<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 18, 1997
GTS DURATEK, INC.
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 0-14292 22-2476180
(State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)
</TABLE>
10100 Old Columbia Road, Columbia, Maryland 21046
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code (410) 312-5100
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 18, 1997, GTS Duratek, Inc. (the "Company") acquired 100% of
the outstanding capital stock of The Scientific Ecology Group, Inc. ("SEG") from
Westinghouse Electric Corporation ("Westinghouse") for $28.0 million in cash and
156,986 shares of the Company's Common Stock. SEG, which was a wholly-owned
subsidiary of Westinghouse, is based in Oak Ridge, Tennessee and is the largest
commercial radioactive waste processing company in the United States, offering
an extensive range of waste processing services and technologies. SEG completed
the sale to a third party of its interest in a joint venture for the processing
of commercial radioactive ion exchange resins and certain assets related to that
business in December 1996. SEG's revenues for the year ended December 31, 1996
were approximately $105 million, excluding those revenues associated with the
assets previously sold.
SEG operates fixed-base processing facilities in Oak Ridge, Tennessee,
comprising over 142,000 square feet of facilities. At that site, SEG operates
three major commercial radioactive waste processing facilities: the Compaction
Facility, the Metal Processing Facility and the Incineration Facility. SEG,
through a wholly-owned subsidiary, also provides transportation services for
radioactive wastes, and maintains a fleet of tractors, trailers and shipping
containers for transporting the wastes. In addition, SEG provides radiological
decommissioning and field waste processing services to nuclear clients,
including government facilities, commercial facilities and
university/research/test facilities. The Company generally intends to continue
the businesses of SEG and to use its assets and facilities for the same purposes
as they were used prior to the acquisition.
The Company paid the cash portion of the purchase price out of
available cash, principally from the proceeds of its public offering in April
1996. However, in connection with the acquisition of SEG, the Company entered
into a new credit facility with its bank. Under this new facility, the Company
has a revolving line of credit providing for borrowings up to $8.8 million based
upon eligible amounts of accounts receivable, as defined in the credit
agreement. Borrowings under the revolving line of credit bear interest at the
LIBOR rate plus 2%. Under this credit facility, the Company's bank has also
issued letters of credit in the aggregate amount of $15.3 million to the State
of Tennessee to provide security for SEG's obligation to clean and remediate
SEG's facility upon its closure.
ITEM 5. OTHER EVENTS.
On March 31, 1997, the Company announced that its management had made
the decision to suspend temporarily the processing of radioactive waste and
initiate an unscheduled controlled cool down of its glass melter at its M-Area
processing plant located on the United States Department of Energy's ("DOE")
Savannah River site. This decision by the Company's management was the result of
the Company's operators observing over the previous few days increasing warning
signs that accelerated wear on certain melter box internal components could be
occurring. Based on these findings, the Company's management determined that it
was prudent to cool down the melter and conduct a detailed inspection and
assessment of any repairs
-1-
<PAGE>
or necessary refurbishment required to return to safe, full capacity operations.
The Company also indicated that if corrective action resulted in a delay in
completing the processing of radioactive wastes, the Company could incur
contract losses on its waste processing contract for the Savannah River site.
Under this contract, all radioactive waste processing is required to be
completed by October 1997.
On April 16, 1997, the Company publicly announced that its management
had reached a decision on the actions to be taken to resume radioactive waste
processing at its facility at the DOE's Savannah River site. Although
inspections confirmed that the melter could be restarted after only minimal
repair, the Company's management concluded that such action would result in
considerable risk that the melter might be unable to complete the $14 million
fixed price contract for processing the radioactive waste without additional
unscheduled shutdowns and repairs. Accordingly, the Company's management made
the decision to undertake more extensive repairs and modification of the
facility, including melter box replacement, before resumption of radioactive
waste processing. The Company's management estimated that the M-Area facility
will resume radioactive waste processing operations by the end of the fourth
quarter of 1997. The schedule is impacted by the time required to order
specialized refractory bricks for the melter and to complete assembly of the
melter and because of the complexities of working in a regulated environment. As
a result of the necessary repairs and the delay in completing the waste
processing required by the contract, the Company announced that it will take a
reserve of $5.9 million in the first quarter of 1997 to cover the estimated
costs of the repair and for estimated losses on the fixed price contract
resulting from the delay. The Company is seeking to extend the date by which it
was required to complete the waste processing under the contract.
The Company also announced on April 16, 1997 that the Company's senior
management had established the priorities for the remainder of 1997 to be: (i)
restarting the M-Area melter; (ii) successfully and rapidly incorporating SEG's
business following the acquisition and (iii) meeting commitments to the DOE
privatization cleanups in Hanford, Washington and Idaho. Consequently, the
Company announced that its capital commitments will be directed to those
priorities and that the Company's management will reduce the priority of, and
capital commitments to, other projects which have higher levels of marketplace
uncertainty or have longer-term financial prospects. As a result, the Company
announced that the DuraChem facility, for processing commercial radioactive ion
exchange resin in the United States, located in Barnwell, South Carolina, will
not commence commercial operations in 1997 as previously reported.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) and (b) Financial Statements and Pro Forma Information. It is
----------------------------------------------
impracticable to provide the required financial statements of SEG and the pro
forma financial information required by this Item 7 of Form 8-K at this time.
The required financial statements and pro forma financial information will be
filed as soon as practicable, but no later than July 2, 1997.
-2-
<PAGE>
(c) Exhibits. The following exhibits are filed with this report, and the
--------
foregoing description is modified by reference to such exhibits:
(1) GTS Duratek, Inc. Press Release dated April 21, 1997.
(2) Stock Purchase Agreement by and between Westinghouse Electric
Corporation and GTS Duratek, Inc. dated as of April 8, 1997.
(3) Credit Agreement as of April 18, 1997 between GTS Duratek, Inc., The
Scientific Ecology Group, Inc., SEG Colorado, Inc., Hittman Transport
Services, Inc., GTS Instrument Services, Incorporated, General
Technical Services, Inc., Analytical Resources, Inc. and First Union
National Bank of Maryland and First Union National Bank of North
Carolina.
(4) Security Agreement dated as of April 18, 1997 between GTS Duratek,
Inc., General Technical Services, Inc., GTS Instrument Services,
Incorporated, Analytical Resources, Inc. and First Union National Bank
of Maryland.
(5) Security Agreement dated as of April 18, 1997 between The Scientific
Ecology Group, Inc., SEG Colorado, Inc., Hittman Transport Services,
Inc. and First Union National Bank of Maryland.
(6) GTS Duratek, Inc. Press Release dated March 31, 1997.
(7) GTS Duratek, Inc. Press Release dated April 16, 1997.
-3-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GTS Duratek, Inc.
By: /s/ Robert F. Shawver
--------------------------------------
Robert F. Shawver
Executive Vice President
and Chief Financial Officer
Date: April 25, 1997
-4-
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
- ------- ----------- --------
(c)(1) GTS Duratek, Inc. Press Release dated April 21, 1997.
(c)(2) Stock Purchase Agreement by and between Westinghouse
Electric Corporation and GTS Duratek, Inc. dated as of April
8, 1997.
(c)(3) Credit Agreement as of April 18, 1997 between GTS Duratek,
Inc., The Scientific Ecology Group, Inc., SEG Colorado,
Inc., Hittman Transport Services, Inc., GTS Instrument
Services, Incorporated, General Technical Services, Inc.,
Analytical Resources, Inc. and First Union National Bank of
Maryland and First Union National Bank of North Carolina.
(c)(4) Security Agreement dated as of April 18, 1997 between GTS
Duratek, Inc., General Technical Services, Inc., GTS
Instrument Services, Incorporated, Analytical Resources,
Inc. and First Union National Bank of Maryland.
(c)(5) Security Agreement dated as of April 18, 1997 between The
Scientific Ecology Group, Inc., SEG Colorado, Inc., Hittman
Transport Services, Inc. and First Union National Bank of
Maryland.
(c)(6) GTS Duratek, Inc. Press Release dated March 31, 1997.
(c)(7) GTS Duratek, Inc. Press Release dated April 16, 1997.
-5-
<PAGE>
Exhibit (c)(1)
<PAGE>
****FOR IMMEDIATE RELEASE****
DATE: April 21, 1997 CONTACT: Diane R. Brown, Investor Relations
410-312-5100/www.gtsduratek.com
Mimi Limbach - Westinghouse
412-642-3341
GTS DURATEK CLOSES ACQUISITION
OF THE SCIENTIFIC ECOLOGY GROUP
COLUMBIA, Md., -- GTS Duratek, Inc. (Nasdaq: DRTK) today announced that it has
closed the acquisition of The Scientific Ecology Group, Inc., (SEG) from
Westinghouse Electric Corporation (NYSE: WX) for $28.0 million in cash and
156,986 shares of GTS Duratek's Common Stock.
Robert E. Prince, President and CEO, said, "We started out in 1991 as a small
environmental technology and services company and upon closing this transaction,
we are the largest processor of low-level radioactive and mixed waste in the
U.S. I believe that GTS Duratek and SEG's field services, when combined, will
have more experience in radiological protection and nuclear facility
decommissioning than any other company in the U.S. It is a great capability
focused on a very important world-wide market."
SEG, based in Oak Ridge, Tennessee, is the largest commercial radioactive waste
processing company in the United States, offering an extensive range of waste
processing services and technologies. SEG's revenues for the year ended December
31, 1996 were approximately $105 million. GTS Duratek's revenues for the year
ended December 31, 1996 were approximately $45 million.
GTS Duratek is an environmental technology and services firm that uses its
proprietary processes to convert radioactive and hazardous waste into
environmentally safe forms.
###
<PAGE>
Exhibit (c)(2)
<PAGE>
================================================================================
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
WESTINGHOUSE ELECTRIC CORPORATION
AND
GTS DURATEK, INC.
REGARDING
THE SALE OF THE SHARES OF
THE SCIENTIFIC ECOLOGY GROUP, INC.
DATED AS OF APRIL 8, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. TERMS OF THE TRANSACTION............................................................... 1
1.1. Sale of the Shares.................................................................. 1
------------------
1.2. Purchase Price...................................................................... 1
--------------
1.3. Payment of Purchase Price........................................................... 1
-------------------------
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER............................................... 1
2.1. Organization; Power and Authority................................................... 2
---------------------------------
2.2. Authorization, Execution and Validity............................................... 2
-------------------------------------
2.3. Capitalization...................................................................... 2
--------------
2.3.1 The Company.................................................................... 2
-----------
2.3.2 Company Subsidiaries........................................................... 3
--------------------
2.4. Officers and Directors.............................................................. 3
----------------------
2.5. Financial Information............................................................... 3
---------------------
2.5.1 Balance Sheet.................................................................. 3
-------------
2.5.2 No Undisclosed Liabilities..................................................... 3
--------------------------
2.6. Absence of Certain Changes.......................................................... 4
--------------------------
2.7. No Conflict; Seller Consents........................................................ 4
----------------------------
2.8. Real Property....................................................................... 4
-------------
2.9. Condition of Assets................................................................. 4
-------------------
2.10. Insurance.......................................................................... 5
---------
2.11. Contracts.......................................................................... 5
---------
2.12. Litigation......................................................................... 7
----------
2.13. Environmental Laws................................................................. 7
------------------
2.13.1. Compliance..................................................................... 7
----------
2.13.2. Conditions..................................................................... 8
----------
2.13.3. Exclusivity.................................................................... 9
-----------
2.14. Other Laws.......................................................................... 9
----------
2.15. Patents, Trademarks and Similar Rights.............................................. 9
--------------------------------------
2.15.1. Intellectual Property.......................................................... 9
---------------------
2.15.2. Licenses; Infringement......................................................... 11
----------------------
2.15.3. Company Entity Commercial Activities........................................... 12
------------------------------------
2.16. Employees........................................................................... 12
---------
2.16.1. Employees...................................................................... 12
---------
2.16.2. Unions......................................................................... 12
------
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
2.16.3. NLRB........................................................................... 12
----
2.17. Employee Benefits................................................................... 12
-----------------
2.17.1. Company Benefit Plans.......................................................... 12
---------------------
2.17.2. Records........................................................................ 14
-------
2.17.3. Actions........................................................................ 14
-------
2.17.4. Funding........................................................................ 14
-------
2.17.5. Acceleration of Benefits....................................................... 14
------------------------
2.17.6. Benefit Plans Maintained By Seller............................................. 14
----------------------------------
2.18. Taxes............................................................................... 14
-----
2.18.1. Returns........................................................................ 14
-------
2.18.2. Tax Audits..................................................................... 15
----------
2.18.3. Section 338(h)(10) Election.................................................... 15
---------------------------
2.19. Brokers............................................................................. 15
-------
2.20. Approvals........................................................................... 15
---------
2.21. No Other Pending Transactions....................................................... 15
-----------------------------
2.22. Corporate Books and Records......................................................... 15
---------------------------
2.23. Business Practices.................................................................. 16
------------------
2.24. Purchase for Investment; Restricted Securities...................................... 16
----------------------------------------------
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER................................................ 17
3.1. Organization; Power and Authority................................................... 17
---------------------------------
3.2. Authorization, Execution and Validity............................................... 17
-------------------------------------
3.3. No Conflict; Buyer Consents......................................................... 17
---------------------------
3.4. Litigation.......................................................................... 17
----------
3.5. Purchase for Investment; Restricted Securities; Due Diligence....................... 18
-------------------------------------------------------------
3.6. Available Funds..................................................................... 18
---------------
3.7. Brokers............................................................................. 18
-------
3.8. GTS Shares.......................................................................... 18
----------
ARTICLE 4. COVENANTS OF SELLER.................................................................... 19
4.1 Cooperation by Seller........................................................................ 19
---------------------
4.2. Pre-Closing Access to Information................................................... 19
---------------------------------
4.3. Conduct of Business................................................................. 19
-------------------
4.3.1. Conduct of Business in Ordinary Course......................................... 19
--------------------------------------
4.3.2. Buyer's Consent................................................................ 21
---------------
4.3.3. Advanced Systems Division Assets and Liabilities............................... 21
------------------------------------------------
4.4. Further Assurances.................................................................. 21
------------------
4.5. HSR Act Compliance.................................................................. 22
------------------
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
4.6. Supplements to Schedules............................................................ 22
------------------------
4.7. Intercompany Accounts............................................................... 22
---------------------
4.8. Transfer of GTS Shares.............................................................. 22
----------------------
4.9. Ventilation System for the SEG(R) Metal Melt Facility; Stormwater
-----------------------------------------------------------------
Separation Project; Trojan Contract................................................. 22
-----------------------------------
4.10. Non-Competition.................................................................... 23
---------------
4.10.1. Seller's Covenant.............................................................. 23
-----------------
4.10.2. Definitions.................................................................... 23
-----------
4.10.3. Services for Governmental Authorities.......................................... 24
-------------------------------------
4.10.4. Injunctive Relief.............................................................. 24
-----------------
4.10.5. Severability................................................................... 25
------------
4.11. Non-Interference Agreement......................................................... 25
--------------------------
4.12. Confidentiality.................................................................... 25
---------------
4.13. Environmental Matters Covenant..................................................... 25
------------------------------
4.14. Release for MMT Matters............................................................ 26
-----------------------
ARTICLE 5. COVENANTS OF BUYER..................................................................... 26
5.1. Cooperation by Buyer................................................................ 26
--------------------
5.2. Due Diligence Activities............................................................ 26
------------------------
5.3. Further Assurances.................................................................. 26
------------------
5.4. HSR Act Compliance.................................................................. 27
------------------
5.5. Trademarks, Etc. ................................................................... 27
----------------
5.6. Certain Contracts................................................................... 27
-----------------
5.7. Insurance Matters................................................................... 27
-----------------
5.8. Registration of GTS Shares.......................................................... 28
--------------------------
ARTICLE 6 MUTUAL COVENANTS........................................................................ 29
6.1. Taxes............................................................................... 29
-----
6.1.1. Apportionment of Income Taxes Between Pre-Closing and
-----------------------------------------------------
Post-Closing Tax Periods....................................................... 29
------------------------
6.1.2. Payment of Income Taxes........................................................ 29
-----------------------
6.1.3. Preparation and Filing of Income Tax Returns................................... 30
--------------------------------------------
6.1.4. Cooperation.................................................................... 30
-----------
6.1.5. Refund Claims.................................................................. 30
-------------
6.1.6. Tax Sharing Agreements......................................................... 31
----------------------
6.1.7. Notice of Audit................................................................ 31
---------------
6.1.8. Audits Controlled by Seller.................................................... 31
---------------------------
6.1.9. Audits Controlled by Buyer..................................................... 31
--------------------------
6.1.10. Section 338 Elections.......................................................... 32
---------------------
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
6.1.11. Tax Indemnification............................................................ 32
-------------------
6.2. Books and Records................................................................... 33
-----------------
6.2.1. Access......................................................................... 33
------
6.2.2. Destruction.................................................................... 33
-----------
6.2.3. Confidentiality................................................................ 33
---------------
6.2.4. Assistance..................................................................... 33
----------
6.3. Notice of Certain Events............................................................ 33
------------------------
6.4. IP Matters.......................................................................... 34
----------
6.5. Certain Consents.................................................................... 34
----------------
6.6. Guarantees.......................................................................... 35
----------
6.7. Legacy Waste and Equipment.......................................................... 35
--------------------------
6.8. Working Capital..................................................................... 36
---------------
6.9. Seller Commitment to Services....................................................... 37
-----------------------------
6.9.1. Existing Contracts............................................................. 37
------------------
6.9.2. Additional Commitment.......................................................... 37
---------------------
6.10. Maxey Flats......................................................................... 38
-----------
ARTICLE 7. CONDITIONS PRECEDENT TO CLOSING........................................................ 38
7.1. Conditions Precedent to Buyer's Obligation.......................................... 38
------------------------------------------
7.1.1. Accuracy of Representations and Warranties..................................... 38
------------------------------------------
7.1.2. HSR Act........................................................................ 38
-------
7.1.3. Litigation..................................................................... 38
----------
7.1.4. Covenants...................................................................... 38
---------
7.1.5. Deliveries..................................................................... 38
----------
7.1.6. Required Consents and Approvals................................................ 39
-------------------------------
7.1.7. Material Adverse Change........................................................ 39
-----------------------
7.1.8. Resignation of Directors....................................................... 39
------------------------
7.2. Conditions Precedent to Seller's Obligations........................................ 39
--------------------------------------------
7.2.1. Truth of Representations and Warranties........................................ 39
---------------------------------------
7.2.2. HSR Act........................................................................ 39
-------
7.2.3. Litigation..................................................................... 39
----------
7.2.4. Covenants...................................................................... 39
---------
7.2.5. Deliveries..................................................................... 39
----------
ARTICLE 8. CLOSING................................................................................ 39
8.1. Time and Place...................................................................... 39
--------------
8.2. Deliveries by Seller................................................................ 40
--------------------
8.3. Deliveries by Buyer................................................................. 41
-------------------
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
ARTICLE 9. TERMINATION PRIOR TO CLOSING DATE...................................................... 42
9.1. Termination......................................................................... 42
-----------
9.2. Effect of Termination............................................................... 42
---------------------
9.3. Break-Up Fee........................................................................ 42
------------
ARTICLE 10. INDEMNIFICATION AND PROCEDURES........................................................ 43
10.1. Indemnification by Seller........................................................... 43
-------------------------
10.2. Indemnification by Buyer............................................................ 45
------------------------
10.3. Notice and Resolution of Claims..................................................... 45
-------------------------------
10.3.1. Notice......................................................................... 45
------
10.3.2. Right to Assume Defense........................................................ 45
-----------------------
10.3.3. Failure to Assume Defense...................................................... 46
-------------------------
10.3.4. Right to Control Cleanup and Access............................................ 46
-----------------------------------
10.4. Limits on Indemnification........................................................... 47
-------------------------
10.4.1. Indemnification Threshold...................................................... 47
-------------------------
10.4.2. Deductible..................................................................... 47
----------
10.4.3. Limit of Liability............................................................. 47
------------------
10.4.4. Survival....................................................................... 48
--------
10.4.5. Actual Knowledge............................................................... 48
----------------
10.4.6. Damages; Mitigation............................................................ 48
-------------------
10.4.7. Exclusive Remedy............................................................... 48
----------------
10.5. Indemnity Payments.................................................................. 49
------------------
10.6. Payment and Assignment of Claims.................................................... 49
--------------------------------
10.6.1. Payment........................................................................ 49
-------
10.6.2. Assignment..................................................................... 49
----------
10.7. Other Indemnitees................................................................... 49
-----------------
10.8. Customer Discounts.................................................................. 49
------------------
10.9. Waiver of Contribution.............................................................. 49
----------------------
10.10. Successor Indemnification Obligation................................................ 49
------------------------------------
ARTICLE 11. EMPLOYEE MATTERS...................................................................... 50
11.1. Continuing Benefits and Benefit Plans............................................... 50
-------------------------------------
11.2. Rights of Employees................................................................. 50
-------------------
ARTICLE 12. MISCELLANEOUS......................................................................... 50
12.1. Severability........................................................................ 50
------------
12.2. Successors and Assigns.............................................................. 50
----------------------
12.3. Counterparts........................................................................ 50
------------
12.4. Headings............................................................................ 50
--------
</TABLE>
-v-
<PAGE>
<TABLE>
<S> <C> <C>
12.5. Waiver.............................................................................. 50
------
12.6. No Third-Party Beneficiaries........................................................ 51
----------------------------
12.7. Sales and Transfer Taxes............................................................ 51
------------------------
12.8. Other Expenses...................................................................... 51
--------------
12.9. Notices............................................................................. 51
-------
12.10. Governing Law; Interpretation....................................................... 52
-----------------------------
12.11. Public Announcements................................................................ 52
12.12. Exclusive Jurisdiction and Consent to Service of Process; Jury Waiver............... 52
12.13. Entire Agreement; Amendment......................................................... 53
12.14. Specific Performance................................................................ 53
ARTICLE 13. DEFINITIONS; INTERPRETATION............................................................... 53
13.1. Definitions......................................................................... 53
-----------
13.2. Certain Interpretive Matters and Limitations........................................ 62
--------------------------------------------
</TABLE>
-vi-
<PAGE>
EXHIBITS
Exhibit A Form of Transition Services Agreement
Exhibit B Form of IP Assignment
Exhibit C Form of IP License Agreement
Exhibit D Form of Opinion of Seller's Counsel
Exhibit E Form of Opinion of Buyer's Counsel
SCHEDULES
Schedule 2.1 Jurisdictions
Schedule 2.3.2 Company Subsidiaries
Schedule 2.4 Officers and Directors
Schedule 2.5.1(a) Balance Sheet
Schedule 2.5.1(b) Description of Matters Reflected in Seller Financial
Statements
Schedule 2.5.2 Certain Liabilities
Schedule 2.6 Certain Changes
Schedule 2.7 Certain Conflicts and Consents of Seller
Schedule 2.8 Owned Real Property
Schedule 2.9(a) Owned Personal Property
Schedule 2.9(b) Certain Assets
Schedule 2.9(c) Seller Provided Services
Schedule 2.10 Insurance Policies
Schedule 2.11(a) Material Contracts
Schedule 2.11(b) Purchase Orders
Schedule 2.11(c) Teaming and Confidentiality Agreements
Schedule 2.11(d) Proposals
Schedule 2.12 Actions and Orders
Schedule 2.13.1(a) Compliance with Environmental Laws
Schedule 2.13.1(b) Environmental Actions
Schedule 2.13.1(c) Environmental Permits
Schedule 2.13.1(d) Environmental Consent Orders or Agreements
Schedule 2.13.2(a) Environmental Documents
Schedule 2.13.2(b) Underground Storage Tanks
Schedule 2.13.2(c) Information Requests
Schedule 2.13.2(d) Recorded Liens
Schedule 2.13.2(f) Transportation of Regulated Substances
Schedule 2.13.2(g) Releases
Schedule 2.14 Compliance with Other Laws; Material Permits
Schedule 2.15.1(a)(i) SEG Intellectual Property
Schedule 2.15.1(a)(ii) Assigned Intellectual Property
Schedule 2.15.1(a)(iii) Retained Intellectual Property
Schedule 2.15.1(b)(i) Exceptions to Intellectual Property
Schedule 2.15.1(b)(ii) Ownership of Assigned IP
Schedule 2.15.1(c) Intellectual Property Claims
-vii-
<PAGE>
Schedule 2.15.2(a)(i) Intellectual Property Licenses
Schedule 2.15.2(a)(ii) Assigned IP Licenses
Schedule 2.15.2(a)(iii) Intellectual Property Licenses from Third Parties to
any Company Entity
Schedule 2.15.3 Third-Party IP Claims
Schedule 2.16.1 Certain Employees
Schedule 2.16.2 Collective Bargaining Agreements; Labor Disputes
Schedule 2.17.1 Employee Benefit Plans
Schedule 2.17.5 Acceleration of Benefits
Schedule 2.17.6 Benefit Plans Maintained by Seller
Schedule 2.18.1 Tax Returns
Schedule 2.18.2 Tax Audits
Schedule 2.20 Approvals
Schedule 3.3 Certain Conflicts and Consents of Buyer
Schedule 4.3.1 Conduct of Business
Schedule 5.6 Certain Contracts
Schedule 6.6 Certain Guarantees
Schedule 6.7(a) Legacy Waste and Equipment
Schedule 6.7(b) Rates for Legacy Waste Processing
Schedule 7.1.6 Closing Consents
Schedule 10.8 Customer Discounts
Schedule 13.1 Seller's Knowledge
-viii-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of April 8, 1997, by and between
WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation ("Seller"), and
GTS DURATEK, INC., a Delaware corporation ("Buyer").
R E C I T A L S:
A. Seller owns 1,000,000 shares of Common Stock, par value $0.01 per
share (the "Shares"), of The Scientific Ecology Group, Inc., a Tennessee
corporation ("SEG" or the "Company"), which constitutes all of the outstanding
capital stock of the Company.
B. Seller desires to sell, and Buyer desires to purchase, the Shares,
on the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, Buyer and Seller, intending to be legally bound, hereby
agree as follows:
ARTICLE 1. TERMS OF THE TRANSACTION
1.1. Sale of the Shares. On the terms and subject to the conditions of
------------------
this Agreement, at the Closing (as hereinafter defined), Seller shall sell,
assign and transfer to Buyer, and Buyer shall purchase and acquire, all of the
Shares. At the Closing, Seller shall deliver to Buyer stock certificates, with
duly completed stock powers attached, representing the Shares, free and clear of
all Liens (as hereinafter defined).
1.2. Purchase Price. The total consideration for the Shares (the
--------------
"Purchase Price") purchased by Buyer shall be the sum of the following: (a)
Twenty-Eight Million Dollars and no/100 ($28,000,000) ("Cash Payment"), subject
to adjustment pursuant to Section 6.8, and (b) One Hundred Fifty-Six Thousand
Nine Hundred Eight-Six (156,986) shares of Common Stock, par value $0.01, of
Buyer ("GTS Shares"), which shares will be subject to the rights to registration
with the Commission and to listing for trading on the Nasdaq Stock Market after
the Closing (as hereinafter defined) as set forth in Section 5.8 hereof.
1.3. Payment of Purchase Price. At the Closing against delivery of the
-------------------------
Shares, duly endorsed for transfer with duly completed stock powers attached,
Buyer shall pay, by wire transfer of immediately available funds to bank
accounts designated by Seller, an amount equal to the Cash Payment and Buyer
shall deliver to Seller stock certificates representing the GTS Shares.
<PAGE>
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller makes the representations and warranties to Buyer set forth in this
Article 2 which, unless expressly made as of a specified date prior to the date
of this Agreement, shall be made as of the date hereof. For purposes of the
representations and warranties in Sections 2.5.2, 2.6, 2.8, 2.9, 2.10, 2.11,
2.15 and 2.16, the term "Company" shall mean SEG, excluding the assets and
liabilities of its Advanced Systems Division located in Carlsbad, New Mexico and
any contracts assigned, partially assigned or subcontracted pursuant to the MMT
Agreement.
2.1. Organization; Power and Authority. Each of the Company Entities (as
---------------------------------
hereinafter defined) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of incorporation designated
therefor on Schedule 2.1. Each of the Company Entities is duly qualified as a
------------
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required by Law (as hereinafter
defined), whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect (as hereinafter
defined). Each of the Company Entities has all corporate power and authority
needed to own or lease its assets and to carry on its business as it is now
being conducted. True, complete and correct copies of the Charter Documents (as
hereinafter defined) of each of the Company Entities have been delivered or made
available to Buyer and the Charter Documents are in full force and effect. None
of the Company Entities is in violation, breach or default of any of the
provisions of its Charter Documents. Seller is a corporation duly organized,
validly existing and subsisting under the laws of the Commonwealth of
Pennsylvania. Seller has all corporate power and authority needed to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby to be consummated by it, including each
instrument, document and agreement contemplated herein to be executed and
delivered by it pursuant to this Agreement.
2.2. Authorization, Execution and Validity. The execution, delivery and
-------------------------------------
performance by Seller of this Agreement and the consummation by Seller of the
transactions contemplated hereby to be consummated by it have been duly
authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by Seller, constitutes its valid and binding obligation
and is enforceable against Seller in accordance with its terms, except to the
extent that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization and similar laws of general application relating to
or affecting creditors' rights generally and general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
2.3. Capitalization.
--------------
2.3.1. The Company. The authorized capital stock of the Company
-----------
consists of 1,000,000 shares of Common Stock, par value $0.01 per share, all of
which are issued and outstanding and owned directly by Seller. All of the
Shares have been duly authorized and
-2-
<PAGE>
validly issued and are fully paid and non-assessable. The Shares are not subject
to any Liens, rights of first refusal or restrictions on transfer of any kind,
other than restrictions imposed by applicable securities Laws. As of the date
hereof, Seller is not a party to or bound by any options, calls, contracts or
commitments of any character relating to any of the Shares or any of the capital
stock or debt securities of the Company, including any agreement, instrument or
understanding, order or decree that would restrict the transfer by Seller of the
Shares pursuant to this Agreement. There is no authorized or outstanding option,
subscription, warrant, call, right, commitment or other agreement ("Subscription
Right") obligating the Company to issue or transfer any shares of its capital
stock or any securities convertible into or exercisable for any shares of its
capital stock. The designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class and series of authorized
capital stock of the Company are as set forth in the Charter Documents of the
Company. There are no outstanding contractual obligations (contingent or
otherwise) of the Company that would prohibit or restrict the Company's ability
to declare or pay dividends or to repurchase or redeem the Company's capital
stock.
2.3.2. Company Subsidiaries. The Company owns directly all of the
--------------------
outstanding shares of capital stock of each of the Company Subsidiaries (as
hereinafter defined) free and clear of any and all Liens. Schedule 2.3.2
--------------
identifies each Company Subsidiary and, with respect thereto, sets forth (a) the
authorized capital stock, (b) the number of issued and outstanding shares of
capital stock, and (c) the record ownership on the date of this Agreement of the
capital stock. All of the outstanding shares of capital stock of each Company
Subsidiary have been duly authorized and validly issued, are fully paid and non-
assessable, and are not subject to any Liens or any restrictions on transfer of
any kind, other than restrictions imposed by applicable securities Laws. There
is no authorized or outstanding Subscription Right obligating any Company Entity
to sell or transfer any of the capital stock of any Company Subsidiary or any
securities convertible into or exercisable for any shares of capital stock.
2.4. Officers and Directors. Schedule 2.4 sets forth a list, as of the
---------------------- ------------
date hereof, of all corporate officers and directors of the Company Entities.
2.5. Financial Information.
---------------------
2.5.1. Balance Sheet. Attached hereto as Schedule 2.5.1(a) is the
------------- -----------------
consolidated audited balance sheet of the Company as of December 31, 1996 (the
"Balance Sheet"), which is accurate in all material respects as of the date
thereof and was prepared in accordance with GAAP (as hereinafter defined)
consistently applied, except for those items which consistent with past practice
have been recorded by or reflected in the financial statements of Seller on
behalf of the Company Entities and are generally described on Schedule 2.5.1(b).
-----------------
2.5.2. No Undisclosed Liabilities. Except as disclosed on Schedule
-------------------------- --------
2.5.2, no Company Entity has any liabilities or obligations, whether accrued,
- -----
contingent, absolute, determined, determinable or otherwise of any nature
whatsoever, except (a) liabilities which are
-3-
<PAGE>
reflected or reserved against on the Balance Sheet or which are not required to
be reflected or reserved against on the Balance Sheet in accordance with GAAP,
(b) those liabilities which consistent with past practice have been recorded by
or reflected in the financial statements of Seller on behalf of the Company
Entities, and (c) current liabilities incurred in the ordinary course of
business consistent with past practice since December 31, 1996.
2.6. Absence of Certain Changes. Except as disclosed on Schedule 2.6 or
-------------------------- ------------
on the Balance Sheet, except for the processing and disposal of Legacy Waste and
Equipment (as hereinafter defined), and except for modification of the
ventilation system for the SEG(R) Metal Melt facility, since December 31, 1996,
(i) there has been no action, event or occurrence that, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect or
(ii) no Company Entity has incurred any material liability or obligation,
indirect, direct or contingent, not in the ordinary course of business nor
entered into any material transaction or agreement not in the ordinary course of
business.
2.7. No Conflict; Seller Consents. Except as set forth in Schedule 2.7
---------------------------- ------------
or as would not have, individually or in the aggregate, a Material Adverse
Effect or a material adverse effect on the ability of Seller to consummate the
transactions contemplated by this Agreement, the execution, delivery and
performance by Seller of this Agreement and the consummation of the transactions
contemplated hereby by Seller, will not (a) violate or be in conflict with any
Law, (b) violate or be in conflict with any Charter Document of Seller or of any
Company Entity, (c) require any Consent (as hereinafter defined) from any
Governmental Authority (as hereinafter defined) or any third party, except (i)
to comply with the HSR Act (as hereinafter defined) and (ii) for actions
required to be taken by Buyer or any of its Affiliates (as hereinafter defined),
(d) constitute a default under, or result in a breach of, any Material Contract
(as hereinafter defined), material License (as hereinafter defined), material
Permit (as hereinafter defined) or Order (as hereinafter defined) of any Company
Entity, give rise to any right of termination, cancellation or acceleration
thereof or result in any material adverse change to the terms thereof, or (e)
result in the creation of any Lien (other than Permitted Liens (as hereinafter
defined)) on any assets of any Company Entity or in the acceleration of any
indebtedness or other obligation of any Company Entity.
2.8. Real Property. Schedule 2.8 lists all of the real properties owned
------------- ------------
by the Company Entities (collectively, the "Owned Real Property"). Except (a) as
set forth on Schedule 2.8 and (b) for Permitted Liens, the Company Entity
------------
identified on Schedule 2.8 opposite each such Owned Real Property has insurable
------------
title to the Owned Real Property identified on Schedule 2.8, free and clear of
------------
all Liens, and good and marketable title to the Owned Real Property located at
1234 Columbia Drive, Richland, Washington identified on Schedule 2.8. The Liens
------------
listed on Schedule 2.8 and the Permitted Liens that exist on the Owned Real
------------
Property do not in any material way adversely affect the use of the Owned Real
Property by the Company Entities as being used as of the date hereof.
-4-
<PAGE>
2.9. Condition of Assets. (a) Except (i) as set forth on Schedule
------------------- --------
2.9(a) and (ii) for Permitted Liens, a Company Entity has good and marketable
- ------
title to all personal property reflected on the Balance Sheet and all personal
property acquired by the Company Entities since the date thereof, other than
property that has been disposed of in the ordinary course of business or in the
processing and disposal of Legacy Waste and Equipment (as hereinafter defined).
(b) Except as set forth on Schedule 2.9(b), the personal
---------------
property owned or leased by the Company Entities and the improvements and
structures located on the Owned Real Property and the fixtures and appurtenances
thereto have been reasonably maintained in the ordinary course of business, are
in good working order and repair, reasonable wear and tear excepted and are
sufficient for the operations of the business of the Company Entities in the
ordinary course of business.
(c) The property or assets owned or leased by the Company
Entities, or which they otherwise have the right to use, including but not
limited to Intellectual Property (as hereinafter defined), together with (i) the
assets related to the Seller Provided Services provided by Seller or a
Continuing Affiliate (as hereinafter defined) to the Company Entities, including
the assets and services described on Schedule 2.9(c) (the "Seller Provided
---------------
Services"), (ii) the Real Property (as hereinafter defined), Assigned
Intellectual Property (as hereinafter defined) and other assets identified on
Schedule 4.3.1 to be transferred by Seller to a Company Entity, and (iii) the
- --------------
Retained Intellectual Property (as hereinafter defined) to be licensed by Seller
to a Company Entity constitute all of the material property and assets held for
use or used in connection with the business of the Company Entities and
constitute all assets, properties, licenses and other agreements necessary for
the continued conduct of the Company's business after the Closing in
substantially the same manner as conducted prior to the Closing.
(d) EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS
AGREEMENT, SELLER MAKES NO EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER REPRESENTATION
OR WARRANTY AS TO THE CONDITION OR OPERATION OF ANY ASSETS.
2.10. Insurance. All material insurance policies providing coverage for
---------
the 1997 policy year owned or held by Seller or any Company Entity that cover
any Company Entity are reflected in Schedule 2.10, are in full force and effect,
-------------
the Seller or the Company Entity, as applicable, are in compliance with all
requirements and provisions thereof, all premiums with respect thereto have been
paid to the extent due, no notice of cancellation or termination has been
received with respect to any such policy (other than policies that have been
replaced or are intended to be replaced prior to the expiration thereof by
policies providing substantially the same coverage) and no such policies are
subject to any retroactive rate or audit adjustments or coinsurance
arrangements. Each Company Entity is either self-insured or insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their
-5-
<PAGE>
respective businesses. Except as set forth on Schedule 2.10, during the past
-----------
five (5) years, no Company Entity has been denied any insurance coverage which
it has sought or for which it has applied. True and correct copies of all
insurance policies that cover any Company Entity have been provided or made
available to Buyer. Seller has provided or made available to Buyer a list of all
insurance claims in excess of $10,000 per single claim made during the past
three (3) years by any Company Entity or by Seller relating to the business of
any Company Entity.
2.11. Contracts. (a) Except for (V) Benefit Plans (as hereinafter
---------
defined), (W) Licenses, (X) purchase orders (whether or not such purchase orders
have been acknowledged by the counterparty and whether or not such purchase
orders have been executed by the issuing entity), invoices, confirmations and
similar documents with, to or from customers or suppliers, (Y) teaming,
confidentiality, secrecy or similar agreements, and (Z) Contracts (as
hereinafter defined) relating solely to obligations between Company Entities,
Schedule 2.11(a) sets forth as of the date hereof (unless with respect to any
- ----------------
Contract another date is specified therefor in Schedule 2.11(a)) all of the
----------------
following Contracts to which any Company Entity is a party or by which any of
their assets are bound: (i) Contracts pertaining to the borrowing of money;
(ii) Contracts creating Liens (other than Permitted Liens); (iii) Contracts
creating Guarantees (as hereinafter defined), other than any Guarantee by a
Company Entity of the obligations of another Company Entity not in excess of
$100,000 in the aggregate in respect of any one-year period; (iv) Contracts
relating to material employment or consulting services that are not terminable
by any Company Entity upon thirty (30) days or less notice without payment of a
premium or penalty; (v) other written Contracts between any Company Entity and
any director, officer or employee thereof; (vi) Contracts relating to capital
expenditures in excess of $100,000; (vii) Real Property Leases (as hereinafter
defined); (viii) executory Contracts for the purchase or sale of real property
or any business or line of business or for any merger or consolidation; (ix)
Leases (as hereinafter defined) of personal property involving annual rental
obligations exceeding $100,000; (x) joint venture or partnership agreements that
are in writing or, other than the matters described in Section 2.11(c),
agreements that are in writing and limit the freedom of any Company Entity to
compete in any business or with any Entity or in any geographic area; (xi)
Contracts to or from customers or suppliers, including any Governmental
Authority, involving orders with a cumulative value as of the date hereof in
excess of $500,000; (xii) Government Contracts; (xiii) executory Contracts that
involve the settlement of any Action (as hereinafter defined) in an amount in
excess of $100,000, and (xiv) any contractual obligation or liability involving
annual payments in excess of $250,000 that are not terminable by the applicable
Company Entity upon thirty (30) days or less notice without the payment of a
premium or penalty. Except as set forth on Schedule 2.11(a), as of the date
----------------
hereof, each Material Contract is valid and binding on the Company Entity that
is a party thereto, and, to Seller's Knowledge, the other party or parties
thereto, and is in full force and effect in all material respects. As of the
date hereof and except as set forth on Schedule 2.11(a), there has been no
----------------
material breach or default of any Material Contract by any Company Entity or, to
Seller's Knowledge, any other Entity which has not been cured or waived. As of
the date hereof, there have been no violations by any Company Entity of any Law
relating to any Material Contract which has not been cured or waived. Except as
set forth on Schedule 2.11(a), neither Seller nor Company has received any
----------------
-6-
<PAGE>
written default notice or written threat thereof with respect to any Material
Contract which has not been cured or waived, and to the Seller's Knowledge,
neither Seller nor the Company has any reasonable basis for suspecting that any
such action will be forthcoming, other than any defaults that individually or in
the aggregate would not have a Material Adverse Effect. Except as set forth in
Schedule 2.11(a), during the past two (2) years, no Company Entity has received
- ----------------
written notice of any stop work order, suspension of work order or written
threat of debarment or suspension with respect to any Material Contract. Except
as set forth in Schedule 2.11(a), no claim, credit, request for equitable
----------------
adjustment or request for contract funding, price or schedule adjustment or
change order between any Company Entity and any of its suppliers or between any
Company Entity and any of its customers is pending or, to Seller's Knowledge,
threatened, except for any of the foregoing matters arising in the ordinary
course of business. None of the Material Contracts require the consent or
approval of any party thereto or the consent or approval of any third party in
connection with the consummation of the transactions contemplated hereby. The
Seller steam generator litigation settlement agreements referenced in Section
10.8. are the only agreements of Seller pursuant to which the Company must offer
a customer discount.
(b) Attached hereto as Schedule 2.11(b) is an accurate and
----------------
complete list of all purchase orders received from customers and accepted by any
Company Entity on or prior to the date hereof that on their face reflect orders
for services to be performed by any Company Entity after the date hereof with a
value in excess of $250,000. Except as to the accuracy and completeness of the
listing set forth as Schedule 2.11(b), SELLER MAKES NO EXPRESS OR IMPLIED
----------------
REPRESENTATION OR WARRANTY CONCERNING PURCHASE ORDERS.
(c) Attached hereto as Schedule 2.11(c) is an accurate and
----------------
complete list of all written teaming, confidentiality and secrecy agreements to
which any Company Entity is a signatory that exist as of the date hereof. Except
as to the accuracy and completeness of the listing set forth as Schedule
--------
2.11(c), SELLER MAKES NO EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY
- -------
CONCERNING TEAMING, CONFIDENTIALITY AND SECRECY AGREEMENTS.
(d) Attached hereto as Schedule 2.11(d) is an accurate and
----------------
complete list of all Proposals made by any Company Entity on or prior to the
date hereof that on their face reflect services to be performed (if awarded) by
any Company Entity after the date hereof with a value in excess of $500,000.
Except as to the accuracy and completeness of the listing set forth as Schedule
--------
2.11(d), SELLER MAKES NO EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY
- -------
CONCERNING PROPOSALS.
2.12. Litigation. Except as set forth on Schedule 2.12, Schedule
---------- ------------- --------
2.13.1(c), Schedule 2.13.3, Schedule 2.15.1(c) or Schedule 2.18.2, as of the
- --------- --------------- ------------------ ---------------
date hereof, there is no Action by any Entity that is pending or, to Seller's
Knowledge, threatened by or against any Company Entity or any of their
properties or assets or that challenges or seeks to prevent, alter or delay any
of the transactions contemplated by this Agreement. Except as set forth on
Schedule 2.12, or Schedule 2.13.1(b), no Company Entity is subject to any Order
- ------------- ------------------
(as hereinafter defined) in effect as of the
-7-
<PAGE>
date hereof. As of the date hereof, there is no Action by any Entity that is
pending or, to the Seller's Knowledge, threatened by or against Seller or any of
its properties or assets that challenges or seeks to prevent, alter or delay any
of the transactions contemplated by this Agreement and there is no Order against
Seller having any such effect.
2.13. Environmental Laws.
------------------
2.13.1. Compliance. (a) Except as set forth on Schedule 2.13.1(a)
---------- ------------------
or as would not have, individually or in the aggregate, a Material Adverse
Effect, on or before the date hereof, no Company Entity has failed to comply
with (i) any Environmental Law, (ii) any Permit required by any Environmental
Law or (iii) any consent agreement or Order to which it is a party or by which
it is bound pursuant to any Environmental Law, to the extent any of the
foregoing results in an Agency Action or an action by a private party against
Buyer or a Company Entity, however, in no way shall the foregoing include
Cleanup which shall be governed by Section 2.13.2(g).
(b) Except as set forth on Schedule 2.13.1(b), as of the date
------------------
hereof, no Company Entity is subject to any outstanding or, to Seller's
Knowledge, threatened Actions related to any Environmental Law.
(c) The Company Entities have secured and maintain all material
Permits required by Environmental Laws for the use of the Owned Real Property
and of the property subject to the Real Property Leases, and for the operations
as presently conducted by the Company Entities on such properties. Schedule
--------
2.13.1(c) sets forth, as of the date hereof, all such material Permits required
- ---------
for the Company Entities by Environmental Laws. Seller has informed Buyer of
all Permits required by any Environmental Law that to Seller's Knowledge are not
readily transferable to Buyer.
(d) Schedule 2.13.1(d) sets forth all consent agreements and
------------------
Orders in effect as of the date hereof to which any Company Entity is a party or
by which it is bound pursuant to any Environmental Law.
2.13.2. Conditions. (a) Seller and Company Entities have provided
----------
to, or otherwise made available for inspection by Buyer, all audit reports,
regulatory inspection reports, environmental assessment reports and remedial
action plans prepared by or on behalf of the Seller or any Company Entity within
three years prior to the date hereof, and that are in their possession, and that
relate to material Environmental Conditions. Schedule 2.13.2(a) sets forth all
------------------
such documents.
(b) Except as set forth on Schedule 2.13.2(b), no underground
------------------
storage tanks were installed, upgraded, maintained or removed during the period
any Company Entity or the Seller owned, leased, or otherwise occupied the
Company Properties. To the best of Seller's Knowledge, no other underground
storage tanks are or were located on the Company Properties.
-8-
<PAGE>
(c) Except as set forth on Schedule 2.13.2(c), neither Seller
------------------
nor any Company Entity has received any information request under any
Environmental Law, or any notice, letter, citation, order, warning, complaint,
inquiry, information request or demand that (i) any Company Entity has violated
or is in violation of any Environmental Law; (ii) there has been a Release at or
from the Company Properties, or any property where wastes or products have been
sent by any Company Entity; or (iii) it may be or is liable, in whole or in part
for the costs of Cleanup or responding to a Release at or from the Company
Properties, or any property where the Company Entities' wastes or products have
been sent.
(d) Except as set forth on Schedule 2.13.2(d), the Company
------------------
Properties are not subject to any recorded Lien or to Seller's Knowledge any
other Lien in favor of any Governmental Authority or other party for any
liability, costs, or damages incurred by such Governmental Authority or other
party in response to a Release.
(e) None of the Company Properties is listed on the National
Priorities List or the CERCLIS, promulgated or published pursuant to CERCLA.
(f) Except as set forth on Schedule 2.13.2(f) to Seller's
------------------
Knowledge no location to which the Company Entities transported or caused to be
transported any Regulated Substances for storage, recycling, treatment or
disposal is or has been the subject of any Cleanup or remediation pursuant to
any Environmental Law.
(g) Except as set forth on Schedule 2.13.2(g), as of the date
------------------
hereof, there has been no Release into the soil, groundwater, surface water or
sediments, of Regulated Substances by any Company Entity onto any of the Company
Properties which would require Cleanup under Environmental Laws.
2.13.3. Exclusivity. Except as set forth in this Section 2.13.,
-----------
Seller makes no express or implied representation or warranty in this Agreement
concerning environmental matters.
2.14. Other Laws. Except as set forth on Schedule 2.14, to Seller's
---------- -------------
Knowledge, the business and operations of each Company Entity are being and have
been conducted in compliance with all Other Laws and neither the Seller nor any
Company Entity has received written notice from any Governmental Authority that
the business or operations of a Company Entity are not in compliance with any
Other Laws. Except as set forth on Schedule 2.14, to Seller's Knowledge, no
-------------
Company Entity has failed to (a) comply in all material respects with an Order
or (b) maintain in effect and comply in all material respects with any material
Permit required by any Other Law. No Action is pending or, to Seller's
Knowledge, threatened to revoke or limit any such material Permit.
-9-
<PAGE>
2.15. Patents, Trademarks and Similar Rights.
--------------------------------------
2.15.1. Intellectual Property. (a) Schedule 2.15.1(a) sets forth a
--------------------- ------------------
true and complete list of all patents, patent applications, trade names, assumed
names, brand names, registered trademarks, registered copyrights and registered
service marks, and applications therefor, that are owned or used (other than
pursuant to Licenses, or licenses of Computer Software, or licenses pertaining
to Seller Provided Services (as hereinafter defined), or licenses pertaining to
services provided by other Entities) by the Company Entities, which Schedule is
divided into (i) Schedule 2.15.1(a)(i), which identifies any such Intellectual
----------------------
Property owned by a Company Entity, (ii) Schedule 2.15.1(a)(ii), which
----------------------
identifies any such Intellectual Property which is Assigned Intellectual
Property (as hereinafter defined), and (iii) Schedule 2.15.1(a)(iii), which
-----------------------
identifies any such Intellectual Property which is Retained Intellectual
Property (as hereinafter defined).
(b)(i) Representations and Warranties regarding Intellectual
-----------------------------------------------------
Property owned by a Company Entity. With respect to the Intellectual Property
- ----------------------------------
set forth in Schedule 2.15.1(a)(i), except as set forth in Schedules
--------------------- ---------
2.15.1(b)(i) and 2.15.2(a)(i), Seller represents and warrants that (1) to
- ------------ ------------
Seller's Knowledge, a Company Entity owns all right, title and interest in and
to the Intellectual Property, free and clear of all Liens (except Permitted
Liens) and the transactions contemplated hereby will not alter or impair such
rights; and (2) to Seller's Knowledge, the Intellectual Property is valid,
subsisting and enforceable; and (3) to Seller's Knowledge there is no pending or
threatened Action, including without limitation before the United States Patent
and Trademark Office or, to Seller's Knowledge, any foreign patent office (other
than in regard to patents that are in or awaiting prosecution, or going through
a post grant opposition period), that in any way calls into question the
ownership, validity, enforceability or use of any of the Intellectual Property,
which consists of Company Entity owned and issued, U.S. or foreign patents or
registered trade names or registered trademarks or registered copyrights, and
(4) to Seller's Knowledge there is no third party infringement or
misappropriation of any of the Intellectual Property, which consists of Company
Entity owned and issued U.S. or foreign patents or registered trade names or
registered trademarks or registered copyrights of which Seller has obtained
proof thereof and to Seller's Knowledge no Company Entity has a reasonable basis
to claim such infringement.
(ii) Representations and Warranties regarding Assigned
-------------------------------------------------
Intellectual Property. With respect to the Assigned Intellectual Property set
- ---------------------
forth in Schedule 2.15.1(a)(ii), except as set forth in Schedules 2.15.1(b)(ii)
---------------------- -----------------------
and 2.15.2(a)(ii), Seller represents and warrants that (1) Seller owns all
-------------
right, title and interest in and to the Assigned Intellectual Property, free and
clear of all Liens (except Permitted Liens) and the transactions contemplated
hereby will not alter or impair Seller's ability to convey such title; and (2)
to Seller's Knowledge, the Assigned Intellectual Property is valid, subsisting
and enforceable; (3) to Seller's Knowledge there is no pending or threatened
Action, including without limitation before the United States Patent and
Trademark Office or, to Seller's Knowledge, any foreign patent office (other
than in regard to patents that are in or awaiting prosecution, or going through
a post grant opposition period), that
-10-
<PAGE>
in any way calls into question the ownership, validity, enforceability or use of
any of the Assigned Intellectual Property which consists of assigned, issued
U.S. or foreign patents or registered tradenames or registered trademarks or
registered copyrights, and (4) to Seller's Knowledge, there is no third party
infringement or misappropriation of any of the Assigned Intellectual Property
which consists of assigned, issued U.S. or foreign patents or registered
tradenames or registered trademarks or registered copyrights of which Seller has
obtained proof, and to Seller's Knowledge, no Company Entity has a reasonable
basis to claim such infringement.
(iii) Representations and Warranties regarding Retained
-------------------------------------------------
Intellectual Property. With respect to the Retained Intellectual Property set
- ---------------------
forth in Schedule 2.15.1(a)(iii), Seller represents and warrants that (1) Seller
-----------------------
has the necessary right, title, interest and authority to grant the licenses of
the Retained Intellectual Property as contemplated by Exhibit C hereto; and (2)
Seller has no claim against any Company Entity for past royalties, damages or
any other past fees or expenses arising from the use of any of the Retained
Intellectual Property.
(c) Except for Seller Provided Services, claims of third parties
not within Seller's Knowledge, and except as set forth in Schedules 2.15.1(b)(i)
--------------------------
and 2.15.1(b)(ii), each Company Entity has sufficient rights to the Intellectual
-------------
Property to conduct its business as currently conducted, which rights are, to
Seller's Knowledge, free of claims of third parties, except where the absence of
such Intellectual Property or the existence of such third party claims would not
have a Material Adverse Effect.
2.15.2. Licenses; Infringement. (a) (i) Seller represents and
----------------------
warrants that, except for implied licenses in connection with the sale of
equipment by a Company Entity, Schedule 2.15.2(a)(i) sets forth a true and
---------------------
complete list of all licenses to any third party of any of the Intellectual
Property owned by a Company Entity. Except as set forth in Schedule
--------
2.15.2(a)(i), to Seller's Knowledge, all such licenses are valid, subsisting,
- ------------
enforceable and in full force and effect, and to Seller's Knowledge, there is no
pending or threatened Action or any breach, deficiency or refusal of performance
to or against Seller or any Company Entity regarding the validity of any such
license, or any provision thereof. (ii) Seller represents and warrants that,
except for implied licenses in connection with the sale of equipment, Schedule
--------
2.15.2(a)(ii) sets forth a true and complete list, as of the date hereof, of all
- -------------
licenses of any of the Assigned Intellectual Property to any third party.
Except as set forth in Schedule 2.15.2(a)(ii), to Seller's Knowledge, all such
----------------------
licenses are valid, subsisting, enforceable and in full force and effect and
there is no pending or threatened Action or any breach, deficiency or refusal of
performance to or against Seller or any Company Entity regarding the validity of
any such license, or any provision thereof. (iii) Seller represents and
warrants that, except for implied licenses in connection with the sale of
equipment to a Company Entity and licenses to Computer Software, Schedule
--------
2.15.2(a)(iii) sets forth a true and complete list of all licenses from any
- --------------
third party of any of the Intellectual Property used by a Company Entity.
Except as set forth in Schedule 2.15.2(a)(iii), to Seller's Knowledge, all such
-----------------------
licenses are valid, subsisting, enforceable and in full force and effect, and to
Seller's Knowledge, there is no pending or threatened Action or any
-11-
<PAGE>
breach, deficiency or refusal of performance to or against the third party to
that license regarding the validity of any such license, or any provision
thereof.
(b) All licenses for Intellectual Property that are included in
the Schedules referred to in this Section 2.15.2. are collectively referred to
in this Agreement as "Licenses." Except for implied licenses in connection with
the sale of equipment, licenses with regard to Retained Intellectual Property
and licenses to Computer Software, Seller represents and warrants that the
Licenses represent all of the licenses between a Company Entity and any other
Entity with respect to the Intellectual Property currently owned or used by any
Company Entity. Except as otherwise expressly provided in this Section 2.15,
nothing in this Agreement or the referenced Schedules shall imply a patent
indemnity with regard to any issue of infringement not to Seller's Knowledge as
of the date hereof. Furthermore, Buyer understands that the license agreement
listed in Schedule 2.15.2(a)(ii) to NNC is primarily related to the operations
----------------------
of Seller's Continuing Affiliates, though it may affect the identified patents
listed in Schedule 2.15.1(a)(ii), and Buyer takes title subject to that license
----------------------
without any claim for royalty or other interest in that agreement.
2.15.3. Company Entity Commercial Activities. Seller represents and
------------------------------------
warrants that, to Seller's Knowledge, no ongoing activity of any Company Entity
or planned activity for which substantial preparations have been made or any
past activity of any Company Entity infringes, violates or misappropriates the
Intellectual Property rights of any third party. With the exception of the
matters set forth in Schedule 2.15.3 to Seller's Knowledge, no third party has
---------------
made any claim, threat, assertion or filed any action alleging any such
infringement, violation or misappropriation before any Governmental Authority
including without limitation the United States Patent and Trademark Office or
any foreign patent office.
2.16. Employees.
---------
2.16.1. Employees. Schedule 2.16.1 lists each person that was an
--------- ---------------
Employee (as hereinafter defined) earning more than $100,000 annually in cash
compensation as of December 31, 1996, including each such person's (a) name, (b)
total periods of employment, (c) current position or job classification, and (d)
employer. As soon as practicable after the date hereof but prior to Closing,
Seller shall deliver or make available to Buyer a separate, confidential list of
wage or salary and bonus information for each Employee. Each Company Entity has
complied in all material respects with all applicable Laws relating to the
employment of labor including the provisions thereof relating to wages, hours,
collective bargaining and the payment of social security and Taxes and is not
liable for any arrears of wages or any Tax or any penalty for failure to comply
with any of the foregoing. Except as set forth on Schedule 2.12, there are no
-------------
charges pending or, to Seller's Knowledge, threatened against the Company
alleging unlawful discrimination in employment practices before any Governmental
Authority.
2.16.2. Unions. As of the date hereof, there are no collective
------
bargaining or other labor union agreements applicable to any Employees. Except
as set forth on Schedule 2.16.2 and
---------------
-12-
<PAGE>
Schedule 2.12, as of the date hereof, (a) no material strikes, slowdowns,
- -------------
lockouts or work stoppages or material labor arbitrations, grievances or
disputes involving the Employees or against any Company Entity are pending or,
to Seller's Knowledge, threatened, and (b) to Seller's Knowledge, (i) there is
no organizational activity underway at any Company Entity, and (ii) no labor
representative holds bargaining rights.
2.16.3. NLRB. As of the date hereof, no Company Entity is engaged
----
in, or has received any written notice of, any unfair labor practice, and no
such complaints are pending before the National Labor Relations Board or any
other Governmental Authority.
2.17. Employee Benefits.
-----------------
2.17.1. Company Benefit Plans. Schedule 2.17.1 lists, as of the
--------------------- ---------------
date hereof, each written pension, retirement, profit-sharing, deferred
compensation, bonus, incentive, performance, stock option, stock appreciation,
phantom stock, stock purchase, restricted stock, medical, retiree medical,
hospitalization, vision, dental or other health, life, disability, severance,
termination or other employee benefit plan, program, arrangement, agreement or
policy (including each ERISA Plan (as hereinafter defined)) (each, a "Benefit
Plan"), which currently covers any current or, in the case of any Company
Benefit Plan (as hereinafter defined), former Employee (or provides benefits for
the dependents of any such Employee or former Employee) and which is sponsored
or maintained or contributed to by any Company Entity (each, a "Company Benefit
Plan"). Except as set forth in Schedule 2.17.1, each Company Benefit Plan
---------------
complies in all material respects, and has been established, operated and
administered in all material respects, in accordance with its terms and all
applicable requirements of all Laws, including ERISA (as hereinafter defined)
and the Code (as hereinafter defined), and no "reportable event", non-exempt
"prohibited transaction" (as such terms are defined in ERISA and the Code, as
applicable) or termination or partial termination has occurred with respect to
any Company Benefit Plan and the consummation of the transactions contemplated
by this Agreement will not result in the occurrence of any such event. Except
as set forth on Schedule 2.17.1, each Company Benefit Plan that is an ERISA Plan
---------------
intended to qualify under Section 401(a) of the Code has received a ruling or
determination letter concluding that such ERISA Plan so qualifies, and, to
Seller's Knowledge, no event has occurred, amendment adopted or action taken
that would cause any such ERISA Plan to lose its qualified status. Except as
set forth on Schedule 2.17.1, there are no written Contracts or, to Seller's
---------------
Knowledge, plans or commitments by any Company Entity, whether legally binding
or not, to create any additional Benefit Plans for the Employees or to modify
any existing Company Benefit Plans, except with respect to changes (i) required
by ERISA, the Code or applicable Other Laws or (ii) contemplated by this
Agreement. Except as set forth on Schedule 2.17.1, none of the Company Benefit
---------------
Plans which are "welfare benefit plans" within the meaning of Section 3(1) of
ERISA provide post-retirement medical or life insurance benefits or coverage to
any current or former Employee or any dependent of any current or former
Employee, except as may be required under Section 4980B of the Code, Section 601
of ERISA or any applicable Other Law. Except as set forth on Schedule 2.17.1,
---------------
no Company Entity has any liability (whether actual, contingent, or otherwise)
with
-13-
<PAGE>
respect to any of the Company Benefit Plans other than as adequately reflected
in or reserved for on the Balance Sheet. Neither any Company Entity nor Buyer or
its Affiliates will have any liability with respect to any Company Benefit Plan
of the Company's control group as defined in Section 414(b), (c), (m) or (o) of
the Code. Controlled Group Liabilities (as defined below) relating to any
Benefit Plan which is an "employee pension benefit plan" or a "welfare benefit
plan," within the meanings of Sections 3(2) and 3(1), respectively, of ERISA,
maintained or contributed to by Seller or any Continuing Affiliate at any time
prior to the Closing Date, or to which Seller or any Continuing Affiliate had or
has any obligation to contribute at any time prior to the Closing Date, other
than Damages relating to any "employee pension benefit plan" or "welfare benefit
plan," as defined above, maintained solely by the Company, shall be retained by
the Seller. For purposes of the preceding sentence, "Controlled Group
Liabilities" shall mean any liability under (a) Title IV of ERISA, (b) section
302 of ERISA, (c) sections 412 and 4971 of the Code, and (d) the continuation of
coverage requirements of sections 601-608 of ERISA and section 4980B of the
Code. Except as set forth on Schedule 2.17.1, none of the Company Benefit Plans
---------------
contains any provisions which would prohibit the transactions contemplated by
this Agreement or which would give rise to any severance, termination or other
payments or liabilities as a result of the transactions contemplated by this
Agreement.
2.17.2. Records. Seller has delivered or made available to Buyer
-------
copies of each Company Benefit Plan and any amendments thereto and any related
trust agreement, funding agreement and insurance contract relating thereto in
existence as of the date hereof, and, if applicable and in existence as of the
date hereof (a) the most recent valuation report, (b) the Forms 5500 or 5500-C
and the schedules thereto filed for the last 3 plan years, (c) the summary plan
description currently in effect for each Company Benefit Plan and all summaries
of material modifications, (d) the last financial statements for each Company
Benefit Plan and its related trust, if any, (e) if applicable, the most recent
determination letter issued with respect to each Company Benefit Plan, and (f)
all administrative forms used with respect to the Company Benefit Plans.
2.17.3. Actions. Except as set forth on Schedule 2.12 hereto, as of
------- -------------
the date hereof, there are no Actions pending (other than routine claims for, or
inquiries regarding, benefits) or, to Seller's Knowledge, threatened, with
respect to any Company Benefit Plan, including any fiduciaries thereof.
2.17.4. Funding. All contributions required under applicable Law or
-------
the terms of any collective bargaining agreement or Company Benefit Plan to be
made on or prior to the date hereof by any Company Entity to an Company Benefit
Plan have been made within the time prescribed by applicable Law, collective
bargaining agreement or Company Benefit Plan.
2.17.5. Acceleration of Benefits. Except as set forth on Schedule
------------------------ --------
2.17.5, the consummation of the transactions contemplated by this Agreement will
- ------
not result in a "change of control" under any Company Benefit Plan and will not
result in any increase in the amount of compensation or benefits or accelerate
the vesting or timing of payment of any benefits payable
-14-
<PAGE>
to or in respect of any Employee or former Employee or the beneficiary or
dependent of any Employee or former Employee.
2.17.6. Benefit Plans Maintained By Seller. Except as set forth on
----------------------------------
Schedule 2.17.6, Seller does not sponsor or maintain any Benefit Plan which
- ---------------
currently covers any current or former Employee.
2.18. Taxes.
-----
2.18.1. Returns. Except as set forth on Schedule 2.18.1, all
------- ---------------
federal, state and local tax returns, notices, reports, declarations and forms
(including any schedules or attachments thereto) ("Returns") relating to the
Company Entities or any combined, consolidated, affiliated or unitary tax group
of which they are or have been members (an "Affiliated Group") that were
required to be filed prior to the date hereof have been accurately prepared in
all material respects and timely filed. Except as set forth on Schedule 2.18.1
---------------
and except for Taxes (as hereinafter defined) that are being contested in good
faith and by appropriate proceedings, the following Taxes have been duly and
timely paid or withheld and paid over to the appropriate taxing authority: (a)
all Taxes shown to be due on the Returns, and (b) all deficiencies and
assessments for any amount of Taxes that are or would become payable by the
Company Entities or chargeable as a Lien upon any of their assets. Each Company
Entity has withheld or otherwise collected all Taxes it was required to withhold
or collect under any applicable Law.
2.18.2. Tax Audits. Except as set forth on Schedule 2.18.2, as of
---------- ---------------
the date hereof (a) no unresolved issue has been raised either in writing or, to
Seller's Knowledge, other than in writing, by any Governmental Authority in the
course of any audit with respect to Taxes for which any Company Entity would be
held liable and (b) no taxing authority is now asserting or threatening to
assert against any Company Entity any deficiency or claim for additional Taxes
or any adjustment of Taxes.
2.18.3. Section 338(h)(10) Election. Seller has filed a consolidated
---------------------------
federal Income Tax Return (as hereinafter defined) with respect to the Company
Entities for the taxable year immediately preceding the current taxable year and
Seller is eligible to make an election under Section 338(h)(10) of the Code (and
any comparable election under state or local tax Law) with respect to the
Company Entities.
2.19. Brokers. No person or Entity is or will become entitled to receive
-------
from Buyer any brokerage or finder's fee, advisory fee or other similar payment
for the transactions contemplated by this Agreement by virtue of having been
engaged by or acted on behalf of Seller.
2.20. Approvals. Schedule 2.20 sets forth a complete and accurate list of
--------- -------------
all of the Approvals (as hereinafter defined) held by the Company Entities,
copies of which have been made available to Buyer. To Seller's Knowledge, the
Company Entities own or possess and hold the Approvals set forth on Schedule
--------
2.20 free from restrictions and such Approvals constitute all
- ----
-15-
<PAGE>
franchises, licenses, permits, consents, approvals and other authority
(governmental or otherwise), and all rights and privileges with respect to the
foregoing, as are necessary for the conduct of its business as now being
conducted except where the failure to own or possess and hold an Approval would
not have a Material Adverse Effect. All of the Approvals set forth on Schedule
--------
2.20 are in full force and effect and the applicable Company Entity is not in
- ----
material violation with respect to any of them. No proceedings are pending or,
to Seller's Knowledge, threatened by any Governmental Authority to revoke or
limit the scope of any of the Approvals. Except as noted on Schedule 2.20, none
-------------
of the Approvals would be rendered ineffective or be required to be reissued as
a result of the consummation of the transactions contemplated hereby.
2.21. No Other Pending Transactions. Except for the transactions
-----------------------------
contemplated by this Agreement: (i) the Seller is not a party to or bound by or
the subject of any agreement, commitment or undertaking with respect to the sale
of all or any part of any of the capital stock of the Company; and (ii) the
Company is not a party to or bound by or the subject of any agreement,
undertaking or commitment to merge or to consolidate with, or to acquire all of
substantially all of the property and assets of, any other Entity or to sell, to
lease or to exchange all or substantially all of the Company's assets to any
other Entity.
2.22. Corporate Books and Records. The minute books, stock record books
---------------------------
and other related corporate records of the Company Entities, all of which have
been made available to Buyer, are correct in all material respects and have been
maintained in accordance with sound business practices and there have been no
transactions involving the business of the Company Entities which are required
to have been set forth therein and which have not been accurately so set forth.
At the Closing, all of such books and records will be in the possession of the
Company.
2.23. Business Practices. To Seller's Knowledge neither any of the
------------------
Company Entities nor Seller on behalf of any of the Company Entities nor any
director, officer, agent, employee or other person acting on behalf of Seller or
any of the Company Entities has during the past four (4) years (a)(i) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds, (iii) established
or maintained any unlawful or secret fund of corporate monies or other assets of
the Company Entities, (iv) made any false or fictitious entry on the books or
records of the Company Entities except insofar as the Company may have failed to
accurately account for the cost of processing and disposal of Legacy Waste and
Equipment for the calendar years 1993, 1994 and 1995, (v) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment, (vi)
given any favor or gift which is not deductible for federal income tax purposes
or (vii) made any bribe, kickback or other payment of a similar or comparable
nature, whether unlawful or not, to any Entity or Governmental Authority,
whether in money, property or services, to obtain favorable treatment in
securing business or to obtain special concessions, or to pay for favorable
treatment for business secured or for special concessions already obtained,
which, with respect to all of the matters set forth in clause (a)
-16-
<PAGE>
hereof, (b)(i) would subject the Company Entities to any Damages, (ii) if not
made, given, established or maintained in the past would have had a Material
Adverse Effect, (iii) if not continued, would have a Material Adverse Effect or
(iv) were not reported by the Company Entities to the appropriate Governmental
Authority and disclosed to Buyer.
2.24. Purchase for Investment; Restricted Securities. Seller is acquiring
----------------------------------------------
the GTS Shares for its own account for investment and not for resale or
distribution. Seller (a) has received no general solicitation or general
advertisement concerning the Buyer or the GTS Shares, (b) is a sophisticated
investor that has prior experience with investments of a similar nature, and has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of investment in the GTS Shares,
(c) has no reason to anticipate any change in its circumstances, financial or
otherwise, which may cause or require resale or distribution by Seller of all or
any part of the GTS Shares and (d) confirms that, to its knowledge, all
requested information pertaining to the GTS Shares and the Buyer has been made
available to the Seller, and Seller confirms that it has been given an
opportunity to make any further inquiries of Buyer that Seller desires to make.
Seller understands that the GTS Shares are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from Buyer in a transaction not involving a public offering and that
under such laws and applicable regulations such securities may not be resold
without registration under the Securities Act of 1933, as amended and applicable
state securities laws only in certain limited circumstances.
It is understood that the certificates evidencing the GTS Shares may bear
the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR STATE SECURITIES LAWS. THEY MAY NOT BE SOLD IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACTS OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS."
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Seller:
3.1. Organization; Power and Authority. Buyer is a corporation duly
---------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has all corporate power needed to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby to be consummated by it, including each instrument, document
and agreement contemplated herein to be executed and delivered by it pursuant to
this Agreement.
-17-
<PAGE>
3.2. Authorization, Execution and Validity. The execution, delivery and
-------------------------------------
performance by Buyer of this Agreement and the consummation by Buyer of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action. This Agreement has been duly and validly executed and
delivered by Buyer, constitutes its valid and binding obligation and is
enforceable against Buyer in accordance with its terms, except to the extent
that such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to or affecting
creditors' rights generally and general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.3. No Conflict; Buyer Consents. Except as set forth on Schedule 3.3,
--------------------------- ------------
the execution, delivery and performance by Buyer of this Agreement will not (a)
violate or be in conflict with any Law, (b) violate or be in conflict with any
Charter Document of Buyer, (c) require any Consent from any Governmental
Authority, except to comply with the HSR Act, or (d) breach any material
Contract to which Buyer is a party or by which it or its assets are bound.
3.4. Litigation. There is no Action by any Entity that is pending or, to
----------
the knowledge of Buyer, threatened by or against or affecting Buyer or any of
its properties, assets, operations or business which would, if adversely
determined, have an adverse effect on Buyer's ability to consummate the
transactions contemplated by this Agreement, and Buyer is not subject to any
Order which would have any such effect.
3.5. Purchase for Investment; Restricted Securities; Due Diligence.
-------------------------------------------------------------
Buyer is acquiring the Shares for its own account for investment and not for
resale or distribution. Buyer (a) has received no general solicitation or
general advertisement concerning the Company Entities or the Shares, (b) is a
sophisticated investor that has prior experience with investments of a similar
nature, and has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of investment in
the Shares, (c) has no reason to anticipate any change in its circumstances,
financial or otherwise, which may cause or require resale or distribution by
Buyer of all or any part of the Shares and (d) confirms that, to its knowledge,
all requested information pertaining to the Shares and the Company Entities,
their assets and business operations has been made available to Buyer, and Buyer
also confirms that it has been given an opportunity to make any further
inquiries of Seller and the Company Entities that Buyer desires to make. Buyer
has no actual knowledge of any breach of any of the representations or
warranties made by Seller under this Agreement. Without limiting the effect of
Section 10.4.5., Seller acknowledges that Buyer has no duty to Seller of due
care or diligence to discover any such breaches. Buyer understands that the
Shares are characterized as "restricted securities" under the federal securities
laws inasmuch as they are being acquired from Seller in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act of
1933, as amended and applicable state securities laws only in certain limited
circumstances.
-18-
<PAGE>
It is understood that the certificates evidencing the Shares may bear the
following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACTS OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1993 AND
APPLICABLE STATE SECURITIES LAWS."
3.6. Available Funds. Buyer has and will have on the Closing Date (as
---------------
hereinafter defined) and immediately prior to the Closing, funds available that
will be sufficient for Buyer to consummate the transactions contemplated hereby.
3.7. Brokers. No person or Entity is or will become entitled to receive
-------
from Seller any brokerage or finder's fee, advisory fee or other similar payment
for the transactions contemplated by this Agreement by virtue of having been
engaged by or acted on behalf of Buyer.
3.8. GTS Shares. As of the Closing, the GTS Shares will be: (a) duly
----------
authorized and validly issued, (b) fully paid and non-assessable and (c) not
subject to any Liens or restrictions on transfer or Subscription Rights. Seller
will receive good and marketable title to the GTS Shares as of the Closing Date.
Except for the effects that consummation of the transactions contemplated by
this Agreement and the other information which has been publicly disclosed by
Buyer in its Form 10-K for the year ended December 31, 1996 and its press
release dated March 31, 1997 may have, which effects are not presently known to
Buyer, Buyer has no knowledge of any fact or circumstance which would prevent
the registration of the GTS Shares on or before the ninetieth day after the
Closing Date.
ARTICLE 4. COVENANTS OF SELLER
Seller hereby covenants and agrees with Buyer as follows:
4.1. Cooperation by Seller. Subject to its rights under Article 9, prior
---------------------
to the Closing, Seller shall use all reasonable efforts to take all actions and
to do all things necessary or advisable to consummate the transactions
contemplated by this Agreement and to cooperate with Buyer in connection with
the foregoing, including using reasonable efforts to obtain all Consents in
connection therewith, to transfer to Buyer all Permits required by any
Environmental Law and to lift or rescind any injunction or restraining order or
other Order adversely affecting the ability of the Parties to consummate the
transactions contemplated hereby (provided that such reasonable efforts shall
not require Seller to make, or cause to be made, any payment).
4.2. Pre-Closing Access to Information. From the date hereof through the
---------------------------------
Closing Date, Seller shall, subject to applicable contractual obligations and
the limitations referred to in Section 5.2., afford to Buyer, its accountants,
its counsel and other agents and representatives
-19-
<PAGE>
reasonable access, upon reasonable notice, to all of the properties, books and
records of the Company Entities (including but not limited to Contracts,
Licenses and Permits) that Buyer needs to complete its due diligence, but not to
information that Seller or any Company Entity is contractually restricted from
providing to Buyer or that Seller or any Company Entity, using all reasonable
efforts, is unable to obtain.
Buyer shall direct all requests for information to:
Mr. Andrew Washburn
Westinghouse Electric Corporation
Gateway Center
11 Stanwix Street
Pittsburgh, PA 15222
Phone: (412) 642-3701
Fax: (412) 642-5751
4.3. Conduct of Business.
-------------------
4.3.1. Conduct of Business in Ordinary Course. Without the prior
--------------------------------------
written consent of Buyer, from the date hereof through the Closing Date, Seller
shall use all reasonable efforts to cause the Company Entities to: (a) preserve
their relationships with suppliers, customers, distributors, Employees,
creditors and Governmental Authorities, (b) maintain the same amounts and kinds,
in the aggregate, of existing insurance coverage, (c) perform their obligations
in all material respects, (d) comply with all applicable Laws, and (e) conduct
their business in the ordinary course and consistent with past practice (except
as otherwise provided in Schedule 4.3.1). Unless otherwise required or
--------------
permitted by this Agreement or identified on Schedule 4.3.1, without the prior
--------------
written consent of Buyer, Seller shall not permit any Company Entity to:
(i) amend its Charter Documents;
(ii) issue, sell or otherwise transfer any capital stock of any
Company Entity;
(iii) incur or guarantee any debt, except accounts payable
incurred by the Company Entities in the ordinary course of business in
accordance with past practice;
(iv) sell, assign or permit the creation of any Lien (except
Permitted Liens) on, any of its assets, except in the ordinary course of
business;
(v) except for normal merit, cost-of-living and promotional
increases to Employees in accordance with past practices of the Company
Entities, increase the rate of compensation for any Employee;
-20-
<PAGE>
(vi) make any change in accounting methods or principles or cost
allocation procedures that materially affects the consolidated financial
statements of the Company and their respective consolidated subsidiaries,
except as (X) may be prescribed by changes promulgated by the American
Institute of Certified Public Accountants, or (Y) permitted or contemplated
under any other provision of this Agreement;
(vii) amend or terminate any Company Benefit Plans or implement
any additional employee benefit plans, except with respect to changes
required by ERISA, the Code or applicable Other Laws or except as otherwise
required or permitted pursuant to Article 11 hereof;
(viii) compromise or settle any material claim;
(ix) make a capital expenditure in excess of $100,000 for any
single item except in connection with the modification of the ventilation
system for the SEG(R) Metal Melt facility or except pursuant to any capital
appropriation that was approved prior to the date hereof and that is listed
on Schedule 4.3.1;
--------------
(x) sell or lease any material portion of the assets of any of
the Company Entities;
(xi) enter into any Government Contract or any customer Contract
involving in excess of $2,500,000;
(xii) enter into any Government Contract or Customer Contract,
involving $2,500,000 or less, except in the ordinary course of business
consistent with its past practice, and the Company shall provide Buyer with
a copy of each such Contract involving in excess of $100,000;
(xiii) enter into any teaming agreement or joint venture agreement;
(xiv) submit a Proposal involving in excess of $2,500,000;
(xv) submit a Proposal involving $2,500,000 or less, except in
the ordinary course of business consistent with its past practice, and the
Company shall provide Buyer with a copy of each such Proposal involving in
excess of $100,000;
(xvi) merge a Company Entity with or into any other Entity or
acquire the capital stock of another Entity or acquire all or substantially
all of the assets of another Entity;
-21-
<PAGE>
(xvii) agree to take any of the actions described in Sections
4.3.1.(i) through 4.3.1.(xvi).
4.3.2. Buyer's Consent. If Seller gives written notice to Buyer
---------------
that any Company Entity proposes to take any action for which Buyer's consent is
required under Section 4.3.1. and if Buyer has not delivered within five (5)
Business Days (as hereinafter defined) of Seller's notice Buyer's written
objection to such proposed action, Buyer shall be deemed to have consented to
such proposed action. Buyer shall not unreasonably withhold its consent under
Section 4.3.1. to any action taken or to be taken by any Company Entity. In the
event Buyer does not consent to a proposed action by Seller, Buyer shall not be
entitled to claim a violation of Section 7.1.1. for any matter related to
directly or indirectly or as a consequence of the failure to take such proposed
action.
4.3.3. Advanced Systems Division Assets and Liabilities. Prior to
------------------------------------------------
the Closing, (i) Seller shall, or shall cause the Company to, assign to Seller
or a Continuing Affiliate all of SEG's rights, title and interest in and to all
owned or leased real and personal property relating to the Company's Advanced
Systems Division located in Carlsbad, New Mexico (the "Advanced Systems Division
Assets") and (ii) Seller shall or shall cause a Continuing Affiliate to assume
the liabilities of the Company Entities relating exclusively to the Company's
Advanced Systems Division located in Carlsbad, New Mexico, including without
limitation, any and all liabilities arising from or relating to the contracts
listed on the Assignment and Assumption Agreement dated as of September 1, 1996
between Seller and Company or the assignment of such contracts by the Company to
the Seller (the "Advanced Systems Division Liabilities").
4.4. Further Assurances. Subject to the other terms and conditions of
------------------
this Agreement, at any time and from time to time, whether before or after the
Closing, Seller shall execute and deliver all instruments and documents and take
all other action that Buyer may reasonably request to consummate or to evidence
the consummation of the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, Seller shall use all reasonable
efforts to cause to be assigned to a Company Entity subject to the receipt of
any Consents listed on Schedule 2.7 as required for such assignment, all
------------
Contracts identified on Schedule 5.6 to be transferred by Seller to a Company
------------
Entity pursuant to transfer instruments in form reasonably satisfactory to
Buyer, providing for the assignment of all rights in and the assumption of all
obligations of Seller and any Continuing Affiliates under such agreements.
4.5. HSR Act Compliance. Promptly after the date hereof, Seller shall
------------------
file any notification required to be filed under the HSR Act to consummate the
transactions contemplated hereby. Seller shall use all reasonable efforts to
comply as promptly as practicable with any request made pursuant to the HSR Act
for additional information. Seller shall cooperate with Buyer in such
compliance, and Seller shall pay one-half of the statutory filing fees required
by the HSR Act. Prior to Closing, Seller shall advise Buyer promptly in respect
of any understandings, undertakings or agreements (oral or written) which Seller
proposes to make or
-22-
<PAGE>
enter into with the Federal Trade Commission, the Department of Justice or any
other Governmental Authority with respect to the transactions contemplated by
this Agreement.
4.6. Supplements to Schedules. After the date hereof and prior to the
------------------------
Closing, if, to Seller's Knowledge, any event occurs or condition changes that
causes any of its representations or warranties in this Agreement to be
inaccurate as of any date that is relevant for such representations or
warranties, Seller shall notify Buyer thereof in writing. Seller may supplement
the Schedules to account for such event or change.
4.7. Intercompany Accounts. As of the Closing Date, the net intercompany
---------------------
receivables, payables and loans relating to Seller Provided Services and any
other corporate charges (but not to contracts for services purchased by Seller
or any Continuing Affiliate from any Company Entity) then existing between
Seller or any Continuing Affiliate, on the one hand, and any Company Entity, on
the other hand, shall be settled.
4.8. Transfer of GTS Shares. Seller will not, directly or indirectly,
----------------------
sell, assign, transfer, offer, contract or grant any option to sell (including
without limitation any short sale), pledge (other than pursuant to a pledge to a
financial institution as collateral for a bona fide loan) or otherwise dispose
of the GTS Shares during the ninety (90) day period following the Closing.
4.9. Ventilation System for the SEG(R) Metal Melt Facility; Stormwater
-----------------------------------------------------------------
Separation Project; Trojan Contract. (a) The reserve of $332,014 for the
- -----------------------------------
costs to complete the proposed modification to the ventilation system for the
SEG(R) Metal Melt facility shall remain on the books of the Company for purposes
of determining the March 31 Working Capital Deficit.
(b) The reserve of $343,734 for costs to complete the proposed
Stormwater Separation Project shall remain on the books of the Company for
purposes of determining the March 31 Working Capital Deficit.
(c) The reserve of $653,496 related to the contract between the
Company and Trojan shall remain on the books of the Company for purposes of
determining the March 31 Working Capital Deficit.
(d) The reserves set forth in this Section 4.9 shall not be adjusted
pursuant to the adjustments contemplated by Section 6.8(a).
4.10. Non-Competition.
---------------
4.10.1. Seller's Covenant. Until the second anniversary of the
-----------------
Closing Date, neither Seller nor any Continuing Affiliate shall engage in or
provide, directly or indirectly, anywhere in the United States of America either
for its own account or as a partner, shareholder, director, officer or
principal, a Competing Service; provided, however, that:
------------------
-23-
<PAGE>
(a) Seller or any Continuing Affiliate may participate by providing
services (and documents or other information depicting, describing or
relating to such services) which do not constitute a Competing Service as a
member of a team in which other non-Seller team members do provide a
Competing Service; provided, however, Seller or any Continuing Affiliate
shall not provide to any team member providing a Competing Service any
information, assistance or any other support relating to a Competing
Service;
(b) Seller's Benefit Plans may acquire securities and other interests
in any Entity for investment purposes;
(c) Seller or any Continuing Affiliate may acquire up to ten percent
(10%) of the outstanding securities and other interests of any Entity
regardless of the percentage of such Entity's revenues that are
attributable to businesses that offer or provide a Competing Service;
(d) Seller or any Continuing Affiliate acquire any percentage of the
securities and other interests, including a controlling interest, of any
Entity if the revenues of such Entity that are attributable to businesses
that offer or provide a Competing Service do not exceed ten percent (10%)
of such Entity's total consolidated annual revenues during each of the past
two years; or
(e) as permitted under Sections 6.9.2(b) or (c).
4.10.2. Definitions. For purposes of this Section 4.10., the
-----------
following terms shall have the meanings ascribed to them herein.
(a) "Competing Service" means (i) the ownership, development or
operation of a centrally located, off-customer site facility for volume
and/or mass reducing commercially-produced radioactive or radioactively-
contaminated or intermingled hazardous and radioactive (mixed) materials,
or (ii) transporting (but not the manufacture, use or sale of containers
used to transport) commercially-produced radioactive or radioactively-
contaminated or intermingled hazardous and radioactive (mixed) materials,
or (iii) the ownership of any of the following incineration facilities
through privatization or otherwise for the purpose of treating, processing
or disposing of radioactive or mixed (intermingled radioactive and
hazardous) wastes or materials of or for the benefit of the United States
Department of Energy or other Governmental Authority: (x) the TSCA
Incinerator Facility at Oak Ridge Tennessee, (y) the CIF Incinerator
Facility at Savannah River, South Carolina and (z) the WERF Incinerator
Facility at Idaho National Engineering Laboratory. "Radioactive or
radioactively-contaminated materials" means materials defined as such by
customer policies or applicable Law, and include materials that may also be
considered hazardous due to other constituents or characteristics (e.g.,
"mixed" or "transuranic" waste and materials) under applicable customer
policies or Law.
-24-
<PAGE>
4.10.3. Services for Governmental Authorities. Notwithstanding the
-------------------------------------
foregoing covenant, and without intending to broaden the scope of Competing
Services, Buyer acknowledges and agrees that Seller and the Continuing
Affiliates may, now or at any time in the future, operate a central facility for
volume and/or mass reducing radioactive or radioactively-contaminated materials
or intermingled hazardous and radioactive (mixed) materials or transport
radioactive or radioactively-contaminated materials or intermingled hazardous
and radioactive (mixed) materials on behalf or for the benefit of the Department
of Energy or any other Governmental Authority, including, without limitation:
(a) as part of or ancillary to a management and operating contract,
an integrator or other management contract, or any other corresponding
contracting arrangement that may evolve with the Department of Energy, or a
counterpart arrangement with or for the benefit of any Governmental
Authority;
(b) as prime contractor or a subcontractor of any tier; or
(c) except as specifically set forth in Section 4.10.2.(a)(iii), at a
Governmental Authority-owned location, or off-site of a Governmental
Authority-owned facility on which Seller or a Continuing Affiliate may be
required by the Governmental Authority or the Governmental Authority's
contractor, to build and/or operate, and which facility Seller may by
contract be required to lease or to own in the entirety or with a majority
or minority interest.
4.10.4. Injunctive Relief. Seller acknowledges that in view of the
-----------------
nature of the Company's business, the foregoing territorial and time limitations
are reasonable and properly required for the adequate protection of Buyer and
that in the event that any such territorial or time limitation is deemed
unreasonable and is then reduced by a court of competent jurisdiction, then, as
reduced, the territorial and/or time limitation shall be enforced. Seller
further acknowledges that the remedy at law for any breach by it of the
agreements contained in this Section 4.10. will be inadequate and that Buyer
will be entitled to seek injunctive relief, and Seller agrees to waive any claim
or defense that there is an adequate remedy at Law for breach by it of the
agreements contained in this Section 4.10.
4.10.5. Severability. This Section 4.10. constitutes an independent
------------
and severable covenant and if any or all of the provisions of this Section 4.10.
are held to be unenforceable for any reason whatsoever, it will not in any way
invalidate or affect the remainder of this Agreement which will remain in full
force and effect. However, if the sale of Shares contemplated by this Agreement
shall be rendered unenforceable or ineffective for any reason, this Section
4.10. shall no longer survive.
-25-
<PAGE>
4.11. Non-Interference Agreement. Seller covenants and agrees that Seller
--------------------------
will not, for a period of two years after the Closing, directly solicit the
employment of any Employee who was an Employee as of the Closing Date.
4.12. Confidentiality. Seller acknowledges that it may possess certain
---------------
data and knowledge of the operations of the Company Entities which are
proprietary and confidential. Seller covenants and agrees that it will not
reveal, divulge or make known to any Entity or use for its own account in
contravention of the covenants set forth in Section 4.10. or for the account of
any other Entity any confidential or proprietary information, method, record,
data, trade secret, pricing policy, bid amount, bid strategy, rate structure,
personnel policy, method or practice of soliciting or obtaining or doing
business by the Company Entities, or any other confidential or proprietary
information whatsoever relating to the Company Entities. Seller further
covenants and agrees that it shall not divulge any such confidential or
proprietary information which it may acquire during any transition period in
which it assists or consults with Buyer or its Affiliates to facilitate the
transfer and the continued success of the Company Entities, respecting such
confidential and proprietary information in trust for the sole benefit of Buyer
and its Affiliates. The foregoing provisions shall not be applicable to any
disclosure or use of confidential information or knowledge that can be
demonstrated to have (i) been publicly known prior to the Closing Date, (ii)
become publicly known by publication or otherwise not due to the unauthorized
act or omission on the part of Seller of its Affiliates, (iii) been
independently developed by Seller, or (iv) been supplied to Seller by a third
party without, to Seller's Knowledge, violation of the rights of the Company
Entities or Buyer or any other party. Further, the foregoing provisions shall
not apply to information used by Seller or Seller's Continuing Affiliates in the
conduct of any of their businesses that do not contravene the covenants in
Section 4.10. or used by Seller or Seller's Continuing Affiliates in connection
with their use of the Company's services after the Closing Date.
4.13. Environmental Matters Covenant. From the date hereof through the
------------------------------
Closing Date, the Seller covenants and agrees with Buyer (a) to provide Buyer
with prompt written notice of any event, the discovery of any fact, or the
existence of any condition which would result in any of the representations and
warranties of the Company in Section 2.13. above not being accurate and complete
in all material respects as of the Closing Date and, concurrently therewith, the
Seller shall supply Buyer with all reports, materials and other information that
is pertinent thereto and (b) to not take any action, permit the Company Entities
to take any action, fail to take any action or permit the Company Entities to
fail to take any action that would or could result in any of the representations
and warranties of the Company in Section 2.13. (Environmental Laws) above not
being accurate and complete in all material respects as of the Closing Date.
4.14. Release for MMT Matters. Subject to the limitations applicable to
-----------------------
Seller's indemnification obligation as set forth in Sections 10.1.(d) and 10.4.,
Seller shall release, indemnify and hold Buyer and the Company Entities harmless
from all indemnity obligations that Seller and the Company may have under the
MMT Agreement or the Acquisition Agreements related to breaches of the MMT
Agreement or the Acquisition Agreements by Seller
-26-
<PAGE>
or the Company, including, without limitation, breaches of the Seller's or the
Company's representations, warranties or covenants, contained therein, which
occurred prior to the Closing Date.
ARTICLE 5. COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
5.1. Cooperation by Buyer. Subject to its rights under Article 9, prior to
--------------------
the Closing, Buyer shall use all reasonable efforts to take all actions and to
do all things necessary or advisable to consummate the transactions contemplated
by this Agreement and to cooperate with Seller in connection with the foregoing,
including using reasonable efforts to obtain all of the Consents in connection
therewith and to lift or rescind any injunction or restraining order or other
Order adversely affecting the ability of the Parties to consummate the
transactions contemplated hereby (provided that such reasonable efforts shall
not require Buyer to make, or cause to be made, any payment).
5.2. Due Diligence Activities. Buyer shall comply with the limitations on
------------------------
the disclosure and use of information set forth in the Confidentiality Agreement
(as hereinafter defined) with respect to the information that Seller provides to
Buyer in and pursuant to this Agreement. Buyer shall not contact any Employee
without the prior written consent of Seller, which shall not be unreasonably
withheld or delayed, or conduct any soil, groundwater or other environmental
sampling in connection with the transactions contemplated hereby without the
prior written consent of Seller, which consent will not be unreasonably withheld
or delayed. Buyer shall use its reasonable efforts to avoid imposing any undue
burden upon any Company Entity and from interfering with the operations of any
Company Entity while conducting due diligence activities and preparing for the
Closing.
5.3. Further Assurances. Subject to the other terms and conditions of this
------------------
Agreement, at any time and from time to time, whether before or after the
Closing, Buyer shall execute and deliver all instruments and documents and take
all other action that Seller may reasonably request to consummate or to evidence
the consummation of the transactions contemplated by this Agreement. In
addition, Buyer shall, upon request from Seller and in compliance with all
applicable Laws, including, without limitation, the Securities Act of 1933, as
amended, remove any legends from the certificates representing the GTS Shares.
5.4. HSR Act Compliance. Promptly after the date hereof, Buyer shall file
------------------
any notification required to be filed under the HSR Act to consummate the
transactions contemplated hereby. Buyer shall use all reasonable efforts to
comply as promptly as practicable with any request made pursuant to the HSR Act
for additional information. Buyer shall cooperate with Seller in such
compliance, and Buyer shall pay one-half of the statutory filing fees required
by the HSR Act. Prior to Closing, Buyer shall advise Seller promptly in respect
of any understandings, undertakings or agreements (oral or written) which Buyer
proposes to make or
-27-
<PAGE>
enter into with the Federal Trade Commission, the Department of Justice or any
other Governmental Authority with respect to the transactions contemplated by
this Agreement.
5.5. Trademarks, Etc. Buyer recognizes and specifically acknowledges that
----------------
none of the Company Entities has, and as a result of the purchase of the Shares,
neither Buyer nor any of its Affiliates shall have, any right, title or interest
in or to the "Westinghouse" trademark or the Westinghouse "CIRCLE W" trademark
or to the trade name Westinghouse.
5.6. Certain Contracts. From and after the Closing, Buyer shall assume all
-----------------
obligations of Seller under the Contracts listed on Schedule 5.6, as described
------------
on such schedule.
5.7. Insurance Matters. (a) On or prior to the Closing, at Buyer's
-----------------
expense, Buyer will have assumed, whether by endorsement, assignment or any
other means that may be prescribed by the American Nuclear Insurers (ANI) and
Material Atomic Energy Liability Underwriters, Nuclear Energy Liability Policy
(Facility Form) under Policy No. NF-305 and Buyer shall maintain such policy in
continuous and uninterrupted force and effect through the tenth anniversary of
the Closing Date. The policy shall be endorsed to provide that the same may not
be cancelled or materially modified without thirty (30) days prior written
notice to Seller from American Nuclear Insurers (ANI) and Material Atomic Energy
Liability Underwriters. In the event Buyer fails to make a premium payment
under such policy, Seller shall have the right, but not the obligation, to make
such payment and to seek reimbursement therefor from Buyer and the policy shall
be endorsed to acknowledge the rights of Seller in this regard.
(b) Subject to the limitations provided in Section 5.7.(c) below,
during the period of time that Seller shall be obligated to indemnify Buyer
Indemnitees pursuant to this Agreement and conditioned upon Seller's compliance
with its indemnification obligation under Section 10.1. hereof, but not
thereafter, Buyer and the Company Entities shall forbear from asserting or
pursuing any rights or interests that the Company Entities may have in or in
connection with or under any policy of insurance issued at any time to Seller or
its Continuing Affiliates, regardless of whether any Company Entity is
designated on such policy as a named insured or an additional insured or is
otherwise entitled to coverage under such policy.
(c) After the Closing, and conditioned upon Seller's compliance with
its indemnification obligation under Section 10.1. hereof, neither Buyer nor any
Company Entity shall have any right or interest in or in connection with or
under any policy of insurance listed on Schedule 2.10, regardless of whether any
-------------
of the Company Entities are designated on any such policy as a named insured or
additional insured or are otherwise entitled to coverage under any such policy,
and all such rights and interests shall be relinquished effective as of the
Closing Date. After the Closing and at the request of Seller, and conditioned
upon, Seller's compliance with its indemnification obligation under Section
10.1. hereof, Buyer shall and shall cause the Company Entities to take such
actions and deliver such assignments, waivers, releases or other documents as
may be necessary or desirable to effect the purposes of this section.
-28-
<PAGE>
5.8 Registration of GTS Shares. (a) Buyer, at its sole cost and expense,
--------------------------
shall use its best efforts to file with the Commission a registration statement
covering the GTS Shares (and no other shares of GTS Duratek stock, common or
preferred except to the extent contractually obligated as of the date hereof)
and shall use its best efforts to have such registration statement declared
effective as soon as possible, including, without limitation, responding
promptly to requests for information by the Commission. Buyer, at its sole cost
and expense, shall use its best efforts to list the GTS shares for trading on
the Nasdaq Stock Market as soon as possible. Buyer shall keep Seller informed
as to the status of the efforts to register and list for trading the GTS Shares,
including, but not limited to any review of the registration statement by the
Commission.
(b) In the event the GTS Shares are not registered with the
Commission and listed for trading on the Nasdaq Stock Market on or before the
ninetieth (90th) day after the Closing Date, Seller shall have the one time
right, at Seller's sole option and at Buyer's expense, to require that Buyer
purchase any or all of the GTS Shares (the "Put Shares") under the terms and
conditions set forth in this Section 5.8. ("Put"). Upon the proper and timely
exercise of the Put by Seller, Buyer shall purchase from Seller and Seller shall
sell to Buyer the Put Shares under the terms and conditions set forth in this
Section 5.8. In the event that Seller desires to exercise the Put, Seller must
so notify Buyer no earlier than the ninetieth (90th) day after the Closing Date
and no later than the one hundred and fifth (105th) day after the Closing Date
("Put Exercise Period") and shall state therein the number of Put Shares. A
failure by Seller to exercise the Put during the Put Exercise Period shall
constitute a waiver of such right. The purchase price for Put Shares upon
exercise of the Put shall equal the closing price for Buyer's common stock as
reported by the Nasdaq Stock Market on the ninetieth (90th) day (or in the event
such date is not a day upon which trading on the Nasdaq Stock Market occurs,
then on the next trading day after such ninetieth (90th) day) after the Closing
Date ("Per Share Price"). At the closing of the purchase and sale pursuant to
the Put, which closing date shall be fixed by Seller in the notice delivered to
Buyer hereunder and which date shall not be earlier than ten (10) days nor later
than thirty (30) days after delivery of such notice ("Put Closing"), Seller
shall execute and deliver to Buyer certificates representing the Put Shares to
be sold pursuant to the Put duly endorsed in negotiable form or with stock
powers duly executed in blank, subject to no Liens. At the Put Closing, Buyer
shall pay to Seller the purchase price by wire transfer in immediately available
funds to an account designated by Seller, equal to the product of the following:
(x) Per Share Price, multiplied by (y) the number of Put Shares tendered by
Seller. In no event, however, shall Buyer be obligated to purchase more than Two
Million U.S. Dollars (U.S. $2,000,000) of GTS Shares, based on the Per Share
Price, pursuant to the Put. The provisions of this Section 5.8.(b) shall not
relieve Buyer of its obligations under Section 5.8.(a) to exercise best efforts
to register and list for trading the GTS Shares, except for any such shares
purchased by Buyer at the Put Closing.
-29-
<PAGE>
ARTICLE 6. MUTUAL COVENANTS
6.1. Taxes.
-----
6.1.1. Apportionment of Income Taxes Between Pre-Closing and Post-
----------------------------------------------------------
Closing Tax Periods. In order to apportion any Income Tax (as hereinafter
- -------------------
defined) relating to any taxable year or any other period that is treated as a
taxable year (a "Tax Period") that includes, but that would not, but for this
Section, close on the Closing Date, the Parties shall, unless specifically
prohibited by applicable law, elect or cause their Affiliates to elect with the
relevant taxing authority to treat for all purposes the Closing Date as the last
day of a taxable period of the Company Entities, and such Tax Period shall be
treated as a Short Tax Period (as hereinafter defined) and a Pre-Closing Tax
Period (as hereinafter defined) for purposes of this Agreement. In any case
where applicable law specifically prohibits the Company Entities from treating
the Closing Date as the last day of a Short Tax Period, then for purposes of
this Agreement, the portion of such Income Tax that is attributable to the
operations of the Company Entities for such Interim Tax Period (as hereinafter
defined) shall be the Income Tax that would be due with respect to the Interim
Tax Period if such Interim Tax Period were a Short Tax Period, based on a
closing of the books as of the Closing Date, provided that exemptions,
allowances or deductions that are calculated on an annual basis (including, but
not limited to, depreciation and amortization deductions) shall be allocated
between the period ending on the Closing Date and the period after the Closing
Date in proportion to the number of days in each such period.
6.1.2. Payment of Income Taxes. In furtherance of the foregoing, any
-----------------------
Income Tax in respect of any Pre-Closing Tax Period shall be borne by Seller,
and any refunds or credits in respect of such Income Tax for any such Pre-
Closing Tax Period shall be the property of Seller. Any Income Tax in respect
of any Interim Tax Period (including amounts payable as a result of an audit or
other adjustment), to the extent not paid on or before the Closing Date, shall
be paid by Seller to Buyer or accrued or reserved for as a current liability as
of the Closing Date for purposes of determining the Closing Working Capital
Deficit, which shall pay such Income Tax to the relevant Governmental Authority,
no later than 15 calendar days prior to the date such payment is due, and any
refunds or credits received by Buyer or any Company Entities in respect of such
Income Tax for such Interim Tax Period shall be the property of Seller. Any
Income Tax attributable to the operations of Buyer or any Company Entities for
any Post-Closing Tax Period (as hereinafter defined) shall be borne by Buyer or
the appropriate Company Entities, as the case may be. Any refunds or credits in
respect of such Income Tax for any such Post-Closing Tax Period shall be the
property of Buyer or the appropriate Company Entities, as the case may be.
Seller shall bear any and all Taxes resulting from any of the Company Entities
having been (or ceasing to be) included in any Affiliated Group for any taxable
period (or portion thereof) ending on or before the Closing Date, including,
without limitation, (a) any liability for Taxes resulting from a "deferred
intercompany transaction" within the meaning of Treasury Regulation Section
1.1502-13(a)(2) (or any analogous or similar provision under state or local law)
that occurred on or before the Closing Date, (b) any liability of any of the
Company Entities pursuant to Treasury Regulation Section 1.1502-6(a) (or any
analogous or similar provision under state or
-30-
<PAGE>
local law), and (c) all Taxes attributable to or arising out of the election
under Section 338(h)(10) of the Code.
6.1.3. Preparation and Filing of Income Tax Returns. Seller shall be
--------------------------------------------
responsible, at its expense, for the preparation and filing of all Income Tax
Returns for any Short Tax Period. Seller shall prepare such Income Tax Returns
in a manner consistent with prior years and shall, in respect of such Income Tax
Returns, determine the income, gain, expenses, losses, deductions and credits of
the Company Entities in a manner consistent with prior practice. The results of
operations of the Company Entities from the first day of the taxable year
through the Closing Date shall be included in Seller's consolidated federal
Income Tax Return and in any consolidated, combined or unitary Income Tax
Returns required to be filed by Seller after the Closing Date. The results of
operations of the Company Entities from the first day of the taxable year
through the Closing Date shall be included in any separate Income Tax Returns
filed by the Company Entities after the Closing Date; provided, however, that
-------- -------
Seller shall prepare (without cost to Buyer or any Company Entity) all such
separate Income Tax Returns for any Short Tax Period (but not for any Tax Period
which includes or ends after the Closing Date) and submit them to Buyer, and
Buyer shall have all such separate Income Tax Returns appropriately executed and
filed on a timely basis. With respect to any Income Tax Return to be prepared
by Seller, Buyer shall, and shall cause each Company Entity to, provide to
Seller information in a manner consistent with past practice for use in
preparation of such Income Tax Returns, in each case, no later than 60 calendar
days after the relevant Tax Period ends. Upon written notice from Seller
stating that applicable Law for the jurisdiction in such notice specifically
prohibits the Company Entities from treating the Closing Date as the last date
of a Short Tax Period, Buyer shall be responsible for preparing and filing in
such designated jurisdictions all Income Tax Returns of the Company Entities for
Tax Periods commencing prior to the Closing Date and not ending on or before the
Closing Date.
6.1.4. Cooperation. Seller and Buyer shall, and shall cause the
-----------
Company Entities to, provide each other with such assistance as may reasonably
be requested by them in connection with the preparation of any Tax Return, any
Tax audit or other examination by any Governmental Authority, or any judicial or
administrative proceedings related to liability for Taxes. Seller and Buyer
shall, and shall cause the Company Entities to, retain and provide each other
with any records or information which may be relevant to such preparation,
audit, examination, proceeding or determination. Such assistance shall include
making employees available on a mutually convenient basis to provide and explain
such records and information and shall include providing copies of any relevant
Tax Returns and supporting work schedules. The Party requesting assistance
hereunder shall reimburse the other for reasonable out-of-pocket expenses
incurred in providing such assistance.
6.1.5. Refund Claims. Seller shall provide Buyer and the Company
-------------
Entities with such assistance as they may reasonably request to prepare any
refund claim attributable to the carry back of any tax losses or tax credits
incurred by Buyer or any Company Entity in any Post-Closing Tax Period to any
consolidated, combined or unitary Income Tax Return of Seller
-31-
<PAGE>
or to any separate Income Tax Return of any Company Entity for any Pre-Closing
Tax Period, and Seller shall receive and retain the amount of any resulting
refunds together with any interest thereon upon receipt by any party. Buyer
reserves the right to carry back or carry forward Tax losses as it determines in
its sole discretion.
6.1.6. Tax Sharing Agreements. Any and all Tax (or similar)
----------------------
agreements, arrangements or undertaking among Seller or its Affiliates and the
Company Entities that relate to any liability of the Company Entities for the
Taxes of Seller shall terminate as of the Closing Date and any rights or
obligations resulting from such agreements shall be eliminated as of the Closing
Date.
6.1.7. Notice of Audit. If, in connection with any examination,
---------------
investigation, audit or other proceeding concerning any Income Tax Return
covering the operations of the Company Entities for any Pre-Closing Tax Period,
any Governmental Authority issues to any of the Parties or the Company Entities
a notice of deficiency, a proposed adjustment, an assertion of claim or a demand
concerning the Tax Period covered by such Income Tax Return, the recipient shall
notify the other Party that it has received the same within 20 calendar days of
its receipt.
6.1.8. Audits Controlled by Seller. Seller shall have the sole and
---------------------------
exclusive right, power and authority to negotiate, resolve, settle or contest
any such notice of deficiency, proposed adjustment or assertion of claim or
demand and to represent and act for and on behalf of the Company Entities in
connection with any such examination, investigation, audit or other proceeding,
including refund claims of any Income Tax Return of the Company Entities for Tax
Periods ending on or before the Closing Date. Buyer shall notify Seller in
writing promptly upon learning of any such examination, investigation, audit or
other proceeding, and Seller shall keep Buyer informed of the progress thereof
and consult with Buyer in good faith in connection therewith. Notwithstanding
the first sentence of this Section 6.1.8., Seller shall not resolve, settle,
compromise or abandon any issue or claim without the prior written consent of
Buyer if such action would materially and adversely affect the Income Taxes of
Buyer or any Company Entity in any Post-Closing Tax Period (including the
imposition of income tax deficiencies, the reduction of asset basis on cost
adjustments, the lengthening of any amortization or depreciation periods, the
denial of amortization or depreciation deductions or the reduction of loss or
credit carryforwards). Such consent shall not be unreasonably withheld, and
shall not be necessary to the extent that Seller has indemnified Buyer and the
Company Entities against the effects of any such settlement.
6.1.9. Audits Controlled by Buyer. Buyer shall have the sole and
--------------------------
exclusive right, power and authority to negotiate, resolve, settle or contest
any such notice of deficiency, proposed adjustment or assertion of claim or
demand in connection with any such examination, investigation, audit or other
proceeding of any Income Tax Return of Buyer or any Company Entity for Tax
Periods ending after the Closing Date. To the extent that Seller has
indemnified Buyer and the Company Entities with respect to any such notice of
deficiency, proposed adjustment or assertion or claim or demand herein, Buyer
shall not, and shall not permit the
-32-
<PAGE>
Company Entities to, resolve, settle, compromise, or abandon any issue or claim
without the prior written consent of Seller if such action would materially and
adversely affect the Income Tax of Seller for any Tax Period (including the
imposition of income tax deficiencies, the reduction of asset basis on cost
adjustments, the lengthening of any amortization or depreciation periods, the
denial of amortization or depreciation deductions or the reduction of loss or
credit carryforwards). Such consent shall not be unreasonably withheld, and
shall not be necessary to the extent that Buyer notifies Seller that Buyer will
forego any obligation of Seller to indemnify Buyer and the Company Entities
against the effects of any such settlement. Buyer shall keep, and shall cause
the Company Entities to keep, Seller informed of the progress of any such
proceedings and to consult with Seller in good faith in connection therewith.
6.1.10. Section 338 Elections. (a) Buyer shall make an election
---------------------
under Section 338(g) of the Code (and any comparable election under state or
local tax Law) with respect to the Company Entities. Buyer and Seller shall
make, and Seller shall cause the Company Entities to make, an election under
Section 338(h)(10) of the Code (and any comparable elections under state or
local tax Law) with respect to the acquisition of the Company Entities by Buyer.
Buyer and Seller shall cooperate fully with each other, and Seller shall cause
the Company Entities to cooperate fully with Buyer, in the making of such
election. In particular, and not by way of limitation, in order to effect such
election, on or prior to the Closing Date, Buyer and Seller shall jointly
execute, and Seller shall cause the Company Entities to jointly execute with
Buyer, necessary copies of Internal Revenue Service Form 8023 and all
attachments required to be filed therewith pursuant to applicable Law.
(b) Buyer and Seller agree that they shall use their reasonable
efforts to enter into an agreement (the "Asset Allocation Agreement") as soon as
practicable, but in any event no later than 60 calendar days after the Closing
Date, concerning the allocation of the Purchase Price for Income Tax purposes
among the assets held by the Company Entities. Buyer and Seller agree that the
Purchase Price shall include all liabilities which are assumed by Buyer and for
which Buyer does not have rights to indemnification pursuant to this Agreement.
If, 60 calendar days before the last date on which the Section 338(h)(10)
election may be filed, Buyer and Seller have not adopted the Asset Allocation
Agreement as described above, each party shall make its own allocation of the
Purchase Price for Income Tax purposes and for any other purpose.
6.1.11. Tax Indemnification. (a) Subject to the limitations
-------------------
applicable to Seller's indemnification obligation as set forth in Sections
10.1.(d) and 10.4., Seller shall indemnify and hold the Buyer Indemnitees (as
hereinafter defined) harmless from and against any and all Damages (as
hereinafter defined) with respect to (i) any Income Tax which Seller is
obligated to bear under this Section 6.1. and (ii) any Tax (other than Income
Taxes) which are owed, owing, accrued or payable by any Company Entity prior to
the Closing Date.
(b) Subject to the limitations applicable to Buyer's indemnification
obligation as set forth in Section 10.2(e) and 10.4, Buyer shall indemnify and
hold the Seller Indemnitees (as
-33-
<PAGE>
hereinafter defined) harmless from and against any and all Damages with respect
to any Income Tax which Buyer is obligated to bear under this Section 6.1.
6.2. Books and Records.
-----------------
6.2.1. Access. For a period of ten years after the Closing, each
------
Party shall provide the other Party with reasonable access during normal
business hours to its books and records and the books and records of the Company
Entities including the personnel employment and medical records (other than
books and records protected by the attorney-client privilege) to the extent that
they relate to the condition or operation of the Company Entities prior to the
Closing and are requested by such Party to prepare its Returns, to respond to
Third Party Claims or Actions, to prepare reports or filings required to be
filed under the Securities Exchange Act of 1934, as amended, or for any other
legitimate purpose specified in writing. Each Party shall have the right, at
its own expense, to make copies of any such books and records. In order to
register the GTS Shares as described in Section 3.8., Buyer will need to file
with the Commission three (3) years of audited consolidated financial statements
of the Company in accordance with Rule 3-05 of Regulation S-X of The Securities
Act of 1933, as amended. Seller agrees to provide whatever assistance is
reasonably required to assist Buyer in completing such audits including securing
representation letters typically provided by management to the auditors in the
course of an audit.
6.2.2. Destruction. For a period of ten years after the Closing,
-----------
neither Party nor any Company Entity shall dispose of or destroy any books and
records of the Company Entities to the extent that they relate to the condition
or operation of the Company Entities prior to the Closing without first offering
to turn over possession thereof to the other Party by written notice at least 90
calendar days prior to the proposed date of disposition or destruction.
6.2.3. Confidentiality. Each Party may take such action as it deems
---------------
reasonably appropriate to separate or redact information unrelated to the
Company Entities from documents and other materials requested and made available
pursuant to this Section and to condition access to materials that it deems
confidential to the execution and delivery of a written agreement by the other
Party not to disclose or misuse such information.
6.2.4. Assistance. Each Party shall, upon written request and at the
----------
requesting Party's expense, make personnel available to assist in locating and
obtaining any books and records of the Company Entities to the extent that they
relate to the condition or operation of the Company Entities prior to the
Closing and make personnel available whose assistance, participation or
testimony is reasonably required in anticipation of, preparation for or the
prosecution or defense of any Third Party Claim (as hereinafter defined) in
which the other Party does not have any adverse interest.
6.3. Notice of Certain Events. Seller shall notify Buyer, and Buyer shall
------------------------
notify Seller, as promptly as practicable, of (a) any notice received by such
Party from any Entity alleging that
-34-
<PAGE>
the Consent of such Entity is or may be required in connection with the
transactions contemplated by this Agreement, (b) any notice or other
communication received by such Party from any Governmental Authority in
connection with the transactions contemplated by this Agreement, (c) any Actions
commenced or threatened against such Party or any of its Affiliates that is
reasonably likely to adversely affect such Party's ability to consummate the
transactions contemplated by this Agreement, or (d) any event or occurrence
that, to the knowledge of Buyer or Seller, as the case may be, causes any of the
representations or warranties made by it in this Agreement to be inaccurate in
any material respect as of any date that is relevant for such representations or
warranties.
6.4. IP Matters. (a) On or prior to the Closing Date, Seller shall, or
----------
shall cause one or more of the Continuing Affiliates to, enter into the IP
Assignment (as hereinafter defined) providing for the assignment of all Assigned
Intellectual Property to Buyer or one of its designated Affiliates. For a
period of up to five years following the Closing Date, Seller shall cooperate to
assist Buyer in the preparation and filing of assignment documents with all
Governmental Authorities required to cause title in and to all of the Assigned
Intellectual Property to be transferred to Buyer or one of its designated
Affiliates. Each of the Parties shall pay one-half of the actual out-of-pocket
costs related to such filings and notices; provided that Seller's obligation to
pay such costs shall not exceed $30,000.
(b) On or prior to the Closing Date, Seller shall, or shall cause one
or more of the Continuing Affiliates to enter into an IP License Agreement (as
hereinafter defined), pursuant to which Seller or such Continuing Affiliate
shall grant the Company Entities a perpetual, fully paid-up non-exclusive
license to use the Retained Intellectual Property as set forth in the form of
Exhibit C hereto.
- ---------
(c) On or prior to the Closing Date, Seller shall, or shall cause one
or more of the Continuing Affiliates to enter into an IP License Agreement,
pursuant to which the Company shall grant Seller or one or more Continuing
Affiliates a perpetual, fully paid-up non-exclusive license to use the Assigned
Intellectual Property.
6.5. Certain Consents. Notwithstanding anything to the contrary in this
----------------
Agreement, this Agreement shall not constitute an agreement to assign or
transfer any interest in any customer purchase order, Contract, License, Permit
or other instrument or arrangement or any claim, right or benefit, or an
agreement to assume any liability, obligation or commitment arising thereunder
or resulting therefrom, if an assignment or transfer or an attempt to make such
an assignment or transfer without the Consent of a third party would constitute
a breach or violation thereof or a breach of Law, or affect adversely the rights
of Buyer or Seller thereunder and such Consent cannot by Law or despite all
necessary and appropriate efforts (other than the payment of money to any third
party or the amendment of the terms of such Contract, License, Permit or other
-35-
<PAGE>
instrument or arrangement in any material respect) be obtained; and any transfer
or assignment to, or any assumption by, Buyer of any interest in, or liability,
obligation or commitment under, any such customer purchase order, Contract,
License, Permit or other instrument or arrangement that requires the Consent of
a third party shall be made subject to such Consent being obtained. Prior to
the Closing, each Party (as hereinafter defined) shall use all reasonable
efforts and cooperate in obtaining all Consents necessary to effect the transfer
of all such customer purchase orders, Contracts, Licenses, Permits and other
instruments and arrangements as contemplated hereby; provided, however, that
-------- -------
neither Party shall be required to pay or commit to pay any amount to (or incur
any obligation in favor of) any person from whom any such Consent may be
required (other than nominal governmental filing fees payable to any
Governmental Authority). In the event any such Consent is not obtained on or
prior to the Closing, the Parties shall cooperate, for a period of one year
following the Closing Date, in any lawful and reasonable arrangement to provide
that Buyer shall receive the benefits under any customer purchase orders,
Contracts, Licenses, Permits or other instrument or arrangement not assigned and
transferred at the Closing by reason of the failure to obtain such Consent (a
"Non-Transferred Instrument"), including, if necessary, at the request and
expense of Buyer, enforcing performance by any third party of its obligations in
respect of such Non-Transferred Instrument; provided, however, that Seller shall
-------- -------
bear the expense of such enforcement to the extent it relates to Seller's
failure to obtain such Consent prior to the Closing or to the extent such
expense would have been the responsibility of Seller had the Consent been
obtained; and provided further, that, to the extent the parties are successful
-------- -------
in providing the benefits of such Non-Transferred Instruments to Buyer, Buyer
shall pay, honor and discharge when due all liabilities, obligations and
commitments of Seller related thereto to the extent due to operations conducted
after the Closing Date.
6.6. Guarantees. Prior to the Closing, Seller and Buyer shall cooperate
----------
and use reasonable efforts to secure effective as of the Closing Date, (a) full
releases for Seller and the Continuing Affiliates under the Contracts listed on
Schedule 5.6 and (b) full releases for Seller and the Continuing Affiliates
- ------------
under or replacements of or substitutions for the Guarantees listed on Schedule
--------
6.6; provided, that any replacements or substitutions shall be obtained at
- ---
Buyer's expense. From and after the Closing, Buyer shall indemnify and hold
Seller and the Continuing Affiliates harmless from and against all Damages
attributable to all of such Contracts and Guarantees, except to the extent that
such Damages arise from events or conditions that entitle any Buyer Indemnitee
to indemnification pursuant to Article 10 and shall use reasonable efforts to
secure, effective as of the Closing Date, full releases for Seller and the
Continuing Affiliates thereunder, and Seller shall, and shall cause the
Continuing Affiliates to, cooperate with Buyer to secure such releases.
6.7. Legacy Waste and Equipment. On or prior to the Closing, Seller shall
--------------------------
use commercially reasonable efforts to cause the Company to complete the
processing and disposal of (a) the secondary waste generated and customer waste
received by the Company prior to June 30, 1996 as identified in the records of
the Company and (b) the sealands and other waste containers identified on
Schedule 6.7(a) (collectively, "Legacy Waste and Equipment"). In the event the
- ---------------
processing and disposal of the Legacy Waste and Equipment is not completed prior
to Closing, then the Company shall process and dispose of such remaining Legacy
Waste and Equipment in a timely manner consistent with the Company's practice
since June 30, 1996. The
-36-
<PAGE>
rates the Company shall charge for processing Legacy Waste and Equipment are set
forth in Schedule 6.7(b). The reserves on the books of any Company Entity
---------------
relating to the costs of processing and disposal of the Legacy Waste and
Equipment as of the Closing Date ("Legacy Waste Reserve") shall remain on the
books of such Company Entity. To the extent the cumulative actual costs as
evidenced by any invoices received by any Company Entity, to process and dispose
of the Legacy Waste and Equipment ("Actual Legacy Waste Costs") exceeds the
Legacy Waste Reserve, Seller shall, upon demand of Buyer and receipt of
reasonable supporting documentation, pay such excess to the Company. In the
event the Actual Legacy Waste Cost is less than the Legacy Waste Reserve, then
Buyer shall notify Seller of such deficiency and shall pay to Seller the amount
of such deficiency.
6.8. Working Capital. (a) As of March 31, 1997, the Company's Working
---------------
Capital Deficit shall be $4,000,000. Within five (5) days prior to the Closing,
Seller shall estimate the March 31 Working Capital Deficit ("Estimated March 31
Working Capital Deficit"), shall provide notice to Buyer of the Estimated March
31 Working Capital Deficit and shall take such actions, such that on the Closing
Date, the Working Capital Deficit of the Company on March 31, 1997, based on the
Estimated March 31 Working Capital Deficit shall be $4,000,000. Seller and
Buyer shall, within sixty (60) days after the Closing, jointly determine the
Company's March 31 Working Capital Deficit ("March 31 Working Capital Deficit").
In the event the March 31 Working Capital Deficit is greater than $4,000,000,
Seller shall pay to Company the amount by which the March 31 Working Capital
Deficit exceeds $4,000,000. In the event the March 31 Working Capital Deficit
is less than $4,000,000, Buyer or Company shall pay to Seller the amount by
which the March 31 Working Capital Deficit is less than $4,000,000. Any
payments due hereunder shall be made within fifteen (15) days after the March 31
Working Capital Deficit is finally determined without interest. In the event
Seller and Buyer are unable to agree upon the Closing Working Capital Deficit,
such dispute shall be resolved by the Unaffiliated Firm no later than ninety
days after the Closing. The costs, expenses and fees of the Unaffiliated Firm
shall be borne equally by Buyer and Seller. Any payments to be made hereunder
shall be deemed an adjustment to the Cash Payment.
(b) An adjustment to the Purchase Price will be made for cash
collections and cash disbursements made by the Company Entities or by Seller on
behalf of the Company Entities after March 31, 1997 through the Closing Date.
As of the Closing Date, an adjustment will be made to the Cash Payment for the
difference between estimated cash collected and estimated cash disbursements
("Estimated Net Cash Flow") made by the Company Entities or by Seller on behalf
of the Company Entities after March 31, 1997 through the Closing Date. In the
event the estimated cash collected is greater than the estimated cash
disbursements, the difference will be subtracted from the Cash Payment. In the
event the estimated cash collected is less than the estimated cash
disbursements, the difference will be added to the Cash Payment. The Seller
shall within sixty (60) days after the closing determine actual cash collected
and actual cash disbursements made by the Company Entities or by Seller on
behalf of the Company Entities after March 31, 1997 through the Closing Date
("Actual Net Cash Flow"). In the event the Actual Net Cash Flow is greater than
the Estimated Net Cash Flow, Seller shall pay to Buyer
-37-
<PAGE>
such difference. In the event the Actual Net Cash Flow is less than the
Estimated Net Cash Flow, Buyer shall pay to Seller the difference. Any payments
due hereunder shall be made within fifteen (15) days after the Actual Net Cash
Flow is finally determined without interest. In the event Seller and Buyer are
unable to agree upon the Actual Net Cash Flow, such dispute shall be resolved by
the Unaffiliated Firm no later than ninety days after the Closing. The costs,
expenses and fees of the Unaffiliated Firm shall be borne equally by Buyer and
Seller. Any payments to be made hereunder shall be deemed an adjustment to the
Cash Payment. Any funds transferred through Seller's clearinghouse shall be
deemed to be cash for purposes hereof.
6.9. Seller Commitment to Services.
-----------------------------
6.9.1. Existing Contracts. Absent a material breach or default by
------------------
the Company which has not been cured within the time period provided in such
agreement, Seller shall not cancel or terminate any existing contracts with any
Company Entity described on Schedule 2.11(a) or on Schedule 2.11(b) prior to the
---------------- ----------------
respective expiration, maturity or termination dates stated therein. Except as
specifically set forth in Section 6.9.2., Seller shall have no obligation to
extend or renew any contract set forth on Schedule 2.11(a) or on Schedule
---------------- --------
2.11(b) or to enter into any agreement for services with Company.
- -------
6.9.2. Additional Commitment. Subject to the limitation set forth in
---------------------
this Section 6.9.2., until the second anniversary of the Closing Date, Seller
shall utilize the services of the Company to transport, process and dispose of
any radioactive or mixed commercial waste produced or generated by or resulting
from the operation of the businesses of Seller and its Continuing Affiliates so
long as the fees of the Company for these services are less expensive than the
cost for final disposal, including burial, without any volume and/or mass
reduction, and the fees and other terms of the Company are commercially
reasonable and no more favorable to the Company than may be obtained by the
Company at that time in comparable, arm's length transactions with Entities
(other than Seller or its Continuing Affiliates) who are not subject to
covenants of this nature and kind provided, however, that:
------------------
(a) This Section 6.9.2. shall not obligate or require Seller to
utilize the services of the Company to achieve or realize for the Company
any specified amounts of revenues or to deliver to the Company any
specified volumes of waste;
(b) Seller shall be permitted to utilize the services of any Entity
other than Company, including any Entity engaged in a Competing Service, to
the extent that the revenues realized from services provided to Seller by
the Company exceed those reflected in the Company's 1997 operating budget
in terms of revenues generated therefrom;
(c) Seller shall not be obligated or required to utilize the services
of the Company and shall be permitted to use the services of any Entity
other than the Company, including any Entity engaged in a Competing
Service, to the extent that the Seller is prevented from doing so by the
terms of any arrangement with Seller's customer
-38-
<PAGE>
or is required by the terms of any arrangement with Seller's customer to
obtain competitive pricing or other terms for such services for the
customer and Seller, in its reasonable discretion consistent with its
obligations to its customers under such arrangement, determines that the
pricing or terms of the Company for such services are not competitive.
6.10. Maxey Flats. As an express condition to the indemnification set
-----------
forth in Section 10.1.(i) Buyer consents to the prosecution of the Aetna
-----
Casualty and Surety v. Nuclear Engineering Co., Civil Action No. 87-CL-03359
- ----------------------------------------------
(Jefferson County, Kentucky) action in its name and shall permit Seller to
control in its sole discretion and sole expense, the defense and prosecution of
this action. Without limiting the foregoing and conditioned upon Seller's
compliance with its indemnification obligation under Section 10.1.(i) hereof,
Seller shall be permitted to terminate, commute or otherwise modify Facility
Form Policy NF-48, naming Hittman Nuclear & Development Corporation as a named
insured and issued on January 18, 1960, and Supplier & Transporters form NS-332,
naming Hittman Nuclear & Development Corporation as a named insured and issued
February 23, 1977, or to enter into any settlement or compromise of the above-
referenced action. Moreover and conditioned upon Seller's compliance with its
indemnification obligation under Section 10.1.(i) hereof, Buyer agrees to assign
(or to cause any Company Entity to assign) to Seller all rights, claims and
causes of action to the extent relating to the Maxey Flats facility including,
to the extent necessary, all rights and causes of action under insurance
policies. Nothing in this paragraph is intended to affect Seller's independent
right to coverage under Facility Form Policy NF-48.
ARTICLE 7. CONDITIONS PRECEDENT TO CLOSING
7.1. Conditions Precedent to Buyer's Obligations. The obligation of Buyer
-------------------------------------------
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction of the following conditions prior to or at the Closing, any
of which may be waived in writing by Buyer:
7.1.1. Accuracy of Representations and Warranties. The
------------------------------------------
representations and warranties made by Seller in this Agreement shall be true
and correct as of the Closing Date, except for (a) representations and
warranties made as of a specified date, which shall be true and correct as of
the specified date, or (b) breaches and inaccuracies that do not, either
individually or in the aggregate, have a Material Adverse Effect.
7.1.2. HSR Act. If the HSR Act is applicable to the transactions
-------
contemplated by this Agreement, all applicable waiting periods thereunder shall
have expired or been terminated.
7.1.3. Litigation. No Order shall be in effect forbidding or
----------
enjoining the consummation of the transactions contemplated hereby and no Action
shall be pending or threatened which, if adversely determined, would result in
any such Order.
-39-
<PAGE>
7.1.4. Covenants. Seller shall have performed and complied in all
---------
material respects with all covenants and agreements required by this Agreement
to be performed by Seller prior to or at the Closing.
7.1.5. Deliveries. Seller shall have delivered to Buyer the
----------
documents, instruments and certificates required by Section 8.2.
7.1.6. Required Consents and Approvals. The Consents and Approvals
-------------------------------
from any Governmental Authority or any other Entity set forth on Schedule 7.1.6
--------------
shall have been obtained and shall be effective and in form and substance
satisfactory to Buyer.
7.1.7. Material Adverse Change. After the date hereof, there shall
-----------------------
have been no event occur or condition change that has either individually, or in
the aggregate, a Material Adverse Effect.
7.1.8. Resignation of Directors. If and to the extent requested by
------------------------
Buyer, the existing members of the board of directors of the Company Entities
shall have submitted resignations to be effective upon the Closing.
7.2. Conditions Precedent to Seller's Obligations. The obligation of
--------------------------------------------
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction of the following conditions prior to or at the
Closing, any of which may be waived in writing by Seller:
7.2.1. Truth of Representations and Warranties. The representations
---------------------------------------
and warranties made by Buyer in this Agreement shall be true and correct in all
material respects as of the Closing Date.
7.2.2. HSR Act. If the HSR Act is applicable to the transactions
-------
contemplated by this Agreement, all applicable waiting periods thereunder shall
have expired or been terminated.
7.2.3. Litigation. No Order shall be in effect forbidding or
----------
enjoining the consummation of the transactions contemplated hereby and no Action
shall be pending or threatened which, if adversely determined, would result in
any such Order.
7.2.4. Covenants. Buyer shall have performed and complied in all
---------
material respects with all covenants and agreements required by this Agreement
to be performed by Buyer prior to or at the Closing.
7.2.5. Deliveries. Buyer shall have delivered to Seller the payments
----------
and documents required by Section 8.3.
-40-
<PAGE>
ARTICLE 8. CLOSING
8.1. Time and Place. Subject to the terms and conditions of this
--------------
Agreement, the Closing shall take place at the offices of Jones, Day, Reavis &
Pogue, 500 Grant Street, 31st Floor, Pittsburgh, Pennsylvania at 10:00 a.m., on
the first business day following the satisfaction or waiver of all of the
conditions set forth in Article 7 (excluding those set forth in Sections 7.1.5.
and 7.2.5.), or at such other time and place as the Parties shall agree upon in
writing (the "Closing Date"). The Closing shall be deemed effective at 11:59
p.m., Pittsburgh time, on the Closing Date.
8.2. Deliveries by Seller. At the Closing, Seller shall deliver or cause
--------------------
to be delivered to Buyer the following:
(a) Certificates representing all of the Shares, together with duly
executed stock powers in favor of Buyer.
(b) Certificates representing the capital stock owned, to the extent
existing, by the Company in the other Company Entities.
(c) The stock books, stock ledgers, minute books and corporate seal
(if any) of each of the Company Entities.
(d) The recorded certificate of incorporation, as amended or
supplemented to date, (or comparable instrument) of Seller and the Company
Entities, recently certified by the Secretary of State of the jurisdiction in
which such Entity is domiciled.
(e) A certificate of the Secretary or Assistant Secretary of Seller
concerning (i) its Charter Documents, (ii) the adoption of resolutions by its
board of directors authorizing the transactions contemplated by this Agreement
and (iii) the incumbency of its officers, all in form and substance satisfactory
to Buyer.
(f) Certificates of the Secretaries or Assistant Secretaries of the
Company Entities, or a certificate of an executive officer of Seller, concerning
the Charter Documents (or comparable instruments) of the Company Entities.
(g) Recent long form (if available) good standing certificates for
Seller and the Company Entities issued by the Secretaries of State of the
jurisdictions in which Seller and the Company Entities are domiciled and for the
Company Entities certificates of qualification to do business as a foreign
corporation in each of the jurisdictions in which such Company Entity is
qualified.
-41-
<PAGE>
(h) A certificate signed by an executive officer of Seller and dated
the Closing Date certifying that the conditions set forth in Sections 7.1.1. and
7.1.4. have been satisfied.
(i) A receipt for the payment of the Purchase Price made as
contemplated by Section 1.3.
(j) A duly executed IP Assignment.
(k) One or more duly executed IP License Agreements.
(l) The Transition Services Agreement, duly executed by Seller and/or
one or more Continuing Affiliates, in substantially the form of Exhibit A.
(m) A written opinion addressed to Buyer from counsel for Seller, who
may be an attorney in the office of the General Counsel of Seller, in
substantially the form of Exhibit D.
---------
(n) A resignation from each employee, officer and director of Seller
or any Continuing Affiliate serving at the request of Seller as an officer or
director of a Company Entity, from each such position and a duly executed
resignation of each of the directors of the Company Entities, effective as of
the Closing Date.
8.3. Deliveries by Buyer. At the Closing, Buyer shall deliver or cause to
-------------------
be delivered to Seller the following:
(a) The payment of the Purchase Price pursuant to Section 1.3.,
including Certificates representing the GTS Shares.
(b) The recorded Certificate of Incorporation, as amended or
supplemented (or comparable instrument) of Buyer, recently certified by the
Secretary of State of the state in which Buyer is domiciled.
(c) A certificate of the Secretary or Assistant Secretary of Buyer
concerning (i) Buyer's Charter Documents, (ii) the adoption of resolutions by
its board of directors authorizing the transactions contemplated by this
Agreement, and (iii) the incumbency of its officers, all in form and substance
satisfactory to Seller.
(d) A recent long form (if available) good standing certificate for
Buyer issued by the Secretary of State of the state in which Buyer is domiciled.
-42-
<PAGE>
(e) A certificate signed by an executive officer of Buyer and dated
the Closing Date certifying that the conditions set forth in Sections 7.2.1. and
7.2.4. have been satisfied.
(f) The Transition Services Agreement, duly executed by Buyer and/or
one or more post-Closing subsidiaries of Buyer.
(g) A written opinion addressed to Seller from counsel for Buyer, who
may be an attorney in the office of the General Counsel of Buyer, in
substantially the form of Exhibit E.
---------
(h) An agreement entered into with Molten Metal Technology, Inc. and
MMT of Tennessee, Inc. pursuant to which Buyer agrees to abide by the
noncompetition covenants as contemplated by Section 9.1.(f) of the MMT
Agreement.
ARTICLE 9. TERMINATION PRIOR TO CLOSING DATE
9.1. Termination. This Agreement may be terminated prior to the Closing
-----------
Date only as follows:
(a) By the mutual written consent of the Parties;
(b) By either Party immediately upon written notice to the other
Party, if the Closing has not occurred on or before May 31, 1997 (the "Outside
Date") and the failure of the Closing to have occurred has not resulted from the
failure of the terminating party to comply with the terms of this Agreement or a
breach of the terminating party's representations and warranties made herein;
(c) By either Party immediately upon written notice to the other
Party if an Order is issued that enjoins or prohibits the Closing and becomes
final and non-appealable; or
(d) By either party immediately upon written notice to the other
party if all of the conditions to such party's obligation to proceed with the
Closing as set forth in this Agreement can not be met prior to the Outside Date
and provided that the inability of the terminating party to satisfy such
condition has not resulted from the failure of the terminating party to comply
with the terms of this Agreement or a breach of the terminating party's
representations and warranties made herein; or
(e) By Buyer if, after the date hereof, there shall have been an
event occur or condition change that has either individually, or in the
aggregate, a Material Adverse Effect, provided that such event or condition does
not result from the failure of Buyer to comply in all material respects with the
terms of this Agreement or a material breach of Buyer's representations and
warranties made herein.
-43-
<PAGE>
9.2. Effect of Termination. If this Agreement terminates pursuant to
---------------------
Section 9.1., no Party shall have any liability or obligation to the other Party
hereunder, other than the confidentiality obligations set forth in Section 5.2
and in the Confidentiality Agreement and the provisions of Sections 9.3. and
12.8. However, such termination shall not relieve any Party of liability for
any willful, material breach of this Agreement.
9.3. Break-Up Fee. In the event the Closing does not occur (other than
------------
as a result of a failure of a condition to Seller's obligation to proceed with
the Closing as set forth in Sections 7.2.1., 7.2.4. or 7.2.5.), then Seller
shall reimburse Buyer for reasonable out-of-pocket fees and expenses incurred by
Buyer in connection with the transactions contemplated herein, including,
without limitation, the fees and disbursements of Buyer's outside counsel,
independent accountants, and nonaffiliated consultants and advisors, in an
aggregate amount not to exceed $350,000. For purposes hereof, International
Technology Corporation shall be deemed a nonaffiliated consultant or advisor of
Buyer.
ARTICLE 10. INDEMNIFICATION AND PROCEDURES
10.1. Indemnification by Seller. Subject to the other provisions of this
-------------------------
Article 10, Seller shall indemnify and hold Buyer, its Affiliates and their
respective employees, representatives, controlling persons, officers, directors,
agents, successors and assigns (the "Buyer Indemnities") harmless from and
against any and all Damages suffered by any Buyer Indemnitee arising out of:
(a) The breach of any representation or warranty made by Seller in
this Agreement or in any certificate delivered by Seller at the Closing;
provided, however, that notwithstanding the foregoing, Seller's obligations
hereunder shall be limited as follows: (i) Buyer Indemnities shall have no claim
for a breach of Section 2.11.(b) in the event a purchase order, which was
required to be scheduled, was not listed on Schedule 2.11.(b) and the pricing
terms applicable to such purchase order are either (X) set forth in the Material
Contract pursuant to which the purchase order was issued, (Y) are the same as
those in effect at the Company immediately before its receipt of the purchase
order, or (Z) are then current prevailing pricing terms at the Company; (ii) any
Damages related to the breach of Section 2.11.(b) in the event a purchase order
which was required to be scheduled was not listed on Schedule 2.11.(b), shall be
limited to the Company's Direct Costs to complete such purchase order which are
not recovered from the customer; (iii) the only Damages which Buyer Indemnitees
may recover for a breach of Section 2.11.(c) in the event a teaming and/or
secrecy agreement, which was required to be scheduled, was not listed on
Schedule 2.11.(c) (an "Unscheduled Teaming Agreement"), are those Damages
incurred as a result of: (x) a claim by a counterparty to an Unscheduled Teaming
Agreement that is determined to be legal, valid and binding, which claim arises
out of Buyer's breach of such agreement, so long as Buyer did not have knowledge
of the existence of such agreement prior to the time when such breach could
reasonably have been avoided without penalty to Buyer; or (y) a claim by a
counterparty to another legal, valid and binding agreement
-44-
<PAGE>
with Buyer, which claim arises out of Buyer's breach of such agreement as a
consequence of Buyer's performance under an Unscheduled Teaming Agreement the
existence of which Buyer did not have knowledge at the time when it entered into
such agreement; (iv) Buyer Indemnitees shall have no claim for a breach of
Section 2.11.(d) with respect to a Proposal which was required to be scheduled
and was not scheduled if, on or before seven (7) calendar days after the
Closing, such Proposal could have been withdrawn without penalty; and (v) any
Damages related to the absence from Schedule 2.11.(d) of a Proposal which was
required to be scheduled shall be limited to the Company's Direct Costs to
complete the contract arising out of such Proposal which are not recovered from
the customer.
(b) The breach of any covenant or agreement by Seller in this
Agreement or by Seller in any other agreement executed and delivered at the
Closing, provided, that, notwithstanding the foregoing, Buyer Indemnitees shall
have no claim for Damages related to the costs incurred by the Company Entities
to complete (i) the modification of the ventilation system for the SEG(R) Metal
Melt facility, (ii) the construction and implementation of the stormwater
collection system as contemplated by Section 7.7. of the MMT Agreement, or (iii)
the performance of the Trojan Contract;
(c) The Advanced Systems Division Assets and Advanced Systems
Division Liabilities and any Tax which any of the Buyer Indemnitees may incur as
a result of the distribution or spin-off of the Advanced System Division Assets
and Advanced System Division Liabilities;
(d) The indemnification obligations of Seller set forth in
Sections 4.14. and 6.1.11.(a);
(e) To the extent not indemnifiable under any other subsections
of this Section 10.1, (i) any liabilities for current deferred federal and state
Income Taxes, or (ii) claims pending as of the Closing Date for liabilities
which consistent with past practice have been recorded by or reflected in the
financial statements of Seller on behalf of the Company Entities and as are
generally described in clause (ii) on Schedule 2.5.1(b);
-----------------
(f) Subject to any applicable deductibles and policy limits and
to the extent not covered by insurance policies or self insurance programs
maintained by the Buyer or Company Entities on or after the Closing Date, any
claims which arise out of liabilities for Occurrences which would have been
covered by the insurance policies listed on Schedule 2.10, including, but not
-------------
limited to, any worker's compensation claims;
(g) Any liabilities of the Company Entities which relate to or
arise out of the Benefit Plans listed on Schedule 2.17.6;
---------------
(h) Any liabilities of the Company Entities which relate to an
unasserted claim by Bell Constructors, Inc. arising out of the construction of
the resin processing facility
-45-
<PAGE>
jointly owned, at that time by Molten Metal Technology, Inc. and the Company and
which is referenced on Schedule 2.5.2;
(i) Any liability of the Company Entities arising out of or
related to the disposal on or prior to the Closing Date of Hazardous Substances
or Regulated Substances at the following facilities: (i) the Maxey Flats nuclear
waste disposal facility in Fleming County, Kentucky or (ii) the Ramp Industries
site;
(j) Any liabilities related to or arising out of items one
through eleven, inclusive, set forth on Schedule 2.12; and
-------------
(k) Any and all liabilities of Westinghouse Transport Leasing
Corporation relating to events or conditions occurring prior to the Closing Date
except as such liability relates to a breach of Seller's representation or
warranty in this Agreement related to any Permit held by such corporation.
10.2. Indemnification by Buyer. Subject to the other provisions of this
------------------------
Article 10, Buyer shall indemnify and hold Seller, the Continuing Affiliates and
their respective employees, representatives, controlling persons, officers,
directors, agents, successors and assigns (the "Seller Indemnitees") harmless
from and against any Damages suffered by any Seller Indemnitee arising out of:
(a) the breach of any representation or warranty made by Buyer
in this Agreement or in any certificate delivered by Buyer at the Closing;
(b) the breach of any covenant or agreement by Buyer in this
Agreement or by Buyer in any other agreement executed and delivered at the
Closing;
(c) the operations of any Company Entity, except to the extent
that such Damages arise from events or conditions that entitle any Buyer
Indemnitee to indemnification pursuant to this Article 10, or that would have
entitled any Buyer Indemnitee to indemnification pursuant to this Article 10 but
for the provisions of Section 10.4.4.;
(d) the obligations of Seller and the Company Entities under the
MMT Agreement or any other Acquisition Agreements, except to the extent that
such Damages arise from events or conditions that entitle Buyer and the Company
Entities to indemnification pursuant to Sections 4.14. and 10.1.(e) hereof; and
(e) The indemnification obligations of Buyer set forth in
Section 6.1.11.(b).
-46-
<PAGE>
10.3. Notice and Resolution of Claims.
-------------------------------
10.3.1. Notice. Each person entitled to indemnification pursuant
------
Section 10.1. or Section 10.2. (an "Indemnitee") shall promptly give written
notice to the indemnifying Party after obtaining knowledge of any claim that it
may have pursuant to this Article 10. Such notice shall set forth in reasonable
detail the claim and the basis for indemnification. Failure to give such
written notice in a timely manner shall not release the indemnifying Party
except to the extent such Party is prejudiced by such failure.
10.3.2. Right to Assume Defense. If such claim for indemnity shall
-----------------------
arise from an Action involving a third party (a "Third Party Claim"), the
Indemnitee shall permit the indemnifying Party to assume its defense provided
that the indemnifying Party employs counsel that shall be reasonably
satisfactory to the Indemnitee. If the indemnifying Party assumes the defense
of such Third Party Claim, it shall take all steps necessary to investigate,
defend or settle such Action and shall, subject to Section 10.4., hold the
Indemnitee harmless from and against any and all Damages caused by or arising
out of any settlement approved by the indemnifying Party or any judgment in
connection with such Third Party Claim. Without the written consent of the
Indemnitee, the indemnifying Party shall not consent to entry of any judgment or
enter into any settlement that (a) does not include an unconditional and
complete release of the Indemnitee by the claimant or plaintiff making the Third
Party Claim or (b) imposes restrictions adversely affecting the future conduct
of the business of such Indemnitee or its Affiliates. The Indemnitee may
participate in such defense or settlement through its own counsel, but at its
own expense unless (i) the indemnifying Party shall have failed to assume the
defense of a Third Party Claim pursuant to Section 10.3.3., (ii) the employment
of such counsel has been specifically authorized in writing by the indemnifying
Party or (iii) the named parties to any such Third Party Claim (including
impleaded parties) include both the Indemnitee and the indemnifying Party and
such Indemnitee shall have been advised in writing by its counsel that there may
be conflicting interests between the Indemnitee and the indemnifying Party in
the legal defense of such Third Party Claim.
10.3.3. Failure to Assume Defense. Failure by the indemnifying
-------------------------
Party to notify the Indemnitee of its election to assume the defense of any
Third Party Claim within 30 calendar days after its receipt of notice thereof
shall be deemed a waiver by the indemnifying Party of its right to assume the
defense of such Third Party Claim. In such event, the Indemnitee may defend
against such Third Party Claim in any manner it deems appropriate. The
Indemnitee may settle such Third Party Claim or consent to the entry of any
judgment with respect thereto, provided that it acts reasonably and in good
faith.
10.3.4. Right to Control Cleanup and Access. With respect to any
-----------------------------------
indemnification claim under Section 10.1(a) for Damages involving a Cleanup,
indemnity by Seller is conditioned upon the following: (i) Buyer shall afford
Seller advance notice of any Buyer initiated Cleanup, and the opportunity to
participate, at Seller's expense, in the evaluation and determination of the
approach to and execution of the Cleanup, if it appears that the cost of
-47-
<PAGE>
the Cleanup will exceed the deductible provided for in Section 10.4.2.; (ii)
once the deductible for Cleanup set forth in Section 10.4.2. has been exceeded,
Seller shall have the right to control and to implement the Cleanup and to
negotiate with the cognizant Governmental Authorities as required to complete
the Cleanup; provided however, Buyer shall have the right to participate at
----------------
Buyer's own expense in any such deliberations with the Governmental Authorities
and Seller shall not, without the prior written consent of Buyer (which shall
not be unreasonably withheld) commit to or take any measure or course of action
that imposes any unreasonable burden upon the operation or conduct of the
business by Buyer; (iii) Buyer grants to Seller a continuing right of reasonable
access to the affected Owned Real Property or affected real property subject to
Leases by any Company Entity for the purpose of Seller undertaking the Cleanup.
Buyer agrees to obtain a similar right of access from Buyer's tenants, if any,
and if required; and Buyer shall cooperate with Seller toward effecting such
Cleanup and provide Seller with reasonable access to Buyer's employees and
documents in Buyer's possession with respect to environmental conditions on the
affected properties.
10.4. Limits on Indemnification.
-------------------------
10.4.1. Indemnification Threshold. For purposes of determining
-------------------------
those Damages arising from breaches of representations, warranties or covenants
that will be considered immaterial in nature or not to have had a Material
Adverse Effect and accordingly not subject to indemnification hereunder, Buyer
and Seller have agreed to use predictable dollar thresholds as provided in this
Section 10.4.1. Accordingly, the Parties agree that with respect to any
representation, warranty or covenant referred to in Section 10.1.(a), 10.1.(b),
10.2.(a) or 10.2.(b), if such representation, warranty or covenant contains a
materiality qualification (e.g., "material", "materiality," "in all material
respects," "a Material Adverse Effect," or similar qualifications), such
materiality qualification shall be deemed to have been met, and such
representation, warranty or covenant shall be deemed to have been breached, if
Buyer Indemnitees or the Seller Indemnitees, as applicable, incur or are alleged
to have incurred Damages for any breach, with respect to each individual claim,
that exceed Forty Thousand Dollars ($40,000) (such excess over $40,000 being the
------
"Threshold Damages" for such claim). The dollar threshold set forth in this
Section 10.4.1 shall not apply to and, subject to Sections 10.4.2. and 10.4.3.
hereof, every dollar of Damages shall be indemnifiable for claims for
indemnification under Sections 10.1.(c), 10.1.(e), 10.1.(f), 10.1.(g), 10.1.(h),
10.1.(i), 10.1.(j) or 10.1.(k) or for claims for indemnification for breach of
the covenant set forth in Section 6.8.
10.4.2. Deductible. Seller shall be liable to the Buyer
----------
Indemnitees for Damages that are indemnifiable pursuant to Section 10.1. and
Buyer shall be liable to the Seller Indemnities for Damages that are
indemnifiable pursuant to Section 10.2. only to the extent that the aggregate
amount of the Threshold Damages to Buyer Indemnities or Seller Indemnitees,
respectively, exceed the deductible of Seven Hundred Thousand Dollars
($700,000). The dollar deductible set forth in the first sentence of this
Section 10.4.2 shall not apply to and, subject to the last sentence of this
Section 10.4.1. and Section 10.4.3., every dollar of Damages shall be
indemnifiable for claims for indemnification under Sections 10.1.(c), 10.1.(e),
10.1(f), 10.1.(g),
-48-
<PAGE>
10.1.(h) 10.1.(i), 10.1.(j) or 10.1.(k) or for claims for indemnification for
breach of the covenant set forth in Section 6.8. Seller shall be liable to the
Buyer Indemnitees for Damages that are indemnifiable pursuant to Section 10.1.
for breaches of the representations or warranties of Seller in Section
2.13.2.(g) only to the extent that the aggregate amount of the Damages to Buyer
Indemnitees exceed the deductible of One Million Dollars ($1,000,000), and
Damages which are applied to the foregoing deductible shall not be applied to
the deductible set forth in the first sentence of this Section 10.4.2. Seller
shall be liable to the Buyer Indemnitees for Damages that are indemnifiable
pursuant to Section 10.1.(j) only to the extent that the aggregate amount of the
Damages to Buyer Indemnities exceed the deductible of One Million Dollars
($1,000,000), and Damages which are applied to the foregoing deductible shall
not be applied to the deductible set forth in the first sentence of this Section
10.4.2.
10.4.3. Limit of Liability. The total aggregate liability of
------------------
Seller for any claims for Damages arising under Section 10.1. of this Agreement
shall not exceed Thirty Million Dollars ($30,000,000).
10.4.4. Survival. The representations and warranties contained in
--------
Articles 2 and 3 of this Agreement shall survive until the second anniversary of
the Closing Date in the case of all representations and warranties except (a)
those representations and warranties set forth in Section 2.18. (Taxes), which
shall survive until ninety (90) days after the expiration (including extensions)
of the applicable statute of limitations and (b) those representations and
warranties set forth in Sections 2.2 or 3.2 (Authorization, Execution and
Validity) or Section 2.3.1. (Capitalization of the Company), which shall survive
indefinitely and (c) those representations and warranties set forth in Sections
2.1. and 3.1. (Organization; Power and Authority) which shall survive
indefinitely and (d) those representations and warranties set forth in Section
2.13.2.(g) which shall survive until the first anniversary of the Closing Date.
Neither Party shall have an obligation to indemnify the other pursuant to
Section 10.1.(a) or 10.2.(a) unless notice of a claim for indemnification shall
have been given hereunder prior to the end of the applicable survival period.
However, the obligation to indemnify for a claim for which timely notice in
accordance with the terms and provisions of this Agreement was provided by the
Party seeking indemnification hereunder shall extend until such time as the
remedy, including, without limitation, the payment of monetary damages, is
completed.
10.4.5. Actual Knowledge. Neither Party shall have any liability
----------------
hereunder for Damages arising from or relating to a breach of any representation
or warranty if the indemnifying Party can establish that the other Party had
actual knowledge on or before the Closing Date of the condition or event
constituting such breach.
10.4.6. Damages; Mitigation. Neither Party shall have any
-------------------
obligation to indemnify any Seller Indemnitee or Buyer Indemnitee for any
Consequential Damages (as hereinafter defined) or for Damages that are (a)
caused, contributed to or exacerbated by the actions of any Buyer Indemnitee (in
the case of Seller's indemnification obligations) or any Seller Indemnitee (in
the case of Buyer's indemnification obligations), (b) recovered by the
-49-
<PAGE>
Indemnitee from any third party (including insurers) or (c) offset by tax
savings realized on account of such Damages by the Indemnitee or any of its
Affiliates. If the amount of any Damages, at any time subsequent to the payment
thereof by an indemnifying Party to the Indemnitee pursuant to this Article 10,
is reduced by recovery, settlement or otherwise under or pursuant to any
insurance coverage or pursuant to any claim, recovery settlement against or with
any third party (including any insurer), the amount of such reduction (net of
any out-of-pocket expenses incurred in obtaining such reduction) shall promptly
be repaid by the Indemnitee to the indemnifying Party.
10.4.7. Exclusive Remedy. In the absence of actual fraud and
----------------
except as set forth in Section 4.10.4. and for breaches of Sections 4.11. and
4.12., this Article 10 sets forth the exclusive remedy for Damages owing from
Seller to the Buyer Indemnitees and from Buyer to the Seller Indemnitees that
arise from the matters described in Sections 10.1. and 10.2. Each of the Parties
hereby waives any claim or cause of action for Damages that it might assert
against the other, other than pursuant to this Article 10 or in connection with
actual fraud, whether under common law or under any Environmental Law,
securities, trade regulation or other Law.
10.5. Indemnity Payments. All payments made pursuant to this Article 10
------------------
(other than interest payments) and to the indemnification provisions of Section
6.1. shall be treated by the Parties on all Income Tax Returns as an adjustment
to the Purchase Price, except to the extent that a different treatment is
required by Law.
10.6. Payment and Assignment of Claims.
--------------------------------
10.6.1. Payment. The indemnifying Party shall promptly pay or
-------
reimburse, as appropriate, the Indemnitee for any Damages to which it is
entitled to be indemnified hereunder. Neither Party shall permit any exercise
of any right of set-off against the other Party.
10.6.2. Assignment. If any of the Damages for which an indemnifying
---------
Party is responsible or allegedly responsible under this Article 10 or the
indemnification provisions of Section 6.1. are recoverable or potentially
recoverable against any third party at the time when payment is due hereunder,
the Indemnitee shall assign any and all rights that it may have to recover such
Damages to the indemnifying Party or, if such rights are not assignable for any
reason, the Indemnitee hereunder shall attempt in good faith to collect any and
all damages and losses on account thereof (net of any out-of-pocket expenses
incurred in connection with such collection) from such third party for the
benefit of the indemnifying Party in the event and to the extent that the
indemnifying Party has already paid or reimbursed the Indemnitee for such
Damages.
10.7. Other Indemnitees. Buyer shall cause the Buyer Indemnitees, and
-----------------
Seller shall cause the Seller Indemnitees, to comply with the provisions and to
abide by the limitations set forth in this Article 10.
-50-
<PAGE>
10.8. Customer Discounts. Schedule 10.8 sets forth a list of all
------------------ -------------
customers of the Company Entities or Seller with whom the Company or Seller has
agreed that the Company Entities will provide services at discounted rates
pursuant to any of the Seller steam generator litigation settlement agreements
with a customer. After the Closing and during the term that any such discount
or discounted rate remains in effect, Seller shall, upon demand from the Company
reimburse the Company for the amount of the discount below applicable prevailing
market rates given to the customers listed on Schedule 10.8. Any such demand
-------------
shall be accompanied by documentation reasonably satisfactory to Seller
indicating the services provided to such customers and the rates charged
therefor.
10.9. Waiver of Contribution. Seller shall not have any right to seek
----------------------
contribution from any of the Company Entities in the event that Seller is
required to make any payments under this Article 10.
10.10. Successor Indemnification Obligation. The indemnification
------------------------------------
obligations of Buyer and Seller pursuant to this Article 10 shall be binding
upon any successor to Buyer or Seller that is not a Permissible Assignee under
Section 12.2. Without limiting the generality of the foregoing, except for a
Permissible Assignee, the indemnification obligations of Buyer and Seller shall
be binding upon any successor to a significant portion of Buyer's or Seller's
business, by way of merger, consolidation, statutory share exchange, sale of
all, substantially all, or any significant amount of a Party's assets, or the
distribution of any significant amount of a Party's business or assets by way of
spin-off, split-off or similar transaction; provided that the operation of this
Section 10.10. shall not limit the indemnification obligations of Buyer or
Seller to the extent that Buyer or Seller remains in legal existence following
any of the foregoing transactions. Further, this Section 10.10. shall not limit
the ability of a Party and its successor to agree solely between themselves to
contribute to the indemnification obligations hereunder.
ARTICLE 11. EMPLOYEE MATTERS
11.1. Continuing Benefits and Benefit Plans. Except as otherwise
-------------------------------------
specifically provided in this Article 11, upon the Closing, the Company Entities
shall assume the Company Benefit Plans and be solely responsible for all assets
and liabilities (except for liabilities for which Buyer is entitled to
indemnification under Article 10) with respect to current and former Employees
under the Company Benefit Plans.
11.2. Rights of Employees. Nothing herein expressed or implied by this
-------------------
Agreement shall confer upon any current or former Employee, or legal
representative thereof, any rights or remedies, including, without limitation,
any right to employment for any specified period, of any nature or kind
whatsoever, under or by reason of this Agreement.
-51-
<PAGE>
ARTICLE 12. MISCELLANEOUS
12.1. Severability. If any provision of this Agreement shall be held
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not be affected or impaired
thereby. Such provision shall be deemed modified to the extent necessary to
render it legal, valid and enforceable, and if no such modification shall render
it legal, valid and enforceable, then this Agreement shall be construed as if
not containing the provision held to be invalid, and the rights and obligations
of the parties shall be construed and enforced accordingly.
12.2. Successors and Assigns. The terms and conditions of this Agreement
----------------------
shall inure to the benefit of and be binding upon the successors and assigns of
the Parties; provided, however, that this Agreement may not be assigned or
-------- -------
delegated by any Party except to a Permissible Assignee.
12.3. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall for all purposes be deemed to be an original
and all of which when taken together shall constitute the same instrument.
12.4. Headings. The headings of the Articles and Sections are inserted
--------
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
12.5. Waiver. Any of the terms or conditions of this Agreement may be
------
waived in writing at any time by the Party which is entitled to the benefits
thereof. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of such provision at any time in the future or a
waiver of any other provision hereof.
12.6. No Third-Party Beneficiaries. Nothing in this Agreement shall
----------------------------
create any third-party beneficiary rights in any person or Entity other than the
Indemnitees.
12.7. Sales and Transfer Taxes. Seller and Buyer shall each be
------------------------
responsible for and pay one-half of all sales, transfer, deed, duties, stamp,
notary public and other similar taxes, duties and transfer fees applicable to
the transactions contemplated by this Agreement, including fees to record
assignments.
12.8. Other Expenses. Except as otherwise expressly provided for herein
--------------
or in any agreement entered into on the date hereof, Seller and Buyer shall each
pay all costs and expenses incurred by it or on its behalf in connection with
this Agreement and the transactions contemplated hereby, including fees and
expenses of its own financial consultants, accountants and legal counsel. Buyer
shall pay the cost of all updates of any surveys or title insurance policies
that it deems necessary or advisable.
-52-
<PAGE>
12.9. Notices. Any notice, request, instruction, consent or other
-------
to be given hereunder by either party hereto to the other party shall be in
writing and delivered personally, by telecopy or sent by registered or certified
mail, postage prepaid, as follows:
If to Seller:
Westinghouse Electric Corporation
Gateway Center
11 Stanwix Street
Pittsburgh, PA 15222
Attn: Chief Financial Officer
Fax Number: (412) 642-3078
with a copy to:
Westinghouse Electric Corporation
Gateway Center
11 Stanwix Street
Pittsburgh, PA 15222
Attn: Office of the General Counsel
Fax Number: (412) 642-3405
If to Buyer:
GTS Duratek, Inc.
10100 Old Columbia Road
Columbia, MD 21046
Attn: President and Chief Executive Officer
Fax Number: (410) 290-9070
with a copy to:
Lawrence R. Seidman, Esquire
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, Maryland 21201-3018
Fax Number: (410) 576-1700
or at such other address for a Party as shall be specified in writing by that
Party. Any notice which is delivered personally or by telecopy to the addresses
provided herein shall be deemed to have been duly given to the Party to whom it
is directed upon actual receipt by such Party. Any notice which is addressed
and mailed in the manner herein provided shall be deemed given to the Entity to
which it is addressed when received.
-53-
<PAGE>
12.10. Governing Law; Interpretation. This Agreement shall be construed
-----------------------------
in accordance with and governed by the Laws of the State of Delaware applicable
to agreements made and to be performed wholly within such jurisdiction. Unless
specifically stated otherwise, references to Articles, Sections, Exhibits and
Schedules refer to Articles, Sections, Exhibits and Schedules in this Agreement.
References to "includes" and "including" mean "includes without limitation" and
"including without limitation."
12.11. Public Announcements. Seller and Buyer shall agree on the terms of
--------------------
the press releases to be issued upon the execution of this Agreement and shall
consult with each other before issuing any other press releases or disclosures
with respect to this Agreement and the transactions contemplated hereby,
including any termination of this Agreement for any reason, except in the case
where the person making such disclosure has determined in good faith that such
disclosure is required by law, rule, regulation, judicial or administrative
process (in which case the disclosing party shall use reasonable efforts to give
notice to allow the other party prior to making such disclosure and, reasonably
practicable in the circumstances, give such other party the opportunity to
review and comment upon the proposed disclosure).
12.12. Exclusive Jurisdiction and Consent to Service of Process; Jury
--------------------------------------------------------------
Waiver. The Parties agree that any legal action, suit or proceeding arising out
- ------
of or relating to this Agreement or the transactions contemplated hereby may be
instituted in a federal court sitting within the Commonwealth of Pennsylvania or
the State of Maryland, which shall be the exclusive venues of said legal
proceedings. Each Party waives any objection which such party may now or
hereafter have to the laying of venue of any such Action in any such court, and
irrevocably submits to the jurisdiction of any such court in any such action,
suit or proceeding. Any and all service of process and any other notice in any
such Action shall be effective against such Party when transmitted in accordance
with Section 12.9. Nothing contained herein shall be deemed to affect the right
of any Party to serve process in any manner permitted by Law. EACH OF SELLER AND
BUYER WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12.13. Entire Agreement; Amendment. This Agreement, including all
---------------------------
Schedules and Exhibits hereto, the Confidentiality Agreement and the other
written agreements, if any, entered into on the date hereof or delivered
herewith constitute the sole understanding of the Parties with respect to the
matters contemplated hereby and thereby and supersede and render null and void
all prior agreements and understandings between the Parties with respect to such
matters, including that certain letter dated January 27, 1997 from Seller to
Buyer. No amendment, modification or alteration of the terms or provisions of
this Agreement, including all Schedules and Exhibits, shall be binding unless
the same shall be in writing and duly executed by the Party against whom such
would apply.
-54-
<PAGE>
12.14. Specific Performance. The Parties acknowledge and agree that the
--------------------
breach of certain provisions of this Agreement could not be adequately
compensated with monetary damages, and the Parties hereto agree, accordingly,
that injunctive relief and specific performance shall be appropriate remedies to
enforce certain provisions of this Agreement and waive any claim or defense that
there is an adequate remedy at law for such breach; provided, however, that
nothing herein shall limit the remedies herein, legal or equitable, otherwise
available and all remedies herein are in addition to any remedies available at
law or otherwise.
ARTICLE 13. DEFINITIONS; INTERPRETATION
13.1. Definitions. For purposes of this Agreement, the terms set forth
-----------
below shall have the following meanings:
13.1.1. "ACM" (Asbestos-Containing Materials) shall mean any
material containing more than 1% asbestos.
13.1.2. "Action" means any action, suit, claim, arbitration,
mediation, inquiry, information, request, demand, proceeding or investigation by
or before any Governmental Authority or any action, suit, claim, arbitration or
proceeding involving any private Entity.
13.1.3. "Actual Net Cash Flow" shall have the meaning set forth in
Section 6.8.
13.1.4. "ARARs" (Applicable or Relevant and Appropriate
Requirements) shall have the meaning ascribed to that term under Section 121 of
the Comprehensive Environmental Response Compensation and Liability Act and the
National Contingency Plan, 40 C.F.R. Part 300 as in effect as of the Closing
Date.
13.1.5. "Advanced Systems Division Assets" shall have the meaning
set forth in Section 4.3.3.
13.1.6. "Advanced Systems Division Liabilities" shall have the
meaning set forth in Section 4.3.3.
13.1.7. "Affiliate" means, with respect to any Entity, any other
Entity directly, or indirectly through one or more intermediaries, controlling,
controlled by, or under common control with such Entity. For purposes of this
Agreement, the term "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with" as used with respect to any
Entity) means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Entity whether
through ownership of voting securities, by contract or otherwise.
13.1.8. "Affiliated Group" shall have the meaning set forth in
Section 2.18.1.
-55-
<PAGE>
13.1.9. "Agency Action" means any notice of violation, complaint,
order, consent order, consent agreement or other final action brought by a
federal, or local regulatory agency having the requisite authority and
jurisdiction to bring such action .
13.1.10. "Agreement" means this Agreement, together with the
Schedules and Exhibits hereto.
13.1.11. "Approvals" means all certificates, licenses, permits or
other approvals required or obtained by a Company Entity in connection with the
use or ownership of its assets or properties or the operation of its business.
13.1.12. "Asset Allocation Agreement" shall have the meaning set
forth in Section 6.1.10.(b).
13.1.13. "Assigned Intellectual Property" means any Intellectual
Property used by the Company Entities which is identified on Schedule
--------
2.15.1(a)(ii).
- -------------
13.1.14. "Balance Sheet" shall have the meaning set forth in Section
2.5.1.
13.1.15. "Business Day" shall mean any day other than a Saturday,
Sunday or legal holiday.
13.1.16. "Buyer" shall have the meaning set forth in the first
paragraph of this Agreement.
13.1.17. "Buyer Indemnitees" shall have the meaning set forth in
Section 10.1.
13.1.18. "Cash Payment" shall have the meaning set forth in Section
1.2.
13.1.19. "Charter Documents" means (a) in the case of any
corporation, its articles or certificate of incorporation and its by-laws, (b)
in the case of any partnership, its partnership agreement and partnership
certificate, if any, and (c) in the case of any joint venture, its joint venture
agreement, as each has been amended or supplemented from time to time.
13.1.20. "Cleanup" means the containment, control, removal,
treatment, remediation, mitigation, investigation or evaluation of any Regulated
Substances.
13.1.21. "Closing" means the consummation of the purchase and sale
of the Shares contemplated hereby.
13.1.22. "Closing Date" shall have the meaning set forth in Section
8.1.
-56-
<PAGE>
13.1.23. "Code" means the Internal Revenue Code of 1986, as amended
from time to time and the regulations thereunder.
13.1.24. "Commission" means the United States Securities and Exchange
Commission.
13.1.25. "Company" shall have the meaning set forth in the recitals
to this Agreement.
13.1.26. "Company Benefit Plan" shall have the meaning set forth in
Section 2.17.1.
13.1.27. "Company Entities" means the Company and the Company
Subsidiaries.
13.1.28. "Company Properties" means the real property previously or
currently owned, leased or used by any Company Entity, including without
limitation the Owned Real Property and the property subject to Real Property
Leases.
13.1.29. "Computer Software" means computer programs and software
(including source code, object code, development documentation, programming
tools, drawings, specifications and data).
13.1.30. "Company Subsidiary" means any Entity of which the Company
directly or indirectly owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions.
13.1.31. "Confidentiality Agreement" means the Confidentiality
Agreement dated as of April 22, 1996 between Buyer and Seller, as supplemented
December 18, 1996.
13.1.32. "Consent" means a consent, approval, authorization, waiver
or notification from any Entity, including any Governmental Authority.
13.1.33. "Consequential Damages" means Damages arising out of any
interruption of business, loss of profits, loss of use of facilities, claims of
customer, loss of goodwill or other indirect Damages.
13.1.34. "Continuing Affiliates" means Affiliates of Seller other
than the Company Entities.
13.1.35. "Contracts" means all contracts, agreements, instruments,
Leases, licenses, commitments and arrangements which by their terms have not
expired prior to the date
-57-
<PAGE>
of this Agreement or which have stated expiration dates after the date of this
Agreement, except Permits and Licenses.
13.1.36. "Damages" means all losses, claims, awards, damages, costs,
fines, Taxes, interest, obligations, judgments, payments, liabilities,
deficiencies, penalties, impositions, assessments or fines (including those
arising out of any Action) incurred by a Party, together with all reasonable
costs and expenses (including, in the case of Third Party Claims only,
reasonable outside attorneys', experts' and consultants' fees) and other
reasonable out-of-pocket expenses incurred in any action or proceeding between
the indemnifying Party and the Indemnitee or in connection with a Third Party
Claim incurred in connection with any of the foregoing.
13.1.37. "Direct Cost" means either direct waste processing cost or
direct project cost. Direct waste processing cost includes: (a) factory
processing costs, (b) secondary and transportation costs and (c) primary waste
disposal costs. Direct Project Cost includes: (x) shop order labor costs and (y)
shop order materials costs.
13.1.38. "Employee" means an employee of any Company Entity.
13.1.39. "Entity" means any individual, corporation, limited
liability company, partnership, trust, unincorporated organization, joint
venture or other entity.
13.1.40. "Environmental Condition" means (i) the Release of any
Regulated Substances into the environment in an amount and under circumstances
that would require notice, removal or remediation, or constitute a basis for a
claim or cause of action; (ii) the migration of any Regulated Substances onto or
under the properties owned, leased or used by a Company Entity or from such
properties onto or under another property; (iii) the violation, or alleged
violation, of any Environmental Law, order, Permit or license of or from any
Governmental Authority relating to environmental, health or safety matters.
13.1.41. "Environmental Laws" means all local, state and federal
statutes, regulations, ordinances, common law, judgments, orders, and decrees
promulgated in final form and in effect as of the date hereof and if applicable
as interpreted in accordance with public announcements made prior to the date
hereof, intended to protect human health or the environment, including, without
limitation, all such Environmental Laws which regulate the handling,
transportation, discharge, emission, treatment, storage and disposal of
Regulated Substances, including, by way of example and not by way of limitation,
the Clean Air Act (CAA), Clean Water Act (CWA), Resource Conservation and
Recovery Act (RCRA), Comprehensive Environmental Response Compensation and
Liability Act (CERCLA), Emergency Planning and Community Right-to-Know Act
(EPCRA), Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), Safe
Drinking Water Act (SDWA), Toxic Substances Control Act (TSCA), Hazardous
Materials Transportation Act (HMTA), Atomic Energy Act (AEA), Low Level
Radioactive Waste Policy Act of 1980 (LLRWPA), Low Level Radioactive
-58-
<PAGE>
Waste Policy Amendments Act of 1985 (LLRWPAA), Energy Reorganization Act of
1974, Occupational Safety and Health Act (OSHA) and Endangered Species Act of
1973, each as currently amended, and all regulations promulgated thereunder,
guidances and directives issued with respect thereto, or policies adopted by
authority thereunder as of the date hereof.
13.1.42. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
13.1.43. "ERISA Plan" shall have the meaning set forth in Section
3.(3) of ERISA with respect to any employee benefit plan maintained and
currently contributed to by any Company Entity that currently accrues a benefit
and covers Employees and is subject to ERISA.
13.1.44. "Estimated March 31 Working Capital Deficit shall have the
meaning given to such term in Section 6.8.
13.1.45. "Estimated Net Cash Flow" shall have the meaning set forth
in Section 6.8.
13.1.46. "GAAP" means generally accepted accounting principles in the
United States of America.
13.1.47. "Government Contract" means any Contract between any Company
Entity and any Governmental Authority or prime contractor of such Governmental
Authority, required to be priced in accordance with government accounting
standards.
13.1.48. "Governmental Authority" means any national, international,
federal, state or local governmental body, any of its subdivisions, agencies,
authorities, commissions, boards or bureaus, any special improvement district,
any international, federal, state or local court or tribunal or any arbitrator
(whether or not a governmental or regulatory official).
13.1.49. "GTS Shares" shall have the meaning set forth in Section
1.2.
13.1.50. "Guarantee" means any letter of credit, bid bond,
performance bond, warranty bond, guarantee, any indemnification obligation and
any other contingent obligation to purchase, to provide funds for payment or to
supply funds to invest in any Entity or otherwise to assure a creditor against
loss.
13.1.51. "Hazardous Substance" means any substance so designated
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 USC (S) 9601 et seq. as of the Closing Date.
13.1.52. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the regulations promulgated thereunder.
-59-
<PAGE>
13.1.53. "Income Tax" means any federal, state or local income,
alternative minimum and franchise or other similar Tax, duty, governmental
charge or assessment imposed by or on behalf of any Governmental Authority that
is based on or measured by income, gross receipts or gross revenues (including,
interest and penalties on any of the foregoing).
13.1.54. "Income Tax Returns" means any Returns with respect to
Income Tax.
13.1.55. "Indemnitee" shall have the meaning set forth in Section
10.3.1.
13.1.56. "Intellectual Property" means all (a) trademarks and service
marks (registered or unregistered), trade dress, trade names and other names and
slogans embodying business or product goodwill or indications of origin, any
goodwill associated therewith, and all applications or registrations in any
jurisdiction pertaining thereto; (b) patents, patent applications, patentable
inventions, discoveries, improvements, ideas, know-how, formula methodology,
processes and technology, (c) Computer Software; (d) trade secrets, including
confidential and other non-public information and the right in any jurisdiction
to limit the use or disclosure thereof; (e) copyrights in writings, designs,
mask works or other works, and registrations or applications therefor in any
jurisdiction; (f) licenses, immunities, governmental authorization, covenants
not to sue and the like relating to any of the foregoing; and (g) claims or
causes of action arising out of or related to infringement or misappropriation
of any of the foregoing.
13.1.57. "Interim Tax Period" means, with respect to any Tax imposed
on the Company Entities on a periodic basis for which the Closing Date is not
the last day of a Short Tax Period, the period of time beginning on the first
day of the actual taxable period that includes (but does not end on) the Closing
Date and ending on the Closing Date.
13.1.58. "IP Assignment" means one or more assignments regarding the
Assigned Intellectual Property, substantially in the form set forth on Exhibit
-------
B.
- -
13.1.59. "IP License Agreement" means one or more license agreements
regarding the Assigned Intellectual Property and the Retained Intellectual
Property, substantially in the form set forth in Exhibit C.
---------
13.1.60. "Law" means any statute, rule, Order, regulation, or
ordinance.
13.1.61. "Lease" means any lease, sublease or use or occupancy
agreement of real or personal property by any Company Entity (whether entered
into as lessor, lessee, sublessor or sublessee), together with any
modifications, amendments, supplements, substitutions, extensions and renewals
of the same.
13.1.62. "Legacy Waste and Equipment" shall have the meaning set
forth in Section 6.7.
-60-
<PAGE>
13.1.63. "License" shall have the meaning set forth in Section
2.15.2.
13.1.64. "Lien" means any lien, mortgage, deed of trust, security
interest, charge, pledge, retention of title agreement, easement, encroachment,
condition, reservation, restriction, covenant or other encumbrance affecting
title.
13.1.65. "Material Adverse Effect" means a material adverse effect on
the business, assets, liabilities, or financial condition (other than the March
31 Working Capital Deficit) of the Company Entities, taken as a whole.
13.1.66. "March 31 Working Capital Deficit" shall have the meaning
set forth in Section 6.8.
13.1.67. "Material Contracts" means the Contracts identified on
Schedule 2.11(a).
- ----------------
13.1.68. "MMT Agreement" shall mean the Asset Purchase Agreement
dated as of December 10, 1996 between Seller, the Company, Molten Metal
Technology, Inc. and MMT of Tennessee, Inc.
13.1.69. "Non-Transferred Instrument" shall have the meaning set
forth in Section 6.5.
13.1.70. "Occurrences" shall mean acts or omissions of Seller or any
of the Company Entities occurring on or prior to the Closing Date, or events or
conditions existing on or prior to the Closing Date, which acts, omissions,
events or conditions result in injury or damage to person or property which
injury or damage has been physically manifested on or prior to the Closing Date.
13.1.71. "Order" means any order, judgment, injunction, decree or
award of any Governmental Authority or any administrative or judicial consent
decree or analogous instrument.
13.1.72. "Other Law" means any Law applicable to any Company Entity,
including, without limitation, any zoning, subdivision or land use Law, other
than an Environmental Law or a Law relating to (a) Taxes or (b) ERISA.
13.1.73. "Outside Date" shall have the meaning set forth in Section
9.1(b).
13.1.74. "Owned Real Property" shall have the meaning set forth in
Section 2.8.
13.1.75. "Party" means Buyer or Seller.
-61-
<PAGE>
13.1.76. "Permissible Assignee" means (a) any person to whom an
assignment is made with the consent of the other party hereto, (b) the Entity in
which the Seller's broadcasting business is to be conducted, (c) the Entity in
which the Seller's industrial and technology business is to be conducted, or (d)
any Entity with a long term credit rating of Baa or higher from Moody's Investor
Services or of BBB or higher, from Standard & Poor's.
13.1.77. "Permit" means any permit, license, certificate (including a
certificate of occupancy) registration, authorization or approval issued by a
Governmental Authority to a Company Entity.
13.1.78. "Permitted Liens" means (a) Liens for Taxes that are not yet
due and payable or that are being contested in good faith by appropriate
proceedings and as to which adequate reserves have been established on the
Balance Sheet in accordance with GAAP, consistently applied; (b) worker's,
repairmen's and similar Liens imposed by Law that have been incurred in the
ordinary course of business and are not yet delinquent or, if delinquent, are
being contested in good faith by appropriate proceedings and as to which
adequate reserves have been established on the Balance Sheet in accordance with
GAAP, consistently applied; (c) Liens on Real Property (other than (i) Leases or
(ii) Liens that secure indebtedness for borrowed money) and other title defects,
easements, encroachments and encumbrances that do not, individually or in the
aggregate, materially adversely affect the value of the Real Property or
materially adversely impair the continued use as currently conducted of the Real
Property to which they relate; (d) encumbrances that represent the rights of
customers, suppliers and subcontractors in the ordinary course of business under
Contracts or under general principles of commercial law and that will not
individually or in the aggregate have a Material Adverse Effect, (e) Liens
securing any liabilities disclosed on the Balance Sheet; (f) Liens disclosed on
the Balance Sheet; and (f) Liens listed on Schedule 2.8.
------------
13.1.79. "Post-Closing Tax Period" means any Tax Period that begins
after the Closing Date and, with respect to any Tax Period beginning before and
ending after the Closing Date, the portion of such Tax Period commencing on the
day following the Closing Date.
13.1.80. "Pre-Closing Tax Period" means any Tax Period, Short Tax
Period or Interim Tax Period ending on or before the Closing Date.
13.1.81. "Proposal" means a written proposal provided in response to
a written request for proposal which cannot be withdrawn without penalty or
premium by a Company Entity once delivered.
13.1.82. "Purchase Price" shall have the meaning set forth in Section
1.2.
13.1.83. "Real Property" means the Owned Real Property and all
property subject to the Real Property Leases.
-62-
<PAGE>
13.1.84. "Real Property Lease" means any Lease of real property to
which a Company Entity is a party.
13.1.85. "Regulated Substances" means any substance regulated under
any Environmental Law as of the Closing Date including, but not limited to,
asbestos, ACM, polychlorinated biphenyls (PCBs), urea-formaldehyde in any of its
forms, petroleum and its fractions, waste oil, radioactive material and any
substances defined as "hazardous waste," "hazardous substances," "pollutants or
contaminants," "low-level radioactive waste," "byproduct material," "special
nuclear material," "source material," "toxic substances," "hazardous chemicals,"
"hazardous air pollutants," "toxic chemicals" or "hazardous materials" under the
applicable Environmental Law.
13.1.86. "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment of any Regulated Substances in excess of ARARs.
13.1.87. "Retained Intellectual Property" means any Intellectual
Property used primarily by Seller or any Continuing Affiliates, which is
identified as such on Schedule 2.15.1(a)(iii).
-----------------------
13.1.88. "Returns" shall have the meaning set forth in Section
2.18.1.
13.1.89. "Seller" shall have the meaning set forth in the first
paragraph of this Agreement.
13.1.90. "Seller Indemnitees" shall have the meaning set forth in
Section 10.2.
13.1.91. "Seller Provided Services" means all services provided by
Seller or any Continuing Affiliate to the Company Entities, including those
described on Schedule 2.9(c), together with all Intellectual Property used by
---------------
Seller or a Continuing Affiliate in connection with or relating to the
performance thereof.
13.1.92. "Seller's Knowledge" means the actual knowledge of the
persons listed on Schedule 13.1 as to the matters specified on Schedule 13.1 to
------------- -------------
which such person's knowledge pertains.
13.1.93. "Shares" shall have the meaning set forth in the recitals to
this Agreement.
13.1.94. "Short Tax Period" means any Tax Period ending on the
Closing Date.
13.1.95. "Subscription Right" shall have the meaning set forth in
Section 2.3.1.
-63-
<PAGE>
13.1.96. "Tax" or "Taxes" means all income, profits, franchise,
gross receipts, capital, sales, use, withholding, value added, ad valorem,
transfer, employment, unemployment, workers' compensation, social security,
disability, occupation, property, severance, production, real estate, excise and
other taxes, duties and similar governmental charges and assessments imposed by
or on behalf of any Governmental Authority (including interest and penalties
thereon).
13.1.97. "Tax Laws" means the Code and all other Laws relating to
Taxes.
13.1.98. "Tax Period" shall have the meaning set forth in Section
6.1.1.
13.1.99. "Third Party Claim" shall have the meaning set forth in
Section 10.3.2.
13.1.100. "Trojan Contract" means that certain purchase order with
Portland General Electric - Trojan (NQ181326) dated July 2, 1996.
13.1.101. "Unaffiliated Firm" shall mean an unaffiliated "big six"
accounting firm to be selected and agreed upon by the Parties.
13.1.102. "Working Capital Deficit" shall mean the excess of the
Company's current liabilities, over its current assets, each as determined in
accordance with GAAP, consistently applied, without regard to any deferred tax
asset or liability, which may be a positive or negative number, and, at the
Closing Date, after giving effect to the adjustment to reserves contemplated
under Sections 6.7 (Legacy Waste and Equipment) and 4.9 (Ventilation System for
the SEG(R) Metal Melt Facility).
13.2. Certain Interpretive Matters and Limitations. (a) Each of the
--------------------------------------------
Parties is a sophisticated legal entity that was advised by experienced counsel
and, to the extent it deemed necessary, other advisors in connection with this
Agreement. Accordingly, each of the Parties hereby acknowledges that (i) no
party has relied or will rely in respect of this Agreement or the transactions
contemplated hereby upon any document or written or oral information previously
furnished to or discovered by it or its representatives, other than this
Agreement (including the Schedules and Exhibits hereto) or such of the foregoing
as are delivered at the Closing, (ii) there are no representations or warranties
by or on behalf of either Party hereto or any of its respective Affiliates or
representatives other than those expressly set forth in this Agreement, and
(iii) the Parties' respective rights and obligations with respect to this
Agreement and the events giving rise thereto shall be solely as set forth in
this Agreement.
(b) Any item disclosed in one Section or Schedule shall be deemed
to be disclosed in any other Section or Schedule where such disclosure is
relevant, even if there is no express cross-reference, provided that the
relevance of the disclosure is on its face reasonably apparent. Disclosure of
items that may or may not be required to be disclosed by this Agreement
-64-
<PAGE>
does not mean that such items are material or create a standard of materiality
and shall not be deemed an admission that any such disclosed matter is or may
give rise to a violation of any Law or is material.
(c) No provision of this Agreement shall be interpreted in favor of,
or against, either of the Parties by reason of the extent to which either such
Party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
-65-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first written above.
WESTINGHOUSE ELECTRIC CORPORATION
By: /s/ Andrew J. Washburn
-------------------------------
Name: Andrew J. Washburn
Title: Managing Director, Global Capital Markets
GTS DURATEK, INC.
By: /s/ Robert F. Shawver
-------------------------------
Name: Robert F. Shawver
Title: Executive Vice President
and Chief Financial Officer
-66-
<PAGE>
Exhibit (c)(3)
<PAGE>
CREDIT AGREEMENT
AS OF APRIL 18, 1997
AMONG
GTS DURATEK, INC.
THE SCIENTIFIC ECOLOGY GROUP, INC.
SEG COLORADO, INC.
HITTMAN TRANSPORT SERVICES, INC.
GTS INSTRUMENT SERVICES, INCORPORATED
GENERAL TECHNICAL SERVICES, INC.
ANALYTICAL RESOURCES, INC.
AND
FIRST UNION NATIONAL BANK OF MARYLAND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
<PAGE>
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.01 Definitions................................................. 1
Section 1.02 Accounting Terms and Determinations......................... 1
ARTICLE II
THE CREDITS
Section 2.01 Commitments to Lend......................................... 1
Section 2.02 Methods of Borrowing........................................ 3
Section 2.03 Funding of Revolving Loans.................................. 4
Section 2.04 Note........................................................ 4
Section 2.05 Interest Rates.............................................. 4
Section 2.06 Fees........................................................ 5
Section 2.07 Maturity and Repayment of Revolving Loans................... 6
Section 2.08 General Provisions as to Payments........................... 8
Section 2.09 Computation of Interest and Fees............................ 8
Section 2.10 Letters of Credit........................................... 8
ARTICLE III
CONDITIONS
Section 3.01 Conditions to Closing.......................................13
Section 3.02 Conditions to all Credit Events.............................16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Corporate Existence and Power...............................17
Section 4.02 Corporate and Governmental Authorization; No Contravention..17
Section 4.03 Binding Effect..............................................18
Section 4.04 Financial Condition.........................................18
Section 4.05 Litigation..................................................19
Section 4.06 Regulation U; Use of Proceeds...............................19
Section 4.07 Regulatory Restrictions on Borrowing........................19
</TABLE>
________________________
*The Table of Contents is not a part of the Credit Agreement.
-i-
<PAGE>
<TABLE>
<S> <C>
Section 4.08 Subsidiaries................................................19
Section 4.09 Full Disclosure.............................................20
Section 4.10 Tax Returns and Payments....................................20
Section 4.11 Compliance with ERISA.......................................20
Section 4.12 Intellectual Property.......................................20
Section 4.13 No Burdensome Restrictions..................................21
Section 4.14 Environmental Matters.......................................21
Section 4.15 Accounts....................................................21
Section 4.16 Fair Labor Standards Act....................................22
ARTICLE V
COVENANTS
Section 5.01 Information.................................................22
Section 5.02 Payment of Obligations......................................26
Section 5.03 Maintenance of Property; Insurance..........................26
Section 5.04 Conduct of Business and Maintenance of Existence............27
Section 5.05 Compliance with Laws........................................27
Section 5.06 Accounting; Inspection of Property, Books and Records.......27
Section 5.07 Collection of Accounts......................................28
Section 5.08 Notification to Account Debtors.............................28
Section 5.09 Restriction on Liens........................................29
Section 5.10 Limitation on Debt..........................................30
Section 5.11 Limitation on Guarantees....................................30
Section 5.12 Consolidated Capital Expenditures...........................30
Section 5.13 Consolidations, Mergers and Sales of Assets.................31
Section 5.14 Investments; Line of Business...............................31
Section 5.15 Dividends, etc..............................................31
Section 5.16 Use of Proceeds.............................................32
Section 5.17 Transactions with Other Persons.............................33
Section 5.18 Minimum Consolidated Tangible Net Worth.....................33
Section 5.19 Minimum Liquidity...........................................33
Section 5.20 SEG Deferred Revenue Turnover...............................33
Section 5.21 LC Cash Collateral Account..................................33
Section 5.22 Independence of Covenants...................................33
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI
DEFAULTS
Section 6.1 Events of Default...........................................34
Section 6.2 Cash Cover..................................................36
ARTICLE VII
THE AGENTS
Section 7.01 Appointment and Authorization...............................36
Section 7.02 Individual Capacity.........................................37
Section 7.03 Delegation of Duties........................................37
Section 7.04 Reliance by the Agents......................................37
Section 7.05 Notice of Default...........................................38
Section 7.06 Non-Reliance on the Agents and Other Banks..................38
Section 7.07 Exculpatory Provisions......................................38
Section 7.08 Indemnification.............................................39
Section 7.09 Resignation; Successors.....................................39
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Section 8.01 Increased Cost and Reduced Return...........................40
ARTICLE IX
MISCELLANEOUS
Section 9.01 Notices.....................................................41
Section 9.02 No Waivers..................................................42
Section 9.03 Expenses; Indemnification...................................42
Section 9.04 Amendments and Waivers......................................43
Section 9.05 Successors and Assigns......................................43
Section 9.06 Right to Set-Off............................................44
Section 9.07 Governing Law...............................................44
Section 9.08 Arbitration; Submission to Jurisdiction.....................44
Section 9.09 Counterparts; Integration; Effectiveness....................45
Section 9.10 Confidentiality.............................................46
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
Exhibit A-1 - Form of Tennessee Letter of Credit ($12,270,000)
Exhibit A-2 - Form of Tennessee Letter of Credit ($3,000,000)
Exhibit B - Form of Revolving Note
Exhibit C - Form of Notice of Issuance for Performance Letters of Credit
Exhibit D - Form of Opinion of Counsel for the Borrowers
Exhibit E-1 - Form of Security Agreement (Parent Company and Subsidiaries)
Exhibit E-2 - Form of Security Agreement (SEG and Subsidiaries)
Exhibit F - Form of Assignment of Patents and Trademarks
Exhibit G - Form of Notice of Assignment of Government Contracts
Schedule 4.05 - Litigation
Schedule 4.08 Subsidiaries
Schedule 5.09 Liens
</TABLE>
-iv-
<PAGE>
CREDIT AGREEMENT dated as of April 18, 1997 among GTS DURATEK, INC., a
Delaware corporation, THE SCIENTIFIC ECOLOGY GROUP, INC., a Tennessee
corporation, SEG COLORADO, INC., a Delaware corporation, HITTMAN TRANSPORT
SERVICES, INC., a Delaware corporation, GTS INSTRUMENT SERVICES, INCORPORATED, a
Maryland corporation, GENERAL TECHNICAL SERVICES, INC., a Maryland corporation,
ANALYTICAL RESOURCES, INC., a Pennsylvania corporation, and FIRST UNION NATIONAL
BANK OF MARYLAND, a national banking association, and FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, a national banking association.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. All capitalized terms used in this
-----------
Agreement or in any Appendix, Schedule or Exhibit hereto which are not otherwise
defined herein or therein shall have the respective meanings set forth in the
Appendix attached hereto identified as the Definitions Appendix. The Definitions
Appendix is incorporated herein by reference in its entirety and is a part of
this Agreement to the same extent as if it had been set forth in this Section
1.01 in full.
SECTION 1.02 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
-----------------------------------
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles in the United States of America as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrowers' independent public accountants) with the most
recent audited consolidated financial statements of the Parent Company and its
Consolidated Subsidiaries delivered to the Bank; provided that until such time
--------
as the Bank has received audited consolidated financial statements of SEG or
audited consolidated financial statements of the Parent Company which include
SEG as a Consolidated Subsidiary, such determinations with respect to SEG shall
be consistent with the most recent unaudited consolidated financial statements
of SEG delivered to the Bank.
ARTICLE II
THE CREDITS
SECTION 2.01 COMMITMENTS TO LEND.
(a) Revolving Loans. The Bank agrees, on the terms and conditions set
---------------
forth in this Agreement, to make advances (each a "Revolving Loan") to the
Borrowers pursuant to this Section 2.01(a) from time to time during the
Revolving Credit Period in amounts such that the
-1-
<PAGE>
aggregate principal amount of Revolving Loans at any one time outstanding will
not exceed the lesser of (i) the Revolving Loan Commitment and (ii) the
Borrowing Base. Within the foregoing limit, the Borrowers may borrow under this
Section 2.01(a), prepay and reborrow Revolving Loans at any time during the
Revolving Credit Period
The Revolving Loan Commitment shall be initially $8,800,000. Upon a
decrease in the Tennessee Letter of Credit Liabilities pursuant to Section
2.01(b) and if no Default has occurred and is continuing hereunder, the
Revolving Loan Commitment may be increased from time to time, at the discretion
of the Parent Company, in an amount equal to the amount by which the Tennessee
Letter of Credit Liabilities have decreased (rounded downward to the nearest
$1,000); provided that such increases in the Revolving Loan Commitment shall not
--------
exceed $4,000,000 in the aggregate. The Parent Company may exercise its right to
so increase the Revolving Loan Commitment by written notice to the Bank within
30 Business Days of the related decrease in the Tennessee Letter of Credit
Liabilities.
Upon an increase in the Tennessee Letter of Credit Liabilities
pursuant to Section 2.01(b), the Revolving Loan Commitment shall be decreased
automatically, without any further action by the Bank, in an amount equal to the
amount by which the Tennessee Letter of Credit Liabilities have increased
(rounded upward to the nearest $1,000); provided that such decreases in the
--------
Revolving Loan Commitment shall not exceed $4,000,000 in the aggregate.
(b) Tennessee Letter of Credit. The North Carolina Bank agrees, on the
--------------------------
terms and conditions set forth in this Agreement, to issue letters of credit
(collectively, the "Tennessee Letter of Credit") on the Closing Date
substantially in the form of Exhibit A-1 and A-2 hereto in the aggregate stated
amount not to exceed the Tennessee Letter of Credit Commitment naming the State
of Tennessee, or a division thereof, as beneficiary, for the account of SEG, as
required by the State of Tennessee pursuant to Chapter 1200, Section 2-10.12 of
the Official Compilation Rules and Regulations of the State of Tennessee, to
provide security for such Borrower's obligation to reclaim its facility located
in Oak Ridge, Tennessee upon the closure of such facility. The Borrowers
acknowledge that the North Carolina Bank will assign, and does hereby assign, to
the Bank a 100% participation interest in the Tennessee Letter of Credit
Liabilities and the Tennessee Reimbursement Obligations.
The Tennessee Letter of Credit Commitment shall be initially
$15,270,000. Upon written notice to SEG that the State of Tennessee has
increased the amount required to secure SEG's reclamation obligations described
above (and delivery of such notice to the Administrative Agent) and deposit with
the Collateral Agent of funds to the LC Cash Collateral Account required to
maintain the balance of such account at 38% (or greater) of the Tennessee Letter
of Credit Liabilities, the Tennessee Letter of Credit Commitment shall increase
by an amount required to satisfy the requirements of the State of Tennessee;
provided that such increases shall not exceed $4,000,000 in the aggregate. Upon
- --------
such an increase in the Tennessee Letter of Credit Commitment, the North
Carolina Bank shall, subject to the terms of this Agreement, either (i) issue an
additional letter of credit in a stated amount equal to the Tennessee Letter of
Credit Commitment less the amount of the Tennessee Letter of Credit Liabilities
then outstanding or (ii)
-2-
<PAGE>
upon delivery to the Administrative Agent of a Tennessee Letter of Credit for
cancellation, issue a replacement letter of credit in a stated amount equal to
the sum of (A) the stated amount of such Tennessee Letter of Credit plus (B) the
Tennessee Letter of Credit Commitment less the amount of the Tennessee Letter of
Credit Liabilities then outstanding (after giving effect to such cancellation),
in either case for the benefit of the State of Tennessee and in the form of an
existing Tennessee Letter of Credit or such cancelled Tennessee Letter of Credit
or such other form as is required by the State of Tennessee and is reasonably
acceptable to the North Carolina Bank.
Upon delivery to the Administrative Agent of (x) written notice to SEG
that the State of Tennessee has decreased the amount required to secure SEG's
reclamation obligations described above and (y) the Tennessee Letter of Credit
related to such decrease, the Administrative Agent shall cancel such Tennessee
Letter of Credit and the Tennessee Letter of Credit Commitment shall then
decrease by the amount equal to the stated amount of such canceled Tennessee
Letter of Credit. Upon such decrease in the Tennessee Letter of Credit
Commitment, (a) the North Carolina Bank shall, subject to the terms of this
Agreement, issue a replacement letter of credit in a stated amount equal to the
Tennessee Letter of Credit Commitment less the amount of the Tennessee Letter of
Credit Liabilities (after giving effect to such cancellation) for the benefit of
the State of Tennessee and in the form of such cancelled Tennessee Letter of
Credit or such other form as is required by the State of Tennessee and is
reasonably acceptable to the North Carolina Bank and (b) the Collateral Agent
shall release those funds from the LC Cash Collateral Account by which the
balance in such account exceeds 38% of the Tennessee Letter of Credit
Liabilities.
(c) Performance Letters of Credit. The Bank agrees, on the terms and
-----------------------------
conditions set forth in this Agreement, to issue Performance Letters of Credit
hereunder from time to time before the 30th day before the Revolving Loan
Termination Date for the account, and upon the request, of any Borrower and in
support of (i) performance obligations of such Borrower under the Borrower's
contracts and (ii) such other obligations of the Borrower as are acceptable to
the Bank; provided that, immediately after each Performance Letter of Credit is
--------
issued, the aggregate amount of the Performance Letter of Credit Liabilities
shall not exceed the lesser of (i) the Performance Letter of Credit Commitment
and (ii) the Borrowing Base.
SECTION 2.02 METHODS OF BORROWING.
(a) Operating Account Overdrafts. If on any day Items are presented to the
----------------------------
Bank for payment against the Operating Account which Items, in the aggregate,
would, if paid in full, cause the Available Balance in the Operating Account on
such day to be less than $100,000, such presentation shall be deemed to be a
request by the Borrowers for a Revolving Loan on the date of such presentation
in an amount equal to the amount (rounded upward to the nearest $1,000) required
to cause such Available Balance to equal $100,000.
-3-
<PAGE>
(b) Overdrafts in Other Accounts. The Bank may, at its option, pay any
----------------------------
Item which will cause any deposit account maintained by any Borrower with the
Bank to become overdrawn, and such payment shall be deemed a Revolving Loan
hereunder.
SECTION 2.03 FUNDING OF REVOLVING LOANS. The proceeds of each
--------------------------
Revolving Loan deemed to be requested under Section 2.02 shall be disbursed by
the Bank by way of direct payment of the relevant Item or by way of deposit to
the Operating Account of the amount set forth in Section 2.02(a), as the case
may be.
SECTION 2.04 NOTE.
----
(a) Evidence of Revolving Loans. The Revolving Loans shall be evidenced by
---------------------------
a single Revolving Note substantially in the form of Exhibit B hereto made by
the Borrowers payable to the order of the Bank in an amount equal to the
aggregate unpaid principal amount of the Revolving Loans.
(b) Records of Amounts Due. The Bank shall record the date and amount of
----------------------
each Revolving Loan made by it and the date and amount of each payment of
principal made by the Borrowers with respect thereto, and may, if the Bank so
elects in connection with any transfer or enforcement of the Note, endorse on
the schedule forming a part thereof appropriate notations to evidence the
foregoing information with respect to each such Revolving Loan then outstanding;
provided that the failure of the Bank to make any such recordation or
- --------
endorsement shall not affect the obligations of the Borrowers hereunder or under
the Note. The Bank is hereby irrevocably authorized by the Borrowers so to
endorse the Note and to attach to and make a part of the Note a continuation of
any such schedule as and when required.
SECTION 2.05 INTEREST RATES.
(a) LIBOR Market Index Rate. Each Revolving Loan shall bear interest on
-----------------------
the outstanding principal amount thereof, for each day from the date such
Revolving Loan is made until it becomes due, at a rate per annum equal to the
LIBOR Market Index Rate for such day. Such interest shall be payable for each
month in arrears on the first day of the immediately succeeding calendar month.
The "Adjusted London Interbank Offered Rate" means on any day a rate
per annum equal to the quotient obtained (rounded upward, if necessary, to the
next higher 1/100 of 1%) by dividing (i) the London Interbank Offered Rate for
such day by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
"LIBOR Market Index Rate" means for any day, the sum of (i) the
Adjusted London Interbank Offered Rate for such day plus (ii) 2.00%.
The "London Interbank Offered Rate" means the rate per annum
designated as the British Bankers' Association settlement rate as of 11:00 A.M.
(London time) for one month deposits in Dollars in the London interbank market
that appears on the display on page 3750
-4-
<PAGE>
(under the caption "USD" of the Telerate Services, Incorporated screen (the
"Telerate Screen") (or on such other display as may replace such page on the
Telerate Screen) at such time) each Euro-Dollar Business Day; provided that if
--------
no offered quotations appear on the Telerate Screen or if quotations are not
given on the Telerate Screen for such one month period, then the London
Interbank Offered Rate shall mean the rate per annum determined by the Bank at
which United States Dollars in the amount of $5,000,000 are being offered to
leading banks in the London interbank market for Dollar deposits at
approximately 11:00 A.M. London time two Euro-Dollar Business Days prior to such
day for settlement in immediately available funds by leading banks in the London
interbank market for a one month period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Revolving Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of the Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
The LIBOR Market Index Rate may change from day to day with changes to
occur on the date the London Interbank Offered Rate changes on the Telerate
Screen, or if such rate is not available, by reference to the rate being offered
to leading banks.
(b) Overdue Amounts. Any overdue principal of or interest on any Revolving
---------------
Loan shall bear interest, payable on demand, for each day from and including the
date payment thereof was due to but excluding the date of actual payment, at a
rate per annum equal to the sum of 2.00% plus the LIBOR Market Index Rate
applicable to such Revolving Loan on such day.
(c) Determination of Interest Rates. The Bank shall determine each
-------------------------------
interest rate applicable to the Revolving Loans hereunder, and its determination
thereof shall be conclusive in the absence of manifest error.
SECTION 2.06 FEES.
----
(a) Revolving Loan Commitment Fee. The Borrowers shall pay to the Bank a
-----------------------------
facility fee for each month of the Revolving Loan Commitment (the "Facility
Fee") in an amount equal to the product of (i) the amount of the Revolving Loan
Commitment as of the first day of such month multiplied by (ii) 35 basis points
per annum. Such Facility Fee shall be payable in advance for each month on the
first day of such month; provided that if on any day the Revolving Loan
--------
Commitment is increased pursuant to Section 2.01(a), the Borrowers shall pay to
the Bank on such day for each day remaining in the month in which such increase
occurs an amount equal
-5-
<PAGE>
to the product of (i) the amount of such increase in the Revolving Loan
Commitment multiplied by (ii) 35 basis points per annum.
(b) Servicing Fee. The Borrowers shall pay to the Bank a monthly servicing
-------------
fee (the "Servicing Fee") equal to $300. The Servicing Fee shall accrue from and
including the Effective Date to but excluding the Revolving Loan Termination
Date (or earlier date of termination of the Revolving Loan Commitment in its
entirety) and shall be payable for each month in arrears on the first day of the
immediately succeeding calendar month.
(c) Tennessee Letter of Credit Fee. The Borrowers shall pay to the North
------------------------------
Carolina Bank a letter of credit fee (the "Tennessee Letter of Credit Fee") at a
rate per annum equal to the product of (i) 1.00% multiplied by (ii) the
aggregate amount available for drawing under the Tennessee Letter of Credit.
Such fee shall be payable in advance on the Effective Date and on each
anniversary of the Effective Date for so long as the Tennessee Letter of Credit
is outstanding; provided that if any Tennessee Letter of Credit shall be
--------
canceled prior to its stated expiration date, the Administrative Agent will
remit to the Parent Company a percentage of the related Tennessee Letter of
Credit Fee equal to the fraction (expressed as a percentage) of (y) the number
of months (or any portion thereof) remaining on the term of such canceled
Tennessee Letter of Credit as of the end of the month during which such
cancellation occurs over (z) 12 . The Borrowers agree to pay to the
Administrative Agent, upon each issuance of, payment under and/or amendment of
the Tennessee Letter of Credit, such amount as shall at the time of such
issuance, payment or amendment be the administrative charges and expenses which
the Bank is customarily charging for issuances of, payments under or amendments
to letters of credit issued by it.
(d) Performance Letter of Credit Fees. The Borrowers shall pay to the Bank
---------------------------------
a letter of credit fee (the "Performance Letter of Credit Fee") for each day at
a rate per annum equal to the product of (i) 1.50% multiplied by (ii) the
aggregate amount available for drawing under any Performance Letter of Credit
issued and outstanding on such day. Such fee shall be payable, for each
Performance Letter of Credit, in advance on the day such Performance Letter of
Credit is issued. The Borrowers agree to pay to the Bank, upon each issuance of,
payment under and/or amendment of a Performance Letter of Credit, such amount as
shall at the time of such issuance, payment or amendment be the administrative
charges and expenses which the Bank is customarily charging for issuances of,
payments under or amendments to letters of credit issued by it.
SECTION 2.07 MATURITY AND REPAYMENT OF REVOLVING LOANS.
(a) Maturity at Revolving Loan Termination Date. Each Revolving Loan shall
-------------------------------------------
mature on the Revolving Loan Termination Date and any Revolving Loans then
outstanding (together with accrued interest thereon) shall be due and payable on
such date.
(b) Mandatory Prepayments of Revolving Loans. If on any day the Credit
----------------------------------------
Agreement Liabilities exceed the Borrowing Base, the Borrowers shall prepay, and
there shall become due
-6-
<PAGE>
and payable, on such date the principal amount of the Revolving Loans equal to
such excess, together with interest thereon to the date of repayment.
(c) Mandatory Repayments from Operating Account.
-------------------------------------------
(i) Deposits of Proceeds to Operating Account. The Borrowers
------------------------------------------
shall instruct all Account Debtors and other Persons obligated in respect
of Accounts and other Collateral to make all payments in respect of the
Accounts or other Collateral directly to a post office box which shall be
in the name and under the control of the Bank. Except as provided in
Section 3.03 of the Security Agreements, all such payments made to the Bank
shall be deposited in the Operating Account. In addition to the foregoing,
the Borrowers agree that if the proceeds of any Collateral (including the
payments made in respect of Accounts) shall be received by it, the
Borrowers shall, unless Section 3.03 of the Security Agreement shall
require otherwise, as promptly as possible deposit such proceeds to the
Operating Account. Until so deposited, all such proceeds shall be held in
trust by the Borrowers for and as the property of the Bank and shall not be
commingled with any other funds or property of the Borrowers. The Borrowers
hereby irrevocably authorize and empower the Bank, its officers, employees
and authorized agents to endorse and sign its name on all checks, drafts,
money orders or other media of payment so delivered, and such endorsements
or assignments shall, for all purposes, be deemed to have been made by the
Borrowers prior to any endorsement or assignment thereof by the Bank. The
Bank may use any convenient or customary means for the purpose of
collecting such checks, drafts, money orders or other media of payment.
(ii) Revolving Loans Due to Extent of Available Balance. Each
--------------------------------------------------
Business Day, the principal amount of the Revolving Loans which equals the
amount by which the then Available Balance exceeds $100,000 shall become
due and payable.
(iii) Withdrawals from Operating Account to Pay Revolving Loans.
---------------------------------------------------------
The amount by which the then Available Balance exceeds $100,000, or so much
thereof as is necessary to pay in full the principal amount of Revolving
Loans referred to in this Section 2.07(c)(iii), shall be withdrawn by the
Bank each Business Day and applied to repay the principal amount of
Revolving Loans which is then due and payable (including those principal
amounts which become due and payable on such date pursuant to subsection
(ii) above).
(d) Optional Prepayments of Revolving Loans. The Borrowers may prepay any
---------------------------------------
Revolving Loan, in whole at any time, or from time to time in part, by paying
the principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each prepayment of a Revolving Loan shall be applied to such
Revolving Loan or Revolving Loans as the Borrowers may designate (or, failing
such designation, as determined by the Bank).
SECTION 2.08 GENERAL PROVISIONS AS TO PAYMENTS. The Borrowers shall
---------------------------------
make each payment of principal of and interest on the Revolving Loans and of
fees hereunder not later
-7-
<PAGE>
than 12:00 Noon (local time in Baltimore, Maryland) on the date when due,
without set-off, counterclaim or other deduction, in Federal or other funds
immediately available in Baltimore, Maryland, to the Administrative Agent at its
address referred to in Section 9.01. The Administrative Agent will promptly
distribute such payments to the Banks, or either of them, as shall be entitled
thereto. The Borrowers hereby irrevocably authorize the Administrative Agent to
deduct from the Operating Account at any time such amount as may then be
necessary to pay Obligations then due and payable. If the Available Balance for
any day is greater than $0 and the Administrative Agent does not deduct amounts
from the Operating Account which are due and payable on such day pursuant to
Sections 2.05(a), 2.06 or 2.07(b), such amounts shall become due and payable
upon 5 days prior written notice to the Parent Company. Whenever any payment of
principal of, or interest on, the Revolving Loans or Letter of Credit
Liabilities or of fees shall be due on a day which is not a Business Day, the
date for payment thereof shall be extended to the next succeeding Business Day.
If the date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.
Each of the Obligations of the Borrowers hereunder is senior to the
obligations of the Parent Company, General Technical Services, Inc. and GTS
Instrument Services, Incorporated under a certain Convertible Debenture dated
November 7, 1995 issued to BNFL Inc. in the principal amount of $10,000,000 and
to any and all renewals and replacements thereof and modifications and
amendments thereto.
SECTION 2.09 COMPUTATION OF INTEREST AND FEES. Interest on Revolving
--------------------------------
Loans, Letter of Credit Liabilities and fees shall be computed on the basis of a
year of 360 days and paid for the actual number of days elapsed (including the
first day but excluding the last day).
SECTION 2.10 LETTERS OF CREDIT.
(a) Method of Issuance of Performance Letters of Credit. The Parent
---------------------------------------------------
Company shall give the Bank notice substantially in the form of Exhibit C hereto
(a "Notice of Issuance") of the requested issuance or extension of a Performance
Letter of Credit prior to 1:00 P.M. (local time in Baltimore, Maryland) at least
three Business Days (or such shorter period as may be agreed by the Bank in any
particular instance) prior to the proposed date of issuance or extension (which
shall be a Business Day), specifying the date such Performance Letter of Credit
is to be issued or extended, the Borrower which shall be the account party
thereunder, and describing the terms of such Performance Letter of Credit and
the nature of the transactions to be supported thereby. The issuance by the Bank
of each Performance Letter of Credit shall, in addition to the conditions
precedent set forth in Article III, be subject to the conditions precedent that
such Performance Letter of Credit shall be in such form and contain such terms
as shall be satisfactory to the Bank and that the Borrowers shall have executed
and delivered such other instruments and agreements relating to such Performance
Letter of Credit as the Bank shall have reasonably requested. The extension or
renewal of any Performance Letter of Credit shall be deemed to be an issuance of
such Performance Letter of Credit, and if any Performance Letter of Credit
contains a provision pursuant to which it is deemed to be extended unless notice
of termination is given by the Bank, the Bank shall timely give such notice of
termination unless it has theretofore
-8-
<PAGE>
timely received a Notice of Issuance and the other conditions to issuance of a
Performance Letter of Credit have also theretofore been met with respect to such
extension. No Performance Letter of Credit shall have a term of more than one
year; provided that a Performance Letter of Credit may contain a provision
--------
pursuant to which it is deemed to be extended on an annual basis unless notice
of termination is given by the Bank; provided further that no Performance Letter
-------- -------
of Credit shall have a term extended or be so extendable beyond one year
following the Revolving Loan Termination Date.
(b) Conditions to Issuance of Performance Letters of Credit. The Bank
-------------------------------------------------------
shall not issue any Performance Letter of Credit unless (i) such Performance
Letter of Credit shall be satisfactory in form and substance to the Bank, (ii)
the Borrowers shall have executed and delivered such other instruments and
agreements relating to such Performance Letter of Credit as the Bank shall have
reasonably requested, (iii) the Bank shall have confirmed on the date of such
issuance that neither the Performance Letter of Credit Commitment nor the
Borrowing Base will be exceeded immediately after such Performance Letter of
Credit is issued and (iv) the Bank shall not have been notified by a Borrower or
otherwise have become aware that any condition specified in Section 3.02(iii),
(iv) or (v) is not satisfied on the date such Performance Letter of Credit is to
be issued.
(c) Drawings and Reimbursements of Letters of Credit . Upon receipt from
-------------------------------------------------
the beneficiary of any Letter of Credit of any notice of a drawing under such
Letter of Credit, the Issuing Bank shall determine in accordance with the terms
of such Letter of Credit whether such drawing should be honored. If the Issuing
Bank determines that any such drawing shall be honored, the Issuing Bank shall
make available to such beneficiary in accordance with the terms of such Letter
of Credit the amount of the drawing and shall notify the Parent Company as to
the amount to be paid as a result of such drawing and the payment date. The
Borrowers shall be irrevocably and unconditionally obligated immediately upon
any such drawing to reimburse the Issuing Bank for any amounts paid by the
Issuing Bank under any Letter of Credit, together with any and all reasonable
charges and expenses which the Issuing Bank may pay or incur relative to such
drawing and interest on the amount drawn at the LIBOR Market Index Rate for each
day from and including the date such amount is drawn to but excluding the date
such reimbursement payment is due and payable (collectively, the "Reimbursement
Obligations"). Such Reimbursement Obligations shall be due and payable (i) at or
before 1:00 P.M. (local time in Baltimore, Maryland) on the date the Issuing
Bank notifies the Parent Company of such drawing, if such notice is given at or
before 10:00 A.M. (local time in Baltimore, Maryland) on such date or (ii) at or
before 10:00 A.M. (local time in Baltimore, Maryland) on the immediately
succeeding Business Day; provided that no payment otherwise required by this
--------
sentence to be made by the Borrowers at or before 1:00 P.M. (local time in
Baltimore, Maryland) on any day shall be overdue hereunder if arrangements for
such payment satisfactory to the Issuing Bank, in its reasonable discretion,
shall have been made by the Borrowers at or before 1:00 P.M. (local time in
Baltimore, Maryland) on such day and such payment is actually made at or before
3:00 P.M. (local time in Baltimore, Maryland) on such day. In addition, the
Borrowers agree to pay to the Issuing Bank interest on any and all Reimbursement
Obligations not paid by the Borrowers to
-9-
<PAGE>
the Issuing Bank when due under this subsection (c), for each day from and
including the date when such amount becomes due to but excluding the date such
amount is paid in full, whether before or after judgment, payable on demand, at
a rate per annum equal to the sum of 2.00% plus the LIBOR Market Index Rate for
such day (such interest to constitute an additional Reimbursement Obligation).
Each payment to be made by the Borrowers pursuant to this subsection (c) shall
be made to the Issuing Bank in Federal or other funds immediately available to
it at its address referred to in Section 9.01.
If on any day, following the application of Section 2.07(b), the
Credit Agreement Liabilities exceed the Borrowing Base, the Borrowers shall pay
to the Collateral Agent an amount in immediately available funds (which shall be
held as Collateral and applied pursuant to the Security Agreements) equal to the
amount of such excess.
(d) Purchase and Sale of Tennessee Letter of Credit Participation. Upon
-------------------------------------------------------------
the issuance by the North Carolina Bank of the Tennessee Letter of Credit, the
North Carolina Bank shall be deemed, without further action by any party hereto,
to have transferred to the Bank and the Bank shall be deemed without further
action by any party hereto, to have purchased from he North Carolina Bank,
without recourse or warranty, a 100% undivided participation interest in the
Tennessee Letter of Credit and the related Tennessee Letter of Credit
Liabilities.
(e) Duties of North Carolina Bank to the Bank; Reliance. In determining
---------------------------------------------------
whether to pay under the Tennessee Letter of Credit, the North Carolina Bank
shall not have any obligation relative to the Bank or the related Tennessee
Letter of Credit Liabilities other than to determine that any document required
to be delivered under such Tennessee Letter of Credit or that any documents
required to be delivered under such Tennessee Letter of Credit have been
delivered and that they substantially comply on their face with the requirements
of such Tennessee Letter of Credit. Any action taken or omitted to be taken by
the North Carolina Bank under or in connection with the Tennessee Letter of
Credit shall not create for the North Carolina Bank any resulting liability if
taken or omitted in the absence of gross negligence or willful misconduct. The
North Carolina Bank shall be entitled (but not obligated) to rely, and shall be
fully protected in relying, on the representation and warranty by the Borrowers
set forth in the last sentence of Section 3.02 to establish whether the
conditions specified in clause (v) of Section 3.02 are met in connection with
any issuance or extension of the Tennessee Letter of Credit. The North Carolina
Bank shall be entitled to rely, and shall be fully protected in relying, upon
advice and statements of legal counsel, independent accountants and other
experts selected by the North Carolina Bank and upon the Tennessee Letter of
Credit, draft, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopier, telex or teletype message, statement,
order or other document believed by it in good faith to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons, and may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary unless the beneficiary and the Borrowers shall have
notified the North Carolina Bank that such documents do not comply with the
terms and conditions of the Tennessee Letter of Credit. The North Carolina Bank
shall be fully justified in refusing to take any action requested of it under
this Section in respect of any Tennessee Letter of Credit unless it
-10-
<PAGE>
shall first have received such advise or concurrence of the Bank as it
reasonably deems appropriate or it shall first be indemnified to its reasonable
satisfaction by the Bank against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take, or omitting or
continuing to omit, any such action. Notwithstanding any other provision of this
Section, the North Carolina Bank shall in all cases be fully protected in
acting, or in refraining from acting, under this Section in respect of any
Tennessee Letter of Credit in accordance with a request of the Bank, and such
request and any action taken or failure to act pursuant hereto shall be binding
upon the Bank; provided that this sentence shall not affect any rights the
--------
Borrowers may have against the Bank that make such request.
(f) Obligations of the Bank to Reimburse the North Carolina Bank for Unpaid
-----------------------------------------------------------------------
Drawings Under Tennessee Letter of Credit. If the North Carolina Bank makes any
- -----------------------------------------
payment under any Tennessee Letter of Credit and the Borrowers shall not have
reimbursed such amount in full to the North Carolina Bank, the North Carolina
Bank shall promptly notify the Bank, and the Bank shall promptly and
unconditionally pay the North Carolina Bank, the amount of such payment under
the Tennessee Letter of Credit made by the North Carolina Bank; provided,
--------
however, that the Bank shall not be obligated to pay to the North Carolina Bank
for any wrongful payment made by the North Carolina Bank under the Tennessee
Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence by the North Carolina Bank. Upon payment in full
of all amounts payable by the Bank under this subsection, the Bank shall be
subrogated to the rights of the North Carolina Bank against the Borrowers.
(g) Obligations in Respect of Letters of Credit Unconditional. The
---------------------------------------------------------
obligations of the Borrowers and the Issuing Bank under this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, under all circumstances whatsoever,
including without limitation the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any Letter of Credit or any document related hereto or thereto;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of this Agreement or any Letter of Credit
or any document related hereto or thereto;
(iii) the use which may be made of any Letter of Credit by, or
any acts or omission of, a beneficiary of any Letter of Credit (or any
Person for whom the beneficiary may be acting);
(iv) the existence of any claim, set-off, defense or other
rights that any Borrower may have at any time against a beneficiary of a
Letter of Credit (or any Person for whom the beneficiary may be acting),
the Issuing Bank or any other Person, whether in connection with this
Agreement or any Letter of Credit or any document related hereto or thereto
or any unrelated transaction;
-11-
<PAGE>
(v) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any respect
or any statement therein being untrue or inaccurate in any respect
whatsoever;
(vi) payment under a Letter of Credit against presentation to
the Issuing Bank of a draft or certificate that does not comply with the
terms of such Letter of Credit, provided that the Issuing Bank's
--------
determination that documents presented under such Letter of Credit comply
with the terms thereof shall not have constituted gross negligence or
willful misconduct of the Issuing Bank; or
(vii) any other act or omission to act or delay of any kind by
the Issuing Bank or any other Person or any other event or circumstance
whatsoever that might, but for the provisions of this subsection (vii),
constitute a legal or equitable discharge of any Borrower's or the Issuing
Bank's obligations hereunder.
Nothing in this subsection (g) is intended to limit the right of the Borrowers
to make a claim against the Issuing Bank for damages as contemplated by the
proviso to the first sentence of subsection (h).
- -------
(h) Indemnification in Respect of Letters of Credit. Each Borrower hereby
-----------------------------------------------
indemnifies and holds harmless the Issuing Bank and its successors and assigns
from and against any and all claims, damages, losses, liabilities, costs or
expenses which they may incur and neither the Issuing Bank nor its successors
and assigns, nor any of their officers or directors or employees or agents shall
be liable or responsible, by reason of or in connection with the execution and
delivery or transfer of or payment or failure to pay under any Letter of Credit,
including without limitation (i) any error, omission, interruption or delay in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, (ii) any error in interpretation of technical terms, (iii) any loss
or delay in the transmission of any document required in order to make a drawing
under a Letter of Credit, (iv) any consequences arising from causes beyond the
control of the Bank, including without limitation any government acts, or any
other circumstances whatsoever in making or failing to make payment under such
Letter of Credit; provided that the Borrowers shall not be required to indemnify
--------
the Issuing Bank or its successors and assigns for any claims, damages, losses,
liabilities, costs or expenses, and the Borrowers shall have a claim against the
Issuing Bank for direct (but not consequential) damage suffered by it, to the
extent found by a court of competent jurisdiction to have been caused by (x) the
willful misconduct or gross negligence of the Issuing Bank in determining
whether a request presented under any Letter of Credit issued by it complied
with the terms of such Letter of Credit or (y) the Issuing Bank's failure to pay
under any Letter of Credit issued by it after the presentation to it of a
request strictly complying with the terms and conditions of such Letter of
Credit. Nothing in this subsection (h) is intended to limit the obligations of
the Borrowers under any other provision of this Agreement.
(i) In the event that any term or provision contained in this Agreement
shall conflict with or be inconsistent with the terms and provisions of any
letter of credit application executed
-12-
<PAGE>
and delivered by a Borrower in connection with a Letter of Credit, the terms and
provisions of this Agreement shall govern.
ARTICLE III
CONDITIONS
SECTION 3.01 CONDITIONS TO CLOSING. The obligation of the Banks to
---------------------
make the first Revolving Loan or issue the first Letter of Credit hereunder is
subject to the satisfaction of the following conditions:
(a) Effectiveness. This Agreement shall have become effective in
-------------
accordance with Section 9.09.
(b) Note. On or prior to the Closing Date, the Bank shall have received a
----
duly executed Revolving Note dated on or before the Closing Date complying with
the provisions of Section 2.04.
(c) Other Loan Documents. Each of the Loan Documents to be executed on or
--------------------
before the Closing Date shall be in form and substance satisfactory to the
Agents and shall have been duly executed and delivered to the Agents by each of
the parties thereto.
(d) Deposit to LC Cash Collateral Account. On or prior to the Closing
-------------------------------------
Date, the Collateral Agent shall have received the deposit required pursuant to
Section 3.05 of the Security Agreement executed and delivered by the Parent
Company.
(e) Adverse Change, etc. On the Closing Date, nothing shall have occurred
-------------------
(and the Administrative Agent shall not have become aware of any facts or
conditions not previously known) which the Administrative Agent shall determine
has, or could reasonably be expected to have, a Material Adverse Effect.
(f) Officer's Certificate. The Administrative Agent shall have received a
---------------------
certificate dated the Closing Date signed on behalf of each Borrower by the
Chairman of the Board, the President, any Vice President or the Treasurer of
such Borrower stating that (x) on the Closing Date and after giving effect to
the Revolving Loans being made on the Closing Date, no Default or Event of
Default shall have occurred and be continuing and (y) to the best knowledge and
belief of such officer, the representations and warranties of such Borrower
contained in the Loan Documents are true and correct on and as of the Closing
Date.
(g) Opinion of Borrowers' Counsel. On the Closing Date, the Administrative
-----------------------------
Agent shall have received from counsel to the Borrowers an opinion addressed to
the Administrative Agent, dated the Closing Date, substantially in the form of
Exhibit D hereto.
(h) Corporate Proceedings. On the Closing Date, the Administrative Agent
---------------------
shall have received (i) a copy of each Borrower's articles or certificate of
incorporation (or analogous organizational documents), as amended, certified by
the appropriate agency of the state of such
-13-
<PAGE>
Borrower's incorporation; (ii) for each Borrower, a certificate of the
appropriate agency of the state of such Borrower's incorporation, dated as of a
recent date, as to the good standing and if available listing in long-form the
charter or similar organizational documents of such Borrower on file; and (iii)
a certificate of the Secretary or an Assistant Secretary of each Borrower dated
the Closing Date and certifying (A) that the articles or certificate of
incorporation of such Borrower have not been amended since the date of the last
amendment thereto indicated on the certificate furnished pursuant to clause (ii)
above, (B) as to the absence of dissolution or liquidation proceedings by or
against such Borrower, (C) that attached thereto is a true and complete copy of
the by-laws of such Borrower as in effect on the date of such certification and
all other times relevant to the transactions contemplated hereby, (D) that
attached thereto is a true, correct and complete copy of resolutions adopted by
the board of directors of such Borrower authorizing the execution, delivery and
performance of this Agreement, the Note and such Borrower's Security Agreement
and each other document delivered in connection herewith or therewith and that
said resolutions have not been amended and are in full force and effect on the
date of such certificate, (E) as to the incumbency and specimen signatures of
each officer of such Borrower executing this Agreement, the Note and such
Borrower's Security Agreement or any other document delivered in connection
herewith or therewith and (F) certifying as to the names and respective
jurisdictions of incorporation of all Subsidiaries of such Borrower existing on
the Closing Date.
All corporate and legal proceedings and instruments and agreements
relating to the transactions contemplated by this Agreement or in any other
document delivered in connection therewith shall be satisfactory in form and
substance to the Administrative Agent and its counsel, and the Administrative
Agent shall have received all information and copies of all documents and
papers, including records of corporate proceedings, governmental approvals, good
standing certificates, which the Administrative Agent reasonably may have
requested in connection therewith, such documents and papers where appropriate
to be certified by proper corporate or governmental authorities.
(i) Perfection of Security Interests; Search Reports. On or prior to the
------------------------------------------------
Closing Date, the Collateral Agent shall have received:
(i) a Perfection Certificate of each Borrower, substantially in
the form of Exhibit A to each of the Security Agreements;
(ii) Notices of Assignment with respect to Government Contracts
identified in any Perfection Certificate duly executed by the Borrower
party to such contract in compliance with the Assignment of Claims Act;
(iii) Assignments of Security Interest in United States Patents
and Trademarks for Patents and Trademarks identified in any Perfection
Certificate duly executed by the appropriate Borrower and in form
appropriate for filing at the United States Patent and Trade Mark Office;
-14-
<PAGE>
(iv) appropriate Financing Statements (Form UCC-1 or such other
financing statements or similar notices as shall be required by local law)
fully executed for filing under the Uniform Commercial Code or other
applicable local law of each jurisdiction in which the filing of a
financing statement or giving of notice may be required, or reasonably
requested by the Collateral Agent, to perfect the security interests
purported to be created by the Loan Documents;
(v) copies of reports from an independent search service
reasonably satisfactory to the Collateral Agent listing all effective
financing statements that name any Borrower (under its present name and any
previous name and, if requested by the Bank, under any trade names) as
debtor or seller that are filed in the jurisdictions referred to in such
Borrower's Perfection Certificate, together with copies of such other
financing statements (none of which shall cover the Collateral except to
the extent evidencing Permitted Liens or for which the Collateral Agent
shall have received termination statements (Form UCC-3) or such other
termination statements as shall be required by local law) fully executed
for filing; and
(vi) evidence of the completion of all other filings and
recordings of, or with respect to, the Loan Documents as may be necessary
or, in the opinion of the Collateral Agent, desirable to perfect the
security interests intended to be created by the Loan Documents.
The obligation of the Bank to make the first Revolving Loan shall be
subject to the additional condition that the Collateral Agent shall have
received copies of reports from an independent search service reasonably
satisfactory to the Collateral Agent indicating that, from and including
February 13, 1997 to one Business Day after the Effective Date, no financing
statements were filed with the Secretary of State of Tennessee or at the
Maryland State Department of Assessments and Taxation that name SEG or Hittman
Transport Services, Inc. as debtor or seller with respect to any of their
respective Accounts or General Intangibles (as defined in the Security
Agreements).
(j) Closing Date Borrowing Base Certificate. On the Closing Date, the
---------------------------------------
Parent Company shall have delivered to the Bank its initial Borrowing Base
Certificate meeting the requirements of Section 5.01(f).
(k) Payment of Fees. All costs, fees and expenses due to the Banks on or
---------------
before the Closing Date (including, without limitation, all audit fees incurred
with respect to audits performed prior to the Closing Date, and all legal fees
and expenses) shall have been paid.
(l) Counsel Fees. The Banks shall have received payment from the
------------
Borrowers of the fees and expenses of McGuire, Woods, Battle & Boothe, L.L.P.,
described in Section 9.03 which are billed through the Closing Date.
-15-
<PAGE>
(m) Consummation of the Acquisition. On or prior to the Closing Date,
-------------------------------
there shall have been delivered to the Administrative Agent true and correct
copies of all Acquisition Documents, certified as such by an officer of the
Parent Company, and all terms and conditions of the Acquisition Documents shall
be in form and substance satisfactory to the Administrative Agent and shall not
be amended without the consent of the Administrative Agent. The Acquisition,
including all of the terms and conditions thereof, shall have been duly approved
by the board of directors and (if required by applicable law) the shareholders
of the Parent Company, and all Acquisition Documents shall have been duly
executed and delivered by the parties thereto and shall be in full force and
effect. The representations and warranties of the Parent Company and, to the
knowledge of the Borrowers, the representations and warranties of Westinghouse
set forth in the Acquisition Documents shall be true and correct in all material
respects as if made on and as of the Closing Date. Each of the conditions
precedent to the Parent Company's obligation to consummate the Acquisition as
set forth in the Acquisition Documents shall have been satisfied to the
reasonable satisfaction of the Administrative Agent or waived with the consent
of the Administrative Agent, and the Acquisition shall have been consummated in
accordance with all applicable laws and the Acquisition Documents (without
giving effect to any amendment or modification thereof or waiver with respect
thereto unless consented to by the Administrative Agent).
The Banks shall promptly notify the Parent Company of the Closing Date, and such
notice shall be conclusive and binding on all parties hereto. The documents
referred to in this Section shall be delivered to the Banks or the Agents, as
appropriate, no later than the Closing Date. The certificates and opinion
referred to in this Section shall be dated the Closing Date.
SECTION 3.02 CONDITIONS TO ALL CREDIT EVENTS. The obligation of the
-------------------------------
Bank to make each Revolving Loan and the obligation of the Issuing Bank to issue
(or renew or extend the term of) any Letter of Credit are subject to the
satisfaction of the following conditions:
(i) the fact that the Closing Date shall have occurred;
(ii) in the case of Performance Letters of Credit, receipt by
the Bank of a Notice of Issuance;
(iii) the fact that, immediately after such Credit Event, (A)
the aggregate outstanding principal amount of all Revolving Loans shall not
exceed the lesser of (w) the Revolving Loan Commitment and (x) the
Borrowing Base, (B) the aggregate amount of Performance Letter of Credit
Liabilities will not exceed the lesser of (y) the Performance Letter of
Credit Commitment and (z) the Borrowing Base, and (C) the aggregate amount
of Credit Agreement Liabilities will not exceed the Borrowing Base (after
giving effect to the application of the proceeds of any Revolving Loan then
being made or Letter of Credit being issued);
(iv) the fact that, immediately before and after such Credit
Event, no Default shall have occurred and be continuing; and
-16-
<PAGE>
(v) the fact that the representations and warranties of the
Borrowers contained in this Agreement and the other Loan Documents shall be
true on and as of the date of such Credit Event.
Each Credit Event hereunder shall be deemed to be a representation and warranty
by each Borrower on the date of such Credit Event as to the facts specified in
clauses (iii), (iv) and (v) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants that:
SECTION 4.01 CORPORATE EXISTENCE AND POWER. Each Borrower and each
-----------------------------
of its Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, and has
all corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted. Each
Borrower and each of its Subsidiaries is duly qualified as a foreign corporation
and in good standing in each jurisdiction where qualification is required by the
nature of its business or the character and location of its property, business
or customers and in which the failure to so qualify, in the aggregate, could
have a Material Adverse Effect.
SECTION 4.02 CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION. The execution, delivery and performance by each Borrower of the
Loan Documents to which it is a party are within the corporate powers of such
Borrower, have been duly authorized by all necessary corporate action, require
no action by or in respect of, or filing with, any governmental body, agency or
official (except for any such action or filing as shall have been taken or made
and that is in full force and effect from and after the Closing Date) and do not
contravene, or constitute (with or without the giving of notice or lapse of time
or both) a default under, any provision of applicable law or of the articles or
certificate of incorporation or by-laws (or analogous organizational documents)
of such Borrower or any of its Subsidiaries or of any agreement, judgment,
injunction, order, decree or other instrument binding upon or affecting such
Borrower or any or its Subsidiaries or result in the creation or imposition of
any Lien on any asset of such Borrower or any of its Subsidiaries.
SECTION 4.03 BINDING EFFECT. Each Loan Document (other than the
--------------
Note) to which a Borrower is a party constitutes a valid and binding agreement
of such Borrower and the Note, when executed and delivered in accordance with
this Agreement, will constitute valid and binding obligations of each Borrower,
in each case enforceable against each Borrower in accordance with its terms
except in each case as such enforceability may be limited by (i) bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
equitable principles of general applicability (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
-17-
<PAGE>
SECTION 4.04 FINANCIAL CONDITION.
(a) Audited Financial Statements. The consolidated balance sheet of the
----------------------------
Parent Company as of December 31, 1996, and the Parent Company's related
consolidated statements of income and cash flows for the fiscal year then ended,
reported on by KPMG Peat Marwick LLP, copies of which have been delivered to the
Bank, fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Parent Company as of such
date and its consolidated results of operations and cash flows for such fiscal
year. To the knowledge of the Parent Company, the unaudited consolidated
balance sheet of SEG as of December 31, 1996, and the unaudited consolidated
statement of income of SEG for the fiscal year ended December 31, 1996, copies
of which have been delivered to the Bank, fairly present, in conformity with
generally accepted accounting principles, the consolidated financial position of
SEG as of such date and SEG's consolidated results of operation for such fiscal
year. As of the date of such financial statements, no Borrower had any material
contingent obligation, contingent liability or liability for taxes, long-term
lease or unusual forward or long-term commitment, which is not reflected in any
of such financial statements or notes thereto.
(b) Material Adverse Change. Since December 31, 1996, there has been no
-----------------------
material adverse change in the condition (financial or otherwise), results of
operations, properties, assets, or business of the Parent Company and its
Consolidated Subsidiaries, considered as a whole except as disclosed in the
financial statements of the Parent Company referred to in subsection (a) above
(including, without limitation, changes disclosed in such financial statements
with respect to the M-Area Contract) and in Schedule 2.6 of the Acquisition
Agreement.
(c) Solvency. On and as of the Closing Date, on a pro-forma basis after
--------
giving effect to the transactions contemplated hereby and to all Debt incurred,
and to be incurred, and Liens created, and to be created, by the Borrowers in
connection therewith, (i) the sum of the assets, at fair valuation, of the
Parent Company and its Consolidated Subsidiaries, taken as a whole, will exceed
Debts (without duplication) of the Parent Company and its Consolidated
Subsidiaries, taken as a whole, (ii) each Borrower will not have unreasonably
small capital with which to conduct its business, and (iii) the Parent Company
and its Consolidated Subsidiaries, taken as a whole, will not have incurred or
intended to, or believe that they will, incur Debts beyond their ability to pay
as such Debts mature.
SECTION 4.05 LITIGATION. Except as disclosed in Schedule 4.05, there
----------
is no action, suit, proceeding or investigation pending against, or to the
knowledge of any Borrower threatened against, contemplated or affecting, any
Borrower or any of its Subsidiaries before any court, arbitrator or any
governmental body, agency or official which has, or, if adversely determined,
could reasonably be expected to have, a Material Adverse Effect, or which in any
manner draws into question the validity or enforceability of this Agreement, the
Note or any of the other Loan Documents and there is no basis known to any
Borrower or any of its Subsidiaries for any such action, suit, proceeding or
investigation.
-18-
<PAGE>
SECTION 4.06 REGULATION U; USE OF PROCEEDS. No Borrower nor any of
-----------------------------
the Borrowers' Subsidiaries own any "margin stock" as such term is defined in
Regulation U. The proceeds of the Revolving Loans will be used by the Borrowers
only for the purposes set forth in Section 5.16 hereof.
SECTION 4.07 REGULATORY RESTRICTIONS ON BORROWING. No Borrower nor
------------------------------------
any of the Borrowers' Subsidiaries is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or otherwise subject to any regulatory scheme which restricts its
ability to incur debt.
SECTION 4.08 SUBSIDIARIES. Part I of Schedule 4.08 (as such Schedule
------------
may be supplemented by a writing delivered by the Borrowers to the Bank from
time to time after the Effective Date) hereto lists all Subsidiaries of the
respective Borrowers (and the direct and indirect ownership interests of the
Borrowers therein), in each case existing on the Effective Date. Except as set
forth on Part 1 of such Schedule 4.08 (as supplemented from time to time), each
such Subsidiary existing on the date hereof is, and, in the case of any
additional corporate Subsidiaries formed after the Effective Date, each of such
additional corporate Subsidiaries will be at each time that this representation
is made or deemed to be made after the Effective Date, a wholly-owned Subsidiary
that is a corporation duly incorporated, validly existing and, to the extent
relevant in such jurisdiction, in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. Except as listed on Part 2 of Schedule 4.08
(as such Schedule may be supplemented by a writing delivered by the Borrowers to
the Bank from time to time after the Effective Date), no Borrower nor any of the
Borrowers' Subsidiaries is engaged in any joint venture or partnership with any
other Person.
SECTION 4.09 FULL DISCLOSURE. All factual information (taken as a
---------------
whole) furnished by or on behalf of the Borrowers or any of the Borrowers'
Subsidiaries in writing to the Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby is true and accurate in all
material respects on the date as of which such information is dated or certified
and is not incomplete by omitting to state any material fact necessary to make
such information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided. Except for economic
trends generally known to the public affecting generally the industry in which
the Borrowers and the Borrowers' Subsidiaries conduct their business, the
Borrowers have disclosed to the Bank in writing any and all facts which
materially and adversely affect or may materially and adversely affect (to the
extent the Borrowers can now reasonably foresee), the business, operations or
financial condition of the Borrowers, taken as a whole, or the ability of any
Borrower to perform its obligations under this Agreement.
SECTION 4.10 TAX RETURNS AND PAYMENTS. Each Borrower and each of its
------------------------
Subsidiaries has filed all United States Federal income tax returns and all
other material tax
-19-
<PAGE>
returns, domestic and foreign, required to be filed by it and has paid all taxes
and assessments payable by it which have become due pursuant to such returns or
pursuant to any assessment received by such Borrower or such Subsidiary, other
than those not yet delinquent and except for those contested in good faith. Each
Borrower and each of its Subsidiaries has paid, or has provided adequate
reserves (in good faith judgment of the management of such Borrower) for the
payment of, all federal, state and foreign income taxes applicable for all prior
fiscal years and for the current fiscal year to the date hereof.
SECTION 4.11 COMPLIANCE WITH ERISA. Each member of the ERISA Group
---------------------
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
SECTION 4.12 INTELLECTUAL PROPERTY. Except as disclosed in Schedule
---------------------
2.15.3 to the Acquisition Agreement, each Borrower and its Subsidiaries owns or
possesses or holds under valid licenses all Patents, Trademarks, service marks,
trade names, copyrights, Licenses and other intellectual property rights that
are necessary for the operation of their respective properties and businesses,
and no Borrower nor any of the Borrowers' Subsidiaries is in violation of any
provision thereof. Each Borrower and its Subsidiaries conduct their respective
businesses without infringement or claim of infringement of any material
license, patent, trademark, trade name, service mark, copyright, trade secret or
any other intellectual property right of others and there is no infringement or
claim of infringement by others of any material license, patent, trademark,
trade name, service mark, copyright, trade secret or other intellectual property
right of any Borrower or its Subsidiaries, other than such infringement or claim
which is disclosed in Schedule 2.15.3 of the Acquisition Agreement.
SECTION 4.13 NO BURDENSOME RESTRICTIONS. No contract, lease,
--------------------------
agreement or other instrument to which any Borrower or its Subsidiaries is a
party or by which any of their property is bound or affected, no charge,
corporate restriction, judgment, decree or order and no provision of applicable
law or governmental regulation has had or is reasonably expected to have a
Material Adverse Effect.
SECTION 4.14 ENVIRONMENTAL MATTERS. In the ordinary course of its
---------------------
business, each Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of such Borrower
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties presently
or previously
-20-
<PAGE>
owned, any capital or operating expenditures required to achieve or maintain
compliance with environmental protection standards imposed by law or as a
condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted at any such facility, any costs or liabilities in connection with off-
site disposal of wastes or Hazardous Substances, and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, each Borrower has reasonably concluded
that such associated liabilities and costs, including the costs of compliance
with Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of such
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.15 ACCOUNTS. With respect to each Eligible Account, all
--------
records, papers and documents relating thereto (if any) are genuine and in all
respects what they purport to be, and all papers and documents (if any) relating
thereto: (i) represent legal, valid and binding obligations of the respective
Account Debtor, subject to adjustments customary in the business of the
Borrowers, with respect to unpaid indebtedness incurred by such Account Debtor
in respect of the performance of labor or services or the sale or lease and
delivery of the merchandise listed therein, or both, (ii) are the only original
writings evidencing and embodying such obligation of the Account Debtor named
therein (other than copies created for general accounting purposes) and are in
compliance with all applicable federal, state and local laws and applicable laws
of any relevant foreign jurisdiction.
SECTION 4.16 FAIR LABOR STANDARDS ACT. All Inventory has or will
------------------------
have been produced in compliance with the applicable requirements of the Fair
Labor Standards Act, as amended from time to time, or any successor statute, and
regulations promulgated thereunder.
ARTICLE V
COVENANTS
The Borrowers agree that, so long as the Bank has any Commitment
hereunder or any Obligation remains unpaid:
SECTION 5.01 INFORMATION. The Borrowers will deliver or cause to be
-----------
delivered to the Administrative Agent:
(a) Annual Financial Statements. As soon as available and in any event
---------------------------
within 120 days after the end of each fiscal year:
(i) copies of the Parent Company's Annual Report to Shareholders
and, as soon as available and in any event within 90 days after the end of
each fiscal year, copies of the Parent Company's Annual Report on Form 10-K
for such fiscal year, such reports to include a consolidated balance sheet
of the Parent Company and its Consolidated Subsidiaries as of the end of
such fiscal year and the related consolidated statements of
-21-
<PAGE>
income and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by an opinion thereon by KPMG Peat
Marwick LLP or other independent public accountants satisfactory to the
Bank, which opinion shall not be qualified as to the scope of the audit and
which shall state that such consolidated financial statements present
fairly the consolidated financial position of the Parent Company and its
Consolidated Subsidiaries as of the date of such financial statements and
the results of their operations for the period covered by such financial
statements in conformity with generally accepted accounting principles
applied on a consistent basis (except for changes in the application of
which such accountants concur) and shall not contain any "going concern" or
like qualification or exception or qualification arising out of the scope
of the audit; and
(ii) copies of reports of (x) the Parent Company and its
Consolidated Subsidiaries (excluding SEG and its Consolidated Subsidiaries)
and (y) SEG and its Consolidated Subsidiaries which include for each such
entity and its Consolidated Subsidiaries (A) a consolidated balance sheet
for such entity and its Consolidated Subsidiaries as of the end of such
fiscal year, (B) consolidated statements of income and cash flows for such
entity and its Consolidated Subsidiaries for such fiscal year, and (C)
statements of income indicating revenue and expenses generated by each
business line of such entity and its Consolidated Subsidiaries for such
fiscal year, all in reasonable detail and certified (subject to normal
year-end audit adjustments) as complete and correct by the chief financial
officer or chief accounting officer of the Parent Company.
(b) Quarterly Financial Statements. As soon as available and in any event
------------------------------
within 45 days after the end of each of the first three fiscal quarters of each
fiscal year:
(i) copies of the Parent Company's Quarterly Report on Form 10-Q
for such quarter, such report to include all financial statements and
financial information required by Rule 10-01 of Regulation S-X (which
includes a consolidated balance sheet of the Parent Company and its
Consolidated Subsidiaries, and the related consolidated statements of
income and cash flows for such fiscal quarter and the portion of such year
ended at the end of such quarter, setting forth in each case in comparative
form the figures for the corresponding quarter of the previous fiscal year
and for the corresponding portion of the previous fiscal year, all in
reasonable detail and certified (subject to normal year-end audit
adjustments) as complete and correct by the chief financial officer or
chief accounting officer of the Parent Company; and
(ii) copies of reports of (x) the Parent Company and its
Consolidated Subsidiaries (excluding SEG and its Consolidated Subsidiaries)
and (y) SEG and its Consolidated Subsidiaries which include for each such
entity and its Consolidated Subsidiaries (A) a consolidated balance sheet
for such entity and its Consolidated Subsidiaries as of the end of such
fiscal quarter and (B) consolidated statements of income for such entity
and its Consolidated Subsidiaries for such fiscal quarter, all in
reasonable detail and certified (subject to normal year-end audit
adjustments) as complete
-22-
<PAGE>
and correct by the chief financial officer or chief accounting officer of
the Parent Company.
(c) Officer's Certificate. Simultaneously with the delivery of each set
---------------------
of financial statements referred to in subsections (a)(i) and (b)(i) above, a
certificate of the chief financial officer or chief accounting officer of the
Parent Company, (i) if applicable, setting forth in reasonable detail the
calculations required to establish whether the Borrowers were in compliance with
the requirements of Sections 5.18 and 5.19 on the date of such financial
statements, (ii) stating whether there exists on the date of such certificate
any Default and, if any Default then exists, setting forth the details thereof
and the action which the Borrowers are taking or propose to take with respect
thereto and (iii) stating whether, since the date of the most recent previous
delivery of financial statements pursuant to subsections (a)(i) and (b)(i) of
this Section, there has been any material adverse change in the condition
(financial or otherwise), results of operations, properties, assets or business
of the Parent Company and its Consolidated Subsidiaries, considered as a whole,
and, if so, the nature of such material adverse change.
(d) Accountant's Certificate. If requested by the Administrative Agent,
------------------------
simultaneously with the delivery of each set of financial statements referred to
in subsection (a) above (or at such other time as the Administrative Agent may
specify), a statement of the firm of independent public accountants which
reported on such statements (x) whether anything has come to their attention to
cause them to believe that any Default existed on the date of such statements
and (y) confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to subsection (c) above.
(e) Waste Tracking Report. As soon as available and in any event within
---------------------
45 days after the end of each fiscal quarter, a report from SEG setting forth
the amount of waste then held or being processed by SEG, the average number of
days required for SEG to process waste received (on a per unit basis) and such
other information as the Bank may reasonably require.
(f) Borrowing Base Certificate. As soon as available and in any event
--------------------------
within 25 days after the end of each calendar month, a Borrowing Base
Certificate executed by the chief financial officer or chief accounting officer
of the Parent Company setting forth the Borrowing Base as of the last Business
Day of such month.
(g) Accounts Receivables Agings. As soon as available and in any event
---------------------------
within 25 days after the end of each calendar month, a report listing all
Accounts of the Borrowers as of the last Business Day of such month, which
report shall include the amount and age of each Account, the name of each
Account Debtor and such other information as the Bank may require in order to
verify the Eligible Accounts, all in reasonable detail and in form satisfactory
to the Bank. The Borrowers shall deliver annually on the first day of the
second quarter of each fiscal year and within 5 days of the Bank's request the
name and mailing address of each Account Debtor.
(h) Accounts Payable Agings. As soon as available and in any event within
-----------------------
45 days after the end of each fiscal quarter, a report listing all accounts
payable of the Borrowers as of the
-23-
<PAGE>
last Business Day of such quarter, which report shall include the amount and age
of each account payable, the name of each payee and such other information as
the Bank may require, all in reasonable detail and in form satisfactory to the
Bank.
(i) Environmental Database Reports. Written notice to the Administrative
------------------------------
Agent of the existence and location of any new facility of any Borrower at which
Hazardous Substances will be processed for disposal or reclamation; and a risk
portfolio or environmental database report for each such facility, obtained by
the Administrative Agent at the Borrowers' expense upon notice of each new
facility and at least every two years with respect to all such facilities, and
prepared by an entity and in detail satisfactory to the Administrative Agent;
and copies of all state inspections, including updates, and all internally
prepared environmental audits relating to any such facility on an annual basis.
(j) Default. Forthwith upon the occurrence of any Default, a certificate
-------
of the chief financial officer or chief accounting officer of the Parent Company
setting forth the details thereof and the action which the Borrowers are taking
or proposes to take with respect thereto.
(k) Litigation. As soon as reasonably practicable after obtaining
----------
knowledge of the commencement of, or of a material threat of the commencement
of, an action, suit, proceeding or investigation against any Borrower or any of
its Subsidiaries which could materially adversely affect the condition
(financial or otherwise), results of operations, properties, assets or business
of any Borrower or the Parent Company and its Consolidated Subsidiaries,
considered as a whole, or could otherwise have a Material Adverse Effect or
which in any manner questions the validity of this Agreement or any of the other
transactions contemplated hereby or thereby, an explanation of the nature of
such pending or threatened action, suit, proceeding or investigation and such
additional information as may be reasonably requested by the Bank.
(l) Auditors' Management Letters. Promptly upon receipt thereof, copies
----------------------------
of each report submitted to any Borrower or its Consolidated Subsidiaries by
independent public accountants in connection with any annual, interim or special
audit made by them of the books of such Borrower or its Consolidated
Subsidiaries including, without limitation, each report submitted to such
Borrower or its Consolidated Subsidiaries concerning its accounting practices
and systems and any final comment letter submitted by such accountants to
management in connection with the annual audit of such Borrower and its
Consolidated Subsidiaries.
(m) Tax Returns. Upon request (excluding such returns or reports for SEG
-----------
or any of its Consolidated Subsidiaries for any period prior to the period in
which the Closing Date occurs), copies of (i) all federal, state and local
income tax returns filed by any Borrower or its Subsidiaries, (ii) all quarterly
reports by any Borrower or its Subsidiaries on Form 941 and (iii) all annual
FUTA tax returns of any Borrower or its Subsidiaries.
(n) ERISA Matters. If and when any member of the ERISA Group (i) gives or
-------------
is required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan
-24-
<PAGE>
under Title IV of ERISA, or knows that the plan administrator of any Plan has
given or is required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under Title IV of
ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent
or has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or appoint a
trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver
of the minimum funding standard under Section 412 of the Internal Revenue Code,
a copy of such application; (v) gives notice of intent to terminate any Plan
under Section 4041(c) of ERISA, a copy of such notice and other information
filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to
Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any
payment-or contribution to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement
which has resulted or could reasonably be expected to result in the imposition
of a Lien or the posting of a bond or other security, a certificate of the chief
financial officer or the chief accounting officer of the Parent Company setting
forth details as to such occurrence and action, if any, which any Borrower or
applicable member of the ERISA Group is required or proposes to take.
(o) Environmental Matters. Promptly, upon receipt of any complaint,
---------------------
order, citation, notice or other written communication from any Person with
respect to, or upon any Borrower's obtaining knowledge of, (A) the existence or
alleged existence of a violation of any applicable Environmental Law in
connection with any property now or previously owned, leased or operated by a
Borrower or any of its Subsidiaries, (B) any release on such property or any
part thereof in a quantity that is reportable under any applicable Environmental
Law and (c) any pending or threatened proceeding for the termination, suspension
or non-renewal of any permit required under any applicable Environmental Law, in
each case in which there is a reasonable likelihood of an adverse decision or
determination which could result in a Material Adverse Effect.
(p) Major Contracts. Written notice immediately upon the award to any
---------------
Borrower of, or the termination, lapse or nonrenewal of, any contract or
agreement providing for aggregate payments to such Borrower over the term
thereof in excess of $10,000,000.
(q) UCC Search Reports. As soon as reasonably practicable but in no event
------------------
later than 15 Business Days after the Effective Date, copies of reports from an
independent search service reasonably satisfactory to the Collateral Agent
indicating that, from and including February 13, 1997 to one Business Day after
the Effective Date, no financing statements were filed with the Secretary of
State of Tennessee or at the Maryland State Department of Assessments and
Taxation that name SEG or Hittman Transport Services, Inc. as debtor or seller
with respect to any of their respective Accounts or General Intangibles (as
defined in the Security Agreements).
-25-
<PAGE>
(r) Other Information. From time to time such additional financial or
-----------------
other information regarding the condition (financial or otherwise), results of
operations, properties, assets or business of any Borrower or its Subsidiaries
as the Bank may reasonably request.
SECTION 5.02 PAYMENT OF OBLIGATIONS. The Borrowers will pay and
----------------------
discharge, and will cause each of their respective Subsidiaries to pay and
discharge, as the same shall become due and payable, (i) all their respective
obligations and liabilities, including all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like persons which, in
any such case, if unpaid, might by law give rise to a Lien upon any of their
properties or assets and (ii) all lawful taxes, assessments and charges or
levies made upon their properties or assets, by any governmental body, agency or
official, except where any of the items in clause (i) or (ii) of this Section
5.02 may be diligently contested in good faith by appropriate proceedings and
the related Borrower or Subsidiary shall have set aside on its books, if
required under generally accepted accounting principles, appropriate reserves
for the accrual of any such items.
SECTION 5.03 MAINTENANCE OF PROPERTY; INSURANCE.
(a) Maintenance of Properties. The Borrowers will keep, and will cause
-------------------------
each of their respective Subsidiaries to keep, all property useful and necessary
in their respective businesses in good working order and condition, subject to
ordinary wear and tear.
(b) Insurance. The Borrowers will maintain, and will cause each of their
---------
respective Subsidiaries to maintain, insurance with financially sound and
responsible companies in such amounts (and with such risk retentions) and
against such risks as is usually carried by owners of similar businesses and
properties in the same general areas in which the respective Borrowers and their
Subsidiaries operate. The Borrowers will deliver to the Collateral Agent upon
request from time to time full information as to the insurance carried.
SECTION 5.04 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
------------------------------------------------
Borrowers will continue, and will cause each of their respective Subsidiaries to
continue, to engage in business of the same general type as now conducted by the
Borrowers and such Subsidiaries, and will preserve, renew and keep in full force
and effect, and will cause each of their respective Subsidiaries to preserve,
renew and keep in full force and effect, their respective corporate existence
and their respective rights, privileges and franchises necessary or desirable in
the normal conduct of business; provided that nothing in this Section 5.04 shall
--------
prohibit (i) the merger of a Subsidiary into a parent Borrower or another
Subsidiary if after giving effect thereto, no Default shall have occurred and be
continuing or (ii) the termination of the corporate existence of any Subsidiary
if the Parent Company in good faith determines that such termination is in the
best interest of the Borrowers and is not materially disadvantageous to the
Banks.
SECTION 5.05 COMPLIANCE WITH LAWS. The Borrowers will comply, and
--------------------
will cause each of their respective Subsidiaries to comply, with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws, ERISA and the
rules and regulations thereunder) except (i) where the
-26-
<PAGE>
necessity of compliance therewith is contested in good faith by appropriate
proceedings or (ii) where noncompliance could not reasonably be expected to have
a Material Adverse Effect.
SECTION 5.06 ACCOUNTING; INSPECTION OF PROPERTY, BOOKS AND RECORDS.
The Borrowers will keep, and will cause each of their respective Subsidiaries to
keep, proper books of record and account in which full, true and correct entries
in conformity with generally accepted accounting principles shall be made of all
dealings and transactions in relation to their respective businesses and
activities, will maintain, and will cause each of their respective Subsidiaries
to maintain, their respective fiscal reporting periods on the present basis and
will permit, and will cause each of their respective Subsidiaries to permit,
representatives of the Bank to visit and inspect any of their respective
properties, to examine and make copies from any of their respective books and
records and to discuss their respective affairs, finances and accounts with
their officers, employees and independent public accountants, all at such
reasonable times and as often as may reasonably be desired. Each of the
Borrowers acknowledge that the Collateral Agent will be conducting an audit of
each Borrower's books and records and a field examination of each Borrower's
facilities within six months of the Closing Date and that the first $6,000 of
expense incurred in connection with such audits and field exams will be borne by
the Borrowers (and will constitute an Obligation hereunder).
SECTION 5.07 COLLECTION OF ACCOUNTS. The Borrowers shall use their
----------------------
best efforts to cause to be collected from each Account Debtor, as and when due,
any and all amounts owing under or on account of each Account (including,
without limitation, Accounts which are delinquent, such Accounts to be collected
in accordance with lawful collection procedures) and shall apply forthwith upon
receipt thereof all such amounts as are so collected to the outstanding balance
of such Account. No Borrower shall rescind or cancel any indebtedness or
obligation evidenced by any Account, modify, make adjustments to, extend, renew,
compromise or settle any material dispute, claim, suit or legal proceeding
relating to or sell or assign any Account, or interest therein, without the
prior written consent of the Collateral Agent, except that, subject to the
rights of the Banks under the Loan Documents, as long as a Default or an Event
of Default shall not have occurred and be continuing, a Borrower may allow in
the ordinary course of business as adjustments to amounts owing under its
Accounts (i) an extension or renewal of the time or times of payment, or
settlement for less than the total unpaid balance, which the Borrower finds
appropriate in accordance with sound business judgment and (ii) a refund or
credit due as a result of discounts, over-billings and miscellaneous credits,
all in accordance with the Borrower's ordinary course of business consistent
with its historical collection practices. The costs and expenses (including,
without limitation, attorneys' fees) of collection, whether incurred by a
Borrower or any of the Banks, shall be borne by the Borrowers.
SECTION 5.08 NOTIFICATION TO ACCOUNT DEBTORS. Upon the effectiveness
-------------------------------
of this Agreement, the Borrowers will promptly notify each Account Debtor in
respect of any Account or Instrument that any payments due or to become due in
respect of such Collateral are to be made in the name of the related Borrower to
such address and post office box as shall be specified by the Collateral Agent;
provided that such notification with respect to any Account or Instrument owned
- --------
by SEG or any of its Consolidated Subsidiaries shall be given to each related
-27-
<PAGE>
Account Debtor as soon as practicable but in no event later than 120 days after
the Effective Date. Except as set forth in Section 3.03 of the Security
Agreement, each such payment shall, upon receipt by the Collateral Agent, be
deposited in the Operating Account in accordance with Section 2.07(c). Upon the
occurrence and continuation of an Event of Default, the Borrowers will promptly
notify (and the Borrowers hereby authorize the Collateral Agent so to notify)
each Account Debtor in respect of any Account or Instrument that such Collateral
has been assigned to the Collateral Agent and that any payments due or to become
due in respect of such Collateral are to be made directly to the Collateral
Agent in accordance with Section 3.03 of the Security Agreement.
SECTION 5.09 RESTRICTION ON LIENS. The Borrowers will not, and will
--------------------
not permit any of their respective Subsidiaries to, create, incur, assume or
suffer to exist any Lien upon or with respect to any property or assets of any
kind (real or personal, tangible or intangible) of the Borrowers or any such
Subsidiary whether now owned or hereafter acquired, or sell any such property or
assets subject to an understanding or agreement, contingent or otherwise, to
repurchase such property or assets (including sales of accounts receivable or
notes with recourse to a Borrower or its Subsidiaries) or assign any right to
receive income, or file or permit the filing of any financing statement under
the Uniform Commercial Code as in effect in any applicable jurisdiction or any
other similar notice of Lien under any similar recording or notice statute;
provided that the provisions of this Section 5.09 shall not prevent the
- --------
creation, incurrence, assumption or existence of the following (with such Liens
described below being herein referred to as "Permitted Liens"):
(i) Liens existing on the date of this Agreement, described in
Schedule 5.09 hereto, securing Debt outstanding on the date of this
Agreement and then in an aggregate principal or face amount not exceeding
$500,000;
(ii) any purchase money security interest (including the interest
of a lessor under a Capital Lease) on any capital asset of any Borrower if
such purchase money security interest attaches to such capital asset
concurrently with the acquisition thereof and if the Debt secured by such
purchase money security interest does not exceed the lesser of the cost or
fair market value as of the time of acquisition of the asset covered
thereby to such Borrower; provided, that the aggregate amount of Debt
--------
secured by such Liens which is incurred by SEG as a result of the
Acquisition does not exceed $2,000,000 in the aggregate at any one time
outstanding and that all other Debt secured by such Liens does not exceed
$1,000,000 in the aggregate at any one time outstanding, and provided
--------
further, that no such purchase money security interest shall extend to or
-------
cover any property or asset of such Borrower other than the related asset;
(iii) any Lien existing on an asset prior to the acquisition
thereof by a Borrower or any Subsidiary and not created in contemplation
of such acquisition;
(iv) Liens created by the Loan Documents;
-28-
<PAGE>
(v) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any of
the foregoing clauses of this Section, provided that the principal amount
--------
of such Debt is not increased and such Debt is not secured by any
additional assets;
(vi) Liens for taxes not yet due or Liens for taxes being
contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Parent
Company) have been established;
(vii) Liens imposed by law securing the charges, claims, demands
or levies of carriers, warehousemen, mechanics and other like persons which
were incurred in the ordinary course of business which (A) do not in the
aggregate materially detract from the value of the property or assets
subject to such Lien or materially impair the use thereof in the operation
of the business of any Borrower or Subsidiary or (B) are being contested in
good faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or assets subject to such
lien;
(viii) Liens (other than any Liens imposed by ERISA or pursuant
to any Environmental Law) not securing Debt or Derivatives Obligations
incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory
obligations, surety bonds (other than appeal bonds), bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations incurred in the ordinary course of business;
(ix) Liens constituting easements, rights of way and similar
charges, title defects or other irregularities with respect to real
property which do not result in a Material Adverse Effect and which do not
affect the marketability of the property subject thereto;
(x) leases or subleases of any of the Borrowers' owned or
leased real property which leases or subleases do not result in a Material
Adverse Effect or the retention of title by a lessor which has entered into
an operating lease with a Borrower; and
(xi) Liens arising from the rendering of a final judgment or
order against any Borrower which does not give rise to any Event of
Default.
SECTION 5.10 LIMITATION ON DEBT. The Borrowers will not, and will
------------------
not permit any of their respective Subsidiaries to, incur or to become liable
with respect to any Debt except (i) Debt outstanding under this Agreement and
the Revolving Note, (ii) Debt secured by a Permitted Lien, and (iii) Debt
existing on the Closing Date which is disclosed on the financial statements of
the Borrowers referenced in Section 4.04.
-29-
<PAGE>
SECTION 5.11 LIMITATION ON GUARANTEES. No Borrower nor any of its
------------------------
Subsidiaries shall Guarantee any Debt of any Person or Persons, except Debt
permitted under Section 5.10.
SECTION 5.12 CONSOLIDATED CAPITAL EXPENDITURES. Consolidated Capital
---------------------------------
Expenditures will not, for any fiscal year of the Borrowers, exceed $6,000,000.
SECTION 5.13 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. No
-------------------------------------------
Borrower will (i) consolidate or merge with or into any other Person or (ii)
sell, lease or otherwise transfer, directly or indirectly, all or substantially
all of the assets of such Borrower to any other Person or Persons.
SECTION 5.14 INVESTMENTS; LINE OF BUSINESS.
(a) Investments. No Borrower nor any Subsidiary will hold, make or
-----------
acquire any Investment in any Person, except:
(i) each Borrower and any Subsidiary may invest in cash and
Cash Equivalents;
(ii) each Borrower and any Subsidiary may acquire and hold
receivables owing to them, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms;
(iii) each Borrower and any Subsidiary may acquire and own
investments (including Debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement
of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(iv) the Borrowers may make loans and advances to and investments
in joint ventures which, in the aggregate for all Borrowers, do not exceed
at any time $9,000,000; and, in addition, the Borrowers may make loans and
advances to employees in the ordinary course of business, which, in the
aggregate for all Borrowers, do not exceed at any time $2,000,000;
(b) Asset Acquisitions. The Borrowers will not, and will not permit any
------------------
of their respective Subsidiaries to, acquire all or substantially all of the
Assets of any Person or make any acquisition of assets outside the ordinary
course of business.
(c) Joint Ventures and Similar Arrangements. Except to the extent
---------------------------------------
permitted by Section 5.14(a)(iv), the Borrowers will not, and will not permit
any of their respective Subsidiaries to, enter into any joint venture or
partnership agreement or arrangement or any other agreement or arrangement with
any Person involving the sharing of profits or joint or coordinated purchasing
or distribution.
-30-
<PAGE>
SECTION 5.15 DIVIDENDS, ETC.
(a) Limitation on Dividends. The Borrowers will not, and will not permit
-----------------------
any of their respective Subsidiaries to, declare or pay any dividends (other
than dividends payable solely in capital stock of such Person) or return any
capital to, its stockholders or authorize or make any other distribution,
payment or delivery of property or cash to its stockholders as such, or redeem,
retire, purchase or otherwise acquire, directly or indirectly, for
consideration, any shares of any class of its capital stock now or hereafter
outstanding (or any warrants for or options or stock appreciation rights in
respect of any of such shares), or set aside any funds for any of the foregoing
purposes, or permit any of such Subsidiaries to purchase or otherwise acquire
for consideration any shares of any class of the capital stock of a Borrower or
any other Subsidiary, as the case may be, now or hereafter outstanding (or any
options or warrants or stock appreciation rights issued by such Person with
respect to its capital stock) (all of the foregoing "Dividends"), except that:
(i) any Subsidiary of a Borrower may pay Dividends to such
Borrower;
(ii) the Parent Company may pay Dividends in an amount not to
exceed $1,280,000 in any fiscal year of the Parent Company; and
(iii) the Parent Company may redeem or purchase shares of its
capital stock (A) as necessary if Westinghouse exercises its option under
Section 5.8(b) of the Acquisition Agreement to require that the Parent
Company purchase certain of its shares owned by Westinghouse; provided that
--------
such redemption or purchase shall occur not later than 135 days after the
Effective Date and the number of shares so redeemed or purchased and the
aggregate amount paid therefor shall not exceed 156,986 shares and
$2,000,000, respectively or (B) upon the written consent of the
Administrative Agent, which consent shall not be unreasonably withheld.
(b) Restrictions with Respect to Intercorporate Transfers. The Borrowers
-----------------------------------------------------
will not, and will not permit any of their respective Subsidiaries to, create or
otherwise cause or suffer to exist any encumbrance or restriction which
prohibits or otherwise restricts (A) the ability of any Subsidiary to (a) pay
dividends or make other distributions or pay any Debt owed to a Borrower or any
Subsidiary, (b) make loans or advances to a Borrower or any Subsidiary, (c)
transfer any of its properties or assets to a Borrower or any Subsidiary or (B)
the ability of a Borrower or any Subsidiary of such Borrower to create, incur,
assume or suffer to exist any Lien upon its property or assets to secure the
Obligations, other than prohibitions or restrictions existing under or by reason
of:
(i) this Agreement and the other Loan Documents;
(ii) applicable law;
(iii) customary non-assignment provisions entered into in the
ordinary course of business and consistent with past practices; and
-31-
<PAGE>
(iv) Liens permitted under Section 5.09 and any documents or
instruments governing the terms of any Debt or other obligations secured by
any such Liens, provided that such prohibitions or restrictions apply only
--------
to the assets subject to such Liens.
SECTION 5.16 USE OF PROCEEDS. The proceeds of the Revolving Loans
---------------
made under this Agreement will be used by the Borrowers for general corporate
purposes. No such use of the proceeds for general corporate purposes will be,
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying any "margin stock" within the meaning of
Regulation U.
SECTION 5.17 TRANSACTIONS WITH OTHER PERSONS. The Borrowers will
-------------------------------
not, and will not permit any of their respective Subsidiaries to, enter into any
agreement with any Person whereby any of them shall agree to any restriction on
the right of a Borrower or any of its Subsidiaries to amend or waive any of the
provisions of this Agreement or any other Loan Document.
SECTION 5.18 MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Consolidated
---------------------------------------
Tangible Net Worth will not be less than $30,000,000 on any March 31, June 30,
September 30 or December 31. The minimum Consolidated Tangible Net Worth
required on each such date shall increase effective as of June 30, 1997 by an
amount equal to the sum of (y) $6,000,000 minus the amount of operating loss or
non-cash write-off of equipment recognized by the Parent Company prior to June
30, 1997 in connection with the M-Area Contract plus (z) $8,000,000 minus the
portion of the purchase price paid in connection with the Acquisition which is
allocated to Intangible Assets prior to June 30, 1997; provided that in no event
--------
shall (a) the increase in the required minimum Consolidated Tangible Net Worth
resulting from this sentence exceed $36,000,000 or (b) the application of this
sentence result in a reduction of the required minimum Consolidated Tangible Net
Worth.
SECTION 5.19 MINIMUM LIQUIDITY. The ratio of the Parent Company's
-----------------
(i) consolidated cash, Cash Equivalents, other marketable securities and
Accounts to (ii) Consolidated Current Liabilities will not at any time be less
than 1.0 to 1.0.
SECTION 5.20 SEG DEFERRED REVENUE TURNOVER. The number of days equal
-----------------------------
to (A) the ratio of (i) SEG's deferred revenue as of the end of a month to (ii)
the portion of SEG's gross revenue for the 12 months preceding such month end
generated from Deferred Revenue Contracts multiplied by (B) 360 days shall be
less than 120 days as of the end of at least one of every three consecutive
months and shall not be greater than 240 days as of the end of any month.
SECTION 5.21 LC CASH COLLATERAL ACCOUNT. The amount on deposit in
--------------------------
the LC Cash Collateral Account shall at all times equal or exceed 38% of the
Tennessee Letter of Credit Liabilities.
-32-
<PAGE>
SECTION 5.22 INDEPENDENCE OF COVENANTS. All covenants contained
-------------------------
herein shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that such action
or condition would be permitted by an exception to, or otherwise be within the
limitations of another covenant shall not avoid the occurrence of a Default if
such action is taken or condition exists.
ARTICLE VI
DEFAULTS
SECTION 6.1 EVENTS OF DEFAULT. If one or more of the following
-----------------
events ("Events of Default") shall have occurred and be continuing:
(i) the Borrowers shall fail to pay when due any principal of
the Revolving Loans or to reimburse when due any drawing under any Letter
of Credit or shall fail to pay any interest on the Revolving Loans, any fee
or any other amount payable hereunder or under the Note;
(ii) any Borrower shall fail to observe or perform any covenant
contained in Article V (other than those contained in Sections 5.01(a)
through (e), Sections 5.01(h) and (i), 5.03(a), and 5.05);
(iii) any Borrower shall fail to observe or perform any covenant
or agreement contained in this Agreement (other than those covered by
clauses (i) or (ii) above) for 15 days after notice thereof has been given
to the Borrowers by the Bank;
(iv) any representation, warranty, certification or statement
made by any Borrower in any Loan Document or in any certificate, financial
statement or other document delivered pursuant hereto or thereto shall
prove to have been incorrect in any material respect when made;
(v) any Borrower or its Subsidiaries shall fail to make any
payment or perform any collateralization obligation in respect of any
Material Financial Obligations when due or within any applicable grace
period;
(vi) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt of a Borrower or any of
its Subsidiaries or enables (or, with the giving of notice or lapse of time
or both, would enable) the holder of such Material Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof;
(vii) any Borrower or any of its Subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
-33-
<PAGE>
(viii) an involuntary case or other proceeding shall be
commenced against any Borrower or any of its Subsidiaries seeking
liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief
shall be entered against any Borrower or any of its Subsidiaries under the
federal Bankruptcy laws as now or hereafter in effect;
(ix) any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $100,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be appointed to
administer any Material Plan; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must
(x) be terminated; or there shall occur a complete or partial
withdrawal from, or default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans which could
reasonably be expected to cause one or more members of the ERISA Group to
incur a current payment obligation in excess of $100,000;
(xi) one or more judgments or orders for the payment of money
in excess of $500,000 in the aggregate shall be rendered against any
Borrower or any of its Subsidiaries and such judgments or orders shall
continue unsatisfied and unstayed for a period of 30 days;
(xii) a Change of Control shall have occurred;
(xiii) (A) any Loan Document shall fail for any reason to be in
full force and effect or shall cease to be effective to grant a perfected
security interest in the Collateral with the priority stated to be created
thereby or such security interest shall at any time fail to constitute a
valid and (to the extent required by the Loan Documents) perfected Lien
with the priority stated to be created by the Loan Documents, or any Loan
Document shall be contested by a Borrower or any of its Subsidiaries or a
Borrower or any of its Subsidiaries shall deny that it has any further
liability or obligation under a Loan Document to which it is a party, or a
Borrower or any of its Subsidiaries shall fail to perform any of its
obligations under the Loan Documents or (B) any creditor of a Borrower or
any of its Subsidiaries (other than a creditor having a Lien permitted by
Section 5.09(i) or (ii) and then solely with respect to the related asset)
shall obtain possession of any of the Collateral by any means, including,
without limitation, levy, distraint, replevin or self-help, or any such
creditor shall establish or obtain any right in the Collateral which is
equal to or senior to the security interests of the Collateral Agent, for
the benefit of the Banks, in such Collateral; or
-34-
<PAGE>
(xiv) (A) an event or condition shall have occurred since the
Effective Date which has had a material adverse effect upon the condition
(financial or otherwise), results of operations, properties, assets or
business of the Parent Company and its Consolidated Subsidiaries, taken as
a whole, the ability of the Parent Company and its Consolidated
Subsidiaries to perform their obligations under this Agreement and the
Note, or the rights and remedies of the Bank under this Agreement and the
Note, which event or condition is not corrected within 15 days after notice
from the Administrative Agent to the Borrower of the occurrence of such
event or condition, or (B) the Banks shall reasonably suspect that one or
more Events of Default have occurred, and the Parent Company, upon 30 days'
notice thereof by the Administrative Agent, shall have failed to provide
reasonably satisfactory evidence to the Banks that such Events of Default
have not in fact occurred;
then, and in every such event, while such event is continuing, the
Administrative Agent may (A) by notice to the Parent Company terminate the
Commitments and they shall thereupon terminate, and (B) by notice to the Parent
Company declare the Revolving Loans and Letter of Credit Liabilities (together
with accrued interest thereon) to be, and the Revolving Loans and Letter of
Credit Liabilities shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind (except as set forth in
clause (A) above), all of which are hereby waived by each Borrower; provided
--------
that in the case of any Default or any Event of Default specified in clause
6.1(vii) or 6.1(viii) above with respect to any Borrower, without any notice to
any Borrower or any other act by the Administrative Agent or the Banks, the
Commitments shall thereupon terminate and the Revolving Loans and Letter of
Credit Liabilities (together with accrued interest and accrued and unpaid fees
thereon) shall become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by each
Borrower.
SECTION 6.2 CASH COVER. The Borrowers agree, in addition to the
----------
provisions of Section 6.01 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by the
Administrative Agent, pay to the Collateral Agent an amount in immediately
available funds (which shall be held as Collateral and applied pursuant to the
Security Agreements) equal to the aggregate amount available for drawing under
all Letters or Credit then outstanding; provided that, upon the occurrence of
--------
any Event of Default specified in Section 6.01(vii) or 6.01(viii) with respect
to any Borrower, the Borrowers shall pay such amount forthwith without any
notice or demand or any other act by the Administrative Agent or the Banks.
ARTICLE VII
THE AGENTS
SECTION 7.01 APPOINTMENT AND AUTHORIZATION. Each of the Banks hereby
-----------------------------
irrevocably designates and appoints each Agent as the Agent of each of the Banks
to act as specified herein and in the other Loan Documents and to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and perform such duties as are
-35-
<PAGE>
expressly delegated to such Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. Each Agent agrees to act as such upon the express conditions contained
in this Article VII. Notwithstanding any provision to the contrary elsewhere in
this Agreement, neither Agent shall have any duties or responsibilities, except
those expressly set forth herein or in the other Loan Documents, or any
fiduciary relationship with the Banks, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against either Agent. The provisions of this
Article VII are solely for the benefit of the Agents and Banks, and the
Borrowers shall not have any rights as third party beneficiaries of any of the
provisions hereof.
SECTION 7.02 INDIVIDUAL CAPACITY. Each Agent and its Affiliates may
-------------------
make loans to, accept deposits from and generally engage in any kind of business
with the Borrowers as though such Agent were not an Agent. With respect to the
Revolving Loans made by it and all Obligations owing to it, each Agent shall
have the same rights and powers under this Agreement as the Banks and may
exercise the same as though it were not the Agent, and the term "Banks" shall
include such Agent in its individual capacity.
SECTION 7.03 DELEGATION OF DUTIES. Either Agent may execute any of
--------------------
its duties under this Agreement or any other Loan Document by or through agents
or attorneys-in-fact. Neither Agent shall be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care except to the extent otherwise required by Section 7.07.
SECTION 7.04 RELIANCE BY THE AGENTS. The Agents shall be entitled to
----------------------
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy or other
electronic facsimile transmission, telex, telegram, cable, teletype, electronic
transmission by modem, computer disk or any other message, statement, order or
other writing or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Borrowers), independent accountants and other experts selected by such Agent.
Each Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless it shall first receive
such advice or concurrence of such of the Banks as it deems appropriate or it
shall first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Loan Documents in accordance with a request of the Banks, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
the Banks.
SECTION 7.05 NOTICE OF DEFAULT. Neither Agent shall be deemed to
-----------------
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless such Agent has received notice from one of the Banks or
Borrowers referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default".
-36-
<PAGE>
If an Agent receives such a notice, such Agent shall give prompt notice thereof
to the Banks. Each Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Banks, provided that,
--------
unless and until such Agent shall have received such directions, such Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of Banks.
SECTION 7.06 NON-RELIANCE ON THE AGENTS AND OTHER BANKS. Each of the
------------------------------------------
Banks expressly acknowledges that neither Agent nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by either Agent
hereinafter taken, including any review of the affairs of the Borrowers or any
of their Subsidiaries, shall be deemed to constitute any representation or
warranty by such Agent to the Banks. Each of the Banks represents to the Agents
that it has, independently and without reliance upon either Agent or the other
Bank, and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, assets,
operations, property, financial and other condition, prospects and
creditworthiness of the Borrowers and made its own decision to make to enter
into this Agreement. Each of the Banks also represents that it will,
independently and without reliance upon either Agent or the other Bank, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement, and to make such investigation
as it deems necessary to inform itself as to the business, assets, operations,
property, financial and other condition, prospects and creditworthiness of the
Borrowers. Neither Agent shall have any duty or responsibility to provide the
Banks with any credit or other information concerning the business, operations,
assets, property, financial and other condition, prospects or creditworthiness
of the Borrowers which may come into the possession of such Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
SECTION 7.07 EXCULPATORY PROVISIONS. Neither Agent, nor any of
----------------------
either Agent's officers, directors, employees, agents, attorneys-in-fact or
affiliates, shall (i) be liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence,
willful misconduct or bad faith) or (ii) be responsible in any manner to the
Banks for any recitals, statements, representations or warranties made by any
Borrower or any of its officers contained in this Agreement, any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by such Agent under or in connection with, this
Agreement or any other Loan Document or for any failure of any Borrower or any
of its officers to perform its obligations hereunder or thereunder. Neither
Agent shall be under any obligation to the Banks to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrowers. Neither Agent shall be
responsible to the Banks for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any Loan
Document or for any representations, warranties, recitals or
-37-
<PAGE>
statements made by any other Person herein or therein or made by any other
Person in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith furnished or made by such Agent to the Banks or by or on behalf of
any Borrower to such Agent or the Banks or be required to ascertain or inquire
as to the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Revolving Loans or of the existence or possible existence of any
Default or Event of Default.
SECTION 7.08 INDEMNIFICATION. The Banks agree to indemnify each
---------------
Agent in its capacity as such from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
reasonable expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
obligations of the Borrowers hereunder) be imposed on, incurred by or asserted
against such Agent in its capacity as such in any way relating to or arising out
of this Agreement or any other Loan Document, or any documents contemplated by
or referred to herein or the transactions contemplated hereby or any action
taken or omitted to be taken by such Agent under or in connection with any of
the foregoing, but only to the extent that any of the foregoing is not paid by
the Borrowers; provided that the Banks shall be liable to either Agent for the
--------
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from the gross negligence, willful misconduct or bad faith of such Agent.
If any indemnity furnished to an Agent for any purpose shall, in the opinion of
such Agent be insufficient or become impaired, such Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished. The agreement in this
Section 7.08 shall survive the payment of all Revolving Loans, fees and other
Obligations of the Borrowers arising hereunder.
SECTION 7.09 RESIGNATION; SUCCESSORS. Either Agent may resign as an
-----------------------
Agent upon 20 days' notice to Banks. Upon the resignation of an Agent, the
Banks shall appoint a successor to such Agent, subject to prior approval by the
Borrower and the consent of each Bank (such approval or consent, as the case may
be, not to be unreasonably withheld), whereupon such successor Agent shall
succeed to the rights, powers and duties of the retiring Agent, and the term
"Agent" shall include such successor Agent effective upon its appointment, and
the retiring Agent's rights, powers and duties as an Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement. After the retiring Agent's resignation
hereunder as an Agent, the provisions of this Article VII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was an
Agent under this Agreement.
-38-
<PAGE>
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 INCREASED COST AND REDUCED RETURN.
(a) Increased Costs. If on or after the date hereof, the adoption of any
---------------
applicable law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Banks with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency:
(i) shall subject the Bank to any tax, duty or other charge with
respect to the Revolving Loans, the Note or its obligation to make
Revolving Loans, or shall change the basis of taxation of payments to the
Bank of the principal of or interest on the Revolving Loans or any other
amounts due under this Agreement in respect of the Revolving Loans or its
obligation to make Revolving Loans (except for changes in the rate of tax
on the overall net income of the Bank); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the Board
of Governors of the Federal Reserve System, but excluding any such
requirement included in an applicable Euro-Dollar Reserve Percentage),
special deposit, insurance assessment or similar requirement against assets
of, deposits with or for the account of, letters of credit issued or
participated in by, or other credit extended by, an Issuing Bank or shall
impose on the Bank or an Issuing Bank or on the United States market for
certificates of deposit or the London interbank market any other condition
affecting the Revolving Loans, the Note or its obligation to make Revolving
Loans or its obligations hereunder in respect of Letters of Credit;
and the result of any of the foregoing is to increase the cost to the Bank or an
Issuing Bank of making or maintaining any Revolving Loan, or of issuing any
Letter of Credit, or to reduce the amount of any sum received or receivable by
the Bank or an Issuing Bank under this Agreement or under the Note with respect
thereto, by an amount deemed by the Bank or an Issuing Bank to be material,
then, within 15 Business Days after demand by the Bank, the Borrowers shall pay
to such Bank or Issuing Bank such additional amount or amounts, as determined by
such Bank or Issuing Bank in good faith, as will compensate such Bank or Issuing
Bank for such increased cost or reduction.
(b) Capital Adequacy. If the Bank or an Issuing Bank shall have determined
----------------
that, after the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change in any such law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
-39-
<PAGE>
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital of the Bank or an Issuing Bank (or such Bank's or
Issuing Bank's Parent) as a consequence of such Bank's or such Issuing Bank's
obligations hereunder to a level below that which such Bank or Issuing Bank (or
such Bank's or Issuing Bank's Parent) could have achieved but for such adoption,
change, request or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Bank or such Issuing
Bank to be material, then from time to time, within 15 Business Days after
demand by such Bank or such Issuing Bank, the Borrowers shall pay to such Bank
or such Issuing Bank such additional amount or amounts as will compensate such
Bank or such Issuing Bank (or such Bank's or such Issuing Bank's Parent) for
such reduction.
(c) Notices. The Bank or such Issuing Bank will promptly notify the Parent
-------
Company of any event of which it has knowledge, occurring after the date hereof,
that will entitle the Bank or the Issuing Bank to compensation pursuant to this
Section. A certificate of the Bank or such Issuing Bank claiming compensation
under this Section and setting forth in reasonable detail the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, the Bank and such Issuing Bank may
use any reasonable averaging and attribution methods.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 NOTICES. Unless otherwise specified herein, all
-------
notices, requests and other communications to a party hereunder shall be in
writing (including bank wire, telex, facsimile transmission or similar writing)
and shall be given to such party: (i) at its address, facsimile number or telex
number set forth on the signature pages hereof, or (ii) at such other address,
facsimile number or telex number as such party may hereafter specify for the
purpose of communication hereunder by notice to the other party hereto. Each
such notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in this
Section and the appropriate answer back is received, (ii) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (iii) if given by mail, 48 hours after
such communication is deposited in the mails, certified mail, return receipt
requested, with appropriate first class postage prepaid, addressed as specified
in this Section or (iv) if given by any other means, when delivered at the
address specified in this Section 9.01. Notwithstanding anything herein to the
contrary, any notice or other communication from the Bank to the Parent Company
shall be deemed effective as to each of the Borrowers when given to the Parent
Company in accordance with this Section 9.01. Rejection or refusal to accept,
or the inability to deliver because of a changed address of which no notice was
given shall not affect the validity of notice given in accordance with this
Section.
SECTION 9.02 NO WAIVERS. No failure by the Banks, the Administrative
----------
Agent or the Collateral Agent to exercise, no course of dealing with respect to,
and no delay in
-40-
<PAGE>
exercising any right, power or privilege hereunder or under the Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided herein shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03 EXPENSES; INDEMNIFICATION.
(a) Expenses. The Borrowers shall pay (i) all out-of-pocket expenses of
--------
the Banks, Administrative Agent and Collateral Agent, including reasonable fees
and disbursements of special and local counsel therefor, in connection with the
preparation and administration of this Agreement and the other Loan Documents,
any waiver or consent thereunder or any amendment thereof or any Default or
alleged Default thereunder and (ii) if an Event of Default occurs, all
reasonable out-of-pocket expenses incurred by the Banks, Administrative Agent
and Collateral Agent, including (without duplication) the fees and disbursements
of outside counsel, in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
(b) Indemnity in Respect of Loan Documents. Each Borrower agrees to
--------------------------------------
indemnify the Banks, the Agents, their affiliates and their respective
directors, officers, trustees, agents and employees of the foregoing (each an
"Indemnitee") and hold each Indemnitee harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel, which may be
incurred by such Indemnitee in connection with any investigative, administrative
or judicial proceeding (whether or not such Indemnitee shall be designated a
party thereto) brought or threatened relating to or arising out of this
Agreement or any actual or proposed use of proceeds of Revolving Loans or of
Letters of Credit hereunder; provided that no Indemnitee shall have the right to
--------
be indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
(c) Indemnity in Respect of Environmental Liabilities. Each Borrower
-------------------------------------------------
hereby indemnifies the Banks and the Agents from and against and agrees to hold
each of them harmless from any and all liabilities, losses, damages, costs and
expenses of any kind (including without limitation reasonable expenses of
investigation by engineers, environmental consultants and similar technical
personnel and reasonable fees and disbursements of counsel) of any of the Banks
or the Agents arising out of, in respect of or in connection with any and all
Environmental Liabilities. Without limiting the generality of the foregoing,
each Borrower hereby waives all rights for contribution or any other rights of
recovery with respect to liabilities, losses, damages, costs and expenses
arising under or related to Environmental Liabilities that it might have by
statute or otherwise against any of the Banks or the Agents.
SECTION 9.04 AMENDMENTS AND WAIVERS. Any provision of this Agreement or
----------------------
the Note may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrowers, the Banks and the Agents.
-41-
<PAGE>
SECTION 9.05 SUCCESSORS AND ASSIGNS.
(a) Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that no Borrower may assign or otherwise transfer
any of its rights under this Agreement without the prior written consent of the
Banks and the Agents.
(b) Assignments and Participations by the Banks. The Banks may at any time
-------------------------------------------
assign any or all of their rights under this Agreement or grant to one or more
banks or other financial institutions (each a "Participant") participating
interests in their Commitments or any or all of the Revolving Loans. In the
event of any such assignment or grant by any of the Banks of rights hereunder or
of a participating interest to a Participant, whether or not upon notice to the
Borrowers, such Bank shall remain responsible for the performance of its
obligations hereunder, and the Borrowers shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement. Any agreement pursuant to which such Bank may grant such
a participating interest shall provide that such Bank shall retain the sole
right and responsibility to enforce the obligations of the Borrowers hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement. The Borrowers agree that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Article VII with respect to its participating
interest to the same extent as if it were the Bank, subject to the same
limitations.
(c) Certain Limitations on Rights of Participants. No Participant shall be
---------------------------------------------
entitled to receive any greater payment under Section 8.01 than the Bank would
have been entitled to receive with respect to the rights transferred, unless
such transfer is made with the Parent Company's prior written consent.
(d) Assignments to Federal Reserve Banks. Any Bank may at any time assign
------------------------------------
all or any portion of its rights under this Agreement and the Revolving Note to
a Federal Reserve Bank. No such assignment shall release the transferor Bank
from its obligations hereunder.
SECTION 9.06 RIGHT TO SET-OFF. Upon the occurrence and during the
----------------
continuance of any Event of Default, the Banks hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by any of the Banks to
or for the credit or the account of any Borrower against any and all of the
obligations of the Borrowers now or hereafter existing under this Agreement, the
Revolving Note, or any other Loan Documents irrespective of whether or not such
Bank or an Agent shall have made any demand under this Agreement, the Revolving
Note any other Loan Documents. The rights of the Banks under this Section are
in addition to all other rights and remedies (including, without limitation,
other rights of set-off) which the Banks may have.
SECTION 9.07 GOVERNING LAW. This Agreement and the Revolving Note
-------------
shall be governed by and construed in accordance with the laws of the State of
Maryland.
-42-
<PAGE>
SECTION 9.08 ARBITRATION; SUBMISSION TO JURISDICTION.
(a) Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Agreement, the Note or any
other Loan Document ("Disputes") between parties to this Agreement shall be
resolved by binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration, claims
brought as class actions, claims arising from loan documents executed in the
future, or claims arising out of or connected with the transaction reflected by
this Agreement.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which is located the
office of the Bank identified in Section 9.01 as the place where notices are to
be sent to the Bank. The expedited procedures set forth in Rule 51 et seq. of
-------
the Arbitration Rules shall be applicable to claims of less than $1,000,000.
All applicable statutes of limitation shall apply to any Dispute. A judgment
upon the award may be entered in any court having jurisdiction. The panel from
which all arbitrators are selected shall be comprised of licensed attorneys.
The single arbitrator selected for expedited procedure shall be a retired judge
from the highest court of general jurisdiction, state or federal, of the state
where the hearing will be conducted or if such person is not available to serve,
the single arbitrator may be a licensed attorney. Notwithstanding the
foregoing, this arbitration provision does not apply to disputes under or
related to Derivatives Obligations.
(b) Notwithstanding the preceding binding arbitration provisions, the
Banks, the Agents and the Borrowers agree to preserve, without diminution,
certain remedies that any party hereto may employ or exercise freely,
independently or in connection with an arbitration proceeding or after an
arbitration action is brought. The Bank and the Borrowers shall have the right
to proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale granted under any Loan Document or under applicable law or by judicial
foreclosure and sale, including a proceeding to confirm the sale; (ii) all
rights of self-help including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property;
(iii) obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and filing an
involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by
confession of judgment. Preservation of these remedies does not limit the power
of an arbitrator to grant similar remedies that may be requested by a party in a
Dispute.
The Borrowers, the Banks and the Agents agree that they shall not have a
remedy of punitive or exemplary damages against the other in any Dispute and
hereby waive any right or
-43-
<PAGE>
claim to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
(c) Any legal action or proceeding with respect to this Agreement, the Note
or any other Loan Document or any document related hereto or thereto may be
brought in the courts of the State of Maryland in Baltimore, Maryland or of the
United States of America for the District of Maryland, and by execution and
delivery of this Agreement each Borrower hereby accepts for itself and in
respect of its property, generally and unconditionally, the nonexclusive
jurisdiction of the aforesaid courts. Each Borrower hereby irrevocably and
unconditionally waives any objection, including without limitation, any
objection to the laying of venue or based on the grounds of the forum non
----- ---
conveniens which it now or hereafter may have to the bringing of any action or
- ----------
proceeding in such respective jurisdictions. Service of process in any such
case may be had against any Borrower by delivery in accordance with the notice
provisions herein or as otherwise permitted by law, and the Borrowers agree that
such service shall be valid in all respects for establishing personal
jurisdiction over it.
SECTION 9.09 COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
----------------------------------------
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement and the other Loan Documents constitute the
entire agreement and understanding among the parties hereto and supersedes any
and all prior agreements and understandings, oral or written, relating to the
subject matter hereof. This Agreement shall become effective upon receipt by
the Administrative Agent of counterparts hereof signed by each of the parties
hereto.
SECTION 9.10 CONFIDENTIALITY. The Banks and the Agents agree to hold
---------------
all non-public information obtained pursuant to the requirements of this
Agreement in accordance with its customary procedure for handling confidential
information of this nature and in accordance with safe and sound banking
practices, provided that nothing herein shall prevent any of them from
--------
disclosing such information (i) to any other Person if reasonably incidental to
the administration of the Revolving Loans or the Letters of Credit, (ii) upon
the order of any court or administrative agency, (iii) upon the request or
demand of any regulatory agency or authority, (iv) which had been publicly
disclosed other than as a result of a disclosure by any of them prohibited by
this Agreement, (v) in connection with any litigation to which any of them or
any of their subsidiaries or parent may be a party, (vi) to the extent necessary
in connection with the exercise of any remedy hereunder, (vii) to any assignee
of any of their rights and obligations hereunder or any Participant and (viii)
to their legal counsel and independent auditors. Subject to the consent of the
Parent Company, the Banks, the Agents and McGuire, Woods, Battle & Boothe,
L.L.P., may circulate promotional materials and place advertisements in
financial and other newspapers and periodicals or on a home page or similar
place for dissemination of information on the Internet or worldwide web after
the closing of the transactions contemplated by this Agreement in the form of a
"tombstone" or otherwise describing the name of the Borrowers and the amount,
type and closing date of such transactions, all at their sole expense.
-44-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed under seal by their respective authorized officers as of the
day and year first above written.
GTS DURATEK, INC., a
Delaware corporation
By:/s/ Craig T. Bartlett
----------------------------------
Name:Craig T. Bartlett
Title: Treasurer
10100 Old Columbia Road
Columbia, Maryland 21046
Attention: President
Phone: (410) 312-5100
Fax: (410) 290-9070
GTS INSTRUMENT SERVICES,
INCORPORATED, a Maryland corporation
By:/s/ Craig T. Bartlett
----------------------------------
Name:Craig T. Bartlett
Title: Treasurer
10100 Old Columbia Road
Columbia, Maryland 21046
Attention: President
Phone: (410) 312-5100
Fax: (410) 290-9070
GENERAL TECHNICAL SERVICES, INC.,
a Maryland corporation
By:/s/ Craig T. Bartlett
----------------------------------
Name:Craig T. Bartlett
Title: Treasurer
10100 Old Columbia Road
Columbia, Maryland 21046
Attention: President
Phone: (410) 312-5100
Fax: (410) 290-9070
<PAGE>
ANALYTICAL RESOURCES, INC.,
a Pennsylvania corporation
By:/s/ Craig T. Bartlett
----------------------------------
Name:Craig T. Bartlett
Title: Treasurer
10100 Old Columbia Road
Columbia, Maryland 21046
Attention: President
Phone: (410) 312-5100
Fax: (410) 290-9070
THE SCIENTIFIC ECOLOGY GROUP, INC.,
a Tennessee corporation
By:/s/ Craig T. Bartlett
----------------------------------
Name:Craig T. Bartlett
Title: Treasurer
10100 Old Columbia Road
Columbia, Maryland 21046
Attention: President
Phone: (410) 312-5100
Fax: (410) 290-9070
SEG COLORADO, INC.,
a Delaware corporation
By:/s/ Craig T. Bartlett
----------------------------------
Name:Craig T. Bartlett
Title: Treasurer
10100 Old Columbia Road
Columbia, Maryland 21046
Attention: President
Phone: (410) 312-5100
Fax: (410) 290-9070
<PAGE>
HITTMAN TRANSPORT SERVICES, INC.,
a Delaware corporation
By:/s/ Craig T. Bartlett
----------------------------------
Name:Craig T. Bartlett
Title: Treasurer
10100 Old Columbia Road
Columbia, Maryland 21046
Attention: President
Phone: (410) 312-5100
Fax: (410) 290-9070
FIRST UNION NATIONAL BANK OF
MARYLAND, a national banking association
By:/s/ Robert J. Bauer
----------------------------------
Name: Robert J. Bauer
Title: Vice President
First Union National Bank of Maryland
Portfolio Management Department
1970 Chain Bridge Road, VA1935
McLean, Virginia 22102
Phone: (703) 760-6190
Fax: (703) 760-6300
FIRST UNION NATIONAL BANK OF
MARYLAND, a national banking association,
as Administrative Agent
By:/s/ Robert J. Bauer
----------------------------------
Name: Robert J. Bauer
Title: Vice President
First Union National Bank of Maryland
Portfolio Management Department
1970 Chain Bridge Road, VA1935
McLean, Virginia 22102
Phone: (703) 760-6190
Fax: (703) 760-6300
<PAGE>
FIRST UNION NATIONAL BANK OF
MARYLAND, a national banking association,
as Collateral Agent
By:/s/ Robert J. Bauer
----------------------------------
Name: Robert J. Bauer
Title: Vice President
First Union National Bank of Maryland
Portfolio Management Department
1970 Chain Bridge Road, VA1935
McLean, Virginia 22102
Phone: (703) 760-6190
Fax: (703) 760-6300
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, a national
banking association
By:/s/ Barbara Gell Carroll
----------------------------------
Name: Barbara Gell Carroll
Title: Senior Vice President
First Union National Bank of North Carolina
Attn: International Division
301 South Tryon Street, M7
Charlotte, North Carolina 28288-0742
Phone: (704) 374-3091
Fax: (704) 383-6984
with a copy to:
First Union National Bank of Maryland
Portfolio Management Department
1970 Chain Bridge Road, VA1935
McLean, Virginia 22102
Phone: (703) 760-6190
Fax: (703) 760-6300
<PAGE>
Exhibit (c)(4)
<PAGE>
SECURITY AGREEMENT
DATED AS OF APRIL 18, 1997
AMONG
GTS DURATEK, INC.,
GENERAL TECHNICAL SERVICES, INC.,
GTS INSTRUMENT SERVICES, INCORPORATED,
AND
ANALYTICAL RESOURCES, INC.
AND
FIRST UNION NATIONAL BANK OF MARYLAND,
AS COLLATERAL AGENT
<PAGE>
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.01 Definitions........................................................ 1
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 Title to Collateral.............................................. 1
Section 2.02 Validity, Perfection and Priority of Security Interests.......... 2
Section 2.03 Insurance........................................................ 2
Section 2.04 Fair Labor Standards Act......................................... 2
ARTICLE III
SECURITY INTEREST
Section 3.01 Grant of Security Interests...................................... 2
Section 3.02 Continuing Liability of the Borrower; Right to Use Collateral.... 2
Section 3.03 Cash Proceeds Account............................................ 3
Section 3.04 Cash Collateral Account.......................................... 3
Section 3.05 LC Cash Collateral Account....................................... 4
Section 3.06 Investment of Funds in Collateral Accounts....................... 5
ARTICLE IV
COVENANTS
Section 4.01 Delivery of Perfection Certificate; Filing of Financing
Statements and Delivery of Search Reports........................ 6
Section 4.02 Change of Name, Identity or Structure; Locations of
Places of Business, Chief Executive Office and Collateral........ 6
Section 4.03 Further Assurances............................................... 6
Section 4.04 Collateral in Possession of Other Persons........................ 7
Section 4.05 Books and Records................................................ 7
Section 4.06 Delivery of Instruments.......................................... 7
</TABLE>
- ----------------------
*The Table of Contents is not a part of this Security Agreement
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.07 Modification of Assigned Agreements, Etc.............................. 7
Section 4.08 Equipment; Fixtures................................................... 8
Section 4.09 Disposition of Collateral............................................. 8
Section 4.10 Insurance............................................................. 8
Section 4.11 Information Regarding Collateral...................................... 9
Section 4.12 Covenants Regarding Patent and Trademark Collateral.................. 9
ARTICLE V
REMEDIES; RIGHTS UPON DEFAULT
Section 5.01 General Authority..................................................... 10
Section 5.02 Remedies upon Event of Default........................................ 11
Section 5.03 Limitation on Duty of the Collateral Agent in Respect of Collateral... 14
Section 5.04 Application of Proceeds............................................... 14
Section 5.05 Assigned Agreements................................................... 15
ARTICLE VI
MISCELLANEOUS
Section 6.01 Notices............................................................... 16
Section 6.02 No Waivers; Non-Exclusive Remedies.................................... 16
Section 6.03 Compensation and Expenses of the Collateral Agent; Indemnification.... 16
Section 6.04 Amendments and Waivers................................................ 18
Section 6.05 Successors and Assigns................................................ 18
Section 6.06 Limitation of Law; Severability....................................... 18
Section 6.07 Governing Law......................................................... 18
Section 6.08 Counterparts; Effectiveness........................................... 18
Section 6.09 Termination........................................................... 19
Section 6.10 Entire Agreement...................................................... 19
</TABLE>
-ii-
<PAGE>
Security Agreement Definitions Appendix
Schedule 4.01 - Schedule of Filings to Perfect Security Interests
Exhibit A - Perfection Certificate
Schedule 1 - Changes of Name, Identity or Corporate Structure; Unusual
Transactions
Schedule 6 - Lists of Patents, Trademarks and Copyrights
Schedule 7 - Assigned Agreements
Exhibit B - Form of Description of Collateral
-iii-
<PAGE>
SECURITY AGREEMENT
This Security Agreement (as amended, supplemented or modified from
time to time, this "Agreement") is dated as of April 18, 1997 and is among GTS
DURATEK, INC., a Delaware corporation ("Duratek"), GENERAL TECHNICAL SERVICES,
INC., a Maryland corporation ("Technical"), GTS INSTRUMENT SERVICES,
INCORPORATED, a Maryland corporation ("Instrument"), and ANALYTICAL RESOURCES,
INC., a Pennsylvania corporation ("Analytical", and together with Duratek,
Technical, and Instrument, the "Assignors"), and FIRST UNION NATIONAL BANK OF
MARYLAND, a national banking association, as Collateral Agent (the "Collateral
Agent") for First Union National Bank of Maryland and First Union National Bank
of North Carolina.
The Borrower, the Banks and the Agents are parties to a Credit
Agreement dated as of April 18, 1997 (as the same may be amended, supplemented
or modified from time to time and including any agreement extending the maturity
of, refinancing or otherwise restructuring all or any portion of the obligations
of the Borrowers under such agreement or any successor agreement, the "Credit
Agreement"). To induce the Banks and the Agents to enter into the Credit
Agreement, and as a condition precedent to the Banks' and Agents' obligations
thereunder, the Assignors have agreed to grant a continuing security interest in
and to the Collateral to secure the Obligations. Accordingly, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. All capitalized terms used in this
-----------
Agreement or in any Appendix, Schedule or Exhibit hereto which are not otherwise
defined herein or therein shall have the meanings set forth in the Security
Agreement Definitions Appendix attached hereto, and which is incorporated herein
by reference in its entirety and is part of this Agreement to the same extent as
if it had been set forth in this Section 1.01 in full. Terms defined in the
Credit Agreement and not otherwise defined herein or in the Security Agreement
Definitions Appendix have, as used herein, the respective meanings provided for
therein.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Assignors represent and warrant that:
SECTION 2.01 TITLE TO COLLATERAL. Each Assignor has good and
-------------------
marketable title to all of the Collateral, free and clear of any Liens other
than Permitted Liens. Each Assignor has taken all actions necessary under the
UCC to perfect its interest in any Accounts and "chattel paper" (as defined in
the UCC) purchased or otherwise acquired by it, as against its assignors and
creditors of its assignors. Each Assignor has not performed any acts which might
prevent the Collateral Agent from enforcing any of the terms of this Agreement
or which would limit the
<PAGE>
Collateral Agent in any such enforcement. Other than financing statements or
other similar or equivalent documents or instruments with respect to the
Security Interests and Permitted Liens, no financing statement, mortgage,
security agreement or similar or equivalent document or instrument covering all
or any part of the Collateral is on file or of record in any jurisdiction in
which such filing or recording would be effective to perfect a Lien on such
Collateral. No Collateral is in the possession of any Person (other than the
Assignor) asserting any claim thereto or security interest therein, except that
the Collateral Agent or its designee may have possession of Collateral as
contemplated hereby and by the Credit Agreement.
SECTION 2.02 VALIDITY, PERFECTION AND PRIORITY OF SECURITY INTERESTS.
-------------------------------------------------------
The Security Interests constitute valid security interests under the UCC
securing the Obligations. When UCC financing statements containing a description
of the Collateral in the form specified in Exhibit B hereto shall have been
filed in the offices specified in Schedule 4.01 hereto, the Security Interests
shall constitute perfected security interests in all right, title and interest
of the Assignors in the Collateral (except Inventory in transit) to the extent
that a security interest therein may be perfected by filing pursuant to the UCC,
prior to all other Liens and rights of others therein except for Permitted
Liens.
SECTION 2.03 INSURANCE. The Inventory and Equipment are insured in
---------
accordance with the requirements of the Credit Agreement.
SECTION 2.04 FAIR LABOR STANDARDS ACT. All Inventory has or will
------------------------
have been produced in compliance with the applicable requirements of the Fair
Labor Standards Act, as amended from time to time, or any successor statute, and
regulations promulgated thereunder.
ARTICLE III
SECURITY INTEREST
SECTION 3.01 GRANT OF SECURITY INTERESTS. In order to secure the full
---------------------------
and punctual payment of the Obligations in accordance with the terms thereof,
and to secure the performance of all of the obligations of the Assignors
hereunder and the Borrowers under the Credit Agreement and the other Loan
Documents, each Assignor hereby grants to the Collateral Agent a continuing
security interest in and to all of the Collateral, whether now owned or existing
or hereafter acquired, created or arising, whether tangible or intangible, and
regardless of where located.
SECTION 3.02 CONTINUING LIABILITY OF THE BORROWER; RIGHT TO USE
--------------------------------------------------
COLLATERAL. The Security Interests are granted as security only and shall not
- ----------
subject the Collateral Agent or the Banks to, or transfer or in any way affect
or modify, any obligation or liability of any Assignor with respect to any of
the Collateral or any transaction in connection therewith. So long as no Event
of Default shall have occurred and be continuing, each Assignor shall have the
-2-
<PAGE>
right to use its Collateral except to the extent otherwise provided herein with
respect to the Collateral Accounts.
SECTION 3.03 CASH PROCEEDS ACCOUNT.
---------------------
(a) Creation of Cash Proceeds Account. There is hereby established with
---------------------------------
the Collateral Agent a cash collateral account (the "Cash Proceeds Account") in
the name of "GTS DURATEK, INC. - FIRST UNION NATIONAL BANK OF MARYLAND" and
under the exclusive control of the Collateral Agent into which there shall be
deposited from time to time the cash proceeds of the Collateral required to be
delivered to the Collateral Agent pursuant to paragraph (b) of this Section or
any other provision of the Loan Documents. Any income received by the Collateral
Agent with respect to the balance from time to time standing to the credit of
the Cash Proceeds Account, including any interest, shall remain, or be
deposited, in the Cash Proceeds Account. All right, title and interest in and to
the cash amounts on deposit from time to time in the Cash Proceeds Account shall
vest in the Collateral Agent, shall constitute part of the Collateral and shall
not constitute payment of the Obligations until applied thereto as hereinafter
provided.
(b) Deposits to Cash Proceeds Account. The Assignors shall instruct all
---------------------------------
Account Debtors and other Persons obligated in respect of Accounts and other
Collateral to make all payments in respect of the Accounts or other Collateral
directly to a post office box which shall be in the name and under the control
of the Collateral Agent. All such payments made to the Collateral Agent shall be
deposited in the Cash Proceeds Account. In addition to the foregoing, each
Assignor agrees that if the proceeds of any Collateral (including the payments
made in respect of Accounts) shall be received by it, such Assignor shall as
promptly as possible deposit such proceeds to the Cash Proceeds Account. Until
so deposited, all such proceeds shall be held in trust by such Assignor for and
as the property of the Collateral Agent and shall not be commingled with any
other funds or property of such Assignor. The Assignors hereby irrevocably
authorize and empower the Collateral Agent, its officers, employees and
authorized agents to endorse and sign their names on all checks, drafts, money
orders or other media of payment so delivered, and such endorsements or
assignments shall, for all purposes, be deemed to have been made by the
Assignors prior to any endorsement or assignment thereof by the Collateral
Agent. The Collateral Agent may use any convenient or customary means for the
purpose of collecting such checks, drafts, money orders or other media of
payment.
(c) Withdrawals from Cash Proceeds Account. Collected funds on deposit in
--------------------------------------
the Cash Proceeds Account shall be withdrawn by the Collateral Agent on the
Business Day following the day on which the Collateral Agent considers the funds
deposited therein to be collected funds and applied to repay the Obligations
which are then due and payable. Until an Event of Default shall occur, all
collected funds remaining on deposit in the Cash Proceeds Account after the
application required by the preceding sentence shall then be deposited in the
Operating Account.
-3-
<PAGE>
SECTION 3.04 CASH COLLATERAL ACCOUNT. All amounts required to be
-----------------------
deposited by the Assignors as cash collateral pursuant to Section 5.04(b)(i)
hereof shall be deposited in a cash collateral account (the "Cash Collateral
Account") established and maintained by the Assignor at the offices of the
Collateral Agent or such other bank as the Assignor and the Collateral Agent may
agree, in the name and under the exclusive control of the Collateral Agent.
Forthwith upon such establishment, the Assignor shall notify the Collateral
Agent of the location, account name and account number of such account. Any
income received with respect to the balance from time to time standing to the
credit of the Cash Collateral Account, including any interest or capital gains
on Liquid Investments, shall remain, or be deposited, in the Cash Collateral
Account. All right, title and interest in and to the cash amounts on deposit
from time to time in the Cash Collateral Account together with any Liquid
Investments from time to time made pursuant to Section 3.06 shall vest in the
Collateral Agent, shall constitute part of the Collateral hereunder and shall
not constitute payment of the Obligations until applied thereto as hereinafter
provided. If and when any portion of the Performance Letter of Credit
Liabilities on which any deposit in the Cash Collateral Account was based (the
"Relevant Contingent Exposure") shall become fixed (a "Direct Exposure") as a
result of the payment by the issuer thereof of a draft presented under any
Performance Letter of Credit, the amount of such Direct Exposure (but not more
than the amount in the Cash Collateral Account at the time) shall be withdrawn
by the Collateral Agent from the Cash Collateral Account for application
pursuant to the Credit Agreement, and the Relevant Contingent Exposure shall
thereupon be reduced by such amount. If immediately available cash on deposit in
the Cash Collateral Account is not sufficient to make any distribution to the
Collateral Agent referred to in this Section 3.04, the Collateral Agent shall
cause to be liquidated as promptly as practicable such Liquid Investments in the
Cash Collateral Account designated by Duratek as required to obtain sufficient
cash to make such distribution and, notwithstanding any other provision of this
Section 3.04, such distribution shall not be made until such liquidation has
taken place. So long as no Event of Default shall have occurred and be
continuing, the funds in the Cash Collateral Account in excess of the Relevant
Contingent Exposure shall be paid to Duratek on demand.
SECTION 3.05 LC CASH COLLATERAL ACCOUNT. There is hereby established
--------------------------
with the Collateral Agent a cash collateral account (the "LC Cash Collateral
Account") in the name of "GTS DURATEK, INC. - FIRST UNION NATIONAL BANK OF
MARYLAND (LC CASH COLLATERAL ACCOUNT)" and under the exclusive control of the
Collateral Agent into which there has been deposited the sum of $5,803,000 in
cash and/or marketable securities. In addition, all amounts required to be
deposited by the Assignors as cash collateral pursuant to Section [5.21] of the
Credit Agreement and Section 5.04(b)(ii) hereof shall be deposited in the LC
Cash Collateral Account. The Collateral Agent is hereby authorized to withdraw
amounts from the Money Manager Account, from time to time, and deposit such
funds into the LC Cash Collateral Account as may be necessary to maintain a
balance in the LC Cash Collateral Account equal to 38% of the amount of the
Tennessee Letter of Credit Liabilities. Any income received by the Collateral
Agent with respect to the balance from time to time standing to the credit of
the
-4-
<PAGE>
LC Cash Collateral Account, including any interest, or capital gains on Liquid
Investments, shall remain, or be deposited, in the LC Cash Collateral Account.
All right, title and interest in and to the cash amounts on deposit from time to
time in the LC Cash Collateral Account, together with any Liquid Investments
from time to time made pursuant to Section 3.06 shall vest in the Collateral
Agent, shall constitute part of the Collateral hereunder and shall not
constitute payment of the Obligations until applied thereto as hereinafter
provided. If and when any portion of the Tennessee Letter of Credit Liabilities
on which any deposit in the LC Cash Collateral Account was based (the "Relevant
Contingent Exposure") shall become fixed (a "Direct Exposure") as a result of
the payment by the issuer thereof of a draft presented under any Tennessee
Letter of Credit, the amount of such Direct Exposure (but not more than the
amount in the LC Cash Collateral Account at the time) shall be withdrawn by the
Collateral Agent from the LC Cash Collateral Account for application pursuant to
the Credit Agreement, and the Relevant Contingent Exposure shall thereupon be
reduced by such amount. If immediately available cash on deposit in the LC Cash
Collateral Account is not sufficient to make any distribution to the Collateral
Agent referred to in this Section 3.05, the Collateral Agent shall cause to be
liquidated as promptly as practicable such Liquid Investments in the LC Cash
Collateral Account designated by Duratek as required to obtain sufficient cash
to make such distribution and, notwithstanding any other provision of this
Section 3.05, such distribution shall not be made until such liquidation has
taken place. So long as no Event of Default shall have occurred and be
continuing, funds in the LC Cash Collateral Account in excess of an amount equal
to 38% of the Tennessee Letter of Credit Liabilities shall be paid to Duratek on
demand.
SECTION 3.06 INVESTMENT OF FUNDS IN COLLATERAL ACCOUNTS. Amounts on
------------------------------------------
deposit in the Cash Collateral Account and the LC Cash Collateral Account shall
be invested and re-invested from time to time in such Liquid Investments as
Duratek shall determine, which Liquid Investments shall be held in the name and
be under the control of the Collateral Agent, provided that, if an Event of
--------
Default has occurred and is continuing, the Collateral Agent may liquidate any
such Liquid Investments and apply or cause to be applied the proceeds thereof in
the manner specified in Section 5.04. For this purpose, "Liquid Investments"
means Cash Equivalents; provided that (i) each Liquid Investment shall mature
--------
within 180 days after it is acquired by the Collateral Agent and (ii) in order
to provide the Collateral Agent with a perfected security interest therein, each
Liquid Investment shall be either:
(i) evidenced by negotiable certificates or instruments, or if
non-negotiable then issued in the name of the Collateral Agent, which
(together with any appropriate instruments of transfer) are delivered to,
and held by, the Collateral Agent or an agent thereof (which shall not be
any Assignor or any of its Affiliates) in the State of Maryland; or
(ii) in book-entry form and issued by the United States and
subject to pledge under applicable state law and Treasury regulations and
as to which (in the
-5-
<PAGE>
opinion of counsel to the Collateral Agent) appropriate measures shall have
been taken for perfection of the Security Interests.
ARTICLE IV
COVENANTS
The Assignors covenant and agree with the Collateral Agent that until
the payment in full of all Obligations and until there is no Commitment to make
further advances, incur obligations or otherwise give value, the Assignors will
comply with the following:
SECTION 4.01 DELIVERY OF PERFECTION CERTIFICATE; FILING OF FINANCING
-------------------------------------------------------
STATEMENTS AND DELIVERY OF SEARCH REPORTS. On or prior to the Effective Date,
- -----------------------------------------
each Assignor shall deliver a Perfection Certificate to the Collateral Agent and
shall cause all filings, recordings, notices and other actions specified in
Schedule 4.01 hereto to have been completed, except that the Assignors shall
have (i) until the expiration of 3 Business Days following the Effective Date to
cause the filing specified on Schedule 4.01 with the United States Patent and
Trademark Office to be completed, and (ii) until the expiration of 5 Business
Days following the Effective Date to cause the UCC filings designated by an
asterisk on Schedule 4.01 to be completed. The information set forth in the
Perfection Certificate shall be correct and complete. Not later than 60 days
following the Closing Date, each Assignor shall furnish to the Collateral Agent
file search reports and confirmations of receipt of notices from each filing
jurisdiction and each notice recipient set forth in Schedule 4.01 confirming the
filing information set forth in such Schedule.
SECTION 4.02 CHANGE OF NAME, IDENTITY OR STRUCTURE; LOCATIONS OF
---------------------------------------------------
PLACES OF BUSINESS, CHIEF EXECUTIVE OFFICE AND COLLATERAL. No Assignor will
- ---------------------------------------------------------
change its name, identity or corporate structure in any manner unless it shall
have given the Collateral Agent not less than 30 days' prior notice thereof. No
Assignor will change the location of (i) its place or places of business, its
chief executive office or its chief place of business or (ii) the locations
where it keeps or holds any Collateral or any records relating thereto from the
applicable location described in such Assignor's Perfection Certificate unless
it shall have given the Collateral Agent not less than 30 days' prior notice
thereof. In any event, no Assignor will change the location of its place or
places of business, its chief executive office or any Collateral if such change
would cause the Security Interests in such Collateral to lapse or cease to be
perfected.
SECTION 4.03 FURTHER ASSURANCES. Each Assignor will, from time to
------------------
time, at its expense, execute, deliver, file and record any statement,
assignment, instrument, document, agreement or other paper and take any other
action (including, without limitation, any filings of financing or continuation
statements under the UCC, any filings with the United States Patent and
Trademark Office, and any Notices of Assignment under the Assignment of Claims
Act) that from time to time may be necessary or desirable, or that the
Collateral Agent may request, in order to create, preserve, perfect, confirm or
validate the Security Interests or to enable the
-6-
<PAGE>
Collateral Agent to obtain the full benefit of this Agreement, or to enable the
Collateral Agent to exercise and enforce any of its rights, powers and remedies
created hereunder or under applicable law with respect to any of the Collateral.
To the extent permitted by applicable law, each Assignor hereby authorizes the
Collateral Agent to execute and file financing statements or continuation
statements without such Assignor's signature appearing thereon. Each Assignor
agrees that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
The Assignors shall pay the costs of, or incidental to, any recording or filing
of any financing or continuation statements concerning the Collateral.
SECTION 4.04 COLLATERAL IN POSSESSION OF OTHER PERSONS. If any
-----------------------------------------
Collateral is at any time in the possession or control of any warehouseman,
bailee or any Assignor's agents or processors, such Assignor shall notify such
warehouseman, bailee, agent or processor of the Security Interests created
hereby and to hold all such Collateral for the Collateral Agent's account
subject to the Collateral Agent's instructions. Such Assignor agrees that if any
warehouse receipt or receipt in the nature of a warehouse receipt is issued with
respect to any of its Inventory, such warehouse receipt or other receipt in the
nature thereof shall not be "negotiable" (as such term is defined in Section 7-
104 of the Uniform Commercial Code in any relevant jurisdiction or under other
relevant law).
SECTION 4.05 BOOKS AND RECORDS. The Assignors shall keep full and
-----------------
accurate books and records relating to the Collateral, including, without
limitation, the originals of all documentation with respect thereto, records of
all payments received, all credits granted thereon, all merchandise returned and
all other dealings therewith, and the Assignors will make the same available to
the Collateral Agent for inspection, at the Assignors' own cost and expense, at
any and all reasonable times upon demand. Upon direction by the Collateral
Agent, the Assignors shall stamp or otherwise mark such books and records in
such manner as the Collateral Agent may reasonably require in order to reflect
the Security Interests.
SECTION 4.06 DELIVERY OF INSTRUMENTS. The Assignors will immediately
-----------------------
deliver each Instrument, certificated security and uncertificated security to
the Collateral Agent indorsed (as applicable) to the Collateral Agent; provided
--------
that so long as no Event of Default shall have occurred and be continuing and
except as provided by any other Loan Document, the Assignors may retain for
collection in the ordinary course of business any Instruments (other than
certificated securities, checks, drafts and other Instruments constituting
payments in respect of Accounts and other Collateral, as to which the provisions
of Section 2.08(c) of the Credit Agreement and Section 3.03 hereof shall apply)
received by them in the ordinary course of business and the Collateral Agent
shall, promptly upon request of any Assignor, make appropriate arrangements for
making any other Instrument pledged by such Assignor available to it for
purposes of presentation, collection or renewal (any such arrangement to be
effected, to the extent deemed appropriate to the Collateral Agent, against
trust receipt or like document).
-7-
<PAGE>
SECTION 4.07 MODIFICATION OF ASSIGNED AGREEMENTS, ETC. Each Assignor
----------------------------------------
shall keep the Collateral Agent informed of all material circumstances bearing
upon the right, title and interest of such Assignor under the Assigned
Agreements. No Assignor will, except with the consent of the Collateral Agent
amend, modify, extend, renew, cancel or terminate any Assigned Agreement, waive
any default under or breach of any Assigned Agreement, compromise or settle any
material dispute, claim, suit or legal proceeding relating to any Assigned
Agreement, sell or assign any Assigned Agreement or interest therein, consent to
or permit or accept any prepayment of amounts to become due under or in
connection with any Assigned Agreement, except as expressly provided therein, or
take any other action in connection with any Assigned Agreement which would
impair the value of the interests or rights of such Assignor thereunder or which
would impair the interests or rights of the Collateral Agent under this
Agreement, except that, unless the Collateral Agent shall have notified such
Assignor upon the occurrence of a Default or Event of Default that this
exception is no longer applicable, such Assignor may modify, make adjustments
with respect to, extend or renew any Assigned Agreements in the ordinary course
of business. The Assignor will duly fulfill all of its obligations under or in
connection with the Assigned Agreements unless the failure to do so would not
have a Material Adverse Effect.
SECTION 4.08 EQUIPMENT; FIXTURES. The Assignors shall promptly
-------------------
inform the Collateral Agent of any material additions to or deletions from the
Equipment and shall not permit any such items to become a fixture to real estate
or an accession to other personal property.
SECTION 4.09 DISPOSITION OF COLLATERAL. Without the prior written
-------------------------
consent of the Collateral Agent, the Assignors will not sell, lease, exchange,
assign or otherwise dispose of, or grant any option with respect to, any
Collateral, except that, subject to the rights of the Collateral Agent hereunder
if an Event of Default shall have occurred and be continuing, the Assignors may
grant Licenses in their respective Patents and Trademarks in the ordinary course
of their businesses, and the Assignors may sell, lease or exchange Inventory and
obsolete, unused or unnecessary Equipment in the ordinary course of business,
whereupon, in the case of such a sale or exchange, the Security Interests
created hereby in such item (but not in any Proceeds arising from such sale or
exchange) shall cease immediately without any further action on the part of the
Collateral Agent.
SECTION 4.10 INSURANCE. Prior to the Closing Date, each Assignor
---------
will cause the Collateral Agent to be named as an insured party and loss payee
on each insurance policy covering risks relating to any of its Inventory and
Equipment. Each Assignor will deliver to the Collateral Agent, upon its request,
the insurance policies for such insurance or certificates of insurance
evidencing such coverage. Each such insurance policy shall include effective
waivers by the insurer of all claims for insurance premiums against the
Collateral Agent, provide for coverage to the Collateral Agent regardless of the
breach by such Assignor of any warranty or
-8-
<PAGE>
representation made therein, not be subject to co-insurance, provide that all
insurance proceeds in excess of $250,000 per claim shall be payable to such
Assignor and the Collateral Agent and provide that no cancellation, termination
or material modification thereof shall be effective until at least 30 days after
receipt by the Collateral Agent of notice thereof. So long as no Event of
Default has occurred and is continuing, the Collateral Agent shall deliver the
proceeds of any claims in the Collateral Agent's possession to the Assignor.
Each Assignor hereby appoints the Collateral Agent as its attorney-in-fact to
make proof of loss, claim for insurance and adjustments with insurers, and to
execute or endorse all documents, checks or drafts in connection with payments
made as a result of any insurance policies, but the Collateral Agent agrees not
to exercise any of the foregoing rights unless an Event of Default shall have
occurred and be continuing. Each Assignor assumes all liability and
responsibility in connection with the Collateral acquired by it and the
liability of such Assignor to pay the Obligations shall in no way be affected or
diminished by reason of the fact that such Collateral may be lost, destroyed,
stolen, damaged or for any reason whatsoever unavailable to such Assignor.
SECTION 4.11 INFORMATION REGARDING COLLATERAL. The Assignors will,
--------------------------------
promptly upon request, provide to the Collateral Agent all information and
evidence it may reasonably request concerning the Collateral to enable the
Collateral Agent to enforce the provisions of this Agreement.
SECTION 4.12 COVENANTS REGARDING PATENT AND TRADEMARK COLLATERAL.
---------------------------------------------------
(a) Each Assignor (either itself or through licensees) will, for each
Patent, not do any act, or omit to do any act, whereby any Patent which is
material to the conduct of such Assignor's business may become invalidated or
dedicated to the public, and shall continue to mark any products covered by a
Patent with the relevant patent number or indication that a Patent is pending as
required by the Patent laws.
(b) Each Assignor (either itself or, if permitted by law, through its
licensees or its sublicensees) will, for each Trademark material to the conduct
of such Assignor's business, (i) maintain such Trademark in full force free from
any claim of abandonment or invalidity for non-use, (ii) maintain the quality of
products and services offered under such Trademark, (iii) display such Trademark
with notice of federal registration to the extent required by applicable law,
(iv) not knowingly use or knowingly permit the use of such Trademark in
violation of any third party rights and (v) not permit any assignment in gross
of such Trademark.
(c) Each Assignor (either itself or through licensees) will, for each work
covered by a material copyright, continue to publish, reproduce, display, adopt
and distribute the work with appropriate copyright notice.
(d) Each Assignor shall notify the Collateral Agent immediately if it
knows or has reason to know that any Patent, Trademark or copyright (or any
application or registration
-9-
<PAGE>
relating thereto) material to the conduct of its business may become abandoned
or dedicated to the public, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
United States Copyright Office or any court) regarding such Assignor's ownership
of any Patent, Trademark or copyright, its right to register the same or to keep
and maintain the same.
(e) Each Assignor will take all necessary steps to file, maintain and
pursue each material application relating to the Patents, Trademarks and/or
copyrights (and to obtain the relevant grant or registration) and to maintain
each registration of the Patents, Trademarks and copyrights which is material to
the conduct of such Assignor's business, including filing of applications for
renewal, affidavits of use, affidavits of incontestability and maintenance fees,
and, if consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.
(f) In the event that any rights to any Patent, Trademark, copyright or
License relating thereto material to the conduct of any Assignor's business is
believed infringed, misappropriated or diluted by a third party, such Assignor
shall notify the Collateral Agent promptly after it learns thereof and shall, if
consistent with good business judgment, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as such
Assignor shall reasonably deem appropriate under the circumstances to protect
such Patent, Trademark, copyright or License.
(g) In no event shall any Assignor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
copyright with the United States Patent and Trademark Office, United States
Copyright Office or any office or agency in any political subdivision of the
United States or in any other country or any political subdivision thereof,
unless not less than 10 days prior thereto it informs the Collateral Agent, and,
upon request of the Collateral Agent, executes and delivers any and all
agreements, instruments, documents and papers as the Collateral Agent may
request to evidence the Security Interests in such Patent, Trademark or
copyright and the goodwill or accounts and general intangibles of such Assignor
relating thereto or represented thereby, and such Assignor hereby appoints the
Collateral Agent its attorney-in-fact to execute and file such writings for the
foregoing purposes.
ARTICLE V
REMEDIES; RIGHTS UPON DEFAULT
SECTION 5.01 GENERAL AUTHORITY. The Assignors hereby irrevocably
-----------------
appoint the Collateral Agent their true and lawful attorney, with full power of
substitution, in the name of any or all of the Assignors, the Collateral Agent
or otherwise, for the sole use and benefit of the Collateral Agent, but at the
Assignors' expense, to the extent permitted by law to exercise at any time and
from time to time while an Event of Default has occurred and is continuing, all
or any
-10-
<PAGE>
of the following powers with respect to all or any of the Collateral, all acts
of such attorney being hereby ratified and confirmed; such power, being coupled
with an interest, is irrevocable until the Obligations are paid in full and
until there is no Commitment by the Collateral Agent to make further advances,
incur obligations or otherwise give value:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due thereon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, including without limitation for
the implementation of any assignment, lease, License, sublicense, grant of
option, sale or other disposition of any Patent, Trademark or copyright or
any action related thereto, as fully and effectually as if the Collateral
Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Collateral Agent shall give such Assignor not less than ten
- --------
days' prior notice of the time and place of any sale or other intended
disposition of any of such Assignor's Collateral, except any Collateral which is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market. The Collateral Agent and such Assignor agree that
such notice constitutes "reasonable notification" within the meaning of Section
9-504(3) of the UCC. Except as otherwise provided herein, each Assignor hereby
waives, to the extent permitted by applicable law, notice and judicial hearing
in connection with the Collateral Agent's taking possession or the Collateral
Agent's dispositions of any of the Collateral, including, without limitation,
any and all prior notice and hearing for any prejudgment remedy or remedies and
any such right which such Assignor would otherwise have under the Constitution
or any statute of the United States or of any state.
SECTION 5.02 REMEDIES UPON EVENT OF DEFAULT.
------------------------------
(a) If any Event of Default has occurred and is continuing, the Collateral
Agent may exercise all rights of a secured party under the UCC (whether or not
in effect in the jurisdiction where such rights are exercised) and, in addition,
the Collateral Agent may, without being required to give any notice, except as
herein provided or as may be required by mandatory provisions of law, (i)
withdraw all cash and Liquid Investments in the Collateral Accounts and apply
such cash and Liquid Investments and other cash, if any, then held by it as
Collateral as specified in Section 5.04 and (ii) if there shall be no such cash
or Liquid Investments or if such cash and Liquid Investments shall be
insufficient to pay all the Obligations in full or cannot be so
-11-
<PAGE>
applied for any reason, sell the Collateral or any part thereof at public or
private sale, for cash, upon credit or for future delivery, and at such price or
prices as the Collateral Agent may deem satisfactory. The Collateral Agent and
any of the Banks may be the purchaser of any or all of the Collateral so sold at
any public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations, at any private sale). The Assignors will execute and
deliver such documents and take such other action as the Collateral Agent deems
necessary or advisable in order that any such sale may be made in compliance
with law. Upon any such sale, the Collateral Agent shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely and free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Assignors which may be waived, and the
Assignors, to the extent permitted by law, hereby specifically waive all rights
of redemption, stay or appraisal which they have or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Section 5.01 shall (i) in the case of a public sale, state the time and place
fixed for such sale, and (ii) in the case of a private sale, state the day after
which such sale may be consummated. Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may determine. The Collateral Agent shall not be obligated to
make any such sale pursuant to any such notice. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned without further notice. In the case of any sale of all
or any part of the Collateral on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the selling price is paid
by the purchaser thereof, but the Collateral Agent shall not incur any liability
in the case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in the case of any such failure, such Collateral may
again be sold upon like notice. The Collateral Agent, instead of exercising the
power of sale herein conferred upon it, may proceed by a suit or suits at law or
in equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) For the purpose of enforcing any and all rights and remedies under
this Agreement the Collateral Agent may (i) require the Assignors to, and each
Assignor agrees that it will, at its expense and upon the request of the
Collateral Agent, forthwith assemble all or any part of the Collateral as
directed by the Collateral Agent and make it available at a place designated by
the Collateral Agent which is, in the Collateral Agent's opinion, reasonably
convenient to the Collateral Agent and such Assignor, whether at the premises of
such Assignor or otherwise, it being understood that such Assignor's obligation
so to deliver the Collateral is of the essence of this Agreement and that,
accordingly, upon application to a court of equity having jurisdiction, the
Collateral Agent shall be entitled to a decree requiring specific performance by
such Assignor
-12-
<PAGE>
of such obligations; (ii) to the extent permitted by applicable law, enter, with
or without process of law and without breach of the peace, any premise where any
of the Collateral is or may be located, and without charge or liability to the
Collateral Agent seize and remove such Collateral from such premises; (iii) have
access to and use the Assignors' books and records relating to the Collateral;
and (iv) prior to the disposition of the Collateral, store or transfer it
without charge in or by means of any storage or transportation facility owned or
leased by the Assignors, process, repair or recondition it or otherwise prepare
it for disposition in any manner and to the extent the Collateral Agent deems
appropriate and, in connection with such preparation and disposition, use
without charge any Patent, Trademark, copyright, License relating thereto or
technical process used by the Assignors. The Collateral Agent may also render
any or all of the Collateral unusable at any Assignor's premises and may dispose
of such Collateral on such premises without liability for rent or costs.
(c) Without limiting the generality of the foregoing, if any Event of
Default has occurred and is continuing (but subject to the terms of any
License):
(i) the Collateral Agent may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or non-exclusive
basis, any Patents, Trademarks or copyrights included in the Collateral
throughout the world for such term or terms, on such conditions and in such
manner as the Collateral Agent shall in its sole discretion determine;
(ii) the Collateral Agent may (without assuming any obligations
or liability thereunder), at any time and from time to time, enforce (and
shall have the exclusive right to enforce) against any licensee or
sublicensee all rights and remedies of the Assignor in, to and under any
Patent License, Trademark License or license with respect to copyrights and
take or refrain from taking any action under any provision thereof, and the
Assignor hereby releases the Collateral Agent from, and agrees to hold the
Collateral Agent free and harmless from and against any claims arising out
of, any lawful action so taken or omitted to be taken with respect thereto;
and
(iii) upon request by the Collateral Agent, each Assignor will
use its best efforts to obtain all requisite consents or approvals by the
licensor or sublicensor of each Patent License, license with respect to
copyrights or Trademark License to effect the assignment of all of the
Assignor's rights, title and interest thereunder to the Collateral Agent or
its designee and will execute and deliver to the Collateral Agent a power
of attorney, in form and substance satisfactory to the Collateral Agent,
for the implementation of any lease, assignment, license, sublicense, grant
of option, sale or other disposition of a Patent, Trademark or copyright;
and
(iv) the Collateral Agent may direct any Assignor to refrain,
in which event such Assignor shall refrain, from using or practicing any
Trademark, Patent or copyright
-13-
<PAGE>
in any manner whatsoever, directly or indirectly and shall, if requested by
the Collateral Agent change such Assignor's name to eliminate therefrom any
use of any Trademark and will execute such other and further documents as
the Collateral Agent may request to further confirm this and transfer
ownership of the Trademarks, Patents, copyrights and registrations and any
pending applications therefor to the Collateral Agent.
(d) In the event of any disposition of any Patent, Trademark or copyright
pursuant to this Article V, the Assignors shall supply their know-how and
expertise relating to the manufacture and sale of the products or services
bearing Trademarks or the products, services or works made or rendered in
connection with or under Patents, Trademarks or copyrights, and their customer
lists and other records relating to such Patents, Trademarks or copyrights and
to the distribution of said products, services or works, to the Collateral
Agent.
SECTION 5.03 LIMITATION ON DUTY OF THE COLLATERAL AGENT IN RESPECT OF
--------------------------------------------------------
COLLATERAL. Beyond the exercise of reasonable care in the custody thereof, the
- ----------
Collateral Agent shall have no duty to exercise any rights or take any steps to
preserve the rights of any Assignor in the Collateral in its or such Assignor's
possession or control or in the possession or control of any agent or bailee or
any income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto, nor shall the Collateral Agent be liable to
the Assignor or any other Person for failure to meet any obligation imposed by
Section 9-207 of the UCC or any successor provision. The Collateral Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and shall not be
liable or responsible for any loss or damage to any of the Collateral, or for
any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by the Collateral Agent in good faith.
SECTION 5.04 APPLICATION OF PROCEEDS.
-----------------------
(a) Priority of Distribution. If an Event of Default shall have occurred
------------------------
and be continuing, the proceeds of any sale of, or other realization upon, all
or any part of the Collateral and any cash held in the Collateral Accounts shall
be applied by the Collateral Agent in the following order of priority:
(i) to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel for
the Collateral Agent, and all expenses, liabilities and advances incurred
or made by the Collateral Agent in connection therewith, and any other
Obligations owing to the Collateral Agent in respect of sums advanced by
the Collateral Agent to preserve the Collateral or to preserve its security
interest in the Collateral;
-14-
<PAGE>
(ii) an amount equal to (A) the unpaid principal of and accrued
but unpaid interest on all Revolving Loans, all Reimbursement Obligations
and all other Obligations which arise or are incurred in connection with
the Loan Documents; plus (B) the aggregate amount that is (or may
thereafter become) available for drawing under all Letters of Credit then
outstanding (or deemed to be outstanding) under the Credit Agreement; plus
(C) all unpaid fees owing to the Collateral Agent under the Credit
Agreement; plus (D) to the extent not covered by paragraph (i) above, all
unreimbursed expenses for which the Collateral Agent is to be reimbursed
pursuant to Section 9.03 of the Credit Agreement, Section 7.03 hereof or
any other provision of any of the Loan Documents, shall be applied to
payment of the Obligations;
(iii) an amount equal to the Derivatives Obligations shall be
applied to the payment thereof;
(iv) to the payment of all other Obligations, until all
Obligations shall have been paid in full; and
(v) to payment to the Assignors or their successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus
then remaining from such proceeds.
(b) Distributions with Respect to Letters of Credit. The Collateral Agent
agrees and acknowledges that if (after all outstanding Revolving Loans and
Reimbursement Obligations with respect to Letters of Credit have been paid in
full) the Collateral Agent is to receive a distribution on account of undrawn
amounts (i) with respect to Performance Letters of Credit issued (or deemed
issued) under the Credit Agreement, such amounts shall be deposited in the Cash
Collateral Account as cash security for the repayment of Obligations and (ii)
with respect to Tennessee Letters of Credit issued (or deemed issued) under the
Credit Agreement, such amounts shall be deposited in the LC Cash Collateral
Account as cash security for the repayment of the Obligations. Upon termination
of all outstanding Letters of Credit, all of such cash security shall be applied
to the remaining Obligations. If there remains any excess cash security in such
accounts, such excess cash shall be withdrawn by the Collateral Agent and
distributed in accordance with Section 5.04(a) hereof.
(c) It is understood that the Assignors shall remain jointly and severally
liable to the extent of any deficiency between the amount of the proceeds of the
Collateral and the amount of the Obligations.
SECTION 5.05 ASSIGNED AGREEMENTS. Each Assignor hereby irrevocably
--------------------
authorizes and empowers the Collateral Agent, in the Collateral Agent's sole
discretion, if an Event of Default has occurred and is continuing, to assert,
either directly or on behalf of such Assignor, any claims such Assignor may
have, from time to time, against any other party to any Assigned Agreement or to
otherwise exercise any right or remedy of such Assignor under any
-15-
<PAGE>
Assigned Agreement (including without limitation, the right to enforce directly
against any party to an Assigned Agreement all of such Assignor's rights
thereunder, to make all demands and give all notices and make all requests
required or permitted to be made by such Assignor under any Assigned Agreements)
as the Collateral Agent may deem proper. Each Assignor hereby irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as such Assignor's true and lawful
attorney-in-fact for the purpose of enabling the Collateral Agent, to assert and
collect such claims and to exercise such rights and remedies.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 NOTICES. Unless otherwise specified herein, all
-------
notices, requests or other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission or similar writing)
and shall be given to such party (i) at its address referred to in Section 9.01
of the Credit Agreement or (ii) other address, facsimile number or telex number
as such party shall hereafter specify for the purpose of communications
hereunder by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by facsimile transmission, when
transmitted to the facsimile number specified in this Section and confirmation
of receipt is received, (iii) if given by mail, 48 hours after such
communication is deposited, certified mail, return receipt requested, in the
mails with appropriate first class postage prepaid, addressed as aforesaid or
(iv) if given by other means, when delivered at the address specified in this
Section 6.01. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given shall not affect the
validity of notice given in accordance with this Section.
SECTION 6.02 NO WAIVERS; NON-EXCLUSIVE REMEDIES. No failure or delay
----------------------------------
on the part of the Collateral Agent to exercise, no course of dealing with
respect to, and no delay in exercising any right, power or privilege under this
Agreement or any other Loan Document or any other document or agreement
contemplated hereby or thereby shall operate as a waiver thereof nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided herein and in the other Loan
Documents are cumulative and are not exclusive of any other remedies provided by
law. Without limiting the foregoing, nothing in this Agreement shall impair the
right of the Collateral Agent to exercise any right of set-off or counterclaim
it may have and to apply the amount subject to such exercise to the payment of
indebtedness of each Assignor other than such Assignor's indebtedness under the
Credit Agreement and the other Loan Documents.
-16-
<PAGE>
SECTION 6.03 COMPENSATION AND EXPENSES OF THE COLLATERAL AGENT;
--------------------------------------------------
INDEMNIFICATION.
- ---------------
(a) Expenses. The Assignors shall pay (i) all out-of-pocket expenses of
--------
the Collateral Agent, including fees and disbursements of special and local
counsel for the Collateral Agent, in connection with the preparation and
administration of this Agreement or any document or agreement contemplated
hereby, any consent or waiver hereunder or any amendment hereof or any Default
or alleged Default and (ii) if an Event of Default occurs, all out-of-pocket
expenses incurred by the Collateral Agent, including (without duplication) the
fees and disbursements of outside counsel in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom.
(b) Protection of Collateral. If any Assignor fails to comply with the
------------------------
provisions of the Credit Agreement, this Agreement or any other Loan Document,
such that the value of any Collateral or the validity, perfection, rank or value
of any Security Interest is thereby diminished or potentially diminished or put
at risk, the Collateral Agent may, but shall not be required to, effect such
compliance on behalf of such Assignor, and such Assignor shall reimburse the
Collateral Agent for the costs thereof on demand. All insurance expenses and
all expenses of protecting, storing, warehousing, appraising, insuring,
handling, maintaining and shipping the Collateral, any and all excise, property,
sales and use taxes imposed by any state, federal or local authority on any of
the Collateral, or in respect of periodic appraisals and inspections of the
Collateral to the extent the same may be requested by the Collateral Agent from
time to time, or in respect of the sale or other disposition thereof shall be
borne and paid by the Assignors. If any Assignor fails to promptly pay any
portion thereof when due, the Collateral Agent may, at its option, but shall not
be required to, pay the same and charge such Assignor's account therefor, and
such Assignor agrees to reimburse the Collateral Agent therefor on demand. All
sums so paid or incurred by the Collateral Agent for any of the foregoing and
any and all other sums for which the Assignors may become liable hereunder and
all costs and expenses (including attorneys' fees, legal expenses and court
costs) reasonably incurred by the Collateral Agent in enforcing or protecting
the Security Interests or any of its rights or remedies under this Agreement,
shall, together with interest thereon for each day from the date when paid or
incurred by the Collateral Agent until paid by the Assignors at the rate per
annum equal to the sum of 2% plus the LIBOR Market Index Rate for such day, be
additional Obligations.
(c) Indemnification. The Assignors agree, jointly and severally, to
---------------
indemnify each Indemnitee and hold each Indemnitee harmless from and against any
and all liabilities, obligations, losses, damages, penalties, claims, demands,
actions, suits, judgments, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel, which may be
incurred by, imposed on or asserted against such Indemnitee in connection with
any investigation or administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating
to or arising out of
-17-
<PAGE>
this Agreement or in any other way connected with the enforcement of any of the
terms of, or the preservation of any rights hereunder, or in any way relating to
or arising out of the manufacture, ownership, ordering, purchasing, delivery,
control, acceptance, lease, financing, possession, operation, condition, sale,
return or other disposition or use of the Collateral (including, without
limitation, latent or other defects, whether or not discoverable), the violation
of the laws of any country, state or other governmental body or unit, any tort
(including, without limitation, any claims, arising or imposed under the
doctrine of strict liability, or for or on account of injury to or the death of
any Person (including any Indemnitee), or property damage), or contract claim;
provided that no Indemnitee shall have the right to be indemnified hereunder
- --------
for such Indemnitee's own gross negligence or willful misconduct as determined
by a court of competent jurisdiction. The Assignors agree that upon written
notice by any Indemnitee of the assertion of such a liability, obligation, loss,
damage, penalty, claim, demand, action, judgment or suit, the Assignors shall
assume full responsibility for the defense thereof. Each Indemnitee agrees to
use its best efforts to notify the Assignors of any such assertion of which such
Indemnitee has knowledge.
(d) Obligations; Survival. Any amounts paid by any Indemnitee as to which
---------------------
such Indemnitee has the right to reimbursement shall constitute Obligations.
The indemnity obligations of the Assignors contained in this Section 6.03 shall
continue in full force and effect notwithstanding the full payment of all Note
and all of the other Obligations and notwithstanding the discharge thereof.
SECTION 6.04 AMENDMENTS AND WAIVERS. Any provision of this
----------------------
Agreement may be amended, changed, discharged, terminated or waived if, but only
if, such amendment or waiver is in writing and is signed by the Assignors and
the Collateral Agent.
SECTION 6.05 SUCCESSORS AND ASSIGNS. This Agreement shall be
----------------------
binding upon each of the parties hereto and inure to the benefit of the
Collateral Agent and its successors and assigns. The Assignors shall not assign
or delegate any of their rights and duties hereunder without the prior written
consent of the Collateral Agent.
SECTION 6.06 LIMITATION OF LAW; SEVERABILITY
-------------------------------
(a) All rights, remedies and powers provided in this Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Agreement are
intended to be subject to all applicable mandatory provisions of law which may
be controlling and be limited to the extent necessary so that they will not
render this Agreement invalid, unenforceable in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of any
applicable law.
(b) If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect
-18-
<PAGE>
in such jurisdiction and shall be liberally construed in favor of the Collateral
Agent in order to carry out the intentions of the parties hereto as nearly as
may be possible; and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provisions in any other jurisdiction.
SECTION 6.07 GOVERNING LAW. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of Maryland except as
otherwise required by mandatory provisions of law and except to the extent that
remedies provided by the laws of any jurisdiction other than the State of
Maryland are governed by the laws of such jurisdictions.
SECTION 6.08 COUNTERPARTS; EFFECTIVENESS. This Agreement may be
---------------------------
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when the Collateral Agent
shall receive counterparts hereof executed by itself and the Assignors.
SECTION 6.09 TERMINATION. Upon full, final and irrevocable payment
------------
and performance of all Obligations and the termination of all Commitments under
the Credit Agreement, the Security Interests shall terminate and all rights to
the Collateral shall revert to the Assignors. In addition, at any time and from
time to time prior to such termination of the Security Interests, the Collateral
Agent may release any of the Collateral of any Assignor. Upon any such
termination of the Security Interests or release of Collateral, the Collateral
Agent will, upon request by and at the expense of such Assignor, execute and
deliver to such Assignor such documents as such Assignor shall reasonably
request to evidence the termination of the Security Interests or the release of
such Collateral, as the case may be. Any such documents shall be without
recourse to or warranty by the Collateral Agent. Upon the termination of all
Commitments under the Credit Agreement, and so long as all Obligations other
than the Letter of Credit Liabilities shall have been fully, finally and
irrevocably paid and performed, the Collateral Agent will release its liens on
all Collateral except for the Collateral Accounts if, but only if, there shall
be, and the Assignors agree that there shall remain, funds in the Cash
Collateral Account and the LC Cash Collateral Account equal to 100% of the
Letter of Credit Liabilities.
SECTION 6.10 ENTIRE AGREEMENT. This Agreement and the other Loan
----------------
Documents constitute the entire agreement and understanding among the parties
hereto and supersedes any and all prior agreements and understandings, oral or
written, and any contemporaneous oral agreements and understandings relating to
the subject matter hereof and thereof.
[SIGNATURES APPEAR ON NEXT PAGE]
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
GTS DURATEK, INC., a Delaware corporation
By: /s/ Craig T. Bartlett
---------------------------------------
Name: Craig T. Bartlett
Title: Treasurer
GENERAL TECHNICAL SERVICES,
INC., a Maryland corporation
By: /s/ Craig T. Bartlett
---------------------------------------
Name: Craig T. Bartlett
Title: Treasurer
GTS INSTRUMENT SERVICES,
INCORPORATED, a Maryland corporation
By: /s/ Craig T. Bartlett
---------------------------------------
Name: Craig T. Bartlett
Title: Treasurer
ANALYTICAL RESOURCES, INC.,
a Pennsylvania corporation
By: /s/ Craig T. Bartlett
---------------------------------------
Name: Craig T. Bartlett
Title: Treasurer
FIRST UNION NATIONAL BANK
OF MARYLAND, a national banking
association, as Collateral Agent
By: /s/ Robert J. Bauer
---------------------------------------
Name: Robert J. Bauer
Title: Vice President
-20-
<PAGE>
GTS DURATEK, INC., GENERAL TECHNICAL SERVICES, INC.,
GTS INSTRUMENT SERVICES, INCORPORATED, and
ANALYTICAL RESOURCES, INC.
SECURITY AGREEMENT DEFINITIONS APPENDIX
---------------------------------------
The definitions set forth in this Security Agreement Definitions
Appendix are incorporated by reference into Section 1.01 of the Security
Agreement dated as of April 18, 1997 between GTS Duratek, Inc., a Delaware
corporation ("Duratek"), General Technical Services, Inc., a Maryland
corporation ("Technical"), GTS Instrument Services, Incorporated, a Maryland
corporation ("Instrument"), and Analytical Resources, Inc., a Pennsylvania
corporation ("Analytical", and together with Duratek, Technical, and Instrument,
the "Assignors") and First Union National Bank of Maryland. Reference in this
Security Agreement Definitions Appendix to "this Agreement", "herein", "hereof",
"hereunder" and to any Article or Section shall be interpreted to mean this
Security Agreement and the referenced Article or Section, including this
Security Agreement Definitions Appendix.
DEFINITIONS
-----------
"Accounts" means, with respect to each Assignor, all "accounts" (as
defined in the UCC) now owned or hereafter acquired by such Assignor, and shall
also mean and include all accounts receivable, contract rights, book debts,
notes, drafts and other obligations or indebtedness owing to such Assignor
arising from the sale, lease or exchange of goods or other property by it and/or
the performance of services by it (including, without limitation, any such
obligation which might be characterized as an account, contract right or general
intangible under the Uniform Commercial Code in effect in any jurisdiction) and
all of such Assignor's rights in, to and under all purchase orders for goods,
services or other property, and all of such Assignor's rights to any goods,
services or other property represented by any of the foregoing (including
returned or repossessed goods and unpaid seller's rights of rescission,
replevin, reclamation and rights to stoppage in transit) and all monies due to
or to become due to such Assignor under all contracts for the sale, lease or
exchange of goods or other property and/or the performance of services by it
(whether or not yet earned by performance on the part of such Assignor), in each
case whether now in existence or hereafter arising or acquired including,
without limitation, the right to receive the proceeds of said purchase orders
and contracts and all collateral security and guarantees of any kind given by
any Person with respect to any of the foregoing.
"Account Debtor" means, with respect to any Account, Document,
Instrument or General Intangible, any Person obligated to make payment
thereunder, including, without limitation, any account debtor thereon.
"Administrative Agent" means the Bank in its capacity as
administrative agent for the Bank under the Credit Agreement and its successors
and assigns in such capacity.
<PAGE>
"Agents" means the Administrative Agent and the Collateral Agent, and
"Agent" means either of them.
"Agreement" or "Security Agreement" means this Security Agreement, as
it may be amended, modified or supplemented from time to time.
"Assigned Agreements" means, with respect to each Assignor, those
contracts and agreements of such Assignor identified in or pursuant to Section 7
of the Perfection Certificate, as the same may be amended, modified or
supplemented from time to time.
"Bank" means First Union National Bank of Maryland, a national banking
association, and its successors and assigns.
"Banks" means the Bank and the North Carolina Bank, and their
respective successors and assigns.
"Borrowers" means GTS Duratek, Inc., a Delaware corporation, General
Technical Services, Inc., a Maryland corporation, GTS Instrument Services,
Incorporated, a Maryland corporation, Analytical Resources, Inc., a Pennsylvania
corporation, The Scientific Ecology Group, Inc., a Tennessee corporation, SEG
Colorado, Inc., a Delaware corporation, and Hittman Transport Services, Inc., a
Delaware corporation, and their successors.
"Cash Collateral Account" has the meaning set forth in Section 3.04 of
this Security Agreement.
"Cash Equivalents" means (i) direct obligations of the United States
or any agency thereof, or obligations guaranteed by the United States or any
agency thereof, (ii) commercial paper rated in the highest grade by a nationally
recognized credit rating agency or (iii) time deposits with, including
certificates of deposit issued by, any office located in the United States of
any bank or trust company which is organized under the laws of the United States
or any state thereof and has capital, surplus and undivided profits aggregating
at least $250,000,000; provided, in each case that such investment matures
--------
within one year from the date of acquisition thereof by the Assignor.
"Cash Proceeds Account" has the meaning set forth in Section 3.03 of
this Security Agreement.
"Collateral" means, with respect to each Assignor, all right, title
and interest of such Assignor in the following, whether now owned or existing or
hereafter acquired, created or arising, whether tangible or intangible, and
regardless of where located:
(a) Accounts;
(b) Inventory;
-2-
<PAGE>
(c) General Intangibles;
(d) Documents;
(e) Instruments;
(f) Equipment (other than items of Equipment now or hereafter subject
to a Capital Lease or a purchase money security interest if such lease or
security agreement provides that it would be a breach of the Assignor's
obligations thereunder to further encumber such item of Equipment);
(g) Assigned Agreements;
(h) the Collateral Accounts, all cash deposited therein from time to
time, the Liquid Investments made pursuant to Section 3.03 of this Security
Agreement and other monies and property (including deposit accounts) of any
kind of such Assignor maintained with or in the possession or under the
control of the Collateral Agent;
(i) all books and records (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer
materials and records) of such Assignor pertaining to any of the
Collateral; and
(j) all Proceeds of all or any of the Collateral described in clauses
(a) through (i) above.
"Collateral Accounts" means the Cash Collateral Account, the Cash
Proceeds Account, the LC Cash Collateral Account and the Operating Account.
"Collateral Agent" means the Bank, in its capacity as collateral agent
for the Banks, and its successors and assigns in such capacity.
"Credit Agreement" means the Credit Agreement among the Borrowers, the
Banks and the Agents, as it may be amended, modified or supplemented from time
to time.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
-3-
<PAGE>
"Documents" means, with respect to each Assignor, all Adocuments" (as
defined in the UCC) or other receipts covering, evidencing or representing
goods, now owned or hereafter acquired by such Assignor.
"Equipment" means, with respect to each Assignor, all "equipment" (as
defined in the UCC) now owned or hereafter acquired by such Assignor, including
all items of machinery, equipment, furnishings and fixtures of every kind,
including leasehold improvements, whether affixed to real property or not, as
well as all motor vehicles, automobiles, trucks, trailers, railcars, barges and
vehicles of every description, trailers, handling and delivery equipment, all
additions to, substitutions for, replacements of or accessions to any of the
foregoing, all attachments, components, parts (including spare parts) and
accessories whether installed thereon or affixed thereto and all fuel for any
thereof.
"General Intangibles" means, with respect to each Assignor, all
"general intangibles" (as defined in the UCC) now owned or hereafter acquired by
such Assignor, including, without limitation, (i) all obligations and
indebtedness owing to such Assignor (other than Accounts), from whatever source
arising, (ii) all Patents, Trademarks, copyrights, Licenses, rights in
intellectual property, goodwill, trade names, service marks, trade secrets,
confidential or proprietary technical and business information, know-how, show-
how, software, customer lists, subscription lists, data bases and related
documentation, registration, franchises and all other intellectual or other
similar property rights, (iii) all rights or claims in respect of refunds for
taxes paid, (iv) all rights in respect of any pension plans or similar
arrangements maintained for employees of such Assignor or any member of the
ERISA Group and (v) all "uncertificated securities" (as defined in the UCC).
"Instruments" means, with respect to each Assignor, all "instruments"
(as defined in Article 9 of the UCC), "chattel paper" and "certificated
securities" (each as defined in the UCC) or "letters of credit" (as defined in
Article 9 of the UCC) evidencing, representing, arising from or existing in
respect of, relating to, securing or otherwise supporting the payment of, any of
the Accounts or General Intangibles, including (but not limited to) promissory
notes, drafts, bills of exchange and trade acceptances, now owned or hereafter
acquired by such Assignor.
"Inventory" means, with respect to each Assignor, all "inventory" (as
defined in the UCC) now owned or hereafter acquired by such Assignor, wherever
located, and shall also mean and include, without limitation, all raw materials
and other materials and supplies, work-in-process and finished goods and any
products made or processed therefrom and all substances, if any, commingled
therewith or added thereto.
"LC Cash Collateral Account" has the meaning set forth in Section 3.05
of this Security Agreement.
"License" means, with respect to each Assignor, (i) with respect to
any Patent, any agreement now or hereafter in existence granting to such
Assignor, or pursuant to which such Assignor has granted to any other Person,
any right with respect to any Patent or any invention
-4-
<PAGE>
now or hereafter in existence, whether patentable or not, whether a Patent or
application for Patent is in existence on such invention or not, and whether a
Patent or application for Patent on such invention may come into existence, and
(ii) with respect to any Trademark, any agreement now or hereafter in existence
granting to such Assignor, or pursuant to which such Assignor has granted to any
other Person, any right to use any Trademark (in each case exclusive of license
agreements which by their terms prohibit assignment or a grant of a security
interest by such Assignor as licensee thereunder); provided that rights to
--------
payments under any such license shall be included in the Collateral to the
extent permitted thereby or by Section 9-318 of the UCC.
"Liquid Investments" has the meaning set forth in Section 3.06 of this
Security Agreement.
"Money Manager Account" means the existing money manager account of
Duratek located at the Bank, bearing the account number 1556592237, and any
successor or replacement account.
"North Carolina Bank" means First Union National Bank of North
Carolina, a national banking association, and its successors and assigns.
"Operating Account" means the demand deposit account maintained with
the Collateral Agent by Duratek on which Duratek draws checks to pay its
operating expenses.
"Patents" means all of the following:
(i) all letters patent and design letters patent of the United
States or any other country, all applications for letters patent and design
letters patent of the United States or any other country including, without
limitation, applications in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof
or any other country or political subdivision thereof;
(ii) all reissues, divisions, continuations, continuations-in-
part, renewals or extensions thereof;
(iii) all claims for, and rights to sue for, past or future
infringement of any of the foregoing; and
(iv) all income, royalties, damages and payments now or
hereafter due or payable with respect to any of the foregoing, including,
without limitation, damages and payments for past or future infringements
thereof.
"Perfection Certificate" means, with respect to each Assignor, a
certificate, substantially in the form of Exhibit A to this Security Agreement,
completed and supplemented with the schedules and attachments contemplated
thereby to the satisfaction of the Collateral Agent, and duly executed by a vice
president or treasurer of such Assignor.
-5-
<PAGE>
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Proceeds" means, with respect to each Assignor, all proceeds of, and
all other profits, products, rents or receipts, in whatever form, arising from
the collection, sale, lease, exchange, assignment, licensing or other
disposition of or other realization upon or payment for the use of, Collateral,
including (without limitation) all claims of such Assignor against third parties
for loss of, damage to or destruction of, or for proceeds payable under, or
unearned premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to any
Collateral, in each case whether now existing or hereafter arising.
"Security Interests" means the security interests in the Collateral
granted under this Security Agreement securing the Obligations.
"Trademark" means all of the following:
(i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service
marks, logos, brand names, trade dress, prints and labels on which any of
the foregoing have appeared or appear, package and other designs, and any
other source or business identifiers, and general intangibles of like
nature, and the rights in any of the foregoing which arise under applicable
law;
(ii) the goodwill of the business symbolized thereby or
associated with each of them;
(iii) all registrations and applications in connection
therewith, including, without limitation, registrations and applications in
the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State thereof or any other country or any
political subdivision thereof;
(iv) all reissues, extensions and renewals thereof;
(v) all claims for, and rights to sue for, past or future
infringements of any of the foregoing; and
(vi) all income, royalties, damages and payments now or
hereafter due or payable with respect to any of the foregoing, including,
without limitation, damages and payments for past or future infringements
thereof.
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of Maryland, provided that if by reason of mandatory
--------
provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interest in any Collateral is governed by
-6-
<PAGE>
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of Maryland, "UCC" means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or effect of perfection or non-perfection.
USAGE
-----
The following rules of construction and usage shall be applicable to
any instrument that is governed by this Appendix:
(a) All terms defined in this Appendix shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant thereto unless otherwise defined therein.
(b) The words "hereof", "herein", "hereunder" and words of similar import
when used in an instrument refer to such instrument as a whole and not to any
particular provision or subdivision thereof; references in any instrument to
"Article", "Section" or another subdivision or to an attachment are, unless the
context otherwise requires, to an article, section or subdivision of or an
attachment to such instrument; and the term "including" means "including without
limitation".
(c) The definitions contained in this Appendix are equally applicable to
both the singular and plural forms of such terms, unless the context otherwise
requires, and to the masculine as well as to the feminine and neuter genders of
such terms.
(d) Any agreement, instrument or statute defined or referred to below or
in any agreement or instrument that is governed by this Appendix means such
agreement or instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and includes (in the case of agreements or instruments) references to
all attachments thereto and instruments incorporated therein. References to a
Person are also to its permitted successors and assigns.
-7-
<PAGE>
SECURITY AGREEMENT
DATED AS OF APRIL 18, 1997
AMONG
THE SCIENTIFIC ECOLOGY GROUP, INC.,
SEG COLORADO, INC.
AND
HITTMAN TRANSPORT SERVICES, INC.
AND
FIRST UNION NATIONAL BANK OF MARYLAND,
AS COLLATERAL AGENT
<PAGE>
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.01 Definitions ........................................................ 1
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 Title to Collateral ................................................ 2
Section 2.02 Validity, Perfection and Priority of Security Interests ............ 2
ARTICLE III
SECURITY INTEREST
Section 3.01 Grant of Security Interests....................................... 2
Section 3.02 Continuing Liability of the Borrower; Right to Use Collateral..... 2
Section 3.03 Cash Proceeds Account............................................. 3
Section 3.04 Cash Collateral Account........................................... 4
Section 3.05 Investment of Funds in Collateral Accounts........................ 4
ARTICLE IV
COVENANTS
Section 4.01 Delivery of Perfection Certificate; Filing of Financing Statements
and Delivery of Search Reports.................................... 5
Section 4.02 Change of Name, Identity or Structure; Locations of Places of
Business, Chief Executive Office and Collateral................... 5
Section 4.03 Further Assurances................................................ 6
Section 4.04 Collateral in Possession of Other Persons......................... 6
Section 4.05 Books and Records................................................. 6
Section 4.06 Delivery of Instruments........................................... 7
Section 4.07 Modification of Assigned Agreements, Etc.......................... 7
Section 4.08 Disposition of Collateral......................................... 7
Section 4.09 Information Regarding Collateral.................................. 8
Section 4.10 Covenants Regarding Patent and Trademark Collateral............... 8
</TABLE>
______________________
* The Table of Contents is not a part of this Security Agreement.
-i-
<PAGE>
ARTICLE V
REMEDIES; RIGHTS UPON DEFAULT
<TABLE>
<S> <C>
Section 5.01 General Authority.................................................. 9
Section 5.02 Remedies upon Event of Default..................................... 10
Section 5.03 Limitation on Duty of the Collateral Agent in Respect of Collateral 13
Section 5.04 Application of Proceeds............................................ 13
Section 5.05 Assigned Agreements................................................ 14
ARTICLE VI
MISCELLANEOUS
Section 6.01 Notices........................................................... 15
Section 6.02 No Waivers; Non-Exclusive Remedies................................ 15
Section 6.03 Compensation and Expenses of the Collateral Agent; Indemnification 15
Section 6.04 Amendments and Waivers............................................ 17
Section 6.05 Successors and Assigns............................................ 17
Section 6.06 Limitation of Law; Severability................................... 17
Section 6.07 Governing Law..................................................... 18
Section 6.08 Counterparts; Effectiveness....................................... 18
Section 6.09 Termination....................................................... 18
Section 6.10 Entire Agreement.................................................. 18
</TABLE>
Security Agreement Definitions Appendix
Schedule 4.01 - Schedule of Filings to Perfect Security Interests
Exhibit A - Perfection Certificate
Schedule 1 - Changes of Name, Identity or Corporate Structure; Unusual
Transaction
Schedule 6 - Lists of Patents, Trademarks and Copyrights
Schedule 7 - Assigned Agreements
Exhibit B - Form of Description of Collateral
-ii-
<PAGE>
SECURITY AGREEMENT
This Security Agreement (as amended, supplemented or modified from
time to time, this "Agreement") is dated as of April 18, 1997 and is among THE
SCIENTIFIC ECOLOGY GROUP, INC., a Tennessee corporation ("Group"), SEG COLORADO,
INC., a Delaware corporation ("Colorado") and HITTMAN TRANSPORT SERVICES, INC.,
a Delaware corporation ("Hittman", and together with Group and Colorado, the
"Assignors"), and FIRST UNION NATIONAL BANK OF MARYLAND, a national banking
association, as Collateral Agent (the "Collateral Agent") for First Union
National Bank of Maryland and First Union National Bank of North Carolina.
The Borrower, the Banks and the Agents are parties to a Credit
Agreement dated as of April 18, 1997 (as the same may be amended, supplemented
or modified from time to time and including any agreement extending the maturity
of, refinancing or otherwise restructuring all or any portion of the obligations
of the Borrowers under such agreement or any successor agreement, the "Credit
Agreement"). To induce the Banks and the Agents to enter into the Credit
Agreement, and as a condition precedent to the Banks' and Agents' obligations
thereunder, the Assignors have agreed to grant a continuing security interest in
and to the Collateral to secure the Obligations. Accordingly, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. All capitalized terms used in this Agreement
-----------
or in any Appendix, Schedule or Exhibit hereto which are not otherwise defined
herein or therein shall have the meanings set forth in the Security Agreement
Definitions Appendix attached hereto, and which is incorporated herein by
reference in its entirety and is part of this Agreement to the same extent as if
it had been set forth in this Section 1.01 in full. Terms defined in the Credit
Agreement and not otherwise defined herein or in the Security Agreement
Definitions Appendix have, as used herein, the respective meanings provided for
therein.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Assignors represent and warrant that:
-1-
<PAGE>
Section 2.00 Title to Collateral. Each Assignor has good and
-------------------
marketable title to all of the Collateral, free and clear of any Liens other
than Permitted Liens. Each Assignor has taken all actions necessary under the
UCC to perfect its interest in any Accounts and "chattel paper" (as defined in
the UCC) purchased or otherwise acquired by it, as against its assignors and
creditors of its assignors. Each Assignor has not performed any acts which
might prevent the Collateral Agent from enforcing any of the terms of this
Agreement or which would limit the Collateral Agent in any such enforcement.
Other than financing statements or other similar or equivalent documents or
instruments with respect to the Security Interests and Permitted Liens, no
financing statement, mortgage, security agreement or similar or equivalent
document or instrument covering all or any part of the Collateral is on file or
of record in any jurisdiction in which such filing or recording would be
effective to perfect a Lien on such Collateral. No Collateral is in the
possession of any Person (other than the Assignor) asserting any claim thereto
or security interest therein, except that the Collateral Agent or its designee
may have possession of Collateral as contemplated hereby and by the Credit
Agreement.
Section 2.01 Validity, Perfection and Priority of Security
---------------------------------------------
Interests. The Security Interests constitute valid security interests under the
- ---------
UCC securing the Obligations. When UCC financing statements containing a
description of the Collateral in the form specified in Exhibit B hereto shall
have been filed in the offices specified in Schedule 4.01 hereto, the Security
Interests shall constitute perfected security interests in all right, title and
interest of the Assignors in the Collateral to the extent that a security
interest therein may be perfected by filing pursuant to the UCC, prior to all
other Liens and rights of others therein except for Permitted Liens.
ARTICLE III
SECURITY INTEREST
Section 3.01 Grant of Security Interests. In order to secure the
---------------------------
full and punctual payment of the Obligations in accordance with the terms
thereof, and to secure the performance of all of the obligations of the
Assignors hereunder and the Borrowers under the Credit Agreement and the other
Loan Documents, each Assignor hereby grants to the Collateral Agent a continuing
security interest in and to all of the Collateral, whether now owned or existing
or hereafter acquired, created or arising, whether tangible or intangible, and
regardless of where located.
Section 3.02 Continuing Liability of the Borrower; Right to Use
--------------------------------------------------
Collateral. The Security Interests are granted as security only and shall not
- ----------
subject the Collateral Agent or the Collateral Agents to, or transfer or in any
way affect or modify, any obligation or liability of any Assignor with respect
to any of the Collateral or any transaction in connection therewith. So long as
no Event of Default shall have occurred and be continuing, each Assignor shall
have the right to use its Collateral except to the extent otherwise provided
herein with respect to the Collateral Accounts.
-2-
<PAGE>
Section 3.03 Cash Proceeds Account.
---------------------
(A) Creation of Cash Proceeds Account. There is hereby established
---------------------------------
with the Collateral Agent a cash collateral account (the "Cash Proceeds
Account") in the name of "THE SCIENTIFIC ECOLOGY GROUP, INC. - FIRST UNION
NATIONAL BANK OF MARYLAND" and under the exclusive control of the Collateral
Agent into which there shall be deposited from time to time the cash proceeds of
the Collateral required to be delivered to the Collateral Agent pursuant to
paragraph (b) of this Section or any other provision of the Loan Documents. Any
income received by the Collateral Agent with respect to the balance from time to
time standing to the credit of the Cash Proceeds Account, including any
interest, shall remain, or be deposited, in the Cash Proceeds Account. All
right, title and interest in and to the cash amounts on deposit from time to
time in the Cash Proceeds Account shall vest in the Collateral Agent, shall
constitute part of the Collateral and shall not constitute payment of the
Obligations until applied thereto as hereinafter provided.
(B) Deposits to Cash Proceeds Account. The Assignors shall instruct
---------------------------------
all Account Debtors and other Persons obligated in respect of Accounts and other
Collateral to make all payments in respect of the Accounts or other Collateral
directly to a post office box which shall be in the name and under the control
of the Collateral Agent. All such payments made to the Collateral Agent shall
be deposited in the Cash Proceeds Account. In addition to the foregoing, each
Assignor agrees that if the proceeds of any Collateral (including the payments
made in respect of Accounts) shall be received by it, such Assignor shall as
promptly as possible deposit such proceeds to the Cash Proceeds Account. Until
so deposited, all such proceeds shall be held in trust by such Assignor for and
as the property of the Collateral Agent and shall not be commingled with any
other funds or property of such Assignor. The Assignors hereby irrevocably
authorize and empower the Collateral Agent, its officers, employees and
authorized agents to endorse and sign their names on all checks, drafts, money
orders or other media of payment so delivered, and such endorsements or
assignments shall, for all purposes, be deemed to have been made by the
Assignors prior to any endorsement or assignment thereof by the Collateral
Agent. The Collateral Agent may use any convenient or customary means for the
purpose of collecting such checks, drafts, money orders or other media of
payment.
(C) Withdrawals from Cash Proceeds Account. Collected funds on
--------------------------------------
deposit in the Cash Proceeds Account shall be withdrawn by the Collateral Agent
on the Business Day following the day on which the Collateral Agent considers
the funds deposited therein to be collected funds and applied to repay the
Obligations which are then due and payable. Until an Event of Default shall
occur, all collected funds remaining on deposit in the Cash Proceeds Account
after the application required by the preceding sentence shall then be deposited
in the Operating Account.
-3-
<PAGE>
Section 3.04 Cash Collateral Account. All amounts required to be
-----------------------
deposited by the Assignors as cash collateral pursuant to Section 5.04(b) hereof
shall be deposited in a cash collateral account (the "Cash Collateral Account")
established and maintained by the Assignor at the offices of the Collateral
Agent or such other bank as the Assignor and the Collateral Agent may agree, in
the name and under the exclusive control of the Collateral Agent. Forthwith
upon such establishment, the Assignor shall notify the Collateral Agent of the
location, account name and account number of such account. Any income received
with respect to the balance from time to time standing to the credit of the Cash
Collateral Account, including any interest or capital gains on Liquid
Investments, shall remain, or be deposited, in the Cash Collateral Account. All
right, title and interest in and to the cash amounts on deposit from time to
time in the Cash Collateral Account together with any Liquid Investments from
time to time made pursuant to Section 3.06 shall vest in the Collateral Agent,
shall constitute part of the Collateral hereunder and shall not constitute
payment of the Obligations until applied thereto as hereinafter provided. If
and when any portion of the Performance Letter of Credit Liabilities on which
any deposit in the Cash Collateral Account was based (the "Relevant Contingent
Exposure") shall become fixed (a "Direct Exposure") as a result of the payment
by the issuer thereof of a draft presented under any Performance Letter of
Credit, the amount of such Direct Exposure (but not more than the amount in the
Cash Collateral Account at the time) shall be withdrawn by the Collateral Agent
from the Cash Collateral Account for application pursuant to the Credit
Agreement, and the Relevant Contingent Exposure shall thereupon be reduced by
such amount. If immediately available cash on deposit in the Cash Collateral
Account is not sufficient to make any distribution to the Collateral Agent
referred to in this Section 3.04, the Collateral Agent shall cause to be
liquidated as promptly as practicable such Liquid Investments in the Cash
Collateral Account designated by Group as required to obtain sufficient cash to
make such distribution and, notwithstanding any other provision of this Section
3.04, such distribution shall not be made until such liquidation has taken
place. So long as no Event of Default shall have occurred and be continuing,
the funds in the Cash Collateral Account in excess of the Relevant Contingent
Exposure shall be paid to Group on demand.
Section 3.05 Investment of Funds in Collateral Accounts. Amounts on
------------------------------------------
deposit in the Cash Collateral Account shall be invested and re-invested from
time to time in such Liquid Investments as Group shall determine, which Liquid
Investments shall be held in the name and be under the control of the Collateral
Agent, provided that, if an Event of Default has occurred and is continuing, the
--------
Collateral Agent may liquidate any such Liquid Investments and apply or cause to
be applied the proceeds thereof in the manner specified in Section 5.04. For
this purpose, "Liquid Investments" means Cash Equivalents; provided that (i)
--------
each Liquid Investment shall mature within 180 days after it is acquired by the
Collateral Agent and (ii) in order to provide the Collateral Agent with a
perfected security interest therein, each Liquid Investment shall be either:
-4-
<PAGE>
(I) evidenced by negotiable certificates or instruments, or if
non-negotiable then issued in the name of the Collateral Agent, which
(together with any appropriate instruments of transfer) are delivered to,
and held by, the Collateral Agent or an agent thereof (which shall not be
any Assignor or any of its Affiliates) in the State of Maryland; or
(II) in book-entry form and issued by the United States and
subject to pledge under applicable state law and Treasury regulations and
as to which (in the opinion of counsel to the Collateral Agent) appropriate
measures shall have been taken for perfection of the Security Interests.
ARTICLE IV
COVENANTS
The Assignors covenant and agree with the Collateral Agent that until
the payment in full of all Obligations and until there is no Commitment to make
further advances, incur obligations or otherwise give value, the Assignors will
comply with the following:
Section 4.01 Delivery of Perfection Certificate; Filing of Financing
-------------------------------------------------------
Statements and Delivery of Search Reports. On the Effective Date, each Assignor
- -----------------------------------------
shall deliver a Perfection Certificate to the Collateral Agent and shall cause
all filings, recordings, notices and other actions specified in Schedule 4.01
hereto to have been completed, except that the Assignors shall have (i) until
the expiration of 3 Business Days following the Effective Date to cause the
filing specified on Schedule 4.01 with the United States Patent and Trademark
Office to be completed, (ii) until the expiration of 120 Business Days following
the Effective Date to cause the Notices of Assignment with respect to the
Government Contracts specified on Schedule 4.01 to be duly sent to the intended
recipients thereof, and (iii) until the expiration of 5 Business Days following
the Effective Date to cause the UCC filings designated by an asterisk on
Schedule 4.01 to be completed. The information set forth in the Perfection
Certificate shall be correct and complete. Not later than 60 days following the
Closing Date, each Assignor shall furnish to the Collateral Agent file search
reports and confirmations of receipt of notices from each filing jurisdiction
and each notice recipient set forth in Schedule 4.01 confirming the filing
information set forth in such Schedule.
Section 4.02 Change of Name, Identity or Structure; Locations of
---------------------------------------------------
Places of Business, Chief Executive Office and Collateral. No Assignor will
- ---------------------------------------------------------
change its name, identity or corporate structure in any manner unless it shall
have given the Collateral Agent not less
-5-
<PAGE>
than 30 days' prior notice thereof. No Assignor will change the location of (i)
its place or places of business, its chief executive office or its chief place
of business or (ii) the locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location described in such
Assignor's Perfection Certificate unless it shall have given the Collateral
Agent not less than 30 days' prior notice thereof. In any event, no Assignor
will change the location of its place or places of business, its chief executive
office or any Collateral if such change would cause the Security Interests in
such Collateral to lapse or cease to be perfected.
Section 4.03 Further Assurances. Each Assignor will, from time to
------------------
time, at its expense, execute, deliver, file and record any statement,
assignment, instrument, document, agreement or other paper and take any other
action (including, without limitation, any filings of financing or continuation
statements under the UCC, any filings with the United States Patent and
Trademark Office, and any Notices of Assignment under the Assignment of Claims
Act) that from time to time may be necessary or desirable, or that the
Collateral Agent may request, in order to create, preserve, perfect, confirm or
validate the Security Interests or to enable the Collateral Agent to obtain the
full benefit of this Agreement, or to enable the Collateral Agent to exercise
and enforce any of its rights, powers and remedies created hereunder or under
applicable law with respect to any of the Collateral. To the extent permitted
by applicable law, each Assignor hereby authorizes the Collateral Agent to
execute and file financing statements or continuation statements without such
Assignor's signature appearing thereon. Each Assignor agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. The Assignors shall
pay the costs of, or incidental to, any recording or filing of any financing or
continuation statements concerning the Collateral.
Section 4.04 Collateral in Possession of Other Persons. If any
-----------------------------------------
Collateral is at any time in the possession or control of any warehouseman,
bailee or any Assignor's agents or processors, such Assignor shall notify such
warehouseman, bailee, agent or processor of the Security Interests created
hereby and to hold all such Collateral for the Collateral Agent's account
subject to the Collateral Agent's instructions. Such Assignor agrees that if
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its Inventory, such warehouse receipt or other receipt in
the nature thereof shall not be "negotiable" (as such term is defined in Section
7-104 of the Uniform Commercial Code in any relevant jurisdiction or under other
relevant law).
Section 4.05 Books and Records. The Assignors shall keep full and
-----------------
accurate books and records relating to the Collateral, including, without
limitation, the originals of all documentation with respect thereto, records of
all payments received, all credits granted thereon, all merchandise returned and
all other dealings therewith, and the Assignors will make the same available to
the Collateral Agent for inspection, at the Assignors' own cost and expense, at
any and all reasonable times upon demand. Upon direction by the Collateral
Agent, the Assignors shall stamp or otherwise mark such books and records in
such manner as the Collateral Agent may reasonably require in order to reflect
the Security Interests.
-6-
<PAGE>
Section 4.06 Delivery of Instruments. The Assignors will
-----------------------
immediately deliver each Instrument, certificated security and uncertificated
security to the Collateral Agent indorsed (as applicable) to the Collateral
Agent; provided that so long as no Event of Default shall have occurred and be
--------
continuing and except as provided by any other Loan Document, the Assignors may
retain for collection in the ordinary course of business any Instruments (other
than certificated securities, checks, drafts and other Instruments constituting
payments in respect of Accounts and other Collateral, as to which the provisions
of Section 2.08(c) of the Credit Agreement and Section 3.03 hereof shall apply)
received by them in the ordinary course of business and the Collateral Agent
shall, promptly upon request of any Assignor, make appropriate arrangements for
making any other Instrument pledged by such Assignor available to it for
purposes of presentation, collection or renewal (any such arrangement to be
effected, to the extent deemed appropriate to the Collateral Agent, against
trust receipt or like document).
Section 4.07 Modification of Assigned Agreements, Etc. Each
----------------------------------------
Assignor shall keep the Collateral Agent informed of all material circumstances
bearing upon the right, title and interest of such Assignor under the Assigned
Agreements. No Assignor will, except with the consent of the Collateral Agent
amend, modify, extend, renew, cancel or terminate any Assigned Agreement, waive
any default under or breach of any Assigned Agreement, compromise or settle any
material dispute, claim, suit or legal proceeding relating to any Assigned
Agreement, sell or assign any Assigned Agreement or interest therein, consent to
or permit or accept any prepayment of amounts to become due under or in
connection with any Assigned Agreement, except as expressly provided therein, or
take any other action in connection with any Assigned Agreement which would
impair the value of the interests or rights of such Assignor thereunder or which
would impair the interests or rights of the Collateral Agent under this
Agreement, except that, unless the Collateral Agent shall have notified such
Assignor upon the occurrence of a Default or Event of Default that this
exception is no longer applicable, such Assignor may modify, make adjustments
with respect to, extend or renew any Assigned Agreements in the ordinary course
of business. The Assignor will duly fulfill all of its obligations under or in
connection with the Assigned Agreements.
Section 4.08 Disposition of Collateral. Without the prior written
-------------------------
consent of the Collateral Agent, the Assignors will not sell, lease, exchange,
assign or otherwise dispose of, or grant any option with respect to, any
Collateral, except that, subject to the rights of the Collateral Agent hereunder
if an Event of Default shall have occurred and be continuing, the Assignors may
grant Licenses in their respective Patents and Trademarks in the ordinary course
of their businesses.
-7-
<PAGE>
Section 4.09 Information Regarding Collateral. The Assignors will,
--------------------------------
promptly upon request, provide to the Collateral Agent all information and
evidence it may reasonably request concerning the Collateral to enable the
Collateral Agent to enforce the provisions of this Agreement.
Section 4.10 Covenants Regarding Patent and Trademark Collateral.
---------------------------------------------------
(A) Each Assignor (either itself or through licensees) will, for each
Patent, not do any act, or omit to do any act, whereby any Patent which is
material to the conduct of such Assignor's business may become invalidated or
dedicated to the public, and shall continue to mark any products covered by a
Patent with the relevant patent number or indication that a Patent is pending as
required by the Patent laws.
(B) Each Assignor (either itself or, if permitted by law, through its
licensees or its sublicensees) will, for each Trademark material to the conduct
of such Assignor's business, (i) maintain such Trademark in full force free from
any claim of abandonment or invalidity for non-use, (ii) maintain the quality of
products and services offered under such Trademark, (iii) display such Trademark
with notice of federal registration to the extent required by applicable law,
(iv) not knowingly use or knowingly permit the use of such Trademark in
violation of any third party rights and (v) not permit any assignment in gross
of such Trademark.
(C) Each Assignor (either itself or through licensees) will, for each
work covered by a material copyright, continue to publish, reproduce, display,
adopt and distribute the work with appropriate copyright notice.
(D) Each Assignor shall notify the Collateral Agent immediately if it
knows or has reason to know that any Patent, Trademark or copyright (or any
application or registration relating thereto) material to the conduct of its
business may become abandoned or dedicated to the public, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office, United States Copyright Office or any court)
regarding such Assignor's ownership of any Patent, Trademark or copyright, its
right to register the same or to keep and maintain the same.
(E) Each Assignor will take all necessary steps to file, maintain and
pursue each material application relating to the Patents, Trademarks and/or
copyrights (and to obtain the relevant grant or registration) and to maintain
each registration of the Patents, Trademarks and copyrights which is material to
the conduct of such Assignor's business, including filing of applications for
renewal, affidavits of use, affidavits of incontestability and maintenance fees,
and, if consistent with good business judgment, to initiate opposition,
interference and cancellation proceedings against third parties.
-8-
<PAGE>
(F) In the event that any rights to any Patent, Trademark, copyright
or License relating thereto material to the conduct of any Assignor's business
is believed infringed, misappropriated or diluted by a third party, such
Assignor shall notify the Collateral Agent promptly after it learns thereof and
shall, if consistent with good business judgment, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as such
Assignor shall reasonably deem appropriate under the circumstances to protect
such Patent, Trademark, copyright or License.
(G) In no event shall any Assignor, either itself or through any
agent, employee, licensee or designee, file an application for any Patent,
Trademark or copyright with the United States Patent and Trademark Office,
United States Copyright Office or any office or agency in any political
subdivision of the United States or in any other country or any political
subdivision thereof, unless not less than 10 days prior thereto it informs the
Collateral Agent, and, upon request of the Collateral Agent, executes and
delivers any and all agreements, instruments, documents and papers as the
Collateral Agent may request to evidence the Security Interests in such Patent,
Trademark or copyright and the goodwill or accounts and general intangibles of
such Assignor relating thereto or represented thereby, and such Assignor hereby
appoints the Collateral Agent its attorney-in-fact to execute and file such
writings for the foregoing purposes.
ARTICLE V
REMEDIES; RIGHTS UPON DEFAULT
Section 5.01 General Authority. The Assignors hereby irrevocably
-----------------
appoint the Collateral Agent their true and lawful attorney, with full power of
substitution, in the name of any or all of the Assignors, the Collateral Agent
or otherwise, for the sole use and benefit of the Collateral Agent, but at the
Assignors' expense, to the extent permitted by law to exercise at any time and
from time to time while an Event of Default has occurred and is continuing, all
or any of the following powers with respect to all or any of the Collateral, all
acts of such attorney being hereby ratified and confirmed; such power, being
coupled with an interest, is irrevocable until the Obligations are paid in full
and until there is no Commitment by the Collateral Agent to make further
advances, incur obligations or otherwise give value:
(I) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due thereon or by virtue thereof,
(II) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
-9-
<PAGE>
(III) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, including without limitation for
the implementation of any assignment, lease, License, sublicense, grant of
option, sale or other disposition of any Patent, Trademark or copyright or
any action related thereto, as fully and effectually as if the Collateral
Agent were the absolute owner thereof, and
(IV) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Collateral Agent shall give such Assignor not less than ten
- --------
days' prior notice of the time and place of any sale or other intended
disposition of any of such Assignor's Collateral, except any Collateral which is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market. The Collateral Agent and such Assignor agree that
such notice constitutes "reasonable notification" within the meaning of Section
9-504(3) of the UCC. Except as otherwise provided herein, each Assignor hereby
waives, to the extent permitted by applicable law, notice and judicial hearing
in connection with the Collateral Agent's taking possession or the Collateral
Agent's dispositions of any of the Collateral, including, without limitation,
any and all prior notice and hearing for any prejudgment remedy or remedies and
any such right which such Assignor would otherwise have under the Constitution
or any statute of the United States or of any state.
Section 5.02 Remedies upon Event of Default.
------------------------------
(A) If any Event of Default has occurred and is continuing, the
Collateral Agent may exercise all rights of a secured party under the UCC
(whether or not in effect in the jurisdiction where such rights are exercised)
and, in addition, the Collateral Agent may, without being required to give any
notice, except as herein provided or as may be required by mandatory provisions
of law, (i) withdraw all cash and Liquid Investments in the Collateral Accounts
and apply such cash and Liquid Investments and other cash, if any, then held by
it as Collateral as specified in Section 5.04 and (ii) if there shall be no such
cash or Liquid Investments or if such cash and Liquid Investments shall be
insufficient to pay all the Obligations in full or cannot be so applied for any
reason, sell the Collateral or any part thereof at public or private sale, for
cash, upon credit or for future delivery, and at such price or prices as the
Collateral Agent may deem satisfactory. The Collateral Agent and any of the
Banks may be the purchaser of any or all of the Collateral so sold at any public
sale (or, if the Collateral is of a type customarily sold in a recognized market
or is of a type which is the subject of widely distributed standard price
quotations, at any private sale). The Assignors will execute and deliver such
documents and take such other action as the Collateral Agent deems necessary or
advisable in order that any such sale may be made in compliance with law. Upon
any such sale, the Collateral Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser at any
such sale shall hold the
-10-
<PAGE>
Collateral so sold to it absolutely and free from any claim or right of
whatsoever kind, including any equity or right of redemption of the Assignors
which may be waived, and the Assignors, to the extent permitted by law, hereby
specifically waive all rights of redemption, stay or appraisal which they have
or may have under any law now existing or hereafter adopted. The notice (if any)
of such sale required by Section 5.01 shall (i) in the case of a public sale,
state the time and place fixed for such sale, and (ii) in the case of a private
sale, state the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Collateral Agent may fix in the notice of such sale.
At any such sale the Collateral may be sold in one lot as an entirety or in
separate parcels, as the Collateral Agent may determine. The Collateral Agent
shall not be obligated to make any such sale pursuant to any such notice. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned without further notice. In the
case of any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Collateral Agent until
the selling price is paid by the purchaser thereof, but the Collateral Agent
shall not incur any liability in the case of the failure of such purchaser to
take up and pay for the Collateral so sold and, in the case of any such failure,
such Collateral may again be sold upon like notice. The Collateral Agent,
instead of exercising the power of sale herein conferred upon it, may proceed by
a suit or suits at law or in equity to foreclose the Security Interests and sell
the Collateral, or any portion thereof, under a judgment or decree of a court or
courts of competent jurisdiction.
(B) For the purpose of enforcing any and all rights and remedies under
this Agreement the Collateral Agent may (i) require the Assignors to, and each
Assignor agrees that it will, at its expense and upon the request of the
Collateral Agent, forthwith assemble all or any part of the Collateral as
directed by the Collateral Agent and make it available at a place designated by
the Collateral Agent which is, in the Collateral Agent's opinion, reasonably
convenient to the Collateral Agent and such Assignor, whether at the premises of
such Assignor or otherwise, it being understood that such Assignor's obligation
so to deliver the Collateral is of the essence of this Agreement and that,
accordingly, upon application to a court of equity having jurisdiction, the
Collateral Agent shall be entitled to a decree requiring specific performance by
such Assignor of such obligations; (ii) to the extent permitted by applicable
law, enter, with or without process of law and without breach of the peace, any
premise where any of the Collateral is or may be located, and without charge or
liability to the Collateral Agent seize and remove such Collateral from such
premises; (iii) have access to and use the Assignors' books and records relating
to the Collateral; and (iv) prior to the disposition of the Collateral, store or
transfer it without charge in or by means of any storage or transportation
facility owned or leased by the Assignors, process, repair or recondition it or
otherwise prepare it for disposition in any manner and to the extent the
Collateral Agent deems appropriate and, in connection with such preparation and
disposition, use without charge any
-11-
<PAGE>
Patent, Trademark, copyright, License relating thereto or technical process used
by the Assignors. The Collateral Agent may also render any or all of the
Collateral unusable at any Assignor's premises and may dispose of such
Collateral on such premises without liability for rent or costs.
(C) Without limiting the generality of the foregoing, if any Event of
Default has occurred and is continuing (but subject to the terms of any
License):
(I) the Collateral Agent may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or non-exclusive
basis, any Patents, Trademarks or copyrights included in the Collateral
throughout the world for such term or terms, on such conditions and in such
manner as the Collateral Agent shall in its sole discretion determine;
(II) the Collateral Agent may (without assuming any obligations
or liability thereunder), at any time and from time to time, enforce (and
shall have the exclusive right to enforce) against any licensee or
sublicensee all rights and remedies of the Assignor in, to and under any
Patent License, Trademark License or license with respect to copyrights and
take or refrain from taking any action under any provision thereof, and the
Assignor hereby releases the Collateral Agent from, and agrees to hold the
Collateral Agent free and harmless from and against any claims arising out
of, any lawful action so taken or omitted to be taken with respect thereto;
and
(III) upon request by the Collateral Agent, each Assignor will
use its best efforts to obtain all requisite consents or approvals by the
licensor or sublicensor of each Patent License, license with respect to
copyrights or Trademark License to effect the assignment of all of the
Assignor's rights, title and interest thereunder to the Collateral Agent or
its designee and will execute and deliver to the Collateral Agent a power
of attorney, in form and substance satisfactory to the Collateral Agent,
for the implementation of any lease, assignment, license, sublicense, grant
of option, sale or other disposition of a Patent, Trademark or copyright;
and
(IV) the Collateral Agent may direct any Assignor to refrain, in
which event such Assignor shall refrain, from using or practicing any
Trademark, Patent or copyright in any manner whatsoever, directly or
indirectly and shall, if requested by the Collateral Agent change such
Assignor's name to eliminate therefrom any use of any Trademark and will
execute such other and further documents as the Collateral Agent may
request to further confirm this and transfer ownership of the Trademarks,
Patents, copyrights and registrations and any pending applications therefor
to the Collateral Agent.
-12-
<PAGE>
(D) In the event of any disposition of any Patent, Trademark or
copyright pursuant to this Article V, the Assignors shall supply their know-how
and expertise relating to the manufacture and sale of the products or services
bearing Trademarks or the products, services or works made or rendered in
connection with or under Patents, Trademarks or copyrights, and their customer
lists and other records relating to such Patents, Trademarks or copyrights and
to the distribution of said products, services or works, to the Collateral
Agent.
Section 5.03 Limitation on Duty of the Collateral Agent in Respect of
--------------------------------------------------------
Collateral. Beyond the exercise of reasonable care in the custody thereof, the
- ----------
Collateral Agent shall have no duty to exercise any rights or take any steps to
preserve the rights of any Assignor in the Collateral in its or such Assignor's
possession or control or in the possession or control of any agent or bailee or
any income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto, nor shall the Collateral Agent be liable to
the Assignor or any other Person for failure to meet any obligation imposed by
Section 9-207 of the UCC or any successor provision. The Collateral Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and shall not be
liable or responsible for any loss or damage to any of the Collateral, or for
any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by the Collateral Agent in good faith.
Section 5.04 Application of Proceeds.
-----------------------
(A) Priority of Distribution. If an Event of Default shall have
------------------------
occurred and be continuing, the proceeds of any sale of, or other realization
upon, all or any part of the Collateral and any cash held in the Collateral
Accounts shall be applied by the Collateral Agent in the following order of
priority:
(I) to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the Collateral
Agent, and all expenses, liabilities and advances incurred or made by the
Collateral Agent in connection therewith, and any other Obligations owing
to the Collateral Agent in respect of sums advanced by the Collateral Agent
to preserve the Collateral or to preserve its security interest in the
Collateral;
(II) an amount equal to (A) the unpaid principal of and accrued
but unpaid interest on all Revolving Loans, all Reimbursement Obligations
and all other Obligations which arise or are incurred in connection with
the Loan Documents; plus (B) the aggregate amount that is (or may
thereafter become) available for drawing under all Letters of Credit then
outstanding (or deemed to be outstanding) under the Credit Agreement; plus
(C) all unpaid fees owing to the Collateral Agent under the Credit
-13-
<PAGE>
Agreement; plus (D) to the extent not covered by paragraph (i) above, all
unreimbursed expenses for which the Collateral Agent is to be reimbursed
pursuant to Section 9.03 of the Credit Agreement, Section 7.03 hereof or
any other provision of any of the Loan Documents, shall be applied to
payment of the Obligations;
(III) an amount equal to the Derivatives Obligations shall be
applied to the payment thereof;
(IV) to the payment of all other Obligations, until all
Obligations shall have been paid in full; and
(V) to payment to the Assignors or their successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
(B) Distributions with Respect to Letters of Credit. The Collateral
-----------------------------------------------
Agent agrees and acknowledges that if (after all outstanding Revolving Loans and
Reimbursement Obligations with respect to Letters of Credit have been paid in
full) the Collateral Agent is to receive a distribution on account of undrawn
amounts with respect to Letters of Credit issued (or deemed issued) under the
Credit Agreement, such amounts shall be deposited in the Cash Collateral Account
as cash security for the repayment of Obligations. Upon termination of all
outstanding Letters of Credit, all of such cash security shall be applied to the
remaining Obligations. If there remains any excess cash security, such excess
cash shall be withdrawn by the Collateral Agent from the Cash Collateral Account
and distributed in accordance with Section 5.04(a) hereof.
(C) It is understood that the Assignors shall remain jointly and
severally liable to the extent of any deficiency between the amount of the
proceeds of the Collateral and the amount of the Obligations.
Section 5.05 Assigned Agreements. Each Assignor hereby irrevocably
-------------------
authorizes and empowers the Collateral Agent, in the Collateral Agent's sole
discretion, if an Event of Default has occurred and is continuing, to assert,
either directly or on behalf of such Assignor, any claims such Assignor may
have, from time to time, against any other party to any Assigned Agreement or to
otherwise exercise any right or remedy of such Assignor under any Assigned
Agreement (including without limitation, the right to enforce directly against
any party to an Assigned Agreement all of such Assignor's rights thereunder, to
make all demands and give all notices and make all requests required or
permitted to be made by such Assignor under any Assigned Agreements) as the
Collateral Agent may deem proper. Each Assignor hereby irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as such Assignor's true and lawful
attorney-in-fact for the purpose of enabling the Collateral Agent, to assert and
collect such claims and to exercise such rights and remedies.
-14-
<PAGE>
ARTICLE VI
MISCELLANEOUS
Section 6.01 Notices. Unless otherwise specified herein, all notices,
--------
requests or other communications to any party hereunder shall be in writing
(including bank wire, telex, facsimile transmission or similar writing) and
shall be given to such party (i) at its address referred to in Section 9.01 of
the Credit Agreement or (ii) other address, facsimile number or telex number as
such party shall hereafter specify for the purpose of communications hereunder
by notice to the other parties hereto. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by facsimile transmission, when
transmitted to the facsimile number specified in this Section and confirmation
of receipt is received, (iii) if given by mail, 48 hours after such
communication is deposited, certified mail, return receipt requested, in the
mails with appropriate first class postage prepaid, addressed as aforesaid or
(iv) if given by other means, when delivered at the address specified in this
Section 6.01. Rejection or refusal to accept, or the inability to deliver
because of a changed address of which no notice was given shall not affect the
validity of notice given in accordance with this Section.
Section 6.02 No Waivers; Non-Exclusive Remedies. No failure or
----------------------------------
delay on the part of the Collateral Agent to exercise, no course of dealing with
respect to, and no delay in exercising any right, power or privilege under this
Agreement or any other Loan Document or any other document or agreement
contemplated hereby or thereby shall operate as a waiver thereof nor shall any
single or partial exercise of any such right, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided herein and in the other Loan
Documents are cumulative and are not exclusive of any other remedies provided by
law. Without limiting the foregoing, nothing in this Agreement shall impair the
right of the Collateral Agent to exercise any right of set-off or counterclaim
it may have and to apply the amount subject to such exercise to the payment of
indebtedness of each Assignor other than such Assignor's indebtedness under the
Credit Agreement and the other Loan Documents.
Section 6.03 Compensation and Expenses of the Collateral Agent;
--------------------------------------------------
Indemnification.
- ---------------
(A) Expenses. The Assignors shall pay (i) all out-of-pocket expenses
--------
of the Collateral Agent, including fees and disbursements of special and local
counsel for the
-15-
<PAGE>
Collateral Agent, in connection with the preparation and administration of this
Agreement or any document or agreement contemplated hereby, any consent or
waiver hereunder or any amendment hereof or any Default or alleged Default and
(ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the
Collateral Agent, including (without duplication) the fees and disbursements of
outside counsel in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
(b) Protection of Collateral. If any Assignor fails to comply with
------------------------
the provisions of the Credit Agreement, this Agreement or any other Loan
Document, such that the value of any Collateral or the validity, perfection,
rank or value of any Security Interest is thereby diminished or potentially
diminished or put at risk, the Collateral Agent may, but shall not be required
to, effect such compliance on behalf of such Assignor, and such Assignor shall
reimburse the Collateral Agent for the costs thereof on demand. All insurance
expenses and all expenses of protecting, storing, warehousing, appraising,
insuring, handling, maintaining and shipping the Collateral, any and all excise,
property, sales and use taxes imposed by any state, federal or local authority
on any of the Collateral, or in respect of periodic appraisals and inspections
of the Collateral to the extent the same may be requested by the Collateral
Agent from time to time, or in respect of the sale or other disposition thereof
shall be borne and paid by the Assignors. If any Assignor fails to promptly pay
any portion thereof when due, the Collateral Agent may, at its option, but shall
not be required to, pay the same and charge such Assignor's account therefor,
and such Assignor agrees to reimburse the Collateral Agent therefor on demand.
All sums so paid or incurred by the Collateral Agent for any of the foregoing
and any and all other sums for which the Assignors may become liable hereunder
and all costs and expenses (including attorneys' fees, legal expenses and court
costs) reasonably incurred by the Collateral Agent in enforcing or protecting
the Security Interests or any of its rights or remedies under this Agreement,
shall, together with interest thereon for each day from the date when paid or
incurred by the Collateral Agent until paid by the Assignors at the rate per
annum equal to the sum of 2% plus the LIBOR Market Index Rate for such day, be
additional Obligations.
(c) Indemnification. The Assignors agree, jointly and severally, to
---------------
indemnify each Indemnitee and hold each Indemnitee harmless from and against any
and all liabilities, obligations, losses, damages, penalties, claims, demands,
actions, suits, judgments, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel, which may be
incurred by, imposed on or asserted against such Indemnitee in connection with
any investigation or administrative or judicial proceeding (whether or not such
Indemnitee shall be designated a party thereto) brought or threatened relating
to or arising out of this Agreement or in any other way connected with the
enforcement of any of the terms of, or the preservation of any rights hereunder,
or in any way relating to or arising out of the manufacture, ownership,
ordering, purchasing, delivery, control, acceptance, lease, financing,
possession, operation, condition, sale, return or other disposition or use of
the Collateral (including, without limitation, latent or other defects,
-16-
<PAGE>
whether or not discoverable), the violation of the laws of any country, state or
other governmental body or unit, any tort (including, without limitation, any
claims, arising or imposed under the doctrine of strict liability, or for or on
account of injury to or the death of any Person (including any Indemnitee), or
property damage), or contract claim; provided that no Indemnitee shall have the
--------
right to be indemnified hereunder for such Indemnitee's own gross negligence or
willful misconduct as determined by a court of competent jurisdiction. The
Assignors agree that upon written notice by any Indemnitee of the assertion of
such a liability, obligation, loss, damage, penalty, claim, demand, action,
judgment or suit, the Assignors shall assume full responsibility for the defense
thereof. Each Indemnitee agrees to use its best efforts to notify the Assignors
of any such assertion of which such Indemnitee has knowledge.
(d) Obligations; Survival. Any amounts paid by any Indemnitee as to
---------------------
which such Indemnitee has the right to reimbursement shall constitute
Obligations. The indemnity obligations of the Assignors contained in this
Section 6.03 shall continue in full force and effect notwithstanding the full
payment of all Note and all of the other Obligations and notwithstanding the
discharge thereof.
Section 6.04 Amendments and Waivers. Any provision of this
----------------------
Agreement may be amended, changed, discharged, terminated or waived if, but only
if, such amendment or waiver is in writing and is signed by the Assignors and
the Collateral Agent.
Section 6.05 Successors and Assigns. This Agreement shall be
----------------------
binding upon each of the parties hereto and inure to the benefit of the
Collateral Agent and its successors and assigns. The Assignors shall not assign
or delegate any of their rights and duties hereunder without the prior written
consent of the Collateral Agent.
Section 6.06 Limitation of Law; Severability.
-------------------------------
(a) All rights, remedies and powers provided in this Agreement may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and all the provisions of this Agreement are
intended to be subject to all applicable mandatory provisions of law which may
be controlling and be limited to the extent necessary so that they will not
render this Agreement invalid, unenforceable in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of any
applicable law.
(b) If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Collateral Agent in order to carry
out the intentions of the parties hereto as nearly as may be possible; and (ii)
the invalidity or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provisions in any other
jurisdiction.
-17-
<PAGE>
Section 6.07 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Maryland except as
otherwise required by mandatory provisions of law and except to the extent that
remedies provided by the laws of any jurisdiction other than the State of
Maryland are governed by the laws of such jurisdictions.
Section 6.08 Counterparts; Effectiveness. This Agreement may be
---------------------------
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when the Collateral Agent
shall receive counterparts hereof executed by itself and the Assignors.
Section 6.09 Termination. Upon full, final and irrevocable payment
-----------
and performance of all Obligations and the termination of all Commitments under
the Credit Agreement, the Security Interests shall terminate and all rights to
the Collateral shall revert to the Assignors. In addition, at any time and from
time to time prior to such termination of the Security Interests, the Collateral
Agent may release any of the Collateral of any Assignor. Upon any such
termination of the Security Interests or release of Collateral, the Collateral
Agent will, upon request by and at the expense of such Assignor, execute and
deliver to such Assignor such documents as such Assignor shall reasonably
request to evidence the termination of the Security Interests or the release of
such Collateral, as the case may be. Any such documents shall be without
recourse to or warranty by the Collateral Agent. Upon the termination of all
Commitments under the Credit Agreement, and so long as all Obligations other
than the Letter of Credit Liabilities shall have been fully, finally and
irrevocably paid and performed, the Collateral Agent will release its liens on
all Collateral except for the Collateral Accounts if, but only if, there shall
be, and the Assignors agree that there shall remain, funds in the Cash
Collateral Account and the LC Cash Collateral Account equal to 100% of the
Letter of Credit Liabilities.
Section 6.10 Entire Agreement. This Agreement and the other Loan
----------------
Documents constitute the entire agreement and understanding among the parties
hereto and supersedes any and all prior agreements and understandings, oral or
written, and any contemporaneous oral agreements and understandings relating to
the subject matter hereof and thereof.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE SCIENTIFIC ECOLOGY GROUP, INC.,
a Tennessee corporation
By: /s/ Craig T. Bartlett
---------------------------
Name: Craig T. Bartlett
Title: Treasurer
SEG COLORADO, INC., a Delaware corporation
By: /s/ Craig T. Bartlett
---------------------------
Name: Craig T. Bartlett
Title: Treasurer
HITTMAN TRANSPORT SERVICES, INC.,
a Delaware corporation
By: /s/ Craig T. Bartlett
---------------------------
Name: Craig T. Bartlett
Title: Treasurer
FIRST UNION NATIONAL BANK
OF MARYLAND, a national banking
association, as Collateral Agent
By: /s/ Robert J. Bauer
---------------------------
Name: Craig T. Bartlett
Title: Treasurer
-19-
<PAGE>
THE SCIENTIFIC ECOLOGY GROUP, INC.,
SEG COLORADO, INC. and HITTMAN TRANSPORT SERVICES, INC.
Security Agreement Definitions Appendix
---------------------------------------
The definitions set forth in this Security Agreement Definitions
Appendix are incorporated by reference into Section 1.01 of the Security
Agreement dated as of April 18, 1997 between The Scientific Ecology Group, a
Tennessee corporation ("Group"), SEG Colorado, Inc., a Delaware corporation
("Colorado") and Hittman Transport Services, Inc., a Delaware corporation
("Hittman", and together with Group and Colorado, the "Assignors"), and First
Union National Bank of Maryland. Reference in this Security Agreement
Definitions Appendix to "this Agreement", "herein", "hereof", "hereunder" and to
any Article or Section shall be interpreted to mean this Security Agreement and
the referenced Article or Section, including this Security Agreement Definitions
Appendix.
Definitions
-----------
"Accounts" means, with respect to each Assignor, all "accounts" (as
defined in the UCC) now owned or hereafter acquired by such Assignor, and shall
also mean and include all accounts receivable, contract rights, book debts,
notes, drafts and other obligations or indebtedness owing to such Assignor
arising from the sale, lease or exchange of goods or other property by it and/or
the performance of services by it (including, without limitation, any such
obligation which might be characterized as an account, contract right or general
intangible under the Uniform Commercial Code in effect in any jurisdiction) and
all of such Assignor's rights in, to and under all purchase orders for goods,
services or other property, and all of such Assignor's rights to any goods,
services or other property represented by any of the foregoing (including
returned or repossessed goods and unpaid seller's rights of rescission,
replevin, reclamation and rights to stoppage in transit) and all monies due to
or to become due to such Assignor under all contracts for the sale, lease or
exchange of goods or other property and/or the performance of services by it
(whether or not yet earned by performance on the part of such Assignor), in each
case whether now in existence or hereafter arising or acquired including,
without limitation, the right to receive the proceeds of said purchase orders
and contracts and all collateral security and guarantees of any kind given by
any Person with respect to any of the foregoing.
"Account Debtor" means, with respect to any Account, Document,
Instrument or General Intangible, any Person obligated to make payment
thereunder, including, without limitation, any account debtor thereon.
-1-
<PAGE>
"Administrative Agent" means the Bank in its capacity as
administrative agent for the Bank under the Credit Agreement and its successors
and assigns in such capacity.
"Agents" means the Administrative Agent and the Collateral Agent, and
"Agent" means either of them.
"Agreement" or "Security Agreement" means this Security Agreement, as
it may be amended, modified or supplemented from time to time.
"Assigned Agreements" means, with respect to each Assignor, those
contracts and agreements of such Assignor identified in or pursuant to Section 7
of the Perfection Certificate, as the same may be amended, modified or
supplemented from time to time.
"Bank" means First Union National Bank of Maryland, a national banking
association, and its successors and assigns.
"Banks" means the Banks and the North Carolina Bank, and their
respective successors and assigns.
"Borrowers" means GTS Duratek, Inc., a Delaware corporation, General
Technical Services, Inc., a Maryland corporation, GTS Instrument Services,
Incorporated, a Maryland corporation, Analytical Resources, Inc., a Pennsylvania
corporation, The Scientific Ecology Group, Inc., a Tennessee corporation, SEG
Colorado, Inc., a Delaware corporation, and Hittman Transport Services, Inc., a
Delaware corporation, and their successors.
"Cash Collateral Account" has the meaning set forth in Section 3.04 of
this Security Agreement.
"Cash Equivalents" means (i) direct obligations of the United States
or any agency thereof, or obligations guaranteed by the United States or any
agency thereof, (ii) commercial paper rated in the highest grade by a nationally
recognized credit rating agency or (iii) time deposits with, including
certificates of deposit issued by, any office located in the United States of
any bank or trust company which is organized under the laws of the United States
or any state thereof and has capital, surplus and undivided profits aggregating
at least $250,000,000; provided, in each case that such investment matures
--------
within one year from the date of acquisition thereof by the Assignor.
"Cash Proceeds Account" has the meaning set forth in Section 3.03 of
this Security Agreement.
-2-
<PAGE>
"Collateral" means, with respect to each Assignor, all right, title
and interest of such Assignor in the following, whether now owned or existing or
hereafter acquired, created or arising, whether tangible or intangible, and
regardless of where located:
(a) Accounts;
(b) General Intangibles;
(c) Documents;
(d) Instruments;
(e) Assigned Agreements;
(f) the Collateral Accounts, all cash deposited therein from time
to time, the Liquid Investments made pursuant to Section 3.03 of this
Security Agreement and other monies and property (including deposit
accounts) of any kind of such Assignor maintained with or in the possession
or under the control of the Collateral Agent;
(g) all books and records (including, without limitation,
customer lists, credit files, computer programs, printouts and other
computer materials and records) of such Assignor pertaining to any of the
Collateral; and
(h) all Proceeds of all or any of the Collateral described in
clauses (a) through (g) above.
"Collateral Accounts" means the Cash Collateral Account, the Cash
Proceeds Account and the Operating Account.
"Collateral Agent" means the Bank, in its capacity as collateral agent
for the Banks, and its successors and assigns in such capacity.
"Credit Agreement" means the Credit Agreement among the Borrowers, the
Banks and the Agents, as it may be amended, modified or supplemented from time
to time.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
-3-
<PAGE>
"Documents" means, with respect to each Assignor, all "documents" (as
defined in the UCC) or other receipts covering, evidencing or representing
goods, now owned or hereafter acquired by such Assignor.
"General Intangibles" means, with respect to each Assignor, all
"general intangibles" (as defined in the UCC) now owned or hereafter acquired by
such Assignor, including, without limitation, (i) all obligations and
indebtedness owing to such Assignor (other than Accounts), from whatever source
arising, (ii) all Patents, Trademarks, copyrights, Licenses, rights in
intellectual property, goodwill, trade names, service marks, trade secrets,
confidential or proprietary technical and business information, know-how, show-
how, software, customer lists, subscription lists, data bases and related
documentation, registration, franchises and all other intellectual or other
similar property rights, (iii) all rights or claims in respect of refunds for
taxes paid, (iv) all rights in respect of any pension plans or similar
arrangements maintained for employees of such Assignor or any member of the
ERISA Group and (v) all "uncertificated securities" (as defined in the UCC).
"Instruments" means, with respect to each Assignor, all "instruments"
(as defined in Article 9 of the UCC), "chattel paper" and "certificated
securities" (each as defined in the UCC) or "letters of credit" (as defined in
Article 9 of the UCC) evidencing, representing, arising from or existing in
respect of, relating to, securing or otherwise supporting the payment of, any of
the Accounts or General Intangibles, including (but not limited to) promissory
notes, drafts, bills of exchange and trade acceptances, now owned or hereafter
acquired by such Assignor.
"License" means, with respect to each Assignor, (i) with respect to
any Patent, any agreement now or hereafter in existence granting to such
Assignor, or pursuant to which such Assignor has granted to any other Person,
any right with respect to any Patent or any invention now or hereafter in
existence, whether patentable or not, whether a Patent or application for Patent
is in existence on such invention or not, and whether a Patent or application
for Patent on such invention may come into existence, and (ii) with respect to
any Trademark, any agreement now or hereafter in existence granting to such
Assignor, or pursuant to which such Assignor has granted to any other Person,
any right to use any Trademark (in each case exclusive of license agreements
which by their terms prohibit assignment or a grant of a security interest by
such Assignor as licensee thereunder); provided that rights to payments under
--------
any such license shall be included in the Collateral to the extent permitted
thereby or by Section 9-318 of the UCC.
-4-
<PAGE>
"Liquid Investments" has the meaning set forth in Section 3.05 of this
Security Agreement.
"North Carolina Bank" means First Union National Bank of North
Carolina, a national banking association, and its successors and assigns.
"Operating Account" means the demand deposit account maintained with
the Collateral Agent by Group on which Group draws checks to pay its operating
expenses.
"Patents" means all of the following:
(i) all letters patent and design letters patent of the United
States or any other country, all applications for letters patent and design
letters patent of the United States or any other country including, without
limitation, applications in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof
or any other country or political subdivision thereof;
(ii) all reissues, divisions, continuations, continuations-in-
part, renewals or extensions thereof;
(iii) all claims for, and rights to sue for, past or future
infringement of any of the foregoing; and
(iv) all income, royalties, damages and payments now or hereafter
due or payable with respect to any of the foregoing, including, without
limitation, damages and payments for past or future infringements thereof.
"Perfection Certificate" means, with respect to each Assignor, a
certificate, substantially in the form of Exhibit A to this Security Agreement,
completed and supplemented with the schedules and attachments contemplated
thereby to the satisfaction of the Collateral Agent, and duly executed by a vice
president or treasurer of such Assignor.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Proceeds" means, with respect to each Assignor, all proceeds of, and
all other profits, products, rents or receipts, in whatever form, arising from
the collection, sale, lease, exchange, assignment, licensing or other
disposition of or other realization upon or payment for the use of, Collateral,
including (without limitation) all claims of such Assignor against third parties
for loss of, damage to or destruction of, or for proceeds payable under, or
unearned premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to any
Collateral, in each case whether now existing or hereafter arising.
-5-
<PAGE>
"Security Interests" means the security interests in the Collateral
granted under this Security Agreement securing the Obligations.
"Trademark" means all of the following:
(i) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
logos, brand names, trade dress, prints and labels on which any of the
foregoing have appeared or appear, package and other designs, and any other
source or business identifiers, and general intangibles of like nature, and
the rights in any of the foregoing which arise under applicable law;
(ii) the goodwill of the business symbolized thereby or associated
with each of them;
(iii) all registrations and applications in connection therewith,
including, without limitation, registrations and applications in the United
States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country or any political
subdivision thereof;
(iv) all reissues, extensions and renewals thereof;
(v) all claims for, and rights to sue for, past or future
infringements of any of the foregoing; and
(vi) all income, royalties, damages and payments now or hereafter
due or payable with respect to any of the foregoing, including, without
limitation, damages and payments for past or future infringements thereof.
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of Maryland, provided that if by reason of mandatory
--------
provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than the State of Maryland, "UCC"
means the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection.
-6-
<PAGE>
Usage
-----
The following rules of construction and usage shall be applicable to
any instrument that is governed by this Appendix:
(a) All terms defined in this Appendix shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant thereto unless otherwise defined therein.
(b) The words "hereof", "herein", "hereunder" and words of similar
import when used in an instrument refer to such instrument as a whole and not to
any particular provision or subdivision thereof; references in any instrument to
"Article", "Section" or another subdivision or to an attachment are, unless the
context otherwise requires, to an article, section or subdivision of or an
attachment to such instrument; and the term "including" means "including without
limitation".
(c) The definitions contained in this Appendix are equally applicable
to both the singular and plural forms of such terms, unless the context
otherwise requires, and to the masculine as well as to the feminine and neuter
genders of such terms.
(d) Any agreement, instrument or statute defined or referred to below
or in any agreement or instrument that is governed by this Appendix means such
agreement or instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and includes (in the case of agreements or instruments) references to
all attachments thereto and instruments incorporated therein. References to a
Person are also to its permitted successors and assigns.
-7-
<PAGE>
Exhibit (c)(6)
<PAGE>
****FOR IMMEDIATE RELEASE****
DATE: March 31, 1997 CONTACT: Robert E. Prince, Pres. and CEO
Robert F. Shawver, Exec. Vice Pres.
Diane R. Brown, Investor Relations
(410) 312-5100
www.gtsduratek.com
GTS DURATEK COOLS DOWN SAVANNAH RIVER
MELTER FOR INSPECTION
COLUMBIA, Md.- GTS Duratek (DRTK - NASDAQ) management on Thursday March 27, 1997
at 6:00 p.m. made the decision to temporarily suspend processing of radioactive
waste and initiate an unscheduled controlled cool down of its glass melter at
the U.S. Department of Energy's (DOE) Savannah River Site. This decision was the
result of GTS Duratek operators observing over the previous few days increasing
warning signs that accelerated wear on certain melter box internal components
could be occurring.
The Company determined on Thursday evening that it was prudent to cool down the
melter and conduct a detailed inspection and assessment of any repairs or
necessary refurbishment required to return to safe, full capacity operations.
The repairs could range from minimal repairs, to replacing certain melter
components, to possibly replacing the entire melter box. If corrective action
results in a delay in completing the processing of radioactive wastes, the
Company could incur contract losses on the Savannah River contract in 1997.
Under this contract, all radioactive waste processing is required to be
completed by October 1997.
Robert E. Prince, President and CEO stated, "We are announcing the melter
inspection at Savannah River because our shareholders are sensitive to the short
term financial impact of meeting the schedule to process the waste under this
contract. The condition of the melter does not pose any danger to our personnel
or to the public. Cooling down the melter will take several days and only when
the melter is cooled down can we complete the inspection. The inspection results
will determine the extent of the repairs and the financial impact on completing
our $14 million fixed price contract at Savannah River. The financial impact
could be negligible, or it could be large enough to have an impact on our near-
term earnings. It is impossible to predict until the assessment is complete.
- more -
<PAGE>
Whatever the short-term financial impact may be, we are committed to meeting our
project milestones on this first and world's largest scale implementation of
vitrification of low-level radioactive waste. GTS Duratek is the only company in
the U.S. getting this kind of large scale, real-world, low-level radioactive
waste glass making experience. Moreover, we are getting the experience while
cleaning up a recognized priority radioactive waste problem. The Company's
financial condition enables it to address any possible problem with this melter
box. Moreover, because of our success in winning the contracts at Hanford and
Idaho we, together with BNFL, have built an integrated technical staff unequaled
anywhere in the world for designing and operating waste melters.
We spent approximately $7 million to build this first of a kind facility on a
DOE site. The return on our investment is based on completion of the initial
waste stream and the DOE letting the Company handle additional waste streams at
the site. We will do what is required to keep the DOE's confidence."
Mario Fiori, DOE's Savannah River Site Operations Manager said, "We remain
committed to the long term benefits of vitrification and the technology
developed by GTS Duratek. As in any manufacturing operation, technical problems
can arise as a normal part of the process. We commend GTS Duratek for dealing
with this issue in a straight forward manner and we look forward to working with
them on its resolution."
Richard Peebles, Vice President, BNFL Inc., said "We applaud GTS Duratek's
prompt pre-cautionary action in suspending operations at M-Area while they
investigate the potential problem. That is always the right approach in our
industry. We have confidence that the GTS Duratek technology is the right choice
for vitrification in the U.S. This was an early design and our joint engineering
team is already benefitting from the thousands of hours of experience we have
had from this melter operation. The lessons learned from this first of a kind
project will improve the quality of the designs for our joint projects at
Hanford and Idaho. We attach the greatest importance to our relationship with
GTS Duratek and we look forward to strengthening and broadening our alliance."
Robert Prince also said, "In addition to working on processing at Savannah
River, we are progressing well with our other projects with BNFL, Inc. for the
privatized processing plants at Hanford and Idaho. In some ways, the Savannah
River glass melter is a first generation, half-scale implementation of the
technology we will be using on those projects. The commercial run time and the
experience we are gaining on the Savannah River project is valuable to the
success of those large future projects.
We are also working toward completing the acquisition of Scientific Ecology
Group (SEG) from Westinghouse Electric which is scheduled to close in April.
Integrating SEG with GTS Duratek will give a more mature and diversified
customer base, and increase the number of commercial clients."
- more -
<PAGE>
GTS Duratek is an environmental technology and services firm that uses its
proprietary processes to convert radioactive and hazardous waste into
environmentally safe forms.
###
<PAGE>
Exhibit (c)(7)
<PAGE>
****FOR IMMEDIATE RELEASE****
DATE: April 16, 1997 CONTACT: Robert E. Prince, Pres. and CEO
Robert F. Shawver, Exec. Vice Pres.
Diane R. Brown, Investor Relations
(410) 312-5100
www.gtsduratek.com
GTS DURATEK COMPLETES ASSESSMENT OF
SAVANNAH RIVER FACILITY
COLUMBIA, Md.- GTS Duratek (DRTK - NASDAQ) announced today that its management
had reached a decision on the actions to be taken to resume radioactive waste
processing at its M-Area processing plant located on the Department of Energy's
(DOE) Savannah River Site. On March 27, 1997, GTS Duratek suspended operations
at the plant to conduct an inspection to determine whether excessive wear of
certain melter box internal components had occurred. Inspections confirmed that
melter restart might have been possible after only minimal repair. However, GTS
Duratek management concluded that minimal repair and restart would leave
considerable risk that the melter might be unable to complete the current $14
million fixed price contract for processing radioactive waste without additional
unscheduled shutdowns and repairs. Accordingly, GTS Duratek management made the
decision to undertake more extensive repairs and modification of the facility,
including melter box replacement, before resumption of radioactive waste
processing. Management determined that establishing a longer term record of
reliable operations of the melter at the M-Area processing plant is an important
step toward the multi-billion dollar DOE Hanford Tank Waste privatization with
GTS Duratek's strategic partner BNFL Inc.
Robert E. Prince, President and CEO said, "The inspection was good news, and bad
news. The inspection showed that most of the refractory did not show excessive
wear. There were only a few spots with severe problems that almost certainly
were the result of chemicals added during initial melter operations. We have
revised the startup procedure to prevent this type of damage in the future.
However, due to the complexity in performing repairs inside of a melter that has
operated for over 1,000 hours processing more than 100,000 gallons of
radioactive waste, the preferable approach is to replace the melter box with a
new one that can be assembled outside the radioactive portion of the facility.
This approach allows working in a non-radioactive environment and thereby
provides more control over cost and schedule. Simultaneously, with melter
replacement, we will also make other facility enhancements to allow processing
of additional waste streams at greater throughput."
- more -
<PAGE>
GTS Duratek estimates that the M-Area facility will resume radioactive waste
processing operation by the end of the fourth of quarter 1997. The schedule is
affected by the time required to order specialized refractory bricks for the
melter and to complete assembly of the melter, and because of the complexities
of working in a regulated environment. GTS Duratek will take a reserve of $5.9
million in the first quarter of 1997 to cover the estimated costs of the repair
and for estimated losses on the fixed price contract resulting from the delay.
GTS Duratek is currently seeking to extend the date by which GTS Duratek was
required to complete the waste processing under this contract.
Richard Peebles, Vice President, BNFL, Inc., said, "I am sorry to see our
friends at GTS Duratek facing a short-term financial loss on this project.
However, GTS Duratek is demonstrating how under the new privatization approach,
it is the contractor's responsibility to sort out the technical problems,
without passing the cost on to the taxpayer. The M-Area melter has made a major
contribution in demonstrating the viability of vitrification for low-level
waste. The lessons learned will be a great value for our projects at Hanford,
Idaho and elsewhere. We fully support GTS Duratek and its technology."
GTS Duratek is also completing the final actions necessary to close the
acquisition of The Scientific Ecology Group (SEG), a wholly owned subsidiary of
Westinghouse. This acquisition will significantly increase the revenue of GTS
Duratek, will add 14 field deployed technologies and 700 employees and will make
GTS Duratek the largest commercial processor of low level radioactive and mixed
waste in the U.S.
With the imminent closing of the SEG acquisition, the Company's senior
management has established the priorities for the remainder of 1997 to be: (1)
restarting the M-Area melter; (2) successfully and rapidly incorporating SEG's
business; and (3) meeting commitments to the billion dollar DOE privatization
cleanups in Hanford, Washington and in Idaho. Consequently, capital commitments
will be directed to these priorities and management will reduce the priority of,
and capital commitments to, other projects which have higher levels of
marketplace uncertainty or have longer-term financial prospects. As a result,
the DuraChem facility, for processing commercial radioactive ion exchange resin
in the U.S., located in Barnwell, South Carolina, will not commence commercial
operations in 1997 as previously reported.
Robert E. Prince, President and CEO said, "Setting priorities is an important
part of achieving success. SEG has excellent potential for near-term financial
return. To realize the return, GTS Duratek must stay focused on the right
targets."
GTS Duratek is an environmental technology and services firm that uses its
proprietary processes to convert radioactive and hazardous waste into
environmentally safe forms.
###
