LOAN AND SECURITY AGREEMENT
DATED AS OF JUNE 4, 1999
among
GSE POWER SYSTEMS, INC.,
as Borrower,
GSE PROCESS SOLUTIONS, INC.,
as Borrower,
GSE SYSTEMS, INC.,
as Guarantor,
MSHI, INC.,
as Guarantor,
GP INTERNATIONAL ENGINEERING & SIMULATION, INC.,
as Guarantor,
and
DIME COMMERCIAL CORP.,
as Lender
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS 1
1.1 Certain Defined Terms 1
1.2 Accounting Terms 15
1.3 Other Definitional Provisions 15
SECTION 2. LOANS AND COLLATERAL 16
2.1 Loans 16
(A) Revolving Loan 16
(B) Eligible Accounts and Inventory 17
(C) Borrowing Mechanics 20
(D) Note 21
(E) Evidence of Revolving Loan Obligations 21
(F) Letters of Credit 21
(1) Maximum Amount 21
(2) Reimbursement 21
(3) Conditions of Issuance 22
(4) Request for Letters of Credit 22
(G) Other Letter of Credit Provisions 22
(1) Obligations Absolute 22
(2) Nature of Lender's Duties 23
(3) Liability 23
(H) Appointment of Borrower Representative 24
2.2 Interest 24
(A) Rate of Interest 24
(B) Interest Periods 25
(C) Computation and Payment of Interest 25
(D) Interest Laws 26
(E) Conversion or Continuation 26
2.3 Fees 27
(A) Unused Line Fee 27
(B) Letter of Credit Fees 27
(C) Audit Fees 27
(D) Collateral Monitoring 27
(E) Other Fees and Expenses 27
(F) Fees Non-Refundable 28
2.4 Payments and Prepayments 28
(A) Manner and Time of Payment 28
(B) Mandatory Prepayments, etc. 28
(1) Overadvance 28
(2) Proceeds of Asset Dispositions 28
(C) Voluntary Prepayments and Repayments 28
(D) Payments on Business Days 29
2.5 Term of this Agreement 29
2.6 Statements 29
2.7 Grant of Security Interest 29
2.8 Capital Adequacy and Other Adjustments 30
2.9 Taxes 30
(A) No Deductions 30
(B) Changes in Tax Laws 30
2.10 Required Termination and Prepayment 31
2.11 Compensation 32
2.12 Booking of LIBOR Loans 32
2.13 Assumptions Concerning Funding of LIBOR Loans 32
2.14 Allocation of Collateral 32
2.15 Federal Assignment of Claims Act 35
SECTION 3. CONDITIONS TO LOANS, ETC. 35
3.1 Conditions to Loans, etc. 35
(A) Closing Deliveries 35
(B) Security Interests 35
(C) Closing Date Availability 36
(D) Representations and Warranties 36
(E) Fees 36
(F) No Default 36
(G) Performance of Agreements 36
(H) No Prohibition 36
(I) No Litigation 36
(J) Indebtedness 36
(K) Borrowing Base Certificate 37
(L) Export Orders 37
3.2 Additional Conditions to Loans to Fund Permitted Acquisitions 37
SECTION 4. REPRESENTATIONS AND WARRANTIES 37
4.1 Organization, Powers, Capitalization 37
(A) Organization and Powers 37
(B) Capitalization 37
4.2 Authorization of Borrowing, No Conflict 38
4.3 Financial Condition 38
4.4 Indebtedness and Liabilities 38
4.5 Account Warranties 38
4.6 Names 39
4.7 Locations; FEIN 39
4.8 Title to Properties; Liens 39
4.9 Litigation; Adverse Facts 39
4.10 Payment of Taxes 39
4.11 Performance of Agreements 40
4.12 Employee Benefit Plans 40
4.13 Intellectual Property 40
4.14 Broker's Fees 40
4.15 Environmental Compliance 40
4.16 Solvency 40
4.17 Disclosure 40
4.18 Insurance 41
4.19 Compliance with Laws 41
4.20 Bank Accounts 41
4.21 Subsidiaries 41
4.22 Employee Matters 41
4.23 Governmental Regulation 42
4.24 Real Property 42
SECTION 5. AFFIRMATIVE COVENANTS 42
5.1 Financial Statements and Other Reports 42
(A) Monthly Financials 42
(B) Quarterly Financials 42
(C) Year-End Financials 43
(D) Accountants' Certification and Reports 43
(E) Compliance Certificate 44
(F) Borrowing Base Certificates, Registers and Journals 44
(G) Reconciliation Reports and Listings and Agings 44
(H) Management Report 44
(I) Government Notices 45
(J) Events of Default, etc. 45
(K) Trade Names 45
(L) Locations 45
(M) Bank Accounts 45
(N) Litigation 45
(O) Projections 45
(P) Other Indebtedness Notices 46
(Q) Other Information 46
(R) Opening Balance Sheet 46
(S) Public Filings 46
5.2 Access to Accountants and Management 46
5.3 Inspection 46
5.4 Collateral Records 47
5.5 Account Covenants; Verification 47
5.6 Collection of Accounts and Payments;
Cash Management Arrangements 47
5.7 Endorsement 48
5.8 Corporate Existence 48
5.9 Payment of Taxes 48
5.10 Maintenance of Properties; Insurance 48
5.11 Compliance with Laws 49
5.12 Further Assurances 49
5.13 Collateral Locations 50
5.14 Instruments; Chattel Paper 50
5.15 Use of Proceeds and Margin Security 50
SECTION 6. FINANCIAL COVENANTS 50
6.1 Minimum EBITDA 50
6.2 Fixed Charge Coverage 51
6.3 Tangible Net Worth 52
6.4 EximBank Tangible Net Worth 52
6.5 Leverage 52
SECTION 7. NEGATIVE COVENANTS 52
7.1 Indebtedness and Liabilities 52
7.2 Guaranties 52
7.3 Transfers, Liens and Related Matters 53
(A) Transfers 53
(B) Liens 53
(C) No Negative Pledges 53
(D) No Restrictions on Distributions 53
7.4 Investments and Loans 54
7.5 Restricted Junior Payments 54
7.6 Restriction on Fundamental Changes 54
7.7 Transactions with Affiliates 57
7.8 Environmental Liabilities 57
7.9 Conduct of Business 57
7.10 Compliance with ERISA 57
7.11 Tax Consolidations 57
7.12 Subsidiaries 57
7.13 Fiscal Year 57
7.14 Press Release; Public Offering Materials 58
7.15 Bank Accounts 58
7.16 Amendments. 58
SECTION 8. DEFAULT, RIGHTS AND REMEDIES 58
8.1 Event of Default 58
(A) Payment 58
(B) Default in Other Agreements 58
(C) Breach of Certain Provisions 58
(D) Breach of Warranty 58
(E) Other Defaults Under Loan Documents 59
(F) Change in Control 59
(G) Involuntary Bankruptcy; Appointment of Receiver, etc. 59
(H) Voluntary Bankruptcy; Appointment of Receiver, etc. 59
(I) Liens 60
(J) Judgment and Attachments 60
(K) Dissolution 60
(L) Solvency 60
(M) Injunction 60
(N) Invalidity of Loan Documents 60
(O) Failure of Security 60
(P) Damage, Strike, Casualty 61
(Q) Licenses and Permits 61
(R) Forfeiture 61
(S) System Activities. 61
(T) Inactive Subsidiaries' Activities. 61
(U) Material Adverse Change. 61
8.2 Suspension of Commitments 61
8.3 Acceleration 62
8.4 Remedies 62
8.5 Appointment of Attorney-in-Fact 63
8.6 Limitation on Duty of Lender with Respect to Collateral 63
8.7 Application of Proceeds 63
8.8 License of Intellectual Property 64
8.9 Waivers, Non-Exclusive Remedies 64
SECTION 9. ASSIGNMENT AND PARTICIPATION; SETOFF 64
9.1 Assignments and Participations in Loans 64
9.2 Set Off and Sharing of Payments 65
SECTION 10. MISCELLANEOUS 65
10.1 Expenses and Attorneys' Fees 65
10.2 Indemnity 66
10.3 Amendments and Waivers 66
10.4 Notices 67
10.5 Survival of Warranties and Certain Agreements 68
10.6 Indulgence Not Waiver 68
10.7 Marshaling; Payments Set Aside 68
10.8 Entire Agreement 68
10.9 Independence of Covenants 68
10.10 Severability 68
10.11 Headings 68
10.12 APPLICABLE LAW 69
10.13 Successors and Assigns 69
10.14 No Fiduciary Relationship; Limitation of Liabilities 69
10.15 CONSENT TO JURISDICTION 69
10.16 WAIVER OF JURY TRIAL 69
10.17 Construction 70
10.18 Counterparts; Effectiveness 70
10.19 No Duty 70
10.20 Year 2000 70
SECTION 11. GUARANTIES 71
11.1 Guaranty 71
11.2 Contribution with Respect to Guaranty Obligations. 71
11.3 Obligations Absolute. 72
11.4 WAIVER. 73
11.5 Recovery 73
11.6 Liability Cumulative 73
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of June 4, 1999, and entered into
among:
GSE POWER SYSTEMS, INC., a Delaware corporation ("Power"),
GSE PROCESS SOLUTIONS, INC., a Delaware corporation ("Process"),
(each a "Borrower" and, collectively, "Borrowers");
and
GSE SYSTEMS, INC., a Delaware corporation ("Systems");
MSHI, INC., a Virginia corporation ("MSHI");
GP INTERNATIONAL ENGINEERING & SIMULATION, INC., a Delaware corporation ("GRI")
(each(including, without limitation, Systems) a "Guarantor" and collectively the
"Guarantors");
and
DIME COMMERCIAL CORP., a New York corporation ("Lender").
WHEREAS, all capitalized terms used herein are defined in Section 1 of this
Agreement;
WHEREAS, the Guarantors and Borrowers desire that Lender extend a credit
facility to Borrowers to refinance certain indebtedness of Borrowers and to
provide working capital financing; and
WHEREAS, Borrowers and Guarantors desire to secure their obligations under
the Loan Documents by granting to Lender a first priority security interest in
and lien upon certain of their property; and
WHEREAS, all Borrowers and all Guarantors are willing to guaranty all of
the obligations of Borrowers to Lender under the Loan Documents;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrowers, Guarantors and Lender
agree as follows:
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms. The following terms used in this Agreement shall
have the following meanings:
"Accounts" means all "accounts" (as defined in the UCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other forms of obligations owed to or owned by any Borrower arising
or resulting from the sale of goods or the rendering of services.
"Acquisition Costs" means the price, cost and expenses payable in
connection with a Permitted Acquisition (including all transaction costs and all
indebtedness, liabilities and contingent obligations incurred or assumed in
connection therewith.)
"Adjustment Date" means, beginning on September 1, 1999, the first day of
each March, June, September or December next succeeding the date on which the
Lender received the financial statements required to be delivered pursuant to
subsection 5.1(B) for the most recently completed Fiscal Quarter, together with
the Compliance Certificate and the Applicable Margin Report required to be
delivered pursuant to subsection 5.1(E) with such financial statements.
"Affected Lender" has the meaning assigned to such term in subsection 2.11.
"Affiliate" means any Person (other than Lender): (a) directly or
indirectly controlling, controlled by, or under common control with, any Loan
Party; (b) directly or indirectly owning or holding five percent (5%) or more of
any equity interest in Systems or any Borrower; (c) five percent (5%) or more of
whose stock or other equity interest having ordinary voting power for the
election of directors or the power to direct or cause the direction of
management, is directly or indirectly owned or held by Systems or any Borrower;
or (d) which has a senior executive officer who is also a senior executive
officer of Systems or any Borrower. For purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by"
and "under common control with") means the possession directly or indirectly of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or other equity
interest, or by contract or otherwise.
"Agreement" means this Loan and Security Agreement as it may be amended,
restated, supplemented or otherwise modified from time to time.
"Allocable Amount" has the meaning assigned to such term in subsection
11.2(B).
"Applicable Base Rate Margin" means, at any date, the applicable percentage
set forth below opposite the Level of Rolling EBITDA as of such date:
Level of Rolling EBITDA Applicable Base Rate Margin
- ----------------------- ---------------------------
Level I: Rolling EBITDA is equal
to or less than $3,500,000 1.50%
Level II: Rolling EBITDA is greater
than $3,500,000 but less than or
equal to $4,500,000 1.25%
Level III: Rolling EBITDA is greater
than $4,500,000 but less than or equal
to $5,500,000 1.00%
Level IV: Rolling EBITDA is greater
than $5,500,000 but less than or equal
to $6,500,000 .75%
Level V: Rolling EBITDA is greater
than $6,500,000 .50%
; provided that (a) the Applicable Base Rate Margin shall be that set forth
above opposite Level I from the Closing Date until the first Adjustment Date
occurring after the Closing Date, (b) the Applicable Base Rate Margin determined
for any Adjustment Date shall remain in effect until a subsequent Adjustment
Date for which Rolling EBITDA falls within a different Level, and (c) if the
financial statements, the related Compliance Certificate and the Applicable
Margin Report for any fiscal period are not delivered by the date due pursuant
to subsections 5.1(B), 5.1(C) and 5.1(E), the Applicable Base Rate Margin shall
be that set forth above opposite Level I until the next subsequent Adjustment
Date.
"Applicable LIBOR Margin" means, at any date, the applicable percentage set
forth below opposite the Level of Rolling EBITDA as of such date:
Level of Rolling EBITDA Applicable LIBOR Margin
- ----------------------- -----------------------
Level I: Rolling EBITDA is equal to
or less than $3,500,000 3.50%
Level II: Rolling EBITDA is greater
than $3,500,000 but less than or equal
to $4,500,000 3.25%
Level III: Rolling EBITDA is greater
than $4,500,000 but less than or equal
to $5,500,000 3.00%
Level IV: Rolling EBITDA is greater
than $5,500,000 but less than or equal
to $6,500,000 2.75%
Level V: Rolling EBITDA is greater
than $6,500,000 2.50%
; provided that (a) the Applicable LIBOR Margin shall be that set forth above
opposite Level I from the Closing Date until the first Adjustment Date occurring
after the Closing Date, (b) the Applicable LIBOR Margin determined for any
Adjustment Date shall remain in effect until a subsequent Adjustment Date for
which Rolling EBITDA falls within a different Level, and (c) if the financial
statements, the related Compliance Certificate and Applicable Margin Report for
any fiscal period are not delivered by the date due pursuant to subsections
5.1(B), 5.1(C) and 5.1(E), the Applicable LIBOR Margin shall be that set forth
above opposite Level I until the next subsequent Adjustment Date.
"Applicable Margin Report" has the meaning assigned to such term in
subsection 5.1(E).
"Asset Disposition" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any or all of
the assets of Systems, any Borrower or any of their respective Subsidiaries.
"Bank Letter of Credit" means each letter of credit issued by a bank
acceptable to and approved by the Lender for the account of any Borrower and
supported by a Risk Participation Agreement.
"Base Rate" means a variable rate of interest per annum equal to the higher
of (a) the rate of interest from time to time established by Dime as its
reference lending rate for domestic commercial loans at its principal domestic
office, or (b) the Federal Funds Effective Rate plus one-half of one percent
(.50%). Such reference lending rate is merely a reference rate and may not
necessarily represent the lowest or best rate actually charged to any customer
by Lender or Dime. Lender and Dime may make loans to customers above, at or
below such reference lending rate.
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate.
"Blocked Accounts" has the meaning assigned to that term in subsection 5.6
"Blocked Account Agreements" has the meaning assigned to such term in
subsection 5.6.
"Borrower" and "Borrowers" have the meanings assigned to such terms in the
preamble to this Agreement.
"Borrower Agreement" means the Borrower Agreement referred to in the
definition of Exim-Bank Documents herein.
"Borrowing Base" has the meaning assigned to such term in subsection
2.1(A)(2).
"Borrowing Base Certificate" means a certificate and assignment schedule
duly executed by an officer of Borrower Representative appropriately completed
and in substantially the form of Exhibit A.
"Borrower Representative" has the meaning assigned to such term in
subsection 2.1(H).
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of New York or is a day on which
banking institutions located in such state are closed, or for the purposes of
LIBOR Loans only, a day on which commercial banks are open for dealings in
Dollar deposits in the London, England (U.K.) market.
"Capital Expenditures" means all expenditures (including deposits) for, or
contracts for expenditures (excluding contracts for expenditures under or with
respect to Capital Leases, but including cash down payments for assets acquired
under Capital Leases) with respect to any fixed assets or improvements, or for
replacements, substitutions or additions thereto, which have a useful life of
more than one year, including the direct or indirect acquisition of such assets
by way of increased product or service charges, offset items or otherwise.
"Capital Lease" means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Corporation or at least P-1 from Moody's Investors Service, Inc.; (c)
certificates of deposit or bankers' acceptances maturing within six (6) months
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and not subject to
setoff rights in favor of such bank; and (d) compensating balances with and
deposits in banks to the extent required to maintain payroll accounts with such
banks.
"Closing Date" means June 4, 1999.
"Collateral" has the meaning assigned to that term in subsection 2.7.
"Collecting Banks" has the meaning assigned to that term in subsection 5.6.
"Commitment" or "Commitments" means the commitment or commitments of
Lenders to make Loans as set forth in subsection 2.1(A) and to provide or
participate in Lender Letters of Credit as set forth in subsection 2.1(F).
"Compliance Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Systems and Borrowers
appropriately completed and in substantially the form of Exhibit B.
"Corporate Overhead" means payments made in cash or accrued by Systems in
connection with the supervision and management of the businesses and operations
of Borrowers including, without limitation, in respect of compensation for
executive officers and other employees of Systems who participate in such
supervision and management, and financial, accounting, legal, computer service,
insurance and other similar payments made in cash relating thereto, in all such
cases being reasonable in amount.
"Default" means a condition, act or event that, after notice or lapse of
time or both, would constitute an Event of
Default.
"Default Rate" has the meaning assigned to that term in subsection 2.2.
"Dime" means The Dime Savings Bank of New York, FSB and its successors.
"Domestic Subsidiary" means any Subsidiary organized under the laws of any
State of the United States.
"EBITDA" means, for any period, without duplication, the total of the
following for Systems, Borrowers and their respective consolidated Subsidiaries
on a consolidated basis, each calculated for such period: (1) net income
determined in accordance with GAAP; plus (without duplication), to the extent
included in the calculation of net income, (2) the sum of (a) income and
franchise taxes paid or accrued; (b) Interest Expenses, net of interest income,
paid or accrued; (c) interest paid in kind; (d) amortization and depreciation
and (e) other non-cash charges (excluding accruals for cash expenses made in the
ordinary course of business); less, to the extent included in the calculation of
net income, (3) the sum of (a) the income of any Person (other than wholly-owned
Subsidiaries of Systems) in which Systems or a Borrower or a wholly-owned
Subsidiary of Systems or a Borrower has an ownership interest except to the
extent such income is received by Systems or a Borrower or such wholly-owned
Subsidiary in a cash distribution during such period; (b) gains or losses from
sales or other dispositions of assets (other than Inventory in the normal course
of business); and (c) extraordinary or non-recurring gains, but not net of
extraordinary or non-recurring "cash" losses.
"Eligible Accounts" has the meaning assigned to that term in subsection
2.1(B).
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of any Loan Party
or any ERISA Affiliate or (b) has at any time within the preceding six (6) years
been maintained for the employees of any Loan Party or any current or former
ERISA Affiliate.
"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials or Environmental Laws.
"Environmental Laws" means any present or future federal, state or local
law, rule, regulation or order relating to pollution, waste, disposal or the
protection of human health or safety, plant life or animal life, natural
resources or the environment.
"Equipment" means all "equipment" (as defined in the UCC), including,
without limitation, all furniture, furnishings, fixtures, machinery, motor
vehicles, trucks, trailers, vessels, aircraft and rolling stock and all parts
thereof and all additions and accessions thereto and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to any Loan Party, means any Person who is a
member of a group which is under common control with any Loan Party, who
together with any Loan Party is treated as a single employer within the meaning
of Section 414(b) and (c) of the IRC.
"Event of Default" means each of the events set forth in subsection 8.1.
"Exim" or "EximBank" means the Export-Import Bank of the United States and
any successor thereto.
"EximBank Documents" means the Borrower Agreement dated June 4, 1999
between Exim, Power, and acknowledged by the Lender, and the Master Guarantee
Agreement No. NY-MGA- 96-020 dated June 4, 1999 between Exim and Lender , each
as amended, restated, supplemented or modified from time to time.
"EximBank Tangible Net Worth" means as to any Person, as at the date of
determination thereof, the equity of such Person and its consolidated
Subsidiaries minus the amounts determined in accordance with paragraphs (a)
through (e) of the definition of Tangible Net Worth, all as determined in
accordance with GAAP.
"Federal Funds Effective Rate" means, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the
immediately following Business Day by the Federal Reserve Bank of New York or,
if such rate is not published for any Business Day, the average of the
quotations for the day of the requested Loan received by Dime from three Federal
funds brokers of recognized standing selected by Dime.
"Fiscal Quarter" has the meaning assigned to such term in the definition of
Fiscal Year.
"Fiscal Year" means each twelve month period ending on the last day of
December in each year (with quarterly accounting periods ending on or about
March 31, June 30, September 30 and December 31 of each Fiscal Year (each a
"Fiscal Quarter")).
"Fixed Charge Coverage" means, for any period, the ratio of Operating Cash
Flow to Fixed Charges.
"Fixed Charges" means, for any period, and each calculated for such period
(without duplication), (a) Interest Expenses paid or accrued by Systems,
Borrowers and their respective consolidated Subsidiaries; plus (b) payments of
principal with respect to all Indebtedness of Systems, Borrowers and their
respective Subsidiaries; plus (c) any provision for (to the extent it is greater
than zero) income or franchise taxes included in the determination of net
income, excluding any provision for deferred taxes; plus (d) payment of deferred
taxes accrued in any prior period; plus (e) Restricted Junior Payments made
during such period.
"Funded Debt" means Indebtedness which matures more than one year from the
date of its creation or matures within one year from such date but is renewable
or extendible, at the option of the debtor, to a date more than one year from
such date or arises under a revolving credit or similar agreement which
obligates the lender or lenders to extend credit during a period of more than
one year from such date including, without limitation, all amounts of Funded
Debt required to be paid or prepaid within one year from the date of
determination.
"Funding Date" means the date of each funding of a Loan or issuance of a
Lender Letter of Credit.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
"GP Strategies" means GP Strategies Corporation, a Delaware corporation.
"GP Strategies Guarantee" means the Guarantee dated June 4, 1999 by GP
Strategies in favor of the Lender.
"Guarantor" and "Guarantors" have the meanings assigned to such terms in
the preamble to this Agreement.
"Guarantor Payment" has the meaning assigned to such term in subsection
11.2(A).
"Hazardous Material" means all or any of the following: (a) substances that
are defined or listed in, or otherwise classified pursuant to, any Environmental
Laws or regulations as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, or toxicity; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; and (d) asbestos in any form or electrical equipment which contains
any oil or dielectric fluid containing polychlorinated biphenyls.
"Inactive Subsidiary" means GSE Systems International Ltd., a Delaware
corporation, GS Information Systems FSC, Ltd., a Barbados corporation, and GSE
Services Company LLC, a Delaware limited liability company, and GSE Erudite
Software, Inc., a Delaware corporation.
"Indebtedness", as applied to any Person, means without duplication: (a)
all indebtedness for borrowed money; (b) all obligations under leases which in
accordance with GAAP constitute Capital Leases; (c) all notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; (e) all indebtedness secured by any Lien
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
non-recourse to the credit of that Person; (f) all obligations in respect of
letters of credit or bankers' acceptances; and (g) any advances` under any
factoring arrangement.
"Intangible Assets" means all intangible assets (determined in conformity
with GAAP) including, without limitation, goodwill, Intellectual Property,
licenses, organizational costs, deferred amounts, covenants not to compete,
unearned income and restricted funds.
"Intellectual Property" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions, copyrights and all applications
and registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired, all goodwill associated
with any of the foregoing, and proceeds of all of the foregoing, including,
without limitation, proceeds of insurance policies thereon.
"Intellectual Property Assignment" means the intellectual property
assignment to be executed and delivered by Systems, each Borrower and each
Guarantor, in a form reasonably acceptable to Lender, as such agreement may
hereafter be amended, restated, supplemented or otherwise modified from time to
time.
"Intercompany Indebtedness" means, with respect to Systems, any Borrower,
any Guarantor or any of their respective Subsidiaries, all assets and
liabilities howsoever arising, which are due to such Person from, or which are
due from such Person to, or which may otherwise arise from any transactions by
such Person with Systems, a Borrower, a Guarantor or a Subsidiary.
"Interest Expenses" means, without duplication, for any period, for
Systems, Borrowers and their respective Subsidiaries each calculated for such
period, the following: all interest expenses deducted in the determination of
net income.
"Interest Period" has the meaning assigned to such term in subsection
2.2(B).
"Interest Rate" has the meaning assigned to such term in subsection 2.2(A).
"Inventory" means all "inventory" (as defined in the UCC), including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business or furnished or
to be furnished under contracts of service, and goods which are returned,
repossessed or reclaimed.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"Lender" has the meaning assigned to such term in the preamble to this
Agreement.
"Lender Letter of Credit" has the meaning assigned to such term in
subsection 2.1(F).
"Lender's Account" means the account designated by Lender from time to time
for payments to Lender under this Agreement.
"Letter of Credit Liability" means all reimbursement and other liabilities
of Borrowers with respect to each Lender Letter of Credit, whether contingent or
otherwise, including: (a) the amount available to be drawn or which may become
available to be drawn; (b) all amounts which have been paid or made available by
any Lender issuing a Lender Letter of Credit or any bank issuing a Bank Letter
of Credit to the extent not reimbursed; and (c) all unpaid interest, fees and
expenses related thereto.
"Liabilities" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.
"LIBOR" means, for each Interest Period, a rate of interest equal to:
(a) the rate of interest determined by Lender at which deposits in Dollars
for the relevant Interest Period are offered based on information presented on
Telerate page 3750 (or such other page as may replace such page on that service)
as of 11:00 A.M. (London Time) on the day which is two (2) Business Days prior
to the first day of such Interest Period, provided, if for any reason such rate
is not available, "LIBOR" shall mean, for each Interest Period, a rate of
interest equal to the rate of interest determined by Lender at which deposits in
Dollars for the relevant Interest Period are offered based on information
presented on the Reuters Screen LIBO Page as of 11:00 A.M. (London time) on the
day which is two (2) Business Days prior to the first day of such Interest
Period; provided further that if at least two such offered rates appear on the
Reuters Screen LIBO Page in respect of such Interest Period, the arithmetic mean
of all such rates (as determined by Lender) will be the rate used; provided
further that if Reuters ceases to provide LIBOR quotations, such rate shall be
the average rate of interest determined by Lender at which deposits in Dollars
are offered for the relevant Interest Period by The Chase Manhattan Bank,
Citibank N.A. or its successors to prime banks in the London interbank market as
of 11:00 A.M. (London time) on the applicable interest rate determination date;
in each case divided by
(b) a number equal to 1.0 minus the aggregate (but without duplication) of
the rates (expressed as a decimal fraction) of reserve requirements in effect on
the day which is two (2) Business Days prior to the beginning of such Interest
Period (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other governmental authority having jurisdiction with
respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
such Board) which are required to be maintained by a member bank of the Federal
Reserve System,
(such rate to be adjusted to the nearest one sixteenth of one percent (1/16
of 1%) or, if there is not a nearest one sixteenth of one percent (1/16 of 1%),
to the next higher one sixteenth of one percent (1/16 of 1%).
"LIBOR Loans" means at any time that portion of the Loans bearing interest
at rates determined by reference to LIBOR.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest) and any filing of UCC
financing statements or similar instruments.
"Loan" or "Loans" means an advance or advances under the Revolving Loan
Commitment.
"Loan Documents" means this Agreement, the EximBank Documents, the Note,
the Intellectual Property Assignment, the GP Strategies Guarantee and ManTech
Guarantee, the Pledge Agreements, and all other instruments, documents and
agreements executed by or on behalf of any Loan Party and delivered concurrently
herewith or at any time hereafter to or for Lender in connection with the Loans,
any Lender Letter of Credit and other transactions contemplated by this
Agreement, all as amended, restated, supplemented or modified from time to time.
"Loan Party" means each of the Borrowers, Systems, the Guarantors, their
respective Subsidiaries, and any other Person (other than Lender, GP Strategies
and ManTech) which is or becomes a party to any Loan Document (collectively,
referred to as the "Loan Parties").
"Loan Year" means each period of twelve (12) consecutive months commencing
on the Closing Date and on each anniversary thereof.
"ManTech" means Mantech International Corporation, a New Jersey
corporation.
"ManTech Guarantee" means the Guarantee dated June 4, 1999 by ManTech in
favor of the Lender.
"Material Adverse Effect" means (1) a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of any Loan Party on an individual basis or taken as a whole, (b) the
ability of any Loan Party to perform its obligations under any Loan Document to
which it is a party or of Lender to enforce or collect any of the Obligations or
(c) the value of any Collateral or the validity, perfection, priority or
enforceability of Lender's Lien in any Collateral, or (2) any loss, cost,
liability or expense suffered or incurred by any Loan Party involving an amount
in excess of $250,000.
"Maximum Revolving Loan Amount" has the meaning assigned to that term in
subsection 2.1(A)(1).
"MGA" means the Master Guarantee Agreement referred to in the definition of
EximBank Documents herein.
"Notes" means the Revolving Notes.
"Notice of Borrowing" has the meaning assigned to such term in subsection
2.1(C).
"Obligations" means all obligations, liabilities and indebtedness of every
nature of each Loan Party from time to time owed to Lender under the Loan
Documents including the principal amount of all debts, claims and indebtedness
(whether incurred before or after the Termination Date), accrued and unpaid
interest and all fees, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable including, without limitation, all interest,
fees, costs and expenses accrued or incurred after the filing of any petition
under any bankruptcy or insolvency law and the obligation to deposit cash
collateral or other amounts under this Agreement.
"Operating Cash Flow" means, for any period, (a) EBITDA less (b) Capital
Expenditures and less (c) the aggregate amount of contingent and "earnout"
payments for which Systems, either Borrower or any of their Subsidiaries is
obligated in respect of any Permitted Acquisition, that are paid in cash during
such period.
"PermittedAcquisition" has the meaning assigned to such term in subsection
7.6(B).
"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other than Liens relating to Environmental Claims or ERISA) for taxes,
assessments or other governmental charges: (x) not yet due and payable; or (y)
due and payable that are being contested in good faith by appropriate
proceedings, provided that, in the case of Liens under this clause (y), a
reserve against the Borrowing Base shall have been established in the amount of
the claims for any such taxes, assessments or other governmental charges; (b)
statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen and
other similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent or the validity of
which is being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted, and (x) the outcome of such proceedings, if
adversely determined, could not have a Material Adverse Effect, and (y) the
amount of such Liens shall be deducted from the Borrowing Base if such Liens
attach to any assets included in the Borrowing Base; (c) Liens (other than any
Lien imposed by ERISA) incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money); (d) easements, rights-of-way, restrictions, and other similar charges or
encumbrances not interfering in any material respect with the ordinary conduct
of the business of Systems, either Borrower, any Guarantor or any of their
respective Subsidiaries; (e) Liens for purchase money obligations, provided that
(i) the Indebtedness secured by any such Lien is permitted under subsection 7.1
and (ii) such Lien encumbers only the asset so purchased; (f) Liens in favor of
Lender; (g) Liens set forth on Schedule 1.1(A); and (h) attachment, judgment and
other similar liens not attaching to the Collateral which arise in connection
with court proceedings, as to which the execution or other enforcement thereof
is effectively stayed, or which are fully covered by applicable insurance as to
which the insurance company has acknowledged coverage (which shall not include
any bonding or other arrangement in connection with which either of the
Borrowers or any of the other Loan Parties may be liable to any extent)
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Pledge Agreement" means each stock pledge agreement executed and delivered
by Systems, each Borrower and each Subsidiary that has a Subsidiary in favor of
Lender, in form and substance satisfactory to Lender.
"Pro Forma" means the unaudited consolidated and consolidating balance
sheet of Systems and the Borrowers as of the Closing Date after giving effect to
the transactions contemplated by this Agreement. The Pro Forma is annexed hereto
as Schedule 1.1(B).
"Projections" means Systems' and the Borrowers' forecasted: (a)
consolidated and consolidating balance sheets; (b) consolidated and
consolidating profit and loss statements; (c) consolidated and consolidating
cash flow statements; (d) capitalization statements; and (e) consolidated and
consolidating schedule of Indebtedness, all prepared on a division by division
and Subsidiary by Subsidiary basis and otherwise consistent with Systems' and
such Borrower's financial statements, together with appropriate supporting
details and a statement of underlying assumptions.
"Reconciliation Report" means a report duly executed by the chief executive
officer or chief financial officer or another officer responsible for finance
matters of a Borrower Representative appropriately completed and in
substantially the form of Exhibit C.
"Restricted Junior Payment" means: (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock or
partnership, membership or other equity interest of Systems, a Borrower or any
of their respective Subsidiaries now or hereafter outstanding, except a dividend
payable solely with shares of the class of stock on which such dividend is
declared; (b) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, retirement, defeasance,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any Indebtedness subordinated in right of payment to the
Obligations or any shares of any class of stock or partnership, membership or
other equity interest of Systems, a Borrower or any of their respective
Subsidiaries now or hereafter outstanding, or the issuance of a notice of an
intention to do any of the foregoing; (c) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of stock or partnership, membership or other equity
interest of Systems, a Borrower or any of their respective Subsidiaries now or
hereafter outstanding; and (d) any payment by Systems, a Borrower or any of
their respective Subsidiaries of any management fees, consulting fees or similar
fees to any Affiliate, whether pursuant to a management agreement or otherwise.
"Revolving Advance" means each advance made by Lender(s) pursuant to
subsection 2.1(A).
"Revolving Loan" means the outstanding balance of all Revolving Advances
and any amounts added to the principal balance of the Revolving Loan pursuant to
this Agreement.
"Revolving Loan Commitment" means the commitment of Lender to make
Revolving Advances pursuant to subsection 2.1(A), and to purchase participations
in Lender Letters of Credit pursuant to subsection 2.1(F) in the aggregate
amount set forth on the signature page of this Agreement (or any amendment to
this Agreement) opposite Lender's signature.
"Revolving Notes" means the promissory notes of the Borrowers in a form
reasonably acceptable to the Lender, issued pursuant to subsection 2.1(D).
"Risk Participation Agreement" has the meaning assigned to that term in
subsection 2.1(F).
"Rolling EBITDA" means EBITDA for a period of four consecutive Fiscal
Quarters ending on the last day of each Fiscal Quarter prior to each Adjustment
Date.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other subsidiaries of that Person or a combination thereof.
"Tangible Net Worth" means, as to any Person as of the date of
determination thereof, the excess of total assets over total liabilities, as
determined in accordance with GAAP, and less the sum of (without duplication):
(a) the total book value of all assets of such Person and its
Subsidiaries properly classified as intangible assets under GAAP, including such
items as good will, the purchase price of acquired assets in excess of the fair
market value thereof, trademarks, trade names, service marks, brand names,
copyrights, patents and licenses, and rights with respect to the foregoing; plus
(b) all amounts representing any write-up in the book value of any
assets of such Person or its Subsidiaries resulting from a revaluation thereof
subsequent to December 31,1998; plus
(c) to the extent otherwise includable in the computation of Tangible
Net Worth, any subscriptions receivable; plus
(d) any deferred charges and treasury stock; plus
(e) software development costs.
"Target" means, with respect to any Permitted Acquisition, any Person whose
capital stock, assets or business are being acquired pursuant to such Permitted
Acquisition.
"Termination Date" means May 31, 2002.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of New York, as amended from time to time, and any successor statute.
"Unused Availability" means, as of any date, the amount (if any) by which
the Maximum Revolving Loan Amount exceeds the Revolving Loan.
1.2 Accounting Terms. For purposes of this Agreement, all accounting terms
not otherwise defined herein shall have the meanings assigned to such terms in
conformity with GAAP. Financial statements and other information furnished to
Lender pursuant to subsection 5.1 shall be prepared in accordance with GAAP (as
in effect at the time of such preparation) on a consistent basis. In the event
any "Accounting Changes" (as defined below) shall occur and such changes affect
financial covenants, standards or terms in this Agreement, then Systems,
Borrowers and Lender agree to enter into negotiations in order to amend such
provisions of this Agreement so as to equitably reflect such Accounting Changes
with the desired result that the criteria for evaluating the financial condition
of Systems, Borrowers and their respective Subsidiaries shall be the same after
such Accounting Changes as if such Accounting Changes had not been made, and
until such time as such an amendment shall have been executed and delivered by
Systems, Borrowers and the other Loan Parties and Lender, (A) all financial
covenants, standards and terms in this Agreement shall be calculated and/or
construed as if such Accounting Changes had not been made, and (B) Systems and
Borrowers shall prepare footnotes to each Compliance Certificate and the
financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). "Accounting Changes" means: (a)
changes in accounting principles required by GAAP and implemented by Systems,
Borrowers and their respective Subsidiaries; (b) changes in accounting
principles recommended by Systems' or Borrowers' certified public accountants;
and (c) changes in carrying value of any of Systems', any Borrowers' or any of
their respective Subsidiaries' assets, liabilities or equity accounts resulting
from any adjustments in excess of $50,000 in the aggregate that, in each case,
were applicable to, but not included in, the Pro Forma. All such adjustments
resulting from expenditures made subsequent to the Closing Date (including, but
not limited to, capitalization of costs and expenses or payment of pre-Closing
Date liabilities) shall be treated as expenses in the period the expenditures
are made and deducted as part of the calculation of EBITDA in such period.
1.3 Other Definitional Provisions. References to "Sections", "subsections",
"Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and
Schedules, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. In this Agreement, words importing any gender include the other
genders; the words "including," "includes" and "include" shall be deemed to be
followed by the words "without limitation"; references to agreements and other
contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
SECTION 2. LOANS AND COLLATERAL
2.1 Loans.
(A) Revolving Loan. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Systems,
Borrowers and the other Loan Parties set forth herein and in the other Loan
Documents, each Lender agrees to lend to Borrowers from time to time Revolving
Advances. The Revolving Loan Commitment shall not exceed at any time $9,000,000
to both Borrowers less any reductions pursuant to subsection 2.4(B).
Notwithstanding the foregoing, the portion of the Revolving Loan attributable to
either Borrower at any time plus the Letter of Credit Liability of such Borrower
at such time, but only in respect of any Letter of Credit issued for the account
of such Borrower (together with the aggregate amount theretofore paid by Lender
in respect of any Letter of Credit issued for the account of such Borrower and
not reimbursed by such Borrower) shall not exceed the lesser of : (1)(x) in the
case of Power, $6,000,000, and (y) in the case of Process, $3,000,000, and (2)
that portion of the Borrowing Base attributable to such Borrower. Amounts
borrowed under this subsection 2.1(A) may be repaid and reborrowed at any time
prior to the earlier of (i) the termination of the Revolving Loan Commitment
pursuant to subsection 8.3 or (ii) the Termination Date. Except as otherwise
provided herein, Lender shall not have any obligation to make an advance under
this subsection 2.1(A) to a Borrower to the extent such advance would cause the
Revolving Loan (after giving effect to any immediate application of the proceeds
thereof) to exceed the Maximum Revolving Loan Amount.
(1) "Maximum Revolving Loan Amount" means, as of any date of
determination, the lesser of (a) the Revolving Loan Commitment minus the Letter
of Credit Liability and (b) the Borrowing Base minus the Letter of Credit
Liability.
(2) "Borrowing Base" means, as of any date of determination, an
amount equal to the sum of (x) 90% of Eligible Accounts of Power and 85% of
Eligible Accounts of Process less such reserves as Lender in its sole discretion
may elect to establish, plus (y) 60% of Power's Eligible Unbilled Accounts, less
such reserves as Lender in its sole discretion may elect to establish, plus (z)
20% of Eligible Inventory of Process but not exceeding $600,000 in the aggregate
under this clause (z), provided that Accounts of Power under which the customer
is located in the United States shall be in an aggregate amount less than
Power's backlog of orders with customers located outside the United States. A
portion of the Borrowing Base shall be attributed to each Borrower on the basis
of the appropriate percentage set forth above of the assets of such Borrower
included in the Borrowing Base.
(B) Eligible Accounts and Inventory.
"Eligible Accounts" means, as at any date of determination, the
aggregate of all Accounts that Lender, in its sole judgment, deems to be
eligible for borrowing purposes (provided that Lender shall give Borrower
Representative reasonably prompt notice following any determination by Lender to
exclude any Accounts from Eligible Accounts based on criteria other than those
set forth below, which notice shall include, subject to confidentiality
constraints as determined by Lender in its sole discretion, the basis for such
determination by Lender). Without limiting the generality of the foregoing,
unless otherwise agreed by Lender, the following Accounts are not Eligible
Accounts:
(1) Accounts which remain unpaid for more than ninety (90) days
after the date of issuance of the original invoice;
(2) Accounts which are otherwise eligible with respect to which
the account debtor is owed a credit or other obligation by any Borrower, but
only to the extent of such credit or other obligation;
(3) Accounts due from a customer whose principal place of
business is located outside the United States of America or Canada unless: (a)
the customer has been approved by Exim and the Account is eligible for inclusion
in the Borrowing Base under the EximBank Documents or (b) such Account is backed
by a letter of credit, in form and substance acceptable to Lender and issued or
confirmed by a bank that is organized under the laws of the United States of
America or a State thereof, that is acceptable to Lender; provided that such
letter of credit has been delivered to Lender as additional collateral;
(4) Accounts due from a customer which Lender has notified
Borrower Representative does not have a satisfactory credit standing;
(5) Accounts in excess of an aggregate face amount of $100,000
with respect to which the customer is the United States of America, any state or
any municipality, or any department, agency or instrumentality thereof unless
the applicable Borrower has, with respect to such Accounts, complied with the
Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any applicable
statute or municipal ordinance of similar purpose and effect, provided that such
Accounts shall not be excluded from Eligible Accounts if the Borrower has
complied with its obligations under Section 2.15;
(6) Accounts with respect to which the customer is an Affiliate
of any Borrower or a director, officer, agent, stockholder or employee of any
Borrower or any of its Affiliates;
(7) Accounts due from a customer if more than fifty percent (50%)
of the aggregate amount of Accounts of such customer owing to any Borrower or in
the aggregate to all Borrowers have at the time remained unpaid for more than
ninety (90) days after the date of issuance of the original invoice;
(8) Accounts with respect to which there is any unresolved
dispute with the respective customer (but if the amount in dispute relates to
25% or less of the amount of such Accounts, only to the extent of the amount of
such dispute);
(9) Accounts evidenced by an "instrument" or "chattel paper" (as
defined in the UCC) not in the possession of Lender;
(10) Accounts with respect to which Lender does not have a valid,
first priority and fully perfected security interest;
(11) Accounts subject to any Lien except those in favor of Lender
and except Permitted Encumbrances referred to in clauses (a) and (h) of the
definition of such term herein as to which a reserve against or deduction from
the Borrowing Base shall have been established;
(12) Accounts with respect to which either Borrower has received
notice that the customer is the subject of any bankruptcy or other insolvency
proceeding;
(13) Accounts due from a customer (other than the United States
Department of Energy and its subdivisions) to the extent that such Accounts
exceed in the aggregate an amount equal to fifteen percent (15%) of the
aggregate of all Accounts at said date;
(14) Accounts with respect to which the customer's obligation to
pay is conditional or subject to a repurchase obligation or right to return or
with respect to which the goods or services giving rise to such Account have not
been delivered (or performed, as applicable) and accepted by such account
debtor, including progress billings, bill and hold sales, guarantied sales, sale
or return transactions, sales on approval or consignment sales;
(15) Any Account with respect to which the customer is located in
(a) New Jersey or Minnesota, or any other state denying creditors access to its
courts in the absence of a Notice of Business Activities Report or other similar
filing, unless the Borrower holding such Account has either qualified as a
foreign corporation authorized to transact business in such state or has filed a
Notice of Business Activities Report or similar filing with the applicable state
agency for the then current year, or (b) any country where Exim is off cover in
accordance with EximBank's Country Limitation Schedule in effect from time to
time;
(16) Accounts with respect to which the customer is a creditor of
any Borrower; provided, however, that any such Account shall only be ineligible
as to that portion of such Account which is less than or equal to the amount
owed by Borrowers to such Person; and
(17) Accounts which do not conform to the requirements contained
in the EximBank Documents or are excluded from the Borrowing Base by Section 2.3
of the Borrower Agreement.
"Eligible Inventory" means, as at any date of determination, all
Inventory of a Borrower (excluding all spare parts) consisting of finished
products, work in progress, or raw materials, valued at the lower of its cost or
its market value that Lender, in its sole judgment, deems to be eligible for
borrowing purposes (provided that Lender shall give Borrower Representative
reasonably prompt notice following any determination by Lender to exclude any
Inventory from Eligible Inventory based on criteria other than those set forth
below, which notice shall include the basis for such determination by Lender).
Without limiting the generality of the foregoing, unless otherwise agreed by
Lender, Eligible Inventory shall satisfy the following eligibility criteria:
(1) such Inventory was acquired by a Borrower in the ordinary course
of business from a non-Affiliate and such Inventory is merchantable and not
obsolete, damaged or otherwise unfit for sale or further processing;
(2) a Borrower has legal and valid title to such Inventory;
(3) a Borrower has the full and unqualified right to assign and grant
a Lien on such Inventory to the Lender as security for the Obligations;
(4) such Inventory is subject to a valid and enforceable perfected
Lien in favor of the Lender, which Lien is prior to the rights of, and
enforceable as such against, all other Persons, and is subject to no other Liens
except Permitted Encumbrances referred to in clauses (a), (b) or (h) of the
definition of such term herein as to which a reserve against or deduction from
the Borrowing Base shall have been established;
(5) none of such Inventory is evidenced by bills of lading or other
documents of title, whether negotiable or non-negotiable, unless such negotiable
document of title has been issued and duly negotiated to a Borrower or the
Lender or such non-negotiable document of title has been issued in the name of
and delivered to a Borrower or the Lender and, in each case, the issuer is
acceptable to the Lender; and
(6) such Inventory is located in a facility acceptable to the Lender
which is owned by a Borrower, leased by a Borrower or otherwise under the
control of a Borrower.
"Eligible Unbilled Accounts" means, as at any date of determination,
Power's rights and claims for services actually performed or goods actually
delivered to a customer as to which such Borrower has not yet issued an invoice.
In order to qualify as an Eligible Unbilled Account, such rights and claims must
be deemed eligible by the Lender, in its sole judgment, for borrowing purposes
(provided that Lender shall give Borrower Representative reasonably prompt
notice following any determination by Lender to exclude such rights or claims
from Eligible Unbilled Accounts based on criteria other than those set forth
below, which notice shall include the basis for such determination by Lender).
The amount of Eligible Unbilled Accounts shall be equal to the amount that would
be included as Eligible Accounts upon issuance of an invoice therefor, but not
to exceed recoverable costs under the relevant contract and not to include any
accrued profit. Without limiting the generality of the foregoing, unless
otherwise agreed by Lender, Eligible Unbilled Accounts shall satisfy the
following eligibility criteria:
(1) Upon issuance of an invoice therefor, an Eligible Account will
arise in favor of a Borrower;
(2) Even if no other services were performed or goods delivered to the
customer, a Borrower has the right to issue an invoice to its customer for
services performed or goods delivered prior to the date as of which Eligible
Unbilled Accounts is determined; and
(3) No Eligible Unbilled Account shall be included in Eligible
Accounts.
(C) Borrowing Mechanics.
(1) LIBOR Loans made on any Funding Date shall be in an aggregate
minimum amount of $500,000 and integral multiples of $100,000 in excess of such
amount.
(2) On any day when any Borrower desires an advance under this
subsection 2.1, Borrower Representative shall give Lender telephonic notice of
the proposed borrowing by 11:00 a.m. New York City time on the Funding Date of a
Base Rate Loan and three (3) Business Days in advance of the Funding Date of a
LIBOR Loan, which notice shall also specify the proposed Funding Date (which
shall be a Business Day), whether such Loans shall consist of Base Rate Loans or
LIBOR Loans, and for LIBOR Loans the Interest Period applicable thereto, and the
name(s) of Borrower(s) on whose behalf such Loans are being requested. Any such
telephonic notice shall be confirmed in writing on the same day by delivery by
one or more of the Borrower Representatives of a Notice of Borrowing in the form
of Exhibit D annexed hereto (a "Notice of Borrowing"). Lender shall not incur
any liability to any Borrower for acting upon any telephonic notice Lender
believes in good faith to have been given by a duly authorized officer or other
Person authorized to convey such notice on behalf of a Borrower or for otherwise
acting in good faith under this subsection 2.1(C). Lender shall not be obligated
to make any advance pursuant to any telephonic notice unless it has also
received the most recent Borrowing Base Certificate and all other documents
required under subsection 5.1 by 11:00 a.m. New York City time. Each Revolving
Advance shall be deposited by wire transfer in immediately available funds in a
Borrower's operating account with Dime as Borrower Representative may from time
to time designate to Lender in writing. The becoming due of any amount required
to be paid under this Agreement or any of the other Loan Documents, whether
principal, accrued interest or fees, shall be deemed irrevocably to be a request
by Borrowers or Borrower Representative for a Base Rate Revolving Loan on the
due date of, and in the amount required to pay, such principal, accrued interest
and fees, and the proceeds of each such Revolving Advance if made by Lender
shall be disbursed by Lender by way of direct payment of the relevant
obligation.
(D) Note. Each of the Borrowers shall jointly and severally execute
and deliver to Lender with appropriate insertions Revolving Notes in the
principal amount of $6,000,000 and $3,000,000, respectively, to evidence
Lender's Revolving Loan Commitment to the Borrowers, respectively. In the event
of an assignment under subsection 9.1, Borrowers shall, upon surrender of the
assigning Lender's Note, issue a new Note to reflect the interest held by the
assigning Lender and its assignee.
(E) Evidence of Revolving Loan Obligations. Each Revolving Advance
shall be evidenced by this Agreement, the Revolving Notes, and notations made
from time to time by Lender in its books and records, including computer
records. Lender shall record in its books and records, including computer
records, the principal amount of the Revolving Loan owing to it from time to
time. Lender's books and records shall constitute presumptive evidence, absent
manifest error, of the accuracy of the information contained therein. Failure by
Lender to make any such notation or record shall not affect the obligations of
Borrowers to Lender with respect to the Revolving Loans.
(F) Letters of Credit. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Systems,
Borrowers and the other Loan Parties, the Revolving Loan Commitments may, in
addition to Revolving Advances, be utilized, upon the request of Borrower
Representative, for (i) the issuance of letters of credit by Lender, or (ii) the
issuance by Lender of risk participations (a "Risk Participation Agreement") to
banks to induce such banks to issue letters of credit for the account of any
Borrower or to Dime to induce Dime to enter into such a risk participation with
such an issuing bank (each of (i) and (ii) above a "Lender Letter of Credit").
In no event shall any Lender Letter of Credit be issued to the extent that the
issuance of such Lender Letter of Credit would cause the sum of the Letter of
Credit Liability after giving effect to such issuance plus the Revolving Loan to
exceed the lesser of (x) the Borrowing Base and (y) the Revolving Loan
Commitment. Notwithstanding the foregoing, in no event shall any Lender Letter
of Credit be issued on behalf of any Borrower to the extent that the issuance of
such Lender Letter of Credit would cause the sum of the Revolving Loan
outstanding to such Borrower plus the Letter of Credit Liability attributable to
such Borrower to exceed that portion of the Borrowing Base attributable to such
Borrower.
(1) Maximum Amount. The aggregate amount of Letter of Credit
Liability with respect to all Lender Letters of Credit outstanding at any time
shall not exceed $9,000,000.
(2) Reimbursement. Borrowers shall be irrevocably and
unconditionally obligated forthwith without presentment, demand, protest or
other formalities of any kind, to reimburse Lender or the issuer for any amounts
paid with respect to a Lender Letter of Credit including all fees, costs and
expenses paid to any bank that issues a Bank Letter of Credit. Borrowers hereby
authorize and direct Lender, at Lender's option, to debit each Borrower's
account (by increasing the principal balance of the Revolving Loan) in the
amount of any payment made with respect to any Lender Letter of Credit issued
for the account of such Borrower. All amounts paid with respect to any Lender
Letter of Credit that are not immediately repaid by Borrowers with the proceeds
of a Revolving Advance or otherwise shall bear interest at the Default Rate
applicable to Base Rate Revolving Loans.
(3) Conditions of Issuance. In addition to all other terms and
conditions set forth in this Agreement, the issuance of any Lender Letter of
Credit shall be subject to the satisfaction of all conditions applicable to
Revolving Advances, and the conditions that the letter of credit be in such
form, be for such amount, contain such terms and support such transactions as
are permitted under Section 5.15 and would not constitute a Default or Event of
Default. The expiration date of each Lender Letter of Credit shall be on a date
which is at least thirty (30) days prior to the Termination Date.
(4) Request for Letters of Credit. Borrower Representative shall
give Lender at least three (3) Business Days prior notice specifying the date a
Lender Letter of Credit is to be issued, identifying the beneficiary and
describing the nature of the transactions proposed to be supported thereby. The
notice shall be accompanied by the form of the letter of credit being requested
and shall contain certifications equivalent to those in the last paragraph of
the Notice of Borrowing.
(G) Other Letter of Credit Provisions.
(1) Obligations Absolute. The obligation of Borrowers to
reimburse Lender for payments made under, and other amounts payable in
connection with, any Lender Letter of Credit shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including the following circumstances:
(a) any lack of validity or enforceability of any Lender
Letter of Credit, Risk Participation Agreement or any other agreement;
(b) the existence of any claim, set-off, defense or other
right which any Borrower, any of its Affiliates or Lender, on the one hand, may
at any time have against any beneficiary or transferee of any Lender Letter of
Credit or Bank Letter of Credit (or any Persons for whom any such transferee may
be acting), Lender or any other Person, on the other hand, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between any Borrower or any of
its Affiliates and the beneficiary of the letter of credit);
(c) any draft, demand, certificate or any other document
presented under any Lender Letter of Credit is, or is alleged to be, forged,
fraudulent, invalid or ineffective in any respect or any statement therein being
untrue or inaccurate in any respect;
(d) payment under any Lender Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such letter of credit; provided that, in the case of
any payment by Lender or the issuer of a Bank Letter of Credit under any Lender
Letter of Credit or Bank Letter of Credit, either (x) Lender has not acted with
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction) in determining that the demand for payment under such Lender
Letter of Credit or Bank Letter of Credit complies on its face with any
applicable requirements for a demand for payment under such Lender Letter of
Credit or Bank Letter of Credit or (y) the documents presented under such letter
of credit substantially comply with the terms of such letter of credit;
(e) any other circumstance or happening whatsoever, which is
similar to any of the foregoing, provided that this clause (e) shall not apply
to any payment by Lender under a Lender Letter of Credit where the beneficiary
fails fully to comply with the conditions for drawing unless either (x) Lender
has not acted with gross negligence or willful misconduct (as determined by a
court of competent jurisdiction) in determining that the demand for payment
under such Lender Letter of Credit complies on its face with any applicable
requirements for a demand for payment thereunder or (y) the documents presented
under such letter of credit substantially comply with the terms of such letter
of credit; or
(f) the fact that a Default or an Event of Default shall
have occurred and be continuing.
(2) Nature of Lender's Duties. As between Lender on the one hand,
and Borrowers, on the other hand, Borrowers assume all risks of the acts and
omissions of, or misuse of any Lender Letter of Credit by, the beneficiary
thereof. In furtherance and not in limitation of the foregoing, Lender shall not
be responsible: (a) for the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document in connection with the application for and
issuance of any Lender Letter of Credit, even if it should in fact prove to be
in any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(b) for the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any Lender Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (c) for failure of the beneficiary of
any Lender Letter of Credit to comply fully with conditions required in order to
demand payment thereunder; provided that, in the case of any payment by Lender
under any Lender Letter of Credit, either (x) Lender has not acted with gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction) in determining that the demand for payment under such Lender
Letter of Credit complies on its face with any applicable requirements for a
demand for payment thereunder or (y) the documents presented under such letter
of credit substantially comply with the terms of such letter of credit; (d) for
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (e) for errors in interpretation of technical terms; (f) for any loss
or delay in the transmission or otherwise of any document required in order to
make a payment under any Lender Letter of Credit; (g) for the credit of the
proceeds of any drawing under any Lender Letter of Credit; and (h) for any
consequences arising from causes beyond the control of Lender. None of the above
shall affect, impair, or prevent the vesting of any of Lender's rights or powers
hereunder.
(3) Liability. In furtherance and extension of and not in
limitation of the specific provisions herein above set forth, any action taken
or omitted by Lender under or in connection with any Lender Letter of Credit, if
taken or omitted in good faith, shall not put Lender under any resulting
liability to any Borrower, provided that this paragraph (3) shall not apply if
Lender makes a payment under a Lender Letter of Credit where the beneficiary
fails fully to comply with the conditions for drawing, unless either (x) Lender
has not acted with gross negligence or willful misconduct (as determined by a
court of competent jurisdiction) in determining that the demand for payment
under such Lender Letter of Credit complies on its face with any applicable
requirements for a demand for payment thereunder or (y) the documents presented
under such letter of credit substantially comply with the terms of such letter
of credit.
(H) Appointment of Borrower Representative. Each Borrower hereby
designates Systems and the other Borrower, each acting singly or together with
the other, as its representative and agent (each a "Borrower Representative")
for the purposes of initiating borrowing requests, requesting Lender Letters of
Credit, selecting interest rate options and giving and receiving notices and
consents hereunder or under any of the other Loan Documents. Lender may regard
any notice or other communication pursuant to any Loan Document from any
Borrower Representative as a notice or communication from Borrowers. Each
Borrower hereby covenants and agrees that each representation and warranty,
covenant, agreement and undertaking made in its name or on its behalf by either
Borrower Representative shall be deemed for all purposes to have been made by
such Borrower and shall be binding upon and enforceable against such Borrower to
the same extent as if the same had been made directly by such Borrower.
2.2 Interest.
(A) Rate of Interest. The Loans and all other Obligations shall bear
interest from the date such Loans are made or such other Obligations become due
to the date paid at a rate per annum equal to (i) in the case of Base Rate Loans
and other Obligations for which no other interest rate is specified, the Base
Rate plus the Applicable Base Rate Margin, and (ii) in the case of LIBOR Loans,
LIBOR plus the Applicable LIBOR Margin (the "Interest Rate"). The applicable
basis for determining the rate of interest shall be selected by Borrower
Representative initially at the time a Notice of Borrowing is given pursuant to
subsection 2.1(C). The basis for determining the interest rate with respect to
any Loan or a portion of any Loan may be changed from time to time pursuant to
subsection 2.2(E). If on any day a Loan or a portion of any Loan is outstanding
with respect to which notice has not been delivered to Lender in accordance with
the terms of this Agreement specifying the basis for determining the rate of
interest, then for that day that Loan or portion thereof shall bear interest
determined by reference to the Base Rate.
After the occurrence and during the continuance of an Event of Default (i)
the Loans and all other Obligations shall, at the option of Lender, bear
interest at a rate per annum equal to two percent (2%) plus the applicable
Interest Rate (the "Default Rate"), and (ii) each LIBOR Loan shall automatically
convert to a Base Rate Loan at the end of any applicable Interest Period. After
the occurrence and during the continuance of any Event of Default or Default, no
Loans may be converted to LIBOR Loans.
(B) Interest Periods. In connection with each LIBOR Loan, Borrower
Representative shall elect an interest period (each an "Interest Period") to be
applicable to such Loan, which Interest Period shall be either a one, two, three
or four month period; provided that:
(1) the initial Interest Period for any LIBOR Loan shall commence
on the Funding Date of such Loan;
(2) in the case of successive Interest Periods, each successive
Interest Period shall commence on the day on which the immediately preceding
Interest Period expires;
(3) if an Interest Period expiration date is not a Business Day,
such Interest Period shall expire on the next succeeding Business Day; provided
that if such succeeding Business Day falls in the next calendar month, such
Interest Period shall expire on the immediately preceding Business Day;
(4) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall, subject to part
(5) and (6) below, end on the last Business Day of a calendar month;
(5) no Interest Period shall extend beyond the Termination Date;
(6) no Interest Period may extend beyond a scheduled principal
payment date unless the sum of (a) the aggregate principal amount of Loans that
are Base Rate Loans or that have Interest Periods expiring on or before such
date and (b) the Unused Availability equals or exceeds the principal amount
required to be paid on the Loans on such date; and
(7) there shall be no more than five (5) Interest Periods
relating to LIBOR Loans outstanding at any time.
(C) Computation and Payment of Interest. Interest on the Loans and all
other Obligations shall be computed on the daily principal balance on the basis
of a 360 day year for the actual number of days elapsed in the period during
which it accrues. In computing interest on any Loan, the date of funding of the
Loan or the first day of an Interest Period applicable to such Loan or, with
respect to a Base Rate Loan being converted from a LIBOR Loan, the date of
conversion of such LIBOR Loan to such Base Rate Loan, shall be included; and the
date of payment of such Loan or the expiration date of an Interest Period
applicable to such Loan, or with respect to a Base Rate Loan being converted to
a LIBOR Loan, the date of conversion of such Base Rate Loan to such LIBOR Loan,
shall be excluded; provided that if a Loan is repaid on the same day on which it
is made, one day's interest shall be paid on that Loan. Interest on Base Rate
Loans and all other Obligations other than LIBOR Loans shall be payable to
Lender monthly in arrears on the first day of each month, on the date of any
prepayment of Loans, and at maturity, whether by acceleration or otherwise.
Interest on LIBOR Loans shall be payable to Lender on the last day of the
applicable Interest Period for such Loan, on the date of any prepayment of the
Loans, and at maturity, whether by acceleration or otherwise. In addition, for
each LIBOR Loan having an Interest Period longer than three (3) months, interest
on such Loan shall also be payable on the last day of each three (3) month
interval during such Interest Period.
(D) Interest Laws. Notwithstanding any provision to the contrary
contained in this Agreement or any other Loan Document, Borrowers shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by applicable law
("Excess Interest"). If any Excess Interest is provided for or determined by a
court of competent jurisdiction to have been provided for in this Agreement or
in any other Loan Document, then in such event: (1) the provisions of this
subsection shall govern and control; (2) neither any Borrower nor any other Loan
Party shall be obligated to pay any Excess Interest; (3) any Excess Interest
that Lender may have received hereunder shall be, at Lender's option, (a)
applied as a credit against the outstanding principal balance of the Obligations
or accrued and unpaid interest (not to exceed the maximum amount permitted by
law), (b) refunded to the payor thereof, or (c) any combination of the
foregoing; (4) the interest rate(s) provided for herein shall be automatically
reduced to the maximum lawful rate allowed from time to time under applicable
law (the "Maximum Rate"), and this Agreement and the other Loan Documents shall
be deemed to have been and shall be, reformed and modified to reflect such
reduction; and (5) neither any Borrower nor any other Loan Party shall have any
action against Lender for any damages arising out of the payment or collection
of any Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligations is calculated at the Maximum Rate rather than the
applicable rate under this Agreement, and thereafter such applicable rate
becomes less than the Maximum Rate, the rate of interest payable on such
Obligations shall remain at the Maximum Rate until each Lender shall have
received the amount of interest which such Lender would have received during
such period on such Obligations had the rate of interest not been limited to the
Maximum Rate during such period.
(E) Conversion or Continuation. Subject to the provisions of
subsection 2.2(A), Borrower Representative shall have the option to (1) convert
at any time all or any part of outstanding Loans equal to $500,000 and integral
multiples of $100,000 in excess of that amount from Base Rate Loans to LIBOR
Loans or (2) upon the expiration of any Interest Period applicable to a LIBOR
Loan, to (a) continue all or any portion of such LIBOR Loan equal to $500,000
and integral multiplies of $100,000 in excess of that amount as a LIBOR Loan or
(b) convert all or any portion of such LIBOR Loan to a Base Rate Loan. The
succeeding Interest Period(s) of such continued or converted Loan commence on
the last day of the Interest Period of the Loan to be continued or converted;
provided that no outstanding Loan may be continued as, or be converted into, a
LIBOR Loan, when any Event of Default or Default has occurred and is continuing.
Borrower Representative shall deliver a notice of
conversion/continuation to Lender no later than noon (New York time) at least
three (3) Business Days in advance of the proposed conversion/continuation date
("Notice of Conversion/Continuation"). A Notice of Conversion/Continuation shall
certify: (1) the proposed conversion/continuation date (which shall be a
Business Day); (2) the amount of the Loan to be converted/continued; (3) the
nature of the proposed conversion/continuation; (4) in the case of conversion
to, or a continuation of, a LIBOR Loan, the requested Interest Period; and (5)
that no Default or Event of Default has occurred and is continuing or would
result from the proposed conversion/continuation.
In lieu of delivering the Notice of Conversion/Continuation, Borrower
Representative may give Lender telephonic notice by the required time of any
proposed conversion/continuation under this subsection 2.2(E); provided that
such notice shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Lender on or before the proposed
conversion/continuation date.
Lender shall not incur any liability to Borrowers in acting upon any
telephonic notice referred to above that Lender believes in good faith to have
been given by a duly authorized officer or other person authorized to act on
behalf of Borrower or for otherwise acting in good faith under this subsection
2.2(E) and upon conversion/continuation by Lender in accordance with this
Agreement pursuant to any telephonic notice, Borrower Representative shall have
effected such conversion or continuation, as the case may be, hereunder.
2.3 Fees.
(A) Unused Line Fee. Borrowers shall pay to Lender each month a fee in
an amount equal to the average daily Revolving Loan Commitment less the sum of
the average daily balance of the Revolving Loan during the preceding month
multiplied by one half of one percent (.50%) per annum, such fee to be
calculated on the basis of a 360 day year for the actual number of days elapsed
and to be payable monthly in arrears on the first day of the first month
following the Closing Date and the first day of each month thereafter.
(B) Letter of Credit Fees. Borrowers shall pay to Lender each month a
fee with respect to the Lender Letters of Credit in the amount of the average
daily amount of Letter of Credit Liability outstanding during such month
multiplied by the Applicable LIBOR Margin in effect from time to time per annum.
Such fees will be calculated on the basis of a 360 day year for the actual
number of days elapsed and will be payable monthly in arrears on the first day
of each month. Borrowers shall also reimburse Lender for any and all fees and
expenses, including issuance fees, if any, paid by Lender to the issuer of any
Bank Letter of Credit.
(C) Audit Fees. Borrowers agree to pay to Lender promptly after each
request from Lender an audit fee for each inspection equal to Lender's costs per
auditor per day or any portion thereof, together with all out-of-pocket
expenses, and Borrowers agree to reimburse Lender for all fees, costs and
expenses paid by Lender to third party auditors. The maximum amount payable
under this subsection 2.3 (C) in any calendar year shall not exceed $20,000,
provided that such limit shall not apply after the occurrence of any Event of
Default.
(D) Collateral Monitoring Fees. Borrowers shall pay to the Lender on
the first day of each month after the Closing Date a collateral monitoring fee
for the preceding month equal to $500.
(E) Other Fees and Expenses. Borrowers shall pay to Lender all charges
for returned items and all other bank charges incurred by Lender, as well as
Lender's standard wire transfer charges for each wire transfer made under this
Agreement.
(F) Fees Non-Refundable. All of the fees payable under Section 2.3
shall be non-refundable.
2.4 Payments and Prepayments.
(A) Manner and Time of Payment. In its sole discretion, Lender may
charge interest and other amounts payable hereunder to the Revolving Loan, all
as set forth on Lender's books and records. If Lender elects to bill Borrowers
for any amount due hereunder, such amount shall be immediately due and payable
with interest thereon as provided herein. All payments made by Borrowers with
respect to the Obligations shall be made without deduction, defense, setoff or
counterclaim. All payments to Lender hereunder shall, unless otherwise directed
by Lender, be made to Lender's Account or in accordance with subsection 5.6.
Proceeds remitted to Lender's Account shall be credited to the Obligations on
the Business Day such proceeds were received; provided, however, that, for the
purpose of calculating interest on the Obligations, such proceeds shall be
deemed received on the second Business Day after receipt by the Lender of
immediately available funds.
(B) Mandatory Prepayments, etc..
(1) Overadvance. At any time that the Revolving Loan exceeds the
Maximum Revolving Loan Amount, Borrowers shall immediately repay the Revolving
Loan to the extent necessary to reduce the principal balance to an amount equal
to or less than the Maximum Revolving Loan Amount. At any time that the sum of
the Revolving Loan outstanding to any Borrower plus the Letter of Credit
Liability at such time, but only in respect of any Letter of Credit issued on
behalf of such Borrower exceeds that portion of the Borrowing Base attributable
to such Borrower, then such Borrower shall immediately repay the Revolving Loan
to eliminate such excess. If the Revolving Loan is fully repaid, and such excess
still exists, Borrowers shall immediately deposit cash collateral with Lender in
an amount equal to such excess.
(2) Proceeds of Asset Dispositions. At such time that the sum of
all proceeds of all Asset Dispositions and all proceeds (net of underwriting
discounts and commissions and all other reasonable costs associated with the
transaction) from any sale or issuance of any equity or security received by
Systems, Borrowers and their respective Subsidiaries exceeds $50,000, then any
proceeds received above such amount ("Excess Proceeds") shall be subject to this
subsection 2.4(B)(2). The Borrowers shall, immediately upon receipt of such
Excess Proceeds, prepay the Obligations in an amount equal to such Excess
Proceeds and, after all Obligations shall have been paid in full, deposit any
remaining Excess Proceeds as cash collateral with the Lender; provided, however,
that Lender shall release such cash collateral upon request of a Borrower
Representative if no Default or Event of Default shall have occurred and be
continuing.
(C) Voluntary Prepayments and Repayments. Borrowers may, at any time
upon not less than thirty (30) Business Days' prior notice to Lender, terminate
the Revolving Loan Commitment and thereupon shall pay in full all of the
Obligations without premium or penalty (but, for the avoidance of doubt, the
Borrowers shall remain obligated for all amounts payable under subsection 2.11)
and shall cause Lender to be released from all liability under any Lender
Letters of Credit and Risk Participation Agreements or, at Lender's option,
Borrowers will deposit cash collateral with Lender in an amount equal to 105% of
the Letter of Credit Liability that will remain outstanding after prepayment or
repayment, all under and pursuant to such instruments and documents in form and
substance satisfactory to Lender.
(D) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next succeeding Business Day, except as otherwise
contemplated by subsection 2.2(B) and (C), and such extension of time shall be
included in the computation of the amount of interest or fees due hereunder.
2.5 Term of this Agreement. The Commitments shall (unless earlier
terminated pursuant to this Agreement) terminate upon the earlier of (i) the
occurrence of an event specified in subsection 8.3 or (ii) the Termination Date.
Upon termination in accordance with subsection 8.3 or on the Termination Date,
all Obligations shall become immediately due and payable without notice or
demand. Notwithstanding any termination, until all Obligations have been fully
paid and satisfied, Lender shall be entitled to retain all security interests in
and liens upon all Collateral (all of which shall be released at Borrowers'
expense upon termination of this Agreement and the Commitments and the payment
and satisfaction in full of all Obligations), and even after payment of all
Obligations hereunder, Systems' and Borrowers' obligation to indemnify Lender
and comply with other provisions which survive termination in accordance with
the terms hereof shall continue.
2.6 Statements. Lender shall render a monthly statement of account to
Borrower Representative within twenty (20) days after the end of each month.
Such statement of account shall constitute an account stated unless Borrower
Representative makes written objection thereto within thirty (30) days from the
date such statement is mailed to Borrower Representative. Borrowers promise to
pay all of their Obligations as such amounts become due or are declared due
pursuant to the terms of this Agreement.
2.7 Grant of Security Interest. To secure the payment and performance of
the Obligations, including all renewals, extensions, restructurings and
refinancings of any or all of the Obligations, each Loan Party (excluding any
subsidiary which is not a Domestic Subsidiary) hereby grants to Lender a
continuing security interest, lien and mortgage in and to all right, title and
interest of such Loan Party in all present and future personal property and
fixtures of such Loan Party, including all the following property of such Loan
Party, whether now owned or existing or hereafter acquired or arising and
regardless of where located (all being collectively referred to as the
"Collateral"): (A) Accounts, and all guaranties and security therefor, and all
goods and rights represented thereby or arising therefrom including the rights
of stoppage in transit, replevin and reclamation; (B) Inventory; (C) general
intangibles and investment property (as defined in the UCC); (D) documents (as
defined in the UCC) or other receipts covering, evidencing or representing
goods; (E) instruments (as defined in the UCC); (F) chattel paper (as defined in
the UCC); (G) Equipment; (H) Intellectual Property; (I) deposit accounts
maintained with any bank or financial institution; (J) cash and other monies and
property in the possession or under the control of Lender or any other Person;
(K) books, records, ledger cards, files, correspondence, computer programs,
tapes, disks and related data processing software that at any time evidence or
contain information relating to any of the property described above or are
otherwise necessary or helpful in the collection thereof or realization thereon;
and (L) products and proceeds of all or any of the property described above,
including, without limitation, the proceeds of any insurance policies covering
any of the above-described property. The Collateral shall include 100% of the
issued and outstanding shares of capital stock and other equity interests of all
direct Domestic Subsidiaries of the Borrowers and Guarantors (other than
Inactive Subsidiaries) and 65% of the issued and outstanding shares of capital
stock and other equity interests of all direct Subsidiaries of the Borrowers and
the Guarantors (other than Inactive Subsidiaries) which are not Domestic
Subsidiaries.
2.8 Capital Adequacy and Other Adjustments. If the Lender shall have
determined that the adoption after the date hereof of any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by Lender or any corporation controlling Lender with any request or
directive regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) from any central bank or governmental
agency or body having jurisdiction does or shall have the effect of increasing
the amount of capital, reserves or other funds required to be maintained by
Lender or any corporation controlling Lender and thereby reducing the rate of
return on Lender's or such corporation's capital as a consequence of its
obligations hereunder, then Borrowers shall from time to time within fifteen
(15) days after notice and demand from Lender (together with the certificate
referred to in the next sentence) pay to Lender additional amounts sufficient to
compensate Lender for such reduction. A certificate as to the amount of such
cost and showing the basis of the computation (including any averaging or
attribution methods) thereof submitted by Lender to Borrower Representative
shall, absent manifest error, be final, conclusive and binding for all purposes.
2.9 Taxes.
(A) No Deductions. Any and all payments or reimbursements made
hereunder or under the Note shall be made free and clear of and without
deduction for any and all taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto; excluding, however, the
following: taxes imposed on the net income of Lender by the United States of
America, or the State of New York or any political subdivision thereof (all such
taxes, levies, imposts, deductions, charges or withholdings and all liabilities
with respect thereto excluding such taxes imposed on net income, herein "Tax
Liabilities"). If any Loan Party shall be required by law to deduct any such Tax
Liabilities from or in respect of any sum payable hereunder to Lender then the
sum payable hereunder shall be increased as may be necessary (and the Borrowers
shall pay all Tax Liabilities and such net income taxes excluded from the
definition of "Tax Liabilities" on such increased amount) so that, after making
all required deductions, Lender receives an amount equal to the sum it would
have received had no such deductions been made.
(B) Changes in Laws. In the event that, subsequent to the Closing
Date, (i) any changes in any existing law, regulation, treaty or directive or in
the interpretation or application thereof, (ii) any new law, regulation, treaty
or directive enacted or any interpretation or application thereof, or (iii)
compliance by Lender or any corporation controlling Lender with any request or
directive (whether or not having the force of law) from any governmental
authority, agency or instrumentality:
(1) does or shall subject Lender or any corporation controlling
Lender to any tax of any kind whatsoever with respect to this Agreement, the
other Loan Documents or any Loans made or Lender Letters of Credit issued
hereunder or any corporation controlling Lender, or change the basis of taxation
of payments to Lender or any corporation controlling Lender of principal, fees,
interest or any other amount payable hereunder (except for net income taxes
imposed by the United States of America, or the State of New York or any
political subdivision thereof, with respect to interest or commitment or other
fees payable hereunder or changes in the rate of tax on the overall net income
of Lender or any corporation controlling Lender); or
(2) does or shall impose on Lender or any corporation controlling
Lender any reserve, special deposit or other condition or increased cost in
connection with the transactions contemplated hereby;
and the result of any of the foregoing is to increase the cost to Lender of
issuing any Lender Letter of Credit, entering into any Risk Participation
Agreement or making or continuing any Loan hereunder, as the case may be, or to
reduce any amount receivable hereunder, then, in any such case, Borrowers shall
promptly pay to Lender upon its demand, any additional amounts necessary to
compensate Lender on an after-tax basis, for such additional cost or reduced
amount receivable, as determined by Lender with respect to this Agreement or the
other Loan Documents. If Lender becomes entitled to claim any additional amounts
pursuant to this subsection 2.9(B), it shall promptly notify Borrower
Representative of the event by reason of which Lender has become so entitled. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by Lender to Borrower Representative shall, absent manifest
error, be final, conclusive and binding for all purposes.
(C) In the event that the Lender actually receives a refund of or
credit for taxes in respect of which any Borrower or Guarantor has made
additional payments to the Lender under this Section 2.9 which credit or refund
is identifiable by the Lender as being a result of taxes in respect of which any
Borrower or Guarantor has made additional payments to the Lender under this
Section 2.9, the Lender shall promptly notify the Borrower or Guarantor which
made such additional payment and shall remit to it the amount of such refund or
credit (without interest) up to but not exceeding the lesser of (a) such
additional payment or payments by such Borrower or Guarantor, or (b) the actual
after-tax benefit to the Lender resulting from such refund or credit as
conclusively determined by the Lender. Nothing contained herein shall (i)
obligate the Lender to apply for such a refund or credit or (ii) afford to any
Borrower or Guarantor any right to inspect or review any financial or tax
records of the Lender.
2.10 Required Termination and Prepayment. If on any date Lender shall have
reasonably determined (which determination shall be final and conclusive and
binding upon all parties) that the making or continuation of LIBOR Loans has
become unlawful or impossible by reason of compliance by Lender in good faith
with any law, governmental rule, regulation or order (whether or not having the
force of law and whether or not failure to comply therewith would be unlawful),
then, and in any such event, Lender shall promptly give notice (by telephone
confirmed in writing) to Borrower Representative of that determination. The
obligation of Lender to make or maintain its LIBOR Loans during any period after
such notice shall be terminated at the earlier of the termination of the
Interest Period then in effect or when required by law and Borrowers shall no
later than the termination of the Interest Period in effect at the time any such
determination pursuant to this subsection 2.10 is made or, earlier when required
by law, repay or prepay LIBOR Loans together with all interest accrued thereon
or convert LIBOR Loans to Base Rate Loans.
2.11 Compensation. Borrowers shall compensate Lender, upon written request
by Lender (which request shall set forth in reasonable detail the basis for
requesting such amounts and which shall, absent manifest error, be conclusive
and binding upon all parties hereto), for all losses, expenses and liabilities
including, without limitation, any loss sustained by Lender in connection with
the re-employment of such funds: (i) if for any reason a borrowing of,
conversion into or continuation of any LIBOR Loan does not occur on a date
specified therefor in a Notice of Borrowing, a Notice of Conversion/Continuation
or a telephonic request for borrowing or conversion/continuation; (ii) if any
prepayment of any LIBOR Loans occurs on a date that is not the last day of an
Interest Period applicable to that Loan; (iii) if any prepayment of any of its
LIBOR Loans is not made on any date specified in a notice of prepayment given by
Borrower Representative; or (iv) as a consequence of any other default by
Borrowers to repay their LIBOR Loans when required by the terms of this
Agreement; provided that during the period while any such amounts have not been
paid, Lender shall be permitted to reserve an equal amount from amounts
otherwise available to be borrowed under the Revolving Loan.
2.12 Booking of LIBOR Loans. Lender may make, carry or transfer LIBOR Loans
at, to, or for the account of, any of its branch offices or the office of an
affiliate of Lender.
2.13 Assumptions Concerning Funding of LIBOR Loans. Calculation of all
amounts payable to Lender under subsection 2.11 shall be made as though Lender
(or an affiliate) had actually funded its relevant LIBOR Loan through the
purchase of a LIBOR deposit bearing interest at LIBOR in an amount equal to the
amount of that LIBOR Loan and having a maturity comparable to the relevant
Interest Period and through the transfer of such LIBOR deposit from an offshore
office to a domestic office in the United States of America; provided, however,
that Lender may fund each of its LIBOR Loans in any manner it sees fit and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under subsection 2.11.
2.14 Allocation of Collateral.
(a) Prior to the occurrence of any Event of Default, the Lender shall
allocate (i) all payments from each Borrower and collections from Collateral of
each Borrower to the Obligations of the Borrowers and (ii) all payments from
each Guarantor, GP Strategies and ManTech and collections from Collateral of
each Guarantor to the Obligations of the Borrowers. Such allocation shall be
made, at the Lender's election, either in accordance with directions from the
Borrower Representative or on any other basis as the Lender shall determine to
use in its sole discretion.
(b) After the occurrence and during the continuance of any Event of
Default, the Borrowers and the Guarantors acknowledge that pursuant to the
EximBank Documents, the Lender may assign to EximBank certain of the obligations
of Power, Process, the Guarantors, GP Strategies and ManTech under this
Agreement and the Loan Documents and certain of the Lender's security interests
in the Collateral. In the event of such an assignment, the following provisions
shall apply:
(i) Direct Obligations of Borrowers. Lender shall assign to EximBank
the Obligations of Power arising from Revolving Advances made or attributable to
it, and the Letter of Credit Liability arising from Letters of Credit issued for
the account of Power; Lender shall retain the Obligations of Process arising
from Revolving Advances made or attributable to it, and the Letter of Credit
Liability arising from Letters of Credit issued for the account of Process;
(ii) Guaranty Obligations of Borrowers. Lender shall assign to
EximBank the Obligations of Process under Section 11 with respect to its
guaranty of the Obligations of Power; Lender shall retain the Obligations of
Power under Section 11 with respect to its guaranty of the Obligations of
Process;
(iii) Guaranty Obligations of Guarantors, ManTech and GP Strategies.
Lender shall assign to EximBank the Obligations of the Guarantors under Section
11 and the obligations of ManTech and GP Strategies under the ManTech Guarantee
and GP Strategies Guarantee with respect to their respective guaranties of the
Obligations of Power; Lender shall retain the Obligations of the Guarantors
under Section 11 and the obligations of ManTech and GP Strategies under the
ManTech Guarantee and GP Strategies Guarantee with respect to their respective
guaranties of the Obligations of Process;
(iv) Payments from Borrowers and Guarantors. All payments and
collections from the Borrowers and the Guarantors or from any Collateral owned
by any of them shall be allocated and applied as follows:
(1) Borrower Payments, etc. With respect to payments and collections
from a Borrower, Collateral owned by such Borrower or Collateral which is the
capital stock of a Borrower, first, to payment of (or as cash collateral for)
Obligations arising from Revolving Advances made or attributable to such
Borrower and Letter of Credit Liability arising from Letters of Credit issued
for the account of such Borrower (the "Direct Obligations"); and, second, to
payment of (or as cash collateral for) Obligations arising under Section 11 with
respect to such Borrower's guaranty of the Obligations of the other Borrower;
and
(2) Guarantor Payments etc. With respect to payments and collections
from a Guarantor or from Collateral of a Guarantor (other than capital stock of
the Borrowers), ratably to the Direct Obligations of the Borrowers in accordance
with the ratio of the portion of the Revolving Loan Commitment available to each
Borrower (that is, on the date hereof, $6,000,000 to Power and $3,000,000 to
Process) until all Direct Obligations of a Borrower shall be paid (or cash
collateralized) in full, and thereafter 100% to the other Borrower's Direct
Obligations;
(v) Payments from GP Strategies and ManTech. All payments and
collections from GP Strategies and ManTech shall be allocated ratably to the
Direct Obligations of the Borrowers in accordance with the following
percentages:
(a) 54.5% to the Direct Obligations of Power, and
(b) 45.5% to the Direct Obligations of Process,
until all Direct Obligations of a Borrower shall be paid (or cash
collateralized) in full, and thereafter 100% to the other Borrower's Direct
Obligations; provided that nothing in this paragraph (v) shall reduce the
amounts payable to Lender or EximBank by GP Strategies under the GP Strategies
Guaranty or by ManTech under the ManTech Guaranty and
(vi) Security Interests, etc. Lender shall assign to EximBank an
undivided ratable portion of the security interest in the Collateral and
Lender's rights and remedies under this Agreement and the other Loan Documents.
The Borrowers and the Guarantors acknowledge and agree that upon such
assignment, each reference to the Lender in any provision of this Agreement and
the other Loan Documents relating to the Collateral shall, except where the
context otherwise requires, include Lender and EximBank. Without limiting the
foregoing:
(1) EximBank shall have the right to exercise all rights and remedies
under this Agreement and the Loan Documents with respect to the Obligations and
security interests assigned to it, and the Lender shall have the right to
exercise all other rights and remedies hereunder and thereunder, and such
exercise of rights and remedies by the Lender and EximBank may occur at the same
or at different times; and
(2) the reference in the fourth line of Section 2.7 to "Lender" shall
be deemed to be a reference to "Lender and EximBank".
The priority of the security interests assigned to EximBank and the
security interests retained by Lender shall be as follows:
(A) EximBank shall have a first priority security interest in all of
the Collateral owned by Power and the capital stock of Power to secure the
Direct Obligations of Power assigned to EximBank; and Lender shall have a second
priority security interest in all of the Collateral owned by Power and the
capital stock of Power to secure the Obligations of Power under Section 11 with
respect to its guaranty of the Obligations of Process;
(B) Lender shall have a first priority security interest in all of the
Collateral owned by Process and the capital stock of Process to secure the
Direct Obligations of Process retained by Lender; and EximBank shall have a
second priority security interest in all of the Collateral owned by Process and
the capital stock of Process to secure the Obligations of Process under Section
11 with respect to its guaranty of the Obligations of Power assigned to
EximBank; and
(C) Lender and EximBank shall have equal priority security interests
in all other Collateral of the Guarantors, and the proceeds of such Collateral
shall be shared ratably as provided in paragraph (b)(iv)(2) above.
Neither Lender nor EximBank shall exercise any rights or remedies to
enforce its second priority security interest provided for in paragraph (A) or
(B) above without the consent of the other, except if all Direct Obligations of
Power or Process, as applicable, secured by the first priority security interest
provided for in paragraph (A) or (B) above have been paid in full.
2.15 Federal Assignment of Claims Act.
In the case of all presently outstanding and hereafter arising Accounts of
either Borrower or any Guarantor with respect to which the United States of
America or any department, agency or instrumentality thereof ("Government
Accounts") is the obligor, except Accounts in the aggregate face amount as to
all Borrowers and Guarantors less than $100,000, the following provisions shall
apply:
(A) On the date hereof or, in the case of such Accounts arising after the
date hereof, within five (5) Business Days after such Accounts arise, such
Borrower or Guarantor shall execute and deliver to the Lender confirmatory
assignments ("Assignments") and notices of assignment (the "Notices") in form
and substance satisfactory to the Lender in its sole discretion. Each Borrower
and Guarantor hereby irrevocably authorizes the Lender or its designee, at the
Borrowers' expense, to file, at any time after the occurrence and during the
continuance of any Event of Default, with the United States government (or the
appropriate department, agency or instrumentality) any such Notices, to which
Assignments may be attached, and hereby irrevocably appoints the Lender as its
attorney-in-fact to execute and file any such Notices, Assignments and related
documents at any time after the occurrence and during the continuance of any
Event of Default.
(B) Schedule 2.15 is a true and complete list of all Government Accounts
existing on the date hereof.
SECTION 3. CONDITIONS TO LOANS, ETC.
3.1 Conditions to Loans, etc. The obligations of Lender to make Loans and
the obligation of Lender to issue Lender Letters of Credit on the Closing Date
and on each Funding Date are subject to satisfaction of all of the conditions
set forth below.
(A) Closing Deliveries. Lender shall have received, in form and
substance satisfactory to Lender, all documents, instruments and information
identified on Schedule 3.1(A) and all other agreements, notes, certificates,
orders, authorizations, financing statements, mortgages and other documents
which Lender may at any time reasonably request, including the EximBank
Documents, the GP Strategies Guarantee and the ManTech Guarantee.
(B) Security Interests. Lender shall have received satisfactory
evidence that all security interests and liens granted to Lender pursuant to
this Agreement or the other Loan Documents have been duly perfected and
constitute first priority liens on the Collateral, subject only to Permitted
Encumbrances.
(C) Closing Date Availability. After giving effect to the consummation
of the transactions contemplated hereunder on the Closing Date and the payment
by Borrowers of all costs, fees and expenses relating thereto, the Maximum
Revolving Loan Amount on the Closing Date shall exceed the Revolving Loan plus
the Letter of Credit Liability by at least $2,000,000.
(D) Representations and Warranties. The representations and warranties
contained herein and in the Loan Documents shall be true, correct and complete
in all material respects on and as of the Closing Date and that Funding Date to
the same extent as though made on and as of that date, except for any
representation or warranty limited by its terms to a specific date and taking
into account any amendments to the Schedules or Exhibits as a result of any
disclosures made by Systems and Borrowers to Lender after the Closing Date and
approved by Lender in its sole discretion.
(E) Fees. Borrowers shall have paid the fees payable on the Closing
Date referred to in subsection 2.3. and shall have paid or reimbursed Lender for
any fees payable by Borrowers or Lender under the EximBank Documents.
(F) No Default. No event shall have occurred and be continuing or
would result from the consummation of the requested borrowing or issuance of a
Lender Letter of Credit that would constitute an Event of Default or a Default.
(G) Performance of Agreements. Each Loan Party shall have performed
all agreements and satisfied all conditions which any Loan Document provides
shall be performed by it on or before that Funding Date.
(H) No Prohibition. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain Lender
from making any Loans or issuing any Lender Letters of Credit.
(I) No Litigation. There shall not be pending or, to the knowledge of
Systems or Borrowers, threatened, any action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration by, against or
affecting Systems, either Borrower or any of their respective Subsidiaries or
any property of any such Person that could in the opinion of Lender have a
Material Adverse Effect and that has not been disclosed to Lender by Borrowers
in writing, and there shall have occurred no development in any such action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration that has been disclosed to Lender that, in the opinion of Lender,
could have a Material Adverse Effect.
(J) Indebtedness. All Indebtedness of all of the Loan Parties shall be
repaid with the initial Revolving Loans and arrangements satisfactory to the
Lender shall have been made with respect to all letters of credit issued for the
account of any Loan Party which remains outstanding on the Closing Date, except
the foregoing shall not apply to Indebtedness which is permitted to exist under
Section 7.1.
(K) Borrowing Base Certificate. The Lender shall have received a
Borrowing Base Certificate current within 5 Business Days prior to the Funding
Date in the case of Power and 30 days prior to the Funding Date in the case of
Process.
(L) Export Orders. In the case of Power, Lender shall have received a
written summary of the Export Orders against which the Loan or Lender Letter of
Credit is to be made current within 5 Business Days prior to the Funding Date,
except if there have been no changes since the delivery of the most recent
summary, each such summary to comply with the MGA.
3.2 Additional Conditions to Loans to Fund Permitted Acquisitions. The
obligations of Lender to make Loans to fund Permitted Acquisitions are subject
to satisfaction of all of the conditions set forth in subsection 7.6, in
addition to those conditions set forth in subsection 3.1.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, and to make Loans and to
issue Lender Letters of Credit, each of Systems, the Borrowers and the other
Guarantors represents and warrants to Lender that the following statements are
and will be true, correct and complete:
4.1 Organization, Powers, Capitalization.
(A) Organization and Powers. Each of the Loan Parties is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and qualified to do business and in good standing
in all states and countries where such qualification is required except where
failures to be so qualified could not in the aggregate be reasonably expected to
have a Material Adverse Effect. Each of the Loan Parties has all requisite
corporate power and authority to own and operate its properties, to carry on its
business as now conducted and proposed to be conducted and to enter into and
perform each Loan Document.
(B) Capitalization. Except as set forth on Schedule 4.1(B), all issued
and outstanding shares of capital stock of each of the Loan Parties are duly
authorized and validly issued, fully paid, nonassessable, and are free and clear
of all Liens other than those in favor of Lender and all such shares were issued
in compliance with all applicable state, federal and other laws concerning the
issuance of securities. The place of organization or incorporation of each Loan
Party is listed in Schedule 4.1(B). The capital stock of each of the Loan
Parties is owned by the stockholders and in the amounts set forth on Schedule
4.1(B) (in the case of Systems with shares held by the public being specified in
the aggregate). To the best knowledge of Systems, each Person or group having
beneficial ownership of more than five percent (5%) of the capital stock of
Systems is identified on Schedule 4.1(B) (the terms "group" and "beneficial
ownership", as used herein, having the meanings given in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, and Rule 13d-3 promulgated
thereunder). No shares of the capital stock of any Loan Party, other than those
described above, are issued and outstanding. Except as set forth on Schedule
4.1(B), there are no preemptive or other outstanding rights, options, warrants,
conversion rights or similar agreements or understandings for the purchase or
acquisition from any Loan Party of any shares of capital stock or other
securities of any such entity.
4.2 Authorization of Borrowing, No Conflict. Each of the Loan Parties which
is now or hereafter a party to any Loan Document has the corporate power and
authority to incur the Obligations and to grant security interests in the
Collateral. On the Closing Date, the execution, delivery and performance of the
Loan Documents by each Loan Party signatory thereto will have been duly
authorized by all necessary corporate and shareholder action. The execution,
delivery and performance by each Loan Party of each Loan Document to which it is
a party and the consummation of the transactions contemplated by this Agreement
and the other Loan Documents by each Loan Party, and the enforcement thereof by
Lender (A) do not contravene and will not be in contravention of any applicable
law, the corporate charter or bylaws (or other constituent documents) of any
Loan Party or any agreement or order by which any Loan Party or any Loan Party's
property is bound and (B) do not and will not require any consent, order,
license, validation or approval of or filing or registration with any
government, governmental authority or agency, court or administrative body,
except such as have been duly obtained, are in full force and effect and are
listed in Schedule 4.2. This Agreement is, and the other Loan Documents,
including the Note when executed and delivered will be, the legally valid and
binding obligations of the applicable Loan Parties respectively, each
enforceable against the Loan Parties, as applicable, in accordance with their
respective terms.
4.3 Financial Condition. All financial statements concerning the Loan
Parties which have been or will hereafter be furnished by any of them to Lender
pursuant to this Agreement have been or will be prepared in accordance with GAAP
consistently applied throughout the periods involved (except as disclosed
therein) and do or will present fairly the financial condition of the
corporations (or other entities) covered thereby as at the dates thereof and the
results of their operations for the periods then ended. The Pro Forma was
prepared by Systems and Borrowers based on the unaudited consolidated balance
sheet of Systems, Borrowers and their respective Subsidiaries dated April 30,
1999 and, during the period from such date through the Closing Date, there has
been no material change in the business, operations or financial condition of
Systems, either of Borrowers or any of their respective Subsidiaries. The
Projections delivered and to be delivered have been and will be prepared by
Systems and Borrowers in light of the past operations of the business of
Systems, Borrowers and their respective Subsidiaries, and such Projections
represent and will represent the good faith estimate of Systems and Borrowers
and their respective senior management concerning the most probable course of
its business as of the date such Projections are prepared and delivered.
4.4 Indebtedness and Liabilities. As of the Closing Date, no Loan Party has
(a) any Indebtedness except as reflected on Schedule 4.4 and the Pro Forma or
(b) any Liabilities other than as reflected on the Pro Forma or as
incurred in the ordinary course of business following the date of the Pro Forma.
4.5 Account Warranties. As to each existing Account: (a) at the time of its
creation, such Account was a valid, bona fide account, representing an
undisputed indebtedness (except any such disputed Account which is excluded in
whole or in part from Eligible Accounts in accordance with paragraph (8) of the
definition of Eligible Accounts herein) incurred by the named account debtor for
goods actually sold and delivered or for services completely rendered; (b) there
are no setoffs, offsets or counterclaims, genuine or otherwise, against such
Account; (c) such Account does not represent a sale to an Affiliate or a
consignment, sale or return or a bill and hold transaction; (d) no agreement
exists permitting any deduction or discount (other than the discount stated on
the invoice); (e) the Borrower or Guarantor that holds such Account is the
lawful owner of the Account and has the right to grant a security interest and
assign the same to Lender; (f) such Account is free of all security interests,
liens and encumbrances other than those in favor of Lender; and (g) such Account
is due and payable in accordance with its terms.
4.6 Names. Schedule 4.6 sets forth all names, trade names, fictitious names
and business names under which any Loan Party currently conducts business or has
at any time during the past six years conducted business.
4.7 Locations; FEIN. Schedule 4.7 sets forth the location of each Loan
Party's principal place of business, chief executive office, the location of
each Loan Party's books and records, the location of all other offices of such
Loan Party and all Collateral locations, and such locations are such Loan
Party's sole locations for its business and the Collateral. Each Loan Party's
federal employer identification number, if any, is also set forth on Schedule
4.7.
4.8 Title to Properties; Liens. Each Loan Party and each of its
Subsidiaries has good, sufficient and legal title, subject to Permitted
Encumbrances, to all its respective properties and assets. Except for Permitted
Encumbrances, all such properties and assets are free and clear of Liens. To the
best knowledge of Systems and each Borrower after due inquiry, there are no
actual, threatened or alleged defaults with respect to any leases of real
property under which Systems, either Borrower or any of their respective
Subsidiaries is lessee or lessor which would have a Material Adverse Effect.
4.9 Litigation; Adverse Facts. Except as set forth on Schedule 4.9, there
are no judgments outstanding against any Loan Party or affecting any property of
any Loan Party nor is there any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration now pending or, to the best
knowledge of Systems or either Borrower after due inquiry, threatened against or
affecting any Loan Party or any property of any Loan Party which individually or
in the aggregate could reasonably be expected to result in any Material Adverse
Effect. No Loan Party has any notice to the effect that it is exposed to any
liability which could reasonably be expected to result in any Material Adverse
Effect.
4.10 Payment of Taxes. All tax returns and reports of each Loan Party
required to be filed by any of them have been timely filed, and all taxes,
assessments, fees and other governmental charges upon such Persons and upon
their respective properties, assets, income and franchises which are due and
payable have been paid when due and payable or are being contested in good faith
by appropriate proceedings and appropriate reserves therefor have been
established in accordance with GAAP. Except as set forth on Schedule 4.10, as of
the Closing Date, none of the United States income tax returns of any Loan Party
are under audit. No tax liens have been filed and no claims (except as otherwise
permitted by Section 5.9) are being asserted with respect to any such taxes. The
charges, accruals and reserves on the books of each Loan Party in respect of any
taxes or other governmental charges are in accordance with GAAP.
4.11 Performance of Agreements. None of the Loan Parties is in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any contractual obligation of any such Person, and no
condition exists that, with the giving of notice or the lapse of time or both,
would constitute such a default.
4.12 Employee Benefit Plans. Each Loan Party and each ERISA Affiliate is in
compliance in all material respects with all applicable provisions of ERISA, the
IRC and all other applicable laws and the regulations and interpretations
thereof with respect to all Employee Benefit Plans. No material liability has
been incurred by any Loan Party, any of its Subsidiaries or any ERISA Affiliate
which remains unsatisfied for any funding obligation, taxes or penalties with
respect to any Employee Benefit Plan.
4.13 Intellectual Property. Each Loan Party and each of its Subsidiaries
owns, is licensed to use or otherwise has the right to use, all Intellectual
Property used in or necessary for the conduct of its business as currently
conducted, and all such Intellectual Property is identified on Schedule 4.13.
4.14 Broker's Fees. No broker's or finder's fee or commission will be
payable with respect to any of the transactions contemplated hereby.
4.15 Environmental Compliance. Each Loan Party has been and is currently in
compliance with all applicable Environmental Laws, including obtaining and
maintaining in effect all permits, licenses or other authorizations required by
applicable Environmental Laws. There are no claims, liabilities, investigations,
litigation, administrative proceedings, whether pending or threatened, or
judgments or orders relating to any Hazardous Materials which have been (a)
asserted or, to the best knowledge of each Loan Party, threatened against any
Loan Party or relating to any real property currently or formerly owned by any
Loan Party or (b) to the best knowledge of each Loan Party, asserted or
threatened against any real property currently or formerly leased or operated by
any Loan Party.
4.16 Solvency. After giving effect to the transactions contemplated by the
Loan Documents, and as of, from and after the date of this Agreement, each
Borrower, each Guarantor, GP Strategies and ManTech (after taking into
consideration all rights of contribution and indemnity it has against the
others): (a) owns and will own assets the fair salable value of which are (i)
greater than the total amount of its liabilities (including contingent
liabilities) and (ii) greater than the amount that will be required to pay the
probable liabilities of such Person as they mature; (b) has capital that is not
unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (c) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due. There is no material fact known to Systems or any Borrower
that has or could have a Material Adverse Effect and that has not been fully
disclosed herein or in such other documents, certificates and statements
furnished to Lender for use in connection with the transactions contemplated
hereby.
4.17 Disclosure. No representation, warranty or statement contained in this
Agreement, the financial statements, the other Loan Documents, or any other
document, certificate or written statement furnished to Lender by or on behalf
of any of Systems, either Borrower or any Guarantor for use in connection with
the Loan Documents contains any untrue statement of a material fact or omitted,
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. The projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made. There is no material fact known to any Loan Party that has had or will
have a Material Adverse Effect and that has not been disclosed herein or in such
other documents, certificates and statements furnished to Lender for use in
connection with the transactions contemplated hereby.
4.18 Insurance. Each Loan Party maintains adequate insurance policies for
public liability, workers compensation, employee benefit liability, fidelity
liability, directors' and officers' liability, errors and omissions, property
damage for its business and properties, product liability, and business
interruption in amounts customarily carried or maintained by corporations of
established reputation engaged in similar businesses. Such policies are in full
force and effect. No notice of cancellation has been received with respect to
such policies and such Loan Party and each of its Subsidiaries is in compliance
with all conditions contained in such policies.
4.19 Compliance with Laws. No Loan Party is in violation of any law,
ordinance, rule, regulation, order, policy, guideline or other requirement of
any domestic or foreign government or any instrumentality or agency thereof,
having jurisdiction over the conduct of its business or the ownership of its
properties, including, without limitation, any violation relating to any use,
release, storage, transport or disposal of any Hazardous Material, which
violation would subject such Loan Party or any of its Subsidiaries, or any of
its respective officers to criminal liability or individually or in the
aggregate with all such violations have a Material Adverse Effect and no such
violation has been alleged.
4.20 Bank Accounts. Schedule 4.20 sets forth the account numbers and
locations of all bank accounts of each Loan Party.
4.21 Subsidiaries. Neither Systems nor any Borrower has any Subsidiaries
other than as set forth on Schedule 4.1(B).
4.22 Employee Matters. Except as set forth on Schedule 4.22, (a) no Loan
Party nor any of such Loan Party's employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of any Loan Party and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of any Loan Party and (c) there are no strikes,
slowdowns, work stoppages or controversies pending or, to the best knowledge of
any Loan Party after due inquiry, threatened between any Loan Party and its
respective employees, other than employee grievances arising in the ordinary
course of business which could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. Except as set forth
on Schedule 4.22, no Loan Party is subject to an employment contract.
4.23 Governmental Regulation. None of the Loan Parties is, or after giving
effect to any loan will be, subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act or the Investment Company Act
of 1940 or to any federal or state statute or regulation limiting its ability to
incur indebtedness for borrowed money.
4.24 Real Property. On the date hereof, none of the Loan Parties owns or
has any option to acquire any real property, including land or buildings, or
leases any real property under a lease or other agreement with a term exceeding
five years except as disclosed in Schedule 4.24.
SECTION 5. AFFIRMATIVE COVENANTS
Each of Systems, the Borrowers and the other Guarantors covenants and agrees
that, so long as the Commitment hereunder shall be in effect and until payment
in full of all Obligations and termination of all Lender Letters of Credit,
unless Lender shall otherwise give its prior written consent, each of Systems,
the Borrowers and the other Guarantors shall perform, and shall cause each of
its Subsidiaries to perform, all covenants in this Section 5 applicable to such
Person or Persons.
5.1 Financial Statements and Other Reports. Systems, Borrowers and the
other Guarantors will maintain, and cause each of their respective Subsidiaries
to maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements in
conformity with GAAP. Borrowers will deliver or cause to be delivered to Lender
the financial statements and other reports described below.
(A) Monthly Financials. As soon as available, and in any event within
thirty (30) days after the end of each month, Borrowers will deliver (1) the
consolidated and consolidating balance sheet of Systems, Borrowers and their
respective Subsidiaries as at the end of such month and the related consolidated
and consolidating statements of income and statement of cash flow for such month
and for the period from the beginning of the then current Fiscal Year to the end
of such month, and (2) a schedule of the outstanding Indebtedness of each Loan
Party describing in reasonable detail each such debt issue or loan outstanding
and the principal amount and amount of accrued and unpaid interest with respect
to each such debt issue or loan.
(B) Quarterly Financials, etc. (i) As soon as available, and in any
event before the earlier of the date one (1) Business Day after Systems files
its quarterly report on Form 10-Q with the Securities and Exchange Commission
for each of its first three Fiscal Quarters in each Fiscal Year and the date
forty-five (45) days after the end of such Fiscal Quarter, Borrowers will
deliver, or will cause to be delivered, to Lender, such report; (ii) in respect
of the fourth Fiscal Quarter in each Fiscal Year, as soon as available, and in
any event within forty-five (45) days after the end of such Fiscal Quarter,
Borrowers will deliver to Lender financial statements that are equivalent in
format to the financial statements that would have been included in a quarterly
report on Form 10-Q made by Systems for such Fiscal Quarter and (iii) in order
to permit the Lender to comply with its obligations under the EximBank
Documents, Power shall deliver to the Lender within thirty (30) days after the
end of each Fiscal Quarter a sampling selected by the Lender of copies of at
least 10% of all written export orders or contracts which gave rise to Eligible
Accounts during the preceding Fiscal Quarter.
(C) Year-End Financials. As soon as available, and in any event not
later than ninety (90) days after the end of each Fiscal Year or, if earlier,
the date on which Systems files its annual report on Form 10-K with the
Securities and Exchange Commission in respect of such Fiscal Year, Borrowers
will deliver: (1) the consolidated balance sheet of Systems, Borrowers and their
respective Subsidiaries as at the end of such year and the related consolidated
statements of income, stockholders' equity and cash flow for such Fiscal Year;
(2) a schedule of the outstanding Indebtedness of Systems, Borrowers and their
respective Subsidiaries describing in reasonable detail each such debt issue or
loan outstanding and the principal amount and amount of accrued and unpaid
interest with respect to each such debt issue or loan; (3) a report with respect
to the financial statements from a firm of independent certified public
accountants selected by Systems and Borrowers and acceptable to Lender, which
report shall be unqualified and shall state that (a) such consolidated financial
statements present fairly the consolidated financial position of Systems,
Borrowers and their respective Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods indicated in
conformity with GAAP and (b) that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards; and (4) copies of the
consolidating financial statements of Systems, Borrowers and their respective
Subsidiaries, including (a) consolidating balance sheets of Systems, Borrower
and their respective Subsidiaries as at the end of such Fiscal Year showing
intercompany eliminations and (b) related consolidating statements of earnings
of Systems, Borrowers and their respective Subsidiaries showing intercompany
eliminations.
(D) Accountants' Certification and Reports. Together with each
delivery of consolidated financial statements of Systems, Borrowers and their
respective Subsidiaries pursuant to subsection 5.1(C), Borrowers will deliver
(1) a written statement by their independent certified public accountants (a)
stating that the examination has included a review of the terms of this
Agreement as same relate to accounting matters and (b) stating whether, in
connection with the examination, any condition or event that constitutes a
Default or an Event of Default has come to their attention and, if such a
condition or event has come to their attention, specifying the nature and period
of existence thereof and (2) a copy of a letter addressed to such accountants
from Systems informing such accountants that a primary intent of Systems and
Borrowers was to have the professional services such accountants provided to
Systems and Borrowers in preparing their audit report and the letter referred to
in this subsection 5.1(D) benefit or influence Lender and identifying Lender as
a party that Systems and Borrowers have indicated intend to rely on such
professional services provided to Systems and Borrowers by such accountants.
Promptly upon receipt thereof, Systems and Borrowers will deliver copies of all
significant reports submitted to Systems and Borrowers by independent public
accountants in connection with each annual, interim or special audit of the
financial statements of Systems, Borrowers or their respective Subsidiaries made
by such accountants, including the comment letter submitted by such accountants
to management in connection with their annual audit.
(E) Compliance Certificate. Together with the delivery of each set of
financial statements referenced in subparts (A), (B) and (C) of this subsection
5.1, Borrowers will deliver a Compliance Certificate, together with (i) copies
of the calculations and work-up employed to determine Systems' and Borrowers'
compliance or noncompliance with the financial covenants set forth in Section 6
and subsection 7.1 and (ii) a report showing in reasonable detail the
calculation of the Applicable Base Rate Margin and the Applicable LIBOR Margin
as at the effective date of such financial statements (the "Applicable Margin
Report").
(F) Borrowing Base Certificates, Registers and Journals. On or before
the fifth Business Day of each month from and after the Closing Date (or on each
Business Day if requested by Lender following the occurrence of any Event of
Default or when Unused Availability is less than $2,000,000 or when Lender in
its reasonable discretion requires such reports on a daily basis) Borrowers
shall deliver to Lender: (1) a separate Borrowing Base Certificate with respect
to each Borrower updated to reflect the most recent sales and collections of
each Borrower through the immediately preceding month (or, if requested by
Lender on a daily basis pursuant hereto, on the immediately preceding Business
Day) and (2) a schedule of all Accounts created or acquired by each Borrower
during such month or, if applicable, on such day, together with a summary aging
of all such Accounts detailing amounts due from each account debtor. Within ten
(10) Business Days after the end of each month, Borrowers shall deliver to
Lender (a) an invoice register or sales journal describing all sales of each
Borrower for such month, in form and substance reasonably satisfactory to
Lender, and, if Lender so requests, copies of invoices evidencing such sales and
proofs of delivery relating thereto, (b) a cash receipts journal for such month,
(c) a schedule of each customer which is owed a credit or other amount in excess
of $25,000 (which amount shall be deducted by Lender as a reserve from the
Borrowing Base) by any Borrower and listing each such amount and (d) a summary
inventory report by category as of the end of such month.
(G) Reconciliation Reports and Listings and Agings. Within ten (10)
Business Days after the last day of each month and from time to time upon the
request of Lender, Borrowers shall deliver to Lender: (i) an aged trial balance
of all then existing Accounts of each Borrower; (2) an aged trial balance of all
then existing accounts payable of each Borrower; and (3) a Reconciliation Report
as at the last day of such period. All such reports shall be in form and
substance reasonably satisfactory to Lender.
(H) Management Report. Together with each delivery of financial
statements of Systems, Borrowers and their respective Subsidiaries pursuant to
subdivisions (A) (on a quarterly basis only), and (B) of this subsection 5.1,
Borrowers shall deliver a copy of the complete management's discussions and
analysis of financial condition and results of operations included in Systems'
Form 10-K or Form 10-Q, as applicable, filed with the Securities and Exchange
Commission for the period covered by such financial statements. Such financial
statements shall be presented in reasonable detail and shall be certified by the
chief financial officer of Systems and each Borrower to the effect that such
information fairly presents the results of operations and financial condition of
Systems, the Borrowers and their Subsidiaries as at the dates and for the
periods indicated.
(I) Government Notices. The Borrowers shall cause all Loan Parties to
deliver to Lender promptly after receipt copies of all notices, requests,
subpoenas, inquiries or other writings received from any governmental agency
concerning any Employee Benefit Plan, the violation or alleged violation of any
Environmental Laws, the storage, use or disposal of any Hazardous Material, the
violation or alleged violation of the Fair Labor Standards Act or a Loan Party's
payment or non-payment of any taxes including any tax audit if the matter
referred to therein, if adversely determined, could have a Material Adverse
Effect or result in any Lien on any assets of a Loan Party.
(J) Events of Default, etc. Promptly upon (but in any event within
five (5) Business Days after) any officer of any Loan Party obtaining knowledge
of any of the following events or conditions, the Borrowers and Systems shall
deliver a certificate of the chief executive officer, chief financial officer or
other officer of Systems having responsibility for finance matters specifying
the nature and period of existence of such condition or event and what action
such Loan Party has taken, is taking and proposes to take with respect thereto:
(1) any condition or event that constitutes an Event of Default or Default; (2)
any notice of default that any Person has given to any Loan Party or any other
action taken with respect to a claimed default; or (3) any Material Adverse
Effect.
(K) Trade Names. Borrowers will give Lender at least thirty (30) days
advance written notice of any change of name or of any new trade name or
fictitious business name by any Loan Party or any of its Subsidiaries. Each Loan
Party's use of any trade name or fictitious business name will be in compliance
with all laws regarding the use of such names.
(L) Locations. Borrowers will give Lender at least thirty (30) days
advance written notice of any change in any Loan Party's principal place of
business or any change in the location of its books and records or the
Collateral or of any new location for its books and records or the Collateral.
(M) Bank Accounts. Loan Parties will give Lender prompt notice of any
new bank accounts any Loan Party intends to establish prior to its opening same.
(N) Litigation. Promptly upon (but in any event within five (5)
Business Days after) any officer of any Loan Party obtaining knowledge of (1)
the institution of any action, suit, proceeding, governmental investigation or
arbitration against or affecting any Loan Party or any property of any Loan
Party not previously disclosed by a Loan Party to Lender which, if adversely
determined, could have a Material Adverse Effect or (2) any material development
in any action, suit, proceeding, governmental investigation or arbitration at
any time pending against or affecting any Loan Party or any property of any Loan
Party which could reasonably be expected to have a Material Adverse Effect,
Borrowers will promptly give notice thereof to Lender and provide such other
information as may be reasonably available to them to enable Lender and its
counsel to evaluate such matter.
(O) Projections. As soon as available and in any event no later than
the end of each Fiscal Year of Systems, Borrowers will deliver preliminary
Projections of Systems, Borrowers and their respective Subsidiaries for the
forthcoming three Fiscal Years, year by year, and for the forthcoming Fiscal
Year, month by month, and shall deliver the final Projections for such periods
as soon as available and in any event no later than January 31 in the first of
such three Fiscal Years.
(P) Other Indebtedness Notices. Borrowers shall promptly deliver
copies of all notices given or received by (but in any event within five (5)
Business Days after receipt from) any Loan Party with respect to noncompliance
with any term or condition (1) related to any Indebtedness in excess of $250,000
either individually or in the aggregate or (2) of any EximBank Documents, and
shall promptly notify Lender of any potential or actual event of default with
respect to any such Indebtedness or EximBank Documents or agreements.
(Q) Other Information. With reasonable promptness, Borrowers will
deliver such other information, reports, contracts, invoices and data with
respect to any Loan Party or the Collateral as Lender may reasonably request
from time to time.
(R) Opening Balance Sheet. As soon as available and in any event
within ninety (90) days after the Closing Date, Borrowers will deliver a
consolidated and consolidating balance sheet as of May 31, 1999, certified by
the chief financial officer of Systems and each Borrower as fairly presenting
the consolidated and consolidating financial condition of Systems, Borrowers and
their Subsidiaries in accordance with GAAP, subject to year-end audit
adjustments.
(S) Public Filings. Within five (5) Business Days after the filing or
release thereof, Systems and Borrowers will deliver a copy of each registration
statement (and amendment and supplement thereto), report, press release,
prospectus, proxy statement or other filing or disclosure made with any
securities commission, exchange or association or under the Securities Act of
1933, the Securities Exchange Act of 1934, any related laws or regulations or
any comparable state acts, laws or regulations relating to any of them or any of
their respective Subsidiaries.
5.2 Access to Accountants and Management. Systems and the Borrowers
authorize Lender to discuss the financial condition and financial statements of
any Loan Party with such Loan Party's independent public accountants upon
reasonable notice to Borrower Representative of its intention to do so, and
authorizes such accountants to respond to all of Lender's inquiries. Lender may
confer with any officers of each Loan Party directly regarding such Loan Party's
business, operations and financial condition.
5.3 Inspection. Systems and the Borrowers shall permit Lender and any
authorized representatives designated by Lender to visit and inspect any of the
properties of any Loan Party or any of its Subsidiaries, including their
financial and accounting records, and in conjunction with such inspection, to
make copies and take extracts therefrom, and to discuss their affairs, finances
and business with their officers and independent public accountants, at such
reasonable times during normal business hours and as often as may be reasonably
requested. Without limiting the foregoing, a field audit shall be permitted at
least once every six months for the purposes set forth in Section 4.4 of the
MGA.
5.4 Collateral Records. The Borrowers and Guarantors shall keep full and
accurate books and records relating to the Collateral and shall mark such books
and records to indicate Lender's security interests in the Collateral.
5.5 Account Covenants; Verification. Borrowers shall and shall cause the
Guarantors to, at their own expense: (a) at any time upon the request of the
Lender, cause all invoices evidencing Accounts and all copies thereof to bear a
notice that such invoices are payable to the lockboxes established in accordance
with subsection 5.6 or otherwise notify all account debtors to make payments
under all present and future Accounts to such lockboxes and (b) use their best
efforts to assure prompt payment of all amounts due or to become due under the
Accounts. Discounts, credits or allowances will be issued, granted or allowed by
any Borrower to customers and returns will be accepted solely in accordance with
the ordinary course of such Borrower's business and consistent with past
practices, provided that, upon written notice to such effect given by Lender at
any time during the existence of any Event of Default, such practice shall
cease. Borrowers will immediately notify Lender in the event that a customer
alleges any dispute or claim with respect to an Account if the amount in dispute
is, or the claim involves an amount, in excess of $10,000 or of any other
circumstances known to any Borrower that may impair the validity or
collectibility of such an amount in respect of any Account. Lender shall have
the right, at any time or times hereafter, to verify the validity, amount or any
other matter relating to an Account, by mail, telephone or in person. After the
occurrence of a Default or an Event of Default, Borrowers shall not, without the
prior consent of Lender, adjust, settle or compromise the amount or payment of
any Account, or release wholly or partly any customer or obligor thereof, or
allow any credit or discount thereon.
5.6 Collection of Accounts and Payments; Cash Management Arrangements.
Prior to the Closing Date, Borrowers shall, and shall cause the Guarantors to,
establish lockboxes and blocked accounts (collectively, "Blocked Accounts") in
Borrowers' or such Guarantor's names with such banks ("Collecting Banks") as are
acceptable to Lender (subject to irrevocable instructions acceptable to Lender
as hereinafter set forth and contained in agreements in form and substance
acceptable to Lender among the applicable Borrowers or such Guarantor's and
Collecting Banks and Lender ("Blocked Account Agreements")) to which, after
notice from the Lender to the Borrower Representative, all account debtors shall
directly remit all payments on Accounts and in which, at all times both before
and after such notice from the Lender to the Borrower Representative, Borrowers
and Guarantors will immediately deposit all payments constituting payments for
Inventory or Accounts or other proceeds of Collateral in the identical form in
which such payment was made, whether by cash or check. The Collecting Banks
shall acknowledge and agree, in a manner satisfactory to Lender, that all
payments made to the Blocked Accounts are the sole and exclusive property of
Lender, and that the Collecting Banks have no right of setoff against the
Blocked Accounts and that all such payments received will be promptly
transferred to Lender's Account. Borrowers and Guarantors hereby agree that all
payments received by Lender, whether by cash, check, wire transfer or any other
instrument, made to such Blocked Accounts or otherwise received by Lender and
whether on the Accounts or as proceeds of other Collateral or otherwise will be
the sole and exclusive property of Lender. Borrowers and Guarantors shall
irrevocably instruct each Collecting Bank immediately to transfer all payments
or deposits to the Blocked Accounts into Lender's Account. Borrowers and
Guarantors and any of their Affiliates, employees, agents or other Persons
acting for or in concert with any Borrower or Guarantor, shall, acting as
trustee for Lender, receive, as the sole and exclusive property of Lender, any
monies, checks, notes, drafts or any other payments relating to and/or proceeds
of Accounts or other Collateral which come into the possession or under the
control of any Borrower or Guarantor or any of such Affiliates, employees,
agents or other Persons acting for or in concert with any Borrower or Guarantor,
and immediately upon receipt thereof, Borrowers or such Persons shall remit the
same or cause the same to be remitted, in kind, to the Blocked Accounts or, upon
written direction from Lender, to Lender at its address set forth in
subsection 10.4 below.
5.7 Endorsement. Each Borrower and each Guarantor hereby constitutes and
appoints Lender and all Persons designated by Lender for that purpose as such
Borrower's or Guarantor's (as the case may be) true and lawful attorney-in-fact,
with power to endorse its name to any of the items of payment or proceeds
described in subsection 5.6 above and all proceeds of Collateral that come into
Lender's possession or under Lender's control. Both the appointment of Lender as
such Borrower's or Guarantor's (as the case may be) attorney and Lender's rights
and powers are coupled with an interest and are irrevocable until payment in
full and complete performance of all of the Obligations.
5.8 Corporate Existence. Except as permitted pursuant to subsection 7.6,
Systems, each Borrower and each Guarantor shall, and shall cause each of their
respective Subsidiaries to, at all times preserve and keep in full force and
effect its corporate existence and all rights and franchises material to its
business. Systems and each Borrower will promptly notify Lender of any change in
its or their respective Subsidiaries' ownership or corporate structure.
5.9 Payment of Taxes. Systems and the Borrowers shall, and shall cause each
other Loan Party to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or with respect to any of its
franchises, business, income or property before any penalty accrues thereon;
provided, however, that no such tax need be paid if such Loan Party is
contesting same in good faith by appropriate proceedings promptly instituted and
diligently conducted and if such Loan Party has established appropriate reserves
as shall be required in conformity with GAAP.
5.10 Maintenance of Properties; Insurance. Systems and the Borrowers shall
and shall cause each other Loan Party to maintain or cause to be maintained (A)
in good repair, working order and condition all material properties used in the
business of any Loan Party and will make or cause to be made all appropriate
repairs, renewals and replacements thereof and (B) with financially sound and
reputable insurers, public liability insurance, workers compensation, employee
benefit liability insurance, fidelity insurance, business interruption
insurance, errors and omissions insurance, directors' and officers' liability
insurance, and property damage insurance with respect to each Loan Party's
business and properties against loss or damage of the kinds customarily carried
or maintained by corporations of established reputation engaged in similar
businesses and in amounts reasonably acceptable to Lender. Each Borrower and
each Guarantor shall cause Lender to be named as loss payee on all insurance
policies relating to any Collateral and as additional insured under all
liability policies of all Loan Parties, in each case pursuant to appropriate
endorsements in form and substance satisfactory to Lender and each of them
hereby collaterally assigns to Lender as security for the payment of the
Obligations all such insurance. The Borrowers and the Guarantors shall apply any
proceeds received from any policies of insurance relating to any Collateral to
the Obligations as set forth in subsection 2.4(B). The Borrowers will, and will
cause each other Loan Party to, deliver to Lender, within ten (10) Business Days
prior to the expiration or termination of any such insurance policy, a
certificate of renewal or replacement of such insurance policy, as issued by the
applicable insurance company or its duly authorized agent.
5.11 Compliance with Laws. Systems and the Borrowers shall and shall cause
each other Loan Party to, comply with the requirements of all applicable laws,
rules, regulations and orders of any governmental authority as now in effect and
which may be imposed in the future in all jurisdictions in which Systems, a
Borrower, or any other Loan Party is now doing business or may hereafter be
doing business, other than those laws the noncompliance with which would not
have a Material Adverse Effect.
5.12 Further Assurances.
(A) Systems and the Borrowers shall, and shall cause each other Loan Party
to, from time to time, execute such guaranties, financing or continuation
statements, documents, security agreements, reports and other documents or
deliver to Lender such instruments, certificates of title or other documents as
Lender at any time may reasonably request to evidence, perfect or otherwise
implement the guaranties and security for repayment of the Obligations provided
for in the Loan Documents.
(B) At Lender's request, each Loan Party shall cause any newly created or
acquired Subsidiary of a Borrower or a Loan Party which is a Domestic Subsidiary
promptly to become a Borrower and/or Guarantor hereunder and to grant to Lender
security interests in the real, personal and mixed property of such Subsidiary
to secure the Obligations.
(C) Each Loan Party shall notify Lender prior to acquiring or leasing any
real property, including land or buildings, and shall execute and deliver such
mortgages in favor of Lender and other documents as Lender shall request to
grant a first priority security interest and mortgage, as security for the
Obligations. This subsection 5.12(C) shall not apply to leases with a term less
than five years under which the annual rent obligations are less than $100,000.
(D) In the event that any Subsidiary which is not a Domestic Subsidiary
shall at any time have Tangible Net Worth or EBITDA for any two consecutive
fiscal quarters (determined for such Subsidiary and its consolidated
Subsidiaries) which exceeds 5% of the consolidated Tangible Net Worth or EBITDA
for such two consecutive fiscal quarters of Systems, the Borrowers and their
Subsidiaries, the Borrowers shall promptly (and in any event within 45 days
after the end of the Fiscal Quarter in which such circumstance occurs) notify
the Lender, and deliver to the Lender within 30 days thereafter an opinion of
counsel in form and substance satisfactory to Lender from a recognized law firm
in the jurisdiction where such non-Domestic Subsidiary is organized relating to,
among other things, the due organization and existence of such Subsidiary, the
valid issuance of its securities held by the Borrowers and/or Guarantors, the
valid and perfected first priority pledge of such securities pursuant to a
Pledge Agreement and the adequacy of the rights and remedies contained in such
Pledge Agreement. If such opinion is not satisfactory to the Lender in all
respects, the Borrowers and/or Guarantors shall execute and deliver to the
Lender such agreements, instruments and documents as the Lender may request in
its sole discretion to more effectively pledge the securities of such
Subsidiary. Notwithstanding the foregoing, Systems and Borrowers shall take all
of the foregoing actions with respect to GSE Power Systems AB within 30 days
after the Closing Date.
5.13 Collateral Locations. Each Borrower and Guarantor will keep the
Collateral at the locations specified on Schedule 4.7. With respect to any new
location (which in any event shall be within the continental United States),
each Borrower and Guarantor will execute such documents and take such actions as
Lender deems necessary to perfect and protect the security interests of Lender
in the Collateral prior to the delivery, transfer or removal of any Collateral
to such new location.
5.14 Instruments; Chattel Paper, etc.. Except to the extent Indebtedness
evidenced thereby does not exceed $50,000 outstanding at any time in the
aggregate, each Borrower and Guarantor will (A) deliver and pledge to Lender all
notes and instruments (as defined in the UCC) duly endorsed and accompanied by
duly executed instruments of transfer or assignment, all in form and substance
satisfactory to Lender, and all letters of credit, and (B) mark conspicuously
all chattel paper with a legend, in form and substance satisfactory to Lender,
indicating that such chattel paper is subject to the security interest of
Lender.
5.15 Use of Proceeds and Margin Security. Borrowers shall use the proceeds
of all Loans and all Lender Letters of Credit for proper business purposes (as
described in the recitals to this Agreement but subject to any limitations
contained in the EximBank Documents) consistent with all applicable laws,
statutes, rules and regulations. No portion of the proceeds of any Loan shall be
used by any Borrower or any other Loan Party for the purpose of purchasing or
carrying margin stock within the meaning of Regulation G or Regulation U, or in
any manner that might cause the borrowing, the application of such proceeds, or
the transactions contemplated hereby or by the other Loan Documents to violate
Regulation T or Regulation X or any other regulation of the Board of Governors
of the Federal Reserve System or to violate the Securities Exchange Act of 1934
or the rules and regulations thereunder.
SECTION 6. FINANCIAL COVENANTS
Each of Systems, the Borrowers and the Guarantors covenants and agrees that
so long as the Commitment remains in effect and until payment in full of all
Obligations and termination of all Lender Letters of Credit, unless Borrowers
have received the prior written consent of Lender, Systems, each Borrower and
each Guarantor shall comply with, and shall cause each of their respective
Subsidiaries to comply with, all covenants in this Section 6.
6.1 Minimum EBITDA. Systems, Borrowers and their respective consolidated
Subsidiaries shall maintain, on a consolidated basis, EBITDA for each of the
periods specified below in at least the amount set forth below opposite each
period:
Period Minimum EBITDA
------ --------------
Four Fiscal Quarters Ending:
March 31, 1999 $4,350,000
June 30, 1999 $5,000,000
September 30, 1999 $5,650,000
December 31, 1999 $6,300,000
March 31, 2000 $6,475,000
June 30, 2000 $6,645,000
September 30, 2000 $6,800,000
December 31, 2000 and each $6,950,000
Subsequent Fiscal Quarter end.
6.2 Fixed Charge Coverage. (A) Systems and Borrowers and their respective
consolidated Subsidiaries shall not permit their Fixed Charge Coverage, on a
consolidated basis, to be less than 1.2 to 1.0 for the four Fiscal Quarters
ending March 31, 1999, 1.4 to 1.0 for the four Fiscal Quarters ending June 30,
1999, 1.6 to 1 for the four Fiscal Quarters ending September 30, 1999, or 1.8 to
1 for the four Fiscal Quarters ending December 31, 1999 or on the last day of
any Fiscal Quarter thereafter.
(B) Each Borrower and its consolidated Subsidiaries shall not permit their
respective Fixed Charge Coverage to be less than the ratios set forth under
their names below for any period set forth below:
Period Power Process
- ------ ----- -------
Four Fiscal Quarters ending:
March 31, 1999 1.8 1.85
June 30, 1999 1.8 1.90
September 30, 1999 1.8 1.95
December 31, 2000 1.8 2.0
and each subsequent
Fiscal Quarter end.
6.3 Tangible Net Worth. Systems and Borrowers and their respective
consolidated Subsidiaries shall maintain at all times on a consolidated basis
Tangible Net Worth during each Fiscal Year equal to or greater than the Tangible
Net Worth as of the end of the immediately preceding Fiscal Year, provided that
on the last day of each Fiscal Year beginning December 31, 1999, such
consolidated Tangible Net Worth shall be at least $1,000,000 higher than such
consolidated Tangible Net Worth as of the last day of the immediately preceding
Fiscal Year.
6.4 EximBank Tangible Net Worth. Power and its consolidated Subsidiaries
shall maintain at all times on a consolidated basis EximBank Tangible Net Worth
equal to or greater than $7,500,000.
6.5 Leverage. Power and its consolidated Subsidiaries shall not permit the
ratio of Liabilities to EximBank Tangible Net Worth (both as determined on a
consolidated bases) at any time to exceed 4 to 1.
SECTION 7. NEGATIVE COVENANTS
Each of Systems, the Borrowers and the Guarantors covenants and agrees that
so long as the Commitment remains in effect and until payment in full of all
Obligations and termination of all Lender Letters of Credit, unless Borrowers
have received the prior written consent of Lender, Systems, each Borrower and
each Guarantor shall not, and shall not permit any of their respective
Subsidiaries to:
7.1 Indebtedness and Liabilities. Directly or indirectly create, incur,
assume, guaranty, or otherwise become or remain directly or indirectly liable,
on a fixed or contingent basis, with respect to any Indebtedness except: (a) the
Obligations; (b) Intercompany Indebtedness among Borrowers and Guarantors but
only to the extent not prohibited under the EximBank Documents; (c) Indebtedness
(excluding Capital Leases) not to exceed (in the aggregate with Indebtedness
permitted under clause (d) of this Section 7.1) $400,000 in the aggregate at any
time outstanding secured by purchase money Liens; (d) Indebtedness under Capital
Leases not to exceed (in the aggregate with Indebtedness permitted under clause
(c) of this Section 7.1) $400,000 outstanding at any time in the aggregate; and
(e) Indebtedness existing on the Closing Date and identified on Schedule 4.4 and
Indebtedness arising after the Closing Date and described in Schedule 4.4 as
future permitted Indebtedness. Except for Indebtedness permitted in the
preceding sentence, Systems, Borrowers and Guarantors will not, and will not
permit any of their Subsidiaries to, incur any Liabilities except for trade
payables and normal accruals in the ordinary course of business not yet due and
payable or with respect to which any Borrower, any Guarantor or any of its
Subsidiaries is contesting in good faith the amount or validity thereof by
appropriate proceedings and then only to the extent such Borrower, Guarantor or
any of its Subsidiaries has established adequate reserves therefor, if
appropriate under GAAP.
7.2 Guaranties. Except for (a) the guaranties of the Obligations provided
hereunder and under the other Loan Documents, (b) performance guaranties given
by a Borrower or Guarantor in respect of a Borrower's performance under a
contract which performance by a Borrower is reasonably contemplated to result in
Eligible Accounts, (c) obligations described in Schedule 4.4 and (d)
endorsements of instruments or items of payment for collection in the ordinary
course of business, guaranty, endorse, or otherwise in any way become or be
responsible for any obligations of any other Person, whether directly or
indirectly, including by agreement to purchase the indebtedness of any other
Person or through the purchase of goods, supplies or services, or maintenance of
working capital or other balance sheet covenants or conditions, or by way of
stock purchase, capital contribution, advance or loan for the purpose of paying
or discharging any indebtedness or obligation of such other Person or otherwise.
7.3 Transfers, Liens and Related Matters.
(A) Transfers. Sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to any of the Collateral
or the assets of such Person, except that Borrowers, Guarantors and their
Subsidiaries may (i) sell inventory in the ordinary course of business; and (ii)
make Asset Dispositions if all of the following conditions are met: (1) the
market value of assets sold or otherwise disposed of in any single transaction
or series of related transactions does not exceed $200,000 and the aggregate
market value of assets sold or otherwise disposed of in any Fiscal Year does not
exceed $400,000; (2) the consideration received is at least equal to the fair
market value of such assets, as determined in good faith by such Borrower's,
Guarantor's or Subsidiary's senior officers; (3) the sole consideration received
is cash or notes as to which a Borrower or Guarantor shall have delivered such
notes to Lender and complied with Section 5.14; (4) the net proceeds of such
Asset Disposition are applied as required by subsection 2.4(B); (5) after giving
effect to the sale or other disposition of the assets included within the Asset
Disposition and the repayment of the Obligations with the proceeds thereof,
Systems and Borrowers are in compliance on a pro forma basis with the covenants
set forth in Section 6 recomputed for the most recently ended month for which
information is available and are in compliance with all other terms and
conditions contained in this Agreement; and (6) no Default or Event of Default
shall then exist or result from such sale or other disposition.
(B) Liens. Except for Permitted Encumbrances, Liens on equipment
described in Schedule 4.4 and Liens on up to $800,000 of cash collateral
securing letters of credit issued by First Union National Bank, directly or
indirectly create, incur, assume or permit to exist any Lien on or with respect
to any of the Collateral or the assets of such Person or any proceeds, income or
profits therefrom, whether now owned or hereafter acquired.
(C) No Negative Pledges. Enter into or assume any agreement (other
than the Loan Documents) prohibiting the creation or assumption of any Lien upon
its properties or assets, whether now owned or hereafter acquired.
(D) No Restrictions on Distributions. Except as provided herein,
directly or indirectly create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Borrower, any Guarantor or any Subsidiary of any Borrower or Guarantor
to: (1) pay dividends or make any other distribution on any of such Subsidiary's
capital stock or other equity owned by a Borrower, a Guarantor or any Subsidiary
of such Borrower or Guarantor; (2) pay any indebtedness owed to any Loan Party;
(3) make loans or advances to any Loan Party; or (4) transfer any of its
property or assets to any Loan Party.
7.4 Investments and Loans. Make or permit to exist investments of any type
in or loans or advances to any other Person or commit to do any of the
foregoing, except: (a) Cash Equivalents; (b) loans and advances to employees for
moving, entertainment, travel and other similar expenses in the ordinary course
of business in an aggregate outstanding amount not in excess of $75,000 to any
one employee and $300,000 in the aggregate for all employees at any time with
respect to all the Loan Parties; (c) Intercompany Indebtedness permitted under
subsection 7.1; (d) Permitted Acquisitions permitted under subsection 7.6(B);
and (e) investments existing on the date of this Agreement in other Loan
Parties.
7.5 Restricted Junior Payments. Directly or indirectly declare, order, pay,
make or set apart any sum for any Restricted Junior Payment, except that, so
long as no Default or Event of Default shall have occurred and be continuing or
would result therefrom (other than in the case of Restricted Junior Payments
made pursuant to clause (i) below, which may be made whether or not a Default or
Event of Default shall have occurred and is continuing or would result
therefrom), (A) a Borrower or any Subsidiary of a Borrower may make Restricted
Junior Payments with respect to its common stock to the extent necessary (i) to
permit Borrowers to pay (or deposit cash collateral for) the Obligations; (ii)
to permit Systems to make payments in cash in respect of Corporate Overhead; and
(iii) to permit any Borrower to pay expenses incurred in the ordinary course of
business; and (B) Systems may make Restricted Junior Payments with respect to
its common stock not earlier than 30 days after or later than 90 days after
delivery of the financial statements referred to in subsection 5.1(C).
7.6 Restriction on Fundamental Changes.
(A)(i) Enter into any transaction of merger or consolidation; (ii)
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution); or (iii) convey, sell, lease, sublease, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets, or the capital stock of any of its
Subsidiaries, whether now owned or hereafter acquired; provided, however, that
so long as no Event of Default then exists or would result therefrom (x) any
Borrower or Guarantor may merge or consolidate with, or convey, sell or transfer
all or substantially all of its assets to, any other Borrower or Guarantor,
provided a Borrower is the surviving corporation in any such merger or
consolidation and any such transaction shall not adversely affect any of the
rights of Lender under the EximBank Documents, (y) any Inactive Subsidiary may
liquidate or dissolve or merge or consolidate with or into another Loan Party
provided a Borrower or a Guarantor is the surviving corporation in any such
merger or consolidation involving a Borrower or Guarantor and any such
transaction shall not adversely affect any of the rights of Lender under and
shall not be prohibited by the EximBank Documents and (z) any Subsidiary which
is not a Domestic Subsidiary may liquidate or dissolve, or merge or consolidate
with or into, another non-Domestic Subsidiary or a Loan Party (other than a
Borrower) whose capital stock is pledged (or, if a non-Domestic Subsidiary, 65%
of whose capital stock is pledged) to the Lender pursuant to a Pledge Agreement.
(B) Acquire by purchase or otherwise, all or any substantial part of
the business or assets of, or stock or other evidence of beneficial ownership
of, any Person or a division of any Person or establish, create or acquire any
new Subsidiary; provided, however, that so long as no Default or Event of
Default has occurred and is continuing before and after giving effect thereto,
any Borrower, any Guarantor or any of their Subsidiaries may acquire all or
substantially all of the assets of or all the capital stock of any Person (in
each case, a "Permitted Acquisition") or organize a new Subsidiary solely to do
so; provided that each Permitted Acquisition shall be subject to the
satisfaction of the condition precedent that the Unused Availability shall be
not less than $2,000,000 without giving effect to the proposed Permitted
Acquisition for the ninety (90) day period preceding the consummation thereof
and to the satisfaction of each of the following additional conditions
precedent:
(1) Lender shall receive not less than fifteen (15) Business
Days' prior written notice of such proposed Permitted Acquisition, which notice
shall include a reasonably detailed description of such proposed Permitted
Acquisition;
(2) such Permitted Acquisition shall only be of capital stock of
a Target whose assets (except assets with an aggregate market value of $100,000
or less) are located solely in, or those assets of a Target (except assets with
an aggregate market value of $100,000 or less) which are located solely in, the
United States and comprising a business, or those assets of a business, of the
type engaged in by Borrowers as of the Closing Date or a related, similar or
compatible business, and which business would not subject Lender to regulatory
or third party approvals in connection with the exercise of its rights and
remedies under this Agreement or any other Loan Documents;
(3) such Permitted Acquisition shall be consensual and shall have
been approved by the Target's board of directors;
(4) the business and assets of the Target acquired in such
Permitted Acquisition shall be acquired free and clear of all Liens (other than
Permitted Encumbrances);
(5) no Indebtedness, contingent obligations or other liabilities
shall be incurred or assumed in connection with such Permitted Acquisition,
except (x) Loan advances, (y) ordinary course trade payables and accrued
expenses and (z) Indebtedness and guaranties permitted under Section 7.1 and
Section 7.2;
(6) on or prior to the date thereof, Lender will be granted a
first and prior perfected security interest (subject to Permitted Encumbrances)
in all assets and equity securities being acquired pursuant to such Permitted
Acquisition, and the Borrowers, the Guarantors and their respective Subsidiaries
shall have executed such documents and taken such actions as may be required by
Lender in connection therewith;
(7) Borrowers shall have delivered to Lender, in form and
substance satisfactory to Lender:
(i) pro forma balance sheets of Borrowers, Guarantors and
their respective Subsidiaries (the "Acquisition Pro Forma") on a consolidated
basis, based on financial data as of a recent date, which shall be complete and
shall accurately and fairly represent the assets, liabilities, financial
condition and results of operations of Borrowers, Guarantors and their
respective Subsidiaries in accordance with GAAP consistently applied, but taking
into account such Permitted Acquisition and the funding of all Loans in
connection therewith, and the Acquisition Projections (as hereinafter defined)
shall reflect that Unused Availability for the 90-day period following the
consummation of such Permitted Acquisition will exceed $2,000,000 on a pro forma
basis (giving effect to such Permitted Acquisition and all Loans funded in
connection therewith as if made on the first day of such period);
(ii) updated versions of the most recently delivered
projections covering the one (1) year period commencing on the date of such
Permitted Acquisition and otherwise prepared in accordance with subsections 4.3
and 4.17 (the "Acquisition Projections") and based upon historical financial
data of a recent date satisfactory to Lender, taking into account such Permitted
Acquisition; and
(iii) a certificate of the chief financial officer of
Systems and Borrowers to the effect that: (I) each Borrower and Guarantor (after
taking into consideration all rights of contribution and indemnity such Borrower
and Guarantor has against each other Borrower and Guarantor) will be solvent (as
represented by Borrowers in subsection 4.16) upon the consummation of the
transaction contemplated by the Permitted Acquisition; (II) the Acquisition Pro
Forma fairly presents the financial condition of Borrowers, Guarantors and their
respective Subsidiaries (on a consolidated basis) as of the date hereof after
giving effect to the transactions contemplated by such Permitted Acquisition;
(III) the Acquisition Projections are good faith estimates, based on assumptions
believed at the date of such certificate in good faith to be reasonable, of the
future financial performance of Borrowers, Guarantors and their respective
Subsidiaries subsequent to the date thereof based upon the historical
performance and the projected future financial performance of Borrowers,
Guarantors and their respective Subsidiaries; and (IV) Borrowers, Guarantors and
their respective Subsidiaries have completed their due diligence investigation
with respect to the Target and such Permitted Acquisition, which investigation
was conducted in a manner similar to that which would have been conducted by a
prudent purchaser of a comparable business and the results of which
investigation were acceptable to Borrowers, Guarantors and their respective
Subsidiaries;
(8) on or prior to the date of such Permitted Acquisition, Lender
shall have received, in form and substance satisfactory to Lender, all
collateral and security documents, opinions, certificates, lien search results
and other documents reasonably requested by Lender to evidence compliance with
the foregoing provisions of this subsection 7.6(B); and
(9) the total Acquisition Costs payable in connection with such
Permitted Acquisition shall not exceed $750,000 and the sum of all Acquisition
Costs paid in any Fiscal Year in connection with all Permitted Acquisitions
shall not exceed $1,000,000.
7.7 Transactions with Affiliates. Directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director or employee of any Loan Party, except for transactions in the
ordinary course of and pursuant to the reasonable requirements of Borrower's, a
Guarantor's or one of their respective Subsidiary's business and upon fair and
reasonable terms which, except for transactions which are expressly permitted
pursuant to the terms of this Agreement, are fully disclosed to Lender and which
are no less favorable to such Borrower, Guarantor or Subsidiary than they would
obtain in comparable arm's length transactions with unaffiliated Persons.
7.8 Environmental Liabilities. (a) Violate any applicable Environmental
Law; (b) dispose of any Hazardous Materials (except in accordance with
applicable law) into or onto or from, any real property owned, leased or
operated by any Loan Party; or (c) permit any Lien imposed pursuant to any
Environmental Law to be imposed or to remain on any real property owned, leased
or operated by any Loan Party.
7.9 Conduct of Business. Engage in any business other than businesses of
the type engaged in by Borrowers, Guarantors or any Subsidiary thereof on the
Closing Date and related, similar types of business.
7.10 Compliance with ERISA. Establish any new Employee Benefit Plan or
amend any existing Employee Benefit Plan if the liability or increased liability
resulting from such establishment or amendment could be reasonably expected to
have a Material Adverse Effect. Neither Borrowers, Guarantors nor any of their
Subsidiaries shall fail to establish, maintain and operate each Employee Benefit
Plan in compliance in all material respects with the provisions of ERISA, the
IRC and all other applicable laws and the regulations and interpretations
thereof.
7.11 Tax Consolidations. File or consent to the filing of any consolidated
income tax return with any Person other than Systems, Borrowers or any of their
respective Subsidiaries; and in the event any Borrower or Guarantor files a
return with Systems, such Borrower's or Guarantor's contribution with respect to
taxes as a result of the filing of such consolidated return shall not be
greater, nor the receipt of tax benefits less, than they would have been if such
Borrower had not filed a consolidated return.
7.12 Subsidiaries. Except to the extent permitted by subsection 7.6(B),
establish, create or acquire any new Subsidiaries.
7.13 Fiscal Year. Change its Fiscal Year.
7.14 Press Release; Public Offering Materials. Disclose the name of Lender
in any press release or in any prospectus, proxy statement or other materials
filed with any governmental entity relating to a public offering of the capital
stock of any Loan Party except as may be required by law.
7.15 Bank Accounts. Establish any new bank accounts, or amend or terminate
any Blocked Account or lockbox agreement, without Lender's prior written
consent; provided, that Borrowers, Guarantors and their respective Subsidiaries
may establish additional bank accounts so long as in each case (a) Borrower
Representative provides Lender with at least ten (10) Business Days' prior
written notice thereof and (b) each such bank account which is a depository
account is subject to an effective Blocked Account Agreement prior to the
establishment thereof. This Section 7.15 shall not apply to Subsidiaries which
are not Domestic Subsidiaries.
7.16 Amendments. Amend its certificate of incorporation, by-laws or other
organizational documents, except for amendments (of which prior notice has been
given to Lender) that would not adversely affect any Obligations, any
Collateral, any rights of the Lender under any Loan Document or the ability of
any Borrower or Guarantor to perform its Obligations or conduct its business as
previously conducted.
SECTION 8. DEFAULT, RIGHTS AND REMEDIES
8.1 Event of Default. "Event of Default" shall mean the occurrence or
existence of any one or more of the
following:
(A) Payment. Failure to make payment of any of the Obligations when
due and in the case of interest, such failure shall not be cured within five (5)
days of the applicable due date; or
(B) Default in Other Agreements. (1) (a) Failure of any Loan Party, GP
Strategies or ManTech to pay when due any principal or interest on any
Indebtedness (other than the Obligations) or (b) breach or default of any Loan
Party, GP Strategies or ManTech with respect to any Indebtedness (other than the
Obligations); if such failure to pay, breach or default entitles the holder
(with the giving of notice or passage of time, or both) to cause such
Indebtedness having an individual principal amount in excess of $100,000 or
having an aggregate principal amount in excess of $200,000 to become or be
declared due prior to its stated maturity; or (2) default under any of the
EximBank Documents, including any breach of any covenant thereunder regardless
of whether such covenant is more restrictive than, or conflicts with, or covers
the same or similar matters as the covenants set forth in this Agreement or any
other Loan Documents; or
(C) Breach of Certain Provisions. Failure of any Loan Party to perform
or comply with any term or condition contained in subsections 5.1 (A), (B), (C),
(F) or (J) or 5.3, 5.5, 5.6 or 5.12(D) or contained in Section 6 or Section 7;
or
(D) Breach of Warranty. Any representation, warranty, certification or
other statement made by any Loan Party, GP Strategies or ManTech in any Loan
Document or in any statement or certificate at any time given by such Person (or
any officer or cash manager) in writing pursuant or in connection with any Loan
Document is false in any material respect on the date made or deemed made; or
(E) Other Defaults Under Loan Documents. Any Loan Party, GP Strategies
or ManTech defaults in the performance of or compliance with any term contained
in this Agreement or the other Loan Documents and such default is not remedied
or waived within twenty (20) days after receipt by Borrower Representative of
notice from Lender of such default (other than occurrences described in other
provisions of this subsection 8.1 for which a different grace or cure period is
specified or which constitute immediate Events of Default); or
(F) Change in Control. GSE ceases to beneficially own and control,
directly or indirectly, at least one hundred percent (100%) of the issued and
outstanding shares of each class of capital stock of each Borrower entitled
(without regard to the occurrence of any contingency) to vote for the election
of a majority of the members of such Borrower's board of directors; or GP
Strategies shall at any time cease to beneficially own and control, directly or
indirectly, at least the same percentage of the issued and outstanding shares of
each class of capital stock of Systems entitled (without regard to the
occurrence of any contingency) to vote for the election of the members of
Systems' board of directors as it does on the closing date, except such
percentage may reduce solely as a result of issuance of additional securities to
third parties by Systems; or
(G) Involuntary Bankruptcy; Appointment of Receiver, etc. (1) A court
enters a decree or order for relief with respect to any Loan Party, GP
Strategies or ManTech in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, which decree or
order is not stayed or other similar relief is not granted under any applicable
federal or state law; or (2) the continuance of any of the following events for
sixty (60) days unless dismissed, bonded or discharged: (a) an involuntary case
is commenced against any Loan Party, GP Strategies or ManTech under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (b) a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over any Loan Party, GP Strategies or ManTech or over all or a
substantial part of their respective property, is entered; or (c) an interim
receiver, trustee or other custodian is appointed without the consent of any
Loan Party, GP Strategies or ManTech for all or a substantial part of the
property of any Loan Party, GP Strategies or ManTech; or
(H) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) Any Loan
Party, GP Strategies or ManTech commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of its property; or (2) any Loan
Party, GP Strategies or ManTech makes any assignment for the benefit of
creditors; or (3) the board of directors or similar Persons of any Loan Party,
GP Strategies or ManTech adopts any resolution or otherwise authorizes action to
approve any of the actions referred to in this subsection 8.1(H); or
(I) Liens. Any lien, levy or assessment is filed or recorded with
respect to or otherwise imposed upon all or any part of (i) any assets of the
Loan Parties not constituting Collateral and having a value at any time in
excess of $125,000 in the aggregate or (ii) any Collateral, in any case by the
United States, any foreign government or any department or instrumentality
thereof or by any state, county, municipality or other governmental agency
(other than Permitted Encumbrances) and such lien, levy or assessment is not
stayed, vacated, paid or discharged within thirty (30) days; or
(J) Judgment and Attachments. Any money judgment, writ or warrant of
attachment, or similar process involving (1) an amount in any individual case in
excess of $100,000 or (2) an amount in the aggregate at any time in excess of
$200,000 (in either case not adequately covered by insurance as to which the
insurance company has acknowledged coverage) is entered or filed against any
Loan Party or any of its assets and remains undischarged, unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event later than five (5)
days prior to the date of any proposed sale thereunder; or
(K) Dissolution. Any order, judgment or decree is entered against any
Loan Party, GP Strategies or ManTech decreeing the dissolution or split up of
such Loan Party, GP Strategies or ManTech and such order remains undischarged or
unstayed for a period in excess of thirty (30) days; or
(L) Solvency. Any Borrower, Guarantor, GP Strategies or ManTech ceases
to be solvent (as represented in subsection 4.16) or admits in writing its
present or prospective inability to pay its debts as they become due; or
(M) Injunction. Any Loan Party is enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of its business and such order
continues for more than thirty (30) days, if any such event or circumstance
could reasonably be expected to have a Material Adverse Effect; or
(N) Invalidity of any Loan Documents. (1) Any of the Loan Documents or
EximBank Documents for any reason, other than a partial or full release in
accordance with the terms thereof, ceases to be in full force and effect or is
declared to be null and void, or any Loan Party or Exim or GP Strategies or
ManTech denies that it has any further liability (except after payment in full
of all amounts payable thereunder) under any Loan Documents or EximBank
Documents to which it is party, or gives notice to such effect; or
(2) If either ManTech or GP Strategies shall deliver to Lender a
notice of termination of the ManTech Guarantee or the GP Strategies Guarantee;
or
(3) If EximBank shall not agree to renew, on terms and
conditions satisfactory to the Lender in its sole discretion, the guaranty by
EximBank under the EximBank Documents at least 30 days prior to any expiration
date of such guaranty; or
(O) Failure of Security. Lender does not have or ceases to have a
valid and perfected first priority security interest in any portion of the
Collateral (other than cash and other monies in the possession or under the
control of a Person other than Lender as to which Lender is unable to obtain a
perfected security interest by any means under the Uniform Commercial Code of
the relevant jurisdiction) (subject to Permitted Encumbrances and Liens
permitted under Section 7.3(B)), in each case, for any reason other than the
failure of Lender to take any action within its control; or
(P) Damage, Strike, Casualty. Any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than sixty (60) consecutive days beyond
the coverage period of any applicable business interruption insurance, the
cessation or substantial curtailment of revenue producing activities at any
facility of any Loan Party if any such event or circumstance could reasonably be
expected to have a Material Adverse Effect; or
(Q) Licenses and Permits. The loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by any
Loan Party, if such loss, suspension, revocation or failure to renew could
reasonably be expected to have a Material Adverse Effect; or
(R) Forfeiture. There is filed against any Loan Party, any civil or
criminal action, suit or proceeding under any federal or state racketeering
statute (including, without limitation, the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (1) is not dismissed
within one hundred twenty (120) days; and (2) could reasonably be expected to
result in the confiscation or forfeiture of any material portion of the
Collateral; or
(S) System Activities. Systems shall engage in any business
activities, other than activities solely related to ownership of the stock of
its Subsidiaries, Corporate Overhead activities, and activities related to
compliance with laws and regulations applicable to Systems as a publicly-owned
corporation; or
(T) Inactive Subsidiaries' Activities. Any Inactive Subsidiary shall
hold any assets, incur any liabilities (other than corporate franchise taxes and
other similar charges incidental to the maintenance of its corporate existence)
or engage in any business activity, unless, within ten (10) days after the first
to occur of any such activity, such entity shall have executed and delivered to
Lender such instruments and documents as shall be satisfactory in form and
substance to Lender and as shall provide for such entity being a Guarantor under
this Agreement; or
(U) Material Adverse Change. Since the Closing Date, any change in the
business, assets, liabilities, financial condition, results of operations or
business prospects of any Loan Party shall have been discovered or shall have
occurred, or any event shall have occurred or failed to occur, that has had or
might have, either alone or in conjunction with all other such changes, events
and failures, a Materially Adverse Effect.
8.2 Suspension of Commitments. Upon the occurrence of any Default or Event
of Default, notwithstanding any grace period or right to cure, Lender may,
without notice or demand, immediately cease making additional Loans and
providing Lender Letters of Credit and the Commitments shall be suspended;
provided that, in the case of a Default, if the subject condition or event is
waived or cured within any applicable grace or cure period, the Commitments
shall be reinstated.
8.3 Acceleration. Upon the occurrence of any Event of Default described in
the foregoing subsections 8.1(G) or 8.1(H), all Obligations shall automatically
become immediately due and payable and the Borrowers shall be immediately and
automatically obligated to deposit with Lender the amount of cash collateral
referred to in clause (b) below, in each case, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by all Borrowers and Guarantors, and the Commitments shall thereupon
terminate. Upon the occurrence and during the continuance of any other Event of
Default, Lender may by written notice to Borrower Representative, (a) declare
all or any portion of the Obligations to be, and the same shall forthwith
become, immediately due and payable without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by all
Borrowers and Guarantors, and the Commitments shall thereupon terminate and (b)
demand that Borrowers immediately deposit with Lender cash collateral in an
amount equal to one hundred five percent (105%) of the Letter of Credit
Liability to secure all Obligations in respect of payments under the Lender
Letters of Credit and Risk Participation Agreements when required, and such
amount shall become immediately due and payable without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by all Borrowers and Guarantors.
8.4 Remedies. If any Event of Default shall have occurred and be
continuing, in addition to and not in limitation of any other rights or remedies
available to Lender at law or in equity, Lender may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected Collateral
but subject to the provisions of the UCC, except in the case of capital stock of
non-Domestic Subsidiaries) and may also (a) notify any or all obligors on the
Accounts to make all payments directly to Lender; (b) require the Borrowers and
Guarantors to, and the Borrowers and Guarantors hereby agree that they will, at
their expense and upon request of Lender forthwith, assemble all or part of the
Collateral as directed by Lender and make it available to Lender at a place to
be designated by Lender which is reasonably convenient to Lender; (c) withdraw
all cash in the Blocked Accounts and apply such monies in payment of the
Obligations in the manner provided in subsection 8.7; (d) without notice or
demand or legal process, enter upon any premises of the Borrowers and Guarantors
and take possession of the Collateral; and (e) without notice except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of Lender's offices or elsewhere, at such time
or times, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as Lender may deem commercially reasonable. The
Borrowers and Guarantors agree that, to the extent notice of sale shall be
required by law, at least ten (10) days notice to Borrower Representative of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. At any sale of the Collateral,
if permitted by law, Lender may bid (which bid may be, in whole or in part, in
the form of cancellation of indebtedness) for the purchase of the Collateral or
any portion thereof for the account of Lender. Lender shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given. The
Borrowers and Guarantors shall remain liable for any deficiency with interest at
the Default Rate. Lender may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. To the extent permitted by law, the Borrowers and Guarantors hereby
specifically waive all rights of redemption, stay or appraisal which they have
or may have under any law now existing or hereafter enacted. Lender shall not be
required to proceed against any Collateral but may proceed against any or all
the Borrowers and Guarantors directly and/or GP Strategies and ManTech and/or
EximBank directly.
8.5 Appointment of Attorney-in-Fact. Each Borrower and Guarantor hereby
constitutes and appoints Lender as its attorney-in-fact with full authority in
its place and stead and in its name, the name of Lender or otherwise, from time
to time in Lender's discretion while an Event of Default is continuing to take
any action and to execute any instrument that Lender may deem necessary or
advisable to accomplish the purposes of this Agreement, including: (a) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral; (b) to adjust, settle or compromise the amount or payment of any
Account, or release wholly or partly any customer or obligor thereunder or allow
any credit or discount thereon; (c) to receive, endorse, and collect any drafts
or other instruments, documents and chattel paper, in connection with clause (a)
above; (d) to file any claims or take any action or institute any proceedings
that Lender may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Lender with respect to any of
the Collateral; and (e) to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral. The appointment of Lender as each Borrower's and
Guarantor's attorney and Lender's rights and powers are coupled with an interest
and are irrevocable until payment in full and complete performance of all of the
Obligations.
8.6 Limitation on Duty of Lender with Respect to Collateral. Beyond the
safe custody thereof, Lender shall have no duty with respect to any Collateral
in its possession or control (or in the possession or control of any agent or
bailee) or with respect to any income thereon or the preservation of rights
against prior parties or any other rights pertaining thereto. Lender 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 Lender accords its own property. Lender 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 Lender or bailee
selected by Lender in good faith.
8.7 Application of Proceeds. Upon the occurrence and during the continuance
of an Event of Default, (a) the Borrowers and Guarantors irrevocably waive the
right to direct the application of any and all payments at any time or times
thereafter received by Lender from or on behalf of any Borrower or Guarantor,
and the Borrowers and Guarantors hereby irrevocably agree that Lender shall have
the continuing exclusive right, subject to Lender's agreements with EximBank, to
apply and to reapply any and all payments received at any time or times after
the occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Lender may deem advisable notwithstanding any
previous entry by Lender upon any books and records and (b) the proceeds of any
sale of, or other realization upon, all or any part of the Collateral shall be
applied: first, to all fees, costs and expenses incurred by Lender with respect
to this Agreement, the other Loan Documents or the Collateral; second, to all
fees due and owing to Lender; third, to accrued and unpaid interest on the
Obligations; fourth, to the principal amounts of the Obligations outstanding;
and fifth, to any other indebtedness or obligations of any Borrower or Guarantor
owing to Lender.
8.8 License of Intellectual Property. Each Borrower and Guarantor hereby
assigns, transfers and conveys to Lender effective upon the occurrence of any
Event of Default hereunder, the non-exclusive right and license to use all
Intellectual Property owned or used by it together with any goodwill associated
therewith, all to the extent necessary to enable Lender to realize on the
Collateral and to permit Lender and any successor or assign to enjoy the
benefits of the Collateral. This right and license shall inure to the benefit of
all successors, assigns and transferees of Lender and its successors, assigns
and transferees, whether by voluntary conveyance, operation of law, assignment,
transfer, foreclosure, deed in lieu of foreclosure or otherwise. Such right and
license is granted free of charge, without requirement that any monetary payment
whatsoever be made to any Borrower or Guarantor by Lender.
8.9 Waivers, Non-Exclusive Remedies. No failure on the part of Lender to
exercise, and no delay in exercising and no course of dealing with respect to,
any right under this Agreement or the other Loan Documents shall operate as a
waiver thereof; nor shall any single or partial exercise by Lender of any right
under this Agreement or any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right. The rights in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other remedies provided by law.
SECTION 9. ASSIGNMENT AND PARTICIPATION; SETOFF
9.1 Assignments and Participations in Loans.
(A) Lender may assign all or any portion of its rights and delegate
all or any portion of its obligations under this Agreement in whole or in part
to another Person without the consent of any Loan Party. In the case of an
assignment authorized under this subsection 9.1, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as it would
if it were a Lender hereunder and the assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitment or assigned portion
thereof. The Borrowers and Guarantors hereby acknowledge and agree that any
assignment will give rise to a direct obligation of Borrowers and Guarantors to
the assignee and that the assignee shall be considered to be a "Lender".
(B) Lender may sell participations in all or any part of any Loans and
other Obligations to another Person; provided, that any such participation shall
be in a minimum amount of $1,000,000, and provided, further, that all amounts
payable by Borrowers and Guarantors hereunder shall be determined as if that
Lender had not sold such participation. The Borrowers and Guarantors hereby
acknowledge and agree that any participation will give rise to a direct
obligation of Borrowers and Guarantors to the participant, and the participant
under each participation shall for purposes of subsections 2.8, 2.9, 2.11 and
10.2 be considered to be a "Lender".
(C) Lender may furnish any information concerning Systems, any
Borrower, any other Guarantor and any of their respective Subsidiaries in the
possession of Lender from time to time to assignees and participants (including
prospective assignees and participants).
(D) Notwithstanding any other provision set forth in this Agreement,
Lender may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Loans owing to
it and the Note held by it in favor of any Federal Reserve Bank in accordance
with Regulation A of the Board of Governors of the Federal Reserve System).
9.2 Set Off and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
Lender is hereby authorized by Borrowers and Guarantors at any time or from time
to time, without notice to any Borrowers and Guarantors or to any other Person
to set off and to appropriate and to apply any and all (A) balances held by
Lender or any Affiliate at any of its offices for the account of any Borrower or
Guarantor (regardless of whether such balances are then due to such Borrower or
Guarantor), and (B) other property at any time held or owing by Lender or any
Affiliate to or for the credit or for the account of any Borrower or Guarantor
against and on account of any of the Obligations which are not paid when due.
SECTION 10. MISCELLANEOUS
10.1 Expenses and Attorneys' Fees. Whether or not the transactions
contemplated hereby shall be consummated, Borrowers and Guarantors agree to
promptly pay all fees, costs and expenses incurred by Lender in connection with
any matters contemplated by or arising out of this Agreement or the other Loan
Documents including the following, and all such fees, costs and expenses shall
be part of the Obligations, payable on demand and secured by the Collateral: (a)
fees, costs and expenses (including reasonable attorneys' fees, allocated costs
of internal counsel and fees of environmental consultants, accountants and other
professionals retained by Lender) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents; (b) fees, costs and expenses
(including reasonable attorneys' fees, allocated costs of internal counsel and
fees of environmental consultants, accountants and other professionals retained
by Lender) incurred in connection with the review, negotiation, preparation,
documentation, execution and administration of the Loan Documents, the Loans,
the Lender Letters of Credit, and any amendments, waivers, consents,
forbearances and other modifications relating thereto or any subordination or
intercreditor agreements; (c) fees, costs and expenses incurred by Lender in
creating, perfecting and maintaining perfection of Liens in favor of Lender; (d)
fees, costs and expenses incurred by Lender in connection with forwarding to
Borrowers the proceeds of Loans including Lender's standard wire transfer fees;
(e) fees, costs, expenses and bank charges, including bank charges for returned
checks, incurred by Lender in establishing, maintaining and handling lock box
accounts, blocked accounts or other accounts for collection of the Collateral;
(f) fees, costs, expenses (including reasonable attorneys' fees and allocated
costs of internal counsel) of Lender and costs of settlement incurred in
collecting upon or enforcing rights against the Collateral or incurred in any
action to enforce this Agreement or the other Loan Documents or to collect any
payments due from Borrowers or Guarantors under this Agreement or any other Loan
Document or incurred in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement, whether in the nature of a
"workout" or in connection with any insolvency or bankruptcy proceedings
or otherwise.
10.2 Indemnity. In addition to the payment of expenses pursuant to
subsection 10.1, whether or not the transactions contemplated hereby shall be
consummated, each Borrower and Guarantor jointly and severally agrees to
indemnify, pay and hold Lender and any holder of the Note and the officers,
directors, employees, agents, consultants, auditors, affiliates and attorneys
of, and Persons engaged by, Lender (collectively called the "Indemnitees")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including the fees and disbursements of
counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnitee shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against that Indemnitee, in any manner relating to or
arising out of this Agreement or the other Loan Documents, the consummation of
the transactions contemplated by this Agreement, the statements contained in the
commitment letters, if any, delivered by Lender, Lender's agreement to make the
Loans hereunder, the use or intended use of the proceeds of any of the Loans or
the Lender Letters of Credit or the exercise of any right or remedy hereunder or
under the other Loan Documents (the "Indemnified Liabilities"); provided that
the Borrowers and Guarantors shall have no obligation to an Indemnitee hereunder
with respect to Indemnified Liabilities arising from the gross negligence or
willful misconduct of that Indemnitee as determined by a court of competent
jurisdiction.
10.3 Amendments and Waivers.
(A) Except as otherwise provided herein, no amendment, modification,
termination or waiver of any provision of this Agreement or any Loan Document,
or consent to any departure by any Loan Party therefrom, shall in any event be
effective unless the same shall be in writing and signed by Lender.
(B) Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given.
(C) No amendment, modification or waiver of any provision of any
Lender Letter of Credit shall be applicable without the written concurrence of
the issuer of such Lender Letter of Credit. No notice to or demand on Systems,
any Borrower or any other Guarantor in any case shall entitle Systems, any
Borrower or any other Guarantor to any other or further notice or demand in
similar or other circumstances.
(D) In the event Lender waives (1) any Default arising under
subsection 8.1(E) as a result of the breach of any of the provisions of Section
5 of this Agreement (other than any such breach which constitutes an Event of
Default) or (2) any Default constituting a condition to the funding of any
Revolving Advance or issuance of any Lender Letter of Credit, such waiver shall
expire on the date upon which the Default which was the subject of such waiver
matures into an Event of Default pursuant to the terms of this Agreement.
10.4 Notices. Unless otherwise specifically provided herein, all notices
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by overnight courier service or United
States mail and shall be deemed to have been given: (a) if delivered in person,
when delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. New York City time or, if not, on
the next succeeding Business Day; (c) if delivered by overnight courier, two (2)
days after delivery to such courier properly addressed; or (d) if by U.S. Mail,
four (4) Business Days after depositing in the United States mail, with postage
prepaid and properly addressed.
If to any Borrower or
Guarantor : GSE SYSTEMS, INC.
9189 Red Branch Road
Columbia, MD 21045
Attn: Ben Rosenbaum, Esq.
Telecopy No.: 410-772-3599
With a copy to: GOLDEN & NELSON PLLC
8285 High Globe Court
Millersville, MD 21108
Attn: Hedy L. Nelson, Esq.
Telecopy No.: 410-729-2246
If to Lender: DIME COMMERCIAL CORP.
1180 Avenue of the Americas
New York, N.Y. 10036
Attn: Mr. James Fisher
Telecopy No.: 212-382-8349
With a copy to: CONNELL & WIENER LLP
545 Fifth Avenue
New York, NY 10017
Attn: Paul R. Wiener, Esq.
Telecopy No.: 212-687-6999
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this subsection
10.4.
10.5 Survival of Warranties and Certain Agreements. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Loan Parties set forth in subsections 2.8, 2.9, 10.1 and 10.2
shall survive the payment of the Obligations and the termination of this
Agreement.
10.6 Indulgence Not Waiver. No failure or delay on the part of Lender, or
any holder of any Note in the exercise of any power, right or privilege
hereunder or under the Loan Documents shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
10.7 Marshaling; Payments Set Aside. Lender shall not be under any
obligation to marshal any assets in favor of any Borrower or Guarantor or any
other party or against or in payment of any or all of the Obligations. To the
extent that any Borrower or Guarantor makes a payment or payments to Lender or
Lender enforces its security interests or exercise its rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the Obligations or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
10.8 Entire Agreement. This Agreement, the Note and the other Loan
Documents referred to herein embody the final, entire agreement among the
parties hereto and supersede any and all prior commitments, agreements,
representations and understandings, whether written or oral, relating to the
subject matter hereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. There are no oral agreements among the parties hereto.
10.9 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
10.10 Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement or the other
Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.
10.11 Headings. Section and subsection headings and the Table of Contents
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose or be given
any substantive effect.
10.12 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.13 Successors and Assigns. 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 or Guarantor may assign its rights or
obligations hereunder without the prior written consent of Lender.
10.14 No Fiduciary Relationship; Limitation of Liabilities.
(A) No provision in this Agreement or in any of the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by Lender to any Borrower or any other Loan Party.
(B) Neither Lender nor any affiliate, officer, director, shareholder,
employee, attorney, or agent of Lender shall have any liability with respect to,
and Systems, Borrowers and Guarantors hereby waive, release, and agree not to
sue any of them upon, any claim for any special, indirect, incidental, or
consequential damages suffered or incurred by any of Systems, Borrowers and
Guarantors in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents. Systems,
Borrowers and Guarantors hereby waive, release, and agree not to sue Lender or
any of Lender's affiliates, officers, directors, employees, attorneys, or agents
for punitive damages in respect of any claim in connection with, arising out of,
or in any way related to, this Agreement or any of the other Loan Documents, or
any of the transactions contemplated by this Agreement or any of the
transactions contemplated thereby.
10.15 CONSENT TO JURISDICTION. EACH OF SYSTEMS, THE BORROWERS AND THE
GUARANTORS HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE BOROUGH OF MANHATTAN STATE OF NEW YORK AND IRREVOCABLY AGREES
THAT, UNLESS WAIVED BY LENDER IN WRITING, ALL ACTIONS OR PROCEEDINGS ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS,
INCLUDING ALL CLAIMS AND ACTIONS AGAINST THE LENDER, SHALL BE LITIGATED IN SUCH
COURTS. EACH OF SYSTEMS, THE BORROWERS AND THE GUARANTORS ACCEPTS FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, THE OTHER LOAN
DOCUMENTS OR THE OBLIGATIONS.
10.16 WAIVER OF JURY TRIAL. EACH OF SYSTEMS, THE BORROWERS AND THE
GUARANTORS AND LENDER HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE NOTE OR THE
OTHER LOAN DOCUMENTS. EACH OF SYSTEMS, THE BORROWERS AND THE GUARANTORS AND
LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING
INTO THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF
SYSTEMS, THE BORROWERS AND THE GUARANTORS AND LENDER FURTHER WARRANTS AND
REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.
10.17 Construction. Each of Systems, the Borrowers and the other Guarantors
and Lender acknowledges that it has had the benefit of legal counsel of its own
choice and has been afforded an opportunity to review this Agreement and the
other Loan Documents with its legal counsel and that this Agreement and the
other Loan Documents shall be construed as if jointly drafted by each of
Systems, the Borrowers and the other Guarantors and Lender.
10.18 Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents, or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto. Delivery of an executed counterpart of a signature
page to this Agreement, to any amendments, waivers, consents or supplements, or
to any other Loan Document by telecopier shall be as effective as delivery of a
manually executed counterpart thereof.
10.19 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to Systems, any Borrower, any of the other Loan Parties, or any of
the Loan Parties' shareholders or any other Person.
10.20 Year 2000. (a) Each of Systems, the Borrowers and Guarantors
represents, warrants and covenants that it (i) is aware of the risks associated
with the date change from December 31, 1999 to January 1, 2000; (ii) has
assessed the related processing capabilities of its computer and other
Technology Systems (as defined below); (iii) is taking or has taken, and shall
continue to take, if necessary, appropriate steps to prepare its Systems for
Year 2000 capability, i.e., to assure that its Technology Systems will operate
in a manner such that on and after January 1, 2000 the Technology Systems will
correctly interpret and manipulate all dates, data, information and records, so
as to avoid errors in processing or failures to operate properly because of
their inability to recognize accurately the year 2000 or subsequent dates; and
(iv) is taking or has taken, and shall continue to take, if necessary,
appropriate steps to verify that the Technology Systems of its material
customers, clients, suppliers and counterparties are able to meet the
requirements of the Year 2000 date change. Each of Systems, the Borrowers and
Guarantors further represents, warrants and covenants that its Technology
Systems shall have Year 2000 capability by June 30, 1999. The term "Technology
Systems" as used in this Section shall mean all (i) computer hardware, computer
software, and data processing systems; (ii) HVAC and other building or
facilities systems and equipment containing embedded microchips; and (iii) other
information technology-based systems, that, in the case of each of (i), (ii) and
(iii), are material to the business operations or financial condition of the
Systems, any Borrower or any other Loan Party.
(b) Each of Systems, the Borrowers and Guarantors agrees that, at the
Lender's request, it will provide the Lender with written documentation of its
efforts and progress with respect to the matters referred to in subsection
10.21(a) above and will also provide the Lender with written assurance of its
Year 2000 Technology Systems capability.
SECTION 11. GUARANTIES
11.1 Guaranty. Each Guarantor hereby jointly and severally absolutely and
unconditionally guaranties to Lender the full and prompt payment of all
Obligations owed or hereafter owing to Lender by each Borrower. Each Borrower
hereby absolutely and unconditionally guarantees to Lender the full and prompt
payment of all Obligations owed or hereafter owing to Lender by each other
Borrower. Notwithstanding any provision herein contained to the contrary, each
Guarantor's and each Borrower's liability under this Section 11 (which liability
of each Borrower is in any event in addition to amounts for which such Borrower
is primarily liable under the other Sections of this Agreement and the other
Loan Documents) shall be limited to an amount not to exceed as of any date of
determination the greater of:
(A) in the case of each Borrower and each Guarantor, the net amount of
all Loans advanced to any other Borrower under this Agreement and then re-loaned
or otherwise transferred to such Borrower or Guarantor; or
(B) in the case of each Borrower and each Guarantor, the amount which
could be claimed by Lender from such Borrower or Guarantor under this Section 11
without rendering such claim voidable or avoidable under Section 548 of Chapter
11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent
Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law
after taking into account, among other things, such Borrower's or Guarantor's
right of contribution and indemnification from the other Borrowers and
Guarantors under subsection 11.2 hereof.
Until all Obligations have been paid in full, this guaranty is and is intended
to be a continuing, unconditional guaranty of payment of the Obligations,
independent of and in addition to any other guaranty, endorsement, collateral or
other agreement now or hereafter held by Lender therefor or with respect
thereto, whether or not furnished by Borrowers and/or any Guarantor.
11.2 Contribution with Respect to Guaranty Obligations.
(A) To the extent that any Borrower or Guarantor shall make a payment
under this Section 11 of all or any of the Obligations for which such Borrower
or Guarantor is not primarily liable (a "Guarantor Payment") which, taking into
account all other Guarantor Payments then previously or concurrently made by the
other Borrower and Guarantors, exceeds the amount which such Borrower or
Guarantor would otherwise have paid if each Borrower and Guarantor had paid the
aggregate Obligations satisfied by such Guarantor Payment in the same proportion
that such Borrower's or Guarantor's "Allocable Amount" (as defined below) (in
effect immediately prior to such Guarantor Payment) bore to the aggregate
Allocable Amounts of all Borrowers and Guarantors in effect immediately prior to
the making of such Guarantor Payment, then such Borrower shall be entitled to
received contribution and indemnification payments from, and be reimbursed by,
each of the other Borrower and the Guarantors for the amount of such excess, pro
rata based upon their respective Allocable Amounts in effect immediately prior
to such Guarantor Payment.
(B) As of any date of determination, the "Allocable Amount" of any
Borrower or Guarantor shall be equal to the maximum amount of the claim which
could then be recovered from such Borrower or Guarantor under this subsection 11
without rendering such claim voidable or avoidable under Section 548 of Chapter
11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent
Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common
law.
(C) This subsection 11.2 is intended only to define the relative
rights of Borrowers and Guarantors between them and nothing set forth in this
subsection 11.2 is intended to or shall impair the obligations of Borrowers and
Guarantors, jointly and severally, to Lender to pay any amounts as and when the
same shall become due and payable in accordance with the terms of this
Agreement, including, without limitation, Section 2 hereof, and nothing
contained in this subsection 11.2 shall limit the liability of any Borrower to
pay the Obligations for which it is primarily liable or of any Borrower or
Guarantor to pay its obligations under this Section 11. Accordingly, the right
of any Borrower or Guarantor to receive any contribution and indemnification
payment from, or to be reimbursed by, any other Borrower or Guarantor under this
Section 11 shall be unsecured and subordinated in right of payment to such other
Borrower's or Guarantor's indebtedness and liability in respect of the
Obligations and obligations under this Section 11.
(D) The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets of any Borrower or Guarantor
to which such contribution and indemnification is owing.
11.3 Obligations Absolute. The liability of each Guarantor and each
Borrower to Lender under this Section 11 shall be absolute and unconditional and
shall not be affected or impaired by any of the following acts by Lender: (i)
any acceptance of collateral security, guarantors, accommodation parties or
sureties for any or all Obligations; (ii) one or more extensions or renewals of
any Obligations (whether or not for longer than the original period) or any
modification of the interest rates, fees, maturities or principal amount of, or
other contractual terms applicable to, any Obligations; (iii) any waiver or
indulgence granted to any Borrower or any other Loan Party, any delay or lack of
diligence in the enforcement of Obligations, or any failure to institute
proceedings, file a claim, give any required notices or otherwise protect any
Obligations; (iv) any full or partial release of, compromise or settlement with,
or agreement not to sue any Borrower or any other Loan Party, or any guarantor
or other person liable in respect of any Obligations; (v) the acceptance of any
instrument in renewal or substitution of any Obligation; (vi) any failure to
obtain collateral security (including rights of setoff) for any Obligations, or
to obtain or maintain the proper or sufficient creation and perfection thereof,
or to establish the priority thereof, or to preserve, protect, insure, care for,
exercise or enforce any collateral security; or any modification, alteration,
substitution, exchange, surrender, cancellation, termination, release or other
change, impairment, limitation, loss or discharge of any collateral security;
(vii) any assignment, pledge or other transfer of any Obligations or any
evidence thereof; or (viii) any manner, order or method of application of any
payments or credits upon Obligations. Each Guarantor and each Borrower hereby
waives any and all defenses and discharges available to a surety, guarantor, or
accommodation co-obligor, other than payment in full in cash of the Obligations
and termination of the Commitment pursuant thereto.
11.4 WAIVER. EACH GUARANTOR AND EACH BORROWER HEREBY WAIVES PRESENTMENT,
DEMAND FOR PAYMENT, NOTICE OF DISHONOR OR NONPAYMENT, AND PROTEST OF ANY
INSTRUMENT EVIDENCING LIABILITIES.
11.5 Recovery. If any payment is applied by Lender to the Obligations and
is hereafter set aside, recovered, rescinded or required to be returned for any
reason (including, without limitation, the bankruptcy, insolvency or
reorganization of any Borrower or any other obligor), the Obligations to which
such payment was applied shall for the purposes of this Section 11 be deemed to
have continued in existence or shall be reinstated, notwithstanding such payment
and application and this guaranty by the Borrowers and Guarantors in this
Section 11 shall be enforceable as to such Obligations as fully as if such
payment and application had never been made.
11.6 Liability Cumulative. The liability of the Guarantors and Borrowers
under this Section 11 is in addition to and shall be cumulative with all
liabilities of each Guarantor and each Borrower to Lender under this Agreement
and the other Loan Documents to which any such Borrower or Guarantor is a party
or in respect of any Obligations of the other Borrower or Guarantors, without
any limitation as to amount, unless the instrument or agreement evidencing or
creating such other liability specifically provides to the contrary.
[SIGNATURE PAGE FOLLOWS]
WITNESS the due execution of this Agreement by the respective duly
authorized officers of the undersigned as of the date first written above.
Systems: GSE SYSTEMS, INC.
By:
---------------------------------
Borrowers: GSE POWER SYSTEMS, INC.
By:
---------------------------------
GSE PROCESS SOLUTIONS, INC.
By:
---------------------------------
Other
Guarantors: MSHI, INC.
By:
---------------------------------
GP INTERNATIONAL ENGINEERING &
SIMULATION, INC.
By:
---------------------------------
DIME COMMERCIAL CORP.
By:
---------------------------------
Title:
------------------------------
Revolving Loan Commitment:
$9,000,000
----------
[Signature page to Loan Agreement]
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
I, Paul R. Wiener, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that _______________, personally known to me to be
the _________________ of Dime Commercial Corp., the person who executed the
foregoing instrument, who being by me duly sworn, did depose and say he is the
officer of such corporation described in and which executed the foregoing
instrument; that said instrument is signed on behalf of such corporation by
order of its Board of Directors; and that he acknowledged said instrument to be
the free act and deed of such corporation.
GIVEN under my hand and notarial seal this 4th day of June, 1999.
___________________________________________
Notary Public
My commission expires:
___________________________________________
STATE OF NEW YORK )
) SS
COUNTY OF NEW YORK )
I, Paul R. Wiener, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that______________________________ , personally
known to me to be a ____________________ of each of the person who executed the
foregoing instrument, who being by me duly sworn, did depose and say he is a of
each such corporation described in and which executed the foregoing instrument;
that said instrument is signed on behalf of each such corporation by order of
its respective Board of Directors; and that he acknowledged said instrument to
be the free act and deed of each such corporation.
GIVEN under my hand and notarial seal this 4th day of June, 1999.
___________________________________________
Notary Public
My commission expires:
___________________________________________
All following exhibits and schedules are available upon request and are
filed in hard copy with the SEC.
EXHIBITS
A. Borrowing Base Certificate
B. Compliance Certificate
C. Reconciliation Report
D. Notice of Borrowing
SCHEDULES
1.1(A) Other Liens
1.1(B) Pro Forma
2.15 Government Accounts
3.1(A) List of Closing Documents
4.1(B) Capitalization of Loan Parties, etc.
4.2 Consents
4.4 Other Indebtedness
4.6 Trade Names (Present and Past Five Years)
4.7 Location of Principal Place of Business, Books and
Records and Collateral; FEIN
4.9 Litigation
4.10 Audits
4.13 Intellectual Property
4.20 Bank Accounts
4.22 Employee Matters
4.24 Leases with a term exceeding 5 years