Exhibit 10.2
FIRST AMENDMENT TO
BUSINESS LOAN AND SECURITY AGREEMENT
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THIS FIRST AMENDMENT TO BUSINESS LOAN AND SECURITY AGREEMENT (this
"Agreement") made as of the 21st day of May, 2008 by and among VSE CORPORATION,
a corporation organized under the laws of the State of Delaware ("VSE"),
ENERGETICS INCORPORATED, a corporation organized under the laws of the State of
Maryland ("Energetics"), VSE SERVICES INTERNATIONAL, INC., a corporation
organized under the laws of the State of Delaware ("VSI"), INTEGRATED CONCEPTS
AND RESEARCH CORPORATION, a corporation organized under the laws of the District
of Columbia ("ICRC"), G&B SOLUTIONS, INC., a corporation organized under the
laws of the Commonwealth of Virginia ("G&B"), jointly and severally (each of
VSE, Energetics, VSI, ICRC and G&B a "Borrower"; and collectively, the
"Borrowers") and CITIZENS BANK OF PENNSYLVANIA, a bank chartered in the State of
Pennsylvania, its successors and assigns (the "Lender").
RECITALS
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A. The Lender has made a revolving line of credit in the current
maximum principal amount of Twenty-Five Million Dollars ($25,000,000), jointly
and severally, to the Borrowers (the "Loan") pursuant to that certain Business
Loan and Security Agreement, dated August 14, 2007, by and among VSE,
Energetics, VSI, ICRC and the Lender (the Business Loan and Security Agreement,
as amended from time to time, is hereinafter called, the "Business Loan
Agreement").
B. The Loan is currently evidenced by that certain Revolving
Promissory Note, dated August 14, 2007, from VSE, Energetics, VSI, and ICRC in
favor of the Lender in the maximum principal amount of Twenty-Five Million
Dollars ($25,000,000) (as amended from time to time, is hereinafter called the
"Note").
C. Pursuant to that certain Additional Borrower Joinder Supplement
dated April 14, 2008 by and among VSE, Energetics, VSI, ICRC, G&B and Lender,
G&B was added as a party to each of the Financing Documents.
D. The Borrowers have requested that the Lender increase the
maximum principal amount of the Loan and revise other provisions of the Business
Loan Agreement and the Lender has agreed on the condition, among others, that
this Agreement be executed and delivered by the Borrowers to the Lender.
E. All capitalized terms used herein and not otherwise defined
shall have the meanings given to such terms in the Business Loan Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Recitals. The parties hereto acknowledge and agree that the above
Recitals are true and correct in all respects and that the same are incorporated
herein and made a part hereof by reference.
2. Definitions.
(a) The following defined terms set forth in Section 1.1 of
the Business Loan Agreement are amended and restated in their entirety as
follows:
"Fees" means the collective reference to each fee payable to the Lender,
under the terms of this Agreement or under the terms of any of the other
Financing Documents, including, without limitation, the Revolving Credit Unused
Line Fees, Letter of Credit Fees and the Field Examination Fees.
"Leverage Ratio" means the ratio of Total Funded Debt on a specified date
to EBITDA for the four (4) quarter period then ending on such date.
"LIBOR rate" means the London interbank offered rate of major banks for
deposits in United States Dollars for a designated period (e.g. one, two, three
or six months) as set forth at Telerate Page 3750 at approximately 11:00 a.m.
London time on the third Euro-Dollar Business Day preceding the date when the
LIBOR-based Rate will be become effective; provided, however, that if such
information is not available on Telerate, the "LIBOR rate" shall be determined
from information supplied to the Lender by a nationally recognized reporting
service for similar information acceptable to the Lender.
"LIBOR Rate Margin" means the amount determined to be in effect from time
to time using the chart set forth below. The initial LIBOR Rate Margin will be
determined at the Supplemental Closing Date using the Leverage Ratio calculated
by reference to the consolidated financial statements of VSE most recently
received by the Lender. Commencing on the date following the Supplemental
Closing Date when the Lender receives the consolidated financial statements of
VSE in accordance with this Agreement and on each such date thereafter, the
LIBOR Rate Margin will be reset based on the Leverage Ratio calculated by
reference to such consolidated financial statements.
LIBOR Rate Margin Leverage Ratio
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1.25% Less than 1.0 to 1.0
1.75% Equal to or greater than 1.0 to 1.0 but
less than 2.0 to 1.0
2.00% Equal to or greater than 2.0 to 1.0
In the event VSE fails to provide such consolidated financial statements
when due, the LIBOR Rate Margin shall be 2.00% until such time as such
consolidated financial statements are submitted as required by this Agreement.
"Obligations" means all present and future, whether now existing or
contemplated or hereafter arising, of any one or more of the Borrowers to the
Lender under, arising pursuant to, in connection with and/or on account of the
provisions of this Agreement, each Note, each Security Document, and/or any of
the other Financing Documents, the Loans, and/or any of the Facilities
including, without limitation, the principal of, and interest on, each Note,
late charges, the Fees, Enforcement Costs, and prepayment fees (if any), letter
of credit reimbursement obligations, letter of credit fees or fees charged with
respect to any guaranty of any letter of credit; also means all other present
and future indebtedness, duties, obligations, and liabilities, whether now
existing or contemplated or hereafter arising, of any one or more of the
Borrowers to the Lender or its Affiliates of any nature whatsoever, including,
without limitation, any indebtedness, duties, obligations, and liabilities,
under or in connection with, any Swap Transaction or Bank Products, regardless
of whether such indebtedness, duties, obligations, and liabilities be direct,
indirect, primary, secondary, joint, several, joint and several, fixed or
contingent; and also means any and all renewals, extensions, substitutions,
amendments, restatements and rearrangements of any such indebtedness, duties,
obligations, and liabilities.
"Prime Rate Margin" means zero percent (0.0%).
"Revolving Credit Expiration Date" means May 21, 2010.
(b) The following defined terms are added in alphabetical
order to Section 1.1 of the Business Loan Agreement:
"Bank Products" shall mean any (i) commercial credit card, purchase card
and merchant card services, or other commercial credit card services or
facilities, (ii) cash management services or facilities, (iii) foreign
investment or exchange products or services or (iv) products under any non-
speculative hedging agreement or arrangement, extended to any Borrower by Lender
or any Affiliate of Lender, from time to time.
"EBITDA" means as to Borrowers for any period of determination thereof,
the sum of (a) net profit (or loss) determined in accordance with GAAP
consistently applied, plus (b) interest expense and income tax provisions for
such period, plus (c) depreciation and amortization of assets for such period,
plus (d) non-cash stock compensation, plus (e) non-cash non-recurring charges,
as approved in writing by the Lender prior to the due date of the Compliance
Certificate as required under Sections 6.1.1(a) (Annual Statements and
Certificates) and 6.1.1(b) (Quarterly Statements and Certificates), minus any
non-cash gains to the extent included in net income. EBITDA shall be determined
on a rolling basis, based on the four (4) quarter period then ending. EBITDA
from any Permitted Acquisitions will be included on a pro forma basis.
"Fixed Charge Coverage Ratio" means as to Borrowers for any period of
determination thereof the ratio of (a) the sum of (i) EBITDA, plus
(ii) operating lease payments (including rent), minus (iii) cash taxes, minus
(iv) dividends, minus (v) share repurchases to (b) Fixed Charges.
"Fixed Charges" means as to Borrowers for any period of determination
thereof, the sum of (i) scheduled or required principal payments on all
Indebtedness for Borrowed Money of Borrowers, plus (ii) all operating lease
payments (including rent), plus (iii) cash interest expense, plus (iv) any earn
out payments of Borrowers.
"Supplemental Closing Date" means May 21, 2008.
"Total Funded Debt" means as to Borrowers for any period of determination
thereof the sum of (i) all Indebtedness for Borrowed Money of Borrowers, plus
(ii) any accrued earn out payments of Borrowers (net of any Cash Equivalents for
purposes of calculating accrued earn out payments of Borrowers).
"Unused Fee Margin" means that per annum percentage rate determined by
Lender from time to time in accordance with the chart set forth below.
Revolving Credit Unused Line Fee Leverage Ratio
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0.10% Less than 1.0 to 1.0
0.15% Equal to or greater than 1.0
to 1.0 but less than 2.0 to 1.0
0.20% Equal to or greater than 2.0 to 1.0
3. Revolving Credit Facility. Section 2.1.1 of the Loan Agreement is
hereby amended and restated in its entirety as follows:
2.1.1 Revolving Credit Facility.
Subject to and upon the provisions of this Agreement, the
Lender establishes a revolving credit facility in favor of the Borrowers. The
aggregate of all advances under the Revolving Credit Facility is sometimes
referred to in this Agreement collectively as the "Revolving Loan". The
Lender's "Revolving Credit Committed Amount" is $35,000,000. During the
Revolving Credit Commitment Period, any or all of the Borrowers may request
advances under the Revolving Credit Facility in accordance with the provisions
of this Agreement; provided that after giving effect to any Borrower's request
the aggregate outstanding principal balance of the Revolving Loan and all Letter
of Credit Obligations would not exceed the lesser of (i) the Revolving Credit
Committed Amount or (ii) the Borrowing Base.
Unless sooner paid, the unpaid Revolving Loan, together
with interest accrued and unpaid thereon and all other Obligations shall be due
and payable in full on the Revolving Credit Expiration Date. Interest on the
Revolving Loan shall be payable on each Interest Payment Date.
4. Revolving Credit Unused Line Fee. Section 2.1.10 of the Loan
Agreement is hereby amended and restated in its entirety as follows:
2.1.10 Revolving Credit Unused Line Fee.
Borrowers shall pay to Lender a revolving credit facility
fee (collectively, the "Revolving Credit Unused Line Fees" and individually, a
"Revolving Credit Unused Line Fee") in an amount equal to the Unused Fee Margin
multiplied by the average daily unused and undisbursed portion of the Revolving
Credit Committed Amount in effect from time to time accruing during each
calendar quarter. For purposes of clarification, the face amount of outstanding
Letters of Credit shall be considered usage of the Revolving Credit Committed
Amount. The accrued and unpaid portion of the Revolving Credit Unused Line Fee
shall be paid by Borrowers to Lender on the last day of each calendar quarter,
commencing on the first such date following the Supplemental Closing Date, and
on the Revolving Credit Termination Date.
5. Financial Statements. Section 6.1.1 of Business Loan Agreement is
hereby amended as follows:
(a) Section 6.1.1(c) is hereby amended and restated in its
entirety as follows:
(c) Quarterly Reports. The Borrowers shall furnish
to the Lender within twenty (20) days after the end of each fiscal quarter, a
Borrowing Base Report, and a report containing the following information:
(i) a detailed aging schedule of all Receivables by
Account Debtor, in such detail, and accompanied by such supporting information,
as the Lender may from time to time reasonably request;
(ii) a detailed aging of all accounts payable by
supplier, in such detail, and accompanied by such supporting information, as the
Lender may from time to time reasonably request; and
(iii) such other information as the Lender may
reasonably request.
(b) Section 6.1.1(g) is hereby added its entirety
immediately after Section 6.1.1(f) as follows:
(g) Annual Projections. The Borrowers shall furnish
to the Lender as soon as available, but in no event less than forty-five (45)
days after the end of each fiscal year, management prepared annual financial
projections on a consolidated basis for the Borrowers for the immediately
succeeding fiscal year.
6. Financial Covenants. Section 6.1.14 of the Business Loan Agreement is
hereby amended and restated in its entirety as follows:
6.1.14 Financial Covenants.
(a) Leverage Ratio. Borrowers will maintain, on a
consolidated basis and tested as of the last day of each of Borrowers' fiscal
quarters, commencing on March 31, 2008, for the four (4) quarter period ending
on that date, a Leverage Ratio of not greater than 3.00 to 1.00.
(b) Fixed Charge Coverage Ratio. Borrowers will
maintain, on a consolidated basis and tested as of the last day of each of
Borrowers' fiscal quarters, commencing on March 31, 2008, for the four (4)
quarter period ending on that date, a Fixed Charge Coverage Ratio of not less
than 1.25 to 1.00.
(c) Profitability. Borrowers will maintain, on a
consolidated basis and tested as of the last day of each of Borrowers' fiscal
quarters, commencing on March 31, 2008, for the four (4) quarter period ending
on that date, net income, minus cash dividends declared by Borrowers during
such period, in excess of $1.00.
7. Exhibits to Loan Agreement. Exhibit B (Revolving Credit Note) to the
Business Loan Agreement is hereby replaced in its entirety with the form
attached hereto as Exhibit A.
8. Conditions Precedent. This Agreement shall be deemed effective by
Lender upon the satisfaction by Borrowers of each of the following:
(a) the due execution and delivery to Lender of this Agreement
by each party hereto;
(b) the due execution and delivery to Lender of that certain
Amended and Restated Revolving Promissory Note, dated as of the date hereof,
by each Borrower in favor of Lender;
(c) the due execution and delivery to Lender of the Collateral
Disclosure List by each party thereto;
(d) a legal opinion letter from Borrowers' counsel, Arent Fox,
dated as of the date hereof;
(e) proof that the Borrowers have paid all fees, costs and
expenses to the Lender in connection with this Agreement, including, but not
limited to, the Lender's attorneys fees; and
(f) such other information, instruments, opinions, documents,
certificates and reports as the Lender may deem necessary.
9. Representations. The Borrowers hereby confirm that:
(a) The representations, warranties and covenants set forth in
Articles IV and VI of the Business Loan Agreement, are true and correct as of
the date hereof; and
(b) The Borrowers have no defenses, rights of setoff, claims,
counterclaims, or causes of action of any kind or nature whatsoever against the
Lender, or any agent, attorney, legal representative, predecessor-in-interest,
or affiliate of the Lender, directly or indirectly in any manner connected with,
pursuant to, or by virtue of the Obligations or any of the Financing Documents,
and TO THE EXTENT ANY SUCH DEFENSES, RIGHTS OF SETOFF, CLAIMS, COUNTERCLAIMS, OR
CAUSES OF ACTION EXIST, SUCH DEFENSES, RIGHTS, CLAIMS, COUNTERCLAIMS, AND CAUSES
OF ACTION ARE HEREBY FOREVER WAIVED, DISCHARGED AND RELEASED.
10. Counterparts. This Agreement may be executed in any number of
duplicate originals or counterparts, each of which duplicate original or
counterpart shall be deemed to be an original and all taken together shall
constitute one and the same instrument.
11. Financing Documents; Governing Law; Etc. This Agreement is one of
the Financing Documents defined in the Business Loan Agreement and shall be
governed and construed in accordance with the laws of the Commonwealth of
Virginia. The headings and captions in this Agreement are for the convenience
of the parties only and are not a part of this Agreement.
12. Acknowledgments. Each Borrower hereby confirms to Lender the
enforceability and validity of each of the Financing Documents. In addition,
each Borrower hereby agrees to the execution and delivery of this Agreement and
the terms and provisions, covenants or agreements contained in this Agreement
shall not in any manner release, impair, lessen, modify, waive or otherwise
limit the joint and several liability and obligations of the Borrowers under the
terms of any of the Financing Documents, except as otherwise specifically set
forth in this Agreement.
13. Modifications. This Agreement may not be supplemented, changed,
waived, discharged, terminated, modified or amended, except by written
instrument executed by the parties.
[signatures are on the following page.]
IN WITNESS WHEREOF, each of the parties hereto have executed and
delivered this Agreement under their respective seals as of the day and year
first written above.
BORROWERS:
WITNESS/ATTEST: VSE CORPORATION
/s/ R. J. Hannah /s/ M. A. Gauthier
_________________________ By:________________________(Seal)
Name: Maurice A. Gauthier
Title: CEO, President, and COO
WITNESS/ATTEST: ENERGETICS INCORPORATED
/s/ R. J. Hannah /s/ D. M. Ervine
_________________________ By:________________________(Seal)
Name: D. M. Ervine
Title: Chairman of the Board
WITNESS/ATTEST: VSE SERVICES INTERNATIONAL, INC.
/s/ R. J. Hannah /s/ D. M. Ervine
_________________________ By:________________________(Seal)
Name: D. M. Ervine
Title: Chairman of the Board
WITNESS/ATTEST: INTEGRATED CONCEPTS AND RESEARCH
CORPORATION
/s/ R. J. Hannah /s/ D. M. Ervine
_________________________ By:________________________(Seal)
Name: D. M. Ervine
Title: Chairman of the Board
WITNESS: G&B SOLUTIONS, INC.
/s/ R. J. Hannah /s/ D. M. Ervine
_________________________ By:________________________(Seal)
Name: D. M. Ervine
Title: Chairman of the Board
LENDER:
WITNESS: CITIZENS BANK OF PENNSYLVANIA
/s/ Owen Burman
_________________________ By:_________________________(Seal)
Name: Owen Burman
Title: Vice President