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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission File number: 0-14618
VECTRA TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1160888
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5000 EXECUTIVE PARKWAY, SUITE 500, SAN RAMON, CA 94583
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(510) 275-4500
Securities registered pursuant to section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
NONE NONE
Securities registered pursuant to section 12(g) of the Act: COMMON STOCK
(Title of Class)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant is $12,239,886 based on the closing price as quoted on the
over-the-counter market on March 1, 1996.
There were 7,833,527 shares of common stock outstanding as of March 1, 1996.
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VECTRA TECHNOLOGIES, INC.
1995 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business............................................................ 3
Commercial Nuclear Utility Market......................................... 3
DOE Nuclear Market........................................................ 4
Business.................................................................. 4
Fuel Services............................................................. 5
Waste Services............................................................ 6
Engineering Services...................................................... 7
Clients................................................................... 8
Foreign Operations........................................................ 8
Competitors............................................................... 8
Contracts................................................................. 8
Insurance................................................................. 9
Proprietary Technology.................................................... 10
Employees................................................................. 10
Government Regulation..................................................... 10
Item 2. Properties.......................................................... 12
Item 3. Legal Proceedings................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders................. 12
PART II
Item 5. Market for Registrants' Common Stock and Related Stockholder........ 13
Item 6. Selected Financial Data............................................. 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 15
Acquisition....................................................... 15
Divestitures...................................................... 15
Results of Operations............................................. 16
Liquidity and Capital Resources................................... 18
Item 8. Financial Statements and Supplementary Data......................... 21
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure........................................... 38
PART III
Item 10. Directors and Executive Officers................................... 38
Item 11. Executive Compensation............................................. 41
PART IV.
Item 12. Security Ownership of Certain Beneficial Owners, Directors and
Executive Officers............................................... 50
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K..... 52
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PART I
ITEM 1. BUSINESS
INDUSTRY OVERVIEW
COMMERCIAL NUCLEAR UTILITY MARKET
Over one hundred of the world's more than four hundred operating commercial
nuclear power plants are located in the United States and are owned by
approximately fifty utilities. While nuclear power plant construction
continues in many countries, in the United States the last newly constructed
plant has been placed into operation and no new plant construction is
currently anticipated. As a result, the U.S. market has shifted from new
plant design and construction to the retrofit-design, maintenance, efficiency
enhancement, and decommissioning of currently operating plants. This shift
has resulted in an increased demand for engineered products and engineering
services relating to high level waste management (dry spent fuel
transportation and storage); low level radioactive waste handling and
processing; and operations, maintenance and operating efficiency
enhancements. The decommissioning process also requires significant
management, planning and design of specifically engineered equipment for the
processing, packaging, storing and transporting of high and low level
radioactive waste.
HIGH LEVEL RADIOACTIVE WASTE High level radioactive waste, principally spent
nuclear fuel assemblies, requires specialized systems for handling, transport
and storage. The U.S. government is contractually obligated through the
Nuclear Waste Policy Act to take title and possession of spent nuclear fuel
from utilities by 1998. Currently, plans for a permanent repository have
suffered a series of delays and the U.S. Department of Energy (the "DOE") has
estimated that such a facility will not be ready before 2010. Until a
federally-sited interim or permanent storage facility is available for
commercial spent fuel, nuclear power utilities continue to store their spent
fuel in pools within the reactor plants. Most spent fuel pools were not
designed to accommodate all fuel assemblies required for the life of a plant
and plants must develop additional fuel storage facilities as they approach
their spent fuel pool storage capacity. The Nuclear Regulatory Commission
(the "NRC") has recommended dry spent fuel storage as the preferred solution
to this on-site capacity requirement.
The industry's preferred solution for on-site dry fuel storage calls for NRC
licensed storage and transportation systems consistent with the DOE multi-
purpose canister concept, which consists of canister-based systems suitable for
both the storage and the transport of spent fuel. The DOE's independent
development of a standardized multi-purpose canister system for receipt,
storage, and transportation of spent fuel has been de-funded and legislation is
pending directing the DOE to utilize NRC licensed, commercially available
systems. Additionally, these NRC licensed, canister-based storage and
transportation systems are required when emptying a plant's spent fuel pool
during decommissioning.
LOW LEVEL RADIOACTIVE WASTE Nuclear power plants, and to a lesser extent
businesses, hospitals, and universities, generate and must dispose of various
types of low level radioactive waste. This low level waste is primarily
composed of various liquids, resins and solids generated during normal
operations. Typical of this type of waste are system decontamination
liquids; ion exchange resins and other filter media; and contaminated
protective clothing and other solid materials.
Historically, low level wastes were encased, untreated, in cementous material
and disposed of at three commercially-operated shallow land burial disposal
facilities for civilian low level radioactive waste in the states of Nevada,
South Carolina, and Washington. The disposal facility in Nevada has been
closed, and the facility in South Carolina, previously scheduled for closure
in 1995, has remained open. Additional disposal/storage is at a premium due
to unfavorable public opinion in the siting of new disposal facilities. In
addition to fewer sites now available, stricter environmental regulations and
changes in the regulations concerning the use of these previously relatively
inexpensive shallow land burial sites have dramatically increased the cost to
the producer for ultimate waste disposal.
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This current situation now requires economically viable, engineered products
and engineering services for the processing, recycling, volume reduction and
disposal of low level radioactive wastes. Additionally, environmental
protection concerns require the need for a truly stabilized waste product,
since the effectiveness of previous practices of cement solidification and
burial have been the subject of technical debate.
SPECIALIZED ENGINEERING SERVICES, Today's energy marketplace is becoming
increasingly competitive, despite the decline in construction of new plants
This is the result of Congressional adoption in 1978 of the Public Utility
Regulatory Policies Act that allowed Independent Power Producers (as defined
in that law) to enter the market. Competition further intensified with
approval of the Energy Policy Act of 1992, which opened access to the
utility-owned transmission lines for bulk power purchases. The evolution
from a regulated monopoly to managed competition has created an operating
environment focused on low cost production techniques. Due to the high fixed
cost structure inherent in nuclear power generation, nuclear utilities have
become increasingly focused on implementing cost reduction programs and
efficiency enhancing measures. Significant needs exist for specialized
engineering services tailored to providing solutions which result in lower
operating and maintenance costs.
Specialized engineering services currently required by the nuclear industry
consist of: (1) the design and analysis of systems, whether new or
retrofitted, which are often required as a result of new regulations or,
increasingly in recent years, are in response to utilities' efforts to
improve operating efficiencies, reduce costs and extend operating life of
plants; and (2) programmatic analysis of systems, procedures, or issues in
response to regulatory, industry or economic concerns.
U.S. DEPARTMENT OF ENERGY NUCLEAR MARKET
The DOE's primary mission has changed since the end of the Cold War to
environmental remediation, management, and restoration. At the majority of
their facilities, the DOE is concerned with cleanup activities instead of
weapons production. As a result, substantial demand exists in this
marketplace for high level and low level radioactive waste management
products and services. Many of the more than fifty DOE sites have numerous
facilities that are thirty to forty years old and must be converted to new
missions or transitioned to a shutdown condition. Additionally, new rules
are to be issued over the next three years that will require the remaining
operating facilities to meet current design, construction, operating and
environmental standards.
The DOE market needs are similar to the commercial market's requirements.
The DOE sites contain a significant amount of spent nuclear fuel that must be
conditioned and stored. The major market opportunities that exist for fuel
storage and transportation are the K-Basin fuel at Hanford, the Navy spent
fuel at Idaho National Energy Laboratories, and the foreign research reactor
fuel at Savannah River. The DOE sites also contain vast quantities of
unprocessed low level waste products stored in tanks and basins which require
treatment and disposal similar to those in the commercial market. This
market includes the cleanup of waste at all DOE sites and represents a major
market growth area. Additionally, the revised DOE mission will create a
demand for specialty engineering services, such as fire protection, seismic,
quality, safety and environmental engineering.
BUSINESS
VECTRA Technologies, Inc. ("VECTRA" or the "Company") operates in one
business segment which is the nuclear market. In this market, the Company
provides high level and low level radioactive waste systems and services and
specialized engineering services to commercial nuclear power plants worldwide
and to the DOE in the U.S. The Company offers technology-based solutions for
the maintenance and operation of commercial nuclear power plants through (1)
the handling, transportation, and dry storage of high level radioactive
material; (2) the packaging and transportation of low level radioactive
waste; and (3) engineering analysis of mechanical, electrical, and
operational systems and procedures.
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ACQUISITIONS
On January 6, 1994, the shareholders approved the purchase from affiliates of
ABB Asea Brown Boveri Ltd, a Swiss company, of all of the outstanding shares
of ABB Impell ("Impell"), ABB Government Services Inc. and ABB Impell Ltd, an
English limited liability company. The names of the companies were changed
to Impell Corporation, VECTRA Government Services Inc. ("VECTRA GSI"), and
VECTRA Technologies Ltd ("VECTRA UK"), respectively. Impell Corporation
merged into the Company on March 31, 1994. The primary differences in
services were that Impell Corporation had significantly more employees,
broader geographical coverage and provided services to more utilities having
nuclear plants than the Company had previously. In addition, VECTRA GSI
provided engineering services to the DOE market and its major prime
contractors, while VECTRA UK provided engineering services to the
government-owned nuclear utilities in the United Kingdom, as well as the
offshore oil industry.
DIVESTITURES
On June 30, 1995, the Company sold all of the outstanding shares of Plant
Services, Inc. ("Plant Services"), its chemical cleaning and chemical
decontamination business to Westinghouse Electric Corporation.
On March 21, 1996, the Company signed a letter of intent that could lead to
Duke Engineering & Services, Inc. ("DE&S") acquiring VECTRA's engineering
services operations (including VECTRA GSI). The proposed sale is contingent
on negotiation and execution of a definite purchase agreement, government
approvals, approval of VECTRA's shareholders and DE&S's board of directors,
and other conditions.
As of April 1, 1996, the Company actively entered into discussions that could
lead to the sale of VECTRA UK.
FUEL SERVICES
The fuel services operations of the Company provides design, licensing,
procurement, fabrication, sale and leasing of equipment for handling,
transporting, and storing spent fuel and high level waste. The primary
products and services provided by the Company are (1) dry storage and
transport systems for spent nuclear fuel and (2) transportation packaging for
high level radioactive material.
DRY STORAGE. The spent fuel storage pools at many nuclear power plants are at
or near capacity, and federal government efforts to develop temporary and
permanent repositories have been continually delayed by strong opposition.
On-site dry spent fuel storage systems offer operators of nuclear power
plants a short-term (up to 40 years) solution for storage of spent fuel until
government repositories are built. Dry storage systems can be built,
operated and maintained at substantially less cost than reactor storage pools
and related support systems and structures.
The Company owns and licenses a system for the dry storage of spent nuclear
fuel, marketed under the trade name NUHOMS-Registered Trademark- (NUtech
HOrizontal Modular Storage), that has been licensed by the NRC for the sites
at which it has been constructed. The Company received a general non-site
specific license for NUHOMS-Registered Trademark- from the NRC in 1995. The
NUHOMS-Registered Trademark- system is an on-site system that integrates a
concrete storage facility with horizontally placed stainless steel canisters
containing spent fuel assemblies. NUHOMS-Registered Trademark- systems are
fabricated and constructed by selected subcontractors to the Company's design
specifications. NUHOMS-Registered Trademark- systems are currently in use at
Carolina Power and Light's H. B. Robinson Plant, Duke Power Company's Oconee
Station, Baltimore Gas and Electric's Calvert Cliffs Plant and Toledo
Edison's Davis Besse Plant. Further, the Company is under contract with the
Sacramento Municipal Utility District, GPU Nuclear Corporation and
Pennsylvania Power and Light to provide NUHOMS-Registered Trademark- systems
and services to their plants. VECTRA also was awarded the contract to
provide a modified NUHOMS-Registered Trademark- system to provide spent fuel
storage of the failed Three Mile Island, Unit 2, fuel canisters at the Idaho
National Engineering Laboratories. This is the first application of a
commercially licensed system at a DOE site.
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VECTRA has entered into a license agreement for the use of NUHOMS-Registered
Trademark- technology with Framatome for storage systems in Europe, Eastern
Europe, and Taiwan and agreements for materials, fabrication and delivery of
NUHOMS-Registered Trademark- systems with Hyundai and Kawasaki in South Korea
and Japan, respectively. The Company received fees upon execution of these
agreements and will receive payments upon production and sale of each
NUHOMS-Registered Trademark-system. The Company will also provide specific
design engineering support on a fee basis as NUHOMS-Registered Trademark-
systems are customized to specific client needs. VECTRA anticipates that it
will execute its first application of the license with Framatome for supply
of NUHOMS-Registered Trademark- technology to Armenia in 1996.
TRANSPORTATION CASKS. The Company owns and leases, on a project specific
basis, two rail mounted transportation casks for shipping spent nuclear fuel.
The Company also custom designs, obtains licenses and fabricates, through
subcontractors, transportation casks used to ship high level radioactive
materials. The Company sells or leases these casks to its customers for
their independent use or provides casks in conjunction with the performance
of radioactive materials management and transportation services. The Company
is currently under contract with the Sacramento Municipal Utility District to
build a railcar-mounted cask for the transport of NUHOMS-Registered
Trademark- canisters as part of the project to decommission that utility's
Rancho Seco plant. The contract was awarded in late 1992.
VECTRA licenses and sells transportation overpacks, UX-30's, to ship uranium
hexafluoride. The UX-30 is an NRC - licensed (for 5 years) transport package
used by fuel vendors to ship the uranium hexafluoride needed to produce
nuclear fuel.
The Company designs custom integrated handling and transportation systems to
move low level and high level radioactive waste. The Company has also
supplied remote controlled systems to the DOE to handle high level waste.
Most of the Company's work for the DOE has been through subcontracts with
corporations which operate the DOE's nuclear facilities. Custom designed
equipment has been developed for ultimate use at the Savannah River Plant,
Idaho National Engineering Laboratory and Hanford Engineering Development
Laboratory.
WASTE SERVICES
The waste services operations of the Company is targeted at assisting
utilities and the DOE in the processing and disposal of certain types of low
level radioactive waste such as resins, liquids and sludges. The Company's
patented dewatering equipment minimizes waste volume and reduces the costs of
disposal. VECTRA has also placed into operation at six plants in the U.S.
its liquid volume reduction system that dries liquid waste streams, such as
evaporator concentrates, to a dry powdered form. VECTRA is also supplying
similar units to a client in South Korea for use at their existing operating
plants and plants under construction. The Company also provides, separately
or in conjunction with these processing services, disposable, high integrity
containers ("HICs") for transporting and disposal of these wastes. VECTRA's
HICs are proprietary containers licensed by the state regulators responsible
for both the South Carolina and Washington disposal sites and by the DOE for
use at the Savannah River site. Together these systems significantly reduce
waste volumes and the transportation and disposal costs associated with low
level waste. The scope of the Company's contracts range from handling a
customer's radioactive waste management needs on a specific service basis to
providing all services required to process and package low level radioactive
waste and transport it to a disposal site.
VECTRA has developed a reverse osmosis system to provide advanced liquid
waste treatment. The reverse osmosis technology uses filtration to remove
particulate and organic materials. When coupled with the liquid volume
reduction system units, VECTRA's reverse osmosis system can remove
radioactive contaminates from the liquid and significantly reduce the waste
volume without generating a secondary waste stream of contaminated resin.
This technology is currently being applied at Commonwealth Edison.
At December 31, 1995, the Company had more than fifteen service contracts
with utilities to provide services and equipment required to treat, package
and dispose of their radioactive resins, liquids and sludges. The Company
also provides waste services and technologies to other utilities in
connection with the handling of low level waste in their plants.
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In December 1994, VECTRA received a notice of allowance from the U.S. Patent
and Trademark office to use the EnviroGlass-Registered Trademark- trademark
for its vitrification system. This thermal treatment process destroys the
organic component of the waste stream, significantly reducing the volume of
low level radioactive waste and stabilizes the remaining inorganic material
in a glass matrix. In late 1994 VECTRA completed a technology development
demonstration of the EnviroGlass-Registered Trademark- vitrification system
in a cost-shared effort with Westinghouse Hanford. The demonstration proved
the feasibility of the system to successfully process low level waste.
VECTRA then entered into a significant capital program to commercialize this
technology. The vitrification unit was able to process the waste, however,
additional design is required to increase the waste streams processed by the
system to make it more economically beneficial in the marketplace. The
project's construction and startup activities have been temporarily suspended
until a contract is procured to provide funding to rework the system to
increase its volume throughput and provide a revenue stream for its
deployment. The required systems rework includes upgrading the air
polution control system and the thermo oxidizer system. The expected cost to
complete the unit is approximately $1.0 million.
The Company is pursuing contracts to demonstrate this new technology for use in
government waste remediation programs and commercial contracts for processing
of low level radioactive waste prior to on-site interim storage. It is expected
that this technology will take a more prominent role in VECTRA's mix of services
in the future.
ENGINEERING SERVICES
The Company currently offers systems engineering and analysis, structural
engineering and analysis, nuclear engineering, and design and analysis of
instrumentation, electrical and mechanical systems. The Company also provides
services to clients needing upgrades to their management information systems
and other operations and maintenance programs.
The following identifies the five primary engineering service areas, together
with a listing of some specific activities in such areas, that VECTRA provides
to its clients:
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MECHANICAL SYSTEMS ELECTRICAL/INSTRUMENTATION & CONTROL
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Erosion/Corrosion Electrical Distribution System Analysis
Environmental Equipment & Qualification Instrumentation & Control System Engineering
Thermal Hydraulic Studies & Analysis
Plant Performance Evaluations Electrical/Instrumentation & Control Plant
Energy Efficiency/Energy Management Modifications
Repowering/Uprates Process Control Automation
Mechanical Systems Design & Analysis
Service Water System Upgrades ENGINEERING ANALYSIS
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Clear Air Act Compliance Piping Analysis
Seismic Equipment Qualification
OPERATIONS Civil/Structural Engineering
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Seismic Engineering
Life Cycle Management Applied Mechanics/Materials Engineering
Materials Management Fracture Mechanics
Maintenance Engineering
Configuration Management RISK MANAGEMENT
Licensing Support -------------------------------------------
Valve Services Fire Protection System Design and Evaluation
Radiation Protection Program Development Fire Hazards Analysis
Weld Overlay Services Individual Plant External Event Evaluation
ASME Section II Inservice Inspection/Inservice Program Development
Testing Programs Process Safety Management
Process Re-engineering Risk Management Prevention Plans
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CLIENTS
The following identifies clients that accounted for more than 10% of the
Company's revenues, the revenues derived from those clients and the percentage
such revenues constitute of the Company's total revenues, during the periods
indicated (dollars in thousands):
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FISCAL YEARS ENDED
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DECEMBER 31, JANUARY 1, DECEMBER 31,
Client 1995 1995 1993
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Commonwealth Edison Company $24,469 19.8% $26,828 19.2% $9,333 14.4%
Entergy Operations, Inc. -- -- -- -- $7,352 11.4%
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While the Company performs continuing services for its clients, billings to a
particular client may fluctuate dramatically depending upon the status of a
particular project. Depending upon the timing and size of contracts, the
identities of the Company's largest clients may change from year to year.
FOREIGN OPERATIONS
The Company competes in certain international markets, principally Canada,
South Korea, Taiwan, and Europe. The Company's international projects
currently are primarily involved with plant maintenance and waste handling
services and engineering services to the government-owned nuclear utilities
in the United Kingdom, as well as the offshore oil industry. In addition, in
the past the Company has sold containers and handling equipment for export.
International revenues were approximately $10.3 million in 1995, $12.1
million in 1994, and $7.9 million in 1993. The Company's operations in
foreign countries are subject to the laws and regulations of such countries.
U.S. export restrictions limit the Company's ability to export some of its
products and services. There is no assurance that the levels of foreign
operations attained in 1995 will be repeated in 1996. As of April 1, 1996,
the Company actively entered into discussions that could lead to the sale of
VECTRA UK.
COMPETITORS
The Company's competition varies by business unit. VECTRA Fuel Services'
major competitors include Sierra Nuclear Corporation, Holtec International,
and Nuclear Assurance Corporation. VECTRA Waste Services competes primarily
with Waste Management's Chem-Nuclear Systems and Westinghouse SEG. The
engineering businesses compete against large and small engineering services
firms: Key competitors include Bechtel, Black & Veatch, Sargent & Lundy,
Raytheon, and Stone & Webster. The Company competes on the basis of price,
range of service, technical expertise, success in obtaining licenses, quality
and responsiveness to customer needs. Several of these competitors have
substantially greater financial and technical resources than the Company.
CONTRACTS
Most of the Company's contracts are awarded by a competitive process in which
a number of firms submit proposals in response to a client's request for
proposals to provide specified products or services. Each of the Company's
contracts is negotiated independently and varies as to profitability. In
entering into contracts with its clients the Company considers, among other
factors, the relative profitability of the contract as well as the long-term
goals of the Company in securing the contract.
Typically, all contracts, including the Company's material contracts, are
subject to termination for convenience upon 30 days written notice by the
client or the Company. Payments under engineering contracts are based on fee
schedules for its engineering and other staff, plus costs and materials.
Engineering contracts are often short-term, specific task contracts, while
contracts for NUHOMS-Registered Trademark- or low level waste systems may be
multi-year, multi-million dollar contracts. In some instances, such
contracts require use of the Company's working capital to fund a portion of
the design and fabrication of products or the provision of services. The
Company seeks progress payments in
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each contract, but the timing and amount of such payments varies with each
contract and is contingent upon schedule commitment. In the course of contract
negotiations, the Company endeavors to limit its liability for indemnity claims
and warranty items and to specifically exclude responsibility for any incidental
and consequential damages.
INSURANCE
The Company's liability insurance issues can generally be grouped into the
following three categories: general liability insurance, professional errors
and omissions, and nuclear-related incidents.
The Company's general liability insurance, which relates primarily to
property damage and personal injury incidents, is composed of two components.
VECTRA self-insures the first $1 million of any general liability damages.
The Company also maintains an excess liability insurance policy in the amount
of $10 million. Three types of incidents are excluded from the Company's
general liability insurance: those relating to errors and omissions
(relating principally to engineering design work), nuclear incidents, and
pollution/environmental damages.
The Company does not carry errors and omissions insurance for its
professional engineering liability. In the course of negotiations with a
client, the Company endeavors to have errors and omissions insurance deleted
from the requirements of the contract. If required by a client, the Company
will endeavor to purchase an errors and omissions policy specific to such
contract. In these cases, the Company endeavors to limit its liability for
errors and omissions to the insured amount, share the deductible portion with
its client, and pass the cost of such insurance to its clients. The
Company's self-insurance coverage, if amended by the Company, could be
applied to the settlement of any errors and omissions claims.
In general, nuclear incidents are covered under insurance carried by and
provided to operators of nuclear plants. Nuclear incidents are those in
which radiation exposure is potentially created. Under the "nuclear facility
form" insurance carried by all U.S. commercial nuclear utilities, coverage
for nuclear incidents is provided to contractors, such as VECTRA, performing
work on nuclear facilities. American Nuclear Insurers, a pool of domestic
and mutual insurers, provides coverage for up to $200 million per site in
claims. Pursuant to the Price-Anderson Amendment to the Atomic Energy Act of
1954 ("Price-Anderson"), additional coverage is provided through a resource
pool contributed to by the U.S. government and utilities. The Price-Anderson
program is estimated to provide approximately $9 billion in additional
coverage. In certain circumstances, transporters of radioactive waste are
covered by separate coverage. American Nuclear Insurers provides $10 million
of coverage in these circumstances. In situations where no intermediary is
involved in the transportation of such waste, incidents are covered under the
nuclear facility form (subcontracting does not remove a party from the
nuclear facility form). However, when an intermediary is introduced into the
transportation process, the facility form coverage is no longer applicable.
While the Company does have transporters and shippers coverage, management
believes that nearly all of its involvement in transporting waste (for which
the Company subcontracts to transporting companies) is covered by the nuclear
utility facility form.
Internationally, VECTRA's activities have generally been limited to
operations in Canada, South Korea, Taiwan and Europe. The Company has
contractual arrangements that may expand sales of its NUHOMS-Registered
Trademark- systems, involving the storage of high level radioactive waste, in
Japan, South Korea and Europe. In general, Japan, South Korea and countries
in Europe impose liability for nuclear incidents on the operators of nuclear
facilities, and require an operator of a nuclear facility to provide certain
minimum coverage. Many European countries have executed the Paris/Brussels
Conventions (1960-1963), an international treaty relating to coverage for
nuclear incidents that provides for additional coverage for claims through
special drawing rights (representing up to approximately $420 million) on
countries that are parties to the convention. The Paris/Brussels Conventions
also establish uniform systems to handle inter-country nuclear damage and
resulting claims. The Paris/Brussels Conventions provides coverage for
nuclear incidents to contractors, such as VECTRA, performing work on nuclear
facilities.
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Under the laws of Japan, South Korea and Canada, the operator of a nuclear
reactor is liable, irrespective of fault, for damages caused as a result of
operation of a nuclear reactor. Contractors of the reactor operator are
generally not liable for damages, except where the damages are caused by
malicious or deliberate acts. Where damages are caused in the transport of
radioactive waste generated by a nuclear reactor, the operator from whose
facility the material is being shipped is liable for the damages unless
otherwise agreed in writing. The Company's policy is not to agree to this
type of exposure. The operator must carry specified amounts of insurance for
damages, with the amounts of coverage varying from country to country. In
each of the three countries, the government provides protection in excess of
the required insurance through nuclear indemnification or other means.
PROPRIETARY TECHNOLOGY
The Company's policy is to seek patent protection for those features of its
products with a design utility of sufficient length to warrant the cost of
seeking a patent. While most of the technology relied on by the Company is
unpatented, it is regarded by the Company as proprietary and confidential. In
December 1994, VECTRA received a notice of allowance from the U.S. Patent and
Trademark office to use the EnviroGlass-Registered Trademark- trademark for
its vitrification system. This thermal treatment process reduces the volume
of low level radioactive waste and stabilizes the remaining radioactive
metals in a glass matrix. The Company has patented its NUHOMS-Registered
Trademark- dry storage systems for spent nuclear fuel discharged from
commercial nuclear power plants and its resin drying technology for low level
waste processing. The Company also has a patent pending for its WEAR-TM-
(Wire Energy Absorbing Rope) Pipe Restraint which is designed to absorb
seismic and other vibrations at industrial facilities and nuclear power
plants. Most of the Company's employees have entered into confidentiality
agreements with the Company restricting the employee's disclosure and use of
the Company's proprietary information.
NRC regulations require the technical specifications and supporting data of
each design submitted for NRC approval to be available for public inspection,
unless the NRC determines that a design or certain features thereof
constitute proprietary information, in which case public access to the
proprietary information is not permitted. The Company has and will continue
to seek such proprietary treatment of certain features of its designs
submitted to the NRC. Parties, including competitors, may challenge
administratively and judicially the staff's determination that the designs
are proprietary and thus entitled to confidential treatment.
Although the Company maintains that most of its technical drawings and
designs are unpublished works protectable by copyright and trade secret laws,
these contentions have never been tested judicially. There is no assurance
that the Company will be able to maintain confidentiality of its NRC approved
designs or prevent competitors from copying such designs. At least two of
its competitors have obtained NRC approval to market casks based on a Company
designed cask.
The Company's research and development strategy consists of adapting its
custom designed products and systems funded by individual customers for
broader market applications and internally funded research and development
expenditures. In 1993, 1994 and 1995, the Company spent approximately
$500,000, $1.6 million, and $3.3 million respectively, on Company-sponsored
research and development. Except for government contracts, the Company
usually retains exclusive rights to customer funded technology to the extent
it is proprietary.
EMPLOYEES
At December 31, 1995, the Company had approximately 872 employees of which
approximately 58% have an engineering background or degree. The Company is
dependent upon obtaining and retaining highly skilled and motivated
personnel. As noted above, most employees are required to sign confidentiality
agreements restricting their ability to disclose or use the Company's
proprietary information.
GOVERNMENT REGULATION
In the United States, the NRC administers a regulatory program which affects
nearly every aspect of the Company's operations. The Department of
Transportation, the Environmental Protection Agency, some states, localities
and other federal agencies also regulate aspects of the Company's business.
Regulatory changes with significant business impact
10
<PAGE>
have occurred with some frequency in the industry. The nuclear industry in
general, and the handling, disposal and transportation of radioactive waste
in particular, have sometimes been the subject of intense political and legal
action. While the Company attempts to anticipate changes in the regulatory,
political and legal environment in which it operates, it is not always able
to do so and such changes could render the Company's products and its methods
of doing business obsolete or require extensive modification. To the best of
management's knowledge, the Company is in compliance in all material respects
with regulatory requirements applicable to its business.
FEDERAL REGULATION
The Company must obtain a Certificate of Compliance from the NRC for each
type of cask it sells or leases and any modifications to such casks. Among
other requirements, applicants for a Certificate of Compliance must provide
the NRC: (1) a description of the cask design (including manufacturing
specifications); (2) a quality assurance program to assure that the cask will
be constructed in accordance with such design and; (3) a safety analysis
report documenting the simulation of various types of transportation
accidents. A Certificate of Compliance is effective for five years; however,
the NRC has the authority at any time to review a Certificate of Compliance
and modify or cancel it based on safety considerations. Once issued, the
design and construction procedures for an approved container may not be
modified without the consent of the NRC.
The NRC also requires the Company to maintain approved quality assurance
programs for its equipment systems. The Company also files, for approval
from the NRC, topical reports detailing the performance characteristics of
various equipment.
The Company must comply with the extensive transportation regulations
promulgated by the Department of Transportation and the NRC concerning the
packaging, handling, labeling and routing of radioactive materials. The
regulations also set forth detailed safety and equipment standards as well as
requirements covering training, quality control, insurance and other matters.
Federal law establishes that each state is responsible for managing most of
the low level radioactive waste generated within the state. To assist states
in managing their low level waste, the Low-Level Radioactive Waste Policy Act
of 1980 (as amended in 1985) encourages states to form regional state
compacts for the establishment of regional disposal facilities. Despite the
enforcement provisions of the amended act (e.g., milestone and surcharges),
no new regional low level waste disposal facilities have yet been
constructed. The Hanford, Washington disposal site is only open to
generators in the Northwest Compact and the Barnwell, South Carolina site is
open to generators nationwide. Low level radioactive waste generators may
utilize volume reduction methods that will allow for the generated waste to
be stored at the generator's site for an indefinite period of time. These
new developments in the management of low level radioactive waste and
additional actions that may be taken by Congress and the courts will be
closely followed by the Company to determine the effect they will have on its
business.
STATE REGULATION
Although the Company does not operate radioactive waste disposal sites,
regulations governing those sites do affect its business. The NRC has issued
regulations requiring the disposal of substantially all low level radioactive
waste by transfer to licensed recipients. There are currently two sites
licensed to accept low level waste. These are in Barnwell, South Carolina
and Hanford, Washington.
South Carolina and Washington regulate the low level radioactive waste
disposal sites located within their borders including approval of the HICs
and solidification and stabilization processes used to bury wastes. As part
of the approval process, the NRC reviews the application and provides
comments to the state.
11
<PAGE>
The Company's decontamination and chemical cleaning activities and, more
recently, its transportation cask leasing activities make it desirable for
the Company to maintain a license for the possession and use of radioactive
materials. The Company currently holds such a license in the state of South
Carolina. Possession of these licenses requires compliance with the
radiation protection rules and regulations of these states as well as the
NRC. Violation of the rules in the handling or storage of radioactive
materials at a licensed facility could result in a fine or the license being
revoked.
Certain states also regulate the shipment of radioactive materials. Some
localities have attempted to regulate radioactive waste shipments as well and
to prohibit such shipments through their jurisdictions. Such state and local
government actions have at times affected a portion of the Company's
business, although the Company believes that it is able to operate in
compliance with the requirements imposed. If such regulations proliferate,
they could have a material adverse affect on the Company.
OTHER REGULATORY CONCERNS
Several states have adopted laws prohibiting or limiting the construction of
nuclear power plants or waste disposal sites or both, and referenda to close
existing plants have been attempted. The NRC has proposed regulations which
would tie the granting of new licenses for nuclear reactors to the resolution
of problems in the disposal of high level radioactive wastes. In addition,
several power companies have canceled plans for, delayed the construction or
operation of, or shut down operating nuclear power plants. The future
operating results of certain of the Company's operations could be adversely
affected if, as a result of these or other developments, nuclear power plants
which are presently in service are removed from service.
The Company is subject to federal, state and local regulations limiting
exposure of its employees and the public to radioactive materials and to the
chemicals used in the cleaning and decontamination processes. The standards
imposed have been made more stringent in recent years.
ITEM 2. PROPERTIES
As of December 31, 1995, the Company leases approximately 250,675 square feet
of office and warehouse space which constitutes most of its facilities. It
owns facilities comprising 3,600 square feet. Management believes the
Company's facilities are adequate, suitable for its present needs, and will
continue to periodically review its leased facilities for economic
optimization. The Company's headquarters are at 5000 Executive Parkway, Suite
500, San Ramon, CA 94583.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in contractual, personal injury and general liability
cases and claims which are considered normal to its business. In the opinion
of Company management, none of these claims will have a material adverse effect
on the Company. However, an unfavorable outcome could materially impact the
Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded over-the-counter on the NASDAQ Stock
Market, National Market System, under the symbol VCTR.
The following table sets forth the range of the high and low bid prices for
the Company's Common Stock from First Quarter 1994 through Fourth Quarter
1995 as reported by NASDAQ.
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
PERIOD HIGH LOW HIGH LOW
------ ----- ----- ------ -----
<S> <C> <C> <C> <C>
First Quarter 3-1/2 2-7/8 10-1/4 7-1/2
Second Quarter 3-3/8 2-3/8 8-1/4 3-3/4
Third Quarter 3-25/32 2-5/8 4-7/8 3-3/8
Fourth Quarter 2-7/8 1-7/8 3-7/8 2-1/2
</TABLE>
At December 31, 1995, the Company had 7,833,527 shares of Common Stock issued
and outstanding and 323 known shareholders of record. The Company has not
paid dividends on its Common Stock and does not expect to pay dividends in
the foreseeable future.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
VECTRA TECHNOLOGIES, INC.
FINANCIAL HIGHLIGHTS
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
FOR THE FISCAL YEAR:
Revenues $123,501 $140,023 $64,581 $68,989 $66,423
Income (loss) before income taxes (12,103) (5,175) (296) (1,672) 1,731
Net income (loss) (12,213) (5,325) (546) (1,827) 1,561
Net income (loss) per share $ (1.56) $ (.68) $ (.09) $ (.32) $ .28
Weighted average shares
outstanding 7,840 7,802 5,909 5,653 5,618
AT YEAR END:
Total assets $ 60,829 $ 84,165 $43,881 $38,102 $38,609
Long-term debt 17,216 8,617 1,514 1,309 2,023
Shareholders' equity $ 17,386 $ 29,800 $19,073 $18,770 $19,015
</TABLE>
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Item 1. Business".
ACQUISITION
On January 6, 1994, the Company's shareholders approved the purchase of all
of the stock of ABB Impell Corporation, ABB Government Services, Inc. and ABB
Impell Ltd. (the "Impell Companies") from affiliates of ABB Asea Brown Boveri
Ltd. of Zurich, Switzerland (the "Seller"). The acquisition, effective as of
midnight December 31, 1993, was completed on January 7, 1994, and was
accounted for as a purchase in 1994. The purchase price of $32.3 million,
together with the direct costs of the acquisition were allocated to the fair
market value of the assets acquired and liabilities assumed. The seller
received $14.0 million in common stock (1,714,503 shares) and the remainder of
the purchase price in cash.
Immediately following the acquisition, the Company commenced integration of
the U.S. commercial engineering services of the predecessor companies into
one organizational unit. Operations were combined and are managed as a
single entity. Due to this integration, management is unable to assess the
separate performance of the Impell Companies' domestic engineering services
(or the Company's engineering services prior to the acquisition) compared to
prior periods.
DIVESTITURES
Effective June 30, 1995, the Company sold all of the outstanding capital
stock of its wholly owned subsidiary, Plant Services, to Westinghouse
Electric Corporation. The sale price was $17.4 million after final
adjustments including environmental remediation and earnout provisions. The
proceeds from the sale were used to reduce notes payable and long-term debt
payable to banks, pay retained liabilities, and pay expenses associated with
the transaction. For the six months ended June 30, 1995, Plant Services
generated revenues of approximately $11 million and operating income of
approximately $4 million.
In September 1995 the Company sold its 10% ownership in Recytec America, Inc.
to Recytec, S.A. for $1.15 million resulting in a loss of $156,000 which is
included in selling, general and administrative expense. These shares had
been issued to VECTRA in connection with the sale of Alaron Corporation to
Recytec S.A. in August 1991.
On March 21, 1996, the Company signed a letter of intent that could lead to
Duke Engineering & Services, Inc. acquiring VECTRA's Engineering Services
(including VECTRA GSI). The proposed sale is contingent on negotiation and
execution of a definite purchase agreement, government approvals, approval of
VECTRA's shareholders and DE&S's board of directors, and other conditions.
If the sale is consummated under this letter of intent, the Company expects
to receive approximately $27.5 million in cash subject to adjustment for the
net book value of the assets ultimately sold.
As of April 1, 1996, the Company actively entered into discussions that could
lead to the sale of VECTRA UK.
15
<PAGE>
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
REVENUES
Total revenues decreased 11.8% to $123.5 million in 1995, from $140.0 million
in 1994. The decrease in revenues for the year is attributable to the sale
of the Plant Services operations, decrease in nuclear engineering activity,
and lower sales in the waste services operations relating to the completion
of a large contract with a client in South Korea during 1994; offset in part
by higher revenues from a spent fuel storage system contract. The nature of
the Company's business is such that a single client may account for more than
10% of the Company's revenues during any year. The Company had one client
that accounted for approximately 20% of total revenues in both 1994 and 1995.
GROSS PROFITS
Each of the Company's contracts is negotiated independently and varies as to
profitability. The timing and actual performance by the Company on its major
contracts also affect the Company's gross profit margin.
Gross profit decreased to 27.6% of revenues in 1995 from 32.6% of revenues in
1994. The lower gross profit in the engineering services operations is due
to competitive pricing pressures. Plant Services, prior to disposition in
June 1995, and fuel services experienced a slight decrease, while waste
services experienced a slight increase in gross margin percent due to the
relative profitability of individual contracts.
EXPENSES
Research and development expenses increased 104.6% to $3.3 million in 1995
from $1.6 million in 1994. The increase is mainly due to expenses related to
the Company's development of its vitrification process,
EnviroGlass-Registered Trademark-.
Selling, general and administrative expenses decreased 16.9% to $38.2 million
in 1995 from $46.0 million in 1994 and, as a percentage of revenue, decreased
to 30.9% in 1995 from 32.8% in 1994. The decrease is primarily due to
decreased severance related costs and lower ongoing staff levels.
Net interest expense increased $400,000 as a result of bank fees and the
amortization of warrant related debt discount offset by decreases in the loan
balances resulting from the sale of Plant Services. Interest expense
includes interest on the term loan and the revolving credit facility as well
as amortization of bank fees and warrant-related debt discount.
Based upon negotiations management has conducted subsequent to December 31,
1995, and the DE&S letter of intent regarding the potential sale of certain
assets of the Company, the Company wrote down intangible assets consisting
primarily of costs in excess of net assets acquired by $12.8 million to their
estimated fair value. Actual amounts realized if these assets are sold may
differ from management's estimates of fair value and such differences could
be material to the financial statements.
The Company periodically reviews its property, plant and equipment for
impairment in the value of these assets. As a result of this review, the
Company wrote off assets with carrying values of approximately $1.5 million.
NET LOSS
The net loss increased 129.4% to $12.2 million in 1995 from $5.3 million
in 1994. The increase is due to increased research and development costs,
the writedown of plant, property and equipment and intangibles, and decreased
revenues offset by a gain on the sale of Plant Services business.
16
<PAGE>
1994 COMPARED TO 1993
REVENUES
On a pro forma basis for the combined Company, as discussed in Note 6 to the
consolidated financial statements, revenues decreased 17% to $140.0 million
for 1994 from the pro forma combined $170.0 million in 1993. The Company
experienced the effects of an industry-wide trend by utilities to reduce or
defer spending. This combined with integration issues resulting from the
combination of the predecessor companies, has contributed to the decrease in
revenues. In 1993 the Company had two clients that in the aggregate
accounted for 26% of total revenues.
GROSS PROFITS
Gross profit decreased to 33% of revenues in 1994 from 34% of revenues in
1993. Engineering services' gross margin percent remained fairly constant
while plant and fuel services experienced a slight decrease and waste
services experienced a slight increase in gross margin percent due to the
relative profitability of individual contracts. During 1994 gross profit
dollars increased due to the overall increase in revenue compared to 1993.
EXPENSES
Research and development expenses increased 242% in 1994 compared to 1993.
The increase is mainly due to expenses related to the Company's development
of its vitrification process, EnviroGlass-Registered Trademark-.
Selling, general and administrative expenses increased $28 million and, as a
percentage of revenues, increased from 28% to 33% for 1994 compared to 1993.
The increase was primarily attributable to the increased size of the combined
Company, increased goodwill amortization expense resulting from the Impell
acquisition, and severance-related costs that were recorded in the second and
fourth quarters of 1994. Utilization rates for engineering services were
lower than expected during 1994 primarily due to organizational changes,
lower demand for engineering services by commercial nuclear utilities, and
resulting excess capacity which contributed to increased overhead expenses.
Actions were taken during the second quarter of 1994 to reduce management
overhead and operating costs, including a temporary reduction in employee
compensation during portions of the second and third quarters and a cessation
of director compensation from June to the end of 1994. Severance costs
related to the reduction in management personnel which resulted from
downsizing two offices and combining two other offices, when combined with
provisions for severance payments to the former president and chief executive
officer, resulted in aggregate charges to earnings of approximately $950,000
in the second quarter of 1994. Management further reduced personnel in the
fourth quarter of 1994 to adjust for the lower demand for engineering
services by commercial nuclear utilities. This reduction resulted in
additional charges to earnings of approximately $1,500,000. Management also
wrote off equipment and intangible assets with impaired value that resulted
in charges to earnings of approximately $750,000 in the fourth quarter of
1994 due primarily to the non-renewal of a lease with a client and reduced
expectations for low level waste transportation in Europe.
Net interest expense increased significantly in 1994 from 1993 as a result of
the debt incurred to finance the acquisition of the Impell Companies.
Interest expense includes interest on the term loan and the revolving credit
facility as well as amortization of bank fees and warrant-related debt
discount.
RESTRUCTURING EXPENSE
In the fourth quarter of 1993, the Company recorded a restructuring charge of
$2.5 million resulting principally from the Company's acquisition of the
Impell Companies. The charge included accrued costs resulting from
integrating the two companies (the Company and the Impell Companies)
including approximately $800,000 of employee-related expenses, $600,000 for
administrative and project management systems integration and $500,000 for
other administrative and legal expenses. The charge also reduced the
valuation of certain fixed and intangible assets by approximately $600,000 to
reflect the new strategic focus of the Company. In the year ended January 1,
1995, the Company has incurred charges of approximately $815,000 for
employee-related expenses, $400,000 for administrative and project management
systems integration, $400,000 for other administrative charges and
17
<PAGE>
$575,000 for adjusted asset valuation. The Company also reduced the estimate
of total restructuring charges by approximately $310,000, which is reflected
in the statement of operations as a credit of $180,000 in the first quarter,
$50,000 in the second quarter and $80,000 in the third quarter of 1994. All
of the accrued costs have been incurred or reversed in 1994. Cash needs for
these expenditures were met from operations and borrowing under the Company's
revolving credit facility.
NET LOSS
Net loss increased to $5.3 million in 1994 from a loss of $500,000 in 1993.
The increase in loss was due primarily to increased overhead costs from lower
utilization rates in domestic engineering services, increased goodwill
amortization, severance-related expenses and increased interest expense.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities decreased to approximately $1.0
million in 1995 from approximately $7.1 million in 1994, a $6.1 million
(86.2%) decrease. Cash provided by operating activities decreased primarily
due to the increase in operating losses, as described above, which were
partially offset by increases in cash from changes in operating working
capital. Operating working capital items increased the net cash provided
from operating activities by approximately $6.1 million and $5.3 million in
1995 and 1994 respectively. The 1995 increase in cash from changes in
operating working capital was gained primarily from increased days
outstanding in accounts payable and the 1994 increase resulted primarily from
a reduced level of accounts receivable resulting from lower levels of
operating activities at year end.
Accounts receivable and billings balances differ from period to period as a
result of varying contractual terms that relate to the timing and amount of
progress payments for some of the Company's multi-year, multi-million dollar
contracts. This variability is expected to continue in future periods.
The $8.4 million net cash provided by investing activities in 1995 was
primarily composed of approximately $17.3 million provided by the sale of the
Company's Plant Services operations and the sale of the Company's minority
investment in Recytec, offset by approximately $9.2 million used for capital
expenditures. The primary component of capital expenditures was related to
the development of the Company's EnviroGlass-Registered Trademark-
technology.
The Company's loan covenants with Banque Paribas and Banque Nationale de
Paris (the "Banks") restrict capital expenditures and commitments to a
maximum amount of $12.0 million and $3.3 million during 1995 and 1996
respectively. The majority of the Company's capital expenditures are
incurred for equipment used for processing radioactive waste volume
reduction, dewatering, and EnviroGlass-Registered Trademark- systems in its
waste services operations. The Company's fuel services operations have
capital requirements primarily for licenses and high-level waste
transportation equipment. The Company's engineering services operations have
modest capital requirements mainly for computer equipment. The Company
anticipates that it will need to devote significant capital resources to
technology development in the future in order to remain competitive and make
significant investments in capital equipment to increase its revenue. The
Company anticipates that much of its 1996 capital equipment acquisitions will
be financed through cash flows from then new, concurrent customer contracts.
The Company had contractual capital acquisition commitments of $900,000 as of
December 31, 1995, and expects to fund these commitments from cash generated
through operations. In addition, the cost to complete the Company's
vitrification unit is expected to be approximately $1.0 million.
The $10.0 million net cash used in financing activities during 1995 was
primarily the result of the Banks' imposed debt repayment. The Company
increased its borrowings under its revolving accounts receivable facility at
various times for a total of $7.0 million and drew down the maximum amount of
$3.0 million under a capital equipment financing facility. The Company was
encouraged by the Banks to enter into divestitures during the year and repaid
bank debt by approximately $21.1 million, consisting primarily of essentially
all of the proceeds of those divestitures and scheduled payments.
18
<PAGE>
In late 1993 and early 1994, the Company financed its acquisitions,
operations and development from the sale of capital stock and from bank debt.
The Company financed the cash portion of the acquisition of the Impell
Companies through a $15 million term loan and a draw on a $25 million
revolving credit line. All debt existing prior to the acquisition was
refinanced through these new credit agreements.
TERM LOAN The Company borrowed $15.0 million from the Banks on January 6,
1994, maturing on December 31, 1998 (the "Term Loan"). In connection with
this loan the Company paid the Banks a $375,000 closing fee and issued
warrants to the Banks to purchase 830,060 shares of the Company's common
stock at $8.17 per share, exercisable through January 7, 1999 (the "Original
Warrants"). The agreement with the Banks specifies certain negative,
affirmative and financial covenants including, without limitation, covenants
with respect to debt/capital ratio, interest coverage, fixed charge coverage
and minimum net worth, and restrictions on dividends and activities of the
Company.
In March 1995, upon the Company's continued failure to meet certain measures
of financial performance as required by the covenants contained in the Term
Loan agreement and the resulting third amendment to waive/reset the Term
Loan's financial covenants, the Banks required that the Original Warrants be
repriced to an exercise price of $2.94 per share and that the Banks be given
the option to reprice these warrants to $0.01 per share if $10.0 million of
cash was not brought into the Company by June 30, 1995. In June 1995 the
Company sold its Plant Services operations and subsequently repaid $7.3
million of the Term Loan. In connection with this payment, the Banks waived
the scheduled June 30, 1995, principal payment and the Original Warrants were
not repriced. After this lump sum payment and scheduled principal payments
since inception, the balance of the Term Loan was approximately $2.9 million
as of September 1995.
In September 1995, the Company again failed to meet certain measures of
financial performance as required by covenants contained in the Term Loan
agreement and again received a waiver of the Term Loan's financial covenants
and a waiver of the scheduled September 30 and December 31, 1995, principal
payments. Additionally, the Banks acquired the rights to reprice the
Original Warrants to $0.01 per share if, among other things, all obligations
to the Banks were not repaid in full by March 31, 1996. Also at this time,
the Banks made available to the Company an additional $3.0 million facility
associated with the Term Loan for capital expenditures, primarily
EnviroGlass-Registered Trademark- ("Tranche B"). Tranche B was initially
scheduled to mature on March 31, 1996, and had an associated $150,000 fee,
payment of which is deferred to March 31, 1996, and provided for warrants
expiring September 20, 2000, equal to a maximum (based on the Company's usage
and repayment of this facility) of 6% of the Company's outstanding common
stock at $0.01 per share. By the end of the fourth quarter of 1995 the
Company had fully used this facility by borrowing $3.0 million and then
repaying $1.1 million obtained from the final escrow payment from the Plant
Services sale, resulting in a balance outstanding under Tranche B of $1.9
million at December 31, 1995. Based on this usage, the Banks acquired the
rights to warrants to purchase 392,431 shares of the Company's common stock
at $0.01 per share.
In December 1995, the Banks made available to the Company an additional $1.0
million working capital facility associated with the Term Loan which was
scheduled to mature on March 31, 1996 ("Tranche C"). Tranche C had an
associated fee of $125,000, payment of which is deferred, and provided for
warrants expiring December 26, 2000, equal to a maximum (based on the
Company's usage and repayment of this facility) of 2% of the Company's
outstanding common stock at $0.01 per share. The Company did not use this
facility through March 31, 1996. At December 31, 1995, the Banks had
acquired the rights to warrants to purchase 78,335 shares of the Company's
common stock at $0.01 per share, and such warrants were valued at $107,000.
Another 78,335 shares of common stock at $0.01 per share are due to the Bank
if the loan is used and not repaid by a specific date.
In March 1996, the Banks extended the due date of borrowings under Tranche B
and Tranche C through April 15, 1996.
19
<PAGE>
In April 1996, the Banks extended the due date of borrowings under Tranche B
and Tranche C through January 2, 1997; waived the scheduled March 31 and June
30, 1995, Term Loan principal payments; reset the financial covenants for the
quarters ending December 31, 1995, through the terms of the loans; and
restored the Original Warrants to an exercise price of $2.94 per share. For
these actions the Banks required a fee of $950,000, payment of which is
deferred until January 2, 1997. If, among other things, the Company's total
obligation to the Banks is not repaid in full before August 31, 1996, this
agreement contains maximum penalties of $600,000 which will also be deferred
to January 2, 1997. This will also trigger the repricing of the Original
Warrants to $0.01 per share and issuing to the Banks rights to purchase
approximately 550,000 shares of the Company's common stock at $0.01 per
share. The Company may also elect to defer the $750,000 payment due
September 30, 1996, to January 2, 1997, by incurring a fee of $150,000,
payment of which is deferred. The Company anticipates, but can give no
assurances, expressed or implied, that by entering into a joint venture or
strategic partnership, or the sale of assets it will be able to raise
sufficient funds to avoid these penalties.
REVOLVING CREDIT AGREEMENT The Company entered into a $25.0 million
revolving credit agreement (the "Credit Agreement") with the Banks on January
6, 1994, which originally matured on December 31, 1995. Borrowings under the
Credit Agreement are limited by the lesser of a percentage of eligible trade
accounts receivable (the "Borrowing Base") or the maximum amount of the
facility. The amount of funds available is subject to fluctuation of accounts
receivable. In October 1994, the maximum amount of the facility was reduced
to $22.5 million.
In June 1995, utilizing a portion of the proceeds from the sale of Plant
Services, the Company repaid $6.6 million of the amount then outstanding
under the Credit Agreement. The maximum amount of the Credit Agreement was
reduced to $12.5 million and the Banks were paid a fee of $100,000.
In December 1995, the Credit Agreement's maturity was extended to March 31,
1996, in consideration for an amendment fee of $125,000, of which the payment
of $100,000 was deferred.
In March 1996, the Credit Agreement's maturity was extended to April 15, 1996.
In April 1996, the Credit Agreement's maturity was extended to January 2,
1997, and its applicable interest rate was increased by approximately three
percentage points to the Bank's prime rate plus 1.5% and the Eurodollar rate
option was eliminated. If the Company does not reduce the outstanding
balance of the Credit Agreement and its maximum amount by a minimum of $1.0
million from the sale of assets by May 31, 1996, this agreement contains a
penalty of $200,000, payment of which is also deferred. Additionally, the
Company has the requirement of either reducing the amount outstanding and
maximum amount of the Credit Agreement by $600,000 by June 30, 1996, or
incurring a fee of $100,000, payment of which is also deferred. Similarly,
the Company may elect to defer a $625,000 payment due on September 15, 1996,
to January 2, 1997, by incurring a fee of $100,000, payment of which is
deferred. For these actions the Company incurred a fee of $125,000, payment
of which is deferred until January 2, 1997.
20
<PAGE>
SUMMARY INTEREST, FEES (PAID & DEFERRED) AND WARRANTS ISSUED TO THE BANKS
<TABLE>
<CAPTION>
ITEM NOTE NUMBER OF SHARES AMOUNT ($000)
---- ---- ---------------- -------------
<S> <C> <C> <C>
Interest Paid, Inception to April 15, 1996 na $4,054
Fees Billed, Inception to April 15, 1996 1 na 1,865
Fees Deferred, Inception to April 15, 1996 2 na 1,450
Warrants exercisable at $2.9375 3 830,060 822
Warrants exercisable at $0.01 3 470,917 1,232
------
Total $9,423
------
------
</TABLE>
Notes:
1. Includes fees paid to the Banks and the Banks' attorneys and accountants.
2. Fees deferred until the earlier of the liquidation of all obligations to
the Banks or January 2, 1997.
3. Warrants valued by management using Black Scholes valuation model with
April 9, 1996, market data.
On January 2, 1997, the indebtedness to the Banks under the Term Loan and
Credit Agreement which could amount to as much as $18.2 million
plus deferred fees of up to $2.6 million become due. All proceeds from the
sales of assets covered under the letter of intent described above are to be
applied against the outstanding bank borrowings. However, there can be no
assurance that these sales will be completed on terms acceptable to the
Company.
The Company believes that cash and cash equivalents at December 31, 1995,
together with cash generated from operations will be adequate to meet its
cash needs through December 31, 1996. Management is committed to decreasing
costs in order to bring the Company to profitable operations and made
substantial expense reductions in 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors 22
Consolidated Statements of Operations for each of the three years in the
period ended December 31, 1995 23
Consolidated Balance Sheets at December 31, 1995, and January 1, 1995 24
Consolidated Statements of Shareholders' Equity for each of the three years in
the period ended December 31, 1995 25
Consolidated Statements of Cash Flows for each of the three years in the
period ended December 31, 1995 26
Notes to Consolidated Financial Statements 27
</TABLE>
21
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
VECTRA Technologies, Inc.
We have audited the accompanying consolidated balance sheets of VECTRA
Technologies, Inc. as of December 31, 1995, and January 1, 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of VECTRA Technologies, Inc. at December 31, 1995, and January 1, 1995, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
ERNST & YOUNG LLP
Walnut Creek, California
April 5, 1996, except Note 3
as to which the date is
April 15, 1996
22
<PAGE>
VECTRA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
DECEMBER 31, JANUARY 1, DECEMBER 31,
1995 1995 1993
------------ ---------- ------------
<S> <C> <C> <C>
Revenues $123,501 $140,023 $64,581
Operating costs 89,444 94,320 42,900
-------- -------- -------
Gross profit 34,057 45,703 21,681
Research and development expenses 3,257 1,592 465
Selling, general and administrative expenses 38,210 45,955 17,826
Write downs of property, plant and equipment and
intangible assets 14,319 629 791
Restructuring and lease termination expenses -- -- 2,544
-------- -------- -------
Operating income (loss) (21,729) (2,473) 55
Interest expense, net (3,105) (2,702) (351)
Gain on sale of subsidiary 12,731 -- --
-------- -------- -------
Loss before income taxes (12,103) (5,175) (296)
Provision for income taxes 110 150 250
-------- -------- -------
Net loss $(12,213) $(5,325) $ (546)
-------- -------- -------
-------- -------- -------
Net loss per share $ (1.56) $ (.68) $ (.09)
-------- -------- -------
-------- -------- -------
Number of shares used to calculate net loss per share 7,840 7,802 5,909
-------- -------- -------
-------- -------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23
<PAGE>
VECTRA TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 1,
1995 1995
------------ ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,834 $ 3,427
Securities available for sale 1,274 919
Accounts receivable, net of allowance of $785 for 1995 ($384 for 1994) 21,065 26,211
Costs and estimated earnings in excess
of billings on uncompleted contracts 1,665 3,076
Refundable income tax prepayments 600 --
Inventories 1,176 1,426
Prepaid expenses 720 931
-------- --------
Total current assets 29,334 35,990
Property, plant and equipment, at cost
Land 94 94
Buildings 359 586
Machinery and equipment 8,707 20,000
Construction in progress 9,011 655
Furniture and fixtures 2,587 4,996
-------- --------
Total property, plant and equipment 20,758 26,331
Less accumulated depreciation 8,614 15,027
-------- --------
Net property, plant and equipment 12,144 11,304
Costs in excess of net assets of acquired businesses, net of accumulated amortization 14,780 28,638
Licenses, patents and other intangibles, at cost, net of accumulated amortization 1,200 1,110
Investments and long-term prepaid costs 3,305 6,807
Other assets 66 316
-------- --------
Total assets $ 60,829 $ 84,165
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Note payable to bank $ -- $ 15,200
Accounts payable 10,762 5,060
Accrued payroll and related expenses 6,011 7,014
Other accrued liabilities 6,742 6,153
Billings in excess of costs and
estimated earnings on uncompleted contracts 2,288 9,122
Long-term debt due within one year -- 2,712
-------- --------
Total current liabilities 25,803 45,261
Long-term debt 17,216 8,617
Deferred lease incentive 424 487
Commitments and contingencies
Shareholders' equity
Class A Preferred Stock, 4,100,000 shares authorized, none issued and
outstanding -- --
Common Stock, $.01 par value, 30,000,000 shares authorized;
7,833,527 shares issued and outstanding in 1995
(7,848,627 shares issued and outstanding in 1994) 44,960 45,212
Accumulated deficit (27,574) (15,412)
-------- --------
Total shareholders' equity 17,386 29,800
-------- --------
$ 60,829 $ 84,165
-------- --------
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24
<PAGE>
VECTRA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands except share amounts)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
NUMBER OF ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT DEFICIT EQUITY
<S> <C> <C> <C> <C>
Balances at December 31, 1992 5,762,083 $28,353 $(9,583) $18,770
Exercise of stock options 176,930 844 -- 844
Issuance of stock, net of
director/shareholder
receivable 15,000 5 -- 5
Net loss -- -- (546) (546)
--------- ------- -------- -------
Balances at December 31, 1993 5,954,013 29,202 (10,129) 19,073
Exercise of stock options 189,649 968 -- 968
Issuance of common stock, net of
cancellations 1,704,965 14,004 -- 14,004
Warrants issued -- 1,038 -- 1,038
Unrealized gain on securities
available for sale -- -- 42 42
Net loss -- -- (5,325) (5,325)
--------- ------- -------- -------
Balances at January 1, 1995 7,848,627 45,212 (15,412) 29,800
Issuance of common stock, net of
cancellations (15,100) -- -- --
Warrants issued, net of warrants
repriced -- (252) -- (252)
Unrealized gain on securities
available for sale -- -- 51 51
Net loss -- -- (12,213) (12,213)
--------- ------- -------- -------
Balances at December 31, 1995 7,833,527 $44,960 $(27,574) $17,386
--------- ------- -------- -------
--------- ------- -------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25
<PAGE>
VECTRA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
DECEMBER 31, JANUARY 1, DECEMBER 31,
1995 1995 1993
------------ ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (12,213) $ (5,325) $ (546)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 2,321 3,392 2,073
Amortization 3,058 3,082 517
Write-downs of property, plant and equipment and
intangible assets 14,319 629 791
Proceeds of lease incentive -- -- 621
Gain on sale of subsidiary (12,731) -- --
Loss on sale of investments 156 -- --
Increase (decrease) in cash from changes in operating
working capital, net of effects of sale of subsidiary:
Accounts receivable and billings (565) 5,734 (872)
Inventories and prepaid expenses 493 (128) (401)
Accounts payable and accrued expenses 6,144 (262) 3,249
---------- --------- --------
Net cash provided by operating activities 982 7,122 5,432
Cash flows from investing activities:
Increase in securities available for sale (303) (123) (336)
Refunds (payments) related to Impell acquisition, net
of cash acquired 559 (23,137) (1,213)
Capital expenditures (9,170) (3,872) (3,018)
Payments for earnout of acquired business -- (304) (303)
Increase in patent and license costs -- (115) (323)
Proceeds from sale of (purchase of) long-term
investments 1,150 -- (78)
Proceeds from sales of subsidiaries, net of transaction
costs 16,152 129 --
Decrease (increase) in other assets 19 (270) (16)
---------- --------- --------
Net cash provided by (used in) investing activities 8,407 (27,692) (5,287)
Cash flow from financing activities:
Net (repayments) borrowings under short-term loan (2,811) 12,871 (1,271)
Proceeds from long-term debt 3,000 15,000 1,226
Repayment of long-term debt (10,171) (5,414) (835)
Proceeds from sale of common stock -- 968 849
---------- --------- --------
Net cash (used in) provided by financing activities (9,982) 23,425 (31)
---------- --------- --------
Net (decrease) increase in cash (593) 2,855 114
Cash and cash equivalents at beginning of year 3,427 572 458
---------- --------- --------
Cash and cash equivalents at end of year $ 2,834 $ 3,427 $ 572
---------- --------- --------
---------- --------- --------
Cash paid for interest $ 1,973 $ 1,652 $ 378
Cash paid for income taxes $ 712 $ 236 $ 195
Supplemental disclosure of non-cash financing activities:
Issuance of Common Stock related to acquisition -- $ 14,000 --
Warrants issued in connection with debt $ 643 $ 1,038 --
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
26
<PAGE>
VECTRA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
VECTRA Technologies, Inc. ("VECTRA" or the "Company") operates in one business
segment which is the nuclear market. In this market, the Company provides high
level and low level radioactive waste systems and services and specialized
engineering services to commercial nuclear power plants worldwide and to the DOE
in the U.S. The Company offers technology-based solutions for the maintenance
and operation of commercial nuclear power plants through: (1) the handling,
transportation, and dry storage of high level radioactive material; (2) the
packaging and transportation of low level radioactive waste; and (3) engineering
analysis of mechanical, electrical, and operational systems and procedures.
Most of the Company's contracts are awarded by a competitive process in which
a number of firms submit proposals in response to a client's request for
proposals to provide specified products or services. Each of the Company's
contracts is negotiated independently and varies as to profitability. In
entering into contracts with its clients the Company considers, among other
factors, the relative profitability of the contract as well as the long-term
goals of the Company in securing the contract. The Company competes in certain
international markets, principally Canada, South Korea, Taiwan, and Europe.
In the United States, the Nuclear Regulatory Commission administers a
regulatory program which affects every aspect of the Company's operations.
The Department of Transportation, the Environmental Protection Agency, some
states, localities and other federal agencies also regulate aspects of the
Company's business. Regulatory changes with significant business impact have
occurred with some frequency in the industry. The nuclear industry in
general, and the handling, disposal and transportation of radioactive waste
in particular, have sometimes been the subject of intense political and legal
action. While the Company attempts to anticipate changes in the regulatory,
political and legal environment in which it operates, it is not always able
to do so and such changes could render the Company's products and its methods
of doing business obsolete or require extensive modification.
PRINCIPLES OF CONSOLIDATION AND FOREIGN CURRENCY TRANSLATION
The consolidated financial statements include the accounts of VECTRA
Technologies, Inc. and its subsidiaries, all of which are wholly owned. All
significant intercompany accounts and transactions have been eliminated. Assets
and liabilities of the foreign subsidiary are translated at current exchange
rates. Income statement accounts are translated at the average rates during
the period. Foreign currency translation and transaction gains and losses have
not been material.
LIQUIDITY
The Company has sustained significant losses from operations during the three
years ended December 31, 1995. Management has implemented plans to further
decrease the Company's cost structure in 1995 and 1996.
In addition, as described in Note 3, the maturities of substantially all of
the Company's indebtedness to banks has been extended to January 2, 1997. At
that date, all indebtedness, amounting to $16.5 million (plus any additional
borrowings, deferred payments, deferred fees and accrued interest) will become
due and payable. As described in Note 6, the Company has entered into a letter
of intent to sell its engineering and government services operations. The
proposed sale is contingent on negotiation and execution of a definite purchase
agreement, government approvals, approval of VECTRA's shareholders and Duke
Engineering & Services, Inc. ("DE&S") board of directors, and other conditions.
If the sale is consummated under the terms of the letter of intent, management
expects to receive approximately $27.5 million in cash, subject to adjustment
for the net book value of the assets ultimately sold. Additionally, if this
transaction is consummated, the Company is obligated to first use the proceeds
of such sale to repay its existing bank debt. There can be no assurance that
such sale will be consummated.
27
<PAGE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
Notes. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue on long-term contracts, other than those billed on a time and
material basis, is recognized on the percentage-of-completion method,
measured by the percentage of costs incurred to date to estimated total costs
for each contract. Cost estimates are reviewed periodically as the work
progresses, and adjustments to revenues are reflected in the period in which
estimates are revised. When current estimates indicate a probable ultimate
loss on a contract, the full amount of the projected loss is accrued. The
accompanying consolidated financial statements reflect management's best
estimates of contract revenues and costs. However, actual amounts could
differ from such estimates and such differences could be material to the
financial statements. Other revenues are recorded on the basis of shipment
of products or performance of services.
The Company periodically enters into contracts which are subject to audit by
U.S. Government agencies with respect to costs and other information submitted.
Ultimate costs recoverable under these Government contracts are not known until
final determination by the U.S. Government agency. Deviations to submitted costs
have not been significant in the past and management does not expect them to be
significant in the future.
The Company also enters into certain contracts that require the Company to
obtain permits and licenses from regulatory agencies, and in the event such
permits and licenses are not obtained, these contracts may be canceled and
payments on these contracts could be subject to refund. The Company has
historically been able to obtain these permits and licenses, but the inability
to obtain such permits and licenses in the future could have a material adverse
effect on the Company's results of operations.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include investments with an original maturity of
three months or less.
SECURITIES AVAILABLE FOR SALE
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Under this statement, the Company's marketable securities
are classified as "available for sale" and are recorded at current market value
with an offsetting adjustment to shareholders' equity. The adoption of this
statement did not have a material effect on the Company's consolidated financial
position. Substantially all of the Company's marketable securities available
for sale are restricted since they are held as collateral for letters of credit
(see Note 3) or held by the Company's captive offshore insurance subsidiary.
INVENTORIES
Inventories, which consist principally of products associated with the
performance of certain contracts, are stated at the lower of cost or market
determined on a specific identification basis.
PROPERTY, PLANT AND EQUIPMENT
Depreciation is computed principally on the straight-line method over the
following estimated useful lives:
Buildings 36 years
Machinery and equipment 3-15 years
Furniture and fixtures 3-7 years
The Company periodically reviews its property, plant and equipment for
impairment in value. As a result of this review, the Company wrote off
assets with carrying values of approximately $1.5 million in 1995.
28
<PAGE>
Construction in progress includes a waste vitrification unit which the
Company is constructing. The primary component of the Company's 1995 capital
expenditures relates to the waste vitrification unit. The Company has
temporarily suspended all construction and start up activities associated
with its EnviroGlass-Registered Trademark- vitrification program. Upon
completion, the Company intends to depreciate this unit on a units of
production basis. The Company will periodically review the carrying value of
the vitrification unit and the status of future related customer contracts,
if any, to determine the requirement for any adjustments to its carrying
value. Management estimates that the Company will recover the carrying value
of this unit; however, an inability to recover the carrying value could
result in material charges to operations in future periods.
In the fourth quarter of 1995, the Company also recorded a charge of $1.2
million to cover anticipated future costs to decommission certain
radioactivity contaminated machinery and equipment. Management estimates
that these amounts will be sufficient to dismantle and dispose of the
currently contaminated equipment under current applicable regulatory
guidelines.
COSTS IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES
The excess of the total acquisition costs of acquired subsidiaries over the
fair value of net assets acquired is being amortized on the straight-line
basis over 25 years. Accumulated amortization was $4,330,000 at December 31,
1995, and $3,187,000 at January 1, 1995.
Based upon negotiations management has conducted subsequent to December 31,
1995, and the DE&S letter of intent (see Note 6) regarding the potential sale
of certain assets of the Company, the Company wrote down intangible assets
consisting primarily of costs in excess of net assets acquired by $12.8 million
to their estimated fair value. Actual amounts realized if these assets are sold
may differ from management's estimates of fair value and such differences could
be material to the financial statements.
LICENSES AND PATENTS
Licenses and patents are amortized on the straight-line method over a period
of 5 to 25 years. Accumulated amortization was $602,000 at December 31, 1995,
and $562,000 at January 1, 1995.
OPERATING COSTS
Operating costs consist of direct labor and related payroll burden and charges,
including depreciation and amortization, that are directly identified to a
contract.
INCOME TAXES
The Company recognizes deferred tax assets and liabilities based on differences
between financial reporting and tax bases of assets and liabilities measured
using tax rates and laws that will be in effect when the differences are
expected to reverse. The Company provides a valuation allowance on its deferred
tax assets to the extent there is uncertainty regarding the Company's ability to
generate taxable income in the future.
CHANGE IN FISCAL YEAR END
Effective January 1, 1994, the Company changed its fiscal year end from
December 31 to the Sunday closest to December 31.
NET LOSS PER SHARE
Net loss per share is based upon the weighted average number of common shares
outstanding during each period.
NEW ACCOUNTING PRONOUNCEMENTS
IMPAIRMENT OF LONG-LIVED ASSETS
In 1995, the Financial Accounting Standards Board issued the Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
SFAS 121 requires recognition of impairment of long-lived assets in the event
the net book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. The Company adopted the provisions of SFAS 121
as of December 31, 1995.
29
<PAGE>
STOCK OPTIONS
The Company accounts for its stock option plan in accordance with provisions
of the Accounting Principles Board's Opinion No. 25 ("APB 25"), "Accounting
for Stock Issued to Employees." In 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock Based Compensation." SFAS 123 provides an alternative
to APB 25 and is effective for fiscal years beginning after December 15, 1995.
The Company expects to continue to account for its employee stock plans in
accordance with the provisions of APB 25 with the disclosures required by
SFAS 123. Accordingly, the adoption of SFAS 123 is not expected to have any
impact on the Company's financial position or results of operations.
2. ACCOUNTS RECEIVABLE AND PROGRESS BILLINGS
Accounts receivable are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 1,
1995 1995
----------- ----------
<S> <C> <C>
Accounts receivable $20,473 $24,698
Allowance for contract adjustments (785) (384)
Retainage 988 1,634
Other 389 263
----------- ----------
Total accounts receivable $21,065 $26,211
----------- ----------
----------- ----------
</TABLE>
Retainages beyond one year are insignificant. Progress billings on long-term
percentage of completion contracts that were in process at December 31, 1995,
and January 1, 1995, were $32.4 million and $34.4 million, respectively. The
Company performs services and provides products mainly to commercial power
utilities. Based on the credit standing of these clients, credit is generally
granted without collateral being required.
Historically, there have been no significant credit losses to the Company;
accordingly, no allowance for doubtful accounts is considered necessary by
management. The allowance for contract adjustments provides for management's
estimate of periodic adjustments that arise from contract related billing
issues. These estimates may differ from actual contract adjustments and such
differences could be material to the financial statements.
3. INDEBTEDNESS TO BANKS
At December 31, 1995, the Company had a revolving credit facility that
provided for borrowings up to $12,500,000. Borrowings under the revolving
credit facility are limited to a calculated borrowing base and are secured by
accounts receivable. Amounts outstanding under the credit facility totaled
$12,389,000 at December 31, 1995, and $15,200,000 at January 1, 1995. The
interest rate is the banks' base rate plus 1.0% to 1.5% or the Eurodollar
rate plus 2.0% to 2.5%. Commitment fees of 0.5% of the unused balance are
payable under this agreement. The weighted average interest rate on the
credit facility was 9.1% at December 31, 1995. The Eurodollar option has
been eliminated from March 1, 1996.
The Company also has long-term loans from banks. The original portion of this
loan has an interest rate of the banks' base rate plus 1.0% to 1.5% or the
Eurodollar rate plus 2.0% to 2.5% (10% at December 31, 1995). The Eurodollar
option has been eliminated from March 1, 1996. The note had an outstanding
balance at December 31, 1995, of $2,927,000 ($11,329,000 at January 1, 1995).
In conjunction with the long-term loan, the Company issued to the banks warrants
to purchase 830,060 shares of Common Stock at $8.17 per share which are
exercisable through January 1999. The warrants were valued upon issuance at
approximately $1.0 million and were recorded as additional paid-in capital.
In connection with the negotiation of an extension on the loan agreement, these
warrants were repriced to $2.94 per share and the Company revalued the warrants
at $142,000. The resulting discount on the long-term loan was fully amortized as
of December 31, 1995. Both the revolving credit facility and the long-term
loan are collateralized by substantially all of the Company's assets.
30
<PAGE>
In September 1995, the Company negotiated a $3.0 million additional facility
related to the term loan to be used for capital expenditures and working
capital. At December 31, 1995, the Company had outstanding borrowings of
$1.9 million on this facility. This additional facility carries an interest
rate of the bank's base rate plus 3% (11.5% at December 31, 1995). This
facility requires the payment of a $150,000 fee to the banks to be made at
the earlier of the raising of sufficient new capital to repay the long-term
debt or at the maturity of the loan and carries a .25% per annum unused
facility fee. The banks will also receive warrants equal to 2% of the
Company's outstanding common stock for each $1 million borrowed under this
facility. The Company reduced this amount to a total of 5% of the Company's
stock through accelerated repayment of borrowings under this facility. The
exercise price of these additional warrants is $0.01 per share. As of
December 31, 1995, the Company had recorded the issuance of warrants to
purchase 392,431 shares of common stock in connection with initial borrowings
of $3 million under this facility. The warrants were valued at approximately
$536,000 and were recorded as interest expense and additional paid in capital.
In December 1995, the Company negotiated a $1.0 million additional facility
under the term loan to be used for working capital. As of December 31, 1995,
the Company had not borrowed on this facility. This additional facility
requires the payment of a $125,000 fee to the banks to be made at the earlier
of raising sufficient new capital to repay the long-term debt or at maturity
and carries a .25% per annum unused facility fee. The banks also received
additional warrants to purchase 78,335 shares of common stock at $0.01 per
share and such warrants were valued at $107,000. Warrants to an additional
78,335 shares of common stock at $0.01 per share are due to the Bank if the
loan is used and not repaid by a specific date.
The agreements with the banks specify certain negative, affirmative and
financial covenants including restrictions on dividends and activities of the
Company. At December 31, 1995, the Company was not in compliance with
certain of these covenants and the Company subsequently negotiated revised
covenants with the banks.
The Company also had $486,000 in outstanding letters of credit with another
bank issued for performance guarantees under various contracts. Securities
available for sale of $507,000 at December 31, 1995, are held as collateral
against a portion of these letters of credit.
On April 15, 1996, the Company entered into amendments to its revolving
credit facility and term loan agreements with its banks. Under these
amendments, all outstanding borrowings under the revolving credit facility
and the additional facilities of the term loan agreements will be due on
January 2, 1997. Amounts outstanding on the revolving credit facility are
included in long-term debt in the accompanying financial statements as
management estimates that the borrowing base will be sufficient through
January 2, 1997, to sustain the outstanding borrowings at December 31, 1995.
These amendments also establish new financial covenants for the fourth
quarter of 1995 (with which the Company complied) and for 1996. As a result
of these amendments, the Company incurred additional bank fees of
approximately $1.1 million due January 2, 1997, or upon repayment of the
outstanding borrowings. The Company also agreed to issue warrants to the
banks to purchase up to 6% of the Company's outstanding common stock on a
fully diluted basis at $0.01 per share, reprice the warrants to purchase
830,060 shares of common stock at $0.01 per share and pay fees to the bank
deferred until January 2, 1997, of up to $600,000 in the event that the
Company does not achieve certain financial milestones in 1996. The Company
may elect to defer the $750,000 payment due September 30, 1996, to January 2,
1997, by paying a fee of $150,000. Under the revolving credit facility, the
Company may elect to defer the $600,000 payment due on June 30, 1996, to
January 2, 1997, by paying a fee of $100,000. In addition, the Company may
elect to defer the $625,000 payment due on September 15, 1996, to January 2,
1997, by paying a fee of $100,000. The agreement also contains a $200,000
penalty if the Company does not reduce the outstanding borrowings by a
specified amount as of May 31, 1996. The amendments also specify that any
proceeds from the proposed sale of operations (Note 6) be used to repay
indebtedness to the banks.
As of April 15, 1996, the Company has reserved 1,300,977 shares of common
stock for warrants earned by the banks, and in the future the Company may be
obligated to issue to the banks warrants to purchase up to an additional 8%
of the Company's fully diluted shares of outstanding common stock.
31
<PAGE>
VECTRA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred income tax assets and liabilities as of
December 31, 1995, January 1, 1995, and December 31, 1993 are as follows
using the liability method (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 1, DECEMBER 31,
1995 1995 1993
------------ ---------- ------------
<S> <C> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards $ 2,279 $ 1,952 $ 1,091
Tax credit carryforwards 254 254 254
Expenses not currently deductible
for tax purposes 1,294 1,661 974
Other 1,098 941 439
------- ------- -------
Deferred tax assets 4,925 4,808 2,758
Valuation allowance (4,898) (4,736) (2,758)
------- ------- -------
Net deferred tax assets $ 27 $ 72 $ --
------- ------- -------
DEFERRED TAX LIABILITIES:
Depreciation 27 72 --
------- ------- -------
Deferred tax liabilities 27 72 --
------- ------- -------
Net deferred taxes $ -- $ -- $ --
------- ------- -------
------- ------- -------
</TABLE>
32
<PAGE>
The provision for income taxes for the fiscal years ended December 31, 1995,
January 1, 1995, and December 31, 1993 is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 1, DECEMBER 1,
1995 1995 1993
------------ ---------- -----------
<S> <C> <C> <C>
Current:
Federal $ -- $ -- $ 95
State and foreign 110 150 155
------- ------- -----
Provision for income taxes $ 110 $ 150 $ 250
------- ------- -----
------- ------- -----
</TABLE>
The provision (benefit) for income taxes differed from the amount computed by
applying the federal statutory income tax rate for the fiscal years ended
December 31, 1995, January 1, 1995, and December 31, 1993 as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 1, DECEMBER 1,
1995 1995 1993
------------ ---------- -----------
<S> <C> <C> <C>
Income tax at federal
statutory rate $(4,275) $(1,864) $(101)
Amortization -- 106 98
Writedown of intangible assets not
deductible for tax purposes 4,228 -- --
Utilization of net operating
loss carryforwards -- -- (465)
Valuation allowance 162 1,751 449
State and foreign income taxes 110 150 155
Other (115) 7 114
------- ------- -----
Provision for income taxes $ 110 $ 150 $ 250
------- ------- -----
------- ------- -----
</TABLE>
At December 31, 1995, the Company has federal net operating loss and research
tax credit carryforwards of approximately $6,511,000 and $254,000,
respectively, which expire in varying amounts through the year 2010. Annual
utilization of the Company's net operating loss and tax credit carryforwards
may be limited if a cumulative change in ownership of more than 50% is deemed
to occur within any three year period.
33
<PAGE>
5. COMMITMENTS AND CONTINGENCIES
Annual rental commitments (exclusive of insurance and property taxes) under
noncancelable operating leases on office facilities and equipment are payable
as follows (in thousands):
<TABLE>
<S> <C>
1996 $ 3,797
1997 2,779
1998 1,906
1999 1,453
2000 996
Thereafter 3,156
-------
Total $14,087
-------
-------
</TABLE>
Rent expense was as follows for the years ended December 31, 1995, January 1,
1995, and December 31, 1993 (in thousands):
<TABLE>
<S> <C>
1995 $5,012
1994 5,473
1993 1,571
</TABLE>
In 1992, the Company incurred a $685,000 early termination obligation in
order to exit a long-term lease for an existing office and enter a new lease
at more attractive terms. The new landlord agreed to provide a cash lease
incentive allowance of $621,000. The lease incentive is being amortized over
the ten year term of the new lease.
The Company is self-insured for general liability risk for $1 million per
occurrence and $2 million in the aggregate. Coverage above the self-insured
limits is provided for under an umbrella policy with a commercial insurance
company. The Company's general liability risk insurance excludes
professional errors and omissions. Such insurance is purchased on a contract
specific basis as required by the customer. At December 31, 1995, the Company
had accrued approximately $564,000 for estimated unreported and/or potential
losses under its self-insurance program. Actual self-insurance losses may
differ from such estimates and such differences could be material to the
financial statements.
The radioactive materials handled by the Company are the legal responsibility
of the Company's utility customers. The Company does not take title to such
materials. In the event of an accident or incident involving such material,
the Company is covered under insurance carried by and provided to operators
of nuclear plants or transporters of nuclear materials.
The Company anticipates that it will need to devote significant capital
resources to technology development in the future in order to remain
competitive. The Company had contractual commitments of $900,000 as of year
end for capital acquisitions during 1996.
The Company is involved in contractual, personal injury and general liability
cases and claims which are considered normal to its business. In the opinion
of Company management, none of these claims will have a material adverse
impact on the Company's results of operations or financial position. However
an unfavorable outcome could have a material adverse impact on the Company's
results of operations and financial position.
34
<PAGE>
6. ACQUISITIONS AND DISPOSITIONS
Subsequent to December 31, 1995, the Company entered into a letter of intent
to sell its engineering and government services operations to a third party.
The proposed sale is contingent on negotiation and execution of a definite
purchase agreement, government approvals, approval of VECTRA's shareholders
and DE&S's board of directors, and other conditions. Under the letter of
intent, if the sale is consummated under the terms of the letter of intent,
management expects to receive approximately $27.5 million in cash, subject to
adjustment for net book value of assets ultimately sold. The engineering and
government services operations accounted for approximately $78 million in
revenue and approximately $1.5 million in operating income, before certain
corporate charges, for the year ended December 31, 1995. Under the terms of
the agreements covering its outstanding indebtedness to banks (Note 3), any
proceeds from the sale of these operations must first be applied to repay
such indebtedness.
Effective June 30, 1995, the Company sold all of the outstanding capital
stock of its wholly owned subsidiary, Plant Services, Inc., to Westinghouse
Electric Corporation. The sale price was $17.4 million after final
adjustments including environmental remediation and earnout provisions. The
proceeds from the sale were used to reduce notes payable and long-term debt
to banks, pay retained liabilities, and pay expenses associated with the
transaction. For the six months ended June 30, 1995, Plant Services
generated revenues of approximately $11 million and operating income of
approximately $4 million.
In September 1995, the Company sold its 10% ownership in Recytec America,
Inc. to Recytec, S.A. for $1.15 million resulting in a loss of $156,000
which is included in selling, general and administrative expense. These
shares had been issued to VECTRA in connection with the sale of Alaron
Corporation to Recytec S.A. in August 1991.
On January 7, 1994, the Company completed the acquisition of all of the stock
of ABB Impell Corporation, ABB Government Services Inc., and ABB Impell Ltd.
(collectively the "Impell Companies") from affiliates of ABB Asea Brown
Boveri Ltd. of Zurich, Switzerland (the "Seller") for approximately $32.3
million. The seller received $14 million in Common Stock (1,714,503 shares)
and the remainder of the purchase price in cash. The acquisition, which
closed January 7, 1994, has been accounted for as a purchase effective as of
January 1, 1994. Accordingly, the purchase price was allocated to assets
acquired based on their estimated fair values. Costs in excess of net assets
of $24.3 million are being amortized on a straight-line basis over 25 years.
The pro forma results listed below for the year ended December 31, 1993,
combine the consolidated results of operations as if the Impell Companies had
been acquired as of the beginning of the period presented. The proforma
results include the impact of adjustments for revenues and costs associated
with a subcontract entered into by the Company and the Seller, elimination of
parent allocated overhead to the Impell Companies, amortization of
intangibles resulting from the acquisition, a reduction in rent expense
resulting from subleases between the Company and the Seller, increased
interest expense on the acquisition debt, and the related income tax effects.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JANUARY 1, DECEMBER 31,
1995 1993
---------- ------------
<S> <C> <C>
Revenues $140,023 $169,705
Net income (loss) $ (5,325) $ 1,153
Net income (loss) per share $ (.68) $ .15
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for all of 1993 and are
not intended to be a projection of future results.
35
<PAGE>
7. STOCK OPTIONS
Under the Company's stock option plans which include incentive stock options
qualified by the Internal Revenue Service (IRS) and non-qualified options,
the Company can issue up to 2,297,500 stock options. Through December 31,
1995, such incentive stock options totaling 916,731 have been exercised and
358,209 options are available for grant.
Stock options are granted at fair market value on the date of grant, are
exercisable in whole or in part beginning one year from the date of grant,
and expire up to ten years from the date of grant.
In February 1995, the Board of Directors approved a program to reprice
certain incentive stock options granted in 1994. Under the repricing
program, the options held by employees could have been repriced at the
employees' option at an exercise price of $4.50 per share. The then current
market price of the Company's common stock was $3.00 per share. In
consideration of the price change, the vesting schedule was changed from an
eighteen month "cliff vesting" and proportional vesting over four years to
100% "cliff vesting" at January 1, 1998.
At December 31, 1995, the Company has reserved 1,080,019 shares of Common
Stock under the incentive stock option plans, which represent stock options
outstanding and stock options available for grant.
Stock options outstanding under the plans are:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
---------- ----------------
<S> <C> <C>
Outstanding at December 31, 1993 912,629 $3.75 $9.125
Granted 471,816 $3.00 - $9.50
Exercised (189,649) $3.75 - $7.00
Forfeitures (175,610) $4.375 - $9.50
---------
Outstanding at January 1, 1995 1,019,186 $3.00 - $9.50
Granted (includes 143,000 shares
that were repriced) 269,500 $2.75 - $4.50
Forfeitures (includes 143,000
shares that were repriced) (454,626) $3.00 - $9.50
---------
Outstanding at December 31, 1995 834,060 $2.75 - $9.50
---------
---------
Exercisable at December 31, 1995 213,983 $3.125 - $9.50
---------
---------
</TABLE>
In addition to the stock option plans, the Company has issued non-qualified
options of which 159,250 shares were outstanding at December 31, 1995, at a
price per share from $2.675 to $9.25 and 225,128 options were exercisable at
a price per share from $2.675 to $9.25. Additionally, there were 63,000
non-qualified stock options that were also repriced.
8. COMMON STOCK
The Company has established a Stockholders' Rights Agreement (SRA) designed
to deter coercive or unfair takeover tactics that could deprive shareholders
of an opportunity to realize the full value of their shares. The Company
amended the SRA effective December 31, 1993.
Under the SRA, as amended, the Company could declare a dividend of one right
for each outstanding share of the Company's Common Stock. The rights become
exercisable after the announcement of either a tender or exchange offer for
more than 25% of the Company's Common Stock or a purchaser acquires 25% of
the Company's Common Stock. Each right entitles the holders, other than the
25% purchaser, to purchase Common Stock of the Company having a market value
of twice the exercise price of the right. In the event that the Company is
acquired in a merger or sells or transfers 50% or more of its assets or
earning power, each right entitles the holder to purchase Common Stock of the
surviving or purchasing company having a market value of twice the exercise
price of the right. The rights, which expire June 1, 1999, may be redeemed
by the Company at a price of $0.01 per right.
36
<PAGE>
9. MAJOR CLIENTS
The nature of the Company's business is such that a single client may account
for more than 10% of the Company's revenues during a specific period when the
Company is performing a significant project for that client. The percentage
of sales to individual clients that were 10% or more of total revenues follows
for the fiscal years ended December 31, 1995, January 1, 1995, and December 31,
1993:
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 1, DECEMBER 31,
1995 1995 1993
----------- --------- -----------
<S> <C> <C> <C>
Commonwealth Edison Company 20% 19% 14%
Entergy Operations, Inc. -- -- 11%
</TABLE>
10. REVENUE AND OPERATING COST INFORMATION
Revenues and operating costs of tangible products and services are as follows
for the fiscal years ended December 31, 1995, January 1, 1995, and December 31,
1993, (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 1, DECEMBER 31,
1995 1995 1993
------------ ---------- -----------
<S> <C> <C> <C>
REVENUES:
Products $ 13,580 $ 6,917 $ 10,335
Services 109,921 133,106 54,246
-------- -------- --------
$123,501 $140,023 $ 64,581
-------- -------- --------
-------- -------- --------
OPERATING COSTS:
Products $ 11,574 $ 4,561 $ 6,283
Services 77,870 89,759 36,617
-------- -------- --------
$ 89,444 $ 94,320 $ 42,900
-------- -------- --------
-------- -------- --------
</TABLE>
Sales to foreign clients in 1995, 1994, and 1993 were $10,254,000, $12,099,000,
and $7,891,000, respectively.
11. SAVINGS AND RETIREMENT PLAN
The Company has a defined contribution plan covering eligible full-time
employees (the "Plan"). The Plan is a profit sharing plan with a salary
reduction arrangement pursuant to Internal Revenue Code Section 401(k) and
subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA). Employees may contribute up to 15% of their gross wages, subject
to these provisions. The Company may, solely at its own discretion, make a
profit sharing contribution to the Plan for each plan year. In addition to
the profit sharing contribution, the Company may make matching contributions
to the Plan, at a predetermined rate subject to certain limitations. In 1995,
matching contributions were only made for certain employee groups. In fiscal
1995, 1994, and 1993, the Company made contributions to the Plan of $112,000,
$1,171,000, and $194,000, respectively.
12. RESTRUCTURING AND LEASE TERMINATION EXPENSE
In the fourth quarter of 1993, the Company recorded a restructuring charge of
$2.5 million related primarily to changes in operations resulting from the
acquisition of ABB Impell Corporation, ABB Government Services, Inc., and ABB
Impell Ltd. (see Note 6). The restructuring charge also included the
revaluation of certain machinery and equipment and intangible assets that are
no longer a part of the strategic focus of the new combined company.
37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the names and ages of the directors:
<TABLE>
<CAPTION>
POSITIONS HELD
NAME AGE (DIRECTOR SINCE)
---- --- ---------------
<S> <C> <C>
Edward J. Keith 60 Chairman of the Board, Director (1994)
Roy Kirkorian 51 Vice Chairman of the Board, Director (1995)
J.E. (Ted) Ardell, III 56 Director (1992)
Albert J. Baciocco, Jr. 65 Director (1989)
E. Linn Draper, Jr. 54 Director (1986)
Ray A. Fortney 50 Director, President and CEO (1994)
Fruzsina Harsanyi 53 Director (1995)
Elwood D. Howse, Jr. 56 Director (1983)
</TABLE>
In February 1995, the Board of Directors amended the bylaws to remove the
staggered election of board members, so that all directors will be, beginning
at the 1995 Annual Meeting, elected annually.
BIOGRAPHIES
Mr. Keith was elected Chairman of the Board in June 1995. He is also
Chairman of the Board of Directors of The Failure Group, a consulting firm
specializing in the analysis and prevention of engineering failures, and a
former Director of Inlex Corporation, which provides computer automation
systems to libraries. From 1969 until 1983, Mr. Keith served as Chairman of
the principal operating subsidiary, Executive Vice President and Director of
Impell Corporation. Mr. Keith was also the co-founder of the Commercial Bank
of San Francisco. He is a licensed professional engineer and structural
engineer in the state of California. Mr. Keith received his B.S. and M.S. in
Engineering in 1961 and 1964, respectively, from the University of
California, Berkeley.
Mr. Kirkorian was elected to the Board of Directors in August 1995 and was
elected Vice Chairman in October 1995. Mr. Kirkorian, is an active partner
in El Rancho Farms and is currently active in various Sand Hill Financial
Company capital investments. He was President of C.P. National (NYSE) and
former President of Contel Corp.'s Contel Business Systems. Mr. Kirkorian
received his B.S. degree in Business Administration in 1967 from California
State Polytechnic University and his J.D. of the Law from Hastings College in
1970. He has been a member of the Cal Poly Business School Advisory Board
since 1988.
Mr. Ardell is a general partner with Technology Partners, a venture capital
firm, and a Director of a number of private companies. From 1968 to 1971,
Mr. Ardell was with Bechtel Power Corporation. From 1971 to 1984 he was a
Director of Impell Corporation and held various other positions with Impell
Corporation and its principal operating subsidiary; and from 1984 to 1986 he
was President and Chief Executive Officer of Impell Corporation. From 1961
to 1968 he served in the U.S. Navy nuclear submarine force. Mr. Ardell is a
registered nuclear engineer in California and received a B.S. degree in
Engineering from the U.S. Naval Academy in 1961.
38
<PAGE>
Mr. Baciocco is President of The Baciocco Group, Inc., a technical and
management consulting practice, providing service in the areas of strategic
planning, technical investment and application and business planning and
development. He is a Director of Honeywell, Inc., and Giddings & Lewis, Inc.
He retired from the U.S. Navy as a Vice Admiral in 1987 after 34 years of
service which included over 18 years of experience in the direct supervision
of nuclear power plant operations and maintenance, and over seven years in
the most senior executive positions in the Navy's R&D organization.
Mr. Baciocco is a member of the Army Science Board and the Naval Studies Board
of the National Research Council. In addition, he serves on the Boards of
Directors of Oak Ridge Associated Universities, the Research Development
Foundation for the Medical University of South Carolina, and the Board of
Visitors to the Software Engineering Institute, Carnegie Mellon University.
He received his B.S. degree in Engineering from the U.S. Naval Academy in
1953 and has completed graduate level studies in the field of nuclear
engineering.
Dr. Draper is Chairman of the Board, President and Chief Executive Officer of
American Electric Power Inc. (AEP) and the American Electric Power Service
Corporation. He also holds the positions of Chairman of the Board of
Directors and Chief Executive Officer of various affiliates of AEP. From 1979
to 1992, Dr. Draper served in various executive positions with Gulf States
Utilities, an electric utility company, serving from 1987 to 1992 as
Chairman, President, and Chief Executive Officer. Both AEP and Gulf States
Utilities have been and are customers of the Company. Dr. Draper is a Member
of the Board of Directors and the Executive Committee of the Nuclear Energy
Institute and the Edison Electric Institute. He received his B.A. degree in
1964 and his B.S. degree in 1965, both in Chemical Engineering, from Rice
University. He received his Ph.D. degree in Nuclear Engineering from Cornell
University in 1970. He is a member of the National Academy of Engineering.
Mr. Fortney was appointed as President and Chief Executive Officer in July
1994. Prior to his appointment, he served as Executive Vice President of the
Company from August 1993 and was President of the Cygna Group of ICF Kaiser
Engineers, an engineering consulting firm, and a Senior Vice President of ICF
Kaiser from 1992 to 1993. He previously served as Vice President and General
Manager of the Power Services Business at Combustion Engineering and
ABB/Combustion Engineering from 1988 through 1990 and President and Chief
Executive of Impell Corporation from 1986 to 1988. Mr. Fortney is a registered
professional engineer in 15 states. He received his B.S. degree from the U.S.
Naval Academy in 1967, his M.S.M.E. degree from Stanford University in 1972
and attended the Stanford University Business School Executive Program in 1989.
Dr. Harsanyi was elected to the Board in June 1995. She is Vice President,
Public Affairs and Corporate Communications, and a Corporate officer of Asea
Brown Boveri Inc. ABB is a Connecticut-based company, providing products
and services for power generation, transmission and distribution, and
industrial processes. She joined the company in 1980 after working for two
years for the Continental Group and prior to that for the U.S. Government.
Dr. Harsanyi received B.A. and M.A. degrees in International Relations and a
Ph.D. in Government from the American University. She has served as an adjunct
professor of International Business at Georgetown University's School of Foreign
Service and is a member of the Business-Government Relations Council, the
Council for Excellence in Government, the Bryce Harlow Foundation, the Public
Affairs Council, and Georgetown University's Landegger Program Advisory Board.
Mr. Howse served as Chairman of VECTRA's Board from 1991 to 1995. He is
President of Cable & Howse Ventures, a venture capital management firm he
co-founded in 1977. He is also a general partner of CH Partners II and CH
Partners III, major shareholders of the Company, and a Director of OrthoLogic
Corporation and Applied Microsystems Corporation. From 1970 to 1974 he served
as Treasurer of Data Science Ventures, a venture capital firm, and from 1974
to 1976 as the Chief Financial Officer for Seattle Stevedore and Miller Produce
companies. Mr. Howse served in the U.S. Navy nuclear submarine force until
1968. Mr. Howse received his B.S. degree in Engineering in 1961 and his M.B.A.
degree in 1970, both from Stanford University.
39
<PAGE>
CURRENT EXECUTIVE OFFICERS
The following table, as of April 15, 1996, sets forth the names, titles and
ages of the Company's executive officers who are serving in the indicated
positions. All executive officers serve until removed by the Board of
Directors:
<TABLE>
<CAPTION>
NAME AGE POSITIONS HELD
---- --- --------------
<S> <C> <C>
Ray A. Fortney 50 President and Chief Executive Officer
Kristin L. Allen 46 Vice President
Walter R. Bak 41 Vice President
Jeffrey W. Cummings 44 Vice President
Vincent Franceschi 37 Vice President
Thomas B. Pfeil 49 Vice President, Finance and Secretary
</TABLE>
BIOGRAPHIES
Mr. Fortney's biography is included with the directors.
Mr. Allen was appointed to his current position in April 1992 upon the
Company's acquisition of his firm, Semper Technology, Inc., a management
consulting firm for utilities. He co-founded Semper in 1990. From 1979
until 1990, he was with Advanced Technology Engineering Systems, Inc. and
its parent, Advanced Technology, Inc., an engineering and management consulting
firm for nuclear utilities and government agencies, holding progressively more
senior positions. From 1972 to 1979 he served in the U.S. Navy nuclear
submarine force and taught at the U.S. Naval Academy. He is a registered
professional engineer in the Commonwealth of Virginia. Mr. Allen received his
B.S. degree in Nuclear Engineering from the University of Virginia in 1972 and
his M.S. degree in High Energy Physics from the Naval Postgraduate School
in 1973.
Mr. Bak was appointed to Vice President, Business Development, in October
1995. Mr. Bak has held the positions of Manager, Power Services, and Manager,
Fuel Services, with VECTRA prior to his current assignment. Mr. Bak has been
involved in managing businesses in the commercial nuclear, government, and
non-nuclear sectors of Impell since 1987. Mr. Bak is a registered Professional
Engineer in California. He received his M.S. degree in Civil Engineering from
the University of California, Berkeley, in 1978, and his B.S. degree in Civil
Engineering from the University of Notre Dame in 1977.
Mr. Cummings was appointed to his current position in June 1992, with
responsibility initially for the Company's Chicago office consisting of over
220 engineering professionals. Since that time, he has assumed roles as Vice
President, Marketing and Business Development and most recently, Vice President,
Nuclear Engineering. Prior to his appointment, Mr. Cummings served in various
positions of increasing responsibility after joining the Company in 1985,
including General Manager, Chicago Operations. Mr. Cummings received a B.S.
degree in Operations Analysis in 1973 from the U.S. Naval Academy and a
M.S. in Operations Research in 1974 from the U.S. Naval Post Graduate School.
Mr. Franceschi was appointed to his current position in January 1994
following the Company's acquisition of ABB Impell Corporation. From 1989
until his appointment, Mr. Franceschi was the Manager of projects for Impell's
Western Region. From 1980 to 1989, Mr. Franceschi served in various positions
of increasing responsibility, including Manager, Systems Engineering and
Manager of Business Development for the DOE market. Mr. Franceschi is a
registered professional engineer in California. He received his B.S. degree
in Civil Engineering from the University of California, Berkeley in 1980 and
his M.B.A. from Saint Mary's College in 1994.
Mr. Pfeil was appointed to his current position in February 1996. From 1992
until his appointment, Mr. Pfeil served as a director and officer of several
start-up manufacturing and small sales businesses. From 1985 to 1992, Mr.
Pfeil served in various positions, including Corporate Controller and Chief
Financial Officer during the restructuring and turnaround of WorldCorp Inc.
and its predecessor, World Airways Inc. Prior to 1985, he served for twelve
years in various positions of increasing responsibility with Baker Hughes, a
multi-national manufacturer of oil field equipment and provider of related
engineering services. He received his M.B.A. and B.S. degree in Business
Administration (Accounting) from California State University, Los Angeles.
40
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth compensation paid by the Company for services
rendered in the Company's last three completed fiscal years ending December
31, 1995, to the Company's chief executive officer and the four highest paid
executives whose total compensation exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE (1)
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- --------------
OTHER
NAME AND PRINCIPAL BONUS ANNUAL OPTIONS/ ALL OTHER
POSITION YEAR SALARY ($) ($) COMPENSATION ($) SARs(#) COMPENSATION
- ------------------ ---- --------- ----- ---------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ray A. Fortney 1995 201,000 173,000
President and CEO 1994 194,074 17,574(2) 68,000 2,276(3)
1993 78,890(4)
John R. Holding 1995 150,749 60,000(12) 6,000
Former Vice 1994 138,219 32,377(5) 41,000 3,265(3)
President, CFO and 1993 68,750(6) 69,563(7) 25,000
Secretary
Lynne M. Heitman 1995 146,543(8) 55,000(12) 25,000 25,577(9)
Former CFO 1994 125,000
1993 76,667(11)
Kristin L. Allen 1995 125,865 36,000
Vice President 1994 124,431
1993 125,000
Walter R. Bak 1995 112,062 34,000
Vice President 1994 110,485 3,600(10)
Jeffrey W. Cummings 1995 130,650 46,000
Vice President 1994 118,688 28,492(13)
Vincent Franceschi 1995 114,810 36,000
Vice President 1994 110,255 17,605(2)
</TABLE>
41
<PAGE>
(1) None of the named executives received compensation reportable under the
Restricted Stock Awards or Long-Term Incentive Plan Payouts columns.
(2) One time payment of accrued vacation balances reflecting change in policy
whereby officers do not accrue vacation.
(3) Matching contribution to the 401(k) and retirement plan.
(4) For the period August 9, 1993, the date Mr. Fortney's employment with the
Company began, through December 31, 1993.
(5) Reimbursement of federal income tax differential of $22,336 attributable
to relocation cost reimbursement, and payment of accrued vacation of
$10,041.
(6) For the period June 16, 1993, the date Mr. Holding's employment with the
Company began, through December 31, 1993.
(7) Reimbursement of $24,670 moving expenses and $44,893 closing costs in
connection with the purchase of a home in the Puget Sound region.
(8) For the period January 1, 1995, to November 18, 1995, the date Ms. Heitman
terminated employment with the Company.
(9) Payment of outplacement fee of $8,750 and severance of $16,827.
(10) Payment of car allowance.
(11) For the period March 22, 1993, the date Ms. Heitman's employment with the
Company began, through December 31, 1993.
(12) Relocation/Retention payments
(13) One time payment of accrued vaction (see note 2) and $19,000 employment
contract buyout.
42
<PAGE>
OPTION GRANTS DURING 1995 FISCAL YEAR
The following table provides information related to options granted to the
named executive officers during 1995.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (1)
- ------------------------------------------------------------------------------ ----------------------
% OF TOTAL
OPTIONS/
SARS GRANTED EXERCISE OR
OPTIONS/SAR TO EMPLOYEES BASE EXPIRATION
NAME GRANTED (2) IN FISCAL YEAR PRICE ($/SH.) (3) DATE 5% ($) 10% ($)
- -------------- ----------- -------------- ----------------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Ray A. Fortney 18,000(4) 5.0% 4.50 2/16/05 11,644 71,027
80,000(5) 22.1% 4.50 6/13/00 -- 34,874
45,000(5) 12.4% 4.50 6/13/00 -- 19,617
30,000(6) 8.7% 2.75 12/01/00 23,377 53,238
Kristen L. Allen 6,000(4) 1.7% 4.50 2/16/05 3,881 23,757
30,000(6) 8.3% 2.75 12/01/00 23,377 53,238
John R. Holding 6,000(4) 1.7% 4.50 2/16/05 3,881 23,757
Walter R. Bak 5,000(4) 1.4% 4.50 2/16/05 3,250 19,800
4,000(4) 1.1% 4.50 2/16/05 2,600 15,840
25,000(6) 6.9% 2.75 12/01/00 19,481 44,365
Jeffrey W. Cummings 6,000(4) 1.7% 4.50 2/16/05 3,881 23,757
20,000(6) 5.5% 3.25 7/31/00 24,835 50,172
20,000(6) 5.5% 2.75 12/01/00 15,585 35,492
Vincent Franceschi 6,000(6) 1.7% 4.50 02/16/05 3,881 23,757
5,000(4) 1.4% 4.50 02/16/05 3,250 19,797
25,000(6) 6.9% 2.75 12/01/00 19,481 44,365
Lynne M. Heitman 10,000(4) 2.8% 4.50 06/13/00 -- 4,359
15,000(4) 4.1% 4.50 06/13/00 -- 6,539
</TABLE>
______________
(1) The potential realizable value portion of the table illustrates value
that might be realized upon exercise of the options immediately prior to
the expiration of their term, assuming the specified compounded rates of
appreciation on the Company's common stock over the term of the options.
These numbers do not take into account certain provisions of the options
providing for cancellation of the option following termination of
employment.
(2) Options to acquire shares of common stock.
(3) The option exercise price may be paid in shares of common stock owned
by the executive officer, in cash, or in any other form of valid
consideration or a combination of any of the foregoing, as determined by
the Human Resources and Compensation Committee in its discretion.
43
<PAGE>
(4) This represents the re-pricing of previously issued options, with a
cliff vest date of January 1, 1998.
(5) Options are exercisable January 1, 1998.
(6) Options are exercisable with respect to 25% of the shares covered
thereby on the anniversary of the exercise date in 1996, 1997, 1998
and 1999.
OPTION EXERCISES DURING 1995 AND YEAR END OPTION VALUES
The following table provides information related to options exercised by the
named executive officers during the 1995 fiscal year and the number and value
of options held at fiscal year end. The Company does not have any outstanding
stock appreciation rights ("SARs").
AGGREGATED OPTION/SAR EXERCISES IN 1995 AND
YEAR END OPTION/SAR VALUE
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT DECEMBER 31, 1995 (#) AT DECEMBER 31, 1995 ($) (1)
-------------------------- ---------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ray A. Fortney -- -- 12,500 210,500 -- --
Kristin L. Allen -- -- 23,250 43,750 -- --
Walter R. Bak -- -- 1,000 34,000 -- --
Jeffrey W. Cummings -- -- 23,750 47,250 -- --
Vince Franceschi -- -- 0 36,000 -- --
John R. Holding -- -- 21,250 44,750 -- --
</TABLE>
(1) The closing price for the Company's common stock as reported by
NASDAQ on December 31, 1995, was $2.25. Since the option exercise price
for each officer is higher than the market price for the Company's Common
Stock, no value is reported in the table.
44
<PAGE>
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF OPTION TERM
SECURITIES MARKET PRICE EXERCISE REMAINING
UNDERLYING OF STOCK AT PRICE NEW AT DATE OF
OPTIONS/SARS TIME OF AT TIME OF EXERCISE REPRICING
NAME POSITION DATE REPRICED REPRICING REPRICING PRICE (YEARS)
- ----------------- -------------- ------- ------------ ------------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Kristin Allen Vice President 2/16/95 6,000 3.13 9.50 4.50 4
Walter Bak Vice President 2/16/95 5,000 3.13 9.25 4.50 4
2/16/95 4,000 3.13 9.50 4.50 4
Jeffrey Cummings Vice President 2/16/95 6,000 3.13 9.50 4.50 4
Ray Fortney President and 2/16/95 18,000 3.13 9.50 4.50 4
CEO 6/13/95 80,000 3.00 6.25 4.50 4
6/13/95 45,000 3.00 6.25 4.50 4
Vincent Franceschi Vice President 2/16/95 5,000 3.13 9.25 4.50 4
2/16/95 6,000 3.13 9.50 4.50 4
Lynne Heitman Former CFO 6/13/95 15,000 3.00 6.13 4.50 4
6/13/95 10,000 3.00 9.00 4.50 4
John Holding Former CFO 2/16/95 6,000 3.13 9.50 4.50 4
</TABLE>
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has executed Executive Employment Agreements with its President
and Vice President Messrs. Fortney and Allen, (for purposes of the following
discussion, each an "Executive"). The terms of the agreements, summarized
below, are substantially identical, except where noted and with respect to
base salary, which is disclosed under Compensation.
Each Executive's employment continues until terminated pursuant to the terms
of the agreement. Each Executive may be terminated by the Company if he is
disabled for more than 90 days, subject to payment of disability amounts, and
for cause, which includes the failure to follow reasonable directives of the
Board of Directors, gross malfeasance or flagrant disloyalty to the Company,
criminal conduct involving moral turpitude, or deficiency in job performance.
The Company may also terminate each Executive's employment without cause upon
sixty days notice. Each Executive has the right to terminate his employment
for good reason, which includes material breach by the Company of its
obligations, reduction of base salary or alteration of his duties or
responsibilities without his consent, geographic relocation of the Executive
or a change in control of the Company.
If the termination by the Company is for cause or by the Executive without
good reason, salary ceases upon termination. If the termination is without
cause by the Company or for good reason, each Executive receives severance
payments equal to a minimum 70% of base salary (100% if more than 8 years of
service with the Company) for 12 months or until the time that Executive is
employed on a full-time basis by another employer, plus payment of the
prorated portion of incentive bonus that he would have received. Mr. Fortney
receives severance payments equal to 100% of base salary for 12 months.
45
<PAGE>
Each Executive also agreed to refrain from engaging in other business
activities in the nuclear utility service industry while employed by the
Company. If the Executive terminates his employment without good reason (but
not for any other type of termination), the Executive is required to refrain
for 12 months from competing with the Company or its subsidiaries on any
pending contract, proposal or bid on which the Executive participated while
an employee or with respect to which the Executive has confidential
information. Each Executive also agreed to maintain the confidentiality of
information belonging to, used by, or in the possession of the Company
relating to its business, except information available in the public domain.
COMPENSATION OF DIRECTORS AND STOCK OPTIONS FOR NON-EMPLOYEE DIRECTORS
During 1995, Directors of the Company, other than Mr. Fortney, were paid a
fee of $750 for each Board of Directors meeting they attended, $750 for each
committee meeting they attended, and a monthly retainer of $889 for the
Chairman of the Board and $667 for all others. Mr. Fortney received
compensation as a member of the management of the Company as indicated in the
"Summary Compensation Table." The Chairman of the Board received stock
options for 47,000 shares and the Vice Chairman of the Board received stock
options for 50,000 shares. All other members of the Board received stock
options for 2,000 shares except one who received 4,500.
Each present director of the Company who is not an employee of the Company is
an "Eligible Director" for the grant of options under the Company's stock
option plans, which plans contain a provision for annual non-discretionary
option grants to all non-employee directors. On the first trading day of
January of each year, each individual, who is on such date an eligible
director, will be granted a nonqualified option to purchase 2,000 shares of
the Company's common stock at 100% of the fair market value of the stock on
the date of such grant. The grants for 1995 were made on January 3, 1995, at
an option price of $3.125.
COMPLIANCE WITH SEC REPORTING REQUIREMENTS
Officers and directors of the Company and greater than ten percent
Shareholders are required to report to the Securities and Exchange Commission
(the "Commission") on a timely basis certain changes in their legal or
beneficial ownership of the Company's stock. Regulations promulgated by the
Commission require the Company to disclose to its Shareholders any reporting
violations occurring after May 1, 1991, that came to the Company's attention
during the current fiscal year based on a review of the applicable filings
required by the Commission to report such changes in legal or beneficial
ownership. The Company believes that during the fiscal year ended December
31, 1995, its directors, executive officers, and principal shareholders filed
all required forms.
REPORT OF HUMAN RESOURCES AND COMPENSATION COMMITTEE
The Human Resources and Compensation Committee ("Committee") of the Board of
Directors is composed entirely of outside directors and is responsible for
establishing compensation policies that apply to executives and managers of
the Company, including executive officers. All decisions by the Committee
relating to the compensation of the Company's executive officers are reviewed
by the full Board, except for decisions about awards under the Company's
stock option plans, which are made solely by the Committee.
PHILOSOPHY
The philosophy of the Company's executive compensation program is that
compensation of executive officers, and in particular that of the President,
should be directly and materially linked to both operating performance of the
Company and to the interests of the Shareholders. In implementing this
philosophy, the Company's policies integrate annual base compensation with
incentive awards based upon corporate performance and individual initiatives
and performance. Measurement of corporate performance is primarily based on
Company-wide goals, while measurement of individual initiatives is primarily
based on review of individual and operations performance goals.
In years in which performance goals are achieved or exceeded, executive
compensation tends to be higher than in years in which performance is below
expectations. Annual cash compensation, together with grants of stock
options and incentive compensation, is designed to attract and retain
qualified executives and to ensure that such executives have a continuing
stake in the long-term success of the Company. Annual increases may also be
necessary at times,
46
<PAGE>
without reference to performance, to adjust the Company's executive salaries
to remain competitive with salaries paid by comparable companies.
The Company's executive compensation program is composed of base salary,
annual cash incentive compensation, long-term incentive compensation in the
form of stock options and various benefits, including medical and profit
sharing plans generally available to employees of the Company.
BASE SALARY
Base salary levels for the Company's executive officers are set in the
context of the Company's total compensation philosophy which is to align
executive interests with the Shareholders and make a significant portion of
their compensation opportunity contingent upon achieving performance goals.
Executive base salaries are generally targeted near the median of companies
in the power and environmental services markets and the service segment of
general industry companies of comparable revenue size. These companies which
are selected with the help of a compensation consultant retained by the
Committee differ from the broader group of companies included in the Piper
Jaffray Hazardous Remediation Disposal Index used in the stock performance
graph which follows this report. Competitive data taken from available
private and published survey sources is reviewed annually for this purpose.
In determining individual salary levels, the Committee takes into account the
executive officer's experience, scope of responsibility, performance level,
and relative impact on the Company's success. In 1994, on an overall basis,
executive officers' base salaries were targeted at or slightly below the
median in the most recent survey. There were no significant changes for 1995.
ANNUAL INCENTIVE COMPENSATION
The annual incentive compensation plan is a key element in the Company's pay
for performance system and is the vehicle by which executive officers can
increase their total compensation. Annual incentive compensation constitutes
that portion of executive compensation that is at risk and is dependent on
achievement of individual and Company performance objectives. The Company's
objectives, which are not specifically weighted, are a combination of
operating, financial, and strategic goals (such as profitability, revenue
growth, productivity, and cash flow) that are considered to be critical to
the Company's short and long-term financial success and its ability to build
shareholder value. The Committee establishes Company-wide and individual
goals annually with the President. The President develops individual
performance goals for the other executives, which goals are approved by the
Committee. The amount of the awards paid to executive officers at the end of
the year varies depending upon the performance against the established
Company-wide, operations, and individual goals. In determining the size of
the awards, no single performance factor or formula is used because the
Committee believes that the rigid application of quantitative performance
measures would eliminate the consideration of qualitative factors critical to
long-term strategic performance. Determination of awards for the President
and other executive officers, however, emphasize overall Company performance.
The Company-wide performance goals included budgeted levels of revenue
growth, net income, and other strategic goals. The Committee determined that
because the primary goal of net income was not met in 1994 or 1995, none of
the Company's executive officers would receive any annual incentive
compensation for 1994 or 1995.
The cash compensation for directors for 1995 was reinstated to the 1993
levels: $8,000 annual fee and a $750 meeting and committee meeting fee,
together with the automatic annual grant of options for 2,000 shares for each
director on the first day of business in January.
STOCK OPTIONS
The Company's stock option plans are the long-term incentive for executive
officers and key employees. The Committee believes that stock options
provide a strong incentive for executives to build shareholder value. The
Committee awards stock options to the President and, upon the recommendation
of the President, to other executive officers. Individual grants are based
upon competitive practices of companies in the service markets described
above, the amount of stock options previously granted to the executive, and
individual performance as evaluated by the Committee.
47
<PAGE>
In February 1995, the Committee recommended and the Board of Directors
approved (as required by the 1993 Stock Option Plan) a program for those
incentive stock options granted in 1994 to employees formerly with Impell and
in lieu of cash bonuses for 1994 performance. Under the repricing program
which was announced to the employees in March 1995, the options held by
employees still employed by the Company can be repriced at the employees'
option at an exercise price of $4.50 per share. The then current market
price was $3.00 per share. In consideration of the price change, the vesting
schedule would be changed from an eighteen months "cliff vesting" and
proportional vesting over four years to 100% "cliff vesting" at January 1,
1998. The Committee debated the merits of repricing incentive options, noted
its general opposition to repricing and concluded that on balance the
interests of the shareholders would best be served by reinforcing the
incentive to the employees with an exercise price within near term achievable
levels and in turn receiving an extension of the vesting period to encourage
continuity with the Company.
The Omnibus Budget Reconciliation Act of 1993 places a limit on the amount of
certain types of compensation for each of the executive officers which may be
tax deductible by the Company beginning in 1994. The Internal Revenue
Service recently issued proposed regulations on the deductibility limit. The
Company's policy is, primarily, to design and administer compensation plans
which support the achievement of long-term strategic objectives and enhance
shareholder value and, to the extent possible, to maximize the proportion of
compensation expense that is tax deductible by the Company. It is
anticipated the new regulations will not result in a limitation for the
Company to fully deduct all compensation expense. The Company will continue
to monitor these proposed regulations.
J.E. (Ted) Ardell, III, Chairman
E. Linn Draper, Jr.
Fruzsina Harsanyi
Members of the Human Resources and
Compensation Committee
48
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the Company's five-year cumulative return on its
common stock to the similar returns for (a) all stocks traded under the
NASDAQ Composite and (b) the Piper Jaffray Hazardous Waste
Remediation/Disposal Index of 38 stocks (including the Company) of companies
in the hazardous waste and environmental services industry.
[GRAPH]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
LEGEND
Symbol Index Description 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
- ------ ----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
u PIPER JAFFRAY 100.0 105.9 92.1 69.5 51.0 41.2
n VECTRA 100.0 91.8 91.8 138.8 53.1 36.7
s NASDAQ - 100.0 156.8 181.1 207.8 201.1 281.4
COMPOSITE
- --------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
PART IV
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND
EXECUTIVE OFFICERS
The following table sets forth information as to the only persons or groups
known by the Company to be the beneficial owners, as defined in Rule 13d-3 of
the Securities and Exchange Commission, of more than five percent of the
common stock of the Company on March 1, 1996, as well as the Company's
directors, the Company's chief executive officer, the Company's four highest
paid executives and for all directors and officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES(1) CLASS(1)
---------------- ------------ ----------
<S> <C> <C>
OWNERS OF MORE THAN 5%
Combustion Engineering, Inc. 1,714,503(2) 21.9%
900 Long Ridge Road
Stamford, Connecticut 06904
Orien Ventures 634,885(3) 8.1%
5520 SW MacAdam Avenue
Suite 112
Portland, Oregon 97201
Cable & Howse Ventures 559,597(4) 7.1%
Security Pacific Bank Plaza
777-108th Avenue N.E.
Suite 2300
Bellevue, Washington 98004
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME SHARES(1) CLASS(1)
---- ------------ ----------
<S> <C> <C>
DIRECTORS
J.E. (Ted) Ardell, III 15,500(5) *
Albert J. Baciocco, Jr. 25,000(6) *
E. Linn Draper, Jr. 16,700(7) *
Ray A. Fortney 33,500(8) *
Fruzsina Harsanyi 4,500(5) *
Elwood D. Howse, Jr. 559,597(4) 7.1%
Edward J. Keith 25,500(5) *
Roy Kirkorian *
</TABLE>
50
<PAGE>
<TABLE>
<S> <C> <C>
EXECUTIVE OFFICERS FOR FISCAL YEAR 1995
Walter R. Bak 1,000 *
Vince Franceschi *
John R. Holding 21,250(5) *
Kristin L. Allen 23,250(5) *
Jeffrey W. Cummings 23,755(5) *
Thomas Pfeil *
All Directors and Officers as a
group (25 persons)(1), (3), (4), (9) 1,517,983 19.4%
</TABLE>
_____________________
*Less than 1%.
(1) Represents beneficial ownership computed in accordance with Rule 13d-3
which includes shares deemed to be outstanding for purposes of the
percentage of ownership by the deemed owner or group but not for purposes
of determining the percentage of ownership of any other person or group.
(2) Combustion Engineering, Inc. is an indirect wholly-owned subsidiary of
ABB Asea Brown Boveri Ltd, a Swiss company.
(3) Includes 615,385 shares held by Orien II, L.P., and 17,500 shares which
may be purchased by Mr. Miadich within 60 days of March 1, 1996, pursuant
to outstanding stock options. Mr. Miadich may be deemed a beneficial
owner of such shares by reason of his position as a partner in Orien II,
L.P. Mr. Miadich shares the power to dispose of and vote the shares held
by that partnership with the other general partner. Mr. Miadich disclaims
beneficial ownership of the 615,385 shares owned by Orien II, L.P.
(4) Includes 520,625 shares held by CH Partners III and 18,472 shares held by
CH Partners II and 10,500 shares which may be purchased by Mr. Howse
pursuant to outstanding stock options within 60 days of March 1, 1996.
Mr. Howse may be deemed a beneficial owner of the shares owned by
CH Partners II and III by reason of his position as a general partner of
such entities. Mr. Howse has the sole power to vote 539,097 of these
shares, including the shares held by CH Partners III and CH Partners II.
Mr. Howse shares the power to dispose of the shares held by those
partnerships with the other general partners.
(5) Represents shares which may be purchased within 60 days of March 1, 1996,
pursuant to outstanding stock options.
(6) Includes 10,000 shares which may be purchased within 60 days of March 1,
1996, pursuant to outstanding stock options.
(7) Includes 10,000 shares which may be purchased within 60 days of March 1,
1996, pursuant to outstanding stock options.
(8) Includes 12,500 shares which may be purchased within 60 days of March 1,
1996, pursuant to outstanding stock options, 20,000 shares owned by
Mr. Fortney and 1,000 shares owned by Mr. Fortney's parents. Mr. Fortney
may be deemed a beneficial owner of such shares.
(9) Includes a total of 301,320 shares which may be purchased within 60 days
of March 1, 1996, pursuant to outstanding stock options.
On March 1, 1996, Cede & Co., the nominee of the Depository Trust Company,
held of record 4,299,443 shares or 54.9 percent of the outstanding shares of
common stock, all of which was held for the accounts of member firms of the
New York Stock Exchange, the American Stock Exchange and various institutions
participating in the facilities of the Depository Trust Company. The Company
has no knowledge that any person owns beneficially five percent or more of
the outstanding shares of common stock which are held in the name of Cede &
Co.
51
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
<TABLE>
PAGE
----
<S> <C> <C>
(a) 1. FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors 22
Consolidated Statements of Operations for each of the three years
in the period ended December 31, 1995 23
Consolidated Balance Sheets at December 31, 1995, and
January 1, 1995 24
Consolidated Statements of Shareholders' Equity for each of the
three years in the period ended December 31, 1995 25
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1995 26
Notes to Consolidated Financial Statements 27
2. FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts is filed
as a part of this annual report. 55
All other schedules are omitted since the required
information is not present or is not present in amounts
sufficient to require submission of the schedules, or because
the information required is included in the consolidated
financial statements and Notes thereto.
3. EXHIBITS
The exhibits listed on the accompanying index to exhibits are
filed as part of this annual report. See page 53 for index
to exhibits.
(b) REPORTS ON FORM 8-K
None.
</TABLE>
52
<PAGE>
VECTRA TECHNOLOGIES, INC.
INDEX TO EXHIBITS
ITEM 14(a)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1
Articles of Incorporation as amended.......................................... C
3.2 Restated Bylaws as amended ................................................... A
10.1 1983 Amended and Restated Stock Option Plan................................... A
10.2 1988 Stock Option Plan as amended............................................. B
10.3 1993 Stock and Incentive Plan................................................. C
10.4 Executive Employment Agreement with Kristin L. Allen dated April 6, 1992...... B
10.5 Executive Employment Agreement with Ray A. Fortney dated August 1, 1993....... C
10.6 First Amendment to the Term Loan Agreement among VECTRA Technologies,
Inc., the banks named herein and Banque Paribas as Agent and Banque
Nationale de Paris as Managing Agent dated November 13, 1995..................
10.7 Second Amendment to the Term Loan Agreement among VECTRA Technologies,
Inc., the banks named herein and Banque Paribas as Agent and Banque
Nationale de Paris as Managing Agent dated December 26, 1995..................
10.8 Third Amendment to the Term Loan Agreement among VECTRA Technologies,
Inc., the banks named herein and Banque Paribas as Agent and Banque
Nationale de Paris as Managing Agent dated March 29, 1996.....................
10.9 Fourth Amendment to the Term Loan Agreement among VECTRA Technologies,
Inc., the banks named herein and Banque Paribas as Agent and Banque
Nationale de Paris as Managing Agent dated April 15, 1996.....................
10.10 Fourth Amendment to the Credit Agreement among VECTRA Nevada, Inc., the
banks named herein and Banque Paribas as Agent and Banque Nationale de
Paris as Managing Agent and Bank Hapoalim as a Bank dated December 26, 1995...
10.11 Sixth Amendment to the Credit Agreement among VECTRA Nevada, Inc., the
banks named herein and Banque Paribas as Agent and Banque Nationale de
Paris as Managing Agent and Bank Hapoalim as a Bank dated March 29, 1996......
10.12 Seventh Amendment to the Credit Agreement among VECTRA Nevada, Inc.,
the banks named herein and Banque Paribas as Agent and Banque Nationale
de Paris as Managing Agent and Bank Hapoalim as a Bank dated April 15, 1996...
10.13 Stock Purchase Agreement dated as of June 30, 1995, by and among VECTRA
Technologies, Inc., VECTRA Services, Inc. and Westinghouse Electric
Corporation, through its Nuclear Products Division............................
11 Statement regarding computation of per share earnings......................... 55
21 Subsidiaries of the Company................................................... 58
</TABLE>
53
<PAGE>
<TABLE>
<S> <C> <C>
23 Consent of Ernst & Young LLP, Independent Auditors............................ 59
27 Financial Data Schedule
</TABLE>
Exhibits in the preceding Exhibit Index designated by an alphabetical
reference were filed in the report with the same alphabetical reference as
indicated below:
(A) Incorporated herein by reference from the Company's Annual Report for 1987
on Form 10-K, filed March 23, 1988.
(B) Incorporated herein by reference from the Company's Annual Report for 1992
on Form 10-K, filed March 30, 1993.
(C) Incorporated herein by reference from the Company's Annual Report for 1993
on Form 10-K, filed March 30, 1994.
(D) Incorporated herein by reference from the Company's Current Report on
Form 8K, filed July 12, 1995.
Except as otherwise set forth herein, all exhibits incorporated by reference
bear the same exhibit numbers as in the documents from which they are
incorporated.
Copies of Exhibits will be furnished upon written request to Vice President,
Finance, VECTRA Technologies, Inc., 5000 Executive Parkway, Suite 500, San
Ramon, CA 94583. The cost of all copies is $0.25 per page.
54
<PAGE>
VECTRA TECHNOLOGIES, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEARS ENDED DECEMBER 31, 1995, JANUARY 1, 1995 AND
DECEMBER 31, 1993
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING OF ADDITIONS DUE CHARGED TO END OF
PERIOD TO ACQUISITION OPERATIONS DEDUCTIONS PERIOD
------------ -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for contract
adjustments:
1995 $384,343 $ -- $650,775 $250,070 $785,048
1994 $ 34,349 $413,734 $178,681 $242,421 $384,343
1993 $ -- $ 34,349 $ -- $ -- $ 34,349
</TABLE>
55
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
VECTRA TECHNOLOGIES, INC.
April 15, 1996 By /s/ Ray A. Fortney
-------------------------------------
Ray A. Fortney
President, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons in the capacities indicated on
April 15, 1996.
<TABLE>
<S> <C>
/s/ Ray A. Fortney President, Chief Executive Officer and Director
- -------------------------------- (Principal Executive Officer)
(Ray A. Fortney)
/s/ Thomas B. Pfeil Vice President, Finance
- -------------------------------- (Principal Financial and Accounting Officer)
(Thomas B. Pfeil)
/s/ Edward J. Keith Edward J. Keith, Chairman of the Board and Director
- --------------------------------
(Edward J. Keith)
/s/ Roy Kirkorian Roy Kirkorian, Vice Chairman and Director
- --------------------------------
(Roy Kirkorian)
/s/ J. E. Ardell, III J. E. Ardell, III, Vice Chairman of the Board and Director
- --------------------------------
(J. E. Ardell, III)
/s/ A. J. Baciocco, Jr. A. J. Baciocco, Jr., Director
- --------------------------------
(A. J. Baciocco, Jr.)
/s/ E. Linn Draper, Jr. E. Linn Draper, Jr., Director
- --------------------------------
(E. Linn Draper, Jr.)
/s/ Fruzsina Harsanyi Fruzsina Harsanyi,, Director
- --------------------------------
(Fruzsina Harsanyi))
/s/ Elwood D. Howse, Jr. Elwood D. Howse, Jr., Director
- --------------------------------
(Elwood D. Howse, Jr.)
</TABLE>
56
<PAGE>
FIRST AMENDMENT
(AMENDED AND RESTATED TERM LOAN AGREEMENT)
This FIRST AMENDMENT ("AMENDMENT") dated as of November 13, 1995 is
entered into by and among VECTRA TECHNOLOGIES, INC. (the "BORROWER"), BANQUE
PARIBAS, as a Bank (as defined below) and as the Agent (as defined below),
and BANQUE NATIONALE DE PARIS, as a Bank and as the Managing Agent (as
defined below).
RECITALS
A. The Borrower has entered into that certain Term Loan Agreement dated
as of January 6, 1994, as amended, and as amended and restated by that
certain Amended and Restated Term Loan Agreement dated as of September 20,
1995 (as so amended and restated, the "TERM AGREEMENT"), among the Borrower,
the Banks party thereto, Banque Paribas, acting in its separate capacity as
agent for the Banks (the "AGENT"), and Banque Nationale de Paris, acting in
its separate capacity as Managing Agent (as defined therein) (the "MANAGING
AGENT").
B. The parties to the Term Agreement desire to further amend the Term
Agreement on and in accordance with the terms, subject to the conditions and
in reliance upon the representations and warranties set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS. Capitalized terms used but not defined in this
Amendment shall have the meanings given to them in the Term Agreement.
SECTION 2. AMENDMENTS TO TERM AGREEMENT.
2.1 Subsection (a) (Leverage Ratio) of Section 6.1 (Financial
Covenants) of the Term Agreement is amended to delete the table appearing at
the end of Subsection (a) and to insert in its place the following:
PERIOD RATIO
Tranche-B Closing Date - 10/1/95 3.50 : 1.0
10/2/95 - 12/31/95 2.40 : 1.0
1/1/96 - Tranche-A Maturity Date 1.50 : 1.0
1.
<PAGE>
2.2 Subsection (b) (Interest Coverage Ratio) of Section 6.1
(Financial Covenants) of the Term Agreement is amended to delete the table
appearing at the end of Subsection (b) and to insert in its place the
following:
PERIOD RATIO
Tranche-B Closing Date - 10/1/95 52 2.25 : 1.0
10/2/95 - Tranche-A Maturity Date 5.00 : 1.0
2.3 Subsection (c) (Fixed Charge Coverage Ratio) of Section 6.1
(Financial Covenants) of the Term Agreement is amended to delete the table
appearing at the end of Subsection (c) and to insert in its place the
following:
PERIOD RATIO
Tranche-B Closing Date - 10/1/95 1.00 : 1.0
10/2/95 - 12/31/95 1.20 : 1.0
1/1/96 - 3/31/96 1.30 : 1.0
4/1/96 - 6/30/96 1.35 : 1.0
7/1/96 - 9/29/96 1.40 : 1.0
9/30/96 - 12/29/96 1.45 : 1.0
12/30/96 - Tranche-A Maturity Date 1.50 : 1.0
2.4 Subsection (e) (Capital Expenditures) of Section 6.1
(Financial Covenants) of the Term Agreement is amended to delete the table
appearing in Subsection (e) and to insert in its place the following:
PERIOD MAXIMUM AMOUNT
Tranche-B Closing Date - 10/1/95 $4,000,000
10/2/95 - 12/31/95 $ 400,000
1/1/96 - 12/29/96 $5,000,000
12/30/96 - 12/28/97 $5,000,000
12/29/97 - 1/3/99 $5,000,000
2.
<PAGE>
SECTION 3. LIMITATION OF AMENDMENT.
(a) The amendments set forth in Section 2, above, are effective
for the purposes set forth herein and shall be limited precisely as written
and shall not be deemed to (i) be a consent to any amendment, waiver or
modification of any other term or condition of any Loan Document or (ii)
otherwise prejudice any right or remedy which the Banks, the Agent or the
Managing Agent may now have or may have in the future under or in connection
with any Loan Document.
(b) This Amendment shall be construed in connection with and as
part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except
as herein waived or amended, are hereby ratified and confirmed and shall
remain in full force and effect.
SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the
Banks, the Agent and the Managing Agent to enter into this Amendment, the
Borrower hereby represents and warrants to each Bank, the Agent and the
Managing Agent as follows:
(a) After giving effect to this Amendment (i) the representations
and warranties contained in the Loan Document (other than those which
expressly speak as of a different date) are true, accurate and complete in
all material respects as of the date hereof and (ii) no Default or Event of
Default has occurred and is continuing;
(b) The Borrower has the corporate power and authority to execute
and deliver this Amendment and to perform its obligations under the Term
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party;
(c) The certificate of incorporation, bylaws and other organizational
documents of the Borrower delivered to each Bank on the Tranche-B Closing
Date are true, accurate and complete and have not been amended, supplemented
or restated and are and continue to be in full force and effect;
(d) The execution and delivery by the Borrower of this Amendment
and the performance by Borrower of its obligations under the Term Agreement,
as amended by this Amendment, and each of the other Loan Documents to which
it is a party have been duly authorized by all necessary corporate action on
the part of the Borrower;
(e) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under the Term
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party do not and will not contravene (i) any law or
regulation binding on or affecting the Borrower, (ii) the certificate of
incorporation or bylaws of the Borrower, (iii) any order, judgment or decree
of any court or other governmental or public body or authority, or
subdivision thereof, binding on the Borrower or (iv) any contractual
restriction binding on or affecting the Borrower;
3.
<PAGE>
(f) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under the Term
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on the Borrower, except as already has been obtained or
made; and
(g) This Amendment has been duly executed and delivered by the
Borrower and is the binding obligation of the Borrower, enforceable against
it in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, liquidation, moratorium or other
similar laws of general application and equitable principles relating to or
affecting creditors' rights.
SECTION 5. REAFFIRMATION. The Borrower hereby reaffirms its
obligations under each Loan Document to which it is a party.
SECTION 6. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed
to constitute one and the same instrument.
SECTION 7. EFFECTIVENESS. This Amendment shall become effective on the
receipt by the Agent of an originally executed counterpart (or facsimile
thereof with the original to follow by Federal Express or other overnight
courier) of this Amendment, executed by the Borrower and each of the Banks as
shall at such point and thereafter be deemed effective as of September 21,
1995.
SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
SECTION 9. RELEASE AND WAIVER.
(a) The Borrower hereby acknowledges and agrees that: (i) it has
no claim or cause of action against any Bank or the Agent or the Managing
Agent or any parent, subsidiary or affiliate of any Bank or the Agent or the
Managing Agent, or any of such Bank's, the Agent's or the Managing Agent's
officers, directors, employees, attorneys or other representatives or agents
(all of which parties other than the Banks, the Agent and the Managing Agent
being, collectively, the "LENDER AGENTS") in connection with the Term
Agreement, the Loans thereunder or the transactions contemplated therein;
(ii) it has no offset or defense against any of its respective obligations,
indebtedness or contracts in favor of the Banks, the Agent or the Managing
Agent; and (iii) it recognizes that each of the Banks, the Agent and the
Managing Agent has heretofore properly performed and satisfied in a timely
manner all of its respective obligations to and contracts with the Borrower.
4.
<PAGE>
(b) Although each of the Banks, the Agent and the Managing Agent
regards its respective conduct as proper and does not believe the Borrower to
have any claim, cause of action, offset or defense against such Bank, the
Agent or the Managing Agent or any Lender Agent in connection with the Term
Agreement, the Loans thereunder or the transactions contemplated therein,
each Bank, the Agent and the Managing Agent wishes and Borrower agrees to
eliminate any possibility that any past conditions, acts, omissions, events,
circumstances or matters could impair or otherwise affect any rights,
interests, contracts or remedies of the Banks, the Agent or the Managing
Agent. Therefore, the Borrower unconditionally releases and waives (i) any
and all liabilities, indebtedness and obligations, whether known or unknown,
of any kind of any Bank, the Agent or the Managing Agent or of any of Lender
Agents to the Borrower, except the obligations remaining to be respectively
performed by the Banks, the Agent or the Managing Agent as expressly stated
in the Term Agreement, this Amendment and the other Loan Documents; (ii) any
legal, equitable or other obligations or duties, whether known or unknown,
of any Bank, the Agent, the Managing Agent or any Lender Agent to the
Borrower (and any rights of the Borrower against any Bank, the Agent, the
Managing Agent or any Lender Agent) besides those expressly stated in the
Term Agreement, this Amendment and the other Loan Documents; (iii) any and
all claims under any oral or implied agreement, obligation or understanding
with any Bank, the Agent, the Managing Agent or any Lender Agent, whether
known or unknown, which is different from or in addition to the express terms
of the Term Agreement, this Amendment or any of the other Loan Documents; and
(iv) all other claims, causes of action or defenses of any kind whatsoever
(if any), whether known or unknown, which the Borrower might otherwise have
against any Bank, the Agent, the Managing Agent and/or any Lender Agent on
account of any condition, act, omission, event, contract, liability,
obligation, indebtedness, claim, cause of action, defense, circumstance or
matter of any kind whatsoever which existed, arose or occurred at any time
prior to the execution and delivery of this Amendment or which could arise
concurrently with the effectiveness of this Amendment.
(c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN,
UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS,
LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS
AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER
AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND
RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH
IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER
APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE EFFECTIVENESS OR
SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT.
5.
<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
VECTRA TECHNOLOGIES, INC.
By: /s/ Ray A. Fortney
-------------------------------------
Its: President & CEO
-------------------------------------
BANQUE PARIBAS, as a Bank and as Agent
By: /s/ Robert S. Pinkerton
-------------------------------------
Its: VP
-------------------------------------
By: /s/ Lee S. Buckner
-------------------------------------
Its: GVP
-------------------------------------
BANQUE NATIONALE DE PARIS, as a Bank
and as Managing Agent
By: /s/ Richard Cushing
-------------------------------------
Its: AVP
-------------------------------------
6.
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
SECTION 1. Each of the undersigned Guarantors hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Amendment.
SECTION 2. Each Guarantor hereby consents to this Amendment and agrees that
its respective Guaranty of the Obligations of the Borrower under the Term
Agreement shall continue in full force and effect, shall be valid and
enforceable and shall not be impaired or otherwise affected by the execution
of this Amendment or any other document or instrument delivered in connection
herewith.
SECTION 3. Each Guarantor severally represents and warrants that, after
giving effect to this Amendment, all representations and warranties contained
in its respective are true, accurate and complete as if made the date hereof.
GUARANTORS PACIFIC NUCLEAR STORAGE SYSTEMS, INC.
By: /s/ Ray A. Fortney
------------------------------------
Printed Name: Ray A. Fortney
--------------------------
Title: President
---------------------------------
NUCLEAR PACKAGING, INC.
By: /s/ Ray A. Fortney
------------------------------------
Printed Name: Ray A. Fortney
--------------------------
Title: President
---------------------------------
VECTRA SERVICES, INC.
By: /s/ Ray A. Fortney
------------------------------------
Printed Name: Ray A. Fortney
--------------------------
Title: President
---------------------------------
CTL INTERNATIONAL, INC.
By: /s/ Ray A. Fortney
------------------------------------
Printed Name: Ray A. Fortney
--------------------------
Title: President
---------------------------------
7.
<PAGE>
VECTRA GOVERNMENT SERVICES, INC.
By: /s/ Ray A. Fortney
------------------------------------
Printed Name: Ray A. Fortney
--------------------------
Title: President
---------------------------------
VECTRA WASTE SERVICES, L.L.C.
by: VECTRA Technologies, Inc., its Manager
By: /s/ Ray A. Fortney
------------------------------------
Printed Name: Ray A. Fortney
--------------------------
Title: President
---------------------------------
8.
<PAGE>
SECOND AMENDMENT
(AMENDED AND RESTATED TERM LOAN AGREEMENT)
THIS SECOND AMENDMENT ("AMENDMENT") dated as of December 26, 1995 is
entered into by and among VECTRA TECHNOLOGIES, INC. (the "BORROWER"), BANQUE
PARIBAS, as a Bank (as defined below) and as the Agent (as defined below),
and BANQUE NATIONALE DE PARIS, as a Bank and as the Managing Agent (as
defined below).
RECITALS
A. The Borrower has entered into that certain Term Loan Agreement dated
as of January 6, 1994, as amended, and as amended and restated by that
certain Amended and Restated Term Loan Agreement dated as of September 20,
1995, as amended by that First Amendment dated as of November 13, 1995 (as so
amended, the "TERM AGREEMENT"), among the Borrower, the Banks party thereto,
Banque Paribas, acting in its separate capacity as agent for the Banks (the
"AGENT"), and Banque Nationale de Paris, acting in its separate capacity as
Managing Agent (as defined therein) (the "MANAGING AGENT").
B. The parties to the Term Agreement desire to further amend the Term
Agreement on and in accordance with the terms, subject to the conditions and in
reliance upon the representations and warranties set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS. Capitalized terms used but not defined in this
Amendment shall have the meanings given to them in the Term Agreement.
SECTION 2. AMENDMENTS TO TERM AGREEMENT.
2.1 SECTION 1.1 (DEFINITIONS). The definition for the term
"Applicable Margin" is amended to delete the period at the end of the
definition and to insert in its place a semi-colon followed by the following:
and, for Tranche-C Loans, shall mean 3.0% PER ANNUM for all
Base Rate Loans.
2.2 SECTION 1.1 (DEFINITIONS). The definition for the term
"Commitment" is deleted and replaced with the following:
1.
<PAGE>
"COMMITMENT" shall mean, for each Bank at any given time,
its Tranche-A Commitment, its Tranche-B Commitment and its Tranche-C
Commitment.
2.3 SECTION 1.1 (DEFINITIONS). The definition for the term
"Note" is deleted and replaced with the following:
"NOTE" shall mean any Tranche-A Note, any Tranche-B Note or
any Tranche-C Note, and any and all replacements, extensions, substitutions
and renewals of any such Notes.
2.4 SECTION 1.1 (DEFINITIONS). A new definition of "Second
Amendment" is added to Section 1.1 of the Term Agreement to read as follows:
"SECOND AMENDMENT" shall mean that Second Amendment (Amended
and Restated Term Loan Agreement) dated as of December 26, 1995 among the
Borrower, the Banks, the Agent and the Managing Agent.
2.5 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C
Available Amount" is added to Section 1.1 of the Term Agreement to read as
follows:
"TRANCHE-C AVAILABLE AMOUNT" shall mean, from the Tranche-C
Closing Date until and including February 4, 1996, an amount equal to 33.33%
of the amount set forth opposite such Bank's name in SCHEDULE 1 hereto under
the heading of "TRANCHE-C COMMITMENT," and from February 5, 1996 until and
including March 3, 1996, an amount equal to 66.67% of the amount set forth
opposite the Bank's name in SCHEDULE 1 hereto under the heading "TRANCHE-C
COMMITMENT," and from March 4, 1996 until and including the Tranche-C
Maturity Date, an amount equal to the Tranche-C Commitment.
2.6 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C
Closing Date" is added to Section 1.1 of the Term Agreement to read as follows:
"TRANCHE-C CLOSING DATE" shall mean the later of December
26, 1995 and the date at which each of the conditions precedent set forth in
SECTION 3.3 shall have been duly satisfied by the Borrower, as determined by
the Banks, in their sole discretion.
2.7 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C
Closing Fee" is added to Section 1.1 of the Term Agreement to read as follows:
"TRANCHE-C CLOSING FEE" shall have the meaning provided in
SECTION 2.8(b).
2.8 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C
Commitment" is added to Section 1.1 of the Term Agreement to read as follows:
2.
<PAGE>
"TRANCHE-C COMMITMENT" shall mean the amount set forth
opposite such Bank's name in SCHEDULE 1 hereto under the heading "TRANCHE-C
COMMITMENT."
2.9 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C
Facility" is added to Section 1.1 of the Term Agreement to read as follows:
2.10 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C
Commitment Fee" is added to Section 1.1 of the Term Agreement to read as
follows:
"TRANCHE-C COMMITMENT FEE" shall have the meaning provided
in SECTION 2.8(b).
"TRANCHE-C FACILITY" means the One Million Dollar
($1,000,000) non-revolving line of credit maturing on the Tranche-C Maturity
Date.
2.11 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C
Loan" is added to Section 1.1 of the Term Agreement to read as follows:
"TRANCHE-C LOAN" shall have the meaning set forth in SECTION
2.15.
2.12 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C
Maturity Date" is added to Section 1.1 of the Term Agreement to read as
follows:
"TRANCHE-C MATURITY DATE" shall mean March 31, 1996.
2.13 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C
Notes" is added to Section 1.1 of the Term Agreement to read as follows:
"TRANCHE-C NOTES" means the separate promissory notes, dated
as of the Tranche-C Closing Date, each executed by the Borrower and payable
to the order of a Bank, in the original amount of such Bank's Tranche-C
Commitment.
2.14 SECTION 2.2. Section 2.2 of the Term Agreement is amended
by inserting after the final paragraph the following new paragraph:
The Banks hereby acknowledge that on December 11,1995 the Borrower
repaid the Tranche-B Facility by the amount of $1,100,000, which amount was
applied to the outstanding Tranche-B Loans in accordance with each Bank's Pro
Rata Share and each Bank's Tranche-B Commitment was permanently reduced by
the same amount. The revised Tranche-B Commitments of each Bank are set forth
on amended SCHEDULE 1 attached hereto.
2.15 SECTION 2.3. A new Subsection (c) is added to Section 2.3 of
the Term Agreement to read as follows:
3.
<PAGE>
(c) TRANCHE-C LOAN NOTES. The Borrower's obligation to
pay the principal of, and interest on, each Bank's Tranche-C Loans shall be
evidenced by a Tranche-C Note duly executed and delivered by the Borrower and
made payable to such Bank substantially in the form of EXHIBIT E hereto in
a principal amount equal to such Bank's Tranche-C Commitment.
2.16 SECTION 2.8. Section 2.8 of the Term Agreement is amended by
deleting it entirely and by replacing it with the following:
SECTION 2.8 FEES.
(a) TRANCHE-B FEES. In consideration of the Banks'
agreement to commit to make the Tranche-B Loans available to the Borrower as
contemplated by this Agreement, the Borrower agrees to pay to the Banks, in
accordance with their respective Tranche-B Commitment Percentage, (a) an
aggregate "Tranche-B Closing Fee" in the amount of $150,000 which fee shall
be earned upon the Tranche-B Closing Date, but which fee shall be due and
payable upon the first to occur of (i) the sale of the Borrower's waste or fuel
services lines of business or other similar sale of assets currently owned by
the Borrower or its subsidiaries, (ii) the Borrower's issuance of additional
common stock or preferred stock with a redemption date of not earlier than
one year after the earliest of the Tranche-A Maturity Date, the Tranche-B
Maturity Date or the Tranche-C Maturity Date, (iii) the Borrower's issuance of
debt subordinated to all debt of the Borrower to institutional lenders on
terms satisfactory to such institutional lenders, including the Banks, or
(iv) the Tranche-B Maturity Date or such prior date as Tranche-B Loans shall
have become due and payable, whether by acceleration or otherwise, and (b) a
"Tranche-B Commitment Fee" in an amount equal to one-quarter of one percent
(0.25%) PER ANNUM of the average daily difference between the aggregate
Tranche-B Commitments and the sum of the aggregate principal amount of the
Tranche-B Loans then outstanding, due and payable quarterly in arrears on the
last day of each calendar quarter, commencing with the quarter during which
the Tranche-B Closing Date occurs, with the final such payment due and payable
on the date the Tranche-B Commitments terminate under the terms of
this Agreement. The initial installment of the Tranche-B Commitment Fee shall
accrue and be calculated from June 30, 1995.
(b) TRANCHE-C FEE. In consideration of the Banks'
agreement to commit to make the Tranche-C Loans available to the Borrower as
contemplated by this Agreement, the Borrower agrees to pay to the Banks, in
accordance with their respective Tranche-C Commitment Percentage, (a) an
aggregate "Tranche-C Closing Fee" in the amount of $125,000 which fee shall
be earned upon the Tranche-C Closing Date, but which fee shall be due and
payable upon the first to occur of (i) the sale of the Borrower's waste or
fuel services lines of business or other similar sale of assets currently
owned by the Borrower or its subsidiaries, (ii) the Borrower's issuance of
additional common stock or preferred stock with a redemption date of not
earlier than one year after the earliest of the Tranche-A Maturity Date, the
Tranche-B Maturity Date or the Tranche-C Maturity Date, (iii) the Borrower's
issuance of debt subordinated to all debt of the Borrower to institutional
lenders on terms satisfactory to such institutional lenders, including
the Banks, or (iv) the Tranche-C Maturity Date or such prior date
4.
<PAGE>
as Tranche-C Loans shall have become due and payable, whether by acceleration
or otherwise, and (b) a "Tranche-C Commitment Fee" in an amount equal to
one-quarter of one percent (0.25%) PER ANNUM of the average daily difference
between the aggregate Tranche-C Commitments and the sum of the aggregate
principal amount of the Tranche-C Loans then outstanding, due and payable
quarterly in arrears on the last day of each calendar quarter, commencing
with March 31, 1996, with the final such payment due and payable on the date
the Tranche-C Commitments terminate under the terms of this Agreement. In the
event that the Tranche-C Commitments terminate prior to March 31, 1996, the
"Tranche-C Commitment Fee shall be due and payable on such earlier date. The
initial installment of the Tranche-C Commitment Fee shall accrue and be
calculated from January 2, 1996.
2.17 SECTION 2.14. Section 2.14 of the Term Agreement is amended
to delete the final full paragraph and to replace it with the following:
All amounts due under this SECTION 2.14 shall be prepaid
within two (2) Business Days of receipt thereof by the Borrower and shall be
applied in inverse order to the scheduled installments for repayment of first
the Tranche-B Loans, second the Tranche-A Loans and then the Tranche-C Loans.
2.18 SECTION 2.15 A new Section 2.15 is added to the Term
Agreement to read as follows:
2.15 TRANCHE-C FACILITY. Subject to and upon the terms and
conditions herein set forth, each Bank, severally but not jointly, agrees to
make Loans of immediately available funds to the Borrower, on a non-revolving
basis from time to time, from the Tranche-C Closing Date until the earlier of
the last Business Day prior to the Tranche-C Maturity Date or the date on
which the Tranche-C Commitment has been fully utilized, in an aggregate
principal amount not to exceed the lesser of the Tranche-C Commitment of such
Bank and the Tranche-C Available Amount of such Bank (each such loan, a
"TRANCHE-C LOAN"). The aggregate amount of the Tranche-C Commitments shall
not exceed $1,000,000. Subject to the terms of this Agreement relating to
optional prepayments and mandatory prepayments and the acceleration of the
maturities, the Tranche-C Loans shall be due and payable, together with all
accrued and unpaid interest and other amounts chargeable to the Borrower
under or with respect to the Tranche-C Facility, on the Tranche-C Maturity
Date.
(a) GENERAL PROVISIONS RELATING TO TRANCHE-C LOANS.
Each Tranche-C Loan made by a Bank under the Tranche-C Facility shall be in
the form of a Base Rate Loan. The Borrower shall repay the principal amount
of the Tranche-C Loans in the amounts and in the manner set forth in this
Section and pay interest accrued on the Tranche-C Loans at the rates and in
the manner set forth in SECTION 2.4(a). The Borrower may, at its option and
upon one (1) Business Day's notice, prepay all or any portion of the
Tranche-C Loans as set for the SECTION 2.6 without premium or penalty. In
addition, the Tranche-C Loans shall be subject to Mandatory Prepayments in
accordance with SECTION 2.14.
5.
<PAGE>
(b) PERMITTED USES OF TRANCHE-C LOANS. The proceeds of
the Tranche-C Loans shall be used for working capital purposes.
(c) NOTICE OF BORROWING FOR TRANCHE-C LOANS.
(i) The Borrower shall give the Agent at the Agent's
Office prior to 10:00 A.M., Los Angeles time, at least five (5) Business
Days' prior telex, facsimile or telephonic notice (promptly confirmed in
writing) of a Tranche-C Loan to be made hereunder. Such notice (the "NOTICE
OF BORROWING") shall be irrevocable and shall specify (i) the aggregate
principal amount of the requested Loans and (ii) the date of Borrowing (which
shall be a Business Day).
(ii) Promptly after receipt of the Notice of
Borrowing, the Agent shall provide each Bank with a copy thereof and inform
each Bank as to its Pro Rata Share of the Tranche-C Loan requested thereunder.
(d) DISBURSEMENT OF FUNDS FOR TRANCHE-C LOANS.
(i) No later than 1:00 P.M., Los Angeles time, on the
date specified in the Notice of Borrowing, each Bank will make available its
Pro Rata Share of the Tranche-C Loan requested to be made on such date, in
U.S. dollars and immediately available funds, at the Agent's Office. After
the Agent's receipt of the proceeds of such Tranche-C Loan, the Agent will
make available to the Borrower by depositing in the Borrower's account at the
Agent's Office the aggregate of the amounts so received.
(ii) Unless the Agent shall have been notified by any
Bank prior to the date of the Borrowing that such Bank does not intend to
make available to the Agent its Tranche-C Loan to be made on such date, the
Agent may assume that such Bank has made such amount available to the Agent
on such date and the Agent in its sole discretion may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such Bank
and the Agent has made such amount available to the Borrower, the Agent shall
be entitled to recover such corresponding amount on demand from such Bank. If
such Bank does not pay such corresponding amount forthwith upon the Agent's
demand therefor, the Agent shall promptly notify the Borrower and the
Borrower shall immediately repay such corresponding amount to the Agent. The
Agent shall also be entitled to recover from such Bank or the Borrower, as
the case may be, interest on such corresponding amount in respect of each day
from the date such corresponding amount was made available by the Agent to
the Borrower to the date such corresponding amount is recovered by the Agent,
at the rate PER ANNUM equal to the Base Rate plus the Applicable Margin,
calculated in accordance with SECTION 2.4(a), for the Tranche-C Loan. Nothing
herein shall be deemed to relieve any Bank from its obligation to fulfill its
commitments hereunder or to prejudice any rights which the Borrower may have
against any Bank as a result of any default by such Bank hereunder.
Notwithstanding anything contained herein or in any other Loan Document to
the contrary, the Agent may apply all funds and proceeds of Collateral
available for the payment of any Obligations first to repay any amount
6.
<PAGE>
owing by any Bank to the Agent as a result of such Bank's failure to fund its
Tranche-C Loans hereunder.
2.19 SECTION 3.3. A new Section 3.3 is added to the Term
Agreement to read as follows:
SECTION 3.3 CONDITIONS PRECEDENT TO LOANS. The obligation
of each Bank to make its initial Tranche-C Loan hereunder is subject to the
satisfaction, as determined by the Banks, the Agent and the Managing Agent,
on or before the Tranche-C Closing Date of the following conditions precedent:
(a) SECOND AMENDMENT. The Borrower and each Bank shall
have duly executed and delivered the Second Amendment to the Agent.
(b) NOTES. The Borrower shall have duly executed and
delivered the Tranche-C Notes to the Agent.
(c) ACKNOWLEDGMENT OF AMENDMENT AND REAFFIRMATION OF
GUARANTY. The Agent shall have received the Acknowledgment of Amendment and
Reaffirmation of Guaranty, duly executed and delivered by each of the
Guarantors party thereto to the Agent.
(d) CERTIFIED RESOLUTIONS. The Agent shall have
received a certificate of the Secretary or Assistant Secretary of each of the
Loan Parties and dated the Tranche-C Closing Date certifying (i) the names
and true signatures of the incumbent officers of such Person authorized to
sign the applicable Loan Documents, (ii) the resolutions of such Person's
Board of Directors approving and authorizing the execution, delivery and
performance of the Term Agreement, as amended by the Second Amendment, the
Tranche-C Notes and the Acknowledgement of Amendment and Reaffirmation of
Guaranty referred to in clause (c), above, as applicable, executed by such
Person, and (iii) that there have been no changes in the Certificate of
Incorporation of such Person or in the Bylaws or similar constituent
documents of such Person since the date of certification thereof to the Agent
in connection with the closing of the Tranche-B Facility.
(e) SIDE LETTER AGREEMENT. The Borrower shall have duly
acknowledged and delivered the side letter agreement dated December 22, 1995
from the Agent to the Borrower relating to compliance with projections as to
financial performance.
(f) WARRANT. The Borrower shall have duly executed and
delivered a Common Stock Purchase Warrant in form and substance satisfactory
to the Banks.
(g) WARRANT PURCHASE AGREEMENT. The Borrower shall have
duly executed and delivered a Common Stock Warrant Purchase Agreement in
form and substance satisfactory to Banks.
7.
<PAGE>
2.20 SECTION 3.4. A new Section 3.4 is added to the Term
Agreement to read as follows:
SECTION 3.4 ALL TRANCHE-C LOANS. The obligation of any Bank
to make any Tranche-C Loan is subject to the satisfaction of the following
further conditions precedent:
(a) NOTICE OF BORROWING. The Agent shall have received
a fully executed Notice of Borrowing in respect of the Loans.
(b) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event
of Default shall have occurred and be continuing on such date either before
or after giving effect to the making of the Loans, and the Agent and each
Bank shall have received a certificate to such effect dated the funding date
of such Loan from the chief financial officer of the Borrower.
The acceptance of the proceeds of the Tranche-C Loans shall constitute a
representation and warranty by the Borrower to each of the Banks that all of
the conditions required to be satisfied under this SECTION 3 in connection
with the making of such Loan have been satisfied.
2.21 SECTION 5.10. A new Section 5.10 is added to the Term
Agreement to read as follows:
SECTION 5.10 OFFERS AND PROPOSALS FOR ACQUISITION. The
Borrower shall, promptly upon its receipt, provide to Agent complete copies
of any and all written offers or proposals for (i) the investment in the
Borrower's or any of its Subsidiaries' capital stock, or (ii) the acquisition
of any portion of the business of the Borrower or any of its Subsidiaries. In
the event that any of such offers or proposals are oral, the Borrower shall
communicate such oral offers or proposals to Agent promptly upon the
Borrower's receiving such oral offer or proposal.
2.22 SECTION 5.11. A new Section 5.11 is added to the Term
Agreement to read as follows:
SECTION 5.11 NOTICE AND ATTENDANCE AT BOARD MEETINGS; COPIES
OF MATERIALS. The Borrower shall duly give notice to the Agent of all
meetings of its Board of Directors at the same time and in the same manner
and form as such notice is given to the members of the Board of Directors in
their capacity as Board members. The Agent shall have the right at the
discretion of the Banks, but not the obligation, to attend in an observer
status all such meetings. In addition, the Borrower shall deliver, or cause
to be delivered, to the Agent any and all written materials which are
delivered to the members of the Board of Directors in their capacity as Board
members at the same time and in the same manner and form as delivered to such
Board members.
The right of Agent to attend meetings and to obtain written materials as
discussed in the previous paragraph shall not apply to the extent that such
meetings or materials pertain to Borrower/Bank group relations or to matters
relating to the Borrower's performance of the Loan Documents if the exercise
of such right would be inconsistent with applicable law or would result in a
breach
8.
<PAGE>
of the Borrower's fiduciary duties. Agent agrees to hold all materials and
information learned from attendance in strict confidence (provided that
Agent may divulge information necessary for disclosure to the Banks and to
regulatory authorities, including bank regulators) and to abide by
applicable law, including securities laws, related thereto.
2.23 SECTION 5.12. A new Section 5.12 is added to the Term
Agreement to read as follows:
SECTION 5.12 AUTHORIZATION TO MEET WITH KEY EMPLOYEES. The
Borrower expressly authorizes the Agent, upon reasonable prior notice to
one of the executive officers of the Borrower and without unreasonable
disruption of the normal operations of the Borrower, to meet with employees
whom the Agent, in its sole discretion, considers to be key employees of any
of the Borrower's Subsidiaries, divisions or business lines for the purpose
of enabling the Banks to obtain further information relevant to the
administration of the Loans hereunder pertaining to the financial condition,
operations and prospects of such Subsidiaries, divisions or business lines.
2.24 SECTION 7.1. Subsection (a) of Section 7.1 of the Term
Agreement is deleted and replaced with the following:
(a) FAILURE TO MAKE PAYMENTS. The Borrower shall
default in the payment when due of any principal of the Loans, interest,
Fees, including, without limitation, the payment of the deferred $125,000
Tranche-B Closing Fee when due, the payment of the deferred $125,000
Tranche-C Closing Fee when due, or other amounts owing hereunder.
SECTION 3. LIMITATION OF AMENDMENT.
(a) The amendments set forth in SECTION 2, above, are effective
for the purposes set forth herein and shall be limited precisely as written
and shall not be deemed to (i) be a consent to any amendment, waiver or
modification of any other term or condition of any Loan Document or
(ii) otherwise prejudice any right or remedy which the Banks, the Agent or
the Managing Agent may now have or may have in the future under or in
connection with any Loan Document.
(b) This Amendment shall be construed in connection with and as
part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except
as herein waived or amended, are hereby ratified and confirmed and shall
remain in full force and effect.
SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the
Banks, the Agent and the Managing Agent to enter into this Amendment, the
Borrower hereby represents and warrants to each Bank, the Agent and the
Managing Agent as follows:
(a) After giving effect to this Amendment (i) the
representations and warranties contained in the Loan Documents (other than
those which expressly speak as of a
9.
<PAGE>
different date) are true, accurate and complete in all material respects as
of the date hereof and (ii) no Default or Event of Default has occurred and
is continuing;
(b) The Borrower has the corporate power and authority to
execute and deliver this Amendment and to perform its obligations under the
Term Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party;
(c) The certificate of incorporation, bylaws and other
organizational documents of the Borrower delivered to each Bank on the
Tranche-C Closing Date are true, accurate and complete and have not been
amended, supplemented or restated and are and continue to be in full force
and effect;
(d) The execution and delivery by the Borrower of this
Amendment and the performance by Borrower of its obligations under the Term
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party have been duly authorized by all necessary corporate
action on the part of the Borrower;
(e) The execution and delivery by the Borrower of this
Amendment and the performance by the Borrower of its obligations under the
Term Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party do not and will not contravene (i) any law
or regulation binding on or affecting the Borrower, (ii) the certificate of
incorporation or bylaws of the Borrower, (iii) any order, judgment or decree
of any court or other governmental or public body or authority, or
subdivision thereof, binding on the Borrower or (iv) any contractual
restriction binding on or affecting the Borrower;
(f) The execution and delivery by the Borrower of this
Amendment and the performance by the Borrower of its obligations under the
Term Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party do not require any order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by any governmental or public body or authority, or
subdivision thereof, binding on the Borrower, except as already has been
obtained or made; and
(g) This Amendment has been duly executed and delivered by
the Borrower and is the binding obligation of the Borrower, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating
to or affecting creditors' rights.
SECTION 5. REAFFIRMATION. The Borrower hereby reaffirms its obligations
under each Loan Document to which it is a party.
SECTION 6. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed
to constitute one and the same instrument.
10.
<PAGE>
SECTION 7. EFFECTIVENESS. This Amendment shall become effective on the
receipt by the Agent of an originally executed counterpart (or facsimile
thereof with the original to follow by Federal Express or other overnight
courier) of this Amendment, executed by the Borrower and each of the Banks as
shall at such point and thereafter be deemed effective as of December 26, 1995.
SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
SECTION 9. RELEASE AND WAIVER.
(a) The Borrower hereby acknowledges and agrees that: (i) it has
no claim or cause of action against any Bank or the Agent or the Managing
Agent or any parent, subsidiary or affiliate of any Bank or the Agent or the
Managing Agent, or any of such Bank's, the Agent's or the Managing Agent's
officers, directors, employees, attorneys or other representatives or agents
(all of which parties other than the Banks, the Agent and the Managing Agent
being, collectively, the "LENDER AGENTS") in connection with the Term
Agreement, the Loans thereunder or the transactions contemplated therein;
(ii) it has no offset or defense against any of its respective obligations,
indebtedness or contracts in favor of the Banks, the Agent or the Managing
Agent; and (iii) it recognizes that each of the Banks, the Agent and the
Managing Agent has heretofore properly performed and satisfied in a timely
manner all of its respective obligations to and contracts with the Borrower.
(b) Although each of the Banks, the Agent and the Managing
Agent regards its respective conduct as proper and does not believe the
Borrower to have any claim, cause of action, offset or defense against such
Bank, the Agent or the Managing Agent or any Lender Agent in connection with
the Term Agreement, the Loans thereunder or the transactions contemplated
therein, each Bank, the Agent and the Managing Agent wishes and Borrower
agrees to eliminate any possibility that any past conditions, acts,
omissions, events, circumstances or matters could impair or otherwise affect
any rights, interests, contracts or remedies of the Banks, the Agent or the
Managing Agent. Therefore, the Borrower unconditionally releases and waives
(i) any and all liabilities, indebtedness and obligations, whether known or
unknown, of any kind of any Bank, the Agent or the Managing Agent or of any
of Lender Agents to the Borrower, except the obligations remaining to be
respectively performed by the Banks, the Agent or the Managing Agent as
expressly stated in the Term Agreement, this Amendment and the other Loan
Documents; (ii) any legal, equitable or other obligations or duties, whether
known or unknown, of any Bank, the Agent, the Managing Agent or any Lender
Agent to the Borrower (and any rights of the Borrower against any Bank, the
Agent, the Managing Agent or any Lender Agent) besides those expressly
stated in the Term Agreement, this Amendment and the other Loan Documents;
(iii) any and all claims under any oral or implied agreement, obligation or
understanding with any Bank, the Agent, the Managing Agent or any Lender
Agent, whether known or unknown, which is different from or in addition to the
express terms of the Term Agreement, this Amendment or any of the other Loan
Documents; and (iv) all other claims, causes of action or defenses of any
kind whatsoever (if
11.
<PAGE>
any), whether known or unknown, which the Borrower might otherwise have
against any Bank, the Agent, the Managing Agent and/or any Lender Agent on
account of any condition, act, omission, event, contract, liability,
obligation, indebtedness, claim, cause of action, defense, circumstance or
matter of any kind whatsoever which existed, arose or occurred at any time
prior to the execution and delivery of this Amendment or which could arise
concurrently with the effectiveness of this Amendment.
(c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL
UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION,
CONTRACTS, LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY
THIS AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE
LENDER AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES
AND RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE
WHICH IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY
OTHER APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE EFFECTIVENESS
OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
VECTRA TECHNOLOGIES, INC.
By: /s/ Ray A. Fortney
-----------------------------------
Its: President & CEO
-----------------------------------
BANQUE PARIBAS, as a Bank and as Agent
By: /s/ Robert S. Pinkerton
-----------------------------------
Its: VP
-----------------------------------
By: /s/ Lee S. Buckner
-----------------------------------
Its: GVP
-----------------------------------
BANQUE NATIONALE DE PARIS, as a Bank
and as Managing Agent
By: /s/ Richard Cushing
-----------------------------------
Its: AVP
-----------------------------------
12.
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
SECTION 1. Each of the undersigned Guarantors hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Amendment.
SECTION 2. Each Guarantor hereby consents to this Amendment and agrees that
its respective Guaranty of the Obligations of the Borrower under the Term
Agreement shall continue in full force and effect, shall be valid and
enforceable and shall not be impaired or otherwise affected by the execution
of this Amendment or any other document or instrument delivered in connection
herewith.
SECTION 3. Each Guarantor severally represents and warrants that, after
giving effect to this Amendment, all representations and warranties contained
in its respective are true, accurate and complete as if made the date hereof.
Dated: 12/29/95
-----------------------
GUARANTORS PACIFIC NUCLEAR STORAGE SYSTEMS, INC.
By: /s/ RAY A. FORTNEY
-----------------------------------
Printed Name: RAY A. FORTNEY
-------------------------
Title: PRESIDENT
--------------------------------
NUCLEAR PACKAGING, INC.
By: /s/ RAY A. FORTNEY
-----------------------------------
Printed Name: RAY A. FORTNEY
-------------------------
Title: PRESIDENT
--------------------------------
VECTRA SERVICES, INC.
By: /s/ RAY A. FORTNEY
-----------------------------------
Printed Name: RAY A. FORTNEY
-------------------------
Title: PRESIDENT
--------------------------------
CTL INTERNATIONAL, INC.
By: /s/ RAY A. FORTNEY
-----------------------------------
Printed Name: RAY A. FORTNEY
-------------------------
Title: PRESIDENT
--------------------------------
13.
<PAGE>
VECTRA GOVERNMENT SERVICES, INC.
By: /s/ RAY A. FORTNEY
-----------------------------------
Printed Name: RAY A. FORTNEY
-------------------------
Title: PRESIDENT
--------------------------------
VECTRA WASTE SERVICES, L.L.C.
by: VECTRA Technologies, Inc., its Manager
By: /s/ RAY A. FORTNEY
-----------------------------------
Printed Name: RAY A. FORTNEY
-------------------------
Title: PRESIDENT
--------------------------------
14.
<PAGE>
SCHEDULE 1
TO CREDIT AGREEMENT
BANKS AND COMMITMENTS
TRANCHE-A
NAME OF BANK COMMITMENT
Banque Paribas $1,463,471
Domestic Lending Office and
Eurodollar Lending Office:
2029 Century Park East, Suite 3900
Los Angeles, CA 90067
Banque Nationale de Paris $1,463,471
Domestic Lending Office and
Eurodollar Lending Office:
499 Park Avenue, 7th Floor
New York, NY 10022
TRANCHE-B
NAME OF BANK COMMITMENT
Banque Paribas $950,000
Domestic Lending Office and
Eurodollar Lending Office:
2029 Century Park East, Suite 3900
Los Angeles, CA 90067
Banque Nationale de Paris $950,000
Domestic Lending Office and
Eurodollar Lending Office:
499 Park Avenue, 7th Floor
New York, NY 10022
15.
<PAGE>
SCHEDULE 1
TO CREDIT AGREEMENT
BANKS AND COMMITMENTS
TRANCHE-C
NAME OF BANK COMMITMENT
Banque Paribas $500,000
Domestic Lending Office and
Eurodollar Lending Office:
2029 Century Park East, Suite 3900
Los Angeles, CA 90067
Banque Nationale de Paris $500,000
Domestic Lending Office and
Eurodollar Lending Office:
499 Park Avenue, 7th Floor
New York, NY 10022
<PAGE>
THIRD AMENDMENT AND LIMITED WAIVER
(AMENDED AND RESTATED TERM LOAN AGREEMENT)
THIS THIRD AMENDMENT AND LIMITED WAIVER ("AMENDMENT") dated as of
March 29, 1996, is entered into by and among VECTRA TECHNOLOGIES, INC.
(the "BORROWER"), BANQUE PARIBAS, as a Bank (as defined below) and as the
Agent (as defined below), and BANQUE NATIONALE DE PARIS, as a Bank and as the
Managing Agent (as defined below).
RECITALS
A. The Borrower has entered into that certain Term Loan Agreement
dated as of January 6, 1994, as amended, and as amended and restated by that
certain Amended and Restated Term Loan Agreement dated as of September 20,
1995, as amended by that First Amendment dated as of November 13, 1995, and
that Second Amendment dated as of December 26, 1995 (as so amended, the "TERM
AGREEMENT"), among the Borrower, the Banks party thereto, Banque Paribas,
acting in its separate capacity as agent for the Banks (the "AGENT"), and
Banque Nationale de Paris, acting in its separate capacity as Managing Agent
(as defined therein) (the "MANAGING AGENT").
B. The Borrower has requested that the Loan Agreement be amended to
extend the Tranche-B Maturity Date, the Tranche-C Maturity Date and the
payment date for the principal installment due on the Tranche-A Loans from
March 31, 1996 to April 15, 1996, for the limited purpose of accommodating
the Borrower in connection with that certain letter of intent dated as of
March 21, 1996, between Duke Engineering & Service ("DE&S") and the
Borrower (the "Letter of Intent"), pursuant to which the Borrower intends to
sell and DE&S intends to purchase all of the assets of the nuclear
engineering, power services and government services business units of the
Borrower (the "NP&G Services Units"). The Borrower has advised the Agent that
such a sale would close as soon as possible and in any event not later than
August 15, 1996, premised on the condition that the net sale proceeds shall
be sufficient to repay the then-outstanding Obligations under and as defined
in the Receivables Facility and the then-outstanding Obligations under the
Term Loan Agreement in full.
C. Pursuant to Sections 5.1(a), (b) and (c) of the Loan Agreement, the
Borrower covenants and agrees to furnish to each Bank certain information.
The Borrower has failed to timely furnish certain of such information for the
fiscal quarter ending December 31, 1995 and the months of November 1995,
December 1995, January 1996, and February 1996 and the fiscal year ending
December 31, 1995, as required by Section 5.1. The Borrower's failure to
furnish such information is a breach of Section 5.1 of the Loan Agreement, an
Event of Default under Section 7.1(d)(i) and a Default under
Section 7.1(d)(ii) of the Loan Agreement. The Borrower's failure to effect
cure of these Defaults within the five (5) Business Day grace period provided
by Section 7.1(d)(ii) of the Loan Agreement has resulted in these Defaults
maturing into Events of Default.
D. Pursuant to Section 6.1 of the Loan Agreement, the Borrower
covenants and agrees to comply with certain financial covenants described in
subsections (a) through (e),
1.
<PAGE>
inclusive of Section 6.1. The Borrower has failed to comply with such
financial covenants for the fiscal quarter ending December 31, 1995. The
Borrower's failure to comply with such financial covenants is a breach of
Section 6.1 of the Loan Agreement and an Event of Default under Section
7.1(d)(i) of the Loan Agreement.
E. The Borrower has requested that the Banks waive the Defaults and
Events of Defaults that have occurred as a result of the Borrower's failure to
furnish certain information and to comply with the financial covenants as
required by Section 5.1 and 6.1, respectively, of the Loan Agreement.
F. The Banks are willing to so amend the Term Agreement and to provide
such a limited waiver, but only upon the terms and conditions and in reliance
upon the representations and warranties set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS. Capitalized terms used but not defined in this
Amendment shall have the meanings given to them in the Term Agreement.
SECTION 2. AMENDMENTS TO TERM AGREEMENT.
2.1 SECTION 1.1 (DEFINITIONS). The definition of the term
"Tranche-B Maturity Date" is deleted and replaced with the following:
"TRANCHE-B MATURITY DATE" shall mean April 15, 1996.
2.2 SECTION 1.1 (DEFINITIONS). The definition of "Tranche-C
Maturity Date" is deleted and replaced with the following:
"TRANCHE-C MATURITY DATE" shall mean April 15, 1996.
2.3 SECTION 2.1 (TRANCHE-A FACILITY). The first paragraph of
Section 2.1 of the Term Agreement is amended to insert the following at the
end thereof:
;PROVIDED, HOWEVER, that the principal installment due and payable on the
March 31, 1996 Payment Date shall be deferred until April 15, 1996.
SECTION 3. LIMITATION OF AMENDMENTS.
(a) The amendments set forth in SECTION 2, above, are effective
for the purposes set forth herein and shall be limited precisely as written
and shall not be deemed to
2.
<PAGE>
(i) be a consent to any amendment, waiver or modification of any other term or
condition of any Loan Document or (ii) otherwise prejudice any right or
remedy which the Banks, the Agent or the Managing Agent may now have or may
have in the future under or in connection with any Loan Document.
(b) This Amendment shall be construed in connection with and as
part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except
as herein waived or amended, are hereby ratified and confirmed and shall
remain in full force and effect.
SECTION 4. LIMITED WAIVERS. Effective as of the date hereof, and
subject to the condition subsequent that the parties hereto enter into a
further amendment of the Loan Agreement on or before April 15, 1996, for the
purpose, among other things, of amending the financial covenants set forth in
Section 6.1 of the Loan Agreement for the Borrower's fiscal year 1996, each
of the Banks, the Agent and the Managing Agent hereby waives the Defaults and
Events of Default which have occurred under Sections 5.1 and 6.1 of the Loan
Agreement solely as a result of the Borrower's failure to furnish certain
information and to comply with the financial covenants as required by
Sections 5.1 and 6.1, respectively, of the Loan Agreement.
SECTION 5. LIMITATION OF WAIVERS.
(a) The waivers set forth in Section 4 above, are effective for
the purposes set forth herein and shall be limited precisely as written and
shall not be deemed to (i) be a consent to any amendment, waiver or
modification of any other term or condition of any Loan Document, (ii) a
waiver of any other breach or violation on any other occasion of the
sections of the Loan Agreement which are the subject of the waivers set forth
in Section 4 above, or (ii) otherwise prejudice any right or remedy which the
Banks, the Agent or the Managing Agent may now have or may have in the future
under or in connection with any Loan Document.
(b) This waiver shall be construed in connection with and as
part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except
as herein waived or amended, are hereby ratified and confirmed and shall
remain in full force and effect.
SECTION 6. REPRESENTATIONS AND WARRANTIES. In order to induce the
Banks, the Agent and the Managing Agent to enter into this Amendment, the
Borrower hereby represents and warrants to each Bank, the Agent and the
Managing Agent as follows:
(a) After giving effect to his Amendment (i) the
representations and warranties contained in the Loan Documents (other than
those which expressly speak as of a different date) are true, accurate and
complete in all material respects as of the date hereof and (ii) no Default
or Event of Default has occurred and is continuing;
3.
<PAGE>
(b) The Borrower has the corporate power and authority to
execute and deliver this Amendment and to perform its obligations under the
Term Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party;
(c) The certificate of incorporation, bylaws and other
organizational documents of the Borrower delivered to each Bank on the
Tranche-C Closing Date remain true, accurate and complete and have not been
amended, supplemented or restated and are and continue to be in full force and
effect;
(d) The execution and delivery by the Borrower of this Amendment
and the performance by Borrower of its obligations under the Term Agreement,
as amended by this Amendment, and each of the other Loan Documents to which
it is a party have been duly authorized by all necessary corporate action on
the part of the Borrower;
(e) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under the Term
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party do not and will not contravene (i) any law or
regulation binding on or affecting the Borrower, (ii) the certificate of
incorporation or bylaws of the Borrower, (iii) any order, judgment or decree
of any court or other governmental or public body or authority, or
subdivision thereof, binding on the Borrower or (iv) any contractual
restriction binding on or affecting the Borrower;
(f) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under the Term
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on the Borrower, except as already has been obtained or
made; and
(g) This Amendment has been duly executed and delivered by the
Borrower and is the binding obligation of the Borrower, enforceable against
it in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, liquidation, moratorium or other
similar laws of general application and equitable principles relating to or
affecting creditors' rights.
SECTION 7. REAFFIRMATION. The Borrower hereby reaffirms its
obligations under each Loan Document to which it is a party.
SECTION 8. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed
to constitute one and the same instrument.
4.
<PAGE>
SECTION 9. EFFECTIVENESS. This Amendment shall be deemed effective upon
the satisfaction of all of the following conditions precedent (PROVIDED that
all such conditions must be satisfied prior to 5:00 p.m., San Francisco time,
March 29, 1996):
(a) THIRD AMENDMENT. The Borrower and each Bank shall have
duly executed and delivered this Amendment to the Agent.
(b) ACKNOWLEDGMENT OF AMENDMENT AND REAFFIRMATION OF
GUARANTY. The Agent shall have received the Acknowledgment of Amendment and
Reaffirmation of Guaranty, duly executed and delivered by each of the
Guarantors to the Agent.
SECTION 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
SECTION 11. RELEASE AND WAIVER.
(a) The Borrower hereby acknowledges and agrees that: (i) it has no
claim or cause of action against any Bank or the Agent or the Managing Agent
or any parent, subsidiary or affiliate of any Bank or the Agent or the Managing
Agent, or any of such Bank's, the Agent's or the Managing Agent's officers,
directors, employees, attorneys or other representatives or agents (all of which
parties other than the Banks, the Agent and the Managing Agent being,
collectively, the "LENDER AGENTS") in connection with the Term Agreement, the
Loans thereunder or the transactions contemplated therein; (ii) it has no
offset or defense against any of its respective obligations, indebtedness
or contracts in favor of the Banks, the Agent or the Managing Agent; and
(iii) it recognizes that each of the Banks, the Agent and the Managing Agent
has heretofore properly performed and satisfied in a timely manner all of its
respective obligations to and contracts with the Borrower.
(b) Although each of the Banks, the Agent and the Managing Agent
regards its respective conduct as proper and does not believe the Borrower to
have any claim, cause of action, offset or defense against such Bank, the
Agent or the Managing Agent or any Lender Agent in connection with the Term
Agreement, the Loans thereunder or the transactions contemplated therein,
each Bank, the Agent and the Managing Agent wishes and Borrower agrees
to eliminate any possibility that any past conditions, acts, omissions,
events, circumstances or matters could impair or otherwise affect any rights,
interests, contracts or remedies of the Banks, the Agent or the Managing
Agent. Therefore, the Borrower unconditionally releases and waives (i) any and
all liabilities, indebtedness and obligations, whether known or unknown, of
any kind of any Bank, the Agent or the Managing Agent or of any of Lender
Agents to the Borrower, except the obligations remaining to be respectively
performed by the Banks, the Agent or the Managing Agent as expressly stated
in the Term Agreement, this Amendment and the other Loan Documents; (ii) any
legal, equitable or other obligations or duties, whether known or unknown,
of any Bank, the Agent, the Managing Agent or any Lender Agent to the
Borrower (and any rights of the Borrower against any Bank, the Agent, the
Managing Agent or any Lender Agent) besides those expressly stated in the Term
5.
<PAGE>
Agreement, this Amendment and the other Loan Documents; (iii) any and
all claims under any oral or implied agreement, obligation or understanding
with any Bank, the Agent, the Managing Agent or any Lender Agent, whether
known or unknown, which is different from or in addition to the express terms of
the Term Agreement, this Amendment or any of the other Loan Documents; and
(iv) all other claims, causes of action or defenses or any kind whatsoever
(if any), whether known or unknown, which the Borrower might otherwise have
against any Bank, the Agent, the Managing Agent and/or any Lender Agent on
account of any condition, act, omission, event, contract, liability,
obligation, indebtedness, claim, cause of action, defense, circumstance or
matter of any kind whatsoever which existed, arose or occurred at any time
prior to the execution and delivery of this Amendment or which could arise
concurrently with the effectiveness of this Amendment.
(c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL
UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION,
CONTRACTS, LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED
BY THIS AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND
THE LENDER AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER
WAIVES AND RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR
DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK
OR ANY OTHER APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE
EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT.
6.
<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
VECTRA TECHNOLOGIES, INC.
By: /s/ RAY A. FORTNEY
----------------------------------
Its: PRESIDENT AND CEO
----------------------------------
BANQUE PARIBAS, as a Bank and as Agent
By: /s/ Robert S. Pinkerton
----------------------------------
Its: VP
----------------------------------
By: /s/ Lee S. Buckner
----------------------------------
Its: GVP
----------------------------------
BANQUE NATIONALE DE PARIS, as a Bank
and as Managing Agent
By: /s/ Richard Cushing
----------------------------------
Its: VP
----------------------------------
7.
<PAGE>
ACKNOWLEDGMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
SECTION 1. Each of the undersigned Guarantors hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Amendment.
SECTION 2. Each Guarantor hereby consents to this Amendment and agrees that
its respective Guaranty of the Obligations of the Borrower under the Term
Agreement shall continue in full force and effect, shall be valid and
enforceable and shall not be impaired or otherwise affected by the execution
of this Amendment or any other document or instrument delivered in connection
herewith.
SECTION 3. Each Guarantor severally represents and warrants that, after
giving effect to this Amendment, all representations and warrranties
contained in its respective are true, accurate and complete as if made the
date hereof.
Dated: March 29, 1996
GUARANTORS PACIFIC NUCLEAR STORAGE SYSTEMS, INC.
By: /s/ RAY A. FORTNEY
-----------------------------------
Printed Name: RAY A. FORTNEY
-------------------------
Title: PRESIDENT
--------------------------------
NUCLEAR PACKAGING, INC.
By: /s/ RAY A. FORTNEY
-----------------------------------
Printed Name: RAY A. FORTNEY
-------------------------
Title: PRESIDENT
--------------------------------
VECTRA SERVICES, INC.
By: /s/ RAY A. FORTNEY
-----------------------------------
Printed Name: RAY A. FORTNEY
-------------------------
Title: PRESIDENT
--------------------------------
1.
<PAGE>
CTL INTERNATIONAL, INC.
By: /s/ RAY A. FORTNEY
------------------------------------
Printed Name: RAY A. FORTNEY
--------------------------
Title: PRESIDENT
---------------------------------
VECTRA GOVERNMENT SERVICES, INC.
By: /s/ RAY A. FORTNEY
------------------------------------
Printed Name: RAY A. FORTNEY
--------------------------
Title: PRESIDENT
---------------------------------
VECTRA WASTE SERVICES, L.L.C.
By: VECTRA Technologies, Inc., its Manager
By: /s/ RAY A. FORTNEY
------------------------------------
Printed Name: RAY A. FORTNEY
--------------------------
Title: PRESIDENT
---------------------------------
2.
<PAGE>
FOURTH AMENDMENT
(AMENDED AND RESTATED TERM LOAN AGREEMENT)
THIS FOURTH AMENDMENT ("Amendment") dated as of April 15, 1996, is entered
into by and among VECTRA TECHNOLOGIES, INC. (the "BORROWER"), BANQUE PARIBAS, as
a Bank (as defined below) and as the Agent (as defined below), and BANQUE
NATIONALE DE PARIS, as a Bank and as the Managing Agent (as defined below).
RECITALS
A. The Borrower has entered into that certain Term Loan Agreement dated
as of January 6, 1994, as amended, and as amended and restated by that certain
Amended and Restated Term Loan Agreement dated as of September 20, 1995, as
amended by that First Amendment dated as of November 13, 1995, that Second
Amendment dated as of December 26, 1995, and that Third Amendment and Limited
Waiver dated as of March 29, 1996 (as so amended, the "TERM AGREEMENT"), among
the Borrower, the Banks (as defined therein) party thereto (the "BANKS"), Banque
Paribas, acting in its separate capacity as Agent (as defined therein) for the
Banks (the "AGENT"), and Banque Nationale de Paris, acting in its separate
capacity as Managing Agent (as defined therein) for the Banks (the "MANAGING
AGENT").
B. The Borrower has requested that the Term Agreement be amended to
extend the Tranche-B Maturity Date and the Tranche-C Maturity Date from April
15, 1996 to January 2, 1997, and to defer the principal installments due under
the Tranche-A Loans on April 15, 1996 and on June 30, 1996 to January 2, 1997,
for the limited purpose of accommodating the Borrower in connection with that
certain letter of intent dated as of March 21, 1996, between Duke Engineering &
Service ("DE&S") and the Borrower (the "DE&S Letter of Intent"), pursuant to
which the Borrower intends to sell and DE&S intends to purchase substantially
all of the assets of the nuclear engineering, power services and government
services business units of the Borrower (the "NP&G Services Units"). The
borrower has advised the Agent that such a sale would close as soon as possible
and in any event the Borrower would receive net cash proceeds from such sale not
later than August 31, 1996, premised on the condition that the net proceeds of
such sale shall be sufficient to repay the then-outstanding Obligations under
and as defined in the Receivables Facility and the then-outstanding Obligations
under the Term Agreement in full. The Agent has advised the Borrower that the
Banks do not intend to agree to any additional extension of the Loans.
C. The parties to the Term Agreement desire to further amend the Term
Agreement on and in accordance with the terms, subject to the conditions and in
reliance upon the representations and warranties set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
1.
<PAGE>
SECTION 1. DEFINITIONS. Capitalized terms used but not defined in this
Amendment shall have the meanings given to them in the Term Agreement.
SECTION 2. AMENDMENTS TO TERM AGREEMENT.
2.1 SECTION 1.1 (DEFINITIONS). The definition of the term "Loan
Documents" is deleted and replaced with the following:
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Guaranty,
the Waste Services Guaranty, the Rate Hedging Agreements, the Side Letter
Agreement and the Security Documents, and any and all other agreements,
documents and instruments executed and delivered by or on behalf or in support
of the Borrower to the Agent, any Bank or their respective authorized designee
evidencing or otherwise relating to the Loans, as the same from time to time may
be amended, modified, supplemented, extended or renewed.
2.2 SECTION 1.1 (DEFINITIONS). The definition of the term "Payment
Date" is deleted and replaced with the following:
"PAYMENT DATE" shall mean the last day of each March, June, September
and December of each year; PROVIDED, HOWEVER, that for 1996, the December
Payment Date shall mean January 2, 1997.
2.3 SECTION 1.1 (DEFINITIONS). The definition of the term "Tranche-B
Maturity Date" is deleted and replaced with the following:
"TRANCHE-B MATURITY DATE" shall mean January 2, 1997.
2.4 SECTION 1.1 (DEFINITIONS). The definition of "Tranche-C Maturity
Date" is deleted and replaced with the following:
"TRANCHE-C MATURITY DATE" shall mean January 2, 1997.
2.5 SECTION 2.1 (TRANCHE-A FACILITY). The second sentence of the
first paragraph of Section 2.1 of the Term Agreement is deleted and replaced
with the following:
Subject to the terms of this Agreement relating to optional prepayments and
mandatory prepayments and the acceleration of maturities, the Tranche-A Loans
shall mature on the Tranche-A Maturity Date and shall be repaid, without premium
or penalty, by the Borrower on each Payment Date occurring after June 30, 1996,
and prior to the Tranche-A Maturity Date in principal installments equal to
$750,000 on each such Payment Date with the then outstanding unpaid principal
amount of the Tranche-A Loans to be repaid in full on the Tranche-A Maturity
Date. Notwithstanding the foregoing, the parties hereto agree that the Borrower
may elect, at its sole option, to defer payment of the $750,000 principal
installment otherwise due and payable on September 30, 1996 (the "SEPTEMBER
PAYMENT"). The Borrower shall effect such election to defer the September
Payment by delivering to the Agent no later than 5:00 p.m. California time on
September 23, 1996, a written notice of election (a "NOTICE OF ELECTION") and
such election shall be effective upon delivery of such Notice of Election to the
Agent. In the event that the
2.
<PAGE>
Borrower elects to defer the September Payment, the September Payment shall be
due and payable upon the first to occur of (i) the sale of NP&G Services Units
to DE&S or other similar sale of assets currently owned by the Borrower or its
Subsidiaries, (ii) the Borrower's issuance of additional common stock or
preferred stock with a redemption date of not earlier than one year after the
Tranche-A Maturity Date, (iii) the Borrower's issuance of debt subordinated to
all of its debt to institutional lenders on terms satisfactory to such
institutional lenders, including the Banks, or (iv) the Tranche-A Maturity Date
or such prior date as the Tranche-A Loans shall have become due and payable,
whether by acceleration or otherwise. As consideration for and in the event of
such deferral, the Borrower shall pay to the Agent, for the benefit of the
Banks according to their Pro Rata Share, a deferral fee (the "DEFERRAL FEE") in
the amount of $150,000, which Deferral Fee shall be earned upon the
effectiveness of such election, but which Deferral Fee shall be due and payable
upon the first to occur of (a) the date upon which the September Payment
becomes due and payable or (b) January 2, 1997.
2.6 SUBSECTION (a) (LEVERAGE RATIO) OF SECTION 6.1 (FINANCIAL
COVENANTS). Section 6.1(a) of the Term Agreement is deleted and replaced with
the following:
(a) LEVERAGE RATIO. The Borrower shall not permit the
ratio of (i) Consolidated Total Indebtedness at the end of any fiscal quarter
of the Borrower during the periods set forth below to (ii) EBITDA of the
Borrower and its Subsidiaries for the four immediately preceding fiscal
quarters of the Borrower then ended, including the fiscal quarter then ended
(taken as one accounting period) (the "LEVERAGE RATIO"), to exceed the ratio
set forth opposite such period; PROVIDED, HOWEVER, that for the determination
of the Leverage Ratio (A) as of the end of the fiscal quarter ending March
31, 1996 only, EBITDA shall be calculated by multiplying EBITDA for such
fiscal quarter by four (4), rather than on a rolling four quarter basis; (B)
as of the end of the fiscal quarter ending June 30, 1996 only, EBITDA shall
be calculated by multiplying the aggregate EBITDA for the immediately
preceding two (2) fiscal quarters (including the fiscal quarter then ended)
by two (2), rather than on a rolling four quarter basis; and (C) as of the
end of the fiscal quarter ending September 29, 1996 only, EBITDA shall be
calculated by multiplying the aggregate EBITDA for the immediately preceding
three (3) fiscal quarters (including the fiscal quarter then ended) by one
and one-third (1.3333), rather than on a rolling four quarter basis; PROVIDED
FURTHER, HOWEVER, that the calculation of EBITDA for the fiscal quarter
ending December 31, 1995 shall specifically exclude write-offs of tangible
and intangible assets, provisions for severance costs, decommissioning
expenses, any gain associated with the sale of the Plant Services Assets
pursuant to the Plant Services Purchase Agreement, general increases to the
revenue/accounts receivables provision and "other adjustments" as such line
item is shown on the Borrower's financial statements, so long as such
aggregate adjustment of EBITDA shall not exceed $12,000,000:
PERIOD RATIO
10/2/95 - 12/31/95 4.0:1.0
1/1/96 - 3/31/96 4.75:1.0
4/1/96 - 6/30/96 4.35:1.0
7/1/96 - 9/29/96 3.65:1.0
3.
<PAGE>
9/30/96 - 12/31/96 3.1:1.0
1/1/97 & thereafter 3.1:1.0
2.7 SUBSECTION (b) (INTEREST COVERAGE RATIO) OF SECTION 6.1
(FINANCIAL COVENANTS). Subsection 6.1(b) of the Term Agreement is deleted and
replaced with the following:
(a) INTEREST COVERAGE RATIO. The Borrower shall not permit the
ratio of (i) Consolidated Interest Expense at the end of any fiscal quarter of
the Borrower during the periods set forth below to (ii) EBITDA of the Borrower
and its Subsidiaries for the four immediately preceding fiscal quarters of the
Borrower then ended, including the fiscal quarter then ended (taken as one
accounting period) (the "INTEREST COVERAGE RATIO"), to be less than the ratio
set forth opposite such period; PROVIDED, HOWEVER, that for the determination of
the Interest Coverage Ratio (A) as of the end of the fiscal quarter ending March
31, 1996 only, EBITDA shall be calculated by multiplying EBITDA for such fiscal
quarter by four (4), rather than on a rolling four quarter basis; (B) as of the
end of the fiscal quarter ending June 30, 1996 only, EBITDA shall be calculated
by multiplying the aggregate EBITDA for the immediately preceding two (2) fiscal
quarters (including the fiscal quarter than ended) by two (2), rather than on a
rolling four quarter basis; and (C) as of the end of the fiscal quarter ending
September 29, 1996 only, EBITDA shall be calculated by multiplying the aggregate
EBITDA for the immediately preceding three (3) fiscal quarters (including the
fiscal quarter then ended) by one and one-third (1.3333), rather than on a
rolling four quarter basis; PROVIDED FURTHER, HOWEVER, that the calculation of
EBITDA for the fiscal quarter ending December 31, 1995 shall specifically
exclude write-offs of tangible and intangible assets, provisions for severance
costs, decommissioning expenses, any gain associated with the sale of the Plant
Services Assets pursuant to the Plant Services Purchase Agreement, general
increases to the revenue/accounts receivables provision and "other adjustments"
as such line item is shown on the Borrower's financial statements, so long as
such aggregate adjustment of EBITDA shall not exceed $12,000,000:
PERIOD RATIO
10/2/95 - 12/31/95 2.1:1.0
1/1/96 - 3/31/96 1.75:1.0
4/1/96 - 6/30/96 2.1:1.0
7/1/96 - 9/29/96 2.6:1.0
9/30/96 - 12/31/96 2.2:1.0
1/1/97 & thereafter 2.2:1.0
2.8 SUBSECTION (c) (FIXED CHARGE COVERAGE RATIO) OF SECTION 6.1
(FINANCIAL COVENANTS). Section 6.1(c) of the Term Agreement is amended to
delete the table appearing at the end of Subsection (c) and to insert in its
place the following:
PERIOD RATIO
10/2/95 - 12/31/95 1.0:1.0
4.
<PAGE>
1/1/96 - 3/31/96 0.8:1.0
4/1/96 - 6/30/96 0.7:1.0
7/1/96 - 9/29/96 1.0:1.0
9/30/96 - 12/31/96 1.0:1.0
1/1/97 & thereafter 1.0:1.0
2.9 SUBSECTION (d) (MINIMUM CONSOLIDATED NET WORTH) OF SECTION 6.1
(FINANCIAL COVENANTS). Section 6.1(d) of the Term Agreement is deleted and
replaced with the following:
(d) MINIMUM CONSOLIDATED NET WORTH. The Borrower shall not
permit Consolidated Net Worth at any time to be less than the sum of (i)
$15,000,000.00 plus (ii) an amount equal to fifty percent (50%) of the
cumulative Consolidated Net Income; calculated using each fiscal quarter of the
Borrower ending after December 31, 1995 (including the Consolidated Net Income
for any fiscal quarter only to the extent that the same is a positive number and
adjusted to eliminate the effects of any fees and warrants accrued, paid or
issued to the Banks in their capacity as Banks, and the sale of VECTRA (U.K.)).
2.10 SUBSECTION (e) (CAPITAL EXPENDITURES) OF SECTION 6.1 (FINANCIAL
COVENANTS). Section 6.1(e) of the Term Agreement is amended to delete the table
appearing in Subsection (e) and to insert in its place the following:
PERIOD MAXIMUM AMOUNT
9/30/95 - 12/31/95 $1,250,000
1/1/96 - 3/31/96 $1,250,000
4/1/96 - 6/30/96 $750,000
7/1/96 - 9/29/96 $650,000
9/30/96 - 12/31/96 $600,000
1/1/97 - 12/31/97 $3,000,000
1/1/98 - 12/31/98 $3,000,000
2.11 SECTION 6.5 (SALE OF ASSETS). Section 6.5 of the Term Agreement
is amended by adding the following at the end thereof:
Notwithstanding anything to the contrary in this Section 6.5, the Borrower shall
first contribute to Receivableco within two (2) Business Days of receipt thereof
by the Borrower, and shall cause Receivableco to apply immediately the following
amounts to repay the Obligations (as defined in the Receivables Facility) then
outstanding under the Receivables Facility and to reduce permanently the Total
Revolving Loan Components (as defined in the Receivables Facility) by
5.
<PAGE>
such amounts: (a) one hundred percent (100%) (or so much thereof as is
necessary to repay in full the Obligations (as defined in the Receivables
Facility) then outstanding) of the net proceeds of the sale of the stock or
all or any substantial part of the assets of VECTRA (U.K.), which net
proceeds shall not be less than $1,000,000, (b) one hundred percent (100%)
(or so much thereof as is necessary to repay in full the Obligations (as
defined in the Receivables Facility) then outstanding) of the net proceeds of
the sale of the DE&S of the NP&G Service Units pursuant to, or as otherwise
contemplated by the DE&S Letter of Intent, and (c) one hundred percent (100%)
(or so much thereof as is necessary to repay in full the Obligations (as
defined in the Receivables Facility) then outstanding) of the net proceeds of
any sale of the stock or all or any substantial part of the property or
assets of the Borrower or any of its Subsidiaries. Upon the full repayment of
the Obligations under the Receivables Facility, the Borrower shall use the
balance of the foregoing amounts to prepay principal and any other
outstanding Obligations (as defined in this Agreement). In the event that the
Borrower receives stock in lieu of cash as consideration for any sale
described in this Section 6.5, such stock shall be of a publicly traded
company, the Borrower shall liquidate such stock within thirty (30) days of
receipt thereof and the Borrower shall apply the proceeds to repay the
Obligations under the Receivables Facility and the Obligations (as defined in
this Agreement) pursuant to the terms of this Section 6.5. The Borrower
understands and acknowledges that pursuant to Section 6.4(a) of this
Agreement, it must obtain the prior written consent of the Required Banks to
the sales referred to in clauses (a) and (b) above. The approval by the
Required Banks of a definitive purchase agreement and any and all amendments
thereto (an "APPROVED AGREEMENT") for such a sale shall constitute consent to
the consummation of such sale. Upon the closing of such sale upon the terms
of an Approved Agreement and the application of the net proceeds of such sale
as required by this Section 6.5 and the Receivables Facility, as amended, the
Banks shall cooperate with the Borrower to execute and deliver such documents
as are necessary to release, terminate or reconvey any Collateral transferred
to the buyer as part of such sale.
2.12 SECTION 1.1 (DEFINITIONS). The following sentence is added to
the end of the definition of the term "EBITDA":
EBITDA shall be adjusted to eliminate the effects of any fees and
warrants accrued, paid or issued to the Banks in their capacity as Banks and the
sale of VECTRA (U.K.).
SECTION 3. LIMITATION OF AMENDMENT.
(a) The amendments set forth in SECTION 2, above, are effective
for the purposes set forth herein and shall be limited precisely as written and
shall not be deemed to (i) be a consent to any amendment, waiver of modification
of any other term or condition of any Loan Document or (ii) otherwise prejudice
any right or remedy which the Banks, the Agent or the Managing Agent may now
have or may have in the future under or in connection with any Loan Document.
(b) This Amendment shall be construed in connection with and as
part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents and
applicable law, except as herein waived or amended, are hereby ratified and
confirmed and shall mean in full force and effect.
4. ACKNOWLEDGEMENTS.
(a) The Borrower understands and acknowledges that the nine
month extension of the Tranche-B Maturity Date and the Tranche-C Maturity Date
and the deferment of the payment date for the principal installments due under
the Tranche-A Loans evidenced by the amendments set forth in SECTION 2, above,
is a limited purpose, one-time accommodation amendment agreed to by the Banks
for the express purpose of affording the Borrower access to
6.
<PAGE>
capital while it completes a refinancing, sale or other similar transaction
generating sufficient proceeds to enable the Borrower to repay the Obligations
in full as soon as possible and in any event not later than the applicable
Maturity Dates as extended by this Amendment. The Borrower further acknowledges
and agrees that it represented to the Banks, in requesting the extension of the
Tranche-B Maturity Date and the Tranche-C Maturity Date and the deferment of the
payment date for the principal installments due under the Tranche-A Loans
evidenced by the amendment set forth in SECTION 2, above, that the Borrower is
engaged in serious ongoing discussions with DE&S regarding the sale of the NP&G
Units and the full repayment of the Obligations and that the Borrower is
confident that such sale will generate sufficient funds to repay the Obligations
in full by August 31, 1996. The Borrower further acknowledges and agrees that
the Banks have reasonably relied on such representations and would not have
otherwise entered into and agreed to this Amendment. The Banks have not (nor has
the Agent or the Managing Agent on behalf of the Banks) agreed or committed to,
or otherwise indicated in any way whatsoever that they would consider, any
further extension of the Tranche-B Maturity Date and the Tranche-C Maturity Date
or further deferment of the payment date for the principal installments due
under the Tranche-A Loans, and the Borrower acknowledges and agrees that the
Banks have made no such agreement or commitment (nor has the Agent or the
Managing Agent on behalf of the Banks) and that the Borrower has no expectation
whatsoever that the Banks would consider any further extension of the Tranche-B
Maturity Date and the Tranche-C Maturity Date or further deferment of the
payment date for the principal installments due under the Tranche-A loans.
4.1 The Borrower hereby ratifies and reaffirms the validity and
enforceability of all of the Liens and security interests heretofore granted,
pursuant to the Security Agreement and other Loan Documents, to the Agent, for
itself and on behalf of the Banks and the Managing Agent, as collateral security
for the Obligations, and acknowledges that all of such Liens and security
interests, and all Collateral heretofore pledged as security for the
Obligations, continues to be and remain collateral for the Obligations from and
after the date hereof. Without limiting the generality of the foregoing, the
Borrower acknowledges and agrees that, pursuant to the Security Agreement and
other Loan Documents, the Agent, for itself and on behalf of the Banks and the
Managing Agent, is entitled to receive and apply all proceeds of the Collateral.
SECTION 5. REPRESENTATIONS AND WARRANTIES. In order to induce the
Banks, the Agent and the Managing Agent to enter into this Amendment, the
Borrower hereby represents and warrants to each Bank, the Agent and the Managing
Agent as follows:
(a) After giving effect to this Amendment (i) the representations and
warranties contained in the Loan Documents (other than those which expressly
speak as of a different date) are true, accurate and complete in all material
respects as of the date hereof and (ii) no Default or Event of Default has
occurred and is continuing;
(b) The Borrower has the corporate power and authority to execute and
deliver this Amendment and to perform its obligations under the Term Agreement,
as amended by this Amendment, and each of the other Loan Documents to which it
is a party;
(c) The certificate of incorporation, bylaws and other organizational
documents of the Borrower delivered to each Bank on the Tranche-C Closing Date
remain true, accurate
7.
<PAGE>
and complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;
(d) The execution and delivery by the Borrower of this Amendment and
the performance by Borrower of its obligations under the Term Agreement, as
amended by this Amendment, and each of the other Loan Documents to which it is a
party have been duly authorized by all necessary corporate action on the part of
the Borrower;
(e) The execution and delivery by the Borrower of this Amendment and
the performance by the Borrower of its obligations under the Term Agreement, as
amended by this Amendment, and each of the other Loan Documents to which it is a
party do not and will not contravene (i) any law or regulation binding on or
affecting the Borrower, (ii) the certificate of incorporation or bylaws of the
Borrower, (iii) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on the Borrower or
(iv) any contractual restriction binding on or affecting the Borrower;
(f) The execution and delivery by the Borrower of this Amendment and
the performance by the Borrower of its obligations under the Term Agreement, as
amended by this Amendment, and each of the other Loan Documents to which it is a
party do not require any order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on the
Borrower, except as already has been obtained or made; and
(g) This Amendment has been duly executed and delivered by the
Borrower and is the binding obligation of the Borrower, enforceable against it
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws of general application and equitable principles relating to or affecting
creditors' rights.
SECTION 6. REAFFIRMATION. The Borrower hereby reaffirms its
obligations under each Loan Document to which it is a party.
SECTION 7. AMENDMENT FEE. As consideration for the Banks' agreement to
amend the Term Agreement as set forth in this Amendment, the Borrower agrees to
pay to the Agent, for the benefit of the Banks according to their Pro Rata
Share, an amendment fee ("AMENDMENT FEE") as set forth in the side letter
agreement described in Section 9(d)(ii) below. The payment of the Amendment Fee
shall be paid in accordance with the terms of such side letter agreement.
SECTION 8. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
SECTION 9. EFFECTIVENESS. This Amendment shall be deemed effective
upon the satisfaction of all of the following conditions precedent (PROVIDED
that all such conditions must be satisfied prior to 5:00 p.m., San Francisco
time, April 15, 1996):
(a) FOURTH AMENDMENT. The Borrower and each Bank shall have duly
executed and delivered this Amendment to the Agent.
8.
<PAGE>
(b) ACKNOWLEDGMENT OF AMENDMENT AND REAFFIRMATION OF GUARANTY. The
Agent shall have received the Acknowledgment of Amendment and Reaffirmation of
Guaranty, duly executed and delivered by each of the Guarantors to the Agent.
(c) CERTIFIED RESOLUTIONS. The Agent shall have received a
certificate of the Secretary or Assistant Secretary of each of the Loan Parties
and dated the date hereof certifying (i) the names and true signatures of the
incumbent officers of such Person authorized to sign the applicable Loan
Documents, (ii) the resolutions of such Person's Board of Directors approving
and authorizing the execution, delivery and performance of the Term Agreement,
as amended by this Amendment, the Acknowledgment of Amendment and Reaffirmation
of Guaranty referred to in clause (b) above, and the side letter agreement
described in subsection (d) below, as applicable, executed by such Person, and
(iii) that there have been no changes in the Certificate of Incorporation of
such Person or in the Bylaws or similar constituent documents of such Person
since the date of certification thereof to the Agent in connection with the
closing of the Tranche-C Facility.
(d) SIDE LETTER AGREEMENT. The Borrower shall have duly
acknowledged and delivered (i) the four (4) side letter dated agreements dated
as of even date herewith from the Agent to the Borrower relating to the
amendment of existing common stock purchase warrants and (ii) the side letter
agreement of even date herewith from the Borrower to the Banks relating to
the issuance of additional common stock purchase warrants and fees.
SECTION 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 11. RELEASE AND WAIVER.
(a) The Borrower hereby acknowledges and agrees that: (i) it has no
claim or cause of action against any Bank or the Agent or the Managing Agent or
any parent subsidiary or affiliate of any Bank or the Agent or the Managing
Agent, or any of such Bank's, the Agent's or the Managing's Agent's officers,
directors, employees, attorneys or other representatives or agents (all of which
parties other than the Banks, the Agent and the Managing Agent being,
collectively, the "LENDER AGENTS") in connection with the Term Agreement, the
Loans thereunder or the transactions contemplated therein; (ii) it has no offset
or defense against any of its respective obligations, indebtedness or contracts
in favor of the Banks, the Agent or the Managing Agent; and (iii) it recognizes
that each of the Banks, the Agent and the Managing Agent has heretofore properly
performed and satisfied in a timely manner all of its respective obligations to
and contracts with the Borrower.
(b) Although each of the Banks, the Agents and the Managing Agent
regards its respective conduct as proper and does not believe the Borrower to
have any claim, cause of action, offset or defense against such Bank, the Agent
or the Managing Agent or any Lender Agent in connection with the Term Agreement,
the Loans thereunder or the transactions contemplated therein, each Bank, the
Agent and the Managing Agent wishes and Borrower agrees to eliminate any
possibility that any past conditions, acts, omissions, events, circumstances or
matters could impair or otherwise affect any rights, interests, contracts or
remedies of the Banks, the Agent or the Managing Agent. Therefore, the Borrower
9.
<PAGE>
unconditionally releases and waives (i) any and all liabilities, indebtedness
and obligations, whether known or unknown, of any kind of any Bank, the Agent or
the Managing Agent or of any of Lender Agents to the Borrower, except the
obligations remaining to be respectively performed by the Banks, the Agent or
the Managing Agent as expressly stated in the Term Agreement, this Amendment and
the other Loan Documents; (ii) any legal, equitable or other obligations or
duties, whether known or unknown, of any Bank, the Agent, the Managing Agent or
any Lender Agent to the Borrower (and any rights of the Borrower against any
Bank, the Agent, the Managing Agent or any Lender Agent) besides those expressly
stated in the Term Agreement, this Amendment and the other Loan Documents; (iii)
any and all claims under any oral or implied agreement, obligation or
understanding with any Bank, the Agent, the Managing Agent or any Lender Agent,
whether known or unknown, which is different from or in addition to the express
terms of the Term Agreement, this Amendment or any of the other Loan Documents;
and (iv) all other claims, causes of action or defenses of any kind whatsoever
(if any), whether known or unknown, which the Borrower might otherwise have
against any Bank, the Agent, the Managing Agent and/or any Lender Agent on
account of any condition, act, omission, event, contract, liability, obligation,
indebtedness, claim, cause of action, defense, circumstance or matter of any
kind whatsoever which existed, arose or occurred at any time prior to the
execution and delivery of this Amendment or which could arise concurrently with
the effectiveness of this Amendment.
(c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN,
UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS,
LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS AMENDMENT
IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER AGENTS. TO
THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND RELEASES (TO THE
MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE
HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER APPLICABLE
JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF
ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT.
10.
<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
VECTRA TECHNOLOGIES, INC.
By: /s/ Ray A. Fortney
-----------------------------
Its: PRESIDENT & CEO
-----------------------------
BANQUE PARIBAS, as a Bank and as Agent
By: /s/ Robert Pinkerton
-----------------------------
Its: VP
-----------------------------
By: /s/ Lee S. Buckner
-----------------------------
Its: VP
-----------------------------
BANQUE NATIONALE DE PARIS, as a Bank and as
Managing Agent
By: /s/ Richard Cushing
-----------------------------
Its: VP
-----------------------------
By: /s/ Illegible
-----------------------------
Its:
-----------------------------
11.
<PAGE>
ACKNOWLEDGMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
SECTION 1. Each of the undersigned Guarantors hereby acknowledges and confirms
that it has reviewed and approved the terms and conditions of this Amendment.
SECTION 2. Each Guarantor hereby consents to this Amendment and agrees that its
respective Guaranty of the Obligations of the Borrower under the Term Agreement
shall continue in full force and effect, shall be valid and enforceable and
shall not be impaired or otherwise affected by the execution of this Amendment
or any other document or instrument delivered in connection herewith.
SECTION 3. Each Guarantor severally represents and warrants that, after giving
effect to this Amendment, all representations and warranties contained in its
respective are true, accurate and complete as if made the date hereof.
Dated: April 15, 1996
GUARANTORS PACIFIC NUCLEAR STORAGE SYSTEMS, INC.
By: /s/ Ray A. Fortney
----------------------------------
Printed Name: RAY A. FORTNEY
-----------------------
Title: PRESIDENT
-------------------------------
NUCLEAR PACKAGING, INC.
By: /s/ Ray A. Fortney
----------------------------------
Printed Name: RAY A. FORTNEY
-----------------------
Title: PRESIDENT
-------------------------------
VECTRA SERVICES, INC.
By: /s/ Ray A. Fortney
----------------------------------
Printed Name: RAY A. FORTNEY
-----------------------
Title: PRESIDENT
-------------------------------
1.
<PAGE>
CTL INTERNATIONAL, INC.
By: /s/ Ray A. Fortney
----------------------------------
Printed Name: RAY A. FORTNEY
-----------------------
Title: PRESIDENT
-------------------------------
VECTRA GOVERNMENT SERVICES, INC.
By: /s/ Ray A. Fortney
----------------------------------
Printed Name: RAY A. FORTNEY
-----------------------
Title: PRESIDENT
-------------------------------
VECTRA WASTE SERVICES, L.L.C.
By: VECTRA Technologies, Inc., its Manager
By: /s/ Ray A. Fortney
----------------------------------
Printed Name: RAY A. FORTNEY
-----------------------
Title: PRESIDENT
-------------------------------
2.
<PAGE>
FOURTH AMENDMENT
(CREDIT AGREEMENT)
This FOURTH AMENDMENT ("AMENDMENT") dated as of December 26, 1995 is
entered into among VECTRA NEVADA, INC. (the "BORROWER"), BANQUE PARIBAS, as a
Bank (as defined below) and as the Agent (as defined below), BANQUE NATIONALE
DE PARIS, as a Bank and as the Managing Agent (as defined below), and BANK
HAPOALIM, as a Bank.
RECITALS
A. The Borrower has entered into that certain Credit Agreement dated
as of January 6, 1994, as amended by the Amendment and Limited Waiver dated
as of August , 1994, the Second Amendment dated as of October 20, 1994 and
the Third Amendment dated as of May 24, 1995 (as so amended, the "CREDIT
AGREEMENT"), among the Borrower, the Banks party thereto, Banque Paribas,
acting in its separate capacity as agent for the Banks (the "AGENT"), and
Banque Nationale de Paris, acting in its separate capacity as Managing Agent
(as defined therein) (the "MANAGING AGENT").
B. The Borrower has requested that the Credit Agreement be amended to
extend the Revolving Loan Maturity Date from December 31, 1995 to March 31,
1996 for the limited purpose of affording the Borrower an additional three
months to finance the full repayment of the Obligations. The Borrower has
advised the Agent that it is engaged in ongoing discussions with several
institutional lenders and investor groups with the objective of closing a
financing, sale or other similar transaction as soon as possible and in any
event not later than March 31, 1996 premised on the condition that the net
proceeds of such transaction shall be sufficient to repay the then
outstanding Obligations in full. The Agent has advised the Borrower that the
Banks do not intend to agree to any additional extension of the Revolving
Loan Maturity Date.
C. The Banks are willing to so amend the Credit Agreement, but only
upon the terms and conditions and in reliance upon the representations and
warranties of the Borrower set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties to the Credit
Agreement agree as follows:
1. DEFINITIONS. Capitalized terms used but not defined in this
Amendment shall have the meanings given to them in the Credit Agreement.
1.
<PAGE>
2. AMENDMENT. The Credit Agreement is hereby amended by deleting the
words "December 31, 1995" in the definition of "Revolving Loan Maturity Date"
set forth in Section 1.1 of the Credit Agreement and inserting in their place
the words "March 31, 1996."
3. LIMITATION OF AMENDMENT.
(a) The amendment set forth in Section 2, above, is effective for
the purposes set forth herein and shall be limited precisely as written and
shall not be deemed to (i) be a consent to any amendment, waiver or
modification of any other term or condition of any Loan Document or (ii)
otherwise prejudice any right or remedy which the Banks, the Agent or the
Managing Agent may now have or may have in the future under or in connection
with any Loan Document.
(b) This Amendment shall be construed in connection with and as
part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except
as herein amended, are hereby ratified and confirmed and shall remain in full
force and effect.
4. ACKNOWLEDGEMENTS.
(a) The Borrower understands and acknowledges that the three months
extension of the Revolving Loan Maturity Date evidenced by the amendment set
forth in Section 2, above, is a limited purpose, one-time, accommodation
amendment agreed by the Banks for the express purpose of affording the
Borrower access to capital while it completes a refinancing, sale or other
similar transaction generating sufficient proceeds to enable the Borrower to
repay the Obligations in full as soon as possible and in any event not later
than the Revolving Loan Maturity Date as extended by this Amendment. The
Borrower further acknowledges and agrees that it represented to the Banks, in
requesting the extension of the Revolving Loan Maturity Date evidenced by the
amendment set forth in Section 2, above, that the Borrower and its Affiliates
are engaged in serious ongoing discussions with several institutional lenders
and investor groups regarding the full repayment of the Obligations and that
the Borrower is confident that a refinancing, sale or other similar
transaction will be closed by March 31, 1996 which would generate sufficient
funds to repay the Obligations in full and that the Banks have reasonably
relied on such representation and would not have otherwise entered into and
agreed to this Amendment. The Banks have not agreed or committed to, or
otherwise indicated in any way whatsoever that they would consider, any
further extension of the Revolving Loan Maturity Date and the Borrower
acknowledges that the Banks have made no such agreement or commitment and
that the Borrower has no expectation whatsoever that the Banks would consider
any further extension of the Revolving Loan Maturity Date.
(b) The Borrower hereby ratifies and reaffirms the validity and
enforceability of all of the Liens and security interests heretofore granted,
pursuant to the Security Agreement and other Loan Documents, to the Agent,
for itself and on behalf of the Banks and the Managing Agent, as collateral
security for the Obligations, and acknowledges that all of such Liens and
security interests, and all Collateral heretofore pledged as security for the
Obligations, continues
2.
<PAGE>
to be and remain collateral for the Obligations from and after the date
hereof. Without limiting the generality of the foregoing, the Borrower
acknowledges and agrees that, pursuant to the Security Agreement and other
Loan Documents, the Agent, for itself and on behalf of the Banks and the
Managing Agent, is entitled to receive and apply all proceeds of the
Collateral.
5. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks, the
Agent and the Managing Agent to enter into this Amendment, the Borrower
hereby represents and warrants to each Bank, the Agent and the Managing Agent
as follows:
(a) After giving effect to this Amendment (i) the representations
and warranties contained in the Loan Documents (other than those which
expressly speak as of a different date) are true, accurate and complete in
all material respects as of the date hereof and (ii) no Default or Event of
Default has occurred and is continuing;
(b) The Borrower has the corporate power and authority to execute
and deliver this Amendment and to perform its obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party;
(c) The certificate of incorporation, bylaws and other
organizational documents of the Borrower delivered to each Bank on the
Closing Date are true, accurate and complete and have not been amended,
supplemented or restated and are and continue to be in full force and effect;
(d) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party have been duly authorized by all necessary corporate
action on the part of the Borrower;
(e) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party do not and will not contravene (i) any law or
regulation binding on or affecting the Borrower, (ii) the certificate of
incorporation or bylaws of the Borrower, (iii) any order, judgment or decree
of any court or other governmental or public body or authority, or
subdivision thereof, binding on the Borrower or (iv) any contractual
restriction binding on or affecting the Borrower;
(f) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on the Borrower, except as already has been obtained or
made; and
(g) This Amendment has been duly executed and delivered by the
Borrower and is the binding obligation of the Borrower, enforceable against
it in accordance with its
3.
<PAGE>
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting
creditors' rights.
6. REAFFIRMATION. The Borrower hereby reaffirms its obligations under
each Loan Document to which it is a party.
7. AMENDMENT FEE. As consideration for the Banks' agreement to amend
the Credit Agreement as set forth in this Amendment, the Borrower agrees to
pay to the Agent, for the benefit of the Banks according to their Pro Rata
Share, an amendment fee ("AMENDMENT FEE") as set forth in a separate
amendment fee letter. The payment of the Amendment Fee shall be a condition
precedent to the effectiveness of this Amendment.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
9. EFFECTIVENESS. Subject to Section 7, above, this Amendment shall be
deemed effective upon the satisfaction of all of the following conditions
precedent (PROVIDED that all such conditions, including the payment of the
Amendment Fee, must be satisfied prior to 5:00 p.m., San Francisco time, on
December 29, 1995):
(a) The receipt by the Agent of an originally executed counterpart
(or facsimile thereof with the original to follow by Federal Express or other
overnight courier) of this Amendment, executed by the Borrower and each Bank;
and
(b) The receipt by the Agent of a comprehensive audit of the
Receivables constituting Collateral for the Obligations, performed by an
independent appraiser designated by the Agent and reasonably acceptable to
the Borrower, with results satisfactory to the Banks in their sole
discretion, including as to the conformance of the Receivables designated by
the Borrower as Eligible Receivables and used by the Borrower in its most
recent calculation of the Borrowing Base with the requirements for
eligibility set forth in the definition of "Eligible Receivable" in Section
1.1 of the Credit Agreement.
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
11. RELEASE AND WAIVER.
(a) The Borrower hereby acknowledges and agrees that: (i) it has no
claim or cause of action against any Bank or the Agent or the Managing Agent
or any parent, subsidiary or affiliate of any Bank or the Agent or the
Managing Agent, or any of such Bank's, the Agent's or the Managing Agent's
officers, directors, employees, attorneys or other representatives or agents
(all of which parties other than the Banks, the Agent and the Managing
4.
<PAGE>
Agent being, collectively, the "LENDER AGENTS") in connection with the Credit
Agreement, the Revolving Loans thereunder or the transactions contemplated
therein; (ii) it has no offset or defense against any of its respective
obligations, indebtedness or contracts in favor of the Banks, the Agent or
the Managing Agent; and (iii) it recognizes that each of the Banks, the Agent
and the Managing Agent has heretofore properly performed and satisfied in a
timely manner all of its respective obligations to and contracts with the
Borrower.
(b) Although each of the Banks, the Agent and the Managing Agent
regards its respective conduct as proper and does not believe the Borrower to
have any claim, cause of action, offset or defense against such Bank, the
Agent or the Managing Agent or any Lender Agent in connection with the Credit
Agreement, the Revolving Loans thereunder or the transactions contemplated
therein, each Bank, the Agent and the Managing Agent wishes and the Borrower
agrees to eliminate any possibility that any past conditions, acts,
omissions, events, circumstances or matters could impair or otherwise affect
any rights, interests, contracts or remedies of the Banks, the Agent or the
Managing Agent. Therefore, the Borrower unconditionally releases and waives
(i) any and all liabilities, indebtedness and obligations, whether known or
unknown, of any kind of any Bank, the Agent or the Managing Agent or of any of
Lender Agents to the Borrower, except the obligations remaining to be
respectively performed by the Banks, the Agent or the Managing Agent as
expressly stated in the Credit Agreement, this Amendment and the other Loan
Documents; (ii) any legal, equitable or other obligations or duties, whether
known or unknown, of any Bank, the Agent, the Managing Agent or any Lender
Agent to the Borrower (and any rights of the Borrower against any Bank, the
Agent, the Managing Agent or any Lender Agent) besides those expressly stated
in the Credit Agreement, this Amendment and the other Loan Documents; (iii)
any and all claims under any oral or implied agreement, obligation or
understanding with any Bank, the Agent, the Managing Agent or any Lender
Agent, whether known or unknown, which is different from or in addition to
the express terms of the Credit Agreement, this Amendment or any of the other
Loan Documents; and (iv) all other claims, causes of action or defenses of
any kind whatsoever (if any), whether known or unknown, which the Borrower
might otherwise have against any Bank, the Agent, the Managing Agent and/or
any Lender Agent on account of any condition, act, omission, event, contract,
liability, obligation, indebtedness, claim, cause of action, defense,
circumstance or matter of any kind whatsoever which existed, arose or
occurred at any time prior to the execution and delivery of this Amendment or
which could arise concurrently with the effectiveness of this Amendment.
(c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN,
UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS,
LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS
AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER
AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND
RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH
IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER
APPLICABLE JURISDICTION WHICH MIGHT
5.
<PAGE>
LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR
RELEASES UNDER THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
VECTRA NEVADA, INC.
By: /s/ RAY A. FORTNEY
----------------------------------
Its: PRESIDENT
----------------------------------
BANQUE PARIBAS, as a Bank and as Agent
By: /s/ ROBERT S. PINKERTON
----------------------------------
Its: VP
----------------------------------
By: /s/ LEE S. BUCKNER
----------------------------------
Its: GROUP VICE PRESIDENT
----------------------------------
BANQUE NATIONALE DE PARIS, as a Bank
and as Managing Agent
By: /s/ RICHARD CUSHING
----------------------------------
Its: VP
----------------------------------
By: /s/ ILLIGEBLE
----------------------------------
Its: VP
----------------------------------
BANK HAPOALIM, as a Bank
By: /s/ CONRAD WAGNER
----------------------------------
Its: VP
----------------------------------
By: /s/ ERIK VERDULIER
----------------------------------
Its: AT
----------------------------------
6.
<PAGE>
SIXTH AMENDMENT AND LIMITED WAIVER
(CREDIT AGREEMENT)
This SIXTH AMENDMENT AND LIMITED WAIVER ("AMENDMENT") dated as of March
29, 1996, is entered into among VECTRA NEVADA, INC. (the "BORROWER"), BANQUE
PARIBAS, as a Bank (as defined below) and as the Agent (as defined below),
BANQUE NATIONALE DE PARIS, as a Bank and as the Managing Agent (as defined
below), AND BANK HAPOALIM, as a Bank.
RECITALS
A. The Borrower has entered into that certain Credit Agreement dated as
of January 6, 1994, as amended by the Amendment and Limited Waiver dated as
of August __, 1994, the Second Amendment dated as of October 20, 1994, the
Third Amendment dated as of May 24, 1995, the Fourth Amendment to Credit
Agreement and First Amendment to Security Agreement dated as of June 30,
1995, and the Fifth Amendment dated as of December 26, 1995 (as so amended,
the "CREDIT AGREEMENT"), among the Borrower, the Banks party thereto, Banque
Paribas, acting in its separate capacity as agent for the Banks (the
"AGENT"), and Banque Nationale de Paris, acting in its separate capacity as
Managing Agent (as defined therein) (the "MANAGING AGENT").
B. The Borrower has requested that the Credit Agreement be amended to
extend the Revolving Loan Maturity Date from March 31, 1996 to April 15,
1996, for the limited purpose of accommodating the Borrower in connection
with that certain letter of intent dated as of March 21, 1996, between Duke
Engineering & Service ("DE&S") and Vectra (the "Letter of Intent"), pursuant
to which Vectra intends to sell and DE&S intends to purchase all of the
assets of the nuclear engineering, power services and government services
business units of Vectra (the "NP&G Services Units"). The Borrower has
advised the Agent that such a sale would close as soon as possible and in any
event not later than August 15, 1996, premised on the condition that the net
sale proceeds shall be sufficient to repay the then-outstanding Obligations
in full.
C. Pursuant to Section 5.1 of the Credit Agreement, the Borrower
covenants and agrees to furnish to each Bank certain information. The
Borrower has failed to timely furnish certain of such information for the
fiscal quarter ending December 31, 1995 and the fiscal year ending December
31, 1995 and the months of November 1995, December 1995, January 1996 and
February 1996 as required by Section 5.1. The Borrower's failure to furnish
such information is a breach of Section 5.1 of the Credit Agreement and a
Default under Section 7.1(c)(ii) of the Credit Agreement. The Borrower's
failure to effect cure of these Defaults within the five (5) Business Day
grace period provided by Section 7.1(c)(ii) of the Credit Agreement has
resulted in these Defaults maturing into Events of Default.
D. The Borrower has requested that the Banks waive the Defaults and
Events of Defaults that have occurred as a result of the Borrower's failure
to furnish certain information as required by Section 5.1 of the Credit
Agreement.
1.
<PAGE>
E. The Banks are willing to so amend the Credit Agreement and to
provide such a limited waiver, but only upon the terms and conditions and in
reliance upon the representations and warranties of the Borrower set forth
below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties to the Credit
Agreement represent, warrant and agree as follows:
1. DEFINITIONS. Capitalized terms used but not defined in this
Agreement shall have the meanings given to them in the Credit Agreement.
2. AMENDMENT.
2.1 SECTION 1.1 (DEFINITIONS). The Credit Agreement is hereby
amended by deleting the words "March 31, 1996" in the definition of
"Revolving Loan Maturity Date" set forth in Section 1.1 of the Credit
Agreement and inserting in their place the words "April 15, 1996."
3. LIMITATION OF AMENDMENT.
(a) The amendment set forth in Section 2, above, is effective for
the purposes set forth herein and shall be limited precisely as written and
shall not be deemed to (i) be a consent to any amendment, waiver or
modification of any other term or condition of any Loan Document or (ii)
otherwise prejudice any right or remedy which the Banks, the Agent or the
Managing Agent may now have or may have in the future under or in connection
with any Loan Document.
(b) This Amendment shall be construed in connection with and as
part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except
as herein amended, are hereby ratified and confirmed and shall remain in full
force and effect.
4. LIMITED WAIVERS. Effective as of the date hereof, and subject to the
condition subsequent that the parties hereto enter into a further amendment
of the Credit Agreement on or before April 15, 1996, each of the Banks, the
Agent and the Managing Agent hereby waives the Defaults and Events of Default
which have occurred under Section 5.1 of the Credit Agreement solely as a
result of the Borrower's failure to furnish certain information as required by
Section 5.1 of the Credit Agreement.
2.
<PAGE>
5. LIMITATION OF WAIVERS.
(a) The waivers set forth in Section 4, above, are effective for
the purposes set forth herein and shall be limited precisely as written and
shall not be deemed to (i) be a consent to any amendment, waiver or
modification of any other term or condition of any Loan Document, (ii) a
waiver of any other breach or violation on any other occasion of the sections
of the Credit Agreement which are the subject of the waivers set forth
in Section 4, above, or (iii) otherwise prejudice any right or remedy which
the Banks, the Agent or the Managing Agent may now have or may have in the
future under or in connection with any Loan Document.
(b) This waiver shall be construed in connection with and as part
of the Loan Documents and all terms, conditions, representations, warranties,
covenants and agreements set forth in the Loan Documents, except as herein
waived or amended, are hereby ratified and confirmed and shall remain in full
force and effect.
6. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks, the
Agent and the Managing Agent to enter into this Amendment, the Borrower
hereby represents and warrants to each Bank, the Agent and the Managing Agent
as follows:
(a) After giving effect to this Amendment (i) the representations
and warranties contained in the Loan Documents (other than those which
expressly speak as of a different date) are true, accurate and complete in
all material respects as of the date hereof and (ii) no Default or Event of
Default has occurred and is continuing;
(b) The Borrower has the corporate power and authority to execute
and deliver this Amendment and to perform its obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party;
(c) The certificate of incorporation, bylaws and other
organizational documents of the Borrower delivered to each Bank on the
Closing Date are true, accurate and complete and have not been amended,
supplemented or restated and are and continue to be in full force and effect;
(d) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party have been duly authorized by all necessary corporate
action on the part of the Borrower;
(e) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents
to which it is a party do not and will not contravene (i) any law or
regulation binding on or affecting the Borrower, (ii) the certificate of
incorporation or bylaws of the Borrower, (iii) any order, judgment or decree
of any court or other governmental or public body or authority, or subdivision
thereof, binding on the Borrower or (iv) any contractual restriction binding
on or affecting the Borrower;
3.
<PAGE>
(f) The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party do not require any order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with, or exemption by any governmental or public body or authority, or
subdivision thereof, binding on the Borrower, except as already has been
obtained or made; and
(g) This Amendment has been duly executed and delivered by the
Borrower and is the binding obligation of the Borrower, enforceable against
it in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, liquidation, moratorium or other
similar laws of general application and equitable principles relating to or
affecting creditors' rights.
7. REAFFIRMATION. The Borrower hereby reaffirms its obligations under
each Loan Document to which it is a party.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
9. EFFECTIVENESS. This Amendment shall be deemed effective upon the
satisfaction of all of the following conditions precedent (PROVIDED that all
such conditions must be satisfied prior to 5:00 p.m., San Francisco time, on
March 29, 1995):
(a) SIXTH AMENDMENT. The receipt by the Agent of an originally
executed counterpart (or facsimile thereof with the original to follow by
Federal Express or other overnight courier) of this Amendment, executed by
the Borrower and each Bank.
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
11. RELEASE AND WAIVER.
(a) The Borrower hereby acknowledges and agrees that: (i) it has no
claim or cause of action against any Bank or the Agent or the Managing Agent
or any parent, subsidiary or affiliate of any Bank or the Agent or the
Managing Agent, or any of such Bank's, the Agent's or the Managing Agent's
officers, directors, employees, attorneys or other representatives or agents
(all of which parties other than the Banks, the Agent and the Managing Agent
being, collectively, the "LENDER AGENTS") in connection with the Credit
Agreement, the Revolving Loans thereunder or the transactions contemplated
therein; (ii) it has no offset or defense against any of its respective
obligations, indebtedness or contracts in favor of the Banks, the Agent or
the Managing Agent; and (iii) it recognizes that each of the Banks, the Agent
and the Managing Agent has heretofore properly performed and satisfied in a
timely manner all of its respective obligations to and contracts with the
Borrower.
4.
<PAGE>
(b) Although each of the Banks, the Agent and the Managing Agent
regards its respective conduct as proper and does not believe the Borrower to
have any claim, cause of action, offset or defense against such Bank, the
Agent or the Managing Agent or any Lender Agent in connection with the Credit
Agreement, the Revolving Loans thereunder or the transactions contemplated
therein, each Bank, the Agent and the Managing Agent wishes and the Borrower
agrees to eliminate any possibility that any past conditions, acts,
omissions, events, circumstances or matters could impair or otherwise affect
any rights, interests, contracts or remedies of the Banks, the Agent or the
Managing Agent. Therefore, the Borrower unconditionally releases and waives
(i) any and all liabilities, indebtedness and obligations, whether known or
unknown, of any kind of any Bank, the Agent or the Managing Agent or of any of
Lender Agents to the Borrower, except the obligations remaining to be
respectively performed by the Banks, the Agent or the Managing Agent as
expressly stated in the Credit Agreement, this Amendment and the other Loan
Documents; (ii) any legal, equitable or other obligations or duties, whether
known or unknown, of any Bank, the Agent, the Managing Agent or any Lender
Agent to the Borrower (and any rights of the Borrower against any Bank, the
Agent, the Managing Agent or any Lender Agent) besides those expressly stated
in the Credit Agreement, this Amendment and the other Loan Documents; (iii)
any and all claims under any oral or implied agreement, obligation or
understanding with any Bank, the Agent, the Managing Agent or any Lender
Agent, whether known or unknown, which is different from or in addition to
the express terms of the Credit Agreement, this Amendment or any of the other
Loan Documents; and (iv) all other claims, causes of action or defenses of
any kind whatsoever (if any), whether known or unknown, which the Borrower
might otherwise have against any Bank, the Agent, the Managing Agent and/or
any Lender Agent on account of any condition, act, omission, event, contract,
liability, obligation, indebtedness, claim, cause of action, defense,
circumstance or matter of any kind whatsoever which existed, arose or
occurred at any time prior to the execution and delivery of this Amendment or
which could arise concurrently with the effectiveness of this Amendment.
(c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN,
UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS,
LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS
AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER
AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND
RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH
IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER
APPLICABLE JURISDICTION WHICH MIGHT
5.
<PAGE>
LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR
RELEASES UNDER THIS AMENDMENT.
IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
VECTRA NEVADA, INC.
By: /s/ Ray A. Fortney
----------------------------------
Its: PRESIDENT
----------------------------------
BANQUE PARIBAS, as a Bank and as Agent
By: /s/ Robert S. Pinkerton
----------------------------------
Its: VP
----------------------------------
By: /s/ Lee S. Buckner
----------------------------------
Its: GVP
----------------------------------
BANQUE NATIONALE DE PARIS, as a Bank
and as Managing Agent
By: /s/ Richard Cushing
----------------------------------
Its: VP
----------------------------------
By: /s/ Illegible
----------------------------------
Its:
----------------------------------
BANK HAPOALIM, as a Bank
By: /s/ Eric Verdulier
----------------------------------
Its: AT
----------------------------------
6.
<PAGE>
CTL INTERNATIONAL, INC.
By: /s/ Ray A. Fortney
------------------------------------
Printed Name: Ray A. Fortney
--------------------------
Title: President & CEO
---------------------------------
VECTRA GOVERNMENT SERVICES, INC.
By: /s/ Ray A. Fortney
------------------------------------
Printed Name: Ray A. Fortney
--------------------------
Title: President & CEO
---------------------------------
VECTRA WASTE SERVICES, L.L.C.
By: VECTRA Technologies, Inc., its Manager
By: /s/ Ray A. Fortney
------------------------------------
Printed Name: Ray A. Fortney
--------------------------
Title: President & CEO
---------------------------------
7.
<PAGE>
SEVENTH AMENDMENT
(CREDIT AGREEMENT)
THIS SEVENTH AMENDMENT ("AMENDMENT") dated as of April 15, 1996, is entered
into among VECTRA NEVADA, INC. (the "BORROWER"), BANQUE PARIBAS, as a Bank (as
defined below) and as the Agent (as defined below), BANQUE NATIONALE DE PARIS,
as a Bank and as the Managing Agent (as defined below), and BANK HAPOALIM, as a
Bank.
RECITALS
A. The Borrower has entered into that certain Credit Agreement dated as
of January 6, 1994, as amended by the Amendment and Limited Waiver dated as of
August ____, 1994, the Second Amendment dated as of October 20, 1994, the Third
Amendment dated as of May 24, 1995, the Fourth Amendment to Credit Agreement and
First Amendment to Security Agreement dated as of June 30, 1995, the Fifth
Amendment dated as of December 26, 1995, and the Sixth Amendment and Limited
Waiver dated as of March 29, 1996 (as so amended, the "CREDIT AGREEMENT"), among
the Borrowers, the Banks (as defined therein) party thereto (the "BANKS"),
Banque Paribas, acting in its separate capacity as Agent (as defined therein)
for the Banks (the "AGENT"), and Banque Nationale de Paris, acting in its
separate capacity as Managing Agent (as defined therein) for the Banks (the
"MANAGING AGENT").
B. The Borrower has requested that the Credit Agreement be amended to
extend the Revolving Loan Maturity Date from April 15, 1996 to January 2, 1997,
for the limited purpose of affording the Borrower an additional nine months to
finance the full repayment of the Obligations. The Borrower has advised the
Agent that Vectra has entered into a certain letter of intent dated as of March
21, 1996, with Duke Engineering & Service ("DE&S") (the "DE&S LETTER OF
INTENT"), pursuant to which Vectra intends to sell and DE&S intends to purchase
substantially all of the assets of the nuclear engineering, power services and
government services business units of Vectra (the "NP&G SERVICES UNITS"). The
Borrower has advised the Agent that such a sale would close as soon as possible
and in any event Vectra would receive net cash proceeds from such sale not later
than August 31, 1996, premised on the condition that the net sale proceeds shall
be sufficient to repay the then-outstanding Obligations in full (as well as the
Obligations then outstanding under the Term Loan Agreement (as such term is
defined in the Term Loan Agreement)). The Agent has advised the Borrower that
the Banks do not intend to agree to any additional extension of the Revolving
Loan Maturity Date.
C. The Banks are willing to so amend the Credit Agreement, but only upon
the terms and conditions and in reliance upon the representations and warranties
of the Borrower set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties to the Credit
Agreement agree as follows:
1.
<PAGE>
1. DEFINITIONS. Capitalized terms used but not defined in this Amendment
shall have the meanings given to them in the Credit Agreement.
2. AMENDMENTS.
2.1 SECTION 1.1 (DEFINITIONS). The definition of "Applicable Margin"
set forth in Section 1.1 of the Credit Agreement shall be deleted in its
entirety and replaced with the following:
"Applicable Margin" shall mean, at all times, one and one-half percent
(1.50%) per annum.
2.2 SECTION 1.1 (DEFINITIONS). The definition of "Loan Documents"
set forth in Section 1.1 of the Credit Agreement shall be deleted in its
entirety and replaced with the following:
"Loan Documents" shall mean this Agreement, the Revolving Notes, the
Security Agreement, each Purchase Agreement and the Subordination Agreement, and
any and all other agreements, documents and instruments executed and delivered
by or on behalf or in support of the Borrower to the Agent, any Bank or their
respective authorized designee evidencing or relating to the Loans, as the same
from time to time may be amended, modified, supplemented, extended or renewed.
2.3 SECTION 1.1 (DEFINITIONS). The Credit Agreement is hereby
amended by deleting the words "April 15, 1996" in the definition of "Revolving
Loan Maturity Date" set forth in Section 1.1 of the Credit Agreement and
inserting in their place the words "January 2, 1997."
2.4 SECTION 2.5 (INTEREST). The Credit Agreement is hereby amended
to eliminate the Eurodollar Loan option. All outstanding Eurodollar Loans shall
be converted to Based Rate Loans on the expiration date of the Interest Period
applicable thereto.
2.5 SECTION 2.9 (VOLUNTARY REDUCTION OF REVOLVING LOAN COMMITMENTS).
Section 2.9 of the Credit Agreement is deleted in its entirety and replaced with
the following:
SECTION 2.9 (VOLUNTARY REDUCTION OF REVOLVING LOAN COMMITMENTS).
Upon at least three (3) Business Days prior irrevocable written notice (or
telephonic notice promptly confirmed in writing) to the Agent (which notice the
Agent shall promptly transmit to each of the Banks), the Borrower shall have the
right, without premium or penalty, to permanently reduce each Bank's Pro Rata
Share of all or part of the Total Revolving Loan Commitment, provided that any
such partial reduction shall be in the minimum aggregate amount of $100,000.
2.6 SECTION 2.10 (MANDATORY PREPAYMENTS). Section 2.10 of the Credit
Agreement is hereby amended to include subsections (c), (d), (e) and (f) as
follows:
2.
<PAGE>
(c) The Borrower has advised the Banks that Vectra is engaged in
ongoing discussions with a purchaser of all of the [assets/stock] of VECTRA
Technologies (U.K.) Limited, an English limited liability company ("VECTRA
(U.K.)"). Pursuant to that certain Fourth Amendment (Amended and Restated Term
Loan Agreement) of even date herewith which amends the Term Loan Agreement (the
"FOURTH TERM LOAN AMENDMENT"), Vectra has agreed to contribute to the Borrower
for the sole purpose of repaying the Obligations, one hundred percent (100%) of
the net proceeds of the sale of Vectra (U.K.), which net proceeds shall not be
less than $1,000,000 (or so much thereof as is necessary to repay the
Obligations in full). Immediately upon its receipt thereof, the Borrower shall
cause one hundred percent (100%) of the net sale proceeds to be applied to
immediately reduce the Obligations under the Credit Agreement and to reduce
permanently the Total Revolving Loan Commitment by such amount.
(d) Pursuant to the Fourth Term Loan Amendment, Vectra has agreed to
contribute to the Borrower for the sole purpose of repaying the Obligations,
such amount of the net proceeds of the sale to DE&S of the NP&G Units pursuant
to the terms, or otherwise as contemplated by, the DE&S Letter of Intent as is
necessary to repay the Obligations in full. Immediately upon its receipt
thereof, the Borrower shall cause the net proceeds of such sale so contributed
to be applied to immediately reduce the Obligations under the Credit Agreement
and to reduce permanently the Total Revolving Loan Commitment by such amount.
(e) On or before June 30, 1996, the Borrower shall make a payment of
$600,000 (the "$600,000 PAYMENT"), which shall be applied to reduce the
Obligations under the Credit Agreement and to reduce permanently the Total
Revolving Loan Commitments by such amount. Notwithstanding the foregoing, the
parties hereto agree that the Borrower may elect, at its sole option, to defer
payment of the $600,000 Payment. The Borrower shall effect such election to
defer the $600,000 Payment by delivering to the Agent no later than 5:00 p.m.
California time on June 24, 1996, a written notice of election (a "NOTICE OF
ELECTION") and such election shall be effective upon delivery of such Notice of
Election to the Agent. In the event that the Borrower elects to defer the
$600,000 Payment, the $600,000 Payment shall be due and payable upon the first
to occur of (i) the sale to DE&S of the NP&G Service Units pursuant to the DE&S
Letter of Intent or other similar sale of assets currently owned by Vectra or
its Subsidiaries, (ii) Vectra's issuance of additional common stock or preferred
stock with a redemption date of not earlier than one year after the Revolving
Loan Maturity Date, (iii) Vectra's issuance of debt subordinated to all of its
debt to institutional lenders on terms satisfactory to such institutional
lenders, including the Banks, or (iv) the Revolving Loan Maturity Date or
such prior date as the Loans shall have become due and payable, whether by
acceleration or otherwise. As consideration for and in the event of such
deferral, the Borrower shall pay to the Agent for the benefit of the Banks
according to their Pro Rata Share, a deferral fee in the amount of $100,000,
which deferral fee shall be earned upon the effectiveness of such election,
but which deferral fee shall be due and payable upon the date which the
$600,000 Payment shall be due and payable.
(f) On or before September 15, 1996, the Borrower shall make a
payment of $625,000 (the "$625,000 PAYMENT"), which shall be applied to reduce
the Obligations under the Credit Agreement and to reduce permanently the Total
Revolving Loan Commitments by such amount. Notwithstanding the foregoing, the
parties hereto agree that the Borrower may elect, at its sole discretion, to
defer payment of the $625,000 Payment. The
3.
<PAGE>
Borrower shall effect such election to defer the $625,000 Payment by delivering
to the Agent no later than 5:00 p.m. California time on September 9, 1996, a
Notice of Election and such election shall be effective upon delivery of such
Notice of Election to the Agent. In the event that the Borrower elects to defer
the $625,000 Payment, the $625,000 Payment shall be due and payable upon the
first to occur of (i) the sale of DE&S of the NP&G Service Units pursuant to the
DE&S Letter of Intent or other similar sale of assets currently owned by Vectra
or its Subsidiaries, (ii) Vectra's issuance of additional common stock or
preferred stock with a redemption date of not earlier than one year after the
Revolving Loan Maturity Date, (iii) Vectra's issuance of debt subordinated to
all of its debt to institutional lenders on terms satisfactory to such
institutional lenders, including the Banks, or (iv) the Revolving Loan Maturity
Date or such prior date as the Loans shall have become due and payable, whether
by acceleration or otherwise. As consideration for and in the event of such
deferral, the Borrower shall pay to the Agent for the benefit of the Banks
according to their Pro Rata Share, a deferral fee in the amount of $100,000,
which deferral fee shall be earned upon the effectiveness of such election, but
which deferral fee shall be due and payable upon the date which the $625,000
Payment shall be due and payable.
Provided that the net proceeds of the sales described in clauses (c) and (d)
above are applied as required by such clauses, the Banks shall cooperate with
the Borrower to execute and deliver such documents as are necessary to release,
terminate or reconvey any Collateral transferred to the buyer as part of such
sale.
2.7 SECTION 2.11 (VOLUNTARY PREPAYMENTS). Section 2.11 of the Credit
Agreement is deleted in its entirety and replaced with the following:
SECTION 2.11 VOLUNTARY PREPAYMENTS. The Borrower shall have the
right to prepay the Loans in whole or in part without premium or penalty from
time to time on the following terms and conditions: (i) the Borrower shall give
the Agent written notice (or telephonic notice promptly confirmed in writing),
which notice shall be irrevocable, of its intent to prepay the Loans, at least
three (3) Business Days prior to a prepayment, and which notice the Agent shall
promptly transmit to each of the Banks and (ii) each prepayment shall be in a
minimum aggregate principal amount of $100,000.
3. LIMITATION OF AMENDMENTS.
(a) The amendments set forth in SECTION 2, above, are effective for
the purposes set forth herein and shall be limited precisely as written and
shall not be deemed to (i) be a consent to any amendment, waiver of modification
of any other term or condition of any Loan Document or (ii) otherwise prejudice
any right or remedy which the Banks, the Agent or the Managing Agent may now
have or may have in the future under or in connection with any Loan Document.
(b) This Amendment shall be construed in connection with and as part
of the Loan Documents and all terms, conditions, representations, warranties,
covenants and agreements set forth in the Loan Documents, except as herein
amended, are hereby ratified and confirmed and shall remain in full force and
effect.
4.
<PAGE>
4. ACKNOWLEDGEMENTS.
(a) The Borrower understands and acknowledges that the nine month
extension of the Revolving Loan Maturity Date evidenced by the amendments set
forth in SECTION 2, above, is a limited purpose, one-time accommodation
amendment agreed by the Banks for the express purpose of affording the Borrower
access to capital while it completes a refinancing, sale or other similar
transaction generating sufficient proceeds to enable the Borrower to repay the
Obligations in full as soon as possible and in any event not later than the
Revolving Loan Maturity Date as extended by this Amendment. The Borrower further
acknowledges and agrees that it represented to the Banks, in requesting the
extension of the Revolving Loan Maturity Date evidenced by the amendment set
forth in SECTION 2, above, that the Borrower and its Affiliates are engaged in
serious ongoing discussions with DE&S regarding the sale of the NP&G Units and
the full repayment of the Obligations and that the Borrower is confident that
such sale will generate sufficient funds to repay the Obligations in full by
August 31, 1996. The Borrower further acknowledges and agrees that the Banks
have reasonably relied on such representation and would not have otherwise
entered into and agreed to this Amendment. The Banks have not (nor has the Agent
or the Managing Agent on behalf of the Banks) agreed or committed to, or
otherwise indicated in any way whatsoever that they would consider, any further
extension of the Revolving Loan Maturity Date and the Borrower acknowledges and
agrees that the Banks have made no such agreement or commitment (nor has the
Agent or the Managing Agent on behalf of the Banks) and that the Borrower has no
expectation whatsoever that the Banks would consider any further extension of
the Revolving Loan Maturity Date.
(b) The Borrower hereby ratifies and reaffirms the validity and
enforceability of all of the Liens and security interests heretofore granted,
pursuant to the Security Agreement and other Loan Documents, to the Agent, for
itself and on behalf of the Banks and the Managing Agent, as collateral security
for the Obligations, and acknowledges that all of such Liens and security
interests, and all Collateral heretofore pledged as security for the
Obligations, continues to be and remain collateral for the Obligations from and
after the date hereof. Without limiting the generality of the foregoing, the
Borrower acknowledges and agrees that, pursuant to the Security Agreement and
other Loan Documents, the Agent, for itself and on behalf of the Banks and the
Managing Agent, is entitled to receive and apply all proceeds of the Collateral.
5. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks, the
Agent and the Managing Agent to enter into this Agreement, the Borrower hereby
represents and warrants to each Bank, the Agent and the Managing Agent as
follows:
(a) After giving effect to this Amendment (i) the representations and
warranties contained in the Loan Documents (other than those which expressly
speak as of a different date) are true, accurate and complete in all material
respects as of the date hereof and (ii) no Default or Event of Default has
occurred and is continuing;
(b) The Borrower has the corporate power and authority to execute and
deliver this Amendment and to perform its obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party;
5.
<PAGE>
(c) The certificate of incorporation, bylaws and other organizational
documents of the Borrower delivered to each Bank on the Closing Date are true,
accurate and complete and have not been amended, supplemented or restated and
are and continue to be in full force and effect;
(d) The execution and delivery by the Borrower of this Amendment and
the performance by Borrower of its obligations under the Credit Agreement, as
amended by this Amendment, and each of the other Loan Documents to which it is a
party have been duly authorized by all necessary corporate action on the part of
the Borrower;
(e) The execution and delivery by the Borrower of this Amendment and
the performance by the Borrower of its obligations under the Credit Agreement,
as amended by this Amendment, and each of the other Loan Documents to which it
is a party do not and will not contravene (i) any law or regulation binding on
or affecting the Borrower, (ii) the certificate of incorporation or bylaws of
the Borrower, (iii) any order, judgment or decree of any court or other
governmental or public body or authority, or subdivision thereof, binding on the
Borrower or (iv) any contractual restriction binding on or affecting the
Borrower;
(f) The execution and delivery by the Borrower of this Amendment and
the performance by the Borrower of its obligations under the Credit Agreement,
as amended by this Amendment, and each of the other Loan Documents to which it
is a party do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on the
Borrower, except as already has been obtained or made; and
(g) This Amendment has been duly executed and delivered by the
Borrower and is the binding obligation of the Borrower, enforceable against it
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws of general application and equitable principles relating to or affecting
creditors' rights.
6. REAFFIRMATION. The Borrower hereby reaffirms its obligations under
each Loan Document to which it is a party.
7. AMENDMENT FEE. As consideration for the Banks' agreement to amend the
Credit Agreement as set forth in this Amendment, the Borrower agrees to pay to
the Agent, for the benefit of the Banks according to their Pro Rata Share, an
amendment fee ("AMENDMENT FEE") as set forth in the side letter agreement
described in SECTION 9(c) below. The payment of the Amendment Fee shall be paid
in accordance with the terms of such side letter agreement.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
9. EFFECTIVENESS. Subject to SECTION 7, above, this Amendment shall be
deemed effective upon the satisfaction of all of the following conditions
precedent (PROVIDED that all such conditions must be satisfied prior to 5:00
p.m., San Francisco time, April 15, 1995):
6.
<PAGE>
(a) SEVENTH AMENDMENT. The receipt by the Agent of an originally
executed counterpart (or facsimile thereof with the original to follow by
Federal Express or other overnight courier) of this Amendment, executed by the
Borrower and each Bank; and
(b) CERTIFIED RESOLUTIONS. The Agent shall have received a
certificate of the Secretary or Assistant Secretary of the Borrower and dated
the date hereof certifying (i) the names and signatures of the incumbent
officers of the Borrower authorized to sign the applicable Loan Documents, (ii)
the resolutions of the Borrower's Board of Directors approving and authorizing
the execution, delivery and performance of the Credit Agreement, as amended by
this Amendment, and the side letter agreement described in Subsection (c) below
and (iii) that there have been no changes in the Certificate of Incorporation of
the Borrower or in the Bylaws or similar constituent documents of the Borrower
since the date of certification thereof to the Agent in connection with the
closing of the Credit Agreement.
(c) SIDE LETTER AGREEMENT. The Borrower shall have duly acknowledged
and delivered the side letter agreement of even date herewith from the Agent to
the Borrower relating to the amendment fee and certain other fees.
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
11. RELEASE AND WAIVER.
(a) The Borrower hereby acknowledges and agrees that: (i) it has no
claim or cause of action against any Bank or the Agent or the Managing Agent or
any parent subsidiary or affiliate of any Bank or the Agent or the Managing
Agent, or any of such Bank's, the Agent's or the Managing's Agent's officers,
directors, employees, attorneys or other representatives or agents (all of which
parties other than the Banks, the Agent and the Managing Agent being,
collectively, the "LENDER AGENTS") in connection with the Credit Agreement, the
Revolving Loans thereunder or the transactions contemplated therein; (ii) it
has no offset or defense against any of its respective obligations,
indebtedness or contracts in favor of the Banks, the Agent or the Managing
Agent; and (iii) it recognizes that each of the Banks, the Agent and the
Managing Agent has heretofore properly performed and satisfied in a timely
manner all of its respective obligations to and contracts with the Borrower.
(b) Although each of the Banks, the Agent and the Managing Agent
regards its respective conduct as proper and does not believe the Borrower to
have any claim, cause of action, offset or defense against such Bank, the
Agent or the Managing Agent or any Lender Agent in connection with the Credit
Agreement, the Revolving Loans thereunder or the transactions contemplated
therein, each Bank, the Agent and the Managing Agent wishes and the Borrower
agrees to eliminate any possibility that any past conditions, acts,
omissions, events, circumstances or matters could impair or otherwise affect
any rights, interests, contracts or remedies of the Banks, the Agent or the
Managing Agent. Therefore, the Borrower unconditionally releases and waives
(i) any and all liabilities, indebtedness and obligations, whether known or
unknown, of any kind of any Bank, the Agent or the Managing Agent or of any
of Lender Agents to the Borrower, except the obligations remaining to be
respectively
7.
<PAGE>
performed by the Banks, the Agent or the Managing Agent as expressly stated in
the Credit Agreement, this Amendment and the other Loan Documents; (ii) any
legal, equitable or other obligations or duties, whether known or unknown, of
any Bank, the Agent, the Managing Agent or any Lender Agent to the Borrower (and
any rights of the Borrower against any Bank, the Agent, the Managing Agent or
any Lender Agent) besides those expressly stated in the Credit Agreement, this
Amendment and the other Loan Documents; (iii) any and all claims under any oral
or implied agreement, obligation or understanding with any Bank, the Agent, the
Managing Agent or any Lender Agent, whether known or unknown, which is different
from or in addition to the express terms of the Credit Agreement, this Amendment
or any of the other Loan Documents; and (iv) all other claims, causes of action
or defenses of any kind whatsoever (if any), whether known or unknown, which the
Borrower might otherwise have against any Bank, the Agent, the Managing Agent
and/or any Lender Agent on account of any condition, act, omission, event,
contract, liability, obligation, indebtedness, claim, cause of action, defense,
circumstance or matter of any kind whatsoever which existed, arose or occurred
at any time prior to the execution and delivery of this Amendment or which could
arise concurrently with the effectiveness of this Amendment.
(c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN,
UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS,
LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS AMENDMENT
IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER AGENTS. TO
THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND RELEASES (TO THE
MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE
HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER APPLICABLE
JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF
ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT.
8.
<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
VECTRA NEVADA, INC.
By: /s/ Ray A. Fortney
-----------------------------
Its: PRESIDENT
-----------------------------
BANQUE PARIBAS, as a Bank and as Agent
By: /s/ Robert S. Pinkerton
-----------------------------
Its: VP
-----------------------------
By: /s/ Lee S. Buckner
-----------------------------
Its: GVP
-----------------------------
BANQUE NATIONALE DE PARIS, as a Bank and as
Managing Agent
By: /s/ Richard Cushing
-----------------------------
Its: VP
-----------------------------
By: /s/ E. D.
-----------------------------
Its:
-----------------------------
BANK HAPOALIM, as a Bank
By: /s/ Conrad Wagner
-----------------------------
Its: VP
-----------------------------
By: /s/ Illegible
-----------------------------
Its:
-----------------------------
9.
<PAGE>
VECTRA TECHNOLOGIES
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------------------
DECEMBER 31, JANUARY 1, DECEMBER 31,
1995 1995 1993
---------------------------------------
<S> <C> <C> <C>
PRIMARY
Weighted average shares outstanding 7,840 7,802 5,909
Net effect of dilutive stock
options - based on the treasury
method using average market price -- -- --
-------- ------- -----
TOTAL 7,840 7,802 5,909
Net loss $(12,213) $(5,325) $(546)
-------- ------- -----
-------- ------- -----
Net loss per share $ (1.56) $ (.68) $(.09)
-------- ------- -----
-------- ------- -----
</TABLE>
57
<PAGE>
VECTRA TECHNOLOGIES, INC.
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
VECTRA Government Services Inc., a Delaware corporation
VECTRA Technologies Ltd. A United Kingdom corporation
VECTRA Nevada, Inc., a Nevada corporation
VECTRA Services, Inc., a Washington corporation
VECTRA Waste Services, LLC, a Washington corporation
VECTRA Fuel Services, LLC, a Delaware corporation
Provident Union Insurance Company Limited, a Bermuda corporation
Nuclear Packaging, Inc., a Washington corporation
Pacific Nuclear Storage Systems, Inc., a Washington corporation
CTL International, Inc., a Washington corporation
58
<PAGE>
VECTRA TECHNOLOGIES, INC.
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-4208, No. 33-15204, No. 33-21655, No. 33-28842, and
No. 33-58194) pertaining to the VECTRA Technologies, Inc. 1988 Stock Option
Plan and the VECTRA Technologies, Inc. Stock Option Plan of our report dated
April 5, 1996, except for Note 3 as to which the date is April 15, 1996, with
respect to the consolidated financial statements and schedule of VECTRA
Technologies, Inc. included in the Annual Report (Form 10-K) for the year
ended December 31, 1995.
ERNST & YOUNG LLP
Walnut Creek, California
April 15, 1996
59
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-K WHICH PRECEDES THIS EXHIBIT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-02-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,834
<SECURITIES> 1,274
<RECEIVABLES> 23,330
<ALLOWANCES> 785
<INVENTORY> 1,176
<CURRENT-ASSETS> 29,334
<PP&E> 20,758
<DEPRECIATION> 8,614
<TOTAL-ASSETS> 60,829
<CURRENT-LIABILITIES> 25,803
<BONDS> 17,640
0
0
<COMMON> 44,960
<OTHER-SE> (27,574)
<TOTAL-LIABILITY-AND-EQUITY> 60,829
<SALES> 123,501
<TOTAL-REVENUES> 123,501
<CGS> 0
<TOTAL-COSTS> 89,444
<OTHER-EXPENSES> 55,786
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,105
<INCOME-PRETAX> (12,103)
<INCOME-TAX> 110
<INCOME-CONTINUING> (12,213)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,213)
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 0
</TABLE>
