EXHIBIT 10.11.1
Crestar Bank
8245 Boone Boulevard
Vienna, VA 22182-3871
September 30, 1997
Mr. David V. Mastran
Chief Executive Officer
MAXIMUS, Inc.
1356 Beverly Rd.
McLean, VA 22l01
Dear David:
Crestar Bank (the Bank) is pleased to advise you that it has renewed
the $10,000,000 revolving line of credit (the Line) for MAXIMUS, Inc., a
Virginia corporation (the Borrower), subject to the terms, covenants and
conditions set forth in this letter agreement (as amended from time to time,
the Agreement). Certain capitalized terms used in this Agreement are defined on
the attached Schedule of Definitions. This Agreement is a renewal and
replacement of the Agreement dated June 29, 1995 and accepted by the Borrower
on July 10, 1995, as amended.
Amount. The aggregate principal amount of Advances under the Line
outstanding at any time shall not exceed $10,000,000. Within this limit, the
Borrower may borrow, repay and reborrow until March 31, 1999 (the Termination
Date). The Bank may in its sole discretion continue to make Advances after the
Termination Date, but it shall have no obligation to do so. Advances made after
the Termination Date on any one or more occasions shall not be deemed to be an
extension of the Termination Date and shall not obligate the Bank to make
Advances on any subsequent occasion.
Cancellation. The Bank shall have the right to cancel the Line at any
time upon written notice to the Borrower given at least 30 days prior to the
effective date of such cancellation. Any Advances subsequent to the giving of
such notice shall be made in the sole and absolute discretion of the Bank.
Interest. Advances shall bear interest at a per annum rate equal to
the Applicable Spread plus LIBOR. Accrued interest shall be payable monthly, in
arrears, on the 1st day of each month, and on the Termination Date. Interest
shall be calculated on the basis of a year of 360 days and for actual days
elapsed.
Use of Proceeds. The proceeds of Advances shall be used to pay
current operating expenses, carry accounts receivable and for other short-term
working capital needs of the Borrower.
LC Subfacility. The Borrower may request that the Bank issue letters
of credit for the account of the Borrower from time to time prior to the
Termination Date, the aggregate principal face amounts of which shall not exceed
$5,000,000 at any one time outstanding; provided, however, that no Letter of
Credit will be issued by the Bank if, after such issuance, the aggregate
principal amount of the outstanding Advances and the aggregate outstanding face
amounts of the Letters of Credit would exceed $10,000,000. The purpose, form and
substance of each letter of credit must be acceptable to the Bank. Unless
otherwise approved by the Bank, no letter of credit shall have a term of more
than one year and may be renewable annually thereafter, subject to the Bank's
prior cancellation of such Letter of Credit, in its sole discretion, within 30
days prior to the anniversary date of the issuance of such Letter of Credit. At
least three days prior to the issuance of a letter of credit, the Borrower shall
execute and deliver an Application and Agreement for Irrevocable Standby Letter
of Credit on the Bank s standard form. The Bank shall be reimbursed on demand by
the Borrower for any draws paid by the Bank under a letter of credit, together
with interest from the date of such demand at the Prime Rate. Subject to the
terms of this Agreement, the Borrower may use the proceeds of an Advance to pay
any Indebtedness arising out of a Letter of Credit. The Borrower shall pay a
nonrefundable annual commission to the Bank for each letter of credit equal to
the Applicable LC Commission multiplied by the face amount, payable quarterly in
advance starting on the date of issuance and each quarterly thereafter for the
number of days the letter of credit is to be outstanding (calculated on the
basis of a year of 360 days) and an opening fee of $200.
Payments. Advances shall be repaid on demand, or if demand is not
sooner made, on the Termination Date. The Borrower agrees that the Bank may
demand payment even if an Event of Default has not occurred. The Borrower
agrees that it shall repay the Line immediately if the outstanding Line balance
exceeds the Borrowing Base in an amount equal to the excess.
MAXIMUS, Inc.
September 30, 1997
Page 2
Administrative Fee. The Borrower agrees to pay to the Bank an audit
and administrative fee of $5,000 per annum. due at closing and on any renewal or
extension of the Termination Date. If any such renewal or extension is not for a
one year period, the fee will be pro rated accordingly.
Conditions. The following are conditions precedent to each Advance:
(a) Loan Documents. Receipt by the Bank of all Loan
Documents, duly executed by all applicable parties;
(b) Organizational Documents. Receipt by the Bank of
certified copies of resolutions and organizational documents of the Borrower, a
certificate as to the incumbency and signatures of the authorized officers or
representatives of the Borrower, and current good standing certificates issued
by the appropriate public officials in the Borrower's state of formation and
each jurisdiction in which it does business;
(c) Insurance. Receipt by the Bank of certificates or
policies of insurance confirming that all insurance required by the Loan
Documents has been obtained;
(d) Systems Report. If required by the Bank, completion
by the Bank of a satisfactory examination report of the Borrower's systems (the
Systems Report);
(e) Satisfactory Documents. All documents, certificates
and opinions delivered under this Agreement must be in form and substance
satisfactory to the Bank and its counsel; and
(f) No Defaults. No Default shall be continuing.
Representations and Warranties. In order to induce the Bank to extend
credit to the Borrower, the Borrower represents and warrants as follows:
(a) Execution of Documents. The Borrower has the power
and has taken all of the necessary actions to execute, deliver and perform the
terms of the Loan Documents. When executed and delivered, the Loan Documents
will be binding obligations of the Borrower, enforceable in accordance with
their terms and will not violate any provisions of law or conflict with, result
in a breach of or constitute a default under the organizational documents of
the Borrower or under any other agreement to which the Borrower is a party.
(b) Financial Statements. All financial statements and
information delivered to the Bank by the Borrower in connection with this
Agreement are correct and complete and present fairly the financial condition,
and reflect all known liabilities, contingent or otherwise, of the Borrower as
of the dates of such statements and information, were prepared in accordance
with GAAP in the case of the Borrower and, since such dates, no material
adverse change in the assets, liabilities, financial condition, business or
operations of the Borrower has occurred.
(c) No Litigation. There is no action, suit or
proceeding pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower that may, either in any case or in the aggregate, result
in any material adverse change in the business, properties or assets or in the
condition, financial or otherwise, of the Borrower, or that may result in any
material liability on the part of the Borrower. This representation is
exclusive of the suit brought by Network Six, Inc. against the Borrower as
disclosed in the Borrower's 10-Q dated June 30, 1997.
(d) Debarment. No event has occurred and no condition
exists that is likely to result in the debarment or suspension of the Borrower
from any Government Contracts, and the Borrower has not, nor has any Affiliate,
been subject to any such debarment or suspension.
(e) Compliance with Laws. The Borrower is in compliance
in all material respects with all federal, state and local laws, regulations
and ordinances.
MAXIMUS, Inc.
September 30, 1997
Page 3
(f) Debt. The Borrower is not in default with respect to
any debt.
(g) Subsidiaries. The Borrower does not have any
subsidiaries.
Covenants. In consideration of credit extended or to be extended by
the Bank, the Borrower covenants and agrees that, unless the Bank otherwise
consents in writing:
(a) Financial Reporting Requirements. The Borrower shall
deliver to the Bank (1) within 120 days after the close of each of its fiscal
years, audited financial statements of the Borrower, prepared in accordance
with GAAP, including a balance sheet, income statement, statements of
stockholders' equity and of cash flows, prepared by an independent certified
public accounting firm acceptable to the Bank and accompanied by an unqualified
opinion of such firm; (2) within 45 days after the end of each quarter of each
of its fiscal years, (i) Form 1 0-Q including unaudited financial statements of
the Borrower, a balance sheet and income statement, prepared in accordance with
GAAP, (ii) a Covenant Compliance Certificate of the Borrower's chief financial
of finer, and (iii) status and backlog reports relating to the Borrower's
contracts; (3) promptly upon receipt, copies of any reports submitted to the
Borrower by its independent certified public accountants in connection with
examinations of the Borrower's financial statements; and (4) such other
information concerning the financial condition of the Borrower as the Bank from
time to time may reasonably request. All financial statements and reports shall
be in form and detail acceptable to the Bank and shall be certified to be
accurate by a duly authorized of finer of the Borrower.
(b) Notices. The Borrower shall furnish to the Bank
prompt written notice of (1) the occurrence of each Default or an Event of
Default, (2) the institution of any material litigation concerning the
Borrower, and (3) any final decision of a contracting of finer disallowing
costs aggregating more than $250,000 with respect to a Government Contract.
(c) Systems Examinations. The Bank shall have the right
to perform systems examinations from time to time in accordance with its
standard procedures.
(d) Compliance with Laws. The Borrower shall comply with
all applicable laws and regulations and shall pay all taxes, assessments or
government charges lawfully levied or imposed on or against it or any of its
properties. The Borrower shall not take any action that would result in the
debarment or suspension of the Borrower from contracting with the Government.
(e) Liens. The Borrower shall not permit any Lien to
attach to any of its assets other than Permitted Liens.
(f) Guaranties. The Borrower shall not guarantee,
endorse, become contingently liable upon or assume the obligations of any
Person, except by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
(g) Debt. The Borrower-shall not permit to exist any
debt other than Permitted Debt.
(h) Dividends and Distributions. The Borrower shall
notify the Bank in writing 60 days prior to (1) the declaration or payment of
any dividends or distributions to its equity owners or (2) the issuance,
redemption, repurchase or retirement of any of its equity interests.
(i) Loans and Investments. The Borrower shall not make
or permit to exist any loans to, or debt or equity investments in, acquire all
or substantially all of the assets of, or merge or consolidate with any Person,
other than accounts receivable that arise in the ordinary course of business.
The Borrower shall not acquire or form any subsidiary, enter into any joint
venture agreement, or become a partner in any partnership; provided that with
the consent of the Bank, the Borrower may enter into joint venture or teaming
agreements with other Persons to perform contracts. This not withstanding, the
Borrower may make investments in or acquire the assets of any Person in a
complimentary line of business to the Borrower as long as the total
consideration for such investments or acquisitions, in the aggregate, is less
than $20,000,000 during the term of this facility.
MAXIMUS, Inc.
September 30, 1997
Page 4
(j) Financial Covenants. The Borrower shall maintain at
all times (1) an excess of current assets to current liabilities of not less
than 1.5 to 1, (2) Tangible Net Worth of not less than $60,000,000, and (3) a
ratio of total liabilities to Tangible Net Worth of not more than 1.5 to 1.
Default. Upon the occurrence of an Event of Default, any obligation
of the Bank to make Advances shall terminate and the Bank, at its option, by
written notice to the Borrower. may declare all Indebtedness to the Bank to be
immediately due and payable.
Accounting Terms. Each accounting term used in this Agreement, not
otherwise defined, will have the meaning given to it under GAAP as in effect on
the date of this Agreement, applied on a consistent basis.
Notices. All notices, requests, demands or other communications
provided for this Agreement or any other Loan Document shall be in writing and
shall be delivered by hand, sent prepaid by a recognized overnight delivery
service or sent by the United States mail, certified, postage prepaid, return
receipt requested, to the Bank or to the Borrower at their addresses set forth
in this Agreement.
Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the Bank and the Borrower, and their respective successors
and assigns, provided that the Borrower may not assign or transfer its rights
under this Agreement.
Sole Agreement. This Agreement and the other Loan Documents represent
the entire agreement between the Bank and the Borrower, and supersede all prior
commitments and may be modified only by an agreement in writing. The other Loan
Documents shall contain such terms as the Bank customarily requires for
financings of the type described in this Agreement.
Survival of Agreement. All terms contained in this Agreement shall
survive the delivery of this Agreement and the other Loan Documents and the
making of the Advances and shall remain in full force and effect until the
Indebtedness is fully discharged.
Governing Law. This Agreement w ill be governed by the laws of the
Commonwealth of Virginia, without reference to conflict of laws principles.
Expenses. Whether or not any Advances are made under this Agreement,
the Borrower shall pay all out-of-pocket expenses (including reasonable
attorneys' fees) incurred by the Bank in connection with the preparation of
this Agreement and the other Loan Documents and the transactions contemplated
by this Agreement.
Counterparts. This Agreement may be executed in counterparts, and all
such counterparts together shall constitute one and the same Agreement.
The Borrower may accept this Agreement by signing below and returning
an executed copy to the Bank prior to November 21, 1997. Upon receipt by the
Bank of such executed copy prior to such date, this Agreement will become a
binding agreement between the Bank and the Borrower.
Sincerely yours,
CRESTAR BANK
By: /s/ John M. Cannon
------------------------------
John M. Cannon, VP
SIGNATURES CONTINUE ON FOLLOWING PAGE
MAXIMUS, Inc.
September 30, 1997
Page 5
ACCEPTED: September 30, 1997
BORROWER
MAXIMUS, Inc.
By: /s/ David V. Mastran
-----------------------------------------------
David V. Mastran, Chief Executive Officer
By: /s/ Raymond B. Ruddy
-----------------------------------------------
Raymond B. Ruddy, Chairman of the Board
SCHEDULE OF DEFINITIONS
The following terms shall have the meanings set forth below when such
terms are used in the Loan Documents:
"Advance" means any advance of funds under the Line.
"Affiliate" means any Person in which the Borrower has an ownership
interest, whether direct or indirect, and any joint venture to which the
Borrower is a party.
"Applicable LC Commission" means as of the date of the Agreement,
0.8%. Based on the Leverage Ratio in effect on the last day of each fiscal
quarter of the Borrower, beginning on September 30, 1997, the Applicable LC
Commission shall be adjusted to the percentage corresponding to the applicable
Leverage Ratio:
Leverage Ratio Applicable LC Commission
-------------- ------------------------
Less than 0.8 to 1 0.8%
Greater than or equal to 0:8 to 1 and less
than or equal to 1.25 to 1 1.0%
Greater than 1.25 to 1 1.25%
The Applicable LC Commission shall be adjusted as of the first day of
the calendar month following receipt by the Bank of the Borrower's quarterly
financial statements. If such statements are not received within the required
time limits, the Applicable Spread shall be equal to the highest percentage
until the next adjustment date at the option of the Bank.
"Applicable Spread" means as of the date of the Agreement, 0.65%.
Based on the Leverage Ratio in effect on the last day of each fiscal quarter of
the Borrower, beginning on September 30, 1997, the Applicable Spread shall be
adjusted to the percentage corresponding to the applicable Leverage Ratio:
Leverage Ratio Applicable Spread
-------------- -----------------
Less than 0.8 to 1 0.65%
Greater than or equal to 0:8 to 1 and less
than or equal to 1.25 to 1 0.95%
Greater than 1.25 to 1 1.25%
The Applicable Spread shall be adjusted as of the first day of the
calendar month following receipt by the Bank of the Borrower's quarterly
financial statements. If such statements are not received within the required
time limits, the Applicable Spread shall be equal to the highest percentage
until the next adjustment date at the option of the Bank.
"Customer" means any Person obligated on an account receivable of the
Borrower.
"Default" means any Event of Default or any event that with the giving
of notice, or lapse of time, or both, would constitute an Event of Default.
"Event of Default" means the occurrence of a default or event of
default under any Loan Document after the expiration of all applicable grace
periods.
"GAAP" means generally accepted accounting principles consistently
applied.
"Government" means the United States of America and any of its
departments and agencies.
"Government Contract" means any contract with the Government under
which the Borrower is the prime contractor or a subcontractor.
"Indebtedness" means all indebtedness, liabilities and obligations of
the Borrower to the Bank, whether now existing or arising in the future, direct
or indirect, fixed or contingent, whether related or unrelated to the Line, and
whether of a similar or different class, including, without limitation,
overdrafts, guaranties and obligations to reimburse the Bank for amounts paid
by it under letters of credit issued by the Bank for the account of the
Borrower.
"Leverage Ratio" means at any time, the ratio of total liabilities of
the Borrower, as determined in accordance with GAAP, to Tangible Net Worth.
"LIBOR" means the rate at which United States Dollar deposits with
maturities of one month are offered to leading banks in the London interbank
market.
"Lien" means any mortgage, deed of trust, assignment, pledge, lien,
security interest, charge or encumbrance of any kind or nature, including the
interest of the lessor under a capitalized lease.
"Loan Documents" means the Agreement, the Note and any other document
that evidences, secures, governs or otherwise relates to any of the
Indebtedness, including, without limitation, any letter of credit application
and agreement, subordination agreement, negative pledge agreement, deed of
trust, mortgage, security agreement, pledge agreement or assignment.
"Note" means a promissory note, on the Bank's standard form, in the
principal amount of the Line, made by the Borrower and evidencing the
obligation of the Borrower to repay the Advances, together with accrued
interest, and any amendments to or replacements of such promissory note.
"Permitted Debt" means (a) the Indebtedness, (b) purchase money
financing and capitalized lease obligations for fixed assets not exceeding
$250,000 in the aggregate outstanding at any time, (c) Subordinated Debt, and
(d) ordinary and customary trade accounts payable.
"Permitted Liens" means (a) Liens securing the Indebtedness, and (b)
Liens securing any purchase money financing or capitalized lease obligations
described in the definition of Permitted Debt.
"Person" means any individual, partnership, limited liability company,
joint venture, corporation, trust, governmental subdivision or agency or any
other entity of any nature.
"Prime Rate" means the rate established by the Bank from time to time
and recorded in its Credit Administration Division as a reference for fixing
the lending rate on certain commercial loans. The Prime Rate is not necessarily
the lowest or most favorable interest rate charged by the Bank.
"Security Agreement" means a security agreement from the Borrower on
the Bank's standard form, creating a first priority security interest in any
Collateral.
"Subordinated Debt" means debt of the Borrower subordinated to the
Indebtedness or terms acceptable to the Bank.
"Tangible Net Worth" means, at any time, amounts that would be
included under stockholders' equity on the balance sheet of the Borrower in
accordance with GAAP consistently applied, provided that, in any event, such
amounts are to be net of amounts carried on the books of the Borrower for (1)
any write-up in the book value of any assets of the Borrower resulting from a
revaluation subsequent to the date of this Agreement, (2) treasury stock, (3)
unamortized debt discount expense, (4) any cost of investments in excess of net
assets acquired at any time of acquisition by the Borrower, (5) loans, advances
or other amounts owed to the Borrower by any Affiliate or investments in any
Affiliate, (6) unmarketable securities, and (7) patents, patent applications,
copyrights, trademarks, trade names, goodwill, research and development costs,
organizational expenses, capitalized software costs and other like intangibles.