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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ________________________
Commission File Number: 0-29292
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HAGLER BAILLY, INC.
(Exact name of registrant as specified in its charter)
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Delaware 54-1759180 (State or other jurisdiction of incorporation or
organization) I.R.S. Employer Identification Number
1530 Wilson Boulevard, Suite 400, Arlington, VA 22209
(Address of principal executive offices) (Zip Code)
703-351-0300
(Registrant's telephone number, including area code)
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 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. Yes(XX) No( )
As of October 31, 1999, the Registrant had 17,911,477 shares of its common stock
outstanding.
<PAGE>
23
i
TABLE OF CONTENTS
Item 1. Financial Statements..................................................1
Consolidated Balance Sheets as of September 30, 1999 (Unaudited) and
December 31, 1998.........................................................1
Consolidated Statements of Operations for the Three and Nine Months
Ended September 30, 1999 and 1998 (Unaudited).............................2
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998 (Unaudited).............................3
Notes To Consolidated Financial Statements....................................4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................5
Part II
Item 1. Legal Proceedings.....................................................16
Item 2. Changes in Securities................................................16
Item 6. Exhibits and Reports on Form 8-K.....................................17
SIGNATURES....................................................................23
<PAGE>
PART I
Item 1. Financial Statements
<TABLE>
<CAPTION>
Hagler Bailly, Inc.
Consolidated Balance Sheets
(in thousands)
September 30, December 31,
1999 1998
---------------------------------------
<S> <C> <C>
Assets (unaudited)
Current assets:
Cash & cash equivalents $ 13,495 $ 16,165
Accounts receivable, net of allowance of $4,839 and $3,888
at September 30, 1999 and December 31, 1998, respectively 65,246 59,092
Note receivable - 382
Prepaid expenses 2,763 2,620
Other current assets 865 304
------------------- -------------------
Total current assets 82,369 78,563
Property and equipment, net 8,278 6,463
Software development costs, net 349 898
Intangible assets, net 28,808 14,208
Other assets 1,226 1,290
------------------- -------------------
Total assets $ 121,030 $ 101,422
=================== ===================
=================== ===================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 12,425 $ 8,476
Accrued compensation and benefits 12,517 8,713
Billings in excess of cost 2,975 2,288
Current portion of long-term debt 333 345
Income taxes payable 908 2,547
Deferred taxes 1,900 1,900
------------------- -------------------
Total current liabilities 31,058 24,269
Long-term debt, net of current portion 674 681
Minority interest 260 177
Deferred income taxes 927 927
Other deferred 1,853 1,769
------------------- -------------------
Total liabilities 34,772 27,823
Stockholders' equity:
Common stock, $0.01 par value, 50,000 shares authorized;
17,927 and 16,483 issued and outstanding at September 30,1999 179 165
and December 31, 1998, respectively
Additional capital 81,028 72,322
Retained earnings 5,254 1,206
Foreign currency translation (203) (94)
------------------- -------------------
Total stockholders' equity 86,258 73,599
------------------- -------------------
=================== ===================
Total liabilities and stockholders' equity $ 121,030 $ 101,422
=================== ===================
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
--------------- ---------------- ----------------- ------------------
Revenues:
Consulting revenues $ 47,814 $ 44,201 $ 131,737 $ 127,339
Other revenues 314 2,289 1,178 4,743
--------------- ---------------- ----------------- ------------------
Total revenues 48,128 46,490 132,915 132,082
Cost of services 36,571 33,131 100,911 94,812
--------------- ---------------- ----------------- ------------------
Gross profit 11,557 13,359 32,004 37,270
Merger-related and other non-recurring costs - 2,493 - 4,212
Selling, general and administrative expenses 9,097 6,905 24,841 18,298
Stock and stock option compensation - - - 2,595
--------------- ---------------- ----------------- ------------------
Income from operations 2,460 3,961 7,163 12,165
Other income (expenses), net (122) 258 (31) 179
--------------- ---------------- ----------------- ------------------
Income before income tax expense and loss from
equity investment in joint venture 2,338 4,219 7,132 12,344
Income tax expense 981 1,713 2,853 6,008
--------------- ---------------- ----------------- ------------------
Income before loss from equity investment in joint
venture 1,357 2,506 4,279 6,336
Loss from equity investment in joint venture,
net of tax (1) - (231) -
--------------- ---------------- ----------------- ------------------
Net income $ 1,356 $ 2,506 $ 4,048 $ 6,336
=============== ================ ================= ==================
=============== ================ ================= ==================
Net income per share:
Basic $ 0.08 $ 0.15 $ 0.24 $ 0.38
Diluted $ 0.08 $ 0.15 $ 0.23 $ 0.36
Weighted average shares outstanding:
Basic 17,267 16,195 16,779 16,636
=============== ================ ================= ==================
=============== ================ ================= ==================
Diluted 17,457 16,939 17,246 17,427
=============== ================ ================= ==================
=============== ================ ================= ==================
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
Hagler Bailly, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
in thousands
Nine months ended September 30,
1999 1998
------------------- --------------------
<S> <C> <C>
Operating activities
Net income $ 4,048 $ 6,336
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense 4,367 3,480
Provision for deferred income taxes - 749
Provision for accounts receivable 2,168 (626)
Loss on equity investment in joint venture 231 -
Minority interest 83 -
Disposal of Fixed Assets - 175
Asset impairment - 456
Amortization of deferred stock compensation - 2,595
Changes in operating assets and liabilities:
Accounts receivable (6,371) (14,535)
Note receivable 382 -
Prepaid expenses (993) (4,957)
Other current assets (535) (1,914)
Other assets (55) 265
Accounts payable and accrued expenses 1,116 (1,718)
Accrued compensation and benefits 3,211 (5,115)
Billings in excess of cost 569 (541)
Income taxes payable (2,821) 1,253
Other deferred 84 -
------------------- --------------------
Net cash provided by (used in) operating activities 5,484 (14,097)
Investing activities
Acquisition of property and equipment (3,329) (3,596)
Purchase of acquired Companies, net of cash received (847) (1,100)
------------------- --------------------
Net cash used in investing activities (4,176) (4,696)
Financing activities
Issuance of common stock 137 -
Purchase of treasury stock (4,115) -
Sale of common stock - 12,676
Dividends paid by foreign subsidiary - (333)
Net borrowings from bank line of credit - 3,200
Payments on long term debt - (1,003)
------------------- --------------------
Net cash (used in) provided by financing activities (3,978) 14,540
Net decrease in cash and cash equivalents (2,670) (4,253)
Cash and cash equivalents, beginning of period 16,165 11,813
=================== ====================
Cash and cash equivalents, end of period $ 13,495 $ 7,560
=================== ====================
See accompanying notes.
</TABLE>
HAGLER BAILLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited interim consolidated financial statements of
Hagler Bailly, Inc. (the "Company") have been prepared pursuant to the rules of
the Securities and Exchange Commission ("SEC") for quarterly reports on Form
10-Q and do not include all of the information and note disclosures required by
generally accepted accounting principles. The information furnished herein
reflects all adjustments, of a normal recurring nature, which are, in the
opinion of management, necessary for a fair presentation of results for these
interim periods.
The interim results of operations are not necessarily indicative of the
results to be expected for the entire fiscal year ending December 31, 1999.
Note 2. Earnings per Share
Basic earnings per share is computed based on the weighted average
number of shares of common stock outstanding during the respective periods.
Diluted earnings per share is inclusive of the dilutive effect of unexercised
stock options using the treasury stock method. Weighted average share figures
are as follows (in thousands):
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $1,356 $2,506 $4,048 $6,336
================= =================== ================ ==================
================= =================== ================ ==================
Weighted average shares of common
stock outstanding during the period
17,267 16,195 16,779 16,636
Effect of dilutive securities:
Stock options 190 744 467 791
----------------- ------------------- ---------------- ------------------
----------------- ------------------- ---------------- ------------------
Weighted average shares of common
stock and dilutive securities
17,457 16,939 17,246 17,427
================= =================== ================ ==================
</TABLE>
Note 3. Business Combinations
On February 8, 1999, the Company acquired all of the outstanding stock
of Lacuna Consulting Limited ("Lacuna"), a United Kingdom corporation, in
exchange for 65,000 shares of the Company's common stock. The acquisition was
accounted for as a purchase. Accordingly, the consolidated financial statements
reflect the results of operations of Lacuna since the date of acquisition. As a
result of the transaction, the Company recorded intangible assets of
approximately $1.4 million.
On April 30, 1999, the Company acquired all of the outstanding stock of
Washington International Energy Group, Ltd. ("WIEG"), a Washington, D.C.-based
worldwide provider of energy and environmental policy consulting research
services, in exchange for 144,210 shares of the Company's common stock and
approximately $850,000 in cash. The Company has the right to repurchase up to
26,210 of these shares at $ .01 cents per share if the price of the Company's
stock meets certain price targets during the three year period following the
acquisition. The transaction was accounted for as a purchase. Accordingly, the
consolidated financial statements reflect the results of operations of WIEG
since the date of acquisition. As a result of the transaction, the Company
recorded intangible assets of approximately $1.5 million.
On June 1, 1999, the Company acquired the remaining minority interest
of its joint venture Hagler Bailly Risk Advisors, LLC, a limited liability
company located in Houston, Texas, from Objective Resources Risk Advisors, LLC
bringing the Company's ownership to 100%.
On August 12, 1999, the Company acquired all of the outstanding stock
of GKMG, Inc. ("GMKG"), a Washington, D.C.-based consulting firm specializing in
the economic, strategic, financial, and regulatory analysis of the aviation
industry, in exchange for 1,420,000 shares of the Company's common stock. Under
the terms of the Share Exchange Agreement by and among the Company, GKMG and
former shareholders of GKMG, the Company is obligated to issue additional shares
of its common stock to the former shareholders of GKMG with a fair market value
(as defined in the Share Exchange Agreement) up to $15 million if certain
earnings targets for GKMG are met for the periods July 1, 1999-June 30, 2000 and
July 1, 2000-June 30, 2001. In addition, the Company is obligated to issue up to
192,857 additional shares of its common stock to the former shareholders of GKMG
if certain stock price performance contingencies are not met. The transaction
was accounted for as a purchase. Accordingly, the consolidated financial
statements reflect the results of operations of GKMG since the date of
acquisition. The Company has recorded intangible assets resulting from the
transaction of approximately $12.4 million, based on information available as of
the date of the financial statements.
The amount of goodwill resulting from the application of purchase accounting on
1999 acquisitions is tentative based on information available as of the date of
the financial statements.
Note 4. Stock Repurchase Plan
The Company is authorized to repurchase up to 1.5 million shares of the
Company's common stock in the open market or in privately negotiated
transactions. As of September 30, 1999, the Company had repurchased 559,700
shares.
<PAGE>
Note 5. Components of Comprehensive Income
Comprehensive income includes the Company's net earnings adjusted for
changes, net of tax, of cumulative translation adjustments. Comprehensive income
for each of the three and nine months ended September 30, 1999 and 1998 is as
follows (in thousands):
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Comprehensive Income:
Net income $ 1,356 $ 2,506 $ 4,048 $ 6,336
Foreign translation adjustment
5 19 (66) (129)
----------------- --------------- ---------------- -----------------
Total comprehensive income
$ 1,361 $ 2,525 $ 3,982 $ 6,207
================= =============== ================ =================
================= =============== ================ =================
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Statements included in Management's Discussion and Analysis of
Financial Condition and Results of Operations, which are not historical in
nature, are intended to be, and are hereby identified as, "forward looking
statements" for purposes of the safe harbor provided by Section 21E of the
Securities Exchange Act of 1934, as amended by Public Law 104-67.
Forward-looking statements may be identified by words including "anticipate,"
"believe," "estimate," "expect" and similar expressions. The Company cautions
readers that forward-looking statements, including without limitation, those
relating to the Company's future business prospects, revenues, working capital,
liquidity, and income, are subject to certain risks and uncertainties that would
cause actual results to differ materially from those indicated in the
forward-looking statements, due to several important factors such as
concentration of the Company's revenues from a relatively limited number of
public and private clients involved in the energy and network industries, the
Company's ability to attract, retain and manage professional and administrative
staff, fluctuations in quarterly results, risks related to acquisitions, and the
fact that historical operations and performance are not necessarily indicative
of future operations and performance, among others, and other risks and factors
identified from time to time in the Company's reports filed with the SEC,
including the risk factors identified in the Company's Registration Statement
(No. 333-22207) on Form S-1 and the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, which are incorporated by reference herein.
The Company, together with its wholly owned subsidiaries PHB Hagler Bailly
Inc., Hagler Bailly Services, Inc., and its domestic and foreign wholly owned
subsidiaries, is a leading worldwide provider of strategy, economics and
operations consulting services to energy and network industries, including
electric power, natural gas and water utilities, fuel providers,
commercial litigation, the environment, aviation transportation and
telecommunications. As of September 30, 1999, Hagler Bailly employed a staff of
881, of which over two-thirds were consulting and technical professionals. The
Company'scommon stock is quoted on the NASDAQ National Market under the symbol,
"HBIX".
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. These revenues are derived from the Company's primary business of
offering strategy and business operations consulting services to public
and commercial rate sector clients. Other revenues include those derived from
information-based products and services, and publication of newsletters,
reference manuals and data series for the energy and transportation industries.
The Company's client base includes both public and commercial rate sector
clients. Revenue from the commercial rate 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 / commercial rate sector business
mix. Through strategic acquisitions and internal growth, the Company has
increased its commercial rate sector client base, and will continue to pursue
additional growth opportunities in the future.
On August 12, 1999, the Company acquired all of the outstanding stock
of GKMG, Inc. ("GMKG"), a Washington, D.C.-based consulting firm specializing in
the economic, strategic, financial, and regulatory analysis of the aviation
industry, in exchange for 1,420,000 shares of the Company's common stock. Under
the terms of the Share Exchange Agreement by and among the Company, GKMG and
former shareholders of GKMG, the Company is obligated to issue additional shares
of its common stock to the former shareholders of GKMG with a fair market value
(as defined in the Share Exchange Agreement) up to $15 million if certain
earnings targets for GKMG are met for the periods July 1, 1999-June 30, 2000 and
July 1, 2000-June 30, 2001. In addition, the Company is obligated to issue up to
192,857 additional shares of its common stock to the former shareholders of GKMG
if certain stock price performance contingencies are not met. The transaction
was accounted for as a purchase. Accordingly, the consolidated financial
statements reflect the results of operations of GKMG since the date of
acquisition. The Company has recorded intangible assets resulting from the
transaction of approximately $12.4 million, based on information available as of
the date of the financial statements.
On September 27, 1999, the Company announced that its Board of
Directors retained Banc of America Securities LLC to assist the Company in
exploring strategic and financial alternatives to maximize shareholder value,
including the potential sale or merger of the Company.
<PAGE>
Results of Operations
The following table presents for the periods indicated the percentage
of revenues represented by certain income and expense items, and the percentage
period-to-period increase (decrease) in such items:
<TABLE>
<CAPTION>
% Period-to-Period
Percentage of Revenues Increase (Decrease) of Dollars
---------------------------------------- -----------------------------------
Three months Nine months
ended ended September
September 30, 1999
30, 1999 compared to
compared to nine months
three months ended September
ended 30, 1998
September
30, 1998
Three months Nine months ended
ended September 30, September 30,
------------------ ----------------- --------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Consulting 99.3 95.1 99.1 96.4 8.2 3.5
Other 0.7 4.9 0.9 3.6 (86.3) (75.2)
Total revenues 100.0 100.0 100.0 100.0 3.5 0.6
Cost of services 76.0 71.3 75.9 71.8 10.4 6.4
Merger related and other
non-recurring costs - 5.4 - 3.2 (100.0) (100.0)
Selling, general, and administrative
expenses 18.9 14.9 18.7 13.9
31.7 35.8
Stock and stock option compensation
- - - 2.0 - (100.0)
Income from operations 5.1 8.5 5.4 9.2 (37.9) (41.1)
Other income (expenses), net (0.3) 0.6 0.0 0.1 (147.3) (117.2)
Income before income tax expense and
loss from equity investment in
joint venture 4.8 9.1 5.4 9.3 (44.6) (42.2)
Income tax expense 2.0 3.7 2.2 4.5 (42.7) (52.5)
Income before loss from equity
investment in joint venture 2.8 5.4 3.2 4.8
(45.8) (32.5)
Loss from joint venture 0.0 - (0.2) -
Net income 2.8 5.4 3.0 4.8 (45.8) (36.1)
</TABLE>
Three months ended September 30, 1999 compared with three months ended September
30, 1998
Revenues for the three months ended September 30, 1999, increased by
approximately $1.6 million, or 3.5%, to $48.1 million from the three months
ended September 30, 1998. The increase resulted primarily from $4.5 million of
revenues from companies acquired since the third quarter of 1998 as well as
approximately $1.0 million of increased volume of pass through equipment sales
to the United States Agency for International Development ("USAID") in the
Company's public sector market. This increase was partially offset by a decrease
in revenues of approximately $2.0 million related to both the sale of certain
assets of the Company's public sector consulting practice in September, 1998,
and the Company's decision to cease operations in its financial advisory
services business in December, 1998, a decrease of approximately $0.8 million
because of reduced staff and a decrease of approximately $1.1 million because of
contract expiration and reduction.
Cost of services for the three months ended September 30, 1999,
increased by approximately $3.4 million or 10.4%, to $36.6 million from the
three months ended September 30, 1998. Cost of services as a percentage of
revenue increased from 71.3% in the three months ending September 30, 1998, to
76.0% in the three months ending September 30, 1999, primarily as the result of
an increase in cash compensation paid to consulting staff, as well as high
pass-through costs associated with the increase in volume of USAID equipment
sales, on which minimal margins are earned.
Selling, general and administrative expenses ("SG&A") for the three
months ended September 30, 1999, increased by approximately $2.2 million or
31.7%, to $9.1 million from the three months ended September 30, 1998. Expressed
as a percentage of total revenues, SG&A expenses increased from 14.9% in the
three months ended September 30, 1998 to 18.9% in the three months ended
September 30, 1999. This increase reflects increased business development costs
and integration costs related to the centralization of certain operating systems
and administrative functions.
There were no material merger related and other non-recurring costs for
the three months ended September 30, 1999, compared with approximately $2.5
million in the three months ended September 30, 1998. The majority of these
costs in the comparable period were associated with the Company's business
combination with Putnam Hayes & Bartlett, Inc. ("PHB"). The remainder were
expenses associated with the Company's business combinations with TB&A Group,
Inc. and its wholly-owned subsidiary Theodore Barry & Associates (collectively
"TB&A"), and Izsak, Grapin et Associes ("IGA").
Other income (expenses), net includes interest expense, interest
income, minority interest and other income and expenses. For the three months
ended September 30, 1999, net expenses were approximately $122,000, compared to
net other income of approximately $258,000 in the three months ended September
30, 1998. The net other income in 1998 was primarily related to the sale of
certain assets of the Company's public sector consulting practice.
The Company's effective tax rate increased to 42.0% in the three months
ended September 30, 1999 from 40.6% in the three months ended September 30,
1998. The higher effective income tax rate in the three months ended September
30, 1999, results from the associated goodwill amortization of recent business
combinations that will be non-deductible for income tax reporting purposes.
Net income for the three months ended September 30, 1999, decreased by
approximately $1.2 million, or 45.8%, to $1.4 million from the three months
ended September 30, 1998, for reasons discussed above.
<PAGE>
Nine months ended September 30, 1999 compared with nine months ended September
30, 1998
Revenues for the nine months ended September 30, 1999, increased by
approximately $0.8 million or 0.6%, to $132.9 million from the nine months ended
September 30, 1998. The increase resulted primarily from approximately $9.1
million of revenues from companies acquired since the third quarter of 1998.
This increase was partially offset by a decrease in revenues of approximately
$7.4 million related to both the sale of certain assets of the Company's public
sector consulting practice in September, 1998, and the Company's decision to
cease operations in its financial advisory services business in December, 1998,
and an aggregate decrease of approximately $0.9 million company wide.
Cost of services for the nine months ended September 30, 1999,
increased by $6.1 million, or 6.4%, to $100.9 million from the nine months ended
September 30, 1998. Cost of services as a percentage of revenue increased from
71.8% in the nine months ending September 30, 1998, to 75.9% in the nine months
ending September 30, 1999. The increase resulted primarily from increased
staffing costs.
SG&A for the nine months ended September 30, 1999, increased by
approximately $6.5 million, or 35.8%, to $24.8 million from the nine months
ended September 30, 1998. Expressed as a percentage of total revenues, SG&A
expenses increased from 13.9% in the nine months ended September 30, 1998, to
18.7% in the nine months ended September 30, 1999. This increase reflects
increased business development costs and integration costs related to the
centralization of certain operating systems and administrative functions.
There were no material merger related and other non-recurring costs for
the nine months ended September 30, 1999, compared with approximately $4.2
million in the nine months ended September 30, 1998. The majority of these costs
in the comparable period were associated with the Company's business combination
with PHB as well as the Company's business combinations with TB&A and IGA.
There were no stock and stock option compensation expenses for the nine
months ended September 30, 1999, compared with approximately $2.6 million in the
nine months ended September 30, 1998. All of these costs in the prior period
were related to the business combination with PHB and included non-cash, non-tax
deductible compensation based on the difference between the fair market value
and book values of PHB common stock issuable under subscriptions within one year
of the acquisition of PHB by the Company.
Other income (expenses), net includes interest expense, interest
income, minority interest and other income and expenses. For the nine months
ended September 30, 1999, net expenses were approximately $31,000, compared to
net other income of approximately $179,000 in the nine months ended September
30, 1998. The net other income in 1998 was primarily related to the sale of
certain assets of the Company's public sector consulting practice.
The Company's effective tax rate decreased to 40.0% in the nine months
ended September 30, 1999 from 48.7% in the nine months ended September 30, 1998.
The effective tax rate for the comparable period was higher than the provisional
rate because of the non-deductibility for tax purposes of the stock compensation
charge discussed above.
Net income for the nine months ended September 30, 1999, decreased by
approximately $2.3 million, or 36.1%, to $4.0 million from the nine months ended
September 30, for the reasons discussed above.
Liquidity and Capital Resources
As of September 30, 1999, working capital decreased to $51.3 million
from $54.3 million at December 31, 1998 because of an increase in accrued
compensation.
Net cash of approximately $5.5 million was provided by operating
activities during the nine months ended September 30, 1999. The primary sources
of cash provided by operating activities were net income of approximately $4.0
million, non-cash depreciation of approximately $4.4 million and an increase in
accrued compensation and benefits of approximately $3.2 million. These cash
flows were partially offset by an increase in accounts receivable of $6.4
million.
Investment activities used approximately $4.2 million during the nine
months ended September 30, 1999. The Company invested approximately $3.3 million
in the purchase of office and computer related equipment, leasehold
improvements, and other resources necessary to improve operating efficiencies of
the Company, as well as approximately $0.8 million for the purchase of acquired
companies.
Financing activities used approximately $4.0 million for the nine
months ended September 30, 1999. The Company used approximately $4.1 million in
funds for the repurchase of 559,700 shares of the Company's common stock. Under
the stock buyback program established by the Board of the Directors, as of
September 30, 1999, the Company is authorized to repurchase 940,300 additional
shares of the Company's common stock.
The Company's primary source of liquidity for the past 12 months has
been funds generated from operations periodically supplemented by borrowings
under a bank line of credit. During the year ended December 31, 1998, the
Company established $50.0 million in revolving credit with Bank of America
(formerly NationsBank.) The amount available under the line of credit at
September 30, 1999 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 at least the next 12 months. The Company, depending on market
conditions, may consider other sources of financing, including equity financing.
<PAGE>
Year 2000
The Year 2000 issue is the result of a computer hardware and software
design that defines the year field as 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 a supplier could disrupt
the Company's operations and could have a material adverse effect 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:
Audit, assessment, remediation, and testing of internal systems.
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.
Developing contingency plans, when practical, to address potential Year
2000 failures.
The Plan was materially complete as of October 31, 1999.
Year 2000 Readiness Report
The Company completed several acquisitions in 1998 and 1999. It
undertook a comprehensive due diligence examination that identified general Year
2000 Readiness issues for itself and the companies it acquired. The Company
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 CEO,
CFO, General Counsel, and other executives and outside consultants as required.
The Company engaged consultants 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). Due to the mid-1999 release of new Year 2000
"software" fixes from Microsoft, the principal supplier of the Company's front
office software, the Company currently expects that the process of updating
those systems that are not Year 2000 ready will be performed in the 4th quarter
1999.
With some exceptions, the Company does not employ significant custom
programming in its front office, work product, or back office systems. The
Company's work product is generated for the most part 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 have been or will be
updated where appropriate. Where the Company has supplemented these commercially
available software products with custom programming, teams are being established
to assess the software. These situations do not represent a significant
percentage of the Company's work product. The Company is implementing a software
application to aid the monitoring of 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
with all new analytic engagements developed on compliant hardware and software.
The conversion of remaining active analytic applications was substantially
complete as of October 31, 1999.
Back office systems including financial accounting, project accounting,
fixed asset management, human resources, payroll, and conflict management have
been replaced. These were updated with vendor supplied Year 2000 fixes or
converted to compliant versions of the software. The Company has tested its
back office systems and expects these systems to present no material problems.
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 contacted the vendors of its principal office systems and
obtained proof of Year 2000 readiness or identified compliance issues which the
Company has addressed. 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 21 domestic and
international offices, the remediation of international office systems was not
complete as of October 31, 1999. Remediation is underway in the case of mission
critical systems judged non-compliant, specifically, a network upgrade in
Indonesia. The assessment of the international offices revealed the need to
perform version upgrades and software patches similar to those being performed
as a result of the domestic audit. Remediation efforts for basic IT systems are
underway and substantially complete in most international offices. Some office
systems in the Company's international offices may 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, and federal, state, local and foreign government entities. The
Company has responded to Year 2000 compliance surveys from over 50 of its major
clients and shared its readiness information. In April 1999, the Company
initiated a survey of a cross section of its largest 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, where practical, to survey new clients upon new engagements. To date, the
Company has not received responses from all the clients surveyed. Based on the
responses received, the Company does not believe that any client failure to
comply with Year 2000 compliance requirements will have a material adverse
effect on it.
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
other maintenance vendors of mission critical hardware and software. If one or
more of these 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 continues to monitor
the Company's principal vendors and 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 through the fourth quarter of 1999.
Contingency Planning
The Committee has developed a contingency plan in the event that a material
system or vendor will not be Year 2000 ready by December 31, 1999.
Costs
The Company budgeted $300,000 in fiscal years 1999 and 2000 to cover the
costs of: (i) evaluating systems, (ii) acquiring Year 2000 remediation software,
(iii) additional testing of hardware and software, (iv) hiring an outside Year
2000 consultant, and (iv) implementing of 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 these costs 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
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 other suppliers to operate their businesses. Year
2000-related failures far removed from the Company could trigger a chain of
events that could materially affect 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. The Company also performs
work in regions deemed at high risk for Year 2000 disruptions, specifically,
Latin America, Eastern Europe, and Asia. Lastly, the Company perceives that the
stability of technical and critical office staff is important to the Plan and is
considering steps to decrease the risk of losing critical resources.
Notwithstanding these efforts, 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>
PART II
Item 1. 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
for the period 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.
Express One International, Inc. ("Express One") sued Galland, Kharash,
Morse & Garfinkle, P.C., a predecessor of the Company's wholly owned subsidiary,
GKMG, Inc. ("GKMG"), and two of its shareholders, Robert W. Kneisley and David
K. Monroe, in a Texas state court in 1994 alleging (i) business disparagement or
injurious falsehood; (ii) business defamation; and (iii) tortious interference
with prospective contracts or business relationships and claiming over $200
million in actual damages and punitive (exemplary) damages of at least three
times actual damages. The case was removed to the United District Court for the
Northern District of Texas, Dallas Division, where it is currently pending. On
October 1, 1999 the court granted GKMG's motion for summary judgment as to
dismissal of claims of business disparagement and business libel per se. The
Company is unable to determine what effect, if any, this litigation 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. Except as described
above, 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, financial condition or results of operations.
Item 2. Changes in Securities
On August 12, 1999, the Company acquired all of the outstanding shares
of GKMG, an aviation consulting company, and issued 1,420,000 shares of its
common stock to GKMG's former shareholders in exchange therefor. The shares of
common stock issued in connection with the acquisition were exempt form
registration pursuant to Section 4(2) of the Securities Act of 1933 and
Regulation D promulgated thereunder.
<PAGE>
Item 6. Exhibits and reports on form 8-K
(a) Exhibits
Exhibit No. Description
2.1 Sale Agreement between RCG International, Inc., and Hagler Bailly
Consulting, Inc. (1)
2.2 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)
2.3 Share Exchange Agreement dated as of August 12, 1999 by and among
Hagler Bailly, Inc., GKMG, Inc. and certain former shareholders of
GKMG, Inc. (11)
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'
Representative. (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.(9)
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. (9)
4.5 Registration Rights Agreement dated as of August 12, 1999 by and
between Hagler Bailly, Inc. and James F. Miller, acting as
Stockholders' Representative. (11)
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 August 27, 1998. (7)
10.28Employment Agreement between the Company and William E. Dickenson,
dated August 27, 1998. (7)
10.29Employment Agreement between the Company and Howard W. Pifer III,
dated June 10, 1998. (7)
10.30Amended and Restated Hagler Bailly, Inc. Employee Incentive and
Non-Qualified Stock Option and Restricted Stock Plan. (10)
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. (8)
10.32Revolving Note by and between Hagler Bailly, Inc. and NationsBank,
N.A., dated November 20, 1998. (8)
10.33Swing Line Note by and between Hagler Bailly, Inc. and NationsBank,
N.A., dated November 20, 1998. (8)
10.34 Subsidiary 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. (8)
10.35Form of Security Agreement by and between Hagler Bailly, Inc. and
NationsBank, N.A., dated November 20, 1998. (8)
10.36Security Agreement by and between Hagler Bailly Consulting, Inc. and
NationsBank, N.A., dated November 20, 1998. (8)
10.37Security Agreement by and between Hagler Bailly Services, Inc. and
NationsBank, N.A., dated November 20, 1998. (8)
10.38Security Agreement by and between HB Capital, Inc. and Nations Bank,
N.A., dated November 20, 1998. (8)
10.39Security Agreement by and between Putnam, Hayes & Bartlett, Inc. and
NationsBank, N.A., dated November 20, 1998. (8)
10.40Security Agreement by and between TB&A Group, Inc. and Nations Bank,
N.A., dated November 20, 1998. (8)
10.41Security Agreement by and between Theodore Barry & Associates and
NationsBank, N.A., dated November 20, 1998. (8)
10.42Security Agreement by and between PHB Hagler Bailly, Inc. and
NationsBank, N.A., dated February 22, 1999. (8)
10.43Security Agreement by and between Private Label Energy Services, Inc.
and NationsBank, N.A., dated November 20, 1998. (8)
10.44Security Agreement by and between Fieldston Publications, Inc. and
NationsBank, N.A., dated November 20, 1998. (8)
10.45Lease by and between One Memorial Drive Limited Partnership and
Putnam, Hayes & Bartlett, Inc. dated January 1, 1998. (8)
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. (8)
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. (8)
10.48Employment agreement between Hagler Bailly Consulting, Inc. and
Jasjeet S. Cheema dated February 2, 1998. (9)
10.49First amendment to revolving credit agreement between Hagler Bailly,
Inc, the lenders from time to time a party thereto, as lenders, and
NationsBank, N.A., dated as of March 22, 1999. (9)
10.50Lease by and between TrizecHahn, 1550 Wilson Blvd. Management and
Hagler Bailly Services, Inc. dated August 29, 1999.
10.51Second amendment to revolving credit agreement between Hagler Bailly,
Inc., the lenders from time to time a party thereto, as lenders, and
NationsBank, N.A., dated as of August 11, 1999.
10.52Security Agreement by and between GKMG, Inc. and NationsBank, N.A.,
dated August 11, 1999.
10.53Security Agreement by and between GKMG Consulting Services, Inc. and
NationsBank, N.A., dated August 11, 1999.
24 Powers of Attorney (included on Signature Pages) (1)
27.1 Finacial Data Schedule - September 30, 1999
-----------------------------------------------------------------
(1) Included in the Company's Registration Statement on Form S-1
filed on July 1, 1997 (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, filed on November 14, 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, filed on March 31, 1998 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 DEFS 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, filed on August 14, 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, filed on November 13, 1998 and
incorporated herein by reference thereto.
(8) Included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, filed on March 31, 1998 and incorporated
herein by reference thereto.
(9) Included in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, and incorporated herein by
reference thereto.
(10) Included in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, and incorporated herein by reference
thereto.
(11) Included in the Company's Current Report on Form 8-K filed on
August 26, 1999 and incorporated herein by reference thereto.
(b) Reports on Form 8-K
On August 26, 1999, the Company filed a current report on Form 8-K to
report its acquisition of all of the shares of GKMG, Inc., an aviation
consulting firm.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 15, 1999 /s/ William E. Dickenson
------------------------
William E. Dickenson
President and Chief Executive Officer
Date: November 15, 1999 /s/ Geoffrey W. Bobsin
----------------------
Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
EXHIBIT 10.50
1
1550 WILSON BOULEVARD
DEED OF LEASE
THIS DEED OF LEASE (the "Lease") is made and entered into this 29th day of
August 1999, by and between TRIZECHAHN CENTERS, INC., a California corporation
d/b/a TRIZECHAHN 1550 WILSON BLVD. MANAGEMENT ("Landlord") and HAGLER BAILLY
SERVICES, INC., a Delaware corporation ("Tenant"').
In consideration of the Rent hereinafter reserved and the agreements hereinafter
set forth, Landlord and Tenant mutually agree as follows:
1. DEFINITIONS.
Except as otherwise expressly provided or unless the context otherwise requires,
the following terms shall have the meanings assigned to them in this Section:
A. Alterations: Any improvements, alterations, fixed decorations or
modifications, structural or otherwise, to the Premises, the Building or the
Land, as defined below, including but not limited to the installation or
modification of carpeting, partitions, counters, doors, air conditioning ducts,
plumbing, piping, lighting fixtures, wiring, hardware, locks, ceilings and
window and wall coverings.
B. Base Year: Calendar year 1999.
C. Building: The building located at 1550 Wilson Boulevard in Arlington,
Virginia, in which the Premises are located. Except as expressly indicated
otherwise, the term "Building" shall include all portions of said building,
including but not limited to the Premises, the Common Areas and the garage.
D. Common Areas: Those areas of the Building and/or Land, as the case may be,
made available by Landlord for use by Tenant in common with the Landlord, other
tenants of the Building and the employees, agents and invitees of Landlord and
of such other tenants.
E. Consumer Price Index (Regular and Base): [intentionally omitted.]
F. Default Rate: That rate of interest which is five (5) percentage points above
the annual rate of interest which is publicly announced by NationsBank of D.C.
or its successor entity, if applicable ("Nations Bank"), from time to time as
its "prime" rate of interest, irrespective of whether such rate is the lowest
rate of interest charged by NationsBank to commercial borrowers. In the event
that NationsBank ceases to announce such a prime rate of interest, Landlord, in
Landlord's reasonable discretion, shall designate the prime rate of interest by
another bank located in the Washington, D.C. metropolitan area, which shall be
the prime rate of interest used to calculate the default rate.
G. Fiscal Year: Each consecutive twelve (12) month period during the Term
of this Lease that commences on January 1 and concludes on December 31
inclusive.
H. Ground Leases: All ground and other underlying leases from which Landlord's
title to the Land and/or the Building is or may in the future be derived.
"Ground Lessors" shall denote those persons and entities holding such ground or
underlying leases.
I. Holidays: New Years Day, Presidents' Day, Martin Luther King, Jr.'s Birthday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran's Day,
Thanksgiving Day, Christmas Day and any other holidays designated by an
executive order of the President of the United States or by Act of Congress.
J. Land: The real estate that supports the Building, and all associated
easements.
K. Tenant's Work: All work to be performed by Landlord under the Work
Agreement, including Additional Tenant Work (as defined in Exhibit C).
L. Lease
Commencement Date: The date this Lease commences, as determined pursuant to
Subsection 2.A. below.
M. Lease Year: That period of twelve (12) consecutive calendar months that
commences on the first day of the calendar month in which the Lease Commencement
Date occurs, and each consecutive twelve (12) month period thereafter. The
earliest such twelve (12) month period shall be referred to as the "first Lease
Year," and each of the following Lease Years shall similarly be numbered for
identification purposes.
N. Mortgages: All mortgages, deeds of trust and similar security instruments
which may now or in the future encumber or otherwise affect the Building or the
Land, including mortgages related to both construction and permanent financing.
"Mortgagees" shall denote those persons and entities holding such mortgages,
deeds of trust and similar security instruments.
O. Operating Expenses: All costs and expenses incurred by Landlord during any
Fiscal Year, as defined in Subsection 1.G. above, in managing, operating and
maintaining the Building and the Land, as determined by Landlord in accordance
with generally accepted accounting principles established and regularly applied
by Landlord. Such costs and expenses shall include, but not be limited to, the
cost of water, gas, sanitary sewer, storm sewer, electricity and other
utilities, trash removal, telephone services, insurance, janitorial and char
services and supplies, security services, labor costs (including social security
taxes and contributions and fringe benefits), charges under maintenance and
service contracts (including but not limited to chillers, boilers, elevators,
window and security services), central heating and air conditioning, management
fees (not to exceed the rate for any comparable building in Arlington, Virginia
which Landlord identifies to Tenant, if the management agent is not an affiliate
of Landlord), business taxes, license fees, public space and vault rentals and
charges, costs, charges and other assessments made by or for any entity
operating a business improvement district in which the Building is located,
condominium fees, assessments, dues, expenses, and other charges which are paid
by Landlord as a result of the Building, the Land or part or all of both being
part of a condominium, and the cost of any equipment or services provided by
Landlord in connection with the servicing, operation, maintenance, repair and
protection of the Building and the Land and related exterior appurtenances
(whether or not provided on the Lease Commencement Date). Operating Expenses
shall include the cost of capital improvements made by Landlord to manage,
operate or maintain the Building which (i) Landlord reasonably contemplates will
reduce Operating Expenses or reduce the rate of increase in Operating Expenses
from what it otherwise would have been with respect to the item which is the
subject of the capital improvement or (ii) are necessary to comply with laws,
regulations or utility company requirements, except for conditions existing in
violation thereof on the Lease Commencement Date, together with any financing
charges incurred in connection therewith, provided that such costs shall be
amortized over the useful life of the improvements and only the portion
attributable to the Fiscal Year shall be included in Operating Expenses for the
Fiscal Year, except that no portion thereof which is attributable to any capital
improvement which is completed at any time prior to the expiration of the Base
Year shall be included in Operating Expenses for any Fiscal Year (including, but
not limited to, the Base Year). Operating Expenses shall not include: (i) Real
Estate Tax Expenses, (ii) payments of principal and interest on any Mortgages or
any financing costs (including points) and broker fees, (iii) leasing
commissions, (iv) costs of preparing, improving or altering any space in
preparation for occupancy of any new or renewal tenant, (v) ground rents and any
and all other payments associated with a Ground Lease, (vi) any and all special
services rendered by Landlord which are not made available to all office tenants
at the Building, (vii) those expenses attributable to retail tenants only,
(viii) original construction costs of the Building, (ix) interest and
amortization of funds borrowed by Landlord, except as provided above with
respect to capital improvements, (x) reserves for repairs, maintenance and
replacements, except to the extent actually utilized for such purposes, (xi)
salaries, wages, or other compensation paid to employees of any property
management organization being paid a fee by Landlord for its services (or to any
employees of Landlord who are not assigned to the operation, management,
maintenance or repair of the Building, including accounting or clerical
personnel and other overhead expenses of Landlord) or any executive above the
level of property manager, except to the extent included in any management fee,
(xii) amounts paid to any partners, shareholders, officers or directors of
Landlord, for salary or other compensation, (xiii) costs of electricity outside
normal business hours sold to tenants of the Building by Landlord or any other
special service to tenants in excess of that furnished to Tenant whether or not
Landlord receives reimbursement from such tenants as an additional charge, (xiv)
expenses for repairs, replacements or improvements arising from the initial
construction of the Building to the extent such expenses either (a) are
reimbursed to Landlord by virtue of warranties from contractors or suppliers or
(b) result by reason of deficiencies in design or workmanship, (xv) any amounts
paid to any person, firm or corporation related to or otherwise affiliated with
Landlord or any general partner, officer or director of Landlord or any of its
general partners, to the extent the same exceeds arm's-length competitive prices
paid in Washington, D.C. for the services or goods provided, (xvi) legal fees
and other costs incurred in connection with (a) the negotiation of leases of
space in the Building, (b) the enforcement of the rent payment provisions of
leases in the Building or in connection with a tenant dispute concerning the
rent payment provisions of leases; and (c) disputes with prospective tenants,
employees, purchasers or mortgagees of the Building, (xvii) professional
accounting fees in connection with the preparation of, or disputes concerning,
Landlord's income tax returns, (xviii) costs relating to maintaining Landlord's
existence, either as a corporation, partnership or other entity, such as
trustee's fees, partnership organization or administration expenses, and deed
recordation expenses, (xix) interest or penalties arising by reason of
Landlord's failure to timely pay any Operating Expenses or Real Estate Tax
Expenses, (xx) compensation paid to clerks, attendants, salespersons or other
persons on or in commercial concessions operated in the Building, or costs which
are the responsibilities of the garage operator, (xxi) capital improvements to
the Building other than those permitted by this Section 1.0, or (xxii) costs
incurred in making the Building Year 2000 compliant. In the event that, during
any Fiscal Year or portion thereof during the Term, Landlord shall furnish any
utility or service which is included in the definition of Operating Expenses to
less than one hundred percent (100%) of the rentable area of the Building
because (i) less than all of the rentable area of the Building is occupied, (ii)
any such utility or service is not desired or required by any tenant, or (iii)
any tenant is itself obtaining or providing any such utility or service, then
the Operating Expenses for such Fiscal Year shall be increased to equal the
total expenses that Landlord reasonably estimates it would have incurred if
Landlord had provided all such utilities and services to one hundred percent
(100%) of the rentable area of the Building for the entire Fiscal Year. For
example, if the average occupancy rate of the Building during a Fiscal Year is
eighty percent (80%), the electrical contractor's charges are $1.00 per occupied
rentable square foot per year, and the Building contains one hundred thousand
(100,000) rentable square feet of space, then it would be reasonable for
Landlord to estimate that, if the Building had been one hundred percent (100%)
occupied during the entire Fiscal Year, electrical charges for such Fiscal Year
would have been One Hundred Thousand Dollars ($100,000) and to compute the
Operating Expenses for such Fiscal Year accordingly. In no event shall the
provisions of this paragraph be used to enable Landlord to collect from the
tenants of the Building more than one hundred percent (100%) of the costs and
expenses incurred by Landlord in managing, operating and maintaining the
Building and the Land.
P. Premises: 20,477 square feet of rentable area on the fourth (4th) floor of
the Building, known as suite(s) 400, as shown on the floor plan attached hereto
as Exhibit A. However, the area and plan of the Premises may change in the event
of the exercise of any option to expand or contract the Premises set forth in
this Lease. The rentable area of the Premises has been determined in accordance
with the Greater Washington Commercial Association of REALTORS@ Standard Method
of Measurement dated June 13, 1995.
Q. Premises' Standard Electrical Capacity. The electrical capacity
sufficient to support Tenant's balanced consumption of
five (5) watts per square foot of rentable area.
R. Real Estate Tax Expenses: All taxes and assessments, general or special,
ordinary or extraordinary, and foreseen or unforeseen, that are assessed, levied
or imposed upon the Building and/or the Land, under any current or future
taxation or assessment system or modification of, or supplement or substitute
for, such system, whether or not based on or measured by the receipts or
revenues from the Building or the Land (including all taxes and assessments for
public improvements or any other purpose and any gross receipts or similar
taxes). Real Estate Tax Expenses also shall include all reasonable expenses
incurred by Landlord in obtaining or attempting to obtain a reduction of any
such taxes, rates or assessments, including but not limited to legal fees, but
shall not include any taxes on Tenant's Personal Property or other tenants'
personal property, which taxes are the sole obligation of each tenant. Under no
circumstances shall Real Estate Taxes include any inheritance, estate,
succession, transfer, or gift tax, or capital levy or any abatements, reductions
or credits received by Landlord and any federal or state tax which is assessed
upon Landlord's net income (i.e. any tax which will directly vary based upon the
amount of Landlord's net income (for example, the present District of Columbia
Unincorporated Business Tax). The foregoing exclusion is not intended to exclude
a tax which is based upon an assessment which takes into consideration, among
other factors, the Landlord's net rents or net income, which latter tax shall be
included in Real Estate Tax Expenses).
S. Rent: All Base Rent and Additional Rent.
(1) Base Rent: The amount payable by Tenant pursuant to Subsection 4.A.
(2) Additional Rent: Ali sums of money payable by Tenant pursuant to
this Lease other than Base Rent. (3) Monthly Rent: A monthly
installment of Base Rent and Additional Rent, if any, which shall equal
one-twelfth
(1/12th) of Base Rent and Additional Rent then in effect.
T. Tenant's Personal Property: All equipment, improvements, furnishings and/or
other property now or hereafter installed or placed in or on the Premises by and
at the sole expense of Tenant or with Tenant's permission (other than any
property of Landlord), with respect to which Tenant has not been granted any
credit or allowance by Landlord, and which: (i) is removable without damage to
the Premises, the Building and the Land, and (ii) is not a replacement of any
property of Landlord, whether such replacement is made at Tenant's expense or
otherwise. Notwithstanding any other provision of this Lease, Tenant's Personal
Property shall not include any improvements or other property installed or
placed in or on the Premises as part of Tenant's Work, whether or not any such
property was purchased or installed at Tenant's expense.
U. Unavoidable Delay: Any delays due to strikes, labor disputes, shortages of
material, labor or energy, acts of God, governmental restrictions, enemy action,
civil commotion, fire, unavoidable casualty or any other causes beyond the
control of Landlord.
V. Work Agreement: Exhibit C, which terms are hereby expressly incorporated
in this Lease.
2. TERM.
A. Term of Lease: The term of this Lease (the "Term") shall commence on a date
(the "Lease Commencement Date"), as defined below, and shall terminate at
midnight on the day preceding the seventh (7th) anniversary of the Lease
Commencement Date, or such earlier date on which this Lease is terminated
pursuant to the provisions hereof (the "Lease Expiration Date"). The Lease
Commencement Date shall be the earlier of (i) the earlier of (a) the date Tenant
commences occupancy of any part of the Premises, or (b) that date on which
Landlord notifies Tenant that Tenant's Work is "substantially complete," as
defined in paragraph 6 of the Work Agreement. Landlord hereby leases the
Premises to Tenant and Tenant hereby leases the Premises from Landlord for the
Term; or (ii) October 1, 1999.
B. Declarations: If requested by Landlord at any time during the Term,
Tenant promptly will execute a declaration in the form attached hereto as
Exhibit B.
C. Effective Date: The rights and obligations set forth in this Lease, except
for the obligation to pay Rent and as otherwise specifically provided herein to
the contrary, shall become effective on the date of final execution of this
Lease.
3. WORK AGREEMENT.
Landlord agrees to improve the Premises in accordance with the Work Agreement,
but shall have no other obligation to make any improvements or alterations to
the Premises.
4. RENT.
From and after the Lease Commencement Date, Tenant shall pay to Landlord such
Base Rent and Additional Rent as are set forth in this Section 4 and in Section
5 below.
A. Base Rent: Base Rent shall equal the following amounts:
<TABLE>
<CAPTION>
Base Rent
Lease Per Square Foot Base Rent Monthly
Year Per Annum Per Annum Base Rent
<S> <C> <C> <C> <C>
1 $20.00 $409,540.00 .$34,128.33
2 $20.60 $421,826.20 $35,152.18
3 $21.22 $434,521.94 $36,210.16
4 $21.86 $447,627.22 $37,302.27
5 $22.52 $461,142.04 $38,428.50
6 $23.20 $475,066.40 $39,588.87
7 $23.90 $489,400.30 $40,783.36
</TABLE>
Tenant shall pay Base Rent to Landlord in equal monthly installments ("Monthly
Base Rent") in advance on the first day of each calendar month during the Term,
without notice, except that the first monthly installment of Base Rent shall be
paid upon execution of this Lease. If the Lease Commencement Date occurs on a
date other than the first day of a calendar month, Tenant shall receive a credit
equal to the Monthly Base Rent multiplied by the number of days in said calendar
month prior to the Lease Commencement Date and divided by the number of days in
such month, which credit shall be applied toward the installment of Monthly Base
Rent next due hereunder. If the Lease Expiration Date occurs after the
expiration of the last numbered Lease Year set forth above in this Section 4.A.
for which an amount of Monthly Base Rent is specified, then Monthly Base Rent
shall continue to be payable by Tenant at such rate for each month or portion of
a month thereafter which is prior to the Lease Expiration Date.
B. Payment: All Base Rent and Additional Rent due and payable to Landlord under
this Lease shall be made payable to TrizecHahn Centers, Inc. and delivered to
TrizecHahn Centers, Inc. at NationsBank, P.O. Box #631569, Baltimore, MD
21263-1569: provided, however, that at Landlord's sole option, following at
least thirty (30) days written notice to Tenant, Tenant shall thereafter make
all payments of Base Rent and Additional Rent due and payable to Landlord under
this Lease by means of electronic transfers of funds from Tenant's financial
institution to Landlord's designated financial institution. Payments of Rent
(other than in cash), if initially dishonored, shall not be considered rendered
until ultimately honored as cash by Landlord's depository. Except as expressly
set forth otherwise in this Lease, Tenant will pay all Rent to Landlord without
demand, deduction, set-off or counter-claim.
C. Late Fee: If Tenant fails to make any payment of Rent on or before the date
when payment is due on more than one (1) occasion in any calendar year or if, on
said one (1) occasion, Tenant falls to make full payment of Rent within five (5)
days after the day on which payment is due, then Tenant also shall pay to
Landlord a late fee equal to five percent (5%) of the amount that is past due
for each month or part thereof until such Rent is fully paid. Said late fee
shall be deemed reimbursement to Landlord for its costs of carrying and
processing Tenant's delinquent account. Acceptance by Landlord of said late fee
shall not waive or release any other rights or remedies to which Landlord may be
entitled on account of such late payment.
D. Arbitration: Any statement provided to Tenant by Landlord pursuant to Section
5 below shall be conclusive and binding upon Tenant unless, within sixty (60)
days after receipt thereof, Tenant notifies Landlord of the respects in which
the statement is claimed to be incorrect. Unless otherwise mutually agreed, any
such dispute shall be determined by arbitration in the jurisdiction in which the
Premises are located, in accordance with the then current commercial rules of
the American Arbitration Association. The costs of the arbitration shall be
divided equally between Landlord and Tenant, except that each party shall bear
the cost of its own legal fees, unless (i) the arbitration results in a
determination that Landlord's statement contained a discrepancy of less than
five percent (5%) in Landlord's favor, in which event Tenant shall bear all
costs incurred in connection with such arbitration, including, without
limitation, reasonable legal fees or (ii) the arbitration results in a
determination that Landlord's statement contained a discrepancy of at least five
percent (5%) in Landlord's favor, in which event Landlord shall bear all
reasonable costs incurred in connection with such arbitration, including,
without limitation, reasonable legal fees. Pending determination of any dispute,
Tenant shall pay all amounts due pursuant to the disputed statement, but such
payments shall be without prejudice to Tenant's position. Upon at least fifteen
(15) days notice to Landlord, Tenant shall have reasonable access during normal
business hours and at Tenant's expense, to appropriate books and records of
Landlord relating to the amount of expenses covered by the disputed statement,
for the purpose of verifying the statement. Any such review shall be made only
by Tenant's employees and/or by an auditor hired by Tenant who is a Certified
Public Accountant and who is employed on other than a contingent fee basis.
5. ADDITIONAL RENT.
A. To Cover Consumer Price Index Increases: [intentionally omitted.]
B. To Cover Increased Operating and Real Estate Tax Expenses:
(1) Definitions: As used herein, "Increased Operating Expenses" shall
equal the amount by which Operating Expenses incurred during such
Fiscal Year exceed the Operating Expenses incurred during the Base
Year, and "Tenant's Share of Increased Operating Expenses" shall be
that percentage of Increased Operating Expenses which is the equivalent
of the number of square feet of rentable area in the Premises (20,477
on the Lease Commencement Date) divided by the number of square feet of
rentable area of office space in the Building (110,472 on the Lease
Commencement Date). As used herein, "Increased Real Estate Tax
Expenses" shall equal the amount by which Real Estate Tax Expenses
incurred during such Fiscal Year exceed the Real Estate Tax Expenses
incurred during the Base Year, and 'Tenant's Share of Increased Real
Estate Tax Expenses" shall be that percentage of Increased Real Estate
Tax Expenses which is equivalent to the number of square feet of
rentable area in the Premises divided by the number of square feet of
rentable area (both office and retail) in the Building (129,289 on the
Lease Commencement Date). However, in no event shall any of the
aforesaid sums be less than zero.
(2) Payment of Tenant's Share: Commencing on the first anniversary of
the Lease Commencement Date, in addition to all other Rent set forth
herein, for each Fiscal Year during the Term, Tenant shall pay to
Landlord as Additional Rent an amount equal to the sum of Tenant's
Share of Increased Operating Expenses and Tenant's Share of Increased
Real Estate Tax Expenses; provided, however, that for the Fiscal Years
during which the Term begins and ends, Tenant's Share of the aforesaid
sum shall be prorated based upon the greater of: (1) the number of days
during such Fiscal Year that this Lease is in effect, or (ii) the
number of days that Tenant actually occupies the Premises or any
portion thereof.
C. Statements:
(1) [intentionally omitted.]
(2) Commencing with the Fiscal Year which includes the first
anniversary of the Lease Commencement, and for each Fiscal Year thereafter,
Landlord shall deliver to Tenant a statement estimating Tenant's Share of
Increased Operating Expenses and Increased Real Estate Tax Expenses for such
Fiscal Year, which Tenant shall pay in equal monthly installments in advance on
the first day of each calendar month during each Fiscal Year. Tenant shall
continue to pay such estimated Increased Operating and Real Estate Tax Expenses
until Tenant receives the next such statement from Landlord, at which time
Tenant shall commence making monthly payments pursuant to Landlord's new
statement. With the first payment of Additional Rent herein which is due at
least fifteen (15) days after Tenant's receipt of a statement from Landlord
specifying Tenant's Share of estimated Increased Operating and Real Estate Tax
Expenses payable during the Fiscal Year, Tenant shall pay the difference between
its monthly share of such sums for the preceding months of the Fiscal Year and
the monthly installments which Tenant has actually paid for said preceding
months.
D. Retroactive Adjustments: After the end of the Fiscal Year which includes the
first anniversary of the Lease Commencement Date, and after the end of each
Fiscal Year thereafter, Landlord shall determine the actual Increased Operating
Expenses and Increased Real Estate Tax Expenses for such Fiscal Year, Landlord
shall calculate the foregoing sums and shall provide to Tenant a statement of
Tenant's Share of Increased Operating Expenses and Increased Real Estate Tax
Expenses for the Fiscal Year, which shall be substantially in the form of the
statement which is attached hereto as Exhibit F and made a part hereof. Within
thirty (30) days after delivery of any such statement, Tenant shall pay to
Landlord any deficiency between the amount shown as Tenant's Share of Increased
Operating and Real Estate Tax Expenses for the Fiscal Year and the estimated
payments made by Tenant. Tenant shall be credited with any excess estimated
payments toward subsequent Rent payments by Tenant, or if the Term has expired,
Landlord shall refund such amount to Tenant within thirty (30) days following
the date of issuance of Landlord's statement if Tenant is not then in default
under this Lease.
E. Change In or Contest of Taxes: In the event of any change by any taxing body
in the period or manner in which any of the Real Estate Tax Expenses are levied,
assessed or imposed, Landlord shall have the right, in its sole discretion, to
make equitable adjustments with respect to computing increases in Real Estate
Tax Expenses. Real Estate Tax Expenses which are being contested by Landlord
shall be included in computing Tenant's Share of Increased Real Estate Tax
Expenses under this Section, but if Tenant shall have paid Rent on account of
contested Real Estate Tax Expenses and Landlord thereafter receives a refund of
such taxes, Tenant shall receive a credit toward subsequent Rent payments in an
amount equal to Tenant's Share of such refund, or if the Term has expired,
Landlord shall refund such amount to Tenant within thirty (30) days following
the date of Landlord's receipt of such refund if Tenant is not then in default
under this Lease.
F. Sales, Use or Other Taxes: If during the Term any governmental authority
having jurisdiction over the Building or the Land levies, assesses or imposes
any tax on Landlord, the Premises, the Building or the Land or the rents payable
hereunder, in the nature of a sales tax, use tax or any tax except (i) taxes on
Landlord's income, (ii) estate or inheritance taxes, or (iii) Real Estate Tax
Expenses, then Tenant shall pay its proportionate share to Landlord within
fifteen (15) days after receipt by Tenant of notice of the amount of such tax.
6. USE.
A. Permitted Use: Tenant shall use and occupy the Premises solely for
office use and for administrative activities directly related thereto and for no
other purpose.
B. Legal and Other Restrictions of Tenant's Use: In its use of the Premises,
Tenant shall comply with all present and future laws, regulations (including but
not limited to fire and zoning regulations) and ordinances of all other public
and quasi-public agencies having jurisdiction over the Land or the Building.
Tenant shall not use the Land, the Building or use or occupy the Premises for
any unlawful, disorderly or hazardous purposes or in a manner which will
interfere with the rights of Landlord, other tenants or their invitees or in any
way injure or annoy any of them.
C. Landlord's Compliance with Laws: Landlord shall make reasonable efforts to
comply with all present and future laws, governmental regulations and ordinances
and shall correct such conditions which may be in violation of any such laws,
regulations or ordinances which may occur with respect to the Building or the
Land, provided that (a) such compliance is not the responsibility of Tenant or
of any other tenant(s) at the Building and (b) Landlord has obtained actual
knowledge of the existence of such condition which constitutes such
noncompliance with an applicable law, regulation or ordinance.
7. CARE OF PREMISES.
Tenant shall at its expense keep the Premises (including all improvements,
fixtures and other property located therein) in a neat and clean condition and
in good order and repair, and will suffer no waste or injury thereto. Tenant
shall surrender the Premises at the end of the Term in as good order and
condition as they were in on the Lease Commencement Date, ordinary wear and tear
excepted.
B. ALTERATIONS BY TENANT.
A. Making of Alterations; Landlord's Consent: Tenant shall not make or permit to
be made any Alterations without the prior written consent of Landlord both as to
whether the Alterations may be made and as to how and when they will be made.
Notwithstanding the foregoing, (i) Landlord shall not unreasonably withhold,
condition or delay its consent to Alterations which would not affect any of the
structural components of the Building or any of the plumbing, electrical,
heating, ventilating or air conditioning systems of the Building and would not
be visible from the exterior of the Premises or of the Building, and (ii) the
consent of Landlord shall not be required with respect to painting of the walls
in the Premises, installation of wall covering in the Premises, and replacement
or installation of carpeting in the Premises, provided that, in each instance,
Tenant provides Landlord with written notice of the work which is proposed to be
performed pursuant to this clause (ii) at least ten (10) days in advance of the
performance of such work and Tenant's contractors comply with all of the
Building's regulations. Any Alterations shall be made at Tenant's expense, by
its contractors and subcontractors and in accordance with complete plans and
specifications approved in advance in writing by Landlord, and only after
Tenant: (i) has obtained all necessary permits from governmental authorities
having jurisdiction and has furnished copies thereof to Landlord, (ii) has
submitted to Landlord an architect's certificate that the Alterations will
conform to all applicable laws and regulations, and (iii) has complied with all
other requirements reasonably imposed by Landlord, including without limitation
any requirements due to the underwriting guidelines of Landlord's insurance
carriers. Landlord's consent to any Alterations and approval of any plans and
specifications constitutes approval of no more than the concept of these
Alterations and not a representation of warranty with respect to the quality or
functioning of such Alterations, plans and specifications. Tenant shall be and
is solely responsible for the Alterations and for the proper integration thereof
with the Building, the Building's systems and existing conditions. Landlord
shall have the right, but not the obligation, to supervise the making of any
Alterations. If any Alterations are made without the prior written consent of
Landlord, or which do not conform to plans and specifications approved by
Landlord or to other conditions imposed by Landlord pursuant to this Section,
Landlord may, in its sole but reasonable discretion, correct or remove such
Alterations at Tenant's expense. Following completion of any Alterations, at
Landlord's request, Tenant e4her--shall deliver to Landlord a complete set of
"as built" plans showing the Alterations or, if Tenant does not provide same to
Land lord with i n ten (10) business days following completion of the
Alterations, then Tenant shall reimburse Landlord for any expense incurred by
Landlord in causing the Building plans to be modified to reflect the
Alterations.
B. No Liens: Tenant shall take all necessary steps to ensure that no mechanic's
or materialmen's liens are filed against the Premises, the Building or the Land
as a result of any Alterations made by the Tenant. If any mechanic's lien is
filed, Tenant shall discharge the lien within ten (10) days thereafter, at
Tenant's expense, by paying off or bonding the lien.
9. EQUIPMENT.
A. Permitted Equipment: Tenant shall not install or operate in the Premises any
equipment or other machinery that, in the aggregate, will cause Tenant to use
more than the Premises' Standard Electrical Capacity, without: (i) obtaining the
prior written consent of Landlord (which consent shall not be unreasonably
withheld, conditioned or delayed), who may condition its consent upon the
payment by Tenant of Additional Rent for additional consumption of utilities,
additional wiring or other expenses resulting therefrom, (ii) securing all
necessary permits from governmental authorities and utility companies and
furnishing copies thereof to Landlord, and (iii) complying with all other
requirements reasonably imposed by Landlord. Prior to the Lease Commencement
Date, Tenant shall provide Landlord with a list of all equipment that Tenant
intends to install or operate in the Premises which operate on more than one
hundred twenty (120) volts, and Tenant shall provide Landlord with an updated
list of such equipment prior to the installation or use of any additional
equipment which operates on more than one hundred twenty (120) volts. Tenant
shall not install any equipment or machinery which may necessitate any changes,
replacements or additions to or material changes in the use of water, heating,
plumbing, air conditioning or electrical systems of the Building without
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld, delayed or conditioned, it being agreed that in
determining whether to consent to any such change, replacement or addition
Landlord may consider, inter alia, any noise, smell, heat, cost to Landlord,
liability to Landlord, or adverse impact on the marketability of the Premises
following the expiration of the Term of this Lease or on the marketability of
any other space in the Building during or after the Term of this Lease, and any
adverse impact of any nature on the operation, maintenance, or management of the
Building or any portion thereof, which may result from the proposed change,
replacement or addition.
B. Payment For Excess Utility Usage: If Tenant's equipment shall result in
electrical demand in excess of the Premises' Standard Electrical Capacity,
Landlord shall have the right, in its sole but reasonable discretion, to install
additional transformers, distribution panels, wiring and other applicable
equipment at the expense of Tenant. None of the equipment so installed shall be
deemed to be Tenant's Personal Property. If at any time during the Term,
Tenant's connected electrical load from its use of equipment and fixtures
(including incandescent lighting and power), as estimated by Landlord, exceeds
the Premises' Standard Electrical Capacity, then Landlord may, at its option:
(i) install separate electrical meter(s) for the Premises, or (ii) cause a
survey to be made by an independent electrical engineer or consulting firm to
determine the amount of electricity consumed by Tenant beyond the Premises'
Standard Electrical Capacity. Tenant shall reimburse Landlord for the cost of
the installation of said meter(s) or completion of said meter(s) or survey, and
shall pay as Additional Rent the cost of any electricity in excess of an average
of the Premises Standard Electrical Capacity, at the rate charged by the utility
company providing such electricity, assuming continuous business hours, within
ten (10) days after receipt of any bill therefor from Landlord for such excess
utility usage, only if said meter or survey reflects that Tenant's equipment has
resulted in electrical demand in excess of the Premises' Standard Electrical
Capacity.
C. Noise; Vibration; Floor Load: Business machines and equipment belonging to
Tenant, which cause noise or vibration that may be transmitted to any part of
the Building to such a degree as to be objectionable to Landlord or to any
tenant of the Building, shall be installed and maintained by Tenant at Tenant's
expense on devices that eliminate the noise and vibration. Tenant shall not
place any load upon the floor of the Premises which exceeds the per square foot
load the floor was designed to carry (eighty (80) pounds per square foot for
live loads and twenty (20) pounds per square foot for dead loads).
10. OWNERSHIP AND REMOVAL OF PROPERTY.
A. Landlord's Property: Any Alterations and other improvements and any
equipment, machinery, furnishings and other property, installed or located in
the Premises, the Building or the Land by or on behalf of Landlord or Tenant,
except for Tenant's Personal Property: (i) shall immediately become the property
of Landlord, and (ii) shall be surrendered to Landlord with the Premises as a
part thereof at the end of the Term; provided, however, that if Landlord
requests Tenant to remove any Alterations installed by or on behalf of Tenant,
Tenant shall cause the same to be removed at Tenant's expense on or before the
Lease Expiration Date, or shall reimburse Landlord for the cost of such removal,
as elected by Landlord (unless Landlord expressly waives in writing the right to
require such removal at the time Landlord give its consent to the making of such
Alterations). Notwithstanding the foregoing, (1) with respect to all Alterations
made pursuant to the Office Space Work Agreement attached hereto as Exhibit C,
Landlord shall specify which, if any, of such Alterations Tenant shall be
required to remove at the end of the Term at the time Landlord approves the
plans and specifications for such Alterations, and (ii) with respect to all
other Alterations, Tenant, upon submitting its request to Landlord to make such
Alterations, shall have the right to request therein that Landlord specify
whether and to what extent Landlord will require Tenant to remove the
Alterations in question at the end of the Term. If Tenant shall fall to request
such information in its request to make any Alterations specified in clause (ii)
in the preceding sentence, such right shall be deemed null and void as to the
Alterations in question, and all such Alterations shall thereafter be subject to
the exercise of Landlord's rights and to Tenant's obligations set forth in the
first sentence of this Section 10.A. If Tenant submits its request for such
information in accordance with the foregoing provisions and Landlord consents to
the Alterations requested, Landlord shall, together with its consent, specify in
writing whether and to what extent it will require Tenant to remove the
Alterations in question at the end of the Term, and if Landlord fails so to
specify, Tenant shall have no further obligation to remove the Alterations which
were the subject of Tenant's request.
B. Removal of Property At End of Term: Tenant shall remove all of Tenant's
Personal Property, and all computer cabling and wiring installed by or on behalf
of Tenant (irrespective of whether such cabling and wiring constitutes Tenant's
Personal Property under the terms of this Lease, and at Tenant's expense, using
a contractor approved in advance by Landlord in writing), from the Building and
the Land on or before the Lease Expiration Date. Any personal property belonging
to Tenant or to any other person or entity which is left in the Building or on
the Land after the date this Lease is terminated for any reason shall be deemed
to have been abandoned. In such event, Landlord shall have the right to store
such property at Tenant's sole cost and/or to dispose of it in whatever manner
Landlord considers appropriate, without waiving its right to claim from Tenant
all expenses and damages caused by Tenant's failure to remove such property, and
Tenant and any other person or entity shall have no right to compensation from
or any other claim against Landlord as a result.
11. LANDLORD'S ACCESS TO PREMISES.
Landlord may at any reasonable time upon reasonable prior notice to Tenant
(which notice maybe given orally and which notice shall not be required in the
event of an emergency) enter the Premises to examine them, to make alterations
or repairs thereto or for any other purposes which Landlord considers necessary
or advisable; however, in the case of any emergency, Landlord and its agents may
enter the Premises at any time and in any manner. Tenant shall allow the
Premises to be exhibited by Landlord: (i) at any reasonable time to
representatives of lending institutions or to prospective purchasers of the
Building, and (ii) at any reasonable time to persons who may be interested in
leasing the Premises. Landlord reserves the right and shall be permitted
reasonable access to the Premises to install facilities within and through the
Premises and to install and service any systems deemed advisable by Landlord to
provide services or utilities to any tenant of the Building, provided that (a)
the square footage of the Premises is not reduced, and (b) Tenant's use of the
Premises is not materially adversely affected during the time in which Landlord
performs such service or makes any installation.
12 SERVICES AND UTILITIES.
A. Services Provided: As long as Tenant is not in Default, as defined in
Subsection 19.A. below, Landlord shall provide the following to Tenant, without
additional charge, except as otherwise provided herein (including, but not
limited to, as provided in Sections 5 and 1.0. hereof):
(1) Elevator service for common use, subject to call at all times,
including Sundays and Holidays. (2) Central heating and air conditioning from
8:00 a.m. until 6:00 p.m. on weekdays and from 8:00 a.m. until 1:00 p.m. on
Saturdays, exclusive of Holidays, during the seasons of the year and within the
temperature ranges usually furnished in comparable office buildings in the city
(or, if not a city, other local jurisdiction) in which the Building is located,
such that, during the hours from 8:00 a.m. to 6:00 p.m. on weekdays, the
temperature in the Premises shall not exceed 75 degrees Fahrenheit with fifty
percent (50%) relative humidity in the Summer and shall not be lower than 70
degrees Fahrenheit in the Winter. Landlord shall provide heat and air
conditioning at other times at Tenant's expense, provided that Tenant gives
Landlord notice by 1:00 p.m. on weekdays for after-hour service on the next
weekday, two (2) business days' notice before a Holiday for service on such
Holiday and two (2) business days' notice for after-hour service on Saturday or
Sunday. Landlord shall charge Tenant for such after-hour, Holiday and special
weekend service at the prevailing rates necessary for Landlord to recover its
actual direct cost of providing such service, including, but not limited to, the
cost of compensation and all fringe benefits for employees providing such
service; provided, however, that Landlord shall provide Tenant with up to an
aggregate of eight (8) hours of after-hour HVAC service during each Lease Year
of the Term at no additional charge from time to time to other tenants of the
Building.
(3) Cleaning and char services in Landlord's standard manner after
6:00 p.m. on weekdays (other than Holidays), and in accordance
with the specifications attached hereto and made a part hereof
as Exhibit G.
(4) Electrical facilities to furnish electricity up to the
Premises' Standard Electrical Capacity (including the
replacement of Building standard light bulbs in Building
standard light fixtures, it being agreed that if Landlord
replaces any other light bulbs in the Premises, Tenant shall
pay Landlord the cost of such bulbs and all labor costs
incurred by Landlord in connection therewith within fifteen
(15) days after Landlord's written demand therefor).
(5) Rest room facilities.
(6) Routine maintenance, painting and electrical lighting service
for all Common Areas of the Building in such manner as
provided in comparable buildings in Arlington, Virginia.
(7) Reasonable access to the Premises at all times (twenty-four
(24) hours per day, seven (7) days per week), subject to such
security procedures, restrictions and other regulations as
Landlord may promulgate. Landlord shall initially provide
Tenant, at Landlord's expense, with such number of keys or
access cards, as the case may be, as are reasonably requested
by Tenant, and thereafter all replacements thereof and
additional keys or access cards shall be provided by Landlord
at Tenant's expense.
(8) A listing on the Building directory.
B. Failure to Provide Services: Landlord shall have no liability to Tenant or
others based on any failure by Landlord to furnish the foregoing, due to
Unavoidable Delays, repair or maintenance work or any other reason, and such
failure shall neither render Landlord liable for damages to either person or
property, nor be construed as an eviction of Tenant, nor cause a diminution or
abatement of Rent nor relieve Tenant of any of Tenant's obligations hereunder.
Notwithstanding the foregoing, if any of the services described in Section 12.A.
hereof is suspended and such suspension renders all or substantially all of the
Premises untenantable and continues for more than five (5) business consecutive
days, then all Rent due hereunder shall be abated for the period commencing on
the sixth (6th) business day of such suspension and concluding on the date that
Landlord gives Tenant written notice that the service has been restored.
C. Conservation: Tenant hereby agrees to comply with all energy conservation
procedures, controls and requirements instituted by Landlord pursuant to any
government regulations or otherwise, including but not limited to controls on
the permitted range of temperatures, the volume of energy consumption or the
hours of operation of the Building. Institution by Landlord of such controls and
requirements shall not entitle Tenant to terminate this Lease or to an abatement
of any Rent payable hereunder.
D. Recycling: Without limiting the foregoing, Tenant covenants and agrees, at
its sole cost and expense, to comply with all present and future laws, orders,
and regulations of the jurisdiction in which the Building is located and of the
federal, municipal, and local governments, departments, commissions, agencies
and boards having jurisdiction over the Building to the extent that they or this
Lease impose on Tenant duties and responsibilities regarding the collection,
sorting, separation, and recycling of trash. Tenant shall pay all costs,
expenses, fines, penalties, or damages that may be imposed on Landlord or Tenant
by reason of Tenant's failure to comply with the provisions of this Section
12.D., and, at Tenant's sole cost and expense, shall indemnify, defend and hold
Landlord harmless (including legal fees and expenses) from and against any
actions, claims, and suits arising from such noncompliance, using counsel
reasonably satisfactory to Landlord.
13. RULES AND REGULATIONS.
Tenant shall abide by and observe the rules and regulations attached hereto as
Exhibit D and such other rules and regulations as may be made by Landlord from
time to time as are generally applicable to all office tenants in the Building,
provided that such rules and regulations shall not be materially inconsistent
with the provisions of this Lease. Nothing contained in this Lease or in any
rules and regulations shall be interpreted to impose upon Landlord any
obligations to enforce against any tenant its rules and regulations, or the
provisions of any lease with any other tenant, and Landlord shall not be liable
to Tenant or any other entity for any violation of said rules, regulations or
lease provisions.
14. REPAIR OF DAMAGE CAUSED BY TENANT: INDEMNIFICATION.
A. Repairs: Except as otherwise expressly provided in this Lease, all injury,
breakage and damage to the Land, the Building or the Premises, caused by any act
or omission of Tenant shall be repaired by and at the sole expense of Tenant,
except that in the event that Tenant fails to make such repairs within the time
designated by Landlord, which shall be not less than five (5) business days
following written notice by Landlord to Tenant or such shorter period of time as
Landlord, in its sole discretion, determines is appropriate under the
circumstances, then, in such event, Landlord shall have the right, at its
option, to make such repairs and to charge Tenant for all costs and expenses
incurred in connection therewith as Additional Rent payable within ten (10) days
after the rendering of a bill therefor. Tenant shall notify Landlord promptly of
any injury, breakage or damage to the Land, the Building, or the Premises caused
by Tenant.
B. Indemnification: Tenant hereby agrees to indemnify and hold Landlord harmless
from and against all costs, damages, claims, liabilities and expenses, including
reasonable attorneys' fees, suffered by or claimed against Landlord, directly or
indirectly, based on, arising out of or resulting from: (i) Tenant's use and
occupancy of the Premises or the business conducted by Tenant therein or
Tenant's presence in the Building or on the Land (ii) the making by Tenant of
any Alterations, (iii) any act or omission of Tenant or its employees, agents or
invitees, and (iv) any breach or default by Tenant in the observance or
performance of its covenants and obligations under this Lease; provided,
however, that Tenant's obligations to indemnify and hold Landlord harmless
pursuant to this Section 14.B. shall not extend to (a) any actions by any person
who is not an agent, employee, independent contractor, or invitee of Tenant or
Landlord, or (b) any actions of Landlord's agents, employees, independent
contractors, or invitees unless they are the result of an effort by Landlord to
cure a Default by Tenant under this Lease or to exercise any right of Landlord
to replace, remove or repair any unauthorized Alteration by Tenant, to take any
action that Tenant was obligated to take under this Lease but did not take, to
correct any violation by Tenant of any of the Rules and Regulations, or to
otherwise enforce the provisions of this Lease.
15 LIMITATION ON LANDLORD LIABILITY.
A. Liability Standard: Landlord shall not be liable to Tenant or any other
individual or entity for any damage, loss or claim whatsoever, except damages,
losses and claims that are the direct result of Landlord's gross negligence or
willful misconduct; however, in no event shall Landlord be liable for
consequential damages.
B. Limitation on Total Liability: Notwithstanding any other provision of this
Lease, it is expressly understood and agreed that the total liability of
Landlord arising out of or in connection with this Lease, the relationship of
Landlord and Tenant hereunder and/or Tenant's use of the Premises, shall be
limited to the estate of Landlord in the Building. No other property or assets
of Landlord or any partner or owner of Landlord shall be subject to levy,
execution, or other enforcement proceedings or other judicial process for the
satisfaction of any judgment or any other right or remedy of Tenant arising out
of or in connection with this Lease, the relationship of Landlord and Tenant
hereunder and/or Tenant's use of the Premises.
16. FIRE AND OTHER CASUALTY.
If the Premises shall be damaged by fire or other casualty, other than as a
result of the repeated negligence or any act of willful misconduct of Tenant,
the Lease shall not terminate and, upon adjustment of insurance claims, Landlord
shall repair the damage, provided that Landlord shall have no obligation to
repair damage to or replace Tenant's Personal Property. Except as otherwise
provided herein, if any part of the Premises are rendered untenantable by reason
of any such damage, Rent shall abate from the date of the damage to the date the
damage is repaired, as determined by Landlord, in the proportion that the area
of the untenantable part bears from time to time to the total area of the
Premises. No compensation or reduction of Rent shall be paid or allowed for
inconvenience, annoyance or injury to Tenant or Tenant's business arising from
any damage to or repair of the Premises or the Building.
Notwithstanding the foregoing, if Landlord does not receive sufficient insurance
proceeds to fully repair the damage, or if the Building shall be so damaged
that, as determined by Landlord, substantial reconstruction of the Premises or
the Building is required (whether or not the Premises have been damaged), then
(i) Landlord, at its option, may give Tenant, within sixty (60) days after the
casualty, written notice of termination of this Lease, and this Lease and the
Term shall terminate (whether or not the Term has commenced) upon the expiration
of thirty (30) days from the date of the notice, with the same effect as if the
new expiration date had been the date initially fixed for expiration of the
Term, and all Rent shall be apportioned as of such date, and (ii) if Landlord
determines that the repairs and restoration cannot be substantially completed
within two hundred twenty-five (225) days after the date of such damage or
destruction, Landlord shall notify Tenant of such determination. For a period of
thirty (30) days after such determination, Tenant shall have the right to
terminate this Lease by giving written notice to Landlord, provided that the
damage or destruction was not caused by the act or omission of Tenant or any of
its employees or agents. If this Lease is terminated pursuant to the foregoing
provisions, then this Lease shall terminate (whether or not the Term has
commenced) upon the expiration of thirty (30) days after the date of the
termination notice, with the same effect as if the termination date had been the
date initially fixed for the expiration of the Term, and all Rent from the date
of the casualty, damage or destruction shall be apportioned and, subject to
abatement as aforesaid, shall be paid to the date of termination.
If the Premises or the Building shall be damaged by fire or other casualty due
to the negligence or misconduct of Tenant: (i) Landlord shall have no obligation
to repair the Premises or the Building, (ii) this Lease shall, at Landlord's
option, not terminate, (iii) Landlord may at Tenant's expense repair the damage,
and (iv) Landlord may pursue any legal and equitable remedies available to it.
17. TENANT INSURANCE.
A. Types of Insurance Required: Tenant, at its expense, shall obtain and
maintain in effect at all times during the Term an insurance policy providing
the following coverage:
(1) An "all risk" insurance policy covering all of Tenant's Personal
Property within, and improvements and alterations to, the Premises
for not less than the full replacement value thereof. All proceeds
of such insurance shall be used to repair or replace the items so
insured.
(2) A commercial general liability policy on an occurrence basis, with the
following limits:
<TABLE>
<CAPTION>
<S> <C>
Each occurrence limit for bodily injury and property damage $1,000,000
General aggregate $2,000,000
Product/completed operations aggregate $2,000,000
Fire damage legal liability $50,000
Medical payments (any one person) $5,000
</TABLE>
Said insurance shall name Landlord (in care of Landlord's management agent and
referring to the Building by its address), Landlord's management agent and
Mortgagee as an additional insured. The policy shall protect Landlord,
Landlord's management agent, and the Mortgagee against any liability for bodily
injury, personal injury, death or property damage occurring upon, in or about
the Premises, the Building or the Land or arising out of or relating to any
risks against which Tenant is required to indemnify Landlord, Landlord's
management agent and the Mortgagee. From time to time during the Term, Landlord
may require Tenant to increase said limits of said insurance to the limits of
liability insurance then customarily required of tenants of other comparable
office buildings in the city (or, if not a city, other local jurisdiction) in
which the Building is located.
B. Required Provisions of Policies: All insurance policies required to be
maintained by Tenant under this Lease must: (i) be issued by insurance companies
approved by Landlord in its reasonable discretion; (ii) be in form and have
content satisfactory to Landlord; (iii) be written as primary policy coverage
and not contributing to or in excess of any coverage which Landlord or the
Mortgagees may carry; (iv) contain an express waiver of any right of subrogation
by the insurance company against Landlord, the Mortgagees and the Landlord's and
the Mortgagees' employees and agents; and (v) provide that the policy may not be
cancelled or permitted to lapse unless Landlord shall have received at least
fifteen (15) days prior written notice of cancellation or non-renewal. Tenant
shall deliver to Landlord (in care of Landlord's management agent and referring
to the Building by its address) certificates at least ten (10) days before the
Lease Commencement Date and at least thirty (30) days before the renewal of any
policies and shall provide a copy of the original policy if so requested by
Landlord. Any insurance required of Tenant under this Section may be carried
under a blanket policy, provided that said policy shall specifically set forth
the amount of insurance allocated to this Lease.
C. Effect of Tenant's Activities on Insurance: Tenant shall not conduct or
permit to be conducted any activity, or place any equipment in or about the
Land, the Building or the Premises which will increase the rate of, or make void
or voidable, any fire or other insurance maintained or required to be maintained
by Landlord or any Mortgagee on the Building, the Land or the property kept
thereon or therein, which will conflict with the provisions of any such
insurance policy or which will make it impracticable for Landlord to obtain
insurance covering any risks against which Landlord reasonably deems it
advisable to obtain insurance. In the event any increases in the rates of such
insurance are, in Landlord's reasonable judgment, due to Tenant's presence in
the Building, to any activity conducted or property installed or placed by
Tenant on or about the Land, the Building or the Premises or to Alterations
installed by Tenant or at Tenant's request, Tenant shall reimburse Landlord for
the amount of such increases promptly upon demand therefor. Statements by the
applicable insurance company or insurance rating bureau that such increases are
due to any activity, property or improvements shall be conclusive for the
purposes of determining Tenant's liability hereunder.
D. Termination Right: Landlord shall have the right to terminate this Lease upon
thirty (30) days notice to Tenant in the event Landlord receives notice from any
of Landlord's insurance carriers that such carrier intends to cancel its
insurance on the Building, or to increase the cost of such insurance by more
than one hundred percent (100%) above the premium payable by Landlord
immediately prior to such notice, due to the activities of Tenant or the
presence of Tenant in the Building. However, Landlord shall not terminate this
Lease in the event Landlord is a-ble, with good faith efforts, to obtain
equivalent insurance from an insurance carrier satisfactory to Landlord at a
premium not more than one hundred percent (100%) greater than the premium for
the cancelled insurance; provided that Tenant shall reimburse Landlord for all
additional premiums charged to Landlord by such new insurance carrier. It is
expressly understood that Landlord shall not have the right to terminate this
Lease pursuant to this Subsection D. if any cancellation or rate increase is due
to factors generally applicable to the insurance or rental market, rather than
to Tenant's activities or presence in the Building.
E. Waiver. Except for gross negligence and intentional acts, Landlord and Tenant
hereby each waive and release each other from any and all liabilities, claims
and losses for which Landlord or Tenant is or may be held liable, to the extent
either party: (i) receives insurance proceeds on account thereof, or (ii) is
required to maintain insurance pursuant to this Section, whichever is greater.
F. Landlord's Insurance: Landlord shall obtain and maintain in effect at all
times during the Term, fire and extended coverage insurance insuring the
Building (exclusive of footings and foundations) (but not the property or
equipment of Tenant, its employees, agents, licensees, or invitees) against loss
or damage by fire either with "all-risk" property insurance or with extended
coverage, in an amount sufficient to prevent Landlord from becoming a co-insurer
within the terms of the applicable policy or applicable law, issued by a company
or companies licensed to do business in the Commonwealth of Virginia, by
policies that shall provide that the proceeds payable in connection with the
loss, if any, shall be payable to Landlord or Landlord's Mortgagee. Landlord's
insurance policy shall contain a waiver of any right of subrogation by
Landlord's insurance company against Tenant, its agents or insurance companies.
18. CONDEMNATION.
A. Landlord's Right to Terminate: If a substantial part of the Premises, the
Building or the Land is taken or condemned by any governmental authority for any
purpose or is granted to any authority in lieu of condemnation (collectively, a
"taking"), Landlord shall have the right in its sole discretion to terminate
this Lease by written notice to Tenant, and upon the giving of such notice, the
Term shall terminate as of the date title vests in the authority, and Rent shall
be abated as of that date. For purposes of this Section, a substantial part of
the Premises, the Land or the Building shall be considered to have been taken
if, in the sole opinion of Landlord, the taking shall render it commercially
undesirable for Landlord to permit this Lease to continue or to continue
operating the Building.
B. Adjustment of Rent: If a portion of the Premises is taken and Landlord does
not elect to terminate this Lease pursuant to the preceding paragraph, then Rent
shall be equitably adjusted as of the date title vests in the authority and this
Lease shall otherwise continue in full force and effect.
C. Division of Award: Tenant shall have no claim against Landlord arising out of
or related to any taking, or for any portion of the amount that may be awarded
as a result, and Tenant hereby assigns to Landlord all its rights, title and
interest in and to any such award; provided, however, that Tenant may assert any
claim it may have against the authority for compensation for Tenant's Personal
Property and for any relocation expenses compensable by statute, as long as such
awards shall be made in addition to and stated separately from the award made
for the Land, the Building and the Premises.
19. DEFAULT.
A. Default of Tenant: The following events shall be a default by Tenant (a
"Default") under this Lease:
(1) Failure of Tenant to pay Rent as and when due, if the failure continues
for five (5) days after notice from Landlord specifying the failure.
(2) Failure of Tenant to comply with or perform any covenant or
obligation of Tenant under this Lease, other than those concerning
the payment of Rent, if the failure continues for thirty (30) days
after notice from Landlord to Tenant specifying the failure;
provided, however, that with respect to any failure to comply with
or perform any covenant or obligation which is not curable within
such 30 day period, if (i) Tenant has expeditiously commenced to
cure same, (ii) the failure does not adversely affect the Building
or other tenants therein and does not result in any liability to,
or expenditure of funds by, Landlord, and (iii) Tenant diligently
pursues the cure of such condition, the cure period shall be
extended to the time necessary to cure the condition, not to
exceed a total of sixty (60) days (inclusive of the original 30
days).
(3) If, in Landlord's reasonable opinion, Tenant's activities or
presence in the Premises results in a significant, continuing or
repeated threat of physical danger to other tenants and/or users
of the Building, whether or not Tenant is capable of controlling
such threat.
(4) If Tenant, any guarantor of Tenant's performance hereunder (a
*Guarantor) or, if Tenant is a partnership, any partner of Tenant
("Partner"), shall file a voluntary petition in bankruptcy or insolvency,
shall be adjudicated bankrupt or insolvent or shall file a petition or
answer seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
federal, state or other law, or shall make an assignment for the benefit of
creditors, or shall seek or acquiesce in the appointment of any trustee,
receiver or liquidator of Tenant or of any Guarantor or Partner or of all
or any part of the property of Tenant or of such Guarantor or Partner.
(5) If, within thirty (30) days after the commencement of any proceeding
against Tenant or a Guarantor or Partner, whether by the filing of a
petition or otherwise, seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
any present or future applicable federal, state or other law, such
proceeding shall not have been dismissed or if, within thirty (30) days
after the appointment of any trustee, receiver or liquidator of Tenant or
any Guarantor or Partner, or of all or any part of the property of Tenant
or of any Guarantor or Partner, without the acquiescence of such individual
or entity, such appointment shall not have been vacated or otherwise
discharged, or if any execution or attachment shall have been issued
against the property of Tenant or of any Guarantor or Partner, pursuant to
which the Premises shall be taken or occupied or attempted to be taken or
occupied.
(6) If Tenant fails to take possession of the Premises on the Lease
Commencement Date or vacates or abandons the Premises prior to the Lease
Expiration Date, with or without an intention of paying Rent; provided,
however, that if (i) Tenant gives Landlord at least thirty (30) days prior
written notice that it intends to vacate the Premises, (11) Tenant pays the
full amount of all Rent due under this Lease while the Premises are vacant,
(111) the fact that the Premises are vacant does not adversely affect the
Building or other tenants therein and does not result in any liability to,
or expenditure of funds by, Landlord, and (iv) Tenant leaves the Premises
in a condition satisfactory to Landlord and continues to maintain the
Premises in a condition satisfactory to Landlord throughout the remainder
of the Term, then, and in such event only, Tenant shall not be deemed to be
in Default under this Section 19.A.(6) and Landlord shall have the right,
exercisable by sending written notice to Tenant, to sublet from Tenant for
the balance of the Term of this Lease all or any portion of the Premises,
or to terminate this Lease as to all or any portion of the Premises, which
rights of Landlord as to subletting and termination shall be exercisable by
Landlord in its sole discretion.
B. Remedies Upon Default: Upon the occurrence of a Default, Landlord shall
have the right, then or at any time thereafter.
(1) Without demand or notice, to reenter and take possession of all or any
part of the Premises, to expel Tenant and those claiming through Tenant and
to remove any property therein, either by summary proceedings or by any
other action at law, in equity or otherwise, with or without terminating
this Lease, without being deemed guilty of trespass and without prejudice
to any other remedies of Landlord for breach of this Lease, and/or
(2) To give Tenant written notice of Landlord's intent to terminate
this Lease, and on the date specified in Landlord's notice,
Tenant's right to possession of the Premises shall cease and this
Lease shall terminate.
If Landlord elects to terminate this Lease, everything contained in this Lease
on the part of Landlord to be done shall cease, without prejudice to Landlord's
right to recover from Tenant all Rent, as set forth in Subsections C. and D.
below. If Landlord elects to reenter pursuant to Subsection B.(1) above,
Landlord may terminate this Lease, or, from time to time without terminating
this Lease, may relet all or any part of the Premises as the agent of Tenant,
for such term, at such rental and upon such other provisions as Landlord deems
acceptable, with the right to make any alterations and repairs to the Premises
that Landlord deems appropriate, at Tenant's expense. No such reentry or taking
of possession of the Premises shall be construed as an election to terminate
this Lease, unless notice of such intention is given pursuant to Subsection
B.(2) above, or unless termination be decreed by a court of competent
jurisdiction at the instance of Landlord. Landlord shall in no event be under
any obligation to relet any part of the Premises.
C. Liability of Tenant: If Landlord terminates this Lease or reenters the
Premises (with or without terminating this Lease), Tenant shall remain liable
(in addition to all other liabilities of Tenant accrued at the time of the
Default) for the sum of (i) any unpaid Rent accrued prior to the time of
termination and/or reentry, as the case may be, plus interest thereon from the
due date at the Default Rate, (ii) all Base Rent and Additional Rent provided
for in this Lease from the time of termination and/or reentry, as the case may
be, until the date this Lease would have expired had a Default not occurred,
plus interest thereon from the due date at the Default Rate, (iii) any and all
expenses (including but not limited to reasonable attorneys' and brokerage fees)
incurred by Landlord in reentering and repossessing the Premises, in correcting
any default, in painting, altering or repairing the Premises in order to place
the Premises in first-class rentable condition (whether or not the Premises are
relet), in protecting and preserving the Premises and in reletting or attempting
to relet the Premises, and (iv) any other amounts necessary to compensate
Landlord for any other injury or detriment caused by the Default, minus the net
proceeds (after deducting any rental abatements, tenant improvement allowances
and other concessions and inducements) actually received by Landlord, if any,
from any reletting to the extent attributable to the period prior to the date
this Lease would have expired had a Default not occurred. Landlord shall have
the option to recover any damages sustained by Landlord either at the time of
reletting, if any, or in separate actions from time to time as said damages
shall have been made more easily ascertainable by successive relettings or, at
Landlord's option, to defer any such recovery until the date this Lease would
have expired in the absence of a Default, in which event Tenant hereby agrees
that the cause of action shall be deemed to have accrued on the aforesaid date.
The provisions of this Section shall be in addition to, and shall not prevent
the enforcement of, any claim Landlord may have for anticipatory breach of this
Lease.
D. Liquidated Damages: In addition to Landlord's rights pursuant to Subsection
C. above, if Landlord terminates this Lease, Landlord shall have the right at
any time, at its sole option, to require Tenant to pay to Landlord on demand, as
liquidated damages, the sum of (i) the total of the Base Rent, Additional Rent
and all other sums which would have been payable under this Lease from the date
of Landlord's demand for liquidated damages ("Landlord's Demand") until the date
this Lease would have terminated in the absence of the Default, discounted to
present value at the rate of five percent (5%) per annum (the "Discount Rate"),
(ii) all unpaid Rent accrued prior to the time of Landlord's Demand, plus
interest thereon from the due date at the Default Rate, (iii) any and all
reasonable expenses (including but not limited to attorneys' and brokerage fees)
incurred by Landlord in reentering and repossessing the Premises, in correcting
any default, in painting, altering or repairing the Premises in order to place
the Premises in first-class rentable condition (whether or not the Premises are
relet), in protecting and preserving the Premises and in reletting or attempting
to relet the Premises, and (iv) any other amounts necessary to compensate
Landlord for any other injury or detriment caused by the Default; minus the sum
of (a) the net fair market rental value of the Premises for the period referred
to in Subsection D.(i) above, discounted to present value at the Discount Rate,
and (b) any sums actually paid by Tenant to Landlord pursuant to Subsection C.
above-, provided, however, that if said damages shall be limited by law to a
lesser amount, Landlord shall be entitled to recover the maximum amount
permitted by law. The "net fair market rental value" referred to in Subsection
D.(a) above shall be the fair market rental value of the Premises at the time of
Landlord's Demand, reduced by any rental abatements, tenant improvement
allowances and other concessions and inducements generally provided by landlords
seeking to lease comparable commercial property in the area of the Premises at
the time of Landlord's Demand. If reletting is accomplished within a reasonable
time after Lease termination, the "net fair market rental value" referred to in
Subsection D.(a) above shall be deemed prima facie to be the net rental income
(after deducting any rental abatements, tenant improvement allowances and other
concessions and inducements) realized upon such reletting.
E. Waiver: Tenant, on its own behalf and on behalf of all persons and entities
claiming through Tenant, including but not limited to creditors of Tenant,
hereby waives any and all rights and privileges which Tenant and such other
persons and entities might otherwise have under any present or future law: (i)
to redeem the Premises, (ii) to reenter or repossess the Premises, or (iii) to
restore the operation of this Lease, with respect to any dispossession of Tenant
by judgment or warrant of any court, any reentry by Landlord or any expiration
or termination of this Lease, whether by operation of law or pursuant to the
provisions of this Lease. Tenant hereby expressly waives receipt of a Notice to
Quit.
F. Lien on Personal Property: Landlord shall have alien upon Tenant's Personal
Property and other Property brought onto the Premises by Tenant, as and for
security for the Rent and other obligations of Tenant herein provided. Landlord
may, at any time after a Default, seize and take possession of any and all such
property, excluding files (hard and electronic), records and computer disks. If
Tenant fails to redeem the property so seized by payment of whatever sums may be
due Landlord pursuant to this Lease, then Landlord shall have the right, after
twenty (20) days written notice to Tenant to sell such personal property at
public or private sale and upon such terms and conditions as Landlord may deem
advantageous, and after the payment of all proper charges incident to such sale,
apply the proceeds thereof to the payment of any balance due to Landlord
hereunder and pay any remaining balance to Tenant. The exercise by Landlord of
the foregoing remedy shall not discharge Tenant from any deficiency owed to
Landlord, nor shall it preclude the exercise by Landlord of any other rights and
remedies. Landlord shall not be liable to Tenant, or other owners of property
seized, for damages, general or special, if Landlord reasonably believed it was
acting lawfully in seizing property located in the Premises.
G. Right of Distress: Landlord shall, to the extent permitted by law, have
a right of distress for Rent.
H. Right of Landlord to Cure: If Tenant defaults in the making of any payment or
in the doing of any act required to be made or done by Tenant under this Lease,
then Landlord may, at its option, make such payment or do such act, and the
expenses thereof, with interest thereon at the Default Rate, from the date paid
by Landlord, shall constitute Additional Rent hereunder due and payable by
Tenant with the next payment of Monthly Base Rent.
I. Attorneys' Fees: In the event of any Default hereunder, Tenant shall pay to
Landlord all reasonable attorneys' fees incurred by Landlord in connection with
such Default or the enforcement of Landlord's rights or remedies arising in
connection therewith, whether or not this Lease is terminated and whether or not
Landlord institutes any lawsuit against Tenant as a result of such Default. In
addition to the foregoing, whether or not this Lease is terminated, Tenant shall
pay to Landlord all other costs incurred by Landlord with respect to any lawsuit
instituted or action taken by Landlord to enforce the provisions of this Lease.
J. Survival: Tenant's liability pursuant to this Section 19 shall survive the
termination of this Lease, the institution of summary proceedings and/or the
issuance of a warrant thereunder.
20. NO WAIVER.
No failure or delay by Landlord in enforcing its right to strict performance by
Tenant of every provision of this Lease or in exercising any right or remedy
hereunder, and no acceptance by Landlord of full or partial rent during the
continuance of any Default, shall constitute a waiver of the provision or the
Default, and no provision shall be waived or modified except by a written
instrument executed by Landlord. No payment by Tenant, or receipt by Landlord,
of a lesser amount than the full Rent shall be deemed to be other than a payment
on account, notwithstanding any endorsement or statement on any check or letter
accompanying any payment of any Rent. No waiver of any Default or settlement of
any proceeding instituted on account of any claimed Default shall affect or
alter this Lease or constitute a waiver of any of Landlord's rights hereunder.
21. HOLDING OVER.
If Tenant shall be in possession of the Premises after termination of this Lease
(whether by normal expiration of the Term or otherwise) and Tenant's request to
hold over made by at least sixty (60) days prior written notice has not been
approved by Landlord, then, at Landlord's option: (i) Landlord may deem Tenant
to be occupying the Premises as a tenant from month-to-month, at the sum of one
hundred fifty percent (150%) of the Monthly Base Rent in effect for the last
full month of the Term, plus the monthly installment of Additional Rent which is
then payable pursuant to Section 5.C. of this Lease, and subject to all of the
other provisions of this Lease, as applicable to a month-to-month tenancy, or
(ii) Landlord may exercise any or all remedies for Default and at law and in
equity, including but not limited to an aciion against Tenant for wrongfully
holding over.
22. SUBORDINATION.
A. Lease Subordinate: This Lease shall be subject and subordinate to the lien of
any and all Mortgages and to any Ground Leases, and any and all renewals,
extensions, modifications, recastings and refinancings thereof. This clause
shall be self-operative, without execution of any further instrument; but if
requested by Landlord or any Mortgagee, Tenant shall promptly execute a
certificate or other document evidencing and providing for such subordination.
Landlord shall have the right to execute said document on behalf of Tenant if
Tenant fails to do so within five (5) days after receipt of the request. Tenant
agrees that, if any Mortgage is foreclosed or Ground Lease terminated, upon
request by the purchaser at the foreclosure sale or Ground Lessor, as the case
may be, Tenant shall attorn to and recognize the purchaser or Ground Lessor as
the landlord under this Lease and shall make all payments required hereunder to
such new landlord without any deduction or set-off of any kind whatsoever.
Tenant waives the provisions of any law or regulation, now or hereafter in
effect, which may give or purport to give Tenant any right to terminate or
otherwise affect this Lease or the obligations of Tenant hereunder in the event
that any such foreclosure, termination or other proceeding is filed, prosecuted
or completed. Notwithstanding anything herein to the contrary, any Mortgagee may
at any time subordinate the lien of its Mortgage to the operation and effect of
this Lease without Tenant's consent. by giving Tenant written notice of such
subordination, in which event this Lease shall be deemed to be senior to such
Mortgage, and thereafter such Mortgagee shall have the same rights as it would
have had if this Lease had been executed, delivered and recorded before said
Mortgage. Upon Landlord's receipt of Tenant's written request therefor, Landlord
shall use reasonable efforts to obtain a non-disturbance and quiet enjoyment
agreement from each future Mortgagee and Ground Lessor, and Tenant shall pay all
third party costs associated with obtaining the agreement, but in no event shall
the fact that a non-disturbance agreement is not obtained from any future
Mortgagee or Ground Lessor affect in any manner the subordination provided for
in Section 22.A. hereof.
B. Modifications to Lease: in the event any of Landlord's insurance carriers or
any Mortgagee requests modifications to this Lease, Tenant shall execute a
written amendment incorporating such requested modifications within thirty (30)
days after the same has been submitted to Tenant by Landlord, provided that such
modifications do not materially adversely affect Tenant's use or quiet enjoyment
of the Premises as herein permitted or any rights of Tenant hereunder against
Landlord or increase the rentals and other sums payable by Tenant hereunder. In
the event Tenant refuses or fails to execute such amendment within thirty (30)
days, Landlord shall have the right, at its sole option, in addition to
Landlord's other remedies for Default, to terminate and cancel this Lease by
written notice to Tenant specifying the date on which this Lease will terminate.
From and after said termination date, both Landlord and Tenant shall be relieved
of any and all further obligations hereunder, except liabilities arising prior
to the date of termination.
23. ASSIGNMENT AND SUBLETTING.
A. No Transfer Without Consent: Except as hereinafter provided in Section 23.E.
hereof, Tenant shall not, without the prior written consent of Landlord in each
instance (which consent may be withheld in Landlord's sole and absolute
discretion) (i) assign, mortgage or otherwise encumber this Lease or any of its
rights hereunder; (ii) sublet the Premises or any part thereof or permit the
occupancy or use of the Premises or any part thereof by any persons or entities
other than Tenant; or (iii) permit the assignment of this Lease or any of
Tenant's rights hereunder by operation of law. Any attempted assignment,
mortgaging or encumbering of this Lease or any of Tenant's rights hereunder and
any attempted subletting or grant of a right to use or occupy all or a portion
of the Premises in violation of the foregoing sentence shall be void.
Notwithstanding the foregoing, Landlord agrees that it shall not unreasonably
withhold, condition or delay its consent to a proposed subletting, provided that
all of the following conditions are satisfied: (a) there shall be no default at
the time of the proposed subletting, (b) the proposed subtenant shall be
creditworthy, (c) the proposed subtenant shall not be a governmental entity or a
person or entity enjoying sovereign or diplomatic immunity, (d) the use of the
Premises by the proposed subtenant shall not attract a volume, frequency or type
of visitor or employee to the Building which is not consistent with the
standards of a high-quality office building, (e) the proposed subtenant shall
specifically covenant and agree to perform the obligations of Tenant hereunder
and to occupy the Premises subject to the provisions of this Lease, and (f)
Tenant remains liable for the faithful performance of this Lease.
B. Take-Back Rights: In addition, Tenant may not assign this Lease, nor sublet
(or permit occupancy or use of) the Premises, or any part thereof, without
giving Landlord thirty (30) days prior written notice thereof. For thirty (30)
days following receipt of said notice if Tenant intends to sublease more than
fifty percent (50%) of the Premises or to assign this Lease, Landlord shall have
the right, exercisable by sending notice to Tenant, to sublet from Tenant for
the balance of the Term of this Lease (i) all of the Premises in the event
Tenant notified Landlord of its desire to assign this Lease, or (ii) so much of
the Premises as Tenant intends to sublet in the event Tenant notified Landlord
of its desire to sublet the Premises or permit another to make use thereof, at
the same rental Tenant is obligated to pay to Landlord hereunder. In the event
Landlord does not exercise the aforesaid right within said thirty (30) days,
Tenant may attempt to assign, sublet or permit use of this Lease or such space;
provided that Tenant shall obtain the prior written consent of Landlord as set
forth in Subsection A. above; provided that Tenant shall obtain the prior
written consent of Landlord as set forth in Subsection A. above, which consent
shall be granted or withheld by the expiration of the thirty (30) day take-back
period. In the event that Tenant defaults hereunder, Tenant hereby assigns to
Landlord the Rent due from any assignee or subtenant and hereby authorizes each
such party to pay said Rent to Landlord.
C. Transfer of Stock: If Tenant and/or any Guarantor is a corporation, then the
sale, issuance or transfer of any voting capital stock of Tenant or any
Guarantor, by the person, persons or entities owning a controlling interest
therein as of the date of this Lease, which results in a change in the voting
control of Tenant or the Guarantor, shall be deemed an assignment within the
meaning of this Section 23. If Tenant and/or any Guarantor is a partnership, the
sale or transfer of the partnership share, or any portion thereof, of any
general partner shall be deemed an assignment of this Lease.
D. Expenses and Profits; Effect of Consent:
(1) In the event Landlord permits Tenant to assign or sublet all or a
portion of the Premises to a third party, one-half (1/2) of the profits to
Tenant from such assignment or subletting (that is, the sums that are paid
by such third party for the right to occupy the Premises, in excess of (i)
the Rent then in effect, (ii) all costs and expenses paid by Tenant
pursuant to Section 23.D.(2) hereof, and (iii) all other costs and expenses
actually incurred by Tenant in connection with such assignment or
subletting for brokerage commissions, improvements to the Premises,
advertising costs, attorney's fees, tenant allowances, and professional
fees), shall be paid by Tenant to Landlord on a monthly basis as Additional
Rent.
(2) Tenant shall be responsible for all reasonable costs and expenses,
including attorneys' fees, incurred by Landlord in connection with
any proposed or purported assignment or sublease and an
administrative fee of Two Thousand Five Hundred Dollars
($2,500.00).
(3) The consent by Landlord to any assignment or subletting shall
neither be construed as a waiver or release of Tenant from any
covenant or obligation of Tenant under this Lease, nor as
relieving Tenant from giving Landlord the aforesaid thirty (30)
days notice of, or from obtaining the consent of Landlord to, any
further assignment or subletting. The collection or acceptance of
Rent from any such assignee or subtenant shall not constitute a
waiver or release of Tenant from any covenant or obligation of
Tenant under this Lease, except as expressly agreed by Landlord in
writing.
E. Permitted Assignments; Permitted Licensees:
Notwithstanding the foregoing provisions of this Section 23, Landlord agrees
that:
(1) So long as (a) no Default is then continuing beyond any applicable cure
period, (b) no circumstance shall have occurred which with the giving of
notice, the passage of time, or both would constitute a Default by Tenant,
and (c) Tenant or its permitted subtenant or assignee named herein shall be
occupying the entire Premises and actively conducting business therein, the
provisions of this Section 23 shall not be applicable with regard to an
assignment of this Lease or a subletting of the Premises to Tenant's
Affiliate (as hereinafter defined), so long as (1) Tenant gives Landlord
prior written notice of any such subletting or assignment to Tenant's
Affiliate (as hereinafter defined); (2) Tenant originally named herein
shall remain primarily liable under this Lease, notwithstanding any such
assignment or subletting; and (3) no other or further assignment or
subletting shall be permitted without Landlord's prior written consent. An
Affiliate, as used herein, shall be a person or entity that directly, or
indirectly through one or more intermediaries, controls or is controlled
by, or is under common control with, the Tenant. "Control" as used herein
shall mean the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a person or entity,
whether through ownership of voting securities, by contract, or otherwise;
and
(2) Provided that Tenant delivers written notice to Landlord of
occupancy of a portion of the Premises by a Permitted Licensee (as
hereinafter defined) within five (5) business days following the
commencement of each such occupancy and, only with respect to
Permitted Licensees who are described in clause (i) of this
Section 23.E.(2), Tenant delivers a copy of a revocable license
agreement with such Permitted Licensee within five (5) business
days following the commencement of such Permitted Licensee's
occupancy of any portion of the Premises, Tenant shall not be
required to obtain Landlord's prior written consent for any such
occupancy by a Permitted Licensee (which occupancy shall be
permitted as a matter of right) and such occupancy by a Permitted
Licensee shall not constitute a sublease for the purposes of this
Section 23. As used herein, a "Permitted Licensee" shall mean
either (i) a retired officer or retired employee of Tenant, any
person or party who is a client or a consultant of Tenant (or an
officer or employee thereof), and any person or party who 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 Premises either in conjunction with or
to support the carrying on of Tenant's regular business or as a
result of an ongoing business relationship between Tenant and any
client of Tenant, and (ii) any employee of Hagler Bailly, Inc., a
Delaware corporation, or PHB Hagler Bailly, Inc., a Delaware
corporation; provided, however, that a Permitted Licensee may only
be a natural person and not any corporation, partnership, limited
liability company or other form of business entity.
24. TRANSFER BY LANDLORD.
Landlord (and any successor or affiliate of Landlord) may freely sell, assign or
transfer all or any portion of its interest in this Lease or the Premises, the
Building or the Land and, in the event of any such sale, assignment or transfer,
shall be relieved of any and all obligations under this Lease from and after the
date of the sale, assignment or transfer. From and after said date, Tenant shall
be bound to such purchaser, assignee or other transferee, as the case may be, as
though the latter had been the original Landlord hereunder, provided that the
purchaser, assignee or transferee agrees to assume the obligations of Landlord
hereunder.
25. INABILITY TO PERFORM.
Except as provided in Section 12.B. hereof, t4:his Lease and Tenant's obligation
hereunder shall in no way be affected, impaired or excused, nor shall Tenant
have any claim against Landlord for damages, because Landlord, due to
Unavoidable Delays, is unable to fulfill any of its obligations under this
Lease, including, but not limited to, any obligations to provide any services,
repairs, replacements, alterations or decorations or to supply any improvements,
equipment or fixtures.
26. ESTOPPEL CERTIFICATES.
Tenant shall, without charge, within ten (10) business days after receipt of any
request therefor, execute and deliver to Landlord a certificate stating: (i)
whether 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 and setting forth
all such modifications); (ii) whether there then exist any defenses against the
enforcement of any right of Landlord hereunder (and, if so, specifying the same
in detail); (iii) the dates to which rent and any other charges hereunder have
been paid by Tenant; (iv) that Tenant has no knowledge of any then uncured
defaults under this Lease (or, if Tenant has knowledge of any such defaults,
specifying the same in detail); (v) that Tenant has no knowledge of any event
that will or may result in the termination of this Lease (or if Tenant has such
knowledge, specifying the same in detail); (vi) the address to which notices to
Tenant are to be sent; and (vii) such other information as may be reasonably
requested. It is understood that any such certificate may be relied upon by
Landlord, any Mortgagee, prospective Mortgagee, Ground Lessor, prospective
Ground Lessor, or purchaser or prospective purchaser of the Land or the
Building. Landlord shall, without charge, on not more than one (1) occasion in
each Fiscal Year, within ten (10) business days after receipt of a request
therefor from Tenant, execute and deliver to Tenant a certificate which
addresses the matters described in clauses (1) through (vi) of the preceding
sentence.
27. COVENANT OF QUIET ENJOYMENT.
Landlord covenants that it has the right to make this Lease and that, if Tenant
shall pay all Rent and perform all of Tenant's other obligations under this
Lease, Tenant shall have the right, during the Term and subject to the
provisions of this Lease, to quietly occupy and enjoy the Premises without
hindrance by Landlord or its successors and assigns.
28. WAIVER OF JURY TRIAL.
Landlord and Tenant hereby waive trial by jury in any action, proceeding or
counterclaim brought by either of them against the other with respect to any
matter arising out of or connected with this Lease.
29. BROKERS.
Landlord and Tenant each represents and warrants to the other that, except as
hereinafter set forth, neither of them has employed any broker in procuring or
carrying on any negotiations relating to this Lease. Landlord and Tenant shall
indemnify and hold each other harmless from any loss, claim or damage relating
to the breach of the foregoing representation and warranty. Landlord recognizes
only The Fred Ezra Company, as agent of Tenant, as broker with respect to this
Lease and agrees to be responsible for the payment of any leasing commissions
owed to said broker.
30. CERTAIN RIGHTS RESERVED BY LANDLORD.
Landlord shall have the following rights, exercisable without notice, without
liability for damage or injury to property, person or business and without
effecting an eviction, constructive or actual, or disturbance of Tenant's use or
possession of the 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. In the event Landlord
changes the address or name of the Building, Landlord shall reimburse Tenant's
reasonable costs for replacement of Tenant's letterhead, envelopes, and business
cards then on hand.
B. To affix, maintain and remove any and all signs on the exterior and
interior of the Building.
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 Tenant that may be visible from the exterior of the 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 for such purposes to enter the Premises, and, during the
continuance of any such work, to close temporarily doors, entry ways, Common
Areas in the Building and to interrupt or temporarily suspend Building services
and facilities, all without affecting Tenant's obligations hereunder, as long as
the Premises remain tenantable, provided that Landlord gives Tenant such notice
as may be required by Section 11 hereof and that there is no unreasonable
interference with Tenant's access to or use of the Premises.
E. To grant to anyone the exclusive right to conduct any business or render any
service in the Building, provided Tenant 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 Premises remain reasonably accessible, provided that Landlord
gives Tenant such notice as may be required by Section 11 hereof and that there
is no unreasonable interference with Tenant's access to or use of the Premises.
G. To alter, relocate, reconfigure, reduce and withdraw the Common Areas located
outside the Building, including parking and access roads, as long as the
Premises remain reasonably accessible.
H. To erect, use and maintain pipes and conduits in and through the Premises,
provided that Landlord gives Tenant such notice as may be required by Section 11
hereof and that there is no unreasonable interference with Tenant's access to or
use of the Premises.
31. NOTICES.
No notice, request, approval, waiver or other communication which may be or is
required or permitted to be given under this Lease shall be effective unless the
same is in writing and hand-delivered, sent by registered or certified mail,
return receipt requested, first-class postage prepaid, or sent with charges
prepaid by a nationally recognized air courier service. addressed as follows:
If to Landlord:
c/o TrizecHahn Mid-Atlantic Management Services LLC
1250 Connecticut Avenue, N.W., Suite 500
Washington, D.C. 20036
Attn: Portfolio Manager - 1550 Wilson Boulevard
If to Tenant:
Hagler Bailly Services, Inc.
1530 Wilson Boulevard, Suite 300
Arlington, Virginia 22209
Attn: Ms. Angela McCluskey
or at any other address of which either party shall notify the other in
accordance with this Section. Such communications, if sent by registered or
certified mail, shall be deemed to have been given two (2) days after the date
of mailing, or if sent by a nationally recognized air courier service, shall be
deemed to have been given one (1) business day after the date of deposit of the
notice with such service. If any Mortgagee shall notify Tenant that it is the
holder of a Mortgage affecting the Premises, no notice, request or demand
thereafter sent by Tenant to Landlord shall be effective until a copy of same
shall be sent to such Mortgagee in the manner prescribed in this Section at such
address as such Mortgagee shall designate.
32. MISCELLANEOUS PROVISIONS.
A. Benefit and Burden: The provisions of this Lease shall be binding upon, and
shall inure to the benefit of, the parties hereto and each of their respective
successors and permitted assigns.
B. Governing Law. This Lease shall be construed and enforced in accordance
with the laws of the jurisdiction in which the Building is located.
C. No Partnership: Nothing contained in this Lease shall be deemed to create a
partnership or joint venture between Landlord and Tenant, or to create any other
relationship between the parties other than that of Landlord and Tenant.
D. Delegation by Landlord. Wherever Landlord has the authority to take any
action under this Lease, Landlord shall have the right to delegate such
authority to others, and Landlord shall be responsible for the authorized
actions of such agents, employees and others, to the same extent as if Landlord
had taken such action itself.
E. Tenant Responsibility for Agents. In any case where Tenant is responsible for
performing or refraining from an act or for preventing an action or result from
occurring, Tenant shall also be responsible for any actions taken or omitted by
Tenant's agents, employees, business invitees, licensees, contractors,
subtenants, family members, guests and any other individuals or entities present
in the Building or on the Land at Tenant's invitation.
F. Invalidity of Particular Provisions: If any provision of this Lease or the
application thereof to any person, entity or circumstance shall, to any extent,
be held invalid or unenforceable, the remaining provisions and the application
of such invalid or unenforceable provisions to persons, entities and
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby. Each provision of this Lease shall be valid and
enforced to the fullest extent permitted by law.
G. Counterparts: This Lease may be executed in several counterparts, all of
which shall constitute one and the same document.
H. Entire Agreement This Lease, and any exhibits and addenda attached hereto,
embody the entire agreement of the parties hereto, and no representations,
inducements or agreements, oral or otherwise, between the parties not contained
in this Lease or in the exhibits or addenda shall be of any force or effect. No
rights, privileges, easements or licenses are granted to Tenant hereby, except
as expressly set forth herein.
I. Amendments: This Lease may not be modified in whole or in part in any
manner other than by an agreement in writing.
J. Mortgagee's Performance: Tenant shall accept performance of any of
Landlord's obligations hereunder by any Mortgagee.
K. Limitation on Interest: In any case where this Lease provides for a rate of
interest that is higher than the maximum rate permitted by law, the rate
specified herein shall be deemed to equal, and the party designated as recipient
of such interest shall be entitled to receive, the maximum rate of interest
permitted by law.
L. Remedies Cumulative: All rights and remedies of Landlord shall be
cumulative and shall not be exclusive of any other rights or remedies of
Landlord hereunder or now or hereafter existing at law or in equity.
M. Annual Financial Statements: Within ten (10) business days after Landlord's
written request therefor, but not more often than once per year except in the
event of a proposed sale or financing of the Building, the Land or both, Tenant
shall submit to Landlord Tenant's most recent annual financial statement.
33. LENDER APPROVAL.
If the Mortgagee fails to give its consent to this Lease, Landlord shall have
the right, at its sole option, to terminate and cancel this Lease. Such option
shall be exercisable by Landlord by written notice to Tenant of such
termination, whereupon this Lease shall be deemed cancelled and terminated, and
both Landlord and Tenant shall be relieved of any and all liabilities and
obligations hereunder.
34. PARKING.
Parking will be made available to Tenant pursuant to the provisions of Exhibit E
attached hereto.
35. SECURITY DEPOSIT.
A. Amount and Uses: Landlord acknowledges receipt from Tenant of Thirty-Four
Thousand One Hundred Twenty-Eight and 33/100 Dollars ($34,128.33)(the "Security
Deposit"), to be held by Landlord as security for the payment of all Rent
payable by Tenant and for the faithful performance by Tenant of all other
obligations of Tenant under this Lease. Said Security Deposit shall be repaid to
Tenant after the termination of this Lease (or any renewal thereof), provided
Tenant shall have made all such payments and performed all such obligations
hereunder. Landlord shall not be required to maintain the Security Deposit in a
separate account but shall maintain the Security Deposit in an account bearing
interest at the rate earned on other similar deposits held by Landlord. The
Security Deposit shall not be mortgaged, assigned, transferred or encumbered by
Tenant without the prior written consent of Landlord, and any such act shall be
void. Landlord may, at Landlord's option, appropriate and apply the entire
Security Deposit, or so much thereof as Landlord believes may be necessary, to
compensate Landlord for the payment of any past-due Rent and for loss or damage
sustained by Landlord due to any Default. In the event Landlord appropriates or
applies the Security Deposit in such a manner, Tenant, within five (5) days
after notice thereof, shall pay to Landlord an amount sufficient to restore the
Security Deposit to the original sum deposited. Tenant's failure to restore any
such deficiency shall constitute a Default hereunder. In the event of bankruptcy
or other debt or creditor proceedings by or against Tenant, the Security Deposit
shall be applied first to the payment of Rent due Landlord for all periods prior
to the filing of such proceedings. In lieu of the cash Security Deposit
hereinabove provided for, Tenant shall have the option to deposit with Landlord,
not later than October 31,1999 a letter of credit (the "Letter of Credit") in an
amount equal to the Security Deposit, which Letter of Credit shall thereupon
constitute the Security Deposit. In the event that Tenant does not deposit a
Letter of Credit with Landlord on or before October 31, 1999, Tenant shall have
no further right to do so. The Letter of Credit shall be maintained throughout
the remainder of the Term. Any Letter of Credit delivered to Landlord by Tenant
shall be an unconditional, irrevocable letter of credit in a form and from a
financial institution located in the Washington, D.C. metropolitan area and
acceptable to Landlord in its sole discretion. Said Letter of Credit shall
provide that it shall expire on the sixtieth (60th) day following the date of
expiration of the Term of this Lease. At Tenant's option, said Letter of Credit
shall have a term equal to the period expiring on the first anniversary of the
date of issuance thereof, in which event Tenant covenants that a renewal of said
Letter of Credit shall be delivered to Landlord by that date which is thirty
(30) days prior to the expiration date thereof, and thereafter a renewal of the
Letter of Credit shall be delivered to Landlord by Tenant by that date which is
thirty (30) days prior to each succeeding anniversary of the original expiration
date of the Letter of Credit. If Tenant fails to so renew and deliver said
Letter of Credit to Landlord by the thirtieth (30th) day preceding each said
expiration date, such failure shall constitute a Default hereunder (as to which
no cure period shall be applicable) and Landlord may draw upon the Letter of
Credit then in effect without the necessity of any other monetary or other
default hereunder by Tenant, in which event the proceeds thereof shall be held
by Landlord. Said Letter of Credit shall provide that Landlord shall be
permitted to draw on same on multiple occasions following the occurrence of a
Default by Tenant under this Lease; provided, however, that in the event that
said Letter of Credit would expire during the pendency of any litigation to
resolve whether such Default has occurred, Landlord may draw upon said Letter of
Credit prior to the expiration thereof. In the event that Landlord draws upon
the Letter of Credit after a Default by Tenant as aforesaid, Landlord shall use,
apply or retain all or any portion of the proceeds thereof for (i) the payment
of any Rent or any other sums as to which Tenant is in default, (ii) the payment
of any amount which Landlord may spend or become obligated to spend to repair
damage to the Premises or the Building for which repairs Tenant is liable
hereunder, or (iii) compensation to Landlord for any losses which Landlord is
entitled to recover hereunder by reason of Tenant's Default, including, but not
limited to, any damage or deficiency arising in connection with the reletting of
the Premises and all associated reasonable legal fees. In the event that the
Letter of Credit is drawn upon by Landlord for failure of Tenant to renew said
Letter of Credit as aforesaid, the proceeds thereof shall be held by Landlord in
accordance with the provisions respecting the Security Deposit under this
Section 36, and, in such event, within sixty (60) days after the expiration of
the Term, and provided Tenant has vacated the Premises and is not in default
hereunder, Landlord shall return such proceeds to Tenant, less such portion
thereof as Landlord may be entitled hereunder to apply to satisfy any Default by
Tenant hereunder. In the event that Tenant is in default upon the expiration of
the Term and Landlord does not use all of the Security Deposit to cure such
default, then, after such default has been cured, Landlord shall return any
unused balance of the Security Deposit to Tenant. The use, application or
retention of the proceeds of the Letter of Credit, or any portion thereof, by
Landlord shall not prevent Landlord from exercising any other right or remedy
provided by this Lease or by law, and shall not limit any recovery to which
Landlord may otherwise be entitled. In the event of the sale or transfer of
Landlord's interest in the Building or the Land, Landlord shall transfer the
proceeds of the Letter of Credit to the purchaser or transferee, in which event
Tenant shall look only to the purchaser or transferee for the return of the
proceeds of the Letter of Credit, and Landlord shall be released from all
liability to Tenant for the return of such proceeds.
B. Transferability: In the event of a sale or transfer of Landlord's interest in
the Building or of the interest of any successor or assign of Landlord, Landlord
(or such successor or assign) shall have the right to transfer the Security
Deposit to any vendee or transferee and shall thereupon be released
automatically from any liability therefor. Tenant shall look solely to the
transferee for the return of the Security Deposit. No Mortgagee or purchaser of
any or all of the Building at any foreclosure proceeding shall (regardless of
whether the Lease is at the time subordinated to the lien of said Mortgage) be
liable to Tenant or any other person for any of such Security Deposit, or any
other payment made by Tenant hereunder, unless Landlord has actually delivered
said deposit or other such sum to such Mortgagee or purchaser. In the event of
any rightful and permitted assignment of Tenant's interest in this Lease, the
Security Deposit shall be deemed to be held by Landlord as a deposit made by the
assignee, and Landlord shall have no liability to the assignor with respect to
the return of the Security Deposit.
36. HAZARDOUS MATERIALS.
A. Definition: As used in this Lease, the term "Hazardous Material" means any
flammable items, explosives, radioactive materials, hazardous or toxic
substances, material or waste or related materials, including any substances
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "infectious wastes", "hazardous materials" or "toxic substances" now or
subsequently regulated under any federal, state or local laws, regulations or
ordinances including, without limitation, oil, petroleum-based products, paints,
solvents, lead, cyanide, DDT, printing inks, acids, pesticides, ammonia
compounds and other chemical products, asbestos, PCBs and similar compounds, and
including any different products and materials which are subsequently found to
have adverse effects on the environment or the health and safety of persons.
B. General Prohibition. Tenant shall not cause or permit any Hazardous Material
to be generated, produced, brought upon, used, stored, treated, discharged,
released, spilled or disposed of on, in under or about the Premises, the
Building, or the Land (hereinafter referred to collectively as the "Property")
by Tenant, its affiliates, agents, employees, contractors, subtenants, assignees
or invitees. Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all actions (including, without limitation, remedial or
enforcement actions of any kind, administrative or judicial proceedings, and
orders or judgments arising out of or resulting therefrom), costs, claims,
damages (including without limitation, attorneys', consultants', and experts'
fees, court costs and amount paid in settlement of any claims or actions),
fines, forfeitures or other civil, administrative or criminal penalties,
injunctive or other relief (whether or not based upon personal injury, property
damage, or contamination of, or adverse effects upon, the environment, water
tables or natural resources), liabilities or losses arising from a breach of
this prohibition by Tenant, its affiliates, agents, employees, contractors,
subtenants, assignees or invitees.
C. Notice: In the event that Hazardous Materials are discovered upon, in, or
under the Property, and any governmental agency or entity having jurisdiction
over the Property requires the removal of such Hazardous Materials, Tenant shall
be responsible for removing those Hazardous Materials arising out of or related
to the use or occupancy of the Property by Tenant or its affiliates, agents,
employees, contractors, subtenants, assignees or invitees but not those of its
predecessors. Notwithstanding the foregoing, Tenant shall not take any remedial
action in or about the Property or any portion thereof without first notifying
Landlord of Tenant's intention to do so and affording Landlord the opportunity
to protect Landlord's interest with respect thereto. Tenant immediately shall
notify Landlord in writing of. (i) any spill, release, discharge or disposal of
any Hazardous Material in, on or under the Property or any portion thereof; (ii)
any enforcement, cleanup, removal or other governmental or regulatory action
instituted, contemplated, or threatened (if Tenant has notice thereof) pursuant
to any laws respecting Hazardous Materials; (iii) any claim made or threatened
by any person against Tenant or the Property or any portion thereof relating to
damage, contribution, cost recovery, compensation, loss or injury resulting from
or claimed to result from any Hazardous Materials; and (iv) any reports made to
any governmental agency or entity arising out of or in connection with any
Hazardous Materials in, on under or about or removed from the Property or any
portion thereof, including any complaints, notices, warnings, reports or
asserted violations in connection therewith. Tenant also shall supply to
Landlord as promptly as possible, and in any event within five (5) business days
after Tenant first receives or sends the same, copies of all claims, reports,
complaints, notices, warnings or asserted violations relating in any way to the
Premises, the Property or Tenant's use or occupancy thereof.
D. Landlord's Obligations: Landlord hereby advises Tenant that Landlord has no
actual knowledge of the existence of any Hazardous Materials in the Premises or
in the structure of the Building. In the event that Landlord obtains actual
knowledge of the presence of Hazardous Materials in the Building or in the
Premises in a quantity and of a nature that violates any applicable governmental
laws or regulations and that were not introduced to the Building by or on behalf
of Tenant, Landlord shall take such action, if any, as may be required to comply
with such governmental laws or regulations, and Landlord shall notify Tenant in
advance of any such corrective action by Landlord and advise Tenant of the
nature of the action to be taken and Landlord's estimate of the approximate time
that such action will take to be completed.
E. Survival: The respective rights and obligations of Landlord and Tenant
under this Section 36 shall survive the expiration or earlier termination
of this Lease.
37. RELOCATION OF TENANT. [Intentionally omitted.]
38. NO RECORDATION.
Tenant shall not record or attempt to record this Lease or any memorandum hereof
in any public records without the prior written approval of Landlord, which may
be denied in Landlord's sole and absolute discretion. In the event that Landlord
grants its approval to record this Lease or a memorandum hereof, Tenant shall
pay all recordation fees, taxes and charges in connection with such recordation.
39. TENANT'S OPTION TO TERMINATE.
Notwithstanding anything in this Lease to the contrary, Hagler Bailly Services,
Inc., a Delaware corporation ("Hagler"), shall have the right, exercisable at
Hagler's sole option, to terminate this Lease, said right of Hagler to be
exercisable by giving written notice thereof (the "Termination Notice") to
Landlord, which Termination Notice shall set forth a date of termination which
is specified to be September 30, 2002 (the "Termination Date"), and which notice
shall be given, if at all, not later than September 30, 2001. In the event that
Hagler exercises its termination option hereunder, this Lease shall continue in
full force and effect until the Termination Date, whereupon Hagler shall
surrender possession of the Premises in accordance with the provisions of this
Lease, this Lease shall terminate with respect to the Premises as if the
Termination Date were the Lease Expiration Date set forth herein, and all
Additional Rent shall be prorated as of the Termination Date, and neither party
shall have any obligations hereunder accruing after the Termination Date.
Hagler's right hereunder to terminate this Lease shall be exercisable only if
(1) Hagler is not then in default under this Lease, and (2) Hagler pays to
Landlord, contemporaneously with the giving of its Termination Notice, Two
Hundred Seventeen Thousand Two Hundred Sixty and 96/100 Dollars ($217,260.96)
(the "Termination Fee"). The Termination Fee payable by Hagler to Landlord
pursuant to the immediately preceding sentence shall be in addition to the Rent
coming due between the date of the Termination Notice and the Termination Date.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Deed of Lease under
seal as of the day and year first above written.
WITNESS: LANDLORD:
TRIZECHAHN CENTERS, INC., a California corporation
d/b/a TRIZECHAHN 1550 WILSON BLVD. MANAGEMENT
By: Name: /s/ Holly H. Davis
ATTEST: TENANT:
[Corporate Seal] HAGLER BAILLY SERVICES, INC., a Delaware corporation
By: /s/ John R. Armstrong By: /s/ Stephen V.R. Whitman
Name: Stephen V.R. Whitman
Its: Senior Vice President and General Counsel
<PAGE>
EXHIBIT A
[Description To Be Provided]
<PAGE>
EXHIBIT A
[FLOOR PLAN INTENTIONALLY OMITTED]
<PAGE>
EXHIBIT B
DECLARATION BY LANDLORD AND TENANT
AS TO DATE OF DELIVERY AND ACCEPTANCE OF
POSSESSION, LEASE COMMENCEMENT DATE, ETC.
THIS DECLARATION made this ______ day of ___________, 19 ____ is hereby attached
to and made a part of the Deed of Lease dated the ____ day of ________, 1999
(the "Lease"), entered into by and between TRIZECHAHN CENTERS, INC., a
California corporation d/b/a TRIZECHAHN 1550 WILSON BLVD. MANAGEMENT, as
Landlord and HAGLER BAILLY SERVICES, INC., a Delaware corporation, as Tenant.
All terms used in this Declaration have the same meaning as they have in the
Lease.
(i) Landlord and Tenant do hereby declare that possession of the Premises
was accepted by Tenant on the _________ day of _________, 19__;
(ii) As of the date hereof, the Lease is in full force and effect, and
Landlord has fulfilled all of its obligations under the Lease required to
be fulfilled by Landlord on or prior to said date; (iii) The Lease
Commencement Date is hereby established to be ________, 19__; and (iv) The
Lease Expiration Date is hereby established to be ____________unless the
Lease is sooner terminated pursuant to any provision thereof.
WITNESS: LANDLORD:
TRIZECHAHN CENTERS, INC., a California corporation
d/b/a TRIZECHAHN 1550 WILSON BLVD. MANAGEMENT
By: By:
Name:
Its:
ATTEST: TENANT:
[Corporate Seal] HAGLER BAILLY SERVICES, INC., a Delaware corporation
By: By:
Name:
Its:
[NOTE: NOT TO BE EXECUTED AT TIME OF EXECUTION OF LEASE]
<PAGE>
EXHIBIT C
WORK AGREEMENT
THIS WORK AGREEMENT is hereby attached to and made part of the Deed of Lease
dated August 29, 1999 entered into by and between TRIZECHAHN CENTERS, INC., a
California corporation d/b/a TRIZECHAHN 1550 WILSON BLVD. MANAGEMENT, as
Landlord, and HAGLER BAILLY SERVICES, INC., a Delaware corporation, as Tenant
(the "Lease). All terms used in this Work Agreement have the same meaning as
they have in the Lease.
1. ARCHITECTURAL DESIGN SERVICES.
Tenant shall engage an architect for competitive market fees to provide a space
plan and completed, finished and detailed architectural drawings and
specifications for all work to be provided by Landlord under Paragraph 4 hereof,
which drawings and specifications shall be completed at Tenant's sole cost and
expense, which shall be payable out of the Tenant Allowance (as hereinafter
defined) to the extent that funds are available therefrom for such purpose. The
architect who prepares such drawings and specifications is hereinafter referred
to as the "Space Planner". Any architectural drawings and specifications which
are completed for Additional Tenant Work (as defined in Paragraph 5 hereof)
shall also be prepared by the Space Planner at Tenant's expense. All such plans
are expressly subject to Landlord's review and written approval.
2. ENGINEERING DESIGN SERVICES.
Tenant, at Tenant's sole cost and expense, which shall be payable out of the
Tenant Allowance (as hereinafter defined) to the extent that funds are available
therefrom for that purpose, shall provide the design services of, a licensed
professional engineer (the "Engineer"), to prepare complete Building standard
mechanical and electrical plans and specifications, as necessary for Tenant's
Work to be performed pursuant to Paragraph 4 hereof. Any mechanical or
electrical plans shall be prepared by the Engineer at Tenant's sole cost and
expense, which shall be payable out of the Tenant Allowance (as hereinafter
defined) to the extent that funds are available therefrom for that purpose. All
such plans are expressly subject to Landlord's review and written approval,
which shall not be unreasonably withheld, conditioned or delayed.
3. TENANT'S RESPONSE TIME.
Tenant covenants and agrees to deliver to Landlord and the Engineer on or before
the fifth (5th) day following the date of receipt by Tenant of all final
detailed architectural plans and specifications and engineering plans for
Tenant's Work and Additional Tenant Work, if any, sufficient to obtain bids for
Tenant's Work and Additional Tenant Work, if any (the "Final Plans and
Specifications") Tenant written approval of such Final Plans and Specifications
and, prior thereto, to provide Landlord and the Space Planner and Engineer with
all information requested by them in order to complete the Final Plans and
Specifications, within five (5) days of each such request. Any and all changes
made to the Final Plans and Specifications subsequent to Tenant's written
approval of same shall be at the sole cost of Tenant.
4. TENANT'S WORK.
Landlord shall make available for the performance of Tenant's Work, and for the
other purposes hereinafter specified, an allowance (the "Tenant Allowance") in
an amount equal to the product of (i) Five Dollars ($5.00) multiplied by (ii)
the number of rentable square feet comprising the Premises. Landlord shall
perform Tenant's Work and shall pay directly to its general contractor and other
service providers and vendors the cost of performing all improvements shown and
contemplated by the Final Plans and Specifications ("Tenant's Work"), including,
but not limited to, the cost of demolition, permits and governmental
inspections, all architectural and engineering fees, and a fee to Landlord in an
amount equal to five percent (5%) of the hard costs of Tenant's Work and any
Additional Tenant Work (as hereinafter defined), all of which costs shall be
payable out of the Tenant Allowance to the extent that the Tenant Allowance is
sufficient for that purpose, and any excess amount of which costs shall be paid
by Tenant within thirty (30) days following Tenant's receipt of an invoice
therefor from Landlord.
Landlord shall solicit bids for Tenant's Work from at least three (3)
contractors, one (1) of which may be designated by Tenant, if so designated by
Tenant within two (2) business days after Landlord's request therefor (which
request may be made verbally). All general contractor bids shall be submitted to
Tenant for its review, and Tenant shall have five (5) days following receipt of
the bids within which to direct that changes be made in the bid documents to
reduce the cost of the work on which the bids were based. The general contractor
selected to construct the Tenant's Work shall (i) demonstrate sufficient
experience, in Landlord's reasonable opinion, to complete the Tenant's Work in a
workmanlike manner, (ii) furnish a certificate of insurance, and (iii) satisfy
other reasonable industry requirements.
5. ADDITIONAL TENANT WORK.
Tenant shall be responsible for coordinating at its expense the placement and
installation of all telephone equipment and outlets. If Tenant shall desire any
work to be performed by Landlord in the Premises, other than Tenant's Work, that
is, any work the cost of which is in excess of the funds available for that
purpose from the Tenant Allowance ("Additional Tenant Work"), all Additional
Tenant Work shall be performed at Tenant's sole expense.
Tenant shall not have the right to order extra work or change orders with
respect to the construction of Tenant's Work without the prior written consent
of Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed. Tenant shall pay for any increase in the actual cost of constructing
Tenant's Work occasioned by a change to the Final Plans and Specifications
requested by Tenant, including, but not limited to, contractors usual and
customary overhead and profit. Said payment by Tenant shall be made within
thirty (30) days following Tenant's receipt of an invoice therefor from
Landlord, which invoice may be issued as early as Landlord's approval of the
change order.
The failure of Tenant to pay any portion of the cost of the Additional Tenant
Work within thirty (30) days following Tenant's receipt of an invoice therefor
from Landlord shall constitute a Default under the Lease entitling Landlord to
exercise all rights and remedies. In the event of a Default by Tenant which
results in a termination of the Lease, Landlord shall also be entitled to
damages in respect of Tenant's Work undertaken on behalf of Tenant.
6. SUBSTANTIAL COMPLETION OF TENANT'S WORK.
Tenant's Work shall be considered "substantially complete" for all purposes of
this Work Agreement and the Lease if Landlord has performed or completed
substantially all of Tenant's Work, except (a) punch list items and details of
construction, decoration or adjustment which do not substantially interfere with
Tenant's ability to occupy the Premises, or to complete improvements to the
Premises to be made by Tenant, and/or (b) custom or specialty items requested by
Tenant for Tenant's Work or Additional Tenant Work and other items which cannot
be completed until said custom or specialty items are delivered, or Tenant's
Work or Additional Tenant Work requiring use of such items is completed.
7. DATE OF SUBSTANTIAL COMPLETION, NO LIABILITY, ETC.
Landlord shall use reasonable efforts to substantially complete Tenant's Work
within sixty (60) calendar days after the date set forth for Tenant's approval
of the Final Plans and Specifications set forth in Paragraph 3 hereof or the
date on which Landlord receives from Tenant Tenant's written approval of the
Final Plans and Specifications set forth in Paragraph 3 hereof, whichever is
later. However, Landlord shall in no event be liable or subject to any claim for
failure to substantially complete Tenant's Work by such date or for delay or
inability to deliver possession of the Premises to Tenant for any reason. If
Landlord shall be delayed in substantially completing said work as a result of.
(a) Tenant's failure to furnish to Landlord, on or before the dates
and time periods set forth in Paragraphs 3 and 5 hereof, the Final
Plans and Specifications, information, requirements and/or
approvals for any work to be done hereunder;
(b) Tenant's request for changes in plans subsequent to the date set
forth for Tenant's approval of the Final Plans and Specifications
set forth in Paragraph 3 hereof;
(c) Tenant's failure to approve the plans, specifications or cost
estimates for Additional Tenant Work or make any payment within
the time required under Paragraph 5 hereof,
(d) Tenant's request for materials, finishes or installations; or
(e) The result of Tenant's, its agents' or employees' acts, failure to act, or
failure to act in a timely manner;
then, solely for the purposes of determining the commencement date of Tenant's
liability for rent and other charges under the Lease, such delay shall neither
postpone the Lease Commencement Date nor the date of substantial completion by
Landlord or occupancy by Tenant of the Premises.
On or before Tenant takes possession of the Premises, Landlord and Tenant shall
walk through the Premises and shall agree upon a punch list of items to be
completed by Landlord. Landlord shall attempt to complete all items on said
punch list within thirty (30) days after the punch list is completed. The taking
of possession of the Premises by Tenant shall be conclusive evidence that the
Premises are in good and satisfactory condition at the time possession is taken,
that Tenant's Work is substantially complete and that Tenant's Work is
satisfactory, with the exception of punch list items remaining to be done or
repaired as of the date Tenant accepts possession and latent defects, which
latent defects Landlord shall remain responsible to repair during the first five
(5) years of the initial Term of the Lease.
B. TENANT ACCESS.
Landlord shall permit Tenant and its agents to enter the Premises fourteen (14)
days prior to the date which Landlord anticipates to be the Lease Commencement
Date to enable Tenant to perform such work and decorations as Landlord shall
approve, provided that (i) Tenant and its agents and contractors shall be deemed
to be bound by all of the terms, covenants, provisions and conditions of the
Lease, including but not limited to Section U.B. regarding Tenant's
indemnification obligations, Section 14.A. regarding Tenant's obligation to
repair injury, loss or damage which may occur to any of Tenant's installations
made prior to the Lease Commencement Date, and Section 17 regarding insurance,
the same being installed and maintained solely at Tenant's risk, (ii) neither
Tenant nor any of its contractors, employees or agents shall in any manner
interfere with or delay the performance of Tenant's Work, and (iii) all such
entries prior to the Lease Commencement Date shall be coordinated in advance
with Landlord's contractors. In the event that Landlord does not notify Tenant
of the opportunity to enter the Premises to perform cabling and wiring work
prior to the walls of the Premises being enclosed, Landlord shall provide "ring
and string" for data communication lines in the Premises.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Agreement under
seal as of the day and year first above written.
WITNESS: LANDLORD:
TRIZECHAHN CENTERS, INC., a California corporation
d/b/a TRIZECHAHN 1550 WILSON BLVD. MANAGEMENT
By: By: /s/ Holly H. Davis
Name: Holly H. Davis
Its:
ATTEST: TENANT:
[Corporate Seal] HAGLER BAILLY SERVICES, INC., a Delaware corporation
By: /s/ John R. Armstrong By: /s/ Stephen V.R. Whitman
Name: Stephen V.R. Whitman
Its: Senior Vice President and General Counsel
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
The following rules and regulations have been formulated for the safety and
well-being of all the tenants of the Building. Adherence to these rules and
regulations by each and every tenant contributes to safe occupancy and quiet
enjoyment of the Building. Any violation of these rules and regulations by any
tenant which continues after notice from Landlord shall be a Default under such
tenant's lease, at the option of Landlord.
Landlord may, upon request by any tenant, waive compliance by such tenant of any
of the following rules and regulations, provided that (a) no waiver shall be
effective unless signed by Landlord or Landlord's authorized agent, (b) no such
waiver shall relieve any tenant from the obligation to comply with such rule or
regulation in the future, unless expressly consented to by Landlord, and (c) no
such waiver granted to any tenant shall relieve any other tenant from the
obligation of complying with said rule or regulation unless such other tenant
has received a similar waiver in writing from Landlord.
1. The sidewalks, entrances, passages, courtyards, elevators, vestibules,
stairways, corridors, halls and other parts of the Building not occupied by any
tenant (hereinafter "Common Areas") shall not be obstructed or encumbered by any
tenant or used for any purposes other than ingress and egress to and from the
tenant's premises. No tenant shall permit the visit to its premises of persons
in such numbers or under such conditions as to interfere with the use and
enjoyment of the Common Areas by other tenants.
2. No awnings or other projections shall be attached to the outside walls of the
Building without the prior written consent of Landlord. No drapes, blinds,
shades or screens shall be attached to or hung in, or used in connection with,
any window or door of a tenant's premises, without the prior written consent of
Landlord. Such awnings, projections, curtains, blinds, screens and other
fixtures shall be of a quality, type, design and color acceptable to Landlord
and shall be attached in a manner approved by Landlord.
3. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any tenant on any part of the outside or inside
if visible from the outside of the tenant's premises of the tenant's premises or
in the Building without the prior written consent of Landlord. In the event of
any violation of the foregoing by any tenant, Landlord may remove the same
without any liability and may charge the expense incurred by such removal to the
tenant or tenants responsible for violating this rule. All interior signs on the
doors and directory tablet of the Building shall be inscribed, painted or
affixed by Landlord at the expense of each tenant, and shall be of a size, color
and style acceptable to Landlord, except that Landlord shall initially provide,
at Landlord's expense, a listing for Tenant on the Building's directory,
replacements for which shall be at Tenant's expense.
4. No show cases or other articles shall be put in front of or affixed to any
part of the exterior of the Building, nor placed in the Common Areas without the
prior written consent of Landlord. 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. No tenant shall throw anything out of the doors or windows or
down any corridors of stairs.
6. There shall be no marking, painting, drilling into or other form of defacing
of or damage to any part of a tenant's premises or the Building. No boring,
cuffing or stringing of wires shall be permitted except for affixing decorative
items such as pictures. No tenant shall construct, maintain, use or operate
within its 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. Upon prior written approval by Landlord, a tenant may
install Muzak or other internal music system within the tenant's premises if the
music system cannot be heard outside of the premises.
7. No tenant shall make or permit to be made any disturbing noises or disturb or
interfere with the occupants of the Building or neighboring buildings or
premises or those having business with them, whether by the use of any musical
instrument, radio, tape recorder, whistling, singing or any other way.
8. No bicycles, vehicles, animals, birds or pets of any kind shall be brought
into or kept in or about a tenant's premises or in the Building.
9. No cooking shall be done or permitted by any tenant on its premises, except
that, with Landlord's prior written approval (including approval of plans and
specifications therefor) (which approval shall not be unreasonably withheld,
conditioned or delayed), a tenant may install and operate for convenience of its
employees a lounge or coffee room with a stove, microwave oven, sink and
refrigerator; provided that in so doing the tenant shall comply with all
applicable building code requirements and any insurance or other requirements
specified by Landlord. No tenant shall cause or permit any unusual or
objectionable odors to originate from its premises.
10. No space in or about the Building shall be used for the manufacture,
storage, sale or auction of merchandise goods or property of any kind.
11. No tenant shall buy or keep in the Building or its premises any inflammable,
combustible or explosive fluid, chemical or substance.
12. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any tenant, nor shall any changes be made in existing locks
or the mechanisms 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 and egress. Each tenant shall, upon the termination of its tenancy,
return to Landlord all keys used in connection with its premises, including any
keys to the premises, to rooms and offices within the premises, to storage rooms
and closets, to cabinets and other built-in furniture, and to toilet rooms,
whether or not such keys were furnished by Landlord or procured by the tenant,
and in the event of the loss of such keys, such tenant shall pay to Landlord the
cost of replacing the locks. On termination of a tenant's lease, the tenant
shall disclose to Landlord the combination of all locks for safes, safe cabinets
and vault doors, if any, remaining in the premises.
13. All removals, or the carrying in or out of any safes, freight, furniture or
bulky matter of any description, must take place in such manner and during such
hours as Landlord may require. Landlord reserves the right (but shall not have
the obligation) to inspect all freight brought into the Building and to exclude
from the Building all freight which violates any of these rules and regulations
or any provision of any tenant's lease.
14. Any person employed by any tenant to do janitorial work within the tenant's
premises must obtain Landlord's approval (which approval shall not be
unreasonably withheld, conditioned or delayed) prior to commencing such work,
and such person shall comply with all instructions issued by the superintendent
of the Building while in the Building. No tenant shall engage or pay any
employees on the tenant's premises or in the Building, except those actually
working for such tenant on said premises.
15. No tenant shall purchase spring water, ice, coffee, soft drinks, towels or
other like merchandise or service from any company or person who has, in
Landlord's reasonable opinion committed violations of Building regulations or
caused a hazard or nuisance to the Building and/or its occupants.
16. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord's reasonable opinion, tends to impair the reputation or
desirability of the Building as a building for offices and, upon written notice
from Landlord, such tenant shall refrain from and discontinue such advertising.
17. Landlord 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's
management or its agents. Landlord may at its option require all persons
admitted to or leaving the Building to register between the hours of 6 p.m. and
8 a.m., Monday through Friday, and all times on Saturdays, Sundays and holidays.
Each tenant shall be responsible for all persons for whom it authorized entry
into the Building, and shall be liable to Landlord for all acts of such persons.
18. Each tenant shall see that all lights are turned off before closing and
leaving its premises at any time.
19. The requirements of tenants will be attended to only upon application at the
office of the Building. Building employees have been instructed not to perform
any work or do anything outside of their regular duties, except with special
instructions from the management of the Building.
20. Canvassing, soliciting and peddling in the Building is prohibited, and each
tenant shall cooperate to prevent the same.
21. No water cooler, plumbing or electrical fixture shall be installed by tenant
without Landlord's prior written consent.
22. No hand trucks, except those equipped with rubber tires and side guards,
shall be used to deliver or receive any merchandise in any space or in the
Common Areas of the Building, either by tenant or its agents or contractors.
23. Access plates to under floor conduits shall be left exposed. Where carpet is
installed, carpet shall be cut around the access plates.
24. Mats, trash and other objects shall not be placed in the public corridors.
25. [Intentionally omitted.]
26. Landlord shall not maintain suite finishes which are non-standard such as
kitchens, bathrooms, wallpaper, special lights, etc. However, should the need
for repairs arise, Landlord shall arrange for the work to be done at tenant's
expense.
27. Landlord's employees are prohibited from receiving articles delivered to the
Building and, if any such employee receives any article for any tenant, such
employee shall be acting as the agent of such tenant for such purposes.
28. No smoking shall be permitted in any of the Common Areas of the Building or
in the tenant's premises. All cigarettes and related trash shall be disposed of
in trash receptacles and not on the sidewalk, parking lot or grass.
<PAGE>
EXHIBIT E
PARKING
1. AVAILABILITY; RENT.
Landlord agrees that it will provide to Tenant sufficient space to park
twenty-six (26) automobiles, either in the garage of the Building or as
otherwise provided. For each month during the Term, Tenant shall pay, directly
to the garage operator for the use of such parking spaces, an amount equal to
the product obtained by multiplying: (i) the number of parking spaces herein
designated, by (ii) the market rent for each such space, as determined from time
to time by Landlord or the garage operator. No specific parking spaces will be
allocated for use by Tenant. Landlord reserves the right to institute either a
valet or self parking system; provided, however, that if at any time during the
Term of the Lease Landlord provides to Tenant any additional spaces, Landlord
shall at all times have the right to reclaim such spaces upon thirty (30) days
notice to Tenant. Tenant shall have the right to terminate its lease of parking
spaces from time to time throughout the Term of the Lease upon thirty (30) days
written notice to Landlord or the garage operator, as the case may be, and shall
have the right to again lease such space(s) upon at least sixty (60) days
written notice to Landlord or the garage operator, as the case may be, if such
spaces are then available.
2. REGULATIONS; LIABILITY.
Tenant and its employees, agents and invitees shall observe reasonable safety
precautions in the use of the garage and shall at all times abide by all rules
and regulations promulgated by Landlord and/or the garage operator governing use
of the garage. Landlord does not assume any responsibility for, and shall not be
held liable for, any damage or loss to any automobiles parked in the garage or
to any personal property located therein, or for any injury sustained by any
person in or about the garage.
<PAGE>
EXHIBIT F
FORM OF OPERATING EXPENSES
AND REAL ESTATE TAX
EXPENSES STATEMENT
[INTENTIONALLY OMITTED]
<PAGE>
EXHIBIT G
CLEANING SPECIFICATIONS
CLEANING SPECIFICATIONS
LAVATORIES:
Lavatories - Daily:
Wash:
a. Shelves
b. Brightwork (Handles, Piping, Hinges)
c. Sinks
d. Urinals
e. Toilets
f. Floors
g. Tile Walls - Spot Clean
h. Partitions and Legs
i. Vents
j. Receptacles
k. Mirrors
Stock with supplies furnished by contractor:
a. Handsoap
b. Towels
c. Tissue
d. Sanitary Napkins
e. Seat Covers
Polish to remove water spots:
a. Brightwork
b. Mirrors
c. Shelves
d. Partitions
LAVATORIES - SPECIAL INSTRUCTIONS:
Tile Floors
Tile floors will be mopped daily using a germicidal detergent. Any stained areas
will be machine scrubbed daily as required to maintain a uniform appearance.
Floors will be stripped and waxed as needed.
Tile Walls
Tile walls will be spot cleaned with disinfectant. Walls will be completely
cleaned monthly or as needed.
Partitions
Partitions will be entirely wiped clean daily. Supporting legs will be cleaned
and polished as necessary.
Trash Rece2tacles
Trash will be removed daily. Plastic liners will be provided and changed daily
in all types of receptacles.
LAVATORIES - SPECIAL INSTRUCTIONS:
Hand Soap Dispensers
Hand soap dispensers will be checked daily for adequate supply levels and will
be filled as necessary.
Paper Supplies
All paper dispensers will be filled completely each night. In some areas, it may
be necessary to place extra rolls of wrapped paper so that no shortages occur.
High Dusting
All high fixtures and lights will be dusted as needed.
Carpeted Floors
All carpeted bathroom areas will be vacuumed daily and shampooed as needed.
OFFICES, HALLWAYS, AND PUBLIC AREAS:
Waste Baskets-- Daily
Waste baskets to be emptied daily. Plastic liners to be provided to tenant waste
baskets and changed as needed. Only remove trash in waste can or clearly marked
"trash".
Ashtrays - Daily
Ashtrays to be emptied and wiped clean daily. Sand levels will be maintained in
cigarette urns.
Dusting - Daily
All furniture and flat surfaces will be dusted daily with a treated cloth. Desks
and tables not cleared of paper and work materials will only be dusted where
desk is exposed. Papers are not to be moved. Telephones, glass desk tops and
tables will be damp wiped.'
Spot Cleaning - Daily
All handprints and spots will be removed from doors and light switches. Woodwork
and interior glass will be spot cleaned as needed.
Vacuuming - Daily/Weekly
All rugs and carpets will be vacuumed daily in all traffic areas. Hard-to-reach
spots, such as corners, under desks and chairs, behind plants, etc., shall be
vacuumed weekly with accessory tools, with light furniture moved to accomplish
cleaning.
Carpet S2ot Cleaning - Daily
An effort will be made to remove carpet spots and stains.
Tile Floors - Daily
All tile floors will be dusted daily and mopped as needed. Extreme care shall be
exercised in all mopping so as to avoid splashing walls, furniture, or carpet.
All tile floors will be buffed as required to maintain a finish.
Water Coolers - Daily
Water Coolers shall be cleaned and polished.
Main Lobby and Corridor Floors
Mop floors daily and buff as required to maintain a lustrous finish.
Elevators - Daily
Interior surfaces and all doors to be spot cleaned for fingerprints.
Entrance Door Glass - Daily
All entrance door glass shall be spot cleaned.
Stairways and Landings - Weekly
Spot cleaning of walls and doors will be done weekly. Handrails, ledges, fire
points, and miscellaneous hardware will be cleaned weekly. Day porter will be
responsible for sweeping and mopping stairwells and landings weekly.
Elevators - Monthly
Carpets will be shampooed as needed.
Glass Partitions and Doors - Monthly
All glass partitions and doors will be cleaned with ammonia using a squeegee,
clean rag, or paper towels.
Air Conditioning Grills - Monthly
All areas around air conditioning and return air grills will be cleaned once
each month or more often, if necessary. Care will be taken so as to prevent dirt
from falling on floor or other surfaces.
Tile Floors - Monthly
Machine stripping and/or scrubbing shall be accomplished as needed to remove
dirt-embedded finishes, stains, spillage and wax buildup. New wax and sealer, if
required, will then be applied.
Venetian Blinds - Monthly
All venetian blinds will be dusted and/or damp wiped as needed.
Entrance Mats - Monthly
Entrance mats will be shampooed as needed.
High Dusting - Quarterly
Pipes, ledges, ceilings, sprinklers, moldings, picture frames, etc., will be
dusted every three months or more frequently if necessary.
Lavatories'- Quarterly
Strip and wax tile floors completely.
Carpet "Shampooing" - Annually
All carpeted public areas to be "shampooed".
Special Floor Coverings - As Necessary
Parquet, quarry, ceramic, raised computer floors, and other special floor
coverings will be treated with appropriate methods and materials. Walls,
Woodwork and Partitions - As Necessary
All walls and ceilings will be brushed down as necessary with approved wall
duster or a vacuum cleaner.
EXHIBIT 10.51
AMENDMENT NO. 2
TO
REVOLVING CREDIT AGREEMENT
AMENDMENT NO. 2, dated as of August 11, 1999 (the "Second Amendment"), to the
Revolving Credit Agreement, dated as of November 20, 1998 (as amended by
Amendment No. 1, dated as of March 22, 1999, the "Revolving Credit Agreement"),
between HAGLER BAILLY, INC., a Delaware corporation (the "Borrower"), THE
LENDERS FROM TIME TO TIME A PARTY THERETO (the "Lenders") and BANK OF AMERICA,
N.A. d/b/a NationsBank, N.A., successor to NationsBank, N.A., in its separate
capacity as agent (the "Agent"). Capitalized terms used herein without
definition shall have the respective meanings specified in the Revolving Credit
Agreement.
W I T N E S S E T H
WHEREAS, pursuant to the Revolving Credit Agreement, the Lenders have provided
to the Borrower a revolving credit facility, and have agreed to issue standby
letters of credit, all upon the terms and conditions specified in the Revolving
Credit Agreement;
WHEREAS, the Borrower has requested a modification to one or more terms of the
Revolving Credit Agreement, and the Lenders are willing to make such
modifications;
WHEREAS, upon the terms and subject to the conditions contained herein, the
parties hereto desire to amend the Revolving Credit Agreement; and
WHEREAS, as of the date hereof, the Lenders under the Revolving Credit Agreement
consist only of Bank of America, N.A. d/b/a NationsBank, N.A., successor to
NationsBank, N.A.;
NOW, THEREFORE, in consideration of the premises and the mutual agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Amendment to Section 1.1 of the Revolving Credit Agreement.
The parties hereto hereby amend the definition of "Consolidated Fixed Charges"
contained in Section 1.1 of the Agreement by inserting at the end of such
definition but before the period the following phrase: "and further excluding,
solely for purposes of determining the Fixed Charge Coverage Ratio, all payments
of principal and interest on the indebtedness owed under the First Union Loan
Agreement described in Section 6.2(a)(v)".
Section 2. Amendment to Section 6.2(a) of the Revolving Credit
Agreement. The parties hereto hereby amend Section 6.2(a) of the Revolving
Credit Agreement by deleting the word "and" immediately following the ";" at the
end of Section 6.2(a)(iii), by deleting the "." at the end of Section 6.2(a)(iv)
and substituting therefor "; and" and, further, by inserting a new subsection
6.2(a)(v), as follows:
"(v) the security interests created under the
Promissory Note and Security Agreement, dated October 28,
1995, executed by GKMG, Inc. (formerly named Galland,
Kharasch, Morse & Garfinkle, P.C.) in favor of First Union
National Bank of Washington, D.C. ("First Union") in
connection with that certain Loan Agreement, dated as of
October 28, 1995 (the "First Union Loan Agreement"), between
First Union and Galland, Kharasch & Garfinkle, Inc."
Section 3. Amendment to Section 6.2(b) of the Revolving Credit
Agreement. The parties hereto hereby amend Section 6.2(b) of the Revolving
Credit Agreement, by deleting the word "and" immediately following the ";" at
the end of Section 6.2(b)(vii), by deleting the "." at the end of Section
6.2(b)(viii) and substituting therefor ";" and, further, by inserting two new
subsections, 6.2(b)(ix) and 6.2(b)(x), as follows:
"(ix) indebtedness of the type described in clause
(i) 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 (i) of Section 6.2(a); and
(x) indebtedness under the First Union Loan Agreement
referred to in Section 6.2(a)(v), provided such indebtedness
does not exceed $128,000.00."
Section 4. Miscellaneous. This Second Amendment shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia, without
regard to principles of conflicts of laws. Except as hereby expressly amended by
this Second Amendment, the terms, covenants, conditions, agreements and
representations and warranties contained in the Revolving Credit Agreement are
in all respects ratified and confirmed and remade as of the date hereof and,
except as amended hereby, shall continue in full force and effect. This Second
Amendment represents the agreement of the parties hereto with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by the Lenders relative to the subject matter hereof not expressly
set forth or referred to herein. This Second Amendment may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which together shall be deemed one and the same instrument. The section headings
and subsection headings have been inserted for convenience of reference only and
do not constitute matters to be considered in interpreting this Second
Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be
duly executed by their respective officers as of the day and year first above
written.
HAGLER BAILLY, INC.
By: /s/ Glenn J. Dozier
Name: Glenn J. Dozier
Title: Senior Vice President and
Chief Financial Officer
BANK OF AMERICA, N.A. d/b/a
NationsBank, N.A., successor to NationsBank, N.A., as Lender and Agent
By: /s/ James W. Gaittens
Name: James W. Gaittens
Title: Senior Vice President
EXHIBIT 10.52
-----------------------------------------------------
SECURITY AGREEMENT
dated as of August 11, 1999
between
GKMG, INC.,
as Debtor
and
BANK OF AMERICA, N.A.
d/b/a NationsBank, N.A.,
successor to NationsBank, N.A.,
as Agent
----------------------------------------------------
<PAGE>
ii
i
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................4
Section 1.1 Definitions Generally................................................................................4
Section 1.2 UCC Definitions......................................................................................6
ARTICLE II SECURITY INTERESTS.....................................................................................6
Section 2.1 Grant of Security Interests..........................................................................6
Section 2.2 Continuing Liability of the Debtor...................................................................7
Section 2.3 Sales and Collections................................................................................8
Section 2.4 Segregation of Proceeds..............................................................................8
Section 2.5 Verification of Receivables..........................................................................9
Section 2.6 Release of Collateral................................................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES
Section 3.1 Title to Collateral.................................................................................10
Section 3.2 Validity, Perfection and Priority of Security Interests.............................................10
Section 3.3 Enforceability of Receivables and Other Intangibles.................................................11
Section 3.4 Place of Business...................................................................................11
Section 3.5 Location of Collateral..............................................................................11
Section 3.6 Trade Names.........................................................................................11
Section 3.7 Patents and Trademarks..............................................................................11
ARTICLE IV COVENANTS.............................................................................................11
Section 4.1 Perfection of Security Interests....................................................................12
Section 4.2 Further Actions.....................................................................................12
Section 4.3 Change of Name, Identity or Structure...............................................................13
Section 4.4 Place of Business and Collateral....................................................................13
Section 4.5 Fixtures............................................................................................13
Section 4.6 Maintenance of Records..............................................................................13
Section 4.7 Compliance with Laws................................................................................13
Section 4.8 Payment of Taxes....................................................................................14
Section 4.9 Compliance with Terms of Accounts and Contracts.....................................................14
Section 4.10 Limitation on Liens on Collateral..................................................................14
Section 4.11 Limitations on Modifications of Receivables and Other Intangibles;
No Waivers or Extensions....................................................................................14
Section 4.12 Maintenance of Insurance...........................................................................14
Section 4.13 Limitations on Dispositions of Collateral..........................................................14
Section 4.14 Further Identification of Collateral...............................................................15
Section 4.15 Notices............................................................................................15
Section 4.16 Change of Law......................................................................................15
Section 4.17 Right of Inspection................................................................................15
Section 4.18 Maintenance of Equipment...........................................................................16
Section 4.19 Covenants Regarding Patent and Trademark Collateral................................................16
Section 4.20 Termination of Federal Contracts...................................................................17
Section 4.21 Federal Contracts..................................................................................17
Section 4.22 Reimbursement Obligation...........................................................................18
ARTICLE V REMEDIES; RIGHTS UPON DEFAULT..........................................................................18
Section 5.1 UCC Rights..........................................................................................18
Section 5.2 Payments on Collateral..............................................................................18
Section 5.3 Possession of Collateral............................................................................19
Section 5.4 Sale of Collateral; Notice..........................................................................19
Section 5.5 Rights of Purchasers................................................................................20
Section 5.6 Additional Rights of the Agent......................................................................20
Section 5.7 Remedies Not Exclusive, etc.........................................................................21
Section 5.8 Waiver and Estoppel.................................................................................21
Section 5.9 Power of Attorney; Powers Coupled With An Interest..................................................22
Section 5.10 Certain Provisions Relating to Securities..........................................................23
Section 5.11 Application of Monies..............................................................................23
ARTICLE VI MISCELLANEOUS.........................................................................................24
Section 6.1 Notices.............................................................................................24
Section 6.2 No Waiver; Cumulative Remedies......................................................................24
Section 6.3 Amendments and Waivers..............................................................................24
Section 6.4 Successors and Assigns..............................................................................24
Section 6.5 Governing Law.......................................................................................25
Section 6.6Limitation by Law; Severability......................................................................25
Section 6.7 Counterparts........................................................................................25
Section 6.8 Expenses of the Agent...............................................................................25
Section 6.9 Indemnification.....................................................................................25
Section 6.10 Termination; Survival..............................................................................26
Section 6.11 Judicial Proceedings; Waiver of Jury Trial.........................................................26
Section 6.12 Integration........................................................................................27
Section 6.13 Authority of Agent.................................................................................27
Section 6.14 Headings, Bold Type and Table of Contents..........................................................27
</TABLE>
Schedule 3.4...... - Place of Business
Schedule 3.5...... - Location of Collateral
Schedule 3.6...... - Trade Names, Division Names, etc.
Schedule 3.7...... - Patents and Trademarks
Schedule 4.1...... - UCC Filings
Exhibit A......... - Assignment of Federal Contract
<PAGE>
26
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of August 11th, 1999 (as amended, supplemented
or modified from time to time, the "Security Agreement"), is made by GKMG, Inc.,
a District of Columbia corporation (the "Debtor"), and BANK OF AMERICA, N.A.
d/b/a NationsBank, N.A., successor to 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 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 recently acquired Debtor, and the Company owns
directly, all of the issued and outstanding shares of stock of the Debtor;
WHEREAS, the Debtor constitutes 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 1.1.......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.
"First Union" means First Union National Bank of Washington, D.C.
"First Union Security Agreement" means the Promissory Note and Security
Agreement, dated October 25, 1995, executed by Debtor under its former name,
Galland, Kharasch, Morse & Garfinkle, P.C., in favor of First Union, in
connection with the First Union Loan Agreement. "First Union Loan Agreement"
means that certain Loan Agreement, dated October 25, 1995, between Debtor, under
its former name Galland, Kharasch, Morse & Garfinkle, P.C., and First Union.
"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) 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 1.2.......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 2.1.......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") except that, so long as any indebtedness remains outstanding, or
any loan commitment remains in effect, under the First Union Loan Agreement, the
Debtor only grants to the Agent, for the ratable benefit of the Lenders, a
second priority security interest in and lien on that portion of the Collateral
in which First Union shall have a perfected security interest under the First
Union Security Agreement:
(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 2.2 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 2.3 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 2.4 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 2.5 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 2.6 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 3.1 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 3.2 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 3.5
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 second in priority,
subordinate only to the security interests granted to First Union pursuant to
the First Union Security Agreement. Other than financing statements or other
similar documents perfecting the security interests in favor of First Union
pursuant to the First Union Security Agreement and those 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 3.3 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 3.4 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 3.5 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 3.6 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 3.7 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 4.1 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 4.2 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 4.3 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 4.4 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 4.5 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 4.6 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 4.7 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 3.4 hereto, the priority of its security interest in the
Collateral.
Section 4.8 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 4.9 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 (or, as permitted by Section 2.1
hereof, a second 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 3.5 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 5.1 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 5.2 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 5.3 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 5.4 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 5.5 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 5.6 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 5.7 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 5.8 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 5.9 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 6.1 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 6.2 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 6.3 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 6.4 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 6.5 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 6.6 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 6.7 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 6.8 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 6.9 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.
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.
GKMG, INC.
Address:
Canal Square
1054 Thirty-first Street, NW
Washington, District of Columbia 20007 By: /s/ Morris R. Garfinkle______
Attention: Name: Morris R. Garfinkle
Phone: (202) 342-5200 Title: President
Fax: (202) 337-8787
BANK OF AMERICA, N.A.
d/b/a NationsBank, N.A.,
successor to NationsBank, N.A.
Address:
6610 Rockledge Drive
Bethesda, Maryland 20817 By:/s/ James W. Gaittens______
Attention: James W. Gaittens Name: James W. Gaittens
Phone: (301) 493-2976 Title: Senior Vice President
Fax: (301) 571-9098
<PAGE>
Schedule 3.4
Place of Business
Canal Square
1054 Thirty-first Street, NW
Washington, District of Columbia 20007
<PAGE>
Schedule 3.5
Location of Collateral
Canal Square
1054 Thirty-first Street, NW
Washington, District of Columbia 20007
<PAGE>
Schedule 3.6
Trade Names, Division Names, etc.
GKMG
<PAGE>
Schedule 3.7
Patents and Trademarks
Applied for Service Mark
for
"Competitive Positioning for Global Transportation"
<PAGE>
Schedule 4.1
UCC Filings
<PAGE>
Exhibit A to Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __ (the "Agreement"), is
made by GKMG, Inc., a District of Columbia corporation (the "Assignor"), in
favor of BANK OF AMERICA, N.A. d/b/a Nationsbank, N.A., successor to
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:
(a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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 BANK OF
AMERICA, N.A. d/b/a Nationsbank, N.A., successor to NationsBank, N.A., for the
account of ________________, Bank Account #__________, Agent ABA#_________, or
(iii) if by wire transfer, to BANK OF AMERICA, N.A. d/b/a Nationsbank, N.A.,
successor 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.
GKMG, INC.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
BANK OF AMERICA, N.A. d/b/a
NationsBank, N.A., successor to 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 BANK OF AMERICA, N.A. d/b/a Nationsbank, N.A., successor 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 BANK OF AMERICA,
N.A. d/b/a Nationsbank, N.A., successor to NationsBank, N.A.,
____________________, (ii) if by electronic transfer, to BANK OF AMERICA, N.A.
d/b/a Nationsbank, N.A., successor to NationsBank, N.A., for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to BANK OF AMERICA, N.A. d/b/a Nationsbank, N.A.,
successor 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 Bank of America, 6610 Rockledge Drive, Bethesda, Maryland 20817,
Attention: James W. Gaittens, Senior Vice President.
Very truly yours,
GKMG, 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 10.53
-----------------------------------------------------
SECURITY AGREEMENT
dated as of August 11, 1999
between
GKMG CONSULTING SERVICES, INC.,
as Debtor
and
BANK OF AMERICA, N.A.
d/b/a NationsBank, N.A.,
successor to NationsBank, N.A.,
as Agent
----------------------------------------------------
<PAGE>
ii
i
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................4
Section 1.1 Definitions Generally................................................................................4
Section 1.2 UCC Definitions......................................................................................6
ARTICLE II SECURITY INTERESTS.....................................................................................6
Section 2.1 Grant of Security Interests..........................................................................6
Section 2.2 Continuing Liability of the Debtor...................................................................7
Section 2.3 Sales and Collections................................................................................8
Section 2.4 Segregation of Proceeds..............................................................................8
Section 2.5 Verification of Receivables..........................................................................9
Section 2.6 Release of Collateral................................................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES.........................................................................
Section 3.1 Title to Collateral.................................................................................10
Section 3.2 Validity, Perfection and Priority of Security Interests.............................................10
Section 3.3 Enforceability of Receivables and Other Intangibles.................................................11
Section 3.4 Place of Business...................................................................................11
Section 3.5 Location of Collateral..............................................................................11
Section 3.6 Trade Names.........................................................................................11
Section 3.7 Patents and Trademarks..............................................................................11
ARTICLE IV COVENANTS.............................................................................................11
Section 4.1 Perfection of Security Interests....................................................................12
Section 4.2 Further Actions.....................................................................................12
Section 4.3 Change of Name, Identity or Structure...............................................................13
Section 4.4 Place of Business and Collateral....................................................................13
Section 4.5 Fixtures............................................................................................13
Section 4.6 Maintenance of Records..............................................................................13
Section 4.7 Compliance with Laws................................................................................13
Section 4.8 Payment of Taxes....................................................................................14
Section 4.9 Compliance with Terms of Accounts and Contracts.....................................................14
Section 4.10 Limitation on Liens on Collateral..................................................................14
Section 4.11 Limitations on Modifications of Receivables and Other Intangibles;
No Waivers or Extensions....................................................................................14
Section 4.12 Maintenance of Insurance...........................................................................14
Section 4.13 Limitations on Dispositions of Collateral..........................................................14
Section 4.14 Further Identification of Collateral...............................................................15
Section 4.15 Notices............................................................................................15
Section 4.16 Change of Law......................................................................................15
Section 4.17 Right of Inspection................................................................................15
Section 4.18 Maintenance of Equipment...........................................................................16
Section 4.19 Covenants Regarding Patent and Trademark Collateral................................................16
Section 4.20 Termination of Federal Contracts...................................................................17
Section 4.21 Federal Contracts..................................................................................17
Section 4.22 Reimbursement Obligation...........................................................................18
ARTICLE V REMEDIES; RIGHTS UPON DEFAULT..........................................................................18
Section 5.1 UCC Rights..........................................................................................18
Section 5.2 Payments on Collateral..............................................................................18
Section 5.3 Possession of Collateral............................................................................19
Section 5.4 Sale of Collateral; Notice..........................................................................19
Section 5.5 Rights of Purchasers................................................................................20
Section 5.6 Additional Rights of the Agent......................................................................20
Section 5.7 Remedies Not Exclusive, etc.........................................................................21
Section 5.8 Waiver and Estoppel.................................................................................21
Section 5.9 Power of Attorney; Powers Coupled With An Interest..................................................22
Section 5.10 Certain Provisions Relating to Securities..........................................................23
Section 5.11 Application of Monies..............................................................................23
ARTICLE VI MISCELLANEOUS.........................................................................................24
Section 6.1 Notices.............................................................................................24
Section 6.2 No Waiver; Cumulative Remedies......................................................................24
Section 6.3 Amendments and Waivers..............................................................................24
Section 6.4 Successors and Assigns..............................................................................24
Section 6.5 Governing Law.......................................................................................25
Section 6.6Limitation by Law; Severability......................................................................25
Section 6.7 Counterparts........................................................................................25
Section 6.8 Expenses of the Agent...............................................................................25
Section 6.9 Indemnification.....................................................................................25
Section 6.10 Termination; Survival..............................................................................26
Section 6.11 Judicial Proceedings; Waiver of Jury Trial.........................................................26
Section 6.12 Integration........................................................................................27
Section 6.13 Authority of Agent.................................................................................27
Section 6.14 Headings, Bold Type and Table of Contents..........................................................27
</TABLE>
Schedule 3.4...... - Place of Business
Schedule 3.5...... - Location of Collateral
Schedule 3.6...... - Trade Names, Division Names, etc.
Schedule 3.7...... - Patents and Trademarks
Schedule 4.1...... - UCC Filings
Exhibit A......... - Assignment of Federal Contract
<PAGE>
24
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of August 11th, 1999 (as amended, supplemented
or modified from time to time, the "Security Agreement"), is made by GKMG
Consulting Services, Inc., a District of Columbia corporation (the "Debtor"),
and BANK OF AMERICA, N.A. d/b/a NationsBank, N.A., successor to 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
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 recently acquired Debtor, and the Company owns
directly, all of the issued and outstanding shares of stock of the Debtor;
WHEREAS, the Debtor constitutes 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 1.1.......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.
"First Union" means First Union National Bank of Washington, D.C.
"First Union Security Agreement" means the Promissory Note and Security
Agreement, dated October 25, 1995, executed by Debtor under its former name,
Galland, Kharasch, Morse & Garfinkle, P.C., in favor of First Union, in
connection with the First Union Loan Agreement. "First Union Loan Agreement"
means that certain Loan Agreement, dated October 25, 1995, between Debtor, under
its former name Galland, Kharasch, Morse & Garfinkle, P.C., and First Union.
"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) 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 1.2.......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 2.1.......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") except that, so long as any indebtedness remains outstanding, or
any loan commitment remains in effect, under the First Union Loan Agreement, the
Debtor only grants to the Agent, for the ratable benefit of the Lenders, a
second priority security interest in and lien on that portion of the Collateral
in which First Union shall have a perfected security interest under the First
Union Security Agreement:
(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 2.2 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 2.3 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 2.4 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 2.5 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 2.6 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 3.1 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 3.2 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 3.5
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 second in priority,
subordinate only to the security interests granted to First Union pursuant to
the First Union Security Agreement. Other than financing statements or other
similar documents perfecting the security interests in favor of First Union
pursuant to the First Union Security Agreement and those 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 3.3 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 3.4 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 3.5 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 3.6 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 3.7 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 4.1 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 4.2 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 4.3 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 4.4 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 4.5 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 4.6 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 4.7 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 3.4 hereto, the priority of its security interest in the
Collateral.
Section 4.8 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 4.9 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 (or, as permitted by Section 2.1
hereof, a second 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 3.5 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 5.1 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 5.2 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 5.3 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 5.4 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 5.5 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 5.6 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 5.7 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 5.8 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 5.9 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 6.1 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 6.2 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 6.3 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 6.4 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 6.5 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 6.6 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 6.7 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 6.8 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 6.9 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.
GKMG CONSULTING SERVICES, INC.
Address:
Canal Square
1054 Thirty-first Street, NW
Washington, District of Columbia 20007 By: /s/ Morris R. Garfinkle
Attention: Name: Morris R. Garfinkle
Phone: (202) 342-5200 Title: President
Fax: (202) 337-8787
BANK OF AMERICA, N.A.
d/b/a NationsBank, N.A.,
successor to NationsBank, N.A.
Address:
6610 Rockledge Drive
Bethesda, Maryland 20817 By:/s/ James W. Gaittens
Attention: James W. Gaittens Name: James W. Gaittens
Phone: (301) 493-2976 Title: Senior Vice President
Fax: (301) 571-9098
<PAGE>
Schedule 3.4
Place of Business
Canal Square
1054 Thirty-first Street, NW
Washington, District of Columbia 20007
Schedule 3.5
Location of Collateral
Canal Square
1054 Thirty-first Street, NW
Washington, District of Columbia 20007
Schedule 3.6
Trade Names, Division Names, etc.
GKMG
GKMG CONSULTING
Schedule 3.7
Patents and Trademarks
NONE
Schedule 4.1
UCC Filings
<PAGE>
Exhibit A to Security Agreement
FORM OF
ASSIGNMENT OF FEDERAL CONTRACT
This ASSIGNMENT OF FEDERAL CONTRACT, dated as of _____, __ (the "Agreement"), is
made by GKMG Consulting Services, Inc., a District of Columbia corporation (the
"Assignor"), in favor of BANK OF AMERICA, N.A. d/b/a Nationsbank, N.A.,
successor to 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:
(a) 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.
(b) 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.
(c) 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.
(d) 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. (e) 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 BANK OF
AMERICA, N.A. d/b/a Nationsbank, N.A., successor to NationsBank, N.A., for the
account of ________________, Bank Account #__________, Agent ABA#_________, or
(iii) if by wire transfer, to BANK OF AMERICA, N.A. d/b/a Nationsbank, N.A.,
successor 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.
GKMG CONSULTING SERVICES, INC.
ATTEST:
, Secretary
By:
[Corporate Seal] Name:
Title:
WITNESS:
BANK OF AMERICA, N.A. d/b/a
NationsBank, N.A., successor to 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 BANK OF AMERICA, N.A. d/b/a Nationsbank, N.A., successor 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 BANK OF AMERICA,
N.A. d/b/a Nationsbank, N.A., successor to NationsBank, N.A.,
____________________, (ii) if by electronic transfer, to BANK OF AMERICA, N.A.
d/b/a Nationsbank, N.A., successor to NationsBank, N.A., for the account of
______________________, Bank Account #__________, Agent ABA#_____________, and
(iii) if by wire transfer, to BANK OF AMERICA, N.A. d/b/a Nationsbank, N.A.,
successor 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 Bank of America, 6610 Rockledge Drive, Bethesda, Maryland 20817,
Attention: James W. Gaittens, Senior Vice President.
Very truly yours,
GKMG CONSULTING 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]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(in thousands)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Sep-01-1999
<CASH> 13,495
<SECURITIES> 0
<RECEIVABLES> 70,085
<ALLOWANCES> 4,839
<INVENTORY> 0
<CURRENT-ASSETS> 82,368
<PP&E> 23,966
<DEPRECIATION> 15,689
<TOTAL-ASSETS> 121,030
<CURRENT-LIABILITIES> 31,057
<BONDS> 0
0
0
<COMMON> 179
<OTHER-SE> 86,079
<TOTAL-LIABILITY-AND-EQUITY> 121,030
<SALES> 132,915
<TOTAL-REVENUES> 132,915
<CGS> 100,911
<TOTAL-COSTS> 125,752
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120
<INCOME-PRETAX> 6,901
<INCOME-TAX> 2,852
<INCOME-CONTINUING> 4,048
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,048
<EPS-BASIC> 0.24
<EPS-DILUTED> 0.23
</TABLE>
