AMENDED AND RESTATED REVOLVING LINE OF CREDIT LOAN AND SECURITY AGREEMENT

Exhibit 10.1

 

AMENDED AND RESTATED REVOLVING LINE OF CREDIT LOAN AND SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED REVOLVING LINE OF CREDIT LOAN AND SECURITY AGREEMENT (“ Agreement ”) is made as of June 30, 2005, by and among (a) ESSEX CORPORATION (“ Essex ”), a Virginia corporation, (b) COMPUTER SCIENCE INNOVATIONS, INC., a Florida corporation, (“CSI”) (c) The Windermere Group, LLC, Windermere Information Technology Systems, LLC, and Windermere HDS, LLC (collectively, the “ Original Borrowers ”) (Essex, CSI and the Original Borrowers being hereinafter called collectively, the “ Borrowers ”), and (c) Bank of America, N.A., a national banking association (the “ Lender ”).

 

RECITALS

 

A. Pursuant to a Revolving Line of Credit Loan Agreement, Overline Loan Agreement and Security Agreement dated as of July 22, 2002 by and among the Original Borrowers and the Lender (the “ Original Loan Agreement ”), the Lender agreed to make available to the Original Borrowers a revolving loan facility in the original maximum principal amount of $8,000,000 at any one time outstanding (as increased or decreased, the “ Revolving Loan ”) and an overline facility in the original maximum amount of $2,000,000 (the “ Overline Facility ”).

 

B. Pursuant to a First Amendment to Revolving Line of Credit Loan Agreement, Overline Loan Agreement and Security Agreement dated as of November 15, 2004, the parties agreed, among other things, to extend the Overline Facility. Pursuant to a Second Amendment to Revolving Line of Credit Loan Agreement, Overline Loan Agreement and Security Agreement dated as of December 22, 2004, the parties agreed, among other things, (a) to increase the maximum principal amount of the Revolving Loan to $10,000,000, and (b) to eliminate the Overline Facility. Pursuant to a Third Amendment to Revolving Line of Credit Loan Agreement, Overline Loan Agreement and Security Agreement, the parties agreed, among other things, to amend certain covenants in the Original Loan Agreement. Pursuant to a Fourth Amendment to Revolving Line of Credit Loan Agreement, Overline Loan Agreement and Security Agreement dated as of February 28, 2005, the parties agreed, among other things, (a) to waive a certain violation of a financial covenant, (b) to extend the maturity of the Revolving Loan, and (c) to amend certain other terms and conditions of the Loan Agreement. Pursuant to a Fifth Amendment to Revolving Line of Credit Loan Agreement, Overline Loan Agreement and Security Agreement, the parties agreed, among other things, to extend the Revolving Loan.

 

C. Essex and the Original Borrowers have now requested (a) that the Lender permit Essex and CSI to become Borrowers, jointly and severally liable with the Original Borrowers, (b) that the Lender agree to increase the maximum principal amount of the Revolving Loan to $20,000,000, (c) that the Lender agree to make

available to the Borrowers an uncommitted guidance line facility pursuant to which the Lender may from time to time make guidance line advances (to increase the Revolving Loan) in an aggregate principal amount not to exceed $20,000,000, and (d) that the Lender agree to amend certain terms and conditions of the Original Loan Agreement. In furtherance thereof, the Lender and the Borrowers have agreed to amend and restate the Original Loan Agreement, as hereinafter set forth.

 

Accordingly, the Original Loan Agreement is hereby amended and restated in its entirety as follows:

 

AGREEMENTS

 

NOW, THEREFORE, in consideration of the premises, the mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers and the Lender hereby agree as follows:

 

ARTICLE 1. DEFINITIONS.

 

1.1 Recitals and Defined Terms . The Recitals set forth above are hereby incorporated herein by reference. Capitalized terms not otherwise defined herein, when used in this Agreement, shall have the following meanings, unless the context otherwise requires:

 

“ Account ” means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provide or to be provided, or (iv) for use or hire of a vessel under a charter or other contract.

 

“ Advance ” means an advance of funds under the Revolving Loan.

 

“ Affiliate ” means, with respect to any specified Person, any other Person which, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such specified Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of a Person, whether through ownership of common stock, by contract, or otherwise.

 

“ Agreement ” means this Amended and Restated Revolving Line of Credit Loan and Security Agreement, as amended, modified or restated from time to time.

 

 

“ Allowed Amount ” shall mean (a) so long as the Borrowers’ consolidated ratio of Total Funded Debt to EBITDA remains below 2.0 to 1.0, the amount of the Maximum Revolving Credit Commitment, and (b) from and after any date upon which the Borrowers’ consolidated ratio of Total Funded Debt to EBITDA is equal to or above 2.0 to 1.0, the lesser of (i) the Maximum Revolving Credit Commitment, or (ii) the then-current Borrowing Base.

 

“ Applicable Margin ” shall mean the margin added to the Libor Rate to obtain the interest rate for the outstanding Advances as set forth in the Table attached hereto as Attachment I . The Applicable Margin during any calendar quarter shall be set based upon the Borrowers’ consolidated ratio of Total Funded Debt to EBITDA as of the last day of the immediately prior calendar quarter. The Applicable Margin shall be determined and adjusted quarterly on the first day of the first month after the date by which the annual and quarterly compliance certificates and related financial statements and information are required in accordance with the provisions of this Agreement. The Applicable Margin as of the date hereof is 125 basis points.

 

“ Assignment ” means a direct assignment of Payments under Government Contracts, pursuant to and in compliance with the Assignment of Claims Act.

 

“ Assignment of Claims Act ” means Title 31, United States Code ' 3727, and Title 41, United States Code ' 15, as revised or amended, and any rules or regulations issued pursuant thereto, and also shall be deemed to include any other laws, rules or regulations governing the assignment of payments under Government Contracts or claims against a Government.

 

“ AutoBorrow Service Agreement” means an AutoBorrow Service Agreement in effect from time to time between the Borrowers and the Lender.

 

“ Billed ” means that a Borrower has submitted an invoice to a Customer requesting payment for goods or services provided by such Borrower.

 

“ Board ” means the Board of Governors of the Federal Reserve System of the United States.

 

“ Borrowers ” means, collectively, Essex, CSI, The Windermere Group, LLC, Windermere Information Technology Systems, LLC, and Windermere HDS, LLC.

 

“ Borrowing Base ” means the sum of:

 

1. Ninety percent (90%) of the Borrowers’ Eligible Government Accounts, plus

 

 

2. Eighty percent (80%) of Borrowers’ Eligible Commercial Accounts; plus

 

3. Fifty Percent (50%) of Borrowers’ Unbilled Eligible Accounts; provided however, that total outstanding Advances on Unbilled Eligible Accounts shall not at any time exceed the sum of Three Million and 00/100 Dollars ($3,000,000.00).

 

After calculating the portion of the Borrowing Base comprised of Eligible Government Accounts, Eligible Commercial Accounts and Unbilled Eligible Accounts, Lender may, after providing thirty (30) days advance written notice to Borrowers, deduct from such portion of the Borrowing Base such reserves as Lender may establish from time to time in its reasonable credit judgment, including without limitation, reserves for dilution, rent at leased locations subject to statutory or contractual landlord’s liens, inventory shrinkage, customs charges, warehousemen’s or bailees’ charges, and the amount of estimated maximum exposure, as determined by Lender from time to time, under any interest rate contracts which any Borrower enters into with Lender (including interest rate swaps, caps, floors, options thereon, combinations thereof, or similar contracts).

 

In addition, Lender may require modifications to the percentage rates of advance set forth above, based on the results of any field examination or audit of Borrowers, as determined in Lender’s sole and absolute discretion.

 

In the absence of manifest error, Lender’s determination of the amount of the Borrowing Base shall be conclusive.

 

“ Borrowing Base Certificate ” means a certificate substantially in the form of Schedule 1.1(A) attached hereto and made a part hereof (or such subsequent form as the Lender shall require).

 

“ Borrowing Date ” means the date on which an Advance is made.

 

“ Business Day ” means any day that is not a Saturday, Sunday or banking holiday in the Commonwealth of Virginia.

 

“ Capital Lease ” means any lease which has been or should be capitalized on the books of the lessee in accordance with GAAP.

 

“ Cash Collateral Account ” means an account to be established by Lender in Borrowers’ name, with the Lender, for the purpose of receiving Payments, which shall constitute part of the Collateral unless and until disbursed to the Borrowers or applied for the Borrowers’ account in accordance with this Agreement.

 

 

“ Cash Flow” is defined, for any period, as the remainder of (a) EBITDA for such period, (b) minus dividends, withdrawals, and other distributions during such period.

 

“ Chattel Paper ” shall have the meaning given to such term in the UCC.

 

“ Closing Date ” means the date on which all conditions to closing as set forth in the Agreement have been met.

 

“ Code ” means the Internal Revenue Code of the United States, as amended.

 

“ Collateral ” means all of the present and future assets of any or all of the Borrowers, other than Patents, whether now owned or hereafter acquired by any or all of the Borrowers, including, without limitation:

 

 

 

 

“ Commercial Accounts ” means all Accounts due from Customers other than the Government.

 

“ Commodity Accounts ” shall have the meaning given to such term in the UCC.

 

“ Commodity Contracts ” shall have the meaning given to such term in the UCC.

 

“ Compliance Certificate ” means a certificate substantially in the form of Schedule 1.1(B) attached hereto and made a part hereof

 

“ Contra Account ” means an Account due from a Customer to which a Borrower owes money.

 

“ Credit Facilities ” shall mean the Revolving Loan and the Guidance Line Facility, and any other credit facilities established subsequently hereto.

 

“ Customer ” means any governmental entity (federal, state, county, municipal or otherwise) or business entity (corporation, association, partnership, limited liability company or partnership, sole proprietorship or otherwise) or individual to which any Borrower provides goods or services for compensation; however, certain individual agencies of the United States Government and certain branches of certain major corporations, as determined by the Lender in its sole discretion, shall be treated as Customers in their own right, separate and distinct from other such agencies or branches and from the United States Government or the corporation of which they are a part.

 

“ Debt ” means:

 

1.

indebtedness or liability for borrowed money, or for the deferred purchase price of property or services;

 

2.

obligations as a lessee under a Capital Lease;

 

3.

obligations to reimburse the issuer of letters of credit or acceptances;

 

4.

all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person or otherwise to assure a creditor against loss; and

 

 

 

5.

obligations secured by any lien or Encumbrance on property owned by any Borrower.

 

For purposes of clarity, the term “Debt” excludes any current “earn out” payments due in connection with Essex’s acquisition of the Original Borrowers

 

“ Default ” means an occurrence which, with the passage of time or the giving of notice or both, shall would constitute an Event of Default.

 

“ Default Collateral Account ” has the meaning set forth in Section 9.2(k).

 

“ Default Rate ” shall mean a floating and fluctuating per annum rate of interest calculated by adding the sum of three and one half percent (3.5%) to the rate of interest then in effect.

 

“ Deposit Accounts ” shall have the meaning given to such term in the UCC.

 

“ Documents ” shall have the meaning given to such term in the UCC.

 

“ EBITDA ” means (a) net income, after income taxes, (b) less income or plus loss from discontinued operations and extraordinary items (c) plus interest expense on all obligations, (d) plus taxes, (e) plus depreciation, and (f) plus amortization, as calculated at the end of each reporting period for which Lender requires financial statements from Borrowers, using the results of the twelve-month period ending with that reporting period.

 

“ Eligible ” means, when used to describe an Account, that the Account conforms to the following criteria:

 

1. the Account has been Billed;

 

2. in the case of a Commercial Account or Government Account, less than ninety-one (91) days have passed from the original billing date;

 

3. in the case of a non-classified Government Account, the applicable Borrower has (upon demand by the Lender) made an Assignment of all Payments due or to become due under the Government Contract giving rise to the Account (provided, however, that the Borrowers acknowledge and agree that, at its sole option, the Lender may exclude from this requirement, contracts of less than $500,000 in remaining value or contracts of less than six months in

 

 

remaining duration and that such exclusion, if granted, will not release the Borrowers from the requirement to provide such assignments at such time in the future, as the Lender desires);

 

4. the Account arose from a bona fide sale of goods or services to a Customer; the goods or services have been delivered or provided to the Customer, and the applicable Borrower possesses receipts from the Customer acknowledging delivery of the goods, or the applicable Borrower has confirmed from the Customer the performance of the services; and Customer has not returned or rejected the goods or services;

 

5. the Account is based upon an enforceable written order or contract for goods or services;

 

6. the applicable Borrower’s title to the Account is absolute and is not subject to any prior assignment, claim, escrow agreement, lien or security interest, and such Borrower otherwise has the full and unqualified right and power to assign and grant a security interest in the Account to the Lender;

 

7. the amount shown on the books of Borrowers and on any invoice, certificate, schedule or statement delivered to the Lender regarding the amount due on the Account is due and owing to Borrowers;

 

8. the Account is not subject to any claim of reduction, counterclaim, set-off, recoupment or other defense in law or equity, or any claim for credits, allowances or adjustments by the Customer because of returned, inferior or damaged goods, unsatisfactory services or for any other reason;

 

9. the Customer has not notified a Borrower of any dispute concerning any of the goods or services giving rise to the Account, nor made claim that the goods or services fail to conform to the requirements of the Customer’s order or contract, nor notified a Borrower to cure any default under the Customer’s order or contract;

 

10. except for classified Government Contracts, the Account does not arise out of a Customer’s contract or order that by its terms forbids or makes void or unenforceable the applicable Borrower’s assignment of the Account to the Lender;

 

11. the applicable Borrower has not received any note, trade acceptance draft or other instrument tendered in payment of the Account;

 

 

12. No Borrower has received any notice of the death of the Customer or any partner in a Customer that is a partnership; nor has any Borrower received any notice of dissolution, termination of existence, insolvency, business failure, appointment of a receiver for any part of the property of, assignment for the benefit of creditors by, or the filing of a petition in bankruptcy or the commencement of any proceeding under any bankruptcy or insolvency laws by or against the Customer;

 

13. to the best of the Borrowers’ knowledge, the Customer is not incorporated in any jurisdiction outside the United States and is not conducting its business primarily outside the United States;

 

14. No Borrower is indebted in any manner to the Customer;

 

15. no bond has been issued or is contemplated with respect to the goods or services furnished by a Borrower or with respect to the project or contract for which those goods or services were furnished; and

 

16. the Account is not an Ineligible Account.

 

In the event of any dispute, under the foregoing criteria, as to whether an Account is, or has ceased to be, an Eligible Account, the Lender’s decision shall control.

 

“ Encumbrance ” means any mortgage, pledge, deed of trust, assignment, security interest, hypothecation, lien or charge of any kind (including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction).

 

“ Enforcement Costs ” shall mean all reasonable expenses, charges, recordation or other taxes, costs and fees (including reasonable attorneys’ fees and expenses) of any nature whatsoever advanced, paid or incurred by or on behalf of the Lender in connection with (a) the collection or enforcement of this Agreement or any of the other Financing Documents, (b) the creation, perfection, maintenance, preservation, defense, protection, realization upon, disposition, collection, sale or enforcement of all or any part of the Collateral, and (c) the exercise by the Lender of any rights or remedies available to it under the provisions of this Agreement, or any of the other Financing Documents.

 

 

“ Environmental Laws ” mean all laws relating to Hazardous Wastes, Toxic Substances or materials that might be emitted, released or discharged into the environment or other laws or regulations protecting the environment.

 

“ Equipment ” shall mean all of each Borrower’s equipment, as such term is defined by the Uniform Commercial Code, together with all additions, parts, fittings, accessories, special tools, attachments, and accessions now and hereafter affixed thereto and/or used in connection therewith, and all replacements thereof and substitutions therefor.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections.

 

“ ERISA Affiliate ” means an entity, whether or not incorporated, which is under common control with a Borrower or any of its subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes a Borrower or any of its subsidiaries and which is treated as a single employer under Sections 414(b), (c), (m), or (o) of the Code.

 

“ Event of Default ” means any one of the events specified as an Event of Default under Section 9.1 of this Agreement.

 

“ Fixed Charge Coverage Ratio ” means the Borrowers’ consolidated ratio of Cash Flow to Fixed Charges.

 

“ Fixed Charges ” means the sum of the current portion of long-term debt, plus the current portion of Capital Lease obligations, plus interest expense on all obligations, plus any preferred stock dividend payments.

 

“ Fixtures ” shall have the meaning given to such term in the UCC.

 

“ GAAP ” means generally accepted accounting principles in the United States of America.

 

“ General Intangibles ” shall mean all of each Borrower’s general intangibles, as such meaning is defined by the Uniform Commercial Code, together with all of each Borrower’s trademarks, applications for trademarks, service marks, trade names and copyrights, whether registered or unregistered, together with all goodwill of the business of each Borrower relating thereto, any and all reissues, extensions, divisions or continuations thereof, all royalties, fees and other payments made or to be made to each

 

 

Borrower with respect thereto, and all rights, interests, claims and demands that any Borrower has or may have in existing and future profits and damages for past and future infringements thereof.

 

“ Goods ” shall have the meaning given to such term in the UCC.

 

“ Governance Documents ” means each Borrower’s Articles or Certificate of Incorporation and Bylaws if such Borrower is a corporation, or such Borrower’s Articles or Certificate of Organization and Operating Agreement if such Borrower is a limited liability company, or such other documents or agreements affecting a Borrower’s corporate or organizational governance.

 

“ Government ” means the government of the United States of America or the departments or agencies of the United States, but does not include the government of any state or the District of Columbia or any departments or agencies of any state or of the District of Columbia.

 

“ Government Accounts ” means all Accounts arising out of any Government Contract.

 

“ Government Contracts ” means all contracts of any Borrower with a Government or all subcontracts of any Borrower with Customers in which the prime contract is between such Customers and a Government, including all renewals, extensions, modifications, change orders and amendments thereof and thereto.

 

“ Guidance Line Advance ” shall have the meaning set forth in Section 2.2 hereof.

 

“ Guidance Line Facility ” shall mean the uncommitted credit facility established pursuant to Section 2.2 hereof, in the amount of not more than Twenty Million Dollars ($20,000,000).

 

“ Hazardous Wastes ” mean all waste materials subject to regulation under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. ' ' 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ' ' 6901 et seq., or applicable state law and any other applicable federal, state or local laws and their regulations now in force or hereafter enacted relating to hazardous wastes.

 

“ Hedge Agreement ” means any agreement between any Borrower and the Lender or any affiliate of the Lender now existing or hereafter entered into, which provides for an interest rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross-currency rate swap, currency option, or any similar transaction or any combination of, or option with respect to, these or similar

 

 

transactions, for the purpose of hedging the Borrowers’ exposure to fluctuations in interest or exchange rates, loan, credit, exchange, security or currency valuations or commodity prices.

 

“ Ineligible Accounts ” shall include the following Accounts:

 

1. Accounts that do not conform with the criteria set forth for Eligible Accounts;

 

2. An Account owing by any Customer for which the Lender has deemed fifty percent (50%) or more of the Customer’s other Accounts to be non-Eligible; however, for purposes of this category of Ineligible Accounts, each Government Contract shall be treated as an individual Customer;

 

3. The last payment, other than the last payment due in the ordinary course of business, due on a Government Account, unless such Government Account arises from a Government Contract which is a fixed price contract (as defined in the Federal Acquisition Regulations) which does not include any provision for progress payments, incentive arrangements or price redetermination;

 

4. Contra Accounts;

 

5. Accounts receivable from Affiliates or subsidiaries of Borrowers;

 

6. Accounts for which a Borrower has not submitted an invoice to a Customer requesting payment for goods or services provided by such Borrower, including without limitation, progress payments, retainages, milestones, and final payments; or

 

7. Any Account deemed by the Lender, in the exercise of its sole and absolute discretion, to be an Ineligible Account because of uncertainty as to the creditworthiness of the Customer or because the Lender otherwise considers the collateral value thereof to the Lender to be impaired or its ability to realize such value to be insecure.

 

“ Intellectual Property ” shall mean any U.S. or foreign patents, patent applications, all licenses, trade names, trademarks, copyrights, inventions, service marks, trademark registrations, service mark registrations and copyright registrations, whether domestic or foreign and applications for any of the foregoing, and all proprietary technology, know-how, trade secrets or other intellectual property rights owned or used by any Borrower or any subsidiary in the operation of their respective businesses.

 

 

“ Instruments ” shall have the meaning given to such term in the UCC.

 

“ Interest Payment Date ” shall have the meaning set forth in Section 2.1(f).

 

“ Interest Rate Change Date ” shall mean the first day of each one-month period; provided, however, that if any such day is not a Business Day, at Lender’s option, the Interest Rate Change Date shall be the next succeeding Business Day.

 

“ Inventory ” shall mean all of each Borrower’s now owned and hereafter acquired inventory as such term is defined by the Uniform Commercial Code, wherever located and however constituted, including, without limitation, raw materials, work and goods in process, finished goods, goods or inventory returned or repossessed or stopped in transit, supplies, packaging, shipping and other materials, all other goods, merchandise and personal property used or consumed in the business of each Borrower, and all documents and documents of title relating to any of the foregoing.

 

“ Investment Property ” shall have the meaning given to such term in the UCC.

 

“ Item ” means any “item” as defined in Section 4-104 of the Uniform Commercial Code, to include, without exclusion or limitation, checks, drafts, money orders or other media by which Payment may be made.

 

“ Lender ” means Bank of America, N.A. and its successors and assigns.

 

“ Letter of Credit ” shall mean any letter of credit issued by the Lender for the account of any Borrower under the Revolving Loan.

 

“ Letter of Credit Account ” shall have the meaning set forth in Section 2.1(m) of this Agreement.

 

“ Letter of Credit Agreement ” means an Application and Agreement for Letter of Credit as such form may be revised by the Lender in its discretion at any time and from time to time hereafter.

 

“ Letter of Credit Exposure ” means at any time the sum of (a) the undrawn amount of all Letters of Credit outstanding at such time, and (b) all Letter of Credit Obligations outstanding at such time.

 

“ Letter of Credit Fee ” shall have the meaning set forth in Section 2.1(l) of this Agreement.

 

 

“ Letter of Credit Obligations ” means, collectively, (a) the amount of each draft drawn under or purporting to be drawn under a Letter of Credit, (b) the amount of any and all charges, reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) which the Lender may charge, pay or incur for drawings under a Letter of Credit, transfers of a Letter of Credit, amendments to and extensions of a Letter of Credit and for the prosecution or defense of any action arising out of or in connection with any Letter of Credit, including, without limitation, any action to enjoin full or partial payment of any draft drawn under or purporting to be drawn under any Letter of Credit, including, but not limited to, Letter of Credit Fees, (c) interest on all amounts payable under (a) and (b) above from the date due until paid in full at a per annum rate of interest equal at all times to the Default Rate.

 

“ Letter of Credit Rights ” shall have the meaning given to such term in the UCC.

 

“ Libor-Based Rate” shall mean a per annum rate of interest equal at all times to the sum of the LIBOR Rate plus the Applicable Margin. The Libor-Based Rate shall change immediately and contemporaneously with each change in the LIBOR Rate.

 

“ LIBOR Rate ” means, at any time, the rate of interest equal to the rate per annum (rounded upwards to the nearest 1/100 of one percent) equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as selected by the Lender from time to time) as determined for each Interest Rate Change Date at approximately 11:00 a.m. London time two (2) Business Days prior to the Interest Rate Change Date, for U.S. Dollar deposits (for delivery on the first day of such interest period) with a term of one month, as adjusted from time to time in the Lender’s sole discretion for Reserve Requirements, deposit insurance assessment rates and other regulatory costs. If such rate is not available at such time for any reason, then the rate for that interest period will be determined by such alternate method as reasonably selected by the Lender.

 

“ Loan Documents ” mean this Agreement, the Revolving Note, or any other document executed by the Borrowers or any other Person evidencing, securing, guaranteeing or relating to the Revolving Loan, as such documents or instruments may be amended, modified or extended from time to time.

 

“ Maximum Revolving Commitment Amount ” means Twenty Million and 00/100 Dollars ($20,000,000.00), as the same may from time to time be increased in accordance with the provisions of Section 2.2 hereof.

 

“ Multiemployer Plan ” means a Plan which is a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.

 

 

“ Multiple Employer Plan ” means a Plan which any Borrower or any of its subsidiaries or any ERISA Affiliate and at least one employer other than a Borrower or any of its subsidiaries or any ERISA Affiliate are contributing sponsors.

 

“ Obligations ” shall mean all present and future indebtedness, liabilities and obligations of any kind and nature whatsoever of any or all of the Borrowers to the Lender both now existing and hereafter arising under, as a result of, on account of, or in connection with, this Agreement and any and all amendments, restatements, supplements and modifications hereof made at any time and from time to time hereafter, any and all extensions, renewals or replacements thereof, amendments thereto and restatements or modifications thereof made at any time or from time to time hereafter, the Letter of Credit Agreements, or the other Financing Documents, including, without limitation, future advances, principal, interest, indemnities, fees, late charges, Letter of Credit Exposure, enforcement costs and other costs and expenses whether direct, contingent, joint, several, matured or unmatured, and the indebtedness owed under any swap contract or any document, instrument or agreement between any or all of the Borrowers and the Lender, now existing or entered into the future, relating to a Hedge Agreement.

 

“ Operating Account ” means a demand deposit account to be established by the Borrowers with the Lender for the Borrowers’ use in connection with its business operations and with the Revolving Loan.

 

“ Original Borrowers ” has the meaning set forth in the Preamble hereto.

 

“ Original Loan Agreement ” has the meaning set forth in the Recitals hereto.

 

“ Patent ” means any U.S. or foreign patents, patent applications, patents pending, and all reissues, divisions, reexaminations, renewals, extensions, provisionals and continuations thereof, including invention disclosures.

 

“ Payment ” or “ Payments ” means any check, draft, cash or any other remittance or credit in payment or on account of any or all of the Accounts.

 

“ Payment Intangibles ” shall have the meaning given to such term in the UCC.

 

“ PBGC ” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereto.

 

“ Permitted Acquisition ” means the acquisition or purchase of, or investment in, any Person, any operating division or unit of any Person, or the capital stock or operational assets of any Person or the combination with any Person by any Borrower or any Subsidiary (each individually, a “Subject Transaction”) regardless of the

 

 

structure of the Subject Transaction, provided that such Subject Transaction is either (i) less than $5,000,000 per transaction or (ii) part of an aggregate of such transactions totalling $7,500,000 or less in any twelve (12) month period, unless such is approved by the Lender in writing prior to consummation.

 

“ Person ” means any individual, partnership, association, trust, corporation, limited liability company or partnership, or other entity.

 

“ Plan ” means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which a Borrower or any of its subsidiaries or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” within the meaning of Section 3(5) of ERISA.

 

“ Prime Based Rate ” shall mean a floating and fluctuating per annum rate of interest equal at all times to the Prime Rate.

 

“ Prime Rate ” shall mean the floating and fluctuating per annum rate of interest of the Lender at any time and from time to time established and publicly declared by the Lender in its sole and absolute discretion as its prime rate, and does not necessarily represent the lowest rate of interest charged by the Lender to borrowers.

 

“ Promissory Notes ” shall have the meaning given to such term in the UCC.

 

“ Reportable Event ” means a “reportable event” as defined in Section 4043 of ERISA with respect to which the notice requirements to the PBGC have not been waived.

 

“ Reserve Requirements ” means the maximum rate (expressed as a decimal) at which reserves (including any marginal, supplemental, emergency or other reserves) are required to be maintained under Regulation D of the Federal Reserve Board or otherwise by any statute or regulation applicable to the class of commercial banks which includes the Lender.

 

“ Revolving Loan ” means the Revolving Loan facility made available by Lender to the Borrowers pursuant to this Agreement in the maximum principal amount equal to the Maximum Revolving Commitment, evidenced by the Revolving Note, as such Revolving Note may be amended or modified from time to time.

 

“ Revolving Loan Ending Date ” means June 30, 2008.

 

“ Revolving Note ” means the Borrowers’ Amended and Restated Revolving Credit Note of even date, in the amount of Forty Million and 00/100 Dollars

 

 

($40,000,000.00), payable to the order of the Lender, and evidencing Borrowers’ obligation to repay the Revolving Loan, as such Revolving Note may be amended from time to time.

 

“ Single Employer Plan ” means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan.

 

“ Software ” shall have the meaning given to such term in the UCC.

 

“ Subordinated Liabilities ” means liabilities or obligations of any Borrower to any person or entity other than Lender which have been subordinated to Borrowers’ obligations or liabilities to Lender by written agreement executed by such person or entity, Borrowers and Lender, or which have otherwise been subordinated in a manner acceptable by Lender as determined by Lender in its sole and absolute discretion.

 

“ Subsidiary ” means an entity of which any Borrower directly or indirectly owns or controls securities or other ownership interests representing more than 50% of the ordinary voting power thereof.

 

“ Termination Event ” means (i) with respect to any Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal of a Borrower or any of its subsidiaries or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (vi) the complete or partial withdrawal of a Borrower or any of its subsidiaries or any ERISA Affiliate from a Multiemployer Plan.

 

“ Total Funded Debt ” shall mean all outstanding liabilities for borrowed money and other interest-bearing liabilities, including current and long-term debt, Capital Leases and subordinated debt, excluding for purposes of clarity any current “earn out” payments due in connection with Essex’s acquisition of the Original Borrowers (the “Windermere Earn-Out Payments”).

 

“ Toxic Substances ” mean any materials which have been shown to have significant adverse effects on human health or which are subject to regulation under the Toxic Substances Control Act, 15 U.S.C. ' ' 2601 et seq., applicable state law, or any other applicable federal, state or local laws now in force or hereafter enacted relating to toxic substances. “Toxic Substances” includes, but is not limited to, asbestos, polychlorinated biphenyls (PCBs), petroleum products, and lead-based paints.

 

 

“ UCC ” means the Uniform Commercial Code in the state(s) as set forth Section 1.4 of this Agreement.

 

“ Unbilled Eligible Accounts ” means Government Accounts or Commercial Accounts which meet all of the criteria for being Eligible Accounts except (A) those set forth in clauses 1 and 2 of the definition of “Eligible”, and (B) those which are not Ineligible Accounts, disregarding clause 6 of the definition of “Ineligible Accounts.”

 

“ Unused Commitment Fee” shall mean the fee paid by the Borrowers to the Lender pursuant to Section 2.1(h)

 

“ Unused Commitment Fee Percentage ” shall mean the percentage upon which the Unused Commitment Fee shall be calculated, as determined in accordance with Attachment I hereto. The Unused Commitment Fee Percentage earned during any calendar quarter shall be determined based upon the Borrowers’ consolidated ratio of Total Funded Debt to EBITDA as of the last day of the immediately prior calendar quarter. The Unused Commitment Fee Percentage shall be determined and adjusted quarterly on the first day of the first month after the date by which the annual and quarterly compliance certificates and related financial statements and information are required in accordance with the provisions of this Agreement. As of the date hereof the Unused Commitment Fee Percentage is 20 basis points.

 

1.2 Accounting Terms . Accounting terms used in this Agreement but not defined in this Agreement shall have the meanings given to them in accordance with GAAP in effect on the date of this Agreement. Except as otherwise provided in this Agreement, all financial computations made pursuant to this Agreement and all financial reports provided to the Lender shall be made in accordance with GAAP, consistently applied. Except as otherwise provided in this Agreement, whenever this Agreement refers to a balance sheet, financial statement or the information contained in a balance sheet or other financial statement, the Agreement shall be construed to refer to most recent consolidated balance sheet or other financial statement that Borrowers have provided to the Lender.

 

1.3 Use of Defined Terms . All terms defined in this Agreement shall have the same defined meanings when used in any certificate, report or other document made or delivered in connection with this Agreement, unless otherwise set forth therein.

 

1.4 UCC Terms . Terms that incorporate definitions provided in the Uniform Commercial Code and not otherwise defined herein shall have such meanings as are mandated by the Uniform Commercial Code of the state or states applicable for the

 

 

determination of such meanings. Terms not otherwise defined herein and not incorporating a definition under the Uniform Commercial Code of any particular state, but which are defined in the Uniform Commercial Code as adopted by the Commonwealth of Virginia, shall have the meanings ascribed to them under the Uniform Commercial Code as adopted by the Commonwealth of Virginia.

 

ARTICLE 2. CREDIT FACILITIES.

 

2.1 Revolving Line of Credit .

 

(a) Advances and Letters of Credit . Subject to and upon the provisions of this Agreement and relying upon the representations and warranties herein set forth, the Lender agrees at any time and from time to time to make Advances to the Borrowers and issue Letters of Credit for the account of the Borrowers from the date hereof until the earlier of the Revolving Loan Ending Date or the date on which this Revolving Loan is terminated pursuant to Section 7 hereof, in an aggregate principal amount at any time outstanding not to exceed the Allowed Amount of Revolving Advances; provided however, that in no event shall the total Letter of Credit Exposure exceed $2,000,000.

 

In no event shall the Lender be obligated to make an Advance or issue a Letter of Credit hereunder if a Default shall have occurred and be continuing. Unless sooner terminated pursuant to other provisions of this Agreement, this Revolving Loan and the obligation of the Lender to make Advances and issue Letters of Credit hereunder shall automatically terminate on the Revolving Loan Ending Date without further action by, or notice of any kind from, the Lender. Within the limitations set forth herein and subject to the provisions of this Agreement, the Borrowers may borrow, repay and reborrow under this Revolving Loan. The fact that there may be no Advances or Letters of Credit outstanding at any particular time shall not affect the continuing validity of this Agreement.

 

(b) Deposit of Advances . Each Advance will be advanced by the Lender not later than the Business Day following the day (which shall be a Business Day) of the Borrowers’ request therefor. The proceeds of each Advances will be deposited by the Lender in the Borrowers’ Operating Account with the Lender.

 

(c) Liability of Lender . Lender shall in no event be responsible or liable to any person other than Borrowers for the disbursement of or failure to disburse Advances or any part thereof, and no other party shall have any right or claim against Lender under this Agreement or the other Financing Documents.

 

(d) Mandatory Prepayments . If the principal outstanding under the

 

 

Revolving Loan plus the outstanding Letter of Credit Exposure, at any time exceeds the Allowed Amount, then Borrowers shall make an immediate payment of principal under the Revolving Loan in an amount sufficient that the principal outstanding under the Revolving Loan plus the outstanding Letter of Credit Exposure will no longer exceed the Allowed Amount.

 

(e) Procedure for Advances . Unless Borrowers have previously entered into a separate auto borrow or similar cash management service with Lender, Borrowers may request Advances by telephone through its employees or agents, as hereinafter provided. Each Advance request must be received by Lender not later than 1:00 p.m. (Eastern Standard time) on the date the Advance is to be made and must specify the amount of the Advance. Lender shall deposit the Advance into Borrowers’ Operating Account if Borrowers are entitled to the Advance, subject to the terms and conditions of this Agreement. If Borrowers have entered into a separate auto borrow or similar cash management service with Lender, then the provisions of such service shall control with respect to the procedures for making Advances to Borrowers. Lender shall have the right to terminate such auto borrow or similar cash management service at any time, as determined in Lender’s sole and absolute discretion.

 

Notwithstanding anything contained herein to the contrary, so long as the Borrowers opt to use the Lender’s “AutoBorrow” program and have executed and delivered to the Lender an AutoBorrow Service Agreement (which AutoBorrow Service Agreement remains in full force and effect), all Advances to be made hereunder shall be made in accordance with, and all interest accrued on such Advances and all repayments of such Advances shall be payable at the times and in the manner provided for in the AutoBorrow Service Agreement. To the extent that any of the provisions hereof are inconsistent with provisions of the AutoBorrow Service Agreement, the provisions of the AutoBorrow Service Agreement shall govern. Any Advances made to the Borrowers under the AutoBorrow Service Agreement shall nonetheless be deemed to be an Advance hereunder, subject to all other terms hereof.

 

(f) Interest on and Repayment of Revolving Loan; Auto Debit . Except for any period during which an Event of Default shall have occurred and be continuing, the Borrowers shall pay interest (calculated on a daily basis) on the unpaid principal balance of the Advances until maturity (whether by acceleration, extension or otherwise) at a per annum rate of interest equal at all times to the Libor-Based Rate in effect from time to time. After maturity, or during any period in which an Event of Default exists and remains continuing, the unpaid principal balance of the Advances shall bear interest at a rate equal to the Default Rate. Until the maturity of the Revolving Loan, all accrued and unpaid interest on all Advances shall be paid monthly on the first day of each month (each, an “ Interest Payment Date ”).

 

 

Notwithstanding any other provision of this Agreement, if the Lender determines (which determination shall be conclusive) (i) that any applicable law, rule, or regulation, or any change in the interpretation of any such law, rule, or regulation shall make it unlawful or impossible for the Lender to charge or collect interest at the Libor-Based Rate, or (ii) that quotations of interest rates for the relevant deposits referred to in the definition of the Libor-Based Rate are not being provided in the relevant amounts or for the relevant maturities, then upon notice from the Lender to the Borrowers, the entire outstanding principal balance of the Revolving Loan shall bear interest at the Prime-Based Rate.

 

If not sooner paid, the entire outstanding principal balance of the Advances, together with all accrued and unpaid interest thereon, shall be due and payable on the Revolving Loan Ending Date.

 

(g) Use of Revolving Loan Proceeds . The proceeds of the Revolving Loan shall be used for working capital, to finance Permitted Acquisitions, and for general corporate purposes not inconsistent with this Agreement.

 

(h) Revolving Loan Fees . Borrowers jointly and severally promise to pay Lender the following fees in consideration of entering into this Agreement. These fees are in addition to interest payable under the Revolving Note:

 

a. During the period from the date hereof until the earlier of the Revolving Loan Ending Date or the date on which the Revolving Loan is terminated pursuant to the provisions hereof, the Borrowers shall pay to the Lender an availability fee in a per annum amount equal to the Unused Commitment Fee Percentage times the average daily unused portion of the Maximum Revolving Credit Commitment. Such availability fee shall commence to accrue on the date hereof and shall be due and payable by the Borrowers quarterly, in arrears, commencing on September 30, 2005, and, on the last Business Day of each third month thereafter, and on the earlier of the Revolving Loan Ending Date or on the date on which the Revolving Loan is terminated pursuant to the terms hereof.

 

b. Lender shall have the right to perform field examinations at any time, in its sole discretion. Borrowers shall pay to Lender, on demand, the fees and costs associated with a field examination performed prior to the closing of the Credit Facilities and for one field examination to be performed each calendar year provided, however, that the Lender does not intend to perform a field examination in the first year following closing unless the Borrowers close an acquisition exceeding $5,000,000 during such time, and with respect to which the Original Borrowers shall be excluded. Any additional field examinations will be at Lender’s own expense if no Event of Default has occurred and remains uncured at the time of the additional field examination, but shall be at the Borrowers’ expense if an Event of Default has occurred and remains uncured at the time of the additional field examination.

 

 

(i) Voluntary Prepayments . Within the limitations set forth herein and subject to the provisions of this Agreement, the Borrowers may prepay any Advance in whole or in part, from time to time without premium or penalty. Any permitted prepayment need not be accompanied by payment of interest on the amount prepaid except, that any prepayment of Advances which constitutes a final payment of all Advances shall be accompanied by payment of all interest thereon accrued through the date of prepayment.

 

(j) Terms of Letters of Credit . Each Letter of Credit shall (i) be a commercial Letter of Credit or a standby Letter of Credit, (ii) be opened pursuant to a Letter of Credit Agreement duly executed and delivered to the Lender by the Borrowers prior to the issuance of such Letter of Credit, (iii) expire on the Revolving Credit Expiration Date, (iv) be in an amount not less than $10,000, (v) be issued in the ordinary course of the Borrowers’ business, and (vi) be issued in accordance with the Lender’s then current practices relating to the issuance of letters of credit. All powers, right, remedies and provisions set forth in any Letter of Credit Agreement shall be in addition to those set forth herein. In the event of any conflict between the provisions of this Agreement and the provisions of any Letter of Credit Agreement, the provisions of this Agreement shall prevail and control unless expressly provided otherwise herein or in the Letter of Credit Agreement .

 

(k) Procedures for Letters of Credit . The Borrowers shall give the Lender written notice of its request for a Letter of Credit at least three (3) Business Days prior to the date on which the Letter of Credit is to be opened by delivering to the Lender a duly executed Letter of Credit Agreement in form and content acceptable to the Lender setting forth (i) the face amount of the Letter of Credit, (ii) the name and address of the beneficiary of the Letter of Credit, (iii) whether the Letter of Credit is irrevocable or revocable, (iv) whether the Letter of Credit requested is a standby or commercial Letter of Credit, (v) the date the Letter of Credit is to be opened and the date the Letter of Credit is to expire, (vi) the purpose of the Letter of Credit, (vii) the terms and conditions for any draws under the Letter of Credit, and (viii) such other information as the Lender may reasonably deem to be necessary or desirable.

 

(l) Letter of Credit Fees . With respect to each Letter of Credit issued hereunder, the Borrowers shall pay to the Lender a letter of credit fee (the “ Letter of Credit Fee ”) set forth in the table attached hereto as Attachment I , payable in advance on or before the date of issuance and on each anniversary thereof plus the Lender’s then standard fee for the issuance, negotiation, processing and administration of letters of credit of the same type as the Letter of Credit. The amount of the Letter of Credit Fee

 

 

payable on any date shall be a percentage of the face amount of such Letter of Credit, calculated on the basis of the table included as Attachment I hereto, based upon the Borrowers’ ratio of Total Funded Debt to EBTIDA as of the end of the immediately preceding calendar quarter.

 

(m) Agreement to Pay Letter of Credit Obligations . The Borrowers shall pay to the Lender the Letter of Credit Obligations when due; provided , however , that so long as the Borrowers have availability under the Revolving Loan, the Lender may, and is hereby authorized to, make Advances to itself to pay when due any or all Letter of Credit Obligations incurred in connection with Letters of Credit. The Lender may maintain on its books a letter of credit account (the “ Letter of Credit Account ”) with respect to the Letter of Credit Obligations paid and payable from time to time hereunder. Except for demonstrable error, the Letter of Credit Account shall be conclusive as to all amounts owing by the Borrowers to the Lender in connection with and on account of the Letter of Credit Obligations. From the date due until paid in full, all Letter of Credit Obligations shall bear interest at the Default Rate.

 

(n) Agreement to Pay Absolute . The obligation of the Borrowers to pay Letter of Credit Obligations set forth above shall be absolute and unconditional and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, (ii) the existence of any claim, setoff, defense or other right which the Borrowers may at any time have against the beneficiary under any Letter of Credit or the Lender, (iii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue provided that payment by the Lender under such Letter of Credit against presentation of such draft shall not have constituted gross negligence or willful misconduct, and (v) any other events or circumstances whatsoever, whether or not similar to any of the foregoing provided that the payment by the Lender under the Letter of Credit shall not have constituted gross negligence or willful misconduct of the Lender.

 

2.2 Guidance Line Facility . Subject to the terms and conditions of this Agreement (including, without limitation, all of the conditions precedent to the making of Advances set forth herein), from the date hereof until the earlier of the Revolving Loan Ending Date or the date on which this facility is otherwise terminated pursuant to the provisions of Section 7, the Lender may, in its sole and absolute discretion, from time to time make Advances to the Borrowers in an amount greater than the difference between the then-current Maximum Revolving Credit Commitment and the then-current Revolving Credit Exposure (each such Advance being hereinafter called a “ Guidance Line Advance ”); provided, however, that (a) the aggregate principal amount of all Guidance Line Advances shall not exceed $20,000,000, and (b) in no event shall the Lender make a new Guidance Line Advance hereunder if an Event of Default shall have occurred and be continuing. Once a Guidance Line Advance has been made

 

 

hereunder, it shall be considered an Advance for all purposes under this Agreement (including, without limitation the calculation of the Revolving Credit Exposure) and shall be repaid in accordance with the terms and conditions hereof. Each time the Lender makes a Guidance Line Advance, the Maximum Revolving Credit Commitment shall automatically be increased to an amount equal to the Revolving Credit Exposure (after giving effect to such Guidance Line Advance).

 

2.3. Additional Provisions .

 

(a) Interest Calculation . All interest and fees payable under the provisions of this Agreement or the Notes (other than interest, if any, calculated based upon the Prime Rate, which shall be calculated on the basis of a 365 day year) shall be computed on the basis of actual number of days elapsed over a year of 360 days.

 

(b) Late Charges . If the Borrowers fail to make any payment of principal, interest, prepayments, fees or any other amount becoming due pursuant to the provisions of this Agreement or the Notes (other than the final principal payment due upon maturity, whether by acceleration or otherwise), within fifteen (15) days after the date due and payable, the Borrowers shall pay to the Lender a late charge equal to five percent (5%) of the amount of such payment. Such 15-day period shall not be construed in any way to extend the due date of any such payment. Late charges are imposed for the purpose of defraying the Lender’s expenses incident to the handling of delinquent payments, and are in addition to, and not in lieu of, the exercise by the Lender of any rights and remedies hereunder or under applicable laws and any fees and expenses of any agents or attorneys which the Lender may employ upon the occurrence of an Event of Default.

 

(c) Payments . Whenever any payment to be made by the Borrowers under the provisions of this Agreement, the Notes or the Letter of Credit Agreements is due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, in the case of any payment which bears interest, such extension of time shall be included in computing interest on such payment. All payments of principal, interest, fees or other amounts to be made by the Borrowers under the provisions of this Agreement or the Notes shall be paid to the Lender at the Lender’s office at 8300 Greensboro Drive, Mezzanine Level, McLean, Virginia 22102, in lawful money of the United States of America in immediately available funds.

 

(d) Interest On Overdue Amounts . If the principal of or interest on, the Notes or any other amount required to be paid to the Lender hereunder or under the Notes is not paid within fifteen (15) days after the date when the same becomes due and payable, whether by acceleration or otherwise, the Borrowers shall on demand from time to time pay to the Lender interest on such principal, interest or other amount from the date due until the date of payment (after as well as before any judgment) at a rate per annum equal to the Default Rate.

 

 

(e) Automatic Debit . To ensure timely payment of all interest and other sums due hereunder, the Borrowers hereby authorize and instruct the Lender to either (i) debit, on the due date thereof, demand deposit account no. (deleted) maintained at the Lender for the amount then due, or (ii) at the Lender’s option, cause an Advance to be made sufficient to pay the amount then due.

 

ARTICLE 3. CONDITIONS PRECEDENT TO CREDIT FACILITIES.

 

3.1 Conditions Precedent to Initial Advance . The Lender shall be under no obligation to make the first Advance or issue the first Letter of Credit under this Agreement until, in the Lender’s judgment, all of the following conditions are satisfied:

 

a. Representations and Warranties; Compliance . All representations and warranties made by Borrowers in or in connection with this Agreement or any of the other Loan Documents or otherwise made in writing in connection with this Agreement shall be true and correct on the Closing Date, and the Borrowers shall have performed all of the promises or undertakings under this Agreement and satisfied all of the conditions of this Agreement that the Borrowers were required to perform or to satisfy as of the Closing Date.

 

b. Documents Concerning the Borrowers . Borrowers shall deliver to the Lender copies of all documents requested by the Lender, including the following: (1) with respect to any Borrower which is a corporation, a complete, correct and current copy of such Borrower’s Articles of Incorporation; and a complete, correct and current copy of such Borrower’s Bylaws, certified by such Borrower’s corporate secretary; (2) with respect to any Borrower which is a limited liability company, a complete, correct and current copy of such Borrower’s Articles of Organization; and a complete correct and current copy of such Borrower’s Operating Agreement, certified by the members of such Borrower; (3) with respect to a Borrower which is a corporation, a complete, correct and current copy of all resolutions of such Borrower’s Board of Directors authorizing the execution, delivery and performance of this Agreement and of the other Loan Documents, certified by such Borrower’s corporate secretary; and appropriate certificates of incumbency for those officers of such Borrower executing this Agreement or any of the other Loan Documents, certified by such Borrower’s corporate secretary and president; and (4) with respect to a Borrower which is a limited liability company, a complete, correct and current copy of all resolutions of such Borrower’s members authorizing the execution, delivery and performance of this Agreement and of the other Loan Documents, certified by such Borrower’s manager, managing member or

 

 

 

 

authorized officer. In addition, the following documents and materials shall have been delivered to the Lender, and must be satisfactory to the Lender in form and substance:

 

1. all supporting documentation with regard to the Borrowers or the Revolving Loan as the Lender may require;

 

2. such additional information, instruments, opinions, documents, certificates and reports relating to the Borrowers or the Collateral as the Lender may deem necessary; and

 

3. such lien releases or termination statements as Lender may deem necessary to remove any Encumbrances on the Collateral.

 

c. Executed Note and Loan Documents . Borrowers shall deliver to the Lender, fully executed: this Agreement, the Revolving Note, UCC-1 Financing Statements and such other documents, instruments and certificates as the Lender may reasonably require, in form and substance satisfactory to the Lender. All taxes, fees and charges with respect to the preparation, filing and recording of the Loan Documents shall have been paid by Borrowers.

 

d. Landlord and Mortgagee Waivers . The Lender shall have received such landlord and mortgagee waivers as it shall request with respect to any of the Borrower’s landlords or mortgagees which could claim an interest in any Collateral as a remedy for a default under any lease, mortgage or deed of trust.

 

e. Financing Statements and Control Agreements . All Financing Statements and Control Agreements deemed necessary by the Lender to perfect its security interest in the Collateral or any other collateral securing the Credit Facilities.

 

f. Legal Opinion . Borrowers shall deliver to the Lender a written opinion or opinions of legal counsel for Borrowers dated the Closing Date and addressed to the Lender, which opinions must be in form and content satisfactory to the Lender.

 

g. Operating Account . The Borrowers shall establish the Operating Account with the Lender.

 

h. Compliance with Covenants . Borrowers shall establish to Lender’s satisfaction that the Advance will not cause Borrowers to cease to comply with Borrowers’ financial covenants as set forth hereinafter.

 

 

3.2 Future Advances . The obligation of the Lender to make any Advance or issue any Letter of Credit under the Revolving Loan subsequent to the Closing Date is further conditional on:

 

a. Conditions of First Advance Remain Satisfied . The Lender shall have determined, in its judgment, that the conditions precedent to the first Advance are satisfied as of the Borrowing Date for the subsequent Advance; the Loan Documents shall remain in full force and effect; and neither the Borrowers nor any Person providing Collateral or a guaranty shall have purported to terminate any of the Loan Documents or notified Lender of an intention not to perform under any applicable Loan Document;

 

b. Borrowing Base Certificate . The Lender shall have received a duly executed Borrowing Base Certificate, if required, with supporting updated schedules attached thereto;

 

c. Representations and Warranties . All representations and warranties contained herein shall be true and correct at the date of such disbursement;

 

d. No Material Adverse Change . The Lender shall have determined, in its discretion, that no material adverse change has occurred in the financial condition of the Borrowers from that disclosed in the most recent financial statements furnished to the Lender prior to the Closing Date; and

 

e. No Default . No Event of Default has occurred and remains uncured, and no event has occurred or circumstance exists which, with the passage of time or the giving of notice or both, would constitute an Event of Default.

 

3.3 The Borrowers’ Representatives . Each of the Borrowers hereby represents and warrants that each of them will derive benefits, directly and indirectly, from the proceeds of the Credit Facilities, both in its separate capacity and as a member of the integrated business to which each of the Borrowers belong. For administrative convenience, Essex is hereby irrevocably appointed by each of the Borrowers as agent for each of the Borrowers for the purpose of requesting Advances and Letters of Credit, receiving the proceeds of the Advances and the Letters of Credit, disbursing the proceeds of the Credit Facilities among the Borrowers, and giving and receiving notices. In its capacity as such agent, Essex shall have the power and authority through its authorized officer or officers to (i) endorse any check for the proceeds of the Credit Facilities for and on behalf of each of the Borrowers and in the name of each of the Borrowers, and (ii) instruct the Lender to credit the proceeds of the Advances (or any portion thereof directly to a banking account of any of the Borrowers. The Lender is hereby irrevocably authorized to make the Credit Facilities to the Borrowers upon the

 

 

request of any person who is authorized to do so under the provisions of the corporate resolutions of Essex. The Lender assumes no responsibility or liability for any errors, mistakes and/or discrepancies in any oral, telephonic, written or other transmissions of any instructions, orders, requests and confirmations between the Lender and any of the Borrowers in connection with the Credit Facilities or other transaction pursuant to the provisions of this Agreement, except for acts of gross negligence and/or willful misconduct; provided, however, that the foregoing sentence shall not be construed to release the Lender from its obligation to credit the Borrowers for payments actually made.

 

ARTICLE 4. SECURITY.

 

4.1 Grant of Security Interest . As security for (i) the payment of the Credit Facilities, and any other extensions of credit, loans, letters of credit or other financial accommodations now or hereafter made by the Lender for the benefit of any or all of the Borrowers, and (ii) the performance of the Borrowers’ obligations under or in connection with any interest rate swap agreement as defined in 11 U.S.C. ' 101 by and between the Borrowers and the Lender or any Affiliate of the Lender (whether absolute or contingent and whether now or hereafter becoming due or owing), and (iii) any other liability or obligation of any or all of the Borrowers to Lender whether now or hereafter existing, of every kind and description, whether or not evidenced by notes or other instruments, and whether or not such liability or obligations are direct or indirect, fixed or contingent, liquidated or unliquidated, each Borrower hereby assigns, grants and conveys to the Lender a security interest in the Collateral. In addition, except as provided by law, each Borrower grants to Lender a security interest in all bank accounts and deposit accounts of any or all of the Borrowers with Lender or any of Lender’s Affiliates. Proceeds of the Collateral shall be allocated pari