<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 and 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 6, 1998
HALIFAX CORPORATION
(Exact name of registrant as specified in charter)
Virginia 2-84160-W 54-0829246
(State or other jurisdiction (Commission
of incorporation) File Number) (IRS Employer
Identification No.)
5250 Cherokee Avenue, Alexandria, Virginia 22312
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 750-2202
Not Applicable
(Former name or former address, if changed since last report)
FIFTH AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated
as of the 25th day of June, 1998 (the Agreement), is made by and
between CRESTAR BANK, a Virginia banking corporation (the Lender), and
HALIFAX CORPORATION, a Virginia corporation (the Company), HALIFAX
ENGINEERING, INC., a Virginia corporation (Engineering), HALIFAX
TECHNICAL SERVICES, INC., a Virginia corporation (Technical), HALIFAX
REALTY, INC., a Virginia corporation (Realty), HALIFAX TECHNOLOGY
SERVICES COMPANY, a Virginia corporation (Technology), and each other
Subsidiary (as defined below) that becomes a party to this Agreement
with the Lender's approval, in accordance with the provisions set forth
below (together with the Company and Engineering, Technical, Realty,
and Technology, collectively, the Borrowers, and individually, a
Borrower).
RECITALS
The Lender has agreed to provide financing to the Borrowers,
subject to the terms and conditions of this Agreement. Each Borrower
will derive substantial direct and indirect benefits by the credit
extended by the Lender to the other Borrowers. Accordingly, for good
and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Lender and the Borrowers agree as follows:
Definitions. As used in this Agreement, the following terms
shall have the meanings assigned to them below, which meanings shall be
equally applicable to the singular and plural forms of the terms
defined.
"Accounts Receivable" means, collectively, and includes all of the
following, whether now owned or hereafter acquired by a Borrower: all
property included within the definitions of "accounts," "chattel
paper," "documents" and "instruments" set forth in the UCC; all present
and future rights to payments for goods sold or leased or for services
rendered, whether or not represented by instruments or chattel paper,
and whether or not earned by performance; contract rights; all present
and future rights to payments for computer software, computer hardware
or computer systems sold, leased or licensed; proceeds of any letter of
credit of which a Borrower is a beneficiary; all forms of obligations
whatsoever owed to a Borrower, together with all instruments and
documents of title representing any of the foregoing; all rights in any
goods that any of the foregoing may represent; any and all rights in
any returned or repossessed goods; and all rights, security and
guaranties with respect to any of the foregoing, including, without
limitation, any right of stoppage in transit.
"Affiliate" means, with respect to any specified Person, any other
Person that, directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common
control with, such specified Person. The term "control" means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership of common stock, by contract or otherwise. The MPS Joint
Venture, if formed, shall be an Affiliate.
"Aging" means a schedule of all outstanding Receivables of the
Borrowers showing the age of such Receivables in intervals of 30 days.
"Agreement" means this Loan and Security Agreement, as the same
may be amended, modified or supplemented from time to time.
"Assignment of Claims Act" means, collectively, the Assignment of
Claims Act of 1940, as amended, 31 U.S.C. 3727, 41 U.S.C. 15, any
applicable rules, regulations and interpretations issued pursuant
thereto, and any amendments to any of the foregoing.
"Assumption Agreement" means each Assumption Agreement,
substantially in the form of Exhibit A attached to this Agreement,
executed by a Subsidiary that becomes a party to this Agreement in
accordance with the provisions of Section 0 below.
"Borrowing Base" means, at any time, without duplication, the sum
of (a) 90% of Eligible Billed Government Receivables, plus (b) 85% of
Eligible Billed Commercial Receivables, plus (c) the Tier Two
Contribution, provided that at no time shall the Borrowing Base
attributable to the Tier Two Contribution exceed $2,000,000.
"Borrowing Base Certificate" means a certificate of the Company
containing a computation of the Borrowing Base and certifying that no
Default or Event of Default has occurred and is continuing, in
substantially the form of Exhibit B attached to this Agreement.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks are authorized or required to close
under the laws of the State, and, with respect to the determination of
LIBOR, on which banks in the London interbank market are open for
business.
"Capital Expenditures" means, for any period, expenditures made by
the Company or any of its Subsidiaries to acquire or construct fixed
assets, plant and equipment (including renewals, improvements and
replacements, but excluding repairs) during such period, computed in
accordance with GAAP.
"Capital Lease" means any lease that has been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Cash Management Agreement" means any applicable agreement between
the Company and the Lender pursuant to which funds are transferred
automatically to and from the Company's operating account or controlled
disbursement account with the Lender, as any such agreement may be
amended, modified or supplemented from time to time.
"Closing" means the initial disbursement of the Loans.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and all regulations issued pursuant thereto.
"Collateral" means, collectively, and includes all Accounts
Receivable, Deposit Accounts, Equipment, General Intangibles,
Intellectual Property, Inventory, Investment Property and all other
property of a Borrower in which a Lien is granted to the Lender
pursuant to this Agreement or any other Loan Document.
"Commercial Receivable" means any Account Receivable that does not
arise out of a Government Contract on which a Borrower is the prime
contractor. An Account Receivable arising out of a Government Contract
on which a Borrower is a subcontractor shall be a Commercial
Receivable.
"Covenant Compliance Certificate" means a certificate executed by
a Principal Officer of the Company, substantially in the form of
Exhibit C attached to this Agreement, containing a calculation of the
financial covenants contained in Section 6.11 below and certifying that
no Default or Event of Default has occurred.
"Customer" means any Person obligated on a Receivable.
"Customer List" means a schedule of all Customers of the
Borrowers, showing the address of each Customer and a listing of the
active contracts between each Borrower and such Customer, which is
otherwise in form and substance satisfactory to the Lender.
"Date Affected Information Technology" means a system comprised of
one or more components including computer hardware, computer software
or equipment with computerized functions, which reads, produces or
processes date data by input, output or otherwise.
"Debt" means, collectively, and includes, without duplication,
with respect to any specified Person, (a) indebtedness or liability for
borrowed money (whether by loan, the issuance and sale of debt
securities or the sale of assets to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such
assets from such Person) or for the deferred purchase price of property
or services; (b) obligations as a lessee under a Capital Lease;
(c) obligations to reimburse the issuer of letters of credit or
acceptances; (d) all guaranties, endorsements (other than for
collection or deposit in the ordinary course of business) and other
contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any other Person or otherwise to assure a
creditor against loss; (e) obligations under interest rate swap, cap or
collar agreements or similar agreements or arrangements designed to
protect that Person against fluctuations in interest rates; (f)
obligations under any foreign exchange contract, currency swap or other
similar agreements or arrangements designed to protect that Person
against fluctuations in currency values; and (g) obligations secured by
any Lien on property owned by the specified Person, whether or not the
obligations have been assumed.
"Debt Coverage Ratio" means, for each 12-month period ending on
the last day of each fiscal quarter of the Company, the ratio of
(a) EBITDA for such period, minus Capital Expenditures for such period,
minus dividends paid during such period, minus cash expenditures for
taxes during such period, to (b) the sum of interest expense for such
period plus principal payments due during the next succeeding 12-month
period with respect to Debt outstanding on the last day of such fiscal
quarter (other than the Revolving Loans). The foregoing shall be
determined on a consolidated basis for the Company and its Subsidiaries
in accordance with GAAP.
"Default" means any event that, with the giving of notice, the
lapse of time, or both, would constitute an Event of Default.
"Default Rate" means the rate at which interest accrues on the
loans upon the occurrence of an Event of Default, determined in
accordance with the provisions of Section 2.5.
"Deposit Account" means any "deposit account," as defined in
Section 9-105 of the UCC, whether now owned or hereafter acquired by a
Borrower.
"Dollars" and "$" means the lawful currency of the United States
of America.
"DSSMP Contract" means Contract No. DAAB07-97-D-L016, dated
June 30, 1997, between the Company and the United States Army
Communications - Electronics Command.
"EBITDA" means, for any period, (a) consolidated Net Income of the
Company and its Subsidiaries for such period plus (b) to the extent
deducted to determine such consolidated Net Income, the sum of
(1) depreciation expense, (2) interest expense, (3) amortization
expense, and (4) tax expense less (c) to the extent added to determine
such consolidated Net Income, extraordinary or unusual gains or other
gains not incurred in the ordinary course of business plus (d) to the
extent deducted to determine such consolidated Net Income,
extraordinary or unusual losses or other losses not incurred in the
ordinary course of business.
"Eligible Billed Commercial Receivable" means an Eligible Billed
Receivable that is not an Eligible Billed Government Receivable.
"Eligible Billed Government Receivables" means Eligible Billed
Receivables arising out of a Government Contract on which a Borrower is
the prime contractor.
"Eligible Billed Receivables" means Eligible Receivables that have
been billed to the appropriate Customer and are aged not greater than
90 days from the date of the initial invoice. For the purposes of this
definition, the term "initial invoice" shall mean the first invoice
relating to the applicable goods shipped or services rendered, and not
any subsequent invoice relating thereto.
"Eligible Bonded Receivables" means, at any time, Accounts
Receivable of a Borrower that satisfy all of the criteria of Eligible
Billed Receivables other than the requirement that such Accounts
Receivable not arise out of a contract secured by a surety bond.
"Eligible Inventory" means Inventory valued at the lower of cost
or market value (a) to which any Borrower or Borrowers other than
Technology have acquired title, and in which the Lender has a
perfected, first priority security interest, (b) that has been
delivered to any of the locations of any such Borrower or Borrowers set
forth on Schedule 1 hereto, free and clear of all Liens other than the
security interest granted to the Lender, (c) that continues to be in
full conformity with the representations and warranties made by the
applicable Borrowers to the Lender herein, and (d) is otherwise
satisfactory to the Lender, in its sole discretion, for inclusion in
the Borrowing Base. Inventory shall lose its status as Eligible
Inventory when any applicable Borrower sells, leases, assigns or
otherwise disposes of it or passes title to it to another Person or
consigns it to another Person.
"Eligible Receivables" means Accounts Receivable of a Borrower
(a) that represent valid obligations incurred by a Customer for
software, goods or services licensed, shipped and delivered, installed
or completed under valid contracts of license, sale, or service that
have been formally awarded to a Borrower, for which all required
contract documents have been executed by such Borrower and such
Customer, and, if the Government is the Customer, for which funds have
been appropriated and allocated; (b) that are due and payable not more
than 30 days from the date of the initial invoice; (c) on which the
Customer is not an Affiliate or Subsidiary of a Borrower; (d) with
respect to which no Borrower has knowledge or notice of any inability
of the Customer to make full payment; (e) from the face amounts of
which have been deducted all payments, setoffs, amounts subject to
adverse claims made in writing to a Borrower, contractual allowances,
bad debt reserves and other credits applicable thereto; (f) that are
subject to no Liens other than those permitted by this Agreement;
(g) that continue to be in full conformity with the representations and
warranties made by the Borrowers to the Lender in this Agreement;
(h) with respect to which the Lender is and continues to be satisfied
with the credit standing of the Customer; (i) on which the Customer is
not a creditor of a Borrower; (j) on which the Customer is not a
Foreign Customer, unless the Foreign Customer's obligations are secured
by a letter of credit acceptable to the Lender, or the Lender elects,
in its sole discretion, to permit such Account Receivable to be
included in the Borrowing Base if it otherwise is an Eligible
Receivable, at such advance percentage as the Lender may elect in its
sole discretion; (k) that are not subject to any dispute; (l) with
respect to which the applicable software, goods or services have been
accepted by the applicable Customer on an absolute sale basis and not
on a bill and hold sale basis, a consignment sale basis, a guaranteed
sale basis, a sale or return basis or on the basis of any other similar
understanding pursuant to which such Borrower would repurchase or
accept a return of, or give a credit for, any such software, goods or
services; and (m) that are not subject to any contingencies; provided,
however, and without limiting any other provisions of this Agreement
with respect to the exclusion of Accounts Receivable from the category
of Eligible Receivables and the Borrowing Base, that (1) if the Lender
reasonably determines that the collectibility of any Account Receivable
makes it unacceptable for inclusion in the Borrowing Base and gives
written notice to the Company indicating the reasons for such
determination, then such Account Receivable shall thereafter be
excluded from the category of Eligible Receivables, (2) if more than
50% of the aggregate face amount of Accounts Receivable owed by a
Customer are aged 90 days or more, then all Accounts Receivable owed by
such Customer shall be excluded from the category of Eligible
Receivables, (3) in no case shall Eligible Receivables include any
Accounts Receivable representing or arising out of retainages,
holdbacks, progress billings, the final payment due under a Government
Contract, revenues recognized or costs incurred in excess of approved
or allowed reimbursement rates, cost overruns, unauthorized work or
work beyond the scope of a contract, rebillings, contracts secured by
surety bonds or classified Government Contracts; (4) an Account
Receivable arising out of a Material IP Agreement shall not be an
Eligible Receivable unless the applicable Intellectual Property, and an
appropriately completed instrument sufficient to file and record the
Lender's Lien with respect thereto, shall be duly registered and filed
with the United States Copyright Office and the United States Patent
and Trademark Office, as applicable. If required by the Lender, no
Eligible Receivable shall be included in more than three month-end
Borrowing Base calculations.
"Eligible Tier Two Term Loan State and Local Receivables" means,
at any time, Accounts Receivable of a Borrower due from any state or
political subdivision of a state that are Eligible Receivables that
have been billed, and are aged not greater than 120 days from the date
of the initial invoice (as such term is used in the definition of
Eligible Billed Receivables).
"Eligible Unbilled Receivables" means, at any time, Accounts
Receivable of the Company arising out of the DSSMP Contract or the
LTLSC Contract that satisfy all of the criteria of Eligible Billed
Receivables other than the requirement that such Accounts Receivable be
billed to the appropriate Customer and for which the Company is
entitled to send a bill within ___ days. If required by the Lender, no
Eligible Unbilled Receivable shall be included in more than ____ month-
end Borrowing Base calculations.
"Equipment" means collectively and includes all of the following,
whether now owned or hereafter acquired by a Borrower: equipment and
fixtures, including, without limitation, computer hardware, computer
software, computer systems, furniture, machinery, vehicles and trade
fixtures together with any and all accessories, accessions, parts and
appurtenances thereto, substitutions therefor and replacements thereof,
together with all other such items that are included within the
definitions of "equipment" and "fixtures" as set forth in the UCC.
"Equity Issuance" means any issuance or sale by a Person of its
capital stock or other similar equity security, or any warrants,
options or similar rights to acquire, or securities convertible into or
exchangeable for, such capital stock or other similar equity security.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all regulations issued pursuant
thereto.
"Event of Default" means any of the events specified as an "Event
of Default" under this Agreement, provided that any requirement for the
giving of notice, the lapse of time, or both, or any other condition,
has been satisfied.
"Existing Agreement" means the Fourth Amended and Restated Loan
and Security Agreement, dated as of November 26, 1996, between the
Lender and the Borrowers, as amended to the date hereof.
"Existing Subordination Agreement" means the Subordination
Agreement, dated as of January 27, 1998, between the Lender, the
Company and Research Industries.
"Foreign Customer" means a Customer that is a foreign government,
an entity organized under the laws of a country other than the United
States or an individual who is not a United States citizen.
"Fully Date Capable" means the ability to correctly process date
data (including, but not limited to, reading, producing, calculating,
comparing, and sequencing date data) from, into, and between the
twentieth and twenty-first centuries) without material degradation in
performance and without unusual intervention, including correct and
continuous processing during the transition between 1999 and 2000, and
correct processing of leap years.
"Funded Debt" means, for any Person, the sum of the consolidated
Debt of such Person and its Subsidiaries for (a) borrowed money, the
deferred purchase price of property or services and obligations under
repurchase agreements, (b) Capital Lease obligations, (c) the amount of
any outstanding Debt guaranteed and (d) contingent or matured
reimbursement obligations for letters of credit issued for the account
of such Person or any Subsidiary of such Person, in each case
determined in accordance with GAAP.
"Funded Debt Ratio" means, at any time, the ratio of
(a) consolidated Funded Debt of the Company and its Subsidiaries
outstanding on the last day of the most recently ended fiscal quarter
of the Company, minus Subordinated Debt, to (b) consolidated EBITDA of
the Company and its Subsidiaries for the period of 12 months then
ended.
"GAAP" means generally accepted accounting principles consistently
applied.
"General Intangibles" means, collectively, and includes all of the
following, whether now owned or hereafter acquired by a Borrower: all
property that is included within the definition of "general
intangibles" as set forth in the UCC; choses in action, causes of
action and all other intangible property of every kind and nature,
including, without limitation, corporate or other business records,
inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, good will,
registrations, copyrights, licenses, franchises, customer lists, tax
refunds, tax refund claims, rights of claims against carriers and
shippers, leases and rights to indemnification.
"Government" means the United States of America or any agency or
instrumentality thereof.
"Government Contract" means any contract with the Government under
which a Borrower is a prime contractor or a subcontractor.
"Increased Costs" means any reserve, special deposit, capital
adequacy guideline or similar requirement relating to any extensions of
credit, Letters of Credit, or other assets of the Lender, or the
deposits with or other liabilities of the Lender, that (a) is imposed
as a result of any Regulatory Change or as a result of the application
of existing capital adequacy guidelines (including, without limitation,
any Regulatory Change or capital adequacy guideline that requires that
letters of credit issued, or lines of credit established, by the Lender
be classified as "risk assets" for purposes of, or otherwise be subject
to the provisions of, any capital adequacy guidelines applicable to the
Lender), and (b) increases the cost to the Lender of making, issuing or
maintaining any Loan or Letter of Credit, reduces the amount receivable
by the Lender in connection with any Loan or Letter of Credit, or
reduces the rate of return on the Lender's capital as a consequence of
its obligations under this Agreement.
"Ineligible Receivables" means any Account Receivable of a
Borrower that is not an Eligible Billed Receivable.
"Intellectual Property" means, collectively, and includes all of
the following, whether now owned or hereafter acquired by a Borrower:
all copyrights (whether registered or unregistered), copyright
registrations, trademarks, servicemarks, patents and rights as a
licensor or licensee of any of the foregoing and all applications with
respect to any of the foregoing.
"Interest Payment Date" means the first day of each calendar
month.
"Inventory" means collectively and includes all of the following,
whether now owned or hereafter acquired by a Borrower: all goods,
computer hardware, computer software and computer systems held or
intended for sale, lease, installation or licensing by a Borrower, or
furnished or to be furnished under contracts of service, all raw
materials, work in process, finished goods, materials and supplies of
every nature used or usable in connection with the manufacture,
packing, shipping, advertising or sale of any such goods, together with
all property including within the definition of "inventory" set forth
in the UCC.
"Investment Property" means all of the following, whether now
owned or hereafter acquired by a Borrower: all property that is
included within the definition of "investment property" as set forth in
the UCC, including all securities, whether certificated or
uncertificated, security entitlements, securities accounts, commodity
contracts and commodity accounts, and all financial assets held in any
securities account or otherwise, and any commercial paper, securities,
repurchase agreements, deposit accounts or other instruments or
obligations purchased for the Borrower pursuant to a Cash Management
Agreement.
"Letters of Credit" means any letter of credit issued by the
Lender for the account of any Borrower, whether now outstanding or
issued after the date of this Agreement.
"Letter of Credit Agreement" means, collectively and individually,
each standard form of Application and Agreement for Irrevocable Standby
Letter of Credit, to be executed and delivered by the Borrowers to the
Lender in connection with each Letter of Credit, as any of the same may
be amended, modified or supplemented from time to time.
"LIBOR" means for each calendar month, the rate at which dollar
deposits with a one-month maturity are offered to leading banks in the
London interbank market at 11:00 a.m. (London time) on the first
Business Day of such calendar month, based on the British Bankers
Association quotations published by an On-Line Information Service,
selected by the Lender, plus adjustments (expressed as a percentage)
for reserve requirements, deposit insurance premium assessments,
broker's commissions and other regulatory costs, all of the foregoing
as determined by the Lender's Funds Management Division in accordance
with its customary practices.
"Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), or preference, priority or other security
agreement, or preferential arrangement, charge or encumbrance of any
kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any Capital Lease
and the filing of any financing statement under the UCC or comparable
law of any jurisdiction to evidence any of the foregoing).
"Loans" means the Revolving Loans, the Tier Two Term Loan and the
Tier Three Term Loan.
"Loan Documents" means this Agreement, the Notes, each Assumption
Agreement, each Letter of Credit Agreement, each Cash Management
Agreement, the Existing Subordination Agreement, and any other document
now or hereafter executed or delivered in connection with the
Obligations, in evidence thereof or as security therefor, including,
without limitation, any life insurance assignment, pledge agreement,
security agreement, deed of trust, mortgage, guaranty, promissory note
or subordination agreement.
"LTLCS Contract" means Contract No. DAAB07-98-D-L771, dated
November 25, 1997, between the Company and the United States Army
Communications - Electronics Command.
"Material Adverse Effect" means a material adverse effect on
()(a) the business, assets, operations, prospects or condition,
financial or otherwise, of the Company and its Subsidiaries taken as a
whole, (b) the ability of any Borrower to perform its obligations under
any Loan Document or (c) the rights of or benefits available to the
Lender under any Loan Document.
"Material Contract" means any contract or other arrangement (other
than the Loan Documents), whether written or oral, to which a Borrower
or any Subsidiary is a party (a) requiring annual payments by any party
thereto of more than 10% of the annual consolidated gross revenues of
the Company and its Subsidiaries, or (b) as to which the breach,
nonperformance, cancellation or failure to renew by any party thereto
could have a Material Adverse Effect.
"Material IP Agreement" means any contract or agreement between a
Borrower and a Customer providing for the sale or licensing to such
Customer of Intellectual Property owned by such Borrower and subject or
entitled to United States copyright, patent or trademark protection,
unless such sale or license is ancillary to other goods or services
provided under such contract or agreement and is not a material element
of such goods or services.
"Maximum Amount" means $12,500,000.
"Minimum Compliance Level" means $7,250,000 as of June 30, 1998,
and September 30, 1998, $12,400,000 as of December 31, 1998, and
adjusted upward, effective as of March 31, 1999, and as of the end of
each fiscal year thereafter, by an amount equal to the sum of (a) 50%
of the consolidated Net Income of the Company and its Subsidiaries for
such fiscal year, with each of the foregoing increases being fully
cumulative, and with no reduction being made on account of any negative
consolidated Net Income of the Company and its Subsidiaries for any
fiscal year, plus (b) the net proceeds of cash and other consideration
received by the Borrower or any Subsidiary in respect of any Equity
Issuance and Subordinated Debt issued after the date hereof, provided
that the aggregate amount of the adjustment to the Minimum Compliance
Level required by this clause (b) shall be $4,500,000.
"MPS Contract" means the contract, if any, awarded to the MPS
Joint Venture in connection with its bid on the Marine Corps
Prepositioning Solicitation.
"MPS Joint Venture" means the joint venture arrangement to be
formed by the Company and VSE Corporation to perform the MPS Contract.
"Net Income" means, for any Person for any period, the
consolidated gross revenues of such Person and its Subsidiaries for
such period less all consolidated operating and non-operating expenses
(including taxes) of such Person and its Subsidiaries for such period,
all as determined in accordance with GAAP.
"Notes" means the Revolving Note, the Tier Two Term Note, and the
Tier Three Note.
"Obligations" means the Loans, the Notes, the Letter of Credit
Agreements, all indebtedness and obligations of a Borrower under this
Agreement and the other Loan Documents and all other indebtedness and
obligations of a Borrower to the Lender, now existing or hereafter
arising, of every kind and description, direct or indirect, fixed or
contingent, liquidated or unliquidated, due or to become due, secured
or unsecured, joint, several or joint and several, as amended,
modified, renewed, extended or increased from time to time, including,
without limitation, any overdrafts in any Deposit Account maintained by
a Borrower with the Lender.
"On-Line Information Service" means a text line or other on-line
information service provided to the Lender by any of Reuters
Information Services, Inc., Knight-Ridder Financial/Americas, Dow Jones
Telerate, Inc. or Bloomberg Financial Markets News Services, or any
comparable reporting service selected by the Lender.
"Optional Termination Date" means the date on which the Borrowers
elect to terminate the Lender's obligations to make Loans and issue
Letters of Credit in accordance with a notice given pursuant to Section
0.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, limited liability company or other
entity of whatever nature.
"Primary Operating Account" means any deposit account or
controlled disbursement account on which the Company draws to pay all
or substantially all of its operating expenses.
"Prime Rate" means the rate of interest established and announced
from time to time by the Lender and recorded in its Central Credit
Administration Division as its Prime Rate, it being understood and
agreed that the Prime Rate is used as a reference for fixing the
lending rate on commercial loans and is not necessarily the lowest or
most favorable rate of interest charged by the Lender on such loans.
"Principal Officer" means the President, the Chief Executive
Officer or the Chief Financial Officer of the Company.
"Receivables" means the Accounts Receivable and the General
Intangibles.
"Regulatory Change" means any change, after the date of this
Agreement, in any federal or state laws, rules and regulations, or
interpretations thereof, or the adoption after the date of this
Agreement of any rules, interpretations, directives or requests,
applying to a class of financial institutions including the Lender,
under any federal or state laws or regulations by any court or
regulatory authority charged with the interpretation or administration
thereof.
"Required Quarterly Curtailment" means, for any principal payment
due with respect to the Tier Two Term Loan or the Tier Three Term Loan,
the greater of (a) $125,000, or (b) 50% of (1) the consolidated Net
Income of the Company and its Subsidiaries for the fiscal quarter
immediately preceding such payment, less (2) dividends paid by the
Company during such quarter.
"Research Industries" means Research Industries Incorporated, a
Delaware corporation.
"Revolving Loans" means the loans to be made by the Lender to the
Borrowers pursuant to Section 0 of this Agreement.
"Revolving Note" means a promissory note in the principal amount
equal to the Maximum Amount, in substantially the form of Exhibit D
attached to this Agreement, made by the Borrowers and payable to the
order of the Lender, as amended, modified or supplemented from time to
time.
"Spread" shall mean the percentage corresponding to the Funded
Debt Ratio set forth below, as calculated by the Lender. The
applicable Spreads on the date hereof are Price Level 2. The Spreads
will be adjusted on a quarterly basis based on the table set forth
below:
<TABLE>
<CAPTION>
Tier Two
Revolvi Revolving Tier Two Tier Three
Price ng Component Term Term Loan
Level Funded Debt Ratio Loans Spread Loan Spread
Spread Spread
<S> <C> <C> <C> <C> <C>
1 Equal to or less 1.75% 2.10% 2.10% 3.00%
than 2.75 to 1
2 Greater than 2.75 2.00% 2.35% 2.35% 3.25%
to 1 but equal to
or less than 3.75
to 1
3 Greater than 3.75 2.25% 2.65% 2.65% 3.55%
to 1
</TABLE>
The Spread will be adjusted to the percentage corresponding to the
applicable Funded Debt Ratio in effect as of the last day of each
fiscal quarter of the Company. The adjustment will become effective as
of the first day of the calendar month next succeeding the last day of
the 30-day period within which the Company must deliver its financial
statements to the Lender for such fiscal quarter pursuant to Section 0.
No decrease in the Spread shall become effective if, at such time, any
Default or Event of Default has occurred and is continuing. If the
Company's financial statements are not delivered to the Lender within
the specified time periods, the Spread may be increased, at the option
of the Lender, to Price Level 3 from the date on which the statements
were due through the next adjustment date.
"State" means the Commonwealth of Virginia.
"Subordinated Debt" means (a) the Debt of the Company to Research
Industries outstanding on the date hereof and subject to the terms of
the Existing Subordination Agreement, and (b) any unsecured Debt of the
Company incurred after the date hereof that has a maturity of not less
than three years, is subordinated to the Obligations pursuant to a
subordination agreement containing terms that are identical in all
material respects to those contained in the Existing Subordination
Agreement, and accruing interest at a rate acceptable to the Lender.
"Subsidiary" as to any Person, means a corporation, partnership,
limited partnership, limited liability company or other entity of which
shares of stock or other ownership interests having ordinary voting
power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such entity are
at the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Company.
"Synthetic Lease" means any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet
financing product where the transaction is considered Debt for borrowed
money for federal income tax purposes but is classified as an operating
lease in accordance with GAAP for financial reporting purposes.
"Tangible Capital Funds" means, at any time, the sum of Tangible
Net Worth plus Subordinated Debt.
"Tangible Net Worth" means, at any time, amounts that would be
included under redeemable preferred stock and stockholders' equity on
the consolidated balance sheet of the Company and its Subsidiaries,
provided that, in any event, such amounts are to be net of amounts
carried on the books of the Company and its Subsidiaries for ()(1) any
write-up in the book value of any assets of the Company resulting from
a revaluation subsequent to the date of this Agreement, (2) investments
in non-marketable securities, (3) treasury stock, (4) unamortized debt
discount expense, (5) any cost of investments in excess of net assets
acquired at any time of acquisition, (6) loans, advances or other
amounts owed to the Company or any of its Subsidiaries by any of its
officers, directors, shareholders, employees or Affiliates, except for
travel advances made in the ordinary course of business, (7) leasehold
improvements, (8) prepaid expenses, and (9) patents, patent
applications, copyrights, trademarks, trade names, goodwill, research
and development costs, organizational expenses, capitalized software
costs and other like intangibles.
"Termination Date" means July 31, 2000, and any extension or
extensions thereof granted by the Lender in accordance with the
provisions of Section 0(0) below.
"Tier Two Borrowing Base" means, at any time, the sum of the
following, without duplication, (a) 35% of Eligible Inventory, provided
that the Tier Two Borrowing Base attributable to this clause (a) shall
not exceed $1,000,000 at any time, plus (b) 80% of Eligible Bonded
Receivables of up to $1,500,000 outstanding at any time, provided that
the Tier Two Borrowing Base attributable to this clause (b) shall not
exceed $1,200,000 at any time, plus (c) 5% of Eligible Tier Two Term
Loan State and Local Receivables.
"Tier Two Contribution" means, at any time, the sum of the
following, without duplication: (a) 80% of Eligible Bonded Receivables
in excess of $1,500,000 outstanding, provided that the Tier Two
Contribution attributable to this clause (a) shall not exceed
$2,000,000 at any time, plus (b) 15% of Eligible Unbilled Receivables,
provided that the Tier Two Contribution attributable to this clause (b)
shall not exceed $500,000 at this time.
"Tier Two Revolving Component" means, at any time, the amount by
which the aggregate amount of outstanding Revolving Loans and Letters
of Credit exceeds (a) 90% of Eligible Billed Government Receivables,
plus (b) 85% of Eligible Billed Commercial Receivables.
"Tier Three Term Loan" means the loan to be made by the Lender to
the Borrowers pursuant to Section 2.3 of this Agreement.
"Tier Three Term Note" means the $2,500,000 promissory note, in
substantially the form of Exhibit E attached to this Agreement,
evidencing the joint and several obligations of the Borrowers to repay
the Tier Three Term Loan, together with interest thereon, and all
extensions, renewals, modifications and amendments of such note.
"Tier Two Term Loan" means the loan to be made by the Lender to
the Borrowers pursuant to Section 2.2 of this Agreement.
"Tier Two Term Note" means the $2,500,000 promissory note, in
substantially the form of Exhibit F attached to this Agreement,
evidencing the joint and several obligations of the Borrowers to repay
the Tier Two Term Loan, together with interest thereon, and all
extensions, renewals, modifications and amendments of such note.
"UCC" means the Uniform Commercial Code as adopted in the State,
and all amendments thereto.
"Unused Fee Percentage" means (a) .25% per annum when Price Level
1 is in effect for the Spread, (b) .30% per annum when Price Level 2 is
in effect for the Spread, and (c) .35% per annum when Price Level 3 is
in effect for the Spread. Adjustments to the Unused Fee Percentage
shall become effective on each date on which Spread adjustments become
effective.
Loans and Letters of Credit.
Revolving Loans and Letters of Credit.
Subject to the terms and conditions of this Agreement, the
Lender agrees to make Revolving Loans to the Borrowers from time to
time until the Termination Date in an aggregate principal amount not to
exceed at any one time outstanding the Maximum Amount. Up to the
Maximum Amount, the Borrowers may borrow, repay without penalty and
reborrow hereunder from the date of this Agreement until the
Termination Date; provided, however, that no Revolving Loan will be
disbursed by the Lender (1) if, after such disbursement the aggregate
principal amount of the Revolving Loans and outstanding Letters of
Credit would exceed the Borrowing Base, or (2) until the Tier Two Term
Loan and the Tier Three Term Loan have been disbursed.
The proceeds of the Revolving Loans shall be used to
refinance Debt outstanding under the Existing Agreement and for short-
term working capital purposes.
The Company authorizes the Lender to make Revolving Loans
from time to time in amounts sufficient to pay checks drawn on the
operating accounts of the Company with the Lender, subject to the
limitation set forth in Section 0(0) above, all as more particularly
described in the Cash Management Agreement. In addition, the Company
may request that a Revolving Loan be made. Any request for a Revolving
Loan must be received by the Lender no later than 12:00 noon
(Washington, D.C. time) on the date on which the Revolving Loan is to
be made. Each request must specify the amount of the Revolving Loan
and, at the option of the Lender, shall be accompanied by a current
Borrowing Base Certificate and a current Aging. The Lender, in its
sole discretion, may accept requests from the Company by telephone. If
required by the Lender, any request made by telephone shall include all
of the information required by a current Borrowing Base Certificate and
a current Aging. Requests made by telephone shall be confirmed in
writing and delivered to the Lender, and if requested by the Lender,
accompanied by the current Borrowing Base Certificate and the current
Aging, within two Business Days after the date of the request. Each
Borrower appoints the Company as its agent to request and receive the
proceeds of the Revolving Loans on behalf of all Borrowers. The
Company agrees to distribute the proceeds of the Revolving Loans among
the Borrowers when and as needed by the Borrowers for working capital.
Revolving Loans may be requested by those individuals designated by the
Company from time to time in written instruments delivered to the
Lender; provided, however, that the Borrowers shall remain liable with
respect to any Revolving Loan disbursed by the Lender in good faith
hereunder, even if such Loan is requested by an individual who has not
been so designated. The proceeds of each Revolving Loan will be
credited to a Deposit Account maintained with the Lender by the Company
pursuant to the Cash Management Agreement. The Company agrees to
confirm in writing from time to time, when and as requested by the
Lender, the purpose for which the proceeds of each Revolving Loan were
used.
The unpaid principal balance of the Revolving Loans shall
bear interest at a rate per annum equal to LIBOR plus the applicable
Spread in effect from time to time, with the Tier Two Revolving
Component Spread being the same as the Spread for the Tier Two Term
Loan. The interest rate on the Revolving Loans shall be determined
initially based on LIBOR in effect on the Closing Date and shall be
adjusted on the first Business Day of each succeeding calendar month
(to be effective as of the first day of such calendar month if not a
Business Day) to reflect LIBOR then in effect, and the applicable
Spread shall be adjusted from time to time as provided in the
definition of such term. Payments of interest on each Revolving Loan
shall be made on each Interest Payment Date, beginning on the Interest
Payment Date next succeeding the date of disbursement of such Revolving
Loan.
The joint and several obligations of the Borrowers to repay
the Revolving Loans, together with interest thereon, shall be evidenced
by the Revolving Note. The unpaid principal balance of the Revolving
Note shall be payable on the Termination Date.
The Lender from time to time may agree, in its sole
discretion, to extend the Termination Date or increase the amount of
Revolving Loans to be provided under this Agreement, or both. During
any such periods of extension, the remaining terms and conditions of
this Agreement shall remain in full force and effect, and the Borrowers
shall execute and deliver any amendments or modifications to the Loan
Documents that the Lender may require in connection with any such
extension or increase. Nothing in this Section 0(0) shall obligate the
Lender to grant such extensions or to increase the amount of credit
provided under this Agreement.
Subject to the terms and conditions of this Agreement, the
Lender, in its sole and absolute discretion, may issue Letters of
Credit for the account of the Borrowers from time to time until the
Termination Date, upon the request of the Company; provided, however,
that no Letter of Credit will be issued by the Lender if, after such
issuance, the aggregate principal amount of the outstanding Revolving
Loans and Letters of Credit would exceed the Borrowing Base. Prior to
the issuance of any Letter of Credit, the Lender must receive an
appropriately completed Letter of Credit Agreement, executed by the
Borrowers, not less than five Business Days prior to the date on which
the Letter of Credit is to be issued. Each such request shall specify
the name of the beneficiary of the Letter of Credit, the amount and
expiration date of the Letter of Credit and the purpose for which the
Letter of Credit is being issued. Unless otherwise approved by the
Lender in its sole discretion, no Letter of Credit shall have a stated
maturity of more than one year after the date of its issuance, and in
no event shall a Letter of Credit expire later than the Termination
Date. The purpose for which each Letter of Credit is to be issued and
the form of each Letter of Credit shall be subject to the Lender's
approval. The Borrowers shall pay to the Lender upon its demand
therefor any amounts paid by the Lender under a Letter of Credit,
together with interest on such amounts from the date of demand at the
applicable per annum rate specified by the Lender in the applicable
Letter of Credit Agreement. The Borrowers shall pay such fees and
commissions as the Lender shall require with respect to any Letter of
Credit.
Tier Two Term Loan.
Subject to the terms and conditions of this Agreement, the
Lender agrees to make the Tier Two Term Loan to the Borrowers in a
principal amount equal to the lesser of $2,500,000 or the Tier Two
Borrowing Base as of the Closing Date. The Borrowers shall not be
allowed to borrow the Tier Two Term Loan unless they first borrow the
Tier Three Term Loan. The proceeds of the Tier Two Term Loan shall be
used to refinance Debt of the Borrowers to the Lender under the
Existing Agreement.
The unpaid principal balance of the Tier Two Term Loan from
time to time outstanding shall bear interest at a per annum rate equal
to LIBOR plus the Spread in effect from time to time. The interest
rate on the Tier Two Term Loan shall be determined initially based on
LIBOR in effect on the Closing Date and shall be adjusted on the first
Business Day of each succeeding calendar month (to become effective as
of the first day of such calendar month if not a Business Day) to
reflect LIBOR then in effect, and the Spread shall be adjusted from
time to time as provided in the definition of such term. Payments of
interest on the Tier Two Term Loan shall be made on each Interest
Payment Date, beginning on the Interest Payment Date next succeeding
the Closing Date.
The joint and several obligations of the Borrowers to repay
the Tier Two Term Loan, together with interest thereon, shall be
evidenced by the Tier Two Term Note. The principal of the Tier Two
Term Loan shall be payable in consecutive quarterly installments, each
in the amount of the Required Quarterly Curtailment, due on the last
day of each March, June, September, and December, beginning on the
first such payment date next succeeding the payment in full of the Tier
Three Term Loan, and continuing until Termination Date, when the unpaid
principal balance of the Tier Two Term Loan and all accrued and unpaid
interest thereon shall be due and payable. The Borrowers shall have
the right to prepay the Tier Two Term Note in whole or in part at any
time after the Tier Three Term Loan has been paid in full. Partial
prepayments of the Tier Two Term Note shall be applied to installments
due thereunder in the inverse order of their maturities. Amounts
prepaid with respect to the Tier Two Term Loan may not be reborrowed.
Tier Three Term Loan.
Subject to the terms and conditions of this Agreement, the
Lender agrees to make the Tier Three Term Loan to the Borrowers in an
amount not to exceed $2,500,000. The proceeds of the Tier Three Term
Loan shall be used to refinance Debt of the Borrowers to the Lender
under the Existing Agreement.
The unpaid principal balance of the Tier Three Term Loan from
time to time outstanding shall bear interest at a per annum rate equal
to LIBOR plus the Spread in effect from time to time. The interest
rate on the Tier Three Term Loan shall be determined initially based on
LIBOR in effect on the Closing Date and shall be adjusted on the first
Business Day of each succeeding calendar month (to become effective as
of the first day of such calendar month if not a Business Day) to
reflect LIBOR then in effect, and the Spread shall be adjusted from
time to time as provided in the definition of such term. Payments of
interest on the Tier Three Term Loan shall be made on each Interest
Payment Date, beginning on the Interest Payment Date next succeeding
the Closing Date.
The joint and several obligations of the Borrowers to repay
the Tier Three Term Loan, together with interest thereon, shall be
evidenced by the Tier Three Term Note. The principal amount of the
Tier Three Term Loan shall be payable in consecutive quarterly
installments, each in the amount of the Required Quarterly Curtailment,
due on the last day of each March, June, September and December,
beginning on September 30, 1998. If not sooner paid, the entire unpaid
principal balance of the Tier Three Term Loan and all accrued and
unpaid interest thereon shall be due and payable in full on the
Termination Date. The Borrowers shall have the right to prepay the
Tier Three Term Note in whole or in part at any time. Partial
prepayments of the Tier Three Term Note shall be applied to
installments due thereunder in the inverse order of their maturities.
Amounts prepaid with respect to the Tier Three Term Loan may not be
reborrowed.
Modifications to Loans.
If the Company achieves a Funded Debt Ratio of 3.5 or less,
and if no Default or Event of Default has occurred and is continuing,
the Lender agrees that upon the written request of the Company, the
Lender will increase the Maximum Amount to $14,500,000, subject to the
execution and delivery by the Borrowers of a Revolving Note in the
amount of $14,500,000 and the amendment described in Section 2.4(e)
below.
If the Tier Two Term Loan and the Tier Three Term Loan are
paid in full, and if no Default or Event of Default has occurred and is
continuing, the Lender agrees that, upon the written request of the
Company, the Lender will (1) increase the Maximum Amount to
$15,000,000, or, if the Maximum Amount has previously been increased to
$14,500,000 pursuant to Section 2.4(a), to $17,500,000, subject to the
execution and delivery by the Borrowers of a Revolving Note in a
principal amount equal to the increased Maximum Amount, and the
amendment described in Section 2.4(e) below, and (2) execute an
amendment to this Agreement pursuant to which (i) the Borrowing Base
will be revised to be equal to the sum of (w) 90% of Eligible Billed
Government Receivables, plus (x) 85% of Eligible Billed Commercial
Receivables, plus (y) 25% of Eligible Inventory, provided that the
revised Borrowing Base attributable to this clause (y) will not exceed
$1,000,000, plus (z) 70% of Eligible Bonded Receivables, provided that
the revised Borrowing Base attributable to this clause (z) will not
exceed $3,000,000, and (ii) all references to the Tier Two Contribution
and the Tier Two Revolving Component will be deleted.
If the Company receives net proceeds of Equity Issuances and
Subordinated Debt issuances after the date of this Agreement and prior
to the December 31, 1998, in an aggregate amount of $4,500,000 or more,
and if no Default or Event of Default has occurred and is continuing,
the Lender agrees that it will, upon the written request of the
Company, execute an amendment to this Agreement lowering each Spread to
.25% per annum below the amounts set forth herein.
If the Lender declines to finance the MPS Contract, the
Lender agrees that it will, upon the Borrower's written request,
execute an amendment to this Agreement pursuant to which up to
$1,000,000 of the Company's capitalized investment in the MPS Joint
Venture will not be deducted as an intangible asset for purposes of
computing Tangible Net Worth.
If the Maximum Amount is increased to $14,500,000 pursuant to
Section 2.4(a), the Borrowers shall execute an amendment to this
Agreement pursuant to which the requirements for the maximum Funded
Debt Ratio set forth in Section 6.11(b) are reduced from 4.5 to 1 to 4
to 1, 4.25 to 1 to 3.75 to 1, and 4 to 1 to 3.5 to 1, respectively. If
the Maximum Amount is increased to $17,500,000 pursuant to Section
2.4(b), the Borrowers shall execute an amendment to this Agreement
pursuant to which the maximum Funded Debt Ratio permitted by Section
6.11(b) shall not exceed 3.5 to 1.
Payments and Computations. All payments due under this
Agreement (including any payment or prepayment of principal, interest,
fees and other charges) or with respect to the Notes, the Letter of
Credit Agreements or the Loans shall be made in lawful money of the
United States of America, in immediately available funds, without
defense, setoff or counterclaim, to the Lender at its office at
Commercial Loan Services, P.O. Box 26202, Richmond, Virginia 23260-
6202, or at such other place as the Lender may designate, and shall be
applied first to accrued fees, next to accrued late charges, next to
accrued interest and then to principal. If any payment of principal,
interest or fees is due on a day other than a Business Day, then the
due date will be extended to the next succeeding full Business Day and
interest and fees will be payable with respect to the extension. If
any payment of principal, interest or fees is not made within ten days
of its due date, the Borrowers agree to pay to the Lender a late charge
equal to 5% of the amount of the payment; provided, however, that as
long as a Borrower makes payments of principal, interest and fees
through the Lender's automatic debit service, no late charge shall be
payable if the Lender fails to debit any such payment when it is due
(if sufficient collected funds are on deposit in such Borrower's
account with the Lender), and such failure shall not constitute an
Event of Default hereunder. Upon the occurrence of an Event of Default
and during the continuation of such Event of Default, interest shall
accrue on the Loans at a per annum rate of 2% above the rate of
interest that otherwise would be applicable. Interest and fees shall
be computed on the basis of a year of 360 days and actual days elapsed.
The Lender may, but shall not be obligated to, debit the amount of any
payment due from the Borrowers under this Agreement to any deposit or
investment account of any Borrower maintained with the Lender or any
Affiliate of the Lender. No setoff, claim, counterclaim, reduction or
diminution of any obligation of any defense of any kind or nature that
a Borrower has or may have against the Lender (other than the defense
of payment) shall be available against the Lender in any suit or action
brought by the Lender to enforce this Agreement or any other Loan
Document. The foregoing shall not be construed as a waiver by the
Borrowers of any rights or claims that the Borrowers may have against
the Lender, but any recovery upon such rights and claims shall be had
from the Lender separately, it being the intent of this Agreement and
the other Loan Documents that the Borrowers shall be obligated to pay,
absolutely and unconditionally, all amounts due hereunder and under the
other Loan Documents.
Increased Costs. If, as a result of any Regulatory Change or
for any other reason, the Lender incurs Increased Costs, the Borrowers
agree to pay such Increased Costs to the Lender within ten Business
Days after receipt by the Company of the Lender's invoice therefor.
The invoice will be accompanied by a written statement of the Lender
setting forth in reasonable detail the basis and the calculation of the
Increased Costs. The Lender's calculation shall include reasonable
averaging and attribution methods to determine the Increased Costs
attributable to the Loans and the Letters of Credit.
Fees.
In consideration of the expenses incurred by the Lender in
connection with administering the Loans and monitoring the Borrowing
Base, the Borrowers agree to pay to the Lender a commitment fee on the
daily average balance of the amount by which the Maximum Amount (as
increased from time to time) exceeds the amount of outstanding
Revolving Loans and Letters of Credit. The commitment fee shall be
payable for the period beginning on the date of this Agreement and
ending on the Termination Date at a per annum rate equal to the Unused
Fee Percentage in effect from time to time. The commitment fee shall
be payable quarterly, in arrears, on the last day of each March, June,
September and December, beginning on September 30, 1998, and on the
Termination Date.
On the Closing Date, the Borrowers shall pay to the Lender a
structuring and underwriting fee equal to $25,000.
Primary Depository Relationship. If the Company fails to
maintain its Primary Operating Account with the Lender, interest shall
accrue on the Loans at a per annum rate of 1.0% above the rate of
interest that otherwise would be applicable, effective as of the first
day following the day on which the Company moves its Primary Operating
Account.
Mandatory Prepayment. The Borrowers shall first prepay the
Revolving Loans and then provide cover for the Letters of Credit, as
specified below, upon the Lender's demand therefor, to the extent that
the aggregate amount of outstanding Revolving Loans and Letters of
Credit exceeds the Borrowing Base at any time. In the event that the
Borrowers shall be required to provide cover for the Letters of Credit,
the Borrowers shall effect the same by paying to the Lender immediately
available funds in an amount equal to the required amount, which funds
shall be retained by the Lender in a cash collateral account until such
time as the Letters of Credit shall have been terminated and all
Obligations with respect to the Letter of Credit are paid in full.
Optional Termination Date. The Borrowers may terminate the
Lender's obligations to make Revolving Loans and issue Letters of
Credit under this Agreement provided that (a) the Company gives the
Lender not less than 30 days' prior written notice of such termination,
specifying the Optional Termination Date, (b) the Borrowers pay in
full, on the Optional Termination Date, all Obligations, and (c) the
Borrowers shall, on the Optional Termination Date, provide cover for
the Letters of Credit pursuant to Section 2.9.
Covenants, Representations and Other Terms Regarding Collateral.
Security Interest. To secure the Obligations, each Borrower
grants to the Lender, its successors and assigns, a first priority
security interest in the Accounts Receivable, the Deposit Accounts, the
Equipment, the General Intangibles, the Intellectual Property, the
Inventory and the Investment Property, all additions and accessions
thereto and replacements thereof, all proceeds and products thereof,
all books of account and records, including all computer software
relating thereto, all policies of insurance on any property of a
Borrower and all proceeds of such policies.
Receivables.
Each Borrower represents and warrants as to each and every
Eligible Receivable now existing that: (1) it is a bona fide existing
obligation, valid and enforceable against the Customer, for software
installed or licensed, goods sold or leased or services rendered in the
ordinary course of business; (2) it is subject to no dispute, defense
or offset in excess of $75,000 except as disclosed in writing to the
Lender; (3) all instruments, chattel paper and other evidence of
indebtedness issued to a Borrower with respect to any Eligible
Receivable have been delivered to the Lender, and, together with all
supporting documents delivered to the Lender, are genuine, complete,
valid and enforceable in accordance with their terms; (4) it is not
subject to any discount, allowance or special terms of payment except
as disclosed in writing to the Lender; and (5) it is not and shall not
be subject to any prohibition or limitation upon assignment. Each
Borrower covenants and agrees that each Eligible Receivable arising
after the date of this Agreement will be in conformance with the
foregoing representations.
Each Borrower shall immediately notify the Lender of (1) any
dispute in excess of $75,000 with a Customer and (2) the bankruptcy,
insolvency, receivership, assignment for the benefit of creditors or
suspension of business of any Customer of which such Borrower has
knowledge. No Borrower shall compromise or discount any Receivable of
more than $10,000 without the prior written consent of the Lender
except for (i) ordinary trade discounts or allowances for prompt
payment, and (ii) prior to the occurrence of a Default or an Event of
Default, such compromises or discounts that, after giving effect
thereto, will not cause the Borrowing Base to be less than the unpaid
principal balance of the Revolving Loans and Letters of Credit then
outstanding.
Upon the written request of the Lender, each Borrower shall
establish and maintain a lockbox with the Lender and shall direct all
Customers to make payments on Receivables to such lockbox by printing
such direction on all invoices given to Customers. Each Borrower also
shall remit to such lockbox or deliver to the Lender all payments on
Receivables received by such Borrower. Such payments shall be remitted
or delivered in their original form on the day of receipt. All notes,
checks and other instruments so received by each Borrower shall be duly
endorsed to the order of the Lender. The payments remitted to the
lockbox and all payments delivered to the Lender shall be credited to a
cash collateral account maintained by the Lender in the name of the
Company over which the Lender shall have the exclusive power of
withdrawal. All funds in the cash collateral account shall be retained
in the cash collateral account and be held as security for the
Obligations, and funds in the cash collateral account may be applied to
the Obligations by the Lender from time to time, whether or not such
Obligations are then due.
Upon the occurrence of a Default or an Event of Default, the
Lender shall have the right to notify account debtors of its security
interest in the Receivables and require payments to be made directly to
the Lender, and to facilitate direct collection of the Receivables, the
Lender shall have the right to take over the post office boxes of the
Borrowers or make other arrangements, with which the Borrowers shall
cooperate, to receive the mail of each Borrower, provided that the
Lender shall not be entitled to receive any mail that does not concern
the Receivables.
The Borrowers shall execute all other agreements, instruments
and documents and shall perform all further acts that the Lender may
require with respect to Receivables owing by the Government to ensure
compliance with the Assignment of Claims Act.
Inventory and Equipment.
All of the Inventory and Equipment will be kept only at the
places of business listed on Schedule 3.3 to this Agreement. The
Borrowers shall give the Lender prior written notice before any
Inventory or Equipment is moved or delivered to a location other than
such designated places of business, and the Lender's lien and security
interest will be maintained despite the location of the Inventory or
Equipment. Without the prior written consent of the Lender, no
Borrower shall move or deliver the Inventory or Equipment with a book
value in any instance or in the aggregate of $100,000 or more to a
location outside of the United States of America.
Each Borrower shall keep and maintain the Equipment in good
operating condition and repair, reasonable wear and tear excepted. No
Borrower shall permit any of the Equipment to become a fixture to any
real estate unless subordination agreements satisfactory to the Lender
are obtained by any owner or mortgagee of such real estate. Each
Borrower, immediately on demand therefore by the Lender, shall deliver
to the Lender any and all evidence of ownership of any of the
Equipment. None of the Equipment shall be sold, transferred, leased or
otherwise disposed of without the prior written consent of the Lender,
except for (1) sales or dispositions of obsolete or unnecessary
Equipment, and (2) sales or dispositions of any item of Equipment that
is replaced contemporaneously with Equipment of comparable value and
utility.
The Lender's security interest shall extend and attach to
Inventory that is presently in existence and is owned by each Borrower
or in which a Borrower purchases or acquires an interest at any time
and from time to time in the future, whether such Inventory is in
transit or in such Borrower's constructive, actual or exclusive
occupancy or possession or not and wherever the same may be located,
including, without limitation, all Inventory that may be located at the
premises of a Borrower or upon the premises of any carriers, forwarding
agents, truckers, warehousemen, vendors, selling agents, finishers,
convertors or other third parties who may have possession of the
Inventory.
Upon the sale, exchange, lease or disposition of the
Inventory, the security interest of the Lender, without break in
continuity and without further formality or act, shall continue in and
attach to all cash and non-cash proceeds of such sale, exchange, lease
or disposition, including Inventory returned or rejected by Customers
or repossessed by either a Borrower or the Lender. As to any such
sale, exchange, lease or disposition, the Lender shall have all of the
rights of an unpaid seller, including stoppage in transit, replevin,
detinue and reclamation.
Except for licenses, sales or leases made in the ordinary
course of business and Liens permitted by this Agreement, no Borrower
shall sell, lease, encumber, license or dispose of, or permit the sale,
lease, encumbrance or disposal of, any Inventory without the prior
written consent of the Lender.
Each Borrower shall have the Equipment and Inventory insured
against loss or damage by fire, theft, burglary, pilferage, loss in
transportation and such other hazards as the Lender shall specify, by
insurers satisfactory to the Lender, in amounts satisfactory to the
Lender and under policies containing loss payable clauses satisfactory
to the Lender. Any such insurance policies, or evidence thereof
satisfactory to the Lender, shall be deposited with the Lender. Each
Borrower agrees that the Lender shall have a security interest in such
policies and the proceeds thereof, and, if any loss should occur, the
proceeds may be applied to the payment of the Obligations or to the
replacement or restoration of the Inventory or Equipment damaged or
destroyed, as the Lender may elect or direct. After the occurrence of
a Default or an Event of Default, the Lender shall have the right to
file claims under any insurance policies, to receive, receipt and given
acquittance for any payments that may be made thereunder, and to
execute any and all endorsements, receipts, releases, assignments,
reassignments or other documents that may be necessary to effect to the
collection, compromise, or settlement of any claims under any of the
insurance policies.
Intellectual Property.
All of each Borrower's present and future Intellectual
Property that is subject to United States copyright, patent or
trademark protection, the sale, licensing or other disposition of which
results in the creation of Receivables pursuant to a Material IP
Agreement, shall be registered with the United States Copyright Office
or the United States Patent and Trademark Office, as applicable, prior
to the date such Borrower includes any such Receivables in the
Borrowing Base.
Upon the occurrence of an Event of Default, in addition to
any other remedies available to the Lender, each Borrower agrees that
the Lender shall have a non-exclusive, royalty-free license to use, or
to grant a license to use, the Intellectual Property.
Defense of Collateral. Each Borrower, at its expense, will
defend the Collateral against any claims or demands adverse to the
Lender's security interest and will promptly pay when due all taxes or
assessments levied against such Borrower on the Collateral.
Information Regarding Collateral. Each Borrower shall provide
the Lender such information as the Lender from time to time reasonably
may request with respect to the Collateral, including, without
limitation, statements describing, designating, identifying and
evaluating all Collateral.
Perfection of Security Interest. Each Borrower shall perform
any and all steps in all relevant or appropriate jurisdictions as may
be necessary or reasonably requested by the Lender to perfect, maintain
and protect the Lender's security interest in the Collateral. All
instruments and chattel paper that are part of the Collateral shall be
delivered to the Lender, duly endorsed to the order of the Lender.
Each Borrower shall pay the taxes and costs of, or incidental to, any
recording or filing of any financing statements concerning the Lender's
security interests. Each Borrower agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement.
Power of Attorney. Each Borrower appoints the Lender and any
officer, employee or agent of the Lender, as the Lender from time to
time may designate, as attorneys-in-fact for a Borrower to perform all
actions necessary or desirable in the discretion of the Lender to
effect the provisions of this Agreement and to carry out the intent of
this Agreement, to do any act that a Borrower is required to do
pursuant to the terms of this Agreement and to exercise such rights and
powers as each Borrower might exercise with respect to the Collateral,
all at the cost and expense of the Borrowers. Each Borrower agrees
that neither the Lender nor any other such attorney-in-fact will be
liable for any acts of omission or commission, unless such acts were
willful and malicious or grossly negligent, nor for any error of
judgment or mistake of law or fact. This power is coupled with an
interest and is irrevocable so long as any Obligations are outstanding.
The Lender agrees that it shall not be entitled to exercise its rights
under this Section 3.8 prior to the occurrence of a Default or an Event
of Default.
Limitations on Obligations. It is expressly agreed by each
Borrower that, notwithstanding any other provision of this Agreement,
each Borrower shall remain liable under each Receivable and contract
giving rise to each Receivable to observe and perform all the
conditions and obligations to be observed and performed by each
Borrower in accordance with and pursuant to the terms and provisions of
each such Receivable and contract. The Lender shall not have any
obligation or liability under any Receivable or contract by reason of
or arising out of this Agreement or the assignment of such Receivable
or contract to the Lender or the receipt by the Lender of any payment
relating to the Receivable pursuant to this Agreement, nor shall the
Lender be required or obligated in any manner to perform or fulfill any
of the obligations of a Borrower under or pursuant to any Receivable or
contract, or to make any payment, or to make any inquiry as to the
nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any Receivable, or to
present or file any claim, or to take any action to collect or enforce
any performance or the payment of any amounts that may have been
assigned to it or to which it may be entitled at any time or times.
Indemnification. In any suit, proceeding or action brought by
or against the Lender relating to the Collateral, the Borrowers will
save, indemnify and keep the Lender harmless from and against all
expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of any
obligor thereunder, arising out of a breach by a Borrower of any
obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such
obligor or its successors from a Borrower, and all such obligations of
the Borrowers shall be and remain enforceable against and only against
the Borrowers and shall not be enforceable against the Lender. The
foregoing obligation of the Borrowers to indemnify the Lender shall not
extend to any suit, proceeding or action arising out of the Lender's
gross negligence or willful or malicious misconduct.
Representations and Warranties. Each Borrower represents and
warrants that:
Incorporation, Good Standing and Due Qualification. Each
Borrower (a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation
or formation; (b) has the power and authority to own its assets and to
transact the business in which it is now engaged or in which it is
proposed to be engaged; and (c) is duly qualified as a foreign
corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required. As of the date
of this Agreement, the Company has no Subsidiaries other than
Engineering, Technical, Realty and Technology, and no other Borrower
has any Subsidiary.
Power and Authority. The execution, delivery and performance by
the Borrowers of the Loan Documents have been duly authorized by all
necessary corporate actions and do not and will not (a) require any
consent or approval of, or filing or registration with, any
governmental agency or authority or the stockholders of a Borrower;
(b) contravene a Borrower's articles of incorporation or bylaws;
(c) result in a breach of or constitute a default under any agreement
or instrument to which a Borrower is a party or by which it or its
properties may be bound or affected; (d) result in or require the
creation or imposition of any Lien upon or with respect to any of the
properties now owned or hereafter acquired by a Borrower; or (e) cause
a Borrower to be in default under any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable
to the Borrower.
Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be,
legal, valid and binding obligations of each Borrower, enforceable
against each Borrower in accordance with their respective terms.
Financial Statements. The financial statements of the Borrowers
that have been furnished to the Lender in connection with this
Agreement are complete and correct and fairly present the financial
condition of the Borrowers as of the dates of such statements. Since
the dates of such statements, there has been no Material Adverse Change
in the condition (financial or otherwise), business or operations of
the Borrowers.
Litigation. There is no pending or threatened action,
investigation or proceeding against or affecting a Borrower before any
court, governmental agency or arbitrator, that, in any one case or in
the aggregate, if adversely determined, would have a Material Adverse
Effect on the financial condition, operations, properties or business
of a Borrower.
Ownership and Liens. Each Borrower has title to all of its
assets, including the Collateral, and none of the Collateral or such
assets is subject to any Lien, except Liens permitted by this
Agreement.
ERISA. No Borrower has incurred any material "accumulated
funding deficiency" within the meaning of 302 of ERISA or 412 of
the Code, nor has the Borrower incurred any material liability to the
PBGC in connection with any "employee pension benefit plan" (as defined
in 3(2) of ERISA) established or maintained by a Borrower. None of
the employee pension benefit plans (as defined above) of a Borrower,
nor any trusts created thereunder, nor any trustee or administrator
thereof, has engaged in a "prohibited transaction," as such term is
defined in 406 of ERISA or 4975 of the Code, that could subject
such plans or any of them, any such trust, or any trustee or
administrator thereof, or any party dealing with such plans or any such
trust to any material liability or tax or penalty on prohibited
transactions imposed by such 406 or 4975. Neither the Borrowers nor
any Affiliate of the Borrowers are now, or at any time in the past have
been, obligated to make contributions to a "multiemployer plan," as
such term is defined in 4001(a)(3) of ERISA.
Taxes. Each Borrower has filed all tax returns (federal, state
and local) required to be filed and has paid all taxes, assessments and
governmental charges and levies thereon to be due, including interest
and penalties.
Debt. No Borrower is in no manner directly or contingently
obligated with respect to any Debt that is not permitted by this
Agreement. No Borrower is in default with respect to any Debt.
Corporate Name; Chief Executive Office. During the five years
immediately preceding the date of this Agreement, no Borrower nor any
predecessor of a Borrower has used any name other than its current
corporate name and the names listed on Schedule 4.10. The chief
executive office of each Borrower, within the meaning of Section
9.103(3)(d) of the UCC, is at 5250 Cherokee Avenue, Alexandria,
Virginia.
Debarment and Suspension. No event has occurred and no
condition exists that may result in the debarment or suspension of a
Borrower from any contracting with the Government, and no Borrower nor
any Affiliate of a Borrower has been subject to any such debarment or
suspension prior to the date of this Agreement.
Year 2000. Each Borrower has undertaken reasonable efforts to
determine whether all material Date Affected Information Technology
used in the business operations of each Borrower is Fully Date Capable,
and, to the extent necessary, each Borrower has initiated efforts to
make its material Date Affected Information Technology Fully Date
Capable prior to the date that the failure to be Fully Date Capable
would adversely affect the operation thereof.
Material Contracts. Attached hereto as Schedule 4.13 is a
correct and complete list, as of the date of this Agreement, of each
Material Contract. No Borrower, Subsidiary or any other party thereto
is in material default under any Material Contract.
Intellectual Property. As of the date hereof, the Borrowers and
the Subsidiaries do not own or hold any Intellectual Property subject
or entitled to United States copyright, patent or trademark protection,
other than as listed on Schedule 4.14 attached hereto. All such
Intellectual Property has been registered with the United States Patent
and Trademark Office and the Register of Copyrights. Each Borrower and
each Subsidiary owns or has the right to use under valid license
agreements or otherwise all Intellectual Property that is required or
necessary for the conduct of the business of each Borrower and its
Subsidiaries as now conducted or proposed to be conducted without any
conflict with any rights of any other Person.
True and Complete Information. All factual and financial
information (taken as a whole) previously furnished to the Lender in
connection with this Agreement by the Borrowers and each Subsidiary is,
and all factual and financial information (taken as a whole) furnished
to the Lender by the Borrowers and the Subsidiaries after the date of
this Agreement will be, true and accurate in all material respects on
the date on which such information is dated, certified or furnished,
and is not, and will not be, incomplete by omitting to state any fact
necessary to make such information (taken as a whole) not misleading at
such time in light of the circumstances under which such information
was provided.
Integrated Business. The Borrowers and the Subsidiaries will be
engaged as an integrated group in providing services and goods to their
respective Customers. The integrated operation will require financing
on such a basis that credit supplied to the Borrowers be made available
from time to time to all Borrowers and Subsidiaries of the Borrowers,
as required for the successful operation of the Borrowers and the
Subsidiaries separately, and the integrated operation as a whole. In
that connection, the Borrowers and the Subsidiaries will request that
the Lender provide the Loans to and issue the Letters of Credit for the
Borrowers to finance such operation. Each Borrower will derive
benefit, directly and indirectly, from the credit so extended to the
Borrowers, both in its separate capacity and as a member of the
integrated group.
Employee Relations. Except as set forth on Schedule 4.17, no
Borrower is a party to any collective bargaining agreement nor has any
labor union been recognized as the representative of its employees. No
Borrower knows of any pending, threatened or contemplated strikes, work
stoppage or other collective labor disputes involving its employees.
Burdensome Provisions. No Borrower is a party to any indenture,
agreement, lease or other instrument, or subject to any corporate or
partnership restriction, governmental approval or applicable law which
is so unusual or burdensome as in the foreseeable future could be
reasonably expected to have a Material Adverse Effect. The Borrowers
do not presently anticipate that future expenditures needed to meet the
provisions of any statutes, orders, rules or regulations of a
governmental authority will be so burdensome as to have a Material
Adverse Effect.
Absence of Defaults. No event has occurred and is continuing
which constitutes a Default or an Event of Default. No event has
occurred and is continuing which constitutes, or which with the passage
of time or giving of notice or both would constitute, a default or
event of default by any Borrower under any Material Contract or
judgment, decree or order to which any Borrower is a party or by which
any Borrower or any of its properties may be bound or which would
require any Borrower to make any payment thereunder prior to the
scheduled maturity date therefor.
Survival of Representations and Warranties, Etc. All
statements contained in any certificate, financial statement or other
instrument delivered by or on behalf of any Borrower to the Lender
pursuant to or in connection with this Agreement or any of the other
Loan Documents (including, but not limited to, any such statement made
in or in connection with any amendment thereto or any statement
contained in any certificate, financial statement or other instrument
delivered by or on behalf of any Borrower prior to the date hereof and
delivered to the Lender in connection with closing the transactions
contemplated hereby) shall constitute representations and warranties
made by the Borrowers under this Agreement. All representations and
warranties made under this Agreement and the other Loan Documents shall
be deemed to be made at and as of the date hereof, the Closing Date and
at and as of the date of the disbursement of any Loan or issuance of
any Letter of Credit, except to the extent that such representations
and warranties expressly relate solely to an earlier date (in which
case such representations and warranties shall have been true and
accurate on and as of such earlier date). All such representations and
warranties shall survive the effectiveness of this Agreement, the
execution and delivery of the Loan Documents, the making of the Loans
and the issuance of the Letters of Credit.
Affirmative Covenants. Each Borrower covenants and agrees that:
Maintenance of Existence. Each Borrower will preserve and
maintain its corporate existence and good standing in the jurisdiction
of its formation, and qualify and remain qualified, as a foreign
corporation in each jurisdiction in which such qualification is
required.
Maintenance of Records. Each Borrower will keep adequate
records and books of account, in which complete entries will be made in
accordance with GAAP, reflecting all financial transactions of such
Borrower. The principal records and books of account, including those
concerning the Collateral, shall be kept at the chief executive office
of the Borrowers described above. No Borrower will move such records
and books of account or change its chief executive office or the name
under which it does business without (a) giving the Lender at least 30
days' prior written notice, and (b) executing and delivering financing
statements satisfactory to the Lender prior to such move or change.
Maintenance of Properties. Each Borrower will maintain, keep
and preserve all of its properties (tangible and intangible) necessary
or useful in the proper conduct of its business in good working order
and condition, ordinary wear and tear excepted.
Conduct of Business. Each Borrower will continue to engage in a
business of the same general type as conducted by it on the date of
this Agreement.
Maintenance of Insurance. Each Borrower will maintain insurance
with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually
carried by companies engaged in the same or a similar business and
similarly situated, including, without limitation, insurance covering
the Inventory and Equipment as required hereby.
Compliance with Laws. Each Borrower will comply in all respects
with all applicable laws, rules, regulations and orders (including,
without limitation, ERISA), such compliance to include, without
limitation, paying, before the same become delinquent, all taxes,
assessments and governmental charges imposed upon it or upon its
property.
Right of Inspection. At any reasonable time and from time to
time, with reasonable notice, each Borrower will permit the Lender or
any agent or representative of the Lender to audit, examine and verify
the Collateral, examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, each
Borrower, and to discuss the affairs, finances and accounts of each
Borrower with any of its officers and directors and each Borrower's
independent accountants. The Borrowers agree to reimburse the Lender
for all reasonable audit and Collateral verification and examination
expenses incurred by it.
Reporting Requirements. The Borrowers will furnish to the
Lender:
Monthly Financial Statements of the Company. As soon as
available and in any event within 30 days after the end of each
calendar month, financial statements of the Company and its
Subsidiaries as of the end of such month in substantially the same
format as Schedule 5.8(a) attached hereto, and prepared in accordance
with the GAAP. Such financial statements shall be certified to be
accurate by a Principal Officer of the Company (subject to year-end
adjustments) and shall be accompanied by a Covenant Compliance
Certificate for such period;
Annual Financial Statements of the Company. As soon as
available and, in any event, within 120 days after the end of each
fiscal year of the Company, audited financial statements consisting of
the consolidated and consolidating balance sheets of the Company and
its Subsidiaries as of the end of such fiscal year, and consolidated
and consolidating statements of income, stockholders' equity and cash
flows of the Company and its Subsidiaries for such fiscal year, all in
reasonable detail and all prepared in accordance with GAAP, accompanied
by an opinion thereon acceptable to the Lender of Ernst & Young or any
other independent certified public accounting firm selected by the
Company and acceptable to the Lender;
Management Letters. Promptly upon receipt thereof, copies of
any reports submitted to the Company by independent certified public
accountants in connection with examination of the financial statements
of the Company made by such accountants;
Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits, investigations and proceedings
before any court or governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, affecting a Borrower,
that, if determined adversely to such Borrower, could have a Material
Adverse Effect;
Notice of Defaults and Events of Default. As soon as
possible and, in any event, within ten days after the occurrence of
each Default and Event of Default, a written notice setting forth the
details of such Default or Event of Default and the action that is
proposed to be taken by the Borrowers with respect thereto;
SEC Reports; Proxy Statements, etc. Promptly after the
sending or filing thereof, copies of all proxy statements, financial
statements and reports that the Company files with the Securities and
Exchange Commission or sends to its stockholders;
Borrowing Base Certificate and Receivables Detail. As soon
as available and, in any event, within 20 days after the end of each
calendar month, (1) a Borrowing Base Certificate appropriately
completed and executed by a Principal Officer of the Company and
including a computation of the Borrowing Base as of the last day of
such calendar month, accompanied by (i) an Aging as of the last day of
the previous calendar month, (ii) such other supporting documents as
the Lender from time to time reasonably may request, and (iii) such
invoices, instruments, chattel paper and other evidence of indebtedness
representing any Receivables, duly endorsed to the Lender, as the
Lender may request; (2) an unbilled Receivables report in form and
detail acceptable to the Lender, and (3) a contract backlog report
reflecting all contracts of the Borrowers, the work completed and
billed under such contracts, the work remaining to be completed and
billed and the type and term of each contract. A copy of each item
described in this Section 0(0) shall be delivered within the deadline
specified to the Lender's Government Contracts Administration Division
at 8245 Boone Boulevard, 3rd Floor, Vienna, Virginia 22182-3871,
Attention: Betty Lillard;
Inventory Report. Within 20 days after the end of each
calendar month, a report, in form and detail acceptable to the Lender,
listing all Inventory of the Borrowers on hand as of the last day of
such calendar month;
Customer List. If required by the Lender, within 90 days
after the end of each fiscal quarter of the Company, a current Customer
List;
Management Changes. At least 30 days prior written notice of
any new appointments to the offices of the president, chairman or chief
financial officer of any Borrower;
Projections. At least 30 days prior to the end of each
fiscal year, consolidated and consolidating balance sheets, income
statements and cash flows of the Borrowers setting forth projections
for each fiscal quarter of the next succeeding fiscal year, and setting
forth in reasonable detail the assumptions underlying such projections;
Notice of Material Adverse Effect. Prompt notice of any
change in the business, assets, liabilities, financial condition,
results of operations or business prospects of the Company or any
Subsidiary which has had or may have a Material Adverse Effect;
Government Contract Audits. Promptly after a Borrower's
receipt thereof, notice of any final decision of a contracting officer
disallowing costs aggregating more than $100,000;
Material Contracts. Promptly after entering into any
Material Contract or amendment thereof (other than contracts awarded to
a Borrower in the ordinary course of business and amendments thereof),
a notice containing a description of such Material Contract or
amendment (with copies thereof if requested by the Lender), and prompt
written notice of the termination or breach by any Person of a Material
Contract; and
General Information. Such other information respecting the
condition or operations, financial or otherwise, of the Borrowers as
the Lender from time to time reasonably may request.
Year 2000 Compliance. The Borrowers shall initiate and maintain
a program to identify any Date Affected Information Technology used in
the business operations of the Borrowers that is not Fully Date
Capable, and, in connection therewith, undertake in good faith to make
all material Date Affected Information Technology used in such business
operations Fully Date Capable prior to the date that the failure to be
Fully Date Capable would adversely affect the operation thereof. The
Borrowers shall advise the Lender in the event that any Borrower has
reason to believe that any material Date Affected Information
Technology will not be Fully Date Capable prior to the date that the
failure to be Fully Date Capable would adversely affect the operation
thereof, and advise the Lender in the event that any Borrower has
reason to believe that it will be adversely affected by the failure of
any affiliated or nonaffiliated entity to have its Date Affected
Information Technology Fully Date Capable. Each Borrower agrees to
provide the Lender, upon request, access to and copies of information
necessary to permit the Lender to determine whether such Borrower's
Date Affected Information Technology is, or will be, Fully Date
Capable, including, without limitation, (i) minutes, resolutions and
reports to and from such Borrower's Board of Directors or committee
thereof, (ii) internally generated reports, consultant reports or
auditor's report regarding the status of such Borrower's Date Affected
Information Technology, (iii) all documents relating to a "Year 2000"
program, and (iv) officer certificates or other statements requested by
the Lender regarding the status of Date Affected Information
Technology. The Borrowers acknowledge that the Lender's right to
receive, or the Lender's receipt of, the foregoing information does not
impose any obligation on the Lender to assess the accuracy or effect of
such information, or to recommend or require remedial action of any
kind. The Borrowers hereby acknowledge that the actual or potential
failure or degradation of any material Date Affected Information
Technology due to its failure to be Fully Date Capable may constitute a
Material Adverse Effect.
Negative Covenants. The Borrowers agree that, without first
obtaining the prior written consent of the Lender:
Liens. The Borrowers will not create, incur, assume or permit
to exist, any Lien upon or with respect to any of their properties, now
owned or hereafter acquired, except: (a) Liens in favor of the Lender;
(b) Liens that are incidental to the conduct of the business of a
Borrower, are not incurred in connection with the obtaining of credit
and do not materially impair the value or use of assets of such
Borrower; (c) purchase-money Liens, whether now existing or hereafter
arising (including those arising out of a Capital Lease) on any fixed
assets provided that (1) any property subject to a purchase-money Lien
is acquired by a Borrower in the ordinary course of its respective
business and the Lien on any such property is created contemporaneously
with such acquisition, (2) each such Lien shall attach only to the
property so acquired, (3) the Debt secured by all such Liens shall not
exceed the aggregate at any time outstanding $600,000 in the aggregate
for all of the Borrowers; and (d) the Lien on the Technology Inventory
in favor of IBM Credit Corporation.
Debt. The Borrowers will not create, incur, assume or permit to
exist, any Debt, except: (a) the Obligations; (b) Subordinated Debt;
(c) ordinary trade accounts payable; (d) Debt of a Borrower (including
Debt arising out of a Capital Lease) or any Subsidiary secured by
purchase-money Liens permitted by this Agreement; (e) Debt of
Technology to IBM Credit Corporation arising out of the Inventory floor
plan financing provided by IBM Credit Corporation to Technology; and
(f) Debt of the Company incurred to finance the MPS Contract if the
Lender does not provide financing for the MPS Contract, provided that
any such Debt for which a Borrower is liable shall be included as
Funded Debt.
Mergers, etc. No Borrower will merge or consolidate with any
Person, or permit any Subsidiary to do so, except that one Borrower may
merge into or transfer assets to any other Borrower.
Sale and Leaseback; Synthetic Leases. No Borrower will (a)
sell, transfer or otherwise dispose of, any real or personal property
to any Person and thereafter, directly or indirectly, lease back the
same or similar property; or (b) create, incur, assume, or permit to
exist any obligations under a Synthetic Lease.
Dividends; Distributions; Subordinated Debt Payments. The
Company will not declare or pay any dividends or distributions; or make
any payments with respect to Subordinated Debt; or purchase, redeem,
retire, prepay or otherwise acquire for value any of its capital stock
or Subordinated Debt now or hereafter outstanding; or make any
distribution of assets to its stockholders as such whether in cash,
assets or obligations of the Company; or allocate or otherwise set
apart any sum for the payment of any dividend or distribution on, or
for the purchase, redemption or retirement of, any shares of its
capital stock; or make any other distribution by reduction of capital
or otherwise in respect of any shares of its capital stock; except
that, subject to the compliance by the Company with the provisions of
Section 6.11 below, (a) the Company may declare and deliver dividends
and make distributions payable solely in common stock of the Company,
and (b) provided that after giving effect thereto, no Default or Event
of Default has occurred or shall occur, the Company may pay dividends
out of retained earnings to its shareholders and make regularly
scheduled payments of interest due with respect to Subordinated Debt.
Sale of Assets. No Borrower will sell, lease, assign, transfer,
license or otherwise dispose of, any of its now owned or hereafter
acquired assets, except for (a) Inventory and Intellectual Property
sold, licensed or leased in the ordinary course of business, and
(b) the sale or other disposition of assets other than Inventory and
$100,000 in the aggregate for all Borrowers during any fiscal year.
Loans. No Borrower will make any loan or advance to any Person
except for (a) travel advances or other advances in an aggregate amount
not to exceed $100,000 at any one time outstanding, which are made to
any employee of any Borrower in the ordinary course of such Borrower's
business and in furtherance of such employee's performance under a
contract with a Customer and (b) loans made to a Borrower by any other
Borrower, and (c) loans to officers and employees of the Borrowers not
to exceed $100,000 in the aggregate outstanding at any time for all
Borrowers, provided that, after giving effect thereto, no Default or
Event of Default shall occur.
Guaranties, etc. No Borrower will assume, guarantee, endorse or
otherwise be or become directly or contingently responsible or liable
(including, but not limited to, any liability arising out of any
agreement to purchase any obligation, stock, assets, goods or services,
or to supply or advance any funds, assets, goods or services, or to
maintain or cause such Person to maintain a minimum working capital or
net worth or otherwise to assure the creditors of any Person against
loss) for obligations of any Person, or permit any such guaranties or
liabilities to exist, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business.
Acquisitions. No Borrower will form a Subsidiary, become a
partner or joint venturer with any person, or purchase or acquire all
or substantially all of the assets of any Person, or any capital stock
of or ownership interest in any other Person, other than the Company's
investment in the MPS Joint Venture. If the Lender consents to the
acquisition or formation of a Subsidiary by a Borrower, such Borrower
will cause such Subsidiary to (a) execute and deliver to the Lender an
Assumption Agreement, and (b) satisfy all of the conditions set forth
in Section 7.3. The Lender agrees that it will not withhold its consent
to a Borrower entering into a joint venture or teaming agreement with
another Person in the ordinary course of business, provided that such
Borrower does not assume any obligations of any other Person in
connection therewith.
Transactions with Affiliates. No Borrower will enter into any
transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any
Affiliate, except in the ordinary course of and pursuant to the
reasonable requirements of such Borrower's business and upon fair and
reasonable terms no less favorable to such Borrower than would be
applicable in a comparable arm's-length transaction with a Person not
an Affiliate.
Financial Covenants. The Company will not:
Tangible Capital Funds. Permit Tangible Capital Funds to be
less than the Minimum Compliance Level as of the end of any fiscal
quarter, beginning with the fiscal quarter ended on June 30, 1998;
Funded Debt Ratio. Permit the Funded Debt Ratio as of the
end of any fiscal quarter to be greater than (1) 4.5 to 1 through and
including December 31, 1998; (2) 4.25 to 1 as of March 31, 1999 through
and including June 30, 1999; and (3) 4 to 1 as of September 30, 1999,
and at all times thereafter;
Capital Expenditures. Incur Capital Expenditures of greater
than $600,000 during any 12-month period; or
Debt Coverage Ratio. Permit the Debt Coverage Ratio to be
less than (1) 1.15 to 1 as of June 30, 1998; (2) 1.25 to 1 as of
September 30, 1998; (3) 1.30 to 1 as of December 31, 1998; and (4) 1.35
to 1 as of March 31, 1999, and as of the end of each fiscal quarter
thereafter.
Conditions of Lending. The making of the Loans shall be subject
to the following conditions:
Conditions Precedent to Closing. The initial disbursement of
the Loans shall be subject to the following conditions precedent,
provided, however, that if the Lender elects to make such initial
disbursement prior to all of such conditions precedent being satisfied,
the Borrowers agree that they shall cause all such conditions to be
satisfied within 30 days after such disbursement:
The Loan Documents shall have been appropriately completed,
duly executed by the parties thereto, recorded where necessary and
delivered to the Lender.
No Default or Event of Default shall have occurred and be
continuing.
All representations and warranties contained herein shall be
true and correct at the Closing Date.
All legal matters incident to the Loans shall be satisfactory
to counsel for the Lender, and the Borrowers agree to execute and
deliver to the Lender such additional documents and certificates
relating to the Loans as the Lender reasonably may request.
Financing statements in form and substance satisfactory to
the Lender shall have been properly filed in each office where
necessary to perfect the Lender's security interest in the Collateral,
termination statements shall have been filed with respect to any other
financing statements covering all or any portion of the Collateral and
all taxes and fees with respect to such recording and filing shall have
been paid by the Borrowers.
All Intellectual Property subject or entitled to United
States copyright, patent or trademark protection, and such documents as
are necessary to perfect the Lender's security interest therein, shall
have been duly registered with the United States Patent and Trademarks
Office or the Register of Copyrights, as applicable, and the Lender
shall have received a search report confirming that no Liens are
recorded with respect thereto.
The Borrowers shall have delivered to the Lender
(1) certified copies of evidence of all corporate actions taken by the
Borrowers to authorize the execution and delivery of the Loan
Documents, (2) certified copies of the article of incorporation, and
bylaws of the Borrowers, (3) a certificate of incumbency for the
officers of the Borrowers executing the Loan Documents, (4) a good
standing certificate, dated not more than 30 days prior to the Closing
Date, from the appropriate state official of any state in which the
Borrowers are incorporated or qualified to do business, and (5) such
additional supporting documents as the Lender or counsel for the Lender
reasonably may request.
The Lender shall have received (1) a Borrowing Base
Certificate, (2) an Aging, and (3) a report setting forth the status of
all contracts relating to Eligible Receivables from the most recent
fiscal month and shall be in form and substance satisfactory to the
Lender.
The Lender shall have received a field examination report of
the Collateral in form and substance acceptable to it.
The Lender shall have received the written opinion of counsel
to the Company, in form and substance satisfactory to the Lender.
The Lender shall have received financing statement, judgment
and tax lien searches reflecting that there are no Liens outstanding
against the Collateral other than those permitted by the Agreement.
The Lender shall have received evidence that the Borrowers
have obtained the insurance required by this Agreement.
The Lender shall have received such landlord and mortgage
waivers as it shall require.
Conditions Precedent to Subsequent Disbursements. The
disbursement and issuance of subsequent Loans and Letters of Credit
shall be subject to the following conditions precedent:
No Default or Event of Default shall have occurred and be
continuing.
No Material Adverse Effect shall have occurred in the
financial condition of any Borrower.
All representations and warranties of the Borrowers contained
in the Loan Documents shall be true and correct at the date of such
disbursement.
No change shall have occurred in any law or regulations
thereunder or interpretations thereof that, in the opinion of counsel
for the Lender, would make it illegal for the Lender to make Loans
hereunder.
If required by the Lender, the Company shall have delivered
to the Lender a current Borrowing Base Certificate and a current Aging,
duly executed by the president or treasurer of the Company and
appropriately completed, and such other supporting data and
documentation relating to the Collateral as may be required by the
Lender in its reasonable discretion.
Conditions Precedent to Subsidiaries Becoming Borrowers. Any
Subsidiary of the Company shall become a Borrower under this Agreement,
subject to the satisfaction of the following conditions precedent:
The Subsidiary shall execute and deliver to the Lender an
Assumption Agreement.
No Default or Event of Default shall have occurred and be
continuing.
All legal matters incident to such Subsidiary becoming a
Borrower shall be satisfactory to counsel for the Lender, and the
Subsidiary shall execute and deliver to the Lender such additional
documents and certificates relating to the Loans as the Lender may
reasonably request.
The Lender shall have received an opinion of counsel to the
Subsidiary, addressed to the Lender, covering such matters as the
Lender may request, in form and substance satisfactory to the Lender.
Financing statements in form and substance satisfactory to
the Lender shall have been properly filed in each office where
necessary to perfect the security interest of the Lender in the
Collateral of the Subsidiary, termination statements shall have been
filed with respect to any other financing statements covering all or
any portion of such Collateral (except with respect to Liens or
security interests permitted by this Agreement), all taxes and fees
with respect to such recording and filing shall have been paid by such
Subsidiary and the Lender shall have received such lien searches or
reports as it shall require confirming that the foregoing filings and
recordings have been completed.
The Subsidiary shall have delivered the following documents
to the Lender, each of which shall be certified as of the date on which
it is to become a Borrower, by its secretary or representative
performing similar functions: (1) copies of evidence of all actions
taken by the Subsidiary to authorize the execution and delivery of the
Assumption Agreement and the other Loan Documents; (2) copies of the
articles or certificate of incorporation and bylaws (or comparable
organizational documents) of the Subsidiary; and (3) a certificate as
to the incumbency and signatures of the officers executing the Loan
Documents.
The Lender shall have received a certificate of good standing
and qualification (or similar instrument) issued by the appropriate
state official of the state of incorporation of the Subsidiary, dated
within 30 days of the date of the applicable Loan Documents.
The Lender shall have received a listing and aging of
Accounts Receivable, a Borrowing Base Certificate, an Inventory
schedule, a report setting forth the status of all contracts relating
to its Eligible Receivables and such other financial information of
such Subsidiary as may be requested by the Lender from time to time,
all of which shall be of a current date and shall be in form and
substance satisfactory to the Lender.
If required by the Lender, the Lender shall have received a
satisfactory field examination of the Collateral and internal control
systems of the Subsidiary performed by a consultant selected by the
Lender, and the Borrowers shall have reimbursed the Lender for the cost
of such consultant.
If required by the Lender, it shall have received a landlord
waiver from each landlord of the Subsidiary, which shall be in form and
substance acceptable to the Lender.
All Intellectual Property of such Subsidiary that is subject
to a Material IP Agreement shall have been duly registered with the
Register of Copyrights or the United States Patent and Trademark
Office, as applicable, all documents necessary to perfect the Lender's
security interest therein shall have been recorded in such office, and
the Lender shall have received evidence that it has a first priority
perfected Lien with respect thereto.
The Borrowers agree no Receivable of a Subsidiary shall be
included in the Borrowing Base prior to the date on which all of the
foregoing conditions are satisfied.
Default.
Events of Default. Each of the following shall constitute an
Event of Default under this Agreement:
Failure of a Borrower to pay any Obligation to the Lender,
including, without limitation, the principal of or interest on any
Notes or the Loans, or amounts due under a Letter of Credit Agreement,
when the same shall become due and payable, whether at maturity, or
otherwise, and such failure shall continue for a period of ten days; or
If a Borrower refuses to permit the Lender to inspect,
examine, verify or audit the Collateral in accordance with the
provisions of this Agreement; or
Failure of a Borrower to perform or observe any covenant
contained in Section 6 of this Agreement; or
Failure of the Borrowers to perform their obligations under
Section 5.8(g) and such failure shall continue for a period of five
days; or
Failure of a Borrower to perform or observe any other term,
condition, covenant, warranty, agreement or other provision contained
in this Agreement (except any such failure resulting in the occurrence
of another Event of Default described in this Section), within 30 days
after the earlier of actual knowledge thereof by such Borrower or
written notice from the Lender to the Company specifying such failure;
or
If any representation or warranty made or deemed made by a
Borrower in this Agreement, any Loan Document or any statement or
representation made in any certificate, report or opinion delivered
pursuant to this Agreement (including any Covenant Compliance
Certificate, Borrowing Base Certificate or financial statements) or in
connection with any borrowing under this Agreement was materially
untrue or is breached in any material respect; or
If, as a result of default, any other obligation of a
Borrower for the payment of any Debt becomes or is declared to be due
and payable prior to the expressed maturity thereof, unless and to the
extent that the declaration is being contested in good faith in a court
of appropriate jurisdiction; or
A Borrower makes an assignment for the benefit of creditors,
files a petition in bankruptcy, petitions or applies to any tribunal
for any receiver or any trustee of such Borrower or any substantial
part of its property, or commences any proceeding relating to such
Borrower under any reorganization, arrangement, readjustments of debt,
dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect; or
If, within 60 days after the filing of a bankruptcy petition
or the commencement of any proceeding against a Borrower seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law
or regulation, the proceeding shall not have been dismissed, or, if,
within 60 days after the appointment, without the consent or
acquiescence of such Borrower, of any trustee, receiver or liquidator
of a Borrower or of all or any substantial part of the properties of a
Borrower, the appointment shall not have been vacated; or
Any judgment against a Borrower in excess of $100,000 or any
attachment in excess of $100,000 against any property of a Borrower
that remains unpaid, undischarged, unbonded or undismissed for a period
of 30 days, unless and to the extent that the judgment or attachment is
appealed in good faith in a court of higher jurisdiction and the appeal
remains pending; or
If any of the following events shall occur or exists with
respect to any Borrower or any employee benefit or other plan
established, maintained or to which contributions have been made by any
Borrower, any Affiliate of any Borrower or any other Person that,
together with the Borrower, would be treated as a single employer under
4001 of ERISA, and the Lender determines that the same would have a
Material Adverse Effect: ()(1) any prohibited transaction (as defined
in 406 of ERISA or 4975 of the Code), (2) any reportable event (as
defined in 4043 of ERISA and the regulations issued thereunder),
(3) the filing under 4041 of ERISA of a notice of intent to terminate
any such plan or the termination of such plan, or (4) the institution
of proceedings by the PBGC under 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any such plan; or
If any Borrower, any Subsidiary or any Affiliate of any
Borrower or Subsidiary shall be debarred or suspended from any
contracting with the Government; or
The Loan Documents shall for any reason cease to create a
valid and perfected first priority security interest in any of the
Collateral purported to be covered thereby or if any Loan Document
ceases to be in full force and effect; or
If the Lender, in good faith, deems itself insecure in its
reasonable judgment or determines that an event has occurred that will
result in a Material Adverse Effect, and the cause for such
determination is not cured to the Lender's satisfaction within 30 days
after notice from the Lender to the Company specifying the Lender's
basis therefor; or
The dissolution, liquidation or termination of existence of a
Borrower; or
If a Borrower fails to give the Lender any notice required by
this Agreement within ten days after the occurrence of the event giving
rise to the obligation to give such notice, provided that such failure
to give notice shall not constitute an Event of Default if the
applicable Event of Default or breach is cured within any grace period
that otherwise would have been applicable had the notice been timely
given; or
The occurrence of an event of default under any other Loan
Document and the expiration of all applicable cure periods; or
If:
Any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), but excluding Research
Industries and Arch C. Scurlock, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a Person will be deemed to have "beneficial
ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than
25% of the total voting power of the then outstanding voting stock
of the Company; or
During any twelve-month period (commencing on or after
the Agreement Date), a majority of the Board of Directors of the
Company shall no longer be composed of individuals (A) who were
members of such Board of Directors on the first date of such
period, (B) whose election or nomination to such Board of
Directors was approved by individuals referred to in clause (A)
above constituting at the time of such election or nomination at
least a majority of such Board of Directors or (C) whose election
or nomination to such Board of Directors was approved by
individuals referred to in clauses (A) and (B) above constituting
at the time of such election or nomination at least a majority of
such Board of Directors; or
If any Subordinated Debt holder gives written notice to the
Lender purporting to terminate the effect of the subordination thereof
to the Obligations.
Remedies upon Default. Upon the occurrence of an Event of
Default, the following provisions shall be applicable:
The Lender, at its option, may terminate its obligation to
make Loans and issue Letters of Credit under this Agreement and declare
all Obligations, whether incurred prior to, contemporaneous with or
subsequent to the date of this Agreement, and whether represented in
writing or otherwise, immediately due and payable and may exercise all
of its rights and remedies against the Borrowers and any Collateral.
The Lender also may require the Borrowers to pay, and the Borrowers
agree to pay, to the Lender an amount of cash equal to the aggregate
amount of the Letters of Credit then outstanding, and any amounts paid
by the Borrowers shall be held by the Lender in a cash collateral
account, over which the Lender shall have the exclusive power of
withdrawal, as security for the Obligations arising out of the Letters
of Credit and the Letter of Credit Agreements.
The Lender may foreclose its lien and security interest in
the Collateral in any way permitted by law and shall have, without
limitation, the remedies of a secured party under the UCC. The Lender
may enter the premises of any Borrower without legal process and
without incurring liability to any Borrower and remove the Collateral
to such place or places as the Lender may deem advisable, or the Lender
may require the Borrowers to assemble the Collateral and make the
Collateral available to the Lender at a convenient place and, with or
without having the Collateral at the time or place of sale, the Lender
may sell or otherwise dispose of all or any part of the Collateral
whether in its then condition or after further preparation or
processing, either at public or private sale or at any broker's board,
in lots or in bulk, for cash or for credit, at any time or place, in
one or more sales and upon such terms and conditions as the Lender may
elect. The Lender shall give not less than five Business Days' prior
written notice to the Borrowers of the time and place of any public
sale of the Collateral or the time after which the Collateral may be
sold in a private sale, which each Borrower agrees constitutes
commercially reasonable notice. At any such sale the Lender may be the
purchaser, subject to the applicable provisions of the UCC.
The proceeds from any sale of the Collateral by the Lender
shall first be applied to any costs and expenses in securing possession
of the Collateral and to any expenses in connection with the sale. The
net proceeds will be applied toward the payment of the Obligations.
Application of the net proceeds as to particular Obligations or as to
principal, interest and fees shall be in the Lender's absolute
discretion. Any deficiency will be paid to the Lender by the Borrowers
forthwith upon demand, and any surplus will be paid to the Borrowers,
as applicable.
The Lender is hereby authorized at any time or from time to
time, without notice to the Borrowers (any such notice being expressly
waived by each Borrower), to setoff and apply any deposit (general or
special, time or demand, provisional or final) or investment account at
any time held, including any certificate of deposit, and other
indebtedness at any time owed by the Lender or any of its affiliates,
whether or not any such deposit or indebtedness is then due, to or for
the credit or account of any Borrower against any and all of the
Obligations. The Lender shall give prompt written notice of any setoff
to the Borrowers.
EACH BORROWER, HAVING KNOWLEDGE THAT IT MAY BE ENTITLED TO
NOTICE AND A HEARING PRIOR TO REPOSSESSION OF THE COLLATERAL, WAIVES
ANY RIGHT THAT IT MAY HAVE UNDER EXISTING OR FUTURE LAW TO NOTICE OF
FORECLOSURE AND ANY OTHER ACT DESCRIBED HEREIN, TO ANY HEARING THAT MAY
BE HELD RELATING TO FORECLOSURE OR ANY OTHER SUCH ACTS, AND TO ANY
NOTICE THAT MAY BE REQUIRED TO BE GIVEN BY THE LENDER PRIOR TO SUCH
HEARING, OTHER THAN THE NOTICES REQUIRED BY THE LOAN DOCUMENTS OR THE
UCC. THE LENDER AND EACH BORROWER EXPRESSLY WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
The Lender itself may perform or comply, or otherwise cause
performance or compliance, with the obligations of a Borrower contained
in this Agreement, including, without limitation, the obligations of
each Borrower to defend and insure the Collateral. The expenses of the
Lender incurred in connection with such performance or compliance,
together with interest thereon at the Prime Rate plus 2%, shall be
payable by the Borrowers to the Lender on demand and shall constitute
Obligations.
Miscellaneous.
Collection Costs. The Borrowers shall pay all of the reasonable
costs and expenses incurred by the Lender in connection with the
enforcement of this Agreement and the other Loan Documents, including,
without limitation, reasonable attorneys' fees and expenses.
Modification and Waiver. Except for the other documents
expressly referred to in this Agreement, this Agreement contains the
entire agreement between the parties and supersedes all prior
agreements between the Lender and the Borrowers concerning the Loans
and the Letters of Credit. No modification or waiver of any provision
of this Agreement or any other Loan Document and no consent by the
Lender to any departure therefrom by any Borrower shall be effective
unless such modification or waiver shall be in writing and signed by an
officer of the Lender with a title of vice president or any higher
office, and the same shall then be effective only for the period and on
the conditions and for the specific instances and purposes specified in
such writing. No notice to or demand on any Borrower in any case shall
entitle any Borrower to any other or further notice or demand in
similar or other circumstances. No failure or delay by the Lender in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies of the Lender
contained in this Agreement and the other Loan Documents are cumulative
and not exclusive of any rights or remedies otherwise provided by law.
Notices. All notices, requests, demands or other communications
provided for in this Agreement (except for requests for Loans made by
telephone as described in Section 0 above) shall be in writing and
shall be delivered by hand, sent prepaid by Federal Express (or a
comparable overnight delivery service) or sent by the United States
mail, certified, postage prepaid, return receipt requested, to the
Lender at 8245 Boone Boulevard, 3rd Floor, Vienna, Virginia 22182,
Attention: Mr. Timothy J. Duggan, or to the Borrowers at 5250 Cherokee
Avenue, Alexandria, Virginia 22312, Attention: Mr. John D. D'Amore.
Any notice, request, demand or other communication delivered or sent in
the foregoing manner shall be deemed given or made (as the case may be)
upon the earliest of (a) the date it is actually received, (b) the
business day after the day on which it is delivered by hand, (c) the
business day after the day on which it is properly delivered to Federal
Express (or a comparable overnight delivery service), or (d) the third
business day after the day on which it is deposited in the United
States mail. Any Borrower or the Lender may change its address by
notifying the other party of the new address in any manner permitted by
this Section 0. Rejection or other refusal to accept or the inability
to deliver because of a changed address of which no notice was given
shall not affect the date of such notice, election or demand sent in
accordance with the foregoing provisions.
Counterparts. This Agreement may be executed by the parties
hereto individually or in any combination, in one or more counterparts,
each of which shall be an original and all of which together constitute
one and the same agreement.
Captions. The captions of the various sections and paragraphs
of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall
not be deemed in any manner to modify, explain, enlarge or restrict any
of the provisions of this Agreement.
Survival of Agreements. All agreements, representations and
warranties made herein shall survive the delivery of this Agreement and
the making and renewal of the Loans hereunder.
Fees and Expenses. Whether or not any Loans are made hereunder,
the Borrowers shall pay on demand all out-of-pocket costs and expenses
incurred by the Lender in connection with the preparation, negotiation,
execution, delivery, filing, recording and enforcement of this
Agreement and any of the documents executed or delivered in connection
herewith, including, without limitation, the reasonable fees and
expenses of counsel to the Lender, and local counsel who may be
retained by the Lender, with respect to this Agreement and such
documents and any amendments thereof and with respect to advising the
Lender as to its rights and responsibilities thereunder.
Use of Defined Terms. All terms defined in this Agreement shall
have the defined meanings when used in certificates, reports or other
documents made or delivered pursuant to this Agreement, unless the
context shall otherwise require.
Successors and Assigns. This Agreement shall inure to the
benefit of and bind the respective parties hereto and their successors
and assigns; provided, however, that no Borrower may assign its rights
hereunder without the prior written consent of the Lender.
Accounting Terms. All accounting terms used herein that are not
otherwise expressly defined in this Agreement shall have the meanings
respectively given to them in accordance with GAAP in effect on the
date of this Agreement. Except as otherwise provided herein, all
financial computations made pursuant to this Agreement shall be made in
accordance with GAAP and all balance sheets and other financial
statements shall be prepared in accordance with GAAP. Except as
otherwise provided herein, whenever reference is made in any provision
of this Agreement to a balance sheet or other financial statement or
financial computation with respect to a Borrower, such terms shall mean
a consolidated balance sheet or other financial statement or financial
computation, as the case may be, with respect to such Borrower and its
Subsidiaries.
Confidentiality. Except as otherwise provided by applicable
law, the Lender shall utilize all non-public information obtained
pursuant to the requirements of this Agreement which has been
identified as confidential or proprietary by the Company in accordance
with its customary procedure for handling confidential information of
this nature and in accordance with safe and sound banking practices but
in any event may make disclosure: (a) to any of its affiliates
(provided they shall agree to keep such information confidential in
accordance with the terms of this Section); (b) as reasonably required
by any bona fide assignee, participant or other transferee in
connection with the contemplated transfer of any Loan or participations
therein (provided they shall agree to keep such information
confidential in accordance with the terms of this Section); (c) as
required by any governmental authority or representative thereof or
pursuant to legal process; (d) to the Lender's independent auditors,
counsel and other professional advisors (provided they shall be
notified of the confidential nature of the information and they agree
to keep such information confidential); and (e) after the happening and
during the continuance of an Event of Default, to any other Person, in
connection with the exercise by the Lender of rights hereunder or under
any of the other Loan Documents.
Limitation of Liability. Each Borrower hereby waives, releases,
and agrees not to sue the Lender or any of the Lender's Affiliates,
officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan
Documents, or any of the transactions contemplated by this Agreement or
financed hereby.
Waiver. EACH OF THE LENDER AND THE BORROWERS EXPRESSLY WAIVES
ITS RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION OR OTHER
DISPUTE RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
Severability. If any provision of any Loan Document is held to
be illegal, invalid or unenforceable under present or future laws
during the term of this Agreement, such provision shall be fully
severable, such Loan Document shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a
part of such Loan Document, and the remaining provisions of such Loan
Document shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance from such Loan Document.
Consent to Jurisdiction. Each party to this Agreement hereby
irrevocably submits generally and unconditionally for itself and in
respect of its property to the jurisdiction of the Circuit Court for
Fairfax County, Virginia, or the United States District Court for the
Eastern District of Virginia, Alexandria Division, over any suit,
action or proceeding arising out of or relating to this Agreement, any
Loan Document or the Obligations. Each party to this Agreement hereby
irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of venue in
any such court and any claim that any such court is an inconvenient
forum. Each Borrower hereby agrees and consents that, in addition to
any methods of service of process provided for under applicable law,
all service of process in any such suit, action or proceeding in the
courts designated above may be made by certified or registered mail,
return receipt requested, directed to such Borrower at its address for
notice stated in Section 0 above, or at a subsequent address of which
the Lender received actual notice from such Borrower in accordance with
the terms hereof, and service so made shall be complete five days after
the same shall have been so mailed. The foregoing provisions shall not
limit the right of the Lender or any other party hereto to serve
process in any other manner permitted by law or limit the right of the
Lender or other party hereto to bring any suit, action or proceeding or
to obtain execution on any judgment rendered in any suit, action or
proceeding in any other appropriate jurisdiction or in any other
manner.
Interpretation.
This Agreement and the rights and obligations of the parties
hereunder shall be construed and interpreted in accordance with the
laws of the State, without reference to conflict of laws principles.
The representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to have been given and
undertaken by the Borrowers jointly and severally.
Amendment and Restatement. The Lender and the Borrowers agree
that the Existing Agreement is amended and restated in its entirety by
this Agreement. This Agreement is an amendment, and not a novation, of
the Existing Agreement.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the Borrowers and the Lender have caused this
Agreement to be signed by their duly authorized representatives all as
of the day and year first above written.
LENDER:
CRESTAR BANK,
a Virginia banking corporation
By: ___________________________
Name: ___________________________
Title: ___________________________
BORROWERS:
HALIFAX CORPORATION,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
HALIFAX ENGINEERING, INC.,
a Virginia corporation
By: ______________________________
Name: ____________________________
Title: _____________________________
HALIFAX TECHNICAL SERVICES, INC.,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE>
HALIFAX REALTY, INC.,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
HALIFAX TECHNOLOGY SERVICES COMPANY,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
<PAGE>
LIST OF SCHEDULES & EXHIBITS
Exhibit A - Assumption Agreement
Exhibit B - Borrowing Base Certificate
Exhibit C - Covenant Compliance Certificate
Exhibit D - Form of Revolving Note
Exhibit E - Form of Tier Three Term Note
Exhibit F - Form of Tier Two Term Note
Schedule 1 - Eligible Inventory Locations
Schedule 3.3 - Equipment and Inventory Locations
Schedule 4.10 - Corporate Names and Chief
Executive Offices
Schedule 4.13 - Intellectual Property
Schedule 4.14 - Material Contracts
Schedule 4.17 - Collective Bargaining Agreements
Schedule 5.8(a) - Form of Monthly Financials
<PAGE>
EXHIBIT A
Form of
Assumption Agreement
THIS ASSUMPTION AGREEMENT (as the same may be amended, modified or
supplemented from time to time, the Assumption), dated as of
_____________, _____, made by ____________________________, a
_____________ corporation (the Subsidiary), in favor of the Lender (as
defined below), recites and provides:
R E C I T A L S
Pursuant to the terms of a Fifth Amended and Restated Loan and
Security Agreement, dated as of June 25, 1998 (as amended, modified or
supplemented from time to time, the Loan Agreement), between Halifax
Corporation, a Virginia corporation (the Company), Halifax Engineering,
Inc., a Virginia corporation (Engineering), Halifax Technical Services,
Inc., a Virginia corporation (Technical), Halifax Realty, Inc., a
Virginia corporation (Realty), and Halifax Technology Services Company,
a Virginia corporation (Technology, and together with the Company,
Engineering, Technical, and Realty, the Original Borrowers), and
Crestar Bank, a Virginia banking corporation (the Lender), the Lender
agreed to extend credit to the Original Borrowers. Terms defined in
the Loan Agreement shall have the same defined meanings when such terms
are used in this Assumption.
[The Company owns 100% of the capital stock of the Subsidiary.]
The Original Borrowers and the Subsidiary, together with the other
Subsidiaries of the Original Borrowers, are engaged in business on a
consolidated and integrated basis, and their integrated operations
include applying for and making use of credit on a joint basis.
Accordingly, the Original Borrowers have requested that the Subsidiary
become a Borrower under the Loan Agreement and the other Loan
Documents. The Lender has agreed to accept the Subsidiary as a
Borrower thereunder, and the Subsidiary has agreed to assume the
Obligations. Accordingly, the Subsidiary agrees as follows:
The Subsidiary (a) assumes and agrees to be jointly and severally
liable with each other Borrower for all of the Obligations now existing
or hereafter arising, including, without limitation, the Obligations
arising out of the Loan Agreement, the Loans, the Notes, the Letter of
Credit Agreements and the other Loan Documents, and (b) agrees to be
jointly and severally bound by all of the terms, covenants and
conditions of the Loan Agreement, the Notes, the Letter of Credit
Agreements and the other Loan Documents, and hereby assumes all of the
Obligations of the Borrowers thereunder and agrees to be jointly and
severally liable therefor.
The Subsidiary represents that (a) its chief executive office,
within the meaning of Section 9.103(3)(d) of the UCC, is located at
[______________________], and (b) during the five years prior to the
date of this Assumption, the Subsidiary has not used any fictitious or
corporate name other than its current corporate name. All of the
representations and warranties set forth in the Loan Agreement are
incorporated by reference in this Assumption, and shall be deemed to
have been made and given by the Subsidiary as of the date hereof as
though such representations and warranties were applicable to it.
The Subsidiary grants to the Lender, in accordance with and
subject to the provisions of the Loan Agreement, a security interest in
all of the Collateral of the Subsidiary as security for the
Obligations.
The Subsidiary also agrees to execute, deliver and, if applicable,
record, such additional instruments, documents and agreements as the
Lender may reasonably require for the purpose of effecting the
assumption described herein.
IN WITNESS WHEREOF, the Subsidiary has caused this Assumption to
be executed by its duly authorized representative as of the day and
year first written above.
_____________________, a ___________
By: _____________________________
Name: _____________________________
Title: _____________________________
<PAGE>
EXHIBIT B
HALIFAX CORPORATION
BORROWING BASE CERTIFICATE
In connection with the terms of the Fifth Amended and Restated Loan and
Security Agreement, dated as of ________(as further amended, modified
or supplemented from time to time, the Loan Agreement) between Halifax
Corporation (the Parent), Halifax Engineering, Inc. (Engineering),
Halifax Technical Services, Inc. (Technical), Halifax Realty, Inc.
(Realty,) and Halifax Technology Services Company, (HTSC, and together
with the Company, Engineering, Technical, and Realty, collectively, the
Borrowers), and Crestar Bank (the Lender), the undersigned, on behalf
of the Parent and the other Borrowers, certifies that the following is
true and correct:
I Tier One
A. Accounts Receivable
Billed Accounts Receivable as of last report
Additions: (a) New Billings
(b) Adjustments
Less: (a) Collections since last report
(b) Adjustments
1. Total Billed Accounts Receivable:
2. Less Ineligible Receivables:
(a) Receivables aged over 90 days
(b) Bonded Receivables
(c) "At Risk" Work
(d) Rebills
(e) Other Ineligible Receivables
3. Total Ineligible Receivable (Line A2-Ae)
4. Total Eligible Billed Accounts Receivable:
5. Eligible Billed Government Accounts Receivable on Line 4
6. Government contribution to Borrowing Base (90% of Line 5):
7. Eligible Billed Commercial Accounts Receivable on Line 4:
8. Commercial contribution to Borrowing Base (85% of Line 7)
9. Tier one Borrowing Base (A6 + A8)
II Tier Two Contribution
A. Bonded Contract Account Receivable:
1. Total Billed Bonded Accounts Receivable:
2. Less $1,500,000 excess factor:
3. Less Ineligible Receivables:
(a) Receivables aged over 90 days:
(b) "At Risk"/Rebills
(c) Other Ineligible Receivables:
4. Total Ineligible Bonded Accounts Receivable (Line A3a-A3c):
5. Total Eligible Bonded Accounts Receivable (Line 1-2-4):
6. Contribution to Borrowing Base (80% of Line 5,
not to exceed $2,000,000 cap)
B Unbilled Accounts Receivable:
Limited to DSSMP/LTLCS
1. Unbilled DSSMP/LTLCS Accounts Receivable as of
last report dated:
2. Additions:
(a) New Unbilled DSSMP/LTLCS Acct. Rec.
3. Total Unbilled DSSMP/LTLCS Acct. Rec.
4. Less:
(a) Conversion to Billed Acct. Rec since last report:
(b) Unbilled Acct. Rec. on Ln 3 not billable w/in 90 days
(c) Other Unbilled Acct. Rec that are not Eligible Rec.
5. Total Ineligible Unbilled Acct. Rec. (Line 4a-4c):
6. Total Eligible Unbilled Accounts Receivables (Line B3-Line B5):
7. Contribution to Borrowing Base (15% of Line B6,
not to exceed $500,000 cap):
8. Total Tier Two Contribution (Line A6 + B7) Not
to exceed total $2,000,000 cap:
C. Total Borrowing Base (Tier I Borrowing Base +
Tier II Contribution) Not to exceed $12,500,000
As of the date of this Borrowing Base Certificate, no Default or Event
has occurred and is continuing.
Capitalized terms used in this Borrowing Base Certificate Shall have
the same meanings as those assigned to them in the Loan Agreement. The
foregoing is true and correct as of ___________
HALIFAX CORPORATION
BY___________________________
Title Vice President Finance & Accounting, CFO
Date: _______________________
<PAGE>
EXHIBIT C
Form of
Covenant Compliance Certificate
In connection with the terms of the Fifth Amended and Restated
Loan Agreement, dated as of June 25, 1998 (as amended, supplemented or
modified from time to time, the Loan Agreement), between Halifax
Corporation, a Virginia corporation (the Company), the Subsidiaries of
the Company that are parties to the Loan Agreement, and Crestar Bank, a
Virginia banking corporation (the Lender), the undersigned certifies
that the following information is true and correct as of the date of
this Covenant Compliance Certificate:
1. No Default or Event of Default has occurred and is continuing.
2. The Minimum Compliance Level as of _______________________ was
required to be $_____, and Tangible Capital Funds as of such date was
$___________ calculated as set forth in Schedule 1.
3. The Funded Debt Ratio for the 12-month period ended on
____________, ____ was ______ to 1, calculated as set forth on Schedule
2. The required Funded Debt Ratio for such period was not greater than
_____ to 1.
4. The Debt Coverage Ratio for the 12-month period ended on
____________, ____ was ____ to 1, calculated as set forth on Schedule
3. The required Debt Coverage Ratio for such period was not less than
____ to 1.
5. For purposes of determining the Spread, the Funded Debt Ratio for
the fiscal quarter ended on _______________, ______ was __ to 1,
calculated as set forth in Schedule 1, and accordingly, effective as of
_______________, ____ the Spread will be ___% and the Unused Fee
Percentage will be ___%.
Capitalized terms used in this Covenant Compliance Certificate
shall have the same meanings as those assigned to them in the
Agreement. The foregoing is true and correct as of _______________,
19___.
Dated ______________, 19___.
Name:
Chief Financial Officer
Halifax Corporation
[CAPTION]
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
Tangible Capital Funds and
Minimum Compliance Level
Tangible Capital Funds
<S> <C>
1. Tangible Net Worth: $___________
(a) Consolidated stockholder equity of the
Company and its Subsidiaries as of ________________: $___________
(b) Write-up in book value of assets of the Company and its
Subsidiaries subsequent to the date of the Agreement $___________
(c) Investments in non-marketable securities $___________
(d) Treasury stock $___________
(e) Unamortized debt discount expense $___________
(f) Costs of investments in excess of net assets acquired at
time of acquisition $___________
(g) Loans, advances and other amounts owed to the Company
and its Subsidiaries by officers, directors,
shareholders, employees or Affiliates $___________
(h) Leasehold improvements $___________
(i) Patents, patent applications, copyrights, trademarks,
trade names, goodwill, research and development costs,
organizational expenses, capitalized software costs and $___________
other like intangibles
TOTAL [(a) minus (b) through (i)] $___________
2. Subordinated Debt: $___________
(a) Subordinated Debt payable to Research Industries $___________
(b) Other $___________
Total $___________
3. Tangible Capital Funds (1 + 2) $___________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Minimum Compliance Level
<S> <C>
1. Tangible Capital Funds as of *___________
________________________
2. 50% of Consolidated Net Income of Company and $___________
Subsidiaries from April 1, 1998 (without deduction for
losses)
3. Equity Issuances from April 1, 1998 $___________
4. Subordinated Debt issued subsequent to April 1, 1998 $___________
5. Minimum Compliance Level (1 + 2 + 3)** $___________
</TABLE>
*$7,250,000 as of 6/30/98 and 9/30/98, and $12,400,000 as of 12/31/98.
**Maximum required to be added by items 3 and 4 is $4,500,000.
<PAGE>
<TABLE>
<CAPTION>
Schedule 2
Funded Debt Ratio
<S> <C>
1. Funded Debt as of ____________________:
(a) Borrowed money $___________
(b) Repurchase agreement obligations $___________
(c) Deferred purchase price obligations $___________
(d) Capital Lease obligations $___________
(e) Obligations for letters of credit and acceptances $___________
(f) Guaranties $___________
TOTAL (a+b+c+d+e+f) $___________
2. EBITDA for the 12-month period ended on
_____________
(a) Consolidated Net Income of the Company and its $___________
Subsidiaries
(b) Depreciation $___________
(c) Interest expense $___________
(d) Amortization $___________
(e) Taxes $___________
(f) Extraordinary, unusual or non-recurring gains $___________
(g) Extraordinary, unusual or non-recurring losses $___________
TOTAL (a+b+c+d+e-f+g) $___________
3. Subordinated Debt as of _____________ $___________
5. Funded Debt Ratio
Funded Debt ($_________) - Subordinated Debt = ____ to 1
($_________)
EBITDA Flow ($_________)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule 3
Debt Coverage Ratio
<S> <C>
1. EBITDA for the 12- month period ended on ____________ $__________
(from Schedule 2)
2. Capital Expenditures for the 12-month period ended on $__________
__________
3. Dividends paid during the 12-month period ended on $__________
__________
4. Cash expenditures for taxes during the 12-month period $__________
ended on _________
5. Cash Flow Available for Debt Service (1 - 2 - 3 - 4)
6. Debt Service $__________
(a) Principal payments of Debt due during the $___________
12-month period ended on ___________
(b) Interest expense for the 12-month period ended $___________
on ___________
TOTAL (a+b) $___________
7. Debt Coverage Ratio
Cash Flow Available for Debt Service ($_________) = ____ to 1
Debt Service ($_________)
</TABLE>
<PAGE>
EXHIBIT D
Form of
Revolving Note
$12,500,000 June 25,1998
Alexandria, Virginia
FOR VALUE RECEIVED, the undersigned, each a Virginia corporation
(collectively, the Borrowers and individually, a Borrower) hereby
jointly and severally promise to pay to the order of CRESTAR BANK, a
Virginia banking corporation (the Lender), at Commercial Loan Services,
P.O. Box 26202, Richmond, Virginia 23260-6202, or such other location
as the holder hereof may in writing designate, the principal sum of
TWELVE MILLION FIVE HUNDRED THOUSAND AND NO/00 DOLLARS ($12,500,000)
(or such lesser amount as shall equal the aggregate unpaid principal
amount of the Revolving Loans made by the Lender to the Borrowers under
the Loan Agreement (as defined below)), in lawful money of the United
States of America in immediately available funds, on the Termination
Date, without defense, offset or counterclaim, and to pay interest on
the unpaid principal amount of the Revolving Loans, at such office, in
like money and funds, for the period commencing on the date of each
Revolving Loan until such Revolving Loan shall be paid in full, at the
applicable rate per annum and on the dates provided in the Loan
Agreement. The Borrowers may borrow, prepay, and reborrow hereunder in
accordance with the provisions of the Loan Agreement.
The Lender is hereby authorized by the Borrowers to maintain
records of the amount of each Revolving Loan made by the Lender, the
date such Revolving Loan is made, and the amount of each payment or
prepayment of principal of such Revolving Loan received by the Lender.
Each Borrower agrees that the amounts so evidenced in such records,
absent manifest error, shall constitute conclusive evidence of the
amount owed hereunder.
This Revolving Note is the Revolving Note referred to in the Fifth
Amended and Restated Loan and Security Agreement (as amended, modified
or supplemented form time to time, the Loan Agreement), dated as of
June 25, 1998, between the Borrowers and the Lender, and evidences
Revolving Loans made by the Lender thereunder. Undefined capitalized
terms used in this Revolving Note have the respective meanings assigned
to them in the Loan Agreement.
Upon the occurrence and continuation of an Event of Default, the
principal hereof and accrued interest hereon may be declared to be, or
may become, forthwith due and payable in the manner, upon the
conditions and with the effect provided in the Loan Agreement.
Each Borrower, and every guarantor and endorser hereof, hereby
waive presentment, demand, notice of dishonor, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Revolving Note.
This Revolving Note shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, without
reference to conflict of laws principles.
IN WITNESS WHEREOF, each Borrower has caused this Revolving Note
to be executed by its duly authorized representative as of the day and
year first above written.
BORROWERS:
HALIFAX CORPORATION,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
HALIFAX ENGINEERING, INC.,
a Virginia corporation
By: ______________________________
Name: ____________________________
Title: _____________________________
HALIFAX TECHNICAL SERVICES, INC.,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE>
HALIFAX REALTY, INC.,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
HALIFAX TECHNOLOGY SERVICES COMPANY,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
<PAGE>
EXHIBIT E
Form of
Tier Three Term Note
$2,500,000 June 25,1998
Alexandria, Virginia
FOR VALUE RECEIVED, the undersigned, each a Virginia corporation
(collectively, the Borrowers and individually, a Borrower) hereby
jointly and severally promise to pay to the order of CRESTAR BANK, a
Virginia banking corporation (the Lender), at Commercial Loan Services,
P.O. Box 26202, Richmond, Virginia 23260-6202, or such other location
as the holder hereof may in writing designate, the principal sum of TWO
MILLION FIVE HUNDRED THOUSAND AND NO/00 DOLLARS ($2,500,000), in lawful
money of the United States of America in immediately available funds,
on the dates set forth below, without defense, offset or counterclaim,
and to pay interest on the unpaid principal amount hereof, at such
office, in like money and funds, for the period commencing on the date
of disbursement of the Tier Three Term Loan until the Tier Three Term
Loan shall be paid in full, at the applicable rate per annum and on the
dates provided in the Loan Agreement.
The principal balance hereof shall be payable in quarterly
installments, each in the amount of the Required Quarterly Curtailment,
due on the last day of each March, June, September and December,
beginning on September 30, 1998. If not sooner paid, the unpaid
principal balance hereof, and all accrued and unpaid interest thereon,
shall be due and payable in full on the Termination Date.
This Note is the Tier Three Term Note referred to in the Fifth
Amended and Restated Loan and Security Agreement (as amended, modified
or supplemented form time to time, the Loan Agreement), dated as of
June 25, 1998, between the Borrowers and the Lender, and evidences the
Tier Three Term Loan made by the Lender thereunder. Undefined
capitalized terms used in this Note have the respective meanings
assigned to them in the Loan Agreement.
Upon the occurrence and continuation of an Event of Default, the
principal hereof and accrued interest hereon may be declared to be, or
may become, forthwith due and payable in the manner, upon the
conditions and with the effect provided in the Loan Agreement.
Each Borrower, and every guarantor and endorser hereof, hereby
waive presentment, demand, notice of dishonor, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to conflict
of laws principles.
IN WITNESS WHEREOF, each Borrower has caused this Note to be
executed by its duly authorized representative as of the day and year
first above written.
BORROWERS:
HALIFAX CORPORATION,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
HALIFAX ENGINEERING, INC.,
a Virginia corporation
By: ______________________________
Name: ____________________________
Title: _____________________________
HALIFAX TECHNICAL SERVICES, INC.,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
HALIFAX REALTY, INC.,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
HALIFAX TECHNOLOGY SERVICES COMPANY,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
<PAGE>
EXHIBIT F
Form of
Tier Two Term Note
$2,500,000 June 25,1998
Alexandria, Virginia
FOR VALUE RECEIVED, the undersigned, each a Virginia corporation
(collectively, the Borrowers and individually, a Borrower) hereby
jointly and severally promise to pay to the order of CRESTAR BANK, a
Virginia banking corporation (the Lender), at Commercial Loan Services,
P.O. Box 26202, Richmond, Virginia 23260-6202, or such other location
as the holder hereof may in writing designate, the principal sum of TWO
MILLION FIVE HUNDRED THOUSAND AND NO/00 DOLLARS ($2,500,000), in lawful
money of the United States of America in immediately available funds,
on the dates set forth below, without defense, offset or counterclaim,
and to pay interest on the unpaid principal amount hereof, at such
office, in like money and funds, for the period commencing on the date
of disbursement of the Tier Two Term Loan until the Tier Two Term Loan
shall be paid in full, at the applicable rate per annum and on the
dates provided in the Loan Agreement.
The principal balance hereof shall be payable in quarterly
installments, each in the amount of the Required Quarterly Curtailment,
due on the last day of each March, June, September and December,
beginning on the first such payment date next succeeding the payment in
full of the Tier Three Term Note. If not sooner paid, the unpaid
principal balance hereof, and all accrued and unpaid interest thereon,
shall be due and payable in full on the Termination Date.
This Note is the Tier Two Term Note referred to in the Fifth
Amended and Restated Loan and Security Agreement (as amended, modified
or supplemented form time to time, the Loan Agreement), dated as of
June 25, 1998, between the Borrowers and the Lender, and evidences the
Tier Two Term Loans made by the Lender thereunder. Undefined
capitalized terms used in this Note have the respective meanings
assigned to them in the Loan Agreement.
Upon the occurrence and continuation of an Event of Default, the
principal hereof and accrued interest hereon may be declared to be, or
may become, forthwith due and payable in the manner, upon the
conditions and with the effect provided in the Loan Agreement.
Each Borrower, and every guarantor and endorser hereof, hereby
waive presentment, demand, notice of dishonor, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
This Note shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to conflict
of laws principles.
IN WITNESS WHEREOF, each Borrower has caused this Note to be
executed by its duly authorized representative as of the day and year
first above written.
BORROWERS:
HALIFAX CORPORATION,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
HALIFAX ENGINEERING, INC.,
a Virginia corporation
By: ______________________________
Name: ____________________________
Title: _____________________________
HALIFAX TECHNICAL SERVICES, INC.,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
HALIFAX REALTY, INC.,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
HALIFAX TECHNOLOGY SERVICES COMPANY,
a Virginia corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
