Exhibit 10.9
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AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
dated as of
February 12, 1996,
by and among
GRC INTERNATIONAL, INC.
(the "Borrower"),
SWL INC.,
GENERAL RESEARCH CORPORATION
and
MERCANTILE-SAFE DEPOSIT
AND TRUST COMPANY
(the "Bank")
TABLE OF CONTENTS
Section Page
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Credit Facility
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1.1 Term Loans 2
1.2 Revolving Credit Loan; Letters of Credit 2
1.3 Advances and Payments 3
1.4 Notice and Manner of Borrowing 4
1.5 Method of Payment 4
1.6 Use of Loan Proceeds 4
1.7 Unused Facility Fee 4
1.8 Collateral Security 4
Definitions
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2.1 Definitions 5
2.2 Amendments, etc. Included 9
Representations and Warranties
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3.1 Organization and Authority; Conflicting
Laws and Agreements 9
3.2 Subsidiaries 10
3.3 Margin Stock 10
3.4 Financial Statements 10
3.5 Financial Condition 10
3.6 Litigation; Tax Returns; Governmental
Approvals 10
3.7 Liens 11
3.8 Enforceability 11
3.9 No Defaults 11
3.10 ERISA 11
3.11 Commercial Loan 11
3.12 Capital Stock 11
3.13 Hazardous Materials 12
3.14 Assignments under the Federal
Assignment of Claims Act 12
Section Page
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Covenants
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4.1 Payment of Taxes and Other Claims 12
4.2 Maintenance of Properties 13
4.3 Corporate Existence 13
4.4 Maintenance of Insurance 13
4.5 Financial Information, Tax Returns and Reports 13
4.6 Indebtedness 16
4.7 Liens 16
4.8 Disposition of Stock and Indebtedness 17
4.9 Investments, Loans, Advances, Guarantees and
Contingent Liabilities 17
4.10 Merger and Sale of Assets 18
4.11 Dealings with Affiliates 18
4.12 Limitations on Certain Contracts 18
4.13 ERISA 19
4.14 Issuance of Stock 19
4.15 Financial Condition and Ratios 19
4.16 Obligations of Borrower Unconditional 20
4.17 Businesses 20
4.18 Compliance with Laws 20
4.19 Hazardous Materials 20
4.20 Material Agreements 21
4.21 Assignments under the Federal
Assignment of Claims Act 21
Events of Default and Remedies
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5.1 Events of Default 21
5.2 Acceleration 23
5.3 Costs of Collection 23
5.4 Consent to Jurisdiction; Waiver of Jury Trial 24
5.5 Service of Process 24
5.6 Acceleration of Other Obligations to Bank 24
5.7 Remedies Cumulative 24
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Section Page
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Conditions Precedent to Lending
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6.1 Conditions to the Making of the Initial Term Loan
and the Initial Advance under the Revolving Credit Loan 24
6.2 Conditions to the Making of Each Advance under
the Revolving Credit Loan 25
6.3 Conditions to the Making of any Supplemental
Term Loan 26
Collateral Security
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7.1 Security Documents 27
7.2 Deposit Balances 27
Miscellaneous
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8.1 Exercise of Rights 28
8.2 Payment Due on Banking Day 28
8.3 Assessments 28
8.4 Survival 28
8.5 Notices 29
8.6 Counterparts 29
8.7 Successors and Assigns; Governing Law;
Amendments 29
8.8 Section Headings; Construction 29
8.9 Transaction Expenses 30
8.10 Estoppel Certificates 30
8.11 Indemnification 30
8.12 Publicity 31
Exhibit A -- Form of Term Loan Note
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Exhibit B -- Form of Consolidated, Amended and Restated
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Revolving Credit Master Note
Exhibit C -- Form of Borrowing Base Certificate
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AMENDED AND RESTATED
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REVOLVING CREDIT AGREEMENT
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THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this "Agreement"),
dated as of the 12th day of February, 1996, by and among GRC INTERNATIONAL,
INC., a Delaware corporation (the "Borrower"), SWL INC., a Virginia corporation
("SWL"), GENERAL RESEARCH CORPORATION, a Virginia corporation ("GRC") and
MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, a Maryland banking institution (the
"Bank").
W I T N E S S E T H:
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WHEREAS, pursuant to (i) a Revolving Credit and Term Loan Agreement dated
July 30, 1990 (the "Original Loan Agreement") by and among the Bank, the
Borrower, SWL, GRC, Moseley Associates, Inc. ("Moseley") and Semifab, Inc.
("Semifab") and (ii) a Revolving Credit Master Note dated August 9, 1990
executed by the Borrower, SWL, GRC, Moseley and Semifab in favor of the Bank
(the "Original Note"), the Bank established a $10,000,000 revolving credit
facility in favor of the Borrower, SWL, GRC, Moseley and Semifab; and
WHEREAS, the Original Loan Agreement was amended as of May 28, 1992 for the
purpose, among other things, of releasing Moseley and Semifab as obligors
thereunder; and
WHEREAS, in connection with such amendment to the Original Loan Agreement,
the Borrower, together with SWL and GRC executed an Amended and Restated
Revolving Credit Master Note (the "Primary Note") dated May 28, 1992 in favor of
the Bank, which Primary Note amended and restated the terms of the Original
Note; and
WHEREAS, pursuant to a Revolving Credit Note (Commercial) executed by the
Borrower and dated December 8, 1995 (the "Supplemental Note"), the Bank made an
additional $5,000,000 in revolving credit available to the Borrower; and
WHEREAS, the Borrower has requested and the Bank has agreed (i) to amend
and restate the Original Loan Agreement, as amended, for the purpose, among
other things, of including the Borrower's obligations under the Supplemental
Note as an additional obligation thereunder and (ii) to consolidate the
indebtedness evidenced by the Primary Note and the Supplemental Note (such
indebtedness, as so consolidated, the "Revolving Credit Loan") by having the
Borrower execute and deliver to the Bank a Consolidated, Amended and Restated
Revolving Credit Master Note; and
WHEREAS, pursuant to a letter from the Bank to the Borrower dated September
8, 1995, the Bank has agreed to make available to the Borrower, on an offering
basis, an additional $5,000,000 revolving credit facility (the "Acquisition
Facility") for the purpose of providing bridge financing to fund acquisitions by
the Borrower from time to time, on the condition that advances under such
facility will be at the Bank's sole discretion; and
WHEREAS, pursuant to such revolving credit facility, the Borrower has
requested and the Bank has agreed initially to lend the Borrower the sum of Two
Million Two Hundred Thousand Dollars ($2,200,000) (the "Term Loan") on the date
hereof; and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, the parties hereby agree as follows:
1. CREDIT FACILITY.
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1.1. Term Loans. (a) Pursuant to the Acquisition Facility, the Borrower
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shall execute and deliver to the Bank on the date of the funding of the Term
Loan (the "Closing Date") a Term Loan Note in the principal amount of
$2,200,000, substantially in the form of Exhibit A attached hereto (the "Term
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Loan Note"). The Term Loan shall bear interest at a fluctuating rate of
interest equal to the Prime Rate set by the Bank from time to time, adjusted
upwards and downwards on and as of the date of any change in the Prime Rate and
calculated on the basis of a 360-day year factor applied to actual days elapsed,
and shall mature on September 1, 1997.
(b) The parties anticipate that from time to time hereafter, the Borrower
may make requests for proposals from the Bank regarding additional bridge and/or
term loans under the Acquisition Facility for the purpose of financing future
acquisitions by the Borrower or any of its Subsidiaries. The Bank may (but
shall in no way be obligated to) consider such requests and make one or more
proposals to the Borrower regarding such requests. Upon the Borrower's
acceptance of such a proposal by the Bank, the Borrower shall execute a term
loan promissory note in such form and containing such terms and conditions
(including without limitation applicable interest rate(s), amortization and
additional collateral, if any) as may then be agreed to by the Bank and the
Borrower. Each such promissory note shall be deemed a "Supplemental Term Loan
Note," and the loan evidenced thereby shall be deemed a "Supplemental Term
Loan," for all purposes hereunder. Nothing herein shall imply or be interpreted
as a commitment by the Bank to lend, or by the Borrower to borrow, any
Supplemental Term Loan.
1.2. Revolving Credit Loan; Letters of Credit. (a) On the Closing Date
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(hereinafter defined) the Borrower shall execute and deliver to the Bank a
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Consolidated, Amended and Restated Revolving Credit Master Note in the face
principal amount of $15,000,000, substantially in the form of Exhibit B attached
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hereto (the "Revolving Credit Note"). The Revolving Credit Loan shall bear
interest at a fluctuating rate of interest equal to the Prime Rate set by the
Bank from time to time, adjusted upwards and downwards on and as of the date of
any change in the Prime Rate and calculated on the basis of a 360-day year
factor applied to actual days elapsed. The Bank is hereby authorized to
indicate by notation on its internal loan accounting system, with appropriate
reference to the customer number assigned by the Bank, all advances of the
Revolving Credit Loan made pursuant to this Agreement and all payments of
principal. Such notations shall be presumptive as to the aggregate unpaid
principal balance of the Revolving Credit Loan, but the failure of the Bank to
make any such notation shall not affect the obligations of the Borrower
hereunder or in connection with the Revolving Credit Loan. The entire, then
outstanding principal balance of the Revolving Credit Loan, together with the
accrued and unpaid interest thereon, shall be due and payable on January 15,
1998, except that the Revolving Credit Loan shall be automatically extended for
one or more successive, one-year renewal terms unless the Bank, at its sole
option, delivers written notice of non-renewal to the Borrower at least fifteen
(15) calendar months prior to the end of the initial period or any renewal
period. Upon the Bank's request, the Borrower shall execute and deliver to the
Bank a new Revolving Credit Note, dated the applicable anniversary of the
Closing Date, upon each renewal of the Revolving Credit Loan, provided that the
failure of the Bank to request or of the Borrower to execute and deliver a new
Revolving Credit Note shall not affect the obligations of the Borrower hereunder
or in connection with the Revolving Credit Loan.
(b) Subject to the terms and conditions hereof, the Bank agrees to
issue letters of credit for the account of the Borrower on any Banking Day prior
to the maturity date of the Revolving Credit Loan, in such form as may be
approved from time to time by the Bank; provided that the Bank shall have no
obligation to issue any letter of credit if, after giving effect to such
issuance, the aggregate amount of all letters of credit so issued and
outstanding, when added to the then outstanding principal balance of the
Revolving Credit Loan, would exceed the Maximum Availability, as set forth in
Section 1.3. Each letter of credit shall be issued pursuant to the Bank's
standard letter of credit application, reimbursement agreement and/or such other
documentation as the Bank may require, and shall be in such amount(s) and
subject to such duration, draw and other conditions as are acceptable to the
Bank in its sole discretion.
1.3. Advances and Payments. The aggregate amount of all advances under
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the Revolving Credit Loan at any one time outstanding shall not exceed the
lesser of (x) $15,000,000 or (y) the Loan Formula (hereinafter defined) (the
"Maximum Availability"). The Borrower shall from time to time make such
payments of principal, together with accrued interest on the principal so paid,
to the Bank as shall be necessary in order to maintain the outstanding balance
of such advances at or below the maximum allowable aggregate amount outstanding
established pursuant to the
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immediately preceding sentence. Each Borrowing Base Certificate furnished to the
Bank pursuant to Section 4.5(d) hereof shall (subject to such modifications and
adjustments as the Bank may reasonably deem appropriate as a result of its
independent review of the calculations and supporting data and documentation
relating to such certificate) govern the Loan Formula for the period until the
next such certificate is delivered to the Bank; provided, however, that the Bank
shall not be obligated to make any advance under the Revolving Credit Loan on
the basis of a certificate which reports Loan Formula data that is more than
forty-five (45) days old.
1.4. Notice and Manner of Borrowing. The Bank shall, from time to time,
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subject to the maximum aggregate outstanding amount permitted under Section
1.3 hereof and so long as no Event of Default or Potential Default has occurred
or is continuing, make advances under the Revolving Credit Loan upon receipt of
requests therefor (which may be given in writing, by telephone or in any other
manner which the Bank deems reasonable and appropriate under the circumstances)
from the Borrower's chief executive officer, chief financial officer or such
other authorized officer or officers as the Borrower may from time to time
specify to the Bank in writing. Each such request shall include the date and
amount of the advance subject thereto and shall comply with such additional
requirements as may be set forth in the Revolving Credit Note.
1.5. Method of Payment. All payments hereunder and under the Notes shall
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be made by not later than 2:00 P.M. (Baltimore time) on the date when due, to
the Bank at its address referred to in Section 8.5 hereof in immediately
available funds. Whenever any payment hereunder or under the Notes becomes due
on a day which is not a Banking Day (hereinafter defined), such payment may be
made on the next succeeding Banking Day and such extension of time shall be
included in the computation of the interest due.
1.6. Use of Loan Proceeds. The Borrower shall use the proceeds of the
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Term Loan for the purpose of financing a portion of the price of its acquisition
of the assets of Quintessential Solutions Incorporated. The Borrower may use
the proceeds of the Revolving Credit Loan for working capital or other corporate
purposes, subject, however, to the restrictions set forth in this Agreement.
1.7. Unused Facility Fee. The Borrower shall pay the Bank a facility fee
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(the "Facility Fee"), payable quarterly in arrears, equal to 1/8 of 1% of the
difference between (i) the average daily amount outstanding of the Revolving
Credit Loan during the quarter for which such payment is made and (ii)
$15,000,000.
1.8. Collateral Security. The Borrower covenants and agrees that the Term
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Loans and all advances under the Revolving Credit Loan at any time outstanding
and all present and future indebtedness from time to time owing to the Bank from
the Borrower or any Subsidiary (hereinafter defined), whether pursuant to this
Agreement,
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any other credit facility, any guarantee or otherwise, shall at all times be
secured by and entitled to the benefit of all collateral security of every type
and description heretofore or hereafter afforded the Bank by the Borrower or any
Subsidiary, whether pursuant to this Agreement, any other credit facility, any
guarantee or otherwise.
2. DEFINITIONS.
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2.1. Definitions. The following terms, when used herein, shall have the
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following meanings:
"Acquisition Facility" shall have the meaning set forth in the sixth
--------------------
recital paragraph hereof.
"Affiliate" shall mean a person, partnership, venture, trust or corporation
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(including a subsidiary) (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
the Borrower, (ii) which beneficially owns or holds five percent (5%) or more of
any class of the voting shares (that is, shares entitled to vote for corporate
directors) of the Borrower, or (iii) five percent (5%) or more of the voting
shares (or in the case of a person which is not a corporation, five percent (5%)
or more of the equity interest) of which is beneficially owned or held by the
Borrower or another Affiliate. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person, partnership, venture, trust or corporation
whether through the ownership of voting securities, by contract or otherwise.
"Banking Day" shall have the meaning set forth in the form of Term Loan
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Note set forth as Exhibit A attached hereto.
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"Closing Date" shall have the meaning set forth in Section 1.1(a) hereof.
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"Collateral" shall have the meaning collectively set forth in Section 1 of
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the Security Agreements and Section 1 of the Pledge Agreement, and
"Receivables," "Inventory" and "Equipment" shall have the meanings set forth in
----------- --------- ---------
Section 1 of the Security Agreements.
"Default Rate" shall mean a fluctuating rate of interest, adjusted daily,
------------
equal to the Prime Rate plus three percent (3%) per annum.
"Environmental Complaint" shall mean any complaint, order, citation or
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notice with regard to air emissions, water discharges, noise emissions or any
other environmental, health or safety matter affecting the Borrower.
"ERISA," "Plan," and "PBGC" shall have the meanings set forth in Section
----- ---- ----
3.10 of this Agreement.
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"Event of Default" shall mean any of the events specified in Section 5.1
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hereof. "Potential Default" shall mean the occurrence of any event or existence
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of any condition which, with the giving of notice, would become an Event of
Default.
"Financial Statements" shall have the meaning set forth in Section 3.4 of
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this Agreement.
"GRC" shall mean General Research Corporation, a Virginia corporation and
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an inactive subsidiary of the Borrower.
"Hazardous Material" shall mean any oil, petroleum products or their
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byproducts or any hazardous, toxic or dangerous waste, substance or material
defined as such in (or for purposes of) the Comprehensive Environmental
Response, Compensation and Liability Act, any so-called "Superfund" or
"Superlien" law or any other federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree (collectively, "Toxic Waste Laws"), as
----------------
now or any time hereafter in effect, regulating, relating to or imposing
liability or standards of conduct concerning any hazardous, toxic or dangerous
waste, substance or material.
"Loan Documents" shall mean, collectively, this Agreement, the Notes and
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the Security Documents.
"Loan Formula" shall mean, as of any time that the same is to be
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determined, the aggregate book value of the Eligible Accounts. "Eligible
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Accounts" shall mean (A) eighty percent (80%) of all accounts receivable of the
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Borrower, as classified in a manner consistent with documents filed by the
Borrower with the United States Securities and Exchange Commission, which are by
their terms payable within thirty (30) days after the billing for performance of
services or the shipment of goods and which are not more than sixty (60) days
past due; and (B) fifty percent (50%) of all amounts fully earned by GRC and SWL
for the performance of services which are classified by the Borrower as unbilled
receivables ("Unbilled Receivables"); provided, however, that no more than
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$2,500,000 in Unbilled Receivables shall be includable in the Borrowing Base for
purposes of Section 1.3 hereof. With respect to any joint venture which is an
Affiliate, Eligible Accounts shall also include eighty percent (80%) of the
accounts receivable of such joint venture which (1) are distributable by such
joint venture to any the Borrower when collected, (2) have been duly billed to
the account debtor and (3) by their terms are payable within thirty (30) days
after the billing for performance of services or the shipment of goods and which
are not more than sixty (60) days past due; provided, however, that the accounts
receivable of a particular joint venture shall not be eligible as provided
herein unless (a) the Borrower owns an interest in income and profits of at
least 51% in the aggregate of such joint venture and also controls its
management, and (b) such accounts receivable have not been pledged or assigned
to any other Person or Eligible Accounts shall not include (w) amounts owed by
an account debtor of the Borrower or any joint venture (as provided above) who
is
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the subject of any bankruptcy, reorganization, insolvency or liquidation
proceeding, (x) accounts receivable of the Borrower or of any joint venture (as
provided above) which are questionable as to collectibility, (y) accounts
receivable of the Borrower or of any joint venture (as provided above) which are
owed with respect to a particular job, contract or project more than one-half of
the accounts (measured by amounts outstanding) for which are ineligible under
clauses (w) and (x) above, or (z) any accounts receivable of a joint venture
which arise from then outstanding accounts receivable of the Borrower,
regardless of whether the corresponding Borrower's receivable is then included
in the Borrowing Base. "Borrowing Base" shall have the same meaning as "Loan
--------------
Formula" for purposes of this Agreement.
"Loans" shall mean collectively, the Revolving Credit Loan, the Term Loan
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and any Supplemental Term Loan made pursuant to Section 1.1(b) hereof.
"Maximum Availability" shall have the meaning set forth in Section 1.3.
--------------------
"Notes" shall mean, collectively, the Revolving Credit Note, the Term Loan
-----
Note and any Supplemental Term Loan Note executed pursuant to Section 1.1(b)
hereof, and shall also include any other document, agreement or instrument
evidencing all or any portion of the Loans and all extensions and renewals
thereof and substitutions therefor.
"Obligations" shall mean, collectively, (i) the payment of all principal of
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and interest on the Notes as and when the same become due and payable (whether
by lapse of time, acceleration or otherwise), (ii) the payment of all interest,
fees and charges payable by the Borrower under the terms of the Loan Documents,
(iii) the payment of all other indebtedness, obligations and liabilities arising
under, and the observance and performance of all covenants and agreements
contained in, the Loan Documents, (iv) the payment of all principal of and
interest on any other loans, credits or advances at any time heretofore or
hereafter made to the Borrower by the Bank, whether or not related to or arising
from the Loans or the Loan Documents, and (v) the payment in full of all
expenses and charges, legal or otherwise, including reasonable attorneys' fees,
suffered or incurred by the Bank in collecting or enforcing payment of the Notes
or any or all of the other foregoing indebtedness or in realizing upon,
protecting or preserving any collateral security for the Notes or such other
indebtedness.
"Premises" shall mean the significant sites of the Borrower's operations,
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including without limitation those sites sets forth below:
1900 Gallows Road 5383 Hollister Ave. 635 Discovery Dr.
Vienna, VA 22182 Santa Barbara, CA 93111 Huntsville, AL 35806
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300 N. Continental 2221 Camino del Rio S. 31255 Cedar Valley Drive
Boulevard, Suite 550 Suite 305 Suite 300
El Segundo, CA 90245 San Diego, CA 92108 Westlake Village, CA 91362
985 Space Center Drive 1980 N. Atlantic Avenue 7200 North Nine Avenue
Suite 310 Suite 1030 Suite 4
Colorado Springs, CO 80915 Cocoa Beach, FL 32931 Pensacola, FL 32504
One 11th Avenue 7351 Shadeland Station 5 Cherry Hill Drive
Suite D-2 Suite 260 Suite 220
Shalimar, FL 32579 Indianapolis, IN 46256 Danvers, MA 01923
8310 Guilford Road 20 Trafalgar Square 3900 Juan Tabo, N.E.
Suite A Suite 455 Suite 12
Columbia, MD 21046 Nashua, NH 03063 Albuquerque, NM 87111
2940 Presidential Drive 2300 Computer Avenue 7410 Northside Drive
Suite 390 Building G Suite 105
Fairborn, OH 45324 Willow Grove, PA 19090 North Charleston, SC 29420
6100 Bandera Road 2121 Eisenhower Avenue Airport Plaza 2
Suite 507 Suite 200 2611 Jefferson Davis Hwy.
San Antonia, TX 78238 Alexandria, VA 22314 Suite 4000
Arlington, VA 22202
Crystal Gateway I 14120 Parke Long Court 16156 Dahlgren Road
1235 Jefferson David Hwy. Suite 101 Suite 136
Suite 501 Chantilly, VA 22021 Dahlgren, VA 22448
Arlington, VA 22202
621 Lynnhaven Parkway Zygimantu 10-6
Suite 360 2001 Vilnius Lithuania
Virginia Beach, VA 23452
"Prime Rate" shall have the meaning set forth in the form of Term Loan
----------
Note set forth as Exhibit A attached hereto.
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"Revolving Credit Note" shall have the meaning given in Section 1.2(a)
---------------------
hereof.
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"Security Documents" shall mean the instruments referred to in Section
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7.1 hereof creating or providing security for the Notes, including (without
limitation) the "Security Agreements" and the "Pledge Agreement" referred to in
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Section 7.1 hereof.
"Subsidiary" shall mean each corporation (if any) actively engaged in
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business, a majority of the issued and outstanding voting shares (that is,
shares entitled to vote for corporate directors) of which shall, at the time as
of which any determination is being made, be owned by the Borrower either
directly or through Subsidiaries.
"Supplemental Term Loan" shall have the meaning given in Section
----------------------
1.1(b) hereof.
"Supplemental Term Loan Note" shall have the meaning given in Section
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1.1(b) hereof.
"SWL" shall mean SWL Inc., a Virginia corporation and an inactive
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subsidiary of the Borrower.
"Term Loan Note" shall have the meaning given in Section 1.1(a)
--------------
hereof.
"UCC" shall mean the Uniform Commercial Code, as in effect in any
---
applicable jurisdiction.
2.2. Amendments, etc. Included. All defined terms herein for
-------------------------
agreements, instruments and other documents shall be deemed to include any and
all amendments, modifications, extensions and renewals thereof, substitutions
therefor and supplements, exhibits and schedules thereto.
3. REPRESENTATIONS AND WARRANTIES.
------------------------------
The Borrower represents and warrants to the Bank that:
3.1. Organization and Authority; Conflicting Laws and Agreements.
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The Borrower is a corporation duly organized and existing and is in good
standing under the laws of the jurisdiction of its incorporation, has full and
adequate corporate power to own its property and to carry on its business as now
conducted, is duly licensed or qualified to do business in all jurisdictions
where the nature of its business or the character of its properties requires
such licensing or qualification and has full right, power and authority to enter
into this Agreement and the Security Documents, to make the borrowings herein
provided for, to issue the Notes and to perform each and all of the matters and
things provided for in this Agreement and in the Security Documents; and this
Agreement, the Security Documents and the Notes do not, nor will the performance
or observance by the Borrower or any Subsidiary of any of the matters or things
provided for in this Agreement, the Security Documents or the Notes contravene,
conflict with or in any way be restricted by any law, rule or regulation or
order of court
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applicable to the Borrower, any Subsidiary or any of their respective
businesses, operations or properties or any provision of any organizational
document of the Borrower or any lease, mortgage, indenture, contract or
agreement of or affecting the Borrower, any Subsidiary or any of their
respective properties.
3.2. Subsidiaries. The Borrower has no Subsidiaries.
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3.3. Margin Stock. Neither the Borrower nor any Subsidiary is
------------
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Loans hereunder will be used to purchase or carry any margin stock or to extend
credit to others for that purpose.
3.4. Financial Statements. The consolidated financial statements of
--------------------
the Borrower and the Subsidiaries examined by Deloitte & Touche LLP for the
fiscal year ended June 30, 1995 (the "Financial Statements"), which have
heretofore been furnished to the Bank, are complete and correct and fairly
present the consolidated financial condition of the Borrower and the
Subsidiaries as of said date and the results of their operations for the period
covered thereby, all in accordance with generally accepted accounting principles
consistently applied throughout, except as otherwise noted therein. Neither the
Borrower nor any Subsidiary has any liabilities which are material to the
Borrower and such Subsidiary, direct or indirect, fixed or contingent, other
than as indicated in the Financial Statements.
3.5. Financial Condition. Since the date of the Financial
-------------------
Statements, there have been no material adverse changes in the condition,
financial or otherwise, of the Borrower and the Subsidiaries nor any changes in
the operations of the Borrower and the Subsidiaries except those occurring in
the ordinary course of business.
3.6. Litigation; Tax Returns; Governmental Approvals. There is no
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litigation or governmental proceeding pending, nor to the knowledge of the
Borrower threatened, against the Borrower or any Subsidiary which, if adversely
determined, would result in any material adverse change in the consolidated
financial condition, properties, business or operations of the Borrower or the
performance by the Borrower of its obligations hereunder, under the Security
Documents or under the Notes, except as previously disclosed in writing to the
Bank. All federal, state and local income tax returns of the Borrower for the
fiscal year ended June 30, 1995, and for all fiscal years ended prior to said
date, have been filed with the appropriate taxing authorities, and all taxes
shown due thereon have been timely paid. To the best of the Borrower's
knowledge there are no objections to or controversies in respect of any of the
income tax returns of the Borrower and the Subsidiaries for any fiscal year
ended after said date pending or threatened, except for those (if any)
previously disclosed in writing to the Bank, the Borrower warranting that such
disclosures are true and accurate as of the date hereof. No authorization,
consent, approval, license, exemption, filing or registration from or with any
court or governmental department, agency or
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instrumentality, is or will be necessary for the valid execution, delivery or
performance by the Borrower of this Agreement, the Security Documents or the
Notes.
3.7. Liens. There are no liens, security interests or encumbrances
-----
on any of the assets or properties of the Borrower or any Subsidiary, except (i)
as permitted by Section 4.7 hereof, and (ii) as provided in Schedule I to this
Agreement and in Schedule I to each of the Security Agreements.
3.8. Enforceability. This Agreement, the Security Documents and the
--------------
Notes are the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms, except as the
same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application relating to or affecting the
enforcement of creditor's rights and by general principles of equity.
3.9. No Defaults. The Borrower is and will remain in full compliance
-----------
with all of the terms and conditions hereof, and no Event of Default or
Potential Default has occurred and is continuing.
3.10. ERISA. The Borrower and the Subsidiaries are in compliance in
-----
all material respects with the Employee Retirement Income Security Act of 1974
("ERISA") as amended, to the extent applicable to them or to any plan, including
both single employer and multi-employer plans subject to Title IV of ERISA and
established or maintained for employees or former employees of the Borrower, any
Subsidiary or any member of the "controlled group" (as defined in ERISA) (such a
plan being hereinafter referred to as a "Plan"). Neither the Borrower nor any
Subsidiary has received any notice to the contrary from the Pension Benefit
Guaranty Corporation ("PBGC") or any other governmental entity or agency, and no
"reportable event" (as defined in ERISA) has occurred and is continuing. Except
as specifically otherwise disclosed in any information given to the Bank, the
present value of all vested benefits (determined on PBGC-guaranteed benefits and
using PBGC interest and mortality assumptions) under all single-employer Plans
maintained by the Borrower or a commonly-controlled entity does not, as of the
most recent valuation date, exceed the value of the assets of such Plans
allocable to such benefits.
3.11. Commercial Loan. Each Loan is a "commercial loan" within the
---------------
meaning of Section 12-101(c) of the Commercial Law Article of the Annotated Code
of Maryland, as amended.
3.12. Capital Stock. All issued and outstanding shares of all
-------------
classes of capital stock of SWL and GRC, including common and preferred stock as
well as convertible debt, are owned legally and beneficially by the Borrower.
With respect to the shares of stock pledged pursuant to the Pledge
Agreement, (i) there exists no voting trust or similar arrangement and there is
no
-11-
restriction on, arrangement concerning, or agreement or contract relating to
the voting thereof, (ii) no proxy is currently in effect relating thereto, and
(iii) such shares have never been traded on any exchange or in any market and
have neither been registered with the United States Securities and Exchange
Commission nor offered or sold to the public.
3.13. Hazardous Materials. Except as previously disclosed in writing
-------------------
to the Bank, to the best of its knowledge, the Borrower has never caused or
permitted any Hazardous Material to be disposed of on, under or at any of its
properties (including, without limitation, the Premises), and none of its
properties have ever been used (whether by the Borrower or, to its best
knowledge, by any other person or entity) as a dump site or storage (whether
permanent or temporary) site for any Hazardous Material. To the best of the
Borrower's knowledge the Premises contain no underground tanks or asbestos, nor
any transformers containing Polychlorinated Biphenyls.
3.14. Assignments under the Federal Assignment of Claims Act. Except
------------------------------------------------------
as previously disclosed in writing to the Bank, neither the Borrower nor any
Subsidiary has executed an assignment of a government contract (i) with respect
to which the United States or any of its departments, agencies or
instrumentalities is currently making payments, and (ii) which has been filed,
along with a notice of assignment, pursuant to the Federal Assignment of Claims
Act.
4. COVENANTS.
---------
So long as any of the Notes remains outstanding, the Borrower
hereby covenants and agrees with the Bank as follows:
4.1. Payment of Taxes and Other Claims. The Borrower will, and will
---------------------------------
cause each Subsidiary to, pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, judgments, assessments
and governmental charges levied or imposed upon the Borrower or any Subsidiary
or upon the income, profits or property of the Borrower or any Subsidiary and
(b) all lawful claims for labor, materials and supplies which if unpaid might by
law become a lien upon the property of the Borrower or any Subsidiary; provided,
however, that the Borrower shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim, the amount,
applicability or validity of which is being contested diligently and in good
faith by appropriate proceedings and for which the Borrower or the Subsidiary
concerned shall have set aside on its books adequate reserves with respect
thereto; provided, further, that the foregoing proviso shall not relieve the
Borrower of its obligation to comply with Section 4.7 hereof; and provided,
further, that such proceedings do not materially impair the value or security of
the Collateral or any part thereof.
-12-
4.2. Maintenance of Properties. The Borrower will cause the Premises
-------------------------
and all other properties owned, leased or operated by the Borrower or any
Subsidiary and used or held for use in the conduct of their respective
businesses to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment, and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the reasonable judgment of the Borrower may be necessary or advisable
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
4.3. Corporate Existence. The Borrower will do or cause to be done,
-------------------
and will cause each Subsidiary to do or cause to be done, all things necessary
to preserve and keep in full force and effect their existence, organizational
status and good standing in the state of their organization and in every other
jurisdiction where the character of their properties or the nature of their
businesses requires them to qualify to do business, as well as the rights
(charter and statutory) and franchises of the Borrower and each Subsidiary. The
Borrower will not create any new subsidiaries, nor change its name, identity or
corporate structure, nor transact business under any trade name, nor change the
location of any material item of the Collateral or of its chief executive
offices or principal place of business without, in each case, first giving the
Bank thirty (30) days' prior written notice of its intent to do so.
4.4. Maintenance of Insurance. In addition to the specific
------------------------
requirements set forth in Section 2(f) of the Security Agreements, the Borrower
will maintain, and will cause each Subsidiary to maintain, insurance coverage by
good and responsible insurance underwriters in such forms and amounts and
against such risks as are customary for companies engaged in similar businesses
and owning and operating similar properties. The Borrower shall from time to
time file with the Bank, promptly upon its request, a detailed list of the
insurance then in effect covering the Borrower's properties (including, without
limitation, the Collateral), stating the names of the insurance companies, the
amounts and rates of the insurance, the dates of the expiration thereof and the
properties and risks covered thereby.
4.5. Financial Information, Tax Returns and Reports. The Borrower
----------------------------------------------
will, and will cause each Subsidiary to, employ generally accepted accounting
principles, applied on a consistent basis, and furnish to the Bank:
(a) as soon as available and in any event within forty-five (45) days
after the end of each interim fiscal quarter of each fiscal year of the Borrower
(or on the next Banking Day thereafter, if the forty-fifth day is not a Banking
Day), a consolidated and consolidating balance sheet of the Borrower and the
Subsidiaries as of the end of such interim fiscal period, and a consolidated and
consolidating statement of earnings of the Borrower and the Subsidiaries for
such fiscal period and for the period beginning on the first day of such fiscal
year and ending on the date of such balance sheet, setting forth in comparative
form the corresponding figures for the corresponding period
-13-
of the preceding fiscal year, all in reasonable detail and certified by the
chief financial officer of the Borrower;
(b) as soon as available and in any event within ninety (90) days
after the last day of each fiscal year (or on the next Banking Day thereafter,
if the ninetieth day is not a Banking Day), consolidated financial statements
which have been examined by Deloitte & Touche LLP or another firm of independent
public accountants of recognized standing selected by the Borrower, covering the
operations of the Borrower and the Subsidiaries as of the end of such year and a
consolidated statement of earnings, shareholders' equity and cash flow for the
Borrower and the Subsidiaries for the year then ended, each on a comparative
basis with corresponding financial statements for the preceding fiscal year,
which financial statements shall be accompanied by a report of such independent
public accountants without exceptions or qualifications not acceptable to the
Bank and stating in substance that such financial statements have been prepared
in accordance with generally accepted accounting principles and that the
examination of accounts in connection with such financial statements has been
made in accordance with generally accepted auditing standards and, accordingly,
included such tests of accounting records and other auditing procedures as such
accountants considered necessary or advisable under the circumstances; and the
Borrower shall also provide the Bank with such unaudited consolidating financial
statements as are used to prepare the foregoing financial statements;
(c) each set of financial statements delivered to the Bank pursuant
to paragraphs (a) and (b) above shall be accompanied by the written statement of
the Borrower, signed by its chief financial officer, to the effect that such
officer has reexamined the terms and provisions of this Agreement and the
Security Documents and that, to the best of his knowledge, the Borrower has not
been in default during the preceding fiscal period in the fulfillment of any of
the terms, covenants, provisions or conditions hereof or thereof, and that no
Event of Default or Potential Default has occurred and is continuing as of the
date of said statement; or if the signer is aware of any such Event of Default
or Potential Default, he shall disclose in reasonable detail the nature thereof
and such curative action as may be or has been taken by the Borrower;
(d) within thirty (30) days following the end of each calendar month,
a copy of a computation of the Loan Formula substantially in the form of Exhibit
-------
C attached hereto, computing the Loan Formula as of the end of such month and
- -
certified as being correct by the chief financial officer of the Borrower;
(e) within forty-five (45) days following the end of each fiscal
quarter of each fiscal year of the Borrower, and also promptly upon a request
therefor by the Bank, a copy of the Borrower's backlog report (a "Backlog
Report") containing information regarding all contracts (other than classified
government contracts) entered into between the Borrower or any Subsidiary
(either as contractor or subcontractor) and the United States or any of its
departments, agencies or instrumentalities;
-14-
(f) promptly upon any filing thereof by the Borrower or any
Subsidiary with the Securities and Exchange Commission, any annual, periodic or
special report or registration statement (without exhibits) generally available
to the public;
(g) promptly upon any request therefor by the Bank, a copy of any
application for any patent, copyright, trademark, trade name or other
intellectual property right filed by the Borrower or any Subsidiary with the
United States Patent and Trademark Office, the United States Copyright Office,
or any similar office or agency of the United States or any State thereof;
(h) such additional information (including, without limitation,
federal, state and local income tax and property tax returns and separate
financial statements) for the Borrower and/or any Subsidiary as the Bank may
reasonably request concerning the Borrower and such Subsidiary(ies) in order to
enable the Bank to determine whether the covenants, terms and provisions of this
Agreement have been complied with by the Borrower; and for that purpose the
Borrower agrees that all pertinent and relevant books, documents and vouchers
relating to its business and affairs and those of its Subsidiaries shall at all
times during regular business hours be open to the inspection of such accountant
or other agent (who may make copies of all or any part thereof) as shall from
time to time be designated by the Bank; and
(i) promptly upon any officer of the Borrower learning of the same,
notice of the occurrence of any Event of Default, notice of any material change
in the financial status of the Borrower or any Subsidiary, and notice of the
institution of any litigation against the Borrower or any Subsidiary which
could, if adversely determined, have a material, adverse effect on the financial
condition or operations of the Borrower or any Subsidiary.
The Bank agrees that it will hold and maintain confidential all
financial information, Backlog Reports and other proprietary information with
respect to the Borrower and its Subsidiaries and all information obtained during
inspections of the books and records of Borrower and its Subsidiaries which are
specifically designated by the Borrower as confidential and will not, without
the consent of the Borrower, disclose such information to any non-affiliated
third party. Notwithstanding the foregoing obligation of the Bank, the Borrower
hereby authorizes the Bank to disclose information obtained pursuant to this
Agreement (i) where required by governmental or regulatory authorities and (ii)
to its outside and in-house legal counsel, auditors, examiners and accountants.
In addition, the foregoing obligation of the Bank shall not apply in connection
with any exercise of the Bank's rights and remedies under the Loan Documents
arising during any period(s) when an Event of Default has occurred and is
continuing.
-15-
4.6. Indebtedness. The Borrower covenants that it will not, and will
------------
not permit any Subsidiary to, create, incur, assume or suffer to exist any
indebtedness for borrowed money (including as such all indebtedness representing
the deferred purchase price of property), except:
(a) the indebtedness evidenced by the Notes;
(b) indebtedness or leases of the Borrower or any Subsidiary
outstanding on the date hereof and disclosed or reflected in the Financial
Statements or in the footnotes thereto;
(c) indebtedness of the Borrower or any wholly owned Subsidiary
to any other wholly owned Subsidiary;
(d) purchase money indebtedness of the Borrower and all
Subsidiaries;
(e) any existing or future indebtedness owed solely to the Bank
or any Payee under the Notes;
(f) leases entered into by the Borrower or any wholly owned
Subsidiary in the ordinary course of business; and
(g) any unsecured indebtedness in addition to any of the
foregoing, which is subordinated to the Notes and which in the aggregate does
not exceed $1,500,000 at any time.
4.7. Liens. The Borrower covenants that it will not, and will not
-----
permit any Subsidiary to, create, assume or suffer to exist any lien, security
interest or encumbrance upon any of their property or assets, whether now owned
or hereafter acquired, except:
(a) liens for taxes not yet due or which are being actively
contested in good faith by appropriate proceedings;
(b) other liens, security interests, charges or encumbrances
incidental to the conduct of their businesses or the ownership of their
properties and assets which were not incurred in connection with the borrowing
of money or the obtaining of advances or credit, and which do not, in the
aggregate, materially detract from the value of their properties or assets or
materially impair the use thereof in the operation of their businesses;
(c) liens and security interests existing on the date hereof and
disclosed or reflected in the Financial Statements or in the footnotes thereto;
-16-
(d) liens and security interests in favor of the Bank; and
(e) liens and security interests on property or assets securing
indebtedness incurred to purchase such property or assets (but not extending to
any other property or assets), to the extent permitted under Section 4.6(d)
hereof.
4.8. Disposition of Stock and Indebtedness. The Borrower covenants
-------------------------------------
that it will not, and will not allow any Subsidiary to, sell, transfer or
otherwise dispose of, or part with control of, any shares of stock or
indebtedness of any Subsidiary, except to the Borrower or any other wholly owned
Subsidiary or to the Bank as collateral security for the Notes.
4.9. Investments, Loans, Advances, Guarantees and Contingent
-------------------------------------------------------
Liabilities. The Borrower covenants that it will not, and will not permit any
- -----------
Subsidiary to, make or permit to remain outstanding any loan or advance to, or
guarantee, endorse or otherwise be or become contingently liable, directly or
indirectly, in connection with the obligations, stock or dividends of, or own,
purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any other person or entity
(including any joint venture), except that the Borrower or any Subsidiary may:
(a) permit to remain outstanding all presently existing loans,
advances and investments in or to any Subsidiary and disclosed or reflected in
the Financial Statements or in the footnotes thereto;
(b) make loans, advances and investments in or to any wholly
owned Subsidiary;
(c) acquire and own stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing to the
Borrower or any Subsidiary;
(d) own, purchase or acquire prime commercial paper rated P-1 by
Moody's Investor Services, Inc. and A-1 by Standard and Poors Corporation,
bankers acceptances of, and certificates of deposit in, the Bank or any other
United States commercial bank with capital resources in excess of $150,000,000,
obligations of the United States Government or any agency thereof, and
obligations guaranteed by the United States Government, all of the foregoing in
each case to become due within one (1) year from the date of purchase;
(e) permit to exist guarantees of obligations of any wholly
owned Subsidiary, which obligations are not prohibited by Section 4.6; and
(f) make deposits and extensions of credit and endorse
negotiable instruments for deposit or collection, all in the ordinary course of
business.
-17-
4.10. Merger and Sale of Assets. The Borrower covenants that it will
-------------------------
not, and will not permit any Subsidiary to, merge or consolidate with any other
person or entity, or sell, lease, transfer or otherwise dispose of all or any
substantial part of their assets, except that:
(a) any Subsidiary may merge with the Borrower (provided that
such Borrower shall be the continuing or surviving corporation) or with any one
or more other Subsidiaries; and
(b) any Subsidiary may sell, lease, transfer or otherwise
dispose of any of its assets to the Borrower or any Subsidiary.
4.11. Dealings with Affiliates. The Borrower will not, and will not
------------------------
permit any Subsidiary to, enter into any transaction with an Affiliate except on
terms no less favorable to the Borrower or such Subsidiary than if such
transaction were an arm's length transaction with a non-affiliated person or
entity.
4.12. Limitations on Certain Contracts. The Borrower will not, and
--------------------------------
will not permit any Subsidiary to, enter into or be a party to:
(a) any contract providing for the making of loans, advances
or capital contributions by the Borrower or any Subsidiary to any person or
entity or for the purchase of any property from any person or entity (except for
employee loans or advances in the ordinary course of business), in each case in
order to enable such person or entity to maintain working capital, net worth or
any other balance sheet condition or to pay debts, dividends or expenses;
(b) any contract for the purchase by the Borrower or any
Subsidiary of materials, supplies or other property or services if such contract
(or any related document) requires that payment for such materials, supplies or
other property or services shall be made regardless of whether or not delivery
of such materials, supplies or other property or services is ever made or
tendered;
(c) any contract to rent or lease (as lessee) any real or
personal property if such contract (or any related document) provides that the
obligation to make payments thereunder is absolute and unconditional under
conditions not customarily found in commercial leases then in general use or
requires that the lessee purchase or otherwise acquire securities or obligations
of the lessor;
(d) any contract for the sale or use of materials, supplies or
other property or the rendering of services which requires that payment to the
Borrower or any Subsidiary for such materials, supplies or other property, or
the use thereof, or for such services shall be subordinated to any indebtedness
of the purchaser or user of
-18-
such materials, supplies or other property or the person or entity entitled to
the benefit of such services owed or to be owed to any other person or entity;
or
(e) any other contract which, in economic effect, is
substantially equivalent to a guarantee by the Borrower or any Subsidiary,
except as permitted by Section 4.9 hereof.
4.13. ERISA. The Borrower will, and will cause each Subsidiary to,
-----
promptly pay and discharge all obligations and liabilities arising under ERISA
of a character which, if unpaid or unperformed, might result in the imposition
of a lien or charge against any of their properties or assets, and will promptly
notify the Bank of the occurrence of any reportable event (as defined in ERISA)
which might result in the termination by PBGC of any Plan or of termination of
any such Plan or appointment of a trustee therefor. The Borrower will notify
the Bank of its or any Subsidiary's intention to terminate or withdraw from any
Plan and will not, and will not permit any Subsidiary to, terminate any such
Plan or withdraw therefrom unless the Borrower or such Subsidiary shall be in
compliance with all of the terms and conditions of this Agreement after giving
effect to any liability to PBGC or to the Plan resulting from such termination
or withdrawal.
4.14. Issuance of Stock. The Borrower shall not permit any
-----------------
Subsidiary (either directly, or indirectly by the issuance of rights or options
for, or securities convertible into, such shares) to issue, sell or dispose of
any shares of any class of its stock, except to the Borrower or any other wholly
owned Subsidiary.
4.15. Financial Condition and Ratios. Commencing with the fiscal
------------------------------
year ending June 30, 1996, the Borrower and the Subsidiaries will at all times
throughout the term of this Agreement satisfy or maintain certain minimum
financial conditions and ratios as follows:
(a) Working Capital. Consolidated working capital, equal to
---------------
consolidated current assets less consolidated current liabilities, of not less
than $19,000,000.
(b) Current Ratio. Consolidated current assets of not less
-------------
than 175% of consolidated current liabilities -- that is, a current ratio of
1.75:1.0.
(c) Tangible Net worth. Consolidated tangible assets
------------------
(excluding patents, copyrights, capitalized research and development costs,
goodwill and other intangible assets) in excess of consolidated liabilities by
at least $24,000,000.
-19-
(d) Quick Ratio. Consolidated cash, cash equivalents and trade
-----------
receivables of not less than 125% of consolidated current liabilities -- that
is, a quick ratio of 1.25:1.0.
(e) Maximum Operating Loss. The Borrower shall not have an
----------------------
operating loss (i) for the fiscal quarter ending December 31, 1995 in excess of
$500,000, (ii) for the fiscal quarter ending March 31, 1996 in excess of
$1,250,000 and (iii) for each fiscal quarter thereafter in excess of $250,000.
(f) Maximum Aggregate Operating Loss. The Borrower shall not
--------------------------------
have an aggregate operating loss for any period of two consecutive fiscal years
in excess of $1,000,000.
(g) Debt Ratio. Consolidated total liabilities of not more
----------
than 125% of consolidated tangible net worth -- that is, a debt ratio of
1.5:1.0.
4.16. Obligations of the Borrower Unconditional. The payment and
-----------------------------------------
performance by the Borrower of its obligations hereunder and under the Notes and
the Security Documents shall be absolute and unconditional, irrespective of any
defense or right of set-off, recoupment or counterclaim it might otherwise have
against the Bank or any other person or entity; and the Borrower shall pay
absolute net during the term thereof all payments to be made on account of the
Loans as prescribed in the Notes and all other payments required hereunder and
thereunder, free of all deductions and without any abatement, diminution or set-
off whatsoever.
4.17. Businesses. The Borrower will not, and will not permit any
----------
Subsidiary to, make or suffer to be made any material change in the manner in
which their businesses are conducted.
4.18. Compliance with Laws. The Borrower will, and will cause each
--------------------
Subsidiary to, comply with all applicable federal, state and local laws, rules,
ordinances and regulations where noncompliance could have a material adverse
effect on their respective financial conditions, properties, businesses or
operations; provided, however, that the Borrower or any Subsidiary, as the case
may be, may in good faith and by appropriate proceedings contest the
applicability or validity of any such law, so long as such Borrower or such
Subsidiary is prosecuting such contest diligently and has set aside on its books
adequate reserves with respect thereto.
4.19. Hazardous Materials. The Borrower will indemnify and defend
-------------------
the Bank and hold the Bank harmless from and against any and all losses,
liabilities, damages, injuries, costs, expenses and claims of any and every kind
whatsoever paid, incurred or suffered by, or asserted against the Bank for, with
respect to, or as a direct or indirect result of, the presence on or under, or
the escape, seepage, leakage, spillage, discharge, emission, discharging or
release from the Premises or any of the Borrower's other properties of, any
Hazardous Material (including, without limitation,
-20-
any losses, liabilities, damages, injuries, costs, expenses or claims asserted
or arising under any Toxic Waste Laws), regardless of whether or not caused by,
or within the control of, the Borrower. If the Borrower receives any notice of
(a) the happening of any event involving the use, spill, discharge or clean-up
of any Hazardous Material or (b) an Environmental Complaint from any person or
entity, including, but not limited to, the United States Environmental
Protection Agency, then the Borrower shall promptly give both oral and written
notice of the same to the Bank. Upon obtaining knowledge of an Environmental
Complaint from any source and by any means, the Bank shall have the right, but
not the obligation, upon five (5) Banking Days' prior written notice to the
Borrower to take such reasonable actions as it deems necessary or advisable to
clean up, remove, resolve or minimize the impact of, or otherwise deal with, any
such Hazardous Material or Environmental Complaint. Any and all sums expended by
the Bank for such purposes, together with interest thereon at the Default Rate,
shall be immediately reimbursed by the Borrower and shall constitute an
Obligation which is secured by the Collateral.
4.20. Material Agreements. Upon the request of the Bank from time to
-------------------
time, the Borrower shall deliver a list of all material leases, mortgages,
indentures, contracts or agreements of or affecting the Borrower, any Subsidiary
or any of their respective properties and true and correct copies of such
document(s) as the Bank may specify.
4.21. Assignments under the Federal Assignment of Claims Act. The
------------------------------------------------------
Borrower shall not execute any assignment of any government contract, to which
the Borrower or any Subsidiary is a party (either as a contractor or
subcontractor), in favor of any person other than the Bank without the prior
written consent of the Bank. In addition, the Borrower will promptly notify the
Bank upon its discovery of any attempt by any person other than the Bank to file
such an assignment under the Federal Assignment of Claims Act.
5. EVENTS OF DEFAULT AND REMEDIES.
------------------------------
5.1. Events of Default. The occurrence or existence of any one or
-----------------
more of the following events or conditions shall constitute an Event of Default:
(a) (i) default in the payment when due of any installment of
the principal of or interest on any Note, whether at the stated maturity thereof
or at any other time provided in such Note or in this Agreement, or (ii) default
for a period of five (5) days after notice in the payment when due of any other
amount payable by the Borrower under this Agreement, any Note or any of the
Security Documents;
(b) default in the observance or performance of any covenant
set forth in Sections 4.6 through 4.13, 4.15 or 4.17 hereof;
-21-
(c) default in the observance or performance by the Borrower of
any other provision of this Agreement or any of the Security Documents which is
not remedied within thirty (30) days after notice thereof to the Borrower by
Bank; provided, however, that if such default cannot be corrected within thirty
(30) days, it shall not be an Event of Default so long as, in the opinion of the
Bank, the Borrower is diligently taking appropriate corrective action to cure
the same and such default will not, in the sole judgment of the Bank, impair the
security for the Loans;
(d) a default shall occur under any evidence of indebtedness
issued, assumed or guaranteed by the Borrower or any Subsidiary (other than any
such indebtedness owing by any Subsidiary to the Borrower or to another
Subsidiary) or under any indenture, agreement or other instrument under which
the same may be issued, and such default shall continue for the period of time
(if any) necessary to permit the acceleration of the maturity of any such
indebtedness in the aggregate amount of $50,000 or more;
(e) any representation or warranty made by the Borrower in this
Agreement or any of the Security Documents, or in any of the exhibits hereto or
thereto, or in any opinion, report, statement (including, without limitation,
financial statements) or certificate furnished by it pursuant to this Agreement
or any of the Security Documents, proves to have been false, misleading or
incomplete in any material respect as of the date of the issuance or making
thereof;
(f) the Borrower or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States Bankruptcy
Code, as amended, (ii) not pay, or admit in writing its inability to pay, its
debts generally as they become due or suspend payment of its obligations, (iii)
become insolvent or make an assignment for the benefit of creditors, (iv) apply
for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, conservator, liquidator or similar official for it or any
substantial part of its property, (v) institute any proceeding seeking an order
for relief or other protection under the United States Bankruptcy Code, as
amended, or seeking dissolution, winding up, liquidation, reorganization,
arrangement, marshalling of assets, adjustment or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, (vi) fail to contest in
good faith any appointment or proceeding described in Section 5.1(g) hereof, or
(vii) take any corporate action in furtherance of any of the foregoing purposes;
(g) a custodian, receiver, trustee, conservator, liquidator or
similar official shall be appointed for the Borrower or any Subsidiary or any
substantial part of any of their respective properties, or a proceeding for such
purposes or the purposes described in Section 5.1(f) hereof shall be instituted
against the Borrower or any Subsidiary and such appointment continues
undischarged or any such proceeding continues undismissed or unstayed for a
period of thirty (30) days;
-22-
(h) any final judgments, writs or warrants of attachment or of
any similar processes aggregating in excess of $50,000 shall be entered or filed
against the Borrower, any Subsidiary or against any of their properties or
assets and remain unpaid, unvacated, unbonded or unstayed on appeal for a period
of five (5) days after entry or filing;
(i) any "reportable event" (as defined in ERISA) which
constitutes grounds for the termination of any Plan of the Borrower or any
member of the "controlled group" (as defined by ERISA) or for the appointment by
the appropriate United States District Court of a trustee to administer or
liquidate any such Plan, shall have occurred and be continuing thirty (30) days
after written notice of such effect shall have been given to the Borrower by the
PBGC or the Bank; or any such Plan shall be terminated; or the Borrower or any
member of the controlled group shall have withdrawn from such Plan or a trustee
shall be appointed by the appropriate United States District Court to administer
any such Plan; or the PBGC shall institute proceedings to administer or
terminate any such Plan; and in the case of vested liabilities allocable to, or
the withdrawal liability of the Borrower or any members of the controlled group
with respect to, such Plans shall exceed (either singly or in the aggregate in
the case of any such liability arising under more than one such Plan and in the
case of more than one liability arising under one or more such Plans) 5% of
consolidated assets of the Borrower and its Subsidiaries (as determined in
accordance with generally accepted accounting principles);
(j) the Borrower or any Subsidiary shall lose any license,
franchise or permit which materially affects their business operations as
presently conducted, if the same is not restored within thirty (30) days after
such loss.
5.2. Acceleration. (a) When any Event of Default (other than any
------------
Event of Default described in Sections 5.1(f) and (g) hereof) has occurred and
is continuing, the Bank may declare the principal of and the accrued interest on
the Notes to be forthwith due and payable and thereupon the Notes, including
both principal and interest, shall be and become immediately due and payable,
together with all other amounts payable under this Agreement, the Notes and the
Security Documents, without further demand, presentment, protest or notice of
any kind.
(b) When any Event of Default described in Section 5.1(f) or
(g) hereof has occurred and is continuing, then the Notes shall immediately
become due and payable, together with all other amounts payable under this
Agreement, the Notes and the Security Documents, without presentment, demand,
protest or notice of any kind.
5.3. Costs of Collection. The Borrower agrees to pay to the Bank all
-------------------
expenses and costs incurred or paid by the Bank, including reasonable attorneys'
fees and court costs, in connection with any default by the Borrower hereunder
or in
-23-
connection with the enforcement of any of the terms hereof or of the Notes or
any Security Document or in connection with protecting or realizing upon any
collateral for the Obligations, including any of the foregoing incurred in
connection with any bankruptcy, reorganization or similar proceedings instituted
by or against the Borrower or any Subsidiary.
5.4. Consent to Jurisdiction; Waiver of Jury Trial. (a) The Borrower
---------------------------------------------
hereby agrees that any action or proceeding with respect to this Agreement or
the Notes or any action or proceeding brought to enforce any breach hereof or
thereof against the Borrower or any of its property may be brought in any
federal or state court situated in the State of Maryland and/or in any other
court having jurisdiction over the subject matter, in one or more actions or
proceedings, all at the sole election of the Bank, and by execution and delivery
of this Agreement, the Borrower irrevocably consents to jurisdiction in each
such court.
(b) The Borrower irrevocably waives any right it may have to a
trial by jury in any action or proceeding described in the foregoing Section
5.4(a), and hereby acknowledge that this waiver is a material provision of this
Agreement and shall be specifically enforceable.
5.5. Service of Process. If, for any reason, the Borrower is unable
------------------
to receive service of process in the manner provided by the Maryland Rules of
Procedure, then the Borrower hereby irrevocably appoints the State Department of
Assessments and Taxation as its agent for the purpose of gaining jurisdiction
over the Borrower in the State of Maryland in connection with any of the
Obligations; provided, however, that the Bank shall promptly notify the Borrower
-------- -------
in writing of any such service of process.
5.6. Acceleration of Other Obligations to Bank. When any Event of
-----------------------------------------
Default has occurred and is continuing, the Bank may declare any and/or all
other indebtedness of the Borrower or any Subsidiary owing to the Bank, whether
now existing or created in the future, to be immediately due and payable,
without presentment, demand, protest or further notice of any kind.
5.7. Remedies Cumulative. All rights, remedies and powers of the
-------------------
Bank hereunder are irrevocable and cumulative, and not alternative or exclusive,
and shall be in addition to all other rights, remedies and powers given hereby
or by any of the other Loan Documents or any laws now existing or hereafter
enacted.
6. CONDITIONS PRECEDENT TO LENDING.
-------------------------------
6.1. Conditions to the Making of the Initial Term Loan and the
---------------------------------------------------------
Initial Advance under the Revolving Credit Loan. The obligation of the Bank to
- -----------------------------------------------
make the initial Term Loan and the initial advance under the Revolving Credit
Loan hereunder is subject to the following conditions precedent:
-24-
(a) Notes. The Bank shall have received the Term Loan Note and
-----
the Revolving Credit Note, duly executed by the Borrower on the Closing Date.
(b) Opinion of Borrower's In-House Legal Counsel. The Bank
--------------------------------------------
shall have received a written opinion of in-house legal counsel for the
Borrower, dated the Closing Date, in form and substance reasonably satisfactory
to the Bank.
(c) Evidence of Authorization. The Bank shall have received
-------------------------
copies of all corporate action taken by the Borrower to authorize this
Agreement, the Security Documents, the Notes and the borrowings hereunder,
certified as of the Closing Date and including a certification as to the
incumbency and signature(s) of the person(s) authorized to execute and deliver
or furnish such documents and all related materials and information.
(d) Estoppel Certificate. The Borrower shall deliver to the
--------------------
Bank a certificate, dated as of the Closing Date, to the effect that (i) no
Event of Default or Potential Default has occurred and is continuing and (ii)
all representations and warranties contained herein and in the Security
Documents are true, accurate and complete in all material respects.
(e) Organizational Documents. The Borrower shall deliver to the
------------------------
Bank certified copies of the organizational documents of the Borrower and
certificates of good standing for the Borrower from the states of its
organization, the states where its chief executive offices are located, the
states where its principal places of business are located and any other states
where the Premises are located.
(f) Consents and Approvals. The Bank shall have received copies
----------------------
of such consents and approvals as the Borrower may be required to obtain from
any person or entity in order to enter into this Agreement or any of the
Security Documents and to consummate the transactions contemplated hereby or
thereby.
(g) Transaction Expenses. The Borrower shall have paid any
--------------------
statements for transaction expenses which are payable under Section 8.9 hereof.
(h) Disclosure Letter. The Bank shall have received specific
-----------------
written disclosure from the Borrower prior to the Closing Date as to any matters
for which disclosure is required under Section 3.6 or 3.13 hereof.
(i) Other Documents. The Bank shall have received such other
---------------
documents, certificates and opinions, and evidence of such other matters, as it
may reasonably require.
6.2. Conditions to the Making of Each Advance under the Revolving
------------------------------------------------------------
Credit Loan. The obligation of the Bank to make each advance under the Revolving
- -----------
Credit Loan) is subject to the conditions precedent that on the date of the
making of
-25-
such advance, (i) the Borrower shall have performed and observed, and shall then
be in compliance with, all of the terms, covenants and conditions of this
Agreement, the Notes and the Security Documents, (ii) there shall not have
occurred or be existing any Event of Default, and (iii) the representations and
warranties contained herein and in the Security Documents shall be true,
accurate and complete, with the same effect as though such representations and
warranties had been made at the time of such advance; and each and every request
for an advance under the Revolving Credit Loan shall constitute a confirmation
and warranty by the Borrower that this Section 6.2 has been satisfied in full.
6.3. Conditions to the Making of any Supplemental Term Loan. The
------------------------------------------------------
obligation of the Bank to make any Supplemental Term Loan hereunder is subject
to the following conditions precedent:
(a) Note. The Bank shall have received the appropriate
----
Supplemental Term Loan Note, duly executed by the Borrower (or its Subsidiary,
as the case may be).
(b) Opinion of Borrower's In-House Legal Counsel. The Bank
--------------------------------------------
shall have received a written opinion of in-house legal counsel for the Borrower
(or such Subsidiary), dated the date of such Supplemental Term Loan Note, in
form and substance reasonably satisfactory to the Bank.
(c) Evidence of Authorization. The Bank shall have received
-------------------------
copies of all corporate action taken by the Borrower (or such Subsidiary) to
authorize such Supplemental Term Loan Note and the borrowings thereunder,
certified as of the date of such Supplemental Term Loan Note and including a
certification as to the incumbency and signature(s) of the person(s) authorized
to execute and deliver or furnish such documents and all related materials and
information.
(d) Estoppel Certificate. The Borrower (or such Subsidiary)
--------------------
shall deliver to the Bank a certificate, dated as of the date of such
Supplemental Term Loan Note, to the effect that (i) no Event of Default or
Potential Default has occurred and is continuing and (ii) all representations
and warranties contained herein and in the Security Documents are true, accurate
and complete in all material respects.
(e) Transaction Expenses. The Borrower (or such Subsidiary)
--------------------
shall have paid any statements for transaction expenses which are payable under
Section 8.9 hereof.
(f) Other Documents. The Bank shall have received such other
---------------
documents, certificates and opinions, and evidence of such other matters, as it
may reasonably require.
-26-
7. COLLATERAL SECURITY.
-------------------
7.1. Security Documents. (a) As collateral security for the
------------------
Obligations, (a) the Borrower has executed and delivered to the Bank a Pledge
and Security Agreement dated as of July 30, 1990 (the "Pledge Agreement"), under
which the Borrower has pledged all of the issued and outstanding capital stock
of each of SWL and GRC, and (b) SWL and GRC have each executed and delivered to
the Bank a Security Agreement (together, the "Security Agreements") covering and
creating a security interest in any and all of its inventory, goods, accounts,
accounts receivable, general intangibles, chattel paper, instruments and
equipment, whether now owned or existing or hereafter acquired or arising (said
Pledge Agreement and Security Agreements, together with any and all additional
documents, agreements, instruments and certificates which may from time to time
secure all or any portion of the Loans, being herein sometimes collectively
referred to as the "Security Documents").
(b) Each of the Borrower, SWL and GRC hereby represents,
warrants and covenants to the Bank (i) that all of the assets of SWL and GRC
have been transferred to the Borrower pursuant to separate Asset Purchase
Agreements each dated as of June 30, 1995 by and between the Borrower and SWL
and GRC, respectively, and (ii) that such assets have been transferred to the
Borrower in each case subject to the Bank's security interest therein created
under the Security Agreements. In addition, the parties agree that the Borrower
shall hereby assume all of the obligations of each of SWL and GRC, respectively,
under the Security Agreements as though it were an original party to such
agreements, and further agree that such Security Agreements shall hereby be
amended to include within the term "Obligations" therein the Borrower's
obligations under the Notes.
(c) Finally, the parties agree that the Bank shall have the
right, upon an Event of Default, (i) to obtain lien search reports covering the
assets of the Borrower, SWL and GRC for all appropriate jurisdictions, (ii) to
require the Borrower to obtain such releases, waivers and subordination
agreements as the Bank may reasonably require and to execute and deliver to the
Bank additional financing statements, amendments to financing statements,
continuation statements and other documents, certificates, instruments and
agreements and (iii) and to file or record the foregoing documents in all
appropriate jurisdictions, all as the Bank deems necessary or advisable to
maintain its first priority perfected security interest in the Collateral and
otherwise to accomplish or facilitate the purposes of this Section 7.1, and the
parties further agree that the Borrower shall pay all filing, recordation and
registration fees and taxes, as well as all other costs and expenses (including
reasonable legal expenses) incurred by the Bank in connection therewith.
7.2. Deposit Balances. As additional security for the payment,
----------------
performance and discharge of the Obligations, the Borrower hereby pledges to the
Bank, grants the Bank a security interest in, and gives to the Bank a first
priority lien upon and a right of set-off against, all deposit balances now or
hereafter arising in any
-27-
of its accounts with the Bank and all property and securities of every kind and
nature which have been or at any time shall be delivered to the Bank or
otherwise come into the Bank's possession, custody or control for any purpose
whatsoever, whether or not for the express purpose of being used by the Bank as
collateral security or for safekeeping or for any other or different purpose, or
which shall be in transit to the Bank or set apart for or on behalf of the Bank,
in any way, by the Borrower or for its account, or in which the Borrower may
have any interest, whether the Bank shall accept the same for the purpose for
which delivered or not, and any and all cash and non-cash proceeds of said
property and securities and every part thereof, with the right of the Bank, in
its discretion, to resort first to any part of said security without exhausting
its rights against any other collateral or source of payment.
8. MISCELLANEOUS.
-------------
8.1. Exercise of Rights. Any delay on the part of the Bank in
------------------
exercising any power, privilege or right under this Agreement shall not operate
as a waiver thereof, and no single or partial exercise of any power, privilege
or right hereunder shall preclude other or further exercise thereof, or the
exercise of any other power, privilege or right. The waiver by the Bank of any
default by the Borrower shall not constitute a waiver of any subsequent
defaults, but shall be restricted to the default so waived. The failure of the
Bank to enforce any of the terms and provisions hereof, or its failure to
declare a default hereunder, shall apply only in the particular instance, and
shall not operate as a continuing waiver. If any part of this Agreement should
be contrary to any law which the Bank might seek to apply or enforce, or should
be otherwise defective, the other provisions of this Agreement shall not be
affected thereby, but shall continue in full force and effect.
8.2. Payment Due on Banking Day. If any payment or prepayment of
--------------------------
principal or interest on the Notes shall fall due on a day which is not a
Banking Day, interest at the applicable rate shall continue to accrue on such
principal from the stated due date thereof to and including the next succeeding
Banking Day, on which day the same shall be payable.
8.3. Assessments. The Borrower agrees that it will pay all
-----------
documentary, stamp, recording and similar taxes which are payable in respect of
this Agreement, the Security Documents or the Notes, including interest and
penalties, in the event any such taxes are assessed, irrespective of when such
assessment is made.
8.4. Survival. All representations and warranties of the Borrower
--------
made herein or in certificates given pursuant hereto shall survive the execution
and delivery of this Agreement, the Security Documents and the Notes, and shall
continue in full force and effect with respect to the date as of which they were
made as long as any of the Notes shall remain outstanding.
-28-
8.5. Notices. All notices and other communications provided for
-------
herein or in any of the Security Documents shall be in writing, except as
otherwise specifically provided for hereinabove, and shall be deemed to have
been given or made when served personally or on the first Banking Day following
deposit in the United States mail and addressed, if to the Borrower, to GRC
International, Inc., 1900 Gallows Road, Vienna, Virginia 22182, Attention:
Chief Financial Officer (with a copy to Thomas E. McCabe, Esq., Senior Vice
President, General Counsel and Secretary, at the same address), or if to the
Bank, to Two Hopkins Plaza, Suite 200, Baltimore, Maryland 21201, Attention:
Mr. Philip G. Enstice, Senior Vice President (with a copy to Venable, Baetjer
and Howard, LLP, Two Hopkins Plaza, Suite 1800, Baltimore, Maryland 21201,
Attention: Mitchell Kolkin, Esq.), or at such other address as shall be
designated by either party hereto in a written notice to the other party
pursuant to this Section 8.5.
8.6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and by different parties on different counterparts, all of which
taken together shall constitute one and the same instrument. Any of the parties
hereto may execute this Agreement by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Agreement shall become effective when each of the parties hereto has executed
this Agreement or a separate counterpart hereof, and delivered the same to the
Bank.
8.7. Successors and Assigns; Governing Law; Amendments. This
-------------------------------------------------
Agreement shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Bank and its successors and assigns, the term
"Bank" as used herein to include any subsequent holder of any Note. The Bank
reserves the right to sell, assign, encumber, transfer or otherwise dispose of
all or any part of its right, title and interest in and to any of the Notes, the
Collateral, the Security Documents and this Agreement, including any undivided
participation therein, all without the consent of or notice to the Borrower;
provided, however, that the Borrower shall continue to recognize the Bank as the
holder of such right, title and interest until it shall have received written
notice from the Bank of disposition. This Agreement and the rights and duties
of the parties hereto shall be construed and determined in accordance with the
internal laws of the State of Maryland, without regard to principles of
conflicts of laws. This Agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof and any prior understandings,
commitments and agreements, whether written or oral, with respect thereto are
superseded hereby. This Agreement, the Notes and the Security Documents may not
be amended or modified except by a written instrument signed by the Borrower and
the Bank. The Borrower may not assign its rights or obligations hereunder
without the prior written consent of the Bank.
8.8. Section Headings; Construction. Section headings used in this
------------------------------
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement. When used in this Agreement, the singular of
any word shall include
-29-
the plural, the plural shall include the singular and the use of any gender
shall include all genders.
8.9. Transaction Expenses. The Borrower shall pay all out-of-pocket
--------------------
costs and expenses incurred by the Bank in connection with the negotiation,
preparation, execution and delivery of this Agreement, all related documents and
any subsequent amendments hereof or thereof, or in connection with the
consummation of any of the transactions contemplated hereby or thereby,
including the reasonable fees and expenses of Venable, Baetjer and Howard, LLP,
special counsel for the Bank.
8.10. Estoppel Certificates. The Borrower will, upon not less than
---------------------
fifteen (15) business days' request by the Bank, execute, acknowledge and
deliver to the Bank a statement in writing, certifying (a) that this Agreement
is unmodified and in full force and effect and that the payments required by
this Agreement, the Notes and the Security Documents to be paid by the Borrower
have been paid, and (b) the then unpaid balance of the Loans; and stating
whether or not, to the knowledge of the signer of such certificate, any Event of
Default or Potential Default has occurred and is continuing and, if so,
specifying each such default of which the signer may have knowledge.
8.11. Indemnification. The Borrower shall protect, indemnify and
---------------
save harmless the Bank and its officers, employees and agents from and against,
any and all liabilities, suits, actions, claims, demands, losses, expenses and
costs of every kind and nature incurred by, or asserted or imposed against, the
Bank and its officers, agents or employees, or any of them, by reason of any
accident, injury (including death) or damage to any person or property, however
caused (other than if by the willful misconduct of such person), resulting from,
connected with or growing out of any act of commission or omission of the
Borrower or any officer, employee, agent, assignee, contractor or subcontractor
of the Borrower or any use, non-use, possession, occupation, condition,
operation, service, design, construction, acquisition, maintenance or management
of, or on, or in connection with, the Premises, the Collateral, or any part
thereof, or by reason of any suit or proceeding brought by or against the Bank
in any way relating to or arising out of the transactions contemplated by the
Loan Documents, the enforcement of any of the terms thereof or the exercise of
any of the remedies provided for therein, regardless of whether such
liabilities, suits, actions, claims, demands, damages, losses, expenses and
costs are against or are suffered or sustained by the Bank or any of its
officers, agents or employees, or are against legal entities to whom the Bank or
any of its officers, agents or employees may become liable therefor. The
Borrower, if so requested by the Bank, shall undertake to defend, at its sole
cost and expense, any and all suits, actions and proceedings brought against the
Bank or any of its officers, agents or employees in connection with any of the
matters mentioned in this Section 8.11.
-30-
8.12. Publicity. Any public notices, advertisements or similar
---------
announcements relating to this Agreement or the Loans shall be subject to the
prior approval of each of the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Loan Agreement to be
duly executed under seal, intending it to be a sealed instrument, as of the day
and year first above written.
[SEAL]
ATTEST or WITNESS: GRC INTERNATIONAL, INC.
/s/ T. E. McCabe By: /s/ Philip R. Pietras (SEAL)
- ------------------------- -----------------------
Name: Philip R. Pietras
-------------------
Title: V.P., Treasurer & CEO
-----------------------
ATTEST or WITNESS: SWL INC.
/s/ T. E. McCabe By: /s/ Philip R. Pietras (SEAL)
- ------------------------- -----------------------
Name: Philip R. Pietras
-------------------
Title: V.P., Treasurer & CEO
-----------------------
ATTEST or WITNESS: GENERAL RESEARCH
CORPORATION
/s/ T. E. McCabe By: /s/ Philip R. Pietras (SEAL)
- ------------------------- -----------------------
Name: Philip R. Pietras
-------------------
Title: V.P., Treasurer & CEO
-----------------------
ATTEST or WITNESS: MERCANTILE-SAFE DEPOSIT
AND TRUST COMPANY
[SIGNATURE APPEARS HERE] By: /s/ Philip G. Enshce (SEAL)
- ------------------------- -----------------------
Name: Philip G. Enshce
-------------------
Title: Senior Vice President
-----------------------
-31-
Exhibit A
---------
TERM LOAN NOTE
--------------
$2,200,000.00 Baltimore, Maryland
February ___, 1996
FOR VALUE RECEIVED, GRC INTERNATIONAL, INC., a Delaware corporation
(hereinafter referred to as the "Maker"), promises to pay to the order of
MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, a Maryland banking institution
(hereinafter, the "Bank," or, together with all subsequent holders of this Note,
the "Payee"), the principal sum of Two Million Two Hundred Thousand and no/
100ths Dollars ($2,200,000), together with interest on the unpaid principal
balance hereof from time to time outstanding, at a fluctuating rate of interest
equal to the "Prime Rate" (hereinafter defined), adjusted (both upwards and
downwards) on the date of any change in the Prime Rate. Interest on the
outstanding principal balance hereof shall be payable monthly in arrears
beginning on March 1, 1996 and continuing on the first day of each month
thereafter, through and including September 1, 1997, and the entire, then
outstanding principal balance hereof, together with all accrued and unpaid
interest hereon, shall be due and payable on September 1, 1997.
If any payment required to be made hereunder is not received within
fifteen (15) calendar days after the date that the same becomes due and payable,
the Maker shall pay a late payment charge equal to five percent (5%) of the
amount of such payment then due. The Maker shall also pay, promptly upon
demand, all costs of collection, including reasonable attorney's fees if this
Note is referred to an attorney for collection after default, whether or not
any action shall be instituted to enforce or collect this Note. Time is of the
essence hereof for all purposes.
The "Prime Rate" is a fluctuating interest rate set by the Bank from
time to time as an interest rate base for borrowings. The Prime Rate is one of
several interest rate bases used by the Bank; and the Bank lends at rates above
and below the Prime Rate. The Maker will be afforded the same interest rate base
as the Bank's other commercial borrowers who are tied to the Prime Rate. On the
date hereof the Prime Rate is eight and one-quarter percent (8 1/4%) per annum.
All payments on this Note shall be applied first to the payment of
accrued but unpaid interest, and any remainder shall be applied to reduction of
the principal balance hereof. The rate of interest hereon shall be calculated on
the basis of a 360-day year factor applied to actual days elapsed. All payments
hereunder shall be payable in lawful money of the United States of America and
shall be made to the Payee in immediately available funds at Two Hopkins Plaza,
Suite 200, Baltimore,
Maryland 21201, or at such other address as the Payee may from time to time
designate in writing to the Maker.
The Maker shall have the right and privilege to prepay this
Note, in whole or in part, at any time upon at least five (5) days' prior
written notice of intention to prepay to the Payee; provided that: (a) each
partial prepayment of principal shall be in multiples of $5,000, unless
otherwise agreed by the Payee, (b) each prepayment shall be made on a date when
an installment of interest or principal hereon is due, (c) each prepayment shall
include all accrued and unpaid interest on or with respect to the principal
amount to be prepaid, and (d) partial prepayments of principal shall be applied
in inverse order of maturity. Such prepayment shall not be subject to any
premium or penalty for prepayment.
The Maker waives presentment and demand for payment, notice of
intent to accelerate maturity, notice of nonpayment, bringing of suit and
diligence in taking any action to collect any sums owing hereunder or in
proceeding against any of the rights and properties securing payment hereof.
From time to time, without affecting the obligation of the Maker to pay the
outstanding principal balance of this Note and to observe the covenants of the
Maker contained herein, without giving notice to or obtaining the consent of the
Maker, and without liability on the part of the Payee, the Payee may, at the
option of the Payee, extend the time for payment of interest hereon and/or
principal hereof, reduce the payments hereunder, release anyone liable on this
Note, accept a renewal of this Note, join in any extension or subordination or
exercise any option or election hereunder, reduce the rate of interest on this
Note or exercise any option or election hereunder. No one or more of such
actions shall constitute a novation.
If default be made in the payment in whole or in part of any sum
provided for herein, or if an event of default shall occur under any instrument
or document executed as security for, as evidence of, or otherwise in connection
with this Note or the indebtedness evidenced hereto or under the Amended and
Restated Revolving Credit and Term Loan Agreement dated February 12, 1996 by and
between the Maker and the Payee (the "Loan Agreement") (this Note, the Loan
Agreement, other promissory notes issued and to be issued pursuant to the Loan
Agreement and the "Security Documents" (defined below) being hereinafter
collectively called the "Loan Documents"), then the Payee may, at its option,
without further notice or demand (except as may be otherwise specifically
provided for in the Loan Documents), declare the unpaid principal balance and
accrued interest on this Note at once due and payable, foreclose all liens
securing payment hereof, pursue any and all other rights, remedies and recourses
available to the Payee, or pursue any combination of the foregoing, all remedies
hereunder and under the Loan Documents being cumulative. The Payee shall have
the right to rescind any acceleration in payment of this Note for default as
aforesaid, if the Payee so elects, in which event this Note shall be construed,
interpreted and enforced in the same manner as if the Payee had not elected to
declare the unpaid principal balance and accrued interest of this Note at once
due and payable.
-2-
Failure to exercise any of the foregoing options upon the happening of
one or more of the foregoing events shall not constitute a waiver of the right
to exercise the same or any other option at any subsequent time in respect to
the same or any other event, and no single or partial exercise of any right or
remedy shall preclude other or further exercise of the same or any other right
or remedy. The Payee shall have no duty to exercise any or all of the rights and
remedies herein provided or contemplated. The acceptance by the Payee of any
payment hereunder that is less than payment in full of all amounts due and
payable at the time of such payment shall not constitute a waiver of the right
to exercise any of the foregoing options at the time or at any subsequent time,
or nullify any prior exercise of any such option without the express written
consent of the Payee.
This Note, together with other promissory notes issued and to be
issued pursuant to the Loan Agreement, are secured, inter alia, by Security
----- ----
Agreements dated as of July 30, 1990 and executed by SWL Inc.("SWL") and General
Research Corporation ("GRC"), respectively (the "Security Agreements"), covering
SWL's and GRC's accounts, instruments, chattel paper, inventory, goods,
equipment, fixtures, machinery, deposit balances, contract rights, general
intangibles and other tangible and intangible personal property, as well as a
Pledge and Security Agreement dated as of July 30, 1990 executed by the Maker
for the benefit of the Bank, covering the stock owner by the Maker in each of
SWL and GRC, all as more particularly described therein (collectively, the
"Security Documents"). Pursuant to Section 7.1 of the Loan Agreement each of the
Maker, SWL and GRC has represented, warranted and covenanted to the Bank (i)
that all of the assets of SWL and GRC have been transferred to the Maker
pursuant to separate Asset Purchase Agreements each dated as of June 30, 1995 by
and between the Maker and SWL and GRC, respectively, and (ii) that such assets
have been transferred to the Maker in each case subject to the Bank's security
interest therein created under the Security Agreements. In addition, the Maker,
SWL and GRC have agreed that the Maker shall assume all of the obligations of
each of SWL and GRC, respectively, under the Security Agreements as though it
were an original party to such agreements, and have further agreed that such
Security Agreements shall be amended to include within the term "Obligations"
therein the Maker's obligations under this Note.
This Note shall be governed by and construed according to the laws of
the State of Maryland, without regard to principles of conflict of laws.
Any attorney at law may appear in any court of record in the State of
Maryland or in the United States, after demand on this Note following an event
of default under any Loan Document, and waive the issuing of service of process
and confess a judgment against the Maker in favor of the Payee for the amount
then appearing due hereunder, together with interest, costs of suit and
attorneys' fees and thereupon release all errors and waive the right of appeal.
-3-
It is expressly stipulated and agreed that the loan evidenced by this
Note is a "commercial loan" as defined in the Commercial Law Article of the
Annotated Code of Maryland.
In any case where the date of maturity of interest on, or principal of,
this Note shall be a Sunday or legal holiday, or a day on which banking
institutions in the city of payment are authorized by law or executive order to
close (any other day being herein referred to as a "Banking Day"), then payment
of interest or principal need not be made on such date, but may be made on the
next succeeding Banking Day; provided, however, that interest shall continue to
accrue through the actual date of payment.
Executed under seal and intending this Note to be a sealed instrument,
as of the date and year above written.
ATTEST or WITNESS GRC INTERNATIONAL, INC.
By: (SEAL)
- ---------------------- ------------------------
Name:
--------------------------
Title:
-------------------------
-4-
Exhibit B
---------
CONSOLIDATED, AMENDED AND RESTATED
----------------------------------
REVOLVING CREDIT MASTER NOTE
----------------------------
$15,000,000.00 Baltimore, Maryland
February __, 1996
THIS CONSOLIDATED, AMENDED AND RESTATED REVOLVING CREDIT MASTER NOTE
(this "Note") is executed this __day of February, 1996, by GRC INTERNATIONAL,
INC., a Delaware corporation (hereinafter referred to as the "Maker"), in favor
of MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, a Maryland banking institution
(hereinafter, the "Bank," or, together with all subsequent holders of this Note,
the "Payee").
RECITALS
--------
1. The Maker, together with SWL Inc. ("SWL"), General Research
Corporation ("GRC"), Moseley Associates, Inc. and Semifab, Inc., executed in
favor of the Bank a Revolving Credit Master Note (the "Original Note") dated
August 9, 1990 in the principal face amount of $10,000,000.
2. The Maker, together with SWL and GRC, executed in favor of the
Bank an Amended and Restated Revolving Credit Master Note (the "Primary Note")
dated May 28, 1992 in the principal face amount of $10,000,000, amending and
restating the terms of the Original Note.
3. The Maker executed in favor of the Bank a Revolving Credit Note
(Commercial)(the "Supplemental Note") dated December 8, 1995 in the principal
face amount of $5,000,000.
4. The Maker has requested and the Bank has agreed, to consolidate
the Primary Note and the Supplemental Note and to modify, amend and restate the
provisions thereof, so that the same shall constitute a single indebtedness
payable in accordance with the terms set forth below.
WITNESSETH
----------
NOW THEREFORE, in consideration of the foregoing and of the promises
contained herein, the Maker agrees as follows:
A. The indebtedness evidenced by the Primary Note and the
Supplemental Note are hereby combined and consolidated, so that together they
shall constitute a single indebtedness.
B. The Primary Note and the Supplemental Note, as hereby consolidated,
are hereby amended and restated in their entirety (hereinafter referred to
collectively as the "Note"), as follows:
* * * * *
FOR VALUE RECEIVED, GRC INTERNATIONAL, INC., a Delaware corporation
(hereinafter referred to as the "Maker"), promises to pay the order of
MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, a Maryland banking institution
(hereinafter, the "Bank," or, together with all subsequent holders of this Note,
the "Payee"), the principal sum of Fifteen Million and no/100ths Dollars
($15,000,000.00) or such lesser aggregate amount as may be advanced by the Payee
from time to time pursuant to Section 1.3 of the "Loan Agreement" (hereinafter
defined), adjusted (both upwards and downwards) on the date of any change in the
Prime Rate. Interest on the outstanding principal balance hereof shall be
payable monthly in arrears on the first day of each calendar month, commencing
on March 1, 1996, and the entire, then outstanding principal balance hereof,
together with the accrued and unpaid interest hereon, shall be due and payable
on January 15, 1998, except that such due date shall be automatically extended
for one or more successive, one-year renewal terms unless the Bank, at its sole
option, delivers written notice of non-renewal to the Maker at least fifteen
(15) calendar months prior to the end of the initial period or any renewal
period.
If any payment required to be made hereunder is not received within
fifteen (15) calendar days after the date that the same becomes due and payable,
the Maker shall pay a late payment charge equal to five percent (5%) of the
amount of such payment then due. The Maker shall also pay, promptly upon
demand, all costs of collection, including reasonable attorneys' fees if this
Note is referred to an attorney for collection after default, whether or not any
action shall be instituted to enforce or collect this Note. Time is of the
essence hereof for all purposes.
The "Prime Rate" is a fluctuating interest rate set by the Bank from
time to time as an interest rate base for borrowings. The Prime Rate is one of
several interest rate bases used by the Bank; and the Bank lends at rates above
and below the Prime Rate. The Maker will be afforded the same interest rate
base as the Bank's other commercial borrowers who are tied to the Prime Rate.
On the date hereof the Prime Rate is eight and one-quarter percent (8 1/4%) per
annum.
All payments on this Note shall be applied first to the payment of
accrued but unpaid interest, and any remainder shall be applied to reduction of
the principal balance hereof. The rate of interest hereon shall be calculated
on the basis of a 360-day year factor applied to actual days elapsed. All
payments hereunder shall be
-2-
payable in lawful money of the United States of America and shall be made to the
Payee in immediately available funds at Two Hopkins Plaza, Suite 200, Baltimore,
Maryland 21201, or at such other address as the Payee may from time to time
designate in writing to the Maker.
All advances by the Payee under this Note shall be made upon the
following terms and conditions: (a) the aggregate principal amount of all
advances shall not exceed $15,000,000; (b) each advance shall be made in the
manner provided for in Section 1.3 of the Loan Agreement; and (c) the Payee
shall make a notation on its internal loan accounting system, with appropriate
reference to the customer number assigned by the Bank to this Note, reflecting
the date and amount of each advance; provided, however, that the Payee's failure
to make appropriate notation of any advance or prepayment shall not limit or
otherwise affect the obligations of the Maker hereunder.
The Maker shall have the right and privilege to prepay this Note, in
whole or in part, at any time. Such prepayments shall be made automatically by
the Bank, in the manner provided for in Section 1.3 of the Loan Agreement from
any available funds of the Maker deposited with the Payee. The date and amount
of all payments (including prepayments) shall be noted by the Payee on its
internal loan accounting system, with reference to the appropriate customer
number, and no prepayment shall be subject to any premium or penalty for
prepayment.
The Maker waives presentment and demand for payment, notice of intent to
accelerate maturity, notice of nonpayment, bringing of suit and diligence in
taking any action to collect any sums owing hereunder or in proceeding against
any of the rights and properties securing payment hereof. From time to time,
without affecting the obligation of the Maker to pay the outstanding principal
balance of this Note and to observe the covenants of the Maker contained herein,
without giving notice to or obtaining the consent of the Maker, and without
liability on the part of the Payee, the Payee may, at the option of the Payee,
extend the time for payment of interest hereon and/or principal hereof, reduce
the payments hereunder, release anyone liable on this Note, accept a renewal of
this Note, join in any extension or subordination or exercise any option or
election hereunder, reduce the rate of interest on this Note or exercise any
option or election hereunder. No one or more of such actions shall constitute a
novation.
This Note is a consolidation, amendment and restatement of the PRimary
Note and the Supplemental Note and is not intended as a novation of any
promissory note(s) previously executed by the Maker in favor of the Bank.
If default be made in the payment in whole or in part of any sum
provided for herein, or if an event of default shall occur under any instrument
or document executed as security for, as evidence of, or otherwise in connection
with this Note or the indebtedness evidenced hereto or under the Amended and
Restated Revolving
-3-
waiver of the right to exercise any of the foregoing options at that time or at
any subsequent time, or nullify any prior exercise of any such option without
the express written consent of the Payee.
This Note is secured, inter alia, by a Security Agreement dated as of
----- ----
July ____, 1990 executed by each Maker (other than GRC International, Inc.)
covering such Maker's accounts, instruments, chattel paper, inventory, goods,
equipment, fixtures, machinery, deposit balances, contract rights, general
intangibles and other tangible and intangible personal property, as well as a
Pledge and Security Agreement dated as of July ____, 1990 executed by GRC
International, Inc. for the benefit of the Payee, covering the stock owned by
GRC International, Inc., in each of the other Makers, all as more particularly
described therein.
This Note shall be governed by and construed according to the laws of
the State of Maryland, without regard to principles of conflict of laws.
Any attorney at law may appear in any court of record in the State of
Maryland or in the United States, after demand on this Note following an event
of default under any Loan Document, and waive the issuing of service of process
and confess a judgment against the Makers in favor of the Payee for the amount
then appearing due hereunder, together with interest, costs of suit and
attorneys' fees, and thereupon release all errors and waive all right of appeal.
It is expressly stipulated and agreed that the loan evidenced by this
Note is a "commercial loan" as defined in the Commercial Law Article of the
Annotated Code of Maryland.
In any case where the date of maturity of interest on, or principal of,
this Note shall be a Sunday or legal holiday, or a day on which banking
institutions in the city of payment are authorized by law or executive order to
close (any other day being herein referred to as a "Banking Day"), then payment
of interest or principal need not be made on such date, but may be made on the
next succeeding Banking Day; provided, however, that interest shall continue to
accrue through the actual date of payment.
Each and every representation, warranty, covenant (affirmative, negative
or otherwise), agreement, undertaking, obligation, restriction, limitation,
waiver and other provision made or incurred by or imposed on the Makers
pursuant to this Note shall be deemed to be the joint and several
representation, warranty, covenant, undertaking, obligation, restriction,
limitation, waiver or agreement of each Maker.
-4-
an original party to such agreements, and have further agreed that such Security
Agreements shall be amended to include within the term "Obligations" therein the
Maker's obligations under this Note.
This Note shall be governed by and construed according to the laws of the
State of Maryland, without regard to principles of conflict of laws.
Any attorney at law may appear in any court of record in the State of
Maryland or in the United States, after demand on this Note following an event
of default under any Loan Document, and waive the issuing of service of process
and confess a judgment against the Maker in favor of the Payee for the amount
then appearing due hereunder, together with interest, costs of suit and
attorneys' fees, and thereupon release all errors and waive the right of appeal.
It is expressly stipulated and agreed that the loan evidenced by this Note
is a "commercial loan" as defined in the Commercial Law Article of the Annotated
Code of Maryland.
In any case where the date of maturity of interest on, or principal of,
this Note shall be a Sunday or legal holiday, or a day on which banking
institutions in the city of payment are authorized by law or executive order to
close (any other day being herein referred to as a "Banking Day"), then payment
of interest or principal need not be made on such date, but may be made on the
next succeeding Banking Day; provided, however, that interest shall continue to
accrue through the actual date of payment.
Executed under seal and intending this Note to be a sealed instrument, as
of the date and year first above written.
ATTEST or WITNESS GRC INTERNATIONAL, INC.
- -------------------------- By: (SEAL)
-------------------------
Name:
--------------------------
Title:
-------------------------
-5-
Exhibit C
---------
BORROWING BASE CERTIFICATE
--------------------------
NUMBER: DATE:
--- -------------
Pursuant to the Amended and Restated Revolving Credit Agreement
("Agreement") between the undersigned and Mercantile-Safe Deposit and Trust
Company (the "Bank"), the undersigned hereby certify as of the above date, as
follows:
($000)
1. Maximum Borrowing Base Available At $
----- -------------
2. Total Principal Loan Balance
Outstanding At $
----- -------------
3. Excess Available Under the Line of
Credit (line 1 less Line 2)(A) At $
----- -------------
4. If Line 2 is greater than Line 1,
the Balance to be repaid By $
----- -------------
The borrowing base available was determined as follows:
Potential
Base Borrowing
Percentage Amount Amount
---------- ------ ---------
i. "Eligible Accounts"
(as defined in Section 2.1 of
the Agreement) 80% $ $
------ ---------
ii. "Unbilled Receivables" (as defined
in Section 2.1) 50% $ $ (B)
------ ---------
Maximum Borrowing as of
$
------------------- =========
(A) Maximum of $15,000
(B) Subject to a maximum of $2,500
FIRST CONFIRMATION AND AMENDMENT
--------------------------------
THIS FIRST CONFIRMATION AND AMENDMENT (this "Amendment") is executed
as of this ____ day of May, 1996 and is effective as of March 31, 1996, by and
among GRC INTERNATIONAL, INC., a Delaware corporation (the "Borrower"), SWL
INC., a Virginia corporation ("SWL"), GENERAL RESEARCH CORPORATION, a Virginia
corporation ("GRC"), and MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, a Maryland
banking institution (the "Bank").
RECITALS
--------
WHEREAS, pursuant to that certain Amended and Restated Revolving
Credit and Term Loan Agreement (the "Loan Agreement") dated as of the 12th day
of February, 1996, by and among the Bank, the Borrower, SWL and GRC, the Bank
established (i) a $15,000,000 revolving credit facility (the "Revolving Credit
Loan") in favor of the Borrower for general working capital purposes and other
valid business purposes and (ii) a $5,000,000 facility (the "Acquisition
Facility") for the stated purpose of providing bridge and/or term financing to
fund acquisitions by the Borrower from time to time, on the condition that
advances under such facility would be at the Bank's sole discretion; and
WHEREAS, the parties desire with this Amendment (i) to amend the Loan
Agreement, among other things, to amend certain of the financial covenants of
the Borrower established thereunder and (ii) to provide that advances under the
Acquisition Facility may also be used for working capital and other valid
business purposes, all as more particularly set forth herein; and
WHEREAS, all capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Loan Agreement.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby confirm and agree as follows:
1. The Borrower, SWL and GRC hereby confirm their obligations under, and
unconditionally and irrevocably covenant and agree to be bound by all of the
terms, provisions, covenants and conditions contained in the Loan Agreement, as
the same shall be amended hereby.
2. The Loan Agreement shall be amended as follows:
(a) The first sentence of Section 1.1(b) shall be amended and
restated in its entirety, to read as follows:
"The parties anticipate that from time to time hereafter, the Borrower may
make requests for proposals from the Bank regarding additional bridge
and/or term loans under the Acquisition Facility for (i) the purpose of
financing future acquisitions by the Borrower or any of its Subsidiaries or
(ii) for working capital or other corporate purposes."
(b) Section 4.15 shall be amended and restated in its
entirety, to read as follows:
"4.15. Financial Condition and Ratios. Commencing with the fiscal year
------------------------------
ending June 30, 1996, the Borrower and the Subsidiaries will at all times
throughout the term of this Agreement satisfy or maintain certain minimum
financial conditions and ratios as follows:
(a) Working Capital. Consolidated working capital, equal to
---------------
consolidated current assets less consolidated current liabilities, of not
less than $15,000,000.
(b) Current Ratio. Consolidated current assets of not less
-------------
than 150% of consolidated current liabilities -- that is, a current ratio of
1.50:1.0.
(c) Consolidated Tangible Net Worth. Consolidated tangible
-------------------------------
assets (excluding patents, copyrights, capitalized research and development
costs, goodwill and other intangible assets) in excess of consolidated
liabilities ("Consolidated Tangible Net Worth") by at least $20,000,000.
(d) Quick Ratio. Consolidated cash, cash equivalents and
-----------
trade receivables of not less than 100% of consolidated current liabilities --
that is, a quick ratio of 1.00:1.0.
(e) Maximum Operating Loss. The Borrower shall not have an
----------------------
operating loss (i) for the fiscal quarter ending December 31, 1995 in excess of
$500,000 and (ii) for each fiscal quarter thereafter in excess of $1,500,000.
For purposes of this Section 4.15(e), the term "operating loss" shall not
include, for a particular fiscal quarter, non-cash charge-offs in an amount up
to but not exceeding $500,000 for such quarter.
(f) Maximum Aggregate Operating Loss. The Borrower shall not
--------------------------------
have an aggregate operating loss for any period of two consecutive fiscal years
in excess of $1,000,000. For purposes of this Section 4.15(f), the term
"operating loss" shall not include, for a particular period of two consecutive
fiscal years, non-cash charge-offs in an amount not to exceed $750,000 for such
period.
-2-
(g) Debt Ratio. Consolidated total liabilities of not more
----------
than 200% of Consolidated Tangible Net Worth -- that is, a debt ratio of
2.00:1.0."
3. All other terms and conditions of the Loan Agreement shall remain
unchanged and shall continue in full force and effect.
4. The Borrower, SWL and GRC (i) will execute and deliver to the Bank such
additional financing statements, amendments to financing statements,
continuation statements and other documents, certificates, instruments and
agreements as the Bank deems necessary or advisable to accomplish or facilitate
the transactions contemplated hereby and will pay all filing, recordation and
registration fees and taxes incurred in connection therewith and (ii) will pay
all costs and expenses (including reasonable legal expenses) incurred by the
Bank in connection herewith.
-3-
IN WITNESS WHEREOF, the undersigned have executed and delivered this
First Confirmation and Amendment under seal as of the day and year first above
written.
ATTEST/WITNESS: GRC INTERNATIONAL, INC.
/s/ T E McCabe (SEAL) By: /s/ R.B. Alexander (SEAL)
- -------------------------- -----------------------------
Name: Ronald B. Alexander
Title: Senior Vice President-Finance,
Chief Financial Officer &
Treasurer
ATTEST/WITNESS: SWL INC.
/s/ T E McCabe (SEAL) By: /s/ R.B. Alexander (SEAL)
- -------------------------- -----------------------------
Name: Ronald B. Alexander
Title: Senior Vice President-Finance,
Chief Financial Officer &
Treasurer
ATTEST/WITNESS: GENERAL RESEARCH CORPORATION
/s/ T E McCabe (SEAL) By: /s/ R.B. Alexander (SEAL)
- -------------------------- -----------------------------
Name: Ronald B. Alexander
Title: Senior Vice President-Finance,
Chief Financial Officer &
Treasurer
ATTEST/WITNESS: MERCANTILE-SAFE DEPOSIT AND
TRUST COMPANY
[SIGNATURE APPEARS HERE] By: /s/ Philip G. Enstice (SEAL)
- -------------------------- -----------------------------
Name: Philip G. Enstice
Title: Senior Vice President
-4-
SECOND CONFIRMATION AND AMENDMENT
---------------------------------
THIS SECOND CONFIRMATION AND AMENDMENT (this "Amendment") is dated this
18 day of July, 1996 and effective as of June 30, 1996, by and among GRC
- --
INTERNATIONAL, INC., a Delaware corporation (the "Borrower"), SWL INC., a
Virginia corporation ("SWL"), GENERAL RESEARCH CORPORATION, a Virginia
corporation ("GRC"), and MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, a Maryland
banking institution (the "Bank").
RECITALS
--------
WHEREAS, pursuant to that certain Amended and Restated Revolving
Credit and Term Loan Agreement dated as of the 12th day of February, 1996, by
and among the Bank, the Borrower, SWL and GRC, the Bank established (i) a
$15,000,000 revolving credit facility (the "Revolving Credit Loan") in favor of
the Borrower for general working capital purposes and other valid business
purposes and (ii) a $5,000,000 facility (the "Acquisition Facility") for the
stated purpose of providing bridge and/or term financing to fund acquisitions by
the Borrower from time to time, on the condition that advances under such
facility would be at the Bank's sole discretion; and
WHEREAS, pursuant to that certain First Confirmation and Amendment (the
"First Amendment") effective as of March 31, 1996, the parties amended the
above-referenced Loan Agreement for the purpose, among other things, (i) of
amending certain of the financial covenants of the Borrower established
thereunder and (ii) of providing that advances under the Acquisition Facility
may also be used for working capital and other valid business purposes, all as
more particularly set forth herein (such Loan Agreement, as amended by the First
Amendment, the "Loan Agreement"); and
WHEREAS, the parties desire with this Amendment, among other things,
(i) to amend the Loan Agreement to increase the Revolving Credit Loan from
$15,000,000 to $22,000,000 and (ii) to provide explicitly that the amount of the
annual "Facility Fee" payable pursuant to Section 1.7 shall be at least $25,000;
and
WHEREAS, all capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Loan Agreement.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby confirm and agree as follows:
1. The Borrower, SWL and GRC hereby confirm their obligations under, and
unconditionally and irrevocably covenant and agree to be bound by all of the
terms,
provisions, covenants and conditions contained in the Loan Agreement, as
the same shall be amended hereby.
2. The Loan Agreement shall be amended as follows:
(a) Section 1.3 shall be amended to change the reference in the third
line thereof from "$15,000,000" to "$22,000,000."
(b) Section 1.7 shall be amended in its entirety to read as follows:
"1.7. Unused Facility Fee. The Borrower shall pay the Bank a
-------------------
facility fee (the "Facility Fee"), payable quarterly in arrears, equal to
1/8 of 1% of the difference between (i) the average daily amount
outstanding of the Revolving Credit Loan during the quarter for which such
payment is made and (ii) $22,000,000; provided that the total annual
Facility Fee shall be at least $25,000 and any shortfall shall be payable
with respect to the final calendar quarter of each year."
(c) The definition of the term "Revolving Credit Note" in Section 2.1
shall be amended in its entirety to read as follows:
""Revolving Credit Note" shall mean the Amended and Restated Revolving
---------------------
Credit Master Note executed and delivered to the Bank on July 18, 1996."
--
3. The "Security Documents," as that term is defined in Section 2.1 of
the Loan Agreement, shall be amended (i) to include within the term
"Obligations" used therein the Revolving Credit Loan, as amended hereby, and
(ii) to change the definition of the term "Loan Agreement," as used therein, to
refer to that certain Amended and Restated Revolving Credit and Term Loan
Agreement dated as of the 12th day of February, 1996, by and among the Bank, the
Borrower, SWL and GRC, as amended by that certain First Confirmation and
Amendment among the parties, effective as of March 31, 1996, and as further
amended hereby.
4. All other terms and conditions of the Loan Agreement shall remain
unchanged and shall continue in full force and effect.
5. The obligation of the Bank to make any further advance under the
Revolving Credit Loan is subject to the following conditions precedent:
(a) Revolving Credit Note. The Bank shall have received the
---------------------
"Revolving Credit Note" (as defined in the Loan Agreement, as amended hereby),
duly executed by the Borrower.
-2-
(b) Opinion of Borrower's Counsel. The Bank shall have received a
-----------------------------
favorable written opinion of the in-house counsel to the Borrower, dated as of
the date hereof, as to such matters as the Bank may reasonably request.
(c) Evidence of Authorization. The Bank shall have received copies
-------------------------
of all corporate action taken by the Borrower to authorize this Amendment, the
Revolving Credit Note and the borrowings thereunder, certified as of the date
hereof and including a certification as to any applicable powers of attorney and
as to the incumbency and signature(s) of the individuals authorized to execute
and deliver or furnish such documents and all related materials and information.
(d) Security Documents. The Borrower shall have executed and
------------------
delivered to the Bank for filing all necessary and advisable Uniform Commercial
Code ("UCC") financing statements, amendments and other appropriate filings, in
all appropriate recording offices, and shall have obtained such releases,
waivers and subordination agreements as the Bank may reasonably require, all in
order to transfer and assign to the Bank, and to perfect (including in cases in
which the such perfection may have lapsed) the Bank's first priority lien on and
security interest in the "Collateral" (as defined in the Security Documents),
and shall have paid all applicable filing and recording fees and taxes with
respect thereto.
(e) Other Documents. The Bank shall have received such other
---------------
documents, certificates and opinions, and evidence of such other matters, as it
may reasonably require.
6. The Borrower, SWL and GRC (i) will execute and deliver to the Bank
such additional financing statements, amendments to financing statements,
continuation statements and other documents, certificates, instruments and
agreements as the Bank deems necessary or advisable to accomplish or facilitate
the transactions contemplated hereby and will pay all filing, recordation and
registration fees and taxes incurred in connection therewith and (ii) will pay
all costs and expenses (including reasonable legal expenses) incurred by the
Bank in connection herewith.
-3-
IN WITNESS WHEREOF, the undersigned have executed and delivered
this First Confirmation and Amendment under seal as of the day and year first
above written.
ATTEST/WITNESS: GRC INTERNATIONAL, INC.
/s/ T E McCabe (SEAL) By:/s/ R. B. Alexander (SEAL)
- ----------------------------- ----------------------------
Name: Ronald B. Alexander
Title: SR VP CFO
ATTEST/WITNESS: SWL INC.
/s/ T E McCabe (SEAL) By:/s/ R. B. Alexander (SEAL)
- ----------------------------- ----------------------------
Name: Ronald B. Alexander
Title: SR VP CFO
ATTEST/WITNESS: GENERAL RESEARCH CORPORATION
/s/ T E McCabe (SEAL) By:/s/ R. B. Alexander (SEAL)
- ----------------------------- ----------------------------
Name: Ronald B. Alexander
Title: SR VP CFO
ATTEST/WITNESS: MERCANTILE-SAFE DEPOSIT AND
TRUST COMPANY
/s/ Joseph C. Schmidt By:/s/ Philip G. Enstice (SEAL)
- ----------------------------- ----------------------------
Name: Philip G. Enstice
Title: SR VP
-4-
THIRD CONFIRMATION AND AMENDMENT
--------------------------------
THIS THIRD CONFIRMATION AND AMENDMENT (this "Amendment") is dated this 24th
day of September, 1996 and effective as of June 30, 1996, by and among GRC
INTERNATIONAL, INC., a Delaware corporation (the "Borrower"), SWL INC., a
Virginia corporation ("SWL"), GENERAL RESEARCH CORPORATION, a Virginia
corporation ("GRC"), and MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, a Maryland
banking institution (the "Bank").
RECITALS
--------
WHEREAS, pursuant to that certain Amended and Restated Revolving Credit and
Term Loan Agreement dated as of the 12th day of February, 1996, by and among the
Bank, the Borrower, SWL and GRC, the Bank established (i) a $15,000,000
revolving credit facility (the "Revolving Credit Loan") in favor of the Borrower
for general working capital purposes and other valid business purposes and (ii)
a $5,000,000 facility (the "Acquisition Facility") for the stated purpose of
providing bridge and/or term financing to fund acquisitions by the Borrower from
time to time, on the condition that advances under such facility would be at the
Bank's sole discretion; and
WHEREAS, pursuant to that certain First Confirmation and Amendment (the
"First Amendment") effective as of March 31, 1996, the parties amended the
above-referenced Loan Agreement for the purpose, among other things, (i) of
amending certain of the financial covenants of the Borrower established
thereunder and (ii) of providing that advances under the Acquisition Facility
may also be used for working capital and other valid business purposes, all as
more particularly set forth therein; and
WHEREAS, pursuant to that certain Second Confirmation and Amendment (the
"Second Amendment") effective as of June 30, 1996, the parties amended the
above-referenced Loan Agreement for the purpose, among other things, (i) of
increasing the Revolving Credit Loan from $15,000,000 to $22,000,000 and (ii) of
providing explicitly that the amount of the annual "Facility Fee" payable
pursuant to Section 1.7 thereof shall be at least $25,000 (such Loan Agreement,
as amended by the First Amendment and the Second Amendment, the "Loan
Agreement"); and
WHEREAS, the parties desire with this Amendment, among other things, to
amend the Loan Agreement (i) to extend the maturity of the Term Loan referenced
in Section 1.1(a) thereof (the maturity of such Term Loan, together with the
maturity of other term loans of the Borrower, to be extended pursuant to
allonges separate from this Amendment) and (ii) to amend certain financial
covenants of the Borrower established thereunder; and
WHEREAS, all capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Loan Agreement.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby confirm and agree as follows:
1. The Borrower, SWL and GRC hereby confirm their obligations under, and
unconditionally and irrevocably covenant and agree to be bound by all of the
terms, provisions, covenants and conditions contained in the Loan Agreement, as
the same shall be amended hereby.
2. The Loan Agreement shall be amended as follows:
(a) Section 1.1(a) shall be amended to change the reference to
"September 1, 1997" in the last line thereof to "September 1, 1998."
(b) Section 4.15 shall be amended and restated in its entirety, to
read as follows:
4.15. Financial Condition and Ratios. Commencing with the
------------------------------
fiscal year ended June 30, 1996 (except as otherwise set forth in this
Section 4.15), the Borrower and the Subsidiaries will at all times
throughout the term of this Agreement satisfy or maintain certain minimum
financial conditions and ratios as follows:
(a) Working Capital. Consolidated working capital, equal
---------------
to consolidated current assets less consolidated current liabilities, of
(i) not less than $8,000,000 for the fiscal quarters ended June 30, 1996
and September 30, 1996 and (ii) not less than $15,000,000 thereafter.
(b) Current Ratio. (i) Consolidated current assets for the
-------------
fiscal quarters ended June 30, 1996 and September 30, 1996 of not less than
130% of consolidated current liabilities -- that is, a current ratio of
1.30:1.0, and (ii) consolidated current assets thereafter of not less than
150% of consolidated current liabilities -- that is, a current ratio of
1.50:1.0.
(c) Consolidated Tangible Net Worth. Consolidated tangible
-------------------------------
assets (excluding patents, copyrights, capitalized research and development
costs, goodwill and other intangible assets) in excess of consolidated
liabilities ("Consolidated Tangible Net Worth") by at least (i) $7,000,000
for
-2-
the fiscal quarters ended June 30, 1996, September 30, 1996, December
31, 1996 and March 31, 1997 and (ii) $8,000,000 thereafter.
(d) Quick Ratio. Consolidated cash, cash equivalents and trade
-----------
receivables of not less than 100% of consolidated current liabilities --
that is, a quick ratio of 1.00:1.0.
(e) Maximum Operating Loss. Commencing with the fiscal quarter
----------------------
ended June 30, 1997, the Borrower shall not have an operating loss in
excess of $500,000. For purposes of this Section 4.15(e), the term
"operating loss" shall not include, for a particular fiscal quarter, non-
cash charge-offs in an amount up to but not exceeding $500,000 for such
quarter.
(f) [Intentionally deleted]
(g) Debt Ratio. Consolidated total liabilities of not more than
----------
1000% of Consolidated Tangible Net Worth -- that is, a debt ratio of
10.00:1.0."
3. All other terms and conditions of the Loan Agreement shall remain
unchanged and shall continue in full force and effect.
4. The Borrower, SWL and GRC (i) will execute and deliver to the Bank
such additional financing statements, amendments to financing statements,
continuation statements and other documents, certificates, instruments and
agreements as the Bank deems necessary or advisable to accomplish or facilitate
the transactions contemplated hereby and will pay all filing, recordation and
registration fees and taxes incurred in connection therewith and (ii) will pay
all costs and expenses (including reasonable legal expenses) incurred by the
Bank in connection herewith.
-3-
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Third Confirmation and Amendment under seal as of the day and year first above
written.
ATTEST/WITNESS: GRC INTERNATIONAL, INC.
/s/ T. E. McCabe (SEAL) By: [SIGNATURE APPEARS HERE] (SEAL)
- -------------------- ---------------------------
Name:
Title:
ATTEST/WITNESS: SWL INC.
/s/ T. E. McCabe (SEAL) By: [SIGNATURE APPEARS HERE] (SEAL)
- -------------------- ---------------------------
Name:
Title:
ATTEST/WITNESS: GENERAL RESEARCH CORPORATION
/s/ T. E. McCabe (SEAL) By: [SIGNATURE APPEARS HERE] (SEAL)
- -------------------- ---------------------------
Name:
Title:
ATTEST/WITNESS: MERCANTILE-SAFE DEPOSIT AND
TRUST COMPANY
[SIGNATURE APPEARS HERE] By: /s/ Nicholas C. Richardson (SEAL)
- ------------------------- ---------------------------
Name: Nicholas C. Richardson
Title: Asst. Vice President
-4-
ALLONGE
TO
TERM LOAN NOTE OF
GRC INTERNATIONAL, INC.
TO
MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY
IN THE PRINCIPAL AMOUNT OF
TWO MILLION TWO HUNDRED THOUSAND DOLLARS ($2,200,000)
DATED FEBRUARY 12, 1996
WITNESSETH:
By consent of the Maker, as evidenced by its execution of this Allonge, the
Term Loan Note identified in the caption above (the "Term Note") is hereby
amended as follows (unless otherwise defined or the context otherwise requires,
the defined terms used herein shall have the same meanings assigned to them in
the Term Note):
1. The references to "September 1, 1997" in each of the eleventh and last lines
of the first paragraph of the Term Note shall be changed to "September 1, 1998."
2. All other terms and conditions of the Term Note shall remain the same. This
Allonge shall not be deemed a novation nor shall it limit, reduce or otherwise
affect the Maker's obligations set forth in the Term Note. This Allonge is made
in addition to, and not in substitution of, the Maker's original obligations as
described in the Term Note. This Allonge shall be affixed to the original Term
Note and shall be considered to be a part thereof.
This Allonge, executed under seal in Baltimore, Maryland and intended to be
a sealed instrument, is dated September 24, 1996 and is effective as of June
30, 1996.
ATTEST/WITNESS: GRC INTERNATIONAL, INC.
[SIGNATURE APPEARS HERE] By:[SIGNATURE APPEARS HERE]
- ------------------------ -----------------------
Name:
Title:
ALLONGE
TO
TERM LOAN NOTE OF
GRC INTERNATIONAL, INC.
TO
MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY
IN THE PRINCIPAL AMOUNT OF
FOUR HUNDRED THOUSAND DOLLARS ($400,000)
DATED MARCH 8, 1996
WITNESSETH:
By consent of the Maker, as evidenced by its execution of this Allonge, the
Term Loan Note identified in the caption above (the "Term Note") is hereby
amended as follows (unless otherwise defined or the context otherwise requires,
the defined terms used herein shall have the same meanings assigned to them in
the Term Note):
1. The references to "September 1, 1997" in each of the eleventh and last lines
of the first paragraph of the Term Note shall be changed to "September 1, 1998."
2. All other terms and conditions of the Term Note shall remain the same. This
Allonge shall not be deemed a novation nor shall it limit, reduce or otherwise
affect the Maker's obligations set forth in the Term Note. This Allonge is made
in addition to, and not in substitution of, the Maker's original obligations as
described in the Term Note. This Allonge shall be affixed to the original Term
Note and shall be considered to be a part thereof.
This Allonge, executed under seal in Baltimore, Maryland and intended to be
a sealed instrument, is dated September 24, 1996 and is effective as of
June 30, 1996.
ATTEST/WITNESS: GRC INTERNATIONAL, INC.
/s/ T.E. McCabe By: /s/ Ronald B. Alexander
- ------------------------ -------------------------
Name:
Title:
ALLONGE
TO
SECURED NOTE (COMMERCIAL) OF
GRC INTERNATIONAL, INC.
TO
MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY
IN THE PRINCIPAL AMOUNT OF
TWO MILLION SIX HUNDRED THOUSAND DOLLARS ($2,600,000)
DATED JUNE 7, 1996
WITNESSETH:
By consent of the Maker, as evidenced by its execution of this Allonge, the
Secured Note (Commercial) identified in the caption above (the "Secured Note")
is hereby amended as follows (unless otherwise defined or the context otherwise
requires, the defined terms used herein shall have the same meanings assigned to
them in the Secured Note):
1. The reference to "September 1, 1997" in the first sentence of the Secured
Note shall be changed to "September 1, 1998."
2. All other terms and conditions of the Secured Note shall remain the same.
This Allonge shall not be deemed a novation nor shall it limit, reduce or
otherwise affect the Maker's obligations set forth in the Secured Note. This
Allonge is made in addition to, and not in substitution of, the Maker's original
obligations as described in the Secured Note. This Allonge shall be affixed to
the original Secured Note and shall be considered to be a part thereof.
This Allonge, executed under seal in Baltimore, Maryland and intended to be
a sealed instrument, is dated September 24, 1996 and is effective as of June
30, 1996.
ATTEST/WITNESS: GRC INTERNATIONAL, INC.
/s/ T.E. McCabe By: /s/ Ronald B. Alexander
- ------------------------ -------------------------
Name:
Title: