-----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, ULgJeGJ5UNj+zkBXoZZahyCWB8uOL8SszdOqQxP11VAR0kpvBW03FYVF5SsE9Km2 N6FGQHT6tznaEvLn2wjB9A== 0000912057-96-006470.txt : 19960416 0000912057-96-006470.hdr.sgml : 19960416 ACCESSION NUMBER: 0000912057-96-006470 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960415 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VECTRA TECHNOLOGIES INC CENTRAL INDEX KEY: 0000782379 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 911160888 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-14618 FILM NUMBER: 96547317 BUSINESS ADDRESS: STREET 1: 1010 S 336TH ST STE 220 CITY: FEDERAL WAY STATE: WA ZIP: 98003 BUSINESS PHONE: 2068742235 MAIL ADDRESS: STREET 2: 1010 S 336TH ST STE 220 CITY: FEDERAL WAY STATE: WA ZIP: 98003 10-K405 1 10-K405 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 Commission File number: 0-14618 VECTRA TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) WASHINGTON 91-1160888 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5000 EXECUTIVE PARKWAY, SUITE 500, SAN RAMON, CA 94583 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code:(510) 275-4500 Securities registered pursuant to section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- NONE NONE Securities registered pursuant to section 12(g) of the Act: COMMON STOCK (Title of Class) Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 90 days. Yes [X] No [ ] Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of voting stock held by non-affiliates of the registrant is $12,239,886 based on the closing price as quoted on the over-the-counter market on March 1, 1996. There were 7,833,527 shares of common stock outstanding as of March 1, 1996. 1 VECTRA TECHNOLOGIES, INC. 1995 ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business............................................................ 3 Commercial Nuclear Utility Market......................................... 3 DOE Nuclear Market........................................................ 4 Business.................................................................. 4 Fuel Services............................................................. 5 Waste Services............................................................ 6 Engineering Services...................................................... 7 Clients................................................................... 8 Foreign Operations........................................................ 8 Competitors............................................................... 8 Contracts................................................................. 8 Insurance................................................................. 9 Proprietary Technology.................................................... 10 Employees................................................................. 10 Government Regulation..................................................... 10 Item 2. Properties.......................................................... 12 Item 3. Legal Proceedings................................................... 12 Item 4. Submission of Matters to a Vote of Security Holders................. 12 PART II Item 5. Market for Registrants' Common Stock and Related Stockholder........ 13 Item 6. Selected Financial Data............................................. 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................. 15 Acquisition....................................................... 15 Divestitures...................................................... 15 Results of Operations............................................. 16 Liquidity and Capital Resources................................... 18 Item 8. Financial Statements and Supplementary Data......................... 21 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure........................................... 38 PART III Item 10. Directors and Executive Officers................................... 38 Item 11. Executive Compensation............................................. 41 PART IV. Item 12. Security Ownership of Certain Beneficial Owners, Directors and Executive Officers............................................... 50 Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K..... 52
2 PART I ITEM 1. BUSINESS INDUSTRY OVERVIEW COMMERCIAL NUCLEAR UTILITY MARKET Over one hundred of the world's more than four hundred operating commercial nuclear power plants are located in the United States and are owned by approximately fifty utilities. While nuclear power plant construction continues in many countries, in the United States the last newly constructed plant has been placed into operation and no new plant construction is currently anticipated. As a result, the U.S. market has shifted from new plant design and construction to the retrofit-design, maintenance, efficiency enhancement, and decommissioning of currently operating plants. This shift has resulted in an increased demand for engineered products and engineering services relating to high level waste management (dry spent fuel transportation and storage); low level radioactive waste handling and processing; and operations, maintenance and operating efficiency enhancements. The decommissioning process also requires significant management, planning and design of specifically engineered equipment for the processing, packaging, storing and transporting of high and low level radioactive waste. HIGH LEVEL RADIOACTIVE WASTE High level radioactive waste, principally spent nuclear fuel assemblies, requires specialized systems for handling, transport and storage. The U.S. government is contractually obligated through the Nuclear Waste Policy Act to take title and possession of spent nuclear fuel from utilities by 1998. Currently, plans for a permanent repository have suffered a series of delays and the U.S. Department of Energy (the "DOE") has estimated that such a facility will not be ready before 2010. Until a federally-sited interim or permanent storage facility is available for commercial spent fuel, nuclear power utilities continue to store their spent fuel in pools within the reactor plants. Most spent fuel pools were not designed to accommodate all fuel assemblies required for the life of a plant and plants must develop additional fuel storage facilities as they approach their spent fuel pool storage capacity. The Nuclear Regulatory Commission (the "NRC") has recommended dry spent fuel storage as the preferred solution to this on-site capacity requirement. The industry's preferred solution for on-site dry fuel storage calls for NRC licensed storage and transportation systems consistent with the DOE multi- purpose canister concept, which consists of canister-based systems suitable for both the storage and the transport of spent fuel. The DOE's independent development of a standardized multi-purpose canister system for receipt, storage, and transportation of spent fuel has been de-funded and legislation is pending directing the DOE to utilize NRC licensed, commercially available systems. Additionally, these NRC licensed, canister-based storage and transportation systems are required when emptying a plant's spent fuel pool during decommissioning. LOW LEVEL RADIOACTIVE WASTE Nuclear power plants, and to a lesser extent businesses, hospitals, and universities, generate and must dispose of various types of low level radioactive waste. This low level waste is primarily composed of various liquids, resins and solids generated during normal operations. Typical of this type of waste are system decontamination liquids; ion exchange resins and other filter media; and contaminated protective clothing and other solid materials. Historically, low level wastes were encased, untreated, in cementous material and disposed of at three commercially-operated shallow land burial disposal facilities for civilian low level radioactive waste in the states of Nevada, South Carolina, and Washington. The disposal facility in Nevada has been closed, and the facility in South Carolina, previously scheduled for closure in 1995, has remained open. Additional disposal/storage is at a premium due to unfavorable public opinion in the siting of new disposal facilities. In addition to fewer sites now available, stricter environmental regulations and changes in the regulations concerning the use of these previously relatively inexpensive shallow land burial sites have dramatically increased the cost to the producer for ultimate waste disposal. 3 This current situation now requires economically viable, engineered products and engineering services for the processing, recycling, volume reduction and disposal of low level radioactive wastes. Additionally, environmental protection concerns require the need for a truly stabilized waste product, since the effectiveness of previous practices of cement solidification and burial have been the subject of technical debate. SPECIALIZED ENGINEERING SERVICES, Today's energy marketplace is becoming increasingly competitive, despite the decline in construction of new plants This is the result of Congressional adoption in 1978 of the Public Utility Regulatory Policies Act that allowed Independent Power Producers (as defined in that law) to enter the market. Competition further intensified with approval of the Energy Policy Act of 1992, which opened access to the utility-owned transmission lines for bulk power purchases. The evolution from a regulated monopoly to managed competition has created an operating environment focused on low cost production techniques. Due to the high fixed cost structure inherent in nuclear power generation, nuclear utilities have become increasingly focused on implementing cost reduction programs and efficiency enhancing measures. Significant needs exist for specialized engineering services tailored to providing solutions which result in lower operating and maintenance costs. Specialized engineering services currently required by the nuclear industry consist of: (1) the design and analysis of systems, whether new or retrofitted, which are often required as a result of new regulations or, increasingly in recent years, are in response to utilities' efforts to improve operating efficiencies, reduce costs and extend operating life of plants; and (2) programmatic analysis of systems, procedures, or issues in response to regulatory, industry or economic concerns. U.S. DEPARTMENT OF ENERGY NUCLEAR MARKET The DOE's primary mission has changed since the end of the Cold War to environmental remediation, management, and restoration. At the majority of their facilities, the DOE is concerned with cleanup activities instead of weapons production. As a result, substantial demand exists in this marketplace for high level and low level radioactive waste management products and services. Many of the more than fifty DOE sites have numerous facilities that are thirty to forty years old and must be converted to new missions or transitioned to a shutdown condition. Additionally, new rules are to be issued over the next three years that will require the remaining operating facilities to meet current design, construction, operating and environmental standards. The DOE market needs are similar to the commercial market's requirements. The DOE sites contain a significant amount of spent nuclear fuel that must be conditioned and stored. The major market opportunities that exist for fuel storage and transportation are the K-Basin fuel at Hanford, the Navy spent fuel at Idaho National Energy Laboratories, and the foreign research reactor fuel at Savannah River. The DOE sites also contain vast quantities of unprocessed low level waste products stored in tanks and basins which require treatment and disposal similar to those in the commercial market. This market includes the cleanup of waste at all DOE sites and represents a major market growth area. Additionally, the revised DOE mission will create a demand for specialty engineering services, such as fire protection, seismic, quality, safety and environmental engineering. BUSINESS VECTRA Technologies, Inc. ("VECTRA" or the "Company") operates in one business segment which is the nuclear market. In this market, the Company provides high level and low level radioactive waste systems and services and specialized engineering services to commercial nuclear power plants worldwide and to the DOE in the U.S. The Company offers technology-based solutions for the maintenance and operation of commercial nuclear power plants through (1) the handling, transportation, and dry storage of high level radioactive material; (2) the packaging and transportation of low level radioactive waste; and (3) engineering analysis of mechanical, electrical, and operational systems and procedures. 4 ACQUISITIONS On January 6, 1994, the shareholders approved the purchase from affiliates of ABB Asea Brown Boveri Ltd, a Swiss company, of all of the outstanding shares of ABB Impell ("Impell"), ABB Government Services Inc. and ABB Impell Ltd, an English limited liability company. The names of the companies were changed to Impell Corporation, VECTRA Government Services Inc. ("VECTRA GSI"), and VECTRA Technologies Ltd ("VECTRA UK"), respectively. Impell Corporation merged into the Company on March 31, 1994. The primary differences in services were that Impell Corporation had significantly more employees, broader geographical coverage and provided services to more utilities having nuclear plants than the Company had previously. In addition, VECTRA GSI provided engineering services to the DOE market and its major prime contractors, while VECTRA UK provided engineering services to the government-owned nuclear utilities in the United Kingdom, as well as the offshore oil industry. DIVESTITURES On June 30, 1995, the Company sold all of the outstanding shares of Plant Services, Inc. ("Plant Services"), its chemical cleaning and chemical decontamination business to Westinghouse Electric Corporation. On March 21, 1996, the Company signed a letter of intent that could lead to Duke Engineering & Services, Inc. ("DE&S") acquiring VECTRA's engineering services operations (including VECTRA GSI). The proposed sale is contingent on negotiation and execution of a definite purchase agreement, government approvals, approval of VECTRA's shareholders and DE&S's board of directors, and other conditions. As of April 1, 1996, the Company actively entered into discussions that could lead to the sale of VECTRA UK. FUEL SERVICES The fuel services operations of the Company provides design, licensing, procurement, fabrication, sale and leasing of equipment for handling, transporting, and storing spent fuel and high level waste. The primary products and services provided by the Company are (1) dry storage and transport systems for spent nuclear fuel and (2) transportation packaging for high level radioactive material. DRY STORAGE. The spent fuel storage pools at many nuclear power plants are at or near capacity, and federal government efforts to develop temporary and permanent repositories have been continually delayed by strong opposition. On-site dry spent fuel storage systems offer operators of nuclear power plants a short-term (up to 40 years) solution for storage of spent fuel until government repositories are built. Dry storage systems can be built, operated and maintained at substantially less cost than reactor storage pools and related support systems and structures. The Company owns and licenses a system for the dry storage of spent nuclear fuel, marketed under the trade name NUHOMS-Registered Trademark- (NUtech HOrizontal Modular Storage), that has been licensed by the NRC for the sites at which it has been constructed. The Company received a general non-site specific license for NUHOMS-Registered Trademark- from the NRC in 1995. The NUHOMS-Registered Trademark- system is an on-site system that integrates a concrete storage facility with horizontally placed stainless steel canisters containing spent fuel assemblies. NUHOMS-Registered Trademark- systems are fabricated and constructed by selected subcontractors to the Company's design specifications. NUHOMS-Registered Trademark- systems are currently in use at Carolina Power and Light's H. B. Robinson Plant, Duke Power Company's Oconee Station, Baltimore Gas and Electric's Calvert Cliffs Plant and Toledo Edison's Davis Besse Plant. Further, the Company is under contract with the Sacramento Municipal Utility District, GPU Nuclear Corporation and Pennsylvania Power and Light to provide NUHOMS-Registered Trademark- systems and services to their plants. VECTRA also was awarded the contract to provide a modified NUHOMS-Registered Trademark- system to provide spent fuel storage of the failed Three Mile Island, Unit 2, fuel canisters at the Idaho National Engineering Laboratories. This is the first application of a commercially licensed system at a DOE site. 5 VECTRA has entered into a license agreement for the use of NUHOMS-Registered Trademark- technology with Framatome for storage systems in Europe, Eastern Europe, and Taiwan and agreements for materials, fabrication and delivery of NUHOMS-Registered Trademark- systems with Hyundai and Kawasaki in South Korea and Japan, respectively. The Company received fees upon execution of these agreements and will receive payments upon production and sale of each NUHOMS-Registered Trademark-system. The Company will also provide specific design engineering support on a fee basis as NUHOMS-Registered Trademark- systems are customized to specific client needs. VECTRA anticipates that it will execute its first application of the license with Framatome for supply of NUHOMS-Registered Trademark- technology to Armenia in 1996. TRANSPORTATION CASKS. The Company owns and leases, on a project specific basis, two rail mounted transportation casks for shipping spent nuclear fuel. The Company also custom designs, obtains licenses and fabricates, through subcontractors, transportation casks used to ship high level radioactive materials. The Company sells or leases these casks to its customers for their independent use or provides casks in conjunction with the performance of radioactive materials management and transportation services. The Company is currently under contract with the Sacramento Municipal Utility District to build a railcar-mounted cask for the transport of NUHOMS-Registered Trademark- canisters as part of the project to decommission that utility's Rancho Seco plant. The contract was awarded in late 1992. VECTRA licenses and sells transportation overpacks, UX-30's, to ship uranium hexafluoride. The UX-30 is an NRC - licensed (for 5 years) transport package used by fuel vendors to ship the uranium hexafluoride needed to produce nuclear fuel. The Company designs custom integrated handling and transportation systems to move low level and high level radioactive waste. The Company has also supplied remote controlled systems to the DOE to handle high level waste. Most of the Company's work for the DOE has been through subcontracts with corporations which operate the DOE's nuclear facilities. Custom designed equipment has been developed for ultimate use at the Savannah River Plant, Idaho National Engineering Laboratory and Hanford Engineering Development Laboratory. WASTE SERVICES The waste services operations of the Company is targeted at assisting utilities and the DOE in the processing and disposal of certain types of low level radioactive waste such as resins, liquids and sludges. The Company's patented dewatering equipment minimizes waste volume and reduces the costs of disposal. VECTRA has also placed into operation at six plants in the U.S. its liquid volume reduction system that dries liquid waste streams, such as evaporator concentrates, to a dry powdered form. VECTRA is also supplying similar units to a client in South Korea for use at their existing operating plants and plants under construction. The Company also provides, separately or in conjunction with these processing services, disposable, high integrity containers ("HICs") for transporting and disposal of these wastes. VECTRA's HICs are proprietary containers licensed by the state regulators responsible for both the South Carolina and Washington disposal sites and by the DOE for use at the Savannah River site. Together these systems significantly reduce waste volumes and the transportation and disposal costs associated with low level waste. The scope of the Company's contracts range from handling a customer's radioactive waste management needs on a specific service basis to providing all services required to process and package low level radioactive waste and transport it to a disposal site. VECTRA has developed a reverse osmosis system to provide advanced liquid waste treatment. The reverse osmosis technology uses filtration to remove particulate and organic materials. When coupled with the liquid volume reduction system units, VECTRA's reverse osmosis system can remove radioactive contaminates from the liquid and significantly reduce the waste volume without generating a secondary waste stream of contaminated resin. This technology is currently being applied at Commonwealth Edison. At December 31, 1995, the Company had more than fifteen service contracts with utilities to provide services and equipment required to treat, package and dispose of their radioactive resins, liquids and sludges. The Company also provides waste services and technologies to other utilities in connection with the handling of low level waste in their plants. 6 In December 1994, VECTRA received a notice of allowance from the U.S. Patent and Trademark office to use the EnviroGlass-Registered Trademark- trademark for its vitrification system. This thermal treatment process destroys the organic component of the waste stream, significantly reducing the volume of low level radioactive waste and stabilizes the remaining inorganic material in a glass matrix. In late 1994 VECTRA completed a technology development demonstration of the EnviroGlass-Registered Trademark- vitrification system in a cost-shared effort with Westinghouse Hanford. The demonstration proved the feasibility of the system to successfully process low level waste. VECTRA then entered into a significant capital program to commercialize this technology. The vitrification unit was able to process the waste, however, additional design is required to increase the waste streams processed by the system to make it more economically beneficial in the marketplace. The project's construction and startup activities have been temporarily suspended until a contract is procured to provide funding to rework the system to increase its volume throughput and provide a revenue stream for its deployment. The required systems rework includes upgrading the air polution control system and the thermo oxidizer system. The expected cost to complete the unit is approximately $1.0 million. The Company is pursuing contracts to demonstrate this new technology for use in government waste remediation programs and commercial contracts for processing of low level radioactive waste prior to on-site interim storage. It is expected that this technology will take a more prominent role in VECTRA's mix of services in the future. ENGINEERING SERVICES The Company currently offers systems engineering and analysis, structural engineering and analysis, nuclear engineering, and design and analysis of instrumentation, electrical and mechanical systems. The Company also provides services to clients needing upgrades to their management information systems and other operations and maintenance programs. The following identifies the five primary engineering service areas, together with a listing of some specific activities in such areas, that VECTRA provides to its clients:
MECHANICAL SYSTEMS ELECTRICAL/INSTRUMENTATION & CONTROL - --------------------------------------- ---------------------------------------- Erosion/Corrosion Electrical Distribution System Analysis Environmental Equipment & Qualification Instrumentation & Control System Engineering Thermal Hydraulic Studies & Analysis Plant Performance Evaluations Electrical/Instrumentation & Control Plant Energy Efficiency/Energy Management Modifications Repowering/Uprates Process Control Automation Mechanical Systems Design & Analysis Service Water System Upgrades ENGINEERING ANALYSIS ------------------------------------------- Clear Air Act Compliance Piping Analysis Seismic Equipment Qualification OPERATIONS Civil/Structural Engineering - ---------------------------------------- Seismic Engineering Life Cycle Management Applied Mechanics/Materials Engineering Materials Management Fracture Mechanics Maintenance Engineering Configuration Management RISK MANAGEMENT Licensing Support ------------------------------------------- Valve Services Fire Protection System Design and Evaluation Radiation Protection Program Development Fire Hazards Analysis Weld Overlay Services Individual Plant External Event Evaluation ASME Section II Inservice Inspection/Inservice Program Development Testing Programs Process Safety Management Process Re-engineering Risk Management Prevention Plans
7 CLIENTS The following identifies clients that accounted for more than 10% of the Company's revenues, the revenues derived from those clients and the percentage such revenues constitute of the Company's total revenues, during the periods indicated (dollars in thousands):
FISCAL YEARS ENDED ----------------------------------------------- DECEMBER 31, JANUARY 1, DECEMBER 31, Client 1995 1995 1993 - --------------------------- --------------- -------------- ------------- Commonwealth Edison Company $24,469 19.8% $26,828 19.2% $9,333 14.4% Entergy Operations, Inc. -- -- -- -- $7,352 11.4%
While the Company performs continuing services for its clients, billings to a particular client may fluctuate dramatically depending upon the status of a particular project. Depending upon the timing and size of contracts, the identities of the Company's largest clients may change from year to year. FOREIGN OPERATIONS The Company competes in certain international markets, principally Canada, South Korea, Taiwan, and Europe. The Company's international projects currently are primarily involved with plant maintenance and waste handling services and engineering services to the government-owned nuclear utilities in the United Kingdom, as well as the offshore oil industry. In addition, in the past the Company has sold containers and handling equipment for export. International revenues were approximately $10.3 million in 1995, $12.1 million in 1994, and $7.9 million in 1993. The Company's operations in foreign countries are subject to the laws and regulations of such countries. U.S. export restrictions limit the Company's ability to export some of its products and services. There is no assurance that the levels of foreign operations attained in 1995 will be repeated in 1996. As of April 1, 1996, the Company actively entered into discussions that could lead to the sale of VECTRA UK. COMPETITORS The Company's competition varies by business unit. VECTRA Fuel Services' major competitors include Sierra Nuclear Corporation, Holtec International, and Nuclear Assurance Corporation. VECTRA Waste Services competes primarily with Waste Management's Chem-Nuclear Systems and Westinghouse SEG. The engineering businesses compete against large and small engineering services firms: Key competitors include Bechtel, Black & Veatch, Sargent & Lundy, Raytheon, and Stone & Webster. The Company competes on the basis of price, range of service, technical expertise, success in obtaining licenses, quality and responsiveness to customer needs. Several of these competitors have substantially greater financial and technical resources than the Company. CONTRACTS Most of the Company's contracts are awarded by a competitive process in which a number of firms submit proposals in response to a client's request for proposals to provide specified products or services. Each of the Company's contracts is negotiated independently and varies as to profitability. In entering into contracts with its clients the Company considers, among other factors, the relative profitability of the contract as well as the long-term goals of the Company in securing the contract. Typically, all contracts, including the Company's material contracts, are subject to termination for convenience upon 30 days written notice by the client or the Company. Payments under engineering contracts are based on fee schedules for its engineering and other staff, plus costs and materials. Engineering contracts are often short-term, specific task contracts, while contracts for NUHOMS-Registered Trademark- or low level waste systems may be multi-year, multi-million dollar contracts. In some instances, such contracts require use of the Company's working capital to fund a portion of the design and fabrication of products or the provision of services. The Company seeks progress payments in 8 each contract, but the timing and amount of such payments varies with each contract and is contingent upon schedule commitment. In the course of contract negotiations, the Company endeavors to limit its liability for indemnity claims and warranty items and to specifically exclude responsibility for any incidental and consequential damages. INSURANCE The Company's liability insurance issues can generally be grouped into the following three categories: general liability insurance, professional errors and omissions, and nuclear-related incidents. The Company's general liability insurance, which relates primarily to property damage and personal injury incidents, is composed of two components. VECTRA self-insures the first $1 million of any general liability damages. The Company also maintains an excess liability insurance policy in the amount of $10 million. Three types of incidents are excluded from the Company's general liability insurance: those relating to errors and omissions (relating principally to engineering design work), nuclear incidents, and pollution/environmental damages. The Company does not carry errors and omissions insurance for its professional engineering liability. In the course of negotiations with a client, the Company endeavors to have errors and omissions insurance deleted from the requirements of the contract. If required by a client, the Company will endeavor to purchase an errors and omissions policy specific to such contract. In these cases, the Company endeavors to limit its liability for errors and omissions to the insured amount, share the deductible portion with its client, and pass the cost of such insurance to its clients. The Company's self-insurance coverage, if amended by the Company, could be applied to the settlement of any errors and omissions claims. In general, nuclear incidents are covered under insurance carried by and provided to operators of nuclear plants. Nuclear incidents are those in which radiation exposure is potentially created. Under the "nuclear facility form" insurance carried by all U.S. commercial nuclear utilities, coverage for nuclear incidents is provided to contractors, such as VECTRA, performing work on nuclear facilities. American Nuclear Insurers, a pool of domestic and mutual insurers, provides coverage for up to $200 million per site in claims. Pursuant to the Price-Anderson Amendment to the Atomic Energy Act of 1954 ("Price-Anderson"), additional coverage is provided through a resource pool contributed to by the U.S. government and utilities. The Price-Anderson program is estimated to provide approximately $9 billion in additional coverage. In certain circumstances, transporters of radioactive waste are covered by separate coverage. American Nuclear Insurers provides $10 million of coverage in these circumstances. In situations where no intermediary is involved in the transportation of such waste, incidents are covered under the nuclear facility form (subcontracting does not remove a party from the nuclear facility form). However, when an intermediary is introduced into the transportation process, the facility form coverage is no longer applicable. While the Company does have transporters and shippers coverage, management believes that nearly all of its involvement in transporting waste (for which the Company subcontracts to transporting companies) is covered by the nuclear utility facility form. Internationally, VECTRA's activities have generally been limited to operations in Canada, South Korea, Taiwan and Europe. The Company has contractual arrangements that may expand sales of its NUHOMS-Registered Trademark- systems, involving the storage of high level radioactive waste, in Japan, South Korea and Europe. In general, Japan, South Korea and countries in Europe impose liability for nuclear incidents on the operators of nuclear facilities, and require an operator of a nuclear facility to provide certain minimum coverage. Many European countries have executed the Paris/Brussels Conventions (1960-1963), an international treaty relating to coverage for nuclear incidents that provides for additional coverage for claims through special drawing rights (representing up to approximately $420 million) on countries that are parties to the convention. The Paris/Brussels Conventions also establish uniform systems to handle inter-country nuclear damage and resulting claims. The Paris/Brussels Conventions provides coverage for nuclear incidents to contractors, such as VECTRA, performing work on nuclear facilities. 9 Under the laws of Japan, South Korea and Canada, the operator of a nuclear reactor is liable, irrespective of fault, for damages caused as a result of operation of a nuclear reactor. Contractors of the reactor operator are generally not liable for damages, except where the damages are caused by malicious or deliberate acts. Where damages are caused in the transport of radioactive waste generated by a nuclear reactor, the operator from whose facility the material is being shipped is liable for the damages unless otherwise agreed in writing. The Company's policy is not to agree to this type of exposure. The operator must carry specified amounts of insurance for damages, with the amounts of coverage varying from country to country. In each of the three countries, the government provides protection in excess of the required insurance through nuclear indemnification or other means. PROPRIETARY TECHNOLOGY The Company's policy is to seek patent protection for those features of its products with a design utility of sufficient length to warrant the cost of seeking a patent. While most of the technology relied on by the Company is unpatented, it is regarded by the Company as proprietary and confidential. In December 1994, VECTRA received a notice of allowance from the U.S. Patent and Trademark office to use the EnviroGlass-Registered Trademark- trademark for its vitrification system. This thermal treatment process reduces the volume of low level radioactive waste and stabilizes the remaining radioactive metals in a glass matrix. The Company has patented its NUHOMS-Registered Trademark- dry storage systems for spent nuclear fuel discharged from commercial nuclear power plants and its resin drying technology for low level waste processing. The Company also has a patent pending for its WEAR-TM- (Wire Energy Absorbing Rope) Pipe Restraint which is designed to absorb seismic and other vibrations at industrial facilities and nuclear power plants. Most of the Company's employees have entered into confidentiality agreements with the Company restricting the employee's disclosure and use of the Company's proprietary information. NRC regulations require the technical specifications and supporting data of each design submitted for NRC approval to be available for public inspection, unless the NRC determines that a design or certain features thereof constitute proprietary information, in which case public access to the proprietary information is not permitted. The Company has and will continue to seek such proprietary treatment of certain features of its designs submitted to the NRC. Parties, including competitors, may challenge administratively and judicially the staff's determination that the designs are proprietary and thus entitled to confidential treatment. Although the Company maintains that most of its technical drawings and designs are unpublished works protectable by copyright and trade secret laws, these contentions have never been tested judicially. There is no assurance that the Company will be able to maintain confidentiality of its NRC approved designs or prevent competitors from copying such designs. At least two of its competitors have obtained NRC approval to market casks based on a Company designed cask. The Company's research and development strategy consists of adapting its custom designed products and systems funded by individual customers for broader market applications and internally funded research and development expenditures. In 1993, 1994 and 1995, the Company spent approximately $500,000, $1.6 million, and $3.3 million respectively, on Company-sponsored research and development. Except for government contracts, the Company usually retains exclusive rights to customer funded technology to the extent it is proprietary. EMPLOYEES At December 31, 1995, the Company had approximately 872 employees of which approximately 58% have an engineering background or degree. The Company is dependent upon obtaining and retaining highly skilled and motivated personnel. As noted above, most employees are required to sign confidentiality agreements restricting their ability to disclose or use the Company's proprietary information. GOVERNMENT REGULATION In the United States, the NRC administers a regulatory program which affects nearly every aspect of the Company's operations. The Department of Transportation, the Environmental Protection Agency, some states, localities and other federal agencies also regulate aspects of the Company's business. Regulatory changes with significant business impact 10 have occurred with some frequency in the industry. The nuclear industry in general, and the handling, disposal and transportation of radioactive waste in particular, have sometimes been the subject of intense political and legal action. While the Company attempts to anticipate changes in the regulatory, political and legal environment in which it operates, it is not always able to do so and such changes could render the Company's products and its methods of doing business obsolete or require extensive modification. To the best of management's knowledge, the Company is in compliance in all material respects with regulatory requirements applicable to its business. FEDERAL REGULATION The Company must obtain a Certificate of Compliance from the NRC for each type of cask it sells or leases and any modifications to such casks. Among other requirements, applicants for a Certificate of Compliance must provide the NRC: (1) a description of the cask design (including manufacturing specifications); (2) a quality assurance program to assure that the cask will be constructed in accordance with such design and; (3) a safety analysis report documenting the simulation of various types of transportation accidents. A Certificate of Compliance is effective for five years; however, the NRC has the authority at any time to review a Certificate of Compliance and modify or cancel it based on safety considerations. Once issued, the design and construction procedures for an approved container may not be modified without the consent of the NRC. The NRC also requires the Company to maintain approved quality assurance programs for its equipment systems. The Company also files, for approval from the NRC, topical reports detailing the performance characteristics of various equipment. The Company must comply with the extensive transportation regulations promulgated by the Department of Transportation and the NRC concerning the packaging, handling, labeling and routing of radioactive materials. The regulations also set forth detailed safety and equipment standards as well as requirements covering training, quality control, insurance and other matters. Federal law establishes that each state is responsible for managing most of the low level radioactive waste generated within the state. To assist states in managing their low level waste, the Low-Level Radioactive Waste Policy Act of 1980 (as amended in 1985) encourages states to form regional state compacts for the establishment of regional disposal facilities. Despite the enforcement provisions of the amended act (e.g., milestone and surcharges), no new regional low level waste disposal facilities have yet been constructed. The Hanford, Washington disposal site is only open to generators in the Northwest Compact and the Barnwell, South Carolina site is open to generators nationwide. Low level radioactive waste generators may utilize volume reduction methods that will allow for the generated waste to be stored at the generator's site for an indefinite period of time. These new developments in the management of low level radioactive waste and additional actions that may be taken by Congress and the courts will be closely followed by the Company to determine the effect they will have on its business. STATE REGULATION Although the Company does not operate radioactive waste disposal sites, regulations governing those sites do affect its business. The NRC has issued regulations requiring the disposal of substantially all low level radioactive waste by transfer to licensed recipients. There are currently two sites licensed to accept low level waste. These are in Barnwell, South Carolina and Hanford, Washington. South Carolina and Washington regulate the low level radioactive waste disposal sites located within their borders including approval of the HICs and solidification and stabilization processes used to bury wastes. As part of the approval process, the NRC reviews the application and provides comments to the state. 11 The Company's decontamination and chemical cleaning activities and, more recently, its transportation cask leasing activities make it desirable for the Company to maintain a license for the possession and use of radioactive materials. The Company currently holds such a license in the state of South Carolina. Possession of these licenses requires compliance with the radiation protection rules and regulations of these states as well as the NRC. Violation of the rules in the handling or storage of radioactive materials at a licensed facility could result in a fine or the license being revoked. Certain states also regulate the shipment of radioactive materials. Some localities have attempted to regulate radioactive waste shipments as well and to prohibit such shipments through their jurisdictions. Such state and local government actions have at times affected a portion of the Company's business, although the Company believes that it is able to operate in compliance with the requirements imposed. If such regulations proliferate, they could have a material adverse affect on the Company. OTHER REGULATORY CONCERNS Several states have adopted laws prohibiting or limiting the construction of nuclear power plants or waste disposal sites or both, and referenda to close existing plants have been attempted. The NRC has proposed regulations which would tie the granting of new licenses for nuclear reactors to the resolution of problems in the disposal of high level radioactive wastes. In addition, several power companies have canceled plans for, delayed the construction or operation of, or shut down operating nuclear power plants. The future operating results of certain of the Company's operations could be adversely affected if, as a result of these or other developments, nuclear power plants which are presently in service are removed from service. The Company is subject to federal, state and local regulations limiting exposure of its employees and the public to radioactive materials and to the chemicals used in the cleaning and decontamination processes. The standards imposed have been made more stringent in recent years. ITEM 2. PROPERTIES As of December 31, 1995, the Company leases approximately 250,675 square feet of office and warehouse space which constitutes most of its facilities. It owns facilities comprising 3,600 square feet. Management believes the Company's facilities are adequate, suitable for its present needs, and will continue to periodically review its leased facilities for economic optimization. The Company's headquarters are at 5000 Executive Parkway, Suite 500, San Ramon, CA 94583. ITEM 3. LEGAL PROCEEDINGS The Company is involved in contractual, personal injury and general liability cases and claims which are considered normal to its business. In the opinion of Company management, none of these claims will have a material adverse effect on the Company. However, an unfavorable outcome could materially impact the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable 12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded over-the-counter on the NASDAQ Stock Market, National Market System, under the symbol VCTR. The following table sets forth the range of the high and low bid prices for the Company's Common Stock from First Quarter 1994 through Fourth Quarter 1995 as reported by NASDAQ.
1995 1994 ----------------- ----------------- PERIOD HIGH LOW HIGH LOW ------ ----- ----- ------ ----- First Quarter 3-1/2 2-7/8 10-1/4 7-1/2 Second Quarter 3-3/8 2-3/8 8-1/4 3-3/4 Third Quarter 3-25/32 2-5/8 4-7/8 3-3/8 Fourth Quarter 2-7/8 1-7/8 3-7/8 2-1/2
At December 31, 1995, the Company had 7,833,527 shares of Common Stock issued and outstanding and 323 known shareholders of record. The Company has not paid dividends on its Common Stock and does not expect to pay dividends in the foreseeable future. 13 ITEM 6. SELECTED FINANCIAL DATA VECTRA TECHNOLOGIES, INC. FINANCIAL HIGHLIGHTS (Amounts in thousands, except per share amounts)
1995 1994 1993 1992 1991 -------- -------- ------- ------- ------- FOR THE FISCAL YEAR: Revenues $123,501 $140,023 $64,581 $68,989 $66,423 Income (loss) before income taxes (12,103) (5,175) (296) (1,672) 1,731 Net income (loss) (12,213) (5,325) (546) (1,827) 1,561 Net income (loss) per share $ (1.56) $ (.68) $ (.09) $ (.32) $ .28 Weighted average shares outstanding 7,840 7,802 5,909 5,653 5,618 AT YEAR END: Total assets $ 60,829 $ 84,165 $43,881 $38,102 $38,609 Long-term debt 17,216 8,617 1,514 1,309 2,023 Shareholders' equity $ 17,386 $ 29,800 $19,073 $18,770 $19,015
14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Item 1. Business". ACQUISITION On January 6, 1994, the Company's shareholders approved the purchase of all of the stock of ABB Impell Corporation, ABB Government Services, Inc. and ABB Impell Ltd. (the "Impell Companies") from affiliates of ABB Asea Brown Boveri Ltd. of Zurich, Switzerland (the "Seller"). The acquisition, effective as of midnight December 31, 1993, was completed on January 7, 1994, and was accounted for as a purchase in 1994. The purchase price of $32.3 million, together with the direct costs of the acquisition were allocated to the fair market value of the assets acquired and liabilities assumed. The seller received $14.0 million in common stock (1,714,503 shares) and the remainder of the purchase price in cash. Immediately following the acquisition, the Company commenced integration of the U.S. commercial engineering services of the predecessor companies into one organizational unit. Operations were combined and are managed as a single entity. Due to this integration, management is unable to assess the separate performance of the Impell Companies' domestic engineering services (or the Company's engineering services prior to the acquisition) compared to prior periods. DIVESTITURES Effective June 30, 1995, the Company sold all of the outstanding capital stock of its wholly owned subsidiary, Plant Services, to Westinghouse Electric Corporation. The sale price was $17.4 million after final adjustments including environmental remediation and earnout provisions. The proceeds from the sale were used to reduce notes payable and long-term debt payable to banks, pay retained liabilities, and pay expenses associated with the transaction. For the six months ended June 30, 1995, Plant Services generated revenues of approximately $11 million and operating income of approximately $4 million. In September 1995 the Company sold its 10% ownership in Recytec America, Inc. to Recytec, S.A. for $1.15 million resulting in a loss of $156,000 which is included in selling, general and administrative expense. These shares had been issued to VECTRA in connection with the sale of Alaron Corporation to Recytec S.A. in August 1991. On March 21, 1996, the Company signed a letter of intent that could lead to Duke Engineering & Services, Inc. acquiring VECTRA's Engineering Services (including VECTRA GSI). The proposed sale is contingent on negotiation and execution of a definite purchase agreement, government approvals, approval of VECTRA's shareholders and DE&S's board of directors, and other conditions. If the sale is consummated under this letter of intent, the Company expects to receive approximately $27.5 million in cash subject to adjustment for the net book value of the assets ultimately sold. As of April 1, 1996, the Company actively entered into discussions that could lead to the sale of VECTRA UK. 15 RESULTS OF OPERATIONS 1995 COMPARED TO 1994 REVENUES Total revenues decreased 11.8% to $123.5 million in 1995, from $140.0 million in 1994. The decrease in revenues for the year is attributable to the sale of the Plant Services operations, decrease in nuclear engineering activity, and lower sales in the waste services operations relating to the completion of a large contract with a client in South Korea during 1994; offset in part by higher revenues from a spent fuel storage system contract. The nature of the Company's business is such that a single client may account for more than 10% of the Company's revenues during any year. The Company had one client that accounted for approximately 20% of total revenues in both 1994 and 1995. GROSS PROFITS Each of the Company's contracts is negotiated independently and varies as to profitability. The timing and actual performance by the Company on its major contracts also affect the Company's gross profit margin. Gross profit decreased to 27.6% of revenues in 1995 from 32.6% of revenues in 1994. The lower gross profit in the engineering services operations is due to competitive pricing pressures. Plant Services, prior to disposition in June 1995, and fuel services experienced a slight decrease, while waste services experienced a slight increase in gross margin percent due to the relative profitability of individual contracts. EXPENSES Research and development expenses increased 104.6% to $3.3 million in 1995 from $1.6 million in 1994. The increase is mainly due to expenses related to the Company's development of its vitrification process, EnviroGlass-Registered Trademark-. Selling, general and administrative expenses decreased 16.9% to $38.2 million in 1995 from $46.0 million in 1994 and, as a percentage of revenue, decreased to 30.9% in 1995 from 32.8% in 1994. The decrease is primarily due to decreased severance related costs and lower ongoing staff levels. Net interest expense increased $400,000 as a result of bank fees and the amortization of warrant related debt discount offset by decreases in the loan balances resulting from the sale of Plant Services. Interest expense includes interest on the term loan and the revolving credit facility as well as amortization of bank fees and warrant-related debt discount. Based upon negotiations management has conducted subsequent to December 31, 1995, and the DE&S letter of intent regarding the potential sale of certain assets of the Company, the Company wrote down intangible assets consisting primarily of costs in excess of net assets acquired by $12.8 million to their estimated fair value. Actual amounts realized if these assets are sold may differ from management's estimates of fair value and such differences could be material to the financial statements. The Company periodically reviews its property, plant and equipment for impairment in the value of these assets. As a result of this review, the Company wrote off assets with carrying values of approximately $1.5 million. NET LOSS The net loss increased 129.4% to $12.2 million in 1995 from $5.3 million in 1994. The increase is due to increased research and development costs, the writedown of plant, property and equipment and intangibles, and decreased revenues offset by a gain on the sale of Plant Services business. 16 1994 COMPARED TO 1993 REVENUES On a pro forma basis for the combined Company, as discussed in Note 6 to the consolidated financial statements, revenues decreased 17% to $140.0 million for 1994 from the pro forma combined $170.0 million in 1993. The Company experienced the effects of an industry-wide trend by utilities to reduce or defer spending. This combined with integration issues resulting from the combination of the predecessor companies, has contributed to the decrease in revenues. In 1993 the Company had two clients that in the aggregate accounted for 26% of total revenues. GROSS PROFITS Gross profit decreased to 33% of revenues in 1994 from 34% of revenues in 1993. Engineering services' gross margin percent remained fairly constant while plant and fuel services experienced a slight decrease and waste services experienced a slight increase in gross margin percent due to the relative profitability of individual contracts. During 1994 gross profit dollars increased due to the overall increase in revenue compared to 1993. EXPENSES Research and development expenses increased 242% in 1994 compared to 1993. The increase is mainly due to expenses related to the Company's development of its vitrification process, EnviroGlass-Registered Trademark-. Selling, general and administrative expenses increased $28 million and, as a percentage of revenues, increased from 28% to 33% for 1994 compared to 1993. The increase was primarily attributable to the increased size of the combined Company, increased goodwill amortization expense resulting from the Impell acquisition, and severance-related costs that were recorded in the second and fourth quarters of 1994. Utilization rates for engineering services were lower than expected during 1994 primarily due to organizational changes, lower demand for engineering services by commercial nuclear utilities, and resulting excess capacity which contributed to increased overhead expenses. Actions were taken during the second quarter of 1994 to reduce management overhead and operating costs, including a temporary reduction in employee compensation during portions of the second and third quarters and a cessation of director compensation from June to the end of 1994. Severance costs related to the reduction in management personnel which resulted from downsizing two offices and combining two other offices, when combined with provisions for severance payments to the former president and chief executive officer, resulted in aggregate charges to earnings of approximately $950,000 in the second quarter of 1994. Management further reduced personnel in the fourth quarter of 1994 to adjust for the lower demand for engineering services by commercial nuclear utilities. This reduction resulted in additional charges to earnings of approximately $1,500,000. Management also wrote off equipment and intangible assets with impaired value that resulted in charges to earnings of approximately $750,000 in the fourth quarter of 1994 due primarily to the non-renewal of a lease with a client and reduced expectations for low level waste transportation in Europe. Net interest expense increased significantly in 1994 from 1993 as a result of the debt incurred to finance the acquisition of the Impell Companies. Interest expense includes interest on the term loan and the revolving credit facility as well as amortization of bank fees and warrant-related debt discount. RESTRUCTURING EXPENSE In the fourth quarter of 1993, the Company recorded a restructuring charge of $2.5 million resulting principally from the Company's acquisition of the Impell Companies. The charge included accrued costs resulting from integrating the two companies (the Company and the Impell Companies) including approximately $800,000 of employee-related expenses, $600,000 for administrative and project management systems integration and $500,000 for other administrative and legal expenses. The charge also reduced the valuation of certain fixed and intangible assets by approximately $600,000 to reflect the new strategic focus of the Company. In the year ended January 1, 1995, the Company has incurred charges of approximately $815,000 for employee-related expenses, $400,000 for administrative and project management systems integration, $400,000 for other administrative charges and 17 $575,000 for adjusted asset valuation. The Company also reduced the estimate of total restructuring charges by approximately $310,000, which is reflected in the statement of operations as a credit of $180,000 in the first quarter, $50,000 in the second quarter and $80,000 in the third quarter of 1994. All of the accrued costs have been incurred or reversed in 1994. Cash needs for these expenditures were met from operations and borrowing under the Company's revolving credit facility. NET LOSS Net loss increased to $5.3 million in 1994 from a loss of $500,000 in 1993. The increase in loss was due primarily to increased overhead costs from lower utilization rates in domestic engineering services, increased goodwill amortization, severance-related expenses and increased interest expense. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities decreased to approximately $1.0 million in 1995 from approximately $7.1 million in 1994, a $6.1 million (86.2%) decrease. Cash provided by operating activities decreased primarily due to the increase in operating losses, as described above, which were partially offset by increases in cash from changes in operating working capital. Operating working capital items increased the net cash provided from operating activities by approximately $6.1 million and $5.3 million in 1995 and 1994 respectively. The 1995 increase in cash from changes in operating working capital was gained primarily from increased days outstanding in accounts payable and the 1994 increase resulted primarily from a reduced level of accounts receivable resulting from lower levels of operating activities at year end. Accounts receivable and billings balances differ from period to period as a result of varying contractual terms that relate to the timing and amount of progress payments for some of the Company's multi-year, multi-million dollar contracts. This variability is expected to continue in future periods. The $8.4 million net cash provided by investing activities in 1995 was primarily composed of approximately $17.3 million provided by the sale of the Company's Plant Services operations and the sale of the Company's minority investment in Recytec, offset by approximately $9.2 million used for capital expenditures. The primary component of capital expenditures was related to the development of the Company's EnviroGlass-Registered Trademark- technology. The Company's loan covenants with Banque Paribas and Banque Nationale de Paris (the "Banks") restrict capital expenditures and commitments to a maximum amount of $12.0 million and $3.3 million during 1995 and 1996 respectively. The majority of the Company's capital expenditures are incurred for equipment used for processing radioactive waste volume reduction, dewatering, and EnviroGlass-Registered Trademark- systems in its waste services operations. The Company's fuel services operations have capital requirements primarily for licenses and high-level waste transportation equipment. The Company's engineering services operations have modest capital requirements mainly for computer equipment. The Company anticipates that it will need to devote significant capital resources to technology development in the future in order to remain competitive and make significant investments in capital equipment to increase its revenue. The Company anticipates that much of its 1996 capital equipment acquisitions will be financed through cash flows from then new, concurrent customer contracts. The Company had contractual capital acquisition commitments of $900,000 as of December 31, 1995, and expects to fund these commitments from cash generated through operations. In addition, the cost to complete the Company's vitrification unit is expected to be approximately $1.0 million. The $10.0 million net cash used in financing activities during 1995 was primarily the result of the Banks' imposed debt repayment. The Company increased its borrowings under its revolving accounts receivable facility at various times for a total of $7.0 million and drew down the maximum amount of $3.0 million under a capital equipment financing facility. The Company was encouraged by the Banks to enter into divestitures during the year and repaid bank debt by approximately $21.1 million, consisting primarily of essentially all of the proceeds of those divestitures and scheduled payments. 18 In late 1993 and early 1994, the Company financed its acquisitions, operations and development from the sale of capital stock and from bank debt. The Company financed the cash portion of the acquisition of the Impell Companies through a $15 million term loan and a draw on a $25 million revolving credit line. All debt existing prior to the acquisition was refinanced through these new credit agreements. TERM LOAN The Company borrowed $15.0 million from the Banks on January 6, 1994, maturing on December 31, 1998 (the "Term Loan"). In connection with this loan the Company paid the Banks a $375,000 closing fee and issued warrants to the Banks to purchase 830,060 shares of the Company's common stock at $8.17 per share, exercisable through January 7, 1999 (the "Original Warrants"). The agreement with the Banks specifies certain negative, affirmative and financial covenants including, without limitation, covenants with respect to debt/capital ratio, interest coverage, fixed charge coverage and minimum net worth, and restrictions on dividends and activities of the Company. In March 1995, upon the Company's continued failure to meet certain measures of financial performance as required by the covenants contained in the Term Loan agreement and the resulting third amendment to waive/reset the Term Loan's financial covenants, the Banks required that the Original Warrants be repriced to an exercise price of $2.94 per share and that the Banks be given the option to reprice these warrants to $0.01 per share if $10.0 million of cash was not brought into the Company by June 30, 1995. In June 1995 the Company sold its Plant Services operations and subsequently repaid $7.3 million of the Term Loan. In connection with this payment, the Banks waived the scheduled June 30, 1995, principal payment and the Original Warrants were not repriced. After this lump sum payment and scheduled principal payments since inception, the balance of the Term Loan was approximately $2.9 million as of September 1995. In September 1995, the Company again failed to meet certain measures of financial performance as required by covenants contained in the Term Loan agreement and again received a waiver of the Term Loan's financial covenants and a waiver of the scheduled September 30 and December 31, 1995, principal payments. Additionally, the Banks acquired the rights to reprice the Original Warrants to $0.01 per share if, among other things, all obligations to the Banks were not repaid in full by March 31, 1996. Also at this time, the Banks made available to the Company an additional $3.0 million facility associated with the Term Loan for capital expenditures, primarily EnviroGlass-Registered Trademark- ("Tranche B"). Tranche B was initially scheduled to mature on March 31, 1996, and had an associated $150,000 fee, payment of which is deferred to March 31, 1996, and provided for warrants expiring September 20, 2000, equal to a maximum (based on the Company's usage and repayment of this facility) of 6% of the Company's outstanding common stock at $0.01 per share. By the end of the fourth quarter of 1995 the Company had fully used this facility by borrowing $3.0 million and then repaying $1.1 million obtained from the final escrow payment from the Plant Services sale, resulting in a balance outstanding under Tranche B of $1.9 million at December 31, 1995. Based on this usage, the Banks acquired the rights to warrants to purchase 392,431 shares of the Company's common stock at $0.01 per share. In December 1995, the Banks made available to the Company an additional $1.0 million working capital facility associated with the Term Loan which was scheduled to mature on March 31, 1996 ("Tranche C"). Tranche C had an associated fee of $125,000, payment of which is deferred, and provided for warrants expiring December 26, 2000, equal to a maximum (based on the Company's usage and repayment of this facility) of 2% of the Company's outstanding common stock at $0.01 per share. The Company did not use this facility through March 31, 1996. At December 31, 1995, the Banks had acquired the rights to warrants to purchase 78,335 shares of the Company's common stock at $0.01 per share, and such warrants were valued at $107,000. Another 78,335 shares of common stock at $0.01 per share are due to the Bank if the loan is used and not repaid by a specific date. In March 1996, the Banks extended the due date of borrowings under Tranche B and Tranche C through April 15, 1996. 19 In April 1996, the Banks extended the due date of borrowings under Tranche B and Tranche C through January 2, 1997; waived the scheduled March 31 and June 30, 1995, Term Loan principal payments; reset the financial covenants for the quarters ending December 31, 1995, through the terms of the loans; and restored the Original Warrants to an exercise price of $2.94 per share. For these actions the Banks required a fee of $950,000, payment of which is deferred until January 2, 1997. If, among other things, the Company's total obligation to the Banks is not repaid in full before August 31, 1996, this agreement contains maximum penalties of $600,000 which will also be deferred to January 2, 1997. This will also trigger the repricing of the Original Warrants to $0.01 per share and issuing to the Banks rights to purchase approximately 550,000 shares of the Company's common stock at $0.01 per share. The Company may also elect to defer the $750,000 payment due September 30, 1996, to January 2, 1997, by incurring a fee of $150,000, payment of which is deferred. The Company anticipates, but can give no assurances, expressed or implied, that by entering into a joint venture or strategic partnership, or the sale of assets it will be able to raise sufficient funds to avoid these penalties. REVOLVING CREDIT AGREEMENT The Company entered into a $25.0 million revolving credit agreement (the "Credit Agreement") with the Banks on January 6, 1994, which originally matured on December 31, 1995. Borrowings under the Credit Agreement are limited by the lesser of a percentage of eligible trade accounts receivable (the "Borrowing Base") or the maximum amount of the facility. The amount of funds available is subject to fluctuation of accounts receivable. In October 1994, the maximum amount of the facility was reduced to $22.5 million. In June 1995, utilizing a portion of the proceeds from the sale of Plant Services, the Company repaid $6.6 million of the amount then outstanding under the Credit Agreement. The maximum amount of the Credit Agreement was reduced to $12.5 million and the Banks were paid a fee of $100,000. In December 1995, the Credit Agreement's maturity was extended to March 31, 1996, in consideration for an amendment fee of $125,000, of which the payment of $100,000 was deferred. In March 1996, the Credit Agreement's maturity was extended to April 15, 1996. In April 1996, the Credit Agreement's maturity was extended to January 2, 1997, and its applicable interest rate was increased by approximately three percentage points to the Bank's prime rate plus 1.5% and the Eurodollar rate option was eliminated. If the Company does not reduce the outstanding balance of the Credit Agreement and its maximum amount by a minimum of $1.0 million from the sale of assets by May 31, 1996, this agreement contains a penalty of $200,000, payment of which is also deferred. Additionally, the Company has the requirement of either reducing the amount outstanding and maximum amount of the Credit Agreement by $600,000 by June 30, 1996, or incurring a fee of $100,000, payment of which is also deferred. Similarly, the Company may elect to defer a $625,000 payment due on September 15, 1996, to January 2, 1997, by incurring a fee of $100,000, payment of which is deferred. For these actions the Company incurred a fee of $125,000, payment of which is deferred until January 2, 1997. 20 SUMMARY INTEREST, FEES (PAID & DEFERRED) AND WARRANTS ISSUED TO THE BANKS
ITEM NOTE NUMBER OF SHARES AMOUNT ($000) ---- ---- ---------------- ------------- Interest Paid, Inception to April 15, 1996 na $4,054 Fees Billed, Inception to April 15, 1996 1 na 1,865 Fees Deferred, Inception to April 15, 1996 2 na 1,450 Warrants exercisable at $2.9375 3 830,060 822 Warrants exercisable at $0.01 3 470,917 1,232 ------ Total $9,423 ------ ------
Notes: 1. Includes fees paid to the Banks and the Banks' attorneys and accountants. 2. Fees deferred until the earlier of the liquidation of all obligations to the Banks or January 2, 1997. 3. Warrants valued by management using Black Scholes valuation model with April 9, 1996, market data. On January 2, 1997, the indebtedness to the Banks under the Term Loan and Credit Agreement which could amount to as much as $18.2 million plus deferred fees of up to $2.6 million become due. All proceeds from the sales of assets covered under the letter of intent described above are to be applied against the outstanding bank borrowings. However, there can be no assurance that these sales will be completed on terms acceptable to the Company. The Company believes that cash and cash equivalents at December 31, 1995, together with cash generated from operations will be adequate to meet its cash needs through December 31, 1996. Management is committed to decreasing costs in order to bring the Company to profitable operations and made substantial expense reductions in 1995. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE ---- Report of Ernst & Young LLP, Independent Auditors 22 Consolidated Statements of Operations for each of the three years in the period ended December 31, 1995 23 Consolidated Balance Sheets at December 31, 1995, and January 1, 1995 24 Consolidated Statements of Shareholders' Equity for each of the three years in the period ended December 31, 1995 25 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1995 26 Notes to Consolidated Financial Statements 27
21 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS To the Shareholders and Board of Directors VECTRA Technologies, Inc. We have audited the accompanying consolidated balance sheets of VECTRA Technologies, Inc. as of December 31, 1995, and January 1, 1995, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of VECTRA Technologies, Inc. at December 31, 1995, and January 1, 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Walnut Creek, California April 5, 1996, except Note 3 as to which the date is April 15, 1996 22 VECTRA TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
YEARS ENDED ----------------------------------------- DECEMBER 31, JANUARY 1, DECEMBER 31, 1995 1995 1993 ------------ ---------- ------------ Revenues $123,501 $140,023 $64,581 Operating costs 89,444 94,320 42,900 -------- -------- ------- Gross profit 34,057 45,703 21,681 Research and development expenses 3,257 1,592 465 Selling, general and administrative expenses 38,210 45,955 17,826 Write downs of property, plant and equipment and intangible assets 14,319 629 791 Restructuring and lease termination expenses -- -- 2,544 -------- -------- ------- Operating income (loss) (21,729) (2,473) 55 Interest expense, net (3,105) (2,702) (351) Gain on sale of subsidiary 12,731 -- -- -------- -------- ------- Loss before income taxes (12,103) (5,175) (296) Provision for income taxes 110 150 250 -------- -------- ------- Net loss $(12,213) $(5,325) $ (546) -------- -------- ------- -------- -------- ------- Net loss per share $ (1.56) $ (.68) $ (.09) -------- -------- ------- -------- -------- ------- Number of shares used to calculate net loss per share 7,840 7,802 5,909 -------- -------- ------- -------- -------- -------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23 VECTRA TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)
DECEMBER 31, JANUARY 1, 1995 1995 ------------ ---------- ASSETS Current Assets Cash and cash equivalents $ 2,834 $ 3,427 Securities available for sale 1,274 919 Accounts receivable, net of allowance of $785 for 1995 ($384 for 1994) 21,065 26,211 Costs and estimated earnings in excess of billings on uncompleted contracts 1,665 3,076 Refundable income tax prepayments 600 -- Inventories 1,176 1,426 Prepaid expenses 720 931 -------- -------- Total current assets 29,334 35,990 Property, plant and equipment, at cost Land 94 94 Buildings 359 586 Machinery and equipment 8,707 20,000 Construction in progress 9,011 655 Furniture and fixtures 2,587 4,996 -------- -------- Total property, plant and equipment 20,758 26,331 Less accumulated depreciation 8,614 15,027 -------- -------- Net property, plant and equipment 12,144 11,304 Costs in excess of net assets of acquired businesses, net of accumulated amortization 14,780 28,638 Licenses, patents and other intangibles, at cost, net of accumulated amortization 1,200 1,110 Investments and long-term prepaid costs 3,305 6,807 Other assets 66 316 -------- -------- Total assets $ 60,829 $ 84,165 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Note payable to bank $ -- $ 15,200 Accounts payable 10,762 5,060 Accrued payroll and related expenses 6,011 7,014 Other accrued liabilities 6,742 6,153 Billings in excess of costs and estimated earnings on uncompleted contracts 2,288 9,122 Long-term debt due within one year -- 2,712 -------- -------- Total current liabilities 25,803 45,261 Long-term debt 17,216 8,617 Deferred lease incentive 424 487 Commitments and contingencies Shareholders' equity Class A Preferred Stock, 4,100,000 shares authorized, none issued and outstanding -- -- Common Stock, $.01 par value, 30,000,000 shares authorized; 7,833,527 shares issued and outstanding in 1995 (7,848,627 shares issued and outstanding in 1994) 44,960 45,212 Accumulated deficit (27,574) (15,412) -------- -------- Total shareholders' equity 17,386 29,800 -------- -------- $ 60,829 $ 84,165 -------- -------- -------- --------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 24 VECTRA TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands except share amounts)
COMMON STOCK TOTAL NUMBER OF ACCUMULATED SHAREHOLDERS' SHARES AMOUNT DEFICIT EQUITY Balances at December 31, 1992 5,762,083 $28,353 $(9,583) $18,770 Exercise of stock options 176,930 844 -- 844 Issuance of stock, net of director/shareholder receivable 15,000 5 -- 5 Net loss -- -- (546) (546) --------- ------- -------- ------- Balances at December 31, 1993 5,954,013 29,202 (10,129) 19,073 Exercise of stock options 189,649 968 -- 968 Issuance of common stock, net of cancellations 1,704,965 14,004 -- 14,004 Warrants issued -- 1,038 -- 1,038 Unrealized gain on securities available for sale -- -- 42 42 Net loss -- -- (5,325) (5,325) --------- ------- -------- ------- Balances at January 1, 1995 7,848,627 45,212 (15,412) 29,800 Issuance of common stock, net of cancellations (15,100) -- -- -- Warrants issued, net of warrants repriced -- (252) -- (252) Unrealized gain on securities available for sale -- -- 51 51 Net loss -- -- (12,213) (12,213) --------- ------- -------- ------- Balances at December 31, 1995 7,833,527 $44,960 $(27,574) $17,386 --------- ------- -------- ------- --------- ------- -------- -------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 25 VECTRA TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands)
YEARS ENDED ----------------------------------------- DECEMBER 31, JANUARY 1, DECEMBER 31, 1995 1995 1993 ------------ ----------- ------------ Cash flows from operating activities: Net loss $ (12,213) $ (5,325) $ (546) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 2,321 3,392 2,073 Amortization 3,058 3,082 517 Write-downs of property, plant and equipment and intangible assets 14,319 629 791 Proceeds of lease incentive -- -- 621 Gain on sale of subsidiary (12,731) -- -- Loss on sale of investments 156 -- -- Increase (decrease) in cash from changes in operating working capital, net of effects of sale of subsidiary: Accounts receivable and billings (565) 5,734 (872) Inventories and prepaid expenses 493 (128) (401) Accounts payable and accrued expenses 6,144 (262) 3,249 ---------- --------- -------- Net cash provided by operating activities 982 7,122 5,432 Cash flows from investing activities: Increase in securities available for sale (303) (123) (336) Refunds (payments) related to Impell acquisition, net of cash acquired 559 (23,137) (1,213) Capital expenditures (9,170) (3,872) (3,018) Payments for earnout of acquired business -- (304) (303) Increase in patent and license costs -- (115) (323) Proceeds from sale of (purchase of) long-term investments 1,150 -- (78) Proceeds from sales of subsidiaries, net of transaction costs 16,152 129 -- Decrease (increase) in other assets 19 (270) (16) ---------- --------- -------- Net cash provided by (used in) investing activities 8,407 (27,692) (5,287) Cash flow from financing activities: Net (repayments) borrowings under short-term loan (2,811) 12,871 (1,271) Proceeds from long-term debt 3,000 15,000 1,226 Repayment of long-term debt (10,171) (5,414) (835) Proceeds from sale of common stock -- 968 849 ---------- --------- -------- Net cash (used in) provided by financing activities (9,982) 23,425 (31) ---------- --------- -------- Net (decrease) increase in cash (593) 2,855 114 Cash and cash equivalents at beginning of year 3,427 572 458 ---------- --------- -------- Cash and cash equivalents at end of year $ 2,834 $ 3,427 $ 572 ---------- --------- -------- ---------- --------- -------- Cash paid for interest $ 1,973 $ 1,652 $ 378 Cash paid for income taxes $ 712 $ 236 $ 195 Supplemental disclosure of non-cash financing activities: Issuance of Common Stock related to acquisition -- $ 14,000 -- Warrants issued in connection with debt $ 643 $ 1,038 --
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26 VECTRA TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF THE BUSINESS VECTRA Technologies, Inc. ("VECTRA" or the "Company") operates in one business segment which is the nuclear market. In this market, the Company provides high level and low level radioactive waste systems and services and specialized engineering services to commercial nuclear power plants worldwide and to the DOE in the U.S. The Company offers technology-based solutions for the maintenance and operation of commercial nuclear power plants through: (1) the handling, transportation, and dry storage of high level radioactive material; (2) the packaging and transportation of low level radioactive waste; and (3) engineering analysis of mechanical, electrical, and operational systems and procedures. Most of the Company's contracts are awarded by a competitive process in which a number of firms submit proposals in response to a client's request for proposals to provide specified products or services. Each of the Company's contracts is negotiated independently and varies as to profitability. In entering into contracts with its clients the Company considers, among other factors, the relative profitability of the contract as well as the long-term goals of the Company in securing the contract. The Company competes in certain international markets, principally Canada, South Korea, Taiwan, and Europe. In the United States, the Nuclear Regulatory Commission administers a regulatory program which affects every aspect of the Company's operations. The Department of Transportation, the Environmental Protection Agency, some states, localities and other federal agencies also regulate aspects of the Company's business. Regulatory changes with significant business impact have occurred with some frequency in the industry. The nuclear industry in general, and the handling, disposal and transportation of radioactive waste in particular, have sometimes been the subject of intense political and legal action. While the Company attempts to anticipate changes in the regulatory, political and legal environment in which it operates, it is not always able to do so and such changes could render the Company's products and its methods of doing business obsolete or require extensive modification. PRINCIPLES OF CONSOLIDATION AND FOREIGN CURRENCY TRANSLATION The consolidated financial statements include the accounts of VECTRA Technologies, Inc. and its subsidiaries, all of which are wholly owned. All significant intercompany accounts and transactions have been eliminated. Assets and liabilities of the foreign subsidiary are translated at current exchange rates. Income statement accounts are translated at the average rates during the period. Foreign currency translation and transaction gains and losses have not been material. LIQUIDITY The Company has sustained significant losses from operations during the three years ended December 31, 1995. Management has implemented plans to further decrease the Company's cost structure in 1995 and 1996. In addition, as described in Note 3, the maturities of substantially all of the Company's indebtedness to banks has been extended to January 2, 1997. At that date, all indebtedness, amounting to $16.5 million (plus any additional borrowings, deferred payments, deferred fees and accrued interest) will become due and payable. As described in Note 6, the Company has entered into a letter of intent to sell its engineering and government services operations. The proposed sale is contingent on negotiation and execution of a definite purchase agreement, government approvals, approval of VECTRA's shareholders and Duke Engineering & Services, Inc. ("DE&S") board of directors, and other conditions. If the sale is consummated under the terms of the letter of intent, management expects to receive approximately $27.5 million in cash, subject to adjustment for the net book value of the assets ultimately sold. Additionally, if this transaction is consummated, the Company is obligated to first use the proceeds of such sale to repay its existing bank debt. There can be no assurance that such sale will be consummated. 27 USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying Notes. Actual results could differ from those estimates. REVENUE RECOGNITION Revenue on long-term contracts, other than those billed on a time and material basis, is recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract. Cost estimates are reviewed periodically as the work progresses, and adjustments to revenues are reflected in the period in which estimates are revised. When current estimates indicate a probable ultimate loss on a contract, the full amount of the projected loss is accrued. The accompanying consolidated financial statements reflect management's best estimates of contract revenues and costs. However, actual amounts could differ from such estimates and such differences could be material to the financial statements. Other revenues are recorded on the basis of shipment of products or performance of services. The Company periodically enters into contracts which are subject to audit by U.S. Government agencies with respect to costs and other information submitted. Ultimate costs recoverable under these Government contracts are not known until final determination by the U.S. Government agency. Deviations to submitted costs have not been significant in the past and management does not expect them to be significant in the future. The Company also enters into certain contracts that require the Company to obtain permits and licenses from regulatory agencies, and in the event such permits and licenses are not obtained, these contracts may be canceled and payments on these contracts could be subject to refund. The Company has historically been able to obtain these permits and licenses, but the inability to obtain such permits and licenses in the future could have a material adverse effect on the Company's results of operations. CASH AND CASH EQUIVALENTS Cash and cash equivalents include investments with an original maturity of three months or less. SECURITIES AVAILABLE FOR SALE Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Under this statement, the Company's marketable securities are classified as "available for sale" and are recorded at current market value with an offsetting adjustment to shareholders' equity. The adoption of this statement did not have a material effect on the Company's consolidated financial position. Substantially all of the Company's marketable securities available for sale are restricted since they are held as collateral for letters of credit (see Note 3) or held by the Company's captive offshore insurance subsidiary. INVENTORIES Inventories, which consist principally of products associated with the performance of certain contracts, are stated at the lower of cost or market determined on a specific identification basis. PROPERTY, PLANT AND EQUIPMENT Depreciation is computed principally on the straight-line method over the following estimated useful lives: Buildings 36 years Machinery and equipment 3-15 years Furniture and fixtures 3-7 years The Company periodically reviews its property, plant and equipment for impairment in value. As a result of this review, the Company wrote off assets with carrying values of approximately $1.5 million in 1995. 28 Construction in progress includes a waste vitrification unit which the Company is constructing. The primary component of the Company's 1995 capital expenditures relates to the waste vitrification unit. The Company has temporarily suspended all construction and start up activities associated with its EnviroGlass-Registered Trademark- vitrification program. Upon completion, the Company intends to depreciate this unit on a units of production basis. The Company will periodically review the carrying value of the vitrification unit and the status of future related customer contracts, if any, to determine the requirement for any adjustments to its carrying value. Management estimates that the Company will recover the carrying value of this unit; however, an inability to recover the carrying value could result in material charges to operations in future periods. In the fourth quarter of 1995, the Company also recorded a charge of $1.2 million to cover anticipated future costs to decommission certain radioactivity contaminated machinery and equipment. Management estimates that these amounts will be sufficient to dismantle and dispose of the currently contaminated equipment under current applicable regulatory guidelines. COSTS IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES The excess of the total acquisition costs of acquired subsidiaries over the fair value of net assets acquired is being amortized on the straight-line basis over 25 years. Accumulated amortization was $4,330,000 at December 31, 1995, and $3,187,000 at January 1, 1995. Based upon negotiations management has conducted subsequent to December 31, 1995, and the DE&S letter of intent (see Note 6) regarding the potential sale of certain assets of the Company, the Company wrote down intangible assets consisting primarily of costs in excess of net assets acquired by $12.8 million to their estimated fair value. Actual amounts realized if these assets are sold may differ from management's estimates of fair value and such differences could be material to the financial statements. LICENSES AND PATENTS Licenses and patents are amortized on the straight-line method over a period of 5 to 25 years. Accumulated amortization was $602,000 at December 31, 1995, and $562,000 at January 1, 1995. OPERATING COSTS Operating costs consist of direct labor and related payroll burden and charges, including depreciation and amortization, that are directly identified to a contract. INCOME TAXES The Company recognizes deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities measured using tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance on its deferred tax assets to the extent there is uncertainty regarding the Company's ability to generate taxable income in the future. CHANGE IN FISCAL YEAR END Effective January 1, 1994, the Company changed its fiscal year end from December 31 to the Sunday closest to December 31. NET LOSS PER SHARE Net loss per share is based upon the weighted average number of common shares outstanding during each period. NEW ACCOUNTING PRONOUNCEMENTS IMPAIRMENT OF LONG-LIVED ASSETS In 1995, the Financial Accounting Standards Board issued the Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". SFAS 121 requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. The Company adopted the provisions of SFAS 121 as of December 31, 1995. 29 STOCK OPTIONS The Company accounts for its stock option plan in accordance with provisions of the Accounting Principles Board's Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees." In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock Based Compensation." SFAS 123 provides an alternative to APB 25 and is effective for fiscal years beginning after December 15, 1995. The Company expects to continue to account for its employee stock plans in accordance with the provisions of APB 25 with the disclosures required by SFAS 123. Accordingly, the adoption of SFAS 123 is not expected to have any impact on the Company's financial position or results of operations. 2. ACCOUNTS RECEIVABLE AND PROGRESS BILLINGS Accounts receivable are summarized as follows (in thousands):
DECEMBER 31, JANUARY 1, 1995 1995 ----------- ---------- Accounts receivable $20,473 $24,698 Allowance for contract adjustments (785) (384) Retainage 988 1,634 Other 389 263 ----------- ---------- Total accounts receivable $21,065 $26,211 ----------- ---------- ----------- ----------
Retainages beyond one year are insignificant. Progress billings on long-term percentage of completion contracts that were in process at December 31, 1995, and January 1, 1995, were $32.4 million and $34.4 million, respectively. The Company performs services and provides products mainly to commercial power utilities. Based on the credit standing of these clients, credit is generally granted without collateral being required. Historically, there have been no significant credit losses to the Company; accordingly, no allowance for doubtful accounts is considered necessary by management. The allowance for contract adjustments provides for management's estimate of periodic adjustments that arise from contract related billing issues. These estimates may differ from actual contract adjustments and such differences could be material to the financial statements. 3. INDEBTEDNESS TO BANKS At December 31, 1995, the Company had a revolving credit facility that provided for borrowings up to $12,500,000. Borrowings under the revolving credit facility are limited to a calculated borrowing base and are secured by accounts receivable. Amounts outstanding under the credit facility totaled $12,389,000 at December 31, 1995, and $15,200,000 at January 1, 1995. The interest rate is the banks' base rate plus 1.0% to 1.5% or the Eurodollar rate plus 2.0% to 2.5%. Commitment fees of 0.5% of the unused balance are payable under this agreement. The weighted average interest rate on the credit facility was 9.1% at December 31, 1995. The Eurodollar option has been eliminated from March 1, 1996. The Company also has long-term loans from banks. The original portion of this loan has an interest rate of the banks' base rate plus 1.0% to 1.5% or the Eurodollar rate plus 2.0% to 2.5% (10% at December 31, 1995). The Eurodollar option has been eliminated from March 1, 1996. The note had an outstanding balance at December 31, 1995, of $2,927,000 ($11,329,000 at January 1, 1995). In conjunction with the long-term loan, the Company issued to the banks warrants to purchase 830,060 shares of Common Stock at $8.17 per share which are exercisable through January 1999. The warrants were valued upon issuance at approximately $1.0 million and were recorded as additional paid-in capital. In connection with the negotiation of an extension on the loan agreement, these warrants were repriced to $2.94 per share and the Company revalued the warrants at $142,000. The resulting discount on the long-term loan was fully amortized as of December 31, 1995. Both the revolving credit facility and the long-term loan are collateralized by substantially all of the Company's assets. 30 In September 1995, the Company negotiated a $3.0 million additional facility related to the term loan to be used for capital expenditures and working capital. At December 31, 1995, the Company had outstanding borrowings of $1.9 million on this facility. This additional facility carries an interest rate of the bank's base rate plus 3% (11.5% at December 31, 1995). This facility requires the payment of a $150,000 fee to the banks to be made at the earlier of the raising of sufficient new capital to repay the long-term debt or at the maturity of the loan and carries a .25% per annum unused facility fee. The banks will also receive warrants equal to 2% of the Company's outstanding common stock for each $1 million borrowed under this facility. The Company reduced this amount to a total of 5% of the Company's stock through accelerated repayment of borrowings under this facility. The exercise price of these additional warrants is $0.01 per share. As of December 31, 1995, the Company had recorded the issuance of warrants to purchase 392,431 shares of common stock in connection with initial borrowings of $3 million under this facility. The warrants were valued at approximately $536,000 and were recorded as interest expense and additional paid in capital. In December 1995, the Company negotiated a $1.0 million additional facility under the term loan to be used for working capital. As of December 31, 1995, the Company had not borrowed on this facility. This additional facility requires the payment of a $125,000 fee to the banks to be made at the earlier of raising sufficient new capital to repay the long-term debt or at maturity and carries a .25% per annum unused facility fee. The banks also received additional warrants to purchase 78,335 shares of common stock at $0.01 per share and such warrants were valued at $107,000. Warrants to an additional 78,335 shares of common stock at $0.01 per share are due to the Bank if the loan is used and not repaid by a specific date. The agreements with the banks specify certain negative, affirmative and financial covenants including restrictions on dividends and activities of the Company. At December 31, 1995, the Company was not in compliance with certain of these covenants and the Company subsequently negotiated revised covenants with the banks. The Company also had $486,000 in outstanding letters of credit with another bank issued for performance guarantees under various contracts. Securities available for sale of $507,000 at December 31, 1995, are held as collateral against a portion of these letters of credit. On April 15, 1996, the Company entered into amendments to its revolving credit facility and term loan agreements with its banks. Under these amendments, all outstanding borrowings under the revolving credit facility and the additional facilities of the term loan agreements will be due on January 2, 1997. Amounts outstanding on the revolving credit facility are included in long-term debt in the accompanying financial statements as management estimates that the borrowing base will be sufficient through January 2, 1997, to sustain the outstanding borrowings at December 31, 1995. These amendments also establish new financial covenants for the fourth quarter of 1995 (with which the Company complied) and for 1996. As a result of these amendments, the Company incurred additional bank fees of approximately $1.1 million due January 2, 1997, or upon repayment of the outstanding borrowings. The Company also agreed to issue warrants to the banks to purchase up to 6% of the Company's outstanding common stock on a fully diluted basis at $0.01 per share, reprice the warrants to purchase 830,060 shares of common stock at $0.01 per share and pay fees to the bank deferred until January 2, 1997, of up to $600,000 in the event that the Company does not achieve certain financial milestones in 1996. The Company may elect to defer the $750,000 payment due September 30, 1996, to January 2, 1997, by paying a fee of $150,000. Under the revolving credit facility, the Company may elect to defer the $600,000 payment due on June 30, 1996, to January 2, 1997, by paying a fee of $100,000. In addition, the Company may elect to defer the $625,000 payment due on September 15, 1996, to January 2, 1997, by paying a fee of $100,000. The agreement also contains a $200,000 penalty if the Company does not reduce the outstanding borrowings by a specified amount as of May 31, 1996. The amendments also specify that any proceeds from the proposed sale of operations (Note 6) be used to repay indebtedness to the banks. As of April 15, 1996, the Company has reserved 1,300,977 shares of common stock for warrants earned by the banks, and in the future the Company may be obligated to issue to the banks warrants to purchase up to an additional 8% of the Company's fully diluted shares of outstanding common stock. 31 VECTRA TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred income tax assets and liabilities as of December 31, 1995, January 1, 1995, and December 31, 1993 are as follows using the liability method (in thousands):
DECEMBER 31, JANUARY 1, DECEMBER 31, 1995 1995 1993 ------------ ---------- ------------ DEFERRED TAX ASSETS: Net operating loss carryforwards $ 2,279 $ 1,952 $ 1,091 Tax credit carryforwards 254 254 254 Expenses not currently deductible for tax purposes 1,294 1,661 974 Other 1,098 941 439 ------- ------- ------- Deferred tax assets 4,925 4,808 2,758 Valuation allowance (4,898) (4,736) (2,758) ------- ------- ------- Net deferred tax assets $ 27 $ 72 $ -- ------- ------- ------- DEFERRED TAX LIABILITIES: Depreciation 27 72 -- ------- ------- ------- Deferred tax liabilities 27 72 -- ------- ------- ------- Net deferred taxes $ -- $ -- $ -- ------- ------- ------- ------- ------- -------
32 The provision for income taxes for the fiscal years ended December 31, 1995, January 1, 1995, and December 31, 1993 is as follows (in thousands):
DECEMBER 31, JANUARY 1, DECEMBER 1, 1995 1995 1993 ------------ ---------- ----------- Current: Federal $ -- $ -- $ 95 State and foreign 110 150 155 ------- ------- ----- Provision for income taxes $ 110 $ 150 $ 250 ------- ------- ----- ------- ------- -----
The provision (benefit) for income taxes differed from the amount computed by applying the federal statutory income tax rate for the fiscal years ended December 31, 1995, January 1, 1995, and December 31, 1993 as follows (in thousands):
DECEMBER 31, JANUARY 1, DECEMBER 1, 1995 1995 1993 ------------ ---------- ----------- Income tax at federal statutory rate $(4,275) $(1,864) $(101) Amortization -- 106 98 Writedown of intangible assets not deductible for tax purposes 4,228 -- -- Utilization of net operating loss carryforwards -- -- (465) Valuation allowance 162 1,751 449 State and foreign income taxes 110 150 155 Other (115) 7 114 ------- ------- ----- Provision for income taxes $ 110 $ 150 $ 250 ------- ------- ----- ------- ------- -----
At December 31, 1995, the Company has federal net operating loss and research tax credit carryforwards of approximately $6,511,000 and $254,000, respectively, which expire in varying amounts through the year 2010. Annual utilization of the Company's net operating loss and tax credit carryforwards may be limited if a cumulative change in ownership of more than 50% is deemed to occur within any three year period. 33 5. COMMITMENTS AND CONTINGENCIES Annual rental commitments (exclusive of insurance and property taxes) under noncancelable operating leases on office facilities and equipment are payable as follows (in thousands): 1996 $ 3,797 1997 2,779 1998 1,906 1999 1,453 2000 996 Thereafter 3,156 ------- Total $14,087 ------- -------
Rent expense was as follows for the years ended December 31, 1995, January 1, 1995, and December 31, 1993 (in thousands): 1995 $5,012 1994 5,473 1993 1,571
In 1992, the Company incurred a $685,000 early termination obligation in order to exit a long-term lease for an existing office and enter a new lease at more attractive terms. The new landlord agreed to provide a cash lease incentive allowance of $621,000. The lease incentive is being amortized over the ten year term of the new lease. The Company is self-insured for general liability risk for $1 million per occurrence and $2 million in the aggregate. Coverage above the self-insured limits is provided for under an umbrella policy with a commercial insurance company. The Company's general liability risk insurance excludes professional errors and omissions. Such insurance is purchased on a contract specific basis as required by the customer. At December 31, 1995, the Company had accrued approximately $564,000 for estimated unreported and/or potential losses under its self-insurance program. Actual self-insurance losses may differ from such estimates and such differences could be material to the financial statements. The radioactive materials handled by the Company are the legal responsibility of the Company's utility customers. The Company does not take title to such materials. In the event of an accident or incident involving such material, the Company is covered under insurance carried by and provided to operators of nuclear plants or transporters of nuclear materials. The Company anticipates that it will need to devote significant capital resources to technology development in the future in order to remain competitive. The Company had contractual commitments of $900,000 as of year end for capital acquisitions during 1996. The Company is involved in contractual, personal injury and general liability cases and claims which are considered normal to its business. In the opinion of Company management, none of these claims will have a material adverse impact on the Company's results of operations or financial position. However an unfavorable outcome could have a material adverse impact on the Company's results of operations and financial position. 34 6. ACQUISITIONS AND DISPOSITIONS Subsequent to December 31, 1995, the Company entered into a letter of intent to sell its engineering and government services operations to a third party. The proposed sale is contingent on negotiation and execution of a definite purchase agreement, government approvals, approval of VECTRA's shareholders and DE&S's board of directors, and other conditions. Under the letter of intent, if the sale is consummated under the terms of the letter of intent, management expects to receive approximately $27.5 million in cash, subject to adjustment for net book value of assets ultimately sold. The engineering and government services operations accounted for approximately $78 million in revenue and approximately $1.5 million in operating income, before certain corporate charges, for the year ended December 31, 1995. Under the terms of the agreements covering its outstanding indebtedness to banks (Note 3), any proceeds from the sale of these operations must first be applied to repay such indebtedness. Effective June 30, 1995, the Company sold all of the outstanding capital stock of its wholly owned subsidiary, Plant Services, Inc., to Westinghouse Electric Corporation. The sale price was $17.4 million after final adjustments including environmental remediation and earnout provisions. The proceeds from the sale were used to reduce notes payable and long-term debt to banks, pay retained liabilities, and pay expenses associated with the transaction. For the six months ended June 30, 1995, Plant Services generated revenues of approximately $11 million and operating income of approximately $4 million. In September 1995, the Company sold its 10% ownership in Recytec America, Inc. to Recytec, S.A. for $1.15 million resulting in a loss of $156,000 which is included in selling, general and administrative expense. These shares had been issued to VECTRA in connection with the sale of Alaron Corporation to Recytec S.A. in August 1991. On January 7, 1994, the Company completed the acquisition of all of the stock of ABB Impell Corporation, ABB Government Services Inc., and ABB Impell Ltd. (collectively the "Impell Companies") from affiliates of ABB Asea Brown Boveri Ltd. of Zurich, Switzerland (the "Seller") for approximately $32.3 million. The seller received $14 million in Common Stock (1,714,503 shares) and the remainder of the purchase price in cash. The acquisition, which closed January 7, 1994, has been accounted for as a purchase effective as of January 1, 1994. Accordingly, the purchase price was allocated to assets acquired based on their estimated fair values. Costs in excess of net assets of $24.3 million are being amortized on a straight-line basis over 25 years. The pro forma results listed below for the year ended December 31, 1993, combine the consolidated results of operations as if the Impell Companies had been acquired as of the beginning of the period presented. The proforma results include the impact of adjustments for revenues and costs associated with a subcontract entered into by the Company and the Seller, elimination of parent allocated overhead to the Impell Companies, amortization of intangibles resulting from the acquisition, a reduction in rent expense resulting from subleases between the Company and the Seller, increased interest expense on the acquisition debt, and the related income tax effects. (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED YEAR ENDED JANUARY 1, DECEMBER 31, 1995 1993 ---------- ------------ Revenues $140,023 $169,705 Net income (loss) $ (5,325) $ 1,153 Net income (loss) per share $ (.68) $ .15
The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been in effect for all of 1993 and are not intended to be a projection of future results. 35 7. STOCK OPTIONS Under the Company's stock option plans which include incentive stock options qualified by the Internal Revenue Service (IRS) and non-qualified options, the Company can issue up to 2,297,500 stock options. Through December 31, 1995, such incentive stock options totaling 916,731 have been exercised and 358,209 options are available for grant. Stock options are granted at fair market value on the date of grant, are exercisable in whole or in part beginning one year from the date of grant, and expire up to ten years from the date of grant. In February 1995, the Board of Directors approved a program to reprice certain incentive stock options granted in 1994. Under the repricing program, the options held by employees could have been repriced at the employees' option at an exercise price of $4.50 per share. The then current market price of the Company's common stock was $3.00 per share. In consideration of the price change, the vesting schedule was changed from an eighteen month "cliff vesting" and proportional vesting over four years to 100% "cliff vesting" at January 1, 1998. At December 31, 1995, the Company has reserved 1,080,019 shares of Common Stock under the incentive stock option plans, which represent stock options outstanding and stock options available for grant. Stock options outstanding under the plans are:
NUMBER OF OPTION PRICE SHARES PER SHARE ---------- ---------------- Outstanding at December 31, 1993 912,629 $3.75 $9.125 Granted 471,816 $3.00 - $9.50 Exercised (189,649) $3.75 - $7.00 Forfeitures (175,610) $4.375 - $9.50 --------- Outstanding at January 1, 1995 1,019,186 $3.00 - $9.50 Granted (includes 143,000 shares that were repriced) 269,500 $2.75 - $4.50 Forfeitures (includes 143,000 shares that were repriced) (454,626) $3.00 - $9.50 --------- Outstanding at December 31, 1995 834,060 $2.75 - $9.50 --------- --------- Exercisable at December 31, 1995 213,983 $3.125 - $9.50 --------- ---------
In addition to the stock option plans, the Company has issued non-qualified options of which 159,250 shares were outstanding at December 31, 1995, at a price per share from $2.675 to $9.25 and 225,128 options were exercisable at a price per share from $2.675 to $9.25. Additionally, there were 63,000 non-qualified stock options that were also repriced. 8. COMMON STOCK The Company has established a Stockholders' Rights Agreement (SRA) designed to deter coercive or unfair takeover tactics that could deprive shareholders of an opportunity to realize the full value of their shares. The Company amended the SRA effective December 31, 1993. Under the SRA, as amended, the Company could declare a dividend of one right for each outstanding share of the Company's Common Stock. The rights become exercisable after the announcement of either a tender or exchange offer for more than 25% of the Company's Common Stock or a purchaser acquires 25% of the Company's Common Stock. Each right entitles the holders, other than the 25% purchaser, to purchase Common Stock of the Company having a market value of twice the exercise price of the right. In the event that the Company is acquired in a merger or sells or transfers 50% or more of its assets or earning power, each right entitles the holder to purchase Common Stock of the surviving or purchasing company having a market value of twice the exercise price of the right. The rights, which expire June 1, 1999, may be redeemed by the Company at a price of $0.01 per right. 36 9. MAJOR CLIENTS The nature of the Company's business is such that a single client may account for more than 10% of the Company's revenues during a specific period when the Company is performing a significant project for that client. The percentage of sales to individual clients that were 10% or more of total revenues follows for the fiscal years ended December 31, 1995, January 1, 1995, and December 31, 1993:
DECEMBER 31, JANUARY 1, DECEMBER 31, 1995 1995 1993 ----------- --------- ----------- Commonwealth Edison Company 20% 19% 14% Entergy Operations, Inc. -- -- 11%
10. REVENUE AND OPERATING COST INFORMATION Revenues and operating costs of tangible products and services are as follows for the fiscal years ended December 31, 1995, January 1, 1995, and December 31, 1993, (in thousands):
DECEMBER 31, JANUARY 1, DECEMBER 31, 1995 1995 1993 ------------ ---------- ----------- REVENUES: Products $ 13,580 $ 6,917 $ 10,335 Services 109,921 133,106 54,246 -------- -------- -------- $123,501 $140,023 $ 64,581 -------- -------- -------- -------- -------- -------- OPERATING COSTS: Products $ 11,574 $ 4,561 $ 6,283 Services 77,870 89,759 36,617 -------- -------- -------- $ 89,444 $ 94,320 $ 42,900 -------- -------- -------- -------- -------- --------
Sales to foreign clients in 1995, 1994, and 1993 were $10,254,000, $12,099,000, and $7,891,000, respectively. 11. SAVINGS AND RETIREMENT PLAN The Company has a defined contribution plan covering eligible full-time employees (the "Plan"). The Plan is a profit sharing plan with a salary reduction arrangement pursuant to Internal Revenue Code Section 401(k) and subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Employees may contribute up to 15% of their gross wages, subject to these provisions. The Company may, solely at its own discretion, make a profit sharing contribution to the Plan for each plan year. In addition to the profit sharing contribution, the Company may make matching contributions to the Plan, at a predetermined rate subject to certain limitations. In 1995, matching contributions were only made for certain employee groups. In fiscal 1995, 1994, and 1993, the Company made contributions to the Plan of $112,000, $1,171,000, and $194,000, respectively. 12. RESTRUCTURING AND LEASE TERMINATION EXPENSE In the fourth quarter of 1993, the Company recorded a restructuring charge of $2.5 million related primarily to changes in operations resulting from the acquisition of ABB Impell Corporation, ABB Government Services, Inc., and ABB Impell Ltd. (see Note 6). The restructuring charge also included the revaluation of certain machinery and equipment and intangible assets that are no longer a part of the strategic focus of the new combined company. 37 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS The following table lists the names and ages of the directors:
POSITIONS HELD NAME AGE (DIRECTOR SINCE) ---- --- --------------- Edward J. Keith 60 Chairman of the Board, Director (1994) Roy Kirkorian 51 Vice Chairman of the Board, Director (1995) J.E. (Ted) Ardell, III 56 Director (1992) Albert J. Baciocco, Jr. 65 Director (1989) E. Linn Draper, Jr. 54 Director (1986) Ray A. Fortney 50 Director, President and CEO (1994) Fruzsina Harsanyi 53 Director (1995) Elwood D. Howse, Jr. 56 Director (1983)
In February 1995, the Board of Directors amended the bylaws to remove the staggered election of board members, so that all directors will be, beginning at the 1995 Annual Meeting, elected annually. BIOGRAPHIES Mr. Keith was elected Chairman of the Board in June 1995. He is also Chairman of the Board of Directors of The Failure Group, a consulting firm specializing in the analysis and prevention of engineering failures, and a former Director of Inlex Corporation, which provides computer automation systems to libraries. From 1969 until 1983, Mr. Keith served as Chairman of the principal operating subsidiary, Executive Vice President and Director of Impell Corporation. Mr. Keith was also the co-founder of the Commercial Bank of San Francisco. He is a licensed professional engineer and structural engineer in the state of California. Mr. Keith received his B.S. and M.S. in Engineering in 1961 and 1964, respectively, from the University of California, Berkeley. Mr. Kirkorian was elected to the Board of Directors in August 1995 and was elected Vice Chairman in October 1995. Mr. Kirkorian, is an active partner in El Rancho Farms and is currently active in various Sand Hill Financial Company capital investments. He was President of C.P. National (NYSE) and former President of Contel Corp.'s Contel Business Systems. Mr. Kirkorian received his B.S. degree in Business Administration in 1967 from California State Polytechnic University and his J.D. of the Law from Hastings College in 1970. He has been a member of the Cal Poly Business School Advisory Board since 1988. Mr. Ardell is a general partner with Technology Partners, a venture capital firm, and a Director of a number of private companies. From 1968 to 1971, Mr. Ardell was with Bechtel Power Corporation. From 1971 to 1984 he was a Director of Impell Corporation and held various other positions with Impell Corporation and its principal operating subsidiary; and from 1984 to 1986 he was President and Chief Executive Officer of Impell Corporation. From 1961 to 1968 he served in the U.S. Navy nuclear submarine force. Mr. Ardell is a registered nuclear engineer in California and received a B.S. degree in Engineering from the U.S. Naval Academy in 1961. 38 Mr. Baciocco is President of The Baciocco Group, Inc., a technical and management consulting practice, providing service in the areas of strategic planning, technical investment and application and business planning and development. He is a Director of Honeywell, Inc., and Giddings & Lewis, Inc. He retired from the U.S. Navy as a Vice Admiral in 1987 after 34 years of service which included over 18 years of experience in the direct supervision of nuclear power plant operations and maintenance, and over seven years in the most senior executive positions in the Navy's R&D organization. Mr. Baciocco is a member of the Army Science Board and the Naval Studies Board of the National Research Council. In addition, he serves on the Boards of Directors of Oak Ridge Associated Universities, the Research Development Foundation for the Medical University of South Carolina, and the Board of Visitors to the Software Engineering Institute, Carnegie Mellon University. He received his B.S. degree in Engineering from the U.S. Naval Academy in 1953 and has completed graduate level studies in the field of nuclear engineering. Dr. Draper is Chairman of the Board, President and Chief Executive Officer of American Electric Power Inc. (AEP) and the American Electric Power Service Corporation. He also holds the positions of Chairman of the Board of Directors and Chief Executive Officer of various affiliates of AEP. From 1979 to 1992, Dr. Draper served in various executive positions with Gulf States Utilities, an electric utility company, serving from 1987 to 1992 as Chairman, President, and Chief Executive Officer. Both AEP and Gulf States Utilities have been and are customers of the Company. Dr. Draper is a Member of the Board of Directors and the Executive Committee of the Nuclear Energy Institute and the Edison Electric Institute. He received his B.A. degree in 1964 and his B.S. degree in 1965, both in Chemical Engineering, from Rice University. He received his Ph.D. degree in Nuclear Engineering from Cornell University in 1970. He is a member of the National Academy of Engineering. Mr. Fortney was appointed as President and Chief Executive Officer in July 1994. Prior to his appointment, he served as Executive Vice President of the Company from August 1993 and was President of the Cygna Group of ICF Kaiser Engineers, an engineering consulting firm, and a Senior Vice President of ICF Kaiser from 1992 to 1993. He previously served as Vice President and General Manager of the Power Services Business at Combustion Engineering and ABB/Combustion Engineering from 1988 through 1990 and President and Chief Executive of Impell Corporation from 1986 to 1988. Mr. Fortney is a registered professional engineer in 15 states. He received his B.S. degree from the U.S. Naval Academy in 1967, his M.S.M.E. degree from Stanford University in 1972 and attended the Stanford University Business School Executive Program in 1989. Dr. Harsanyi was elected to the Board in June 1995. She is Vice President, Public Affairs and Corporate Communications, and a Corporate officer of Asea Brown Boveri Inc. ABB is a Connecticut-based company, providing products and services for power generation, transmission and distribution, and industrial processes. She joined the company in 1980 after working for two years for the Continental Group and prior to that for the U.S. Government. Dr. Harsanyi received B.A. and M.A. degrees in International Relations and a Ph.D. in Government from the American University. She has served as an adjunct professor of International Business at Georgetown University's School of Foreign Service and is a member of the Business-Government Relations Council, the Council for Excellence in Government, the Bryce Harlow Foundation, the Public Affairs Council, and Georgetown University's Landegger Program Advisory Board. Mr. Howse served as Chairman of VECTRA's Board from 1991 to 1995. He is President of Cable & Howse Ventures, a venture capital management firm he co-founded in 1977. He is also a general partner of CH Partners II and CH Partners III, major shareholders of the Company, and a Director of OrthoLogic Corporation and Applied Microsystems Corporation. From 1970 to 1974 he served as Treasurer of Data Science Ventures, a venture capital firm, and from 1974 to 1976 as the Chief Financial Officer for Seattle Stevedore and Miller Produce companies. Mr. Howse served in the U.S. Navy nuclear submarine force until 1968. Mr. Howse received his B.S. degree in Engineering in 1961 and his M.B.A. degree in 1970, both from Stanford University. 39 CURRENT EXECUTIVE OFFICERS The following table, as of April 15, 1996, sets forth the names, titles and ages of the Company's executive officers who are serving in the indicated positions. All executive officers serve until removed by the Board of Directors:
NAME AGE POSITIONS HELD ---- --- -------------- Ray A. Fortney 50 President and Chief Executive Officer Kristin L. Allen 46 Vice President Walter R. Bak 41 Vice President Jeffrey W. Cummings 44 Vice President Vincent Franceschi 37 Vice President Thomas B. Pfeil 49 Vice President, Finance and Secretary
BIOGRAPHIES Mr. Fortney's biography is included with the directors. Mr. Allen was appointed to his current position in April 1992 upon the Company's acquisition of his firm, Semper Technology, Inc., a management consulting firm for utilities. He co-founded Semper in 1990. From 1979 until 1990, he was with Advanced Technology Engineering Systems, Inc. and its parent, Advanced Technology, Inc., an engineering and management consulting firm for nuclear utilities and government agencies, holding progressively more senior positions. From 1972 to 1979 he served in the U.S. Navy nuclear submarine force and taught at the U.S. Naval Academy. He is a registered professional engineer in the Commonwealth of Virginia. Mr. Allen received his B.S. degree in Nuclear Engineering from the University of Virginia in 1972 and his M.S. degree in High Energy Physics from the Naval Postgraduate School in 1973. Mr. Bak was appointed to Vice President, Business Development, in October 1995. Mr. Bak has held the positions of Manager, Power Services, and Manager, Fuel Services, with VECTRA prior to his current assignment. Mr. Bak has been involved in managing businesses in the commercial nuclear, government, and non-nuclear sectors of Impell since 1987. Mr. Bak is a registered Professional Engineer in California. He received his M.S. degree in Civil Engineering from the University of California, Berkeley, in 1978, and his B.S. degree in Civil Engineering from the University of Notre Dame in 1977. Mr. Cummings was appointed to his current position in June 1992, with responsibility initially for the Company's Chicago office consisting of over 220 engineering professionals. Since that time, he has assumed roles as Vice President, Marketing and Business Development and most recently, Vice President, Nuclear Engineering. Prior to his appointment, Mr. Cummings served in various positions of increasing responsibility after joining the Company in 1985, including General Manager, Chicago Operations. Mr. Cummings received a B.S. degree in Operations Analysis in 1973 from the U.S. Naval Academy and a M.S. in Operations Research in 1974 from the U.S. Naval Post Graduate School. Mr. Franceschi was appointed to his current position in January 1994 following the Company's acquisition of ABB Impell Corporation. From 1989 until his appointment, Mr. Franceschi was the Manager of projects for Impell's Western Region. From 1980 to 1989, Mr. Franceschi served in various positions of increasing responsibility, including Manager, Systems Engineering and Manager of Business Development for the DOE market. Mr. Franceschi is a registered professional engineer in California. He received his B.S. degree in Civil Engineering from the University of California, Berkeley in 1980 and his M.B.A. from Saint Mary's College in 1994. Mr. Pfeil was appointed to his current position in February 1996. From 1992 until his appointment, Mr. Pfeil served as a director and officer of several start-up manufacturing and small sales businesses. From 1985 to 1992, Mr. Pfeil served in various positions, including Corporate Controller and Chief Financial Officer during the restructuring and turnaround of WorldCorp Inc. and its predecessor, World Airways Inc. Prior to 1985, he served for twelve years in various positions of increasing responsibility with Baker Hughes, a multi-national manufacturer of oil field equipment and provider of related engineering services. He received his M.B.A. and B.S. degree in Business Administration (Accounting) from California State University, Los Angeles. 40 ITEM 11. EXECUTIVE COMPENSATION The following tables set forth compensation paid by the Company for services rendered in the Company's last three completed fiscal years ending December 31, 1995, to the Company's chief executive officer and the four highest paid executives whose total compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE (1) LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS ----------------------------------------- -------------- OTHER NAME AND PRINCIPAL BONUS ANNUAL OPTIONS/ ALL OTHER POSITION YEAR SALARY ($) ($) COMPENSATION ($) SARs(#) COMPENSATION - ------------------ ---- --------- ----- ---------------- -------- ------------ Ray A. Fortney 1995 201,000 173,000 President and CEO 1994 194,074 17,574(2) 68,000 2,276(3) 1993 78,890(4) John R. Holding 1995 150,749 60,000(12) 6,000 Former Vice 1994 138,219 32,377(5) 41,000 3,265(3) President, CFO and 1993 68,750(6) 69,563(7) 25,000 Secretary Lynne M. Heitman 1995 146,543(8) 55,000(12) 25,000 25,577(9) Former CFO 1994 125,000 1993 76,667(11) Kristin L. Allen 1995 125,865 36,000 Vice President 1994 124,431 1993 125,000 Walter R. Bak 1995 112,062 34,000 Vice President 1994 110,485 3,600(10) Jeffrey W. Cummings 1995 130,650 46,000 Vice President 1994 118,688 28,492(13) Vincent Franceschi 1995 114,810 36,000 Vice President 1994 110,255 17,605(2)
41 (1) None of the named executives received compensation reportable under the Restricted Stock Awards or Long-Term Incentive Plan Payouts columns. (2) One time payment of accrued vacation balances reflecting change in policy whereby officers do not accrue vacation. (3) Matching contribution to the 401(k) and retirement plan. (4) For the period August 9, 1993, the date Mr. Fortney's employment with the Company began, through December 31, 1993. (5) Reimbursement of federal income tax differential of $22,336 attributable to relocation cost reimbursement, and payment of accrued vacation of $10,041. (6) For the period June 16, 1993, the date Mr. Holding's employment with the Company began, through December 31, 1993. (7) Reimbursement of $24,670 moving expenses and $44,893 closing costs in connection with the purchase of a home in the Puget Sound region. (8) For the period January 1, 1995, to November 18, 1995, the date Ms. Heitman terminated employment with the Company. (9) Payment of outplacement fee of $8,750 and severance of $16,827. (10) Payment of car allowance. (11) For the period March 22, 1993, the date Ms. Heitman's employment with the Company began, through December 31, 1993. (12) Relocation/Retention payments (13) One time payment of accrued vaction (see note 2) and $19,000 employment contract buyout. 42 OPTION GRANTS DURING 1995 FISCAL YEAR The following table provides information related to options granted to the named executive officers during 1995. OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION FOR INDIVIDUAL GRANTS OPTION TERM (1) - ------------------------------------------------------------------------------ ---------------------- % OF TOTAL OPTIONS/ SARS GRANTED EXERCISE OR OPTIONS/SAR TO EMPLOYEES BASE EXPIRATION NAME GRANTED (2) IN FISCAL YEAR PRICE ($/SH.) (3) DATE 5% ($) 10% ($) - -------------- ----------- -------------- ----------------- ---------- ------ ------- Ray A. Fortney 18,000(4) 5.0% 4.50 2/16/05 11,644 71,027 80,000(5) 22.1% 4.50 6/13/00 -- 34,874 45,000(5) 12.4% 4.50 6/13/00 -- 19,617 30,000(6) 8.7% 2.75 12/01/00 23,377 53,238 Kristen L. Allen 6,000(4) 1.7% 4.50 2/16/05 3,881 23,757 30,000(6) 8.3% 2.75 12/01/00 23,377 53,238 John R. Holding 6,000(4) 1.7% 4.50 2/16/05 3,881 23,757 Walter R. Bak 5,000(4) 1.4% 4.50 2/16/05 3,250 19,800 4,000(4) 1.1% 4.50 2/16/05 2,600 15,840 25,000(6) 6.9% 2.75 12/01/00 19,481 44,365 Jeffrey W. Cummings 6,000(4) 1.7% 4.50 2/16/05 3,881 23,757 20,000(6) 5.5% 3.25 7/31/00 24,835 50,172 20,000(6) 5.5% 2.75 12/01/00 15,585 35,492 Vincent Franceschi 6,000(6) 1.7% 4.50 02/16/05 3,881 23,757 5,000(4) 1.4% 4.50 02/16/05 3,250 19,797 25,000(6) 6.9% 2.75 12/01/00 19,481 44,365 Lynne M. Heitman 10,000(4) 2.8% 4.50 06/13/00 -- 4,359 15,000(4) 4.1% 4.50 06/13/00 -- 6,539
______________ (1) The potential realizable value portion of the table illustrates value that might be realized upon exercise of the options immediately prior to the expiration of their term, assuming the specified compounded rates of appreciation on the Company's common stock over the term of the options. These numbers do not take into account certain provisions of the options providing for cancellation of the option following termination of employment. (2) Options to acquire shares of common stock. (3) The option exercise price may be paid in shares of common stock owned by the executive officer, in cash, or in any other form of valid consideration or a combination of any of the foregoing, as determined by the Human Resources and Compensation Committee in its discretion. 43 (4) This represents the re-pricing of previously issued options, with a cliff vest date of January 1, 1998. (5) Options are exercisable January 1, 1998. (6) Options are exercisable with respect to 25% of the shares covered thereby on the anniversary of the exercise date in 1996, 1997, 1998 and 1999. OPTION EXERCISES DURING 1995 AND YEAR END OPTION VALUES The following table provides information related to options exercised by the named executive officers during the 1995 fiscal year and the number and value of options held at fiscal year end. The Company does not have any outstanding stock appreciation rights ("SARs"). AGGREGATED OPTION/SAR EXERCISES IN 1995 AND YEAR END OPTION/SAR VALUE
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS AT DECEMBER 31, 1995 (#) AT DECEMBER 31, 1995 ($) (1) -------------------------- --------------------------- SHARES ACQUIRED ON VALUE NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - -------------- ------------ ------------ ----------- ------------- ----------- ------------- Ray A. Fortney -- -- 12,500 210,500 -- -- Kristin L. Allen -- -- 23,250 43,750 -- -- Walter R. Bak -- -- 1,000 34,000 -- -- Jeffrey W. Cummings -- -- 23,750 47,250 -- -- Vince Franceschi -- -- 0 36,000 -- -- John R. Holding -- -- 21,250 44,750 -- --
(1) The closing price for the Company's common stock as reported by NASDAQ on December 31, 1995, was $2.25. Since the option exercise price for each officer is higher than the market price for the Company's Common Stock, no value is reported in the table. 44 TEN-YEAR OPTION REPRICINGS
LENGTH OF ORIGINAL NUMBER OF OPTION TERM SECURITIES MARKET PRICE EXERCISE REMAINING UNDERLYING OF STOCK AT PRICE NEW AT DATE OF OPTIONS/SARS TIME OF AT TIME OF EXERCISE REPRICING NAME POSITION DATE REPRICED REPRICING REPRICING PRICE (YEARS) - ----------------- -------------- ------- ------------ ------------ ---------- -------- ----------- Kristin Allen Vice President 2/16/95 6,000 3.13 9.50 4.50 4 Walter Bak Vice President 2/16/95 5,000 3.13 9.25 4.50 4 2/16/95 4,000 3.13 9.50 4.50 4 Jeffrey Cummings Vice President 2/16/95 6,000 3.13 9.50 4.50 4 Ray Fortney President and 2/16/95 18,000 3.13 9.50 4.50 4 CEO 6/13/95 80,000 3.00 6.25 4.50 4 6/13/95 45,000 3.00 6.25 4.50 4 Vincent Franceschi Vice President 2/16/95 5,000 3.13 9.25 4.50 4 2/16/95 6,000 3.13 9.50 4.50 4 Lynne Heitman Former CFO 6/13/95 15,000 3.00 6.13 4.50 4 6/13/95 10,000 3.00 9.00 4.50 4 John Holding Former CFO 2/16/95 6,000 3.13 9.50 4.50 4
EXECUTIVE EMPLOYMENT AGREEMENTS The Company has executed Executive Employment Agreements with its President and Vice President Messrs. Fortney and Allen, (for purposes of the following discussion, each an "Executive"). The terms of the agreements, summarized below, are substantially identical, except where noted and with respect to base salary, which is disclosed under Compensation. Each Executive's employment continues until terminated pursuant to the terms of the agreement. Each Executive may be terminated by the Company if he is disabled for more than 90 days, subject to payment of disability amounts, and for cause, which includes the failure to follow reasonable directives of the Board of Directors, gross malfeasance or flagrant disloyalty to the Company, criminal conduct involving moral turpitude, or deficiency in job performance. The Company may also terminate each Executive's employment without cause upon sixty days notice. Each Executive has the right to terminate his employment for good reason, which includes material breach by the Company of its obligations, reduction of base salary or alteration of his duties or responsibilities without his consent, geographic relocation of the Executive or a change in control of the Company. If the termination by the Company is for cause or by the Executive without good reason, salary ceases upon termination. If the termination is without cause by the Company or for good reason, each Executive receives severance payments equal to a minimum 70% of base salary (100% if more than 8 years of service with the Company) for 12 months or until the time that Executive is employed on a full-time basis by another employer, plus payment of the prorated portion of incentive bonus that he would have received. Mr. Fortney receives severance payments equal to 100% of base salary for 12 months. 45 Each Executive also agreed to refrain from engaging in other business activities in the nuclear utility service industry while employed by the Company. If the Executive terminates his employment without good reason (but not for any other type of termination), the Executive is required to refrain for 12 months from competing with the Company or its subsidiaries on any pending contract, proposal or bid on which the Executive participated while an employee or with respect to which the Executive has confidential information. Each Executive also agreed to maintain the confidentiality of information belonging to, used by, or in the possession of the Company relating to its business, except information available in the public domain. COMPENSATION OF DIRECTORS AND STOCK OPTIONS FOR NON-EMPLOYEE DIRECTORS During 1995, Directors of the Company, other than Mr. Fortney, were paid a fee of $750 for each Board of Directors meeting they attended, $750 for each committee meeting they attended, and a monthly retainer of $889 for the Chairman of the Board and $667 for all others. Mr. Fortney received compensation as a member of the management of the Company as indicated in the "Summary Compensation Table." The Chairman of the Board received stock options for 47,000 shares and the Vice Chairman of the Board received stock options for 50,000 shares. All other members of the Board received stock options for 2,000 shares except one who received 4,500. Each present director of the Company who is not an employee of the Company is an "Eligible Director" for the grant of options under the Company's stock option plans, which plans contain a provision for annual non-discretionary option grants to all non-employee directors. On the first trading day of January of each year, each individual, who is on such date an eligible director, will be granted a nonqualified option to purchase 2,000 shares of the Company's common stock at 100% of the fair market value of the stock on the date of such grant. The grants for 1995 were made on January 3, 1995, at an option price of $3.125. COMPLIANCE WITH SEC REPORTING REQUIREMENTS Officers and directors of the Company and greater than ten percent Shareholders are required to report to the Securities and Exchange Commission (the "Commission") on a timely basis certain changes in their legal or beneficial ownership of the Company's stock. Regulations promulgated by the Commission require the Company to disclose to its Shareholders any reporting violations occurring after May 1, 1991, that came to the Company's attention during the current fiscal year based on a review of the applicable filings required by the Commission to report such changes in legal or beneficial ownership. The Company believes that during the fiscal year ended December 31, 1995, its directors, executive officers, and principal shareholders filed all required forms. REPORT OF HUMAN RESOURCES AND COMPENSATION COMMITTEE The Human Resources and Compensation Committee ("Committee") of the Board of Directors is composed entirely of outside directors and is responsible for establishing compensation policies that apply to executives and managers of the Company, including executive officers. All decisions by the Committee relating to the compensation of the Company's executive officers are reviewed by the full Board, except for decisions about awards under the Company's stock option plans, which are made solely by the Committee. PHILOSOPHY The philosophy of the Company's executive compensation program is that compensation of executive officers, and in particular that of the President, should be directly and materially linked to both operating performance of the Company and to the interests of the Shareholders. In implementing this philosophy, the Company's policies integrate annual base compensation with incentive awards based upon corporate performance and individual initiatives and performance. Measurement of corporate performance is primarily based on Company-wide goals, while measurement of individual initiatives is primarily based on review of individual and operations performance goals. In years in which performance goals are achieved or exceeded, executive compensation tends to be higher than in years in which performance is below expectations. Annual cash compensation, together with grants of stock options and incentive compensation, is designed to attract and retain qualified executives and to ensure that such executives have a continuing stake in the long-term success of the Company. Annual increases may also be necessary at times, 46 without reference to performance, to adjust the Company's executive salaries to remain competitive with salaries paid by comparable companies. The Company's executive compensation program is composed of base salary, annual cash incentive compensation, long-term incentive compensation in the form of stock options and various benefits, including medical and profit sharing plans generally available to employees of the Company. BASE SALARY Base salary levels for the Company's executive officers are set in the context of the Company's total compensation philosophy which is to align executive interests with the Shareholders and make a significant portion of their compensation opportunity contingent upon achieving performance goals. Executive base salaries are generally targeted near the median of companies in the power and environmental services markets and the service segment of general industry companies of comparable revenue size. These companies which are selected with the help of a compensation consultant retained by the Committee differ from the broader group of companies included in the Piper Jaffray Hazardous Remediation Disposal Index used in the stock performance graph which follows this report. Competitive data taken from available private and published survey sources is reviewed annually for this purpose. In determining individual salary levels, the Committee takes into account the executive officer's experience, scope of responsibility, performance level, and relative impact on the Company's success. In 1994, on an overall basis, executive officers' base salaries were targeted at or slightly below the median in the most recent survey. There were no significant changes for 1995. ANNUAL INCENTIVE COMPENSATION The annual incentive compensation plan is a key element in the Company's pay for performance system and is the vehicle by which executive officers can increase their total compensation. Annual incentive compensation constitutes that portion of executive compensation that is at risk and is dependent on achievement of individual and Company performance objectives. The Company's objectives, which are not specifically weighted, are a combination of operating, financial, and strategic goals (such as profitability, revenue growth, productivity, and cash flow) that are considered to be critical to the Company's short and long-term financial success and its ability to build shareholder value. The Committee establishes Company-wide and individual goals annually with the President. The President develops individual performance goals for the other executives, which goals are approved by the Committee. The amount of the awards paid to executive officers at the end of the year varies depending upon the performance against the established Company-wide, operations, and individual goals. In determining the size of the awards, no single performance factor or formula is used because the Committee believes that the rigid application of quantitative performance measures would eliminate the consideration of qualitative factors critical to long-term strategic performance. Determination of awards for the President and other executive officers, however, emphasize overall Company performance. The Company-wide performance goals included budgeted levels of revenue growth, net income, and other strategic goals. The Committee determined that because the primary goal of net income was not met in 1994 or 1995, none of the Company's executive officers would receive any annual incentive compensation for 1994 or 1995. The cash compensation for directors for 1995 was reinstated to the 1993 levels: $8,000 annual fee and a $750 meeting and committee meeting fee, together with the automatic annual grant of options for 2,000 shares for each director on the first day of business in January. STOCK OPTIONS The Company's stock option plans are the long-term incentive for executive officers and key employees. The Committee believes that stock options provide a strong incentive for executives to build shareholder value. The Committee awards stock options to the President and, upon the recommendation of the President, to other executive officers. Individual grants are based upon competitive practices of companies in the service markets described above, the amount of stock options previously granted to the executive, and individual performance as evaluated by the Committee. 47 In February 1995, the Committee recommended and the Board of Directors approved (as required by the 1993 Stock Option Plan) a program for those incentive stock options granted in 1994 to employees formerly with Impell and in lieu of cash bonuses for 1994 performance. Under the repricing program which was announced to the employees in March 1995, the options held by employees still employed by the Company can be repriced at the employees' option at an exercise price of $4.50 per share. The then current market price was $3.00 per share. In consideration of the price change, the vesting schedule would be changed from an eighteen months "cliff vesting" and proportional vesting over four years to 100% "cliff vesting" at January 1, 1998. The Committee debated the merits of repricing incentive options, noted its general opposition to repricing and concluded that on balance the interests of the shareholders would best be served by reinforcing the incentive to the employees with an exercise price within near term achievable levels and in turn receiving an extension of the vesting period to encourage continuity with the Company. The Omnibus Budget Reconciliation Act of 1993 places a limit on the amount of certain types of compensation for each of the executive officers which may be tax deductible by the Company beginning in 1994. The Internal Revenue Service recently issued proposed regulations on the deductibility limit. The Company's policy is, primarily, to design and administer compensation plans which support the achievement of long-term strategic objectives and enhance shareholder value and, to the extent possible, to maximize the proportion of compensation expense that is tax deductible by the Company. It is anticipated the new regulations will not result in a limitation for the Company to fully deduct all compensation expense. The Company will continue to monitor these proposed regulations. J.E. (Ted) Ardell, III, Chairman E. Linn Draper, Jr. Fruzsina Harsanyi Members of the Human Resources and Compensation Committee 48 STOCK PRICE PERFORMANCE GRAPH The graph below compares the Company's five-year cumulative return on its common stock to the similar returns for (a) all stocks traded under the NASDAQ Composite and (b) the Piper Jaffray Hazardous Waste Remediation/Disposal Index of 38 stocks (including the Company) of companies in the hazardous waste and environmental services industry. [GRAPH]
- -------------------------------------------------------------------------------------- LEGEND Symbol Index Description 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 - ------ ----------------- -------- -------- -------- -------- -------- -------- u PIPER JAFFRAY 100.0 105.9 92.1 69.5 51.0 41.2 n VECTRA 100.0 91.8 91.8 138.8 53.1 36.7 s NASDAQ - 100.0 156.8 181.1 207.8 201.1 281.4 COMPOSITE - --------------------------------------------------------------------------------------
49 PART IV ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth information as to the only persons or groups known by the Company to be the beneficial owners, as defined in Rule 13d-3 of the Securities and Exchange Commission, of more than five percent of the common stock of the Company on March 1, 1996, as well as the Company's directors, the Company's chief executive officer, the Company's four highest paid executives and for all directors and officers as a group.
NUMBER OF PERCENT OF NAME AND ADDRESS SHARES(1) CLASS(1) ---------------- ------------ ---------- OWNERS OF MORE THAN 5% Combustion Engineering, Inc. 1,714,503(2) 21.9% 900 Long Ridge Road Stamford, Connecticut 06904 Orien Ventures 634,885(3) 8.1% 5520 SW MacAdam Avenue Suite 112 Portland, Oregon 97201 Cable & Howse Ventures 559,597(4) 7.1% Security Pacific Bank Plaza 777-108th Avenue N.E. Suite 2300 Bellevue, Washington 98004
NUMBER OF PERCENT OF NAME SHARES(1) CLASS(1) ---- ------------ ---------- DIRECTORS J.E. (Ted) Ardell, III 15,500(5) * Albert J. Baciocco, Jr. 25,000(6) * E. Linn Draper, Jr. 16,700(7) * Ray A. Fortney 33,500(8) * Fruzsina Harsanyi 4,500(5) * Elwood D. Howse, Jr. 559,597(4) 7.1% Edward J. Keith 25,500(5) * Roy Kirkorian *
50 EXECUTIVE OFFICERS FOR FISCAL YEAR 1995 Walter R. Bak 1,000 * Vince Franceschi * John R. Holding 21,250(5) * Kristin L. Allen 23,250(5) * Jeffrey W. Cummings 23,755(5) * Thomas Pfeil * All Directors and Officers as a group (25 persons)(1), (3), (4), (9) 1,517,983 19.4%
_____________________ *Less than 1%. (1) Represents beneficial ownership computed in accordance with Rule 13d-3 which includes shares deemed to be outstanding for purposes of the percentage of ownership by the deemed owner or group but not for purposes of determining the percentage of ownership of any other person or group. (2) Combustion Engineering, Inc. is an indirect wholly-owned subsidiary of ABB Asea Brown Boveri Ltd, a Swiss company. (3) Includes 615,385 shares held by Orien II, L.P., and 17,500 shares which may be purchased by Mr. Miadich within 60 days of March 1, 1996, pursuant to outstanding stock options. Mr. Miadich may be deemed a beneficial owner of such shares by reason of his position as a partner in Orien II, L.P. Mr. Miadich shares the power to dispose of and vote the shares held by that partnership with the other general partner. Mr. Miadich disclaims beneficial ownership of the 615,385 shares owned by Orien II, L.P. (4) Includes 520,625 shares held by CH Partners III and 18,472 shares held by CH Partners II and 10,500 shares which may be purchased by Mr. Howse pursuant to outstanding stock options within 60 days of March 1, 1996. Mr. Howse may be deemed a beneficial owner of the shares owned by CH Partners II and III by reason of his position as a general partner of such entities. Mr. Howse has the sole power to vote 539,097 of these shares, including the shares held by CH Partners III and CH Partners II. Mr. Howse shares the power to dispose of the shares held by those partnerships with the other general partners. (5) Represents shares which may be purchased within 60 days of March 1, 1996, pursuant to outstanding stock options. (6) Includes 10,000 shares which may be purchased within 60 days of March 1, 1996, pursuant to outstanding stock options. (7) Includes 10,000 shares which may be purchased within 60 days of March 1, 1996, pursuant to outstanding stock options. (8) Includes 12,500 shares which may be purchased within 60 days of March 1, 1996, pursuant to outstanding stock options, 20,000 shares owned by Mr. Fortney and 1,000 shares owned by Mr. Fortney's parents. Mr. Fortney may be deemed a beneficial owner of such shares. (9) Includes a total of 301,320 shares which may be purchased within 60 days of March 1, 1996, pursuant to outstanding stock options. On March 1, 1996, Cede & Co., the nominee of the Depository Trust Company, held of record 4,299,443 shares or 54.9 percent of the outstanding shares of common stock, all of which was held for the accounts of member firms of the New York Stock Exchange, the American Stock Exchange and various institutions participating in the facilities of the Depository Trust Company. The Company has no knowledge that any person owns beneficially five percent or more of the outstanding shares of common stock which are held in the name of Cede & Co. 51 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K PAGE ---- (a) 1. FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors 22 Consolidated Statements of Operations for each of the three years in the period ended December 31, 1995 23 Consolidated Balance Sheets at December 31, 1995, and January 1, 1995 24 Consolidated Statements of Shareholders' Equity for each of the three years in the period ended December 31, 1995 25 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1995 26 Notes to Consolidated Financial Statements 27 2. FINANCIAL STATEMENT SCHEDULES Schedule II - Valuation and Qualifying Accounts is filed as a part of this annual report. 55 All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements and Notes thereto. 3. EXHIBITS The exhibits listed on the accompanying index to exhibits are filed as part of this annual report. See page 53 for index to exhibits. (b) REPORTS ON FORM 8-K None.
52 VECTRA TECHNOLOGIES, INC. INDEX TO EXHIBITS ITEM 14(a)
EXHIBIT NUMBER DESCRIPTION REFERENCE - --------------------------------------------------------------------------------------------------------- 3.1 Articles of Incorporation as amended.......................................... C 3.2 Restated Bylaws as amended ................................................... A 10.1 1983 Amended and Restated Stock Option Plan................................... A 10.2 1988 Stock Option Plan as amended............................................. B 10.3 1993 Stock and Incentive Plan................................................. C 10.4 Executive Employment Agreement with Kristin L. Allen dated April 6, 1992...... B 10.5 Executive Employment Agreement with Ray A. Fortney dated August 1, 1993....... C 10.6 First Amendment to the Term Loan Agreement among VECTRA Technologies, Inc., the banks named herein and Banque Paribas as Agent and Banque Nationale de Paris as Managing Agent dated November 13, 1995.................. 10.7 Second Amendment to the Term Loan Agreement among VECTRA Technologies, Inc., the banks named herein and Banque Paribas as Agent and Banque Nationale de Paris as Managing Agent dated December 26, 1995.................. 10.8 Third Amendment to the Term Loan Agreement among VECTRA Technologies, Inc., the banks named herein and Banque Paribas as Agent and Banque Nationale de Paris as Managing Agent dated March 29, 1996..................... 10.9 Fourth Amendment to the Term Loan Agreement among VECTRA Technologies, Inc., the banks named herein and Banque Paribas as Agent and Banque Nationale de Paris as Managing Agent dated April 15, 1996..................... 10.10 Fourth Amendment to the Credit Agreement among VECTRA Nevada, Inc., the banks named herein and Banque Paribas as Agent and Banque Nationale de Paris as Managing Agent and Bank Hapoalim as a Bank dated December 26, 1995... 10.11 Sixth Amendment to the Credit Agreement among VECTRA Nevada, Inc., the banks named herein and Banque Paribas as Agent and Banque Nationale de Paris as Managing Agent and Bank Hapoalim as a Bank dated March 29, 1996...... 10.12 Seventh Amendment to the Credit Agreement among VECTRA Nevada, Inc., the banks named herein and Banque Paribas as Agent and Banque Nationale de Paris as Managing Agent and Bank Hapoalim as a Bank dated April 15, 1996... 10.13 Stock Purchase Agreement dated as of June 30, 1995, by and among VECTRA Technologies, Inc., VECTRA Services, Inc. and Westinghouse Electric Corporation, through its Nuclear Products Division............................ 11 Statement regarding computation of per share earnings......................... 55 21 Subsidiaries of the Company................................................... 58
53 23 Consent of Ernst & Young LLP, Independent Auditors............................ 59 27 Financial Data Schedule
Exhibits in the preceding Exhibit Index designated by an alphabetical reference were filed in the report with the same alphabetical reference as indicated below: (A) Incorporated herein by reference from the Company's Annual Report for 1987 on Form 10-K, filed March 23, 1988. (B) Incorporated herein by reference from the Company's Annual Report for 1992 on Form 10-K, filed March 30, 1993. (C) Incorporated herein by reference from the Company's Annual Report for 1993 on Form 10-K, filed March 30, 1994. (D) Incorporated herein by reference from the Company's Current Report on Form 8K, filed July 12, 1995. Except as otherwise set forth herein, all exhibits incorporated by reference bear the same exhibit numbers as in the documents from which they are incorporated. Copies of Exhibits will be furnished upon written request to Vice President, Finance, VECTRA Technologies, Inc., 5000 Executive Parkway, Suite 500, San Ramon, CA 94583. The cost of all copies is $0.25 per page. 54 VECTRA TECHNOLOGIES, INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FISCAL YEARS ENDED DECEMBER 31, 1995, JANUARY 1, 1995 AND DECEMBER 31, 1993
BALANCE AT ADDITIONS BALANCE AT BEGINNING OF ADDITIONS DUE CHARGED TO END OF PERIOD TO ACQUISITION OPERATIONS DEDUCTIONS PERIOD ------------ -------------- ---------- ---------- ---------- Allowance for contract adjustments: 1995 $384,343 $ -- $650,775 $250,070 $785,048 1994 $ 34,349 $413,734 $178,681 $242,421 $384,343 1993 $ -- $ 34,349 $ -- $ -- $ 34,349
55 SIGNATURES Pursuant to the requirements of section 13 or 15(d) 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. VECTRA TECHNOLOGIES, INC. April 15, 1996 By /s/ Ray A. Fortney ------------------------------------- Ray A. Fortney President, Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons in the capacities indicated on April 15, 1996. /s/ Ray A. Fortney President, Chief Executive Officer and Director - -------------------------------- (Principal Executive Officer) (Ray A. Fortney) /s/ Thomas B. Pfeil Vice President, Finance - -------------------------------- (Principal Financial and Accounting Officer) (Thomas B. Pfeil) /s/ Edward J. Keith Edward J. Keith, Chairman of the Board and Director - -------------------------------- (Edward J. Keith) /s/ Roy Kirkorian Roy Kirkorian, Vice Chairman and Director - -------------------------------- (Roy Kirkorian) /s/ J. E. Ardell, III J. E. Ardell, III, Vice Chairman of the Board and Director - -------------------------------- (J. E. Ardell, III) /s/ A. J. Baciocco, Jr. A. J. Baciocco, Jr., Director - -------------------------------- (A. J. Baciocco, Jr.) /s/ E. Linn Draper, Jr. E. Linn Draper, Jr., Director - -------------------------------- (E. Linn Draper, Jr.) /s/ Fruzsina Harsanyi Fruzsina Harsanyi,, Director - -------------------------------- (Fruzsina Harsanyi)) /s/ Elwood D. Howse, Jr. Elwood D. Howse, Jr., Director - -------------------------------- (Elwood D. Howse, Jr.)
56 EX-10.6 2 FIRST AMENDMENT FIRST AMENDMENT (AMENDED AND RESTATED TERM LOAN AGREEMENT) This FIRST AMENDMENT ("AMENDMENT") dated as of November 13, 1995 is entered into by and among VECTRA TECHNOLOGIES, INC. (the "BORROWER"), BANQUE PARIBAS, as a Bank (as defined below) and as the Agent (as defined below), and BANQUE NATIONALE DE PARIS, as a Bank and as the Managing Agent (as defined below). RECITALS A. The Borrower has entered into that certain Term Loan Agreement dated as of January 6, 1994, as amended, and as amended and restated by that certain Amended and Restated Term Loan Agreement dated as of September 20, 1995 (as so amended and restated, the "TERM AGREEMENT"), among the Borrower, the Banks party thereto, Banque Paribas, acting in its separate capacity as agent for the Banks (the "AGENT"), and Banque Nationale de Paris, acting in its separate capacity as Managing Agent (as defined therein) (the "MANAGING AGENT"). B. The parties to the Term Agreement desire to further amend the Term Agreement on and in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Term Agreement. SECTION 2. AMENDMENTS TO TERM AGREEMENT. 2.1 Subsection (a) (Leverage Ratio) of Section 6.1 (Financial Covenants) of the Term Agreement is amended to delete the table appearing at the end of Subsection (a) and to insert in its place the following: PERIOD RATIO Tranche-B Closing Date - 10/1/95 3.50 : 1.0 10/2/95 - 12/31/95 2.40 : 1.0 1/1/96 - Tranche-A Maturity Date 1.50 : 1.0 1. 2.2 Subsection (b) (Interest Coverage Ratio) of Section 6.1 (Financial Covenants) of the Term Agreement is amended to delete the table appearing at the end of Subsection (b) and to insert in its place the following: PERIOD RATIO Tranche-B Closing Date - 10/1/95 52 2.25 : 1.0 10/2/95 - Tranche-A Maturity Date 5.00 : 1.0 2.3 Subsection (c) (Fixed Charge Coverage Ratio) of Section 6.1 (Financial Covenants) of the Term Agreement is amended to delete the table appearing at the end of Subsection (c) and to insert in its place the following: PERIOD RATIO Tranche-B Closing Date - 10/1/95 1.00 : 1.0 10/2/95 - 12/31/95 1.20 : 1.0 1/1/96 - 3/31/96 1.30 : 1.0 4/1/96 - 6/30/96 1.35 : 1.0 7/1/96 - 9/29/96 1.40 : 1.0 9/30/96 - 12/29/96 1.45 : 1.0 12/30/96 - Tranche-A Maturity Date 1.50 : 1.0 2.4 Subsection (e) (Capital Expenditures) of Section 6.1 (Financial Covenants) of the Term Agreement is amended to delete the table appearing in Subsection (e) and to insert in its place the following: PERIOD MAXIMUM AMOUNT Tranche-B Closing Date - 10/1/95 $4,000,000 10/2/95 - 12/31/95 $ 400,000 1/1/96 - 12/29/96 $5,000,000 12/30/96 - 12/28/97 $5,000,000 12/29/97 - 1/3/99 $5,000,000 2. SECTION 3. LIMITATION OF AMENDMENT. (a) The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document or (ii) otherwise prejudice any right or remedy which the Banks, the Agent or the Managing Agent may now have or may have in the future under or in connection with any Loan Document. (b) This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein waived or amended, are hereby ratified and confirmed and shall remain in full force and effect. SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks, the Agent and the Managing Agent to enter into this Amendment, the Borrower hereby represents and warrants to each Bank, the Agent and the Managing Agent as follows: (a) After giving effect to this Amendment (i) the representations and warranties contained in the Loan Document (other than those which expressly speak as of a different date) are true, accurate and complete in all material respects as of the date hereof and (ii) no Default or Event of Default has occurred and is continuing; (b) The Borrower has the corporate power and authority to execute and deliver this Amendment and to perform its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party; (c) The certificate of incorporation, bylaws and other organizational documents of the Borrower delivered to each Bank on the Tranche-B Closing Date are true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect; (d) The execution and delivery by the Borrower of this Amendment and the performance by Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party have been duly authorized by all necessary corporate action on the part of the Borrower; (e) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not and will not contravene (i) any law or regulation binding on or affecting the Borrower, (ii) the certificate of incorporation or bylaws of the Borrower, (iii) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on the Borrower or (iv) any contractual restriction binding on or affecting the Borrower; 3. (f) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on the Borrower, except as already has been obtained or made; and (g) This Amendment has been duly executed and delivered by the Borrower and is the binding obligation of the Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. SECTION 5. REAFFIRMATION. The Borrower hereby reaffirms its obligations under each Loan Document to which it is a party. SECTION 6. COUNTERPARTS. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. SECTION 7. EFFECTIVENESS. This Amendment shall become effective on the receipt by the Agent of an originally executed counterpart (or facsimile thereof with the original to follow by Federal Express or other overnight courier) of this Amendment, executed by the Borrower and each of the Banks as shall at such point and thereafter be deemed effective as of September 21, 1995. SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 9. RELEASE AND WAIVER. (a) The Borrower hereby acknowledges and agrees that: (i) it has no claim or cause of action against any Bank or the Agent or the Managing Agent or any parent, subsidiary or affiliate of any Bank or the Agent or the Managing Agent, or any of such Bank's, the Agent's or the Managing Agent's officers, directors, employees, attorneys or other representatives or agents (all of which parties other than the Banks, the Agent and the Managing Agent being, collectively, the "LENDER AGENTS") in connection with the Term Agreement, the Loans thereunder or the transactions contemplated therein; (ii) it has no offset or defense against any of its respective obligations, indebtedness or contracts in favor of the Banks, the Agent or the Managing Agent; and (iii) it recognizes that each of the Banks, the Agent and the Managing Agent has heretofore properly performed and satisfied in a timely manner all of its respective obligations to and contracts with the Borrower. 4. (b) Although each of the Banks, the Agent and the Managing Agent regards its respective conduct as proper and does not believe the Borrower to have any claim, cause of action, offset or defense against such Bank, the Agent or the Managing Agent or any Lender Agent in connection with the Term Agreement, the Loans thereunder or the transactions contemplated therein, each Bank, the Agent and the Managing Agent wishes and Borrower agrees to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters could impair or otherwise affect any rights, interests, contracts or remedies of the Banks, the Agent or the Managing Agent. Therefore, the Borrower unconditionally releases and waives (i) any and all liabilities, indebtedness and obligations, whether known or unknown, of any kind of any Bank, the Agent or the Managing Agent or of any of Lender Agents to the Borrower, except the obligations remaining to be respectively performed by the Banks, the Agent or the Managing Agent as expressly stated in the Term Agreement, this Amendment and the other Loan Documents; (ii) any legal, equitable or other obligations or duties, whether known or unknown, of any Bank, the Agent, the Managing Agent or any Lender Agent to the Borrower (and any rights of the Borrower against any Bank, the Agent, the Managing Agent or any Lender Agent) besides those expressly stated in the Term Agreement, this Amendment and the other Loan Documents; (iii) any and all claims under any oral or implied agreement, obligation or understanding with any Bank, the Agent, the Managing Agent or any Lender Agent, whether known or unknown, which is different from or in addition to the express terms of the Term Agreement, this Amendment or any of the other Loan Documents; and (iv) all other claims, causes of action or defenses of any kind whatsoever (if any), whether known or unknown, which the Borrower might otherwise have against any Bank, the Agent, the Managing Agent and/or any Lender Agent on account of any condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind whatsoever which existed, arose or occurred at any time prior to the execution and delivery of this Amendment or which could arise concurrently with the effectiveness of this Amendment. (c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS, LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT. 5. IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. VECTRA TECHNOLOGIES, INC. By: /s/ Ray A. Fortney ------------------------------------- Its: President & CEO ------------------------------------- BANQUE PARIBAS, as a Bank and as Agent By: /s/ Robert S. Pinkerton ------------------------------------- Its: VP ------------------------------------- By: /s/ Lee S. Buckner ------------------------------------- Its: GVP ------------------------------------- BANQUE NATIONALE DE PARIS, as a Bank and as Managing Agent By: /s/ Richard Cushing ------------------------------------- Its: AVP ------------------------------------- 6. ACKNOWLEDGEMENT OF AMENDMENT AND REAFFIRMATION OF GUARANTY SECTION 1. Each of the undersigned Guarantors hereby acknowledges and confirms that it has reviewed and approved the terms and conditions of this Amendment. SECTION 2. Each Guarantor hereby consents to this Amendment and agrees that its respective Guaranty of the Obligations of the Borrower under the Term Agreement shall continue in full force and effect, shall be valid and enforceable and shall not be impaired or otherwise affected by the execution of this Amendment or any other document or instrument delivered in connection herewith. SECTION 3. Each Guarantor severally represents and warrants that, after giving effect to this Amendment, all representations and warranties contained in its respective are true, accurate and complete as if made the date hereof. GUARANTORS PACIFIC NUCLEAR STORAGE SYSTEMS, INC. By: /s/ Ray A. Fortney ------------------------------------ Printed Name: Ray A. Fortney -------------------------- Title: President --------------------------------- NUCLEAR PACKAGING, INC. By: /s/ Ray A. Fortney ------------------------------------ Printed Name: Ray A. Fortney -------------------------- Title: President --------------------------------- VECTRA SERVICES, INC. By: /s/ Ray A. Fortney ------------------------------------ Printed Name: Ray A. Fortney -------------------------- Title: President --------------------------------- CTL INTERNATIONAL, INC. By: /s/ Ray A. Fortney ------------------------------------ Printed Name: Ray A. Fortney -------------------------- Title: President --------------------------------- 7. VECTRA GOVERNMENT SERVICES, INC. By: /s/ Ray A. Fortney ------------------------------------ Printed Name: Ray A. Fortney -------------------------- Title: President --------------------------------- VECTRA WASTE SERVICES, L.L.C. by: VECTRA Technologies, Inc., its Manager By: /s/ Ray A. Fortney ------------------------------------ Printed Name: Ray A. Fortney -------------------------- Title: President --------------------------------- 8. EX-10.7 3 SECOND AMENDMENT SECOND AMENDMENT (AMENDED AND RESTATED TERM LOAN AGREEMENT) THIS SECOND AMENDMENT ("AMENDMENT") dated as of December 26, 1995 is entered into by and among VECTRA TECHNOLOGIES, INC. (the "BORROWER"), BANQUE PARIBAS, as a Bank (as defined below) and as the Agent (as defined below), and BANQUE NATIONALE DE PARIS, as a Bank and as the Managing Agent (as defined below). RECITALS A. The Borrower has entered into that certain Term Loan Agreement dated as of January 6, 1994, as amended, and as amended and restated by that certain Amended and Restated Term Loan Agreement dated as of September 20, 1995, as amended by that First Amendment dated as of November 13, 1995 (as so amended, the "TERM AGREEMENT"), among the Borrower, the Banks party thereto, Banque Paribas, acting in its separate capacity as agent for the Banks (the "AGENT"), and Banque Nationale de Paris, acting in its separate capacity as Managing Agent (as defined therein) (the "MANAGING AGENT"). B. The parties to the Term Agreement desire to further amend the Term Agreement on and in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Term Agreement. SECTION 2. AMENDMENTS TO TERM AGREEMENT. 2.1 SECTION 1.1 (DEFINITIONS). The definition for the term "Applicable Margin" is amended to delete the period at the end of the definition and to insert in its place a semi-colon followed by the following: and, for Tranche-C Loans, shall mean 3.0% PER ANNUM for all Base Rate Loans. 2.2 SECTION 1.1 (DEFINITIONS). The definition for the term "Commitment" is deleted and replaced with the following: 1. "COMMITMENT" shall mean, for each Bank at any given time, its Tranche-A Commitment, its Tranche-B Commitment and its Tranche-C Commitment. 2.3 SECTION 1.1 (DEFINITIONS). The definition for the term "Note" is deleted and replaced with the following: "NOTE" shall mean any Tranche-A Note, any Tranche-B Note or any Tranche-C Note, and any and all replacements, extensions, substitutions and renewals of any such Notes. 2.4 SECTION 1.1 (DEFINITIONS). A new definition of "Second Amendment" is added to Section 1.1 of the Term Agreement to read as follows: "SECOND AMENDMENT" shall mean that Second Amendment (Amended and Restated Term Loan Agreement) dated as of December 26, 1995 among the Borrower, the Banks, the Agent and the Managing Agent. 2.5 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C Available Amount" is added to Section 1.1 of the Term Agreement to read as follows: "TRANCHE-C AVAILABLE AMOUNT" shall mean, from the Tranche-C Closing Date until and including February 4, 1996, an amount equal to 33.33% of the amount set forth opposite such Bank's name in SCHEDULE 1 hereto under the heading of "TRANCHE-C COMMITMENT," and from February 5, 1996 until and including March 3, 1996, an amount equal to 66.67% of the amount set forth opposite the Bank's name in SCHEDULE 1 hereto under the heading "TRANCHE-C COMMITMENT," and from March 4, 1996 until and including the Tranche-C Maturity Date, an amount equal to the Tranche-C Commitment. 2.6 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C Closing Date" is added to Section 1.1 of the Term Agreement to read as follows: "TRANCHE-C CLOSING DATE" shall mean the later of December 26, 1995 and the date at which each of the conditions precedent set forth in SECTION 3.3 shall have been duly satisfied by the Borrower, as determined by the Banks, in their sole discretion. 2.7 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C Closing Fee" is added to Section 1.1 of the Term Agreement to read as follows: "TRANCHE-C CLOSING FEE" shall have the meaning provided in SECTION 2.8(b). 2.8 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C Commitment" is added to Section 1.1 of the Term Agreement to read as follows: 2. "TRANCHE-C COMMITMENT" shall mean the amount set forth opposite such Bank's name in SCHEDULE 1 hereto under the heading "TRANCHE-C COMMITMENT." 2.9 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C Facility" is added to Section 1.1 of the Term Agreement to read as follows: 2.10 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C Commitment Fee" is added to Section 1.1 of the Term Agreement to read as follows: "TRANCHE-C COMMITMENT FEE" shall have the meaning provided in SECTION 2.8(b). "TRANCHE-C FACILITY" means the One Million Dollar ($1,000,000) non-revolving line of credit maturing on the Tranche-C Maturity Date. 2.11 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C Loan" is added to Section 1.1 of the Term Agreement to read as follows: "TRANCHE-C LOAN" shall have the meaning set forth in SECTION 2.15. 2.12 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C Maturity Date" is added to Section 1.1 of the Term Agreement to read as follows: "TRANCHE-C MATURITY DATE" shall mean March 31, 1996. 2.13 SECTION 1.1 (DEFINITIONS). A new definition of "Tranche-C Notes" is added to Section 1.1 of the Term Agreement to read as follows: "TRANCHE-C NOTES" means the separate promissory notes, dated as of the Tranche-C Closing Date, each executed by the Borrower and payable to the order of a Bank, in the original amount of such Bank's Tranche-C Commitment. 2.14 SECTION 2.2. Section 2.2 of the Term Agreement is amended by inserting after the final paragraph the following new paragraph: The Banks hereby acknowledge that on December 11,1995 the Borrower repaid the Tranche-B Facility by the amount of $1,100,000, which amount was applied to the outstanding Tranche-B Loans in accordance with each Bank's Pro Rata Share and each Bank's Tranche-B Commitment was permanently reduced by the same amount. The revised Tranche-B Commitments of each Bank are set forth on amended SCHEDULE 1 attached hereto. 2.15 SECTION 2.3. A new Subsection (c) is added to Section 2.3 of the Term Agreement to read as follows: 3. (c) TRANCHE-C LOAN NOTES. The Borrower's obligation to pay the principal of, and interest on, each Bank's Tranche-C Loans shall be evidenced by a Tranche-C Note duly executed and delivered by the Borrower and made payable to such Bank substantially in the form of EXHIBIT E hereto in a principal amount equal to such Bank's Tranche-C Commitment. 2.16 SECTION 2.8. Section 2.8 of the Term Agreement is amended by deleting it entirely and by replacing it with the following: SECTION 2.8 FEES. (a) TRANCHE-B FEES. In consideration of the Banks' agreement to commit to make the Tranche-B Loans available to the Borrower as contemplated by this Agreement, the Borrower agrees to pay to the Banks, in accordance with their respective Tranche-B Commitment Percentage, (a) an aggregate "Tranche-B Closing Fee" in the amount of $150,000 which fee shall be earned upon the Tranche-B Closing Date, but which fee shall be due and payable upon the first to occur of (i) the sale of the Borrower's waste or fuel services lines of business or other similar sale of assets currently owned by the Borrower or its subsidiaries, (ii) the Borrower's issuance of additional common stock or preferred stock with a redemption date of not earlier than one year after the earliest of the Tranche-A Maturity Date, the Tranche-B Maturity Date or the Tranche-C Maturity Date, (iii) the Borrower's issuance of debt subordinated to all debt of the Borrower to institutional lenders on terms satisfactory to such institutional lenders, including the Banks, or (iv) the Tranche-B Maturity Date or such prior date as Tranche-B Loans shall have become due and payable, whether by acceleration or otherwise, and (b) a "Tranche-B Commitment Fee" in an amount equal to one-quarter of one percent (0.25%) PER ANNUM of the average daily difference between the aggregate Tranche-B Commitments and the sum of the aggregate principal amount of the Tranche-B Loans then outstanding, due and payable quarterly in arrears on the last day of each calendar quarter, commencing with the quarter during which the Tranche-B Closing Date occurs, with the final such payment due and payable on the date the Tranche-B Commitments terminate under the terms of this Agreement. The initial installment of the Tranche-B Commitment Fee shall accrue and be calculated from June 30, 1995. (b) TRANCHE-C FEE. In consideration of the Banks' agreement to commit to make the Tranche-C Loans available to the Borrower as contemplated by this Agreement, the Borrower agrees to pay to the Banks, in accordance with their respective Tranche-C Commitment Percentage, (a) an aggregate "Tranche-C Closing Fee" in the amount of $125,000 which fee shall be earned upon the Tranche-C Closing Date, but which fee shall be due and payable upon the first to occur of (i) the sale of the Borrower's waste or fuel services lines of business or other similar sale of assets currently owned by the Borrower or its subsidiaries, (ii) the Borrower's issuance of additional common stock or preferred stock with a redemption date of not earlier than one year after the earliest of the Tranche-A Maturity Date, the Tranche-B Maturity Date or the Tranche-C Maturity Date, (iii) the Borrower's issuance of debt subordinated to all debt of the Borrower to institutional lenders on terms satisfactory to such institutional lenders, including the Banks, or (iv) the Tranche-C Maturity Date or such prior date 4. as Tranche-C Loans shall have become due and payable, whether by acceleration or otherwise, and (b) a "Tranche-C Commitment Fee" in an amount equal to one-quarter of one percent (0.25%) PER ANNUM of the average daily difference between the aggregate Tranche-C Commitments and the sum of the aggregate principal amount of the Tranche-C Loans then outstanding, due and payable quarterly in arrears on the last day of each calendar quarter, commencing with March 31, 1996, with the final such payment due and payable on the date the Tranche-C Commitments terminate under the terms of this Agreement. In the event that the Tranche-C Commitments terminate prior to March 31, 1996, the "Tranche-C Commitment Fee shall be due and payable on such earlier date. The initial installment of the Tranche-C Commitment Fee shall accrue and be calculated from January 2, 1996. 2.17 SECTION 2.14. Section 2.14 of the Term Agreement is amended to delete the final full paragraph and to replace it with the following: All amounts due under this SECTION 2.14 shall be prepaid within two (2) Business Days of receipt thereof by the Borrower and shall be applied in inverse order to the scheduled installments for repayment of first the Tranche-B Loans, second the Tranche-A Loans and then the Tranche-C Loans. 2.18 SECTION 2.15 A new Section 2.15 is added to the Term Agreement to read as follows: 2.15 TRANCHE-C FACILITY. Subject to and upon the terms and conditions herein set forth, each Bank, severally but not jointly, agrees to make Loans of immediately available funds to the Borrower, on a non-revolving basis from time to time, from the Tranche-C Closing Date until the earlier of the last Business Day prior to the Tranche-C Maturity Date or the date on which the Tranche-C Commitment has been fully utilized, in an aggregate principal amount not to exceed the lesser of the Tranche-C Commitment of such Bank and the Tranche-C Available Amount of such Bank (each such loan, a "TRANCHE-C LOAN"). The aggregate amount of the Tranche-C Commitments shall not exceed $1,000,000. Subject to the terms of this Agreement relating to optional prepayments and mandatory prepayments and the acceleration of the maturities, the Tranche-C Loans shall be due and payable, together with all accrued and unpaid interest and other amounts chargeable to the Borrower under or with respect to the Tranche-C Facility, on the Tranche-C Maturity Date. (a) GENERAL PROVISIONS RELATING TO TRANCHE-C LOANS. Each Tranche-C Loan made by a Bank under the Tranche-C Facility shall be in the form of a Base Rate Loan. The Borrower shall repay the principal amount of the Tranche-C Loans in the amounts and in the manner set forth in this Section and pay interest accrued on the Tranche-C Loans at the rates and in the manner set forth in SECTION 2.4(a). The Borrower may, at its option and upon one (1) Business Day's notice, prepay all or any portion of the Tranche-C Loans as set for the SECTION 2.6 without premium or penalty. In addition, the Tranche-C Loans shall be subject to Mandatory Prepayments in accordance with SECTION 2.14. 5. (b) PERMITTED USES OF TRANCHE-C LOANS. The proceeds of the Tranche-C Loans shall be used for working capital purposes. (c) NOTICE OF BORROWING FOR TRANCHE-C LOANS. (i) The Borrower shall give the Agent at the Agent's Office prior to 10:00 A.M., Los Angeles time, at least five (5) Business Days' prior telex, facsimile or telephonic notice (promptly confirmed in writing) of a Tranche-C Loan to be made hereunder. Such notice (the "NOTICE OF BORROWING") shall be irrevocable and shall specify (i) the aggregate principal amount of the requested Loans and (ii) the date of Borrowing (which shall be a Business Day). (ii) Promptly after receipt of the Notice of Borrowing, the Agent shall provide each Bank with a copy thereof and inform each Bank as to its Pro Rata Share of the Tranche-C Loan requested thereunder. (d) DISBURSEMENT OF FUNDS FOR TRANCHE-C LOANS. (i) No later than 1:00 P.M., Los Angeles time, on the date specified in the Notice of Borrowing, each Bank will make available its Pro Rata Share of the Tranche-C Loan requested to be made on such date, in U.S. dollars and immediately available funds, at the Agent's Office. After the Agent's receipt of the proceeds of such Tranche-C Loan, the Agent will make available to the Borrower by depositing in the Borrower's account at the Agent's Office the aggregate of the amounts so received. (ii) Unless the Agent shall have been notified by any Bank prior to the date of the Borrowing that such Bank does not intend to make available to the Agent its Tranche-C Loan to be made on such date, the Agent may assume that such Bank has made such amount available to the Agent on such date and the Agent in its sole discretion may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Bank and the Agent has made such amount available to the Borrower, the Agent shall be entitled to recover such corresponding amount on demand from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify the Borrower and the Borrower shall immediately repay such corresponding amount to the Agent. The Agent shall also be entitled to recover from such Bank or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrower to the date such corresponding amount is recovered by the Agent, at the rate PER ANNUM equal to the Base Rate plus the Applicable Margin, calculated in accordance with SECTION 2.4(a), for the Tranche-C Loan. Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have against any Bank as a result of any default by such Bank hereunder. Notwithstanding anything contained herein or in any other Loan Document to the contrary, the Agent may apply all funds and proceeds of Collateral available for the payment of any Obligations first to repay any amount 6. owing by any Bank to the Agent as a result of such Bank's failure to fund its Tranche-C Loans hereunder. 2.19 SECTION 3.3. A new Section 3.3 is added to the Term Agreement to read as follows: SECTION 3.3 CONDITIONS PRECEDENT TO LOANS. The obligation of each Bank to make its initial Tranche-C Loan hereunder is subject to the satisfaction, as determined by the Banks, the Agent and the Managing Agent, on or before the Tranche-C Closing Date of the following conditions precedent: (a) SECOND AMENDMENT. The Borrower and each Bank shall have duly executed and delivered the Second Amendment to the Agent. (b) NOTES. The Borrower shall have duly executed and delivered the Tranche-C Notes to the Agent. (c) ACKNOWLEDGMENT OF AMENDMENT AND REAFFIRMATION OF GUARANTY. The Agent shall have received the Acknowledgment of Amendment and Reaffirmation of Guaranty, duly executed and delivered by each of the Guarantors party thereto to the Agent. (d) CERTIFIED RESOLUTIONS. The Agent shall have received a certificate of the Secretary or Assistant Secretary of each of the Loan Parties and dated the Tranche-C Closing Date certifying (i) the names and true signatures of the incumbent officers of such Person authorized to sign the applicable Loan Documents, (ii) the resolutions of such Person's Board of Directors approving and authorizing the execution, delivery and performance of the Term Agreement, as amended by the Second Amendment, the Tranche-C Notes and the Acknowledgement of Amendment and Reaffirmation of Guaranty referred to in clause (c), above, as applicable, executed by such Person, and (iii) that there have been no changes in the Certificate of Incorporation of such Person or in the Bylaws or similar constituent documents of such Person since the date of certification thereof to the Agent in connection with the closing of the Tranche-B Facility. (e) SIDE LETTER AGREEMENT. The Borrower shall have duly acknowledged and delivered the side letter agreement dated December 22, 1995 from the Agent to the Borrower relating to compliance with projections as to financial performance. (f) WARRANT. The Borrower shall have duly executed and delivered a Common Stock Purchase Warrant in form and substance satisfactory to the Banks. (g) WARRANT PURCHASE AGREEMENT. The Borrower shall have duly executed and delivered a Common Stock Warrant Purchase Agreement in form and substance satisfactory to Banks. 7. 2.20 SECTION 3.4. A new Section 3.4 is added to the Term Agreement to read as follows: SECTION 3.4 ALL TRANCHE-C LOANS. The obligation of any Bank to make any Tranche-C Loan is subject to the satisfaction of the following further conditions precedent: (a) NOTICE OF BORROWING. The Agent shall have received a fully executed Notice of Borrowing in respect of the Loans. (b) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default shall have occurred and be continuing on such date either before or after giving effect to the making of the Loans, and the Agent and each Bank shall have received a certificate to such effect dated the funding date of such Loan from the chief financial officer of the Borrower. The acceptance of the proceeds of the Tranche-C Loans shall constitute a representation and warranty by the Borrower to each of the Banks that all of the conditions required to be satisfied under this SECTION 3 in connection with the making of such Loan have been satisfied. 2.21 SECTION 5.10. A new Section 5.10 is added to the Term Agreement to read as follows: SECTION 5.10 OFFERS AND PROPOSALS FOR ACQUISITION. The Borrower shall, promptly upon its receipt, provide to Agent complete copies of any and all written offers or proposals for (i) the investment in the Borrower's or any of its Subsidiaries' capital stock, or (ii) the acquisition of any portion of the business of the Borrower or any of its Subsidiaries. In the event that any of such offers or proposals are oral, the Borrower shall communicate such oral offers or proposals to Agent promptly upon the Borrower's receiving such oral offer or proposal. 2.22 SECTION 5.11. A new Section 5.11 is added to the Term Agreement to read as follows: SECTION 5.11 NOTICE AND ATTENDANCE AT BOARD MEETINGS; COPIES OF MATERIALS. The Borrower shall duly give notice to the Agent of all meetings of its Board of Directors at the same time and in the same manner and form as such notice is given to the members of the Board of Directors in their capacity as Board members. The Agent shall have the right at the discretion of the Banks, but not the obligation, to attend in an observer status all such meetings. In addition, the Borrower shall deliver, or cause to be delivered, to the Agent any and all written materials which are delivered to the members of the Board of Directors in their capacity as Board members at the same time and in the same manner and form as delivered to such Board members. The right of Agent to attend meetings and to obtain written materials as discussed in the previous paragraph shall not apply to the extent that such meetings or materials pertain to Borrower/Bank group relations or to matters relating to the Borrower's performance of the Loan Documents if the exercise of such right would be inconsistent with applicable law or would result in a breach 8. of the Borrower's fiduciary duties. Agent agrees to hold all materials and information learned from attendance in strict confidence (provided that Agent may divulge information necessary for disclosure to the Banks and to regulatory authorities, including bank regulators) and to abide by applicable law, including securities laws, related thereto. 2.23 SECTION 5.12. A new Section 5.12 is added to the Term Agreement to read as follows: SECTION 5.12 AUTHORIZATION TO MEET WITH KEY EMPLOYEES. The Borrower expressly authorizes the Agent, upon reasonable prior notice to one of the executive officers of the Borrower and without unreasonable disruption of the normal operations of the Borrower, to meet with employees whom the Agent, in its sole discretion, considers to be key employees of any of the Borrower's Subsidiaries, divisions or business lines for the purpose of enabling the Banks to obtain further information relevant to the administration of the Loans hereunder pertaining to the financial condition, operations and prospects of such Subsidiaries, divisions or business lines. 2.24 SECTION 7.1. Subsection (a) of Section 7.1 of the Term Agreement is deleted and replaced with the following: (a) FAILURE TO MAKE PAYMENTS. The Borrower shall default in the payment when due of any principal of the Loans, interest, Fees, including, without limitation, the payment of the deferred $125,000 Tranche-B Closing Fee when due, the payment of the deferred $125,000 Tranche-C Closing Fee when due, or other amounts owing hereunder. SECTION 3. LIMITATION OF AMENDMENT. (a) The amendments set forth in SECTION 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document or (ii) otherwise prejudice any right or remedy which the Banks, the Agent or the Managing Agent may now have or may have in the future under or in connection with any Loan Document. (b) This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein waived or amended, are hereby ratified and confirmed and shall remain in full force and effect. SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks, the Agent and the Managing Agent to enter into this Amendment, the Borrower hereby represents and warrants to each Bank, the Agent and the Managing Agent as follows: (a) After giving effect to this Amendment (i) the representations and warranties contained in the Loan Documents (other than those which expressly speak as of a 9. different date) are true, accurate and complete in all material respects as of the date hereof and (ii) no Default or Event of Default has occurred and is continuing; (b) The Borrower has the corporate power and authority to execute and deliver this Amendment and to perform its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party; (c) The certificate of incorporation, bylaws and other organizational documents of the Borrower delivered to each Bank on the Tranche-C Closing Date are true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect; (d) The execution and delivery by the Borrower of this Amendment and the performance by Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party have been duly authorized by all necessary corporate action on the part of the Borrower; (e) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not and will not contravene (i) any law or regulation binding on or affecting the Borrower, (ii) the certificate of incorporation or bylaws of the Borrower, (iii) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on the Borrower or (iv) any contractual restriction binding on or affecting the Borrower; (f) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on the Borrower, except as already has been obtained or made; and (g) This Amendment has been duly executed and delivered by the Borrower and is the binding obligation of the Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. SECTION 5. REAFFIRMATION. The Borrower hereby reaffirms its obligations under each Loan Document to which it is a party. SECTION 6. COUNTERPARTS. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 10. SECTION 7. EFFECTIVENESS. This Amendment shall become effective on the receipt by the Agent of an originally executed counterpart (or facsimile thereof with the original to follow by Federal Express or other overnight courier) of this Amendment, executed by the Borrower and each of the Banks as shall at such point and thereafter be deemed effective as of December 26, 1995. SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 9. RELEASE AND WAIVER. (a) The Borrower hereby acknowledges and agrees that: (i) it has no claim or cause of action against any Bank or the Agent or the Managing Agent or any parent, subsidiary or affiliate of any Bank or the Agent or the Managing Agent, or any of such Bank's, the Agent's or the Managing Agent's officers, directors, employees, attorneys or other representatives or agents (all of which parties other than the Banks, the Agent and the Managing Agent being, collectively, the "LENDER AGENTS") in connection with the Term Agreement, the Loans thereunder or the transactions contemplated therein; (ii) it has no offset or defense against any of its respective obligations, indebtedness or contracts in favor of the Banks, the Agent or the Managing Agent; and (iii) it recognizes that each of the Banks, the Agent and the Managing Agent has heretofore properly performed and satisfied in a timely manner all of its respective obligations to and contracts with the Borrower. (b) Although each of the Banks, the Agent and the Managing Agent regards its respective conduct as proper and does not believe the Borrower to have any claim, cause of action, offset or defense against such Bank, the Agent or the Managing Agent or any Lender Agent in connection with the Term Agreement, the Loans thereunder or the transactions contemplated therein, each Bank, the Agent and the Managing Agent wishes and Borrower agrees to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters could impair or otherwise affect any rights, interests, contracts or remedies of the Banks, the Agent or the Managing Agent. Therefore, the Borrower unconditionally releases and waives (i) any and all liabilities, indebtedness and obligations, whether known or unknown, of any kind of any Bank, the Agent or the Managing Agent or of any of Lender Agents to the Borrower, except the obligations remaining to be respectively performed by the Banks, the Agent or the Managing Agent as expressly stated in the Term Agreement, this Amendment and the other Loan Documents; (ii) any legal, equitable or other obligations or duties, whether known or unknown, of any Bank, the Agent, the Managing Agent or any Lender Agent to the Borrower (and any rights of the Borrower against any Bank, the Agent, the Managing Agent or any Lender Agent) besides those expressly stated in the Term Agreement, this Amendment and the other Loan Documents; (iii) any and all claims under any oral or implied agreement, obligation or understanding with any Bank, the Agent, the Managing Agent or any Lender Agent, whether known or unknown, which is different from or in addition to the express terms of the Term Agreement, this Amendment or any of the other Loan Documents; and (iv) all other claims, causes of action or defenses of any kind whatsoever (if 11. any), whether known or unknown, which the Borrower might otherwise have against any Bank, the Agent, the Managing Agent and/or any Lender Agent on account of any condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind whatsoever which existed, arose or occurred at any time prior to the execution and delivery of this Amendment or which could arise concurrently with the effectiveness of this Amendment. (c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS, LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT. IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. VECTRA TECHNOLOGIES, INC. By: /s/ Ray A. Fortney ----------------------------------- Its: President & CEO ----------------------------------- BANQUE PARIBAS, as a Bank and as Agent By: /s/ Robert S. Pinkerton ----------------------------------- Its: VP ----------------------------------- By: /s/ Lee S. Buckner ----------------------------------- Its: GVP ----------------------------------- BANQUE NATIONALE DE PARIS, as a Bank and as Managing Agent By: /s/ Richard Cushing ----------------------------------- Its: AVP ----------------------------------- 12. ACKNOWLEDGEMENT OF AMENDMENT AND REAFFIRMATION OF GUARANTY SECTION 1. Each of the undersigned Guarantors hereby acknowledges and confirms that it has reviewed and approved the terms and conditions of this Amendment. SECTION 2. Each Guarantor hereby consents to this Amendment and agrees that its respective Guaranty of the Obligations of the Borrower under the Term Agreement shall continue in full force and effect, shall be valid and enforceable and shall not be impaired or otherwise affected by the execution of this Amendment or any other document or instrument delivered in connection herewith. SECTION 3. Each Guarantor severally represents and warrants that, after giving effect to this Amendment, all representations and warranties contained in its respective are true, accurate and complete as if made the date hereof. Dated: 12/29/95 ----------------------- GUARANTORS PACIFIC NUCLEAR STORAGE SYSTEMS, INC. By: /s/ RAY A. FORTNEY ----------------------------------- Printed Name: RAY A. FORTNEY ------------------------- Title: PRESIDENT -------------------------------- NUCLEAR PACKAGING, INC. By: /s/ RAY A. FORTNEY ----------------------------------- Printed Name: RAY A. FORTNEY ------------------------- Title: PRESIDENT -------------------------------- VECTRA SERVICES, INC. By: /s/ RAY A. FORTNEY ----------------------------------- Printed Name: RAY A. FORTNEY ------------------------- Title: PRESIDENT -------------------------------- CTL INTERNATIONAL, INC. By: /s/ RAY A. FORTNEY ----------------------------------- Printed Name: RAY A. FORTNEY ------------------------- Title: PRESIDENT -------------------------------- 13. VECTRA GOVERNMENT SERVICES, INC. By: /s/ RAY A. FORTNEY ----------------------------------- Printed Name: RAY A. FORTNEY ------------------------- Title: PRESIDENT -------------------------------- VECTRA WASTE SERVICES, L.L.C. by: VECTRA Technologies, Inc., its Manager By: /s/ RAY A. FORTNEY ----------------------------------- Printed Name: RAY A. FORTNEY ------------------------- Title: PRESIDENT -------------------------------- 14. SCHEDULE 1 TO CREDIT AGREEMENT BANKS AND COMMITMENTS TRANCHE-A NAME OF BANK COMMITMENT Banque Paribas $1,463,471 Domestic Lending Office and Eurodollar Lending Office: 2029 Century Park East, Suite 3900 Los Angeles, CA 90067 Banque Nationale de Paris $1,463,471 Domestic Lending Office and Eurodollar Lending Office: 499 Park Avenue, 7th Floor New York, NY 10022 TRANCHE-B NAME OF BANK COMMITMENT Banque Paribas $950,000 Domestic Lending Office and Eurodollar Lending Office: 2029 Century Park East, Suite 3900 Los Angeles, CA 90067 Banque Nationale de Paris $950,000 Domestic Lending Office and Eurodollar Lending Office: 499 Park Avenue, 7th Floor New York, NY 10022 15. SCHEDULE 1 TO CREDIT AGREEMENT BANKS AND COMMITMENTS TRANCHE-C NAME OF BANK COMMITMENT Banque Paribas $500,000 Domestic Lending Office and Eurodollar Lending Office: 2029 Century Park East, Suite 3900 Los Angeles, CA 90067 Banque Nationale de Paris $500,000 Domestic Lending Office and Eurodollar Lending Office: 499 Park Avenue, 7th Floor New York, NY 10022 EX-10.8 4 THIRD AMENDMENT THIRD AMENDMENT AND LIMITED WAIVER (AMENDED AND RESTATED TERM LOAN AGREEMENT) THIS THIRD AMENDMENT AND LIMITED WAIVER ("AMENDMENT") dated as of March 29, 1996, is entered into by and among VECTRA TECHNOLOGIES, INC. (the "BORROWER"), BANQUE PARIBAS, as a Bank (as defined below) and as the Agent (as defined below), and BANQUE NATIONALE DE PARIS, as a Bank and as the Managing Agent (as defined below). RECITALS A. The Borrower has entered into that certain Term Loan Agreement dated as of January 6, 1994, as amended, and as amended and restated by that certain Amended and Restated Term Loan Agreement dated as of September 20, 1995, as amended by that First Amendment dated as of November 13, 1995, and that Second Amendment dated as of December 26, 1995 (as so amended, the "TERM AGREEMENT"), among the Borrower, the Banks party thereto, Banque Paribas, acting in its separate capacity as agent for the Banks (the "AGENT"), and Banque Nationale de Paris, acting in its separate capacity as Managing Agent (as defined therein) (the "MANAGING AGENT"). B. The Borrower has requested that the Loan Agreement be amended to extend the Tranche-B Maturity Date, the Tranche-C Maturity Date and the payment date for the principal installment due on the Tranche-A Loans from March 31, 1996 to April 15, 1996, for the limited purpose of accommodating the Borrower in connection with that certain letter of intent dated as of March 21, 1996, between Duke Engineering & Service ("DE&S") and the Borrower (the "Letter of Intent"), pursuant to which the Borrower intends to sell and DE&S intends to purchase all of the assets of the nuclear engineering, power services and government services business units of the Borrower (the "NP&G Services Units"). The Borrower has advised the Agent that such a sale would close as soon as possible and in any event not later than August 15, 1996, premised on the condition that the net sale proceeds shall be sufficient to repay the then-outstanding Obligations under and as defined in the Receivables Facility and the then-outstanding Obligations under the Term Loan Agreement in full. C. Pursuant to Sections 5.1(a), (b) and (c) of the Loan Agreement, the Borrower covenants and agrees to furnish to each Bank certain information. The Borrower has failed to timely furnish certain of such information for the fiscal quarter ending December 31, 1995 and the months of November 1995, December 1995, January 1996, and February 1996 and the fiscal year ending December 31, 1995, as required by Section 5.1. The Borrower's failure to furnish such information is a breach of Section 5.1 of the Loan Agreement, an Event of Default under Section 7.1(d)(i) and a Default under Section 7.1(d)(ii) of the Loan Agreement. The Borrower's failure to effect cure of these Defaults within the five (5) Business Day grace period provided by Section 7.1(d)(ii) of the Loan Agreement has resulted in these Defaults maturing into Events of Default. D. Pursuant to Section 6.1 of the Loan Agreement, the Borrower covenants and agrees to comply with certain financial covenants described in subsections (a) through (e), 1. inclusive of Section 6.1. The Borrower has failed to comply with such financial covenants for the fiscal quarter ending December 31, 1995. The Borrower's failure to comply with such financial covenants is a breach of Section 6.1 of the Loan Agreement and an Event of Default under Section 7.1(d)(i) of the Loan Agreement. E. The Borrower has requested that the Banks waive the Defaults and Events of Defaults that have occurred as a result of the Borrower's failure to furnish certain information and to comply with the financial covenants as required by Section 5.1 and 6.1, respectively, of the Loan Agreement. F. The Banks are willing to so amend the Term Agreement and to provide such a limited waiver, but only upon the terms and conditions and in reliance upon the representations and warranties set forth below. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: SECTION 1. DEFINITIONS. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Term Agreement. SECTION 2. AMENDMENTS TO TERM AGREEMENT. 2.1 SECTION 1.1 (DEFINITIONS). The definition of the term "Tranche-B Maturity Date" is deleted and replaced with the following: "TRANCHE-B MATURITY DATE" shall mean April 15, 1996. 2.2 SECTION 1.1 (DEFINITIONS). The definition of "Tranche-C Maturity Date" is deleted and replaced with the following: "TRANCHE-C MATURITY DATE" shall mean April 15, 1996. 2.3 SECTION 2.1 (TRANCHE-A FACILITY). The first paragraph of Section 2.1 of the Term Agreement is amended to insert the following at the end thereof: ;PROVIDED, HOWEVER, that the principal installment due and payable on the March 31, 1996 Payment Date shall be deferred until April 15, 1996. SECTION 3. LIMITATION OF AMENDMENTS. (a) The amendments set forth in SECTION 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to 2. (i) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document or (ii) otherwise prejudice any right or remedy which the Banks, the Agent or the Managing Agent may now have or may have in the future under or in connection with any Loan Document. (b) This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein waived or amended, are hereby ratified and confirmed and shall remain in full force and effect. SECTION 4. LIMITED WAIVERS. Effective as of the date hereof, and subject to the condition subsequent that the parties hereto enter into a further amendment of the Loan Agreement on or before April 15, 1996, for the purpose, among other things, of amending the financial covenants set forth in Section 6.1 of the Loan Agreement for the Borrower's fiscal year 1996, each of the Banks, the Agent and the Managing Agent hereby waives the Defaults and Events of Default which have occurred under Sections 5.1 and 6.1 of the Loan Agreement solely as a result of the Borrower's failure to furnish certain information and to comply with the financial covenants as required by Sections 5.1 and 6.1, respectively, of the Loan Agreement. SECTION 5. LIMITATION OF WAIVERS. (a) The waivers set forth in Section 4 above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, (ii) a waiver of any other breach or violation on any other occasion of the sections of the Loan Agreement which are the subject of the waivers set forth in Section 4 above, or (ii) otherwise prejudice any right or remedy which the Banks, the Agent or the Managing Agent may now have or may have in the future under or in connection with any Loan Document. (b) This waiver shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein waived or amended, are hereby ratified and confirmed and shall remain in full force and effect. SECTION 6. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks, the Agent and the Managing Agent to enter into this Amendment, the Borrower hereby represents and warrants to each Bank, the Agent and the Managing Agent as follows: (a) After giving effect to his Amendment (i) the representations and warranties contained in the Loan Documents (other than those which expressly speak as of a different date) are true, accurate and complete in all material respects as of the date hereof and (ii) no Default or Event of Default has occurred and is continuing; 3. (b) The Borrower has the corporate power and authority to execute and deliver this Amendment and to perform its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party; (c) The certificate of incorporation, bylaws and other organizational documents of the Borrower delivered to each Bank on the Tranche-C Closing Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect; (d) The execution and delivery by the Borrower of this Amendment and the performance by Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party have been duly authorized by all necessary corporate action on the part of the Borrower; (e) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not and will not contravene (i) any law or regulation binding on or affecting the Borrower, (ii) the certificate of incorporation or bylaws of the Borrower, (iii) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on the Borrower or (iv) any contractual restriction binding on or affecting the Borrower; (f) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on the Borrower, except as already has been obtained or made; and (g) This Amendment has been duly executed and delivered by the Borrower and is the binding obligation of the Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. SECTION 7. REAFFIRMATION. The Borrower hereby reaffirms its obligations under each Loan Document to which it is a party. SECTION 8. COUNTERPARTS. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 4. SECTION 9. EFFECTIVENESS. This Amendment shall be deemed effective upon the satisfaction of all of the following conditions precedent (PROVIDED that all such conditions must be satisfied prior to 5:00 p.m., San Francisco time, March 29, 1996): (a) THIRD AMENDMENT. The Borrower and each Bank shall have duly executed and delivered this Amendment to the Agent. (b) ACKNOWLEDGMENT OF AMENDMENT AND REAFFIRMATION OF GUARANTY. The Agent shall have received the Acknowledgment of Amendment and Reaffirmation of Guaranty, duly executed and delivered by each of the Guarantors to the Agent. SECTION 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 11. RELEASE AND WAIVER. (a) The Borrower hereby acknowledges and agrees that: (i) it has no claim or cause of action against any Bank or the Agent or the Managing Agent or any parent, subsidiary or affiliate of any Bank or the Agent or the Managing Agent, or any of such Bank's, the Agent's or the Managing Agent's officers, directors, employees, attorneys or other representatives or agents (all of which parties other than the Banks, the Agent and the Managing Agent being, collectively, the "LENDER AGENTS") in connection with the Term Agreement, the Loans thereunder or the transactions contemplated therein; (ii) it has no offset or defense against any of its respective obligations, indebtedness or contracts in favor of the Banks, the Agent or the Managing Agent; and (iii) it recognizes that each of the Banks, the Agent and the Managing Agent has heretofore properly performed and satisfied in a timely manner all of its respective obligations to and contracts with the Borrower. (b) Although each of the Banks, the Agent and the Managing Agent regards its respective conduct as proper and does not believe the Borrower to have any claim, cause of action, offset or defense against such Bank, the Agent or the Managing Agent or any Lender Agent in connection with the Term Agreement, the Loans thereunder or the transactions contemplated therein, each Bank, the Agent and the Managing Agent wishes and Borrower agrees to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters could impair or otherwise affect any rights, interests, contracts or remedies of the Banks, the Agent or the Managing Agent. Therefore, the Borrower unconditionally releases and waives (i) any and all liabilities, indebtedness and obligations, whether known or unknown, of any kind of any Bank, the Agent or the Managing Agent or of any of Lender Agents to the Borrower, except the obligations remaining to be respectively performed by the Banks, the Agent or the Managing Agent as expressly stated in the Term Agreement, this Amendment and the other Loan Documents; (ii) any legal, equitable or other obligations or duties, whether known or unknown, of any Bank, the Agent, the Managing Agent or any Lender Agent to the Borrower (and any rights of the Borrower against any Bank, the Agent, the Managing Agent or any Lender Agent) besides those expressly stated in the Term 5. Agreement, this Amendment and the other Loan Documents; (iii) any and all claims under any oral or implied agreement, obligation or understanding with any Bank, the Agent, the Managing Agent or any Lender Agent, whether known or unknown, which is different from or in addition to the express terms of the Term Agreement, this Amendment or any of the other Loan Documents; and (iv) all other claims, causes of action or defenses or any kind whatsoever (if any), whether known or unknown, which the Borrower might otherwise have against any Bank, the Agent, the Managing Agent and/or any Lender Agent on account of any condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind whatsoever which existed, arose or occurred at any time prior to the execution and delivery of this Amendment or which could arise concurrently with the effectiveness of this Amendment. (c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS, LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT. 6. IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. VECTRA TECHNOLOGIES, INC. By: /s/ RAY A. FORTNEY ---------------------------------- Its: PRESIDENT AND CEO ---------------------------------- BANQUE PARIBAS, as a Bank and as Agent By: /s/ Robert S. Pinkerton ---------------------------------- Its: VP ---------------------------------- By: /s/ Lee S. Buckner ---------------------------------- Its: GVP ---------------------------------- BANQUE NATIONALE DE PARIS, as a Bank and as Managing Agent By: /s/ Richard Cushing ---------------------------------- Its: VP ---------------------------------- 7. ACKNOWLEDGMENT OF AMENDMENT AND REAFFIRMATION OF GUARANTY SECTION 1. Each of the undersigned Guarantors hereby acknowledges and confirms that it has reviewed and approved the terms and conditions of this Amendment. SECTION 2. Each Guarantor hereby consents to this Amendment and agrees that its respective Guaranty of the Obligations of the Borrower under the Term Agreement shall continue in full force and effect, shall be valid and enforceable and shall not be impaired or otherwise affected by the execution of this Amendment or any other document or instrument delivered in connection herewith. SECTION 3. Each Guarantor severally represents and warrants that, after giving effect to this Amendment, all representations and warrranties contained in its respective are true, accurate and complete as if made the date hereof. Dated: March 29, 1996 GUARANTORS PACIFIC NUCLEAR STORAGE SYSTEMS, INC. By: /s/ RAY A. FORTNEY ----------------------------------- Printed Name: RAY A. FORTNEY ------------------------- Title: PRESIDENT -------------------------------- NUCLEAR PACKAGING, INC. By: /s/ RAY A. FORTNEY ----------------------------------- Printed Name: RAY A. FORTNEY ------------------------- Title: PRESIDENT -------------------------------- VECTRA SERVICES, INC. By: /s/ RAY A. FORTNEY ----------------------------------- Printed Name: RAY A. FORTNEY ------------------------- Title: PRESIDENT -------------------------------- 1. CTL INTERNATIONAL, INC. By: /s/ RAY A. FORTNEY ------------------------------------ Printed Name: RAY A. FORTNEY -------------------------- Title: PRESIDENT --------------------------------- VECTRA GOVERNMENT SERVICES, INC. By: /s/ RAY A. FORTNEY ------------------------------------ Printed Name: RAY A. FORTNEY -------------------------- Title: PRESIDENT --------------------------------- VECTRA WASTE SERVICES, L.L.C. By: VECTRA Technologies, Inc., its Manager By: /s/ RAY A. FORTNEY ------------------------------------ Printed Name: RAY A. FORTNEY -------------------------- Title: PRESIDENT --------------------------------- 2. EX-10.9 5 FOURTH AMENDMENT (TERM LOAN) FOURTH AMENDMENT (AMENDED AND RESTATED TERM LOAN AGREEMENT) THIS FOURTH AMENDMENT ("Amendment") dated as of April 15, 1996, is entered into by and among VECTRA TECHNOLOGIES, INC. (the "BORROWER"), BANQUE PARIBAS, as a Bank (as defined below) and as the Agent (as defined below), and BANQUE NATIONALE DE PARIS, as a Bank and as the Managing Agent (as defined below). RECITALS A. The Borrower has entered into that certain Term Loan Agreement dated as of January 6, 1994, as amended, and as amended and restated by that certain Amended and Restated Term Loan Agreement dated as of September 20, 1995, as amended by that First Amendment dated as of November 13, 1995, that Second Amendment dated as of December 26, 1995, and that Third Amendment and Limited Waiver dated as of March 29, 1996 (as so amended, the "TERM AGREEMENT"), among the Borrower, the Banks (as defined therein) party thereto (the "BANKS"), Banque Paribas, acting in its separate capacity as Agent (as defined therein) for the Banks (the "AGENT"), and Banque Nationale de Paris, acting in its separate capacity as Managing Agent (as defined therein) for the Banks (the "MANAGING AGENT"). B. The Borrower has requested that the Term Agreement be amended to extend the Tranche-B Maturity Date and the Tranche-C Maturity Date from April 15, 1996 to January 2, 1997, and to defer the principal installments due under the Tranche-A Loans on April 15, 1996 and on June 30, 1996 to January 2, 1997, for the limited purpose of accommodating the Borrower in connection with that certain letter of intent dated as of March 21, 1996, between Duke Engineering & Service ("DE&S") and the Borrower (the "DE&S Letter of Intent"), pursuant to which the Borrower intends to sell and DE&S intends to purchase substantially all of the assets of the nuclear engineering, power services and government services business units of the Borrower (the "NP&G Services Units"). The borrower has advised the Agent that such a sale would close as soon as possible and in any event the Borrower would receive net cash proceeds from such sale not later than August 31, 1996, premised on the condition that the net proceeds of such sale shall be sufficient to repay the then-outstanding Obligations under and as defined in the Receivables Facility and the then-outstanding Obligations under the Term Agreement in full. The Agent has advised the Borrower that the Banks do not intend to agree to any additional extension of the Loans. C. The parties to the Term Agreement desire to further amend the Term Agreement on and in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows: 1. SECTION 1. DEFINITIONS. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Term Agreement. SECTION 2. AMENDMENTS TO TERM AGREEMENT. 2.1 SECTION 1.1 (DEFINITIONS). The definition of the term "Loan Documents" is deleted and replaced with the following: "LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Guaranty, the Waste Services Guaranty, the Rate Hedging Agreements, the Side Letter Agreement and the Security Documents, and any and all other agreements, documents and instruments executed and delivered by or on behalf or in support of the Borrower to the Agent, any Bank or their respective authorized designee evidencing or otherwise relating to the Loans, as the same from time to time may be amended, modified, supplemented, extended or renewed. 2.2 SECTION 1.1 (DEFINITIONS). The definition of the term "Payment Date" is deleted and replaced with the following: "PAYMENT DATE" shall mean the last day of each March, June, September and December of each year; PROVIDED, HOWEVER, that for 1996, the December Payment Date shall mean January 2, 1997. 2.3 SECTION 1.1 (DEFINITIONS). The definition of the term "Tranche-B Maturity Date" is deleted and replaced with the following: "TRANCHE-B MATURITY DATE" shall mean January 2, 1997. 2.4 SECTION 1.1 (DEFINITIONS). The definition of "Tranche-C Maturity Date" is deleted and replaced with the following: "TRANCHE-C MATURITY DATE" shall mean January 2, 1997. 2.5 SECTION 2.1 (TRANCHE-A FACILITY). The second sentence of the first paragraph of Section 2.1 of the Term Agreement is deleted and replaced with the following: Subject to the terms of this Agreement relating to optional prepayments and mandatory prepayments and the acceleration of maturities, the Tranche-A Loans shall mature on the Tranche-A Maturity Date and shall be repaid, without premium or penalty, by the Borrower on each Payment Date occurring after June 30, 1996, and prior to the Tranche-A Maturity Date in principal installments equal to $750,000 on each such Payment Date with the then outstanding unpaid principal amount of the Tranche-A Loans to be repaid in full on the Tranche-A Maturity Date. Notwithstanding the foregoing, the parties hereto agree that the Borrower may elect, at its sole option, to defer payment of the $750,000 principal installment otherwise due and payable on September 30, 1996 (the "SEPTEMBER PAYMENT"). The Borrower shall effect such election to defer the September Payment by delivering to the Agent no later than 5:00 p.m. California time on September 23, 1996, a written notice of election (a "NOTICE OF ELECTION") and such election shall be effective upon delivery of such Notice of Election to the Agent. In the event that the 2. Borrower elects to defer the September Payment, the September Payment shall be due and payable upon the first to occur of (i) the sale of NP&G Services Units to DE&S or other similar sale of assets currently owned by the Borrower or its Subsidiaries, (ii) the Borrower's issuance of additional common stock or preferred stock with a redemption date of not earlier than one year after the Tranche-A Maturity Date, (iii) the Borrower's issuance of debt subordinated to all of its debt to institutional lenders on terms satisfactory to such institutional lenders, including the Banks, or (iv) the Tranche-A Maturity Date or such prior date as the Tranche-A Loans shall have become due and payable, whether by acceleration or otherwise. As consideration for and in the event of such deferral, the Borrower shall pay to the Agent, for the benefit of the Banks according to their Pro Rata Share, a deferral fee (the "DEFERRAL FEE") in the amount of $150,000, which Deferral Fee shall be earned upon the effectiveness of such election, but which Deferral Fee shall be due and payable upon the first to occur of (a) the date upon which the September Payment becomes due and payable or (b) January 2, 1997. 2.6 SUBSECTION (a) (LEVERAGE RATIO) OF SECTION 6.1 (FINANCIAL COVENANTS). Section 6.1(a) of the Term Agreement is deleted and replaced with the following: (a) LEVERAGE RATIO. The Borrower shall not permit the ratio of (i) Consolidated Total Indebtedness at the end of any fiscal quarter of the Borrower during the periods set forth below to (ii) EBITDA of the Borrower and its Subsidiaries for the four immediately preceding fiscal quarters of the Borrower then ended, including the fiscal quarter then ended (taken as one accounting period) (the "LEVERAGE RATIO"), to exceed the ratio set forth opposite such period; PROVIDED, HOWEVER, that for the determination of the Leverage Ratio (A) as of the end of the fiscal quarter ending March 31, 1996 only, EBITDA shall be calculated by multiplying EBITDA for such fiscal quarter by four (4), rather than on a rolling four quarter basis; (B) as of the end of the fiscal quarter ending June 30, 1996 only, EBITDA shall be calculated by multiplying the aggregate EBITDA for the immediately preceding two (2) fiscal quarters (including the fiscal quarter then ended) by two (2), rather than on a rolling four quarter basis; and (C) as of the end of the fiscal quarter ending September 29, 1996 only, EBITDA shall be calculated by multiplying the aggregate EBITDA for the immediately preceding three (3) fiscal quarters (including the fiscal quarter then ended) by one and one-third (1.3333), rather than on a rolling four quarter basis; PROVIDED FURTHER, HOWEVER, that the calculation of EBITDA for the fiscal quarter ending December 31, 1995 shall specifically exclude write-offs of tangible and intangible assets, provisions for severance costs, decommissioning expenses, any gain associated with the sale of the Plant Services Assets pursuant to the Plant Services Purchase Agreement, general increases to the revenue/accounts receivables provision and "other adjustments" as such line item is shown on the Borrower's financial statements, so long as such aggregate adjustment of EBITDA shall not exceed $12,000,000: PERIOD RATIO 10/2/95 - 12/31/95 4.0:1.0 1/1/96 - 3/31/96 4.75:1.0 4/1/96 - 6/30/96 4.35:1.0 7/1/96 - 9/29/96 3.65:1.0 3. 9/30/96 - 12/31/96 3.1:1.0 1/1/97 & thereafter 3.1:1.0 2.7 SUBSECTION (b) (INTEREST COVERAGE RATIO) OF SECTION 6.1 (FINANCIAL COVENANTS). Subsection 6.1(b) of the Term Agreement is deleted and replaced with the following: (a) INTEREST COVERAGE RATIO. The Borrower shall not permit the ratio of (i) Consolidated Interest Expense at the end of any fiscal quarter of the Borrower during the periods set forth below to (ii) EBITDA of the Borrower and its Subsidiaries for the four immediately preceding fiscal quarters of the Borrower then ended, including the fiscal quarter then ended (taken as one accounting period) (the "INTEREST COVERAGE RATIO"), to be less than the ratio set forth opposite such period; PROVIDED, HOWEVER, that for the determination of the Interest Coverage Ratio (A) as of the end of the fiscal quarter ending March 31, 1996 only, EBITDA shall be calculated by multiplying EBITDA for such fiscal quarter by four (4), rather than on a rolling four quarter basis; (B) as of the end of the fiscal quarter ending June 30, 1996 only, EBITDA shall be calculated by multiplying the aggregate EBITDA for the immediately preceding two (2) fiscal quarters (including the fiscal quarter than ended) by two (2), rather than on a rolling four quarter basis; and (C) as of the end of the fiscal quarter ending September 29, 1996 only, EBITDA shall be calculated by multiplying the aggregate EBITDA for the immediately preceding three (3) fiscal quarters (including the fiscal quarter then ended) by one and one-third (1.3333), rather than on a rolling four quarter basis; PROVIDED FURTHER, HOWEVER, that the calculation of EBITDA for the fiscal quarter ending December 31, 1995 shall specifically exclude write-offs of tangible and intangible assets, provisions for severance costs, decommissioning expenses, any gain associated with the sale of the Plant Services Assets pursuant to the Plant Services Purchase Agreement, general increases to the revenue/accounts receivables provision and "other adjustments" as such line item is shown on the Borrower's financial statements, so long as such aggregate adjustment of EBITDA shall not exceed $12,000,000: PERIOD RATIO 10/2/95 - 12/31/95 2.1:1.0 1/1/96 - 3/31/96 1.75:1.0 4/1/96 - 6/30/96 2.1:1.0 7/1/96 - 9/29/96 2.6:1.0 9/30/96 - 12/31/96 2.2:1.0 1/1/97 & thereafter 2.2:1.0 2.8 SUBSECTION (c) (FIXED CHARGE COVERAGE RATIO) OF SECTION 6.1 (FINANCIAL COVENANTS). Section 6.1(c) of the Term Agreement is amended to delete the table appearing at the end of Subsection (c) and to insert in its place the following: PERIOD RATIO 10/2/95 - 12/31/95 1.0:1.0 4. 1/1/96 - 3/31/96 0.8:1.0 4/1/96 - 6/30/96 0.7:1.0 7/1/96 - 9/29/96 1.0:1.0 9/30/96 - 12/31/96 1.0:1.0 1/1/97 & thereafter 1.0:1.0 2.9 SUBSECTION (d) (MINIMUM CONSOLIDATED NET WORTH) OF SECTION 6.1 (FINANCIAL COVENANTS). Section 6.1(d) of the Term Agreement is deleted and replaced with the following: (d) MINIMUM CONSOLIDATED NET WORTH. The Borrower shall not permit Consolidated Net Worth at any time to be less than the sum of (i) $15,000,000.00 plus (ii) an amount equal to fifty percent (50%) of the cumulative Consolidated Net Income; calculated using each fiscal quarter of the Borrower ending after December 31, 1995 (including the Consolidated Net Income for any fiscal quarter only to the extent that the same is a positive number and adjusted to eliminate the effects of any fees and warrants accrued, paid or issued to the Banks in their capacity as Banks, and the sale of VECTRA (U.K.)). 2.10 SUBSECTION (e) (CAPITAL EXPENDITURES) OF SECTION 6.1 (FINANCIAL COVENANTS). Section 6.1(e) of the Term Agreement is amended to delete the table appearing in Subsection (e) and to insert in its place the following: PERIOD MAXIMUM AMOUNT 9/30/95 - 12/31/95 $1,250,000 1/1/96 - 3/31/96 $1,250,000 4/1/96 - 6/30/96 $750,000 7/1/96 - 9/29/96 $650,000 9/30/96 - 12/31/96 $600,000 1/1/97 - 12/31/97 $3,000,000 1/1/98 - 12/31/98 $3,000,000 2.11 SECTION 6.5 (SALE OF ASSETS). Section 6.5 of the Term Agreement is amended by adding the following at the end thereof: Notwithstanding anything to the contrary in this Section 6.5, the Borrower shall first contribute to Receivableco within two (2) Business Days of receipt thereof by the Borrower, and shall cause Receivableco to apply immediately the following amounts to repay the Obligations (as defined in the Receivables Facility) then outstanding under the Receivables Facility and to reduce permanently the Total Revolving Loan Components (as defined in the Receivables Facility) by 5. such amounts: (a) one hundred percent (100%) (or so much thereof as is necessary to repay in full the Obligations (as defined in the Receivables Facility) then outstanding) of the net proceeds of the sale of the stock or all or any substantial part of the assets of VECTRA (U.K.), which net proceeds shall not be less than $1,000,000, (b) one hundred percent (100%) (or so much thereof as is necessary to repay in full the Obligations (as defined in the Receivables Facility) then outstanding) of the net proceeds of the sale of the DE&S of the NP&G Service Units pursuant to, or as otherwise contemplated by the DE&S Letter of Intent, and (c) one hundred percent (100%) (or so much thereof as is necessary to repay in full the Obligations (as defined in the Receivables Facility) then outstanding) of the net proceeds of any sale of the stock or all or any substantial part of the property or assets of the Borrower or any of its Subsidiaries. Upon the full repayment of the Obligations under the Receivables Facility, the Borrower shall use the balance of the foregoing amounts to prepay principal and any other outstanding Obligations (as defined in this Agreement). In the event that the Borrower receives stock in lieu of cash as consideration for any sale described in this Section 6.5, such stock shall be of a publicly traded company, the Borrower shall liquidate such stock within thirty (30) days of receipt thereof and the Borrower shall apply the proceeds to repay the Obligations under the Receivables Facility and the Obligations (as defined in this Agreement) pursuant to the terms of this Section 6.5. The Borrower understands and acknowledges that pursuant to Section 6.4(a) of this Agreement, it must obtain the prior written consent of the Required Banks to the sales referred to in clauses (a) and (b) above. The approval by the Required Banks of a definitive purchase agreement and any and all amendments thereto (an "APPROVED AGREEMENT") for such a sale shall constitute consent to the consummation of such sale. Upon the closing of such sale upon the terms of an Approved Agreement and the application of the net proceeds of such sale as required by this Section 6.5 and the Receivables Facility, as amended, the Banks shall cooperate with the Borrower to execute and deliver such documents as are necessary to release, terminate or reconvey any Collateral transferred to the buyer as part of such sale. 2.12 SECTION 1.1 (DEFINITIONS). The following sentence is added to the end of the definition of the term "EBITDA": EBITDA shall be adjusted to eliminate the effects of any fees and warrants accrued, paid or issued to the Banks in their capacity as Banks and the sale of VECTRA (U.K.). SECTION 3. LIMITATION OF AMENDMENT. (a) The amendments set forth in SECTION 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (i) be a consent to any amendment, waiver of modification of any other term or condition of any Loan Document or (ii) otherwise prejudice any right or remedy which the Banks, the Agent or the Managing Agent may now have or may have in the future under or in connection with any Loan Document. (b) This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents and applicable law, except as herein waived or amended, are hereby ratified and confirmed and shall mean in full force and effect. 4. ACKNOWLEDGEMENTS. (a) The Borrower understands and acknowledges that the nine month extension of the Tranche-B Maturity Date and the Tranche-C Maturity Date and the deferment of the payment date for the principal installments due under the Tranche-A Loans evidenced by the amendments set forth in SECTION 2, above, is a limited purpose, one-time accommodation amendment agreed to by the Banks for the express purpose of affording the Borrower access to 6. capital while it completes a refinancing, sale or other similar transaction generating sufficient proceeds to enable the Borrower to repay the Obligations in full as soon as possible and in any event not later than the applicable Maturity Dates as extended by this Amendment. The Borrower further acknowledges and agrees that it represented to the Banks, in requesting the extension of the Tranche-B Maturity Date and the Tranche-C Maturity Date and the deferment of the payment date for the principal installments due under the Tranche-A Loans evidenced by the amendment set forth in SECTION 2, above, that the Borrower is engaged in serious ongoing discussions with DE&S regarding the sale of the NP&G Units and the full repayment of the Obligations and that the Borrower is confident that such sale will generate sufficient funds to repay the Obligations in full by August 31, 1996. The Borrower further acknowledges and agrees that the Banks have reasonably relied on such representations and would not have otherwise entered into and agreed to this Amendment. The Banks have not (nor has the Agent or the Managing Agent on behalf of the Banks) agreed or committed to, or otherwise indicated in any way whatsoever that they would consider, any further extension of the Tranche-B Maturity Date and the Tranche-C Maturity Date or further deferment of the payment date for the principal installments due under the Tranche-A Loans, and the Borrower acknowledges and agrees that the Banks have made no such agreement or commitment (nor has the Agent or the Managing Agent on behalf of the Banks) and that the Borrower has no expectation whatsoever that the Banks would consider any further extension of the Tranche-B Maturity Date and the Tranche-C Maturity Date or further deferment of the payment date for the principal installments due under the Tranche-A loans. 4.1 The Borrower hereby ratifies and reaffirms the validity and enforceability of all of the Liens and security interests heretofore granted, pursuant to the Security Agreement and other Loan Documents, to the Agent, for itself and on behalf of the Banks and the Managing Agent, as collateral security for the Obligations, and acknowledges that all of such Liens and security interests, and all Collateral heretofore pledged as security for the Obligations, continues to be and remain collateral for the Obligations from and after the date hereof. Without limiting the generality of the foregoing, the Borrower acknowledges and agrees that, pursuant to the Security Agreement and other Loan Documents, the Agent, for itself and on behalf of the Banks and the Managing Agent, is entitled to receive and apply all proceeds of the Collateral. SECTION 5. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks, the Agent and the Managing Agent to enter into this Amendment, the Borrower hereby represents and warrants to each Bank, the Agent and the Managing Agent as follows: (a) After giving effect to this Amendment (i) the representations and warranties contained in the Loan Documents (other than those which expressly speak as of a different date) are true, accurate and complete in all material respects as of the date hereof and (ii) no Default or Event of Default has occurred and is continuing; (b) The Borrower has the corporate power and authority to execute and deliver this Amendment and to perform its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party; (c) The certificate of incorporation, bylaws and other organizational documents of the Borrower delivered to each Bank on the Tranche-C Closing Date remain true, accurate 7. and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect; (d) The execution and delivery by the Borrower of this Amendment and the performance by Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party have been duly authorized by all necessary corporate action on the part of the Borrower; (e) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not and will not contravene (i) any law or regulation binding on or affecting the Borrower, (ii) the certificate of incorporation or bylaws of the Borrower, (iii) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on the Borrower or (iv) any contractual restriction binding on or affecting the Borrower; (f) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Term Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on the Borrower, except as already has been obtained or made; and (g) This Amendment has been duly executed and delivered by the Borrower and is the binding obligation of the Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. SECTION 6. REAFFIRMATION. The Borrower hereby reaffirms its obligations under each Loan Document to which it is a party. SECTION 7. AMENDMENT FEE. As consideration for the Banks' agreement to amend the Term Agreement as set forth in this Amendment, the Borrower agrees to pay to the Agent, for the benefit of the Banks according to their Pro Rata Share, an amendment fee ("AMENDMENT FEE") as set forth in the side letter agreement described in Section 9(d)(ii) below. The payment of the Amendment Fee shall be paid in accordance with the terms of such side letter agreement. SECTION 8. COUNTERPARTS. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. SECTION 9. EFFECTIVENESS. This Amendment shall be deemed effective upon the satisfaction of all of the following conditions precedent (PROVIDED that all such conditions must be satisfied prior to 5:00 p.m., San Francisco time, April 15, 1996): (a) FOURTH AMENDMENT. The Borrower and each Bank shall have duly executed and delivered this Amendment to the Agent. 8. (b) ACKNOWLEDGMENT OF AMENDMENT AND REAFFIRMATION OF GUARANTY. The Agent shall have received the Acknowledgment of Amendment and Reaffirmation of Guaranty, duly executed and delivered by each of the Guarantors to the Agent. (c) CERTIFIED RESOLUTIONS. The Agent shall have received a certificate of the Secretary or Assistant Secretary of each of the Loan Parties and dated the date hereof certifying (i) the names and true signatures of the incumbent officers of such Person authorized to sign the applicable Loan Documents, (ii) the resolutions of such Person's Board of Directors approving and authorizing the execution, delivery and performance of the Term Agreement, as amended by this Amendment, the Acknowledgment of Amendment and Reaffirmation of Guaranty referred to in clause (b) above, and the side letter agreement described in subsection (d) below, as applicable, executed by such Person, and (iii) that there have been no changes in the Certificate of Incorporation of such Person or in the Bylaws or similar constituent documents of such Person since the date of certification thereof to the Agent in connection with the closing of the Tranche-C Facility. (d) SIDE LETTER AGREEMENT. The Borrower shall have duly acknowledged and delivered (i) the four (4) side letter dated agreements dated as of even date herewith from the Agent to the Borrower relating to the amendment of existing common stock purchase warrants and (ii) the side letter agreement of even date herewith from the Borrower to the Banks relating to the issuance of additional common stock purchase warrants and fees. SECTION 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SECTION 11. RELEASE AND WAIVER. (a) The Borrower hereby acknowledges and agrees that: (i) it has no claim or cause of action against any Bank or the Agent or the Managing Agent or any parent subsidiary or affiliate of any Bank or the Agent or the Managing Agent, or any of such Bank's, the Agent's or the Managing's Agent's officers, directors, employees, attorneys or other representatives or agents (all of which parties other than the Banks, the Agent and the Managing Agent being, collectively, the "LENDER AGENTS") in connection with the Term Agreement, the Loans thereunder or the transactions contemplated therein; (ii) it has no offset or defense against any of its respective obligations, indebtedness or contracts in favor of the Banks, the Agent or the Managing Agent; and (iii) it recognizes that each of the Banks, the Agent and the Managing Agent has heretofore properly performed and satisfied in a timely manner all of its respective obligations to and contracts with the Borrower. (b) Although each of the Banks, the Agents and the Managing Agent regards its respective conduct as proper and does not believe the Borrower to have any claim, cause of action, offset or defense against such Bank, the Agent or the Managing Agent or any Lender Agent in connection with the Term Agreement, the Loans thereunder or the transactions contemplated therein, each Bank, the Agent and the Managing Agent wishes and Borrower agrees to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters could impair or otherwise affect any rights, interests, contracts or remedies of the Banks, the Agent or the Managing Agent. Therefore, the Borrower 9. unconditionally releases and waives (i) any and all liabilities, indebtedness and obligations, whether known or unknown, of any kind of any Bank, the Agent or the Managing Agent or of any of Lender Agents to the Borrower, except the obligations remaining to be respectively performed by the Banks, the Agent or the Managing Agent as expressly stated in the Term Agreement, this Amendment and the other Loan Documents; (ii) any legal, equitable or other obligations or duties, whether known or unknown, of any Bank, the Agent, the Managing Agent or any Lender Agent to the Borrower (and any rights of the Borrower against any Bank, the Agent, the Managing Agent or any Lender Agent) besides those expressly stated in the Term Agreement, this Amendment and the other Loan Documents; (iii) any and all claims under any oral or implied agreement, obligation or understanding with any Bank, the Agent, the Managing Agent or any Lender Agent, whether known or unknown, which is different from or in addition to the express terms of the Term Agreement, this Amendment or any of the other Loan Documents; and (iv) all other claims, causes of action or defenses of any kind whatsoever (if any), whether known or unknown, which the Borrower might otherwise have against any Bank, the Agent, the Managing Agent and/or any Lender Agent on account of any condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind whatsoever which existed, arose or occurred at any time prior to the execution and delivery of this Amendment or which could arise concurrently with the effectiveness of this Amendment. (c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS, LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT. 10. IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. VECTRA TECHNOLOGIES, INC. By: /s/ Ray A. Fortney ----------------------------- Its: PRESIDENT & CEO ----------------------------- BANQUE PARIBAS, as a Bank and as Agent By: /s/ Robert Pinkerton ----------------------------- Its: VP ----------------------------- By: /s/ Lee S. Buckner ----------------------------- Its: VP ----------------------------- BANQUE NATIONALE DE PARIS, as a Bank and as Managing Agent By: /s/ Richard Cushing ----------------------------- Its: VP ----------------------------- By: /s/ Illegible ----------------------------- Its: ----------------------------- 11. ACKNOWLEDGMENT OF AMENDMENT AND REAFFIRMATION OF GUARANTY SECTION 1. Each of the undersigned Guarantors hereby acknowledges and confirms that it has reviewed and approved the terms and conditions of this Amendment. SECTION 2. Each Guarantor hereby consents to this Amendment and agrees that its respective Guaranty of the Obligations of the Borrower under the Term Agreement shall continue in full force and effect, shall be valid and enforceable and shall not be impaired or otherwise affected by the execution of this Amendment or any other document or instrument delivered in connection herewith. SECTION 3. Each Guarantor severally represents and warrants that, after giving effect to this Amendment, all representations and warranties contained in its respective are true, accurate and complete as if made the date hereof. Dated: April 15, 1996 GUARANTORS PACIFIC NUCLEAR STORAGE SYSTEMS, INC. By: /s/ Ray A. Fortney ---------------------------------- Printed Name: RAY A. FORTNEY ----------------------- Title: PRESIDENT ------------------------------- NUCLEAR PACKAGING, INC. By: /s/ Ray A. Fortney ---------------------------------- Printed Name: RAY A. FORTNEY ----------------------- Title: PRESIDENT ------------------------------- VECTRA SERVICES, INC. By: /s/ Ray A. Fortney ---------------------------------- Printed Name: RAY A. FORTNEY ----------------------- Title: PRESIDENT ------------------------------- 1. CTL INTERNATIONAL, INC. By: /s/ Ray A. Fortney ---------------------------------- Printed Name: RAY A. FORTNEY ----------------------- Title: PRESIDENT ------------------------------- VECTRA GOVERNMENT SERVICES, INC. By: /s/ Ray A. Fortney ---------------------------------- Printed Name: RAY A. FORTNEY ----------------------- Title: PRESIDENT ------------------------------- VECTRA WASTE SERVICES, L.L.C. By: VECTRA Technologies, Inc., its Manager By: /s/ Ray A. Fortney ---------------------------------- Printed Name: RAY A. FORTNEY ----------------------- Title: PRESIDENT ------------------------------- 2. EX-10.10 6 FOURTH AMENDMENT (CREDIT) FOURTH AMENDMENT (CREDIT AGREEMENT) This FOURTH AMENDMENT ("AMENDMENT") dated as of December 26, 1995 is entered into among VECTRA NEVADA, INC. (the "BORROWER"), BANQUE PARIBAS, as a Bank (as defined below) and as the Agent (as defined below), BANQUE NATIONALE DE PARIS, as a Bank and as the Managing Agent (as defined below), and BANK HAPOALIM, as a Bank. RECITALS A. The Borrower has entered into that certain Credit Agreement dated as of January 6, 1994, as amended by the Amendment and Limited Waiver dated as of August , 1994, the Second Amendment dated as of October 20, 1994 and the Third Amendment dated as of May 24, 1995 (as so amended, the "CREDIT AGREEMENT"), among the Borrower, the Banks party thereto, Banque Paribas, acting in its separate capacity as agent for the Banks (the "AGENT"), and Banque Nationale de Paris, acting in its separate capacity as Managing Agent (as defined therein) (the "MANAGING AGENT"). B. The Borrower has requested that the Credit Agreement be amended to extend the Revolving Loan Maturity Date from December 31, 1995 to March 31, 1996 for the limited purpose of affording the Borrower an additional three months to finance the full repayment of the Obligations. The Borrower has advised the Agent that it is engaged in ongoing discussions with several institutional lenders and investor groups with the objective of closing a financing, sale or other similar transaction as soon as possible and in any event not later than March 31, 1996 premised on the condition that the net proceeds of such transaction shall be sufficient to repay the then outstanding Obligations in full. The Agent has advised the Borrower that the Banks do not intend to agree to any additional extension of the Revolving Loan Maturity Date. C. The Banks are willing to so amend the Credit Agreement, but only upon the terms and conditions and in reliance upon the representations and warranties of the Borrower set forth below. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties to the Credit Agreement agree as follows: 1. DEFINITIONS. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Credit Agreement. 1. 2. AMENDMENT. The Credit Agreement is hereby amended by deleting the words "December 31, 1995" in the definition of "Revolving Loan Maturity Date" set forth in Section 1.1 of the Credit Agreement and inserting in their place the words "March 31, 1996." 3. LIMITATION OF AMENDMENT. (a) The amendment set forth in Section 2, above, is effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document or (ii) otherwise prejudice any right or remedy which the Banks, the Agent or the Managing Agent may now have or may have in the future under or in connection with any Loan Document. (b) This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect. 4. ACKNOWLEDGEMENTS. (a) The Borrower understands and acknowledges that the three months extension of the Revolving Loan Maturity Date evidenced by the amendment set forth in Section 2, above, is a limited purpose, one-time, accommodation amendment agreed by the Banks for the express purpose of affording the Borrower access to capital while it completes a refinancing, sale or other similar transaction generating sufficient proceeds to enable the Borrower to repay the Obligations in full as soon as possible and in any event not later than the Revolving Loan Maturity Date as extended by this Amendment. The Borrower further acknowledges and agrees that it represented to the Banks, in requesting the extension of the Revolving Loan Maturity Date evidenced by the amendment set forth in Section 2, above, that the Borrower and its Affiliates are engaged in serious ongoing discussions with several institutional lenders and investor groups regarding the full repayment of the Obligations and that the Borrower is confident that a refinancing, sale or other similar transaction will be closed by March 31, 1996 which would generate sufficient funds to repay the Obligations in full and that the Banks have reasonably relied on such representation and would not have otherwise entered into and agreed to this Amendment. The Banks have not agreed or committed to, or otherwise indicated in any way whatsoever that they would consider, any further extension of the Revolving Loan Maturity Date and the Borrower acknowledges that the Banks have made no such agreement or commitment and that the Borrower has no expectation whatsoever that the Banks would consider any further extension of the Revolving Loan Maturity Date. (b) The Borrower hereby ratifies and reaffirms the validity and enforceability of all of the Liens and security interests heretofore granted, pursuant to the Security Agreement and other Loan Documents, to the Agent, for itself and on behalf of the Banks and the Managing Agent, as collateral security for the Obligations, and acknowledges that all of such Liens and security interests, and all Collateral heretofore pledged as security for the Obligations, continues 2. to be and remain collateral for the Obligations from and after the date hereof. Without limiting the generality of the foregoing, the Borrower acknowledges and agrees that, pursuant to the Security Agreement and other Loan Documents, the Agent, for itself and on behalf of the Banks and the Managing Agent, is entitled to receive and apply all proceeds of the Collateral. 5. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks, the Agent and the Managing Agent to enter into this Amendment, the Borrower hereby represents and warrants to each Bank, the Agent and the Managing Agent as follows: (a) After giving effect to this Amendment (i) the representations and warranties contained in the Loan Documents (other than those which expressly speak as of a different date) are true, accurate and complete in all material respects as of the date hereof and (ii) no Default or Event of Default has occurred and is continuing; (b) The Borrower has the corporate power and authority to execute and deliver this Amendment and to perform its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party; (c) The certificate of incorporation, bylaws and other organizational documents of the Borrower delivered to each Bank on the Closing Date are true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect; (d) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party have been duly authorized by all necessary corporate action on the part of the Borrower; (e) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not and will not contravene (i) any law or regulation binding on or affecting the Borrower, (ii) the certificate of incorporation or bylaws of the Borrower, (iii) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on the Borrower or (iv) any contractual restriction binding on or affecting the Borrower; (f) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on the Borrower, except as already has been obtained or made; and (g) This Amendment has been duly executed and delivered by the Borrower and is the binding obligation of the Borrower, enforceable against it in accordance with its 3. terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. 6. REAFFIRMATION. The Borrower hereby reaffirms its obligations under each Loan Document to which it is a party. 7. AMENDMENT FEE. As consideration for the Banks' agreement to amend the Credit Agreement as set forth in this Amendment, the Borrower agrees to pay to the Agent, for the benefit of the Banks according to their Pro Rata Share, an amendment fee ("AMENDMENT FEE") as set forth in a separate amendment fee letter. The payment of the Amendment Fee shall be a condition precedent to the effectiveness of this Amendment. 8. COUNTERPARTS. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 9. EFFECTIVENESS. Subject to Section 7, above, this Amendment shall be deemed effective upon the satisfaction of all of the following conditions precedent (PROVIDED that all such conditions, including the payment of the Amendment Fee, must be satisfied prior to 5:00 p.m., San Francisco time, on December 29, 1995): (a) The receipt by the Agent of an originally executed counterpart (or facsimile thereof with the original to follow by Federal Express or other overnight courier) of this Amendment, executed by the Borrower and each Bank; and (b) The receipt by the Agent of a comprehensive audit of the Receivables constituting Collateral for the Obligations, performed by an independent appraiser designated by the Agent and reasonably acceptable to the Borrower, with results satisfactory to the Banks in their sole discretion, including as to the conformance of the Receivables designated by the Borrower as Eligible Receivables and used by the Borrower in its most recent calculation of the Borrowing Base with the requirements for eligibility set forth in the definition of "Eligible Receivable" in Section 1.1 of the Credit Agreement. 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 11. RELEASE AND WAIVER. (a) The Borrower hereby acknowledges and agrees that: (i) it has no claim or cause of action against any Bank or the Agent or the Managing Agent or any parent, subsidiary or affiliate of any Bank or the Agent or the Managing Agent, or any of such Bank's, the Agent's or the Managing Agent's officers, directors, employees, attorneys or other representatives or agents (all of which parties other than the Banks, the Agent and the Managing 4. Agent being, collectively, the "LENDER AGENTS") in connection with the Credit Agreement, the Revolving Loans thereunder or the transactions contemplated therein; (ii) it has no offset or defense against any of its respective obligations, indebtedness or contracts in favor of the Banks, the Agent or the Managing Agent; and (iii) it recognizes that each of the Banks, the Agent and the Managing Agent has heretofore properly performed and satisfied in a timely manner all of its respective obligations to and contracts with the Borrower. (b) Although each of the Banks, the Agent and the Managing Agent regards its respective conduct as proper and does not believe the Borrower to have any claim, cause of action, offset or defense against such Bank, the Agent or the Managing Agent or any Lender Agent in connection with the Credit Agreement, the Revolving Loans thereunder or the transactions contemplated therein, each Bank, the Agent and the Managing Agent wishes and the Borrower agrees to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters could impair or otherwise affect any rights, interests, contracts or remedies of the Banks, the Agent or the Managing Agent. Therefore, the Borrower unconditionally releases and waives (i) any and all liabilities, indebtedness and obligations, whether known or unknown, of any kind of any Bank, the Agent or the Managing Agent or of any of Lender Agents to the Borrower, except the obligations remaining to be respectively performed by the Banks, the Agent or the Managing Agent as expressly stated in the Credit Agreement, this Amendment and the other Loan Documents; (ii) any legal, equitable or other obligations or duties, whether known or unknown, of any Bank, the Agent, the Managing Agent or any Lender Agent to the Borrower (and any rights of the Borrower against any Bank, the Agent, the Managing Agent or any Lender Agent) besides those expressly stated in the Credit Agreement, this Amendment and the other Loan Documents; (iii) any and all claims under any oral or implied agreement, obligation or understanding with any Bank, the Agent, the Managing Agent or any Lender Agent, whether known or unknown, which is different from or in addition to the express terms of the Credit Agreement, this Amendment or any of the other Loan Documents; and (iv) all other claims, causes of action or defenses of any kind whatsoever (if any), whether known or unknown, which the Borrower might otherwise have against any Bank, the Agent, the Managing Agent and/or any Lender Agent on account of any condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind whatsoever which existed, arose or occurred at any time prior to the execution and delivery of this Amendment or which could arise concurrently with the effectiveness of this Amendment. (c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS, LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER APPLICABLE JURISDICTION WHICH MIGHT 5. LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT. IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. VECTRA NEVADA, INC. By: /s/ RAY A. FORTNEY ---------------------------------- Its: PRESIDENT ---------------------------------- BANQUE PARIBAS, as a Bank and as Agent By: /s/ ROBERT S. PINKERTON ---------------------------------- Its: VP ---------------------------------- By: /s/ LEE S. BUCKNER ---------------------------------- Its: GROUP VICE PRESIDENT ---------------------------------- BANQUE NATIONALE DE PARIS, as a Bank and as Managing Agent By: /s/ RICHARD CUSHING ---------------------------------- Its: VP ---------------------------------- By: /s/ ILLIGEBLE ---------------------------------- Its: VP ---------------------------------- BANK HAPOALIM, as a Bank By: /s/ CONRAD WAGNER ---------------------------------- Its: VP ---------------------------------- By: /s/ ERIK VERDULIER ---------------------------------- Its: AT ---------------------------------- 6. EX-10.11 7 SIXTH AMENDMENT SIXTH AMENDMENT AND LIMITED WAIVER (CREDIT AGREEMENT) This SIXTH AMENDMENT AND LIMITED WAIVER ("AMENDMENT") dated as of March 29, 1996, is entered into among VECTRA NEVADA, INC. (the "BORROWER"), BANQUE PARIBAS, as a Bank (as defined below) and as the Agent (as defined below), BANQUE NATIONALE DE PARIS, as a Bank and as the Managing Agent (as defined below), AND BANK HAPOALIM, as a Bank. RECITALS A. The Borrower has entered into that certain Credit Agreement dated as of January 6, 1994, as amended by the Amendment and Limited Waiver dated as of August __, 1994, the Second Amendment dated as of October 20, 1994, the Third Amendment dated as of May 24, 1995, the Fourth Amendment to Credit Agreement and First Amendment to Security Agreement dated as of June 30, 1995, and the Fifth Amendment dated as of December 26, 1995 (as so amended, the "CREDIT AGREEMENT"), among the Borrower, the Banks party thereto, Banque Paribas, acting in its separate capacity as agent for the Banks (the "AGENT"), and Banque Nationale de Paris, acting in its separate capacity as Managing Agent (as defined therein) (the "MANAGING AGENT"). B. The Borrower has requested that the Credit Agreement be amended to extend the Revolving Loan Maturity Date from March 31, 1996 to April 15, 1996, for the limited purpose of accommodating the Borrower in connection with that certain letter of intent dated as of March 21, 1996, between Duke Engineering & Service ("DE&S") and Vectra (the "Letter of Intent"), pursuant to which Vectra intends to sell and DE&S intends to purchase all of the assets of the nuclear engineering, power services and government services business units of Vectra (the "NP&G Services Units"). The Borrower has advised the Agent that such a sale would close as soon as possible and in any event not later than August 15, 1996, premised on the condition that the net sale proceeds shall be sufficient to repay the then-outstanding Obligations in full. C. Pursuant to Section 5.1 of the Credit Agreement, the Borrower covenants and agrees to furnish to each Bank certain information. The Borrower has failed to timely furnish certain of such information for the fiscal quarter ending December 31, 1995 and the fiscal year ending December 31, 1995 and the months of November 1995, December 1995, January 1996 and February 1996 as required by Section 5.1. The Borrower's failure to furnish such information is a breach of Section 5.1 of the Credit Agreement and a Default under Section 7.1(c)(ii) of the Credit Agreement. The Borrower's failure to effect cure of these Defaults within the five (5) Business Day grace period provided by Section 7.1(c)(ii) of the Credit Agreement has resulted in these Defaults maturing into Events of Default. D. The Borrower has requested that the Banks waive the Defaults and Events of Defaults that have occurred as a result of the Borrower's failure to furnish certain information as required by Section 5.1 of the Credit Agreement. 1. E. The Banks are willing to so amend the Credit Agreement and to provide such a limited waiver, but only upon the terms and conditions and in reliance upon the representations and warranties of the Borrower set forth below. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties to the Credit Agreement represent, warrant and agree as follows: 1. DEFINITIONS. Capitalized terms used but not defined in this Agreement shall have the meanings given to them in the Credit Agreement. 2. AMENDMENT. 2.1 SECTION 1.1 (DEFINITIONS). The Credit Agreement is hereby amended by deleting the words "March 31, 1996" in the definition of "Revolving Loan Maturity Date" set forth in Section 1.1 of the Credit Agreement and inserting in their place the words "April 15, 1996." 3. LIMITATION OF AMENDMENT. (a) The amendment set forth in Section 2, above, is effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document or (ii) otherwise prejudice any right or remedy which the Banks, the Agent or the Managing Agent may now have or may have in the future under or in connection with any Loan Document. (b) This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect. 4. LIMITED WAIVERS. Effective as of the date hereof, and subject to the condition subsequent that the parties hereto enter into a further amendment of the Credit Agreement on or before April 15, 1996, each of the Banks, the Agent and the Managing Agent hereby waives the Defaults and Events of Default which have occurred under Section 5.1 of the Credit Agreement solely as a result of the Borrower's failure to furnish certain information as required by Section 5.1 of the Credit Agreement. 2. 5. LIMITATION OF WAIVERS. (a) The waivers set forth in Section 4, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, (ii) a waiver of any other breach or violation on any other occasion of the sections of the Credit Agreement which are the subject of the waivers set forth in Section 4, above, or (iii) otherwise prejudice any right or remedy which the Banks, the Agent or the Managing Agent may now have or may have in the future under or in connection with any Loan Document. (b) This waiver shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein waived or amended, are hereby ratified and confirmed and shall remain in full force and effect. 6. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks, the Agent and the Managing Agent to enter into this Amendment, the Borrower hereby represents and warrants to each Bank, the Agent and the Managing Agent as follows: (a) After giving effect to this Amendment (i) the representations and warranties contained in the Loan Documents (other than those which expressly speak as of a different date) are true, accurate and complete in all material respects as of the date hereof and (ii) no Default or Event of Default has occurred and is continuing; (b) The Borrower has the corporate power and authority to execute and deliver this Amendment and to perform its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party; (c) The certificate of incorporation, bylaws and other organizational documents of the Borrower delivered to each Bank on the Closing Date are true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect; (d) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party have been duly authorized by all necessary corporate action on the part of the Borrower; (e) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not and will not contravene (i) any law or regulation binding on or affecting the Borrower, (ii) the certificate of incorporation or bylaws of the Borrower, (iii) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on the Borrower or (iv) any contractual restriction binding on or affecting the Borrower; 3. (f) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on the Borrower, except as already has been obtained or made; and (g) This Amendment has been duly executed and delivered by the Borrower and is the binding obligation of the Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. 7. REAFFIRMATION. The Borrower hereby reaffirms its obligations under each Loan Document to which it is a party. 8. COUNTERPARTS. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 9. EFFECTIVENESS. This Amendment shall be deemed effective upon the satisfaction of all of the following conditions precedent (PROVIDED that all such conditions must be satisfied prior to 5:00 p.m., San Francisco time, on March 29, 1995): (a) SIXTH AMENDMENT. The receipt by the Agent of an originally executed counterpart (or facsimile thereof with the original to follow by Federal Express or other overnight courier) of this Amendment, executed by the Borrower and each Bank. 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 11. RELEASE AND WAIVER. (a) The Borrower hereby acknowledges and agrees that: (i) it has no claim or cause of action against any Bank or the Agent or the Managing Agent or any parent, subsidiary or affiliate of any Bank or the Agent or the Managing Agent, or any of such Bank's, the Agent's or the Managing Agent's officers, directors, employees, attorneys or other representatives or agents (all of which parties other than the Banks, the Agent and the Managing Agent being, collectively, the "LENDER AGENTS") in connection with the Credit Agreement, the Revolving Loans thereunder or the transactions contemplated therein; (ii) it has no offset or defense against any of its respective obligations, indebtedness or contracts in favor of the Banks, the Agent or the Managing Agent; and (iii) it recognizes that each of the Banks, the Agent and the Managing Agent has heretofore properly performed and satisfied in a timely manner all of its respective obligations to and contracts with the Borrower. 4. (b) Although each of the Banks, the Agent and the Managing Agent regards its respective conduct as proper and does not believe the Borrower to have any claim, cause of action, offset or defense against such Bank, the Agent or the Managing Agent or any Lender Agent in connection with the Credit Agreement, the Revolving Loans thereunder or the transactions contemplated therein, each Bank, the Agent and the Managing Agent wishes and the Borrower agrees to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters could impair or otherwise affect any rights, interests, contracts or remedies of the Banks, the Agent or the Managing Agent. Therefore, the Borrower unconditionally releases and waives (i) any and all liabilities, indebtedness and obligations, whether known or unknown, of any kind of any Bank, the Agent or the Managing Agent or of any of Lender Agents to the Borrower, except the obligations remaining to be respectively performed by the Banks, the Agent or the Managing Agent as expressly stated in the Credit Agreement, this Amendment and the other Loan Documents; (ii) any legal, equitable or other obligations or duties, whether known or unknown, of any Bank, the Agent, the Managing Agent or any Lender Agent to the Borrower (and any rights of the Borrower against any Bank, the Agent, the Managing Agent or any Lender Agent) besides those expressly stated in the Credit Agreement, this Amendment and the other Loan Documents; (iii) any and all claims under any oral or implied agreement, obligation or understanding with any Bank, the Agent, the Managing Agent or any Lender Agent, whether known or unknown, which is different from or in addition to the express terms of the Credit Agreement, this Amendment or any of the other Loan Documents; and (iv) all other claims, causes of action or defenses of any kind whatsoever (if any), whether known or unknown, which the Borrower might otherwise have against any Bank, the Agent, the Managing Agent and/or any Lender Agent on account of any condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind whatsoever which existed, arose or occurred at any time prior to the execution and delivery of this Amendment or which could arise concurrently with the effectiveness of this Amendment. (c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS, LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER APPLICABLE JURISDICTION WHICH MIGHT 5. LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT. IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. VECTRA NEVADA, INC. By: /s/ Ray A. Fortney ---------------------------------- Its: PRESIDENT ---------------------------------- BANQUE PARIBAS, as a Bank and as Agent By: /s/ Robert S. Pinkerton ---------------------------------- Its: VP ---------------------------------- By: /s/ Lee S. Buckner ---------------------------------- Its: GVP ---------------------------------- BANQUE NATIONALE DE PARIS, as a Bank and as Managing Agent By: /s/ Richard Cushing ---------------------------------- Its: VP ---------------------------------- By: /s/ Illegible ---------------------------------- Its: ---------------------------------- BANK HAPOALIM, as a Bank By: /s/ Eric Verdulier ---------------------------------- Its: AT ---------------------------------- 6. CTL INTERNATIONAL, INC. By: /s/ Ray A. Fortney ------------------------------------ Printed Name: Ray A. Fortney -------------------------- Title: President & CEO --------------------------------- VECTRA GOVERNMENT SERVICES, INC. By: /s/ Ray A. Fortney ------------------------------------ Printed Name: Ray A. Fortney -------------------------- Title: President & CEO --------------------------------- VECTRA WASTE SERVICES, L.L.C. By: VECTRA Technologies, Inc., its Manager By: /s/ Ray A. Fortney ------------------------------------ Printed Name: Ray A. Fortney -------------------------- Title: President & CEO --------------------------------- 7. EX-10.12 8 SEVENTH AMENDMENT SEVENTH AMENDMENT (CREDIT AGREEMENT) THIS SEVENTH AMENDMENT ("AMENDMENT") dated as of April 15, 1996, is entered into among VECTRA NEVADA, INC. (the "BORROWER"), BANQUE PARIBAS, as a Bank (as defined below) and as the Agent (as defined below), BANQUE NATIONALE DE PARIS, as a Bank and as the Managing Agent (as defined below), and BANK HAPOALIM, as a Bank. RECITALS A. The Borrower has entered into that certain Credit Agreement dated as of January 6, 1994, as amended by the Amendment and Limited Waiver dated as of August ____, 1994, the Second Amendment dated as of October 20, 1994, the Third Amendment dated as of May 24, 1995, the Fourth Amendment to Credit Agreement and First Amendment to Security Agreement dated as of June 30, 1995, the Fifth Amendment dated as of December 26, 1995, and the Sixth Amendment and Limited Waiver dated as of March 29, 1996 (as so amended, the "CREDIT AGREEMENT"), among the Borrowers, the Banks (as defined therein) party thereto (the "BANKS"), Banque Paribas, acting in its separate capacity as Agent (as defined therein) for the Banks (the "AGENT"), and Banque Nationale de Paris, acting in its separate capacity as Managing Agent (as defined therein) for the Banks (the "MANAGING AGENT"). B. The Borrower has requested that the Credit Agreement be amended to extend the Revolving Loan Maturity Date from April 15, 1996 to January 2, 1997, for the limited purpose of affording the Borrower an additional nine months to finance the full repayment of the Obligations. The Borrower has advised the Agent that Vectra has entered into a certain letter of intent dated as of March 21, 1996, with Duke Engineering & Service ("DE&S") (the "DE&S LETTER OF INTENT"), pursuant to which Vectra intends to sell and DE&S intends to purchase substantially all of the assets of the nuclear engineering, power services and government services business units of Vectra (the "NP&G SERVICES UNITS"). The Borrower has advised the Agent that such a sale would close as soon as possible and in any event Vectra would receive net cash proceeds from such sale not later than August 31, 1996, premised on the condition that the net sale proceeds shall be sufficient to repay the then-outstanding Obligations in full (as well as the Obligations then outstanding under the Term Loan Agreement (as such term is defined in the Term Loan Agreement)). The Agent has advised the Borrower that the Banks do not intend to agree to any additional extension of the Revolving Loan Maturity Date. C. The Banks are willing to so amend the Credit Agreement, but only upon the terms and conditions and in reliance upon the representations and warranties of the Borrower set forth below. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties to the Credit Agreement agree as follows: 1. 1. DEFINITIONS. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Credit Agreement. 2. AMENDMENTS. 2.1 SECTION 1.1 (DEFINITIONS). The definition of "Applicable Margin" set forth in Section 1.1 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "Applicable Margin" shall mean, at all times, one and one-half percent (1.50%) per annum. 2.2 SECTION 1.1 (DEFINITIONS). The definition of "Loan Documents" set forth in Section 1.1 of the Credit Agreement shall be deleted in its entirety and replaced with the following: "Loan Documents" shall mean this Agreement, the Revolving Notes, the Security Agreement, each Purchase Agreement and the Subordination Agreement, and any and all other agreements, documents and instruments executed and delivered by or on behalf or in support of the Borrower to the Agent, any Bank or their respective authorized designee evidencing or relating to the Loans, as the same from time to time may be amended, modified, supplemented, extended or renewed. 2.3 SECTION 1.1 (DEFINITIONS). The Credit Agreement is hereby amended by deleting the words "April 15, 1996" in the definition of "Revolving Loan Maturity Date" set forth in Section 1.1 of the Credit Agreement and inserting in their place the words "January 2, 1997." 2.4 SECTION 2.5 (INTEREST). The Credit Agreement is hereby amended to eliminate the Eurodollar Loan option. All outstanding Eurodollar Loans shall be converted to Based Rate Loans on the expiration date of the Interest Period applicable thereto. 2.5 SECTION 2.9 (VOLUNTARY REDUCTION OF REVOLVING LOAN COMMITMENTS). Section 2.9 of the Credit Agreement is deleted in its entirety and replaced with the following: SECTION 2.9 (VOLUNTARY REDUCTION OF REVOLVING LOAN COMMITMENTS). Upon at least three (3) Business Days prior irrevocable written notice (or telephonic notice promptly confirmed in writing) to the Agent (which notice the Agent shall promptly transmit to each of the Banks), the Borrower shall have the right, without premium or penalty, to permanently reduce each Bank's Pro Rata Share of all or part of the Total Revolving Loan Commitment, provided that any such partial reduction shall be in the minimum aggregate amount of $100,000. 2.6 SECTION 2.10 (MANDATORY PREPAYMENTS). Section 2.10 of the Credit Agreement is hereby amended to include subsections (c), (d), (e) and (f) as follows: 2. (c) The Borrower has advised the Banks that Vectra is engaged in ongoing discussions with a purchaser of all of the [assets/stock] of VECTRA Technologies (U.K.) Limited, an English limited liability company ("VECTRA (U.K.)"). Pursuant to that certain Fourth Amendment (Amended and Restated Term Loan Agreement) of even date herewith which amends the Term Loan Agreement (the "FOURTH TERM LOAN AMENDMENT"), Vectra has agreed to contribute to the Borrower for the sole purpose of repaying the Obligations, one hundred percent (100%) of the net proceeds of the sale of Vectra (U.K.), which net proceeds shall not be less than $1,000,000 (or so much thereof as is necessary to repay the Obligations in full). Immediately upon its receipt thereof, the Borrower shall cause one hundred percent (100%) of the net sale proceeds to be applied to immediately reduce the Obligations under the Credit Agreement and to reduce permanently the Total Revolving Loan Commitment by such amount. (d) Pursuant to the Fourth Term Loan Amendment, Vectra has agreed to contribute to the Borrower for the sole purpose of repaying the Obligations, such amount of the net proceeds of the sale to DE&S of the NP&G Units pursuant to the terms, or otherwise as contemplated by, the DE&S Letter of Intent as is necessary to repay the Obligations in full. Immediately upon its receipt thereof, the Borrower shall cause the net proceeds of such sale so contributed to be applied to immediately reduce the Obligations under the Credit Agreement and to reduce permanently the Total Revolving Loan Commitment by such amount. (e) On or before June 30, 1996, the Borrower shall make a payment of $600,000 (the "$600,000 PAYMENT"), which shall be applied to reduce the Obligations under the Credit Agreement and to reduce permanently the Total Revolving Loan Commitments by such amount. Notwithstanding the foregoing, the parties hereto agree that the Borrower may elect, at its sole option, to defer payment of the $600,000 Payment. The Borrower shall effect such election to defer the $600,000 Payment by delivering to the Agent no later than 5:00 p.m. California time on June 24, 1996, a written notice of election (a "NOTICE OF ELECTION") and such election shall be effective upon delivery of such Notice of Election to the Agent. In the event that the Borrower elects to defer the $600,000 Payment, the $600,000 Payment shall be due and payable upon the first to occur of (i) the sale to DE&S of the NP&G Service Units pursuant to the DE&S Letter of Intent or other similar sale of assets currently owned by Vectra or its Subsidiaries, (ii) Vectra's issuance of additional common stock or preferred stock with a redemption date of not earlier than one year after the Revolving Loan Maturity Date, (iii) Vectra's issuance of debt subordinated to all of its debt to institutional lenders on terms satisfactory to such institutional lenders, including the Banks, or (iv) the Revolving Loan Maturity Date or such prior date as the Loans shall have become due and payable, whether by acceleration or otherwise. As consideration for and in the event of such deferral, the Borrower shall pay to the Agent for the benefit of the Banks according to their Pro Rata Share, a deferral fee in the amount of $100,000, which deferral fee shall be earned upon the effectiveness of such election, but which deferral fee shall be due and payable upon the date which the $600,000 Payment shall be due and payable. (f) On or before September 15, 1996, the Borrower shall make a payment of $625,000 (the "$625,000 PAYMENT"), which shall be applied to reduce the Obligations under the Credit Agreement and to reduce permanently the Total Revolving Loan Commitments by such amount. Notwithstanding the foregoing, the parties hereto agree that the Borrower may elect, at its sole discretion, to defer payment of the $625,000 Payment. The 3. Borrower shall effect such election to defer the $625,000 Payment by delivering to the Agent no later than 5:00 p.m. California time on September 9, 1996, a Notice of Election and such election shall be effective upon delivery of such Notice of Election to the Agent. In the event that the Borrower elects to defer the $625,000 Payment, the $625,000 Payment shall be due and payable upon the first to occur of (i) the sale of DE&S of the NP&G Service Units pursuant to the DE&S Letter of Intent or other similar sale of assets currently owned by Vectra or its Subsidiaries, (ii) Vectra's issuance of additional common stock or preferred stock with a redemption date of not earlier than one year after the Revolving Loan Maturity Date, (iii) Vectra's issuance of debt subordinated to all of its debt to institutional lenders on terms satisfactory to such institutional lenders, including the Banks, or (iv) the Revolving Loan Maturity Date or such prior date as the Loans shall have become due and payable, whether by acceleration or otherwise. As consideration for and in the event of such deferral, the Borrower shall pay to the Agent for the benefit of the Banks according to their Pro Rata Share, a deferral fee in the amount of $100,000, which deferral fee shall be earned upon the effectiveness of such election, but which deferral fee shall be due and payable upon the date which the $625,000 Payment shall be due and payable. Provided that the net proceeds of the sales described in clauses (c) and (d) above are applied as required by such clauses, the Banks shall cooperate with the Borrower to execute and deliver such documents as are necessary to release, terminate or reconvey any Collateral transferred to the buyer as part of such sale. 2.7 SECTION 2.11 (VOLUNTARY PREPAYMENTS). Section 2.11 of the Credit Agreement is deleted in its entirety and replaced with the following: SECTION 2.11 VOLUNTARY PREPAYMENTS. The Borrower shall have the right to prepay the Loans in whole or in part without premium or penalty from time to time on the following terms and conditions: (i) the Borrower shall give the Agent written notice (or telephonic notice promptly confirmed in writing), which notice shall be irrevocable, of its intent to prepay the Loans, at least three (3) Business Days prior to a prepayment, and which notice the Agent shall promptly transmit to each of the Banks and (ii) each prepayment shall be in a minimum aggregate principal amount of $100,000. 3. LIMITATION OF AMENDMENTS. (a) The amendments set forth in SECTION 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (i) be a consent to any amendment, waiver of modification of any other term or condition of any Loan Document or (ii) otherwise prejudice any right or remedy which the Banks, the Agent or the Managing Agent may now have or may have in the future under or in connection with any Loan Document. (b) This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect. 4. 4. ACKNOWLEDGEMENTS. (a) The Borrower understands and acknowledges that the nine month extension of the Revolving Loan Maturity Date evidenced by the amendments set forth in SECTION 2, above, is a limited purpose, one-time accommodation amendment agreed by the Banks for the express purpose of affording the Borrower access to capital while it completes a refinancing, sale or other similar transaction generating sufficient proceeds to enable the Borrower to repay the Obligations in full as soon as possible and in any event not later than the Revolving Loan Maturity Date as extended by this Amendment. The Borrower further acknowledges and agrees that it represented to the Banks, in requesting the extension of the Revolving Loan Maturity Date evidenced by the amendment set forth in SECTION 2, above, that the Borrower and its Affiliates are engaged in serious ongoing discussions with DE&S regarding the sale of the NP&G Units and the full repayment of the Obligations and that the Borrower is confident that such sale will generate sufficient funds to repay the Obligations in full by August 31, 1996. The Borrower further acknowledges and agrees that the Banks have reasonably relied on such representation and would not have otherwise entered into and agreed to this Amendment. The Banks have not (nor has the Agent or the Managing Agent on behalf of the Banks) agreed or committed to, or otherwise indicated in any way whatsoever that they would consider, any further extension of the Revolving Loan Maturity Date and the Borrower acknowledges and agrees that the Banks have made no such agreement or commitment (nor has the Agent or the Managing Agent on behalf of the Banks) and that the Borrower has no expectation whatsoever that the Banks would consider any further extension of the Revolving Loan Maturity Date. (b) The Borrower hereby ratifies and reaffirms the validity and enforceability of all of the Liens and security interests heretofore granted, pursuant to the Security Agreement and other Loan Documents, to the Agent, for itself and on behalf of the Banks and the Managing Agent, as collateral security for the Obligations, and acknowledges that all of such Liens and security interests, and all Collateral heretofore pledged as security for the Obligations, continues to be and remain collateral for the Obligations from and after the date hereof. Without limiting the generality of the foregoing, the Borrower acknowledges and agrees that, pursuant to the Security Agreement and other Loan Documents, the Agent, for itself and on behalf of the Banks and the Managing Agent, is entitled to receive and apply all proceeds of the Collateral. 5. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks, the Agent and the Managing Agent to enter into this Agreement, the Borrower hereby represents and warrants to each Bank, the Agent and the Managing Agent as follows: (a) After giving effect to this Amendment (i) the representations and warranties contained in the Loan Documents (other than those which expressly speak as of a different date) are true, accurate and complete in all material respects as of the date hereof and (ii) no Default or Event of Default has occurred and is continuing; (b) The Borrower has the corporate power and authority to execute and deliver this Amendment and to perform its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party; 5. (c) The certificate of incorporation, bylaws and other organizational documents of the Borrower delivered to each Bank on the Closing Date are true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect; (d) The execution and delivery by the Borrower of this Amendment and the performance by Borrower of its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party have been duly authorized by all necessary corporate action on the part of the Borrower; (e) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not and will not contravene (i) any law or regulation binding on or affecting the Borrower, (ii) the certificate of incorporation or bylaws of the Borrower, (iii) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on the Borrower or (iv) any contractual restriction binding on or affecting the Borrower; (f) The execution and delivery by the Borrower of this Amendment and the performance by the Borrower of its obligations under the Credit Agreement, as amended by this Amendment, and each of the other Loan Documents to which it is a party do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on the Borrower, except as already has been obtained or made; and (g) This Amendment has been duly executed and delivered by the Borrower and is the binding obligation of the Borrower, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. 6. REAFFIRMATION. The Borrower hereby reaffirms its obligations under each Loan Document to which it is a party. 7. AMENDMENT FEE. As consideration for the Banks' agreement to amend the Credit Agreement as set forth in this Amendment, the Borrower agrees to pay to the Agent, for the benefit of the Banks according to their Pro Rata Share, an amendment fee ("AMENDMENT FEE") as set forth in the side letter agreement described in SECTION 9(c) below. The payment of the Amendment Fee shall be paid in accordance with the terms of such side letter agreement. 8. COUNTERPARTS. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 9. EFFECTIVENESS. Subject to SECTION 7, above, this Amendment shall be deemed effective upon the satisfaction of all of the following conditions precedent (PROVIDED that all such conditions must be satisfied prior to 5:00 p.m., San Francisco time, April 15, 1995): 6. (a) SEVENTH AMENDMENT. The receipt by the Agent of an originally executed counterpart (or facsimile thereof with the original to follow by Federal Express or other overnight courier) of this Amendment, executed by the Borrower and each Bank; and (b) CERTIFIED RESOLUTIONS. The Agent shall have received a certificate of the Secretary or Assistant Secretary of the Borrower and dated the date hereof certifying (i) the names and signatures of the incumbent officers of the Borrower authorized to sign the applicable Loan Documents, (ii) the resolutions of the Borrower's Board of Directors approving and authorizing the execution, delivery and performance of the Credit Agreement, as amended by this Amendment, and the side letter agreement described in Subsection (c) below and (iii) that there have been no changes in the Certificate of Incorporation of the Borrower or in the Bylaws or similar constituent documents of the Borrower since the date of certification thereof to the Agent in connection with the closing of the Credit Agreement. (c) SIDE LETTER AGREEMENT. The Borrower shall have duly acknowledged and delivered the side letter agreement of even date herewith from the Agent to the Borrower relating to the amendment fee and certain other fees. 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 11. RELEASE AND WAIVER. (a) The Borrower hereby acknowledges and agrees that: (i) it has no claim or cause of action against any Bank or the Agent or the Managing Agent or any parent subsidiary or affiliate of any Bank or the Agent or the Managing Agent, or any of such Bank's, the Agent's or the Managing's Agent's officers, directors, employees, attorneys or other representatives or agents (all of which parties other than the Banks, the Agent and the Managing Agent being, collectively, the "LENDER AGENTS") in connection with the Credit Agreement, the Revolving Loans thereunder or the transactions contemplated therein; (ii) it has no offset or defense against any of its respective obligations, indebtedness or contracts in favor of the Banks, the Agent or the Managing Agent; and (iii) it recognizes that each of the Banks, the Agent and the Managing Agent has heretofore properly performed and satisfied in a timely manner all of its respective obligations to and contracts with the Borrower. (b) Although each of the Banks, the Agent and the Managing Agent regards its respective conduct as proper and does not believe the Borrower to have any claim, cause of action, offset or defense against such Bank, the Agent or the Managing Agent or any Lender Agent in connection with the Credit Agreement, the Revolving Loans thereunder or the transactions contemplated therein, each Bank, the Agent and the Managing Agent wishes and the Borrower agrees to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters could impair or otherwise affect any rights, interests, contracts or remedies of the Banks, the Agent or the Managing Agent. Therefore, the Borrower unconditionally releases and waives (i) any and all liabilities, indebtedness and obligations, whether known or unknown, of any kind of any Bank, the Agent or the Managing Agent or of any of Lender Agents to the Borrower, except the obligations remaining to be respectively 7. performed by the Banks, the Agent or the Managing Agent as expressly stated in the Credit Agreement, this Amendment and the other Loan Documents; (ii) any legal, equitable or other obligations or duties, whether known or unknown, of any Bank, the Agent, the Managing Agent or any Lender Agent to the Borrower (and any rights of the Borrower against any Bank, the Agent, the Managing Agent or any Lender Agent) besides those expressly stated in the Credit Agreement, this Amendment and the other Loan Documents; (iii) any and all claims under any oral or implied agreement, obligation or understanding with any Bank, the Agent, the Managing Agent or any Lender Agent, whether known or unknown, which is different from or in addition to the express terms of the Credit Agreement, this Amendment or any of the other Loan Documents; and (iv) all other claims, causes of action or defenses of any kind whatsoever (if any), whether known or unknown, which the Borrower might otherwise have against any Bank, the Agent, the Managing Agent and/or any Lender Agent on account of any condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, circumstance or matter of any kind whatsoever which existed, arose or occurred at any time prior to the execution and delivery of this Amendment or which could arise concurrently with the effectiveness of this Amendment. (c) THE BORROWER AGREES TO ASSUME THE RISK OF ANY AND ALL UNKNOWN, UNANTICIPATED OR MISUNDERSTOOD DEFENSES, CLAIMS, CAUSES OF ACTION, CONTRACTS, LIABILITIES, INDEBTEDNESS AND OBLIGATIONS WHICH ARE RELEASED BY THIS AMENDMENT IN FAVOR OF THE BANKS, THE AGENT, THE MANAGING AGENT AND THE LENDER AGENTS. TO THE EXTENT ANY LAW MAY BE APPLICABLE, THE BORROWER WAIVES AND RELEASES (TO THE MAXIMUM EXTENT PERMITTED BY LAW) ANY RIGHT OR DEFENSE WHICH IT MIGHT OTHERWISE HAVE UNDER THE LAWS OF THE STATE OF NEW YORK OR ANY OTHER APPLICABLE JURISDICTION WHICH MIGHT LIMIT OR RESTRICT THE EFFECTIVENESS OR SCOPE OF ANY OF ITS WAIVERS OR RELEASES UNDER THIS AMENDMENT. 8. IN WITNESS WHEREOF, the parties hereby have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. VECTRA NEVADA, INC. By: /s/ Ray A. Fortney ----------------------------- Its: PRESIDENT ----------------------------- BANQUE PARIBAS, as a Bank and as Agent By: /s/ Robert S. Pinkerton ----------------------------- Its: VP ----------------------------- By: /s/ Lee S. Buckner ----------------------------- Its: GVP ----------------------------- BANQUE NATIONALE DE PARIS, as a Bank and as Managing Agent By: /s/ Richard Cushing ----------------------------- Its: VP ----------------------------- By: /s/ E. D. ----------------------------- Its: ----------------------------- BANK HAPOALIM, as a Bank By: /s/ Conrad Wagner ----------------------------- Its: VP ----------------------------- By: /s/ Illegible ----------------------------- Its: ----------------------------- 9. EX-11 9 EXHIBIT 11 VECTRA TECHNOLOGIES EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS (AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
FISCAL YEARS ENDED --------------------------------------- DECEMBER 31, JANUARY 1, DECEMBER 31, 1995 1995 1993 --------------------------------------- PRIMARY Weighted average shares outstanding 7,840 7,802 5,909 Net effect of dilutive stock options - based on the treasury method using average market price -- -- -- -------- ------- ----- TOTAL 7,840 7,802 5,909 Net loss $(12,213) $(5,325) $(546) -------- ------- ----- -------- ------- ----- Net loss per share $ (1.56) $ (.68) $(.09) -------- ------- ----- -------- ------- -----
57 EX-21 10 EXHIBIT 21 VECTRA TECHNOLOGIES, INC. EXHIBIT 21 SUBSIDIARIES OF THE COMPANY VECTRA Government Services Inc., a Delaware corporation VECTRA Technologies Ltd. A United Kingdom corporation VECTRA Nevada, Inc., a Nevada corporation VECTRA Services, Inc., a Washington corporation VECTRA Waste Services, LLC, a Washington corporation VECTRA Fuel Services, LLC, a Delaware corporation Provident Union Insurance Company Limited, a Bermuda corporation Nuclear Packaging, Inc., a Washington corporation Pacific Nuclear Storage Systems, Inc., a Washington corporation CTL International, Inc., a Washington corporation 58 EX-23 11 EXHIBIT 23 VECTRA TECHNOLOGIES, INC. EXHIBIT 23 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 33-4208, No. 33-15204, No. 33-21655, No. 33-28842, and No. 33-58194) pertaining to the VECTRA Technologies, Inc. 1988 Stock Option Plan and the VECTRA Technologies, Inc. Stock Option Plan of our report dated April 5, 1996, except for Note 3 as to which the date is April 15, 1996, with respect to the consolidated financial statements and schedule of VECTRA Technologies, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 1995. ERNST & YOUNG LLP Walnut Creek, California April 15, 1996 59 EX-27 12 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-K WHICH PRECEDES THIS EXHIBIT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1995 JAN-02-1995 DEC-31-1995 2,834 1,274 23,330 785 1,176 29,334 20,758 8,614 60,829 25,803 17,640 0 0 44,960 (27,574) 60,829 123,501 123,501 0 89,444 55,786 0 3,105 (12,103) 110 (12,213) 0 0 0 (12,213) 1.56 0
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