SECOND AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS			1
Section 1.1		Certain Defined Terms.	1
Section 1.2		Accounting Terms and Other Definitional Provisions.	19
ARTICLE II THE CREDIT FACILITIES			19
Section 2.1		The Revolving Credit Facility.	19
2.1.1		Revolving Credit Facility.	19
2.1.2		Procedure for Making Advances Under the Revolving Loan; Lender Protection Loans.	20
2.1.3		Borrowing Base.	20
2.1.4		Borrowing Base Report.	21
2.1.5		Revolving Credit Note.	21
2.1.6		Mandatory Prepayments of Revolving Loan.	22
2.1.7		Optional Prepayments of Revolving Loan.	22
2.1.8		The Collateral Account.	22
2.1.9		Revolving Loan Account.	23
2.1.10		Revolving Credit Unused Line Fee.	23
Section 2.2		The Letter of Credit Facility.	23
2.2.1		Letters of Credit.	23
2.2.2		Letter of Credit Fees.	24
2.2.3		Terms of Letters of Credit.	24
2.2.4		Procedures for Letters of Credit.	25
2.2.5		Payments of Letters of Credit.	25
2.2.6		Change in Law; Increased Cost.	26
2.2.7		General Letter of Credit Provisions.	27
Section 2.3		Applicable Interest Rates.	28
Section 2.4		General Financing Provisions.	28
2.4.1		Borrowers’ Representatives.	28
2.4.2		Use of Proceeds of the Revolving Loan.	30
2.4.3		Origination Fee.	30
2.4.4		Monitoring Fee.	30
2.4.5		Computation of Interest and Fees.	31
2.4.6		Maximum Interest Rate.	31
2.4.7		Payments.	31
2.4.8		Liens; Setoff.	31
2.4.9		Requirements of Law.	32
2.4.10		Guaranty.	32
2.4.11		ACH Transactions and Swap Contracts.	35
2.4.12		Termination of Revolving Credit Facility.	35
ARTICLE III THE COLLATERAL			36
Section 3.1		Debt and Obligations Secured.	36
Section 3.2		Grant of Liens.	36
Section 3.3		Collateral Disclosure List.	36
Section 3.4		Personal Property.	37
Section 3.5		Record Searches.	37
Section 3.6		Costs.	37
Section 3.7		Release.	38
Section 3.8		Inconsistent Provisions.	38

 

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES			38
Section 4.1		Representations and Warranties.	38
4.1.1		Subsidiaries.	38
4.1.2		Existence.	38
4.1.3		Power and Authority.	39
4.1.4		Binding Agreements.	39
4.1.5		No Conflicts.	39
4.1.6		No Defaults, Violations.	39
4.1.7		Compliance with Laws.	40
4.1.8		Margin Stock.	40
4.1.9		Investment Company Act; Margin Stock.	40
4.1.10		Litigation.	40
4.1.11		Financial Condition.	40
4.1.12		Full Disclosure.	41
4.1.13		Indebtedness for Borrowed Money.	41
4.1.14		Taxes.	41
4.1.15		ERISA.	41
4.1.16		Title to Properties.	42
4.1.17		Patents, Trademarks, Etc.	42
4.1.18		Employee Relations.	42
4.1.19		Presence of Hazardous Materials or Hazardous Materials Contamination.	43
4.1.20		Perfection and Priority of Collateral.	43
4.1.21		No Suspension or Debarment.	43
4.1.22		Collateral Disclosure List.	43
4.1.23		Business Names and Addresses.	43
4.1.24		Equipment.	44
4.1.25		Accounts.	44
4.1.26		Compliance with Eligibility Standards.	44
Section 4.2		Survival; Updates of Representations and Warranties.	44
ARTICLE V CONDITIONS PRECEDENT			45
Section 5.1		Conditions to the Initial Advance and Initial Letter of Credit.	45
5.1.1		Organizational Documents.	45
5.1.2		Opinion of Borrowers’ Counsel.	45
5.1.3		Organizational Documents - Guarantor.	46
5.1.4		Consents, Licenses, Approvals, Etc.	46
5.1.5		Note.	46
5.1.6		Financing Documents and Collateral.	47
5.1.7		Other Financing Documents.	47
5.1.8		Other Documents, Etc.	47
5.1.9		Payment of Fees.	47
5.1.10		Collateral Disclosure List.	47
5.1.11		Recordings and Filings.	47
5.1.12		Insurance Certificate.	47
5.1.13		Landlord’s Waivers.	47
5.1.14		Blocked Account Agreements.	48
5.1.15		Borrowing Base Report.	48
Section 5.2		Conditions to all Extensions of Credit.	48
5.2.1		Compliance.	48
5.2.2		Borrowing Base.	48
5.2.3		Default.	48
5.2.4		Representations and Warranties.	48
5.2.5		Adverse Change.	48
5.2.6		Legal Matters.	49

 

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ARTICLE VI COVENANTS			49
Section 6.1		Affirmative Covenants.	49
6.1.1		Financial Statements.	49
6.1.2		Recordkeeping, Rights of Inspection, Field Examination, Etc.	50
6.1.3		Existence.	51
6.1.4		Compliance with Laws.	52
6.1.5		Preservation of Properties.	52
6.1.6		Line of Business.	52
6.1.7		Insurance.	52
6.1.8		Taxes.	53
6.1.9		ERISA.	53
6.1.10		Notification of Events of Default and Adverse Developments.	53
6.1.11		Hazardous Materials; Contamination.	54
6.1.12		Financial Covenants.	55
6.1.13		Collection of Receivables.	55
6.1.14		Assignments of Receivables.	56
6.1.15		Government Accounts.	56
6.1.16		Notice of Returned Goods, etc.	56
6.1.17		Equipment.	56
6.1.18		Defense of Title and Further Assurances.	56
6.1.19		Business Names; Locations.	57
6.1.20		Protection of Collateral.	57
6.1.21		Depository Relationship.	58
Section 6.2		Negative Covenants.	58
6.2.1		Capital Structure, Merger or Sale of Assets.	58
6.2.2		Acquisitions.	58
6.2.3		Subsidiaries.	58
6.2.4		Issuance of Stock.	58
6.2.5		Purchase or Redemption of Securities, Dividend Restrictions.	58
6.2.6		Indebtedness.	59
6.2.7		Investments, Loans and Other Transactions.	59
6.2.8		Stock of Subsidiaries.	60
6.2.9		Subordinated Indebtedness.	60
6.2.10		Liens; Confessed Judgment.	60
6.2.11		Other Businesses.	61
6.2.12		ERISA Compliance.	61
6.2.13		Prohibition on Hazardous Materials.	61
6.2.14		Method of Accounting; Fiscal Year.	61
6.2.15		Sale and Leaseback.	62
6.2.16		Disposition of Collateral.	62
ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES			62
Section 7.1		Events of Default.	62
7.1.1		Failure to Pay.	62
7.1.2		Breach of Representations and Warranties.	62
7.1.3		Failure to Comply with Specific Covenants.	62
7.1.4		Failure to Comply with Covenants.	62
7.1.5		Default Under Other Financing Documents or Obligations.	63
7.1.6		Receiver; Bankruptcy.	63
7.1.7		Involuntary Bankruptcy, etc.	63
7.1.8		Judgment.	63
7.1.9		Execution; Attachment.	64
7.1.10		Default Under Other Borrowings.	64
7.1.11		Challenge to Agreements.	64
7.1.12		Material Adverse Change.	64

 

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7.1.13		Contract Default, Debarment or Suspension.	64
7.1.14		Liquidation, Termination, Dissolution, etc.	64
Section 7.2		Remedies.	64
7.2.1		Acceleration.	65
7.2.2		Further Advances.	65
7.2.3		Uniform Commercial Code.	65
7.2.4		Specific Rights With Regard to Collateral.	66
7.2.5		Application of Proceeds.	67
7.2.6		Performance by Lender.	67
7.2.7		Other Remedies.	68
ARTICLE VIII MISCELLANEOUS			68
Section 8.1		Notices.	68
Section 8.2		Amendments; Waivers.	69
Section 8.3		Cumulative Remedies.	69
Section 8.4		Severability.	70
Section 8.5		Assignments by Lender.	71
Section 8.6		Participations by Lender.	71
Section 8.7		Disclosure of Information by Lender.	72
Section 8.8		Successors and Assigns.	72
Section 8.9		Continuing Agreements.	72
Section 8.10		Enforcement Costs.	72
Section 8.11		Applicable Law; Jurisdiction.	73
8.11.1		Applicable Law.	73
8.11.2		Submission to Jurisdiction.	73
8.11.3		Service of Process.	73
Section 8.12		Duplicate Originals and Counterparts.	73
Section 8.13		Headings.	73
Section 8.14		No Agency.	74
Section 8.15		Date of Payment.	74
Section 8.16		Entire Agreement.	74
Section 8.17		Waiver of Trial by Jury.	74
Section 8.18		LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES.	74
Section 8.19		Liability of Lender.	75
Section 8.20		Indemnification.	75
Section 8.21		Confidentiality.	76
Section 8.22		Patriot Act Notice.	76
Section 8.23		Compliance with Laws.	76
Section 8.24		Electronic Transmission of Data.	77

 

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SECOND AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT

 

THIS SECOND AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT (this “Agreement”) is made as of November 5, 2008, by and between GENERAL PHYSICS CORPORATION, a Delaware corporation (“General Physics” or “Borrower”) and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (“Lender”).

 

RECITALS

 

A.             Borrower and Lender are parties to an Amended and Restated Financing and Security Agreement dated as of August 6, 2007 (the “Original Financing Agreement”) pursuant to which Lender has provided to Borrower a revolving credit facility in the maximum principal amount of $25,000,000 and a letter of credit facility as a part of that revolving credit facility, to be used by Borrower for the certain permitted uses as defined in the Original Financing Agreement.

 

C.             Borrower has applied to Lender for (i) an extension of the maturity date of the credit facilities under the Original Financing Agreement, (ii) an increase in the revolving credit facility to the maximum principal amount of $35,000,000, (iii) an increase in sublimit for the letter of credit facility to $5,000,000, (iv) a change in the Permitted Uses (as hereinafter defined) and (v) a change in the pricing applicable to the revolving credit facility.

 

D.             Lender has agreed to amend the Original Financing Agreement and, in connection therewith, agreed with Borrower to restate the Original Financing Agreement in its entirety upon the terms and subject to the conditions set forth in this Agreement.

 

AGREEMENTS

 

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1              Certain Defined Terms .

 

As used in this Agreement, the terms defined in the Preamble and Recitals hereto shall have the respective meanings specified therein, and the following terms shall have the following meanings:

 

“Account” individually and “Accounts” collectively mean all presently existing or hereafter acquired or created accounts, accounts receivable, health-care insurance receivables, contract rights, notes, drafts, instruments, acceptances, chattel paper, leases and writings evidencing a monetary obligation or a security interest in, or a lease of, goods, all rights to payment of a monetary obligation or other consideration under present or future contracts

 

 

(including, without limitation, all rights (whether or not earned by performance) to receive payments under presently existing or hereafter acquired or created letters of credit), or by virtue of property that has been sold, leased, licensed, assigned or otherwise disposed of, services rendered or to be rendered, loans and advances made or other considerations given, by or set forth in or arising out of any present or future chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy, instrument, document or general intangible, and all extensions and renewals of any thereof, all rights under or arising out of present or future contracts, agreements or general interest in goods which gave rise to any or all of the foregoing, including all commercial tort claims, other claims or causes of action now existing or hereafter arising in connection with or under any agreement or document or by operation of law or otherwise, all collateral security of any kind (including, without limitation, real property mortgages and deeds of trust) Supporting Obligations, letter-of-credit rights and letters of credit given by any Person with respect to any of the foregoing, all books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to any or all of the foregoing and all equipment and general intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records, and all Proceeds of the foregoing.

 

“Account Debtor” means any Person who is obligated on a Receivable and “Account Debtors” mean all Persons who are obligated on the Receivables.

 

“ACH Transactions” means any cash management or related services including the automatic clearing house transfer of funds by Lender for the account of any Borrower pursuant to agreement or overdrafts.

 

“Additional Borrower” means each Person that has executed and delivered an Additional Borrower Joinder Supplement that has been accepted and approved by Lender.

 

“Additional Borrower Joinder Supplement” means an Additional Borrower Joinder Supplement in substantially the form attached hereto as EXHIBIT A , with the blanks appropriately completed and executed and delivered by the Additional Borrower and accepted by General Physics on behalf of Borrowers.

 

“Adjustment Date” has the meaning described in Section 8.5 (Assignments by Lender).

 

“Affiliate” means, with respect to any designated Person, any other Person, (a) directly or indirectly controlling, directly or indirectly controlled by, or under direct or indirect common control with the Person designated, (b) directly or indirectly owning or holding twenty percent (20%) or more of any equity interest in such designated Person, or (c) twenty percent (20%) or more of whose stock or other equity interest is directly or indirectly owned or held by such designated Person.  For purposes of this definition, the term “control” (including with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or other equity interests or by contract or otherwise.

 

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“Agreement” means this Amended and Restated Financing and Security Agreement, as amended, restated, supplemented or otherwise modified in writing in accordance with the provisions of Section 8.2 (Amendments; Waivers).

 

“Applicable Margin” means the applicable rate per annum added, as set forth in Section 2.3 (Applicable Interest Rates), to the LIBOR Market Index Rate.

 

“Applicable Rate” means the sum of (a) the Applicable Margin plus (b) the LIBOR Market Index Rate.

 

“Assets” means at any date all assets that, in accordance with GAAP consistently applied, should be classified as assets on a consolidated balance sheet of Borrowers and their respective Subsidiaries.

 

“Assignee” means any Person to which Lender assigns all or any portion of its interests under this Agreement, any Commitment, and the Revolving Loan, in accordance with the provisions of Section 8.5 (Assignments by Lender), together with any and all successors and assigns of such Person; “Assignees” means the collective reference to all Assignees.

 

“Bankruptcy Code” means Title 11 of the United States Code, as amended from time to time, and any successor Laws.

 

“Blocked Account” means collectively the deposit accounts subject to the Blocked Account Agreements.

 

“Blocked Account Agreements” means collectively the Blocked Account Agreement dated as of August 13, 2003 by and among General Physics, Lender and Bank of America, N. A., each as amended, modified, substituted, extended, and renewed from time to time.

 

“Borrower” means each Person defined as a “Borrower” in the preamble of this Agreement and each Additional Borrower; “Borrowers” means the collective reference to all Persons defined as “Borrower” in the preamble to this Agreement and all Additional Borrowers.

 

“Borrowing Base” has the meaning described in Section 2.1.3 (Borrowing Base).

 

“Borrowing Base Deficiency” has the meaning described in Section 2.1.3 (Borrowing Base).

 

“Borrowing Base Report” has the meaning described in Section 2.1.4 (Borrowing Base Report).

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the State are authorized or required to close.

 

“Capital Adequacy Regulation” means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank.

 

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“Capital Expenditure” means an expenditure (whether payable in cash or other property or accrued as a liability) for Fixed or Capital Assets, including, without limitation, the entering into of a Capital Lease.

 

“Capital Lease” means with respect to any Person any lease of real or personal property, for which the related Lease Obligations have been or should be, in accordance with GAAP consistently applied, capitalized on the balance sheet of that Person.

 

“Cash Equivalents” means (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit with maturities of one (1) year or less from the date of acquisition of, or money market accounts maintained with, Lender, any Affiliate of Lender, or any other domestic commercial bank having capital and surplus in excess of One Hundred Million Dollars ($100,000,000.00) or such other domestic financial institutions or domestic brokerage houses to the extent disclosed to, and approved by, Lender and (c) commercial paper of a domestic issuer rated at least either A-1 by Standard & Poor’s Corporation (or its successor) or P-1 by Moody’s Investors Service, Inc. (or its successor) with maturities of six (6) months or less from the date of acquisition.

 

“Chattel Paper” means a record or records (including, without limitation, electronic chattel paper) that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, or a lease of specific goods; all Supporting Obligations with respect thereto; any returned, rejected or repossessed goods and software covered by any such record or records and all proceeds (in any form including, without limitation, accounts, contract rights, documents, chattel paper, instruments and general intangibles) of such returned, rejected or repossessed goods; and all Proceeds of the foregoing.

 

“Closing Date” means the date on the cover of this Agreement.

 

“Collateral” means all property of each and every Borrower subject from time to time to the Liens of this Agreement, any of the Security Documents and/or any of the other Financing Documents, together with any and all Proceeds thereof.

 

“Collateral Account” has the meaning described in Section 2.1.8 (The Collateral Account).

 

“Collateral Disclosure List” has the meaning described in Section 3.3 (Collateral Disclosure List).

 

“Commitment” means the Revolving Credit Commitment.

 

“Compliance Certificate” means a periodic Compliance Certificate described in Section 6.1.1 (Financial Statements).

 

“Commonly Controlled Entity” means an entity, whether or not incorporated, which together with any Borrower would be deemed to be a “single employer” within the meaning of Internal Revenue Code § 414(b) or (c), and for the purpose of ERISA § 302 and/or Internal Revenue Code §§ 412, 4971, 4977, 4980D, 4980E and/or each “applicable section” under

 

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Internal Revenue Code § 414(t)(2), within the meaning of the Internal Revenue Code § 414(b), (c) (m) or (o).

 

“Copyrights” means and includes, in each case whether now existing or hereafter arising, all of each Borrower’s rights, title and interest in and to (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations, copyright applications, and all renewals of any of the foregoing, (b) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past, current or future infringements of any of the foregoing, (c) the right to sue for past, present and future infringements of any of the foregoing, and (d) all rights corresponding to any of the foregoing throughout the world.

 

“Credit Facility” means the Revolving Credit Facility or the Letter of Credit Facility, as the case may be, and “Credit Facilities” means collectively the Revolving Credit Facility and the Letter of Credit Facility and any and all other credit facilities now or hereafter extended under or secured by this Agreement.

 

“Current Letter of Credit Obligations” has the meaning described in Section 2.2.5 (Payments of Letters of Credit).

 

“Default” means an event which, with the giving of notice or lapse of time, or both, would reasonably be expected to constitute an Event of Default under the provisions of this Agreement.

 

“Documents” means all documents of title or receipts, whether now existing or hereafter acquired or created, and all Proceeds of the foregoing.

 

“Eligible Receivable” and “Eligible Receivables” mean, at any time of determination thereof, the unpaid portion of each account (net of any returns, discounts, claims, credits, charges, accrued rebates or other allowances, offsets, deductions, counterclaims, disputes or other defenses and reduced by the aggregate amount of all reserves, limits and deductions provided for in this definition and elsewhere in this Agreement) receivable in United States Dollars, provided each account conforms and continues to conform to the following criteria to the satisfaction of Lender:

 

(a)            the account arose in the ordinary course of business from a bona fide outright sale of goods or from services performed;

 

(b)            the account is a valid, legally enforceable obligation of the Account Debtor and requires no further act on the part of any Person under any circumstances to make the account payable by the Account Debtor;

 

(c)            the account is based upon an enforceable order or contract, written or oral, for Inventory shipped or services performed, and the same were shipped or performed in accordance with such order or contract;

 

(d)            if the account arises from the sale of Inventory, the Inventory the sale of which gave rise to the account has been shipped or delivered

 

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to the Account Debtor on an absolute sale basis and not on a bill and hold sale basis, a consignment sale basis, a guaranteed sale basis, a sale or return basis, or on the basis of any other similar understanding;

 

(e)            if the account arises from the performance of services, such services have been fully rendered and do not relate to any warranty claim or obligation;

 

(f)             the account is evidenced by an invoice or other documentation in form acceptable to Lender, dated no later than is customary in the ordinary course of business and containing only terms normally offered by the applicable Borrower;

 

(g)            the amount shown on the books of a Borrower, and on any invoice, certificate, schedule or statement delivered to Lender is owing to such Borrower, and no partial payment has been received unless reflected on the books of such Borrower, and deducted from the amount due;

 

(h)            the account is not outstanding more than ninety (90) days from the date of the invoice therefor or past due more than sixty (60) days after its due date, which shall not be later than sixty (60) days after the invoice date;

 

(i)             the account is not owing by any Account Debtor for which Lender has deemed fifty percent (50%) or more of such Account Debtor’s other accounts (or any portion thereof) due to a Borrower, individually, or all Borrowers collectively, to be non-Eligible Receivables;

 

(j)             the account is not owing by an Account Debtor or a group of affiliated Account Debtors to any Borrower whose then existing accounts owing to that Borrower, individually, exceed in aggregate face amount fifteen percent (15%) of such Borrower’s total Eligible Receivables; provided, however, for the purposes of this subsection (j), each contract with any agency or division of the United States Government, shall be treated as though entered into with a separate Account Debtor and if a Borrower has an account or accounts which, when aggregated with other accounts owing by an Account Debtor or group of affiliated Account Debtors, exceed(s) fifteen percent (15%) of such Borrower’s total Eligible Receivables, only that portion of the account in excess of fifteen percent (15%) shall be deemed ineligible;

 

(k)            the Account Debtor has not returned, rejected or refused to retain, or otherwise notified a Borrower of any dispute concerning, or claimed nonconformity of, any of the Inventory or services from the sale or furnishing of which the account arose; provided, however, the Receivable shall be deemed ineligible only to the extent of the disputed amount;

 

(l)             the account is not subject to any present or contingent (and no facts exist which are the basis for any future) offset, claim,

 

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deduction or counterclaim, dispute or defense in law or equity on the part of such Account Debtor, or any claim for credits, allowances, or adjustments by the Account Debtor because of returned, inferior or damaged Inventory or unsatisfactory services, or for any other reason including, without limitation, those arising on account of a breach of any express or implied representation or warranty; provided, however, the Receivable shall be deemed ineligible only to the extent of the disputed amount;

 

(m)           the Account Debtor is not a Subsidiary or Affiliate of any Borrower, or an employee, officer, director or shareholder of any Borrower, or Affiliate of any Borrower;

 

(n)            the Account Debtor is not incorporated or primarily conducting business in any jurisdiction outside of the United States of America or Canada (excluding Quebec Province), unless the Account Debtor’s obligations with respect to such account are secured by a letter of credit, guaranty or banker’s acceptance having terms and from such issuers and confirmation banks as are acceptable to Lender in its sole and absolute discretion (which letter of credit, guaranty or banker’s acceptance is subject to the perfected Lien of Lender);

 

(o)            as to which none of the following events has occurred with respect to the Account Debtor on such Account:  death or judicial declaration of incompetency of an Account Debtor who is an individual; the filing by or against the Account Debtor of a request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or other relief under the bankruptcy, insolvency, or similar laws of the United States, any state or territory thereof, or any foreign jurisdiction, now or hereafter in effect; the making of any general assignment by the Account Debtor for the benefit of creditors; the appointment of a receiver or trustee for the Account Debtor or for any of the assets of the Account Debtor, including, without limitation, the appointment of or taking possession by a “custodian,” as defined in the Federal Bankruptcy Code; the institution by or against the Account Debtor of any other type of insolvency proceeding (under the bankruptcy laws of the United States or otherwise) or of any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against, or winding up of affairs of, the Account Debtor; the sale, assignment, or transfer of all or any material part of the assets of the Account Debtor; the nonpayment generally by the Account Debtor of its debts as they become due; or the cessation of the business of the Account Debtor as a going concern;

 

(p)            no Borrower, is indebted in any manner to the Account Debtor (as creditor, lessor, supplier or otherwise), with the exception of customary credits, adjustments and/or discounts given to an Account Debtor by a Borrower, in the ordinary course of its business; provided, however, if in the ordinary course of business any Borrower incurs obligations to an Account Debtor for goods or services, the account shall be deemed ineligible only to the

 

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extent of the amount of such payable due to the Account Debtor by such Borrower;

 

(q)            the account does not arise from services under or related to any warranty obligation or out of service charges, finance charges or other fees for the time value of money;

 

(r)             the account is not evidenced by chattel paper or an instrument of any kind and, except as may occur under subsection (n) above, is not secured by any letter of credit;

 

(s)            the title of the respective Borrower, to the account is absolute and is not subject to any prior assignment, claim, Lien, or security interest, except Permitted Liens;

 

(t)             no bond or other undertaking by a guarantor or surety has been or is required to be obtained, supporting the performance of any Borrower, or any other obligor in respect of any of such Borrower’s agreements with the Account Debtor or supporting the account and any of the Account Debtor’s obligations in respect of the account;

 

(u)            each Borrower, has the full and unqualified right and power to assign and grant a security interest in, and Lien on, the account to Lender as security and collateral for the payment of the Obligations;

 

(v)            the account does not arise out of a contract with, or order from, an Account Debtor that, by its terms, forbids or makes void or unenforceable the assignment or grant of a security interest by Borrower, to Lender of the account arising from such contract or order;

 

(w)           the account is subject to a Lien in favor of Lender, which Lien is perfected as to the account by the filing of financing statements and which Lien upon such filing constitutes a first priority security interest and Lien, subject to Permitted Liens;

 

(x)            the Inventory giving rise to the account was not, at the time of the sale thereof, subject to any Lien other than Permitted Liens;

 

(y)            no part of the account represents an advance or “up-front” billing for which work has not been performed or a retainage; and

 

(z)            Lender in the good faith exercise of its sole and absolute discretion has not deemed the account ineligible because of uncertainty as to the creditworthiness of the Account Debtor or because Lender otherwise considers the collateral value of such account to Lender to be impaired or its ability to realize such value to be insecure.

 

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In the event of any dispute, under the foregoing criteria, as to whether an account is, or has ceased to be, an Eligible Receivable, the decision of Lender in the good faith exercise of its sole and absolute discretion shall control.

 

“Enforcement Costs” means all reasonable expenses, charges, costs and fees whatsoever of any nature whatsoever paid or incurred by or on behalf of Lender in connection with (a) any or all of the Obligations, this Agreement and/or any of the other Financing Documents, (b) the creation, perfection, collection, maintenance, preservation, defense, protection, realization upon, disposition, sale or enforcement of all or any part of the Collateral, this Agreement or any of the other Financing Documents, including, without limitation, those costs and expenses more specifically enumerated in Section 3.6 (Costs) and/or Section 8.10 (Enforcement Costs), and further including, without limitation, amounts paid to lessors, processors, bailees, warehousemen, sureties, judgment creditors and others in possession of or with a Lien against or claimed against the Collateral, and (c) the monitoring, administration, processing and/or servicing of any or all of the Obligations, the Financing Documents, and/or the Collateral.

 

“Equipment” means all equipment, machinery, computers, chattels, tools, parts, machine tools, furniture, furnishings, fixtures and supplies of every nature, presently existing or hereafter acquired or created and wherever located, whether or not the same shall be deemed to be affixed to real property, and all of such types of property leased by any Borrower and all of Borrowers’ rights and interests with respect thereto under such leases (including, without limitation, options to purchase), together with all accessions, additions, fittings, accessories, special tools, and improvements thereto and substitutions therefor and all parts and equipment which may be attached to or which are necessary or beneficial for the operation, use and/or disposition of such personal property, all licenses, warranties, franchises and General Intangibles related thereto or necessary or beneficial for the operation, use and/or disposition of the same, together with all Accounts, Chattel Paper, Instruments and other consideration received by any Borrower on account of the sale, lease or other disposition of all or any part of the foregoing, and together with all rights under or arising out of present or future Documents and contracts relating to the foregoing and all Proceeds of the foregoing.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

“Event of Default” has the meaning described in ARTICLE VII (Default and Rights and Remedies).

 

“Facilities” means the collective reference to the loan, letter of credit, interest rate protection, foreign exchange risk, cash management, and other credit facilities now or hereafter provided to any one or more of Borrowers by Lender.

 

“Fees” means, without duplication, the collective reference to each fee payable to Lender under the terms of this Agreement or under the terms of any of the other Financing Documents.

 

“Financing Documents” means at any time collectively this Agreement, the Notes, the Security Documents, the Letter of Credit Documents, and any other instrument, agreement or document previously, simultaneously or hereafter executed and delivered by any Borrower, any

 

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Guarantor and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with this Agreement, any Note, any of the Security Documents, any of the Facilities, and/or any of the Obligations.

 

“Fixed or Capital Assets” of a Person at any date means all assets which would, in accordance with GAAP consistently applied, be classified on the balance sheet of such Person as property, plant or equipment at such date.

 

“GAAP” means generally accepted accounting principles in the United States of America in effect from time to time.

 

“General Intangibles” means all general intangibles of every nature, whether presently existing or hereafter acquired or created, and without implying any limitation of the foregoing, further means all books and records, commercial tort claims, other claims (including without limitation all claims for income tax and other refunds), payment intangibles, Supporting Obligations, choses in action, claims, causes of action in tort or equity, contract rights, judgments, customer lists, software, Patents, Trademarks, licensing agreements, rights in intellectual property, goodwill (including goodwill of any Borrower’s business symbolized by and associated with any and all Trademarks, trademark licenses, Copyrights and/or service marks), royalty payments, licenses, letter-of-credit rights, letters of credit, contractual rights, the right to receive refunds of unearned insurance premiums, rights as lessee under any lease of real or personal property, literary rights, Copyrights, service names, service marks, logos, trade secrets, amounts received as an award in or settlement of a suit in damages, deposit accounts, interests in joint ventures, general or limited partnerships, or limited liability companies or partnerships, rights in applications for any of the foregoing, books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to any or all of the foregoing, all Supporting Obligations with respect to any of the foregoing, and all Equipment and General Intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records, and all Proceeds of the foregoing.

 

“Governmental Authority” means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of government and any department, agency or instrumentality thereof.

 

“Government Contracts” means any contract with the United States or any department, agency or instrumentality of the United States.

 

“GPX” means GP Strategies Corporation, a corporation organized and existing under the laws of the State of Delaware.

 

“Guarantor” means GPX and its successors and assigns.

 

“Guaranty” means that certain guaranty of payment for the benefit of Lender dated as of the Closing Date from GPX, as the same may from time to time be extended, amended, restated or otherwise modified.

 

“Hazardous Materials” means (a) any “hazardous waste” as defined by the Resource Conservation and Recovery Act of 1976, as amended from time to time, and regulations

 

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promulgated thereunder; (b) any “hazardous substance” as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, and regulations promulgated thereunder; and (c) any substance the presence of which on any property now or hereafter owned, acquired or operated by any Borrower is prohibited by any Law similar to those set forth in this definition.

 

“Hazardous Materials Contamination” means the contamination (whether presently existing or occurring after the date of this Agreement) by Hazardous Materials of any property owned, operated or controlled by any Borrower or for which any Borrower has responsibility, including, without limitation, improvements, facilities, soil, ground water, air or other elements on, or of, any property now or hereafter owned, acquired or operated by any Borrower, and any other contamination by Hazardous Materials for which any Borrower is responsible.

 

“Indebtedness” of a Person means at any date the total liabilities of such Person at such time determined in accordance with GAAP consistently applied.

 

“Indebtedness for Borrowed Money” of a Person means at any time the sum at such time of (a) Indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (b) any obligations of such Person in respect of letters of credit, banker’s or other acceptances or similar obligations issued or created for the account of such Person, (c) Lease Obligations of such Person with respect to Capital Leases, (d) all liabilities secured by any Lien on any property owned by such Person, to the extent attached to such Person’s interest in such property, even though such Person has not assumed or become personally liable for the payment thereof, (e) obligations of third parties which are being guarantied or indemnified against by such Person or which are secured by the property of such Person; (f) any obligation of such Person under an employee stock ownership plan or other similar employee benefit plan; (g) any obligation of such Person or a Commonly Controlled Entity to a Multiemployer Plan; and (h) any obligations, liabilities or indebtedness, contingent or otherwise, under or in connection with, any Swap Contract; but excluding trade and other accounts payable in the ordinary course of business in accordance with customary trade terms and which are not overdue (as determined in accordance with customary trade practices) or which are being disputed in good faith by such Person and for which adequate reserves are being provided on the books of such Person in accordance with GAAP.

 

“Indemnified Parties” has the meaning set forth in Section 8.20 (Indemnification).

 

“Instrument” means a negotiable instrument or any other writing which evidences a right to payment of a monetary obligation and is not itself a security agreement or lease and is of a type that in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment, and all Supporting Obligations with respect to any of the foregoing and all Proceeds with respect to any of the foregoing.

 

“Interest Coverage Ratio” shall be defined as (a) earnings before deduction of interest and taxes paid divided by (b) the sum of interest and tax payments.

 

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the Income Tax Regulations issued and proposed to be issued thereunder.

 

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“Inventory” means all goods whether now owned or hereafter acquired and other personal property furnished under any contract of service or intended for sale or lease, including, without limitation, all raw materials, work-in-process, finished goods and materials and supplies of any kind, nature or description which are used or consumed in any Borrower’s business or are or might be used in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods and other personal property and all licenses, warranties, franchises, General Intangibles, personal property and all documents of title or documents relating to the same, together with all Accounts, Chattel Paper, Instruments and other consideration received on account of the sale, lease or other disposition of all or any part of the foregoing, and together with all rights under or arising out of present or future Documents and contracts relating to the foregoing and all Proceeds of the foregoing.

 

“Investment Property” means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract or commodity account and all Proceeds of, and Supporting Obligations with respect to, the foregoing.

 

“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).

 

“Item of Payment” means each check, draft, cash, money, instrument, item, and other remittance in payment or on account of payment of the Receivables or otherwise with respect to any Collateral, including, without limitation, cash proceeds of any returned, rejected or repossessed goods, the sale or lease of which gave rise to a Receivable, and other proceeds of Collateral; and “Items of Payment” means the collective reference to all of the foregoing.

 

“Laws” means all ordinances, statutes, rules, regulations, orders, injunctions, writs, or decrees of any Governmental Authority.

 

“Lease Obligations” of a Person means for any period the rental commitments of such Person for such period under leases for real and/or personal property (net of rent from subleases thereof, but including taxes, insurance, maintenance and similar expenses which such Person, as the lessee, is obligated to pay under the terms of said leases, except to the extent that such taxes, insurance, maintenance and similar expenses are payable by sublessees), including rental commitments under Capital Leases.

 

“Letter of Credit” and “Letters of Credit” shall have the meanings described in Section 2.2.1 (Letters of Credit).

 

“Letter of Credit Agreement” means the collective reference to each letter of credit application and agreement substantially in the form of Lender’s then standard form of application for letter of credit or such other form as may be approved by Lender, executed and delivered by any Borrower or Borrowers in connection with the issuance of a Letter of Credit, as the same may from time to time be amended, restated, supplemented or modified and “Letter of Credit Agreements” means all of the foregoing in effect at any time and from time to time.

 

“Letter of Credit Cash Collateral Account” has the meaning described in Section 2.2.3 (Terms of Letters of Credit).

 

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“Letter of Credit Documents” means any and all drafts under or purporting to be under a Letter of Credit, any Letter of Credit Agreement, and any other instrument, document or agreement executed and/or delivered by any Borrower or Borrowers or any other Person under, pursuant to or in connection with a Letter of Credit or any Letter of Credit Agreement.

 

“Letter of Credit Facility” means the facility established pursuant to Section 2.2 (Letter of Credit Facility).

 

“Letter of Credit Fee” and “Letter of Credit Fees” have the meanings described in Section 2.2.2 (Letter of Credit Fees).

 

“Letter of Credit Obligations” means all Obligations of Borrowers with respect to the Letters of Credit and the Letter of Credit Agreements.

 

“Letter-of-credit right” means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance.

 

“Liabilities” means at any date all liabilities that in accordance with GAAP consistently applied should be classified as liabilities on a consolidated balance sheet of Borrowers and their respective Subsidiaries.

 

“LIBOR Market Index Rate”, for any day the rate (rounded to the next higher 1/100 of 1%) for 1 month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m., London time, on such day, provided, if such day is not a London business day, then the immediately preceding London business day (or if not so reported, then as determined by Lender from another recognized source or interbank quotation).

 

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing).

 

“Loan Notice” has the meaning described in Section 2.1.2 (Procedure for Making Advances).

 

“Lockbox” has the meaning described in Section 2.1.8 (The Collateral Account).

 

“Maximum Rate” has the meaning described in Section 2.4.6 (Maximum Interest Rate).

 

“Monitoring Fee” and “Monitoring Fees” have the meanings described in Section 2.4.4 (Monitoring Fee).

 

“Multiemployer Plan” means a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

 

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“Net Worth” means the consolidated shareholders’ equity, defined in accordance with GAAP, of Borrowers and their respective Subsidiaries.

 

“Notice” means a communication delivered in accordance with the terms of Section 8.1 (Notices).

 

“Note” means the Revolving Credit Note, and “Notes” means collectively the Revolving Credit Note and any other promissory note which may from time to time evidence all or any portion of the Obligations.

 

“Obligations” means, without duplication, all present and future indebtedness, duties, obligations, and liabilities, whether now existing or contemplated or hereafter arising, of any one or more of Borrowers to Lender under, arising pursuant to, in connection with and/or on account of the provisions of this Agreement, each Note, each Security Document, and/or any of the other Financing Documents, the Revolving Loan, any Swap Contract and/or any of the Facilities including, without limitation, the principal of, and interest on, each Note, late charges, the Fees, Enforcement Costs, and prepayment fees (if any), letter of credit reimbursement obligations, letter of credit fees or fees charged with respect to any guaranty of any letter of credit, regardless of whether such indebtedness, duties, obligations, and liabilities be direct, indirect, primary, secondary, joint, several, joint and several, fixed or contingent; and also means any and all renewals, extensions, substitutions, amendments, restatements and rearrangements of any such indebtedness, duties, obligations, and liabilities.

 

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

 

“Origination Fee” has the meaning described in Section 2.4.3 (Origination Fee).

 

“Outstanding Letter of Credit Obligations” has the meaning described in Section 2.2.3 (Terms of Letters of Credit).

 

“Patents” means and includes, in each case whether now existing or hereafter arising, all of each Borrower’s rights, title and interest in and to (a) any and all patents and patent applications, (b) any and all inventions and improvements described and claimed in such patents and patent applications, (c) reissues, divisions, continuations, renewals, extensions and continuations-in-part of any patents and patent applications, (d) income, royalties, damages, claims and payments now or hereafter due and/or payable under and with respect to any patents or patent applications, including, without limitation, damages and payments for past and future infringements, (e) rights to sue for past, present and future infringements of patents, and (f) all rights corresponding to any of the foregoing throughout the world.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Permitted Acquisitions” means acquisitions which may be made by Borrower, provided there is no Default or Event of Default both prior to the acquisition and on a pro-forma basis, for which the aggregate cash purchase price paid at closing plus the projected earnout payments to be paid by Borrower do not exceed Twenty Million Dollars ($20,000,000).

 

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“Permitted Liens” means:  (a) Liens for Taxes which are not delinquent or which Lender has determined in the exercise of its sole and absolute discretion (i) are being diligently contested in good faith and by appropriate proceedings, and such contest operates to suspend collection of the contested Taxes and enforcement of a Lien, (ii) the applicable Borrower, has the financial ability to pay, with all penalties and interest, at all times without materially and adversely affecting such Borrower, and (iii) are not, and will not be with appropriate filing, the giving of notice or the passage of time alone, entitled to priority over any Lien of Lender; (b) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds and other obligations of a like nature incurred in the ordinary course of business; (c) Liens securing the Obligations; (d) judgment Liens to the extent the entry of such judgment does not constitute an Event of Default under the terms of this Agreement or result in the sale or levy of, or execution on, any of the Collateral; (e) Liens existing as of the date hereof, including Liens securing the Subordinated Debt; (f) Liens securing Capital Leases that are otherwise permitted hereunder; (g) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Borrower; (h) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Borrower; and (i) such other Liens, if any, as are set forth on Schedule 4.1.20 attached hereto and made a part hereof.

 

“Permitted Uses” means (a) an amount not to exceed $10,000,000 to be used to repurchase issued and outstanding stock of GPX after August 14, 2008, (b) general working capital purposes arising in the ordinary course of Borrowers’ business which shall include payment of annual earn-out payments in connection with the acquisitions of Sandy Corporation, Via Training, LLC and Performance Consulting Services, Inc., and (c) to support the issuance of Letters of Credit.

 

“Person” means and includes an individual, a corporation, a partnership, a joint venture, a limited liability company or partnership, a trust, an unincorporated association, a Governmental Authority, or any other organization or entity.

 

“Plan” means any “pension plan” as defined in ERISA Section 3(2) maintained by any Borrower or a Commonly Controlled Entity in which any Borrower or a Commonly Controlled Entity is an “employer” as defined in Section 3(5) of ERISA and which is intended to qualify for favorable tax treatment pursuant to Internal Revenue Code Section 401(a).

 

“Post-Default Rate” means the Applicable Rate in effect from time to time, plus three percent (3%) per annum.

 

“Post-Expiration Date Letter of Credit” and “Post-Expiration Date Letters of Credit” have the meanings described in Section 2.2.3 (Terms of Letters of Credit).

 

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“Prepayment” means a Revolving Loan Mandatory Prepayment or a Revolving Loan Optional Prepayment, as the case may be, and “Prepayments” mean collectively all Revolving Loan Mandatory Prepayments and all Revolving Loan Optional Prepayments.

 

“Pricing Ratio” means the Total Liabilities to Tangible Net Worth Ratio.

 

“Proceeds” has the meaning described in the Uniform Commercial Code as in effect from time to time.

 

“Receivable” means a now owned or hereafter owned, acquired or created Account, Chattel Paper, General Intangible or Instrument and all Proceeds thereof; and “Receivables” means all now or hereafter owned, acquired or created Accounts, Chattel Paper, General Intangibles and Instruments, and all Proceeds thereof.

 

“Registered Organization” means an organization organized solely under the law of a single state or the United States and as to which the state or the United States must maintain a public record showing the organization to have been organized.

 

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA or the regulations thereunder.

 

“Responsible Officer” means, with respect to a Person, the chief executive officer or the president of such Person or, with respect to financial matters, the chief financial officer of such Person.

 

“Revolving Credit Commitment” means the agreement of Lender relating to the making of the Revolving Loan and advances thereunder subject to and in accordance with the provisions of this Agreement.

 

“Revolving Credit Commitment Period” means the period of time from the Closing Date to the Business Day preceding the Revolving Credit Termination Date.

 

“Revolving Credit Committed Amount” has the meaning described in Section 2.1.1 (Revolving Credit Facility).

 

“Revolving Credit Expiration Date” means October 31, 2010, unless otherwise extended for successive periods of one (1) year beyond the then existing maturity date commencing as of the first anniversary date of this Agreement, by Lender in the exercise of its sole and absolute discretion.

 

“Revolving Credit Facility” means the facility established by Lender pursuant to Section 2.1 (Revolving Credit Facility).

 

“Revolving Credit Note” has the meaning described in Section 2.1.5 (Revolving Credit Note).

 

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“Revolving Credit Termination Date” means the earlier of (a) the Revolving Credit Expiration Date, or (b) the date on which the Revolving Credit Commitment is terminated pursuant to Section 7.2 (Remedies) or otherwise.

 

“Revolving Credit Unused Line Fee” and “Revolving Credit Unused Line Fees” have the meanings described in Section 2.1.10 (Revolving Credit Unused Line Fee).

 

“Revolving Loan” has the meaning described in Section 2.1.1 (Revolving Credit Facility).

 

“Revolving Loan Account” has the meaning described in Section 2.1.9 (Revolving Loan Account).

 

“Revolving Loan Mandatory Prepayment” and “Revolving Loan Mandatory Prepayments” have the meanings described in Section 2.1.6 (Mandatory Prepayments of Revolving Loan).

 

“Revolving Loan Optional Prepayment” and “Revolving Loan Optional Prepayments” have the meanings described in Section 2.1.7 (Optional Prepayment of Revolving Loan).

 

“Sanctioned Country” means a country subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/sanctions/, or as otherwise published from time to time.

 

“Sanctioned Person” means (i) a person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/enforcement/ofac/sdn or as otherwise published from time to time, or (ii) (A) an agency of the government of a Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or (C) a person resident in a Sanctioned Country to the extent subject to a sanctions program administered by OFAC.

 

“Security Documents” means collectively any assignment, pledge agreement, security agreement, mortgage, deed of trust, deed to secure debt, financing statement and any similar instrument, document or agreement under or pursuant to which a Lien is now or hereafter granted to, or for the benefit of, Lender on any real or personal property of any Person to secure all or any portion of the Obligations, all as the same may from time to time be amended, restated, supplemented or otherwise modified.

 

“State” means the State of Maryland.

 

“Subordinated Indebtedness” means all Indebtedness incurred at any time by any Borrower or Borrowers, which is in amounts, subject to repayment terms, and subordinated to the Obligations, as set forth in one or more written agreements, all in form and substance satisfactory to Lender in its sole and absolute discretion.

 

“Subsidiary” means any corporation the majority of the voting shares of which at the time are owned directly by any Borrower and/or by one or more Subsidiaries of any Borrower.

 

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“Supporting Obligation” means a letter-of-credit right, secondary obligation or obligation of a secondary obligor or that supports the payment or performance of an account, chattel paper, document, general intangible, instrument or investment property.

 

“Swap Contract” means any document, instrument or agreement between Borrower and Lender or any Affiliate of Lender, now existing or entered into in the future, relating to an interest rate swap transaction, forward rate transaction, interest rate cap, floor or collar transaction, any similar transaction, any option to enter into any of the foregoing, and any combination of the foregoing, which agreement may be oral or in writing, including, without limitation, any master agreement relating to or governing any or all of the foregoing and any related schedule or confirmation, each as amended from time to time.

 

“Tangible Net Worth” means as to the Borrowers and their respective Subsidiaries on a consolidated basis at any date of determination thereof, the sum at such time of:  the Net Worth less the total of (a) all Assets which would be classified as intangible assets under GAAP consistently applied, (b) any revaluation or other write-up in book value of assets subsequent to the date of the most recent financial statements delivered to Lender, and (c) the amount of all loans and advances (exclusive of advances permitted under Section 6.2.7(a)) to, or investments in, any Person, excluding Cash Equivalents and deposit accounts maintained by Borrower with any financial institution.

 

“Taxes” means all taxes and assessments whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character (including all penalties or interest thereon), which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority on any Borrower or any of its or their properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.

 

“Trademarks” means and includes in each case whether now existing or hereafter arising, all of Borrower’s rights, title and interest in and to (a) any and all trademarks (including service marks), trade names and trade styles, and applications for registration thereof and the goodwill of the business symbolized by any of the foregoing, (b) any and all licenses of trademarks, service marks, trade names and/or trade styles, whether as licensor or licensee, (c) any renewals of any and all trademarks, service marks, trade names, trade styles and/or licenses of any of the foregoing, (d) income, royalties, damages and payments now or hereafter due and/or payable with respect thereto, including, without limitation, damages, claims, and payments for past, present and future infringements thereof, (e) rights to sue for past, present and future infringements of any of the foregoing, including the right to settle suits involving claims and demands for royalties owing, and (f) all rights corresponding to any of the foregoing throughout the world.

 

“Unbilled Receivables” means Receivables which otherwise qualify as Eligible Receivables but which shall be billed within fifteen (15) days after the last day of the prior month and are included in General Physics’ General Ledger Account number 11-601 titled “Sales earned not billed”.

 

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“Uniform Commercial Code” means, unless otherwise provided in this Agreement, the Uniform Commercial Code as adopted by and in effect from time to time in the State or in any other jurisdiction, as applicable.

 

“Wholly Owned Subsidiary” means any corporation, all the shares of stock of all classes of which (other than directors’ qualifying shares) at the time are owned directly or indirectly by a Borrower and/or by one or more Wholly Owned Subsidiaries of Borrower.

 

Section 1.2                                       Accounting Terms and Other Definitional Provisions.

 

Unless otherwise defined herein, as used in this Agreement and in any certificate, report or other document made or delivered pursuant hereto, accounting terms not otherwise defined herein, and accounting terms only partly defined herein, to the extent not defined, shall have the respective meanings given to them under GAAP, as consistently applied to the applicable Person.  All terms used herein which are defined by the Uniform Commercial Code shall have the same meanings as assigned to them by the Uniform Commercial Code unless and to the extent varied by this Agreement.  The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, subsection, schedule and exhibit references are references to articles, sections or subsections of, or schedules or exhibits to, as the case may be, this Agreement unless otherwise specified.  As used herein, the singular number shall include the plural, the plural the singular and the use of the masculine, feminine or neuter gender shall include all genders, as the context may require.  Reference to any one or more of the Financing Documents shall mean the same as the foregoing may from time to time be amended, restated, substituted, extended, renewed, supplemented or otherwise modified.

 

ARTICLE II
THE CREDIT FACILITIES

 

Section 2.1                                       The Revolving Credit Facility.

 

2.1.1         Revolving Credit Facility.

 

Subject to and upon the provisions of this Agreement, Lender establishes a revolving credit facility in favor of Borrowers.  The aggregate of all advances under the Revolving Credit Facility is sometimes referred to in this Agreement as the “Revolving Loan”.

 

The principal amount of Thirty-Five Million Dollars ($35,000,000) is the “Revolving Credit Committed Amount”.

 

During the Revolving Credit Commitment Period, Lender agrees to make advances under the Revolving Credit Facility in accordance with the provisions of this Agreement; provided that after giving effect to any request duly made pursuant to this Agreement, the aggregate outstanding principal balance of the Revolving Loan and all Letter of Credit Obligations would not exceed the lesser of (a) the Revolving Credit Committed Amount or (b) the then most current Borrowing Base.

 

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Unless sooner paid, the unpaid Revolving Loan, together with interest accrued and unpaid thereon, and all other Obligations shall be due and payable in full on the Revolving Credit Expiration Date.

 

2.1.2                         Procedure for Making Advances Under the Revolving Loan; Lender Protection Loans.

 

Borrowers may borrow under the Revolving Credit Facility on any Business Day.  Advances under the Revolving Loan shall be deposited to a demand deposit account of General Physics with Lender (or an Affiliate of Lender) or shall be otherwise applied as directed by General Physics, which direction Lender may require to be in writing.  No later than 12:00 p.m. (Eastern Time) on the date of the requested borrowing, General Physics shall give Lender oral or written notice (a “Loan Notice”) of the amount and (if requested by Lender) the purpose of the requested borrowing.  Any oral Loan Notice shall be confirmed in writing by General Physics within three (3) Business Days after the making of the requested advance under the Revolving Loan.  Each Loan Notice shall be irrevocable.

 

In addition, each Borrower hereby irrevocably authorizes Lender at any time and from time to time, without further request from or notice to such Borrower, to make advances under the Revolving Loan, and to establish, without duplication, reserves against the Borrowing Base, which Lender, in its sole and absolute discretion, deems necessary or appropriate to protect the interests of Lender, including, without limitation, advances and reserves under the Revolving Loan made to cover debit balances in the Revolving Loan Account, principal of, and/or interest on, the Revolving Loan, the Obligations (including, without limitation, any Letter of Credit Obligations), and/or Enforcement Costs, prior to, on, or after the termination of other advances under this Agreement, regardless of whether the outstanding principal amount of the Revolving Loan that Lender may advance or reserve hereunder exceeds the Revolving Credit Committed Amount or the Borrowing Base.  Lender shall communicate to General Physics from time to time any action taken under this paragraph either orally or in writing.

 

2.1.3                         Borrowing Base.

 

As used in this Agreement, the term “Borrowing Base” means at any time, an amount equal to the aggregate of (a) eighty percent (80%) of the amount of Eligible Receivables of Borrowers and (b) eighty percent (80%) of Borrowers’ Unbilled Receivables.

 

The Borrowing Base shall be computed based on the Borrowing Base Report most recently delivered to and accepted by Lender in its sole and absolute discretion.  In the event Borrowers fail to furnish a Borrowing Base Report required by Section 2.1.4 (Borrowing Base Report), or in the event Lender believes that a Borrowing Base Report is no longer accurate, Lender may, in its sole and absolute discretion exercised from time to time and without limiting its other rights and remedies under this Agreement, suspend the making of or limit advances under the Revolving Loan.

 

If at any time the total of the aggregate principal amount of the Revolving Loan and Outstanding Letter of Credit Obligations exceeds the Borrowing Base, a borrowing base deficiency (“Borrowing Base Deficiency”) shall exist.  Each time a Borrowing Base

 

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Deficiency exists, Borrowers, at the sole and absolute discretion of Lender exercised from time to time, shall pay the Borrowing Base Deficiency ON DEMAND to Lender.

 

Without implying any limitation on Lender’s discretion with respect to the Borrowing Base, the criteria for Eligible Receivables contained in the respective definitions of Eligible Receivables are in part based upon the business operations of Borrowers existing on or about the Closing Date and upon information and records furnished to Lender by Borrowers.  If at any time or from time to time hereafter, the business operations of Borrowers change or such information and records furnished to Lender is incorrect or misleading, Lender in its discretion, may at any time and from time to time during the duration of this Agreement change such criteria or add new criteria.  Lender shall communicate such changed or additional criteria to Borrowers from time to time either orally or in writing.

 

2.1.4                         Borrowing Base Report.

 

Borrowers will furnish to Lender no less frequently than monthly and at such other times as may be requested by Lender a report of the Borrowing Base (each a “Borrowing Base Report”; collectively, the “Borrowing Base Reports”) in the form required from time to time by Lender, appropriately completed and duly signed.  The Borrowing Base Report shall contain the amount and payments on the Receivables, both billed and unbilled, and the calculations of the Borrowing Base, all in such detail, and accompanied by such supporting and other information, as Lender may from time to time request.  Upon Lender’s request Borrowers will provide Lender with (a) confirmatory assignment schedules; (b) copies of Account Debtor invoices; (c) evidence of shipment or delivery; and (d) such further schedules, documents and/or information regarding the Receivables, both billed and unbilled, as Lender may reasonably require.  The items to be provided under this subsection shall be in form satisfactory to Lender, and certified as true and correct by a Responsible Officer (or by any other officers or employees of Borrower whom a Responsible Officer from time to time authorizes in writing to do so), and delivered to Lender from time to time solely for Lender’s convenience in maintaining records of the Collateral.  Any Borrower’s failure to deliver any of such items to Lender shall not affect, terminate, modify, or otherwise limit the Liens of Lender on the Collateral.

 

2.1.5                         Revolving Credit Note.

 

The obligation of Borrowers to pay the Revolving Loan, with interest, shall be evidenced by a promissory note (as from time to time extended, amended, restated, supplemented or otherwise modified, the “Revolving Credit Note”) substantially in the form of EXHIBIT B attached hereto and made a part hereof, with appropriate insertions.  The Revolving Credit Note shall be payable to the order of Lender at the times provided in the Revolving Credit Note, and shall be in the principal amount of the Revolving Credit Committed Amount.  Borrowers acknowledge and agree that, if the outstanding principal balance of the Revolving Loan outstanding from time to time exceeds the face amount of the Revolving Credit Note, the excess shall bear interest at the Post-Default Rate for the Revolving Loan and shall be payable, with accrued interest, ON DEMAND.  The Revolving Credit Note shall not operate as a novation of any of the Obligations or nullify, discharge, or release any such Obligations or the continuing contractual relationship of the parties hereto in accordance with the provisions of this Agreement.

 

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2.1.6                         Mandatory Prepayments of Revolving Loan.

 

Borrowers shall make the mandatory prepayments (each a “Revolving Loan Mandatory Prepayment” and collectively, the “Revolving Loan Mandatory Prepayments”) of the Revolving Loan at any time and from time to time in such amounts as is required pursuant to Section 2.1.3 (Borrowing Base) in order to cover any Borrowing Base Deficiency.

 

2.1.7                         Optional Prepayments of Revolving Loan.

 

Borrowers shall have the option, at any time and from time to time, to prepay (each a “Revolving Loan Optional Prepayment” and collectively the “Revolving Loan Optional Prepayments”) the Revolving Loan, in whole or in part without premium or penalty.

 

2.1.8                         The Collateral Account.

 

Each Borrower will deposit, or cause to be deposited, all Items of Payment to a bank account or bank accounts designated by Lender and from which Lender alone has power of access and withdrawal (collectively, the “Collateral Account”).  In the case of any deposit that is made by a Borrower manually (i.e., the payment is received by a Borrower rather than being delivered to the Lockbox or wired to the Collateral Account), such deposit shall be made not later than the next Business Day after the date of receipt of the Items of Payment.  The Items of Payment shall be deposited in precisely the form received, except for the endorsements of the applicable Borrower where necessary to permit the collection of any such Items of Payment, each Borrower hereby agreeing to make such endorsement.  In the event any Borrower shall fail to do so, Lender is hereby authorized by each Borrower to make the endorsement in the name of the applicable Borrower.  Prior to such a deposit, Borrowers will not commingle any Items of Payment with any of the other funds or property of any Borrower, but will hold them separate and apart in trust and for the account of Lender.

 

Each Borrower shall direct its Account Debtors that all Items of Payment are to be either (a) wired to the Collateral Account or (b) mailed to one or more post-office boxes designated by Lender, or to such other additional or replacement post-office boxes pursuant to the request of Lender from time to time (collectively, the “Lockbox”).  Lender shall have unrestricted and exclusive access to the Lockbox.

 

Each Borrower hereby authorizes Lender to inspect all Items of Payment, endorse all Items of Payment in the name of such Borrower, and deposit such Items of Payment in the Collateral Account.  Lender reserves the right, exercised in its sole and absolute discretion from time to time, to provide to the Collateral Account credit prior to final collection of an Item of Payment and to disallow credit for any Item of Payment which is unsatisfactory to Lender.  In the event Items of Payment are returned to Lender for any reason whatsoever, Lender may, in the exercise of its discretion from time to time, forward such Items of Payment a second time.  Any returned Items of Payment shall be charged back to the Collateral Account, the Revolving Loan Account, or other account, as appropriate.

 

Lender will apply the whole or any part of the collected funds credited to the Collateral Account (including funds received from the Blocked Account) against the Revolving Loan (or with respect to Items of Payment that are not proceeds of Accounts or after the occurrence and during the continuance of an Event of Default, against any of the Obligations)

 

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or credit such collected funds to a depository account of Borrower with Lender (or an Affiliate of Lender), the order and method of such application to be in the sole discretion of Lender.

 

2.1.9                         Revolving Loan Account.

 

Lender will establish and maintain a loan account on its books (the “Revolving Loan Account”) to which Lender will (a)  debit (i) the principal amount of each advance of the Revolving Loan made by Lender hereunder as of the date made, (ii) the amount of any interest accrued on the Revolving Loan as and when due, and (iii) any other amounts due and payable by Borrowers to Lender from time to time under the provisions of this Agreement in connection with the Revolving Loan, including, without limitation, Enforcement Costs, Fees, late charges, and service, collection and audit fees, as and when due and payable, and (b)  credit all payments made by Borrowers to Lender on account of the Revolving Loan as of the date made including, without limitation, funds credited to the Revolving Loan Account from the Collateral Account.  Lender may debit the Revolving Loan Account for the amount of any Item of Payment that is returned to Lender unpaid.  All credit entries to the Revolving Loan Account are conditional and shall be readjusted as of the date made if final and indefeasible payment is not received by Lender in cash or solvent credits.  Any and all periodic or other statements or reconciliations, and the information contained in those statements or reconciliations, of the Revolving Loan Account shall be final, binding and conclusive upon Borrowers in all respects, absent manifest error, unless Lender receives specific written objection thereto from Borrowers within thirty (30) Business Days after such statement or reconciliation shall have been sent by Lender.

 

2.1.10                   Revolving Credit Unused Line Fee.

 

Borrowers shall pay to Lender a revolving credit facility fee (collectively, the “Revolving Credit Unused Line Fees” and individually, a “Revolving Credit Unused Line Fee”) in an amount equal to three-eighths percent (3/8%) per annum of the average daily unused and undisbursed portion of the Revolving Credit Committed Amount in effect from time to time accruing during each quarter; provided, however, the Revolving Credit Unused Line Fee shall be calculated at a rate equal to one-quarter of one percent (1/4%) per annum of the average daily unused and undisbursed portion of the Revolving Credit Committed Amount in effect from time to time accruing during such quarter if the unused and undisbursed portion of the Revolving Credit Committed Amount is less than fifty percent (50%) of the Revolving Credit Committed Amount.  The accrued and unpaid portion of the Revolving Credit Unused Line Fee shall be paid in arrears by Borrowers to Lender on the first day of each September, December, March and June, commencing on the first such date following the date hereof, and on the Revolving Credit Termination Date.

 

Section 2.2                                       The Letter of Credit Facility.

 

2.2.1                         Letters of Credit.

 

Subject to and upon the provisions of this Agreement, and as a part of the Revolving Credit Commitment, any of Borrowers, upon the prior approval of Lender, may obtain standby letters of credit (as the same may from time to time be amended, supplemented or otherwise modified, each a “Letter of Credit” and collectively the “Letters of Credit”) from Lender from time to time from the Closing Date until the Business Day preceding the Revolving

 

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Credit Termination Date.  No Borrower will be entitled to obtain a Letter of Credit hereunder unless (a) after giving effect to the request, the outstanding principal balance of the Revolving Loan and of the Letter of Credit Obligations would not exceed the lesser of (i) the Revolving Credit Committed Amount or (ii) the most current Borrowing Base and (b) the sum of the aggregate face amount of the then outstanding Letters of Credit (including the face amount of the requested Letter of Credit) does not exceed Five Million Dollars ($5,000,000)

 

2.2.2         Letter of Credit Fees.

 

Prior to or simultaneously with the opening of each Letter of Credit, Borrowers shall pay to Lender, a letter of credit fee (each a “Letter of Credit Fee” and collectively the “Letter of Credit Fees”) in an amount equal to the Applicable Margin multiplied by the face amount of the Letter of Credit, but not less than the customary fee charged commercial customers for issuing a Letter of Credit from time to time.  The Letter of Credit Fees shall be paid upon the opening of each Letter of Credit and upon each anniversary thereof, if any.  In addition, Borrowers shall also pay to Lender all other reasonable and customary amendment, negotiation, processing, transfer or other fees to the extent and as and when required by the provisions of any Letter of Credit Agreement.  All Letter of Credit Fees and all such other additional fees are included in and are a part of the “Fees” payable by Borrowers under the provisions of this Agreement and are a part of the Obligations.

 

2.2.3                         Terms of Letters of Credit.

 

Each Letter of Credit shall (a) be opened pursuant to a Letter of Credit Agreement, and (b) expire on a date not later than the Business Day preceding the Revolving Credit Expiration Date; provided, however, if any Letter of Credit does have an expiration date later than the Business Day preceding the Revolving Credit Termination Date (each a “Post-Expiration Date Letter of Credit” and collectively, the “Post-Expiration Date Letters of Credit”), effective as of the Business Day preceding the Revolving Credit Termination Date and without prior notice to or the consent of Borrowers, Lender shall make advances under the Revolving Loan for the account of Borrowers in the aggregate face amount of all such Letters of Credit.  Lender shall deposit the proceeds of such advances into one or more non-interest bearing accounts with and in the name of Lender and over which Lender alone shall have exclusive power of access and withdrawal (collectively, the “Letter of Credit Cash Collateral Account”).  The Letter of Credit Cash Collateral Account is to be held by Lender as additional collateral and security for any Letter of Credit Obligations relating to the Post-Expiration Date Letters of Credit.  Each Borrower hereby assigns, pledges, grants and sets over to Lender a first priority security interest in, and Lien on, all of the funds on deposit in the Letter of Credit Cash Collateral Account, together with any and all proceeds and products thereof as additional collateral and security for the Letter of Credit Obligations relating to the Post-Expiration Date Letters of Credit.  Each Borrower acknowledges and agrees that Lender shall be entitled to fund any draw or draft on any Post-Expiration Date Letter of Credit from the monies on deposit in the Letter of Credit Cash Collateral Account with notice to but without the consent of any Borrower.  Each Borrower further acknowledges and agrees that Lender’s election to fund any draw or draft on any Post-Expiration Date Letter of Credit from the Letter of Credit Cash Collateral shall in no way limit, impair, lessen, reduce, release or otherwise adversely affect Borrowers’ obligation to pay any Letter of Credit Obligations under or relating to the Post-Expiration Date Letters of Credit.  At such time as all Post-Expiration Date Letters of Credit have expired, all Obligations

 

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have been paid in full, and the Commitment has been terminated, any remaining funds on deposit in the Letter of Credit Cash Collateral Account shall be paid to Borrowers.

 

The aggregate face amount of all Letters of Credit at any one time outstanding and issued by Lender pursuant to the provisions of this Agreement, including, without limitation, any and all Post-Expiration Date Letters of Credit, plus the amount of any unpaid Letter of Credit Fees accrued thereon, and less the aggregate amount of all drafts issued under or purporting to have been issued under such Letters of Credit that have been paid by Lender and for which Lender has been reimbursed by Borrower in full in accordance with Section 2.2.5 (Payments of Letters of Credit) and the Letter of Credit Agreements, and for which Lender has no further obligation or commitment to restore all or any portion of the amounts drawn and reimbursed, is herein called the “Outstanding Letter of Credit Obligations”.

 

2.2.4                         Procedures for Letters of Credit.

 

A Borrower shall give Lender written notice at least five (5) Business Days prior to the date on which such Borrower desires Lender to issue a Letter of Credit.  Such notice shall be accompanied by a duly executed Letter of Credit Agreement specifying, among other things:  (a) the name and address of the intended beneficiary of the Letter of Credit, (b) the requested face amount of the Letter of Credit, (c) whether the Letter of Credit is to be revocable or irrevocable, (d) the Business Day on which the Letter of Credit is to be opened and the date on which the Letter of Credit is to expire, (e) the terms of payment of any draft or drafts which may be drawn under the Letter of Credit, and (f) any other terms or provisions such Borrower desires to be contained in the Letter of Credit.  Such notice shall also be accompanied by such other information, certificates, confirmations, and other items as Lender may require to assure that the Letter of Credit is issued in accordance with the provisions of this Agreement and a Letter of Credit Agreement.  In the event of any conflict between the provisions of this Agreement and the provisions of a Letter of Credit Agreement, the provisions of this Agreement shall prevail and control unless otherwise expressly provided in the Letter of Credit Agreement.  Upon (x) receipt of such notice, (y) payment of all Letter of Credit Fees and all other Fees payable in connection with the issuance of such Letter of Credit, and (z) receipt of a duly executed Letter of Credit Agreement, Lender shall process such notice and Letter of Credit Agreement in accordance with its customary procedures and open such Letter of Credit on the Business Day specified in such notice.

 

2.2.5                         Payments of Letters of Credit.

 

Borrowers hereby promise to pay to Lender, ON DEMAND and in United States Dollars, the following which are herein collectively referred to as the “Current Letter of Credit Obligations”:

 

(a)            the amount which Lender has paid or will be required to pay under each draft or draw on a Letter of Credit, whether such demand be in advance of Lender’s payment or for reimbursement for such payment;

 

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(b)            any and all reasonable charges and expenses which Lender may pay or incur relative to the Letter of Credit and/or such draws or drafts; and

 

(c)            interest on the amounts described in (a) and (b) not paid by Borrowers as and when due and payable under the provisions of (a) and (b) above from the day the same are due and payable until paid in full at the Post-Default Rate.

 

In addition, Borrowers hereby promise to pay any and all other Letter of Credit Obligations as and when due and payable in accordance with the provisions of this Agreement and the Letter of Credit Agreements.  The obligation of Borrowers to pay Current Letter of Credit Obligations and all other Letter of Credit Obligations shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which any Borrower or any other account party may have or have had against the beneficiary of such Letter of Credit, Lender, or any other Person, including, without limitation, any defense based on the failure of any draft or draw to conform to the terms of such Letter of Credit, any draft or other document proving to be forged, fraudulent or invalid, or the legality, validity, regularity or enforceability of such Letter of Credit, any draft or other documents presented with any draft, any Letter of Credit Agreement, this Agreement, or any of the other Financing Documents, all whether or not Lender had actual or constructive knowledge of the same, and irrespective of any Collateral, security or guarantee therefor or right of offset with respect thereto and irrespective of any other circumstances whatsoever which constitutes, or might be construed to constitute, an equitable or legal discharge of Borrowers for any Letter of Credit Obligations, in bankruptcy or otherwise; provided , however , that Borrowers shall not be obligated to reimburse Lender for any wrongful payment under such Letter of Credit made as a result of Lender’s gross negligence or willful misconduct.  The obligation of Borrowers to pay the Letter of Credit Obligations shall not be conditioned or contingent upon the pursuit by Lender or any other Person at any time of any right or remedy against any Person which may be or become liable in respect of all or any part of such obligation or against any Collateral, security or guarantee therefor or right of offset with respect thereto.

 

The Letter of Credit Obligations shall continue to be effective, or be reinstated, as the case may be, if at any time payment of all or any portion of the Letter of Credit Obligations is rescinded or must otherwise be restored or returned by Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Person, or upon or as a result of the appointment of a receiver, intervenor, or conservator of, or trustee or similar officer for, any Person, or any substantial part of such Person’s property, all as though such payments had not been made.

 

2.2.6                         Change in Law; Increased Cost.

 

If any change in any law or regulation or in the interpretation thereof by any court or other Governmental Authority charged with the administration thereof occurring after the date of this Agreement shall either (a) impose, modify or deem applicable any reserve, special deposit or similar requirement against Letters of Credit issued by Lender, or (b) impose on Lender any other condition regarding this Agreement or any Letter of Credit, and the result of any event referred to in clauses (a) or (b) above shall be to increase the cost to Lender of issuing,

 

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maintaining or extending the Letter of Credit or the cost to Lender of funding any obligation under or in connection with the Letter of Credit (other than a cost relating to net income, franchise or similar taxes), then, upon demand by Lender, Borrowers shall immediately pay to Lender from time to time as specified by Lender, additional amounts which shall be sufficient to compensate Lender for such increased cost, together with interest on each such amount from the date demanded until payment in full thereof at a rate per annum equal to the then highest current rate of interest on the Revolving Loan.  A certificate as to such increased cost incurred by Lender, submitted by Lender to Borrowers, shall be conclusive, absent manifest error.

 

2.2.7                         General Letter of Credit Provisions.

 

Borrowers consent to Lender’s payment of any draft complying with the terms of any Letter of Credit irrespective of any instructions of any Borrower to the contrary.  As between Borrowers and Lender, Borrowers assume all risks of the acts and omissions of the beneficiary and other users of any Letter of Credit.  Lender and its respective branches, Affiliates and/or correspondents shall not be responsible for and each Borrower hereby indemnifies and holds Lender and its respective branches, Affiliates and/or correspondents harmless from and against all liability, loss and expense (including reasonable attorney’s fees and costs) incurred by Lender and/or its branches, Affiliates and/or correspondents relative to and/or as a consequence of (a) any failure by Borrowers to perform the agreements hereunder and under any Letter of Credit Agreement, (b) any Letter of Credit Agreement, this Agreement, any Letter of Credit and any draft, draw and/or acceptance under or purported to be under any Letter of Credit, (c) any action taken or omitted by Lender and/or any of its respective branches, Affiliates and/or correspondents at the request of Borrowers, (d) any failure or inability to perform in accordance with the terms of any Letter of Credit by reason of any control or restriction rightfully or wrongfully exercised by any de facto or de jure Governmental Authority, group or individual asserting or exercising governmental or paramount powers, and/or (e) any consequences arising from causes beyond the control of Lender and/or any of its respective branches, Affiliates and/or correspondents.

 

Except for gross negligence or willful misconduct, Lender and its respective branches, Affiliates and/or correspondents, shall not be liable or responsible in any respect for any (a) error, omission, interruption or delay in transmission, dispatch or delivery of any one or more messages or advices in connection with any Letter of Credit, whether transmitted by cable, telegraph, mail or otherwise and despite any cipher or code which may be employed, and/or (b) action, inaction or omission which may be taken or suffered by it or them in good faith or through inadvertence in identifying or failing to identify any beneficiary or otherwise in connection with any Letter of Credit.

 

Subject to the terms of the Letter of Credit, a Letter of Credit may be amended, modified or revoked only upon the receipt by Lender from Borrowers and the beneficiary (including any transferee and/or assignee of the original beneficiary), of a written consent and request therefor.

 

If any Laws, order of court and/or ruling or regulation of any Governmental Authority of the United States (or any state thereof) and/or any country other than the United States permits a beneficiary under a Letter of Credit to require Lender and/or any of its respective branches, Affiliates and/or correspondents to pay drafts under or purporting to be

 

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under a Letter of Credit after the expiration date of the Letter of Credit, Borrowers shall reimburse Lender, as appropriate, for any such payment pursuant to provisions of Section 2.2.6 (Change in Law; Increased Cost).

 

Except as may otherwise be specifically provided in a Letter of Credit or Letter of Credit Agreement, (a) the rules of the ISP shall apply to each standby Letter of Credit, and (b) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce (the “ ICC ”) at the time of issuance shall apply to each commercial Letter of Credit.

 

Section 2.3              Applicable Interest Rates.

 

(a)            Each advance of the Revolving Loan shall bear interest until maturity (whether by acceleration, declaration, extension or otherwise) at the Applicable Rate as determined in accordance with the provisions of this Section.

 

(b)            Notwithstanding the foregoing, following the occurrence and during the continuance of an Event of Default, at the option of Lender, all advances of the Revolving Loan and all other Obligations shall bear interest at the Post-Default Rate.

 

(c)            The Applicable Margin shall be 125 basis points per annum unless and until a change is required by the operation of Section 2.3(d).

 

(d)            Changes in the Applicable Margin shall be made not more frequently than quarterly based on the Pricing Ratio, det