to wit:
I, ________________, a Notary Public in and for the aforesaid District,
do hereby certify that William Joseph H. Smith, Trustee, who is personally well
known to me as the person who executed the foregoing and annexed Agreement,
dated the 31st day of March, 1997, as Lessor, personally appeared before me in
said District and acknowledged said Agreement to be his act and deed, and
delivered the same as such.
GIVEN under my hand and seal this 31st day of March, 1997.
------------------------------- Notary Public, D.C.
[SEAL]
My commission expires: 8/31/97
<PAGE>
LESSOR:
THE KIPLINGER WASHINGTON EDITORS, INC., Trustee,
with respect to Lot 855
Attest:
/s/ Janice K. Bigslow By:/s/ Corbin M. Wilkes___________
Name: Janice K. Bigslow Name: Corbin M. Wilkes
Title: Title: Vice President for Finance
(Corporate Seal)
DISTRICT OF COLUMBIA, to wit:
I, Sharon A. Tucker, a Notary Public in and for the aforesaid District,
do hereby certify that Corbin M. Wilkes, who is personally well known to me as
the person who executed the foregoing and annexed Agreement, dated the 31st day
of March, 1997, as Lessor, personally appeared before me in said District and
acknowledged said Agreement to be his act and deed, and delivered the same as
such.
GIVEN under my hand and seal this day of 31st day of March , 1997.
/s/ Sharon A. Tucker_________
Notary Public, D.C.
[SEAL]
My commission expires:
<PAGE>
LESSEE:
Attest: Putnam, Hayes & Bartlett, Inc.
/s/ Barbara J. Levine By: /s/ William E. Dickenson
Name: Barbara J. Levine Name: William E. Dickenson
Title: Corporate Counsel Title: President & CEO
and Clerk
(Corporate Seal)
I, Elizabeth W. Trimber, a Notary Public in and for the jurisdiction
aforesaid, do hereby certify that William E. Dickenson, who is personally well
known to me as the person who executed the foregoing and annexed Agreement,
dated the 31st day of March, 1997, as Lessee, to acknowledge the same,
personally appeared before me in said jurisdiction and acknowledged said
Agreement to be the act and deed of PUTNAM, HAYES & BARTLETT, INC., and
delivered the same as such.
GIVEN under my hand and seal this 7th day of April, 1997.
/s/ Elizabeth W. Trimber
Notary Public, D.C.
[SEAL]
My commission expires:
Elizabeth W. Trimber
Notary Public
District of Columbia
My Commission Expires Dec 14 1997
<PAGE>
EXHIBIT G
LANDLORD'S SERVICES
1. Landlord shall provide security personnel for the common areas of the
building 24 hours a day, 365 days per year.
2. Landlord agrees to provide elevator service to the building 24 hours a
day, 365 days a year with no less than five (5) passenger elevators
during normal business hours except for reasonable periods of "down
time" for maintenance and repairs. Access to said elevators shall be
provided by Building security in the "off hours" as in other first
class office buildings in the Boston/Cambridge area.
3. Landlord agrees to furnish hot and chilled water for the distribution
of hot and cold air to the leased premises 24 hours a day, 365 days a
year sufficient to keep the Premises at a comfortable temperature
commensurate with first class office buildings in Cambridge.
4. Landlord shall provide Tenant with hot and cold water for drinking,
lavatory and toilet purposes from regular building supply at reasonable
temperatures. For water furnished for any other purposes, Tenant shall
pay Landlord at the same rates as would have been charged by the City
of Cambridge.
5. Landlord shall (a) keep and maintain in first class and workable
condition (including replacement) the Building's sanitary, electrical,
heating, plumbing, elevator, air conditioning and other systems, (b)
provide cleaning services to the common areas of the Building, (c) keep
all roadways, walkways and parking areas of the Lot clean and lit, and
remove all snow and ice therefrom, (d) provide light bulbs for the
common areas of the Building, and (e) provide grounds maintenance to
all landscaped areas.
6. Landlord agrees to furnish cleaning service as is customary in similar
buildings in
Cambridge, to all office areas, corridors, stairwells, lavatories,
elevators, entrance lobbies, and all exterior windows of the Building.
<PAGE>
EXHIBIT H
RULES AND REGULATIONS
1. The sidewalks, entrances, driveways, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or encumbered by any
tenant or used for any purpose other than for ingress to and egress from
tenant's space or the Building and for delivery of merchandise and equipment in
a prompt and efficient manner using elevators and passageways designated for
such delivery by Landlord. There shall not be used in any common areas of the
Building either by any Tenant, its invitees or others in the delivery or receipt
of merchandise, any hand trucks, except those equipped with rubber tires and
sideguards. If a tenant's space is situated on the ground floor of the Building,
the tenant thereof shall further, at tenant's expense, keep the sidewalks and
curb in front of said premises clean and free from ice, snow, dirt and rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for any
purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any window of
the building; and no tenant shall sweep or throw or permit to be swept or thrown
from the tenant's space any dirt or other substances into any of the corridors
or halls, elevators, or out of the doors or windows or stairways of the
building, and no tenant shall use, keep or permit to be used or keep any foul or
noxious gas or substance in the tenant's space, or permit or suffer the tenant's
space to be occupied or used in a manner offensive or objectionable to Landlord
or other occupants of the Building by reason of noise, odors and/or vibrations,
or interfere in any way with other Tenants or those having business therein, nor
shall any animals or birds be kept in or about the Building. smoking or carrying
lighted cigars or cigarettes in the elevators of the Building is prohibited.
4. No awnings or other projections shall be attached to the outside walls of the
Building without the prior written consent of Landlord, in the Landlord's sole
discretion.
5. No sign, advertisement, notice or other lettering shall be exhibited
inscribed, painted or affixed by any tenant on any part of the outside of the
tenant's space of the Building or on the inside of the tenant's space if the
same is visible from the outside of the tenant's space without the prior written
consent of Landlord, except that the name of a tenant may appear on the entrance
door of the tenant's space. In the event of the violation of the foregoing by
any tenant, Landlord may remove same without any liability, and may charge the
expense incurred by such removal to a tenant or tenants violating this rule.
Interior signs on doors and the directory tablet shall be inscribed, painted or
affixed for
EXHIBIT 10.47
ADDENDUM NO. 1 TO OFFICE LEASE
THIS ADDENDUM NO. 1 TO OFFICE LEASE (the "Addendum No. 1") made as of
this 10th day of February, 1998 (the "Effective Date"), by and between (i)
Greystone Square 127 Limited Liability Company, a District of Columbia limited
liability company, hereinafter called "Lessor," as successor in interest
collectively to The Greystone Square 127 Associates, the former beneficial owner
of the office building situated at 1776 Eye Street, N.W., Washington, D.C. 20006
(the "Building"), and George H. Beuchert, Jr., Trustee, Thomas J. Egan, Trustee,
Oliver T. Carr, Trustee, William Joseph H. Smith, Trustee, and The Kiplinger
Washington Editors, Inc., Trustee, the owners of record who held legal title to
the Building as trustees on behalf of The Greystone Square 127 Associates, the
former beneficial owner of the Building, and (ii) Putnam, Hayes & Bartlett, Inc.
a Massachusetts corporation, hereinafter called "Lessee."
WITNESSETH:
WHEREAS, by Office Lease made, entered into and effective as of March
31, 1997 (the "Original Lease"), Lessor leased to Lessee and Lessee leased from
Lessor approximately 45,116 square feet of rentable area on the fifth (5th) and
sixth (6th) floors of the office building located at 1776 Eye Street, N.W.,
Washington, D.C. 20006 (such area being hereinafter referred to as the "Original
Demised Premises", and the building being hereinafter referred to as the
"Building");
WHEREAS, pursuant to the section of the Original Lease entitled
"OPTIONS TO EXPAND" Lessee had certain rights to expand the Original Demised
Premises;
WHEREAS, Lessor and Lessee have agreed to revise the Original Lease
related to Lessee's rights to lease additional space in the Building as
expansion areas of the Original Demised Premises;
WHEREAS, Lessor and Lessee desire to formally reflect their
understandings and agreements regarding the revision of Lessee's rights with
regard to the leasing of additional space in the Building as expansion areas of
the Original Demised Premises, and thus desire to modify the Original Lease
accordingly, with respect to the following sections of the Original Lease:
1. Demised Premises
2. Term
3. Rent
4. Operating Expenses, Operating Costs and Real Estate Taxes
5. Options to Expand
6. First Right to Negotiate
7. Alterations
8. Broker and Agent, and
9. Parking; and
WHEREAS, the Original Lease as modified and amended by this Addendum No. I are
sometimes hereinafter collectively referred to as the "Lease."
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
1. DEMISED PREMISES
(A) Alternate Expansion Space One.
(1) As of 12:00 a.m. of January 1, 1998 (the "Alternate
Expansion Space One Commencement Date") Lessor does hereby lease to Lessee and
Lessee does hereby lease from Lessor, for the term and upon the conditions Set
forth in this Addendum No. 1, a space on the seventh (7th) floor of the Building
identified as of the Alternate Expansion Space One as Suite 750, containing
approximately 3,660 square feet of rentable area (such space being hereinafter
referred to as "Alternate Expansion Space One"). The Alternate Expansion Space
One is outlined on the floor plan attached hereto as Exhibit A, and made a part
hereof. The floor area measurement of the Alternate Expansion Space One has been
measured in accordance with the Washington, D.C., Association of Realtors
Standard Method of Measurement, 1983 Version.
(2) Lessee agrees to accept possession of the Alternate
Expansion Space One in its "as-is" condition, existing on the Alternate
Expansion Space One Commencement Date without Lessor being required to undertake
any demolition, removals, alterations, improvements, decorations repairs or
modifications of the Alternate Expansion Space One, except that Lessor shall
take such steps as reasonably necessary to ensure (a) that building standard
services specified in the Section of the Lease entitled "SERVICES AND UTILITIES"
are readily available to the Alternate Expansion Space One, (b) that the
Alternate Expansion Space One is fit out to a condition no less than building
standard condition as specified in Exhibit B to the Lease, (c) that base
building fire and life safety systems of the Building are sufficiently in
compliance with applicable local codes and ordinances such that Lessee many
obtain a certificate of occupancy for use of Alternate Expansion Space One for
Lessee's business purposes and Lessee may obtain all necessary permits and
licenses to permit Lessee to make Alterations to Alternate Expansion Space One,
which Alterations by their nature fall generally within the scope and kind of
building standard improvements identified in Exhibit B to the Lease, and (d)
that as of the Effective Date any and all base building operating equipment
serving the Alternate Expansion Space One is in normal operating condition,
Notwithstanding the foregoing Lessor agrees to provide to Lessee the Alternate
Expansion Space One Allowance as hereinafter noted in Subsection (A) of the
Section of this Addendum No. 1 entitled "Alterations" subject however to the
conditions for Lessor's obligation to deliver such Allowance specified in that
Section.
(B) Mandatory Expansion Premises.
(1) As of 12:00 a.m. of the Mandatory Expansion Premises
Commencement Date (as hereinafter defined), Lessor does hereby lease to Lessee,
and Lessee does hereby lease from Lessor, for the term and upon the conditions
set forth in this Addendum No. 1, a space on the seventh (7th) floor of the
Building containing approximately 3,347 square feet of additional rentable area
(such space hereinafter referred to as the "Mandatory Expansion Premises"). The
Mandatory Expansion Premises is outlined on the floor plan attached hereto and
made a part hereof as Exhibit A-1. The floor area measurement of the Mandatory
Expansion Premises has been measured in accordance with the Washington, D.C.,
Association of Realtors Standard Method of Measurement, 1983 Version.
(2) Lessee agrees to accept possession of the Mandatory Expansion
Premises in its "as-is" condition, existing on the Mandatory Expansion Premises
Commencement Date without Lessor being required to undertake any demolition,
removals, alterations, improvements, decorations repairs or modifications of
the" Mandatory Expansion Premises, except that Lessor shall take such steps as
reasonably necessary to ensure (a) that building standard services specified in
the Section of the Lease entitled "SERVICES AND UTILITIES" are readily available
to the Alternate Expansion Space One, (b) that the Mandatory Expansion Premises
are delivered in broom clean condition, (e) that the Alternate Expansion Space
One is fit out to a condition no less than building standard condition as
specified in Exhibit D to the Lease and that base building fire and life safety
systems of the Building -are sufficiently in compliance with applicable local
codes and ordinances such that Lessee many obtain a certificate of occupancy for
use of Mandatory Expansion Premises for Lessee's business purposes and that
Lessee may obtain all necessary permits and licenses to permit Lessee to make
Alterations to Alternate Expansion Space One, which Alterations by their nature
fall generally within the scope and kind of building standard improvements
identified in Exhibit B to the Lease, and (d) that as of the date of delivery of
the Mandatory Expansion Premises any and all base building operating equipment
serving the Alternate Expansion Space One is in normal operating condition.
Notwithstanding the foregoing Lessor agrees to provide to Lessee the Mandatory
Expansion Premises Allowance as hereinafter noted in Subsection (B) of the
Section of this Addendum No. 1 entitled "Alterations" subject however to the
conditions for Lessor's obligation to deliver such Allowance specified in that
Section.
(C) "Definition of 'Demise Premises". As of the Alternate Expansion
Space One Commencement Date, the Original Demised Premises and the Alternate
Expansion Space One will be collectively referred to as the "Demised Premises,"
and the provisions of the Original Lease shall apply to the Demised Premises as
so redefined subject however to, and except as modified by, the provisions of
this Addendum No. 1". As of the Mandatory Expansion Premises Commencement Date,
the Original Demised Premises, the Alternate Expansion Space One and the
Mandatory Expansion Premises will thereafter be collectively referred to as the
"Demised Premises" and the provisions of the Original Lease shall apply to the
Demised Premises as so redefined subject however to, and except as modified by,
the provisions of this Addendum No. 1".
2. TERM
(A) Alternate Expansion Space One.
(1) Subject to and upon the covenants, agreements and
conditions of Lessor and Lessee set forth in this Addendum No. 1, the term of
the Original Lease with regard to Alternate Expansion Space One shall commence
on the Alternate Expansion Space One Commencement Date and shall be coterminous
with the term of the Original Lease with regard to the. Original Demised
Premises.
(2) With Lessee's acceptance of possession of the Alternate
Expansion Space One pursuant to this Addendum No. 1, Lessor and Lessee shall
execute the "Declaration as to Date of Delivery and Acceptance of Possession of
Alternate Expansion Space One," attached hereto as Exhibit D-2 all specify the
Alternate, which shall Expansion Space One Commencement Date. As of the
Alternate Expansion Space One Commencement Date, Exhibit D-2 of the Original
Lease shall be deemed deleted in its entirety.
(B) Mandatory Expansion Premises.
(1) Subject to and upon the covenants, agreements and
conditions of Lessor and Lessee set forth in this Addendum No. 1, the term of
the Original Lease with regard to the Mandatory Expansion Premises shall
commence on April 1, 1999 (the "Mandatory Expansion Premises Commencement
Date"), and shall be coterminous with the term of the Original Lease.
(2) In the event Lessor is unable to deliver possession of the
Mandatory Expansion Premises to Lessee by the Mandatory Expansion Premises
Commencement Date in Delivery Condition (as hereinafter defined) due to causes
beyond the control of Lessor, Lessor, its agents and employees, shall not be
liable or responsible for any claims, damages or liabilities arising in
connection therewith or by reason thereof, nor shall Lessee be excused or
released from the Original Lease or its obligations under this Addendum No. 1
due to Lessor's inability to deliver the Mandatory Expansion Premises in
Delivery Condition. The Mandatory Expansion Premises Commencement Date shall be
extended, however, to the date Lessor delivers possession of the Mandatory
Expansion Premises in Delivery Condition, and Lessee's obligations to pay
Mandatory Expansion Premises Monthly Rent (as hereinafter defined) pursuant to
the Lease shall commence thereon- Notwithstanding the foregoing, Lessor shall
diligently pursue the removal of any holdover tenant, including promptly filing
legal action for any available summary landlord/tenant proceeding and diligently
prosecuting such action to a final disposition. The Original Lease shall,
however, otherwise continue in full force and effect as to the Original Demised
Premises and the Alternate Expansion Space One in accordance with its terms. The
term "Delivery Condition!' shall mean that at the time of delivery of the
Mandatory Expansion Premises to Lessee (i) the Mandatory Expansion Premises are
free and clear of all tenancies and occupancies, and (ii) the physical condition
of the Mandatory Expansion Premises is as provided for in Subsection (B) (2) of
the Section of this Addendum No, I entitled "Demised Premises".
(3) When Lessor delivers possession of the Mandatory Expansion
Premises, Lessor and Lessee shall execute the "Declaration as to Date of
Delivery and Acceptance of Possession of Mandatory Expansion Premises," attached
hereto as Exhibit D-3, which shall specify the Mandatory Expansion Premises
Commencement Date. For the purposes of the Lease, the term "Mandatory Expansion
Premises Commencement Date" shall also mean any extended Mandatory Expansion
Premises Commencement Date which may be established pursuant to the operation of
the provisions of this section of the Addendum No. 1. As of the Effective Date,
Exhibit D-3 to the Original Lease is deleted in its entirety.
3. RENT
(A) Alternate Expansion Space One.
(1) Lessee covenants and agrees to pay to Lessor as
consideration for the leasing of the Alternate Expansion Space One the rent of
any kind or nature hereinafter specified in this Addendum No. 1. In that regard
Lessee agrees to pay monthly in advance to Lessor as part of rent monthly rent
for the Alternate Expansion Space One, the sum of which is as of the Alternate
Expansion Space One Commencement Date (as hereinafter defined), Ten Thousand
Five Hundred Twenty Five and 55/100ths Dollars ($10,525.55), but which sum is
subject to adjustment as provided for in Subsection (3) below of this Section of
this Addendum No. 1 (the "Alternate Expansion Space One Monthly Rent"). Lessee's
obligation to pay rent attributable to the Alternate Expansion Space One shall
begin on the Alternate Expansion Space One Commencement Date and shall continue
to remain an obligation of Lessee until completely satisfied.
(2) Alternate Expansion Space One Monthly Rent shall be
payable with Monthly Rent in the manner and as otherwise specified in the
Section of the Original Lease entitled "RENT' except that checks shall be made
payable to "Greystone Square 127 Limited Liability Company" and shall be sent in
care of "Hagner Management Corporation, Suite 710, 1776 Eye Street, N.W.,
Washington, D.C. 20006."
(3) Alternate Expansion Space One Monthly Rent shall be
subject to annual escalation pursuant to the Section of the Original Lease
entitled "ANNUAL ESCALATION OF MONTHLY RENT."
(4) Lessee additionally agrees to pay as rent with regard to
the leasing of the Alternate Expansion Space One such sum arising under the
Section of the Original Lease entitled "OPERATING EXPENSES. OPERATING COSTS AND
REAL ESTATE TAXES" as provided for by the Section of this Addendum No. 1
entitled "OPERATING EXPENSES- OPERATING COSTS AND REAL ESTATE TAXES."
(5) Lessor agrees to abate and forgive the payment by Lessee
of Alternate Expansion Space One Monthly Rent from January 1, 1998 through
October 31, 1998, with Lessee's first payment of Alternate Expansion Space One
Monthly Rent being due and payable as of November 1, 1998. Additionally Lessor
agrees to abate and forgive the payment of Alternate Expansion Space One Monthly
Rent for the calendar months of January 1999 and December 1999.
(B) Mandatory Expansion Premises.
(1) Lessee covenants and agrees to pay to Lessor as
consideration or the leasing of the Mandatory Expansion Premises rent of any
kind or nature hereinafter in this Addendum No. 1. In that regard Lessee agrees
to pay monthly in advance to Lessor as monthly rent for the Mandatory Expansion
Premises (the "Mandatory Expansion Premises Monthly Rent"). Mandatory Expansion
Premises Monthly Rent, as of the Mandatory Expansion Premises Commencement Date,
shall be an amount equal to one-twelfth (1/12th) of the product of the number of
square feet of rentable area attributable to Mandatory Expansion Premises
multiplied by the rental rate per rentable square foot for the Original Demised
Premises which would be in effect as of the Mandatory Expansion Premises
Commencement Date, said then effective rental rate being for the purposes of
this paragraph the rate determined by multiplying the then applicable amount of
Monthly Rent 1 (as defined in the Original Lease) as escalated pursuant to the
Section of the Lease entitled "ANNUAL ESCALATION OF MONTHLY RENT" by twelve (12)
and dividing the product thereof by 36,265 (being the rentable area of the
Original Premises as described and defined in the Original Lease). Lessee's
obligation to pay rent attributable to the Mandatory Expansion Premises shall
begin on the Mandatory Expansion Premises Commencement Date and shall continue
to remain an obligation of Lessee until completely satisfied.
(2) Mandatory Expansion Premises Rent shall be payable with
Monthly Rent in the manner and as otherwise specified in the Section of the
Original Lease entitled "RENT", except that checks shall be made payable to
"Greystone Square 127 Limited Liability Company" and shall be sent in care of
"Hagner Management Corporation, Suite 710, 1776 Eye Street, N.W., Washington,
D.C. 20006."
(3) Mandatory Expansion Premises Monthly Rent shall be subject
to annual escalation pursuant to the Section of the Original Lease entitled
"ANNUAL ESCALATION OF MONTHLY RENT."
(4) Lessee additionally agrees to pay as rent with regard to
the leasing of the Mandatory Expansion Premises such sums arising under the
Section of the Original Lease entitled "OPERATING EXPENSES, OPERATING COSTS AND
REAL ESTATE TAXES" as provided for by the Section of this Addendum No.1 entitled
"OPERATING EXPENSES, OPERATING COSTS AND REAL ESTATE TAXES."
(5) Lessor agrees to abate and forgive the payment by Lessee
of Mandatory Expansion Premises Monthly Rent for the first three (3) full
calendar months immediately following the Mandatory Expansion Premises
Commencement Date.
4. OPERATING EXPENSES, OPERATING COSTS AND REAL ESTATE TAXES
(A) Operating Expenses.
(1) As of the Alternate Expansion Space One Commencement Date,
Lessee's proportionate share of Operating Expenses (as defined in the Original
Lease) allocable to the Alternate Expansion Space One shall be the percentage
which the total rentable square feet of the Alternate Expansion Space One bears
to the total rentable square feet of office and retail areas in the Building,
which percentage as of the date of this Addendum No. 1 is 1.72% (based on the
total rentable square feet of the office and retail areas in the Building as of
the date of the Original Lease). The amount of such percentage to be paid by
Lessee for any calendar year shall be the percentage of the calendar year that
the Alternate Expansion Space One were leased by Lessee.
(2) As of the Mandatory Expansion Premises Commencement Date,
Lessee's proportionate share of Operating Expenses allocable to the Mandatory
Expansion Premises shall be the percentage which the total rentable square feet
of the Mandatory Expansion Premises bears to the total rentable square feet of
office and retail areas in the Building, which percentage shall be 1.57% (based
on the total rentable square feet of the office and retail areas in the Building
as of the date. of the Original Lease). The amount of such percentage to be paid
by Lessee for any calendar year shall be the percentage of the calendar year
that the Mandatory Expansion Premises were leased by Lessee.
(B) Operating Costs.
(1) As of the Alternate Expansion Space One Commencement Date,
Lessee's proportionate share of Operating Costs (as defined in the Original
Lease) allocable to the Alternate Expansion Space One shall be the percentage
which the total rentable square feet of the Alternate Expansion Space One bears
to the total rentable square feet of all office area in the Building, which
percentage as of the date of this Addendum No. 1 is 1.83% (based on the total
rentable square feet of office areas of the Building as of the date of the
Original Lease). The amount of such percentage to be paid by Lessee for any
calendar year shall be the percentage of the calendar year that the Alternate
Expansion Space One we're leased by Leases.
(2) As of the Mandatory Expansion Premises Commencement Date,
Lessee's proportionate share of Operating Costs allocable to the Mandatory
Expansion Premises shall be the percentage which the total rentable square feet
of the Mandatory Expansion Premises bears to the total rentable square feet of
office area in the Building, which percentage shall be 1.68% (based on the total
rentable square feet of office areas of the Building as of the date of the
Original Lease). The amount of such percentage to be paid by Lessee for any
calendar year shall be the percentage of the calendar year that the Mandatory
Expansion Premises were leased by Lessee.
(C) Real Estate Taxes.
(1) As of the Alternate Expansion Space One Commencement Date,
Lessee's proportionate share of Real Estate Taxes (as defined in the Original
Lease) allocable to the Alternate Expansion Space One shall be the percentage
which the total rentable square feet of the Alternate Expansion Space One bears
to the total rentable square feet of all office and retail areas in the
Building, which percentage as of the date of this Addendum No. 1 is 1.72% (based
on the total rentable square feet of the office and retail areas in the Building
as of the date of the Original Lease). The amount of such percentage to be paid
by Lessee for any calendar year shall be the percentage of the calendar that the
Alternate Expansion Space One were leased by Lessee.
(2) As of the Mandatory Expansion Premises Commencement Date,
Lessee's proportionate share of Real Estate Taxes allocable to the Mandatory
Expansion Premises shall be the percentage which the total rentable square feet
of the Mandatory Expansion Premises bears to the total rentable square feet of
office and retail areas in the Building, which percentage shall be 1.57% (based
on the total rentable square feet of the office and retail areas in the Building
as of the date of the Original Lease). The amount of such percentage to be paid
by Lessee for any calendar year shall be the percentage of the calendar year
that the Mandatory Expansion Premises were leased by Lessee.
(D) Estimated Payments.
Lessee shall continue to pay to Lessor, as additional rent, Estimated
Payments (as defined in the Original Lease) for Lessee's accumulated obligations
for increases in Operating Expenses, Operating Costs, and Real Estate Taxes,
except that the amounts of any Estimated Payment from time to time shall be
adjusted as of the Alternate Expansion Space One Commencement Date and again as
of the Mandatory Expansion Premises Commencement Date to reflect the increase in
Lessee's obligations under this Section of this Addendum No. 1 attributable to
the leasing first of the Alternate Expansion Space One and then to the leasing
of the Mandatory Expansion Premises,
(E) Mandatory Expansion Premises/Abatement of Additional Rent
Attributable to Operating Expenses Operating Costs and Real
Estate Taxes.
So long as Lessee is not in a Material Default (as defined in the
Original Lease) Lessor agrees to abate and forgive the payment of additional
rent attributable to increases in Operating Expenses, Operating Costs and Real
Estate Taxes through October 31, 1998, with Lessee's first payment of additional
rent attributable to increases in Operating Expenses, Operating Costs and Real
Estate Taxes, including Estimated Payments therefore, being due and payable as
of November 1, 1998. Additionally Lessor agrees to abate and forgive the payment
of one sixth (1/6th) of additional rent attributable to increases in Operating
Expenses, Operating Costs and Real Estate Taxes for calendar year 1999.
6. OPTIONS TO EXPAND
As of the Effective Date, the text of the Section of the Original Lease
entitled "OPTIONS T0 EXPAND" is deleted in its entirety as of the Effective
Date; additionally the Exhibits of the Original Lease related to the text of
that Section of the Original Lease, identified as Exhibit A-2 and Exhibit A-3,
and Exhibit D-2 and Exhibit D-3 are deleted in their entirety. In lieu of the
text of such Section and such Exhibits, the following new text and the attached
Substitute Exhibits A-2 through Substitute Exhibit A-7 and Substitute Exhibits
D-2, D-3 and D-5 are added to the Lease in their respective places:
"(A) Lessor grants to Lessee the following options to expand the
Demised Premises during the term of this Lease.
(i) The first option to expand the Demised Premises (the "First Expansion
Option") shall apply to space on the seventh (7th) floor of the Building,
having a rentable area of approximately 1,583 square feet (said area being
hereinafter referred to as the "First Expansion Space"). The First
Expansion Space is roughly indicated on Substitute Exhibit A-2 attached
hereto and made a part hereof. The First Expansion Space is identified as
of the Effective Date of the Addendum No. 1 as Suite 735.
(ii) The second option-to expand the Demised Premises (the "Second Expansion
Option") shall apply to space on the seventh (7th) floor of the Building,
having a rentable area of approximately 3,277 square feet (said area being
hereinafter referred to as the "Second Expansion Space"). The Second
Expansion Space is roughly indicated on Substitute Exhibit A-3 attached
hereto and made a part hereof The Second Expansion Space is identified as
of the Effective Date of the Addendum No.1 as Suite 725.
(iii) The third option to expand the Demised Premises
(the "Third Expansion Option")
shall apply to space on the seventh (7th) floor of the Building, having a
rentable area of approximately 974 square feet (said area being hereinafter
referred to as the "Third Expansion Space"). The Third Expansion Space is
roughly indicated on Substitute Exhibit A-4 attached hereto and made a part
hereof. The Third Expansion Space is identified as of the Effective Date of the
Addendum No.1 as Suite 720.
(iv) The fourth option to expand the Demised Premises (the "Fourth Expansion
Option") shall apply to space on the seventh (7th) floor of the Building,
having a rentable area of approximately 1,211 square feet (said area being
hereinafter referred to as the "Fourth Expansion Space"). The Fourth
Expansion Space is roughly indicated on Substitute Exhibit A-5 attached
hereto and made a part hereof. The Fourth Expansion Space is identified as
of the Effective Date of the Addendum No.1 as Suite 710,
(v) The fifth option to expand the Demised Premises (the "Fifth Expansion
Option') shall apply to space on the seventh (7th) floor of the Building,
having a rentable area of approximately 959 square feet (said area being
hereinafter referred to as the "Fifth Expansion Space"). The Fifth
Expansion Space is roughly indicated on Substitute Exhibit A-6 attached
hereto and made a part hereof, The Fifth Expansion Space is identified as
of the Effective Date of the Addendum No.1 as Suites 700-B,
(vi) The sixth option to expand the Demised Premises (the "Sixth Expansion
Option") shall apply to space on the seventh (7th) floor of the Building,
having a rentable area of approximately 7,589 square feet (said area being
hereinafter referred to as the "Sixth Expansion Space"). The Sixth
Expansion Space is roughly indicated on Substitute Exhibit A-7 attached
hereto and made a part hereof. The Sixth Expansion Space is identified as
of the Effective Date of the Addendum No.1 as Suite 700-A.
(vii)The First Expansion Space, the Second Expansion Space, the Third Expansion
Space, the Fourth Expansion Space, Fifth Expansion Space, and the Sixth
Expansion Space are hereinafter sometimes singularly or collectively
referred to as an '!Expansion Space"; and the First Expansion Option, the
Second Expansion Option, the Third Expansion Option, the Fourth Expansion
Option, the Fifth Expansion Option and Sixth Expansion Option are sometimes
singularly or collectively referred to as an "Expansion Option."
(viii) Lessee's entitlement to any Expansion Option shall be conditioned upon
Lessee exercising the applicable Expansion Option as set forth below. If
Lessee shall be in Material Default under the Lease either on the date
Lessee notifies Lessor of its intent to exercise the applicable Expansion
Option or at any time thereafter up to and including the commencement date
of the term of the Lease with respect to the applicable Expansion Space,
then the Expansion Option with regard to the applicable Expansion Space
shall become null and void and of no further force and effect.
(B) Lessee may exercise an applicable Expansion Option only as follows:
(i) With -regard to the First Expansion Option, Lessee may
only exercise the First Expansion Option by delivering written notice to Lessor,
not later than June 30, 1998, nor earlier than January 1, 1998, specifying its
election to exercise the First Expansion Option. If Lessee timely and properly
gives notice of its election to exercise this Expansion Option, the commencement
date of the Lease with -regard to the First Expansion Space, and the date Lessor
shall deliver possession of the First Expansion Space to Lessee, shall be July
1, 1999 (the "First Expansion Space Lease Commencement Date"). In the event
Lessor is unable to deliver possession of the First Expansion Space to Lessee by
July 1, 1999, Lessor, its agents and employees, shall. not be liable or
responsible for any claims, damages or liabilities arising in connection
therewith or by reason thereof, nor shall Lessee be excused or released from its
obliga- to accept possession of the First Expansion Space, pay rent for the
First Expansion Space, and perform any and all of Lessee's obligations under the
Lease with respect to the First Expansion Space. The First Expansion Space Lease
Commencement Date shall be extended to the earlier of (a) the date Lessor
delivers possession of the First Expansion Space to Lessee, provided Lessor has
given Lessee no less than ten (10) days prior written notice of the date of such
delivery, or (b) the date Lessee enters into. possession of the First Expansion
Space in accordance with the terms and conditions set forth herein. Lessor and
Lessee shall confirm the First Expansion Space Lease Commencement Date by
entering into the document provided for in Subsection (F) below of this Section.
(ii) No later than December 31, 2000, Lessor shall advise
Lessee of the earliest date that Lessor will be able to deliver the Second
Expansion Space to Lessee, which delivery date may be between April 1, 2002 and
April 1, 2003. Lessee may exercise the Second Expansion Option only by
delivering written notice to Lessor, no later than the later of March 31, 2001,
or twelve (12) full calendar months prior to the stated delivery date given by
Lessor in its notice to Lessee. Lessee may not issue its notice of election to
exercise such option to expand prior to receiving Lessor's notice of a delivery
date. Lessee's notice must specify its intent to exercise the Second Expansion
Option. If Lessee timely and properly gives notice of its intent to exercise
this Second Expansion Option, Lessor shall use due diligence to deliver the
Second Expansion Space to Lessee on the delivery date specified in Lessor's
notice (the "Second Expansion Space Lease Commencement Date"). In the event
Lessor is unable to deliver possession of the Second Expansion Space to Lessee
by Second Expansion Space Commencement Date, Lessor, its agents, and their
respective officers and employees, shall not be liable or responsible for any
claims, damages or liabilities arising in connection therewith or by reason
thereof, nor shall Lessee be excused or released from its obligation to accept
possession of the Second Expansion Space, pay rent for the Second Expansion
Space, and perform any and all of Lessee 's obligations under this Lease with
respect to the Second Expansion. Space. The Second Expansion Space Lease
Commencement Date shall be extended to the earlier of (a) the date Lessor
delivers possession of the Second Expansion Space to Lessee in accordance with
the- terms and conditions set forth herein, provided Lessor has given Lessee no
less than ten (10) days prior written notice of the date of such delivery, or
(b) the date Lessee enters into possession of the Second Expansion Space. Lessor
and Lessee shall confirm the Second Expansion Space Lease Commencement Date by
entering into the document provided for in Subsection (F) below of this Section.
(iii) No later than December 31, 2000, Lessor shall advise
Lessee of the earliest date that Lessor will be able to deliver the Third
Expansion Space to Lessee, which delivery date may between April 1, 2002 and
April 1, 2003. Lessee may exercise the Third Expansion Option only by delivering
written notice to Lessor, no later than the later of March 31, 2001, or twelve
(12) full calendar months prior to the stated delivery date given by Lessor in
its notice to Lessee. Lessee may not issue its notice of election to exercise
such option to expand prior to receiving Lessor's notice of a delivery date.
Lessee's notice must specify its intent to exercise the Third Expansion Option.
If Lessee timely and properly gives notice of its intent to exercise this Third
Expansion Option, Lessor shall use due diligence to deliver the Third Expansion
Space to Lessee on the delivery date specified in Lessor's notice (the "Third
Expansion Space Lease Commencement Date"). In the event Lessor is unable to
deliver possession of the Third Expansion Space to Lessee by Third Expansion
Space Commencement Date, Lessor, its agents, and their respective officers and
employees, shall not be liable or responsible for any claims, damages or
liabilities arising in connection therewith or by reason thereof, nor shall
Lessee be excused or released from its obligation to accept possession of the
Third Expansion Space, pay rent for the Third Expansion Space, and perform any
and all of Lessee 'a obligations under this Lease with respect to the Third
Expansion Space. The Third Expansion Space Lease Commencement Date shall be
extended to the earlier of (a) the date Lessor delivers possession of the Third
Expansion Space to Lessee in accordance with the terms and conditions set forth
herein, provided Lessor has given Lessee no less than ten (10) days prior
written notice of the date of such delivery, or (b) the date Lessee enters into
possession of the Third Expansion Space, Lessor and Lessee shall confirm the
Third Expansion Space Lease Commencement Date by entering into the document
provided for in Subsection (F) below of this Section.
(iv) No later than December 31, 2000, Lessor shall advise
Lessee of the earliest date that Lessor will be able to deliver the Fourth
Expansion Space to Lessee, which delivery date may be between April 1, 2002 and
April 1, 2003. Lessee may exercise the Fourth Expansion Option only by
delivering written notice to Lessor, no later than the later of March 31, 2001,
or twelve (12) full calendar months prior to the stated delivery date given by
Lessor in its notice to Lessee. Lessee may not issue its notice of election to
exercise such option to expand prior to receiving Lessor's notice of a delivery
date. Lessee's notice must specify its intent to exercise the Fourth Expansion
Option. If Lessee timely and properly gives notice of its intent to exercise
this Fourth Expansion Option, Lessor shall use due diligence to deliver the
Fourth Expansion Space to Lessee on the delivery date specified in Lessor's
notice (the "Fourth Expansion Space Lease Commencement Date"). In the event
Lessor is unable to deliver possession of the Fourth Expansion Space to Lessee
by Fourth Expansion Space Commencement Date, Lessor, its agents, and their
respective officers and employees, shall not be liable or responsible for any
claims, damages or liabilities arising in connection therewith or by reason
thereof, nor shall Lessee be excused or -released from its obligation to accept
possession of the Fourth Expansion Space, pay rent for' the Fourth Expansion
Space, and perform any and all of Lessee 's obligations under this Lease with
respect to the Fourth Expansion Space. The Fourth Expansion Space Lease
Commencement Date shall be extended to the earlier of (a) the date Lessor
delivers possession of the Fourth Expansion Space to Lessee in accordance with
the terms and conditions set forth herein, provided Lessor has given Lessee no
less than ten (10) days prior written notice of the date of such delivery, or
(b) the date Lessee enters into possession of the Fourth Expansion Space. Lessor
and Lessee shall confirm the Fourth Expansion Space Lease Commencement Date by
entering into the document provided for in Subsection (F) below of this Section.
(v) No-later than December 31, 2000, Lessor shall advise Lessee of the earliest
date that Lessor will be able to deliver the Fifth Expansion Space to
Lessee, which delivery date may be between April 1, 2062 and April 1, 2003.
Lessee may exercise the Fifth Expansion Option only by delivering written
notice to Lessor, no later than the later of March 31, 2001, or twelve (12)
full calendar months prior to the stated delivery date given by Lessor in
its notice to Lessee. Lessee may not issue its notice of election to
exercise such option to expand prior to receiving Lessor's notice of a
delivery date. Lessee's notice must specify its intent to exercise the
Fifth Expansion Option. If Lessee timely and properly 'gives notice of its
intent to exercise this Fifth Expansion Option, Lessor shall use due
diligence to deliver the Fifth Expansion Space to Lessee on the delivery
date specified in Lessor's notice (the "Fifth Expansion Space Lease
Commencement Date"). In the event Lessor is unable to deliver possession of
the Fifth Expansion Space to Lessee by Fifth Expansion Space Commencement
Date, Lessor, its agents, and their respective officers and employees,
shall not be liable or responsible for any claims, damages or liabilities
arising in connection therewith or by -reason thereof, nor shall Lessee be
excused or released from its obligation to accept possession of the Fifth
Expansion Space, pay rent for the Fifth Expansion Space, and perform any
and all of Lessee 's obligations under this Lease with respect to the Fifth
Expansion Space. The Fifth Expansion Space Lease Commencement Date shall be
extended to the earlier of (a) the date Lessor delivers possession of the
Fifth Expansion Space to Lessee in accordance with the terms and conditions
set forth herein, provided Lessor has given Lessee no less than ten (10)
days prior written notice of the date of such delivery, or (b) the date
Lessee enters into possession of the Fifth Expansion Space. Lessor and
Lessee shall confirm the Fifth Expansion Space Lease Commencement Date by
entering into the document provided for in Subsection (F) below of this
Section.
(vi) With regard to the Sixth Expansion Option, Lessee may
only exercise the Sixth Expansion Option by delivering written notice to Lessor,
not later than March 31, 2003, nor earlier than October 1, 2002, specifying its
election to exercise the Sixth Expansion Option. If Lessee timely and properly
gives notice of its election to exercise this Expansion Option, the commencement
date of this Lease with regard to the Sixth Expansion Space, and the date Lessor
shall deliver possession of the Sixth Expansion Space to Lessee, shall be April
1, 2004 (the "Sixth Expansion Space Lease Commencement Date"). In the event
Lessor is unable to deliver possession of the Sixth Expansion Space to Lessee by
April 1, 2004, Lessor, its agents and employees, shall not be liable or
responsible for any claims, damages or liabilities arising in connection
therewith or by reason thereof, nor shall Lessee be excused or released from its
obligation to accept possession of the Sixth Expansion Space, pay rent for the
Sixth Expansion Space, and perform any and all of Lessee's obligations under
this Lease with re- to the Sixth Expansion Space. The Sixth Expansion Space
Lease Commencement Date shall be extended to the earlier of (a) the date Lessor
delivers possession of the Sixth Expansion Space to Lessee, provided Lessor has
given Lessee to less than ten (10) days prior written notice of the date of such
delivery, or (b) the date Lessee enters into possession of the Sixth Expansion
Space in accordance -with the tern and conditions set forth herein. Lessor and
Lessee shall confirm the Sixth Expansion Space Lease Commencement Date by
entering into the document provided for in Subsection (F) below of this Section.
(vii) Lessee may exercise the Second Expansion Option, the
Third Expansion Option, the Fourth Expansion Option and the Fifth Expansion
Option by one or. more notices delivered to Lessor, provided that any notice or
notices given must be delivered to Lessor no later than the later of March 31,
2001, or twelve (12) full calendar months prior to the stated delivery date
given by Lessor in its notice to Lessee as specified above. Additionally Lessor
may advise Lessee by one or more notices of the date or dates of delivery of the
various Expansion Spaces designated as the Second Expansion Space, the Third
Expansion Space, the Fourth Expansion Space, or the Fifth Expansion Space,
provided that Lessor shall have advised Lessee as to all of such delivery dates
for all space encompassed in such Expansion Spaces by the close of business of
December 31, 2000. As and to the extent that Lessee has exercised one or more of
such Expansion Options, Lessor may deliver any Expansion Space for which Lessee
has exercised its Expansion Option singly or in combination, provided that
Lessor shall have delivered each Expansion Space for which Lessee has exercised
an Expansion Option by April 1, 2003. Finally as to any Expansion Space
identified as in this Section as the Second Expansion Space, the Third Expansion
Space, the Fourth Expansion Space, and the Fifth. Expansion Space in this
Section, Lessor reserves the right to reconfigure any or all of such Expansion
Spaces to permit Lessor to lease all or parts of the space encompassed by such
Expansion Spaces to third parties during the period prior to delivery to Lessee
pursuant to the provisions of this Section of the lease, and if Lessor elects to
so reconfigure any or all of the space encompassed by those Expansion Spaces
then any notice given to Lessee by Lessor pursuant to Subsections (B) (ii)
(iii), (iv) and (v) of this Section advising Lessee of the delivery date for any
Expansion Space may refer to that Expansion Space as reconfigured, provided that
Lessor may not delay, as a result of any leasing arrangement with any third
party related to interim leasing of any space that is, in whole or in part, all
or a portion of the Second Expansion Space, the Third Expansion Space, the
Fourth Expansion Space, and the Fifth Expansion Space, the delivery of any space
indicated as part of any Expansion Space beyond the last date provided for
Delivery of those Expansion Spaces in Subsections (B) (ii) (iii), (iv) and (v)
of this Section.
(viii) Furthermore if the delivery date of any of the Second
Expansion Space, the Third Expansion Space, the Fourth Expansion Space or the
Fifth Expansion Space specified by Lessor would occur within three (3) calendar
months of the delivery date for any other of these Expansion Spaces, then Lessee
shall not be obligated to accept any Expansion Space unless or until Lessor is
able to deliver at the same time one or more additional Expansion Space(s), such
that the total rentable area being delivered by Lessor to Lessee at any one time
as one or more Expansion Spares is in the aggregate no less than twenty four
hundred (2,400) rentable square feet, which Space or Spaces would be contiguous.
(C) Lessee's exercise of any Expansion Option shall be subject to the
following conditions.
(i) Lessee shall accept the Expansion Space, as part of the
Demised Premises, in its then "as Is" condition, existing on the date that
possession of the Expansion Space is delivered to Lessee by Lessor, without
Lessor being required to undertake any demolition, removals, alterations,
improvements, decorations, repairs or modifications of the Expansion Space.
Notwithstanding the agreement of Lessor and Lessee contained in the preceding
sentence, Lessor shall take such steps as reasonably necessary to ensure (a)
that building standard services specified in the Section of this Lease entitled
"SERVICES AND UTILITIES" are readily available to the Expansion Space, (b) that
the Expansion Space in question is fit out to a condition no less than building
standard condition as specified in Exhibit 11 to this Lease, and (c) that base
building fire and life safety systems of the Building are sufficiently in
compliance with applicable local codes and ordinances such that (1) Lessee may
obtain, if required by then applicable District of Columbia law, a certificate
of occupancy for use of the Expansion Space for Lessee's business purposes and
(2) Lessee may obtain all necessary permits and licenses to permit Lessee to
make Alterations to the Expansion Space, which Alterations by their nature fall
generally within the scope and kind of building standard improvements identified
in Exhibit B to this Lease,
(ii) The term of this Lease with respect to any Expansion
Space shall commence on the applicable Expansion Space Commencement Date, and
said term shall be coterminous with the initial term of this Lease and any
extension thereof duly exercised by Lessee.
(iii) Lessee shall pay to Lessor, -as the initial monthly rent
for the applicable Expansion Space (hereinafter "Expansion Space Monthly Rent"),
an amount equal to one-twelfth (1/12th) of the product of the number of square
feet of rentable area attributable to that Expansion Space multiplied by one
hundred percent (100%) of the Net Effective Market Rental Rate projected to be
in effect as of the applicable Expansion Space Commencement Date and further to
pay the applicable Expansion Space Monthly Rent to Lessor with Monthly Rent. If
Lessor and Lessee cannot reach agreement on the Net Effective Market Rental Rate
for any Expansion Space at the time Lessee. exercises an Expansion Option within
sixty (60) days after the date Lessor receives Lessee's notice of election to
exercise the applicable Expansion ion Option, the Net Effective Market Rental
Rate for the applicable Expansion Space shall be determined in accordance with
the procedure set forth in Subsection (C) of the Section of this Lease entitled
"OPTION TO EXTEND." Net Effective Market Rental Rate shall take into account
that (i) any Expansion Space Monthly Rent for an Expansion Space shall be
subject to periodic escalation during the term of this Lease as provided in
Subsection (C)(vii) of this Section, and (ii) Lessee shall be paying to Lessor
with regard to such Expansion Space additional rent arising under the provisions
of the Section of this Lease entitled "OPERATING EXPENSES, OPERATING COSTS AND
REAL ESTATE TAXES" with the calendar year fixed as the Base Year for the
calculations under that Section of this Lease with regard to the applicable
Expansion Space to be the calendar year in which the appropriate Expansion Space
Commencement Date of this Lease with regard to that Expansion Space occurs.
(iv) Lessee shall commence to pay the appropriate Expansion
Space Monthly Rent, in advance, from and after the appropriate Expansion Space
One Commencement Date.
(v) Lessee shall commence to pay, with regard to the
applicable Expansion Space, additional rent arising under the provisions of the
Section of this Lease entitled "OPERATING EXPENSES REAL ESTATE, OPERATING COSTS
AND REAL ESTATE TAXES" as of the applicable Expansion Space Commencement Date,
except that the calendar year fixed as the Base Year for the purposes of making
the calculations under that Section shall be, with regard to the applicable
Expansion Space, the calendar year in which the appropriate Expansion Space
Commencement Date fixed under -the applicable provisions of Subsection (B) of
this Section above occurs. The percentages of Lessee's proportionate shares of
Operating Expenses, Operating Costs and Real Estate Taxes with regard to the
applicable Expansion Space shall be determined by comparing the applicable
rentable area of that Expansion Space in question to the stated rentable area of
the office spaces of the Building or the stated rentable area of the office and
retail spaces of the Building as given in that Section of this Lease.
(vi) During the initial term of this Lease, Expansion Space
Monthly Rent for any Expansion Space as initially fixed at the leasing of such
Expansion Space by Lease shall be subject to adjustment and increase as and when
Monthly Rent is subject to adjustment pursuant to the provisions of the Section
of this Lease entitled "ANNUAL ESCALATION OF MONTHLY RENT," and in accordance
with the formula fixed therein for increase and escalation of Monthly Rent,
provided that any such increase in any Expansion Space Monthly Rent shall be
abated during the period from the Expansion Space Commencement Date through the
last day of the calendar month that is twelve (12) full calendar months
following the applicable Expansion Space Commencement Date. During the Extension
Period, Expansion Space Monthly Rent for each Expansion Space shall be subject
to adjustment and increase by the prevailing mechanism for effectuating an
escalation of Monthly Rent agreed upon by Lessor and Lessee, or as otherwise
determined pursuant to the provisions of Subsection (C) of the Section of this
Lease entitled "OPTION T0 EXTEND."
(vii) All rent accruing or related to any Expansion Space
shall be treated as part of rent due and owing by Lessee to Lessor under this
Lease.
(viii) All other terms and conditions of this Lease shall
apply to each Expansion Space, except as the same are specifically modified by
the mutual written agreement of Lessor and Lessee, with the applicable Expansion
Space being deemed to become and be treated as part of the Demised Premises from
and after the applicable Expansion Space Commencement Date,
(D) If Lessee duly and properly exercises the option to terminate the
term of this Lease as provided in the Section of this Lease entitled "OPTION TO
TERMINATE", then Lessee, by giving such notice of its election to terminate,
shall be deemed to have waived thereafter any further rights under this Section
to exercise any Expansion Option for Expansion Space not then exercised by
Lessee through the giving of written notice to Lessor as provided in Subsection
(B) above of this Section. Additionally Lessee shall be obligated to pay to
Lessor as consideration for the right to exercise such right of termination with
regard to any Expansion Space leased by Lessee pursuant to this Section of this
Lease as of the Termination Date, a termination payment calculated as provided
in Subsection (E) of the Section of this Lease entitled "OPTION TO TERMINATE."
Such termination payment shall be due and payable to Lessor with the Termination
Payment provided for in that Section of this Lease.
(E) Lessor shall have prepared an addendum setting forth the terms and
conditions for Lessee's leasing of the applicable Expansion Space. Thereafter
Lessor and Lessee agree in good faith to proceed to diligently negotiate and
execute such addendum with intent of having such addendum executed by Lessor and
Lessee within sixty (60) days after the date Lessor and Lessee agree upon the
business terms for the leasing of the applicable Expansion Space, or
alternatively. if applicable the date that the brokers present their
determinations of Net Effective Market Rental Rate applicable to that Expansion
Space.
(F) As appropriate, when Lessor delivers possession of an Expansion
Space to Lessee, Lessor and Lessee shall execute a document in the form of the
Declaration, attached hereto as Exhibit D-5, which shall specify the applicable
Expansion Space Commencement Date for that Expansion Space. In each case,
execution of such document shall not be deemed a condition to the occurrence of
the applicable commencement date of this Lease with regard to the applicable
Expansion Space.
(G) This Section of the Lease shall become null and void and of no
force and effect if Lessee assigns this Lease, or has subleased at any one time
in excess of thirty percent (30%) of the area of the Demised Premises as then
leased by Lessee, to any party other than a qualified party identified in
Subsection (D) of the Section of this Lease entitled "ASSIGNMENT AND
SUBLETTING".
6. ALTERATIONS
(A) In connection with Lessee's leasing of Alternate Expansion Space
One pursuant to this Addendum No. 1, and except as specifically provided for in
Subsection (A) (2) of the Section of this Addendum No. 1 entitled "Demised
Premises, " Lessor shall have no obligation to perform or pay for any
Alterations in Alternate Expansion Space One or in the Demised Premises. Lessor
shall, however, make available to Lessee, subject to the satisfaction of the
conditions of this Section of this Addendum No. 1, an allowance in the amount of
not more that One Hundred Seven Thousand Nine Hundred Seventy and 00/100 ths
Dollars ($107,970.00) (the "Alternate Expansion Space One Allowance"). The
Alternate Expansion Space One Allowance may be used by Lessee for (i) the hard
construction costs incurred by Lessee to construct and install Alterations which
Lessee may perform in or to the Alternate Expansion Space One during a period
beginning on the Alternate Expansion Space One Commencement Date and expiring
June 30, 2002 (the "Fit Out Period"), provided that if Lessee has not exercised
its option to terminate the term of the Lease set forth in the Section of the
Lease entitled ".OPTION TO TERMINATE" then the Fit Out Period shall be
automatically extended to December 31, 2004; (h) any construction-related items
(including by not limited to, architectural and consulting fees, permit fees,
computer, telephone and communications facilities, and construction management
fees); and (iii) the costs of office personal property of Lessee to be located
in the Alternate Expansion Space One, including equipment and furniture.
Provided Lessee has satisfied the conditions hereinafter related to release of
all or any portion of the Alternate Expansion Space Allowance, no request for
'reimbursement to Lessee under the Alternate Expansion Space One Allowance will
be accepted by Lessor prior to December 1, 1999 nor later than the last date of
the Fit Out Period.
(B) In connection with Lessee's leasing of Mandatory Expansion Premises
pursuant to this Addendum No. 1, and except as specifically provided for in
Subsection (B)(2) of the Section of this Addendum No. 1 entitled "Demised
Premise" Lessor shall have no obligation to perform or pay for any Alterations
in Mandatory Expansion Premises or in the Demised Premises. Lessor shall,
however, make available to Lessee, subject to the satisfaction of the conditions
of this Section of this Addendum No. 1, an allowance in the amount of not more
than Eighty Three Thousand Six Hundred Seventy Five and 00/100ths Dollars
($83,675.00) (the "Mandatory Expansion Premises Allowance"). The Mandatory
Expansion Premises Allowance may be used by Lessee for (i) the hard construction
costs incurred by Lessee to construct and install Alterations which Lessee may
perform in or to the Mandatory Expansion Premises during a period beginning on
the Mandatory Expansion Premises Commencement Date and expiring June 30, 2002
(the "Fit Out Period"), provided that if Lessee has not exercised its option to
terminate the term of the Lease set forth in the Section of the Lease entitled
"OPTION TO TERMINATE" then the Fit Out Period shall be automatically extended to
December 31, 2004; (ii) any construction-related items (including by not limited
to, architectural and consulting fees, permit fees, computer, telephone and
communications facilities, and construction management fees); and (iii) the
costs of office personal property of Lessee to be located in the Mandatory
Expansion Premises, including equipment and furniture, Provided Lessee has
satisfied the conditions hereinafter related. to release of all or any portion
of the Mandatory Expansion Premises Allowance, no request for reimbursement to
Lessee under the Mandatory Expansion Premises Allowance will be accepted by
Lessor prior to December 1, 1999 nor later than the last date of the Fit Out
Period. Notwithstanding the foregoing if at any time Lessee is in default, after
the giving of notice and the passage of the applicable period to cure, of its
obligations to pay rent provided for under the Lease, then Lessor shall have no
obligation to reimburse Lessor from the Mandatory Expansion Premises Allowance
for any costs incurred by Lessee for or related to Alterations performed in or
to the Mandatory Expansion Premises.
(C) Any Alterations to the Alternate Expansion Space One and to the
Mandatory Expansion Premises shall be performed in accordance with the Section
of the Original Lease entitled "ALTERATIONS", except as hereinafter modified by
the following provisions:
(i) Prior to the commencement of any Alterations in and to the
Alternate Expansion Space One and Mandatory Expansion
Premises, Lessee shall also submit to Lessor copies of all
permits required in connection therewith, and upon the
completion of those Alterations, Lessee, at its expense, shall
furnish to Lessor a set of the "as-built" plans for such
Alterations performed in the Alternate Expansion Space One and
Mandatory Expansion Premises.
(ii) Lessee shall promptly submit to Lessor (but on a monthly basis only)
invoices for the costs incurred by Lessee in performing the Alterations in
or related to Alternate Expansion Space One and Mandatory Expansion
Premises, together with signed waivers of mechanic's hens executed by all
contractors or subcontractors performing those Alterations, and such other
information or documentation as Lessor's lender may request or require,
which may include an architect's certificate of substantial completion for
any final disbursement to be made. After inspection and approval of those
portion(s) of these Alterations as reflected by such certificates and
invoices and verification of the invoices and waivers submitted, Lessor
shall promptly reimburse to Lessee appropriate amounts requested by the
invoices. In no event, however, shall Lessor be obligated to reimburse
Lessee for any amount if such amount individually or in the aggregate
exceeds the total amount of the Alternate Expansion Space One Allowance and
Mandatory Expansion Premises Allowance.
(iii) Lessee must submit all invoices for reimbursement no earlier
than December 1, 1999 and no later than the last date of the
Fit Out Period, and Lessor shall have no obligation to
reimburse Lessee for any invoices submitted prior to December
1, 1999 or after the last date of the Fit Out Period. In the
event that Lessee has not requested release of all monies in
the Alternate Expansion Space One Allowance and Mandatory
Expansion Premises Allowance by the last date of the Fit Out
Period, then any remaining monies shall be credited by Lessor
to rent next due and owing by Lessee under the Lease.
(iv) Notwithstanding the foregoing, Lessor shall have no obligation
to reimburse Lessee or to credit any unused portion of the
Alternate Expansion Space One Allowance and Mandatory
Expansion Premises Allowance to Monthly Rent due and owing, if
Lessee fails to comply with the terms and conditions of this
Section of this Addendum No. 1, or if Lessee is in Material
Default of the Lease, whether at the time Lessee makes a
request for reimbursement or at any time thereafter up to and
including the date Lessor makes any such reimbursement to
Lessee.
7. BROKER AND AGENT
(A) Lessor and Lessee each represent and warrant one to another that,
except as hereinafter set forth, neither of them has employed any broker in
carrying on the negotiations, or had any dealings with any broker, relating to
this Addendum No. 1 to Lease Agreement. Lessor represents that it has employed
Randall H. Hagner Company as its broker ("Lessor's Broker"); Lessee represents
that it has worked with both Goodman Segar Hogan Hoffler and Jones Lang Wootton
USA (collectively, "Lessee's Brokers"). Lessor, pursuant to a separate
agreement, has agreed to pay the commission of Lessor's Broker, together with
the commission of a single, authorized cooperating broker, Lessee represents and
warrants to Lessor that in no event shall Lessor be obligated to pay a
cooperating broke-rage or other commission to more than one of Lessee's Brokers.
Lessor shall indemnify and hold Lessee harmless from and against all claim or
claims for brokerage or other commission(s) arising from or out of any breach of
the foregoing representation and warranty by Lessor. Lessee shall indemnify and
hold Lessor harmless from and against all claim or claims for brokerage or other
commission(s) arising from or out of my breach of any of the foregoing
representations and warranties by Lessee, and additionally from or out or any
conflicting or competing claims made by Lessee's Brokers as to any entitlement
and/or amount of commission due to either of Lessee's Brokers and relating to
this transaction.
(B) Lessor has designated as of the date first hereinabove stated,
Hagner Management Corporation, its manager of operations, as its agent pursuant
to the provisions of the second (2nd) paragraph of the Section of the Original
Lease entitled "BROKER AND AGENT."
8. PARKING
(A) As of the Alternate Expansion Space One Commencement Date, Lessee
shall be entitled to two (2) additional parking contracts, under the same terms
and conditions as specified in the Section of the Original Lease entitled
"PARKING," provided that the period for action by Lessee shall be sixty (60)
days after the Alternate Expansion Space One.
(B) As of the Mandatory Expansion Premises Commencement Date, Lessee
shall be entitled to two (2) additional parking contracts, under the same terms
and conditions of the Section of the Original Lease entitled "PARKING," provided
that the period for action by Lessee shall be sixty (60) days after the
Mandatory Expansion Premises Commencement Date.
(C) As of the applicable Expansion Space Commencement Date, Lessee
shall be entitled to appropriate number parking contracts, under the same terms
and conditions of the Section of the Original Lease entitled "PARKING," provided
that the period for action by Lessee shall be sixty (60) days after the
applicable Expansion Space Commencement Date.
9. OTHER TERMS AND PROVISIONS
All other provisions of the Original Lease shall remain in effect and
unchanged except as modified herein, and all terms, covenants and conditions
shall remain in effect as modified by this Addendum No. 1. If any provision of
this Addendum No. 1 agreement conflicts with the Original Lease, the provisions
of this Addendum No.
1 shall control.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Addendum No. 1
to Original Lease Agreement to be signed in their names by themselves or by
their duly authorized representatives and delivered as their act and deed,
continuing to be legally bound by all its terms and conditions.
LESSOR:
GREYSTONE SQUARE 127 LIMITED LIABILITY COMPANY, a District of Columbia limited
liability company
By. CAPITOL TREE LIMITED LIABILITY
COMPANY,
a District of Columbia limited
liability company, a Member
By: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION, a Delaware corporation,
its Member
By: REYSTONE REALTY CORPORATION, a Delaware corporation, as duly authorized
agent for New York Life Insurance and Annuity Corporation
Attest:
Name: /s/Mary M. Macy
Title: Assistant Secretary
(Corporate Seal)
By:
Name: Assistant
Title: Assistant Secretary
(Corporate Seal)
By: /s/Daniel J. McKillop
Daniel J. McKillop
Vice President
<PAGE>
By. KBSK SQUARE 127 LIMITED PARTNERSHIP a District of Columbia limited
partnership, a Member
By: KBSK SQUARE 127 ASSOCIATES, L.L.C., a District of Columbia limited
liability company, its sole General Partner
By: The Kiplinger Washington Editors, Inc Manager and Member
Name:
Title: Manager
Attest:
By:
Name: Assistant Secretary
(Corporate Seal)
<PAGE>
LESSEE:
Putnam, Hayes & Bartlett, Inc.
By: /s/ Barbara J. Levine
Barbara J. Levine
Corporate Counsel and Clerk
Attest:
Name:
Title:
(Corporate Seal)
<PAGE>
"Exhibit A"
to Addendum No. 1 to Office Lease
Plan of Alternate Expansion Space One
<PAGE>
EXHIBIT A
Seventh Floor Plan
Intentionally Deleted
<PAGE>
"Exhibit A-1"
to Addendum No. I to Office Lease
Plan of Mandatory Expansion Premises
<PAGE>
EXHIBIT A-1
Seventh Floor Plan
Intentionally Deleted
<PAGE>
"Exhibit it A-2"
to Addendum No. I to Office Lease
Plan to First Expansion Space
<PAGE>
EXHIBIT A-2
Seventh Floor Plan
Intentionally Deleted
<PAGE>
"Exhibit A-3"
to Addendum No. 1 to Office Lease
Plan of Second Expansion Space
<PAGE>
EXHIBIT A-3
Seventh Floor Plan
Intentionally Deleted
<PAGE>
"Exhibit A-4"
to Addendum No. 1 to Office Lease
Plan of Third Expansion Space
<PAGE>
EXHIBIT A-4
Seventh Floor Plan
Intentionally Deleted
<PAGE>
"Exhibit A-5"
to Addendum No. 1 to Office Lease
Plan of Fourth Expansion Space
<PAGE>
EXHIBIT A-5
Seventh Floor Plan
Intentionally Deleted
<PAGE>
"Exhibit A-6"
to Addendum No. 1 to Office Lease
Plan of Fifth Expansion Space
<PAGE>
EXHIBIT A-6
Seventh Floor Plan
Intentionally Deleted
<PAGE>
"Exhibit A-7"
to Addendum No. 1 to Office Lease
Plan of Sixth Expansion Space
<PAGE>
EXHIBIT A-7
Seventh Floor Plan
Intentionally Deleted
<PAGE>
"Exhibit D-2"
Declaration As to Date of Delivery
And Acceptance of Possession of
Alternate Expansion Space One
Attached to and made a part of the Lease, dated the ___________ day of
____________, 19__, entered into by and between Greystone Square 127 Limited
Liability Company, a District of Columbia limited liability company, (the
"Lessor") and Putnam, Hayes & Bartlett, Inc., a Massachusetts corporation,
hereinafter called "Lessee."
Lessor and Lessee do hereby declare and evidence that possession of the
Expansion Space Two was accepted by Lessee in its "as is" condition on the
________ day of __________, ____. The Lease is now in fall force and effect with
regard to Alternate Expansion Space One. For the purpose of this Lease,
Alternate Expansion Space One Commencement Date is established as beginning on
the _________________ day of ________________, ________. As of the date of
delivery and acceptance of possession of the Expansion Space Two as herein set
forth, there is no right of set off against rents claimed by Lessee against
Lessor.
Lessee, if a corporation, states that its registered agent in the
District of Columbia is _________________________, having an address at
_________________________________________, and that it is a corporation in good
standing in the District of Columbia.
[Signatures appear on immediately following pages.]
<PAGE>
LESSOR:
GREYSTONE SQUARE 127 LIMITED LIABILITY COMPANY, a District of Columbia limited
liability company
By: CAPITOL TREE LIMITED LIABILITY COMPANY,
a District of Columbia limited liability company, a Member
By; NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION, a Delaware corporation,
its Member
By: GREYSTONE REALTY CORPORATION,
a Delaware corporation, as duly authorized agent for New York Life
Insurance and Annuity Corporation
By:
Charles J. Lauckhardt
Vice Chairman and Chief Investment Officer
Attest:
Name:
Title:
(Corporate Seal)
By: KBSK SQUARE 127 LIMITED PARTNERSHIP, a District of Columbia limited
partnership, a Member
By: KBSK SQUARE 127 ASSOCIATES, L.L.C., a District of Columbia limited
liability company, its sole General
Partner
Attest:
Name:
Title:
By: The Kiplinger Washington Editors, Inc. a Manager and Member
By:
Name:
Title:
LESSEE:
Putnam, Hayes & Bartlett, Inc.
By:
Name:
Title:
Attest:
Name:
Title:
<PAGE>
"Exhibit D-3"
Declaration As to Date of Delivery
And Acceptance of Possession of
Mandatory Expansion Premises
Attached to and made a part of the Loan, dated the ___________ day of
___________, 19___, entered into by and between Greystone Square 127 Limited
Liability Company, a District of Columbia limited liability company, (the
"Lessor") and Putnam, Hayes & Bartlett, Inc., a Massachusetts corporation,
hereinafter called "Lessee."
Lessor and Lessee do hereby declare and evidence that possession of the
Expansion Space Two was accepted by Lessee in its "as is" condition on the
_____________ day of _____________________, 20___. The Lease is now in full
force and effect with regard to Expansion Space Two. For the purpose of this
Lease, Expansion Space Two Commencement Date is established as beginning on the
__________ day of __________, 1920. As of the date of delivery and acceptance of
possession of the Expansion Space Two as herein set forth, there is no right of
set off against rents claimed by Lessee against Lessor.
Lessee, if a corporation, states that its registered agent in the
District of Columbia is ___________________________, having an address at
_______________________, and that it is a corporation in good standing in the
District of Columbia.
[Signatures appear on immediately following pages.]
<PAGE>
LESSOR:
GREYSTONE SQUARE 127 LIMITED LIABILITY COMPANY, a District of Columbia limited
liability company
By: CAPITOL TREE LIMITED LIABILITY TY COMPANY,
a District of Columbia limited liability company, a Member
By: NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION, a Delaware corporation,
its Member
By: GREYSTONE REALTY CORPORATION,
a Delaware corporation, as duly authorized agent for New York Life
Insurance and Annuity Corporation
By:
Charles J. Lauckhardt
Vice Chairman and Chief Investment Officer
Attest:
By:
Name:
Title:
(Corporate Seal)
By: KBSK SQUARE 127 LIMITED PARTNERSHIP, a District of Columbia limited
partnership, a Member
By: KBSK SQUARE 127 ASSOCIATES, L.L.C., a District of Columbia limited
liability company, its role General
Partner
By: The Kiplinger Washington Editors, Inc.
a Manager and Member
By:
Name:
Title:
Attest:
<PAGE>
LESSEE:
Putnam, Hayes & Bartlett, Inc.
By:
Name:
Title:
Attest:
Name:
Title.:
<PAGE>
"Exhibit D-5"
Form of Declaration as to Date
of Delivery and Acceptance of
Possession of An Expansion Space
Attached to and made a part of the Lease, dated the _______ day of
_________________, 19___, entered into by and between Greystone Square 127
Limited Liability Company, a District of Columbia limited liability company,
(the "Lessor") and Putnam, Hayes & Bartlett, Inc., a Massachusetts corporation,
hereinafter called "Lessee."
Lessor and Lessee do hereby declare and evidence that possession of the
Expansion Space was accepted by Lessee in its "as is" condition on the
______________ day of ________, _____________. The Lease is now in full force
and effect with regard to ____________ Expansion Space. For the purpose of the
Lease, ________________________ Expansion Space Lease Commencement Date is
established as beginning on the day _______of __________, _____________. As of
the date of delivery and acceptance of possession of the ______________.
Expansion Space as herein set forth, there is to right of set off against rents
claimed by Lessee against Lessor.
Lessee, if a corporation, states that its registered agent in the
District of Columbia is _____________________________________, having an address
at ___________________, and that it is a corporation in good standing in the
District of Columbia.
[Signatures appear on immediately following pages.]
<PAGE>
LESSOR:
GREYSTONE SQUARE 127 LIMITED LIABILITY COMPANY, a District of Columbia limited
liability company
By: CAPITOL TREE LIMITED LIABILITY COMPANY,
a District of Columbia limited liability company, a Member
By: NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION, a Delaware corporation,
its Member
By: GREYSTONE REALTY CORPORATION,
a Delaware corporation, as duly authorized agent for Now York Life
Insurance and Annuity Corporation
By:
Charles J. Lauckhardt
Vice Chairman and Chief Investment Officer
Attest:
Name:
Title:
(Corporate Seal)
By: KBSK SQUARE 127 LIMITED PARTNERSHIP, a District of Columbia limited
partnership, a Member
By: KBSK SQUARE 127 ASSOCIATES, L.L.C., a District of Columbia limited
liability company, its sole General Partner
By: Its Kiplinger Washington Editors, Inc.
a Manager and Member
By:
Name:
Title:
Attest:
EXHIBIT 21
The following corporations are subsidiaries of Hagler Bailly, Inc.:
Name Jurisdiction of Incorporation
Hagler Bailly Services, Inc. Delaware
(a subsidiary of Hagler Bailly, Inc.)
PHB Hagler Bailly, Inc. Delaware
(a subsidiary of Hagler Bailly, Inc.)
Hagler Bailly Texas, Inc. Texas
(a subsidiary of Hagler Bailly Consulting, Inc.)
Putnam, Hayes & Bartlett - Asia Pacific Pty Ltd Australia (a subsidiary of PHB
Hagler Bailly, Inc.)
Putnam, Hayes & Bartlett - Asia Pacific Ltd New Zealand (a subsidiary of PHB
Hagler Bailly, Inc.)
PHB Hagler Bailly Ltd. United Kingdom
CORE Management Systems Ltd New Zealand (a subsidiary of Putnam, Hayes &
Bartlett - Asia Pacific Ltd.)
Apogee Research, Inc. Maryland
(a subsidiary of Hagler Bailly, Inc.)
Apogee Capital LLC Maryland
(a subsidiary of Apogee Research, Inc.)
Hagler Bailly Canada Ltd Canada
(a subsidiary of Apogee Research, Inc.)
Hagler Bailly S.A. Argentina
(a subsidiary of Hagler Bailly Services, Inc.)
Hagler Bailly Indonesia, Inc. Delaware
(a subsidiary of Hagler Bailly Services, Inc.)
PT Hagler Bailly Indonesia Indonesia
(a subsidiary of Hagler Bailly Indonesia, Inc.)
Hagler Bailly Armenia Armenia
(a subsidiary of Hagler Bailly Services, Inc.)
- --------------------------------------------------------------------------
Hagler Bailly Services (India) Private Ltd. India
(a subsidiary of Hagler Bailly Services, Inc.)
India
- --------------------------------------------------------------------------
Hagler Bailly Consulting, S.A. France
(a subsidiary of Hagler Bailly Consulting, Inc.)
- --------------------------------------------------------------------------
Hagler Bailly Consulting Ltd. Ireland
(a subsidiary of Hagler Bailly Services, Inc.)
- --------------------------------------------------------------------------
Hagler Bailly Pakistan (Private) Ltd. Pakistan
(Hagler Bailly Services, Inc. has a minority interest)
- --------------------------------------------------------------------------
Hagler Bailly International S.A. Belgium
(a subsidiary of Hagler Bailly Services, Inc.)
- --------------------------------------------------------------------------
Private Label Utility Services, Inc. Delaware
(a subsidiary of HB Capital, Inc.)
EXHIBIT 23.1
Exhibit 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-56759) pertaining to the Hagler Bailly, Inc. Employee
Incentive and Non-Qualified Stock Option and Restricted Stock Plan and to the
incorporation by reference therein of our report dated March 12, 1999, with
respect to the consolidated financial statements of Hagler Bailly, Inc. included
in the Annual Report (Form 10-K) for the year ended December 31, 1998, filed
with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Vienna, VA
March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE HAGLER
BAILLY, INC. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 16,165
<SECURITIES> 0
<RECEIVABLES> 62,980
<ALLOWANCES> 3,888
<INVENTORY> 0
<CURRENT-ASSETS> 78,563
<PP&E> 20,289
<DEPRECIATION> 13,826
<TOTAL-ASSETS> 101,422
<CURRENT-LIABILITIES> 24,269
<BONDS> 0
0
0
<COMMON> 165
<OTHER-SE> 73,434
<TOTAL-LIABILITY-AND-EQUITY> 101,422
<SALES> 177,462
<TOTAL-REVENUES> 177,462
<CGS> 126,204
<TOTAL-COSTS> 163,293
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 410
<INCOME-PRETAX> 14,438
<INCOME-TAX> 7,275
<INCOME-CONTINUING> 7,163
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,700
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.40
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE HAGLER
BAILLY, INC. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,261
<SECURITIES> 6,551
<RECEIVABLES> 55,730
<ALLOWANCES> 3,873
<INVENTORY> 0
<CURRENT-ASSETS> 68,038
<PP&E> 16,576
<DEPRECIATION> 11,063
<TOTAL-ASSETS> 84,657
<CURRENT-LIABILITIES> 33,916
<BONDS> 0
0
0
<COMMON> 155
<OTHER-SE> 48,694
<TOTAL-LIABILITY-AND-EQUITY> 84,657
<SALES> 160,615
<TOTAL-REVENUES> 160,615
<CGS> 120,585
<TOTAL-COSTS> 158,981
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,301
<INCOME-PRETAX> 1,234
<INCOME-TAX> 5,460
<INCOME-CONTINUING> (4,226)
<DISCONTINUED> 0
<EXTRAORDINARY> 2,366
<CHANGES> 0
<NET-INCOME> (1,890)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
