-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GqFmhQc4GojirCna4Vh1C3ilqh6o551EJkIfve9VsHMRwFKzJKeD3cltwSVbqab+ tGNFgPSZcB8s7imqcFqj7Q== 0001047469-98-030374.txt : 19980812 0001047469-98-030374.hdr.sgml : 19980812 ACCESSION NUMBER: 0001047469-98-030374 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANALYTICAL SURVEYS INC CENTRAL INDEX KEY: 0000753048 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 840846389 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13111 FILM NUMBER: 98682241 BUSINESS ADDRESS: STREET 1: 941 MERIDIAN STREET CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3176341000 MAIL ADDRESS: STREET 1: 941 MERIDIAN STREET CITY: INDIANAPOLIS STATE: IN ZIP: 46204 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) - --- of the Securities Exchange Act of 1934 For the quarterly period ended JUNE 30, 1998 or Transition Report Pursuant to Section 13 or 15(d) - --- of the Securities Exchange Act of 1934 Commission File Number 0-13111 ANALYTICAL SURVEYS, INC. (Exact name of small business issuer as specified in its charter) COLORADO 84-0846389 (State of incorporation) (IRS Employer Identification No.) 941 NORTH MERIDIAN STREET INDIANAPOLIS, INDIANA 46204 (Address of principal executive offices) (Zip Code) (317) 634-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past (12) months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days. Yes X No --- --- The number of shares of common stock outstanding as of July 31, 1998 was 6,721,749. PART I ITEM 1. ANALYTICAL SURVEYS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) (Unaudited)
September 30, June 30, 1997 1998 ------------- -------- ASSETS CURRENT ASSETS Cash $ 1,559 $ 1,571 Accounts receivable, net of allowance for doubtful accounts of $164 and $179 8,991 14,881 Revenue in excess of billings 21,613 37,608 Deferred income taxes 136 330 Prepaid expenses and other 545 911 Prepaid income taxes --- 1,470 ------- ------- Total current assets 32,844 56,771 ------- ------- EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost: Equipment 7,983 12,109 Furniture and fixtures 1,151 1,411 Leasehold improvements 499 530 ------- ------- 9,633 14,050 Less accumulated depreciation and amortization (5,483) (6,708) ------- ------- 4,150 7,342 Deferred income taxes 41 140 Goodwill, net of accumulated amortization of $368 and $1,199 12,353 25,491 Other assets, net of accumulated amortization of $130 and $511 758 374 ------- ------- TOTAL ASSETS $50,146 $90,118 ------- ------- ------- -------
See accompanying notes to financial statements. ANALYTICAL SURVEYS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) (Unaudited)
September 30, June 30, 1997 1998 ------------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Lines of credit with banks (Note 2) $ 1,473 $ 67 Current portion of long-term debt 3,051 4,714 Billings in excess of revenue 789 1,376 Accounts payable and other accrued liabilities 3,693 6,986 Accrued payroll and related benefits 2,753 5,044 ------- ------- Total current liabilities 11,759 18,187 Line of credit with bank (note 2) --- 7,300 Long-term debt, less current portion 14,145 22,502 Deferred compensation payable 411 295 ------- ------- Total liabilities 26,315 48,284 ------- ------- STOCKHOLDERS' EQUITY Preferred stock; no par value. Authorized 2,500 shares; none issued or outstanding -- -- Common stock; no par value. Authorized 100,000 shares; 6,114 and 6,700 shares issued and outstanding at September 30, 1997 and June 30, 1998, respectively 15,269 28,030 Retained earnings 8,562 13,804 ------- ------- Total stockholders' equity 23,831 41,834 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $50,146 $ 90,118 ------- ------- ------- -------
See accompanying notes to financial statements. ANALYTICAL SURVEYS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) (Unaudited)
Three months Nine Months Ended Ended June 30, June 30, 1997 1998 1997 1998 ------ ------- ------- ------- SALES $8,484 $22,752 $24,643 $60,105 ------ ------- ------- ------- COSTS AND EXPENSES Salaries, wages and related benefits 3,983 10,553 11,524 28,958 Subcontractor costs 1,391 3,750 4,419 8,096 Other general and administrative 1,382 3,931 4,029 10,531 Depreciation and amortization 320 905 973 2,513 ------ ------- ------- ------- 7,076 19,139 20,945 50,098 ------ ------- ------- ------- EARNINGS FROM OPERATIONS 1,408 3,613 3,698 10,007 ------ ------- ------- ------- OTHER (INCOME) EXPENSE Interest expense, net 123 541 382 1,425 Other (7) (84) (8) (115) ------ ------- ------- ------- 116 457 374 1,310 ------ ------- ------- ------- EARNINGS BEFORE INCOME TAXES 1,292 3,156 3,324 8,697 INCOME TAX EXPENSE 490 1,271 1,267 3,455 ------ ------- ------- ------- NET EARNINGS $ 802 $ 1,885 $ 2,057 $ 5,242 ------ ------- ------- ------- ------ ------- ------- ------- EARNINGS PER COMMON SHARE Basic $0.16 $0.30 $ 0.41 $0.84 ------ ------- ------- ------- ------ ------- ------- ------- Diluted $0.15 $0.28 $0.39 $0.78 ------ ------- ------- ------- ------ ------- ------- ------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic 5,090 6,345 4,978 6,224 ------ ------- ------- ------- ------ ------- ------- ------- Diluted 5,409 6,819 5,260 6,720 ------ ------- ------- ------- ------ ------- ------- -------
See accompanying notes to financial statements and common stock equivalent. ANALYTICAL SURVEYS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
Nine months Nine months Ended Ended June 30, June 30, 1997 1998 ----------- ----------- CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES $2,680 $ (5,994) ------ -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of equipment 157 21 Purchase of equipment and leasehold improvements (709) (2,668) Payments for net assets acquired in business combinations ----- (8,304) ------ -------- Net cash used in investing activities (552) (10,951) ------ -------- CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings (payments) under lines of credit with banks (500) 5,347 Proceeds from issuance of long-term debt 214 11,501 Principal payments of long-term debt (948) (1,481) Proceeds from issuance of common stock 486 1,590 ------ -------- Net cash provided (used) by financing activities (748) 16,957 ------ -------- Net increase in cash 1,380 12 Cash at beginning of period 1,022 1,559 ------ -------- Cash at end of period $2,402 $ 1,571 ------ -------- ------ -------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for interest $ 386 $ 1,278 ------ -------- ------ -------- Cash paid for income taxes $ 738 $ 2,197 ------ -------- ------ -------- Common stock issued for net assets acquired in business combinations $ 0 $ 8,270 ------ -------- ------ --------
See accompanying notes to financial statements. ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying interim condensed consolidated financial statements have been prepared by management in accordance with the accounting policies described in the Company's annual report for the year ended September 30, 1997. The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. (See Note 3 regarding recent acquisitions). All significant intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated financial statements have not been audited by independent auditors. Certain information and note disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended September 30, 1997. The condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position of Analytical Surveys, Inc., at June 30, 1998 and its results of operations for the three and nine months ended June 30, 1998 and 1997, and its cash flows for the nine months ended June 30, 1998 and 1997. All such adjustments are of a normal recurring nature. The Company has adopted Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS 128 requires the restatement of all prior-period earnings per share ("EPS") data. SFAS 128 replaces the presentation of primary EPS, with a presentation of basic EPS and diluted EPS. Under SFAS 128, basic EPS excludes dilution for common stock equivalents and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The Company's diluted EPS for prior periods is the same as the primary EPS previously reported while the Company's basic EPS will be greater than the primary EPS previously reported. 2. NOTES PAYABLE TO BANK On June 3, 1998, the Company replaced its existing lines of credit with a three-year $11,000,000 secured line of credit and a $10,000,000 line of credit for acquisitions (which is due in quarterly installments over a five-year period), and the Company refinanced $16,000,000 of term debt. Borrowings under the new credit facilities bear interest at either LIBOR plus 1.25% to 2.25% or the prime rate. ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 3. ACQUISITIONS In June 1998, the Company, through its wholly owned subsidiary, Surveys Holdings, Inc. acquired all of the issued and outstanding common stock of Cartotech, Inc. for cash of $8,059,000 and 354,167 shares of restricted common stock valued at $8,269,799 for total consideration of $16,328,799. In May 1998, the Company acquired all of the issued and outstanding common stock of Interra Technologies (India) Private Limited for cash of $437,701. Interra had previously been an exclusive subcontractor to Analytical Surveys, Inc. Current assets $ 3,600,702 Equipment 1,950,146 Other assets, including Goodwill 13,806,988 Current liabilities (2,591,336) Non current liabilities ----- ----------- $16,766,500 ----------- -----------
4. STOCK OPTIONS The following table summarizes stock option transactions under the Company's four non-qualified stock option plans (in thousands except per share amounts):
Average Shares under Option Price option per share ------------ ------------ Outstanding at September 30, 1997 1,288 $ 9.23 Granted 728 39.19 Exercised (232) 6.88 Cancelled (1) 10.01 ----- Outstanding June 30, 1998 1,783 21.78 ----- ----- Options Exercisable at June 30, 1998: 730 ----- ----- Available for Grant at June 30, 1998 82 ----- -----
ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 PART I ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY SET FORTH BELOW SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1997. THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISK AND UNCERTAINTIES. THE STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q THAT ARE NOT PURELY HISTORICAL ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. WHEN USED IN THIS QUARTERLY REPORT, OR IN THE DOCUMENTS INCORPORATED BY REFERENCE INTO THIS QUARTERLY REPORT, THE WORDS "ANTICIPATE," "BELIEVE," "ESTIMATE," "INTEND" AND "EXPECT" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS RELATING TO COMPETITION, FUTURE ACQUISITIONS, MANAGEMENT OF GROWTH, INTERNATIONAL SALES, THE COMPANY'S STRATEGY, FUTURE SALES, FUTURE EXPENSES AND FUTURE LIQUIDITY AND CAPITAL RESOURCES. ALL FORWARD-LOOKING STATEMENTS IN THIS QUARTERLY REPORT ARE BASED UPON INFORMATION AVAILABLE TO THE COMPANY ON THE DATE OF THIS QUARTERLY REPORT, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THIS QUARTERLY REPORT. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1997, AND OTHER FILINGS MADE WITH THE SECURITIES AND EXCHANGE COMMISSION. OVERVIEW ASI, a leading provider of data conversion and digital mapping services to users of customized geographic information systems, was founded in 1981 by its current Chief Technical Officer, John A. Thorpe. From 1981 to 1990, the Company experienced steady growth in revenues with periodic fluctuations in financial results. After the hiring of the Company's current Chief Executive Officer and Chief Financial Officer in 1990, the Company implemented a controlled growth strategy, including improving and standardizing operating controls and procedures, investing in infrastructure, upgrading the Company's proprietary software and establishing capital sources. In 1995, the Company embarked on a more aggressive growth strategy, including consolidation of the fragmented GIS services industry. The Company acquired substantially all of the assets of Wisconsin-based Intelligraphics, Inc. ("Intelligraphics") in December 1995 for $3.5 million in cash and 345,000 shares of restricted Common Stock valued at $891,000. Intelligraphics, with over 200 employees, significantly expanded the Company's capacity to perform large projects, added utility industry expertise, and established ASI's presence in the midwestern United States. The acquisition contributed over 25 new customers and $12.3 million in "backlog," which represents the amount of revenue that has not been recognized on signed contracts. In July 1996, the Company expanded its services to state and local governments by acquiring substantially all of the assets of Westinghouse Landmark GIS, Inc. ("ASI Landmark") for $2.0 million in cash. Based in North ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 Carolina, ASI Landmark's primary business is land base and cadastral mapping. Prior to this acquisition, ASI had utilized subcontractors for certain of these services. ASI Landmark also provided the Company with additional capacity for photogrammetry, and a presence in the eastern and southeastern United States. The acquisition contributed approximately 20 new customers, $9.1 million in backlog and 105 employees to the Company. The Company acquired MSE Corporation ("MSE") in July 1997 for $12.5 million in cash and 925,000 shares of restricted Common Stock valued at $7.3 million. The acquisition of Indiana-based MSE gave the Company greater capacity to serve the utility market and further enhanced ASI's presence in the midwestern United States. In addition, the acquisition of MSE contributed over 200 customers and $43.0 million of backlog to the Company. Over 325 employees joined the ASI workforce as a result of the MSE acquisition, including the Company's current Chief Operations Officer and Chief Administrative Officer. The Company acquired Texas-based Cartotech, Inc. ("Cartotech") in June 1998 for approximately $7.7 million in cash, net of cash acquired, and 354,167 shares of restricted Common Stock valued at approximately $8.3 million, plus acquisition costs of $359,000. The Cartotech acquisition extended ASI's presence in the utility market, enhanced the Company's field inventory operations and provided the Company with a strong presence in the southwestern United States. The Cartotech acquisition contributed over 50 new customers and 270 employees to the Company. One of Cartotech's customers, FirstEnergy Corp. (formerly known as Ohio Edison), accounted for approximately 46.0% of Cartotech's revenues in calendar 1997. In conjunction with the above acquisitions, the Company has recorded goodwill, which represents the excess of the purchase price over the fair value of the net assets acquired in business combinations. As of June 30, 1998, goodwill, net of accumulated amortization, was $25.5 million. The Company will amortize the value of the intangible assets acquired in its recent business acquisitions over a period of 15 years, representing the expected period of benefit from the acquisitions. The Company believes this amortization period to be appropriate based on the historical and forecasted operating results of the acquired businesses. The Company recognizes revenue using the percentage of completion method of accounting on a cost-to-cost basis. For each contract, an estimate of total production costs is determined. At each accounting period and for each of the Company's contracts, the percentage of completion is based on production costs incurred to date as a percentage of total estimated production costs. This percentage is then multiplied by the contract's total value to calculate the sales revenue to be recognized. Production costs consist of internal costs, primarily salaries and wages, and external costs, primarily subcontractor costs. Internal and external production costs may vary considerably among projects and during the course of completion of each project. As a result, the Company experiences yearly and quarterly fluctuations in production costs, in salaries, wages and related benefits and in subcontractor costs. These costs may vary as a percentage of sales from period to period. Since 1995 the Company has relied less on subcontractors and more on employees. The Company anticipates that, as a percentage of sales, salaries, wages and related benefits will continue to increase, with a corresponding decrease in subcontractor costs, due, in part, to the Company's May 1998 purchase of Interra Technologies, an India-based company that had been a provider of subcontractor services to the Company. The following table illustrates the relationship of salaries, wages and related benefits and subcontractor costs: ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 Nine Months Ended Year Ended September 30, June 30, ------------------------ ----------------- 1995 1996 1997 1997 1998 PERCENTAGE OF SALES: Salaries, wages and related benefits 38.8% 46.3% 48.5% 46.8% 48.2% Subcontractor costs . . . . . . . . . 23.9% 17.2% 14.5% 17.9% 13.5% ----- ----- ----- ----- ----- Total . . . . . . . . . . . . . . . . 62.7% 63.5% 63.0% 64.7% 61.7% ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
The Company recognizes losses on contracts in the period such loss is determined. From the beginning of fiscal 1995 through the nine-month period ending June 30, 1998, the Company has recognized aggregate losses on contracts of approximately $913,000. Over the same period, the Company recognized sales of $137.2 million. Sales and marketing expenses associated with obtaining contracts are expensed as incurred. Backlog increases when new contracts are signed and decreases as revenue is recognized. As of June 30, 1998, backlog was $113.6 million. Recently, the number of large projects awarded to the Company has increased. Contracts for larger projects generally increase the Company's risk due to inflation as well as changes in customer expectations and funding availability. The Company's contracts are generally terminable on short notice, and while in the Company's experience such termination is rare, there is no assurance that the Company will receive all of the revenue anticipated under signed contracts. The Company engages in significant research and development activities. The majority of these activities occur as the Company develops software or designs a product for a particular contract, so that the costs of such efforts are included as an integral part of the Company's services. Such custom-designed software can often be applied to projects for other customers. These amounts expended by the Company are not included in research and development expenses, although the Company retains ownership of such proprietary software or products. The Company, through its Advanced Technology Division, also engages in research and development activities independently of the Company's work on particular customer projects. For fiscal 1997 and for the nine months ended June 30, 1998, the Company expended $275,000 and $190,000, respectively, on such independent research and development activities. ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected consolidated statements of operations data expressed as a percentage of sales:
Three months ended Nine months ended June 30 June 30 1997 1998 1997 1998 ---- ---- ---- ---- PERCENTAGE OF SALES: Sales. . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% Costs and expenses Salaries, wages and related benefits. . . . . . 46.9 46.4 46.8 48.2 Subcontractor costs . . . . . . . . . . . . . . 16.4 16.4 17.9 13.5 Other general and administrative. . . . . . . . 16.2 17.3 16.4 17.5 Depreciation and amortization . . . . . . . . . 3.8 4.0 3.9 4.2 ----- ----- ----- ----- Earnings from operations . . . . . . . . . . . . . 16.7 15.9 15.0 16.6 Other expense, net . . . . . . . . . . . . . . . . 1.4 2.0 1.5 2.2 ----- ----- ----- ----- Earnings before income taxes . . . . . . . . . . . 15.3 13.9 13.5 14.4 Income tax expense . . . . . . . . . . . . . . . . 5.8 5.6 5.1 5.7 ----- ----- ----- ----- Net earnings . . . . . . . . . . . . . . . . . . . 9.5% 8.3% 8.4% 8.7% ----- ----- ----- ----- ----- ----- ----- -----
ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 THREE MONTHS ENDED JUNE 30, 1998 AND 1997 SALES. The Company's sales consist of revenue recognized for services performed. Sales increased $14.3 million or 168.2% to $22.8 million for the three months ended June 30, 1998 from $8.5 million for the three months ended June 30, 1997. This increase was due to an increase in the number and size of customer contracts with the Company (including MSE) as well as the impact of the acquisition of MSE in July 1997. Prior to its acquisition by the Company, MSE's sales for the three months ended June 30, 1997 were $6.9 million. SALARIES, WAGES AND RELATED BENEFITS. Salaries, wages and related benefits include employee compensation for production, marketing, selling, administrative and executive employees. Salaries, wages and related benefits increased 165.0% to $10.6 million for the three months ended June 30, 1998 from $4.0 million for the three months ended June 30, 1997. This increase was primarily due to the addition of over 325 employees as a result of the MSE acquisition in July 1997, as well as the hiring of additional employees to support the Company's increased business. As a percentage of sales, salaries, wages and related benefits decreased to 46.4% for the three months ended June 30, 1998 from 46.9% for the three months ended June 30, 1997. This decrease was primarily attributable to normal fluctuations in the mix of contracts worked. The Company anticipates that, as a percentage of sales, salaries, wages and related benefits will increase, with a corresponding decrease in subcontractor costs, due, in part, to the Company's May 1998 purchase of Interra Technologies, an India-based company that had been a provider of subcontractor services to the Company. SUBCONTRACTOR COSTS. Subcontractor costs include production costs incurred through the use of third parties for production tasks such as data conversion services to meet contract requirements, aerial photography and ground and airborne survey services. Subcontractor costs increased 169.6% to $3.8 million for the three months ended June 30, 1998 from $1.4 million for the three months ended June 30, 1997. As a percentage of sales, however, sub contractor costs remained constant at 16.4% for both the three months ended June 30, 1998 and the three months ended June 30, 1997. OTHER GENERAL AND ADMINISTRATIVE COSTS. Other general and administrative costs include rent, maintenance, travel, supplies, utilities, insurance and professional services. Such costs increased 184.4% to $3.9 million for the three months ended June 30, 1998 from $1.4 million for the three months ended June 30, 1997, primarily due to greater supplies expense, increased travel, and employee recruiting and relocation expenses related to the integration of MSE. As a percentage of sales, other general and administrative costs increased to 17.3% for the three months ended June 30, 1997 from 16.2% for the three months ended June 30, 1997. DEPRECIATION AND AMORTIZATION. Depreciation and amortization consists primarily of amortization of goodwill incurred in connection with the Company's acquisitions, as well as depreciation of certain of the Company's operating assets. For the three months ended June 30, 1998, depreciation and amortization increased 182.8% to $905,000 from $320,000 for the three months ended June 30, 1997. This increase was primarily attributable to the increased goodwill recorded as a result of the MSE acquisition. As a percentage of sales, depreciation and amortization increased slightly to 4.0% for the three months ended June 30, 1998 from 3.8% for the three months ended June 30, 1997. The Company expects amortization expense to increase substantially as a result of the Cartotech acquisition. ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 OTHER EXPENSE, NET. Other expense, net is comprised primarily of net interest expense. Net interest expense increased 341.0% to $541,000 for the three months ended June 30, 1998 from $123,000 for the three months ended June 30, 1997. This increase was primarily due to increased term debt incurred in connection with the acquisition of MSE in July 1997 and increased utilization of the Company's lines of credit for working capital. INCOME TAX EXPENSE. Income tax expense was $1.3 million for the three months ended June 30, 1998 compared to $490,000 for the three months ended June 30, 1997. The Company's effective income tax rate for the three months ended June 30, 1998 was 40.3%, an increase from 37.9% for the three months ended June 30, 1997, due to the change in the mix of state tax rates as a result of the MSE acquisition. NET EARNINGS. Due to the factors discussed above, net earnings increased 135% to $1.9 million for the three months ended June 30, 1998 from $802,000 for the three months ended June 30, 1997. NINE MONTHS ENDED JUNE 30, 1998 AND 1997 SALES. Sales increased $35.5 million or 143.9% to $60.1 million for the nine months ended June 30, 1998 from $24.6 million for the nine months ended June 30, 1997. This increase was due to an increase in the number and size of customer contracts with the Company (including MSE) as well as the impact of the acquisition of MSE in July 1997. Prior to its acquisition by the Company, MSE's sales for the nine months ended June 30, 1997 were $20.7 million. SALARIES, WAGES AND RELATED BENEFITS. Salaries, wages and related benefits increased 151.3% to $29.0 million for the nine months ended June 30, 1998 from $11.5 million for the nine months ended June 30, 1997. This increase was primarily due to the addition of over 325 employees as a result of the MSE acquisition in July 1997, as well as the hiring of additional employees to support the Company's increased business. As a percentage of sales, salaries, wages and related benefits increased to 48.2% for the nine months ended June 30, 1998 from 46.8% for the nine months ended June 30, 1997. This increase, and the corresponding decrease in subcontractor costs, was primarily attributable to the Company's increased capability to perform more tasks internally as well as a decrease in the number of projects which required subcontractor services. SUBCONTRACTOR COSTS. Subcontractor costs increased 83.2% to $8.1 million for the nine months ended June 30, 1998 from $4.4 million for the nine months ended June 30, 1997, but decreased as a percentage of sales to 13.5% for the nine months ended June 30, 1998 from 17.9% for the nine months ended June 30, 1997. OTHER GENERAL AND ADMINISTRATIVE COSTS. Other general and administrative costs increased 161.4% to $10.5 million for the nine months ended June 30, 1998 from $4.0 million for the nine months ended June 30, 1997, primarily due to greater supplies expenses, increased travel, and employee recruiting and relocation expenses related to the integration of MSE. As a percentage of sales, other general and administrative costs increased to 17.5% for the nine months ended June 30, 1997 from 16.4% for the nine months ended June 30, 1997. ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 DEPRECIATION AND AMORTIZATION. For the nine months ended June 30, 1998, depreciation and amortization increased 158.3% to $2.5 million from $973,000 for the nine months ended June 30, 1997. This increase was primarily attributable to the increased goodwill recorded as a result of the MSE acquisition. As a percentage of sales, depreciation and amortization increased slightly to 4.2% for the nine months ended June 30, 1998 from 3.9% for the nine months ended June 30, 1997. OTHER EXPENSE, NET. Net interest expense increased 272.4% to $1.4 million for the nine months ended June 30, 1998 from $382,000 for the nine months ended June 30, 1997. This increase was primarily due to increased term debt incurred in connection with the acquisition of MSE in July 1997 and increased utilization of the Company's lines of credit for working capital. INCOME TAX EXPENSE. Income tax expense was $3.5 million for the nine months ended June 30, 1998 compared to $1.3 million for the nine months ended June 30, 1997. The Company's effective income tax rate for the nine months ended June 30, 1998 was 39.7%, an increase from 38.1% for the nine months ended June 30, 1997, due to the change in the mix of state tax rates as a result of the MSE acquisition. NET EARNINGS. Due to the factors discussed above, net earnings increased 154.8% to $5.2 million for the nine months ended June 30, 1998 from $2.1 million for the nine months ended June 30, 1997. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company's principal source of liquidity has consisted of cash flow from operations supplemented by secured lines of credit. On June 3, 1998, the Company replaced its existing lines of credit with a three-year, $11.0 million secured working capital line of credit and a $10.0 million line of credit for acquisitions (which is due in quarterly installments over a five-year period), and the Company refinanced $16.0 million of term debt. Borrowings under the new credit facilities bear interest at a rate per annum equal to, at the Company's option, (i) the agent bank's prime rate or (ii) an adjusted London Interbank Offering Rate (LIBOR) plus a margin ranging from 1.25% to 2.25%. The agent bank's prime rate was 8.25% on June 3, 1998. The Company borrowed approximately $8.9 million under the new acquisition line of credit to fund the cash portion of the acquisition of Cartotech, related transaction costs, retire existing Cartotech loans, and to provide working capital. As of June 30, 1998, the Company's outstanding balances on its working capital lines of credit were $7.4 million. On June 26, 1998, the Company filed a registration statement with the United States Securities and Exchange Commission for an offering of 2,250,000 shares of common stock, 1,750,000 of which will be sold by the Company and the remaining 500,000 shares of which will be sold by existing shareholders. The underwriters may exercise over allotment rights and increase the total offering to 2,587,500 shares, of which 2,012,500 shares would be issued by the Company and 575,000 shares would be sold by existing shareholders. If the offering is successfully completed, the Company expects to use a portion of the net proceeds of the offering to repay substantially all of the outstanding term debt and line of credit loans. ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 The Company's cash flow is significantly affected by three contract-related accounts: accounts receivable; revenues in excess of billings; and billings in excess of revenues. Under the percentage of completion method of accounting, an "account receivable" is created when an amount becomes due from a customer, which typically occurs when an event specified in the contract triggers a billing. "Revenues in excess of billings" occur when the Company has performed under a contract even though a billing event has not been triggered. "Billings in excess of revenues" occur when the Company receives an advance or deposit against work yet to be performed. These accounts, which represent a significant investment by ASI in its business, affect the Company's cash flow as projects are signed, performed, billed and collected. Approximately $6.0 million in cash was used in operating activities for the first nine months of fiscal 1998, compared to $2.7 million in cash generated for the first nine months of fiscal 1997. The change in operating cash flows is primarily attributable to normal fluctuations in the investment in contract-related accounts. At June 30, 1998, the working capital in contract-related accounts, excluding the newly acquired Cartotech balances, was equivalent to 195 days sales outstanding, up from 189 days at March 31, 1998. The Company believes that this level of investment is consistent with its normal operating range of days sales outstanding. For the nine months ended June 30, 1998, $11.0 million was used in investing activities compared to $552,000 for the nine months ended June 30, 1997. Such investing activities principally consisted of payments for net assets acquired in business combinations and purchases of equipment and leasehold improvements. For the nine months ended June 30, 1998, cash provided by financing activities was $17.0 million compared to $748,000 in cash used for the nine months ended June 30, 1997. Financing activities consisted primarily of net borrowings and payments under lines of credit for working capital purposes and net borrowings and payments of long-term debt used for business combinations and the purchase of equipment and leasehold improvements. The Company believes that funds available under its lines of credit and cash flow from operations are adequate to finance its operations for at least the next 18 months. RECENT ACCOUNTING PRONOUNCEMENTS The Company has adopted Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS 128 requires the restatement of all prior-period earnings per share ("EPS") data. SFAS 128 replaces the presentation of the primary EPS with a presentation of "basic EPS" and "diluted EPS." Under SFAS 128, basic EPS excludes dilution for common stock equivalents and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock are exercised or converted into common stock or result in the issuance of common stock that then share in the earnings of the entity. Under SFAS 128, the Company's diluted EPS is the same as the income per share reported by the Company prior to the adoption of SFAS 128, while the Company's basic EPS is greater than the income per share as previously reported. ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This statement requires that changes in comprehensive income be shown in a financial statement that is displayed with the same prominence as other financial statements. The statement will be effective for fiscal years beginning after December 15, 1997 (the Company's fiscal year beginning October 1, 1998). Reclassification for earlier periods is required for comparative purposes. The Company is currently evaluating the impact this statement will have on its financial statements; however, because the statement requires only additional disclosure, the Company does not expect the statement to have a material impact on its financial position or results of operations. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information." This statement supersedes Statement of Financial Accounting Standards No. 14, "Financial Reporting for Segments of a Business Enterprise." This statement includes requirements to report selected segment information quarterly and entity-wide disclosures about products and services, major customers, and the material countries in which the entity holds assets and reports revenues. The statement will be effective for fiscal years beginning after December 15, 1997 (the Company's fiscal year beginning October 1, 1998). Reclassification for earlier periods is required, unless impracticable, for comparative purposes. The Company is currently evaluating the impact this statement will have on its financial statements; however, because the statement requires only additional disclosure, the Company does not expect the statement to have a material impact on its financial position or results of operations. YEAR 2000 ISSUES The "Year 2000" issue concerns the potential exposures related to the automated generation of business and financial misinformation resulting from the application of computer programs that have been written using two digits, rather than four, to define the applicable year. The Company and the third parties with which it does business rely on numerous computer programs in their daily operations. The Company has assessed its internal exposure to this issue and is in the process of upgrading or replacing systems where necessary. The Company does not believe that the costs to upgrade or replace such systems will be material, and such costs will be expensed as incurred. The Company's customers specify database designs, including date fields, and the Company's delivery of data conforms to such specifications. Accordingly, the Company has not formally evaluated the Year 2000 issue as it relates to the computer systems used by its customers and potential customers. PART II OTHER INFORMATION Item 2. Legal Proceedings The Company is not a party to any material pending legal proceeding nor is its property the subject of a pending legal proceeding. The Company is involved in routine litigation from time to time, which is incidental to the business and the outcome of which is not expected to have a material effect on the Company. Item 5. Other Information Shareholder Proposals ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 Shareholder proposals intended to be considered at the 1999 Annual Meeting of Shareholders must be received by the Secretary of the Company not later than September 9, 1998. Such proposals may be included in the 1999 Proxy Statement if they comply with certain rules and regulations promulgated by the Securities and Exchange Commission. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Credit Agreement between the Company and Bank One, Colorado dated June 3, 1998 10.2 Exhibit A-1 to Credit Agreement Promissory Note - Revolving Loan 10.3 Exhibit A-2 to Credit Agreement Promissory Note - Term Loan 10.4 Exhibit A-3 to Credit Agreement Promissory Note - Acquisition Loan 10.5 Exhibit C to Credit Agreement Guaranty 10.6 Exhibit D to Credit Agreement Pledge and Security Agreement 10.7 Exhibit E to Credit Agreement Security Agreement and Assignment 27. Financial Data Schedule (b) Reports on Form 8-K The following report on Form 8-K was filed during the three months ended June 30, 1998: June 28, 1998 - Item 2 Acquisition on disposition of assets reporting the acquisitions of Cartotech, Inc. ANALYTICAL SURVEYS, INC. QUARTERLY REPORT ON FORM 10-Q JUNE 30, 1998 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ANALYTICAL SURVEYS, INC. (Registrant) Date: August 4, 1998 /s/ Sidney V. Corder --------------------------- Sidney V, Corder, Chairman and Chief Executive Officer Date: August 4, 1998 /s/ Scott C. Benger --------------------------- Scott C. Benger, Secretary/ Treasurer (principal financial officer and principal accounting officer) Date: August 4, 1998 /s/ Brian J. Yates --------------------------- Brian J. Yates, Controller EX-10.1 2 EXHIBIT 10.1 $37,000,000 CREDIT AGREEMENT DATED AS OF JUNE 3, 1998 BY AND AMONG ANALYTICAL SURVEYS, INC., AS BORROWER AND THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF AND BANK ONE, COLORADO, N.A., AS AGENT ARRANGED BY BANK ONE, COLORADO, N.A. TABLE OF CONTENTS
Page ---- RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE I DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . 1 SECTION 1.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.2 ACCOUNTING TERMS AND DETERMINATIONS. . . . . . . . . . . . 20 ARTICLE II COMMITMENT; AMOUNTS AND TERMS OF THE ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 2.1 COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . 20 (a) REVOLVING LOANS COMMITMENT . . . . . . . . . . . . . 21 (b) TERM LOAN COMMITMENT . . . . . . . . . . . . . . . . 21 (c) ACQUISITION LOAN COMMITMENT . . . . . . . . . . . . 21 SECTION 2.2 ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 2.3 MAKING THE ADVANCES . . . . . . . . . . . . . . . . . . . 22 (a) REQUEST FOR ADVANCE . . . . . . . . . . . . . . . . 22 (b) REQUEST FOR ADVANCE IRREVOCABLE . . . . . . . . . . 22 (c) AVAILABILITY OF FUNDS, REVOLVING LOANS AND ACQUISITION LOANS . . . . . . . . . . . . 23 (d) ADVANCES BY AGENT . . . . . . . . . . . . . . . . . 23 SECTION 2.4 COMMITMENT FEE . . . . . . . . . . . . . . . . . . . . . . 24 (a) COMMITMENT FEE RATE . . . . . . . . . . . . . . . . 24 (b) CALCULATION OF COMMITMENT FEE . . . . . . . . . . . 24 SECTION 2.5 REDUCTION OF THE REVOLVING LOANS AND ACQUISITION LOANS COMMITMENT . . . . . . . . . . . . . . . 24 SECTION 2.6 REPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . 24 (a) VOLUNTARY REPAYMENT . . . . . . . . . . . . . . . . 24 (b) INSTALLMENT PAYMENTS OF TERM LOAN . . . . . . . . . 25 (c) REPAYMENT OF ACQUISITION LOANS . . . . . . . . . . . 25 (d) MANDATORY REPAYMENT . . . . . . . . . . . . . . . . 26 (e) APPLICATION OF REPAYMENTS . . . . . . . . . . . . . 26 SECTION 2.7 DISTRIBUTION OF PAYMENTS BY THE AGENT . . . . . . . . . . 26 SECTION 2.8 PROMISSORY NOTES . . . . . . . . . . . . . . . . . . . . . 27 (a) THE REVOLVING NOTES . . . . . . . . . . . . . . . . 27 (b) TERM NOTES . . . . . . . . . . . . . . . . . . . . . 27 (c) ACQUISITION LOAN NOTE . . . . . . . . . . . . . . . 28 SECTION 2.9 PRO RATA TREATMENT . . . . . . . . . . . . . . . . . . . . 28 SECTION 2.10 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . 29 (a) PRIME RATE LOANS . . . . . . . . . . . . . . . . . . 29
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Page ---- (b) LIBOR RATE LOANS . . . . . . . . . . . . . . . . . . 29 (c) DEFAULT RATE INTEREST . . . . . . . . . . . . . . . 29 SECTION 2.11 YIELD PROTECTION . . . . . . . . . . . . . . . . . . . . . 29 (a) INCREASED COSTS . . . . . . . . . . . . . . . . . . 30 (b) ADDITIONAL INTEREST. . . . . . . . . . . . . . . . . 30 (c) INCREASED CAPITAL. . . . . . . . . . . . . . . . . . 31 (d) BREAKAGE COSTS . . . . . . . . . . . . . . . . . . . 31 SECTION 2.12 CONVERSION OF LOANS; CHANGE OF INTEREST PERIODS . . . . . . . . . . . . . . . . . . . . . 32 SECTION 2.13 ILLEGALITY, ETC. . . . . . . . . . . . . . . . . . . . . . 32 SECTION 2.14 PAYMENTS AND COMPUTATIONS . . . . . . . . . . . . . . . . 33 ARTICLE III CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . 34 SECTION 3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE . . . . . . . . . 34 SECTION 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES . . . . . . . . . . . 37 ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 38 SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . . . 38 (a) CORPORATE EXISTENCE. . . . . . . . . . . . . . . . . 38 (b) POWERS, ETC. . . . . . . . . . . . . . . . . . . . . 39 (c) AUTHORIZATION; NO CONFLICT . . . . . . . . . . . . . 39 (d) APPROVALS. . . . . . . . . . . . . . . . . . . . . . 40 (e) ENFORCEABILITY . . . . . . . . . . . . . . . . . . . 40 (f) FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 40 (g) LITIGATION . . . . . . . . . . . . . . . . . . . . . 40 (h) FEDERAL RESERVE REGULATIONS. . . . . . . . . . . . . 41 (i) INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . 41 (j) ERISA. . . . . . . . . . . . . . . . . . . . . . . . 41 (k) COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . 42 (l) PAYMENT OF DEBTS AND TAXES . . . . . . . . . . . . . 42 (m) INDEBTEDNESS, GUARANTIES . . . . . . . . . . . . . . 43 (n) MATERIAL AGREEMENTS. . . . . . . . . . . . . . . . . 43 (o) PROPERTIES, INVENTORY AND EQUIPMENT. . . . . . . . . 43 (p) FINANCIAL CONDITION. . . . . . . . . . . . . . . . . 44 (q) INSURANCE. . . . . . . . . . . . . . . . . . . . . . 45 (r) FULL DISCLOSURE . . . . . . . . . . . . . . . . . . 45 (s) NO DEFAULT . . . . . . . . . . . . . . . . . . . . . 45 (t) STATUS OF LOANS AS SENIOR DEBT . . . . . . . . . . . 45 (u) SWAP OBLIGATIONS . . . . . . . . . . . . . . . . . . 45 ARTICLE V COVENANTS OF THE BORROWER. . . . . . . . . . . . . . . . . . . . 46
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Page ---- SECTION 5.1 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 46 (a) USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . 46 (b) REPORTING AND NOTICE REQUIREMENTS . . . . . . . . . . 46 (c) MAINTENANCE OF EXISTENCE, ETC.. . . . . . . . . . . . 49 (d) COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . 49 (e) INSURANCE . . . . . . . . . . . . . . . . . . . . . . 50 (f) MATERIAL AGREEMENTS . . . . . . . . . . . . . . . . . 50 (g) OBLIGATIONS AND TAXES . . . . . . . . . . . . . . . . 50 (h) MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS. . . . . . . . . . . . . . 50 (i) ENVIRONMENTAL AND SAFETY MATTERS. . . . . . . . . . . 51 (j) DEPOSIT BALANCES. . . . . . . . . . . . . . . . . . . 52 (k) INTEREST RATE PROTECTION. . . . . . . . . . . . . . . 52 (l) SURVEYS . . . . . . . . . . . . . . . . . . . . . . . 52 (m) AUDIT OF ACCOUNTS RECEIVABLE AND INVENTORY . . . . . . . . . . . . . . . . . . . . . . 52 (n) ADDITIONAL PLEDGES AND GUARANTORS . . . . . . . . . . 53 (p) LANDLORD'S WAIVER AND CONSENT . . . . . . . . . . . . 54 (q) FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . 54 SECTION 5.2 NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 54 (a) FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . 54 (b) PROHIBITION OF FUNDAMENTAL CHANGES. . . . . . . . . . 55 (c) LIMITATION ON LIENS . . . . . . . . . . . . . . . . . 55 (d) DEBT. . . . . . . . . . . . . . . . . . . . . . . . . 55 (e) GUARANTEES. . . . . . . . . . . . . . . . . . . . . . 56 (f) INVESTMENTS, LOANS, ADVANCES, ETC.. . . . . . . . . . 56 (g) SALES OF ASSETS . . . . . . . . . . . . . . . . . . . 57 (h) TRANSACTIONS WITH AFFILIATES. . . . . . . . . . . . . 57 (i) MODIFICATION OF CERTAIN DOCUMENTS; PERFORMANCE OF MATERIAL AGREEMENTS. . . . . . . . . . 57 (j) DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . 58 (k) ACCOUNTING. . . . . . . . . . . . . . . . . . . . . . 58 (l) CHANGE OF ADDRESS; BUSINESS NAME(s) . . . . . . . . . 58 ARTICLE VI EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 6.1 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . 59 (a) PAYMENTS UNDER THE AGREEMENT AND THE NOTES . . . . . . . . . . . . . . . . . . . . . . 59 (b) REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . 59 (c) OTHER LOAN INSTRUMENT OBLIGATIONS . . . . . . . . . . 59 (d) OTHER DEBT. . . . . . . . . . . . . . . . . . . . . . 59 (e) INSOLVENCY. . . . . . . . . . . . . . . . . . . . . . 60
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Page ---- (f) JUDGMENTS . . . . . . . . . . . . . . . . . . . . . 60 (g) TERMINATION OF CERTAIN LOAN INSTRUMENTS . . . . . . . . . . . . . . . . . . . . 61 (h) COLLATERAL LIENS. . . . . . . . . . . . . . . . . . 61 SECTION 6.2 BANK'S RIGHTS UPON AN EVENT OF DEFAULT. . . . . . . . . . 61 ARTICLE VII THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 7.1 APPOINTMENT AND POWERS. . . . . . . . . . . . . . . . . . 61 SECTION 7.2 LIMITATION ON AGENT'S LIABILITY . . . . . . . . . . . . . 62 SECTION 7.3 DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 7.4 RIGHTS AS A BANK. . . . . . . . . . . . . . . . . . . . . 63 SECTION 7.5 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 63 SECTION 7.6 NON-RELIANCE ON AGENT AND OTHER BANKS . . . . . . . . . . 64 SECTION 7.7 EXECUTION AND AMENDMENT OF LOAN INSTRUMENTS ON BEHALF OF THE BANKS . . . . . . . . . . . . . . . . . . 64 SECTION 7.8 RESIGNATION OF THE AGENT. . . . . . . . . . . . . . . . . 65 ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 8.1 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . 65 SECTION 8.2 NOTICES, ETC. . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 8.3 REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . 67 SECTION 8.4 COSTS, EXPENSES AND TAXES . . . . . . . . . . . . . . . . 67 SECTION 8.5 RIGHT OF SET-OFF. . . . . . . . . . . . . . . . . . . . . 68 SECTION 8.6 BINDING EFFECT. . . . . . . . . . . . . . . . . . . . . . 68 SECTION 8.7 INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . 68 SECTION 8.8 CONSENT TO EXCLUSIVE JURISDICTION . . . . . . . . . . . . 69 SECTION 8.9 WAIVER OF JURY TRIAL AND CERTAIN DAMAGES. . . . . . . . . 69 SECTION 8.10 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . 69 SECTION 8.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 8.12 INCONSISTENT PROVISIONS . . . . . . . . . . . . . . . . . 70 SECTION 8.13 SHARING OF RECOVERIES . . . . . . . . . . . . . . . . . . 71 SECTION 8.14 ASSIGNMENTS AND PARTICIPATIONS. . . . . . . . . . . . . . 71 (a) ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . 71 (b) PARTICIPATIONS. . . . . . . . . . . . . . . . . . . 73 SECTION 8.15 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 8.18 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 8.19 ENTIRE AGREEMENT, COMMITMENT LETTER SUPERSEDED . . . . . . . . . . . . . . . . . . . . . . . 75 SECTION 8.20 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . 75
-iv- SCHEDULES Schedule I Banks Schedule 2.1 Banks; Address; Commitment Percentages Schedule 4.1(a) Borrower's and Guarantors' Capital Structure and Shareholders Schedule 4.1(b) Borrower's and Guarantors' Business Names and Jurisdictions where Qualified to do Business Schedule 4.1(d) Approvals Schedule 4.1(f) Financial Disclosures Schedule 4.1(g) Litigation Schedule 4.1(j) ERISA Disclosures Schedule 4.1(m) Indebtedness; Guaranties Schedule 4.1(n) Material Agreements Schedule 4.1(o) Real Property; Inventory; Liens Schedule 4.1(q) Insurance
-v- EXHIBITS Exhibit A-1 Form of Revolving Note Exhibit A-2 Form of Term Note Exhibit A-3 Form of Acquisition Loan Note Exhibit B-1 Form of Request for Advance Exhibit B-2 Form of Compliance Certificate Exhibit B-3 Form of Interest Period/Conversion Notice Exhibit C Form of Guaranty Exhibit D Form of Pledge and Security Agreement Exhibit E Form of Security Agreement and Assignment Exhibit F-1 Form of Deed of Trust Exhibit F-2 Form of Collateral Assignment of Leases and Rents Exhibit F-3 Landlord's Waiver and Consent Exhibit F-4 Consent to Assignment of Contracts Exhibit F-5 Form of Assignment of Lease Exhibit G-1 Form of Borrower's Omnibus Certificate Exhibit G-2 Form of Guarantor's Omnibus Certificate Exhibit H-1 Form of Opinion of Counsel to Borrower Exhibit H-2 Form of Opinion of Counsel to Guarantors Exhibit H-3 Form of Opinion of Local Counsel Exhibit I Form of Notice of Assignment
-vi- CREDIT AGREEMENT Dated as of June 3,1998 THIS CREDIT AGREEMENT (the "AGREEMENT") is made and entered into as of June 3, 1998 by and between Analytical Surveys, Inc., a Colorado corporation,(the "BORROWER") and the Banks listed on the attached SCHEDULE I, as revised from time to time (collectively the "BANKS" and individually the "BANK"); and BANK ONE, COLORADO, N.A.,in its capacity as agent for the Banks hereunder(in such capacity, the "AGENT"). RECITALS Pursuant and subject to the terms and conditions of this Agreement, the Banks will make available to the Borrower (a) until June30, 2001, a Senior Secured Revolving Line of Credit in the maximum amount of up to $11,000,000, (b) until June 30, 2003, a Senior Secured Term Loan of $16,000,000, and (c) until June 30, 1999 a Senior Secured Acquisition Draw Facility in the maximum amount of $10,000,000. Payment by the Borrower of the amounts due hereunder will be secured by liens on and security interests in the real and personal property of the Borrower and guaranteed by the Subsidiaries of the Borrower. AGREEMENT In consideration of the covenants contained herein the Parties hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 DEFINITIONS. As used in this Agreement, the terms identified in this SECTION 1.1 shall have the meanings specified below. "ACCOUNT RECEIVABLE" means any account (as such term is defined in the Uniform Commercial Code as adopted in the State of -1- Colorado) or other right to payment for goods sold or services rendered of the Borrower and its Subsidiaries. "ACQUISITION LOANS" means the Advance of funds by the Banks to the Borrower pursuant to the Acquisition Loan Commitment, which Loans will be evidenced by the Acquisition Loan Notes. "ACQUISITION LOANS COMMITMENT" means the commitment of each Bank to Advance Acquisition Loans to the Borrower in the aggregate amount of $10,000,000.00 as provided in SECTION 2.1(c) as the same may be adjusted or terminated pursuant to SECTION 2.5 OR 6.2 or as otherwise provided in this Agreement. "ACQUISITION LOANS DRAW DATE" means June 30, 1999. "ACQUISITION LOANS NOTE" means the promissory notes in the aggregate principal amount of $10,000,000 evidencing the Acquisition Loan, made by the Borrower and payable to the order of the Banks, substantially in the form of EXHIBIT A-3 hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein. "ACQUISITION LOAN RECORD" means a Record with respect to an Acquisition Loan. "ACQUISITION LOANS SCHEDULED MATURITY DATE" means June 30, 2004. "ADVANCE" means an advance of funds by the Bank to the Borrower as a Loan pursuant to a Request for Advance as provided in SECTION 2.2. "AFFILIATE" means a Person that controls, is controlled by or is under common control with another Person. For purposes hereof, "control" means the practical power to direct the activities of a Person. "AGENT" means Bank One, Colorado, N.A., as agent for and representative (within the meaning of Section 9-105(m) of the Uniform Commercial Code) of the Banks under the Loan Instruments, and any successor Agent appointed pursuant to Section 7.8. "AGREEMENT" means this Credit Agreement dated as of June 3, 1998 between the Borrower and the Banks, together with all schedules and exhibits hereto, and all modifications, amendments, supplements, renewals and extensions hereof in the manner provided herein. -2- "APPLICABLE LAW" means,(a) all applicable common law and principles of equity and (b) all applicable provisions of all (i) constitutions, statutes, rules, regulations and orders of governmental bodies, (ii) approvals of Government Authorities and (iii) orders, decisions, judgements and decrees of all courts (whether at law or in equity or admiralty) and arbitrators. "APPLICABLE MARGIN" means such percentage for the Type of Loan as set forth in the following table opposite the applicable ratio of Total Debt to Trailing Four Quarter EBITDA determined as of the end of the Fiscal Quarter immediately preceding such period: - ----------------------------------------------------------------------- Ratio of Total Less Than LIBOR Base Rate + Prime Rate + Debt to Trailing Four Quarter EBITDA Greater Than or Equal to - ----------------------------------------------------------------------- 3.50x -- 2.25% 0.500% - ----------------------------------------------------------------------- 3.00x 3.50x 2.00% 0.250% - ----------------------------------------------------------------------- 2.50x 3.00x 1.75% 0.000% - ----------------------------------------------------------------------- 2.00x 2.50x 1.50% 0.000% - ----------------------------------------------------------------------- -- 2.00x 1.25% 0.000% - -----------------------------------------------------------------------
(i) The ratio of Total Debt to Trailing Four Quarter EBITDA shall be computed by the Borrower and such ratio and the Applicable Margin for each Type of Loan will be set forth in the Compliance Certificate furnished under SECTION 5.1(b)(iv). The Applicable Margin shall be subject to adjustment, if necessary, on the earlier of (a) five (5) days after the delivery of the Compliance Certificate for the applicable Fiscal Quarter and (b) fifty (50) days after the end of each Fiscal Quarter of the Borrower ("MARGIN ADJUSTMENT DATE"). Any change in the Applicable Margin shall apply to all Loans outstanding of any Type as of the Margin Adjustment Date. (ii) Notwithstanding the foregoing, the Applicable Margin will be equal to the LIBOR Base Rate + 2.25% or Prime Rate +0.50%, as the case may be, from the Effective Date to fifty (50) days after the Fiscal Quarter ended June 30, 1998, at which point the Applicable Margin will be as set forth in the Compliance Certificate accompanying the -3- financial statements furnished under SECTION 5.1(b)(iv) for the Fiscal Quarter ended June 30, 1998. (iii) If the Borrower fails to furnish the Compliance Certificate and the financial statements fifty (50) days after the end of any Fiscal Quarter, the Applicable Margin shall be for the relevant Fiscal Quarter equal to 2.25% for LIBOR Rate Loans or 0.50% for Prime Rate Loans, as the case may be. "ASSIGNMENT OF LEASE" means the assignment of lease pertaining to the lessee's interest in leasehold estates held by the Borrower and its Subsidiaries in the form of EXHIBIT F-5 hereto. "AUTHORIZED SIGNATORY" means such Person or Persons as may be designated from time to time in the most recent certificate delivered to the Bank by the Borrower as being authorized to execute and deliver certificates or other documents required or permitted to be executed and delivered to the Bank by the Borrower or other Persons pursuant to this Agreement or any other Loan Instrument, and in any case shall include the President, Treasurer and the Chief Financial Officer of the Borrower. "BANK" and "BANKS" means (a) the Agent and any Person listed on the signature pages hereof following the Agent and (b) any Person that has been assigned any or all of the rights or obligations of a Bank pursuant to SECTION 8.14. "BORROWER" means Analytical Surveys, Inc., a Colorado corporation. "BORROWER'S ACCOUNT" means a demand deposit account maintained by the Borrower with the Agent. "BORROWER LOAN INSTRUMENTS" means, the Loan Instruments to which the Borrower is a party. "BORROWER'S OMNIBUS CERTIFICATE" means a certificate from the Borrower substantially in the form of EXHIBIT G-1 hereto. "BORROWER'S REAL PROPERTY" has the meaning given thereto in SECTION 4.1(o). "BUSINESS DAY" means a day of the year other than Saturday or Sunday on which banks are not authorized to close in -4- Denver, Colorado and, if the applicable Business Day relates to any LIBOR Rate Loans, on which dealings are carried on in the London interbank market. "CAPITAL EXPENDITURES" means amounts paid or indebtedness incurred by the Borrower or any of its Subsidiaries in connection with the acquisition, purchase or lease by such Borrower or any of its Subsidiaries of capital assets that would be required to be capitalized (including the applicable amount in respect of capitalized interest) and which amounts would be shown as such capital expenditures on the consolidated statement of cash flows of such Person in accordance with GAAP, PROVIDED, HOWEVER, Capital Expenditures shall not include (i) amounts paid with insurance proceeds or the proceeds of a condemnation award within twelve (12) months after receipt by the Borrower or its Subsidiaries, as the case may be, in connection with the purchase of capital assets to replace the capital assets destroyed in the casualty loss giving rise to such insurance proceeds or taken in the condemnation proceeding giving rise to such condemnation proceeds, as the case may be, and (ii) capital assets acquired pursuant to a Qualified Acquisition. "CHANGE OF CONTROL" means the acquisition by any person or group (other than Sidney V. Corder, Sol C. Miller and John A. Thorpe) of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) of beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 30% or more of the outstanding shares of common stock of the Borrower; or, during any period of twelve consecutive calender months, individuals who were directors of the Borrower on the first day of such period shall cease to constitute a majority of the board of directors of the Borrower. "CMLTD" means, with respect to the Borrower or any Guarantor, all principal amounts due and payable by the Borrower or such Guarantor during the then-current month and during the following eleven months with respect to Debt of such Person, other than accounts payable, accrued expenses and income taxes payable. "CODE" means the Internal Revenue Code of 1986, as amended, and as the same may be supplemented, modified, amended or restated from time to time, and the rules and regulations promulgated thereunder, or any corresponding or succeeding provisions of applicable law. -5- "COLLATERAL" shall mean all rights and interests of the Borrower and of the Guarantors which are subject to the Collateral Documents. "COLLATERAL DOCUMENTS" means the Deeds of Trust, the Security Agreements, the Guaranties, the Landlord's Consent and Waiver and Consent, the Assignments of Lease, the Collateral Assignments of Leases and Rents, and the Pledge Agreement. "COMMITMENT" means, with respect to each Bank, such Bank's obligation to make Loans pursuant to the Revolving Loan Commitment, Term Loan Commitment and Acquisition Loan Commitment. "COMMITMENT FEE" has the meaning specified in SECTION 2.4 hereof. "COMMITMENT FEE RATE" means the percentage set forth below in the following table opposite the applicable ratio of Total Debt to Trailing Four Quarter EBITDA determined as of the end of the Fiscal Quarter immediately preceding such period: - --------------------------------------------------------------- Ratio of Total Less Than Commitment Fee Rate Debt to Trailing Four Quarter EBITDA Greater Than or Equal to - --------------------------------------------------------------- 2.50x -- 0.250% - --------------------------------------------------------------- 2.00x 2.50x 0.185% - --------------------------------------------------------------- -- 2.00x 0.150% - ---------------------------------------------------------------
The ratio of Total Debt to Trailing Four Quarter EBITDA shall be computed by the Borrower and such ratio and the Commitment Fee Rate for the Fiscal Quarter will be set forth in the Compliance Certificate furnished under SECTION 5.1(b)(iv). The Commitment Fee Rate shall be subject to adjustment, if necessary, on the earlier of (a) five (5) days after the delivery of the Compliance Certificate for the applicable Fiscal Quarter and (b) fifty (50) days after the end of each Fiscal Quarter of the Borrower. Notwithstanding the foregoing, the Commitment Fee Rate shall be 0.250% from the Effective Date to fifty (50) days after the Fiscal Quarter ended June 30, 1998, at which point the Commitment Fee Rate shall be as set forth in the Compliance Certificate accompanying the financial statements furnished under SECTION 5.1(b)(iv) for the Fiscal Quarter ended June 30, 1998. -6- "COMPLIANCE CERTIFICATE" means, a certificate substantially in the form of EXHIBIT B-2. "CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion of a Loan of one Type into a Loan of another Type pursuant to SECTION 2.12 or 2.13. "DEBT" means (i) indebtedness for borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations to pay the deferred purchase price of property or services, (iv) obligations as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, and (v) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above. "DEED OF TRUST" and "DEEDS OF TRUST" mean, respectively, any mortgage, deed of trust or other collateral security document pertaining to non-leasehold interests in real property executed by the Borrower or any Guarantor from time to time in favor of the Agent (on behalf of the Banks)supporting or securing any of the Obligations, including the Deeds of Trust substantially in the form of EXHIBIT F-1 hereto from the Borrower and certain of the Guarantors, as the same may be supplemented, modified, amended or restated from time to time in the manner provided therein. "DEFAULT" means any event or state of affairs that, with the giving of notice or the passage of time (or both) would constitute an Event of Default. "DEFAULT RATE" means an interest rate per annum equal to three percent (3%) above the Prime Rate in effect with respect to Loans at the time of occurrence of any Event of Default. "DISPOSITION" means any sale, assignment, transfer or other disposition (including a ground lease or other long term obligation which under GAAP is the equivalent of a sale of such asset)of any asset (whether now owned or hereafter acquired) of any Person, other than inventory in the ordinary course of business. Disposition shall not include sale and lease back of capital equipment in an amount not in excess of, at any one time, an aggregate principal amount of $3,000,000. -7- "DOLLARS", "DOLLARS" and "$" means lawful money of the United States of America. "EBITDA" means, for any computation period, with respect to the Borrower and all of its Subsidiaries on a consolidated basis or with respect to a Person, an amount equal to Net Income for such period(determined in accordance with GAAP) before deduction of interest expenses, taxes, depreciation expenses and amortization for such period and excluding all extraordinary items with respect to gains or losses arising out of the sale or disposition of assets. This definition of EBITDA shall be used in the calculation of the Applicable Margin, Commitment Fee Rate, Qualified Acquisitions, covenants and for all other purposes under this Credit Agreement. "EFFECTIVE DATE" means June 3, 1998. "EMPLOYEE BENEFIT PLAN" means an employee pension benefit plan as defined in ERISA Section 3(2). "ENVIRONMENTAL CLAIM" means: (a) any responsibility, liability or unlawful act or omission under any Environmental Law (whether alleged or otherwise); (b) any tortious act or omission or breach of contract pertaining to any Environmental Substance (whether alleged or otherwise); or (c) any other violation or claim under any Environmental Law or in respect of any Hazardous Materials (whether alleged or otherwise). "ENVIRONMENTAL AND SAFETY LAWS" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, codes and similar provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations and common law concerning public health or safety, worker health or safety or pollution or protection of the environment, including without limitation those relating to any emissions, discharges or releases of Hazardous Materials to ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, control, clean-up or handling of Hazardous Materials. "EQUIPMENT" shall mean the equipment identified in SCHEDULE 4.1(o). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and as the same may be supplemented, modified, amended or restated from time to time, and the rules -8- and regulations promulgated thereunder, or any corresponding or succeeding provisions of applicable law. "ERISA AFFILIATE" and "ERISA AFFILIATES" shall mean, respectively, any one or more of any trade, business, person or persons that together with the Borrower would be deemed to be a single employer within the meaning of Section 4001(a)(14) of ERISA. "ERISA EFFECT" means any material and adverse effect on (a) any Plan, (b) the assets and properties of any Plan or (c) any funding or other liability of any one or more of the Borrower or any ERISA Affiliate in respect of any Plan (individually or in the aggregate). "ERISA EVENT" means any (a) "accumulated funding deficiency" (whether or not waived), "prohibited transaction," "reportable event" (other than any event for which the 30-day notice requirement has been waived by regulation), "disqualification," "partial withdrawal," involuntary "partial termination" or "termination," "insolvency," "reorganization" or the imposition of any "penalty" or "withdrawal liability" in respect of any Plan under (and as such words and phrases are defined in" ERISA or the Code, as applicable), (b) any other violation of ERISA, the Code or any other applicable law in respect of any Plan (whether asserted or otherwise), (c) supplement or amendment to or modification or restatement of any Plan that could have or has had an ERISA Effect, or (d) imposition, increase or other adverse change in any funding obligation or other liability of any one or more of the Borrower or any ERISA Affiliate in respect of any Plan or to the Pension Benefit Guaranty Corporation (individually or in the aggregate). "EVENT OF DEFAULT" shall have the meaning assigned thereto in SECTION 6.1 hereof. "EXISTING LOAN AGREEMENT" means (a) the Business Loan Agreement, dated as of June 30, 1997, between the Borrower, MSE Corporation, ASI Landmark, Inc. and Bank One, Colorado, N.A. and the promissory notes referred to therein, and (b) and the promissory notes of the Borrower in favor of Bank One, Colorado, N.A. dated (i) February 26, 1998 in the principal amount of $2,500,000, (ii) December 20, 1995 in the principal amount of $1,850,000, (iii) June 21, 1996 in the principal amount of $5,182,692.12 and (iv) February 6, 1997 in the principal amount of $1,000,000. -9- "FEDERAL FUNDS RATE" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, if such rate is not so published for any day that is a Business Day, the average of quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent. "FEES" means the Commitment Fee. "FISCAL QUARTER" means one of the three month accounting periods comprising a Fiscal Year. "FISCAL YEAR" means the twelve-month accounting period ending on September 30 of each year. "FIXED CHARGES" means, as of any date of determination, the following, determined with respect to the immediately preceding four Fiscal Quarters of the Borrower and the Guarantors for which financial statements have been delivered pursuant to SECTION 5.1, the sum of (a) CMLTD,(b) Interest Expense, (c) capital lease payments (d) federal and state income tax expense and (e) dividends (other than dividends payable solely in capital stock) for such period. "GAAP" means generally accepted accounting principals applied in the United States and practices which are recognized as such by the American Institute of Certified Public Accountants or any successor organization. "GOVERNMENTAL AUTHORITIES" means any federal, state, county, municipal, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "GUARANTEE" and "GUARANTEES" mean a guarantee, endorsement, contingent agreement to purchase or furnish funds for the payment or maintenance of, or otherwise to be or become contingently liable under or with respect to, any indebtedness (including Debt) or other obligations of any Person, or a guarantee of the payment of dividends or other distributions upon the stock or other equity interests in any Person, or an agreement to purchase, sell or lease (as lessee or lessor) real or personal property or services primarily for the purpose of enabling a debtor to make payment of its obligations or an agreement to assure a creditor against loss, and including, -10- without limitation, causing a bank to issue a letter of credit for the benefit of another Person. "GUARANTOR" and "GUARANTORS" means, respectively, any one or more of MSE Corporation, an Indiana corporation, and ASI Landmark, Inc., a Colorado corporation and any Person added as a Guarantor pursuant to SECTION 5.1(n). "GUARANTOR OMNIBUS CERTIFICATE" means a certificate to be provided to the Bank by each of the Guarantors, each substantially in the form of EXHIBIT G-2 hereto. "Guarantor's Real Property" has the meaning given thereto in SECTION 4.1(o). "GUARANTY" and "GUARANTIES" means, the Guaranty from each of the Guarantors to the Bank substantially in the form of EXHIBIT C hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided therein. "HAZARDOUS MATERIALS" means, collectively, any polychlorinated biphenyls, petroleum or petroleum derived substance, friable asbestos, and any toxic or otherwise hazardous waste, material or substance, including, without limitation, all substances with respect to which liability or standards of conduct may be imposed pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, the Resource Conservation and Recovery Act of 1976, as amended from time to time, or any other Environmental and Safety Law. "INTEREST EXPENSE" means, with respect to the Borrower and its Subsidiaries, for any period, the interest payable by the Borrower and its Subsidiaries during such period as determined in accordance with GAAP. "INTEREST PERIOD" means, for each LIBOR Rate Loan, the period commencing on the date of the Advance thereof or the date of the Conversion of any Prime Rate Loan into such a LIBOR Rate Loan and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be 1, 3 or 6 months as the Borrower may, upon notice received by the Bank not later than 11:00 a.m. (Denver, Colorado time) on the third -11- Business Day prior to the first day of such Interest Period, select; PROVIDED, HOWEVER, that: (i) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, PROVIDED, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (ii) no Interest Period applicable to a Term Loan or Acquisition Loan or portion thereof shall extend beyond any date upon which is due any scheduled principal payment in respect of the Term Loans and Acquisition Loans unless the aggregate principal amount of Term Loans or Acquisition Loans, respectively, represented by Prime Rate Loans or LIBOR Rate Loans having Interest Periods that will expire on or before such date, equals or exceeds the amount of such principal payment; and (iii) no Interest Period for any Term Loan shall extend beyond June 30, 2003 and no Interest Period for any Revolving Loan shall extend beyond June 30, 2001 and no Interest Period for any Acquisition Loan shall extend beyond June 30, 2004. "INTEREST PERIOD/CONVERSION NOTICE" means a notice from the Borrower to the Bank substantially in the form of EXHIBIT B-3 concerning Conversions of Types of Advances, or concerning Interest Period elections. "INTEREST RATE PROTECTION AGREEMENT" means any interest rate protection agreement, future, option swap, cap or collar agreement or other arrangement designed to fix interest rates or other wise hedge against fluctuations in interest rates. "INVENTORY" means all raw materials, work in process, finished goods, merchandise, parts and supplies of every kind and description of the Borrower, and of the Guarantors, and goods held for sale or lease or furnished under contracts of service in which the Borrower or any Guarantor now has or hereafter acquires any right, whether held by the Borrower or others, and all documents of title, warehouse receipts, bills of lading, and all -12- other documents of every type covering all or any part of the foregoing. Inventory includes inventory temporarily out of the Borrower's or any Guarantor's custody or possession. "LANDLORD WAIVER AND CONSENT" means the Landlord Waiver and Consent pertaining to the lessor's interest in the leasehold estates held by the Borrower or its Subsidiaries in the form of EXHIBIT F-3 hereto. "LIBOR BASE RATE" means, for any Interest Period for any LIBOR Rate Loan, the offered rate for U.S. Dollar deposits of not less than $1,000,000.00 as of 11:00 A.M. City of London, England time two London Business Days prior to the first date of each Interest Period as shown on the display designated as "British Bankers Assoc. Interest Settlement Rates" on the Telerate System ("TELERATE"), Page 3750 or Page 3740, or such other page or pages as may replace such pages on Telerate for the purpose of displaying such rate. PROVIDED, HOWEVER, that if such offered rate is not available on Telerate then such offered rate shall be otherwise independently determined by Agent from an alternate, substantially similar independent source available to Agent or shall be calculated by Agent by a substantially similar methodology as that thereto for used to determine such offered rate in Telerate. "LONDON BUSINESS DAY" means any day other than a Saturday, Sunday or a day on which banking institutions are generally authorized or obligated by law or executive order to close in the City of London, England. "LIBOR RATE" means, for any LIBOR Rate Loan for any Interest Period therefor, a rate per annum (expressed as a decimal, rounded upwards, if necessary, to the nearest 1/100,000 of 1%) determined by the Agent to be equal to the sum of (a) the LIBOR Base Rate for such Advance for such Interest Period, plus (b) the Applicable Margin. "LIBOR RATE LOAN" means a Loan which bears interest as provided in SECTION 2.10(b). "LIEN" means any mortgage, deed of trust, lien, chattel mortgage, conditional sale contract, pledge, charge, security interest or encumbrance of any kind whatsoever. "LOAN" and "LOANS" means, respectively, all funds Advanced by the Banks to the Borrower pursuant to Requests for Advance submitted by the Borrower to the Agent and all other amounts paid or otherwise advanced pursuant to any other Loan Instrument, which Loans will be evidenced by the Notes. -13- "LOAN INSTRUMENT" and "LOAN INSTRUMENTS" means, respectively, any one or more of this Agreement, the Notes, the Requests for Advance, the Guaranties, the Collateral Documents, and the various other deeds of trust, mortgages, assignments, instruments and other documents creating or evidencing the Banks' interest in any collateral securing or intended to secure anyone's obligations under any of the foregoing, and all waivers, consents, agreements, representations and warranties, reports, statements, certificates, schedules and other documents executed by the requisite Person(s) pursuant to or in connection with any of the foregoing and accepted or delivered by the Agent (whether prior to, on or from time to time after the Effective Date), as each may be supplemented, modified, amended or restated from time to time in the manner provided therein. "MATERIAL ADVERSE EFFECT" means any material and adverse effect, whether individually or in the aggregate, upon (a) the assets, business, operations, properties or condition, financial or otherwise, of the Borrower and its wholly owned Subsidiaries, taken as a whole, (b) the ability of the Borrower to make payment as and when due of all or any part of the Obligations, or (c) the Collateral. "MATERIAL AGREEMENTS" means all agreements of the Borrower or the Guarantors which are Collateral Documents, and all other agreements and contracts (written or oral, now existing or hereafter entered into) to which the Borrower is a party, or by which the Borrower, or the Collateral is bound, the nonperformance of which by the Borrower, the Guarantors or by the Borrower's or a Guarantor's counter parties thereto would have a Material Adverse Effect which Material Agreements in effect on the date hereof are identified in SCHEDULE 4.1(n) hereto. "MATURITY DATE" means, (a) with respect to the Revolving Loans, the first to occur of (i) the Revolving Loans Scheduled Maturity Date and (ii) the date on which the due date of the Loans has been accelerated and payment demanded by the Agent by reason of an Event of Default pursuant to ARTICLE VI; and (b) with respect to the Term Loans, the first to occur of (ii) the Term Loans Scheduled Maturity Date and (i) the date on which the due date of the Loans has been accelerated and payment demanded by the Agent by reason of an Event of Default pursuant to ARTICLE VI; and (c) with respect to the Acquisition Loans, the first to occur of (i) the Acquisition Loans Scheduled Maturity Date and (ii) the date on which the due date of the Loans has been accelerated and payment demanded by the Agent by reason of an Event of Default pursuant to ARTICLE VI. -14- "MAXIMUM REVOLVING CREDIT AMOUNT" means $11,000,000. "MULTIEMPLOYER PLAN" of any Person shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been made by such Person or any ERISA Affiliate of such Person and which is covered by Title IV of ERISA. "NET INCOME" means, for any computation period, with respect to the Borrower on a consolidated basis, cumulative net income earned during such period as determined in accordance with GAAP. "NET PROCEEDS" means the proceeds received by the Borrower in cash from the sale, lease, assignment or other Disposition of any asset or property (other than sales of assets in the ordinary course of business, which, for purposes of this definition, shall not include any disposition of assets in which the total consideration received or receivable is in excess of $500,000), net of (a) reasonable and customary fees, costs, commissions and expenses, including attorneys' fees, incurred in connection with such sale, lease, assignment or other disposition and payable by or on behalf of the seller or the transferor of the assets to which sale or disposition relates, and (b) the amount of all foreign, Federal, state and local taxes payable as a direct consequence of such sale, lease, assignment or other disposition. For this purpose, all proceeds of insurance paid on account of the loss of or damage to any such asset or property, or group of assets or properties, and awards of compensation for any such asset or property, or group of properties, taken by condemnation or eminent domain shall be deemed to be Net Proceeds (PROVIDED that, in the case of proceeds from insurance paid with respect to any loss or damage to any asset, such proceeds, or any portion thereof, shall not constitute Net Proceeds if the Agent has received notice from the Borrower of its intention to use such proceeds or portion thereof at the time of such loss or damage, and such proceeds or portion thereof are in fact so used within six months after the occurrence of such loss or damage, to repair, restore or replace such assets). With respect to the issuance or sale of equity securities, Net Proceeds also means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' fees, discounts and commissions and other expenses actually incurred in connection with such sale or issuance. Net Proceeds do not include the proceeds from the exercise of stock options issued pursuant to an employee stock option plan described in the Borrower's proxy statements. -15- "NOTES" means, collectively, the Revolving Notes, the Term Notes and the Acquisition Loans Notes. "OBLIGATIONS" means the obligations of the Borrower to repay the balance of the Loans outstanding hereunder, together with accrued and unpaid interest thereon, fees payable hereunder, and all other amounts payable or obligations to be performed by the Borrower hereunder or under any other Loan Instrument or under any Permitted Swap Obligations for which the counterparty is a Bank. "PERMITTED LIEN" means: (a) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due or which are being contested in good faith and with due diligence and with respect to which adequate reserves have been established; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's, or other like Liens arising in the ordinary course of business not yet delinquent or which are being contested in good faith and with due diligence and with respect to which adequate reserves have been established; (c) Liens (other than Liens imposed by ERISA) consisting of pledges or deposits under workers' compensation, unemployment insurance and other social security legislation; (d) easements, rights-of-way, zoning restrictions and other similar encumbrances of record on real property incurred in the ordinary course of business which, in the aggregate, are not material in dollar amount, and which do not in any case interfere with the ordinary conduct of the business of the Borrower or any Guarantor; (e) Liens existing on the date hereof and disclosed in SCHEDULE 4.1(o) hereto; (f) purchase money security interests securing payment by the Borrower or any Guarantor of a portion of the purchase price of any asset, PROVIDED THAT (i) any such Lien attaches to such property concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the property so acquired in -16- such transaction, (iii) the principal amount of the debt secured thereby does not exceed 100% of the cost of such property, and (iv) the aggregate outstanding principal of such purchase money security interest Liens shall not at any one time exceed $4,000,000; (g) Liens, deposits or pledges to secure the non-delinquent performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business; or (h) Liens arising out of the lease of capital equipment in the aggregate amount at any one time not exceed $4,000,000; or (i) any attachment or judgment Lien either in existence less than 30 calendar days after the entry thereof, or with respect to which execution has been stayed, or with respect to which payment in full above any deductible is covered by insurance. "PERMITTED SWAP OBLIGATIONS" means all obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or arising under Swap Contracts with one or more creditworthy parties as the swap counterparty, provided that such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments or assets held or reasonably anticipated by such Person and not for the purpose of speculation. For the purposes of this definition, the term "creditworthy party" means any Bank, any Affiliate of any Bank or any third party having a credit rating from Standard & Poor's and Moodys Investor's Services, Inc. not less than that of the Bank with the lowest credit rating. All Swap Contracts with counterparties who are not Banks will be unsecured. "PERSON" means any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, limited liability partnership, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof). "PLAN" of a Person shall mean an employee benefit or other plan established or maintained by such Person or any ERISA -17- Affiliate of such Person and which is covered by Title IV of ERISA, other than a Multiemployer Plan of such Person. "PLEDGE AGREEMENT" means the Pledge and Security Agreement of the Borrower pertaining to its interest in its Subsidiaries and its other personal property substantially in the form of EXHIBIT D hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided therein. "PRIME RATE" means a fluctuating interest rate per annum as shall be in effect from time to time as announced publicly by the Agent in Denver, Colorado, from time to time, as the Agent's prime rate. Such rate will not necessarily be the lowest interest rate charged by the Agent for loans to its customers. The Prime Rate shall change on each day on which the Agent announces a change in such Prime Rate. "PRIME RATE LOAN" means an Advance which bears interest as provided in SECTION 2.10(a). "PRO RATA SHARE" means, as to any Bank at any time, the percentage equivalent (expressed as a decimal, rounded to the fifth decimal) at such time of such Bank's Commitment divided by the combined Commitments of all Banks. "QUALIFIED ACQUISITION" means any Person acquired by the Borrower or a Subsidiary who fulfills all of the following requirements as of the date of acquisition: (a) Total annual revenues of the acquired Person shall not exceed 50% of Borrower's pre-acquisition consolidated revenues for the twelve months immediately preceding the date of acquisition; (b) The total consideration paid for the acquired Person (excluding assumed Debt and equity securities issued by the Borrower) shall not exceed $8,500,000.00; (c) The consolidated pro-forma balance sheet of the Borrower and the acquired Person shall comply with all applicable financial covenants set forth in SECTION 5.2 as of the date of the acquisition; and (d) The acquired Person had positive EBITDA during the twelve months immediately preceding the date of acquisition. -18- "REAL PROPERTY" has the meaning given thereto in SECTION 4.1(O). "RECORD" means the grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Bank with respect to any Loan referred to in such Note. "REGULATIONS D, T, U AND X" mean, respectively, Regulations D, T, U and X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be amended or supplemented from time to time. "REGULATORY CHANGE" means, with respect to the Banks, any change enacted or adopted after the date of this Agreement in United States federal or state law or regulations or any foreign law or regulations (including, without limitation, Regulation D) or the adoption or publication after the date of this Agreement of any interpretations, directives or requests (whether or not having the force of law) applying to a class of banks, including the Banks, by any court or governmental or monetary authority charged with the interpretation or administration thereof. "REQUEST FOR ADVANCE" means a written request by the Borrower to the Agent for an Advance of funds as a Loan hereunder, which written request will be in the form of EXHIBIT B-1 hereto. "REQUIRED BANKS" means, at any particular time, those Banks having 66 2/3% of the Loans or, if there are no Loans outstanding, at least 66 2/3% of the Commitments. "REQUIREMENT OF LAW" means, as to any Person, any law (statutory or common), ordinance, treaty, code, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its assets to which the Person or any of assets is subject. "RESERVE REQUIREMENT" means, for any Interest Period for any LIBOR Rate Loan, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion dollars against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall include any other reserves required -19- to be maintained by such member banks by reason of any Regulatory Change against (i) any category of liabilities which includes deposits by reference to which the LIBOR Base Rate is to be determined as provided in the definition of "LIBOR Base Rate" in this SECTION 1.1, or (ii) any category of extensions of credit or other assets which includes LIBOR Rate Loans. "REVOLVING LOANS" means all Advances of funds by the Banks to the Borrower pursuant to the Revolving Loans Commitment, which Loans will be evidenced by the Revolving Note. "REVOLVING LOANS COMMITMENT" means the commitment of the Banks to Advance Revolving Loans to the Borrower from time to time in the aggregate amount of $11,000,000.00 as provided in SECTION 2.1 as the same may be adjusted or terminated pursuant to SECTIONS 2.5 AND 6.2 or as otherwise provided in this Agreement. "REVOLVING LOANS SCHEDULED MATURITY DATE" means June 30, 2001. "REVOLVING NOTE" means the promissory notes in the aggregate principal amount of $11,000,000, made by the Borrower and payable to the order of the Banks, substantially in the form of EXHIBIT A-1 hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein. "REVOLVING NOTE RECORD" means a Record with respect to a Revolving Note. "SECURED PARTY" has the meaning ascribed to such term in the Security Agreements, Pledge Agreements and the Deeds of Trust. "SECURITY AGREEMENT" means a Security Agreement and Assignment from the Borrower and the Guarantors substantially in the form of EXHIBIT E hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided therein. "SECURITY INTEREST" means the Liens created, or purported to be created, by the Loan Instruments. "SUBSIDIARY" or "SUBSIDIARIES" of a Person means, any corporation, association, partnership, limited liability company, joint venture or other business entity of which more than 50% of the voting stock, membership interests or other equity interest (in the case of Persons other than corporations), is owned or -20- controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refers to a Subsidiary of the Borrower. "SWAP CONTRACT" means any agreement, whether or not in writing, relating to any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond, note or bill option, interest rate option, forward foreign exchange transaction, cap, collar or floor transaction, currency option or any other, similar transaction (including any option to enter into any of the foregoing) or any combination of the foregoing, and, unless the context otherwise clearly requires, any master agreement relating to or governing any or all of the foregoing. "TERM LOAN" means the Advance of funds by the Banks to the Borrower pursuant to the Term Loan Commitment, which Loans will be evidenced by the Term Notes. "TERM LOAN COMMITMENT" means the commitment of each Bank to Advance the Term Loan to the Borrower in a single Advance, as provided in SECTION 2.1(b). "TERM NOTE" means the promissory notes in the aggregate principal amount of $16,000,000 evidencing the Term Loan, made by the Borrower and payable to the order of the Banks, substantially in the form of EXHIBIT A-2 hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein. "TERM LOAN RECORD" means a Record with respect to a Term Loan. "TERM LOAN SCHEDULED MATURITY DATE" means June 30, 2003. "TOTAL DEBT" means, at any time, the Debt of the Borrower and its Subsidiaries on a consolidated basis for the purposes of calculating the financial covenants in SECTION 5.2(a), the Applicable Margin and the Commitment Fee Rate at such time. "TRAILING FOUR QUARTER EBITDA" means, with respect to the Borrower and all of its Subsidiaries on a consolidated basis, the EBITDA for the immediately preceding four Fiscal Quarters of the Borrower. -21- "TYPE" means a type of Advance, being a Prime Rate Loan or a LIBOR Rate Loan, as the case may be. "UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in effect from time to time in the State of Colorado. SECTION 1.2 ACCOUNTING TERMS AND DETERMINATIONS. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, all calculations for purposes of determining compliance with the terms of this Agreement shall be made, and all financial statements and certificates and reports as to financial matters required to be delivered to the Agent hereunder shall be prepared in accordance with GAAP applied for all periods to the extent practicable on a basis consistent with that used in the preparation of the financial statements identified in SECTION 4.1(f), so as to fairly present the financial condition and results of operations of the applicable Person. ARTICLE II COMMITMENT; AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.1 COMMITMENT. Each Bank severally agrees, on the terms and subject to the conditions contained in this Agreement and the Loan Instruments, to make Loans to the Borrower for the account of the Borrower in accordance with the provisions of this SECTION 2.1. (a) REVOLVING LOANS COMMITMENT. Pursuant to the Revolving Loans Commitment, from the Effective Date until the Maturity Date, each Bank severally agrees to Advance funds to the Borrower as Revolving Loans, PROVIDED, HOWEVER, that at no time shall the Banks be required to Advance Revolving Loans to the Borrower if, after such Advance the sum of the principal amount of Revolving Loans outstanding is in excess of the Maximum Revolving Credit Amount; and PROVIDED FURTHER, that no Bank shall be required to Advance Revolving Loans in an aggregate amount exceeding the Bank's Revolving Loan Commitment as described on SCHEDULE 2.1. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow funds Advanced to the Borrower as Revolving Loans. (b) TERM LOAN COMMITMENT. Pursuant to the Term Loan Commitment, each Bank severally agrees to Advance, on the Effective Date, a Term Loan to the Borrower, in a -22- single Advance, in a principal amount not exceeding the Bank's Term Loan Commitment as described on SCHEDULE 2.1. (c) ACQUISITION LOAN COMMITMENT. Pursuant to the Acquisition Loan Commitment, from the Effective Date to the Maturity Date, each Bank severally agrees to Advance funds to the Borrower as Acquisition Loans for the sole purpose of making Qualified Acquisitions, PROVIDED, HOWEVER, that no Bank shall be required to Advance Acquisition Loans in an aggregate amount exceeding the Bank's Acquisition Loans Commitment as described on SCHEDULE 2.1, PROVIDED, FURTHER, that at no time shall the Banks be required to Advance Acquisition Loans to the Borrower if, after such Advance the aggregate principal amount of Acquisition Loans Advanced would exceed (A) the amount of the Acquisition Loans Commitment MINUS (B) the aggregate principal amount of Acquisition Loans Advanced to such time. The Borrower may not reborrow funds Advanced as Acquisition Loans after such Advances, or any part thereof, have been repaid. SECTION 2.2 ADVANCES. The Banks agree, on the terms and conditions set forth herein, (a) to make Advances to the Borrower of Revolving Loans (as LIBOR Rate Loans or as Prime Rate Loans) from time to time on any Business Day from and after the Effective Date through the Maturity Date, (b) to make Advances of to the Borrower of Acquisition Loans (as LIBOR Rate Loans or as Prime Rate Loans) from time to time on any Business Day from and after the Effective Date through the first to occur of the Acquisition Loans Draw Date and the Maturity Date, and (c) to make an Advance to the Borrower of the Term Loan (as a LIBOR Rate Loan or a Prime Rate Loan) in a single Advance on the Effective Date. Each LIBOR Rate Loan shall be in an amount not less than $500,000 or in integral multiples of $250,000 in excess thereof, and each Prime Rate Loan shall be in an amount not less than $100,000 or in integral multiples of $10,000 in excess thereof, EXCEPT that an Advance of a Prime Rate Loan may be in an amount equal to the entire unused Revolving Loans Commitment. The total number of individual LIBOR Rate Loan Advances outstanding at any time shall not exceed three (3) for the Revolving Loans, two (2) for the Acquisition Loans and one (1) for the Term Loan. -23- SECTION 2.3 MAKING THE ADVANCES. (a) REQUEST FOR ADVANCE. Each Revolving Loan, Acquisition Loan and Term Loan Advance shall be made after delivery by the Borrower to the Agent of a Request for Advance, duly executed by an Authorized Signatory, delivered to the Agent (i) in the case of a Prime Rate Loan, not later than 11:00 a.m.(Denver, Colorado time) on the Business Day which is the date of the proposed Advance and (ii) in the case of a LIBOR Rate Loan, not later than 11:00 a.m. (Denver, Colorado time) on the third Business Day prior to the date of the proposed Advance. The Request for Advance shall specify (A) the date and amount of the Advance, (B) whether a Revolving Loan, Acquisition Loan or Term Loan is requested, (C) the Type of Advance requested, (D) if a LIBOR Rate Loan is requested, the initial Interest Period therefor, (E)and if an Acquisition Loan is requested, such information regarding the Qualified Acquisition as the Agent and Banks may request. Promptly upon receipt of such Request for Advance, the Agent shall notify the Banks thereof and of their Pro Rata Share of such proposed Advance. Not later than 2:00 p.m. (Denver, Colorado time) on the date of such Advance, subject to fulfillment of the applicable conditions set forth in ARTICLE III, the Agent will make such Advance available to the Borrower in same day funds by depositing such funds in the Borrower's Account. (b) REQUEST FOR ADVANCE IRREVOCABLE. Each Request for Advance from the Borrower to the Agent shall be irrevocable and binding on the Borrower. In the case of any request for a LIBOR Rate Loan the Borrower shall indemnify the Banks against any loss, cost or expense incurred by the Banks as a result of any failure to fulfill on or before the date specified in such notice for such Advance the applicable conditions set forth in ARTICLE III, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Banks to fund the Advance when the Advance, as a result of such failure, is not made on such date. (c) AVAILABILITY OF FUNDS, REVOLVING LOANS AND ACQUISITION LOANS. Not later than 2:00 p.m. (Denver, Colorado time) on the proposed day of the Advance of any Revolving Loan or Acquisition Loan, each of the Banks -24- will make available to the Agent, at its address referred to in SECTION 8.2, in immediately available funds, the amount of such Bank's Pro Rata Share of the requested Revolving Loan or Acquisition Loan. Upon receipt from each Bank of such amount and upon receipt of the documents required by SECTIONS 3.1 AND 3.2 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Agent will make available to the Borrower the aggregate amount of such Revolving Loan or Acquisition Loan made available to the Agent by the Banks. The failure or refusal of any Bank to make available to the Agent at the aforesaid time and place the amount of its Pro Rata Share of the requested Revolving Loan or Acquisition Loan shall not relieve any other Bank from its several obligation hereunder to make available to the Agent the amount of such other Bank's Pro Rata Share of any requested Revolving Loan or Acquisition Loan Advance. (d) ADVANCES BY AGENT. The Agent may, unless notified to the contrary by any Bank prior to an Advance, reasonably assume that such Bank has made available to the Agent on such day the amount of such Bank's Pro Rata Share of the Revolving Loan or Acquisition Loan to be made on such day, and the Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If any Bank makes available to the Agent such amount on a date after such day of Advance, such Bank shall pay to the Agent on demand an amount equal to the product of (i) the Federal Funds Rate each day included in such period, TIMES (ii) the amount of such Bank's Pro Rata Share of such Revolving Loan or Acquisition Loan, TIMES (iii) a fraction, the numerator of which is the number of days that elapse from and including such day of Advance to the date on which the amount of such Bank's Pro Rata Share of such Revolving Loan or Acquisition Loan shall become immediately available to the Agent, and the denominator of which is 360. A statement of the Agent submitted to such Bank with respect to any amounts owing under this paragraph shall be PRIMA FACIE evidence of the amount due and owing to the Agent by such Bank. SECTION 2.4 COMMITMENT FEE. (a) COMMITMENT FEE RATE. The Borrower agrees to pay to the Agent a Commitment Fee (the "COMMITMENT FEE") on -25- the average daily unused portion of the sum of the Revolving Loans Commitment and Acquisition Loans Commitment at the Commitment Fee Rate, payable in arrears on the last day of each Fiscal Quarter of the Borrower, and payable on the Maturity Date. (b) CALCULATION OF COMMITMENT FEE. The Commitment Fee payable with respect to the Revolving Loans and Acquisition Loans will be calculated for the period from the Effective Date through the date the Commitments have been terminated in accordance with this Agreement, and shall be based upon (i) the amount by which the daily average of the aggregate principal amount of Revolving Loans and Acquisition Loans outstanding is less than (ii) the aggregate Revolving Loans Commitment and Acquisition Loans Commitment at such time. SECTION 2.5 REDUCTION OF THE REVOLVING LOANS AND ACQUISITION LOANS COMMITMENT. The Borrower shall have the right at any time, upon at least three (3) Business Days' notice to the Agent, to terminate in whole or reduce in part the unused portion of the Revolving Loans Commitment and the Acquisition Loans Commitment, PROVIDED that each partial reduction of the Revolving Loans Commitment and Acquisition Loans Commitment shall be in the amount of not less than $1,000,000 or an integral multiple thereof. Any such termination or reduction of the Revolving Loans Commitment and Acquisition Loans Commitment shall be irrevocable and permanent. Promptly after receiving such notice from the Borrower, the Agent will notify the Banks of the substance thereof. The Revolving Loans Commitments and Acquisition Loans Commitment of the Banks shall be reduced PRO RATA pursuant to the notice or, as the case may be, terminated. SECTION 2.6 REPAYMENT. (a) VOLUNTARY REPAYMENT. The Borrower may repay the principal amount of the Loans at any time, at its election, (i) in the case of a Prime Rate Loan, on any Business Day, without prior notice, and (ii) in the case of LIBOR Rate Loans, upon not less than three (3) Business Days prior notice to the Agent, subject to breakage costs provided for in SECTION 2.11. Any such voluntary repayment of the Loans shall be in the principal amount of not less than (y) $100,000 for Prime Rate Loans and in integral multiples of $10,000 in excess thereof and (z) $1,000,000 for LIBOR Rate Loans and in integral multiples of $250,000 in excess -26- thereof. Any voluntary repayment of the Term Loan and the Acquisition Loans shall be accompanied by payment of all accrued but unpaid interest applicable to the principal amount of the Term Loan and the Acquisition Loans so repaid. (b) INSTALLMENT PAYMENTS OF TERM LOAN. The Borrower will repay the Term Loan in quarterly installment payments of principal, commencing on September 30, 1998 and on the last day of each quarter thereafter, in accordance with the following:
QUARTERLY REPAYMENT PRINCIPAL DATE PAYMENT AMOUNT ------------------ --------------- September 30, 1998 $650,000 December 31, 1998 $650,000 March 31, 1999 $650,000 June 30, 1999 $650,000 September 30, 1999 $725,000 December 31, 1999 $725,000 March 31, 2000 $725,000 June 30, 2000 $725,000 September 30, 2000 $800,000 December 31, 2000 $800,000 March 31, 2001 $800,000 June 30, 2001 $800,000 September 30, 2001 $875,000 December 31, 2001 $875,000 March 31, 2002 $875,000 June 30, 2002 $875,000 September 30, 2002 $950,000 December 31, 2002 $950,000 March 31, 2003 $950,000 June 30, 2003 $950,000
(c) REPAYMENT OF ACQUISITION LOANS. The Acquisition Loans shall be paid as follows: (i) Interest only shall be payable quarterly in accordance with SECTION 2.10 on the outstanding principal balance of the Acquisition Loans from the Effective Date to the Acquisition Loans Draw Date. -27- (ii) After the Acquisition Loans Draw Date, twenty (20) consecutive quarterly principal payments on the last Business Day of each Fiscal Quarter in equal amounts, plus interest payable in accordance with SECTION 2.10. (d) MANDATORY REPAYMENT. (i) The Borrower will repay the Loans in full on demand upon the acceleration of the due date of any of the Loans by the Agent pursuant to ARTICLE VI hereof. (ii) The Borrower shall pay to the Agent Net Proceeds within not more than five (5) Business Days after the Borrower shall receive Net Proceeds from(x) Dispositions, (y) any equity securities issuance or sale or (z) insurance recoveries and condemnation and eminent domain awards. Collateral shall be released from the liens of the Collateral Documents upon any Disposition of such Collateral, provided that (i) no Event of Default has occurred and (ii) the Borrower shall have made the mandatory repayment required under the terms of this SECTION 2.6. (e) APPLICATION OF REPAYMENTS. All voluntary Loan repayments received by the Agent from the Borrower will be applied to the Revolving Loans, Acquisition Loans and Term Loans as the Borrower shall instruct the Agent in writing concurrently with the payment, and in the absence of such written instructions, will be applied first to the Revolving Loans until they are repaid in full, then to the Acquisition Loans until they are repaid in full and finally to the Term Loan. All mandatory Loan repayments will be applied first to reduce the Term Loan until the Term Loan is paid in full, then to the repayment of the Acquisition Loans until they are paid in full and finally to the repayment of the Revolving Loans. All repayments of the Term Loan and Acquisition Loans will be applied to the principal payments due with respect to the such Loans in inverse order of maturity. SECTION 2.7 DISTRIBUTION OF PAYMENTS BY THE AGENT. The Agent shall promptly distribute to each Bank its Pro Rata Share of each payment received by the Agent under the Loan -28- Instruments for the account of the Banks by credit to an account of such Bank at the Agent's Bank identified at SECTION 8.2 or by wire transfer to an account of such Bank. Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks under the Loan Instruments that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent in its sole discretion may, in reliance upon such assumption, cause to be distributed to each Bank on such due date a corresponding amount with respect to the amount then due such Bank. If and to the extent the Borrower shall not have so made such payment in full to the Agent and the Agent shall have so distributed to any Bank a corresponding amount, such Bank shall, on demand, repay to the Agent the amount so distributed together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent at the Prime Rate. SECTION 2.8 PROMISSORY NOTES. (a) THE REVOLVING NOTES. The Revolving Loans shall be evidenced by promissory notes of the Borrower in substantially the form of EXHIBIT A-1 hereto (each a "REVOLVING NOTE"), dated as of the Effective Date and completed with appropriate insertions. One Revolving Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Revolving Loans Commitment or, if different, the outstanding amount of all Revolving Loans made (or held) by such Bank, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes each Bank to make or cause to be made, at or about the time of an Advance of any Revolving Loan or at the time of receipt of any payment of principal on such Bank's Revolving Note, an appropriate notation on such Revolving Note Record reflecting the making of such Revolving Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Revolving Loans set forth on such Bank's Revolving Note Record shall be PRIMA FACIE evidence of the principal amount thereof owing and unpaid to such Bank absent manifest error, but the failure to record, or any error in so recording, any such amount shall not affect the obligation of the Borrower hereunder or under any Revolving Note to make payments of principal of or interest on any Revolving Note when due. -29- (b) TERM NOTES. The Term Loans shall be evidenced by promissory notes of the Borrower in substantially the form of EXHIBIT A-2 hereto (each a "TERM NOTE"), dated the Effective Date and completed with appropriate insertions. One Term Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Term Loan Commitment and representing the obligation of the Borrower to pay to such Bank such principal amount or, if less, the outstanding amount of such Bank's Term Loan Commitment, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes each Bank to make or cause to be made a notation on such Bank's Term Note Record reflecting the original principal amount of such Bank's Term Loan Commitment and, at or about the time of such Banks' receipt of any principal payment on such Bank's Term Note, an appropriate notation on such Bank's Term Note Record reflecting such payment. The aggregate unpaid amount set forth on such Bank's Term Note Record shall be PRIMA FACIE evidence of the principal amount thereof owing and unpaid to such Bank absent manifest error, but the failure to record, or any error in so recording, any such amount on such Bank's Term Note Record shall not affect the obligation of the Borrower hereunder or under any Term Note to make payments of principal of and interest on any Term Note when due. (c) ACQUISITION LOAN NOTE. The Acquisition Loans shall be evidenced by promissory notes of the Borrower in substantially the form of EXHIBIT A-3 hereto (each a "ACQUISITION LOAN NOTE"), dated as of the Effective Date and completed with appropriate insertions. One Acquisition Loan Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Acquisition Loan Commitment or, if different, the outstanding amount of all Acquisition Loans made (or held) by such Bank, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes each Bank to make or cause to be made, at or about the time of an Advance of any Acquisition Loan or at the time of receipt of any payment of principal on such Bank's Acquisition Loan Note, an appropriate notation on such Acquisition Loan Note Record reflecting the making of such Acquisition Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Acquisition Loans set forth on such Bank's Acquisition Loan Record shall be PRIMA FACIE evidence -30- of the principal amount thereof owing and unpaid to such Bank absent manifest error, but the failure to record, or any error in so recording, any such amount on such Bank's Acquisition Loan Note Record shall not affect the obligation of the Borrower hereunder or under any Acquisition Loan Note to make payments of principal and interest on any Acquisition Loan Note when due. SECTION 2.9 PRO RATA TREATMENT. Except to the extent otherwise provided herein, (a) Loans shall be made by the Banks pro rata in accordance with their respective Commitments, (b) Loans of the Banks shall be Converted and continued pro rata in accordance with their respective amounts and Type and, in the case of LIBOR Rate Loans, having the Interest Period being so Converted or continued, (c) each reduction in the Revolving Loans Commitment, Acquisition Loan Commitment and the Term Loan Commitment shall be made pro rata in accordance with the respective amounts thereof and (d) each payment of the principal of or interest on the Loans shall be made for the account of the Banks pro rata in accordance with their respective amounts thereof then due and payable. SECTION 2.10 INTEREST. The Borrower shall pay interest on the unpaid principal amount of each Loan from the date of the Advance thereof comprising such Loan until (but not including) the date such principal amount has been repaid in full, at the following rates per annum: (a) PRIME RATE LOANS. During such periods as such Loan is a Prime Rate Loan, at a rate per annum equal at all times to the Prime Rate PLUS Applicable Margin or the Default Rate, whichever is applicable. Prime Rate interest PLUS the Applicable Margin shall be payable quarterly in arrears, on the first day of each Fiscal Quarter. Interest accruing at the Default Rate shall be payable on demand. (b) LIBOR RATE LOANS. During such periods as such Loan is a LIBOR Rate Loan, at a rate per annum during the Interest Period for such Loan equal to the LIBOR Rate or the Default Rate, whichever is applicable. LIBOR Rate interest will be payable on termination of the Interest Period applicable to the Loan, and, if such Interest Period is longer than 3 months, then every 3 months. Interest accruing at the Default Rate shall be payable on demand. -31- (c) DEFAULT RATE INTEREST. Subject to the provisions of SECTION 6.2, all outstanding Loans will bear interest at the Default Rate during all periods when an Event of Default has occurred and is continuing. (d) INTEREST CALCULATIONS. Interest on the Loans shall be computed on a 365/360 simple interest basis, by applying the ratio of the applicable annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. SECTION 2.11 YIELD PROTECTION. In order to protect the yield of the Banks in connection with the Advances to be made hereunder, the Borrower agrees as follows. (a) INCREASED COSTS. If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation, or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to the Banks of agreeing to make or making, funding or maintaining LIBOR Rate Loans, then the Borrower shall from time to time, upon demand by a Bank through the Agent, pay to such Bank additional amounts sufficient to compensate the Bank for such increased cost. A certificate as to the amount of such increased cost, shall be submitted to the Borrower by the Agent. Such certificate shall show in reasonable detail the Bank's computations of its increased costs. Notwithstanding the foregoing, there shall be no duplication of costs to the Borrower as the result of the application of SECTION 2.11(b). Such certificate of increased costs shall be conclusive and binding for all purposes, absent manifest error. (b) ADDITIONAL INTEREST. The Borrower shall pay to the Banks, so long as the Banks shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency liabilities (as such term is defined in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time), additional interest on the unpaid principal amount of each LIBOR Rate Loan, from the date of the Advance thereof until the principal amount thereof is paid in -32- full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the LIBOR Rate for the Interest Period for such Loan from (ii) the rate obtained by dividing such LIBOR Rate by a percentage equal to 100% minus the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum Reserve Requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for the Banks with respect to liabilities or assets consisting of or including Eurocurrency liabilities having a term equal to such Interest Period, payable on each date on which interest is payable on such Loan. Such additional interest shall be determined by the Agent and a certificate as to the amount shall be submitted to the Borrower. Such certificate shall show in reasonable detail the Agent's computations. Such certificate of additional interest shall be conclusive and binding for all purposes, absent manifest error. (c) INCREASED CAPITAL. If a Bank determines that compliance with any law or regulation or any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and that the amount of such capital is increased by or based upon the existence of the Bank's commitment to lend hereunder and other commitments of this type, then, upon demand by the Bank through the Agent, the Borrower shall immediately pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank or such corporation in the light of such circumstances, to the extent that the Bank reasonably determines such increase in capital to be allocable to the existence of the Bank's commitment to lend hereunder. A certificate as to such amounts submitted to the Borrower by the Agent or a Bank, shall be conclusive and binding for all purposes, absent manifest error. Such certificate shall show in -33- reasonable detail the Agent's or the Bank's computations. (d) BREAKAGE COSTS. If any payment of principal of any LIBOR Rate Loan is made other than on the last day of the Interest Period for such Loan as a result of acceleration of the maturity of the Loans and the Notes pursuant to SECTION 6.2, or for any other reason, the Borrower shall, upon demand by the Agent, hold the Banks harmless and pay to the Banks, through the Agent, any amounts required to compensate the Banks for additional losses, costs or expenses which they may incur as a result of such payment, including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Banks to fund or maintain such Advance provided, however, that such loss or expense shall not include loss of Applicable Margin. Such payment shall be calculated as though the Banks funded the principal amount prepaid through the purchase of Dollar deposits in the London, England interbank market having a maturity corresponding to such Interest Period and bearing an interest rate equal to the LIBOR Rate less the Applicable Margin for such Interest Period, whether in fact that is the case or not. The Agent's determination of the amount of such payment shall be conclusive in the absence of manifest error. SECTION 2.12 CONVERSION OF LOANS; CHANGE OF INTEREST PERIODS. At any time, with respect to Prime Rate Loans, and at any time not less than three (3) Business Days prior to the end of the then current Interest Period for any LIBOR Rate Loan, the Borrower may elect, by delivery to the Bank of an Interest Period/Conversion Notice in the form of EXHIBIT B-3 duly executed by an Authorized Signatory, to Convert the Type of Advance or, with respect to LIBOR Rate Loans, to select an Interest Period for such Advance as permitted herein. If the Borrower fails to select the duration of any Interest Period for any LIBOR Rate Loan in the foregoing manner, such Advance will, unless paid in full on the last day of such Interest Period, automatically, on the last day of the then existing Interest Period therefor, Convert into a Prime Rate Loan. SECTION 2.13 ILLEGALITY, ETC. (a) Notwithstanding any other provision of this Agreement, if the Agent or a Bank shall notify the -34- Borrower that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for a Bank to perform its obligations hereunder to make LIBOR Rate Loans or to fund LIBOR Rate Loans hereunder, (i) the obligation of the Bank to make, or to Convert Loans into LIBOR Rate Loans shall be suspended until the Bank shall notify the Borrower that the circumstances causing such suspension no longer exist and (ii) the Borrower shall prepay in full all LIBOR Rate Loans of the Bank then outstanding, together with interest accrued thereon, either on the last day of the Interest Period thereof if the Banks may lawfully continue to maintain LIBOR Rate Loans to such day, or immediately, if the Banks may not lawfully continue to maintain LIBOR Rate Loan, unless the Borrower, within five (5) Business Days of notice from the Bank, Converts all LIBOR Rate Loans of the Bank then outstanding into Prime Rate Loans in accordance with SECTION 2.12. (b) If, with respect to any LIBOR Rate Loan, a Bank notifies the Borrower that the LIBOR Rate for any Interest Period for such Advance will not adequately reflect the cost to the Bank, in the Bank's reasonable judgement, of making, funding or maintaining such LIBOR Rate Loan for such Interest Period, such LIBOR Rate Loan will automatically, on the last day of the then existing Interest Period therefor, Convert into a Prime Rate Loan, and the obligation of the Bank to make, or to Convert Advances into, LIBOR Rate Loans shall be suspended until the Bank shall notify the Borrower that the circumstances causing such suspension no longer exist. Upon receipt of such notice, the Borrower may revoke any Request for Advance or Interest Period/Conversion Notice then submitted by it. If the Borrower does not revoke such request or notice, the Bank shall make, Convert or continue the Loan, as proposed by the Borrower, in the amount specified in the applicable request or notice submitted by the Borrower, but such Loan shall be made, Converted or continued as a Prime Rate Loan instead of a LIBOR Rate Loan. SECTION 2.14 PAYMENTS AND COMPUTATIONS. (a) The Borrower shall make each payment under any Loan Instrument not later than 12:00 noon (Denver, -35- Colorado time) on the day when due in Dollars to the Agent at its address referred to in SECTION 8.2 in same day funds. (b) The Borrower hereby authorizes the Agent, if and to the extent payment is not made when due, subject to the expiration of applicable grace periods, under any Loan Instrument, to charge from time to time against the Borrower's Account or any or all other accounts of the Borrower with the Agent any amount so due. (c) All computations of interest and of Fees shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or Commitment Fees are payable. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error, on the Borrower and the Banks. (d) Whenever any payment under any Loan Instrument shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or the Commitment Fee, as the case may be; PROVIDED, HOWEVER, if such extension would cause payment of interest on or principal of LIBOR Rate Loans to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. ARTICLE III CONDITIONS OF LENDING SECTION 3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of the Banks to make the initial Advance of the Loans is subject to the satisfaction (or waiver by the Banks in their sole discretion) of the following conditions precedent: (a) that the Agent shall have received on or before the day of such Advance the following, each dated as of the Effective Date, in form and substance satisfactory to the Agent: -36- (i) The Notes, duly executed by Authorized Signatories on behalf of the Borrower. (ii) The Guaranties, duly executed by the Guarantors. (iii) A Deed of Trust from and duly executed by Authorized Signatories on behalf of the Borrower pertaining to all of Borrower's owned Real Property. (iv) A Security Agreement from and duly executed by Authorized Signatories on behalf of the Borrower, pertaining to the Borrower's Equipment, Accounts Receivable, Inventory and all other personal property of the Borrower. (v) A Collateral Assignment of Leases in the form of EXHIBIT F-2 duly executed by Authorized Signatories on behalf of the Borrower pertaining to the portion of Borrower's owned Real Property consisting of leasehold interests. (vi) The Pledge Agreement, duly executed by the Borrower, pertaining to Borrower's shares of stock in Guarantors together with the original stock certificates subject thereto and stock powers therefor, and pertaining to Borrower's Equipment and the Borrower's Accounts Receivable and Inventory and all the other personal property of the Borrower except the personal property subject to other Collateral Documents. (vii) A Deed of Trust from and duly executed by each Guarantor pertaining to the Real Property owned by such Guarantor. (viii) A Security Agreement from and duly executed by each Guarantor pertaining to such Guarantor's portion of Guarantors' Equipment, such Guarantor's Accounts Receivable, such Guarantor's Inventory and all other personal property of each such Guarantor except the personal property subject to other Collateral Documents. (ix) Uniform Commercial Code Financing Statements and assignments of patents, trademarks -37- and copyrights pertaining to the Security Agreements, the Pledge Agreement and the Collateral Assignments of Leases, duly executed by the Borrower and the Guarantors, respectively, as the Agent may request. (x) Title insurance commitments in ALTA form pertaining to Borrower's owned Real Property, in form and content and issued by a title insurance company or companies reasonably acceptable to the Agent, in an amount equal to the fair market value of such Real Property insuring the Agent's first and prior Lien on all such parcels established pursuant to the Deeds of Trust and Collateral Assignments of Leases, together with a revolving credit endorsement and such other endorsements and affirmative coverages as the Agent may request, subject only to Permitted Liens and other Liens and exceptions approved by the Banks in their sole discretion, in all cases constituting the unconditional commitment of such title insurance company or companies to issue title insurance policies in favor of the Agent on the terms of such title insurance commitments promptly after the recording by such title insurance company or companies of the Deeds of Trust and Collateral Assignments of Leases. (xi) The results of Lien searches of the appropriate public offices, including the United States Patent and Trademark Office and Copyright Office, demonstrating to the Agent's satisfaction that no Lien is of record with respect to the Borrower or any Guarantor except (A) Liens which will be terminated or released upon the repayment of the Borrower's obligations under the Existing Loan Agreement and (B) Permitted Liens. (xii) Certificates of insurance, in form and substance satisfactory to the Agent from an independent insurance broker dated as of the Effective Date, identifying insurers, types of insurance, insurance limits, policy terms, and identifying the Agent (on behalf of the Banks) as additional insured and loss payee. -38- (xiii) The Borrower's Omnibus Certificate, duly executed by Authorized Signatories on behalf of the Borrower. (xiv) A Guarantor's Omnibus Certificate, on behalf of each of the Guarantors, duly executed by Authorized Signatories on behalf of each of such Persons. (xv) The favorable opinion of Sherman and Howard L.L.C. legal counsel to the Borrower and the Guarantors, substantially in the form of EXHIBIT H-1 AND H-2 hereto and local counsel opinions, substantially in form of EXHIBIT H-3 and otherwise satisfactory to the Banks and the Agent, with respect to matters involving the laws of Indiana. (xvi) The articles or certificate of incorporation of the Borrower and each Guarantor as in effect as of the Effective Date, certified by the Secretary of State of its state of incorporation. (xvii) A good standing certificate or certificate of status for the Borrower and each Guarantor from the Secretary of State of its state of incorporation and each state where the Borrower or such Guarantor is qualified to do business as a foreign corporation as of a recent date. (xviii) A Compliance Certificate, effective as of April 30, 1998, duly executed by the Borrower and certified as true and correct by the Borrower. (xix) Phase I Environmental Assessments of all of Borrower's owned Real Property and Guarantors' owned Real Property (excluding such parcels as the Agent may approve in its sole discretion), in form and content and prepared by consultants, reasonably acceptable to the Agent, indicating the absence of conditions which would warrant a Phase II Environmental Assessment of such Real Property. (xx) An Assignment of Lease duly executed by Authorized Signatories on behalf of the Borrower in the form of EXHIBIT F-5 pertaining to each of the Borrower's leased business premises. -39- (xxi) An Assignment of Lease duly executed by each Guarantor in the form of EXHIBIT F-5 pertaining to each of the Guarantor's leased business premises. (xxii) Such other documents as the Agent and the Banks may reasonably request to effect the purposes of this Agreement and the other Loan Instruments. (b) The Deeds of Trust identified in (a)(iii) and (a)(vii) shall have been duly recorded and the Uniform Commercial Code Financing Statements and assignments of patents, trademarks and copyrights identified in (a)(ix) above shall have been duly filed. (c) The Agent shall have received evidence satisfactory to it that all amounts due from the Borrower to the lender under the Existing Loan Agreement have been paid in full out of the proceeds of the Loans on the Effective Date, or provision for payment thereof in a manner acceptable to the Agent in its sole discretion, shall have been made by the Borrower and approved by the Agent, and the Agent shall have received executed termination statements, in form satisfactory for filing, evidencing the termination of the security interests in the Borrower's properties which secured the Existing Loan Agreement. (d) The Borrower shall have paid to the Agent the Fees and all fees and expenses set forth in SECTION 8.4, including, without limitation, all accrued and unpaid legal fees and disbursements and the reasonable estimate of the Agent of the attorneys fees and disbursements incurred by it through the closing (provided that such estimate shall not thereafter preclude final settling of accounts between the Agent and the Borrower with respect to attorneys fees and disbursements incurred by the Agent hereunder). SECTION 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of the Banks to make each Advance (including the initial Advance) shall be subject to the satisfaction (or written waiver by the Required Banks in their sole discretion) of the following further conditions precedent that on the date of such Advance: -40- (a) the following statements shall be true: (i) Except as provided in SECTION 3.2(a)(ii), the representations and warranties contained in SECTION 4.1 of this Agreement and in the Guaranties, are correct on and as of the date of such Advance, before and after giving effect to such Advance and to the application of the proceeds therefrom, as the case may be, as though made on and as of such date; (ii) The information contained in the Schedules to this Agreement is correct, except that the Borrower may amend such Schedules at the time of a Request for Advance if such amendment to the Schedule does not disclose an Event of Default or a Material Adverse Effect; (iii) No event has occurred and is continuing, or would result from such Advance or from the application of the proceeds therefrom, which constitutes a Default or an Event of Default hereunder; (iv) No change shall have occurred in the financial condition or business of the Borrower or any Guarantor which would constitute a Material Adverse Effect; and (v) With respect to an Acquisition Loan, the proceeds of such Acquisition Loan Advance will be used only for the purpose of making a Qualified Acquisition. (b) the Agent shall have received a Request for Advance and such other approvals, opinions or documents as the Agent may reasonably request. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.1 REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower represents and warrants as follows: -41- (a) CORPORATE EXISTENCE. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Colorado. Each of MSE Corporation and ASI Landmark, Inc. is a corporation duly incorporated, validly existing and in good standing under the laws of the States of Indiana and Colorado, respectively. The capital structure and shareholders of the Borrower and the Guarantors are set forth in SCHEDULE 4.1(a). (b) POWERS, ETC. The Borrower and each of the Guarantors (a) has the power and authority to carry on its business as now conducted and to own or hold under lease the assets and properties it purports to own or hold under lease; (b) is duly qualified, licensed or registered to transact its business and is in good standing in every jurisdiction in which failure to be so qualified, licensed or registered could have a Material Adverse Effect; (c) has the power and authority to execute and deliver this Agreement and each of the other Loan Instruments to which it is or will be a party and to perform all of its obligations hereunder and thereunder; and (d) conducts its business under the names (and only the names) set forth in SCHEDULE 4.1(B) hereto; and (e) is qualified to do business in each of the states listed on SCHEDULE 4.1(b). (c) AUTHORIZATION; NO CONFLICT. The execution, delivery and performance by the Borrower of each Loan Instrument to which it is or will be a party are within the Borrower's powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's Articles of Incorporation or Bylaws, (ii) any law or judgement, order, writ, injunction, decree or consent of any court binding on or affecting the Borrower, (iii) any contract to which the Borrower is a party, or by which the Borrower or its properties are bound; and (iv) do not result in or require the creation of any lien, security interest or other charge or encumbrance (other than pursuant hereto) upon or with respect to any of its properties. The execution, delivery and performance by each of the Guarantors of each Loan Instrument to which such Person is or will be a party are within the such Person's respective corporate powers or limited liability company, as applicable, have been duly authorized by all necessary corporate or limited liability company, as applicable, -42- action by such Person, and do not contravene (i) such Person's articles of incorporation or by-laws, or (ii) any law or any contractual restriction binding on or affecting such Person, and do not result in or require the creation of any lien, security interest or other charge or encumbrance (other than pursuant hereto) upon or with respect to any of such Person's properties. (d) APPROVALS. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower or the Guarantors of any Loan Instrument to which any such Person is or will be a party all of which have been duly obtained and are in full force and effect, except as indicated in SCHEDULE 4.1(d). (e) ENFORCEABILITY. This Agreement is, and each other Loan Instrument to which the Borrower will be a party when delivered hereunder will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms. Each Loan Instrument to which each Guarantor will be a party when delivered hereunder will be the legal, valid and binding obligation of each such Person, enforceable against such Persons, respectively, in accordance with its terms. (f) FINANCIAL STATEMENTS. The audited consolidated balance sheets of the Borrower and the Guarantors and the related consolidated statements of income and retained earnings of the Borrower and the Guarantors as of September 30, 1997 for the Fiscal Year then ended, and the unaudited balance sheets of the Borrower and the Guarantors as at March 31, 1998, and the related consolidated statements of income and retained earnings of the Borrower and Guarantors for the Fiscal Quarter then ended, copies of which have been furnished to the Banks, fairly present the consolidated financial position of the Borrower and the Guarantors as of such date and the consolidated results of the operations of the Borrower and the Guarantors for the period ended on such date, all in accordance with Regulation S-X promulgated under the Securities Exchange Act of 1934, and since September 30, 1997, there has been no material adverse change in such condition or operations except as disclosed in SCHEDULE 4.1(f) hereto. -43- (g) LITIGATION. Except as set forth in SCHEDULE 4.1(g) hereto, there is no pending, or to the Borrower's knowledge, threatened action or proceeding affecting the Borrower or any of its properties or business activities or any of the Guarantors or their respective properties or business activities, before any court, governmental agency or arbitrator, in which there is a reasonable possibility of a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Agreement or any Loan Instrument to which the Borrower or any Guarantor will be a party. (h) FEDERAL RESERVE REGULATIONS. None of the Advances to be provided to the Borrower hereunder will be used in violation of Regulations T, U or X. The Borrower is not engaged in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock (within the meaning of Regulations T, U and X). No part of the proceeds of any extension of credit hereunder, whether directly or indirectly, and whether immediately, incidentally or ultimately, will be used (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose, or (ii) for any purpose which entails a violation of, or which is inconsistent with, the provisions of the Regulations of the Board of governors of the Federal Reserve system, including Regulations T, U or X. (i) INVESTMENT COMPANY ACT. The Borrower is not an "investment company' or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (j) ERISA. (i) The Borrower and Guarantors neither maintain nor contribute to any Employee Benefit Plan or Multiemployer Plan other than those specified in SCHEDULE 4.1(j). (ii) The Borrower and the Guarantors are in compliance in all material respects with all applicable provisions of ERISA and the Code with -44- respect to all Employee Benefit Plans. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such Plan has been determined to be exempt from federal income tax under Section 501(a) of the Code. The actuarial present value of all accumulated benefit obligations under each Plan, as disclosed in the most recent actuarial report with respect to such Plan, do not exceed the fair market value of the assets of such Plan. No material liability has been incurred by the Borrower, any Guarantor or any of their ERISA Affiliates which remains unsatisfied for any taxes, penalties or other amount (other than contributions in the ordinary course) with respect to any Employee Benefit Plan or any Multiemployer Plan, and to the best knowledge of the Borrower no such material liability is expected to be incurred. (iii) The Borrower and the Guarantors have not (a) engaged in a nonexempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code; (b) incurred any liability to the Pension Benefit Guaranty Corporation which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid; (c) failed to make a required contribution or payment to a Multiemployer Plan; or (d) failed to make a required installment or other required payment under Section 412 of the Code. (iv) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan or Multiemployer Plan maintained or contributed to by the Borrower or any Guarantor. (v) No material proceeding, claim (other than routine claims for benefits) lawsuit and/or investigation is existing or, to the Borrower's knowledge, threatened concerning or involving any Employee Benefit Plan or Multiemployer Plan maintained or contributed to by the Borrower or any Guarantor. (k) COMPLIANCE WITH LAWS. The Borrower and the Guarantors are in compliance with all applicable laws, -45- ordinances, treaties, rules, regulations and orders of, and all applicable restrictions imposed by, all Governmental Authorities in respect of the conduct of their respective businesses and the ownership of their respective properties, except such noncompliance as would not, individually or in the aggregate, have a Material Adverse Effect. (l) PAYMENT OF DEBTS AND TAXES. (i) The Borrower and each Guarantor: (a) has filed all required federal, state and local tax returns with appropriate taxing authorities respecting its operations, assets and properties; and (b) has paid or caused to be paid all taxes shown on those returns to the extent due, and has paid all tax or other assessments imposed by Governmental Authorities, except in either case taxes which are being contested in good faith and for which adequate bonds or other sureties as required by law have been posted by the Borrower or Guarantor. (ii) The Borrower and each Guarantor is current in its payment of Debts (other than Debt in an aggregate amount not to exceed $1,000,000.00) and performance of material obligations under Material Agreements except those being contested in good faith. (m) INDEBTEDNESS, GUARANTIES. (i) SCHEDULE 4.1(m), PART I contains a complete and accurate list of all Debt of the Borrower and each of the Guarantors, whether individual, joint, several or otherwise, and whether fixed or contingent, including commitments, lines of credit and other credit availabilities, identifying with respect to each the respective parties, amounts and maturities. (ii) SCHEDULE 4.1(m), PART II contains a complete and accurate list of all guarantees or other surety arrangements or undertakings of the Borrower and each of the Guarantors for obligations of any other Person (except for negotiable instruments endorsed for collection or deposit in the ordinary course of business), -46- whether individual, joint, several or otherwise, identifying with respect to each of the parties, amounts and maturities. (n) MATERIAL AGREEMENTS. Except as set forth in SCHEDULE 4.1(n), and except for the Loan Instruments, the Borrower and the Guarantors are not a party to any Material Agreements. The Borrower and each Guarantor is in compliance with all Material Agreements and has not received any notices from counter parties thereto asserting violations of any such Material Agreements by the Borrower or any Guarantor or asserting rights to terminate or modify any of such Material Agreements. (o) PROPERTIES, INVENTORY AND EQUIPMENT. The Borrower owns or leases the real property identified in PART I of SCHEDULE 4.1(o) (the "BORROWER'S REAL PROPERTY") and owns the Equipment and Inventory in the states identified in SCHEDULE 4.1(o). The Guarantors own or lease the real property identified in PART II of SCHEDULE 4.1(o) (the "GUARANTORS' REAL PROPERTY") and own the Equipment and Inventory in the states identified in SCHEDULE 4.1(o). The Borrower's Equipment and Inventory is located in the states set forth in PART I of SCHEDULE 4.1(o). The Guarantors' Equipment and Inventory is located in the states listed in PART II of SCHEDULE 4.1(o). The Borrower has good, marketable and insurable title to, or valid leasehold interests in, all of Borrower's owned Real Property and good title to Borrower's Equipment and the other assets of the Borrower, free and clear of all Liens, other than the Liens identified in PART III of SCHEDULE 4.1(o) and other Permitted Liens. The Guarantors have good, marketable and insurable title to, or valid leasehold interests in, all of Guarantors' Real Property and good title to Guarantors' Equipment and the other assets of the Guarantors, free and clear of all Liens, other than the Liens identified in PART IV of SCHEDULE 4.1(o) and other Permitted Liens. (p) FINANCIAL CONDITION. Neither the Borrower nor any Guarantor is entering into the arrangements contemplated by this Agreement and the other Loan Instruments with actual intent to hinder, delay or defraud either present or future creditors of the Borrower or any Guarantor. On and as of the date of execution hereof by the Borrower, and on and as of the date of each Advance hereunder by the Banks, on a pro-forma basis -47- after giving effect to the transactions contemplated by the Loan Instruments and to all indebtedness (including Debt) incurred or to be created in connection herewith: (i) the present fair saleable value of the assets of the Borrower and each Guarantor, respectively, (on a going concern basis) will exceed the probable liability of the Borrower and each Guarantor, respectively, on its indebtedness (including Debt and contingent obligations); (ii) the Borrower and each Guarantor, respectively, has not incurred, nor does Borrower intend to or believe it will incur, nor will Borrower permit any Guarantor to incur indebtedness (including Debt and contingent obligations) beyond its ability to pay such indebtedness as such indebtedness matures (taking into account the timing and amounts of cash to be received from any source, and of amounts to be payable on or in respect of such indebtedness); and the amount of cash available to the Borrower and Guarantors after taking into account all other anticipated uses of funds is anticipated to be sufficient to pay all such amounts on or in respect of its respective indebtedness (including Debt and contingent liabilities) when such amounts are required to be paid; and (iii) the Borrower and each Guarantor will have sufficient capital with which to conduct its present and proposed business, and the assets of the Borrower and each Guarantor, respectively, do not constitute unreasonably small capital with which to conduct its present or proposed business. (q) INSURANCE. The Borrower and each of the Guarantors currently maintains with financially sound and reputable insurers insurance concerning its assets and business, with such deductibles and retentions and having coverages against risks, losses or damages as are customarily carried by reputable companies in the same or similar businesses, such insurance being in amounts no less than those amounts which are customary for such companies under similar circumstances, which third-party insurance coverages are identified in SCHEDULE 4.1(q). -48- (r) FULL DISCLOSURE. No representation or warranty contained in this Agreement or in any other Loan Instrument to which the Borrower is a party, or in any other document furnished from time to time by the Borrower to the Bank pursuant to this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading in any material respect as of the date made or deemed to be made. Except as may be set forth herein or in any of the Schedules hereto or in the certificates and information furnished pursuant to SECTION 5.1(b), there is no fact known to the Borrower which has had, or is reasonably expected to have, a Material Adverse Effect. (s) NO DEFAULT. No Default or Event of Default has occurred and is continuing. (t) STATUS OF LOANS AS SENIOR DEBT. All Debt of the Borrower to the Banks and the Agent in respect of the Loans constitutes "Senior Debt" or "Senior Indebtedness" (or the analogous term used therein) under the terms of any instrument evidencing or pursuant to which there is issued indebtedness which purports to be Debt of the Borrower. (u) SWAP OBLIGATIONS. Neither the Borrower nor any of its Subsidiaries has incurred any outstanding obligations under any Swap Contracts, other than Permitted Swap Obligations. The Borrower has undertaken its own independent assessment of its consolidated assets, liabilities and commitments and has considered appropriate means of mitigating and managing risks associated with such matters and has not relied on any swap counterparty or any Affiliate of any swap counterparty in determining whether on not to enter into any Swap Contract. (v) FRANCHISES, PATENTS, COPYRIGHTS, ETC. The Borrower and the Subsidiaries possess all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of their business as now conducted without known conflict with any rights of others. -49- ARTICLE V COVENANTS OF THE BORROWER SECTION 5.1 AFFIRMATIVE COVENANTS. So long as any of the Notes shall remain unpaid, or the Banks shall have any Commitment hereunder, or any obligation of the Borrower or any Guarantor hereunder or under any Loan Instrument has not been fully performed, the Borrower will, unless the Required Banks shall otherwise consent in writing: (a) USE OF PROCEEDS. Subject to compliance by the Borrower with all of the terms and conditions hereof, use the Advances exclusively to pay amounts due under the Existing Loan Agreement, to make Qualified Acquisitions and for any corporate purpose of the Borrower or any Guarantor. (b) REPORTING AND NOTICE REQUIREMENTS. Provide to the Agent: (i) as soon as available, and in any event within 90 days after the end of each Fiscal Year of the Borrower, audited consolidated statements of income, retained earnings and cash flows for the Borrower and its Subsidiaries for such Fiscal Year and the related audited consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Year, setting forth in comparative form the corresponding consolidated figures for such Fiscal Year and the prior Fiscal Year, each accompanied by a report of the Borrower's independent public accountants (who shall be a nationally recognized firm or otherwise satisfactory to the Agent), which reports shall state that such consolidated financial statements fairly present the consolidated financial position and results of operations of the Borrower and its Subsidiaries in accordance with GAAP without material qualification; (ii) simultaneously with the delivery of the annual financial statements referred to in SECTION 5.1(b)(i) above, a report of the independent auditors who audited such statements stating that, in connection with their audit of such statements (and without conducting any procedures other than those customarily conducted -50- in a year-end audit), such auditors have obtained no knowledge of any condition or event which constitutes a Default or Event of Default hereunder, or if such auditors have obtained knowledge of any such condition or event, specifying in such report each such condition or event of which they have knowledge and the nature and status thereof; PROVIDED, HOWEVER, that such auditors shall not be liable to the Banks by reason of any failure to obtain knowledge of any condition or event which constitutes a Default or Event of Default that would not be disclosed in the course of their audit examination; (iii) as soon as available, and in any event within 90 days after the end of each Fiscal Year of the Borrower, (a) a consolidated annual budget, broken down quarterly, for the Borrower and the Guarantors for the following Fiscal Year, and (b) an operating plan for the Borrower and the Guarantors for the then current Fiscal Year and the four following Fiscal Years, all in a form and at a level of detail reasonably acceptable to the Agent; (iv) within 45 days after the conclusion of each Fiscal Quarter of the Borrower, a Compliance Certificate signed by the chief executive officer or chief financial officer of the Borrower,(a) to the effect that no Default or Event of Default is in existence, (b) setting forth in reasonable detail the computations necessary to demonstrate compliance by the Borrower with the financial covenants set forth in SECTION 5.2(a), (c) the computations in reasonable detail of the ratio of Total Debt to Trailing Four Quarter EBITDA ratio referred to in the definitions of Applicable Margin and Commitment Fee Rate and (d)(if applicable) reconciliations to reflect any relevant changes in GAAP since the Effective Date; (v) as soon as available, and in any event within 45 days after the end of each Fiscal Quarter, (a) a Form 10-K or 10-Q, as applicable, filed by the Borrower with the Securities and Exchange Commission; and (b) a backlog summary report in form and substance reasonably satisfactory to the Agent; -51- (vi) within 45 days after the end of each Fiscal Quarter a listing and aging of all Accounts Receivable of the Borrower and the Guarantors (with all of the foregoing to be in form and at a level of detail reasonably acceptable to the Agent); (vii) at least 30 days prior to the acquisition date of a proposed Qualified Acquisition, notice identifying the Person to be acquired and such information concerning the Person as the Agent may request in order to prepare the Collateral Documents referred to in SECTION 5.1(n); (viii) within 20 days after the date of acquisition of a Qualified Acquisition, (a) a Compliance Certificate, as of the last day of the month immediately preceding the date of acquisition of the Qualified Acquisition, for the Borrower and the acquired Person on a pro-forma basis and (b) a certificate, in form and level of detail reasonably acceptable to the Agent, establishing compliance with the definition of Qualified Acquisition, all signed by the chief executive officer or chief financial officer of the Borrower; (ix) promptly upon the request of the Agent, copies of all "management letters" received by the Borrower from the Borrower's independent accountants; (x) as soon as possible, and in any event within 5 days after the Borrower knows or has reason to know thereof, notice of any ERISA Event, describing the same in reasonable detail; (xi) promptly upon the occurrence thereof, notice of any Default or Event of Default describing the same in reasonable detail, together with a report concerning the steps which the Borrower is taking or will take to remedy such Default or Event of Default; (xii) promptly on the occurrence thereof, notice of any Material Adverse Effect describing the same in reasonable detail, together with a -52- report concerning the steps which the Borrower is taking or will take to eliminate such Material Adverse Effect; (xiii) promptly after receipt of written request from the Agent or the Required Banks, such other information concerning the Borrower or any of the Guarantors, and concerning their respective businesses, operations, assets or financial condition (including accounts payable listings and agings, fixed asset schedules and information concerning leases) as the Agent or Required Banks may reasonably request; provided that so long as no Event of Default has occurred, such request for information shall be limited to one request per month; and (xiv) promptly upon the occurrence thereof, notice of all changes in the articles of incorporation or bylaws of the Borrower or any of the Guarantors, or the employment status with the Borrower or Guarantors of Sidney V. Corder or Scott C. Benger; (xv) promptly after the furnishing thereof to the shareholders of the Borrower copies of all financial statements, reports and proxy statements so furnished; and (xvi) promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission. (c) MAINTENANCE OF EXISTENCE, ETC. Except as provided in SECTION 5.2(b), maintain its corporate existence and cause each Guarantor to maintain its corporate existence, and maintain and cause each Guarantor to maintain their respective material rights, privileges and franchises. (d) COMPLIANCE WITH LAWS. Comply and cause each Guarantor to comply in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over each such Person or their respective business, except where the failure to comply would not have a Material Adverse Effect. -53- (e) INSURANCE. (i) Maintain the third-party insurance identified in SCHEDULE 4.1(q), PROVIDED, HOWEVER, that in no event shall such insurance be for an amount less than the replacement cost of the assets so insured. (ii) Without limiting the obligations of the Borrower under this SECTION 5.1(e), in the event the Borrower fails to maintain the insurance required by the foregoing provisions of this SECTION 5.1(e), then the Banks may, but shall have no obligation to, procure insurance covering the interests of the Banks, in such amounts and against such risks as the Banks shall deem appropriate, and the Borrower will reimburse the Banks in respect of any premiums paid by the Banks as provided in SECTION 8.4. (f) MATERIAL AGREEMENTS. Perform, and cause all Guarantors to perform, all of each such Person's obligations under the Material Agreements in substantial compliance with all terms and conditions thereof. (g) OBLIGATIONS AND TAXES. Pay and cause all Guarantors to pay each such Person's Debt in excess of $1,000,000 and other obligations in accordance with their terms and pay and discharge promptly all Federal and State and local taxes, and all governmental assessments and charges or levies imposed upon any such Person or upon such Person's income or profits or in respect of its assets or business, or in any event before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise which, if unpaid, might give rise to a Lien upon such properties or any part thereof; PROVIDED, HOWEVER, that such payment and discharge shall not be required so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Borrower or such Guarantor, as applicable, shall have set aside on its books adequate reserves in accordance with GAAP with respect thereto. (h) MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS. Maintain, and cause all Guarantors to -54- maintain, all financial records in accordance with GAAP and permit, and cause all Guarantors to permit, after two weeks notice unless an Event of Default has occurred, any Bank employees or other representatives designated by the Agent or the Required Banks to visit and inspect the properties of the Borrower or of any Guarantor, and to inspect their respective financial and business records and make extracts therefrom and copies thereof, all at reasonable times and in a manner so as not to unreasonably disrupt the operations of the Borrower or of such Guarantors and as often as reasonably requested, and permit, and cause such Guarantors to permit, any such employees or representatives to discuss the affairs, finances and condition of the Borrower and Guarantors with the officers and other representatives thereof, including the Borrower's independent accountants if a representative of the Borrower is present and if the Agent has notified the Borrower not less than 24 hours prior to such meeting of the issues that will be discussed. (i) ENVIRONMENTAL AND SAFETY MATTERS. (i) Comply and cause all Guarantors to comply with all Environmental and Safety Laws applicable to the Borrower and the Guarantors, respectively, in all material respects. (ii) Keep its properties and facilities and cause all Guarantors to keep their facilities and properties free from any Liens arising under any applicable Environmental and Safety Laws. (iii) If the Banks at any time have reason to believe that any property or facility owned or operated by the Borrower or any Guarantor has been or may be operated in violation of any Environmental or Safety Laws applicable thereto or contaminated with any Hazardous Materials in excess of levels allowed by Environmental or Safety Laws or subject to any government-imposed obligation to conduct any environmental investigation or clean-up, any of which in the good faith judgement of the Banks may impair in any material respect the ability of the Borrower or any Guarantor to satisfy any obligations of the Borrower hereunder or under any Loan Instrument, -55- the Borrower shall, upon the written request of the Banks, at the Borrower's sole cost and expense, conduct such investigation or study, through retention of a consulting firm reasonably satisfactory to the Banks, as is necessary in the good faith judgment of the Banks to demonstrate that no such impairment could reasonably be expected to have a Material Adverse Effect. (j) DEPOSIT BALANCES. Maintain, and cause the Guarantors to maintain, their respective primary operating, payroll and investment deposit account balances with the Agent or its Affiliates, except for accounts maintained in locations where the Agent and its Affiliates have no bank. (k) INTEREST RATE PROTECTION. If after the Effective Date an issuance or sale of the equity securities of the Borrower resulting in Net Proceeds to the Borrower of $20,000,000 or more has not occurred by September 30, 1998, enter into as of September 30, 1998 and maintain during the time that any Loan is outstanding, interest rate protection, subject to an Interest Rate Protection Agreement in form and substance satisfactory to the Agent, in an amount to be negotiated by the Borrower and the Agent. (l) SURVEYS. At its expense provide to the Agent, on or before May 31, 1998, a current ALTA/ACSM survey of the real property described in the Deeds of Trust prepared by a surveyor acceptable to the Agent showing the legal description of the land, the location of all improvements thereon, the location of any recorded easements or other restrictions affecting the land, the flood plain status of the land and a description and the date of the map or maps reviewed. (m) AUDIT OF ACCOUNTS RECEIVABLE AND INVENTORY. (i) No more often than annually, so long as there is no Event of Default, permit, and cause the Guarantors to permit, the Agent or representatives of the Agent to conduct during regular business hours a field examination and inspection of the Collateral, and to audit and copy all of the Borrower's and the Guarantors' financial books, records, journals and other records and data relating to the Collateral to the -56- extent that the Agent deems necessary in regard to the Banks' rights under the Loan Instruments. (ii) Promptly pay or reimburse the Agent for the actual cost of all field examinations and audits including all out of pocket expenses for travel, food and lodging. (n) ADDITIONAL PLEDGES AND GUARANTORS. Within ten (10) Business Days after any Person becomes a Subsidiary of the Borrower, (i) The Borrower shall grant to the Agent on behalf of the Banks, a pledge of 100% of the shares of capital and voting stock of such Person owned by the Borrower and the Guarantors pursuant to a Pledge Agreement and execute and deliver to the Agent such Pledge Agreement, original stock certificates subject thereto and stock powers therefor. (ii) Such Person shall execute and deliver to the Agent a Guaranty, Deed of Trust, Pledge Agreement, Security Agreement, Collateral Assignment of Leases, Assignment of Lease, Landlord's Waiver and Consent, and Uniform Commercial Code Financing Statements pertaining to all of such Person's real and personal property, both tangible and intangible, all in form and substance satisfactory to the Agent. (iii) Borrower, at its expense, shall provide to Agent (A) title insurance as provided under SECTION 3.1(a)( ) with respect to such Person's owned real property, (b) a current ALTA/ACSM survey as provided under SECTION 5.1 ( ) with respect to such Person's owned real property,(C)Phase I Environmental Assessments with respect to such Person's owned real property as provided under SECTION 3.1(a) ( ), (D) certificates of insurance, in form and substance satisfactory to the Agent, from an independent insurance broker identifying insurers, types of insurance, insurance limits, policy terms, and identifying the Agent (on behalf of the Banks) as additional insured and loss payee with respect to such Person's property, and (E) such other documents as the Agent and the Bank's may request -57- with respect to such Person's property to effect the purposes of this Agreement and the other Loan Instruments. (iv)Borrower shall pay all reasonable legal fees, disbursements and expenses incurred by the Agent in connection with the preparation, execution, delivery, recording and filing of the Loan Instruments described in this SECTION 5.2(n). (o) YEAR 2000 COMPATIBILITY. Take all action necessary to ensure that the computer based systems of the Borrower and its Subsidiaries are able to operate and effectively process data including dates on or after January 1, 2000, except that such action shall not be required to the extent that failure to take such action would not have a Material Adverse Effect. At the request of the Agent, the Borrower shall provide assurance reasonably acceptable to the Agent of the year 2000 compatibility of the Borrower and its Subsidiaries. (p) LANDLORD'S WAIVER AND CONSENT. Promptly, but in no event more than 30 days after the Effective Date, use commercially reasonable efforts to provide a Landlord's Waiver and Consent, in form and substance satisfactory to the Agent, for each of the Borrower's or Guarantor's leased business premises, executed by the landlord for such premises. (q) FURTHER ASSURANCES. Execute and deliver such further documents and do such other acts and things as the Banks may reasonably request in order to effect fully the purposes of this Agreement and each of the other Loan Instruments and to provide for payment of the Loans and all other amounts due hereunder within the scope of this Agreement. SECTION 5.2 NEGATIVE COVENANTS. So long as any of the Notes shall remain unpaid, or the Banks shall have any Commitment hereunder, or any obligation of the Borrower or any Guarantor hereunder or under any Loan Instrument has not been fully performed, the Borrower will not, unless the Required Banks shall otherwise consent in writing: -58- (a) FINANCIAL COVENANTS. (i) MAXIMUM TOTAL DEBT TO EBITDA RATIO. Permit, as of the end of any Fiscal Quarter, for Borrower and all Subsidiaries on a consolidated basis a ratio of (y) Total Debt to (z) Trailing Four Quarter EBITDA to be greater than TIME PERIOD MAXIMUM RATIO From the Effective Date to September 29, 1998 3.00:1.00 September 30, 1998 to September 29, 1999 2.50:1.00 September 30, 1999 and thereafter 2.00:1.00
(ii) MINIMUM FIXED CHARGE COVERAGE RATIO. Fail to maintain a ratio of Trailing Four Quarter EBITDA to Fixed Charges of less than 1.3:1.0. (iii) MINIMUM NET INCOME. Fail to earn Net Income for two (2) consecutive Fiscal Quarters. (iv) MAXIMUM ANNUAL CAPITAL EXPENDITURES. During any Fiscal Year, make Capital Expenditures for the Borrower and all Subsidiaries on a consolidated basis in excess of $4,000,000. (v) MINIMUM EBITDA. Fail to maintain for the Borrower and all Subsidiaries on a consolidated basis a minimum Trailing Four Quarter EBITDA of $10,000,000. (b) PROHIBITION OF FUNDAMENTAL CHANGES. Effect, or permit to be effected with respect to any Guarantor, any transaction of merger, consolidation, recapitalization, reorganization, liquidation or dissolution except any Subsidiary may merge, consolidate or reorganize with, or liquidate and transfer its assets to,(i) the Borrower, provided that the Borrower is the continuing -59- or surviving corporation or (ii) any Subsidiary provided that if any transaction shall be between a Guarantor and a Subsidiary, the Guarantor shall be the continuing or surviving corporation, and in each case no Default or Event of Default has occurred and is continuing or no Material Adverse Effect has occurred. (c) LIMITATION ON LIENS. Create or suffer to exist, or permit any Guarantor to create or suffer to exist, any Liens on any assets of any such Person, except for Permitted Liens. (d) DEBT. Create, incur or suffer to exist, or permit any Guarantor to create, incur or suffer to exist, any Debt except, (i) Debt hereunder, (ii) intercompany Debt (iii) Debt of such Persons in effect on the date hereof as reflected in the financial statements identified in Section 4.1(f), (iv) Debt consisting of trade payables incurred in the ordinary course of business and (v) other Debt in the aggregate principal amount of $4,000,000.00. (e) GUARANTEES. Create or become liable, directly or indirectly, or permit any Guarantor to create or become liable, directly or indirectly, with respect to any guarantee of the obligation of any other Person except, (i) guarantees resulting from the endorsement of instruments for collection in the ordinary course of business,(ii) guarantees in effect on the date hereof and disclosed in the financial statements identified in SECTION 4.1(f), (iii) the Guaranties of the Guarantors in favor of the Bank as contemplated hereby and (iv) guarantees of performance or obligations of any Subsidiary by the Borrower, if such obligations were directly incurred or maintained by the Borrower would not violate any provision of any Loan Instrument. (f) INVESTMENTS, LOANS, ADVANCES, ETC. The Borrower shall not directly or indirectly purchase or otherwise acquire, hold or invest in the securities of any Person, acquire control of any Person, make loans or advances or enter into any agreement or other arrangement for the purpose of providing funds or credit to any Person (other than guaranties permitted hereunder), or enter into any partnership, joint venture or other entity or business arrangement with or make any equity investment in any Person, or offer or agree to do so, and will not permit any Guarantor to do -60- so except for: (i) securities issued by any of its Subsidiaries; (ii) loans or advances between the Borrower and any wholly owned Subsidiary; (iii) securities issued or guarantied by the United States of America; (iv) except as provided in SECTION 5.1(j), and deposit accounts for payment of ordinary course of business expenses by the Borrower and Guarantors, with respect to which no limits concerning the deposit bank apply, deposits in domestic commercial banks that have, or are members of a group of domestic commercial banks that has, consolidated total assets of not less than one billion dollars, or investments in the certificates of deposit, commercial paper or other permissible market rate instruments offered by any such bank, the holding company of any such bank or subsidiary of any such holding company; (v) normal business banking accounts in federally insured institutions in amounts not exceeding the limits of such insurance; (vi) commercial paper or other short-term debt securities rated not less than "A" or its equivalent by Standard & Poor's Corporation or Moody's Investors Service, Inc.; (vii) investments constituting Permitted Swap Obligations or payments or advances under Swap Contracts relating to Permitted Swap Obligations; (viii) overnight cash management services offered under the Agent's Corporate Cash program; (ix) Qualified Acquisitions and (x) other investments not exceeding $500,000 in the aggregate at any one time in Persons that are not Affiliates of the Borrower or any Guarantor. (g) SALES OF ASSETS. Make any Disposition of assets of the Borrower, or permit any Guarantor to make any Disposition of assets of such Guarantor other than (i) sales of inventory in the ordinary course of business or (ii) Dispositions of obsolete or surplus equipment or other assets or (iii) up to $1,000,000 in fair market value of other Dispositions each Fiscal Year, or (iv) Dispositions of its assets to the Borrower or a Subsidiary. (h) TRANSACTIONS WITH AFFILIATES. Except for transactions existing on the Effective Date, enter into or permit any Subsidiary to enter into any transaction or series of transactions, whether or not related or in the ordinary course of business of the Borrower, with any Affiliate of the Borrower or any Subsidiary (except for transactions between the Borrower and its -61- Subsidiaries and between wholly owned subsidiaries of the Borrower and a Subsidiary), other than pursuant to the reasonable requirements of the Borrower's or such Subsidiaries's business and on terms and conditions no less favorable to the Borrower or any Subsidiary than would be obtainable by the Borrower or any Subsidiary at the time in a comparable arm's-length transaction with a Person not an Affiliate of the Borrower or any Subsidiary. (i) MODIFICATION OF CERTAIN DOCUMENTS; PERFORMANCE OF MATERIAL AGREEMENTS. Amend its articles of incorporation or bylaws in a manner adverse to the Bank; or amend, modify, cancel, terminate, waive any default under or breach of, in any manner any Material Agreement other than in the ordinary course of business or permit any Guarantor to do any of the foregoing; or enter into any new agreement that is inconsistent with the obligations of the Borrower or Guarantor under any Loan Instrument to which such Person is a party, without the prior written consent of the Required Banks, which consent shall not be unreasonably withheld. The Borrower further agrees that it will not be in default under, or otherwise fail to perform and will not permit any Guarantor to be in default under or -62- otherwise fail to perform all of its material obligations under any of the Material Agreements to which any such Person is a party. (j) DIVIDENDS. Declare or pay or permit any Guarantor to declare or pay cash or stock dividends or other distributions with respect to the Borrower's stock or Guarantor's stock, except that () any Guarantor may declare and pay dividends and make distributions to the Borrower and (ii) the Borrower may declare and pay a dividend payable solely in the capital stock of the Borrower. (k) ACCOUNTING. Change, or permit any Guarantor to change its respective Fiscal Years or accounting methods or practices (except to conform to changes in GAAP). If any preparation of the financial statements referred to in SECTION 4.1(f), hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) result in a material change in the method of calculation of financial covenants, standards or terms found in this Agreement, the Borrower will, and will cause each Guarantor to, enter into good faith negotiations with the Bank in order to amend such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating the Borrower's consolidated financial condition shall be the same after such changes as if such changes had not been made. Unless and until such provisions have been so amended, the provisions of this agreement shall govern and the financial covenants hereunder shall be calculated using GAAP as in effect prior to such changes. (l) CHANGE OF ADDRESS; BUSINESS NAME(S). Except upon not less than 30 days prior written notice to the Agent, change or permit any Guarantor to change the address at which the Borrower or such Guarantor maintains its chief executive offices and principal place of business; nor conduct its business activities under any names other than those set forth SCHEDULE 4.1(b) hereto unless the Borrower notifies the Agent of any such new name not less than 30 days prior to beginning use of such new name, except that no more than seven days notice shall be required in the case of -63- a new name resulting from an acquisition of a business or assets by the Borrower. ARTICLE VI EVENTS OF DEFAULT SECTION 6.1 EVENTS OF DEFAULT. Each of the following events shall constitute an Event of Default hereunder: (a) PAYMENTS UNDER THE AGREEMENT AND THE NOTES. The Borrower shall fail to pay any principal of, or interest on, the Notes when the same become due and payable or the Borrower shall fail to pay any Fees or other amount due the Bank from the Borrower hereunder and such failure, in the case of a payment other than a payment of principal shall continue for three (3) Business Days. (b) REPRESENTATIONS AND WARRANTIES. Any representation or warranty made by the Borrower or any of the Guarantors (or any of their respective officers, if applicable) under or in connection with any Loan Instrument shall prove to have been incorrect in any material respect when made. (c) OTHER LOAN INSTRUMENT OBLIGATIONS. (i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in SECTION 5.2, or (ii) the Borrower shall fail to perform or observe any term, covenant or agreement contained in any Loan Instrument to which it is a party (other than any such failures addressed by SUBSECTIONS (a), (b) and (c)(i) above in this SECTION 6.1) and such failure continues unremedied for a period of 15 days after the Borrower receives notice or otherwise has actual knowledge thereof, or (iii) any Guarantor shall fail to perform or observe any term, covenant or agreement contained in any Loan Instrument to which it is a party, and such failure under CLAUSE (i), (ii) or (iii) continues unremedied for a period of 15 Business Days after such Person receives notice or otherwise has actual knowledge thereof. (d) OTHER DEBT. The Borrower or any Guarantor shall fail to pay any principal of or premium or interest on -64- any Debt which is outstanding in a principal amount of at least $1,000,000 in the aggregate (but excluding Debt evidenced by the Notes) of such Person, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof. (e) INSOLVENCY. The Borrower or any of the Guarantors shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of the Guarantors seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 45 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or Borrower or any Guarantor shall take any corporate action to authorize any of the actions set forth above in this SUBSECTION (e). -65- (f) JUDGMENTS. Any non-interlocutory judgment or order for the payment of money which is not covered by existing insurance in excess of $1,000,000 shall be rendered against the Borrower or any Guarantor and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. (g) TERMINATION OF CERTAIN LOAN INSTRUMENTS. Any provision of this Agreement, the Notes, or any of the Collateral Documents shall for any reason cease to be valid and binding on the Borrower or Guarantors (as the case may be), or the Borrower or any of the Guarantors shall so state in writing. (h) COLLATERAL LIENS. The Deeds of Trust, Security Agreements, Pledge Agreement or Collateral Assignment of Leases shall, after delivery thereof by the Borrower or any Guarantor pursuant hereto, for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority security interest in favor of the Agent in any of the collateral purported to be covered thereby. (i) CHANGE OF CONTROL. There occurs any Change of Control. SECTION 6.2 BANK'S RIGHTS UPON AN EVENT OF DEFAULT. Upon the occurrence and during the continuation of any Event of Default the Agent (i) may, by notice to the Borrower, declare the obligation of the Banks to make Advances to be terminated, whereupon the same shall forthwith terminate, (ii) may, by notice to the Borrower, declare the Notes, all accrued interest on the Loans and all other amounts payable under this Agreement, the Notes and any other Loan Instrument to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower, and (iii) may exercise the Banks rights and remedies under the Loan Instruments and such other rights and remedies as may be available to the Banks at law or in equity; PROVIDED, HOWEVER, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower or any of the Guarantors -66- under the Federal Bankruptcy Code, (A) the obligation of the Banks to make Advances shall automatically be terminated and (B) the Advances, the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE VII THE AGENT SECTION 7.1 APPOINTMENT AND POWERS. Each Bank hereby irrevocably appoints and authorizes Bank One, Colorado, N.A., and Bank One, Colorado, N.A. hereby agrees, to act as the agent for and representative (within the meaning of Section 9-105(m) of the Uniform Commercial Code) of such Bank under the Loan Instruments with such powers as are delegated to the Agent and the Secured Party by the terms thereof, together with such other powers as are reasonably incidental thereto. The Agent's duties shall be purely ministerial and it shall have no duties or responsibilities except those expressly set forth in the Loan Instruments. The Agent shall not be required under any circumstances to take any action that, in its judgment, (a) is contrary to any provision of the Loan Instruments or Applicable Law or (b) would expose it to any Liability or expense against which it has not been indemnified to its satisfaction. The Agent shall not, by reason of its serving as the Agent, be a trustee or other fiduciary for any Bank. SECTION 7.2 LIMITATION ON AGENT'S LIABILITY. Neither the Agent nor any of its directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them under or in connection with the Loan Instruments, except for its or their own gross negligence, willful misconduct or knowing violations of law. The Agent shall not be responsible to any Bank for (a) any recitals, statements, representations or warranties contained in the Loan Instruments or in any certificate or other document referred to or provided for in, or received by any of the Banks under, the Loan Instruments, (b) the validity, effectiveness or enforceability of the Loan Instruments or any such certificate or other document, (c) the value or sufficiency of the Collateral or (d) any failure by the Borrower or other parties to the Loan Instruments to perform any of their obligations under the Loan Instruments. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact so long as the Agent was not grossly -67- negligent in selecting or directing such agents or attorneys-in-fact. The Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telecopier, telegram or cable) believed by it to be genuine and correct and to have been signed or given by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Agent. As to any matters not expressly provided for by the Loan Instruments, the Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Loan Instruments in accordance with instructions signed by the Required Banks, and such instructions of the Required Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks. SECTION 7.3 DEFAULTS. The Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment to it of principal of or interest on Loans or fees) unless the Agent has received notice from a Bank or the Borrower specifying such Default and stating that such notice is a "Notice of Default." In the event that the Agent has knowledge of such a non-payment or receives such a notice of the occurrence of a Default, the Agent shall give prompt notice thereof to the Banks. In the event of any Default, the Agent shall (a) in the case of a Default that constitutes an Event of Default, take any or all of the actions referred to in SECTION 6.2 if so directed by the Required Banks and (b) in the case of any Default, take such other action with respect to such Default as shall be reasonably directed by the Required Banks. Unless and until the Agent shall have received such directions, in the event of any Default, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Banks. SECTION 7.4 RIGHTS AS A BANK. Each Person acting as the Agent that is also a Bank shall, in its capacity as a Bank, have the same rights and powers under the Loan Instruments as any other Bank and may exercise the same as though it were not acting as the Agent, and the term "Bank" or "Banks" shall include such Person in its individual capacity. Each Person acting as the Agent (whether or not such Person is a Bank) and its Affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower and other parties to the Loan Instruments and their Affiliates as if it were not acting as the Agent, and such Person and its Affiliates may accept fees and other consideration from the Borrower and -68- other parties to the Loan Instruments and their Affiliates for services in connection with the Loan Instruments or otherwise without having to account for the same to the Banks. SECTION 7.5 INDEMNIFICATION. The Banks agree to indemnify the Agent (to the extent not reimbursed by the Borrower and other parties to the Loan Instruments under the Loan Instruments), ratably on the basis of the respective principal amounts of the Loans outstanding made by the Banks (or, if no Loans are at the time outstanding, ratably on the basis of their respective Commitments), for any and all Liabilities, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent (including the costs and expenses that the Borrower and other parties to the Loan Instruments are obligated to pay under the Loan Instruments) in any way relating to or arising out of the Loan Instruments or any other documents contemplated thereby or referred to therein or the transactions contemplated thereby or the enforcement of any of the terms thereof or of any such other documents, provided that no Bank shall be liable for any of the foregoing to the extent they arise from gross negligence, willful misconduct or knowing violations of law by the Agent. SECTION 7.6 NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank agrees that it has made and will continue to make, independently and without reliance on the Agent or any other Bank, and based on such documents and information as it deems appropriate, its own credit analysis of the Borrower, its own evaluation of the Collateral and its own decision to enter into the Loan Instruments and to take or refrain from taking any action in connection therewith. The Agent shall not be required to keep itself informed as to the performance or observance by the Borrower or other parties to the Loan Instruments of the Loan Instruments or any other document referred to or provided for therein or to inspect the properties or books of the Borrower or any Subsidiary thereof or the Collateral. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Agent under the Loan Instruments, the Agent shall have no obligation to provide any Bank with any information concerning the business, status or condition of the Borrower or any other party to the Loan Instruments or any Subsidiary thereof, the Loan Instruments or the Collateral that may come into the possession of the Agent or any of its Affiliates. SECTION 7.7 EXECUTION AND AMENDMENT OF LOAN INSTRUMENTS ON BEHALF OF THE BANKS. Each Bank hereby authorizes the Agent to -69- (a) execute and deliver, in the name of and on behalf of such Bank, (i) the Security Agreements, the Guaranty Agreements, the Deeds of Trust and the Pledge Agreement, (ii) all Uniform Commercial Code financing and continuation statements and other documents the filing or recordation of which are, in the determination of the Agent, necessary or appropriate to create, perfect or maintain the existence or perfected status of the Security Interest, (iii) subordination agreements, subordinating the lien of the Banks to the lien of Banc One Leasing Corporation with respect to capital equipment leased by the Borrower or Guarantors in an aggregate principal amount not to exceed $3,000,000 and (iv) any other Loan Instrument requiring execution by or on behalf of such Bank, (b) release Collateral from the Security Interest to the extent that such Collateral has been disposed of in accordance with SECTION 5.2(g). The Agent shall consent to any amendment of any term, covenant, agreement or condition of the Security Agreements, the Guaranty Agreements, the Deeds of Trust and the Pledge Agreement, or to any waiver of any right thereunder, if, but only if, the Agent is directed to do so in writing by the Required Banks; PROVIDED, HOWEVER, that (i) the Agent shall not be required to consent to any such amendment or waiver that affects its rights or duties and (ii) the Agent shall not, unless directed to do so in writing by each Bank, (A) consent to any assignment by any Bank of any of its rights or obligations under any such agreement or (B) release any Collateral from the Security Interest, except as specified in clause (b) above. SECTION 7.8 RESIGNATION OF THE AGENT. The Agent may at any time give notice of its resignation to the Banks and the Borrower. Upon receipt of any such notice of resignation, the Required Banks may, with the consent of the Borrower which shall not be unreasonably withheld, appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the resigning Agent's giving of notice of resignation, then the resigning Agent may, on behalf of the Banks and after consultation with the Borrower, appoint a successor Agent. Upon the acceptance by any Person of its appointment as a successor Agent, (a) such Person shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the resigning Agent and the resigning Agent shall be discharged from its duties and obligations as Agent under the Loan Instruments and (b) the resigning Agent shall promptly transfer all Collateral within its possession or control to the possession or control of the successor Agent and shall execute and deliver such notices, instructions and assignments as may be necessary or desirable to transfer the rights of the Agent with -70- respect to the Collateral to the successor Agent. After any resigning Agent's resignation as Agent, the provisions of this ARTICLE VII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent. ARTICLE VIII MISCELLANEOUS SECTION 8.1 AMENDMENTS; WAIVERS. Any term, covenant, agreement or condition of the Loan Instruments may be amended, and any right under the Loan Instruments may be waived, if, but only if, such amendment or waiver is in writing and is signed by (a) in the case of an amendment or waiver with respect to the Loan Instruments referred to in SECTION 7.7(a), the Agent, (b) in the case of an amendment or waiver with respect to any other Loan Instrument, the Required Banks and, if the amendment or waiver would affect the rights and duties of the Agent, by the Agent, and(c) in the case of an amendment with respect to any Loan Instrument, by the Borrower; PROVIDED, HOWEVER, that no amendment or waiver shall be effective, unless in writing and signed by each Bank affected thereby, to the extent it (i) changes the amount of such Bank's Commitment, (ii) reduces the principal of or the rate of interest on such Bank's Loans or Note, or any fees payable to such Bank hereunder, (iii) postpones any date fixed for any reduction of the Revolving Loan Commitments or any payment of principal of or interest on such Bank's Loans, Note or any fees payable to such Bank hereunder, (iv) except as provided in this Agreement or any other Loan Instrument, releases any Collateral from the Security Interest, or (v) amends SECTION 2.9, this SECTION 8.1, the definition of "Required Banks" contained in SECTION 1.1 or any other provision of this Agreement requiring the consent or other action of all of the Banks. Unless otherwise specified in such waiver, a waiver of any right under the Loan Instruments shall be effective only in the specific instance and for the specific purpose for which given. No election not to exercise, failure to exercise or delay in exercising any right, nor any course of dealing or performance, shall operate as a waiver of any right of the Agent or any Bank under the Loan Instruments or Applicable Law, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right of the Agent or any Bank under the Loan Instruments or Applicable Law. -71- SECTION 8.2 NOTICES, ETC. All notices and other communications provided for hereunder shall be in writing (including telecopier, telegraphic, telex or cable communication) and mailed, telecopied, telegraphed, telexed, cabled or delivered, if to the Borrower, at its address at: Analytical Surveys, Inc. 1935 Jamboree Drive Colorado Springs, Colorado 80920 Attn: Sidney V. Corder Chairman of the Board, President and Chief Executive Officer Telecopy: (719) 528-5093 with a copy to: Steven D. Miller, Esq. Sherman and Howard L.L.C. 633 Seventeenth Street, Suite 3000 Denver, Colorado 80202 Telecopy: (303) 298-0940 and if to the Agent, at its address at: Bank One, Colorado, N.A. P.O. Box 1699 Colorado Springs, Colorado 80942 Attn: Shaun P. McCarthy Vice President Telecopy: (719)471-5213 with a copy to: Ted R. Sikora II, Esq. Davis, Graham & Stubbs LLP 370 Seventeenth Street 47th Floor Denver, CO 80202 Telecopy: (303)893-1379 or, as to each party, at such other address as shall be designated by such party in a written notice to the other Party. All such notices and communications shall, when telecopied, telegraphed, telexed or cabled, be effective when telecopied, delivered to the telegraph company, confirmed by telex answerback or delivered to the cable company, respectively, or when -72- personally delivered. Any notice, if mailed and properly addressed with first class postage prepaid, return receipt requested, shall be deemed given three Business Days after deposit in the U.S. mail. Except that notices to the Banks pursuant to the provisions of ARTICLE II shall not be effective until received by the Bank. SECTION 8.3 REMEDIES. The remedies provided in the Loan Instruments are cumulative and not exclusive of any remedies provided by law. SECTION 8.4 COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all out-of-pocket costs and expenses in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Instruments and the other documents to be delivered under the Loan Instruments, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under the Loan Instruments. The Borrower further agrees to pay on demand all costs and expenses, if any (including reasonable legal counsel, consultants and appraisers fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Instruments and the other documents to be delivered under the Loan Instruments, including, without limitation, counsel, consultants and appraisers fees and expenses in connection with the enforcement of rights under this SECTION 8.4, expressly including all such costs and expenses incurred by the Agent and the Banks in connection with or during the pendency of any bankruptcy or insolvency proceedings involving the Borrower or any Guarantor. In addition, the Borrower shall pay any and all recording fees and stamp and other taxes payable or determined to be payable in connection with the execution, delivery, filing and recording of the Loan Instruments and the other documents to be delivered under the Loan Instruments, and agrees to save the Agent and the Banks harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes. SECTION 8.5 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of any Event of Default the Banks are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Banks to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or -73- hereafter existing under any Loan Instrument, whether or not the Banks shall have made any demand under such Loan Instrument and although such obligations may be unmatured. The Banks agree promptly to notify the Borrower after any such set-off and application, PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Banks under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Banks may have. SECTION 8.6 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Borrower and the Banks and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Banks. Any assignment of rights or interests herein by the Borrower without such prior written consent of the Bank will be void and ineffective. It is expressly agreed that the Banks may transfer interests herein to other lending institutions by way of assignment or participation agreement as an to the extent permitted by SECTION 8.14. SECTION 8.7 INDEMNITY. The Borrower agrees to indemnify the Agent and the Banks, and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses incurred by any of them arising out of or by reason of any investigation or litigation or other proceedings (including any threatened investigation or litigation or other proceedings) relating to the extensions of credit hereunder or any actual or proposed use by the Borrower of the proceeds of any extensions of credit hereunder or the past, present or future business activities of the Borrower including, without limitation, the fees and disbursements of counsel incurred in connection with any such investigation or litigation or other proceedings (but excluding any such losses, liabilities, claims, damages or expenses that are determined pursuant to a final, non-appealable order of a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of the Person to be indemnified). SECTION 8.8 CONSENT TO EXCLUSIVE JURISDICTION. ANY LEGAL ACTION OR OTHER PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN INSTRUMENT SHALL BE BROUGHT EXCLUSIVELY IN THE COURTS OF COMPETENT JURISDICTION OF THE STATE OF COLORADO OR OF THE UNITED STATES LOCATED IN THE CITY AND COUNTY OF DENVER, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS -74- PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY OTHER LOAN INSTRUMENT. THE BORROWER AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY COLORADO LAW. SECTION 8.9 WAIVER OF JURY TRIAL AND CERTAIN DAMAGES. EACH OF THE BORROWER AND THE BANKS HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE BORROWER AND THE BANKS ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY LOAN INSTRUMENT. THE BORROWER HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO INTERPOSE SET OFF OR COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SET OFF, COUNTERCLAIM OR CROSS-CLAIM EXCEPT TO THE EXTENT THAT THE FAILURE SO TO ASSERT A SET OFF, COUNTERCLAIM OR CROSS-CLAIM WOULD PERMANENTLY PRECLUDE THE PROSECUTION OF OR RECOVERY UPON THE SAME. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT OR ANY OTHER LOAN INSTRUMENT TO THE CONTRARY, NO CLAIM MAY BE MADE BY THE BORROWER AGAINST THE BANKS FOR ANY LOST PROFITS OR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (OTHER THAN WILLFUL MISCONDUCT CONSTITUTING ACTUAL FRAUD) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED HEREUNDER OR UNDER ANY OTHER LOAN INSTRUMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES. THE BORROWER AGREES THAT THIS SECTION 8.9 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT THE BANKS WOULD NOT EXTEND TO THE BORROWER THE CREDIT PROVIDED FOR HEREIN IF THIS SECTION 8.9 WERE NOT PART OF THIS AGREEMENT. SECTION 8.10 ARBITRATION. EACH OF THE BORROWER AND THE BANKS AGREE THAT UPON THE WRITTEN DEMAND OF A PARTY HERETO, WHETHER MADE BEFORE OR AFTER THE INSTITUTION OF ANY LEGAL PROCEEDINGS, BUT PRIOR TO THE RENDERING OF ANY JUDGEMENT IN THAT PROCEEDING, ALL DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE, ARISING UNDER THIS AGREEMENT OR ANY OTHER LOAN INSTRUMENT OR OTHERWISE, INCLUDING -75- WITHOUT LIMITATION CONTRACT DISPUTES AND TORT CLAIMS, SHALL BE RESOLVED BY BINDING ARBITRATION PURSUANT TO THE COMMERCIAL RULES OF THE AMERICAN ARBITRATION ASSOCIATION. ANY ARBITRATION PROCEEDING HELD PURSUANT TO THIS ARBITRATION PROVISION SHALL BE CONDUCTED IN DENVER, COLORADO, OR AT ANY OTHER PLACE SELECTED BY MUTUAL AGREEMENT OF THE PARTIES. NO ACT TO TAKE OR DISPOSE OF ANY COLLATERAL SHALL CONSTITUTE A WAIVER OF THIS ARBITRATION AGREEMENT OR BE PROHIBITED BY THIS ARBITRATION AGREEMENT. THIS ARBITRATION PROVISION SHALL NOT LIMIT THE RIGHT OF EITHER PARTY DURING ANY DISPUTE, CLAIM OR CONTROVERSY TO SEEK, USE AND EMPLOY ANCILLARY, OR PRELIMINARY RIGHTS AND/OR REMEDIES, JUDICIAL OR OTHERWISE, FOR THE PURPOSES OF REALIZING UPON, PRESERVING, PROTECTING, FORECLOSING UPON OR PROCEEDING UNDER ANY FORCIBLE ENTRY AND DETAINER FOR POSSESSION OF, ANY REAL OR PERSONAL PROPERTY, AND ANY SUCH ACTION SHALL NOT BE DEEMED AN ELECTION OF REMEDIES. SUCH REMEDIES INCLUDE, WITHOUT LIMITATION, OBTAINING INJUNCTIVE RELIEF OR A TEMPORARY RESTRAINING ORDER, INVOKING A POWER OF SALE UNDER ANY DEED OF TRUST OR MORTGAGE, OBTAINING A WRIT OF ATTACHMENT OR IMPOSITION OF A RECEIVERSHIP, OR EXERCISING ANY RIGHTS RELATING TO PERSONAL PROPERTY, INCLUDING TAKING OR DISPOSING OF SUCH PROPERTY WITH OR WITHOUT JUDICIAL PROCESS PURSUANT TO ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE OR WHEN APPLICABLE, A JUDGEMENT BY CONFESSION OF JUDGEMENT. ANY DISPUTES, CLAIMS OR CONTROVERSIES CONCERNING THE LAWFULNESS OR REASONABLENESS OF ANY ACT, OR EXERCISE OF ANY RIGHT OR REMEDY CONCERNING ANY COLLATERAL, INCLUDING ANY CLAIM TO RESCIND, REFORM, OR OTHERWISE MODIFY ANY AGREEMENT RELATING TO THE COLLATERAL, SHALL ALSO BE ARBITRATED; PROVIDED, HOWEVER, THAT NO ARBITRATOR SHALL HAVE THE RIGHT OR THE POWER TO ENJOIN OR RESTRAIN ANY ACT OF EITHER PARTY. JUDGEMENT UPON ANY AWARD RENDERED BY ANY ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. NOTHING IN THIS ARBITRATION PROVISION SHALL PRECLUDE ANY PARTY HERETO FROM SEEKING EQUITABLE RELIEF FROM A COURT OF COMPETENT JURISDICTION. THE STATUTE OF LIMITATIONS, ESTOPPEL, WAIVER, LACHES AND SIMILAR DOCTRINES WHICH WOULD OTHERWISE BE APPLICABLE IN AN ACTION BROUGHT BY A PARTY SHALL BE APPLICABLE IN ANY ARBITRATION PROCEEDING, AND THE COMMENCEMENT OF AN ARBITRATION PROCEEDING SHALL BE DEEMED THE COMMENCEMENT OF ANY ACTION FOR THESE PURPOSES. THE FEDERAL ARBITRATION ACT (TITLE 9 OF THE UNITED STATES CODE) SHALL APPLY TO THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT OF THIS ARBITRATION PROVISION. SECTION 8.11 GOVERNING LAW. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of Colorado, without giving effect to any conflict -76- of law or choice of law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Colorado. SECTION 8.12 INCONSISTENT PROVISIONS. In the event of any inconsistency or conflict between the terms of this Agreement and the terms of any other Loan Instrument, the provisions of this Agreement will be controlling. SECTION 8.13 SHARING OF RECOVERIES. Each Bank agrees that, if, for any reason, including as a result of (a) the exercise of any right of counterclaim, set-off, banker's lien or similar right, (b) its claim in any applicable bankruptcy, insolvency or other similar law being deemed secured by a Debt owed by it to the Borrower and any Guarantor, including a claim deemed secured under Section 506 of the Bankruptcy Code, or (c) the allocation of payments by the Agent or the Borrower or any Guarantor in a manner contrary to the provisions of SECTION 2.9, such Bank shall receive payment of a proportion of the aggregate amount due and payable to it hereunder as principal of or interest on the Loans or fees that is greater than the proportion received by any other Bank in respect of the aggregate of such amounts due and payable to such other Bank hereunder, then the Bank receiving such proportionately greater payment shall purchase participations (which it shall be deemed to have done simultaneously upon the receipt of such payment) in the rights of the other Banks hereunder so that all such recoveries with respect to such amounts due and payable hereunder (net of costs of collection) shall be pro rata; PROVIDED that if all or part of such proportionately greater payment received by the purchasing Bank is thereafter recovered by or on behalf of the Borrower or any Guarantor from such Bank, such purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such Bank to the extent of such recovery, but without interest (unless the purchasing Bank is required to pay interest on the amount recovered to the Person recovering such amount, in which case the selling Bank shall be required to pay interest at a like rate). The Borrower expressly consents to the foregoing arrangements and agrees that any holder of a participation in any rights hereunder so purchased or acquired pursuant to this SECTION 8.13 shall, with respect to such participation, be entitled to all of the rights of a Bank under SECTIONS 2.9, 7.4, 7.5 AND 7.7 (subject to any condition imposed on a Bank hereunder with respect thereto) and may exercise any and all rights of set-off with respect to such participation as fully as though the Borrower were directly indebted to the holder -77- of such participation for Loans in the amount of such participation. SECTION 8.14 ASSIGNMENTS AND PARTICIPATIONS. (a) ASSIGNMENTS. (i) The Borrower may not assign any of its rights or obligations under the Loan Instruments without the prior written consent of (A) in the case of the Loan Instruments referred to in SECTION 7.7(a), the Agent and (B) in the case of any of the other Loan Instruments, each Bank, and no assignment of any such obligation shall release such Borrower therefrom unless the Agent and each Bank, as applicable, shall have consented to such release in a writing specifically referring to the obligation from which such Borrower is to be released. (ii) Each Bank may from time to time assign any or all of its rights and obligations under the Loan Instruments to one or more Persons; PROVIDED that, except in the case of the grant of a security interest to a Federal Reserve Bank (which may be made without condition or restriction), no such assignment shall be effective unless (A) the assignment is consented to by the Borrower (unless an Event of Default exists) and the Agent, such consents not to be unreasonably withheld, (B) in the case of a partial assignment, the assignment shall involve the assignment of not less than $5,000,000 of the assignor Bank's Commitment and there shall at no time be more than three Banks and the assignment is consented to by the Borrower, such consent not to be unreasonably withheld, (C) a Notice of Assignment in the form of EXHIBIT I with respect to the assignment, duly executed by the assignor and the assignee, shall have been given to the Borrower and the Agent, (D) except in the case of an assignment by the Bank that is the Agent, the Agent shall have been paid an assignment fee of $3,500, (E) unless otherwise agreed to by each of the Banks, such assignment is made on or after the earlier of the date that is 90 days following the Effective Date and the date on which the general syndication of the credit facility provided for herein is completed, as specified by the Agent and (F) in -78- the case of an assignment of any Revolving Loan, Revolving Loan Commitment, Term Loan, Acquisition Loan or Acquisition Loan Commitment to any assignee, the assignment shall include a PRO RATA portion of all of the Revolving Loans, Revolving Loan Commitments, Term Loan, Acquisition Loans, and Acquisition Loan Commitments of the assignor Bank. Upon any effective assignment, the assignor shall be released from the obligations so assigned and, in the case of an assignment of all of its Loans and Commitment, shall cease to be a Bank. In the event of any effective assignment by a Bank, the Borrower shall issue new Notes to the assignee Bank (against, other than in the case of a partial assignment, receipt of the existing Note of the assignor Bank). Nothing in this SECTION 8.14 shall limit the right of any Bank to assign its interest in the Loans and its Notes to a Federal Reserve Bank as collateral security under Regulation A of the Board of Governors of the Federal Reserve System, but no such assignment shall release such Bank from it obligations hereunder. (b) PARTICIPATIONS. Each Bank may from time to time sell or otherwise grant participations in any or all of its rights and obligations under the Borrower Loan Instruments. In the event of any such grant by a Bank of a participation, such Bank's obligations under the Loan Instruments to the other parties thereto shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, and the Borrower, the Agent and the other Banks may continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations thereunder. A Bank may not grant to any holder of a participation the right to require such Bank to take or omit to take any action under the Loan Instruments, except that a Bank may grant to any such holder the right to require such holder's consent to (i) reduce the principal of or the rate of interest on such Bank's Loans, Note or any fees payable to such Bank hereunder, (ii) postpone any date fixed for any payment of principal of or interest on such Bank's Loans, Note or any fees payable to such Bank hereunder, (iii) permit any Loan Party to assign any of its obligations under the Loan Instruments to any other Person or (iv) release any Collateral from the Security Interest except as required or -79- contemplated by the Loan Instruments. Each holder of a participation in any rights under the Borrower Loan Instruments, if and to the extent the applicable participation agreement so provides, shall, with respect to such participation, be entitled to all of the rights of a Bank as fully as though it were a Bank under SECTIONS 2.9, 2.11, 8.1 AND 8.7 (subject to any conditions imposed on a Bank hereunder with respect thereto) and may exercise any and all rights of set-off with respect to such participation as fully as though the Borrower were directly indebted to the holder of such participation for Loans in the amount of such participation; PROVIDED, HOWEVER, that no holder of a participation shall be entitled to any amounts that would otherwise be payable to it with respect to its participation under SECTION 2.9 OR 2.11 unless (x) such amounts are payable in respect of Regulatory Changes that are enacted, adopted or issued after the date the applicable participation agreement was executed or (y) such amounts would have been payable to the Bank that granted such participation if such participation had not been granted. SECTION 8.15 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties of the Borrower contained in this Agreement or of any of its subsidiaries contained in any other Loan Instrument shall survive delivery of the Notes and the making of the Loans. SECTION 8.16 TERMINATION OF EXISTING LOAN AGREEMENT. Upon payment in full of all of Borrower's and MSE Corporation's obligations under the Existing Loan Agreement, the Agent will deliver to the Borrower the promissory notes listed in the definition of Existing Loan Agreement in SECTION 1.1. SECTION 8.17 CONFIDENTIALITY. Each Bank agrees to exercise normal and reasonable precautions and to exercise due care to keep confidential all information of a confidential nature received by it from the Borrower or any of its Affiliates pursuant to any Loan Instrument; PROVIDED, HOWEVER, that such information may be disclosed: (i) to directors, officers, employees, agents, representatives or outside counsel of such Bank or such Bank's Affiliates, (ii) to any auditor, examiner or Governmental Authorities, (iii) pursuant to any subpoena or other court order or otherwise as may be required by Applicable Law, (iv) to the extent reasonably -80- required in connection with any litigation or proceeding to which the Agent, any Bank or their respective Affiliates may be party, (v) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Instrument, (vi) to any assignee of or participant in, or prospective assignee of or participant in, any Bank's Loans or its Commitment, or any part thereof, who, in each case, agrees in writing to be bound by the terms of this provision, and PROVIDED, FURTHER, that no confidentiality obligation shall attach to any information which (a) is or becomes publicly known, through no wrongful act on the part of any person who shall have received such information, (b) is rightfully received by such person from a third party, (c) is independently developed by such person or (d) is explicitly approved for release by the Borrower or any of its Affiliates. SECTION 8.18 SEVERABILITY. Any provision in any Loan Instrument that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Instruments are declared to be severable. SECTION 8.19 ENTIRE AGREEMENT, COMMITMENT LETTER SUPERSEDED. This Agreement, together with the other Loan Instruments, embodies the entire agreement and understanding among the Borrower, the Banks and the Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. The Commitment Letter between the Borrower and the Agent dated May 4, 1998 is superseded by this Agreement and the Loan Instruments. Nothing herein shall in any manner effect the validity of the Fee Letter executed in connection with the Commitment Letter. SECTION 8.20 COUNTERPARTS. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving the Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. -81- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers, as of the date first above written. ANALYTICAL SURVEYS, INC. By: ------------------------------------- Scott C. Benger Senior Vice President of Finance, Treasurer and Secretary BANK ONE, COLORADO, N.A. as Agent and as a Bank By: ------------------------------------- Shaun P. McCarthy Vice President -82- EX-10.2 3 EXHIBIT 10.2 PROMISSORY NOTE (REVOLVING LOAN) $11,000,000.00 June 3, 1998 FOR VALUE RECEIVED, the undersigned, ANALYTICAL SURVEYS, INC., a Colorado corporation (referred to herein as the "MAKER"), hereby promises to pay to the order of BANK ONE, COLORADO, N.A. (the "LENDER"), at the offices of Bank One, Colorado, N.A., the Agent, on or before the Revolving Loans Scheduled Maturity Date, ELEVEN MILLION DOLLARS AND 00/100 CENTS ($11,000,000.00) or if less, the aggregate unpaid principal amount loaned as Revolving Loans Advanced to the Maker by the Lender pursuant to, or otherwise outstanding under, that certain Credit Agreement, dated as of June 3, 1998 between the Maker, Bank One, Colorado N.A. as the Agent, and certain Banks (the "CREDIT AGREEMENT"). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement. The Maker further agrees to pay and deliver to the Agent, when and as provided in the Credit Agreement, interest on the outstanding principal amount hereof at the rate and at the times specified in the Credit Agreement. This Note is the Revolving Note made by the Maker pursuant to, and is subject to, all of the terms and conditions of the Credit Agreement. Subject to the terms and conditions of the Credit Agreement, Maker may borrow, repay and reborrow amounts evidenced hereby as Revolving Loans under the Credit Agreement. Reference is made to the Credit Agreement and the documents delivered in connection therewith for a statement of the prepayment rights and obligations of the Maker, and for a statement of the terms and conditions under which the due date of this Note may be accelerated. This Note evidences the obligation of the Maker to repay all sums Advanced pursuant to the Credit Agreement by the Lender and any holder hereof to the Maker as Revolving Loans. The Lender and any holder hereof shall, and are hereby authorized to, record on the Revolving Note Record attached hereto, or to otherwise record in accordance with its usual practice, the date, principal amount, applicable interest rate or margin and Interest Period of each Revolving Loan and the date and amount of each principal payment hereunder; PROVIDED, HOWEVER, that neither the failure to so record nor any error in this recordation shall affect the Maker's obligations under this Revolving Note. In addition to, and not in limitation of, the foregoing and the provisions of the Credit Agreement, the Maker further agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including reasonable attorneys' fees and legal expenses, incurred by the Lender or any holder hereof in endeavoring to collect any amounts due and payable hereunder which are not paid and delivered or otherwise satisfied when due, whether by acceleration or otherwise. This includes the Lender's or holder's reasonable attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings, appeals, post-judgment collection services and court costs. The Maker, for itself and for all endorsers hereof, hereby waives notice, demand, presentment for payment, protest and notice of dishonor. This Note and the rights of the Maker and the Lender are governed by the laws of the State of Colorado. IN WITNESS WHEREOF, the Maker has executed and delivered this Note on the date first above written. ANALYTICAL SURVEYS, INC. By: ---------------------------------- Scott C. Benger Senior Vice President, Treasurer and Secretary REVOLVING NOTE RECORD LOANS AND PAYMENTS OF PRINCIPAL TO REVOLVING NOTE OF ANALYTICAL SURVEYS, INC. DATED JUNE [ ], 1998
Principal Amount of Interest Rate Type of Principal Unpaid Date Loan (or Margin) Loan Amount Paid Balance - ---- --------- ------------- ------- ----------- -------
EX-10.3 4 EXHIBIT 10.3 EXHIBIT A-2 PROMISSORY NOTE (TERM LOAN) $ 16,000,000.00 June 3, 1998 FOR VALUE RECEIVED, the undersigned, ANALYTICAL SURVEYS, INC., a Colorado corporation (referred to herein as the "MAKER"), hereby promises to pay to the order of BANK ONE, COLORADO, N.A. (the "LENDER"), at the offices of Bank One, Colorado, N.A., the Agent, on or before the Term Loan Scheduled Maturity Date, SIXTEEN MILLION DOLLARS AND 00/100 CENTS ($ 16,000,000.00) loaned as a Term Loan to the Maker by the Lender pursuant to, or otherwise outstanding under, that certain Credit Agreement, dated as of June 3, 1998, as amended, among the Maker, Bank One, Colorado, N.A., as the Agent, and certain Banks (the "CREDIT AGREEMENT"). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement. The Maker furthers agrees to pay and deliver to the Agent, when and as provided in the Credit Agreement, interest on the outstanding principal amount hereof at the rate and at the times specified in the Credit Agreement. This Note is the Term Note made by the Maker pursuant to, and is subject to, all of the terms and conditions of the Credit Agreement. Maker may not repay and reborrow amounts evidenced hereby. Reference is made to the Credit Agreement and the documents delivered in connection therewith for a statement of the prepayment rights and obligations of the Maker, and for a statement of the terms and conditions under which the due date of this Note may be accelerated. This Note evidences the obligation of the Maker to repay all sums Advanced pursuant to the Credit Agreement by the Lender and any holder hereof to the Maker as a Term Loan. The Lender and any holder hereof shall, and are hereby authorized to, record on the Term Note Record attached hereto, or to otherwise record in accordance with its usual practice, the date, principal amount, applicable interest rate or margin and Interest Period of each Term Loan and the date and amount of each principal payment hereunder; PROVIDED, HOWEVER, that neither the failure to so record nor any error in the recordation shall affect the Maker's obligations under this Term Note. In addition to, and not in limitation of, the foregoing and the provisions of the Credit Agreement, the Maker further agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including reasonable attorneys' fees and legal expenses, incurred by the Lender or any holder hereof in endeavoring to collect any amounts due and payable hereunder which are not paid and delivered or otherwise satisfied when due, whether by acceleration or otherwise. This includes Lender's or any holder's reasonable attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings, appeals, post-judgment collection services and court costs. The Maker, for itself and for all endorsers hereof, hereby waives notice, demand, presentment for payment, protest and notice of dishonor. This Note and the rights of the Maker and the Lender are governed by the laws of the State of Colorado. IN WITNESS WHEREOF, the Maker has executed and delivered this Note on the date first above written. ANALYTICAL SURVEYS, INC. By: ------------------------------------ Scott C. Benger Senior Vice President, Treasurer and Secretary -2- TERM NOTE RECORD LOANS AND PAYMENTS OF PRINCIPAL TO TERM LOAN NOTE OF ANALYTICAL SURVEYS, INC. DATED JUNE [ ], 1998
Principal Amount of Interest Rate Principal Unpaid Date Loan (or Margin) Amount Paid Balance - -----------------------------------------------------------------------------
-3- EX-10.4 5 EXHIBIT 10.4 EXHIBIT A-3 PROMISSORY NOTE (ACQUISITION LOAN) $10,000,000.00 June 3, 1998 FOR VALUE RECEIVED, the undersigned, ANALYTICAL SURVEYS, INC., a Colorado corporation (referred to herein as the "MAKER"), hereby promises to pay to the order of BANK ONE, COLORADO, N.A. (the "LENDER"), at the offices of Bank One, Colorado, N.A., the Agent, on or before the Acquisition Loans Scheduled Maturity Date, TEN MILLION DOLLARS AND 00/100 CENTS ($10,000,000.00) or if less, the aggregate unpaid principal amount loaned as Acquisition Loans to the Maker by the Lender pursuant to, or otherwise outstanding under, that certain Credit Agreement, dated as of June 3, 1998 among the Maker, Bank One, Colorado N.A. as the Agent, and certain Banks (the "CREDIT AGREEMENT"). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement. The Maker further agrees to pay and deliver to the Agent, when and as provided in the Credit Agreement, interest on the outstanding principal amount hereof at the rate and at the times specified in the Credit Agreement. This Note is the Acquisition Loans Note made by the Maker pursuant to, and is subject to, all of the terms and conditions of the Credit Agreement. Maker may repay and reborrow amounts evidenced hereby as Acquisition Loans under the Credit Agreement. Reference is made to the Credit Agreement and the documents delivered in connection therewith for a statement of the prepayment rights and obligations of the Maker, and for a statement of the terms and conditions under which the due date of this Note may be accelerated. This Note evidences the obligation of the Maker to repay all sums Advanced pursuant to the Credit Agreement by the Lender and any holder hereof to the Maker as Acquisition Loans. The Lender and any holder hereof shall, and are hereby authorized to, record on the Acquisition Note Record attached hereto, or to otherwise record in accordance with its usual practice, the date, principal amount, applicable interest rate or margin and Interest Period of each Acquisition Loan and the date and amount of each principal payment hereunder; PROVIDED, HOWEVER, that neither the failure to so record nor any error in this recordation shall affect the Maker's obligations under this Revolving Note. In addition to, and not in limitation of, the foregoing and the provisions of the Credit Agreement, the Maker further agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including reasonable attorneys' fees and legal expenses, incurred by the Lender or any holder hereof in endeavoring to collect any amounts due and payable hereunder which are not paid and delivered or otherwise satisfied when due, whether by acceleration or otherwise. This includes the Lender's or holder's reasonable attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings, appeals, post-judgment collection services and court costs. The Maker, for itself and for all endorsers hereof, hereby waives notice, demand, presentment for payment, protest and notice of dishonor. This Note and the rights of the Maker and the Lender are governed by the laws of the State of Colorado. IN WITNESS WHEREOF, the Maker has executed and delivered this Note on the date first above written. ANALYTICAL SURVEYS, INC. By: ------------------------------------ Scott C. Benger Senior Vice President, Treasurer and Secretary ACQUISITION LOANS NOTE RECORD LOANS AND PAYMENTS OF PRINCIPAL TO ACQUISITION LOANS NOTE OF ANALYTICAL SURVEYS, INC. DATED JUNE [ ], 1998
Principal Amount of Interest Rate Principal Unpaid Date Loan (or Margin) Amount Paid Balance - ---- --------- ------------- ----------- -------
EX-10.5 6 EXHIBIT 10.5 GUARANTY THIS GUARANTY AGREEMENT, dated as of June 3, 1998, is entered into by ASI LANDMARK, INC., a Colorado corporation ("GUARANTOR"), and BANK ONE, COLORADO, N.A., a national banking association having an office at the Denver Banking Center, 30 Pikes Peak Avenue, Colorado Springs, Colorado 80903, in its capacity as Agent for the Banks (the "AGENT"). RECITALS ARTICLE 1 The Guarantor is a wholly-owned subsidiary of ANALYTICAL SURVEYS, INC., a Colorado corporation (the "BORROWER"). ARTICLE 2 The Borrower, the Banks and the Agent have entered into a Credit Agreement dated June 3, 1998 (together with all schedules and exhibits thereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided therein, the "CREDIT AGREEMENT," which is incorporated herein by reference as if fully set forth), pursuant to which the Agent, for the ratable benefit of the Banks, has agreed to make available to the Borrower a revolving line of credit in the maximum principal amount outstanding at any one time of ELEVEN MILLION DOLLARS ($11,000,000), a term loan in the principal amount of SIXTEEN MILLION DOLLARS ($16,000,000) and an acquisition loan in the principal amount of TEN MILLION DOLLARS ($10,000,000). ARTICLE 3 The Guarantor will benefit by the making of loans under the Credit Agreement. ARTICLE 4 As a condition precedent to the extension of loans under the Credit Agreement, the Agent requires, among other things, that the Guarantor unconditionally and irrevocably guarantees the full and punctual repayment of all loans advanced under the Credit Agreement and all other related Obligations owing by the Borrower to the Agent, for the ratable benefit of the Banks. AGREEMENT NOW, THEREFORE, for and in consideration of the foregoing recitals, the extension of the loans under the Credit Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Guarantor and the Agent agree as follows: ARTICLE I CERTAIN DEFINITIONS AND REFERENCES SECTION 1.1 Terms Defined in Credit Agreement. Reference is hereby made to the Credit Agreement for statements of terms thereof. All capitalized terms used in this Guaranty which are defined in the Credit Agreement but which are not otherwise defined herein shall have the meanings provided in the Credit Agreement. SECTION 1.2 GENERAL DEFINITIONS. As used in this Guaranty, in addition to the terms defined in the preamble and the Recitals hereto, the following capitalized terms shall have the meanings respectively assigned to them below: "AGENT" shall mean Bank One, Colorado, N.A., a national banking association having its principal offices at 1125 Seventeenth Street, Third Floor, Denver, Colorado 80202. "BANKS" shall mean (a) the Agent and the Banks under that certain Credit Agreement dated as of June 3, 1998, by and among the Borrower, the Banks listed therein and the Agent; and (b) any Person that has been assigned any or all of the rights or obligations of a Bank pursuant to SECTION 8.14 of the Credit Agreement. "BORROWER" shall have the meaning assigned to it in the Recitals hereto. "CODE" shall mean the Uniform Commercial Code as enacted in the State of Colorado, C.R.S. Section 4-1-101 ET SEQ., and any successor statutes thereto. 2 "COLLATERAL" shall mean, collectively all property of whatever type, in which the Banks shall receive a security interest pursuant to the Credit Agreement or any other Loan Instrument. "CREDIT AGREEMENT" shall have the meaning assigned to it in the Recitals hereto. "DEFAULT" means any event or state of affairs that, with the giving of notice or the passage of time (or both) would constitute an Event of Default. "EVENT OF DEFAULT" shall mean the occurrence of any one or more of the events identified in SECTION 6.1 of the Credit Agreement. "GUARANTOR" shall have the meaning specified in the introductory paragraph hereof. "GUARANTY" shall mean this Guaranty Agreement, together with all schedules and exhibits hereto, as the same may be supplemented, modified, amended or restated from time to time in the manner provided herein. "LOAN OR LOANS" shall have the meaning assigned to the terms "Loan" and "Loans" in SECTION 1.1 of the Credit Agreement. "LOAN INSTRUMENTS" shall mean and include collectively: (a) the Credit Agreement; (b) the Notes; and (c) all other instruments, agreements and documents, whether now or hereafter existing or executed, executed and delivered by Borrower or any guarantor in connection with the Obligations, as any such instrument may be supplemented, modified, amended or restated from time to time in the manner provided therein. "MATERIAL ADVERSE EFFECT" means any material and adverse effect, whether individually or in the aggregate, upon (a) the assets, business, operations, properties or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole, (b) the ability of the Borrower to make payment as and when due of all or any part of the Obligations, or (c) the Collateral. "NOTES" shall have the meaning assigned to the term "Notes" in SECTION 1.1 of the Credit Agreement. "OBLIGATIONS" shall have the meaning assigned to the term "Obligations" in SECTION 1.1 of the Credit Agreement. "PERSON" means any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, limited liability partnership, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof). 3 SECTION 1.3 TERMS DEFINED IN CODE. All terms used in this Guaranty which are defined in the Code and not otherwise defined herein or in the Credit Agreement shall have the meanings provided in the Code. SECTION 1.4 AMENDMENT OF DEFINED INSTRUMENTS. Unless the context otherwise requires or unless otherwise provided herein, references in this Guaranty to a particular agreement, instrument or document also refer to and include all renewals, extensions, amendments, modifications, supplements or restatements of any such agreement, instrument or document. SECTION 1.5 REFERENCES, TITLES, ETC. All references in this Guaranty to Articles, Sections, Subsections and other subdivisions refer to the Articles, Sections, Subsections and other subdivisions of this Guaranty unless expressly provided otherwise. The words "this Guaranty", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Guaranty as a whole and not to any particular subdivision unless expressly so limited. Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender. Words in the singular form shall be construed to include the plural and words in the plural form shall be construed to include the singular, unless the context otherwise requires. ARTICLE II GUARANTY OF PAYMENT SECTION 2.1 GUARANTY. The Guarantor hereby irrevocably, absolutely and unconditionally: (a) guarantees the due and punctual payment and performance when due, whether at stated maturity, by acceleration or otherwise, of the Obligations; and (b) agrees to pay any and all expenses (including reasonable attorneys' fees and disbursements) which may be paid or incurred by the Agent in enforcing any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, the Guarantor under this Guaranty. SECTION 2.2 GUARANTY OF PAYMENT AND NOT OF COLLECTION. This Guaranty is a guarantee of payment, and not of collection, and a debt of the Guarantor for its own account. Accordingly, the Agent shall not be obligated or required before enforcing this Guaranty against Guarantor: (a) to pursue any right or remedy the Agent may have against the Borrower or any other guarantor of the Obligations in any court, tribunal or otherwise; (b) to make any claim in a liquidation or bankruptcy of the Borrower, or any other guarantor of the Obligations; (c) to make demand of the Borrower, or any other guarantor of the Obligations; or (d) to enforce or seek to enforce or realize upon any Collateral or other security held by the Agent or any other party which may secure any of the 4 Obligations. In this connection, the Guarantor hereby waives any right it may have to require the Agent to take action against the Borrower or any other guarantor of the Obligations. SECTION 2.3 CONTINUING GUARANTY. The Guarantor agrees that: (a) this is an open and continuing guaranty of payment and satisfaction, whether the Obligations are now or hereafter existing, acquired or created, and irrespective of the fact that from time to time under the terms and provisions of the Loan Instruments, monies may be advanced, repaid and readvanced and the outstanding balance of the Loans may be zero; and (b) the Obligations shall not be deemed to have been otherwise fully paid and satisfied so long as the Notes, or any other evidence of indebtedness shall have any continuing force or effect. This Guaranty of payment and satisfaction will not be discharged until payment in full of all of the Obligations, and the Banks' Commitments under the Credit Agreement have been terminated. No payment or payments made by any other person in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability or limitations of the Guarantor hereunder until the Obligations are indefeasibly paid in full and the Banks' Commitments under the Credit Agreement have been terminated. SECTION 2.4 GUARANTY ABSOLUTE, SURVIVAL OF REPRESENTATIONS, ETC. The Guarantor covenants and agrees that all of the representations, warranties, covenants and other agreements and obligations of Guarantor under this Guaranty and the other Loan Instruments: (a) shall be absolute and unconditional irrespective of the validity, legality, binding effect or enforceability of any of the terms and provisions of any of the Loan Instruments; (b) shall survive the execution and delivery of this Guaranty and the other Loan Instruments and the advance, repayment and readvance of any or all of the monies to be lent thereunder; (c) shall remain and continue in full force and effect without regard to any waiver, modification, extension, renewal, consolidation, spreading, amendment or restatement of any other term or provision of any Loan Instrument (including without limitation any increase in the Obligations), to any full, partial or non-exercise of any of the Agent's rights, powers, privileges, remedies and interests under any Loan Instrument, against any person or with respect to any Collateral, to any release or subordination of all or any part of any Collateral, to any statute of limitations or similar time constraint under any applicable law, to any investigation, analysis or evaluation by the Agent or its designees of the assets, business, operations, properties or condition (financial or otherwise) of the Guarantor, the Borrower or any other person, to any act or omission on the part of the Agent or any other person, or to any other event that otherwise might constitute a legal or equitable counterclaim, defense or discharge of a surety or guarantor; 5 (d) shall not be subject to any defense, counterclaim, set-off, right of recoupment, abatement, reduction or other claim or determination that the Guarantor or the Borrower may have against the Agent, the Banks, or any other person; (e) shall not be diminished or qualified by the death, disability, dissolution, reorganization, insolvency, bankruptcy, custodianship or receivership of the Guarantor, the Borrower or any other guarantor, surety or pledgor or any other person, or the inability of any of them to pay their debts or perform or otherwise satisfy their obligations as they become due for any reason whatsoever; and (f) shall remain and continue in full force and effect regardless of any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Guarantor; it being agreed that the obligations of the Guarantor under this Guaranty shall not be satisfied or discharged except as expressly provided in this Guaranty. ARTICLE III CONSENTS AND WAIVERS SECTION 3.1 CONSENT. Without limiting the generality of the foregoing Sections or any other term or provision of this Guaranty, the Guarantor agrees and consents that, without notice to the Guarantor, at any time, and from time to time: (a) the amount of the Loans, the rates of interest thereon or any other Obligations may be increased or otherwise changed; (b) the time, manner, place and other terms and provisions of payment or performance of the Obligations may be extended, modified, amended, restated or otherwise changed; (c) any partial or late payment or any payment during the continuance of any default under the Loan Instruments may be accepted in whole or in part or rejected; (d) any Collateral securing or intended to secure any obligations under any Loan Instrument may be sold, conveyed, assigned or otherwise realized upon, dealt with or disposed of in whole or in part; (e) any mortgage or other security interest in any such Collateral may be held without due recordation or other perfection (whether intentionally or otherwise), may be recorded or otherwise perfected, or may be assigned, released, subordinated or otherwise impaired, dealt with or disposed of in whole or in part; 6 (f) any one or more payments, distributions and proceeds received from or in respect of the Guarantor, the Borrower, any other guarantor, surety or pledgor or any other person or any such Collateral may be applied to any of the Obligations, or if not designated therefore, or otherwise restricted thereto, may be applied to other indebtedness of the Guarantor, the Borrower, or any such other guarantor, surety, pledgor or other person owed to the Agent or any of its affiliates; (g) the liability of the Guarantor, the Borrower, any other guarantor, surety or pledgor or any other person to pay any and all of the Obligations may be settled, or compromised or released, in whole or in part; (h) the rights of set-off of the Agent may be exercised as provided under this Guaranty, any other Loan Instrument or applicable law against any of the deposits, assets, properties and indebtedness subject thereto, without any demand on or notice to the Guarantor or the Borrower, without regard to the frequency of exercise thereof, and whether or not the relevant Obligations shall then be matured; (i) any representation, warranty, covenant or other term or provision of any Loan Instrument, or any part thereof, may be a subject of one or more waivers of applicability or consents to nonperformance, noncompliance or nonobservance, whether or not constituting defaults, or may be otherwise not exercised or enforced (whether intentionally or otherwise); (j) any one or more of this Guaranty, the Notes and any other Loan Instrument, or any one or more of the rights, powers, privileges, remedies and interests of the Agent herein or therein, may be sold, conveyed, assigned or otherwise transferred in whole or part (including participations or other undivided interests) to any other person; and/or (k) any other right, power, privilege, remedy or interest of the Agent under the Guaranty, the Notes, any other Loan Instrument or applicable law may be exercised or enforced by the Agent or its designee, which exercise or enforcement may be delayed, discontinued or otherwise not pursued or exhausted for any or no reason whatsoever, or any such right, power, privilege, remedy or interest may be waived, omitted or otherwise not exercised or enforced (whether intentionally or otherwise), in the sole and absolute discretion of the Agent. SECTION 3.2 WAIVER. The Guarantor, to the fullest extent permitted by law, hereby irrevocably waives each of the following: (a) any duty on the part of the Agent to disclose to the Guarantor any matter, fact or thing relating to the business, operation or condition of the Borrower, or its assets now known or hereafter known by the Agent; 7 (b) any and all notice of: (i) acceptance of this Guaranty; (ii) any action taken or omitted in reliance hereon; and (iii) any default in the payment of any sums due pursuant to the Obligations, or any Loan Instrument or otherwise; (c) presentment, demand for payment, protest or notice of protest relating to this Guaranty, the Obligations and/or any of the Loan Instruments; (d) any and all notice of the occurrence or continuance of any Default, Event of Default or any event that (with the giving of notice or the passage of time or both) could constitute a Default, under any of the Loan Instruments, or of any other material or adverse event or Material Adverse Effect; (e) any and all notice of the terms, time, and place of any public or private sale of any of the Collateral whether required by the Code or otherwise; (f) any "one action" or anti-deficiency law or any other law which may prevent the Agent from bringing any action, including a claim for deficiency, against the Guarantor, before or after the Agent's commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (g) any election of remedies by the Agent which destroys or otherwise adversely affects the Guarantor's subrogation rights or the Guarantor's rights to proceed against the Borrower for reimbursement, including without limitation, any loss of right the Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Obligations; (h) any disability or other defense of the Borrower or any other guarantor, or of any other person, or by reason of the cessation of the liability of the Borrower from any cause whatsoever, other than payment in full in legal tender, of the Obligations; (i) any right to claim discharge of the Obligations on the basis of unjustified impairment of any Collateral; (j) any statute of limitations, if at any time any action or suit brought by the Agent against the Guarantor is commenced there is outstanding any of the Obligations which are not barred by any applicable statute of limitations; (k) any defenses given to guarantors at law or in equity other than actual payment and performance of the Obligations including all defenses based upon suretyship or impairment of collateral pursuant to C.R.S. Section 4-3-603; 8 (l) any and all right, if any, to require the Agent to: (i) continue lending money or to extend other credit to the Borrower; (ii) proceed directly against, marshall or exhaust any of the Collateral; (iii) pursue any remedy within the Agent's power; or (iv) commit any act or omission of any kind, at any time, with respect to any matter whatsoever; and (m) any other proof, notice or demand of any kind whatsoever with respect to any or all of the Obligations or promptness in making any claim or demand under this Guaranty or any of the Loan Instruments. No act or omission of any kind in connection with any of the foregoing shall in any way impair or otherwise affect the legality, validity, binding effect or enforceability of any term or provision of this Guaranty or any of the obligations of the Guarantor hereunder. SECTION 3.3 WAIVER OF SUBROGATION. The Guarantor hereby irrevocably waives any and all claims and other rights that it now has or may hereafter acquire against the Borrower, or any other guarantor, that arise from the existence, payment, performance or enforcement of this Guaranty or any other Loan Instruments, including any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Agent against the Borrower, any other guarantor or any Collateral that the Guarantor now has or hereafter acquires, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including the right to take or receive from the Borrower, directly or indirectly, in cash or other property, by set-off or in any other manner, payment or security on account of any such claim or other right. If any amount is paid to the Guarantor in violation of the preceding sentence and the Obligations have not been paid in full, such amounts shall be deemed to have been paid to the Guarantor for the benefit of, and held in trust for the benefit of, the Agent and shall be forthwith paid to the Agent to be credited and applied to the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Instruments. This waiver of subrogation is for the benefit of the Agent and the foregoing waiver may not be revoked by the Guarantor without the prior written consent of the Agent. SECTION 3.4 ACKNOWLEDGMENT OF BENEFIT. The Guarantor acknowledges that it has received and will receive direct and indirect benefits from the financing arrangements contemplated by the Loan Instruments and that the consents and waivers set forth in this Article are knowingly made in contemplation of such benefits. SECTION 3.5 MISCELLANEOUS. The Guarantor understands and agrees that the foregoing waivers and the other waivers, consents, releases and agreements contained in this Guaranty will, among other things, adversely and materially effect, and under certain circumstances may eliminate entirely, the Guarantor's rights or ability to collect monies from the Borrower that the Guarantor may have paid to the Borrower and defenses that the Guarantor might have to payment of the Obligations. This result may occur because of the actions of the Agent or the Borrower, such as electing certain remedies and foregoing or delaying others, releasing security, or modifying the Obligations, all without notice to or consent from the Guarantor. The Guarantor agrees that the foregoing waivers 9 and the other waivers, consents, releases and agreements contained in this Guaranty are made with the Guarantor's full knowledge of their significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy. ARTICLE IV SUBORDINATION OF INDEBTEDNESS SECTION 4.1 SUBORDINATION OF INDEBTEDNESS. The Guarantor covenants and agrees that until all of the Obligations have been fully paid and satisfied, all indebtedness of the Borrower together with interest thereon, owed directly or indirectly to the Guarantor, whether now or hereafter existing, acquired or created, whether as a result of any payment made by the Guarantor or otherwise, shall be subordinate, junior and inferior in dignity and deferred as to payment to the full payment and satisfaction of all of the Obligations. The Guarantor shall not seek any payment or exercise or enforce any right, power, privilege, remedy or interest that it may have with respect to any such indebtedness except with the prior written consent of the Agent and except in connection with a bankruptcy of the Borrower, in which case the Guarantor may file any claims it may have against the Borrower, subject to the provisions of Section 4.3 below to pay over any amounts received to the Agent. Any payment, asset or property delivered to or for the benefit of the Guarantor in respect of any such indebtedness shall be accepted in trust for the benefit of the Agent and shall be promptly paid or delivered to the Agent to be credited and applied to the payment and satisfaction of the Obligations, whether matured or unmatured, or to be held by the Agent as additional Collateral. The Guarantor agrees to execute such additional documents as the Agent may reasonably request to evidence the subordination provided in this Section. SECTION 4.2 SECURITY INTEREST IN INDEBTEDNESS. The Guarantor hereby assigns and grants to the Agent a continuing security interest in and to all indebtedness owing from the Borrower to the Guarantor, whether or not hereafter existing, acquired or created, together with the proceeds thereof, all payments and other distributions with respect thereto and any and all renewals, substitutions, modifications and extensions of any and all of the foregoing, as security for the timely and full payment and satisfaction of the Obligations as and when due. The Guarantor shall endorse and deliver to the Agent such instruments representing that indebtedness and shall execute and deliver to the Agent such financing statements and other documents as the Agent may deem necessary or desirable to evidence, confirm or perfect the foregoing security interest (which financing statements may be signed by the Agent on behalf and in the name of the Guarantor if the Guarantor does not promptly sign and return the same). In addition to the rights, powers, privileges, remedies and interest afforded to the Agent by this Guaranty and applicable law, if an Event of Default has occurred, the Agent may exercise any voting, consent, enforcement or other right, power, privilege, 10 remedy or interest pertaining to any item of such collateral to the same extent as if the Agent were the outright owner thereof. The Agent is hereby authorized, in the name of the Guarantor, from time to time to execute and file financing statements and continuation statements and to execute such other documents and to take such other actions as the Agent deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty. SECTION 4.3 BANKRUPTCY. In the event of insolvency, reorganization, or liquidation of the assets of the Borrower through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of the Borrower applicable to the payment of the claims of both the Agent and the Guarantor shall be paid to the Agent and shall, subject to Applicable Law, be applied by the Agent to the Obligations in such order and manner as the Agent may determine. The Guarantor does hereby assign to the Agent all claims which it may have or acquire against the Borrower or against any assignee or trustee in bankruptcy of the Borrower; provided, however, that such assignment shall be effective only for the purpose of assuring to the Agent full payment in legal tender of all Obligations. ARTICLE V RIGHT OF SET-OFF SECTION 5.1 RIGHT OF SET-OFF, ETC. Upon the occurrence and during the continuance of any Event of Default, the Agent hereby is authorized at any time and from time to time, without notice to the Guarantor (any such notice being hereby expressly waived by the Guarantor), to set-off and apply, directly or through any of its affiliates, custodians, participants and designees, any and all deposits (whether general or special, time or demand, provisional or final, or individual or joint) and other assets and properties at any time held in the possession, custody or control of the Agent and any of its affiliates, custodians, participants and designees, and any indebtedness or other amount at any time held in the possession, custody or control of the Agent and any of its affiliates, custodians, participants and designees, and any indebtedness or other amount at any time owing by the Agent or any of its affiliates or participants, to or for the credit, account or benefit of the Guarantor against any and all of the Obligations now or hereafter existing under this Guaranty, whether or not the Agent shall have declared a Default, accelerated the Obligations or made any demand or taken any other action under this Guaranty, and although such Obligations may be unmatured. The Guarantor hereby grants to the Agent a security interest in and to, among other things, all such deposits, assets, properties and indebtedness in the possession of the Agent's affiliates, custodians, participants and designees, and the Guarantor hereby authorizes any such person to so set-off and apply such amounts at such times and in such manner as the Agent may direct pursuant to this Section. The Agent shall notify the Guarantor subject to such set-off after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. In debiting any such account, the Obligations shall be 11 deemed to have been paid or repaid only to the extent of the funds actually available in the account notwithstanding any internal procedure of the Agent or any of its affiliates, custodians, participants and designees to the contrary. The rights of the Agent under this Section are in addition to and without limitation of any other rights, powers, privileges, remedies and other interests (including, without limitation, other rights of set-off and security interests) that the Agent may have under this Guaranty and applicable law. ARTICLE VI REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS SECTION 6.1 GENERAL REPRESENTATIONS, WARRANTIES AND AGREEMENTS. So long as any of the Obligations remain outstanding, the Guarantor hereby represents and warrants to, and agrees with, the Agent that: (a) LEGAL CAPACITY. The Guarantor has the legal capacity and power to execute and deliver this Guaranty. (b) VALID AND BINDING. This Guaranty, when executed and delivered by the Guarantor, will be a legal, valid and binding obligation of the Guarantor enforceable in accordance with the terms and provisions of this Guaranty, except as enforceability may be limited by applicable bankruptcy, insolvency or Applicable Laws affecting the enforcement and creditors' rights generally or by equitable principles relating to enforceability. (c) NO VIOLATION OF LAW OR CONTRACT. The execution and delivery of this Guaranty and the performance by the Guarantor of the obligations hereunder: (i) will not violate or be in conflict with (A) any provision of applicable law, or (B) any judgment, order, writ, injunction, decree or consent of any court or other judicial authority, and (ii) will not violate, be in conflict with, result in a breach of or constitute a default under, any material instrument, indenture, agreement or obligation of the Guarantor. (d) NO OTHER CONDITIONS PRECEDENT. There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived. (e) INDEPENDENT INVESTIGATION. The Guarantor has, independently and without reliance upon the Agent and based on documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty. 12 (f) FINANCIAL STATEMENTS. The audited consolidated balance sheets of the Borrower and the Guarantors (for purposes of this Section 6.1(f), as "Guarantors" is defined in the Credit Agreement) at March 31, 1998, and the related consolidated statements of income and retained earnings of the Borrower and the Guarantors for the fiscal year then ended, and the related consolidated statements of income and retained earnings of the Borrower and Guarantors for the fiscal year ended March 31, 1998, copies of which have been furnished to the Banks, fairly present the financial condition of the Borrower and the Guarantors as at such date and the results of the operations of the Borrower and the Guarantors for the period ended on such date, all in accordance with Regulation S-X promulgated under the Securities Exchange Act of 1934, and since March 31, 1998, there has been no material adverse change in such condition or operations except as disclosed in SCHEDULE 4.1(f) of the Credit Agreement. (g) LITIGATION. Except as set forth in SCHEDULE 4.1(g) of the Credit Agreement, the Guarantor represents and warrants that there is no pending, or to the Guarantor's knowledge, threatened action or proceeding affecting the Guarantor or its properties or business activities, before any court, governmental agency or arbitrator, in which there is a reasonable possibility of a Material Adverse Effect or which purports to affect the legality, validity or enforceability of this Agreement or any Loan Instrument to which the Guarantor will be a party. (h) SOLVENCY. As of the date hereof, after giving effect to the direct and indirect indebtedness and other liabilities of the Guarantor arising under this Guaranty, the Guarantor: (i) is solvent (I.E., the aggregate fair value of its assets exceeds the sum of its liabilities); (ii) has adequate capital; and (iii) is able to pay its debts as they mature. Any term or provision of this Guaranty to the contrary notwithstanding, the aggregate amount of the Obligations guaranteed hereunder shall be reduced to the minimum extent necessary to prevent this Guaranty from violating or becoming voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. (i) REVIEW OF CREDIT AGREEMENTS. The Guarantor has reviewed and understands the Credit Agreement. (j) NO MATERIAL MISREPRESENTATIONS OF OMISSIONS. No representation, warranty, agreement or covenant of the Guarantor made or contained in this Guaranty and no report, statement, certificate, schedule or other document or information furnished by the Guarantor in connection with the transactions contemplated by this Guaranty contains or will contain a misstatement of a material fact or omits or will omit to state a material fact required to be stated therein in order to make it, in the light of the circumstances under which made, not misleading in any material respect as of the date made or deemed made. 13 SECTION 6.2 AFFIRMATIVE COVENANTS. So long as any of the Obligations remain outstanding, the Guarantor hereby covenants and agrees that, unless the Agent shall consent otherwise in writing: (a) NOTICE OF CERTAIN CHANGES. Upon receipt of knowledge thereof, the Guarantor shall give, or cause to be given, immediate written notice to the Agent of (i) any change in the name or the location of the principal place of business of the Guarantor; (ii) any change in location or material change in the status of the Collateral, (iii) any act or event that violates, is in conflict with, results in a breach of or constitutes a Default (with or without the giving of notice or the passage of time or both) under (A) this Guaranty or the Loan Instruments, or (B) any other material instrument, indenture, agreement or obligation to which the Guarantor or the Borrower is a party or by which any part of the Collateral may be bound or subject; (iv) the occurrence of a Material Adverse Effect; (v) any information required under SECTION 5.1(b) of the Credit Agreement applicable to the Guarantor. (b) INSPECTION OF RECORDS. The Guarantor shall, upon two weeks' notice (unless an Event of Default has occurred), allow the Agent or any representatives permitted by the terms of SECTION 5.1(h) of the Credit Agreement access to and right of inspection of the financial records of the Guarantor, all to the extent and in the same manner as provided in SECTION 5.1(h) of the Credit Agreement. (c) PAYMENT OF TAXES AND CHARGES. The Guarantor shall pay promptly when due all federal and material state and local taxes, assessments, liens and governmental charges and levies, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings. (d) MAINTENANCE OF INSURANCE. The Guarantor shall procure and maintain the third-party insurance identified in SCHEDULE 4.1(g) to the Credit Agreement, but in no event shall such insurance be for an amount less than the replacement cost of the assets so incurred, and issued by a financially sound and reputable independent insurance company or companies reasonably acceptable to the Agent. (e) PERFORMANCE OF GUARANTY. The Guarantor shall do and perform every act and discharge all of the obligations provided to be performed and discharged by the Guarantor under this Guaranty, at the times and in the manner specified herein. (f) FURTHER ASSURANCES. The Guarantor shall promptly cure any defects in the creation and issuance of this Guaranty. The Guarantor at its expense will promptly execute and deliver to the Agent upon request all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements of the Guarantor in this Guaranty, or to correct any omissions in this Guaranty, or more fully to state the security obligations set out herein, or to perfect, protect or preserve any liens created pursuant to this Guaranty, or to 14 make any recordings, to file any notices, or obtain any consents, all as may be necessary or appropriate in connection herewith. SECTION 6.3 NEGATIVE COVENANTS. So long as any Obligations remain outstanding, the Guarantor hereby covenants and agrees that, unless the Agent shall consent otherwise in writing: (a) NO NEW DEBT. The Guarantor shall not directly or indirectly permit, create, incur, assume, permit to exist, increase, renew or extend on or after the date hereof any material additional indebtedness on its part, except as otherwise permitted by Section 5.2(d) of the Credit Agreement; (b) NO NEW LIABILITY. The Guarantor shall not directly or indirectly guaranty, assume or otherwise become liable or responsible for the indebtedness or other obligations of any other persons, except any guarantee of indebtedness owed to the Agent, and except as otherwise permitted by SECTION 5.2(e) of the Credit Agreement; and (c) NO DISPOSAL OF ALL ASSETS. The Guarantor shall not sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of the Guarantor's assets, or any interest therein, except as permitted by SECTIONS 5.2(c) AND (g) of the Credit Agreement. ARTICLE VII REMEDIES SECTION 7.1 DEFAULT. Upon the occurrence and during the continuation of any Event of Default or an event that would require or permit acceleration pursuant to the Credit Agreement of any outstanding indebtedness, then all of the Obligations shall be immediately due and payable by the Guarantor to the Agent. SECTION 7.2 REMEDIES. In addition to all other rights, powers and remedies conferred herein, and through applicable law, upon the occurrence and during the continuation of an Event of Default, the Agent may reduce its claim to judgment or otherwise enforce, in whole or in part, this Guaranty. SECTION 7.3 OTHER RECOURSE. The Guarantor waives any right it may have to require the Agent to proceed against any other person, exhaust any Collateral or other security for the Obligations, or pursue any other remedy in the Agent's power. 15 SECTION 7.4 REINSTATEMENT. In the event any payment to the Agent of any of the Obligations, or any part thereof, at any time is rescinded or must otherwise be restored or returned by the Agent upon the insolvency, bankruptcy or reorganization of the Borrower, any guarantor or any other person, whether by order of any court, by any settlement approved by any court, or otherwise, then the terms and provisions of this Guaranty shall continue to apply, or shall be reinstated if not then in effect, as the case may be, with respect to the Obligations so rescinded, restored or returned, all as though such payment had never been made. SECTION 7.5 REMEDIES NOT EXCLUSIVE. All rights, powers and remedies herein conferred are cumulative, and not exclusive, of: (i) any and all other rights and remedies herein conferred or provided for; and (ii) any and all rights, powers and remedies conferred, provided for or existing at law or in equity, and the Agent shall, in addition to the rights, powers and remedies herein conferred or provided for, be entitled to avail itself of all such other rights, powers and remedies as may now or hereafter exist at law or in equity for the collection of and enforcement of the Obligations and the enforcement of the representations, warranties, agreements, covenants and indemnities contained in this Guaranty. ARTICLE VIII MISCELLANEOUS PROVISIONS SECTION 8.1 PAYMENTS. All payments of principal, interest, fees or other amounts due the Agent pursuant to this Guaranty shall be made in immediately available funds by 12:00 noon (Denver, Colorado time) on the date payment is due in U.S. Dollars to the Agent at the address contained in this Article for notices to the Agent. SECTION 8.2 JOINT AND SEVERAL OBLIGATIONS. Although this Guaranty is made solely by the Guarantor, other persons or entities are also guaranteeing all or a portion of the Obligations. The obligations of the Guarantor hereunder and such other guarantors, sureties or pledgors as may exist from time to time are joint and several. Accordingly, the Guarantor is liable for the full amount of the Obligations notwithstanding the existence of other guarantors, sureties or pledgors. SECTION 8.3 ATTORNEYS' FEES; EXPENSES. The Guarantor agrees to pay upon demand all of the Agent's costs and expenses, including reasonable attorneys' fees and the Agent's reasonable legal expenses, incurred in connection with the enforcement of this Guaranty. The Agent may pay someone else to help enforce this Guaranty, and the Guarantor shall pay the costs and expenses of such enforcement. The costs and expenses include the Agent's reasonable attorneys' fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, any anticipated post-judgment collection services, reasonable experts' fees and 16 consultants' fees. The Guarantor also shall pay all court costs and such additional fees as may be directed by the court. SECTION 8.4 MERGER OF THE BORROWER. This Guaranty shall not be affected by any change in the name of the Borrower, or by the acquisition of the business of the Borrower by any person, firm or corporation, or by any change whatsoever in the capital structure or constitution of the Borrower, or by any merger, amalgamation or consolidation of the Borrower with any corporation, or by any dissolution or liquidation of the Borrower, but shall, notwithstanding the happening of any such event, continue to apply to all the Obligations. SECTION 8.5 INFORMATION. The Guarantor assumes all responsibility for being and keeping informed of the financial condition and assets of the Borrower, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that the Guarantor assumes and incurs hereunder, and agrees that the Agent will not have any duty to advise the Guarantor of information known to it or any Bank regarding such circumstances or risks. SECTION 8.6 FURTHER ASSURANCES. The Guarantor agrees to do such further acts and things and to execute and deliver such statements, assignments, agreements, instruments and other documents as the Agent from time to time reasonably may request in connection with the administration maintenance, enforcement or adjudication of this Guaranty in order (a) to evidence, confirm, perfect or protect any lien or security interest granted or required to have been granted under this Guaranty, (b) to give the Agent or its designee confirmation and assurance of the Agent's rights, powers, privileges, remedies and interests under this Guaranty and applicable law, (c) to better enable the Agent to exercise any such right, power, privilege or remedy, or (d) to otherwise effectuate the purpose and the terms and provisions of this Guaranty, each in the form and substance as may be reasonably acceptable to the Agent. The Agent shall execute, acknowledge and deliver to the Guarantor such documents and take such other actions as the Guarantor reasonably may request in order to effectuate the purpose and terms and provisions of this Guaranty. SECTION 8.7 RELIANCE. The Agent shall be entitled to reasonably rely upon any notice, consent, certificate, affidavit, statement, paper, document, writing or other communication reasonably believed by the Agent to be genuine and correct and to have been signed, sent or made by the proper person or persons, and upon opinions and advice of legal counsel (including counsel for the Guarantor), independent public accountants and other experts selected by the Agent. The Agent shall be entitled to rely, and in entering into this Guaranty in fact has relied, upon the representations, warranties and other information respecting the Guarantor contained in this Guaranty notwithstanding any investigation, analysis or evaluation that may have been made or from time to time may be made by the Agent or its designees of all or any part of the assets, business, operations, properties or condition (financial or otherwise) of the Guarantor. 17 SECTION 8.8 EXCULPATION. The Agent, the Banks and their designees, and their respective directors, officers, employees, attorneys and agents, shall not incur any liability (other than for a person's own acts or omissions breaching a duty owed to the Guarantor and amounting to gross negligence or willful misconduct as finally determined pursuant to applicable law by a governmental authority having jurisdiction) for acts and omissions arising out of or related directly or indirectly to this Guaranty or any of the Loan Instruments; and the Guarantor hereby expressly waives any and all claims and actions (other than those attributable to a person's own acts or omissions breaching a duty owed to a Guarantor and amounting to gross negligence or willful misconduct as finally determined pursuant to applicable law by a governmental authority having jurisdiction) against the Agent, the Banks and their designees, and their respective directors, officers, employees, attorneys and agents, arising out of or related directly or indirectly to any and all of the foregoing acts, omissions and circumstances. SECTION 8.9 INDEMNIFICATION. The Agent, the Banks and their designees, and their respective directors, officers, employees, attorneys and agents, shall be indemnified, reimbursed, held harmless and, at the request of the Agent, defended by the Guarantor from and against any and all claims, liabilities, losses and expenses (including, without limitation, the reasonable disbursements, expenses and fees of their respective attorneys) that may be imposed upon, incurred by, or asserted against any of them, or any of their respective directors, officers, employees, attorneys and agents, arising out of or related directly or indirectly to this Guaranty or any of the Loan Instruments, except such as are occasioned by the indemnified person's own acts or omissions breaching a duty owed to a Guarantor or amounting to gross negligence or willful misconduct as finally determined pursuant to applicable law by a governmental authority having jurisdiction. SECTION 8.10 INTERPRETATION. The parties acknowledge and agree that: each party and its counsel have reviewed and negotiated the terms and provisions of this Guaranty and have contributed to its revision; the normal rule of construction, to the effect that any ambiguities are resolved against the drafting party, shall not be employed in the interpretation of it; and its terms and provisions shall be construed fairly to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Guaranty. SECTION 8.11 WAIVER AND MODIFICATION. This Guaranty constitutes the entire agreement and understanding of the parties as to matters set forth in this Guaranty. This Guaranty and the provisions hereof may be waived, amended, modified, changed, discharged or terminated only by an instrument in writing and signed by the Guarantor and the Agent. No delay or omission on the part of the Agent in exercising any right under this Guaranty shall operate as a waiver of such right or any other right. A waiver by the Agent of a provision of this Guaranty shall not prejudice or constitute a waiver of the Agent's right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by the Agent, nor any course of dealing between the Agent and the Guarantor, shall constitute a waiver of any of the Agent's rights or any of the Guarantor's obligations as to any future transactions. Whenever the consent of the Agent is 18 required under this Guaranty, the granting of such consent by the Agent in any instance shall not constitute continuing consent to subsequent instances where such consent is required and, unless otherwise provided herein, such consent may be granted or withheld in the sole and absolute discretion of the Agent. SECTION 8.12 BINDING AGREEMENT. This Guaranty shall be binding upon the Guarantor and its successors and shall inure, together with the rights and remedies of the Agent, to the benefit of the Agent and its successors and assigns. SECTION 8.13 ASSIGNMENT. The Guarantor may not assign its rights or delegate its duties hereunder without the Agent's prior written consent. However, the Agent may assign or otherwise transfer any rights under this Guaranty to the extent provided in Section 7.8 of the Credit Agreement, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to the Agent herein or otherwise. SECTION 8.14 NOTICES. Except as otherwise expressly provided in this Guaranty, any notice, request, demand or other communication permitted or required to be given under this Guaranty shall be in writing, shall be sent by one of the following means to the addressee at the address set forth below (or at such other address as shall be designated hereunder by notice to the other parties and persons receiving copies, effective upon actual receipt) and shall be deemed conclusively to have be given: (i) on the first business day following the day timely deposited with Federal Express (or other equivalent national overnight courier) or United States Express Mail, with the cost of delivery prepaid; (ii) on the fifth business day following the day duly sent by certified or registered United States mail, postage prepaid and return receipt requested; or (iii) when otherwise actually delivered to the addressee. If a written notice, certificate or signed item is expressly required by another provision of this Guaranty, a manually signed original must be delivered by the party giving it; any other notice, request, demand or other communication also may be sent by tested telex, telegram or telecopy, with the cost of transmission prepaid, and shall be deemed conclusively to have been given on the first business day following the day duly sent. Copies may be sent by regular first-class mail, postage prepaid, to the persons, if any, set forth below, but any failure or delay in sending copies shall not affect the validity of any such notice, request, demand or other communication so given to a party. The addresses of the parties and those persons receiving copies are as follows: If to the Agent, at the following address: Bank One, Colorado, N.A. 30 Pikes Peak Avenue Colorado Springs, Colorado 80903 Attn: Shaun P. McCarthy, Vice President Telecopy: (719) 471-5213 With a copy of all notices to: 19 Ted R. Sikora II, Esq. Davis, Graham & Stubbs LLP 370 Seventeenth Street, 47th Floor Denver, Colorado 80202 Telecopy: (303) 893-1379 If to the Guarantor, at the following address: ASI Landmark, Inc. c/o Analytical Surveys, Inc. 1935 Jamboree Drive Colorado Springs, CO 80920 Attn: Scott C. Benger Telecopy: (719) 528-5093 With a copy of all notices to: Steven D. Miller, Esq. Sherman & Howard L.L.C. 633 Seventeenth Street, Suite 3000 Denver, CO 80202 Telecopy: (303) 298-0940 SECTION 8.15 PARTIAL INVALIDITY. In the event that any provision hereof shall be deemed to be invalid by any reason of the operation of any law or by reason of the interpretation placed thereon by any court, this Guaranty shall be construed as not containing such provision with respect to any jurisdiction where such law or interpretation is operative, and the invalidity of such provision shall not affect the validity of any remaining provision hereof, and any and all other provisions hereof which are otherwise lawful and valid shall remain in full force and effect. SECTION 8.16 GOVERNING LAW, JURISDICTION, VENUE AND WAIVER OF JURY TRIAL RIGHTS. THIS GUARANTY AND ALL MATTERS RELATING HERETO SHALL, EXCEPT TO THE EXTENT OTHERWISE REQUIRED BY APPLICABLE LAW, BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. THE GUARANTOR HEREBY SUBMITS TO THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF COLORADO AND AGREES THAT THE AGENT MAY, AT ITS OPTION, ENFORCE ITS RIGHTS IN SUCH COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE GUARANTOR HEREBY IRREVOCABLY WAIVES THE DEFENSE OF AN INCONVENIENT FORUM TO MAINTENANCE OF ANY ACTION OR PROCEEDING BY THE BANK IN SUCH COURTS. THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL 20 BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 8.17 COUNTERPARTS. This Guaranty may be executed in any number of counterparts and by different parties hereto on separate counterparts, each constituting an original, but all together one and the same instrument. IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed as of the date first above written. ASI LANDMARK, INC. By: ------------------------------ Scott C. Benger Vice President BANK ONE, COLORADO, N.A., AS AGENT By: ------------------------------ Shaun P. McCarthy Vice President 21 EX-10.6 7 EXHIBIT 10.6 PLEDGE AND SECURITY AGREEMENT ANALYTICAL SURVEYS, INC. THIS PLEDGE AND SECURITY AGREEMENT, dated as of June 3, 1998, is by ANALYTICAL SURVEYS, INC., a Colorado corporation ("Pledgor") to BANK ONE, COLORADO, N.A., ("Agent") for the ratable benefit of the Banks under that certain Credit Agreement dated as of June 3, 1998, by and among Pledgor (as Borrower thereunder), Agent, and the Banks, with such Credit Agreement, as hereafter amended, modified or extended by the parties thereto referred to as the "Credit Agreement". RECITALS A. The Banks are willing to extend credit facilities to Pledgor subject to the terms and conditions of the Credit Agreement. One of the terms of the Credit Agreement is the requirement for execution and delivery of this Pledge Agreement by Pledgor. B. In order to induce the Banks to enter into the Credit Agreement, Pledgor is willing to enter into this Pledge Agreement to secure the due and punctual performance of the obligations of Pledgor under the Credit Agreement. AGREEMENT NOW, THEREFORE, the parties hereto agree as follows: 1. DEFINED TERMS. (a) As used herein, the following terms shall have the following meanings: "PLEDGE AGREEMENT" shall mean this Pledge and Security Agreement, as the same may be further amended, supplemented or otherwise modified from time to time. "PLEDGED COLLATERAL" shall mean the Pledged Stock and all Proceeds. "PLEDGED STOCK" shall mean the shares of capital stock or limited liability company membership interests of each Subsidiary Issuer listed in Schedule I hereto, in each case together with all stock certificates, options, warrants or rights of any nature whatsoever that may be issued or granted by any Subsidiary Issuer to the Pledgor in respect of the Pledged Stock while this Pledge Agreement is in effect. "PROCEEDS" shall have the meaning given thereto by C.R.S. 4-9-306. "SUBSIDIARY ISSUER" shall mean the company listed on SCHEDULE 1 hereto, which is a wholly-owned Subsidiary of Pledgor. (b) Unless otherwise defined herein, the capitalized terms used herein which are defined in, or by reference in, the Credit Agreement shall have the meanings specified therein. (c) The words "hereof", "herein" and "hereunder" and words of similar import shall refer to this Pledge Agreement as a whole and not to any particular provision of this Pledge Agreement, and section, subsection, exhibit and schedule references are to this Pledge Agreement unless otherwise specified. 2. PLEDGE AND GRANT OF SECURITY INTEREST. For value received and to induce the Banks to make the Loans and otherwise to extend credit to Borrower, Pledgor, for the ratable benefit of the Banks, hereby pledges, charges, assigns, transfers and delivers, by way of a first lien, security interest and assignment, to Agent, and grants a security interest to Agent in, all of its right, title and interest in and to the Pledged Collateral as security for all present and future obligations and liabilities of all kinds of Pledgor to the Banks under the Loan Instruments or hereunder, whether incurred by Pledgor as maker, endorser, drawer, acceptor, guarantor, accommodation party or otherwise, and whether due or to become due, secured or unsecured, absolute or contingent, joint or several, and howsoever or whensoever incurred by Pledgor or acquired by any Bank (collectively referred to as the "Obligations"). 3. DELIVERY; STOCK POWERS; ENDORSEMENTS. All certificates or instruments representing or evidencing the Pledged Stock pledged pursuant to SECTION 2 hereof have previously been delivered or are being delivered to and held by Agent concurrently with the execution of this Pledge Agreement and are in suitable form for transfer by delivery, endorsed in blank or accompanied by duly executed undated instruments of transfer or assignments in blank, having attached thereto or to such certificates all requisite federal, state or provincial stock transfer tax stamps, all in form and substance satisfactory to Agent. 4. WARRANTIES, COVENANTS AND AGREEMENTS OF PLEDGOR. Pledgor warrants, covenants and agrees that: (a) the Subsidiary Issuers are all of the directly-owned Subsidiaries of the Pledgor, and the Pledged Stock, consisting of the shares of the Subsidiary Issuers listed on SCHEDULE 1 hereto, is all of the issued and outstanding common stock or other equity interests in the Subsidiary Issuers, (b) except for the security interests granted hereby, (i) Pledgor is, and as to Pledged Collateral acquired after the date hereof, Pledgor shall and will be at the time of acquisition, the owner and holder of the Pledged Collateral free from any adverse claim, security interest, encumbrance, lien, -2- charge, or other right, title or interest of any person other than Agent and covenants that at all times the Pledged Collateral will be and remain free of all such adverse claims, security interests, or other liens or encumbrances; (ii) Pledgor has full power and lawful authority to enter into this Pledge and Security Agreement and to pledge, assign and transfer the Pledged Collateral to Agent and to grant to Agent a first and prior security interest therein as herein provided, all of which have been duly authorized by all necessary corporate action; (iii) the execution and delivery and the performance hereof are not in contravention of any charter, article of incorporation or by-law provision, or of any indenture, agreement or undertaking to which Pledgor is a party or by which Pledgor or its property is bound; (iv) this Pledge and Security Agreement constitutes the valid and legally binding obligation of Pledgor enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (v) Pledgor will defend the Pledged Collateral against all claims and demands of all persons at any time claiming the same or any interest therein. Any officer, agent or representative acting for or on behalf of Pledgor in connection with this Pledge and Security Agreement or any aspect hereof, or entering into or executing this Pledge and Security Agreement on behalf of Pledgor, has been duly authorized to do so, and is fully empowered to act for and represent Pledgor in connection with this Pledge and Security Agreement and all matters related thereto or in connection therewith. (c) (i) Pledgor has not heretofore signed any financing statement or security agreement which covers any of the Pledged Collateral, and no such financing statement or security agreement is now on file in any public office. (ii) As long as any amount remains unpaid on any of the Obligations or under any agreements entered into in connection with the Obligations, except as expressly permitted by any such agreements, (A) Pledgor will not enter into or execute any security agreement or financing statement covering the Pledged Collateral, other than those security agreements and financing statements in favor of Agent hereunder, and further (B) there will not be on file in any public office any financing statement or statements (or any documents or papers filed as such) covering the Pledged Collateral, other than financing statements in favor of Agent hereunder, unless in any case the prior written consent of Agent shall have been obtained. (iii) At the request of Agent, Pledgor will join Agent in executing such documents as Agent may determine from time to time to be necessary or desirable under provisions of any applicable laws in effect where the Pledged Collateral is -3- located or where Pledgor conducts business; without limiting the generality of the foregoing, Pledgor agrees to join Agent, at Agent's request, in executing one or more financing statements or other instruments in form satisfactory to Agent, and Pledgor will pay the costs of filing or recording the same, or of filing or recording this Pledge Agreement, in all public offices at any time and from time to time whenever filing or recording of any such financing statement or of this Pledge Agreement is deemed by Agent to be necessary or desirable. In connection with the foregoing, it is agreed and understood between the parties hereto (and Agent is hereby authorized to carry out and implement this agreement and understandings, and Pledgor hereby agrees to pay the costs thereof) that Agent may, at any time or times, file as a financing statement any counterpart, copy or reproduction of this Pledge Agreement. (d) In the event that Pledgor receives any promissory notes or evidences of indebtedness of any Subsidiary Issuer, Pledgor shall hold the same in trust as property of the Banks and forthwith assign, pledge and deliver the same to Agent for the ratable benefit of the Banks. 5. RIGHTS OF AGENT AND PLEDGOR RELATED TO PLEDGED COLLATERAL. Agent may from time to time following the occurrence of an Event of Default, as defined in SECTION 7 hereof: (a) Transfer any of the Pledged Collateral into the name of Agent or its nominee. (b) Notify parties obligated on any of the Pledged Collateral to make payment to Agent of any amounts due or to become due thereunder. (c) Enforce collection of any of the Pledged Collateral by suit or otherwise; surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligation of any nature of any party with respect thereto; and exercise all other rights of Pledgor in any of the Pledged Collateral, except as hereinafter provided with respect to income from or interest on the Pledged Collateral and except that, prior to an Event of Default, Pledgor may exercise its voting and consensual rights with respect to any Pledged Collateral constituting voting securities. (d) Take possession or control of any proceeds of the Pledged Collateral. Until the occurrence of an Event of Default, Pledgor shall have the right to receive all income from or interest on the Pledged Collateral, and if Agent receives any such income or interest prior to the occurrence of an Event of Default, Agent shall pay the same promptly to Pledgor, except that in the case of securities or other property distributed by way of a dividend or otherwise with respect to the Pledged Collateral, such securities or other property (other than cash) shall be promptly delivered to Agent to be held as Pledged Stock or other Pledged Collateral hereunder. Upon the occurrence of an Event of Default, Pledgor will not demand or receive any income from or interest on the Pledged Collateral, and if Pledgor receives any such income or interest without any demand by it, the same shall be held by Pledgor in trust for Agent in the same medium in which received, shall not be commingled with any assets of Pledgor and shall be delivered to Agent in the -4- form received, properly endorsed to permit collection, not later than the next business day following the day of its receipt. Agent shall promptly apply the net cash received from such income or interest to payment of any of the Obligations, provided that Agent shall account for and pay over to Pledgor any such income or interest remaining after payment in full of the Obligations then outstanding. So long as no Event of Default or event which, with the giving of notice or the lapse of time, or both, would become an Event of Default shall have occurred and be continuing: (i) Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Pledge Agreement or the Credit Agreement; PROVIDED, HOWEVER, that Pledgor shall not exercise or refrain from exercising any such right if, in Agent's judgment, such action would have a material adverse effect on the value of the Pledged Collateral or any part thereof; and, PROVIDED, FURTHER, that upon the request of Agent, Pledgor shall give Agent at least five days' written notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such rights; and (ii) Agent shall execute and deliver (or cause to be executed and delivered) to Pledgor all such proxies and other instruments as Pledgor may reasonably request for the purpose of enabling Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to PARAGRAPH (i) above. Agent shall never be under any obligation to collect, attempt to collect, protect or enforce the Pledged Collateral or any security therefor, which Pledgor agrees and undertakes to do at Pledgor's expense, but Agent may do so in its discretion at any time after the occurrence of an Event of Default and at such time Agent shall have the right to take any steps by judicial process or otherwise as it may deem proper to effect the collection of all or any portion of the Pledged Collateral or to protect or to enforce the Pledged Collateral or any security therefor. All reasonable expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred or paid by Agent in connection with any such collection or attempt to collect the Pledged Collateral or actions to protect or enforce the Pledged Collateral or any security therefor shall be borne by Pledgor or reimbursed by Pledgor to Agent upon demand. The proceeds received by Agent as a result of any such actions in collecting or enforcing or protecting the Pledged Collateral shall be held by Agent without liability for interest thereon and shall be promptly applied by Agent as Agent may deem appropriate toward payment of any of the Obligations secured hereby in such order or manner as Agent may elect. In the event Agent shall pay any taxes, assessments, interests, costs, penalties or expenses incident to or in connection with the collection of the Pledged Collateral or protection or enforcement of the Pledged Collateral or any security therefor, Pledgor, upon demand of Agent, shall pay to Agent the full amount thereof with interest at a rate per annum (based on a 360-day year for the actual number of days involved) from the date expended by Agent until repaid equal to the sum of three percent (3%) plus the Prime Rate in effect under and defined by the Credit Agreement. So long as Agent shall be entitled to any such payment, this Pledge Agreement shall operate as security therefor as fully and to the same extent as it operates as security for payment of the other Obligations -5- secured hereunder, and for the enforcement of such repayment, Agent shall have every right and remedy provided hereunder for enforcement of payment of the Obligations. 6. FURTHER ASSURANCES; AGENT AS AGENT. Pledgor agrees to take such actions and to execute such stock or bond powers and such other or different writings as Agent may request (and irrevocably authorizes Agent to execute such writings as Pledgor's agent and attorney-in-fact) further to perfect, confirm and assure Agent's security interest in the Pledged Collateral and to assist Agent's realization thereon including, without limitation, the right to receive, indorse, and collect all instruments made payable to Pledgor representing any dividend, interest payment or other distribution in respect of the Pledged Collateral or any part thereof except to the extent Pledgor is entitled to receive any cash dividend pursuant to Section 5. 7. EVENT OF DEFAULT. The occurrence of any of the following shall constitute an "Event of Default" hereunder: (a) Failure of Pledgor to pay any Obligation (including any installment of principal or interest thereon) when due and payable (after the expiration of any grace period provided by the applicable Loan Instruments), whether at maturity, by notice of intention to prepay or otherwise; (b) Default in the timely performance by Pledgor of any obligation or covenant contained herein or an Event of Default under the Credit Agreement or any other Collateral Document to which Pledgor is a party, which default shall not have been cured during any applicable grace period; (c) Any representation or warranty made by Pledgor herein or in any other agreement with or instrument delivered to Agent, or any statement or representation made in any certificate, report or opinion delivered in connection herewith or in connection with any such other agreement or instrument that proves to be false or misleading in any material respect when made; or (d) The insolvency of Pledgor, the admission by Pledgor of its inability to pay its debts as they become due, the commencement of any case by or against Pledgor under any bankruptcy or insolvency law (and, in the event such case is not instituted by Pledgor, it shall remain undismissed or unstayed for a period of 45 days or any of the actions sought in such proceeding shall occur), or the making by Pledgor of any assignment for the benefit of creditors. 8. RIGHTS AND REMEDIES OF AGENT UPON DEFAULT. If an Event of Default shall have occurred: -6- (a) Agent shall have and may exercise with reference to the Pledged Collateral and the Obligations any or all of the rights and remedies of a secured party under the Uniform Commercial Code ("UCC"), as applicable, and as otherwise granted herein or under any other applicable law or under any other agreement now or hereafter in effect executed by Pledgor, including, without limitation, the right and power to sell, at public or private sale or sales, or otherwise dispose of, or otherwise utilize the Pledged Collateral and any part or parts thereof in any manner authorized or permitted under said UCC after default by a debtor, and to apply the proceeds thereof toward payment of any costs and expenses and attorneys' fees and expenses thereby incurred by Agent and toward payment of the Obligations in such order or manner as Agent may elect. Specifically and without limiting the foregoing, Agent shall have the right to take possession of all or any part of the Pledged Collateral or any security thereof and of all books, records, papers and documents of Pledgor or in Pledgor's possession or control relating to the Pledged Collateral which are not already in Agent's possession, and for such purpose may enter upon any premises upon which any of the Pledged Collateral or any security therefor or any of said books, records, papers and documents are situated and remove the same therefrom without any liability for trespass or damages thereby occasioned. To the extent permitted by law, Pledgor expressly waives any notice of sale or other disposition of the Pledged Collateral and all other rights or remedies of Pledgor or formalities prescribed by law relative to sale or disposition of the Pledged Collateral or exercise of any other right or remedy of Agent existing after default hereunder; and to the extent any such notice is required and cannot be waived, Pledgor agrees that if such notice is given in the manner provided in SECTION 14 hereof at least ten days before the time of the sale or disposition, such notice shall be deemed reasonable and shall fully satisfy any requirement for giving of said notice. Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed thereof, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) Upon notice by Agent to Pledgor, Agent or its nominee or nominees shall have the sole and exclusive right to exercise all voting and consensual powers pertaining to the Pledged Collateral or any part thereof and may exercise such powers in such manner as Agent may elect. (c) All dividends, payments of interest and other distributions of every character made upon or in respect of the Pledged Collateral or any part thereof shall be deemed to be Pledged Collateral and shall be paid directly to and shall be held by Agent as additional Pledged Collateral pledged under and subject to this Pledge Agreement. (d) All rights to marshaling of assets of Pledgor, including any such right with respect to the Pledged Collateral, are hereby waived by Pledgor. (e) All recitals in any instrument of assignment or any other instrument executed by Agent incident to sale, lease, transfer, assignment or other disposition, lease or utilization of the Pledged Collateral or any part thereof hereunder shall be full proof of the matters stated therein and no other proof shall be requisite to establish full legal propriety of the sale or other action taken by Agent or of any fact, condition or thing incident thereto, and all requisites of such sale or other action or of any fact, condition or thing incident thereto shall be presumed conclusively to have been performed or to have occurred. -7- 9. SPECIAL PROVISIONS FOR PLEDGED STOCK. Pledgor hereby acknowledges that the sale by Agent of any of the Pledged Stock pursuant to the terms hereof in compliance with applicable federal or state securities laws (as now in effect or as hereafter amended, or any similar statute hereafter adopted with similar purpose or effect, the "Securities Laws") may require strict limitations as to the manner in which Agent or any subsequent transferee of the Pledged Stock may dispose of such securities. Pledgor understands that in order to protect Agent's interest it may be necessary to sell the Pledged Stock at a price less than the maximum price attainable if a sale were delayed or were made in another manner, such as a public offering requested under the Securities Laws. Pledgor has no objection to a sale in such a manner. 10. APPLICATION OF PROCEEDS BY AGENT. In the event Agent sells or otherwise disposes of the Pledged Collateral in the course of exercising the remedies provided for in SECTION 8 hereof, any amounts held, realized or received by Agent pursuant to the provisions hereof, including the proceeds of the sale of any of the Pledged Collateral or any part thereof, shall be applied by Agent first toward the payment of any costs and expenses incurred by Agent in enforcing this Pledge Agreement, in realizing on or protecting any Pledged Collateral and in enforcing or collecting any Obligations or any guaranty thereof, including, without limitation, the reasonable, actual attorneys' fees and expenses incurred by Agent (all of which costs and expenses are secured by the Pledged Collateral), all of which costs and expenses Pledgor agrees to pay, and then as provided in the Credit Agreement. Any amounts and any Pledged Collateral remaining after such application and after payment to the Banks of all of the Obligations in full shall be paid or delivered to Pledgor, its successor or assigns, or as a court of competent jurisdiction may direct. Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equal to that which Agent accords its own property, it being understood that Agent shall not have any responsibility for (x) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not Agent has or is deemed to have knowledge of such matters or (y) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral. 11. ABSOLUTE INTEREST. (a) So long as any Obligations are unsatisfied, all rights of Agent hereunder, and all obligations of Pledgor hereunder, shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of any provision of the Credit Agreement, any agreement with respect to the Obligations or any other agreement or instrument relating to any of the foregoing, (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement or any other agreement or instrument, (iii) any exchange, release or non-perfection of any Pledged Collateral, or any release or amendment or waiver of or any consent to or departure from any guarantee, for all or any of the Obligations or (iv) any other circumstance which might constitute -8- a defense available to, or a discharge of, Pledgor in respect of the Obligations or this Pledge Agreement. (b) This Pledge Agreement shall not be construed as relieving Pledgor from full liability on the Obligations and any and all future and other indebtedness secured hereby and for any deficiency thereon. (c) Agent is hereby subrogated to all of Pledgor's interests, rights and remedies in respect to the Pledged Collateral and all security now or hereafter existing with respect thereto and all guaranties and endorsements thereof and with respect thereto. 12. TERMINATION. This Pledge Agreement and the security interests created hereunder shall terminate when all the Obligations have been indefeasibly paid in full and when Agent has no further obligation to extend credit under the Credit Agreement, at which time Agent shall execute and deliver to Pledgor all documents which Pledgor shall reasonably request to evidence termination of such security interest and shall return physical possession of any Pledged Collateral then held by Agent to Pledgor; PROVIDED, HOWEVER, that all indemnities of Pledgor contained in this Pledge Agreement shall survive, and remain in full force and effect regardless of the termination of the security interest of this Pledge Agreement. 13. ADDITIONAL INFORMATION. Pledgor agrees to furnish Agent from time to time such additional information and copies of such documents relating to this Pledge Agreement, the Pledged Collateral, the Obligations and Pledgor's financial condition to the extent and at such times as provided under Section 5.1(h) of the Credit Agreement as Agent may reasonably request. 14. NOTICES. Any communication, notice or demand to be given hereunder shall be in writing (including telex and facsimile communication) and mailed, sent by facsimile, or delivered, if to Pledgor, Analytical Surveys, Inc. 1935 Jamboree Drive Colorado Springs, Colorado 80902 Attention: Scott C. Benger Senior Vice President-Finance, Secretary and Treasurer Facsimile: (719) 528-5093 -9- and if to Agent, Bank One, Colorado, N.A. 30 East Pikes Peak Avenue Colorado Springs, Colorado 80903 Attention: Shaun P. McCarthy Vice President Facsimile: (719) 471-5213 as to each party, at such other address or numbers as shall be designated by either party hereto to the other party in a written notice. All such notices and communications shall be effective (a) when received, if mailed by registered or certified mail or physically delivered, (b) five (5) days after being sent by mail, if sent by ordinary mail, and (c) upon confirmation of transmission, if sent by telex or telecopier, addressed in each case as aforesaid. 15. INDEMNITY AND EXPENSES. The Pledgor agrees to indemnify Agent from and against any and all claims, losses and liabilities growing out of or resulting from this Pledge Agreement (including, without limitation, enforcement of this Pledge Agreement and other Collateral Documents, and all claims and demands of all persons at any time claiming the Pledged Collateral or any interest therein), except claims, losses or liabilities resulting from Agent's gross negligence or willful misconduct. Pledgor agrees to pay on demand all out-of-pocket expenses of the Agent (including the reasonable fees and expenses of Agent's attorneys, experts and agents) in any way relating to the enforcement or protection of the rights of the Banks hereunder and further agrees that the Pledged Collateral secures such payment. 16. NO WAIVER; CUMULATIVE RIGHTS. No failure on the part of Agent to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Agent of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy and power hereby granted to Agent or allowed it by law or other agreement shall be cumulative and not exclusive of any other and may be exercised by Agent from time to time. 17. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO, WITHOUT, HOWEVER, GIVING EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF. PLEDGOR, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY (a) AGREES THAT ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING AGAINST PLEDGOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE SUBJECT MATTER HEREOF MAY BE INSTITUTED IN ANY COURT OF -10- APPROPRIATE JURISDICTION IN THE CITY AND COUNTY OF DENVER, COLORADO; (b) WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF SUCH ACTION, SUIT OR PROCEEDING OR ANY CLAIM OF FORUM NON CONVENIENS; (c) SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF ANY SUCH COURT, FOR THE PURPOSES OF SUCH ACTION, SUIT OR PROCEEDING; (d) WAIVES ANY IMMUNITY FROM JURISDICTION TO WHICH IT MIGHT OTHERWISE BE ENTITLED IN ANY SUCH ACTION, SUIT OR PROCEEDING WHICH MAY BE INSTITUTED IN ANY SUCH COURT, AND WAIVES ANY IMMUNITY FROM THE MAINTAINING OF AN ACTION AGAINST IT TO ENFORCE IN ANY SUCH COURT, ANY JUDGMENT FOR MONEY OBTAINED IN SUCH ACTION, SUIT OR PROCEEDING AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY IMMUNITY FROM EXECUTION; AND (e) AGREES THAT ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING BROUGHT BY PLEDGOR AGAINST AGENT OR OTHER LENDING PARTY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE SUBJECT MATTER HEREOF SHALL BE INSTITUTED IN SUCH COURTS. 18. JURY TRIAL. PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS PLEDGE AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE SUBJECT MATTER HEREOF. THE PROVISIONS OF THIS SECTION 18 ARE A MATERIAL INDUCEMENT FOR AGENT AND THE BANKS TO ENTER INTO THIS PLEDGE AGREEMENT AND THE CREDIT AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN AND THEREIN. PLEDGOR HEREBY ACKNOWLEDGES THAT IT HAS REVIEWED THE PROVISIONS OF THIS SECTION 18 WITH ITS INDEPENDENT COUNSEL. 19. INCONSISTENCY OF AGREEMENTS. In case of any inconsistency between this Pledge Agreement and the Credit Agreement, the provisions of the Credit Agreement shall be controlling except with respect to SECTIONS 1 and 2 hereof as to which the terms of this Pledge Agreement shall be controlling. 20. EXECUTION IN COUNTERPARTS. This Pledge Agreement may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute one and the same agreement. -11- IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be duly executed as of the date first above written. ANALYTICAL SURVEYS, INC. By: ________________________________ Scott C. Benger Senior Vice President, Treasurer and Secretary BANK ONE, COLORADO, N.A., as Agent for the Banks By: ________________________________ Shaun P. McCarthy Vice President -12- SCHEDULE I Pledge and Security Agreement ANALYTICAL SURVEYS, INC. DESCRIPTION OF PLEDGED STOCK OF SUBSIDIARY ISSUERS ---------------------
Stock % Shares ISSUER Class of Stock Certificate No. of Shares Outstanding No. by Pledgor MSE Common Stock, 100,000 100 Corporation No par value ASI Landmark, Common Stock 1,000 100 Inc. No par value
-13- ACKNOWLEDGMENT AND CONSENT The undersigned, MSE CORPORATION (the "Issuer"), hereby (i) acknowledges receipt of the attached Pledge and Security Agreement, dated as of June 3, 1998 (the "Pledge Agreement") made by ANALYTICAL SURVEYS, INC. ("Pledgor") with and in favor of BANK ONE, COLORADO, N.A., as Agent (the "Agent") for the Banks under that certain Credit Agreement (as defined in the Pledge Agreement), (ii) consents to the pledge pursuant to the Pledge Agreement of the shares of stock of the Issuer owned by Pledgor and listed in Schedule I thereto (the "Pledged Stock"), (iii) agrees to notify the Agent promptly in writing of the breach of any warranty or covenant or the occurrence of any of the events described in SECTIONS 4 or 7 of the Pledge Agreement and (iv) agrees that, if an Event of Default has occurred, (a) the Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Obligations in such order as provided in the Credit Agreement, and (b) all shares of the Pledged Stock shall be registered in the name of the Agent or its nominee and the Agent or its nominee may thereafter exercise all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders or otherwise, and any and all rights of conversion, exchange, subscription or any other rights, privileges or options existing at such time and pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the Issuer, or upon the exercise by the Pledgor or the Agent of any right, privilege or option pertaining to such share of the Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions (as it may determine to be appropriate), all without liability to the Agent except to account for property actually received by it, but the Agent shall have no duty to the Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing). Capitalized terms used herein but not defined have the meanings specified in the Pledge Agreement. This Acknowledgment and Consent when executed by the Issuer and accepted by the Agent by executing the acceptance at the foot hereof, shall be deemed to be a contract under the laws of Colorado and for all purposes, shall be construed in accordance with the laws of said jurisdiction. MSE CORPORATION. By:____________________________________ Scott C. Benger Vice President ACCEPTED: BANK ONE, COLORADO, N.A., as Agent for the Banks By:_______________________ Shaun P. McCarthy -14- Vice President -15- ACKNOWLEDGMENT AND CONSENT The undersigned, ASI LANDMARK, INC. (the "Issuer"), hereby (i) acknowledges receipt of the attached Pledge and Security Agreement, dated as of June 3, 1998 (the "Pledge Agreement") made by ANALYTICAL SURVEYS, INC. ("Pledgor") with and in favor of BANK ONE, COLORADO, N.A., as Agent (the "Agent") for the Banks under that certain Credit Agreement (as defined in the Pledge Agreement), (ii) consents to the pledge pursuant to the Pledge Agreement of the shares of stock of the Issuer owned by Pledgor and listed in Schedule I thereto (the "Pledged Stock"), (iii) agrees to notify the Agent promptly in writing of the breach of any warranty or covenant or the occurrence of any of the events described in SECTIONS 4 or 7 of the Pledge Agreement and (iv) agrees that, if an Event of Default has occurred, (a) the Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Obligations in such order as provided in the Credit Agreement, and (b) all shares of the Pledged Stock shall be registered in the name of the Agent or its nominee and the Agent or its nominee may thereafter exercise all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders or otherwise, and any and all rights of conversion, exchange, subscription or any other rights, privileges or options existing at such time and pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of the Issuer, or upon the exercise by the Pledgor or the Agent of any right, privilege or option pertaining to such share of the Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions (as it may determine to be appropriate), all without liability to the Agent except to account for property actually received by it, but the Agent shall have no duty to the Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing). Capitalized terms used herein but not defined have the meanings specified in the Pledge Agreement. This Acknowledgment and Consent when executed by the Issuer and accepted by the Agent by executing the acceptance at the foot hereof, shall be deemed to be a contract under the laws of Colorado and for all purposes, shall be construed in accordance with the laws of said jurisdiction. ASI LANDMARK, INC. By:_________________________________ Scott C. Benger President ACCEPTED: BANK ONE, COLORADO, N.A., as Agent for the Banks By:_______________________________ Shaun P. McCarthy -16- Vice President -17- -18- EX-10.7 8 EXHIBIT 10.7 SECURITY AGREEMENT AND ASSIGNMENT THIS SECURITY AGREEMENT AND ASSIGNMENT is entered into as of June 3, 1998 by and between ASI LANDMARK, INC., a Colorado corporation (the "Debtor") and BANK ONE, COLORADO, N.A., a national banking association (the "Agent"), for the ratable benefit of the Banks under that certain Credit Agreement dated as of June 3, 1998, by and among the Analytical Surveys, Inc. (as Borrower thereunder), Agent and the Banks, with such Credit Agreement, as hereafter amended, modified or extended by the parties thereto referred to as the "Credit Agreement." Section 1 DEFINITIONS SECTION 1.1 Specific Definitions. The following definitions shall apply: (a) "Account Debtors" means Debtor's customers and all other persons who are obligated or indebted to Debtor in any manner, whether directly or indirectly, primarily or secondarily, contingently or otherwise, with respect to Accounts or General Intangibles. (b) "Accounts" shall have the meaning set forth at SECTION 2.1(a). (c) "Agent" shall have the meaning assigned to it in the Recitals hereto. (d) "Banks" shall have the meaning assigned to it in the Recitals hereto. (e) "Code" shall mean the Uniform Commercial Code of the State of Colorado. (f) "Credit Agreement" shall have the meaning assigned to it in the Recitals hereto, and pursuant to which this Security Agreement and Assignment is given. (g) "Debtor" shall have the meaning assigned to it in the Recitals hereto. (h) "Debtor's Obligations" shall mean the full and prompt payment and performance of all of the indebtedness, obligations, convents, agreements and liabilities of Debtor to Agent together with all interest and other charges thereon, whether direct or indirect, existing, future, contingent or otherwise, due or to become due, under or arising out of or in connection with (i) Debtor's guaranty; (ii) any pledge or guaranty; (iii) any overdraft; (iv) any Loan Document and (v) any and all modifications, extensions and renewals of any of the foregoing. (i) "Debtor's Books" means all of Debtor's books and records including, but not limited to: minute books; ledgers; records indicating, summarizing, or evidencing Debtor's assets, liabilities, and the Accounts; all information relating to Debtor's business operations or financial condition; and all computer programs, disk or tape files, printouts, runs, and other computer-prepared information. (j) "Debtor's Guaranty" shall mean the unlimited guaranty of prompt payment dated June 3, 1998 given by Debtor to Agent as the same may be supplemented, modified, amended or restated from time to time. (k) "Equipment" shall have the meaning set forth at SECTION 2.1(c). (l) "Event of Default" shall have the meaning set forth in SECTION 9. (m) "General Intangibles" shall have the meaning set forth at SECTION 2.1(d). (n) "Guarantor" and "Guarantors" shall mean, respectively, any one or more of Debtor and ASI Landmark, Inc., a Colorado corporation. (o) "Inventory" shall have the meaning set forth at SECTION 2.1(b). (p) "Lien" means any security interest, mortgage, pledge, assignment, lien, or other encumbrance of any kind, including any interest of a vendor under a conditional sale contract or consignment and any interest of a lessor under a capital lease. (q) "Loan Documents" shall mean the Credit Agreement, the Notes, this Security Agreement and Assignment, and any other instrument now or hereafter given to evidence, secure or guaranty Debtor's Obligations. (r) "Permitted Liens" means: a. Liens imposed by any Governmental Authority for taxes, assessments or charges not yet due or which are being contested in good faith and with due diligence and with respect to which adequate reserves have been established; b. carriers', warehousemen's, mechanics', materialmen's, repairmen's, or other like Liens arising in the ordinary course of business not yet delinquent or which are being contested in good faith and with due diligence and with respect to which adequate reserves have been established; -2- c. Liens (other than Liens imposed by ERISA) consisting of pledges or deposits under workers' compensation, unemployment insurance and other social security legislation; d. easements, rights-of-way, zoning restrictions and other similar encumbrances of record on real property incurred in the ordinary course of business which, in the aggregate, are not material in dollar amount, and which do not in any case interfere with the ordinary conduct of the business of the Borrower or any Guarantor; e. Liens existing on the date hereof and disclosed in SCHEDULE 4.1(o) to the Credit Agreement; f. purchase money security interests securing payment by the Borrower or any Guarantor of a portion of the purchase price of any asset, PROVIDED THAT (i) any such Lien attaches to such property concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the property so acquired in such transaction, (iii) the principal amount of the debt secured thereby does not exceed 100% of the cost of such property, and (iv) the aggregate outstanding principal of such purchase money security interest Liens shall not at any one time exceed $4,000,000; g. Liens, deposits or pledges to secure the non-delinquent performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business; or h. Liens arising out of the lease of capital equipment in the aggregate amount at any one time not exceed $4,000,000; or i. any attachment or judgment Lien either in existence less than 30 calendar days after the entry thereof, or with respect to which execution has been stayed, or with respect to which payment in full above any deductible is covered by insurance. (s) "Proceeds" shall have the meaning set forth in SECTION 2.1(g). (t) "Secured Obligations" shall mean Debtor's Notes, Debtor's Obligations and "Secured Party Expenses." -3- (u) "Secured Party Expenses" means: (i) all costs and expenses (including, without limitation, taxes and insurance premiums) required to be paid by Debtor under this Security Agreement and Assignment or under any of the other Loan Documents that are paid or advanced by Agent; (ii) filing, recording, publication, and search fees paid or incurred by Agent in connection with Agent's transactions with Debtor, (iii) costs and expenses incurred by Agent to correct any default or enforce any provision of the Loan Documents or in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, and preparing for sale and/or advertising to sell the Collateral, whether or not a sale is consummated (including reasonable counsel, consultant and appraiser fees and expenses); (iv) costs and expenses of suit incurred by Agent as Agent in enforcing or defending the Loan Documents or any portion thereof, and (v) Agent's reasonable attorney fees and expenses incurred (before or after execution of this Security Agreement and Assignment) in advising Agent with respect to, or in structuring, drafting, reviewing, negotiating, amending, terminating, enforcing, defending, or otherwise concerning, the Loan Documents or any portion thereof, irrespective of whether suit is brought. SECTION 1.2 Uniform Commercial Code Terms. Terms used in this Security Agreement and Assignment, other than those defined in this SECTION 1.1, have the meanings accorded to them in the Uniform Commercial Code of the State of Colorado. SECTION 1.3 Construction. (a) Unless the context of this Security Agreement and Assignment clearly requires otherwise, the plural includes the singular, the singular includes the plural, the part includes the whole, "including" is not limited, and "or" has the inclusive meaning of the phrase "and/or." The words "hereof," "herein," "hereunder," and other similar terms in this Security Agreement and Assignment refer to this Security Agreement and Assignment as a whole and not exclusively to any particular provision of this Security Agreement and Assignment. (b) It is intended that the Credit Agreement expresses the primary understandings and agreements of the parties. In the event of any inconsistency or conflict between the terms of this document and the terms of the Credit Agreement, the provisions of the Credit Agreement shall control. Any schedule required by this document which duplicates the requirement of a schedule attached to the Credit Agreement shall be deemed to be fulfilled by the schedule to the Credit Agreement. Capitalized terms used but not defined herein, and defined in the Credit Agreement, shall have the meaning given thereto in the Credit Agreement. -4- Section 2 SECURITY INTEREST SECTION 2.1 Grant of Security Interest. In order to secure prompt payment and performance of Debtor's Guaranty and Debtor's Obligations, Debtor hereby grants to Agent a continuing first-priority pledge and security interest in the following property of Debtor (the "Collateral"), whether now owned or existing or hereafter acquired or arising and regardless of where located: (a) All Accounts, which shall mean all accounts, contract rights, notes, drafts, instruments, documents, chattel paper, and obligations in any form owing to Debtor arising out of the sale or lease of goods or the rendition of services by Debtor whether or not earned by performance; all credit insurance, guaranties, letters of credit, advices of credit, and other security for any of the above; all merchandise returned to or reclaimed by Debtor; and Debtor's Books relating to any of the foregoing. (b) All Inventory, which shall mean any and all goods, supplies, wares, merchandise, and other tangible personal property, including raw materials, work in process, supplies and components, and finished goods, whether held for sale or lease or to be furnished under any contract for service or so leased or furnished, or used or consumed in Debtor's business, and also including products of and accessions to inventory, packing and shipping materials, and all documents of title, whether negotiable or nonnegotiable, representing any of the foregoing. (c) All Equipment, which shall mean all equipment, fixtures, machinery, machine tools, office equipment, furniture, furnishings, motors, motor vehicles, tractors, trailers, non-titled vehicles, tools, dies, parts, jigs, goods, all attachments, accessories, accessions, parts, replacements, substitutions, additions, and improvements thereto, and all supplies used or to be used in connection therewith, including without limitation those items of Equipment set forth on SCHEDULE 2.1(c) attached. (d) All General Intangibles, which shall mean all general intangibles, choses in action, causes of action, and all other personal property of every kind and nature (other than goods and Accounts), including, without limitation: (i) all tax refunds, (ii) all inventions, processes, production methods, proprietary information, know-how and trade secrets used or useful in the business of Debtor, (iii) all trade names, trademarks, and service marks; all trademark and service mark registrations (other than intent to use applications for trademarks and service marks, if any) and applications for trademark and service mark registrations and all renewals of trademark and service mark registrations, all rights relating thereto, including without limitation, the right to recover for all past, present and future infringements thereof, and all other rights of any kind whatsoever accruing thereunder or pertaining thereto, together with the goodwill of the business connected with -5- the use of, and symbolized by, each such trade name, trademark, and service mark, (iv) all logos, copyrights, patents and applications for patents, (v) all licenses or other agreements relating to any of the foregoing, (vi) all information, customer lists, identifications of suppliers, data, plans, blueprints, specifications, designs, drawings, recorded knowledge, surveys, engineering reports, test reports, manuals, materials standards, processing standards, performance standards, catalogs, computer and automatic machinery software and programs, and the like pertaining to any present or future operations by Debtor, (vii) all field repair data, sales data and other information relating to sales or service of all present or future products, (viii) all accounting information and all media in which or on which any of the information or knowledge or data or records which pertain to any present or future operations of Debtor may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records or data, (ix) all licenses, consents, permits, variances, certifications and approvals of any governmental authority or any other person pertaining to any operations now or hereafter conducted by Debtor (including, without limitation, all franchises, licenses, consents, permits, variances, certifications and approvals specifically described on SCHEDULE 2.1(d)(ix) attached), (x) all licenses, franchises, permits or other rights to use any processes, production methods, proprietary information, know-how, trade secrets and software in connection with Debtor's business (including, without limitation, any of the foregoing described on SCHEDULE 2.1(d)(x), attached), (xi) all causes of action, claims and warranties relating to any of the foregoing, (xii) all certificates of deposits evidencing a deposit by Debtor with Agent or any other financial institution, (xiii) all promissory notes payable to Debtor which are determined not to be instruments, (xiv) all Debtor's interest as lessee under all leases of real and personal property (including, without limitation, the leases set forth on SCHEDULE 4.1(o) to the Credit Agreement or any other schedule that is either now or hereafter delivered by Debtor to Agent and incorporated herein by reference) and (xv) all Debtor's interest in contracts and agreements (including, without limitation, the contracts set forth on SCHEDULE 4.1(n) of the Credit Agreement or any other schedule that is either now or hereafter delivered by Debtor to Agent and incorporated herein by reference). (e) Investment Property, which shall mean all certificated or uncertificated securities, security entitlements, security accounts, commodity contracts or commodity accounts. (f) Possessory Collateral, which shall mean notes, drafts, instruments, documents, securities, money, letters of credit, advices of credit, or other assets, properties or indebtedness owned by Debtor or in which Debtor has an interest that now or thereafter are at any time in the possession or control of Agent, Agent's affiliates, custodians, participants and designees or in transit by mail or carrier to Agent, Agent's affiliates, custodians, participants and designees or in the possession of any other third party acting on behalf of Agent, without regard to whether Agent received the same in pledge, for safekeeping, as agent for collection or transmission or otherwise, or whether Agent had conditionally released the same, and all deposit accounts of Debtor with Agent, Agent's affiliates, custodians, participants and designees, including all demand, time, savings, passbook, or other accounts. -6- (g) Proceeds, which shall mean all proceeds and products of Collateral and all additions and accessions to, replacements of, insurance or condemnation proceeds of, and documents covering Collateral; all property received wholly or partly in trade or exchange for Collateral; all claims against third parties arising out of damage, destruction, or decrease in value of the Collateral; all leases of Collateral; and all rents, revenues, issues, profits, and proceeds, arising from the sale, lease, license, encumbrance, collection, or any other temporary or permanent disposition of the Collateral or any interest therein. Section 3 PROVISIONS CONCERNING ACCOUNTS SECTION 3.1 Office and Records of Debtor. Debtor's chief executive office is located at: 1903 North Harrison Avenue, Cary, North Carolina 27513. Debtor maintains all of its records with respect to its Accounts in Indiana. Debtor shall not maintain its chief executive office or its records with respect to its Accounts at any other location except after thirty (30) days prior written notice to the Agent. SECTION 3.2 Representations. Debtor represents and warrants that each Account of the Debtor at the time of its assignment to Agent (a) will be owned solely by Debtor; (b) will be for a liquidated amount maturing as stated in Debtor's Books; (c) will be a bona fide existing obligation created by the final sale and delivery of goods or the rendition of services to Account Debtors by Debtor in the ordinary course of its business; and (d) will not be subject to any known deduction, offset, counterclaim, return privilege, or other condition, except as reflected on Debtor's Books. SECTION 3.3 Shipment Arrangements. After two (2) weeks notice, unless an Event of Default has occurred then promptly upon the request of the Agent, Debtor shall deliver to Agent, as Agent may request no more often than annually, so long as an Event of Default has not occurred, copies of delivery receipts, customer purchase orders, shipping instructions, bills of lading, and other documentation respecting shipment arrangements. Absent such a request by Agent, copies of all such documentation shall be held by Debtor as custodian for Agent. SECTION 3.4 Agent's Rights. Upon and after the occurrence of an Event of Default and at any time Agent reasonably believes an Event of Default has occurred or is likely to occur with the passage of time, any officer, employee, or agent of Agent shall have the right, at any time or times hereafter, in the name of Agent or its nominee (including Debtor), to verify the validity, amount, or any other matter relating to any Accounts by mail, telephone, or otherwise; and all reasonable costs thereof shall be payable by Debtor to Agent. At such time, Agent or its designee may at any time notify customers or Account Debtors that Accounts have been assigned to Agent or of Agent's security interest therein and collect the same directly and charge all collection costs and expenses to Debtor's account. -7- SECTION 3.5 Post Default Rights. After a declared Event of Default hereunder, no discount, credit, or allowance shall be granted by Debtor to any Account Debtor and no return of merchandise shall be accepted by Debtor without Agent's consent. Agent may thereafter settle or adjust disputes and claims directly with Account Debtors for amounts and upon terms that Agent considers advisable, and in such cases, Agent will credit Debtor's account with only the net amounts received by Agent in payment of such disputed Accounts, after deducting all Agent Expenses incurred in connection therewith. Section 4 PROVISIONS CONCERNING INVENTORY SECTION 4.1 Locations. SCHEDULE 4.1(o) of the Credit Agreement is a true and correct list showing all states where inventory is located (except for Inventory in transit), including, without limitation, facilities leased and operated by Debtor and locations neither owned nor leased by Debtor, and showing all such places where Inventory of Debtor has been located in the past four months. Such list indicates whether the premises are those of a warehouseman or other party. No Inventory will be removed from states set forth in such Schedule except for the purpose of sale in the ordinary course of Debtor's business provided that Inventory may be moved from one location set forth in such Schedule to another in the ordinary course of Debtor's business. Debtor will promptly notify Agent of any new Inventory location. SECTION 4.2 Inventory, Books and Records. Debtor shall keep all Inventory in good order and condition and shall maintain full, accurate, and complete books and records with respect to Inventory at all times. SECTION 4.3 Inspection of Collateral. Agent may, during Debtor's usual business hours and consistent with SECTION 5.1(m) of the Credit Agreement, inspect and examine the Inventory and check and test the same as to quality, quantity, value, and condition. SECTION 4.4 Sales of Inventory. Subject to the rights of Agent upon the occurrence of an Event of Default, Debtor may sell Inventory in the ordinary course of its business (which does not include a transfer in full or partial satisfaction of indebtedness or a transfer for less than fair equivalent value). SECTION 4.5 Warehouses and Landlords. Except as set forth on SCHEDULE 4.1(o) of the Credit Agreement, Inventory is not now and shall not at any time hereafter be stored with a bailee, warehouse, or similar party without Agent's prior written consent. Section 5 -8- PROVISIONS CONCERNING EQUIPMENT SECTION 5.1 Maintenance and Repair. Debtor shall keep and maintain Equipment material to its business in good operating condition and repair and make all necessary repairs thereto so that the value and operating efficiency thereof shall at all times be maintained and preserved. Debtor shall immediately notify Agent of any material loss or damage to the Equipment. SECTION 5.2 Fixtures. Debtor shall not permit any item of Equipment that is not a fixture to become a fixture to real estate or an accession to other property without the prior written consent of Agent, and the Equipment is now and shall at all times remain personal property except with Agent's prior written consent. If any of the Collateral is or will be attached to real estate in such a manner as to become a fixture under applicable state law and if such real estate is encumbered and such encumbrance attaches to such Collateral, Debtor will obtain from the holder of each Lien or encumbrance a written consent and subordination to the security interest hereby granted, or a written disclaimer of any interest in the Collateral, in a form acceptable to Agent in its reasonable judgment. SECTION 5.3 Additional Acquisitions. Debtor shall promptly notify Agent in writing of its acquisition, by purchase, lease, or otherwise, of any material after-acquired Equipment, including a description of the Equipment and of its present locations and (if different) its intended permanent locations. Section 6 PROVISIONS CONCERNING GENERAL INTANGIBLES SECTION 6.1 Title to General Intangibles. Debtor represents and warrants that all of the General Intangibles assigned to Agent or in which Debtor grants Agent a Lien are owned by Debtor. SECTION 6.2 Intellectual Property. (a) A true and complete schedule setting forth all patents, federal and/or state trademarks, service marks, trade name or brand name registrations and copyright registrations, and all pending applications and applications (other than intent to use applications) to be filed therefore, owned or controlled by Debtor or licensed to Debtor is contained in SCHEDULE 2.1(d)(x) hereto. No licenses, sublicenses, covenants, or agreements have been entered into by Debtor in respect of any of such items, and each such item is in full force and effect, free and clear of all Liens and encumbrances of every nature, is not currently being challenged in any way, and is not involved in any pending (or, to the knowledge of Debtor, threatened) interference proceeding. (b) Concurrently with its execution and delivery of this Security Agreement and Assignment, Debtor shall execute and deliver to Agent collateral assignments of all registered -9- patents, trademarks, trade names, copyrights, and applications (other than intent to use applications) for any of them, in a form satisfactory to Agent and suitable for recording in the records of the registering authority. SECTION 6.3 Contracts and Leases. (a) SCHEDULE 4.1(o) and SCHEDULE 4.1(n) of the Credit Agreement are, respectively, true and complete lists (i) of all leases of real property and (ii) of all Material Agreements to which Debtor is a party. Debtor represents and warrants that each of the leases, contracts, and other agreements listed on such Schedules is in full force and effect; that neither Debtor nor, to Debtor's knowledge, any other party thereto is in default under or in breach of the terms or conditions of any such lease, contract, or other agreement; and that there has not occurred any event of default or event that, after the giving of notice or the lapse of time or both, would constitute a default under or breach of any such lease. (b) Debtor shall not amend, modify or supplement any Material Agreement or waive any provision thereof other than in the ordinary course of business, without the prior written consent of the Agent, which consent will not be unreasonably withheld. (c) Debtor shall remain liable to perform all of its duties and obligations under any leases, contracts, and agreements included in the Collateral to the same extent as if this Security Agreement and Assignment had not been executed, and Agent shall not have any obligation or liability under such leases, contracts, and agreements by reason of this Security Agreement and Assignment or otherwise. Section 7 OTHER PROVISIONS CONCERNING COLLATERAL SECTION 7.1 Title. Debtor has good title to the Collateral, and the Liens granted to Agent pursuant to this Security Agreement and Assignment are fully perfected first priority Liens in and to the Collateral with priority over the rights of every person in the Collateral other than the rights of Debtor and other than Permitted Liens, and the Collateral is free, clear, and unencumbered by any Liens in favor of any person other than Agent except for Permitted Liens. SECTION 7.2 Further Assurances. Debtor shall execute and deliver to Agent, concurrent with Debtor's execution of this Security Agreement and Assignment and at any time or times hereafter at the request of Agent, all financing statements, continuation financing statements, fixture filings, security agreements, chattel mortgages, assignments, endorsements of certificates of title, applications for titles, affidavits, reports, notices, schedules of accounts, letters of authority, and all other documents Agent may reasonably request, in form satisfactory to Agent, to perfect and -10- maintain perfected Agent's Liens in the Collateral and in order to consummate fully all of the transactions contemplated under the Loan Documents. Debtor hereby irrevocably makes, constitutes, and appoints Agent (and any of Agent's officers, employees, or agents designated by Agent) as Debtor's true and lawful attorney with power to sign the name of Debtor on any of the above-described documents or on any other similar documents that need to be executed, recorded, and/or filed in order to perfect or continue perfected Agent's Liens in the Collateral. The appointment of Agent as Debtor's attorney is irrevocable as long as any Secured Obligations are outstanding. Any person dealing with Agent shall be entitled to rely conclusively on any written or oral statement of Agent that this power of attorney is in effect. SECTION 7.3 Transfer of Collateral. Debtor shall not sell, lease, license, transfer, or otherwise dispose of any interest in any Collateral except for sales of Inventory in the ordinary course of its business (sales of Inventory in full or partial satisfaction of existing obligations of Debtor are not considered to be sales in the ordinary course of business) and except for sales, transfers or other dispositions permitted by SECTION 5.2(g) of the Credit Agreement. SECTION 7.4 Agent's Duty of Care. Agent shall have no duty of care with respect to the Collateral except that Agent shall exercise reasonable care with respect to the Collateral in Agent's custody. Agent shall be deemed to have exercised reasonable care if such property is accorded treatment substantially equal to that which Agent accords its own property or if Agent takes such action with respect to the Collateral as the Debtor shall request or agree to in writing, provided that no failure to comply with any such request nor any omission to do any such act requested by the Debtor shall be deemed a failure to exercise reasonable care. Agent's failure to take steps to preserve rights against any parties or property shall not be deemed to be failure to exercise reasonable care with respect to the Collateral in Agent's custody. All risk of loss, damage, or destruction of the Collateral shall be borne by Debtor. SECTION 7.5 Debtor's Contracts. Debtor shall remain liable to perform its obligations under any contracts and agreements included in the Collateral to the same extent as though this Security Agreement and Assignment had not been entered into, and Agent shall not have any obligation or liability under such contracts and agreements by reason of this Security Agreement and Assignment or otherwise. SECTION 7.6 Reinstatement of Liens. If at any time after payment in full of all Secured Obligations and termination of Agent's Liens, any payment on Secured Obligations previously made must be disgorged by Agent for any reason whatsoever (including, without limitation, the insolvency, bankruptcy, or reorganization of Debtor or any Guarantor), this Security Agreement and Assignment and Agent's Liens granted hereunder shall be reinstated as to all disgorged payments as though such payments had not been made, and Debtor shall sign and deliver to Agent all documents and things necessary to reperfect all terminated Liens. -11- SECTION 7.7 Agent Expenses. If Debtor fails to pay any moneys (whether taxes, assessments, insurance premiums, or otherwise) due to third persons or entities, fails to make any deposits or furnish any required proof of payment or deposit, or fails to discharge any Lien prohibited hereby, all as required under the terms of this Security Agreement and Assignment, then Agent may, to the extent that it determines that such failure by Debtor could have a material adverse effect on Agent's interests in the Collateral, in its discretion and with three (3) days prior notice to Debtor, make payment of the same or any part thereof. Any amounts paid or deposited by Agent shall constitute Agent Expenses, shall become part of the Secured Obligations and shall be secured by the Collateral. Any payments made by Agent shall not constitute (a) an agreement by Agent to make similar payments in the future or (b) a waiver by Agent of any Event of Default under this Security Agreement and Assignment. Agent need not inquire as to, or contest the validity of, any such expense, tax, security interest, encumbrance, or Line, and the receipt of the usual official notice for the payment of moneys to a governmental entity shall be conclusive evidence that the same was validly due and owing. Debtor shall immediately and without demand reimburse Agent for all sums expended by Agent that constitute Agent Expenses, and Debtor hereby authorizes and approves all advances and payments by Agent for items constituting Agent Expenses. SECTION 7.8 Inspection of Collateral and Records. Subject to and consistent with the provisions of SECTIONS 5.1(h) and 5.1(m) of the Credit Agreement, during Debtor's usual business hours, Agent may inspect and examine the Collateral and check and test the same as to quality, quantity, value and condition. Agent shall also have the right at any time or times hereafter, during Debtor's usual business hours or during the usual business hours of any third party having control over the records of Debtor, to inspect and verify Debtor's Books in order to verify the amount or condition of, or any other matter relating to, the Collateral and Debtor's financial condition and to copy and make extracts therefrom. Debtor waives the right to assert a confidential relationship. If any, it may have with any accounting firm and/or service bureau in connection with any information requested by Agent pursuant to this Security Agreement and Assignment and agrees that Agent may directly contact any such accounting firm and/or service bureau in order to obtain such information. Section 8 COVENANTS SECTION 8.1 Encumbrance of Assets. Debtor shall not create, incur, assume, or permit to exist any Lien on any asset now owned or hereafter acquired by Debtor, except for Liens to Agent and Permitted Liens or as otherwise provided by SECTION 5.2(c). -12- SECTION 8.2 Condition and Repair. Debtor shall maintain in good repair and working order all properties used in its business and from time to time shall make all appropriate repairs and replacements thereof. SECTION 8.3 Insurance. Debtor shall maintain, with financially sound and reputable insurers, insurance with respect to the Collateral against loss or damage of the kinds and in the amounts customarily insured against by corporations of established reputation engaged in the same or similar businesses. Each such policy shall name Agent as an additional insured and, where applicable, as loss payee under a lender loss payable endorsement satisfactory to Agent and shall provide for thirty (30) days' written notice to Agent before such policy is altered or canceled. Debtor shall provide evidence satisfactory to Agent that all such coverages are in full force and effect. Section 9 EVENTS OF DEFAULT Any of the following events shall be deemed an Event of Default or a default hereunder: (a) if default shall be made in payment or performance of any Secured Obligations as and when the same shall become due and payable after the expiration of the applicable grace period, if any; or (b) if Debtor fails to perform or observe any other term, provision, covenant or agreement of this Security Agreement and Assignment (within 15 days of Debtor's receipt of written notice or actual knowledge thereof) or in any of the Loan Instruments to which it is a party, and Debtor shall not cure such failure within the applicable grace period, if any; or (c) if there occurs an event of default under the Credit Agreement or any other Loan Instrument; or (d) if any warranty, representation, certification, financial statement or other information made or furnished at any time pursuant to the terms of this Security Agreement and Assignment, by Debtor or any Guarantor, shall prove to be materially false as of the date made. Section 10 REMEDIES SECTION 10.1 General Remedies. Upon the occurrence of any Event of Default, in addition to all other rights, powers and remedies conferred herein, in the Credit Agreement or by law, the Agent may declare the Secured Obligations immediately due, payable and performable, including -13- all principal and interest remaining unpaid on the Debtor's Notes and all other amounts secured hereby, all without demand, presentment or notice, all of which are expressly waived. The Agent shall also have, in addition to all other rights provided herein, in the Credit Agreement, or by law, the rights and remedies of Agent under the Code and applicable common law (regardless of whether the Code is the law of the jurisdiction where the rights or remedies are asserted and regardless of whether the Code applies to the affected Collateral), and further, but not by way of limitation, the Agent may take (and/or may cause one or more of its designees to take) any or all of the following actions upon the occurrence of any Event of Default: (a) Notify other parties with respect to or interested in any item of the Collateral of the Agent's interest therein or of any action proposed to be taken with respect thereto, and direct one or more of those parties to make all payments, distributions and proceeds otherwise payable to the Debtor with respect thereto directly to the Agent or its order until notified by the Agent that all the Secured Obligations have been fully paid and satisfied. (b) Require the Debtor to, and the Debtor hereby agrees that it shall at its expense and upon request of the Agent forthwith, assemble all or part of the Collateral as directed by the Agent and make it available to the Agent at a place to be designated by the Agent reasonably convenient to both parties. (c) Receive and retain all payments, distributions and proceeds of any kind with respect to any and all of the Collateral. (d) Enter any premises where any item of Collateral may be located, with or without permission or process of law but without breach of the peace, and seize and remove such Collateral or remain upon such premises and use or dispose of such Collateral as contemplated under this Security Agreement and Assignment. (e) Request the judicial appointment of a receiver respecting the Collateral or any portion thereof in any action, suit or proceeding in which claims are asserted against the Collateral by the Agent or its designee, irrespective of the solvency of the Debtor or any other person or the adequacy of any Collateral, and without notice to or the approval of the Debtor, which receiver shall have the power to manufacture, operate, sell, lease or rent such items of Collateral pending the sale of all of the Collateral and to collect the rent, issues and profits therefrom, together with such other powers as may have been requested by the Agent and shall apply the amounts received (net of all proper charges and expenses) to the Obligations as provided in this Security Agreement and Assignment. Such a receiver may serve without bond or under such minimal bond as may be required by applicable law. (f) Reduce its claim to judgment or foreclose or otherwise enforce, in whole or in part, the security interest created hereby by any available judicial procedure. -14- (g) Take any action with respect to the offer, sale, lease or other disposition, and delivery of the whole of, or from time to time any one or more items of, the Collateral, including, without limitation: to sell, assign, lease or otherwise dispose of the whole of, or from time to time any part of, the Collateral, or offer or agree to do so, in any established market or at any broker's board, private sale or public auction or sale (with or without demand on the Debtor or any advertisement or other notice of the time, place or terms of sale, except such reasonable notice of the time and place of any public sale or the time after which a private sale or other disposition may be made as may be required by the Code) for cash, credit or any other asset or property, for immediate or future delivery, and for such consideration and upon such terms and subject to such conditions as the Agent in its sole and absolute discretion may determine. The requirements of reasonable notice shall be met if such notice is mailed or delivered to the Debtor at the address designated at SECTION 12.4 at least ten (10) days before the time of the sale or disposition. The Agent may purchase (the consideration for which may consist in whole or in part of cancellation of indebtedness) or any other person may purchase the whole or any one or more items of the Collateral so sold free and clear of any and all rights, powers, privileges, remedies and interests of the Debtor (which the Debtor has expressly waived); to postpone or adjourn any such auction, sale or other disposition or cause the same to be postponed or adjourned from time to time to a subsequent time and place, or to abandon or cause the abandonment of the same, all without any advertisement or other notice thereof; and to carry out any agreement to sell any item or items of the Collateral in accordance with the terms and provisions of such agreement, notwithstanding that, after the Agent shall have entered into such an agreement, all the Obligations may have been paid and satisfied in full. Agent may dispose of the Collateral in its then existing condition or, at its election, may take such measures as it deems necessary or advisable to refurbish, repair, improve, process, finish, operate, demonstrate, and prepare for sale the Collateral and may store, ship, reclaim, recover, protect, advertise for sale or lease, and insure the Collateral. (h) Pay, purchase, contest, or compromise any encumbrance, charge, or Lien that, in the opinion of Agent, appears to be prior or superior to its Lien and pay all expenses incurred in connection therewith. (i) Agent may (i) notify Account Debtors to make payment on Accounts, and General Intangibles directly to Agent; (ii) settle, adjust, compromise, extend, or renew Accounts, or General Intangibles, either before or after legal proceedings to collect such Accounts, or General Intangibles have commenced; (iii) prepare and file any bankruptcy proofs of claim or similar documents against any Account Debtor; (iv) prepare and file any notice, assignment, satisfaction, or release of Lien, UCC termination statement, or any similar document; (v) sell or assign Accounts, and General Intangibles, individually or in bulk, upon such terms, for such amounts, and at such time or times as Agent deems advisable; and (vi) complete the performance required of Debtor under any contract or agreement to which Debtor is a party and out of which Accounts, or General Intangibles arise or may arise. Agent may use and operate Debtor's Equipment for all such purposes. -15- (j) Agent may (i) endorse Debtor's name on all checks, notes, drafts, money orders, or other forms of payment of or security for Accounts or other Collateral; (ii) sign Debtor's name on drafts drawn on Account Debtors or issuers of letters of credit; and (iii) notify the postal authorities in Debtor's name to change the address for delivery of Debtor's mail to an address designated by Agent, receive and open all Mail addressed to Debtor, copy all mail, retain copies of all mail relating to Collateral, and hold all mail available for pickup by Debtor. (k) Exercise any voting, consent, enforcement or other right, power, privilege, remedy or interest of the Debtor pertaining to any item of Collateral to the same extent as if the Agent were the outright owner thereof. (l) Take possession of and thereafter deal with or use from time to time all or any part of the Collateral in all respects as if the Agent were the outright owner thereof. (m) At the Agent's sole and absolute discretion, retain the Collateral or any part thereof in satisfaction of the Secured Obligations. (n) Transfer or cause the transfer of the ownership of all or any part of the Collateral to its own name and have such transfer recorded in any jurisdiction(s) and publicized in any manner deemed appropriate by the Agent. SECTION 10.2 Non-Judicial Remedies. In granting to the Agent the power to enforce its rights hereunder without prior judicial process or judicial hearing, the Debtor expressly waives, renounces and knowingly relinquishes any legal right which might otherwise require the Agent to enforce its rights by judicial process. In so providing for non-judicial remedies, the Debtor recognizes and concedes that such remedies are consistent with the usage of trade, are responsive to commercial necessity, and are the result of a bargain at arm's length. Nothing herein is intended to prevent the Agent from resorting to judicial process at its option. SECTION 10.3 Proceeds. The Agent shall collect the cash and non-cash proceeds received from any sale or other disposition or from any other source contemplated by SECTION 10.1, and, after deducting all reasonable costs and expenses incurred by the Agent and any person designated by the Agent to take any of the action enumerated in this Security Agreement and Assignment in connection with such collection and sale or disposition (including reasonable attorneys' disbursements, expenses and reasonable fees and the reasonable fees and expenses of any appraisers or consultants employed by Agent), the Agent in its discretion may retain the same as additional or substitute Collateral or may apply the same in accordance with the terms and provisions of this Security Agreement and Assignment. In the event any funds remain after satisfaction in full of the Secured Obligations, then the remainder shall be returned to the Debtor, subject, however, to any other rights or interests the Agent may have therein under any other instrument, agreement or document or applicable law. -16- SECTION 10.4 Application of Proceeds. Any funds received from or on behalf of the Debtor (whether pursuant to the terms and provisions of this Security Agreement and Assignment or otherwise) by the Agent shall be applied to the following items in such manner and order as the Agent may determine in its sole and absolute discretion. (a) The payment to or reimbursement for any fees and expenses for which the Agent is entitled to be paid or reimbursed pursuant to any of the provisions of this Security Agreement and Assignment. (b) The payment of accrued and unpaid interest on the Secured Obligations. (c) The payment of the outstanding principal on the Secured Obligations. (d) The payment in full of all other Obligations under this Security Agreement and Assignment. All advances and payments made pursuant to this Security Agreement and Assignment may be recorded by the Agent on its books and records, and such books and records shall be conclusive absent manifest error as to the existence and amounts thereof. SECTION 10.5 Deficiency. If the amount of all proceeds received with respect to and in liquidation of the Collateral that shall be applied to payment of the Secured Obligations shall be insufficient to pay and satisfy all of the Secured Obligations in full, the Debtor acknowledges that it shall remain liable for any deficiency, together with interest thereon and costs of collection thereof (including attorneys' disbursements, expenses and reasonable fees and the reasonable fees of any appraisers or consultants employed by Agent), and in accordance with the terms and provisions of this Security Agreement and Assignment. SECTION 10.6 Other Recourse. The Debtor waives any right to require the Agent to proceed against any other person, exhaust or marshal any Collateral or other security for the Secured Obligations, or pursue any other remedy in the Agent's power. Until all of the Secured Obligations shall have been paid in full, the Debtor shall have no right to subrogation and the Debtor waives the right to enforce any remedy which the Agent has or may hereafter have against any other party liable for the Secured Obligations, and waives any benefit of and any right to participate in any other security whatsoever now or hereafter held by the Agent. SECTION 10.7 Remedies Not Exclusive. All rights, powers and remedies conferred in this SECTION 10 are cumulative, and not exclusive, of: (i) any and all other rights and remedies herein conferred or provided for; (ii) any and all other rights, powers and remedies conferred or provided for in the Credit Agreement or in any other Loan Document; and (iii) any and all rights, powers and remedies conferred, provided for or existing at law or in equity, and the Agent shall, in addition to -17- the rights, powers and remedies herein conferred or provided for, be entitled to avail itself of all such other rights, powers and remedies as may now or hereafter exist at law or in equity for the collection of and enforcement of the Secured Obligations and the enforcement of the representations, warranties, agreements, covenants and indemnities contained in this Security Agreement and Assignment, the Credit Agreement and in any other Loan Document. The Agent, in its sole discretion, may proceed to exercise or enforce any right, power, privilege, remedy or interest that the Agent may have under this Security Agreement and Assignment, the Credit Agreement any other Loan Document, or applicable law, without notice except as otherwise expressly provided herein; without pursuing, exhausting or otherwise exercising or enforcing any other right, power, privilege, remedy or interest that the Agent may have against or in respect of the Debtor or the Collateral, or other person or thing, and without regard to any act or omission of the Agent or any other person. The Agent may institute separate proceedings with respect to this Security Agreement and Assignment in such order and at such times as the Agent may elect in its sole and absolute discretion. This Security Agreement and Assignment may be enforced without possession of any Note or its production in any action, suit or proceeding. SECTION 10.8 Equitable Relief. The Debtor acknowledges that it will be impossible to measure in money the damage to the Agent in the event of a breach of any of the terms and provisions of this Security Agreement and Assignment, and the Debtor agrees that, in the event of any such breach, the Agent will not have an adequate remedy at law, although the foregoing shall not constitute a waiver of any of the Agent's rights, powers, privileges and remedies against or in respect of a breaching party, any Collateral or any other person or thing under this Security Agreement and Assignment or applicable law. It is therefore agreed that the Agent, in addition to all other such rights, powers, privileges and remedies that it may have, shall be entitled to injunctive relief, specific performance or such other equitable relief as the Agent may request to exercise or otherwise enforce any of the terms and provisions of this Security Agreement and Assignment and to enjoin or otherwise restrain any act prohibited thereby, and the Debtor will not urge and hereby waives any defense that there is an adequate remedy of law. SECTION 10.9 License. Agent is hereby granted a license or other right to use, without charge, Debtor's patents, copyrights, trade secrets, technical processes, rights of use of any name, trade names, trademarks, labels, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral, and Debtor's rights under all licenses and shall inure to Agent's benefit. SECTION 10.10 Power of Attorney. Debtor hereby appoints Agent (and any of Agent's officers, employees, nominees, designees or agents designated by Agent) as Debtor's attorney, with power after the occurrence of an Event of Default and at any time Agent reasonably believes an Event of Default has occurred or is likely to occur with the passage of time, with respect to the various assets and properties included in the Collateral, and in addition to any other powers of attorney contained herein: (a) to take possession of and endorse (to Agent or otherwise) Debtor's -18- name on any checks, bills of exchange, notes, acceptances, money orders, drafts, or other documents, forms of payment or security received in payment for or on account of those assets and properties; (b) demand, collect and receive any monies due on account of those assets and properties and give receipts and acquittances in connection therewith; (c) negotiate and compromise any claim, and commence, prosecute, defense, settle or withdraw and claims, suits or proceedings pertaining to or arising out of those assets and properties; (d) pay any indebtedness or other liability or perform any other Secured Obligation required to be paid or performed under this Security Agreement and Assignment or the Credit Agreement by the Debtor; (e) prepare and execute on behalf of the Debtor any mortgage, financing statement or other evidence of a security interest contemplated by this Security Agreement and Assignment, or any modification, refiling, continuation or extension thereof; (f) to sign Debtor's name on drafts against Account Debtors, on schedules and assignments of Accounts, on verifications of Accounts, and on notices to Account Debtors; (g) to notify the post office authorities to change the address for delivery of Debtor's mail to an address designated by Agent, to receive and open all mail addressed to Debtor, and to retain copies of all mail relating to the Collateral and hold all mail available for pick up by Debtor; (h) to send requests for verification of Accounts; (i) take any other action contemplated by this Security Agreement and Assignment or the Credit Agreement; (j) sign, execute, acknowledge, swear to, verify, deliver, file, record and publish any one or more of the foregoing; and (k) to do all things necessary to carry out this Security Agreement and Assignment. The appointment of Agent as Debtor's attorney and each and every one of Agent's rights and powers, being coupled with an interest, are irrevocable as long as any Secured Obligations are outstanding. Any person dealing with Agent shall be entitled to rely conclusively on any written or oral statement of Agent that this power of attorney is in effect. This Power of Attorney shall survive the dissolution, reorganization or bankruptcy of the Debtor and shall extend to and be binding upon the Debtor's successors, assigns, heirs and legal representatives. To the extent permitted by applicable law, the Debtor hereby ratifies and approves all acts of any such attorney and agrees that neither the Agent nor any such attorney will be liable for any acts or omissions nor for any error of judgment or mistake of fact or law other than their gross negligence, willful misconduct or unlawful misconduct. Agent may also use Debtor's stationary solely in connection with exercising its rights and remedies hereunder and performing the Obligations of Debtor. SECTION 10.11 Expenses Secured. The Debtor agrees to pay on demand all reasonable costs and expenses, if any (including reasonable counsel, consultant and appraiser fees and expenses), in connection with the exercise and enforcement (whether through negotiations, legal proceedings or otherwise) of Agent's rights and remedies provided by this Security Agreement and Assignment, the Credit Agreement or any other Loan Document, or which by law shall be payable by the Debtor, expressly including all such costs and expenses incurred by the Agent in connection with or during the pendency of any bankruptcy or insolvency proceedings involving the Debtor or any Guarantor. All such expenses shall be part of the Secured Obligations, and shall be secured by the Collateral. -19- SECTION 10.12 Miscellaneous. The Debtor acknowledges and agrees that the rights, powers, privileges, remedies and interests conferred upon the Agent in respect of the Collateral by this Security Agreement and Assignment and applicable law are solely to enable the Agent to protect and preserve the Collateral, as well as to realize upon it in accordance with this Security Agreement and Assignment, all in such manner as the Agent in its discretion may elect, and shall not impose upon the Agent any duty or other obligation to exercise or enforce any such right, power, privilege, remedy or interest. Any exercise or other enforcement of any such right, power, privilege, remedy or interest, if undertaken by the Agent in its discretion, may be delayed, discontinued or otherwise not pursued or exhausted for any reason whatsoever (whether intentionally or otherwise). Without limiting the generality of the foregoing, the Agent shall be under no duty or obligation to protect or preserve any of the Collateral, perform any obligation or duty of the Debtor under any of the Collateral, or take any action to mitigate or otherwise reduce any damage or other loss or to otherwise collect, exercise or enforce any claim, right or other interest arising under or with respect to the Collateral, except as specifically provided in this Security Agreement and Assignment. Section 11 RIGHT OF SET-OFF SECTION 11.1 Right of Set-Off. Upon the occurrence and during the continuance of any Event of Default, the Agent hereby is authorized at any time and from time to time, without notice to the Debtor (any such notice being hereby expressly waived by the Debtor), to set-off and apply, directly or through any of its affiliates, custodians, participants and designees, any and all deposits (whether general or special, time or demand, provisional or final, or individual or joint) and other assets and properties at any time held in the possession, custody or control of the Agent and any of its affiliates, custodians, participants and designees, and any indebtedness or other amount at any time held in the possession, custody or control of the Agent and any of its affiliates, custodians, participants and designees, and any indebtedness or other amount at any time owing by the Agent or any of its affiliates or participants, to or for the credit, account or benefit of the Debtor against any and all of the Secured Obligations now or hereafter existing, whether or not the Agent shall have declared a default, accelerated the Secured Obligations or made any demand or taken any other action under this Security Agreement and Assignment, and although such Secured Obligations may be unmatured. The Debtor acknowledges that pursuant to SECTION 2.1(f) hereof it granted to the Agent a senior security interest in and to, among other things, all such deposits, assets, properties and indebtedness in the possession of the Agent's affiliates, custodians, participants and designees, and the Debtor hereby authorizes any such person to so set-off and apply such amounts at such times and in such manner as the Agent may direct pursuant to this SECTION 11.1. The Agent shall notify the Debtor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. In debiting any such account, the Secured Obligations shall be deemed to have been paid or repaid only to the extent of the funds actually available in the account notwithstanding any internal procedure of the Agent or any of its -20- affiliates, custodians, participants and designees to the contrary. The rights of the Agent under this Section are in addition to and without limitation of any other rights, powers, privileges, remedies and other interests (including, without limitation, other rights of set-off and security interests) that the Agent may have under this Security Agreement and Assignment and applicable law. Section 12 MISCELLANEOUS PROVISIONS SECTION 12.1 Delay and Waiver. No delay or omission to exercise any right shall impair any such right or be a waiver thereof, but any such right may be exercised from time to time and as often as may be deemed expedient. A waiver on one occasion shall be limited to that particular occasion. SECTION 12.2 Severability; Headings. If any part of this Security Agreement and Assignment or the application thereof to any person or circumstance is held invalid, the remainder of this Security Agreement and Assignment shall not be affected thereby. The section headings herein are included for convenience only and shall not be deemed to be a part of this Security Agreement and Assignment. SECTION 12.3 Binding Effect. This Security Agreement and Assignment shall be binding upon and inure to the benefit of the respective legal representatives, successors, and assigns of the parties hereto; however, Debtor may not assign any of its rights or delegate any of its obligations hereunder. Agent (and any subsequent assignee) may transfer and assign this Security Agreement and Assignment and deliver the Collateral to the assignee, who shall thereupon have all of the rights of Agent; and Agent (or such subsequent assignee who in turn assigns as aforesaid) shall then be relieved and discharged of any responsibility or liability with respect to this Security Agreement and Assignment and said Collateral. SECTION 12.4 Notices. Any notices under or pursuant to this Security Agreement and Assignment shall be deemed duly sent when delivered in hand or when mailed by registered or certified mail, return receipt requested, or when delivered by courier or when transmitted by facsimile, telecopy, or similar electronic medium to the following addresses: To Debtor: ASI LANDMARK, INC. c/o Analytical Surveys, Inc. 1935 Jamboree Drive Colorado Springs, Colorado 80920 Attention: Scott C. Benger Telecopy: (719) 528-5093 -21- With a copy to: Steven D. Miller, Esq. Sherman & Howard L.L.C. 633 17th Street, Suite 3000 Denver, Colorado 80202 Telecopy: (303) 298-0940 To Agent: Bank One, Colorado, N.A. 30 Pikes Peak Avenue Colorado Springs, Colorado 80903 Attention : Shaun P. McCarthy Vice President Telecopy: (719) 471-5213 With a copy to: Ted R. Sikora II, Esq. Davis, Graham & Stubbs LLP 370 Seventeenth Street, Suite 4700 Denver, Colorado 80202 Telecopy: (303) 893-1379 Either party may change such address by sending notice of the change to the other party; such change of address shall be effective only upon actual receipt of the notice by the other party. SECTION 12.5 CONSENT TO JURISDICTION. ANY LEGAL ACTION OR OTHER PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT AND ASSIGNMENT OR ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF COLORADO OR OF THE UNITED STATES LOCATED IN THE CITY AND COUNTY OF DENVER (TO THE EXTENT THAT SUCH COURTS WOULD OTHERWISE HAVE SUBJECT MATTER JURISDICTION), AND BY EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT AND ASSIGNMENT, EACH OF THE DEBTOR AND THE AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE JURISDICTION OF THOSE COURTS. EACH OF THE DEBTOR AND THE AGENT IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS SECURITY AGREEMENT AND ASSIGNMENT OR ANY OTHER LOAN DOCUMENTS. THE DEBTOR AND THE AGENT EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY COLORADO LAW. SECTION 12.6 WAIVER OF JURY TRIAL AND CERTAIN DAMAGES. EACH OF THE DEBTOR AND THE AGENT HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS SECURITY AGREEMENT AND ASSIGNMENT OR ANY OTHER LOAN DOCUMENT OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF; AND THE DEBTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE -22- LAW, THE RIGHT TO INTERPOSE ANY SETOFF OR COUNTERCLAIM OR CROSS-CLAIM IN CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM EXCEPT TO THE EXTENT THAT THE FAILURE SO TO ASSERT ANY SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM WOULD PERMANENTLY PRECLUDE THE PROSECUTION OF OR RECOVERY UPON THE SAME. NOTWITHSTANDING ANYTHING CONTAINED IN THIS SECURITY AGREEMENT AND ASSIGNMENT OR ANY OTHER LOAN DOCUMENTS TO THE CONTRARY, NO CLAIM MAY BE MADE BY THE DEBTOR AGAINST THE AGENT FOR ANY LOST PROFITS OR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (OTHER THAN WILLFUL MISCONDUCT CONSTITUTING ACTUAL FRAUD) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENTS, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND THE DEBTOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES. THE DEBTOR AGREES THAT THIS SECTION 12.6 IS A SPECIFIC AND MATERIAL ASPECT OF THIS SECURITY AGREEMENT AND ASSIGNMENT AND ACKNOWLEDGES THAT THE AGENT WOULD NOT EXTEND TO THE DEBTOR ANY ADVANCES PURSUANT TO THE CREDIT AGREEMENT IF THIS SECTION 12.6 WERE NOT PART OF THIS SECURITY AGREEMENT AND ASSIGNMENT. SECTION 12.7 Governing Law. All acts and transactions hereunder and the rights and obligations of the parties hereto shall be governed, construed, and interpreted in accordance with the domestic laws of Colorado. IN WITNESS WHEREOF, the Debtor and the Agent have executed this Security Agreement and Assignment by their duly authorized officers as of the date first above written. AGENT: DEBTOR: BANK ONE, COLORADO, N.A. ASI LANDMARK, INC. By:______________________________ By:________________________________ Shaun P. McCarthy Scott C. Benger Vice President Vice President -23- -24- EX-27 9 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS SEP-30-1998 JUN-30-1998 1,571 0 52,668 179 0 56,771 14,050 6,708 90,118 18,187 0 0 0 28,030 13,804 90,118 0 60,105 0 50,098 (115) 0 1,425 8,697 3,455 5,242 0 0 0 5,242 .84 .78
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