Exhibit 10.1
BUSINESS LOAN AND SECURITY AGREEMENT
dated as of March 18, 1999,
by and among
AVERSTAR, INC.,
COMPUTER BASED SYSTEMS, INC.
and other Borrower parties hereto from time to time,
as the Borrowers,
FIRST UNION COMMERCIAL CORPORATION
and other Lender parties hereto from time to time,
as the Lenders,
and
FIRST UNION COMMERCIAL CORPORATION,
as the Agent
TABLE OF CONTENTS
CERTAIN DEFINITIONS........................................................ 1
ARTICLE 1 COMMITMENT................................................... 15
Section 1.1 Maximum Loan Amount.......................................... 15
Section 1.2 Use of Proceeds.............................................. 16
Section 1.3 Borrowing Base and Maximum Advances.......................... 16
Section 1.4 Advances..................................................... 17
Section 1.5 Additional Mandatory Payments; Reduction of Commitment....... 18
Section 1.6 Field Audits................................................. 20
Section 1.7 Fees......................................................... 20
Section 1.8 Termination of Advances; Reduction of the Revolving Facility
Commitment Amount............................................ 21
Section 1.9 Appointment of AverStar...................................... 21
Section 1.10 Joinder of New Subsidiaries and Affiliates................... 22
ARTICLE 2 LETTERS OF CREDIT............................................ 22
Section 2.1 Issuance..................................................... 22
Section 2.2 Amounts Advanced Pursuant to Letters of Credit............... 23
Section 2.3 Letter of Credit Fees........................................ 23
ARTICLE 3 SECURITY..................................................... 24
Section 3.1 Security Generally........................................... 24
Section 3.2 No Preference or Priority.................................... 26
Section 3.3 Release of Security Interest................................. 26
ARTICLE 4 CONDITIONS TO THE OBLIGATIONS OF THE LENDER(S)............... 26
Section 4.1 Satisfaction of Commitment Letter Conditions;
Compliance with Agreements................................... 26
Section 4.2 No Default................................................... 28
Section 4.3 Documentation................................................ 28
ARTICLE 5 REPRESENTATIONS AND WARRANTIES............................... 29
Section 5.1 Corporate Existence and Qualification........................ 29
Section 5.2 Corporate Authority; Noncontravention........................ 29
Section 5.3 Financial Position........................................... 29
Section 5.4 Payment of Taxes............................................. 30
Section 5.5 Accuracy of Submitted Information; Omissions................. 30
Section 5.6 Government Contracts......................................... 30
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Section 5.7 No Defaults or Liabilities................................... 31
Section 5.8 No Violations of Law......................................... 31
Section 5.9 Litigation and Proceedings................................... 31
Section 5.10 Security Interest in the Collateral.......................... 31
Section 5.11 Principal Place of Business; Location
of Books and Records; No Inventory........................... 32
Section 5.12 Fiscal Year.................................................. 32
Section 5.13 Pension Plans................................................ 32
Section 5.14 O.S.H.A., ADA and Environmental Compliance................... 33
Section 5.15 Intellectual Property........................................ 34
Section 5.16 Existing or Pending Defaults; Material Contracts............. 34
Section 5.17 Leases and Real Property..................................... 34
Section 5.18 Labor Relations.............................................. 34
Section 5.19 Assignment of Government Contracts........................... 35
Section 5.20 Ownership Interests.......................................... 35
Section 5.21 Contribution Agreement....................................... 35
Section 5.22 Solvency..................................................... 35
Section 5.23 Year 2000 Compliance......................................... 35
Section 5.24 Joint and Several Liability.................................. 36
Section 5.25 Survival of Representations and Warranties................... 36
ARTICLE 6 AFFIRMATIVE COVENANTS........................................ 36
Section 6.1 Payment of Loan Obligations.................................. 36
Section 6.2 Payment of Taxes............................................. 36
Section 6.3 Delivery of Financial and Other Statements................... 36
Section 6.4 Maintenance of Records; Review by the Lenders................ 38
Section 6.5 Maintenance of Insurance Coverage............................ 38
Section 6.6 Maintenance of Property/Collateral; Performance of Contracts. 38
Section 6.7 Maintenance of Corporate Existence........................... 39
Section 6.8 Maintenance of Certain Accounts with Lender.................. 39
Section 6.9 Maintenance of Management.................................... 39
Section 6.10 Disclosure of Defaults, Etc.................................. 39
Section 6.11 Security Perfection; Assignment of Claims Act;
Payment of Costs............................................. 40
Section 6.12 Defense of Title to Collateral............................... 40
Section 6.13 Compliance with Law.......................................... 40
Section 6.14 Further Assurances; Additional Requested Information......... 41
Section 6.15 Financial Covenants.......................................... 41
Section 6.16 Year 2000 Compliance......................................... 44
Section 6.17 Landlord Waivers; Subordination.............................. 44
Section 6.18 Substitute Notes............................................. 44
Section 6.19 Interest Rate Contracts...................................... 45
Section 6.20 Joint and Several Liability.................................. 45
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ARTICLE 7 NEGATIVE COVENANTS........................................... 45
Section 7.1 Change of Control; Disposition of Assets;
Merger....................................................... 45
Section 7.2 Margin Stocks................................................ 46
Section 7.3 Change of Operations......................................... 46
Section 7.4 Judgments; Attachments....................................... 46
Section 7.5 Further Assignments; Performance and
Modification of Contracts; etc............................... 46
Section 7.6 Affect Rights of the Agent or Lender(s)...................... 46
Section 7.7 Indebtedness; Granting of Security Interests................. 47
Section 7.8 Dividends; Loans; Advances; Investments
and Certain Other Events..................................... 47
Section 7.9 Lease Obligations............................................ 48
Section 7.10 Capital Expenditures......................................... 48
Section 7.11 Lockbox Deposits............................................. 49
Section 7.12 Shareholders Agreement; Merger Agreement, Etc................ 49
Section 7.13 Transactions With Affiliates................................. 49
Section 7.14 Joint and Several Liability.................................. 49
ARTICLE 8 COLLATERAL ACCOUNT........................................... 49
ARTICLE 9 DEFAULT AND REMEDIES......................................... 50
Section 9.1 Events of Default............................................ 50
Section 9.2 Remedies..................................................... 52
ARTICLE 10 THE AGENT; AGENCY............................................ 55
Section 10.1 Appointment.................................................. 55
Section 10.2 General Nature of the Agent's Duties......................... 55
Section 10.3 Exercise of Powers........................................... 56
Section 10.4 General Exculpatory Provisions............................... 57
Section 10.5 Administration by the Agent.................................. 58
Section 10.6 Lenders Not Relying on the Agent or Other Lenders............ 59
Section 10.7 Indemnification.............................................. 60
Section 10.8 The Agent in its Individual Capacity......................... 60
Section 10.9 Holders of Notes............................................. 60
Section 10.10 Successor Agent.............................................. 61
Section 10.11 Additional Agents............................................ 61
Section 10.12 Calculations................................................. 61
Section 10.13 Funding by Agent............................................. 62
Section 10.14 Benefit of Article........................................... 64
ARTICLE 11 CERTAIN ADDITIONAL RIGHTS AND OBLIGATIONS REGARDING
THE COLLATERAL............................................... 64
Section 11.1 Power of Attorney............................................ 64
Section 11.2 Lockbox...................................................... 65
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Section 11.3 Other Agreements............................................. 66
ARTICLE 12 MISCELLANEOUS................................................ 66
Section 12.1 Remedies Cumulative.......................................... 66
Section 12.2 Waiver....................................................... 67
Section 12.3 Notices...................................................... 67
Section 12.4 Entire Agreement............................................. 68
Section 12.5 Relationship of the Parties.................................. 68
Section 12.6 Waiver of Jury Trial......................................... 69
Section 12.7 Submission to Jurisdiction; Service of Process; Venue........ 69
Section 12.8 Changes in Capital Requirements.............................. 69
Section 12.9 Captions..................................................... 70
Section 12.10 Modification and Waiver...................................... 70
Section 12.11 Transferability.............................................. 70
Section 12.12 Governing Law; Binding Effect................................ 70
Section 12.13 Gender; Number............................................... 71
Section 12.14 Materiality.................................................. 71
Section 12.15 Counterparts................................................. 71
LIST OF EXHIBITS:
EXHIBIT 1 - Request for Advance
EXHIBIT 1(a)- Request for Swing Line Loan
EXHIBIT 2 LIBOR Election Form and Certification
EXHIBIT 3 LIBOR Interest Election Procedure and
Requirements
EXHIBIT 4 - Borrowing Base/Non-Default Certificate (with Schedules A, B & C)
EXHIBIT 5 - Quarterly Covenant Compliance/Non-Default Certificate
EXHIBIT 6 Form of Joinder Agreement
EXHIBIT 7 Pricing Grid
EXHIBIT 8 Form of Payment Direction Letter
EXHIBIT 9 Form of Assignment and Acceptance Agreement
SCHEDULES
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BUSINESS LOAN AND SECURITY AGREEMENT
------------------------------------
THIS BUSINESS LOAN AND SECURITY AGREEMENT, dated as of March 18, 1999,
is by and among (i) FIRST UNION COMMERCIAL CORPORATION, a North Carolina
corporation, having offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇; (ii) FIRST UNION COMMERCIAL CORPORATION, a North Carolina
corporation, acting in its capacity as Agent for the Lenders, having offices at
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; (iii) each other
person or entity who is now or hereafter becomes a "Lender" pursuant to this
Agreement; (iv) AVERSTAR, INC., a Delaware corporation ("AverStar"), having
offices at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, COMPUTER BASED
SYSTEMS, INC., a Virginia corporation ("CBSI"), having offices at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, COMPUTING APPLICATIONS
SOFTWARE TECHNOLOGY, INC., a California corporation, having offices at ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, INTERMETRICS SECURITIES, INC., a
Massachusetts corporation, having offices at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and INTERMETRICS INTERNATIONAL, INC., a Massachusetts
corporation, having offices at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇; and (v) each other person or entity hereafter becoming a "Borrower" by
executing, among other things, a "Joinder Agreement" pursuant to this Agreement.
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
In consideration of the mutual covenants and agreements herein contained,
Ten Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree,
represent and warrant as follows:
CERTAIN DEFINITIONS
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For the purposes of this Business Loan and Security Agreement, the terms
set forth below shall have the following definitions:
"Acceleration Date" shall mean the date on which all principal, interest
and other sums owing on the Obligations shall be declared immediately due and
payable in full prior to the stated maturity thereof.
"Account Debtor" shall mean any person or entity who is (i) unrelated and
unaffiliated with any Borrower, and (ii) indebted to any Borrower for the
payment of any Receivable; it being understood and agreed that when computations
are being made with respect to amounts due and owing from an Account Debtor (a)
such computations shall be made on a contract by contract basis (as opposed to
on an Account Debtor basis), with respect to amounts owing in connection with
Government Contracts, and (b) such
computations shall be made on the basis of all amounts due from the Account
Debtor and any other person or entity related to or affiliated with the
particular Account Debtor, with respect to amounts owing in connection with
contracts which are not Government Contracts.
"Acquisition" shall mean the acquisition by AverStar of all of the issued
and outstanding capital stock of CBSI pursuant to the terms and provisions of
the Merger Agreement.
"Additional Base Rate Interest Margin" shall have the meaning assigned to
such term in the Notes and in Exhibit 7 attached to this Agreement.
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"Additional Libor Interest Rate Margin" shall have the meaning assigned
to such term in the Notes and in Exhibit 7 attached to this Agreement.
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"Agent" shall mean First Union Commercial Corporation, a North Carolina
corporation, acting in its capacity as agent for the Lenders, or any successor
Agent appointed pursuant to Section 10.10 of this Agreement.
"Agreement" or "Loan Agreement" shall mean this Business Loan and
Security Agreement, together with all exhibits and schedules attached hereto and
any and all amendments or modifications of any of the foregoing made in
accordance with Section 12.10 of this Agreement.
"Applicable Interest Rate" shall mean either the (i) LIBOR or (ii) Base
Rate, as set forth in the Notes.
"Applicable Laws" shall mean any federal, state or local law, ordinance,
rule or regulation to which any Borrower or the property of any Borrower is
subject, whether domestic or international.
"Assignment of Claims Act" shall mean the Assignment of Claims Act of
1940, 31 U.S.C. Section 3727 and 41 U.S.C. Section 15, as amended.
"Assignment of Promissory Notes as Collateral" shall mean that certain
Assignment of Promissory Notes as Collateral of even date herewith, made by
AverStar and accepted by the Agent for the ratable benefit of the Lenders,
together with any and all modifications and/or amendments thereof.
"Averstar" shall have the meaning attributed to such term in the Preamble
of this Agreement.
"Base Rate" shall mean the higher of the (i) Federal Funds Rate, plus
one-half of one percent (.50%) or (ii) Prime Rate.
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"Borrower" or "Borrowers" shall mean AverStar, Inc., a Delaware
corporation, Computer Based Systems, Inc., a Virginia corporation, Computing
Applications Software Technology, Inc., a California corporation, Intermetrics
Securities, Inc., a Massachusetts corporation, Intermetrics International, Inc.,
a Massachusetts corporation, and/or each other person or entity hereafter
executing a Joinder Agreement pursuant to Section 1.10 of this Agreement,
individually or collectively, as the context may require.
"Borrowing Base/Non-Default Certificate" shall mean a certificate in the
form of Exhibit 4 hereto.
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"Borrowing Base Deficiency" shall have the meaning assigned to such term
in Section 1.3 of this Agreement.
"Business Day" shall mean any day other than (i) a Saturday, Sunday, or
public holiday under the laws of the Commonwealth of Virginia; (ii) any other
day on which banking institutions are authorized or obligated to close in the
city in which the Agent's office is located; or (iii) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, any Loan bearing interest on a LIBOR basis, any day on which banks
are not open for trading in Dollar deposits in the London interbank market.
"CBSI" shall have the meaning attributed to such term in the Preamble of
this Agreement.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601 et
seq.).
"Closing" shall mean the settlement of the transactions contemplated
hereby.
"Closing Date" shall mean the date on which Closing occurs.
"Collateral" shall have the meaning assigned to such term in Section 3.1
of this Agreement.
"Collateral Account" shall have the meaning assigned to such term in
Article 8 of this Agreement.
"Commercial Contract" shall mean any written contract to which the
Borrower is a party (other than a Government Contract or a contract with the
District of Columbia or any department, instrumentality or agency thereof) which
gives rise or may give rise to a Receivable.
"Commitment Amount" shall mean Seventy-five Million and No/100 Dollars
($75,000,000.00), or if the maximum aggregate commitment of the Lender(s)
hereunder is reduced pursuant to the terms of this Agreement, such lesser
amount.
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"Commitment Fee" shall have the meaning assigned to such term in Section
1.7(a) of this Agreement.
"Commitment Letter" shall mean that certain letter dated February 1, 1999
from the Agent and First Union Capital Markets Corp. to the Borrowers relating
to the Loan.
"Contribution Agreement" shall mean that certain Contribution Agreement
of even date herewith, executed and delivered by and among the Borrowers
immediately prior to the Closing, as amended from time to time pursuant to the
terms thereof.
"Default Rate" shall mean the Applicable Interest Rate, plus the
applicable Additional Base Rate Interest Margin and/or the applicable Additional
Libor Interest Rate Margin (as the case may be), plus two percent (2%).
"EBITDA" shall mean, as of the date of any determination, the Borrowers'
net income (or loss), plus interest expense, plus all charges against income for
foreign, federal, state and local income taxes, plus depreciation expense, plus
amortization expense, and excluding any other non-cash items to the extent
included in determining net income (or loss), all as determined on a
consolidated basis in accordance with GAAP. For the purpose of any applicable
EBITDA calculation, EBITDA for the fiscal quarter ending 12/31/98 may include
"add-backs" for the one-time, non-recurring items set forth on Schedule A
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hereto.
"Eligible Accounts Receivables" shall mean, collectively, Eligible Billed
Government Accounts Receivable, Eligible Billed Commercial Accounts Receivable
and Eligible Unbilled Government Costs.
"Eligible Assignee" shall mean any Lender, an affiliate of any Lender, a
Federal Reserve Bank or any other "Qualified Institutional Buyer," as such term
is defined under Rule 144(A), promulgated under the Securities Act of 1933, as
amended.
"Eligible Billed Government Accounts Receivable" shall mean all
Receivables arising from Government Contracts which (a) represent amounts due
and owing for products actually delivered or services actually performed or
rendered by or on behalf of any Borrower to or for the benefit of an Account
Debtor pursuant to a Government Contract; (b) have been properly billed and are
outstanding less than one hundred twenty-one (121) days from the date of
original invoice; (c) arise in the ordinary course of such Borrower's business;
(d) are due, owing and not subject to any defense, set-off or counterclaim; and
(e) are not Ineligible Receivables.
"Eligible Billed Commercial Accounts Receivable" shall mean all
Receivables (other than Receivables arising from Government Contracts) which (a)
represent amounts due and owing for products actually delivered or services
actually performed or rendered by
4
or on behalf of any Borrower to or for the benefit of an Account Debtor (other
than the Government); (b) have been properly billed and are outstanding less
than ninety-one (91) days from the date of original invoice; (c) arise in the
ordinary course of such Borrower's business; (d) are due, owing and not subject
to any defense, set-off or counterclaim; and (e) are not Ineligible Receivables.
"Eligible Unbilled Government Costs" shall mean all costs actually
incurred by any Borrower and arising out of work actually performed by such
Borrower under Government Contracts which (a) are eligible to be billed to the
Government in accordance with the applicable Government Contract within thirty
(30) days of the certification date of the applicable Borrowing Base/Non-Default
Certificate (or within forty-five (45) days of the certification date of the
applicable Borrowing Base/Non-Default Certificate if incurred in connection with
progress payment/milestone contracts), in each case, with no additional
performance required by any person, and no condition to payment by the
Government, other than receipt of an appropriate invoice); (b) may, in
accordance with GAAP, be included as current assets of such Borrower, even
though such amounts have not been billed to the Government; (c) satisfy all
requirements of Eligible Billed Government Receivables (except that such costs
have not yet been billed and are therefore not yet due and payable); and (d) are
not (i) cost or profit retentions; (ii) variances from approved government
reimbursement rates; or (iii) otherwise deemed ineligible by the Agent or the
Required Lenders.
"Event of Default" shall have the meaning assigned to such term in
Section 9.1 of this Agreement.
"Excess Cash Event" shall mean (i) any sale or disposition of any of the
assets of any Borrower which is (a) not in the ordinary course of business; or
(b) prohibited by the terms of this Agreement; (ii) the receipt by or on behalf
of any Borrower of insurance proceeds in excess of (a) Five Hundred Thousand and
No/100 Dollars ($500,000.00), in the aggregate, during any fiscal year, or (b)
One Million and No/100 Dollars ($1,000,000.00), in the aggregate, during the
term of the Facilities; and/or (iii) the reversion of any pension plan assets.
"Excess Cash Flow" shall mean, as of the date of determination (which
shall occur no later than March 31st of each fiscal year of the Borrowers), the
sum of the Borrowers' net income, plus non-cash charges, minus scheduled
principal payments, minus capital expenditures and minus any increase (or plus
any decreases) in working capital requirements (i.e., any increase or decrease
in the amount by which current assets exceed current liabilities), and minus any
payments required to be paid by the Borrowers pursuant to certain retirement
plans and repurchase agreements described on Schedule B hereto, as the case may
----------
be, in each case for the immediately preceding fiscal year, and determined on a
consolidated basis in accordance with GAAP.
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"Facility" or "Facilities" shall mean the Revolving Facility, Term
Facility "A", Term Facility "B" and/or Swing Line Facility, individually or
collectively, as the context may require.
"Federal Funds Rate" for any day shall mean the rate per annum (rounded
upward to the nearest 1/8 of 1%) determined by the Agent to be the rate per
annum announced by the Federal Reserve Bank of New York (or any successor) on
such day as being the weighted average of the rates on overnight Federal Funds
transactions arranged by Federal Funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank (or any successor) in
substantially the same manner as such Federal Reserve Bank computes and
announces the weighted average it refers to as the "Federal Funds Effective
Rate" as of the date of this Agreement; provided that if such Federal Reserve
Bank (or its successor) does not announce such rate on any day, the "Federal
Funds Effective Rate" for such day shall be the Federal Funds Rate for the last
day on which such rate was announced.
"Fee Letter" shall mean that certain letter dated February 1, 1999, by
and between the Borrower and the Agent with respect to certain fees payable in
connection with the Loan.
"First Union" shall mean First Union Commercial Corporation, a North
Carolina corporation, acting individually, together with its successors and
assigns.
"Fixed Charge Coverage Ratio" shall have the meaning assigned to such
term in Section 6.15(b) of this Agreement.
"GAAP" shall mean domestic generally accepted accounting principles,
consistently applied.
"Government" shall mean the United States government or any department,
instrumentality or agency thereof, and any state government or any department,
instrumentality or agency thereof; it being expressly understood and agreed that
the District of Columbia is not included within this definition of Government.
"Government Contract Assignments" shall have the meaning assigned to such
term in Section 6.11 of this Agreement.
"Government Contract" or "Government Contracts" shall mean each and all
written contracts between a Borrower and the Government.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances,
pollutants or contaminants as
6
defined in CERCLA, HMTA, RCRA or any other applicable environmental law, rule,
order or regulation.
"Hazardous Wastes" shall mean, without limitation, all waste materials
subject to regulation under CERCLA, RCRA or analogous state law, and/or any
other applicable Federal and/or state law now in force or hereafter enacted
relating to hazardous waste treatment or disposal.
"HMTA" shall mean the Hazardous Materials Transportation Act, as amended
(49 U.S.C. Sections 1801 et seq.)
"IES Notes" shall have the meaning attributed to such term in Section
7.8(b) of this Agreement.
"Ineligible Receivables" shall mean Receivables which are (a) evidenced
by a promissory note or similar instrument; (b) owed or payable by an Account
Debtor pursuant to a Commercial Contract, if payment of fifty percent (50%) or
more of the aggregate balance due from that Account Debtor is outstanding for
more than ninety (90) days from the date of original invoice; (c) owed or
payable by an Account Debtor pursuant to a Government Contract, if payment of
fifty percent (50%) or more of the aggregate balance due from that Account
Debtor under such Government Contract is outstanding for more than one hundred
twenty (120) days from the date of original invoice; (d) owing from any person
that is the subject of any (i) suit, lien, levy or judgment which could
reasonably be expected to affect the collectibility of said account(s), or (ii)
bankruptcy, insolvency or a similar process or proceeding; (e) owing from
foreign Account Debtors; (f) unbilled as a result of rate variances or retainage
provisions; (g) bonded accounts receivable; (h) at-risk receivables (i.e.,
receivables arising from work for which payment from an Account Debtor is not
certain); or (i) other receivables deemed ineligible by the Agent or the
Required Lenders in their sole and absolute discretion.
"Intellectual Property Security Agreement" shall mean that certain
Intellectual Property Security Agreement of even date herewith, made by the
Borrowers in favor of the Agent for the ratable benefit of the Lenders, together
with any and all modifications and/or amendments thereto.
"Interest Expense" shall mean, as of the date of any determination, the
Borrowers' aggregate cash interest expense for borrowed money (including,
without limitation, premiums and interest expense arising from or relating to
interest rate protection agreements and original issue discounts), plus the
amount of all other interest due (whether paid or not paid) on any indebtedness
of the Borrowers for the applicable measurement period, all as determined on a
consolidated basis in accordance with GAAP.
"Interest Period" means as to any Loan proceeds for which LIBOR based
interest has been elected in accordance with this Agreement, the period
commencing on
7
and including the date such LIBOR election is effective (or the
effective date of the election to convert any portion of the Loan to a LIBOR
interest basis in accordance with the provisions of this Agreement) and ending
on and including the day which is 30, 60, 90 or 180 days thereafter, as
available, and as selected in accordance with the provisions of this Agreement;
provided, however, that: (i) the first day of any Interest Period shall be a
Business Day; (ii) if any Interest Period would end on a day that would not be a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day; and (iii) no Interest Period shall extend beyond the Revolving
Facility Maturity Date, Term Facility "A" Maturity Date or Term Facility "B"
Maturity Date, as applicable.
"Joinder Agreement" shall have the meaning assigned to such term in
Section 1.10 of this Agreement.
"Lender" and/or "Lenders" shall mean, individually or collectively as the
context may require, First Union Commercial Corporation, a North Carolina
corporation, and any and all other banking or financial institutions which have
(i) extended credit to the Borrowers pursuant to this Agreement, and (ii) agreed
to be bound by the terms and provisions of this Agreement.
"Letter of Credit" and "Letters of Credit" shall mean, respectively, each
and all of the trade and standby letters of credit issued pursuant to this
Agreement, if any.
"Letter of Credit Application" shall have the meaning assigned to such
term in Section 2.1 of this Agreement.
"Letter of Credit Administration Fee" shall have the meaning assigned to
such term in Section 2.3 of this Agreement.
"Letter of Credit Fee" shall have the meaning assigned to such term in
Section 2.3 of this Agreement.
"LIBOR" shall mean for any Interest Period with respect to any Loan
proceeds for which a LIBOR election has been made and is effective, the per
annum interest rate (rounded upward, if necessary, to the nearest next 1/8 of
1%) set forth on Telerate Page 3750, on an immediately available funds basis, at
or about 11:00 a.m. (London time) on the date that is two (2) Business Days
prior to the first day of such Interest Period, for the offering by leading
banks in the London Interbank Eurodollar market of Dollar deposits for a period
comparable in time to the duration of such Interest Period and in amounts
comparable to the amounts for which LIBOR is to be determined, adjusted for
reserve requirements, if any. If the Agent shall be unable to obtain LIBOR
quotes on Telerate Page 3750, LIBOR shall be the average of those rates quoted
on the REUTERS "LIBO" page for a period comparable to the applicable Interest
Period (rounded upward, if necessary, to the nearest next 1/8 of 1%).
8
"LIBOR Election Form and Certification" shall mean that certain LIBOR
Election Form and Certification attached as Exhibit 2 hereto.
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"Loan" and "Loans" shall mean, individually or collectively as the
context may require, the loan or loans made by the Lender(s) to the Borrowers in
the aggregate maximum principal amount of Seventy-five Million and No/100
Dollars ($75,000,000.00), or so much thereof as shall be advanced or readvanced
from time to time, which are represented by the Facilities, and which shall be
evidenced by, bear interest and be payable in accordance with the terms and
provisions of the Notes and this Agreement.
"Loan Document" and "Loan Documents" shall mean, respectively, each and
all of this Agreement, the Notes, the Stock Security Agreement, the Pledge of
Accounts, the Assignment of Promissory Notes as Collateral, the Intellectual
Property Security Agreement and each and every other document, instrument or
certificate now or hereafter executed and/or delivered by any Borrower in
connection with the Loan.
"Mandatory Payments" shall mean the mandatory payments required to be
made on the Loan pursuant to Section 1.5 of this Agreement.
"Mass Mutual" shall mean Massachusetts Mutual Life Insurance Company, a
Massachusetts corporation.
"Mass Mutual Entities" shall mean, individually or collectively as the
context may require, Mass Mutual, MassMutual Corporate Investors, a
Massachusetts business trust, MassMutual Participation Investors, a
Massachusetts business trust, MassMutual Corporate Value Partners, a Grand
Cayman Islands corporation and MassMutual High Yield Partners II, LLC, a
Delaware limited liability company, and their successors and assigns.
"Material Contract" shall mean (i) any and all Government Contracts
pursuant to which a Borrower is or may be (a) entitled to receive payments in
excess of One Million and No/100 Dollars ($1,000,000.00), in the aggregate, per
annum, or (b) obligated to make payments or have any other obligation or
liability thereunder (direct or contingent) in excess of One Million and No/100
Dollars ($1,000,000.00), in the aggregate, per annum; and (ii) any and all
contracts or agreements (other than Government Contracts) to which a Borrower is
a party and pursuant to which such Borrower is or may be (a) entitled to receive
payments in excess of Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00), in the aggregate, per annum, or (b) obligated to make payments or
have any other obligation or liability thereunder (direct or contingent) in
excess of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), in the
aggregate, per annum.
9
"Maximum Borrowing Base" shall have the meaning assigned to such term in
Section 1.3(a) of this Agreement.
"Merger Agreement" shall mean that certain Agreement and Plan of Merger
dated as of January 31, 1999, by and among (i) AverStar, (ii) AverStar
Acquisition, Inc., a Virginia corporation, (iii) CBSI, and (iv) the Stockholders
of CBSI party thereto.
"Note" and "Notes" shall mean, individually or collectively as the
context may require, the Revolving Facility Note(s), the Term Facility "A"
Note(s), the Term Facility "B" Note(s), the Swing Line Note and/or any other
promissory notes executed pursuant to this Agreement, together with all
extensions, renewals, modifications, replacements and substitutions thereof and
therefor.
"Note "B" Holder" and "Note "B" Holders" shall mean, individually or
collectively as the context may require, each and all of the holders from time
to time of the Term Facility "B" Notes, and their respective successors and
assigns.
"Obligation" and "Obligations" shall mean, respectively, any and all
obligations or liabilities of any Borrower to any Lender(s) and/or the Agent,
whether now existing or hereafter created or arising, direct or indirect,
matured or unmatured, and whether absolute or contingent, joint, several or
joint and several, and no matter how the same may be evidenced or shall arise
(including, without limitation, any and all interest rate protection agreements,
overdraft protection contracts and foreign exchange contracts).
"Payment Default" shall have the meaning attributed to such term in
Section 9.2(c) of this Agreement.
"Percentage" shall mean with respect to each Lender, the percentage set
forth next to such Lender's name on Schedule 1 to this Agreement, as the same
----------
may be amended from time to time.
"Permitted Liens" shall mean: (a) liens for taxes which are not yet due
and payable or which are being contested in good faith and by appropriate
proceedings, which (i) the Borrower has the financial ability to pay, including
penalties and interest, and (ii) the non-payment thereof will not result in the
execution of any such tax lien or otherwise adversely affect the interests of
the Agent in any part of the Collateral; (b) deposits or pledges to secure
obligations under workers' compensation, social security or similar laws,
incurred in the ordinary course of business; (c) liens securing indebtedness of
the Borrowers permitted by Section 7.7 of this Agreement; (d) cash deposits
pledged to secure the performance of bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety and
appeal bonds and other obligations of like nature made in the ordinary course of
business; (e) mechanics', workmen's, repairmen's, warehousemen's, vendors' or
carriers' liens or other similar liens; provided that such liens arise in the
ordinary course of the Borrower's business and secure sums which are not past
10
due, or which are separately secured by cash deposits or pledges in an amount
adequate to obtain the release of such liens; (f) except as otherwise provided
in this Agreement, statutory or contractual landlord's liens on the Borrower's
tangible personal property located in the demised premises; (g) zoning or other
similar and customary land use restrictions, which do not materially impair the
use or value of the subject property; (h) judgment liens which are not
prohibited by Section 7.4 of this Agreement; (i) other liens expressly permitted
by the terms and provisions of this Agreement; and (j) liens in favor of the
Agent.
"Pledge of Accounts" shall mean that certain Pledge of Accounts of even
date herewith, made by the Borrowers in favor of the Agent for the ratable
benefit of the Lenders, together with any and all amendments and/or
modifications thereof.
"Prepayment Fee" shall have the meaning attributed to such term in
Exhibit 3 to this Agreement.
---------
"Prime Rate" shall mean the rate of interest from time to time
established and publicly announced by First Union as its prime rate, in First
Union's sole discretion, which rate of interest may be greater or less than
other interest rates charged by First Union to other borrowers and is not solely
based or dependent upon the interest rate which First Union may charge any
particular borrower or class of borrowers.
"Principal Borrowers" shall mean, individually or collectively as the
context may require, AverStar, CBSI and/or any other Borrower which, as of any
date of determination, is a "significant subsidiary," as such term is defined in
Title 17, Code of Federal Regulations, Part 210.1-02.
"Quarterly Covenant Compliance Certificate" shall have the meaning
attributed to such term in Section 6.3(d) of this Agreement.
"RCRA" shall mean the Resource Conservation and Recovery Act, as amended
(42 U.S.C. Sections 6901 et. seq.).
"Receivables" shall mean all of the Borrowers' present and future
accounts, contracts, contract rights, chattel paper, general intangibles, notes,
drafts, acceptances, chattel mortgages, conditional sale contracts, bailment
leases, security agreements, contribution rights and other forms of obligations
now or hereafter arising out of or acquired in the course of or in connection
with any business the Borrowers conduct, together with all liens, guaranties,
securities, rights, remedies and privileges pertaining to any of the foregoing,
whether now existing or hereafter created or arising, and all rights with
respect to returned and repossessed items of inventory.
"Reduction/Termination Date" shall mean the date on which, in accordance
with Section 1.8 of this Agreement, the Borrowers shall have terminated the
obligation of
11
the Lender(s) to make additional advances under the Loan, or irrevocably reduced
the Revolving Facility Commitment Amount.
"Request for Advance and Certification" shall mean the form Request for
Advance and Certification attached as Exhibit 1 hereto.
---------
"Required Lenders" shall mean all of the Lenders who, at any given time
(a) are not in default under or in breach of any of the terms and conditions of
this Agreement applicable to such Lender, and (b) hold Notes or participation
interests representing, in the aggregate, at least fifty-one percent (51%) of
the aggregate Commitment Amount (excluding the Swing Line Commitment Amount).
"Revolving Facility" shall mean the revolving credit facility being
extended pursuant to this Agreement on the basis of Eligible Accounts
Receivable, in the original maximum principal amount of Thirty Million and
No/100 Dollars ($30,000,000.00).
"Revolving Facility Commitment Amount" shall mean Thirty Million and
No/100 Dollars ($30,000,000.00), or if the Revolving Facility Commitment Amount
shall be permanently reduced pursuant to Section 1.8 of this Agreement, such
lesser amount.
"Revolving Facility Lender" shall mean each Lender who, as of any date of
determination, owns and holds a Percentage of the Revolving Facility Commitment
Amount.
"Revolving Facility Maturity Date" shall mean March 17, 2004.
"Revolving Facility Note" and "Revolving Facility Notes" shall mean each
and all of the Revolving Facility Promissory Notes of even date herewith, made
by the Borrowers and payable to the order of certain Lenders, in the aggregate
maximum principal amount of Thirty Million and No/100 Dollars ($30,000,000.00),
together with all extensions, renewals, modifications, replacements and
substitutions thereof or therefor.
"Securities Purchase Agreement" shall mean, individually or collectively
as the context may require, each and all of those certain Amended and Restated
Securities Purchase Agreements dated February 27, 1998, by and among AverStar,
Apollo Holding, Inc., a Delaware corporation, Intermetrics, Inc., a Delaware
corporation, Pacer Infotech, Inc., a Massachusetts corporation, and the
respective Mass Mutual Entities, as amended by that certain letter agreement
dated March 18, 1999 by and among AverStar, Apollo Holding, Inc., a Delaware
corporation, Intermetrics, Inc., a Delaware corporation, Pacer Infotech, Inc., a
Massachusetts corporation and the respective Mass Mutual Entities.
"Shareholders Agreement" shall mean that certain Shareholders Agreement
dated as of February 27, 1998, by and among AverStar and the shareholder parties
thereto.
12
"Stock Security Agreement" shall mean that certain Stock Security
Agreement of even date herewith, by and between AverStar and the Agent, made for
the benefit of the Lender(s), together with any and all amendments and/or
modifications thereof.
"Subordination Agreement" shall have the meaning attributed to such term
in Section 7.7 of this Agreement.
"Subordinated Notes" shall have the meaning attributed to such term in
the Subordination Agreement.
"Swing Line Commitment" shall mean the Swing Line Lender's obligation to
make Swing Line Loans to the Borrowers in an aggregate principal amount not to
exceed Two Million and No/100 Dollars ($2,000,000.00).
"Swing Line Commitment Amount" shall mean Two Million and No/100 Dollars
($2,000,000.00).
"Swing Line Commitment Period" shall mean the period commencing on the
Closing Date and ending on the fifth (5th) Business Day prior to the Revolving
Facility Maturity Date.
"Swing Line Facility" shall mean the swing line credit facility being
extended pursuant to this Agreement, in the original maximum principal amount of
Two Million and No/100 Dollars ($2,000,000.00).
"Swing Line Lender" shall mean First Union Commercial Corporation, a
North Carolina corporation.
"Swing Line Loan" or "Swing line Loans" shall have the meaning attributed
to such term in Section 1.1(b) of this Agreement.
"Swing Line Note" shall mean that certain Swing Line Promissory Note of
even date herewith, made by the Borrowers and payable to the order of the Swing
Line Lender, in the aggregate maximum principal amount of Two Million and No/100
Dollars ($2,000,000.00) or so much thereof as shall be advanced, together with
all extensions, renewals, modifications and substitutions thereof or therefor.
"Swing Line Outstandings" shall mean, as of any date of determination,
the aggregate principal amount of all Swing Line Loans then outstanding.
"Swing Line Termination Date" shall mean the fifth (5th) Business Day
prior to the Revolving Facility Maturity Date, or such earlier date on which the
Revolving Facility shall terminate, as provided herein.
13
"Term Facilities" shall mean, collectively, Term Facility "A" and Term
Facility "B".
"Term Facility "A"" shall mean the term loan facility being extended
pursuant to this Agreement, in the original principal amount of Fifteen Million
and No/100 Dollars ($15,000,000.00).
"Term Facility "A" Commitment Amount" shall mean Fifteen Million and
No/100 Dollars ($15,000,000.00).
"Term Facility "A" Maturity Date" shall mean March 17, 2004.
"Term Facility "A" Note" and "Term Facility "A" Notes" shall mean each
and all of Term Facility "A" Promissory Notes of even date herewith, made by the
Borrowers and payable to the order of certain Lenders, in the original aggregate
principal amount of Fifteen Million and No/100 Dollars ($15,000,000.00),
together with all extensions, renewals, modifications, replacments and
substitutions thereof or therefor.
"Term Facility "B"" shall mean the term loan facility being extended
pursuant to this Agreement, in the original principal amount of Thirty Million
and No/100 Dollars ($30,000,000.00).
"Term Facility "B" Commitment Amount" shall mean Thirty Million and
No/100 Dollars ($30,000,000.00).
"Term Facility "B" Maturity Date" shall mean March 17, 2005.
"Term Facility "B" Note" and "Term Facility "B" Notes" shall mean each
and all of Term Facility "B" Promissory Notes of even date herewith, made by the
Borrowers and payable to the order of certain Lenders, in the original aggregate
principal amount of Thirty Million and No/100 Dollars ($30,000,000.00), together
with all extensions, renewals, modifications, replacements and substitutions
thereof or therefor.
"Total Debt" shall mean, as of the date of determination, the actual
amount of borrowed money (including, without limitation, subordinated debt,
capital leases and synthetic leases, that remain unpaid or outstanding as of the
date of any determination), plus the aggregate amount of any and all financial
guarantees, contingent obligations (including, without limitation, any
obligation to provide financing pursuant to the IES Notes) and the face amount
of any and all outstanding letters of credit; it being understood and agreed
that trade debt incurred in the ordinary course of the Borrowers' business shall
not be included in the computation of Total Debt.
"Total Debt to EBITDA Ratio" shall have the meaning attributed to such
term in Section 6.15 of this Agreement.
14
"Year End Compliance Certificate" shall mean the Quarterly Covenant
Compliance Certificate required to be delivered by the Borrowers to the Agent
and each Lender on or before the one hundred twentieth (120th) day following the
close of each of the Borrowers' fiscal years.
ARTICLE 1
---------
COMMITMENT
Section 1.1 Maximum Loan Amount.
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(a) Subject to the terms and conditions of this Agreement, (i) each
Lender severally agrees to make the Loan to the Borrowers (except for the Swing
Line Loan, which shall be extended only by the Swing Line Lender), with the
maximum amount of each Lender's obligation being equal to the Lender's
Percentage of the Revolving Facility Commitment Amount, Term Facility "A"
Commitment Amount and Term Facility "B" Commitment Amount; and (ii) as more
fully set forth in Section 1.1(b) below, the Swing Line Lender shall make the
Swing Line Loan to the Borrowers. The Loan, including the Swing Line Loan, shall
bear interest and be payable in accordance with the terms and provisions of the
Notes, each of which shall be payable to the order of a Lender and all of which
together (excluding the Swing Line Note) shall equal the Commitment Amount. The
Notes shall be executed and delivered to the Agent on the Closing Date, and may
be substituted and/or replaced from time to time upon the Agent's request if the
number of Lender parties to this Agreement shall change.
(b) Subject to the terms and conditions of this Agreement, the Swing
Line Lender shall make swing line loans (each, a "Swing Line Loan" and
collectively, the "Swing Line Loans") to the Borrowers from time to time during
the Swing Line Loan Commitment Period, in the aggregate principal amount at any
one time outstanding not to exceed Two Million and No/100 Dollars
($2,000,000.00); provided, however, that at no time may the aggregate
outstanding principal amount of the Swing Line Loans, plus the aggregate
principal amount of the Revolving Facility (including the aggregate face amount
of all Letters of Credit outstanding), exceed the Maximum Borrowing Base. During
the Swing Line Commitment Period, the Borrowers may use the Swing Line
Commitment by borrowing, repaying Swing Line Loans in whole or in part, and
reborrowing, all in accordance with the terms of this Agreement. At the request
of the Swing Line Lender, the Agent may, at any time, on behalf of the Borrowers
(which hereby irrevocably direct the Agent to act on their behalf) request each
Lender having a Percentage of the Revolving Facility, including the Swing Line
Lender, to make, and each such Lender, including the Swing Line Lender, shall
make an advance under the Revolving Facility, in an amount equal to such
Lender's Percentage of the Revolving Facility, of the amount of the Swing Line
Outstandings as of the date such request is made. In such event, each such
Lender shall make the requested proceeds available to the Agent for the account
of the Swing Line Lender in accordance with the funding provisions set forth in
this Agreement. The
15
proceeds of the Revolving Facility advanced pursuant to this Section 1.1(b)
shall be immediately applied to repay the Swing Line Outstandings.
Section 1.2 Use of Proceeds. The Loan shall be used by the Borrowers only
---------------
for the following purposes: (i) to refinance certain existing indebtedness of
the Borrowers; (ii) to finance certain costs and expenses incurred by the
Borrowers in connection with the Closing; (iii) to finance the Acquisition and
certain costs and expenses incurred by the Borrowers in connection with the
Acquisition; and (iv) for working capital and general corporate needs.
Notwithstanding the foregoing, the proceeds of (a) the Revolving Facility
necessary to finance the Acquisition may only be used for such purpose if
advanced on the Closing Date and, with respect to certain costs and expenses
(including attorneys' fees and other professional fees) incurred by the
Borrowers in connection with the Acquisition, may only be used for such purpose
if advanced within sixty (60) days of the Closing Date; and (b) any Swing Line
Loan made pursuant to this Agreement shall only be used for general working
capital purposes. The Borrowers agree that the Loan proceeds (including, without
limitation, Swing Line Loan proceeds) shall not be used for any other purpose
without the Agent's prior written consent.
Section 1.3 Borrowing Base and Maximum Advances. Notwithstanding any term
-----------------------------------
or provision of this Agreement or any other Loan Document to the contrary, it is
understood and agreed that in no event whatsoever shall the Agent or any Lender
be obligated to:
(a) advance any amount under the Revolving Facility or Swing Line
Facility, or issue any Letter(s) of Credit hereunder, if such advance or the
issuance of such Letter(s) of Credit would cause the aggregate amount of the
outstanding Loans under the Revolving Facility, the face amount of all
outstanding Letters of Credit, and the Swing Line Outstandings to exceed the
lesser of (the "Maximum Borrowing Base"):
(i) the Revolving Facility Commitment Amount; or
(ii) the aggregate of:
(A) Ninety percent (90%) of Eligible Billed Government
Accounts Receivable which are outstanding less
than one hundred twenty-one (121) days from the
date of original invoice; plus
(B) Eighty percent (80%) of Eligible Billed Commercial
Accounts Receivable which are outstanding less
than ninety-one (91) days from the date of
original invoice; plus
16
(C) Fifty percent (50%) of Eligible Unbilled
Receivables which are billable within thirty (30)
days; provided, however, that in no event shall
the amount set forth in this clause (C) exceed the
lesser of:
(1) an amount equal to twenty-five percent (25%) of
the sum of (A) and (B) above; or
(2) $10,000,000.00.
(b) advance any amount under Term Facility "A" in excess of the Term
Facility "A" Commitment Amount; and/or (c)
(c) advance any amount under Term Facility "B" in excess of the
Facility "B" Commitment Amount.
If at any time the outstanding principal balance of the Revolving Facility
(including the aggregate face amount of all Letters of Credit Outstanding and
Swing Line Outstandings) exceeds the Maximum Borrowing Base (such excess being
referred to herein as a "Borrowing Base Deficiency"), the Borrowers shall
immediately make a principal payment in the amount of the Borrowing Base
Deficiency. Notwithstanding the foregoing, in the event a Borrowing Base
Deficiency shall occur as a result of (i) the Agent's determination that a
particular Receivable included in computing the Maximum Borrowing Base is no
longer eligible for inclusion or (ii) the Agent or the Required Lenders imposing
any additional eligibility requirement which has not been previously imposed as
a basis for classifying Receivables as ineligible, the Borrower shall make a
principal payment in the amount of the resulting Borrowing Base Deficiency
within three (3) Business Days of the date on which the Borrower is notified by
the Agent of the ineligibility of the particular Receivable or the additional
eligibility requirement.
Section 1.4 Advances.
--------
(a) Agreement to Advance and Readvance; Procedure. So long as no
---------------------------------------------
Event of Default shall have occurred and be continuing, and no act, event or
condition shall have occurred and be continuing which with notice or the lapse
of time, or both, shall constitute an Event of Default, and subject to the terms
and provisions of this Agreement, the Lender(s) shall (i) advance and readvance
the proceeds of the Revolving Facility from time to time in accordance with this
Agreement; and (ii) advance the proceeds of the Term Facilities, in their
entirety, to the Borrowers at Closing. Requests for advances of Loan proceeds
with respect to the Revolving Facility shall be in the form of Exhibit 1 hereto,
---------
and requests for advances of Swing Line Loan proceeds shall be in the form of
Exhibit 1(a) hereto; it being understood and agreed that in each case such
------------
requests may be made via facsimile on a Business Day if the Borrower provides
the Agent, in advance, with a written
17
list of the names of the specific officers authorized to request disbursements
by facsimile. Upon request by the Agent, the Borrower shall confirm in an
original writing each facsimile request for advance made by the Borrower.
Notwithstanding the foregoing, (a) the Lender(s) shall have no obligation to
make any advance with respect to the Revolving Facility after the Revolving
Facility Maturity Date; and (b) the Swing Line Lender shall have no obligation
to make any advance with respect to the Swing Line Facility after the Swing Line
Termination Date.
(b) Interest Rate Election; Certain Advance Procedures and Limits.
-------------------------------------------------------------
Amounts advanced in connection with the Loan shall bear interest on a Base Rate
basis or LIBOR basis as more fully set forth in the Notes, except that Swing
Line Loans shall only be made available to the Borrowers on a Base Rate basis.
The Borrowers' right to request LIBOR based interest, as well as the terms,
conditions and requirements relating thereto, are set forth in the Notes and/or
on Exhibit 3 of this Agreement, and the parties expressly acknowledge and
---------
consent to such terms, conditions and requirements. Advances bearing interest on
a Base Rate basis shall be in minimum and incremental amounts of One Hundred
Thousand and No/100 Dollars ($100,000.00), and shall be made available on a
same-day basis, if requested by 12:00 Noon Washington, D.C. time on a Business
Day. Advances bearing interest on a LIBOR basis shall be in a minimum amount of
Five Hundred Thousand and No/100 Dollars ($500,000.00) and in incremental
amounts of One Hundred Thousand and No/100 Dollars ($100,000.00), and shall be
made available three (3) Business Days after request therefor, subject to the
terms of the Loan Documents. It is expressly understood and agreed that the
Borrowers shall have the right, subject to the foregoing terms, conditions and
requirements, to elect that amounts previously advanced and outstanding under
the Facilities bear interest on a LIBOR basis following the Agent's receipt of a
LIBOR Election Form and Certification, in the form attached as Exhibit 2 to this
---------
Agreement.
Section 1.5 Additional Mandatory Payments; Reduction of Commitment. In
------------------------------------------------------
addition to all other sums payable by the Borrowers pursuant to any of the
Notes, this Agreement or any other Loan Document, the Borrowers shall also make
mandatory payments on the Notes (applied to the Facilities as provided
hereinbelow), in the following amounts:
(i) one hundred percent (100%) of the cash proceeds (net of
reasonable and customary costs paid to unrelated and unaffiliated
third parties in connection with the particular transaction) arising
from any Excess Cash Event;
(ii) seventy-five percent (75%) of the cash proceeds (net of
reasonable and customary costs paid to unrelated and unaffiliated
third parties in connection with the particular transaction) arising
from any issuance by the Borrower of subordinated debt after the
Closing Date ("Subordinate Debt Issuance");
18
(iii) fifty percent (50%) of the cash proceeds (net of reasonable and
customary costs paid to unrelated and unaffiliated third parties in
connection with the particular transaction) arising from any issuance
by the Borrower of any equity interests in any Borrower ("Equity
Issuance"); it being understood and agreed that the cash proceeds
arising from the issuance of stock in connection with the stock
options listed on Schedule 1.5 hereto shall not be deemed an Equity
------------
Issuance for the purpose of this clause (iii);
(iv) seventy-five percent (75%) of Excess Cash Flow, if the
Borrowers' Total Debt to EBITDA Ratio shall be greater than 3.0 to
1.0, calculated as of the applicable date of determination for Excess
Cash Flow; and
(v) fifty percent (50%) of Excess Cash Flow, if the Borrowers' Total
Debt to EBITDA Ratio shall be less than or equal to 3.0 to 1.0,
calculated as of the applicable date of determination for Excess Cash
Flow.
Mandatory payments arising from any Excess Cash Event, Subordinate Debt
Issuance and/or Equity Issuance shall be due and payable in full upon the
occurrence of such Excess Cash Event, Subordinate Debt Issuance and/or Equity
Issuance (as applicable), and mandatory payments arising from Excess Cash Flow
shall be due and payable in full simultaneously with the Agent's receipt of the
Borrowing Base/Non-Default Certificate for the month of December of each
calendar year (or the date on which such certificate is required to be
delivered, if the Borrowers fail to deliver the same as required by this
Agreement), which Borrowing Base/Non-Default Certificate shall include the
Borrower's detailed computation of Excess Cash Flow. Furthermore, if the
Mandatory Payment amount for Excess Cash Flow set forth in the Year End
Compliance Certificate (the "Required Excess Cash Flow Payment") shall be
greater than the Mandatory Payment arising from Excess Cash Flow paid by the
Borrowers pursuant to the immediately preceding sentence (the "Excess Cash Flow
Paid Amount"), then the Borrowers shall make an additional Mandatory Payment,
simultaneously with the Borrower's submission of the Year End Compliance
Certificate (or the date on which such certificate is required to be delivered,
if the Borrowers fail to deliver the same as required by this Agreement), in an
amount equal to the difference between the Required Excess Cash Flow Payment and
the Excess Cash Flow Paid Amount
Any mandatory payment(s) made pursuant to this Section 1.5 shall be accompanied
by the applicable Prepayment Fee, if any, payable pursuant to Exhibit 3 of this
---------
Agreement. Such mandatory payments shall be applied to the Term Facilities, in
inverse order of maturities, on a pro-rata basis (unless all of the Note "B"
Holders shall have instructed the Agent in writing to apply such payments first
to Term Facility "A" until Term Facility "A" shall have
19
been paid and satisfied in full), then to any Swing Line Outstandings, and then
to principal outstanding under the Revolving Facility.
Section 1.6 Field Audits. The Agent will schedule and conduct not less
------------
than two (2) field audits per annum with respect to the Collateral and the
Borrowers' accounts receivable, inventory, business and operations, and shall
have the right at any time to conduct such other field audits with respect to
the Collateral and the Borrowers' accounts receivable, inventory, business and
operations, as the Agent deems necessary or appropriate, in its sole discretion.
All field audits shall be at the cost and expense of the Borrowers; provided,
however, that, except as otherwise expressly set forth below, in the absence of
an Event of Default hereunder, the cost and expense to the Borrowers of field
audits shall be limited to the cost and expense of no more than two (2) field
audits conducted during any twelve (12) month period (the "Field Audit Cost
Limitation"). Notwithstanding the foregoing, any field audit conducted with
respect to the joinder of a new Borrower pursuant to Section 1.10 of this
Agreement shall not be subject to the Field Audit Cost Limitation.
Section 1.7 Fees.
----
(a) Commitment Fee. In addition to principal, interest and other
--------------
sums payable under the Notes, so long as any amounts remain outstanding in
connection with the Revolving Facility, or any Lender has any obligation to make
any advance in connection therewith, the Borrowers agree to pay to the Agent,
for the benefit of the Lender(s), pro-rata based on each Lender's Percentage of
the Revolving Facility Commitment Amount, a quarter-annual commitment fee (the
"Commitment Fee"), at the annual rate corresponding to the Borrower's Total Debt
to EBITDA Ratio reported as of the immediately preceding quarter, as set forth
on Exhibit 7 hereto, and calculated on the difference between (i) the Revolving
---------
Facility Commitment Amount, and (ii) the sum of the average daily outstanding
principal balance of the Revolving Facility during the applicable quarter, plus
the aggregate face amount of all Letters of Credit issued and/or outstanding
during the applicable quarter. Notwithstanding the foregoing, during the six (6)
month period immediately following the Closing Date, the Commitment Fee annual
percentage shall be fixed and equal to one-half of one percent (.50%). The
Commitment Fee shall be calculated on the basis of the actual number of days
elapsed and a three hundred sixty (360) day year, shall be due for any quarter
in which the Revolving Facility is available to the Borrower or outstanding (for
all or any portion of such quarter), and shall be payable in arrears, commencing
on March 31, 1999, and continuing on the last Business Day of every third (3rd)
calendar month thereafter so long as this Agreement remains in effect.
(b) Out-of-Pocket Fees and Expenses. The Borrowers shall timely pay
-------------------------------
all reasonable out-of-pocket costs and expenses (including reasonable attorneys'
fees and expenses of counsel for the Agent, and of other special and local
counsel and other experts, if any, engaged by the Agent) from time to time
incurred by the Agent in connection with the Agent's administration of,
preservation of rights in and enforcement of this Agreement,
20
the other Loan Documents and the transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, the Borrowers shall be liable
for all reasonable out-of-pocket costs and expenses associated with fixed asset
appraisals and environmental reports deemed necessary or appropriate by the
Agent, in its reasonable discretion, as well as any and all amendments, waivers
and/or consents relating to any of the Facilities. Furthermore, following the
occurrence of an Event of Default which has continued unremedied beyond any
applicable notice and/or grace period, the Borrowers shall be liable for all
reasonable attorneys' fees and expenses incurred by each Lender in connection
with such Lender's preservation of rights in and enforcement of this Agreement,
the other Loan Documents and the transactions contemplated by this Agreement.
(c) Letter of Credit Fees. The Borrowers shall also pay all fees and
---------------------
expenses related to Letters of Credit, as set forth in Article 2 below.
Section 1.8 Termination of Advances; Reduction of the Revolving Facility
------------------------------------------------------------
Commitment Amount. The Borrowers may (a) following the date on which the Term
-----------------
Facilities shall have been paid and satisfied in full, terminate the obligation
of the Lender(s) to make additional advances under the Revolving Facility, or
(b) irrevocably reduce the Revolving Facility Commitment Amount in whole or in
part; provided that, in each case, (i) the Borrowers shall have provided written
notice thereof to the Agent at least five (5) Business Days prior to the
Reduction/Termination Date; (ii) any reduction of the Revolving Facility
Commitment Amount shall be in minimum and incremental amounts of Five Hundred
Thousand and No/100 Dollars ($500,000.00), and after giving effect to any such
reduction, the aggregate outstanding principal amount of the Revolving Facility,
together with all accrued interest and all other sums payable under the
Revolving Facility, shall not exceed the Maximum Borrowing Base; (iii)
simultaneously with any such reduction or termination of the Revolving Facility
Commitment Amount, the Borrowers shall have paid to the Agent, for the benefit
of the Lender(s), pro-rata based on each Lender's Percentage of the Revolving
Facility Commitment Amount, the applicable Prepayment Fee, if any; and (iv) no
Event of Default exists hereunder and no act, event or condition shall have
occurred or be continuing which with notice or the passage of time, or both,
would constitute an Event of Default.
Section 1.9 Appointment of Averstar. Each Borrower acknowledges that (i)
-----------------------
the Lenders have agreed to extend credit to each of the Borrowers on an
integrated basis for the purposes herein set forth; (ii) it is receiving direct
and/or indirect benefits from each such extension of credit; and (iii) the
obligations of the "Borrower" or "Borrowers" under this Agreement are the joint
and several obligations of each Borrower. To facilitate the administration of
the Loan, each Borrower hereby irrevocably appoints AverStar as its true and
lawful agent and attorney-in-fact with full power and authority to execute,
deliver and acknowledge on such Borrower's behalf, each Request for Advance and
Certification, Borrowing Base/Non-Default Certificate and all other Loan
Documents or other materials provided or to be provided to the Agent or Lenders
pursuant to this Agreement or in connection with the Loan. This power-of-
attorney is coupled with an
21
interest and cannot be revoked, modified or amended without the prior written
consent of the Agent. Upon request of the Agent, each Borrower shall execute,
acknowledge and deliver to the Agent a form Power of Attorney confirming and
restating the power-of-attorney granted herein.
Section 1.10 Joinder Of New Subsidiaries and Affiliates. Any present or
------------------------------------------
future subsidiary of any Borrower in which such Borrower now or hereafter owns,
directly or indirectly, an ownership interest of greater than fifty percent
(50%) shall, at the Agent's option, execute and deliver to the Agent (a) a
Joinder Agreement in the form attached hereto as Exhibit 6 (A "Joinder
---------
Agreement"), pursuant to which such subsidiary shall (i) join in and become a
party to this Agreement and the other Loan Documents; (ii) agree to comply with
and be bound by the terms and conditions of this Agreement and all of the other
Loan Documents; and (iii) become a "Borrower" and thereafter be jointly and
severally liable for the performance of all the past, present and future
obligations and liabilities of the Borrowers hereunder and under the Loan
Documents; and (b) such other documents, instruments and agreements as may be
reasonably required by the Agent in connection therewith (including, without
limitation, an opinion of counsel), in form and substance acceptable to the
Agent in all respects. The Borrowers acknowledge and agree that the Agent shall
perform a field audit of the accounts receivable, inventory, business and
operations of any present or future subsidiary proposed to be joined as a
"Borrower" hereunder, if requested by the Required Lenders, and without limiting
any other terms and provisions of this Agreement, the results of such field
audit must be reasonably satisfactory to the Agent.
ARTICLE 2
---------
LETTERS OF CREDIT
Section 2.1 Issuance. The Borrowers and Lenders acknowledge that from
--------
time to time the Borrowers may request that First Union issue or amend Letter(s)
of Credit. Subject to the terms and conditions of this Agreement, and any other
reasonable requirements for letters of credit normally and customarily imposed
by First Union from time to time, First Union agrees to issue such requested
letters of credit, provided that no Event of Default has occurred and is
continuing, and no act, event or condition which with notice or the passage of
time, or both, would constitute an Event of Default has occurred and is
continuing. If any such Letter(s) of Credit are issued by First Union, each
Revolving Facility Lender shall purchase from First Union a risk participation
with respect to such Letter(s) of Credit in an amount equal to such Lender's
Percentage of such Letter(s) of Credit. First Union shall have no obligation to
issue any Letter of Credit which has an expiration date beyond the Revolving
Facility Maturity Date, unless the Borrowers shall have deposited with the
Agent, concurrent with the issuance of any such Letter of Credit, cash security
therefor in an amount equal to the face amount of the Letter of Credit. Any
request for a Letter of Credit shall be made by the Borrowers submitting to the
Agent an Application and Agreement for Letter of Credit or Amendment to Letter
of Credit (each
22
being herein referred to as a "Letter of Credit Application") on First Union's
standard form, at least three (3) Business Days prior to the date on which the
issuance or amendment of the Letter of Credit shall be required, which Letter of
Credit Application shall be executed by an authorized officer of the Borrower,
and be accompanied by such other supporting documentation and information as the
Agent may from time to time reasonably request. Each Letter of Credit
Application shall be deemed to govern the terms of issuance of the subject
Letter of Credit, except to the extent inconsistent with the terms of this
Agreement. It is understood and agreed that Letters of Credit shall not be
issued for durations of longer than one (1) year. Any outstanding Letter of
Credit may be renewed from time to time; provided that (i) at least sixty (60)
days' prior written notice thereof shall have been given by the Borrowers to the
Agent; and (ii) as of the date of application for such renewal, and as of the
date of issuance of such renewal, no Event of Default exists under the terms and
provisions of the particular Letter of Credit or this Agreement, and no act,
event or condition has occurred which with notice or the passage of time, or
both, would constitute an Event of Default under the terms and provisions of the
particular Letter of Credit or this Agreement.
Section 2.2 Amounts Advanced Pursuant to Letters Of Credit. Upon the
----------------------------------------------
issuance of any Letter(s) of Credit (i) any amounts drawn under any Letter of
Credit shall be deemed advanced ratably under the Revolving Facility Notes,
shall bear interest and be payable in accordance with the terms of the Revolving
Facility Notes and shall be secured by the Collateral (in the same manner as all
other sums advanced under the Revolving Facility Notes); and (ii) each Revolving
Facility Lender shall purchase from First Union such risk participations in the
Letter(s) of Credit as shall be necessary to cause each such Lender to share the
funding obligations with respect thereto ratably in accordance with its
particular Percentage. It is expressly understood and agreed that all
obligations and liabilities of the Borrowers to First Union in connection with
any such Letter(s) of Credit shall be deemed to be "Obligations," and the Agent
shall not be required to release its security interest in the Collateral until
(i) all Notes and all other sums due to the Lender(s) in connection with the
Loan have been paid and satisfied in full, (ii) all Letters of Credit have been
canceled or expired, and (iii) no Lender has any further obligation or
responsibility to make additional Loan advances or issue additional Letters of
Credit. Furthermore, in no event whatsoever shall First Union have any
obligation to issue any Letter of Credit which would cause the face amount of
all then outstanding Letters of Credit issued for the benefit of the Borrower,
in the aggregate, to exceed Five Million Dollars ($5,000,000.00).
Section 2.3 Letter of Credit Fees. In connection with each Letter of
---------------------
Credit issued, amended or renewed pursuant to this Agreement, the Borrowers
shall pay: (i) to the Revolving Facility Lender(s) ratably, in advance, a per
annum fee (the "Letter of Credit Fee") at the annual rate corresponding to the
Borrower's Total Debt to EBITDA Ratio reported as of the immediately preceding
quarter, as set forth on Exhibit 7 hereto, which shall be calculated on the face
---------
amount of each Letter of Credit as of the date of issuance (or the anniversary
or amendment date, as applicable), and shall be calculated on the basis of
23
the actual number of days elapsed and a three hundred sixty (360) day year; and
(ii) to First Union, customary issuance and administrative charges in an amount
not less than one-eighth of one percent (.125%) of the face amount of each
Letter of Credit issued and/or outstanding (the "Letter of Credit Administration
Fee"). The Letter of Credit Administration Fee shall be due and payable in full,
in advance, on the date the Letter of Credit is issued, amended or renewed.
ARTICLE 3
---------
SECURITY
Section 3.1 Security Generally. As collateral security for the Loan and
------------------
all other Obligations, the Borrowers hereby grant and convey to the Agent, for
the ratable benefit of the Lender(s), a security interest in all of the
following (collectively, the "Collateral"):
Receivables. All of each Borrower's present and future accounts,
-----------
contracts, contract rights (including, without limitation, all of
each Borrower's rights and remedies under the Merger Agreement),
chattel paper, general intangibles, notes (including, without
limitation, the IES Notes), drafts, acceptances, chattel mortgages,
conditional sale contracts, bailment leases, security agreements and
other forms of obligations now or hereafter arising out of or
acquired in the course of or in connection with any business any
Borrower conducts, together with all liens, guaranties, securities,
rights, remedies and privileges pertaining to any of the foregoing,
whether now existing or hereafter created or arising, and all rights
with respect to returned and repossessed items of inventory;
Inventory. All of each Borrower's inventory and goods (as defined in
---------
the Uniform Commercial Code in effect in the Commonwealth of
Virginia) now or hereafter owned by each Borrower, whenever acquired
and wherever located, and whether held for sale or lease or
furnished or to be furnished under contracts of service, and all raw
materials, work in process and materials now or hereafter owned by
any Borrower, wherever located, and used or consumed in its
business, including all returned and repossessed items; and all
other property now or hereafter constituting inventory (as defined
in the Uniform Commercial Code in effect in the Commonwealth of
Virginia);
24
Other Collateral. All of each Borrower's present and future
----------------
furniture, fixtures, equipment, machinery, supplies and other assets
and personal property of every type or nature whatsoever, including
without limitation, all of each Borrower's present and future
investment property (as defined in the Uniform Commercial Code in
effect in the Commonwealth of Virginia), instruments, documents,
inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, goodwill,
registrations, copyrights, licenses, franchises, customer lists, tax
refunds, tax refund claims, rights of claims against carriers and
shippers, leases and rights to indemnification;
Leases. All of each Borrower's present and future right, title and
------
interest in and to any and all leases, occupancy agreements,
subleases, contracts, licenses, agreements and other understandings
of or relating to the use, enjoyment and occupancy of real property
or any improvements thereon;
Stock. All of AverStar's right, title and interest in and to all of
-----
the issued and outstanding capital stock of the Borrowers (other
than AverStar), whether common and/or preferred, and whether now or
hereafter issued or outstanding and whether now or hereafter
acquired by AverStar, together with all voting or other rights
appurtenant thereto, including, without limitation, the right to
receive all dividends and/or distributions, and all proceeds
thereof, pursuant to the terms and conditions of the Stock Security
Agreement; together with all right, title and interest of any
Borrower in and to all of the issued and outstanding capital stock
or other ownership interests of any entity, whether now or hereafter
issued or outstanding and whether now or hereafter acquired by such
Borrower, together with all voting or other rights appurtenant
thereto, including, without limitation, the right to receive all
dividends and/or distributions, and all proceeds thereof;
Accounts. All of each Borrower's bank accounts, cash from time to
--------
time on deposit therein and all interest from time to time earned
thereon, pursuant to the Pledge of Accounts;
Records. All of each Borrower's records, documents and files, in
-------
whatever form, pertaining to the foregoing or any part thereof; and
25
Proceeds, Etc. Any and all cash and non-cash proceeds, increases,
--------------
substitutions, replacements and/or additions to any or all of the
foregoing.
Notwithstanding the foregoing, the above described grant and conveyance
shall not be deemed to include the grant or conveyance of any Government
Contract, which by its terms or applicable law may not be conveyed; it being
understood, however, that in any such situation(s), the Agent's security
interest shall include (i) the entirety of each Borrower's right, title and
interest in and to all accounts receivable and all other proceeds directly or
indirectly arising from such Government Contract, and (ii) all other rights and
interests which each Borrower may lawfully convey to the Agent.
Section 3.2 No Preference or Priority. It is expressly understood and
-------------------------
agreed that each of the Notes shall be secured without preference or priority;
it being the intention of the parties that the Notes shall be co-equal and
coordinate in right of payment of principal, interest, late charges and other
sums due thereunder, except as may otherwise be expressly set forth herein.
Section 3.3 Release of Security Interest. At such time as (i) the Notes
----------------------------
and all other sums due to the Lender(s) pursuant to all of the Loan Documents
and/or in connection with the Loan have been paid and satisfied in full, (ii)
all Letters of Credit and interest rate protection agreements have been
cancelled, terminated or expired, and (iii) no Lender has any further obligation
or responsibility hereunder to make additional Loan advances or issue additional
Letters of Credit, the Agent shall, upon request of the Borrower and at no cost
to the Agent or any Lender, execute and deliver such documentation as the
Borrower may reasonably request to release the Collateral from the Agent's lien,
terminate this Agreement and ▇▇▇▇ the Notes paid and satisfied in full.
ARTICLE 4
---------
CONDITIONS TO THE OBLIGATIONS OF THE LENDER(S)
The obligation of the Lender(s) to proceed to Closing shall be subject to
the following conditions:
Section 4.1 Satisfaction of Commitment Letter Conditions; Compliance with
-------------------------------------------------------------
Agreements. The Borrowers shall have satisfied all conditions precedent to
----------
Closing set forth in the Commitment Letter, including without limitation, each
of the following items:
(a) Execution and delivery of Loan Documents, as well as other
ancillary documentation, in each case satisfactory to the Agent in all respects.
26
(b) The Agent's review of and satisfaction with the (a)
organizational structure of the Borrowers, (b) the Loan structure, and (c) tax,
ownership, capital and legal structure of the Borrowers.
(c) The Agent shall have a perfected first lien security interest in
all Collateral described herein, with such exceptions as shall be satisfactory
to the Agent. Additionally, for each Government Contract the Agent selects to
have specifically assigned pursuant to the Assignment of Claims Act of 1940 as
of the date of Closing, the Borrowers shall have executed all documents
necessary to be executed by the Borrowers in order to cause compliance with such
act.
(d) The Agent's review and satisfaction with the final terms and
conditions of, and all documentation relating to, the Acquisition (including all
representations, warranties and indemnities contained in the Merger Agreement
and related documents, as well as arrangements for the transition of management,
termination of employees and non-compete matters).
(e) The Agent's review and satisfaction with evidence provided by the
Borrowers that all conditions to closing the Acquisition have been satisfied or
waived.
(f) Receipt of legal opinion(s) from counsel to the Borrowers, in
form and substance acceptable to the Agent in all respects.
(g) Evidence of each Borrower's solvency (i.e., a consolidated
balance sheet dated as of the Closing Date), in form and substance satisfactory
to the Agent in all respects.
(h) The Agent's satisfaction that the Loan shall be in full
compliance with all legal requirements, including without limitation, that the
Borrowers have obtained all necessary regulatory and third party consents and
approvals.
(i) Delivery of, and Agent's satisfaction with, an initial Borrowing
Base/Non-Default Certificate.
(j) Evidence satisfactory to the Agent that the Borrowers are in full
compliance with all financial covenants set forth in this Agreement as of the
Closing Date.
(k) Evidence satisfactory to the Agent of the repayment in full of
all outstanding indebtedness of the Borrowers, both direct and contingent, other
than trade payables incurred in the ordinary course of business, operating
leases and/or other indebtedness permitted pursuant to the terms and provisions
of this Agreement; it being understood and agreed that the indebtedness owing by
the Borrower to Mass Mutual shall have been modified or amended to the Agent's
satisfaction.
27
(l) No litigation by any entity (private or governmental) shall be
pending or threatened against any Borrower at Closing (i) with respect to the
Loan, Loan Documents or transactions contemplated thereby; or (ii) which in the
Agent's good faith judgment could reasonably be expected to have a materially
adverse effect on the business, property, assets, liabilities, condition
(financial or otherwise), or results of operations of the Borrowers going
forward.
(m) The Agent's satisfaction that the Borrowers will be able to
service and maintain any performance bonds that may be required in the ordinary
course of business.
(n) The Borrowers' compliance in all material respects with all
applicable federal, state, local and foreign laws and regulations, including all
applicable labor and environmental laws and regulations.
(o) The Agent's satisfaction with the terms, conditions and existence
of insurance coverage appropriate to the conduct of the Borrowers' business.
(p) No material adverse change in the business, assets, properties,
prospects or condition (financial, proforma financial or otherwise) of AverStar
or CBSI shall have occurred since the date of the most recent financial
statements delivered to the Agent, and the Agent shall be satisfied with the
business, assets, properties, prospects and condition (financial, proforma
financial and otherwise) of AverStar and CBSI.
(q) The Agent's satisfaction that prior to and during the syndication
of the Loan, there shall be no additional offering, placement or arrangement of
any debt securities or bank financing by or on behalf of the Borrowers.
(r) All costs, fees and expenses (including, without limitation,
reasonable legal fees and expenses) of closing the transactions hereunder shall
have been paid in full, to the extent due.
Section 4.2 No Default. There shall exist no Event of Default, and no
----------
act, event or condition shall have occurred which with notice or the lapse of
time, or both, would constitute an Event of Default; and the Borrowers shall
have performed all agreements theretofore to be performed by the Borrowers
pursuant to the Commitment Letter.
Section 4.3 Documentation. The Agent shall have received such certificates
-------------
of good standing, corporate resolutions, opinions and certifications, in such
form and content and from such parties, as the Agent shall require. All
documentation relating to the Acquisition, the Loan and all related transactions
must be satisfactory in all respects to the Agent and its counsel.
28
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Lender(s) to enter into this Agreement, each Borrower jointly
and severally represents, warrants, covenants and agrees as follows:
Section 5.1 Corporate Existence and Qualification. Each Borrower is a
-------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, with all corporate power and authority and all
necessary licenses and permits to own, operate and lease its properties and
carry on its business as now being conducted. Each Borrower is duly qualified
and authorized to do business and is in good standing in each jurisdiction in
which the nature of its activities or the character of its properties makes
qualification necessary, except for such failures to qualify which would not
have a material adverse effect on (a) the Borrowers, taken as a whole, or any of
the Principal Borrowers or (b) the ability of the Borrowers, taken as a whole,
or any of the Principal Borrowers, to conduct their respective business or
operations.
Section 5.2 Corporate Authority; Noncontravention. The execution,
-------------------------------------
delivery and performance by each Borrower of its obligations set forth in this
Agreement, the Notes and the other Loan Documents (i) have been duly authorized
by all necessary corporate and/or stockholder action; (ii) do not require the
consent of any governmental body, agency or authority; (iii) will not violate or
result in (and with notice or the lapse of time will not violate or result in)
the breach of any provision of the Articles of Incorporation/Certificate of
Incorporation or By-laws of such Borrower, any material indenture, material
instrument, material agreement or other material undertaking to which such
Borrower is a party or by which such Borrower is bound, or any order or
regulation of any governmental authority or arbitration board or tribunal; and
(iv) except as expressly permitted by the terms and provisions of this
Agreement, result in the creation of a lien, charge or encumbrance of any nature
upon any of the properties or assets of any Borrower. When the Loan Documents
are executed and delivered, they will constitute legal, valid and binding
obligations of the Borrowers, enforceable against the Borrowers in accordance
with their respective terms, except as such enforceability may be subject to the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and subject to the effect of
general principals of equity (whether considered in a proceeding in equity or at
law).
Section 5.3 Financial Position. The financial statements dated December
------------------
31, 1998, copies of which have been delivered to the Agent, present fairly the
financial condition of the Borrowers as of the date thereof and the results of
the Borrowers' operations for the periods indicated therein, were prepared in
accordance with GAAP, are true and accurate in all material respects, and with
respect to the Borrowers (other than CBSI), are not misleading in any respect.
All liabilities, fixed or contingent (other than those liabilities, whether
fixed or contingent, not required by GAAP to be reflected or
29
reserved on financial statements and which (i) are not letters of credit or (ii)
do not exceed $10,000.00 individually or $200,000 in the aggregate), are fully
shown or provided for on the referenced financial statements or the notes
thereto as of the dates thereof. There has been no material adverse change in
the business, property or condition (financial or otherwise) of any Borrower
since the date of the most recent financial statement dated December 31, 1998,
and all other financial statements and information delivered to First Union
prior to the Closing Date are true and accurate in all material respects, and
are not misleading in any material respect.
Section 5.4 Payment of Taxes. Each Borrower has filed all tax returns and
----------------
reports required to be filed by it with the United States Government and/or with
all state and local governments, and has paid in full or made adequate provision
on its books for the payment of all taxes, interest, penalties, assessments or
deficiencies shown to be due or claimed to be due on or in respect of such tax
returns and reports, except to the extent that the validity or amount thereof is
being contested in good faith by appropriate proceedings and the non-payment
thereof pending such contest will not result in the execution of any tax lien or
otherwise adversely affect the Agent's interests in any part of the Collateral.
Section 5.5 Accuracy of Submitted Information; Omissions. All documents,
--------------------------------------------
certificates, information, materials and financial statements (other than
projections) furnished or to be furnished to the Agent or any Lender pursuant to
this Agreement or otherwise in connection with the Loan, as of the date
furnished, (i) are and will be true and correct in all material respects; (ii)
do not and will not contain any untrue statement of a material fact; and (iii)
do not and will not omit any material fact necessary to make the statements
contained therein or herein not misleading. No Borrower is aware of any fact
which has not been disclosed to the Agent in writing which materially adversely
affects, or so far as any Borrower can now reasonably foresee, could reasonably
be expected to materially adversely affect, the properties, business, profit or
condition (financial or otherwise) of the Borrowers, taken as a whole, or any of
the Principal Borrowers or the ability of the Borrowers, taken as a whole, or
any of the Principal Borrowers to perform their respective obligations under
this Agreement or any other Loan Document.
Section 5.6 Government Contracts. Except as set forth on Schedule 5.6(a)
-------------------- ---------------
hereto, no notice of suspension, debarment, cure notice, show cause notice or
notice of termination for default has been received by any Borrower (or to the
best of each Borrower's knowledge issued) in connection with any Government
Contract, and no Borrower is a party to any pending (or to each Borrower's
knowledge, there is no threatened) suspension, debarment or termination for
default issued or being pursued by the Government or any other adverse
Government action or proceeding in connection with any Government Contract. All
Government Contracts which have a remaining value in excess of One Million and
No/100 Dollars ($1,000,000.00) and a remaining term of twelve (12) months or
longer are listed on Schedule 5.6(b) hereto, and documentation necessary for
---------------
compliance with the Assignment of Claims Act, has been executed and
30
delivered by the Borrowers to the Agent in connection with each such Government
Contract.
Section 5.7 No Defaults or Liabilities. Except as set forth on Schedule
-------------------------- --------
5.7 hereto, no Borrower is (a) in default in the performance of any obligation,
---
covenant or condition contained in any agreement to which it is a party, which
default could reasonably be expected to materially adversely affect the
properties, business, profit or condition (financial or otherwise) of the
Borrowers, taken as a whole, or any of the Principal Borrowers or the ability of
the Borrowers, taken as a whole, or any of the Principal Borrowers to perform
their respective obligations under this Agreement or any other Loan Document; or
(b) aware of any condition, act, event or occurrence, including, without
limitation, any pending or threatened litigation, legal or administrative
proceeding or investigation, not disclosed to the Agent in writing which could
reasonably be expected to prejudice the Agent's or any Lender's rights under any
Loan Document in any respect.
Section 5.8 No Violations of Law. No Borrower is in violation of any
--------------------
Applicable Laws, except for such violations which could not reasonably be
expected to materially adversely affect the properties, business, profit or
condition (financial or otherwise) of the Borrowers, taken as a whole, or any of
the Principal Borrowers or the ability of the Borrowers, taken as a whole, or
any of the Principal Borrowers to perform their respective obligations under
this Agreement or any other Loan Document; no Borrower has failed to obtain any
material license, material permit, material franchise or other material
governmental authorization necessary to the ownership of its properties or to
the conduct of its business; and each Borrower has conducted its business and
operations in full compliance with all Applicable Laws, except for any non-
compliance which is not reasonably likely to limit the ability of the Borrowers,
taken as a whole, or any of the Principal Borrowers, to conduct their respective
business or operations in the manner in which the same are now being conducted.
Section 5.9 Litigation and Proceedings. Except as set forth on Schedule
-------------------------- --------
5.9 hereto, no action, suit or proceeding against or affecting any Borrower is
---
presently pending, or to the knowledge of each Borrower, threatened, in any
court, before any governmental agency or department, or before any arbitration
board or tribunal, which could reasonably be expected to result in any judgment
or liability against any Borrower in excess of Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) and which is not fully covered by insurance. No
Borrower is aware of any existing basis that is reasonably likely to result in
any such action, suit or proceeding. No Borrower is in default in any material
respect of any applicable order, writ, injunction or decree of any court,
governmental authority or arbitration board or tribunal.
Section 5.10 Security Interest in the Collateral. Each Borrower is the
-----------------------------------
sole legal and beneficial owner of the Collateral owned or purported to be owned
by it, free and clear of all liens, claims and encumbrances of any nature,
except for the Permitted Liens. Each Borrower has provided or will provide to
the Agent upon request written landlord
31
waivers from each lessor/landlord of any premises at which such Borrower's
tangible personal property (having an aggregate value in excess of $500,000.00)
is located. Each such landlord waiver subordinates or will subordinate any
statutory, contractual or other lien the lessor/landlord may have in any of the
Collateral to the lien, operation and effect of the lien being granted to the
Agent pursuant to this Agreement.
Section 5.11 Principal Place of Business; Location of Books and Records;
-----------------------------------------------------------
No Inventory. Each Borrower (other than CBSI) maintains its principal place of
------------
business and the office where it keeps its books and records with respect to
accounts and contracts rights at AverStar's offices located at the address set
forth in the preamble of this Agreement. CBSI's principal place of business and
the office where it keeps its books and records with respect to accounts and
contracts rights is at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇. Set forth on Schedule 5.11 hereto is a list of each Borrower's business
-------------
locations as of the Closing Date, and all places where Collateral having a value
in excess of One Hundred Thousand and No/100 Dollars ($100,000.00), in the
aggregate, is located. Except as expressly set forth above, the Borrowers agree
to notify the Agent in writing at least ten (10) days prior to any change in any
Borrower's principal place of business, or any change in the location of the
office where the Borrowers keep their books and records with respect to accounts
and contract rights, or any change of or addition to the locations where any
Collateral is located.
Section 5.12 Fiscal Year. Each Borrower's fiscal year ends on December
-----------
31.
Section 5.13 Pension Plans.
-------------
(a) The present value of all benefits vested under all "employee
pension benefit plans," as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), which are defined benefit
plans, and which are from time to time maintained by each Borrower
(individually, a "Pension Plan" and collectively, the "Pension Plans") did not,
as of December 31, 1998, exceed the value of the assets of the Pension Plans
allocable to such vested benefits;
(b) No Pension Plan, trust created thereunder or other person dealing
with any Pension Plan has engaged in a non-exempt transaction proscribed by
Section 406 of ERISA or a non-exempt "prohibited transaction," as such term is
defined in Section 4975 of the Internal Revenue Code, that could have a material
adverse effect on the Borrowers, taken as a whole, or any of the Principal
Borrowers or the ability of the Borrowers, taken as a whole, or any of the
Principal Borrowers to conduct their respective business or operations;
(c) No Pension Plan or trust created thereunder has been terminated
within the last three (3) years (except pursuant to a "standard termination,"
within the meaning of Section 4041(B) of ERISA), and there have been no material
"reportable events" (as such term is defined in Section 4043 of ERISA and the
regulations thereunder)
32
with respect to any pension plan or trust created within the three (3) year
period immediately preceding the Closing Date (other than reportable events for
which reporting has been waived pursuant to applicable PGBC regulations); and
(d) No Pension Plan or trust created thereunder has incurred any
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA or Section 412 of the Internal Revenue Code) as of the end of any plan
year, whether or not waived.
Section 5.14 O.S.H.A., ADA and Environmental Compliance.
-------------------------------------------
(a) Each Borrower is in compliance with, and its facilities, business
assets, property, leaseholds and equipment are in compliance with, the
provisions of the Federal Occupational Safety and Health Act ("O.S.H.A."), the
Americans with Disabilities Act ("ADA"), the Environmental Protection Act, RCRA
and all other applicable environmental and handicapped access laws; and there
have been no citations, notices, notifications or orders of any such non-
compliance issued to any Borrower or relating to its business, assets, property,
leaseholds or equipment under any such laws, rules or regulations;
(b) each Borrower has been issued all required federal, state and
local licenses, certificates and permits necessary or appropriate in the
operation of its facilities, businesses, assets, property, leaseholds and
equipment; and
(c) (i) there are no visible signs of releases, spills, discharges,
leaks or disposal (collectively referred to herein as "Releases") of Hazardous
Substances at, upon, under or within any real property owned, or premises
leased, by any Borrower; (ii) to the knowledge of each Borrower, there are no
underground storage tanks or polychlorinated biphenyls on any real property
owned, or premises leased, by any Borrower; (iii) to the knowledge of each
Borrower, no real property owned, or premises leased, by any Borrower has ever
been used by any Borrower or any other person as a treatment, storage or
disposal facility for Hazardous Waste; and (iv) to the knowledge of each
Borrower, no Hazardous Substances are present on any real property owned, or
premises leased, by any Borrower, except for such quantities of Hazardous
Substances as are handled in accordance with all applicable manufacturer's
instructions and governmental regulations, and as are necessary or appropriate
for the operation of the business of such Borrower. Each Borrower, for itself
and its successors and assigns, hereby covenants and agrees to indemnify, defend
and hold harmless the Agent and each Lender from and against any and all
liabilities, losses, claims, damages, suits, penalties, costs and expenses of
every kind or nature, including, without limitation, reasonable attorneys' fees
arising from or in connection with (i) the presence or alleged presence of any
Hazardous Substance or Hazardous Waste on, under or about any property of any
Borrower (including, without limitation, any property or premises now or
hereafter owned or leased by any Borrower), or which is caused by or results
from, directly or indirectly, any act or omission to act by any Borrower; and
(ii) any Borrower's violation of the ADA or any environmental statute,
ordinance, order, rule or
33
regulation of any governmental entity or agency thereof (including, without
limitation, any liability arising under CERCLA, RCRA, HMTA or any Applicable
Laws).
Section 5.15 Intellectual Property. All registered patents, patent
---------------------
applications, registered trademarks, trademark applications, registered
copyrights, copyright applications, registered tradenames, trade secrets and
licenses necessary for the conduct of the business of each Borrower, if any, are
and shall remain (i) owned or utilized by such Borrower, (ii) domestic property
of such Borrower; and (iii) valid and, except with respect to licenses and trade
secrets, have been duly registered or filed with all appropriate governmental
authorities; there is no objection or, to the knowledge of any Borrower, pending
challenge to the validity of any such patent, trademark, copyright, tradename,
trade secret or license, and no Borrower is aware of any grounds for any such
challenge or objection thereto. Except as set forth on Schedule 5.15 attached
-------------
hereto, no Borrower pays any royalty to anyone in connection with any patent,
trademark, copyright, tradename, trade secret or license; and no Borrower has
assigned and each Borrower has the right to bring any legal action for the
infringement of any such patent, trademark, copyright, tradename, trade secret
or license that is owned by such Borrower in accordance with Applicable Laws.
Section 5.16 Existing or Pending Defaults; Material Contracts. All
------------------------------------------------
Material Contracts are listed on Schedule 5.16(a) hereto. Except as set forth on
----------------
Schedule 5.16(b) attached hereto, no Borrower is aware of any pending or
----------------
threatened litigation, or any other legal or administrative proceeding or
investigation pending or threatened, against any Borrower arising from or
related to any Material Contract.
Section 5.17 Leases and Real Property. All material leases and other
------------------------
material agreements under which each Borrower occupies real property are in full
force and effect and constitute legal, valid and binding obligations of, and are
legally enforceable against, each Borrower, and to the best of each Borrower's
knowledge, are the binding obligations of and legally enforceable against, the
other parties thereto. All necessary governmental approvals required to have
been obtained by each Borrower, if any, have been obtained for each such
material lease or agreement, and to each Borrower's knowledge there have been no
threatened cancellations thereof, and there are no outstanding material disputes
with respect thereto. No Borrower owns any interest in real property (other
than the real property and leasehold interests listed on Schedule 5.17 hereto).
-------------
SECTION 5.18 Labor Relations. There are no strikes, work stoppages,
---------------
grievance proceedings, union organization efforts or other labor controversies
pending, or to any Borrower's knowledge, threatened or reasonably anticipated,
between any Borrower and (i) any current or former employee of any Borrower, or
(ii) any union or other collective bargaining unit representing any such
employee. Each Borrower is in compliance in all material respects with all
Applicable Laws relating to employment or the workplace, including, without
limitation, provisions relating to wages, hours, collective bargaining, safety
and health, work authorization, equal employment opportunity, immigration,
withholding, unemployment compensation, employee privacy and right to know.
Except
34
as set forth on Schedule 5.18, there are no collective bargaining agreements,
-------------
employment agreements between any Borrower and any of its employees, or
professional service agreements not terminable at will relating to the
businesses or assets of any Borrower. The consummation of the transactions
contemplated hereby will not cause any Borrower to incur or suffer any liability
relating to, or obligation to pay, severance, termination or other similar
payments to any person or entity.
Section 5.19 Assignment of Government Contracts. No existing Government
----------------------------------
Contract of any Borrower (and no present or future interest of any Borrower, in
whole or in part, in, to or under any such Government Contract) is currently
assigned, pledged, hypothecated or otherwise transferred to any person or entity
(other than the Agent).
Section 5.20 Ownership Interests. All of the issued and outstanding
-------------------
capital stock of AverStar is wholly owned and controlled by the persons and/or
entities set forth on SCHEDULE 5.20 hereto. All of the issued and outstanding
capital stock of the Borrowers (other than AverStar) is wholly owned and
controlled by AverStar, free and clear of all liens, claims and encumbrances
(other than the security interest in favor of the Agent). As of the date hereof
(and except as described above), no Borrower has any subsidiaries or owns any
interest in any other entity or venture.
Section 5.21 Contribution Agreement. The Contribution Agreement is in
----------------------
full force and effect, has not been modified, altered or amended in any respect
(other than to add a new Borrower party thereto from time to time), and no
Borrower is in default thereunder.
Section 5.22 Solvency. Both immediately prior to and after giving effect
--------
to the transactions contemplated by the terms and provisions of this Agreement,
each Borrower (i) owned and owns property whose fair salable value is greater
than the amount required to pay all of such Borrower's Indebtedness (including
contingent debts), (ii) was and is able to pay all of its Indebtedness as such
Indebtedness matures, and (iii) had and has capital sufficient to carry on its
business and transactions and all business and transactions in which it is about
to engage. For purpose hereof, "Indebtedness" means, without duplication (a) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Borrower,
as of the date on which Indebtedness is to be determined, (b) all obligations of
any other person or entity which such Borrower has guaranteed, (c) reimbursement
obligations in connection with letters of credit issued for the benefit of such
Borrower, and (d) the Obligations.
Section 5.23 Year 2000 Compliance. Each Borrower has reviewed the areas
--------------------
within its business and operations which could be adversely affected by, and has
developed or is developing a program to address on a timely basis, the "Year
2000 Problem" (that is, the risk that computer based systems and applications
used by such Borrower may be unable to recognize and perform properly date-
sensitive functions involving certain dates
35
prior to and any date on or after December 31, 1999), and have made related
appropriate inquiry of material suppliers and vendors. Based on such review and
program, each Borrower believes that the "Year 2000 Problem" will not have a
material adverse affect on its business administration or operations.
Section 5.24 Joint and Several Liability. Each and all of the
---------------------------
representations and warranties made or remade to the Agent and each Lender
pursuant to this Article 5 are hereby made and shall be remade by each Borrower
severally and on a joint and several basis.
Section 5.25 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made herein shall survive the making of the Loan,
and shall be deemed remade and redated as of the date of each request for an
advance or readvance of any Loan proceeds, unless any Borrower is unable to
remake and/or redate any such representation or warranty (other than the
representation and warranty set forth in Section 5.9 hereof), discloses the same
to the Agent in writing, and such inability does not constitute or give rise to
an Event of Default.
ARTICLE 6
---------
AFFIRMATIVE COVENANTS
---------------------
So long as any Obligation remains outstanding or this Agreement remains in
effect, each Borrower jointly and severally covenants and agrees with the Agent
and each Lender that:
Section 6.1 Payment of Loan Obligations. Each Borrower will duly and
---------------------------
punctually pay all sums to be paid to the Agent and/or any Lender in accordance
with the terms and conditions of the Loan Documents, and will comply with,
perform and observe all of the terms thereof.
Section 6.2 Payment of Taxes. Each Borrower will promptly pay and
----------------
discharge when due all federal, state and other governmental taxes, assessments,
fees and charges imposed upon each Borrower, or upon any of its properties or
assets, except to the extent that validity or amount thereof is being contested
in good faith by appropriate proceedings and the non-payment thereof will not
result in the execution of any tax lien or otherwise jeopardize the Agent's
interest in any part of the Collateral.
Section 6.3 Delivery of Financial and Other Statements. The Borrowers
------------------------------------------
shall deliver to the Agent and each Lender financial and other statements, each
of which shall, unless otherwise expressly provided to the contrary, be prepared
in accordance with GAAP consistently applied, as follows:
36
(a) on or before the one hundred twentieth (120th) day following the
close of each fiscal year, the Borrowers will submit to the Agent and each
Lender (i) annual audited and unqualified financial statements of the Borrowers,
which shall be accompanied by schedules and management letters (if issued) and
certified by an independent certified public accountant acceptable to the Agent,
(ii) an annual budget for the Borrowers for the then current year and
projections for the remainder of the Loan term, in form reasonably satisfactory
to the Agent, certified by the Borrower's Chief Financial Officer or another
duly authorized executive officer of the Borrowers, and (iii) the Year End
Covenant Compliance Certificate, certified by an authorized executive officer of
the Borrowers;
(b) on or before the forty-fifth (45) day following the close of each
calendar quarter, the Borrowers will submit to the Agent and each Lender
internally prepared financial statements of the Borrowers, including a balance
sheet, income statement, cash flow statement and statement of stockholders'
equity, reporting the Borrowers' current financial position and the results of
their respective operations for the month then ended and year-to-date, in form
reasonably satisfactory to the Agent, certified by the Borrower's Chief
Financial Officer or another duly authorized executive officer of the Borrowers;
(c) on or before the fifteenth (15th) day following the close of each
calendar month, the Borrowers will submit to the Agent and each Lender a
Borrowing Base/Non-Default Certificate in the form of Exhibit 4 hereto,
---------
accompanied by a current accounts receivable agings report, an unbilled agings
report and an accounts payable listing, each of which shall be certified by an
authorized executive officer of the Borrowers;
(d) on or before the forty-fifth (45th) day following the close of
each calendar quarter (other than each calendar quarter ending on December
31st), the Borrowers will submit to the Agent and each Lender a contract
status/backlog report and a Quarterly Covenant Compliance/Non-Default
Certificate in the form of Exhibit 5 hereto (the "Quarterly Covenant Compliance
---------
Certificate"), each of which shall be certified by the Borrower's Chief
Financial Officer or another duly authorized executive officer of the Borrowers;
(e) the Borrowers will submit to the Agent and each Lender copies of
all public filings, disclosure statements and/or registration statements which
any Borrower issues to, distributes to or files with the Securities and Exchange
Commission or any state agency or department regulating securities (or any other
person or entity, pursuant to the rules and/or regulations of the Securities and
Exchange Commission or any state agency or department regulating securities).
Each such public filing, disclosure statement and/or registration statement
shall be submitted by the Borrowers to the Agent and each Lender not later than
five (5) days prior to the issuance, distribution or filing thereof (as
applicable), except in circumstances in which it is not practicable to make any
such submission to the Agent and each Lender on an earlier date, in which case
such public filing, disclosure statement and/or registration statement shall be
submitted by the
37
Borrower to the Agent and each Lender concurrent with the issuance, distribution
or filing thereof (as applicable).
(f) promptly upon the request of the Agent, the Borrowers will
provide to the Agent and each Lender such other information and/or reports
relating to the business, operations, properties or prospects of the Borrowers
as the Agent may from time to time reasonably request.
The Borrowers acknowledge and agree that any and all financial statements,
schedules and other financial information required to be delivered to the Agent
and each Lender pursuant to this Section 6.3 shall be prepared on a consolidated
basis.
Section 6.4 Maintenance of Records; Review by the Lenders. Each Borrower
---------------------------------------------
will maintain at all times proper books of record and account in accordance with
GAAP, consistently applied, and, subject to any confidentiality and secrecy
requirements imposed by any Government agency, will permit the Agent's officers
or any of the Agent's authorized representatives or accountants to visit and
inspect the offices and properties of each Borrower, examine its respective
books of account and other records, and discuss their respective affairs,
finances and accounts with the officers of each Borrower, all at such reasonable
times during normal business hours, and as often as the Agent may desire. Each
Borrower acknowledges and agrees that, following the occurrence of an Event of
Default which has continued unremedied beyond any applicable notice and/or grace
period, each Lender shall have the right to accompany the Agent in the exercise
of the Agent's rights set forth in this Section 6.4.
Section 6.5 Maintenance of Insurance Coverage. Each Borrower will maintain
---------------------------------
in effect fire and extended coverage insurance on any and all the tangible
personal property comprising the Collateral, public liability insurance and
workmen's compensation insurance, with responsible insurance companies, in such
amounts and against such risks as are customary for similar businesses, required
by governmental authorities, if any, having jurisdiction over all or part of its
operations, or otherwise reasonably required by the Agent, and will furnish to
the Agent certificates evidencing such continuing insurance. The Agent shall be
named as loss payee on all hazard and casualty insurance policies by means of a
standard noncontributory mortgagee clause and as an additional insured on all
liability insurance policies. All insurance policies shall also provide for (i)
not less than thirty (30) days written notice to the Agent prior to expiration,
cancellation or material change; and (ii) waiver of subrogation.
Section 6.6 Maintenance of Property/Collateral; Performance of Contracts.
------------------------------------------------------------
Each Borrower will at all times maintain the Collateral and its tangible
property, both real and personal, in good order and repair (subject to ordinary
wear and tear), and will permit the Agent's officers or authorized
representatives to visit and inspect all or any part of the Collateral at such
reasonable times during normal business hours, as
38
and when the Agent deems necessary or appropriate; provided, however, that the
Agent's review of any and all "classified contracts" shall be subject to
compliance with Applicable Laws. Each Borrower shall perform in all material
respects all obligations under all contracts to which it is a party (including,
without limitation, all obligations of such Borrower as a contractor under any
Material Contract), including all exhibits and other attachments to such
contracts, all modifications thereto and all documents and instruments delivered
pursuant thereto, and will comply in all material respects with all laws, rules
and regulations governing the execution, delivery and performance thereof.
Section 6.7 Maintenance of Corporate Existence. Except as otherwise
----------------------------------
expressly permitted pursuant to this Agreement, each Borrower will maintain its
corporate existence and will provide the Agent with evidence of the same from
time to time upon the Agent's request.
Section 6.8 Maintenance of Certain Accounts with Lender. Each Borrower
-------------------------------------------
will maintain its primary operating accounts, including all depository accounts
(time and demand), disbursement accounts and collection accounts with State
Street Bank & Trust Company, N.A., a national banking association, at its
offices located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; it being
understood and agreed that if at any time State Street Bank shall no longer be a
"Lender" party to this Agreement, all such accounts shall be maintained with the
Agent or another Lender designated by the Agent and reasonably satisfactory to
the Borrowers.
Section 6.9 Maintenance of Management. Each Borrower will at all times
-------------------------
maintain management reasonably satisfactory to the Agent or the Required Lenders
in all respects, and shall notify the Agent in writing of the change of any
corporate officer or director of any Borrower, within ten (10) days of the date
of any such change; it being understood and agreed that (a) the Borrowers shall
be deemed in compliance with this covenant so long as (i) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is
the acting President or Vice President in charge of business operations of
AverStar and performs all duties material to the operation of the Borrowers'
business, as may be required of him acting in such capacity, and (ii) ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ is the acting Chairman of the board of AverStar and performs all
duties material to the operation of the Borrowers' business, as may be required
of him acting in such capacity; and (b) in the event that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ no longer acts as President (or Vice President in charge of
business operations) or Chairman of the board of AverStar, respectively, or in
the event that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ fails to perform any
duty material to the operation of the Borrowers' business, as may be required of
each of them acting in their respective capacities, any replacement President
(or Vice President in charge of business operations) and/or Chairman of the
board of the Borrowers must be reasonably satisfactory to the Agent or the
Required Lenders in all respects.
Section 6.10 Disclosure of Defaults, Etc. Promptly upon the occurrence
----------------------------
thereof, the Borrowers will provide the Agent with written notice of any Event
of Default,
39
or any act, event or occurrence that upon the giving of any required notice or
the lapse of time, or both, would constitute an Event of Default. In addition,
the Borrowers will promptly advise the Agent in writing of any condition, act,
event or occurrence which comes to any Borrower's attention that would or could
reasonably be expected to prejudice the Agent's or any Lender's rights in
connection with any Material Contract, any Government Contract, the Collateral,
this Agreement, any Note or any other Loan Document, including, without
limitation, the details of any pending or threatened suspension, debarment or
other governmental action or proceeding, any material pending or threatened
litigation, and any other legal or administrative proceeding or investigation
pending or threatened against any Borrower, including the entry of any judgment
or lien (other than a Permitted Lien) against such Borrower, its assets or
property.
Section 6.11 Security Perfection; Assignment of Claims Act; Payment of
---------------------------------------------------------
Costs. Each Borrower will execute and deliver and pay the costs of recording and
-----
filing financing statements, continuation statements, termination statements,
assignments and other documents, as the Agent may from time to time deem
necessary or appropriate for the perfection of any liens granted to the Agent
pursuant hereto or pursuant to any other Loan Document, including, without
limitation, all documents or materials necessary or appropriate in order to
comply with the Assignment of Claims Act of 1940 (the "Government Contract
Assignments") in connection with each Government Contract required to be
assigned to the Agent in accordance with the terms of this Agreement; it being
understood and agreed that (i) no Government Contract Assignment is being
required for any Government Contract which (a) has a remaining value of less
than One Million and No/100 Dollars ($1,000,000.00), or (b) has a remaining term
of less than twelve (12) months; and (ii) the Agent will not submit any
Government Contract Assignment to the Government in the absence of an Event of
Default which has continued unremedied beyond any applicable notice and/or grace
period. All costs and expenses incurred in connection with the Government
Contract Assignments shall be borne solely by the Borrowers. Additionally, the
Borrowers will pay any and all costs of Closing hereunder, as well as any and
all taxes (other than the Agent's and each Lender's income and franchise taxes),
which may be payable as a result of the execution of this Agreement or any
agreement supplemental hereto, or as a result of the execution and/or delivery
of any Note or other Loan Document.
Section 6.12 Defense of Title to Collateral. Each Borrower will at all
------------------------------
times defend the Agent's and each Borrower's rights in the Collateral, subject
to the Permitted Liens, against all persons and all claims and demands
whatsoever, and will, upon request of the Agent (i) furnish such further
assurances of title as may be reasonably required by the Agent, and (ii) do any
other acts reasonably necessary to effectuate the purposes and provisions of
this Agreement, or as required by law or otherwise in order to perfect,
preserve, maintain or continue the security interests of the Agent in the
Collateral.
Section 6.13 Compliance with Law. Each Borrower will conduct its businesses
-------------------
and operations in full compliance with (i) all Applicable Laws and requirements
40
of all federal, state and local regulatory authorities having jurisdiction, (ii)
the provisions of its charter documents and by-laws, (iii) all agreements and
instruments by which it or any of its properties may be bound, and (iv) all
applicable decrees, orders and judgments. It is understood and agreed that any
Borrower's failure to comply with any of the items set forth in clause (i),
(iii) or (iv) of this Section 6.13 shall not constitute a violation of this
covenant if such failure to comply is not reasonably likely to have a material
adverse effect on (a) the Borrowers, taken as a whole, or any of the Principal
Borrowers, or (b) the business, assets, operations, properties or financial
condition of the Borrowers, taken as a whole, or any of the Principal Borrowers.
Section 6.14 Further Assurances; Additional Requested Information. Each
----------------------------------------------------
Borrower will provide to the Agent such further assurances and additional
documents regarding the Collateral and the Agent's security interest therein as
the Agent may from time to time reasonably request, and each Borrower will
promptly provide the Agent with such additional information, reports and
statements respecting the business, operations, properties and financial
condition of the Borrowers, and respecting their respective affiliated
businesses and investments, as the Agent may from time to time reasonably
request.
Section 6.15 Financial Covenants. So long as any Obligation remains
-------------------
outstanding or this Agreement remains in effect, the Borrowers will comply with
each of the financial covenants set forth below:
(a) Net Worth. The Borrowers will at all times maintain Net
---------
Worth of not less than the sum of (i) $1,000,000.00,
plus (ii) fifty percent (50%) of the Borrowers'
consolidated positive net income arising after December
31, 1998 (not to be reduced for subsequently incurred
consolidated losses), plus (iii) one hundred percent
(100%) of the net proceeds (net of reasonable and
customary costs paid to unrelated and unaffiliated
third parties in connection with the particular
transaction) of any issuance by the Borrower after the
Closing Date of equity securities or other equity
interests or obligations (determined on a cumulative
basis and calculated in accordance with GAAP), less
(iv) one hundred percent (100%) of the amount of stock
redemptions paid pursuant to the Repurchase Agreements
listed on Schedule B hereto.
----------
For purposes of this Agreement, "Net Worth" shall mean
total assets minus all liabilities, determined in
accordance with GAAP. Net Worth shall be measured on
3/31/99 and on the last day of each fiscal quarter
thereafter, throughout the term of the Loan.
41
(b) Fixed Charge Coverage Ratio. The Borrowers will
---------------------------
maintain on a consolidated basis at all times during
the periods specified below, a Fixed Charge Coverage
Ratio of not less than the following:
Minimum
Fixed Charge
Period Coverage Ratio
------ --------------
For the calendar quarter ending on
3/31/99 through the calendar 1.25 to 1.0
quarter ending 12/31/1999.
For the calendar quarter ending on
3/31/2000 through the calendar 1.30 to 1.0
quarter ending on 12/31/2000.
For the calendar quarter ending on
3/31/2001 and for each calendar 1.35 to 1.0
quarter ending thereafter.
For purposes of the foregoing, "Fixed Charge Coverage
Ratio" shall mean the Borrowers' EBITDA, minus capital
expenditures, minus cash paid for taxes, divided by the
sum of Interest Expense, plus required principal
payments on the Term Facilities and payments for
capital lease obligations. The Fixed Charge Coverage
Ratio shall be measured on the last day of each fiscal
quarter, and at the end of each of the Borrowers'
fiscal years, throughout the term of the Loan on a four
(4) quarter rolling basis.
(c) EBITDA to Interest Expense Ratio. The Borrowers will
--------------------------------
maintain on a consolidated basis at all times during
the periods specified below, an EBITDA to Interest
Expense ratio of not less than the following:
Minimum EBITDA to
Period Interest Expense Ratio
------ ---------------------
For the calendar quarter
ending on 3/31/99 through 2.50 to 1.00
the calendar quarter ending
12/31/99.
42
For the calendar quarter
ending on 3/31/2000 and 3.00 to 1.00
for each calendar quarter
ending thereafter.
The EBITDA to Interest Expense Ratio shall be
calculated and tested on the last day of each fiscal
quarter, throughout the term of the Loan on a four (4)
quarter rolling basis.
(d) Total Debt to EBITDA Ratio. The Borrowers will at all
--------------------------
times maintain on a consolidated basis during the
periods specified below, a Total Debt to EBITDA Ratio
of not more than the following:
Maximum Total
Debt to EBITDA
Period Ratio
------ -----
For the calendar quarter ending
3/31/99 through the calendar 4.25 to 1.00
quarter ending on 12/31/1999.
For the calendar quarter ending
3/31/2000 through the calendar 3.75 to 1.00
quarter ending on 6/30/2000.
For the calendar quarter ending
9/30/2000 through the calendar 3.50 to 1.00
quarter ending on 12/31/2000.
For the calendar quarter ending
3/31/2001 through the calendar 3.25 to 1.00
quarter ending on 6/30/2001.
For the calendar quarter ending
9/30/2001 through the calendar 3.00 to 1.00
quarter ending on 12/31/2001.
For the calendar quarter ending
3/31/2002 through the calendar 2.50 to 1.00
quarter ending on 12/31/2002.
For the calendar quarter ending on
3/31/2003 and for each calendar 2.00 to 1.00
quarter ending thereafter.
43
For purposes hereof, the "Total Debt to EBITDA Ratio"
shall mean the ratio of Total Debt to EBITDA (a)
calculated and tested using (i) the Borrower's twelve
(12) month trailing EBITDA results and (ii) Total Debt
as of the date of calculation, and (b) measured on the
last day of each fiscal quarter, throughout the term of
the Loan.
The financial covenants referenced above shall be calculated on a four (4)
quarter rolling basis. Unless otherwise defined, all financial terms used in
this Section 6.15 shall have the meanings attributed to such terms in accordance
with GAAP.
Section 6.16 Year 2000 Compliance. Each Borrower shall take all action
--------------------
necessary to assure that its computer systems are capable of effectively
processing data and information, including dates on and after January 1, 2000,
and that all such systems (i) shall not cease to perform or provide (and shall
not cause any software and/or system which is material to the operations of such
Borrower or any interface therewith to provide) invalid or incorrect results as
a consequence of date functionality and/or data; (ii) shall not experience any
degradation of performance or functionality arising from or relating to date
functionality and/or data which is material to the operations of such Borrower
or any material interface therewith and which represents or references different
centuries, more than one century or leap years; (iii) shall effectively and
accurately manage and manipulate data derived from, involving or relating in any
way to dates, including single century formulas and multi-century or leap year
formulas; and (iv) shall not cause an abnormal ending scenario within such
business computer related systems or in any software and/or system with which
such systems interface (or generate incorrect values or invalid results
involving such dates). Each Borrower will, at the reasonable request of the
Agent, provide evidence to the Agent of such compatibility.
Section 6.17 Landlord Waivers; Subordination. Each Borrower shall provide
-------------------------------
landlord waivers to the Agent prior to any Borrower storing, keeping or locating
tangible personal property having an aggregate value in excess of Five Hundred
Thousand and No/100 Dollars ($500,000.00) on any particular lessor's/landlord's
premises. Each landlord waiver shall subordinate any statutory, contractual or
other lien the lessor/landlord may have in any Collateral to the lien, operation
and effect of the lien granted to the Agent pursuant to this Agreement, and
shall be in form and substance reasonably acceptable to the Agent.
Section 6.18 Substitute Notes. Upon request of the Agent, each Borrower
----------------
shall execute and deliver to the Agent substitute promissory notes, in form and
substance satisfactory to the Agent in all respects, payable to the order of
such person or entity as may be designated by the Agent; it being understood and
agreed, however, that the aggregate principal amount of all outstanding
promissory notes shall not exceed the Commitment Amount as of the date any such
substitute note is issued.
44
Section 6.19 Interest Rate Contracts. If required by the Agent, the
-----------------------
Borrowers shall have in effect at all times interest rate protection agreements
for the Term Facilities ("Interest Rate Contracts") reasonably satisfactory to
the Agent. Any such Interest Rate Contract must be purchased from a Lender, an
affiliate of a Lender or another financial institution reasonably acceptable to
the Agent. The Borrowers' obligations under any Interest Rate Contract purchased
from a Lender or an affiliate of a Lender shall be secured by the Collateral on
a pari passu basis, pursuant to documentation acceptable to the Agent in all
respects. All other Interest Rate Contracts shall be unsecured in all respects.
The Borrowers shall determine to their own satisfaction whether any such
Interest Rate Contract is sufficient to meet the Borrowers' needs for interest
rate protection, and neither the Agent nor any Lender shall have any obligation
or liability with respect thereto, nor any obligation to propose, quote or enter
into any Interest Rate Contract, unless such Interest Rate Contract shall be on
terms and conditions satisfactory to the applicable Lender in all respects.
Section 6.20 Joint and Several Liability. Each Borrower acknowledges and
---------------------------
agrees that each Borrower shall be severally and jointly and severally liable
for each and every affirmative covenant set forth in this Article 6.
ARTICLE 7
---------
NEGATIVE COVENANTS
------------------
So long as any Obligation remains outstanding or this Agreement remains in
effect, each Borrower jointly and severally covenants and agrees that, without
the prior written consent of the Agent, no Borrower will:
Section 7.1 Change of Control; Disposition of Assets; Merger.
------------------------------------------------
(a) Permit majority ownership of any Borrower or control of any
Borrower's business or operations to be sold, assigned or otherwise transferred,
legally or equitably, to any person or entity; or
(b) suffer or permit the issuance of any capital stock of any
Borrower (except for (i) any securities issued pursuant to a stock option plan
approved by Agent in writing, or pursuant to any other equity-based employee
incentive compensation plan approved by the Agent in writing and/or listed in
Schedule 7.1(B) hereto; and (ii) issuances of any capital stock of AverStar
---------------
which do not, individually or in the aggregate, cause or result in a default of
any other provision of this Agreement); or
(c) sell, assign, loan, deliver, lease, transfer or otherwise dispose
of property or assets of any Borrower (except in the ordinary course of
business), in excess of Fifty Thousand and No/100 Dollars ($50,000.00), in the
aggregate, per annum; or
45
(d) merge or consolidate with any company or enterprise, or acquire
or purchase any company or enterprise; it being understood and agreed that this
negative covenant shall not be deemed violated by the merger or consolidation of
any wholly owned subsidiary of AverStar with or into (i) AverStar; provided
that, after giving effect to any such merger or consolidation, AverStar shall be
the surviving entity; or (ii) a Borrower (other than AverStar); provided that,
after giving effect to any such merger or consolidation, the surviving entity
shall be a Borrower party to this Agreement.
Section 7.2 Margin Stocks. Use all or any part of the proceeds of any
-------------
advance made hereunder to purchase or carry, or to reduce or retire any loan
incurred to purchase or carry, any margin stocks (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any such
margin stocks.
Section 7.3 Change of Operations. Suffer or permit any change in the
--------------------
general character of any Borrower's business as conducted on the Closing Date,
or suffer or permit any Borrower to engage in any type of business not
reasonably related to or compatible with such business as presently and normally
conducted.
Section 7.4 Judgments; Attachments. Suffer or permit any judgment in
----------------------
excess of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) against
any Borrower or any attachment against any Borrower's property (for an amount
not fully covered by insurance) to remain unpaid, undischarged or undismissed
for a period of thirty (30) days, unless enforcement thereof shall be
effectively stayed or bonded.
Section 7.5 Further Assignments; Performance and Modification of
----------------------------------------------------
Contracts; etc. Except as may be expressly permitted by the Loan Documents (i)
--------------
make any further assignment, pledge or disposition of the Collateral or any part
thereof (other than dispositions of inventory or equipment in the ordinary
course of business or the sale of obsolete equipment or other equipment not
material to the operation of such Borrower's business); (ii) permit any set-off
or reduction, delay the timing of any payment under, or otherwise modify any
Material Contract, if such set-off, reduction, delay or modification would give
rise to a Borrowing Base Deficiency or otherwise adversely affect any of the
Subsidiary Borrowers, taken as a whole, or any of the Principal Borrowers in any
material respect; (iii) create, incur or permit to exist any lien or encumbrance
(other than Permitted Liens) on any real or personal property now or hereafter
owned by any Borrower; or (iv) do or permit to be done anything to impair the
Agent's or any Lender's security in any Collateral or the payments due to any
Borrower thereunder.
Section 7.6 Affect Rights of the Agent or Lender(s). At any time do or
---------------------------------------
perform any act or permit any act to be performed which would or reasonably
could materially adversely affect the interests or rights of the Agent or any
Lender under any Loan Document.
46
Section 7.7 Indebtedness; Granting of Security Interests. Suffer or
--------------------------------------------
permit any Borrower to incur any new indebtedness, except for (i) trade debt and
operating leases incurred in the ordinary course of business; (ii) indebtedness
secured by liens listed on Schedule 7.7 hereto, or other indebtedness secured by
------------
Permitted Liens; (iii) indebtedness incurred to finance (by purchase or lease)
equipment constituting capital expenditures, provided that all capital leases
permitted hereby do not, in the aggregate, exceed Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00) per annum; and (iv) the indebtedness owing directly
(or indirectly by and through ▇▇▇▇▇▇▇ & Co., Inc., as custodian) to the Mass
Mutual Entities (other than Mass Mutual, acting in its capacity as a Lender
party pursuant to this Agreement) in a principal amount not to exceed Five
Million and No/100 Dollars ($5,000,000.00), evidenced by the Subordinated Notes
and subordinated in all respects to the Obligations pursuant to a certain letter
agreement dated as of the Closing Date (the "Subordination Agreement"), by and
among the Agent, the Mass Mutual Entities and the Borrowers. Except as otherwise
expressly permitted herein, no Borrower shall mortgage, assign, pledge,
hypothecate or otherwise encumber or permit any lien, security interest or other
encumbrance, including purchase money liens, whether under conditional or
installment sales arrangements or otherwise, to affect the Collateral or any
other assets or properties of any Borrower (except for Permitted Liens), nor
shall any Borrower guarantee or otherwise become obligated for any indebtedness
of others. Furthermore, each Borrower agrees that it will not enter into any
agreement or understanding with any person or entity pursuant to which such
Borrower agrees to be bound by a covenant not to encumber all or any part of its
property or assets, unless such agreement or understanding is entered into in
connection with the granting of purchase money security interests permitted
pursuant to the terms and provisions this Agreement (and relates to solely to
the property subject to such purchase money security interests).
Section 7.8 Dividends; Loans; Advances; Investments and Certain Other
---------------------------------------------------------
Events.
------
Except as otherwise described on Schedule 7.8(a) hereto:
---------------
(a) suffer or permit any dividend to be declared or paid on any
Borrower's capital stock of any class (other than dividends payable solely to
another Borrower and/or dividends payable in the form of additional capital
stock of AverStar), suffer or permit any alteration or amendment to any
Borrower's capital structure, or suffer or permit any Borrower to purchase,
redeem or otherwise retire any shares of such Borrower's capital stock, or
suffer or permit any voluntary prepayment, acquisition or anticipation of any
sinking fund requirement of any indebtedness of any Borrower, or suffer or
permit any distributions to be made in cash or assets to any shareholders of any
Borrower (other than to another Borrower); or
(b) suffer or permit any loans, salary advances or other payments to
be made by any Borrower to (i) any shareholders of any Borrower (other than to
another Borrower); (ii) any corporation or other enterprise directly or
indirectly owned in whole or
47
in part by any shareholder of any Borrower (other than another Borrower); or
(iii) any other person or entity; it being understood and agreed that this
negative covenant shall not be deemed violated by (A) normal and customary
operating expenses and trade credit extended to customers of the Borrowers, in
each case made in the ordinary course of business; (B) regularly scheduled
salary payments to shareholders of any Borrower who are also salaried employees
of such Borrower; (C) loans and/or travel and expense reimbursement payments to
salaried employees in an amount not to exceed, at any time, Fifteen Thousand and
No/100 Dollars ($15,000.00), individually, or Two Hundred Fifty Thousand and
No/100 Dollars ($250,000.00), in the aggregate; (D) regularly scheduled
consulting fees payable pursuant to the consulting agreements listed on Schedule
--------
7.8(b) hereto; provided that (i) no Payment Default exists, and (ii) the payment
------
of such consulting fees does not, individually or in the aggregate, exceed Three
Hundred Thousand and No/100 Dollars ($300,000.00) per annum; (E) a loan or loans
made by AverStar on or about the Closing Date to IES Holding, Inc., a Delaware
corporation ("IES"), in an amount not to exceed, at any time, Two Million and
No/100 Dollars ($2,000,000.00), in the aggregate, provided that (i) such loan(s)
shall have been made and fully advanced on or before December 31, 1999, without
any obligation to advance or readvance any proceeds of such loan(s) after
December 31, 1999, (ii) such loan(s), including any other indebtedness owing by
IES to a Borrower, shall have been properly evidenced by one or more duly
executed and enforceable promissory notes (collectively, the "IES Notes"), and
reflected as notes receivable on the Borrowers' books, (iii) concurrent with the
making of such loan(s), all of the IES Notes evidencing such loan(s) and such
other indebtedness shall have been pledged to the Agent, for the benefit of the
Lenders, as additional Collateral for the Obligations, pursuant to the
Assignment of Promissory Notes as Collateral, and (iv) at the time any such
loan(s) shall have been made available to IES, no Event of Default exists
hereunder; (F) regularly scheduled payments described in Schedule 7.8(c) hereto;
---------------
and (G) subject to the terms of the Subordination Agreement, regularly scheduled
payments of accrued and unpaid interest payable pursuant to the Subordinated
Notes.
Section 7.9 Lease Obligations. Enter into any new lease of real or
-----------------
personal property, except in the ordinary course of business.
Section 7.10 Capital Expenditures. Make any capital expenditure,
--------------------
including, but not limited to, expenditures for leasehold improvements and
capitalized costs, in excess of (a) $2,500,000, in the aggregate per annum,
during the period commencing on the Closing Date and ending on the day
immediately preceding the second (2nd) anniversary of the Closing Date; (b)
$3,000,000, in the aggregate per annum, during the period commencing on the
second (2nd) anniversary of the Closing Date and ending on the day immediately
preceding the fourth (4th) anniversary of the Closing Date, and (c)
$3,500,000, in the aggregate per annum, from and after the fourth (4th)
anniversary of the Closing Date, except that, in each case, the Borrowers shall
be entitled to carry over availability (on a non-cumulative basis) of any unused
capital expenditure of any particular twelve (12) month period to the succeeding
twelve (12) month period. By way of example
48
and not of limitation, if the Borrowers incur $2,000,000 in capital expenditures
during the second year of the Loan term (and the applicable capital expenditure
limitation is $2,500,000), the Borrowers may incur up to $3,500,000 of capital
expenditures during the third year of the Loan term without being in violation
of this negative covenant. However, if the Borrowers incur less than $3,500,000
in capital expenditures during the third year of the Loan term, the dollar
limitation applicable to capital expenditures for the fourth year of the Loan
term will not be increased by any amount whatsoever.
Section 7.11 Lockbox Deposits. If a Lockbox shall have been established
----------------
pursuant to Section 11.2 of this Agreement, permit or cause any and all payments
required to be made directly to the Agent or any Lender pursuant to Section 11.2
of this Agreement to be made or directed to any other person or entity, without
the prior approval of the Agent.
Section 7.12 Shareholders Agreement; Merger Agreement; Etc., Suffer or
----------------------------------------------
permit any modification or amendment to (a) the Shareholders Agreement; (b) the
Subordination Agreement; (c) any of the Subordinated Notes; (d) any Securities
Purchase Agreement, or (e) the Merger Agreement.
Section 7.13 Transactions With Affiliates. Enter into or otherwise bind
----------------------------
any Borrower to any contract, agreement or other understanding with any person
or entity directly or indirectly related to, affiliated with or under common
control or ownership with any Borrower or any stockholder of any Borrower (other
than another Borrower), except upon fair and reasonable terms which are at least
as favorable to such Borrower as would be the case in a comparable, arm's-length
transaction with an unaffiliated and unrelated entity or person.
Section 7.14 Joint and Several Liability. Each Borrower acknowledges and
---------------------------
agrees that each Borrower shall be severally and jointly and severally liable
for each and every negative covenant set forth in this Article 7.
ARTICLE 8
---------
COLLATERAL ACCOUNT
------------------
Following the occurrence of an Event of Default, the Agent may require
that the Borrowers deposit or cause to be deposited into a collateral account
(the "Collateral Account") designated by the Agent, all checks, drafts, cash and
other remittances received by each Borrower, and the Borrowers shall deposit
such items for credit to the Collateral Account within one (1) Business Day of
the receipt thereof and in precisely the form received. Pending such deposit,
no Borrower will commingle any such items of payment with any of its other funds
or property, but will hold them separate and apart.
49
The Borrowers hereby covenant and agree that the Collateral Account shall
secure the Obligations and hereby grant, assign and transfer to the Agent, for
the ratable benefit of the Lenders, a continuing security interest in all of
each Borrower's right, title and interest in and to the Collateral Account.
Notwithstanding anything to the contrary under applicable state law, the Agent
may apply funds in the Collateral Account to any of the Obligations, including,
without limitation, any principal, interest or other payment(s) not made when
due, whether arising under this Loan Agreement and/or any other Loan Document,
or any other Obligation of any Borrower, without notice to the Borrowers,
without regard to the origin of the deposits in the account, the beneficial
ownership of the funds therein or whether such Obligations are owed jointly with
another or severally; the order and method of such application to be in the sole
discretion of the Agent. The Agent's right to deduct sums due under the Loan
Documents from the account(s) of the Borrowers shall not relieve any Borrower
from its obligation to make all payments required by the Loan Documents as and
when required by the Loan Documents, and the Agent shall not have any obligation
to make any such deductions or any liability whatsoever for any failure to do
so.
ARTICLE 9
---------
DEFAULT AND REMEDIES
--------------------
Section 9.1 Events of Default. Any one of the following events shall be
-----------------
an "Event of Default":
(a) if any Borrower shall fail to pay any principal, interest or
other sum owing on any of the Notes or any other Obligation when the same shall
become due and payable, whether by reason of acceleration or otherwise;
(b) if the Borrowers shall exceed the Maximum Borrowing Base and
fail, immediately upon the happening of any such occurrence, without notice or
demand therefor, to make a payment to the Agent, for the benefit of the
Lender(s), in an amount equal to or greater than the Borrowing Base Deficiency;
provided, however, that upon the occurrence of the circumstances described in
the last paragraph of Section 1.3 of this Agreement, the Borrowers shall not be
required to make an immediate payment, but rather, shall be required to make the
required payment within the time frame specified in the last paragraph of
Section 1.3 of this Agreement;
(c) if any Borrower shall fail to pay and satisfy in full, within
thirty (30) days of the rendering thereof, any judgment against such Borrower in
excess of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) which is
not, to the reasonable satisfaction of the Agent, fully bonded, stayed, covered
by insurance or covered by appropriate reserves;
50
(d) with respect to any warranty or representation expressly
qualified by a "materiality" standard set forth herein or in any other Loan
Document and made by any Borrower or any other person or entity on behalf of any
Borrower, if such warranty or representation shall be untrue in any respect when
made, including, without limitation, any information contained in any financial
statement, application, schedule, report or other document given by any Borrower
or any other person or entity on behalf of any Borrower in connection with any
of the Obligations or Loan Documents; and/or with respect to any warranty or
representation not expressly qualified with a "materiality" standard set forth
herein or in any other Loan Document and made by any Borrower or any other
person or entity on behalf of any Borrower, if such warranty or representation
shall be untrue in any material respect when made, including, without
limitation, any information contained in any financial statement, application,
schedule, report or other document given by any Borrower or any other person or
entity on behalf of any Borrower in connection with any of the Obligations or
Loan Documents;
(e) if there shall be non-compliance with or a breach of any of the
Affirmative Covenants or Negative Covenants contained in this Agreement, or any
other covenants or agreements of any Borrower, in any of the Notes or in any
other Loan Document;
(f) if (i) without the prior written consent of the Agent, any
Borrower shall be liquidated or dissolved or shall discontinue its business;
(ii) a trustee or receiver is appointed for any Borrower or for all or a
substantial part of its assets; (iii) any Borrower makes a general assignment
for the benefit of creditors; (iv) any Borrower files or is the subject of any
insolvency proceeding or petition in bankruptcy, which in the case of an
involuntary bankruptcy, remains undismissed for sixty (60) days; (v) any
Borrower shall become insolvent or at any time fail generally to pay its debts
as such debts become due; or (vi) any governmental agency or bankruptcy court or
other court of competent jurisdiction shall assume custody or control of the
whole or any material part of the assets of any Borrower;
(g) if any property or assets of any Borrower (including, without
limitation, any deposit accounts) having a value, individually or in the
aggregate, in excess of Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) are levied upon, attached or subject to any other enforcement
proceeding, which is not fully bonded or stayed within thirty (30) days of such
levy, attachment or other enforcement proceeding;
(h) if, except as otherwise expressly permitted pursuant to this
Agreement, any Borrower shall dissolve, merge or consolidate with another
entity, or reorganize, in each case without the prior written consent of the
Agent;
(i) if any obligation of any Borrower for the payment of borrowed
money, which involves amounts in excess of Fifty Thousand and No/100 Dollars
($50,000.00), whether now existing or hereafter created, incurred or arising,
becomes or is
51
declared to be due and payable prior to the expressed maturity thereof, whether
such obligation is owed to the Agent, any Lender or any other person or entity;
(j) if (i) there shall be a default under any Material Contract;
(ii) a notice of termination shall have been issued under any Material Contract
or Government Contract; or (iii) a cure notice issued under any Material
Contract or Government Contract shall remain uncured beyond (x) the expiration
of the time period available to the Borrower pursuant to such Material Contract,
Government Contract and/or such cure notice (as the case may be), to cure the
noticed default, or (y) the date on which the other contracting party is
entitled to exercise its rights and remedies under the Material Contract or
Government Contract as a consequence of such default;
(k) if (i) any Borrower is debarred or suspended from contracting
with any part of the Government; (ii) a notice of debarment or suspension shall
have been issued to any Borrower; or (iii) a notice of termination for default
or the actual termination for default of any Material Contract or Government
Contract shall have been issued to or received by any Borrower; or (iv) a
Government investigation or inquiry relating to any Borrower and involving
fraud, deception or willful misconduct shall have been commenced in connection
with any Government Contract or any Borrower's activities;
(l) if either the Agent or the Required Lenders are not satisfied in
their reasonable discretion, with the results of any field audit conducted by
the Agent or its agents;
(m) if any Borrower is in default under any Commercial Contract
involving amounts in excess of Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00);
(n) if either the Agent or the Required Lenders believe in good
faith there is a material adverse change in the business, assets, properties,
prospects, condition (financial or otherwise) of the Borrowers, taken as a
whole, or any of the Principal Borrowers;
(o) if the Borrower is in default under the Subordinated Notes, the
Securities Purchase Agreement, the Subordination Agreement, the Shareholders
Agreement or the Merger Agreement or a default by any party (other than the
Agent) shall occur under the Subordination Agreement; and/or
(p) if, except as otherwise expressly permitted pursuant to this
Agreement, any change in majority ownership or control of any Borrower's
business or operations shall occur.
Section 9.2 Remedies. Upon the occurrence of any Event of Default, the
--------
Agent, acting on behalf of the Lender(s), may exercise any or all of the
following remedies:
52
(a) Withhold disbursement of all or any part of the Loan proceeds
until such time that such Event of Default is cured to the satisfaction of the
Agent and no other Event of Default exists;
(b) Subject to the expiration of the applicable notice and cure
period set forth in subsection (c) below, terminate the obligation of the
Lender(s) to make further disbursements of the Loan proceeds;
(c) Declare all principal, interest and other sums owing on the
Obligations to be immediately due and payable without demand, protest, notice of
protest, notice of default, presentment for payment or further notice of any
kind; provided, however, that payments of amounts hereunder shall not be
accelerated by reason of (i) a default in the payment of any sum due and payable
hereunder or pursuant to any other Loan Document (a "Payment Default"), unless
such Payment Default remains uncured for five (5) Business Days (with no notice
of default being required); and (ii) a default other than a Payment Default (a
"Non-Payment Default"), unless such Non-Payment Default remains uncured for
twenty (20) days following notice thereof from the Agent to the Borrower.
Notwithstanding the foregoing, no notice of a Non-Payment Default shall be
required prior to acceleration or prior to the Agent or any Lender exercising
any other right or remedy under this Agreement or any other Loan Document, if
(i) the Agent in good faith believes that any such delay would adversely affect
the Agent's security or the Agent's lien priority or (ii) the default is a
violation of Section 6.3(c) or Section 6.15 of this Agreement;
(d) Without notice, offset and apply against all or any part of the
Obligations then owing by any Borrower to the Agent or any Lender, any and all
money, credits, stocks, bonds or other securities or property of any Borrower of
any kind or nature whatsoever on deposit with, held by or in the possession of
the Agent or any Lender in any capacity whatsoever, including, without
limitation, any deposits with the Agent or any Lender or any of its affiliates,
to the credit of or for the account of any Borrower. Notwithstanding any
applicable state law to the contrary (and without limiting the Agent's right,
for the convenience of the Borrowers, to charge any Borrower's account(s) for
any principal, interest or other sums payable pursuant to this Agreement, the
Notes or any other Loan Document when due), the Agent and/or any Lender is
authorized at any time to charge the Obligations against any Borrower's
account(s), without regard to the origin of deposits to the account or
beneficial ownership of the funds;
(e) Exercise all rights, powers and remedies of a secured party under
the Uniform Commercial Code in effect in the Commonwealth of Virginia, any other
jurisdiction in which the Collateral is located and/or any other applicable
law(s), including, without limitation, the right to (i) require the Borrowers to
assemble the Collateral (to the extent that it is movable) and make it available
to the Agent at a place to be designated by the Agent, and (ii) enter upon any
Borrower's premises, peaceably by the Agent's own means or with legal process,
and take possession of, render unusable or dispose of the
53
Collateral on such premises; each Borrower hereby agreeing not to resist or
interfere with any such action. The Agent agrees to give the Borrower written
notice of the time and place of any public sale of the Collateral or any part
thereof, and the time after which any private sale or any other intended
disposition of the Collateral is to be made, and such notice will be mailed,
postage prepaid, to the principal place of business of the Borrower, at least
ten (10) days before the time of any such sale or disposition, unless any
Applicable Law permits a shorter notice period. Each Borrower acknowledges and
agrees that the ten (10) day notice period (or shorter notice period permitted
by Applicable Law) is commercially reasonable. Each Borrower hereby authorizes
and appoints the Agent and its successors and assigns to (x) sell the
Collateral, and (y) declare that such Borrower assents to the passage of a
decree by a court of proper jurisdiction for the sale of the Collateral. Any
such sale pursuant to (x) or (y) above is to be made in accordance with the
applicable provisions of the laws and rules of procedure of the Commonwealth of
Virginia or other applicable law; and/or
(f) Proceed to enforce such other and additional rights and remedies
as the Agent and/or any Lender may have hereunder, and/or under any of the other
Loan Documents, or as may be provided by applicable law.
It is expressly understood and agreed that the Agent and/or any Lender
may exercise its respective rights under this Agreement or under any other Loan
Document without exercising the rights or affecting the security afforded by any
other Loan Document, and it is further understood and agreed that the Agent may
proceed against all or any portion of the Collateral in such order and at such
times as the Agent, in its sole discretion, sees fit; and each Borrower hereby
expressly waives, to the extent permitted by law, all benefit of valuation,
appraisement, marshaling of assets and all exemptions under the laws of the
Commonwealth of Virginia and/or any other state, district or territory of the
United States. Furthermore, if any Borrower shall default in the performance
when due of any of the provisions of this Agreement, the Agent, without notice
to or demand upon the Borrower (and without any grace or cure period) and
without waiving or releasing any of the Obligations or any default hereunder,
under the Notes or under any other Loan Document, may (but shall be under no
obligation to) perform the same for such Borrower's account, and any monies
expended in so doing shall be chargeable to the Borrowers with interest, at the
Default Rate, until the Event of Default is cured, and added to the indebtedness
secured by the Collateral.
All sums paid or advanced by the Agent or any Lender in connection with
the foregoing or otherwise in connection with the Loan, and all court costs and
expenses of collection, including without limitation, reasonable attorneys' fees
and expenses (and fees and expenses resulting from the taking, holding or
disposition of the Collateral) incurred in connection therewith shall be paid by
the Borrowers upon demand and shall become a part of the Obligations secured by
the Collateral. The Borrowers agree to bear the expense of each lien search,
property and judgment report or other form of Collateral ownership
54
investigation as the Agent in its discretion, shall deem necessary or desirable
to assure or further assure to the Agent its interests in the Collateral.
Notwithstanding anything to the contrary set forth in this Agreement or
any other Loan Document, in the event that any Collateral proceeds shall have
been received by the Agent to pay any of the Obligations, such proceeds shall be
applied first to the Obligations relating to, arising from or incurred in
connection with the transactions contemplated by this Agreement in accordance
with the terms and provisions of this Agreement, and then to any other
Obligations of any Borrower.
ARTICLE 10
----------
THE AGENT; AGENCY
-----------------
Section 10.1 Appointment. Each Lender hereby irrevocably appoints First
-----------
Union to act as the Agent for each such Lender pursuant to the provisions of
this Agreement and the other Loan Documents, and irrevocably authorizes the
Agent to take such action, and exercise such powers and perform such duties as
are expressly delegated to or required of the Agent by the terms hereof or
thereof, or are reasonably incidental thereto, including without limitation,
executing documents on behalf of the Lender(s), as agent. First Union agrees to
act as Agent on behalf of the Lender(s) on the terms and conditions set forth in
this Agreement and the other Loan Documents, subject to its right to resign as
provided in Section 10.10 of this Agreement. Each Lender agrees that the rights
and remedies granted to the Agent under this Agreement and the other Loan
Documents shall be exercised exclusively by the Agent, and that no Lender shall
have the right individually to exercise any such right or remedy, except to the
extent expressly provided herein or therein.
Section 10.2 General Nature of the Agent's Duties. Notwithstanding
------------------------------------
anything to the contrary elsewhere in this Agreement or any other Loan Document:
(a) The Agent shall have no duties or responsibilities other than
those expressly set forth in this Agreement and the other Loan Documents, and no
implied duties or responsibilities on the part of the Agent shall be read into
this Agreement or any other Loan Document or shall otherwise exist.
(b) The duties and responsibilities of the Agent under this Agreement
and the other Loan Documents shall be mechanical and administrative in nature,
and the Agent shall not have a fiduciary relationship in respect of any Lender,
except with respect to funds or collateral it receives on behalf of any Lender.
(c) The Agent is and shall be solely the agent of the Lender(s). The
Agent does not assume, and shall not at any time be deemed to have, any
relationship of
55
agency or trust with or for, or any other duty or responsibility to, any
Borrower or any other person.
(d) The Agent shall be under no obligation to take any action
hereunder or under any other Loan Document if the Agent believes in good faith
that taking such action may conflict with any applicable law, or any provision
of this Agreement or any other Loan Document, or may require the Agent to
qualify to do business in any jurisdiction where it is not then so qualified.
Section 10.3 Exercise of Powers.
------------------
(a) The Agent shall have the authority to take any action of the
type specified in this Agreement or any other Loan Document as being within the
Agent's rights, powers or discretion, as it determines in its sole discretion,
except as provided in subsection (b) below, and except as provided in any other
Loan Document which expressly requires the direction or consent of (i) the
Required Lenders; or (ii) all of the Lenders, in either of which circumstances
the Agent shall not take such action absent such direction or consent. Any
action or inaction pursuant to such direction or consent shall be binding on all
of the Lenders.
(b) Except as otherwise expressly provided in this Agreement,
without the consent or approval of the Required Lenders, the Agent shall not, in
any material respect, amend, modify, grant consents or waive terms or provisions
of this Agreement or any other Loan Document (each, an "Amendment" and
collectively, "Amendments"), or declare an Event of Default, provide formal
written notice of an Event of Default to the Borrowers or exercise any rights or
remedies against any Borrower. Each Lender agrees that its decision to consent
to or reject any request by the Agent for any Amendment or for permission to
declare an Event of Default, provide formal notice thereof to the Borrowers
and/or exercise any rights or remedies arising by virtue of such default, shall
be made as soon as reasonably practicable after the Agent has provided all
information reasonably necessary to act on any such request, but in all events
within fifteen (15) Business Days of the receipt of such information; provided,
however, that in an emergency situation, the Agent may require the Lenders to
respond within such shorter time period as may be specified by the Agent in
writing, but in no event less than five (5) Business Days from the receipt of
such information. Unless otherwise provided herein, the Agent shall exercise any
and all rights and responsibilities on behalf of the Lenders in connection with
an Event of Default. Additionally, the consent or approval of all of the Lenders
shall be required for the Agent to (a) extend the final maturity of the Loan or
any Note, reduce the interest rate payable on or extend the time of payment for
any installment of principal, interest or fees payable in connection with the
Loan, or issue Letters of Credit (i) having an expiration date beyond the
Revolving Facility Maturity Date, except as otherwise expressly provided in this
Agreement, or (ii) causing the aggregate outstanding amount of all such Letters
of Credit issued to exceed Five Million Dollars ($5,000,000); (b) change the
Percentage of the Commitment Amount of any Lender, (c) release all or a
substantial portion of the
56
Collateral, except in accordance with the provisions of any applicable Loan
Document, (d) amend the definition of the Required Lenders or Maximum Borrowing
Base, expand the definitions of Eligible Billed Government Accounts Receivable,
Eligible Billed Commercial Accounts Receivable and/or Eligible Unbilled
Government Costs, or limit the definition of Ineligible Receivables, (e) consent
to the assignment or transfer by any Borrower of any of its rights or
obligations hereunder, (f) amend, modify or waive any provisions of this Section
10.3, (g) change the manner of application by the Agent of payments made under
the Loan Documents, or (h) change the method of calculation used in connection
with the computation of interest, commissions or fees. Each Lender agrees that
its decision to approve or reject any request for an amendment or waiver with
respect to this Agreement shall be made as soon as reasonably practicable after
the Lender has received all information deemed by the Agent to be necessary to
act on any such request. Notwithstanding anything to the contrary set forth in
this Article 10, (i) if at any time the vote of all of the Lenders shall be
required under this Agreement, then the vote of all of the Lenders (other than
Mass Mutual, acting in its capacity as a Note "B" Holder) shall be necessary,
except for any reduction to the interest rate payable under the Term Facility
"B" Note, any extension of the Term Facility "B" Maturity Date or any change to
the manner in which Mandatory Payments are to be applied to the Facilities (as
set forth in Section 1.5 of this Agreement), in which event the vote of all of
the Lenders (including Mass Mutual, acting in its capacity as a Note "B" Holder)
shall be required; and (ii) with respect to matters requiring the vote of the
Required Lenders, so long as Mass Mutual and First Union are not the only Lender
parties hereto and the Percentage of Mass Mutual (acting in its capacity as a
Note "B" Holder) and First Union (acting in its capacity as a Lender) equals or
exceeds, in the aggregate, fifty-one percent (51%) of the aggregate Commitment
Amount, such Percentages shall not be included in the calculation of the
required fifty-one percent (51%) of the aggregate Commitment Amount unless one
(1) of the other Lenders (excluding any Lender which is a subsidiary or
affiliate of, or related to, Mass Mutual or First Union) votes in the same
manner as Mass Mutual or First Union.
Section 10.4 General Exculpatory Provisions. Notwithstanding anything to
------------------------------
the contrary elsewhere in this Agreement or any other Loan Document:
(a) The Agent, in its capacity as Agent (but not as a Lender), shall
not be liable for any action taken or omitted to be taken by it under or in
connection with this Agreement or any other Loan Document, unless the same
constitutes gross negligence or willful misconduct, as finally determined by a
court of competent jurisdiction.
(b) The Agent, in its capacity as the Agent (but not a Lender), shall
not be responsible for (i) the execution, delivery, effectiveness,
enforceability, genuineness, validity or adequacy of this Agreement or any other
Loan Document, (ii) any recital, representation, warranty, document,
certificate, report or statement in this Agreement or any other Loan Document,
(iii) any failure of any Borrower or any Lender to perform any of their
respective obligations under this Agreement or any other Loan Document, (iv) the
existence, validity, enforceability, perfection, recordation, priority, adequacy
or value, now
57
or hereafter, of any lien or encumbrance or other direct or indirect security
afforded or purported to be afforded by any of the Loan Documents, or otherwise
from time to time, or (v) caring for, protecting, insuring or paying any taxes,
charges or assessments with respect to any Collateral.
(c) The Agent shall be under no obligation to ascertain, inquire or
give any notice relating to (i) the performance or observance of any of the
terms or conditions of this Agreement or any other Loan Document on the part of
any Borrower, (ii) the business, operations, condition (financial or otherwise)
or prospects of any Borrower, or (iii) except to the extent as may be set forth
in Section 10.5(f) of this Agreement, the existence of any Event of Default.
(d) The Agent shall be under no obligation, either initially or on a
continuing basis, to provide any Lender with any notices, reports or information
of any nature, whether in its possession presently or hereafter, except for such
notices, reports and other information expressly required by this Agreement or
any other Loan Document to be furnished by the Agent to such Lender; it being
understood and agreed that the Agent shall promptly deliver to each Lender
copies of any and all notices, documents, instruments and agreements deemed by
the Agent, in its reasonable discretion, to be material to the transactions
contemplated by this Agreement (including, without limitation, copies of any and
all field audit results and requests for the issuance of any Letter(s) of
Credit).
Section 10.5 Administration by the Agent.
---------------------------
(a) The Agent may rely upon any notice or other communication of any
nature (written or oral, including telephone conversations, whether or not such
notice or other communication is made in a manner permitted or required by this
Agreement or any other Loan Document) purportedly made by or on behalf of the
proper party or parties, and the Agent shall have no duty to verify the identity
or authority of any person giving such notice or other communication.
(b) The Agent may consult with legal counsel (including in-house
counsel for the Agent), independent public accountants and any other experts
selected by the Agent from time to time, and the Agent shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts.
(c) The Agent may conclusively rely upon the truth of the statements
and the correctness of the opinions expressed in any certificates or opinions
furnished to the Agent in accordance with the requirements of this Agreement or
any other Loan Document. Whenever the Agent shall deem it necessary or desirable
that a matter be proved or established with respect to any Borrower or any
Lender, such matter may (in the Agent's discretion) be established by a
certificate of such Borrower or such Lender, as the case may be, and the Agent
may conclusively rely upon such certificate.
58
(d) The Agent may fail or refuse to take any action unless it shall
be indemnified to its reasonable satisfaction from time to time against any and
all amounts, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of every kind and nature
which may be imposed on, incurred by or asserted against the Agent by reason of
taking or continuing to take any such action; provided that no Lender shall be
obligated to indemnify the Agent for any portion of such amounts, liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements resulting solely from the gross negligence or willful
misconduct of the Agent, as finally determined by a court of competent
jurisdiction.
(e) The Agent may perform any of its duties under this Agreement or
any other Loan Document by or through agents or attorneys-in-fact. The Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
(f) In the event that any Lender becomes aware (other than by written
notice from the Agent) that an Event of Default exists, such Lender shall
promptly provide written notice thereof to the Agent, as provided hereinbelow.
The Agent shall not be deemed to have any knowledge or notice of the occurrence
of any Event of Default (other than a default in the payment of regularly
scheduled principal or interest), unless the Agent has received from a Lender or
any Borrower a written notice referring to this Agreement, describing the Event
of Default, and stating that such notice is a "notice of default." If the Agent
receives such a notice from any Lender or Borrower, the Agent shall give prompt
notice thereof to each Lender.
(g) Except in emergency situations requiring immediate audits, as
determined by the Agent, the Agent shall provide three (3) Business Days prior
notice to the Lender(s) of any field audit scheduled to be performed by the
Agent pursuant to Section 1.6 of this Agreement. The Lender(s) shall be entitled
to (i) receive copies of field audits performed by the Agent, and (ii) accompany
the Agent to any field audit, provided that the Agent may, in its discretion,
limit the number of Lenders attending any such field audit.
Section 10.6 Lenders Not Relying on the Agent or Other Lenders. Each
-------------------------------------------------
Lender acknowledges as follows:
(a) Neither the Agent nor any other Lender has made any
representations or warranties to it, and no act taken hereafter by the Agent or
any other Lender shall be deemed to constitute any representation or warranty by
the Agent or such other Lender to it.
(b) It has, independently and without reliance upon the Agent or any
other Lender, and based upon such documents and information as it has deemed
59
appropriate, made its own credit and legal analysis and decision to enter into
this Agreement and the other Loan Documents.
(c) It will, independently and without reliance upon the Agent or any
other Lender, and based upon such documents and information as it shall deem
appropriate at the time, make its own decisions to authorize the Agent to take
or not take action under or in connection with this Agreement and the other Loan
Documents.
Section 10.7 Indemnification. Each Lender agrees to reimburse and
---------------
indemnify the Agent and the Agent's directors, officers, employees and agents
(to the extent not reimbursed by any Borrower, and without limitation of the
obligation of the Borrowers to do so), ratably in accordance with each Lender's
Percentage, from and against any and all amounts, losses, liabilities, claims,
damages, expenses, obligations, penalties, actions, judgments, suits, costs and
disbursements of every kind or nature (including the reasonable fees and
disbursements of counsel for the Agent or such other person in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not the Agent or such other person shall be designated a
party thereto) that may at any time be imposed on, reasonably incurred by or
asserted against the Agent or such other person as a result of this Agreement,
any other Loan Document, any transaction from time to time contemplated hereby
or thereby, or any transaction financed in whole or in part, directly or
indirectly, with the proceeds of the Loan; provided that no Lender shall be
--------
obligated to indemnify the Agent or such other person for any portion of such
amounts, losses, liabilities, claims, damages, expenses, obligations, penalties,
actions, judgments, suits, costs or disbursements resulting solely from the
gross negligence or willful misconduct of the person seeking indemnity, as
finally determined by a court of competent jurisdiction.
Section 10.8 The Agent in its Individual Capacity. With respect to its
------------------------------------
commitments and the Obligations owing to it, First Union shall have the same
rights and powers under this Agreement and each other Loan Document as any other
Lender, and may exercise the same as though it was not the Agent. The terms
"Lender," "holders of Notes" and like terms shall include First Union in its
individual capacity. First Union and its affiliates may make loans to, accept
deposits from, acquire debt or equity interests in, act as trustee under
indentures of and engage in any other business with any Borrower and any
stockholder, subsidiary or affiliate of any Borrower, as though First Union was
not the Agent hereunder, and without liability to account to any other Lender
with respect to the same.
Section 10.9 Holders of Notes. The Agent may deem and treat any Lender
----------------
which is the payee of a Note as the owner and holder of such Note for all
purposes hereof unless and until written notice evidencing such transfer shall
have been filed with the Agent; it being understood and agreed that any such
transfer must comply with the requirements of Section 12.10(b) of this
Agreement. Any authority, direction or consent of any person who at the time of
giving such authority, direction or consent was a Lender
60
shall be conclusive and binding on each present and subsequent holder,
transferee or assignee of any Note or Notes payable to such Lender or issued in
exchange therefor.
Section 10.10 Successor Agent. The Agent may resign at any time by giving
---------------
fifteen (15) days prior written notice thereof to the Lender(s) and the
Borrower, subject to appointment of a successor Agent (and such appointees
acceptance of appointment) as below provided in this Section 10.10. Upon any
such resignation, the Required Lenders shall appoint another Lender as the
successor Agent; provided that such Lender is a commercial bank or trust company
organized under the laws of the United States of America or any State thereof
and has a combined capital and surplus of at least $1,000,000,000. In such
event, the Agent's resignation shall not be effective until the successor Agent
shall have accepted its appointment. Upon the acceptance by a successor Agent
of its appointment as Agent hereunder, such successor Agent shall thereupon
succeed to and become vested with all of the properties, rights, powers,
privileges and duties of the former Agent, without further act, deed or
conveyance. Upon the effective date of resignation of a retiring Agent, such
Agent shall be discharged from its duties under this Agreement and the other
Loan Documents, but the provisions of this Agreement shall continue to inure to
its benefit as to any actions taken or omitted by it while it was Agent under
this Agreement. If for any reason, at any time, there is no Agent hereunder,
then during such period, the Required Lenders shall have the right to exercise
the Agent's rights and perform its duties hereunder, except that (i) all notices
or other communications required or permitted to be given to the Agent shall be
given to each Lender, and (ii) with respect to the absence of the Agent, all
payments to be made to the Agent shall be made directly to the Lender for whose
account such payment is made (or to the Borrowers, if applicable).
Section 10.11 Additional Agents. If the Agent shall from time to time deem
-----------------
it necessary or advisable to engage other agents for its own protection in the
performance of its duties hereunder or in the interests of the Lenders, then the
Agent and the Borrowers shall execute and deliver a supplemental agreement and
all other instruments and agreements necessary or advisable, in the opinion of
the Agent, to constitute another commercial bank or trust company, or one or
more other persons approved by the Agent, to act as co-Agent or a separate agent
with respect to any part of the Collateral, with such powers as may be provided
in such supplemental agreement, and with the power to vest in such bank, trust
company or other person (as such co-Agent or separate agent, as the case may
be), any properties, rights, powers, privileges and duties of such Agent under
this Agreement or any other Loan Document.
Section 10.12 Calculations. The Agent shall not be liable for any
------------
calculation, apportionment or distribution of payments made by it in good faith.
If such calculation, apportionment or distribution is subsequently determined to
have been made in error, the sole recourse of any Lender to whom payment was due
but not made shall be to recover from the Lenders any payment in excess of the
amount to which they are determined to be entitled, with interest thereon at the
Federal Funds Rate, or, if the amount due was not
61
paid by the Borrowers, to recover such amount from the Borrowers, with interest
thereon at the rate provided in the applicable Note.
Section 10.13 Funding by Agent.
----------------
(a) Except as otherwise expressly provided in this Agreement, the
Agent alone be entitled to make all advances in connection with the Loan and
shall receive all payments and other receipts relating to the Loan; it being
understood, however, that the Agent has reserved the right not to advance any
amounts to the Borrowers which the Agent has not received from the Lender(s).
The Agent will notify each Lender of the date and amount of any requested
advance, and if such notification is received by 1:00 p.m. Washington, D.C. time
on any given Business Day, the Lender(s) shall provide the required funds to the
Agent no later than the close of business on such Business Day. Once per week,
or within such shorter time frame as may be requested by the Agent, the Agent
and each Lender shall pay to each other such amounts (the "Equalization
Payments") as may be necessary to cause each Lender to own its applicable
Percentage of the Loan and otherwise implement the terms and provisions of this
Agreement; it being understood that (i) each Lender shall be entitled to receive
interest on amounts advanced by it only from the date of such Lender's advance
of funds; (ii) payments made by the Borrowers and received by the Agent shall be
promptly distributed to the Lenders in accordance with the terms of this
Agreement; and (iii) LIBOR advances and payments of amounts outstanding on a
LIBOR basis shall be made by and between the Agent and the applicable Lenders on
a same day basis, provided that the applicable Request for Advance, LIBOR
Election Form and Certification and/or payment of amounts outstanding on a LIBOR
basis shall have been received by the Agent on or before 1:00 p.m. Washington,
D.C. time on any given Business Day. The obligation of the Agent and each Lender
to make Equalization Payments shall not be affected by a bankruptcy filing by
any Borrower, the occurrence of any Event of Default or any other act,
occurrence or event whatsoever, whether the same occurs, before, on or after the
date on which an Equalization Payment is required to be made. All Equalization
Payments shall be made by 1:00 p.m. Washington, D.C. time on the date such
payment is required.
(b) Unless the Agent shall have been notified in writing by any
Lender no later than the close of business on the Business Day before the
Business Day on which an advance requested by the Borrowers is to be made, that
such Lender will not make its ratable share of such advance, the Agent may
assume that such Lender will make its ratable share of the advance, and in
reliance upon such assumption the Agent may (but in no circumstances shall be
required to) make available to the Borrowers a corresponding amount. If and to
the extent that any Lender fails to make such payment to the Agent when
required, such Lender shall pay such amount on demand (or, if such Lender fails
to pay such amount on demand, the Borrowers shall arrange for the repayment of
such amount to the Agent), together with interest for the Agent's own account
for each day from and including the date of the Agent's payment, to and
including the date of repayment to the Agent (before and after judgment).
Interest (a) if paid by such Lender
62
(i) for each day from and including the date of the Agent's payment to and
including the second Business Day thereafter, shall accrue at the Federal Funds
Rate for such day, and (ii) for each day thereafter, shall accrue at the rate or
rates per annum payable under the Notes; and (b) if paid by the Borrowers, shall
accrue at the rate or rates per annum payable under the Notes. All payments to
the Agent under this Section shall be made to the Agent at its office set forth
in the preamble of this Agreement (or as otherwise directed by the Agent), in
dollars, in immediately available funds, without set-off, withholding,
counterclaim or other deduction of any nature.
(c) All borrowings under this Agreement shall be incurred from the
Lenders pro rata on the basis of their respective Percentages of the applicable
Facility (except to the extent advanced (i) as a Swing Line Loan, or (ii) by the
Agent on behalf of any Lender as provided in subsection (a) or (b) above). It is
understood that no Lender shall be responsible for any other Lender's failure to
meet its obligation to make advances hereunder, and that each Lender shall be
obligated to make advances required to be made by it hereunder regardless of the
failure of any other Lender to make its advances hereunder.
(d) Each payment and prepayment received by the Agent for the account
of the Lenders shall be distributed first to the Swing Line Lender for
application to any Swing Line Outstandings, and then to each Lender entitled to
share in such payment, ratably in accordance with each Lender's Percentage;
provided, however, that (i) any payment or prepayment made with respect to
amounts outstanding under any Term Facility shall not be distributed first to
the Swing Line Lender for application to any Swing Line Outstandings; (ii) any
payment received by the Agent after the Acceleration Date shall be distributed
first to the Swing Line Lender for application to any Swing Line Outstandings,
and then to each Lender entitled to share in such payment, ratably based on the
aggregate outstanding principal amount of the Loans funded by such Lender,
together with any and all accrued and unpaid interest thereon, and (iii) any
Lender who shall be in default of its obligations set forth in this Agreement or
any other Loan Document or who has failed to fund its Percentage of any advance
under the Loan shall not be entitled to share in any such payment(s) until such
time as such default has been cured or such failure to fund, together with
interest thereon (as provided in subsection (b) above), has been paid to the
Agent in accordance with the terms and conditions of this Agreement or cured (as
the case may be). Payments from the Agent to the Lenders shall be made by wire
transfer in accordance with written instructions provided to the Agent by the
Lenders from time to time. Unless the Agent shall have received notice from the
Borrowers prior to the date on which any payment is due to the Lenders hereunder
that the Borrowers will not make such payment in full, the Agent may assume that
the Borrowers have made such payment in full on such date and the Agent, in
reliance upon such assumption, may cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent the Borrowers shall not have made such payment in full to the Agent, each
Lender shall repay to the Agent upon its demand therefor such amount distributed
to such Lender, together with interest thereon at the overnight Federal Funds
Rate for each
63
day from the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Agent.
(e) If any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of setoff, or otherwise) in
excess of such Lender's Percentage of payments, such Lender shall forthwith
purchase from the other Lender(s) such participations in the Loans made by them
as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of the other Lender(s); provided, however, if all or
any portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from the other Lender(s) shall be rescinded and each other
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery, together with an amount equal to such Lender's ratable share
(according to the proportion of (1) the amount of such Lender's required
repayment, to (2) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount recovered. The Borrowers agree that any Lender purchasing a
participation from another Lender pursuant to this Section 10.13(e), to the
fullest extent permitted by law, may exercise all of its rights of payment with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrowers in the amount of such participation.
Section 10.14 Benefit of Article. The provisions of this Article 10 are
------------------
solely for the benefit of the Lenders. The Borrowers shall have no rights under
(or rights to require any Lender's compliance with) any of the provisions of
this Article 10; it being understood that the provisions of this Article 10 are
not in limitation of any right, power, duty, obligation or liability which the
Agent would have to or against any Borrower.
ARTICLE 11
----------
CERTAIN ADDITIONAL RIGHTS AND
OBLIGATIONS REGARDING THE COLLATERAL
------------------------------------
Section 11.1 Power of Attorney. Each Borrower hereby irrevocably appoints
-----------------
the Agent as its agent and attorney-in-fact, with power of substitution, having
full power and authority, in its own name, in the name of any Borrower or
otherwise (but at the cost and expense of the Borrowers and without notice to
the Borrowers), to (i) notify account debtors obligated on any of the
Receivables to make payments thereon directly to the lockbox referenced in
Section 11.2 (if the lockbox shall have been established as required pursuant to
Section 11.2 of this Agreement), and to take control of the cash and non-cash
proceeds of any such Receivables, which right the Agent may exercise at any time
whether or not any Borrower is then in default hereunder or was theretofore
making collections thereon; (ii) charge against any bank account of any Borrower
any item of payment credited to the Collateral Account which is dishonored by
the drawee or the maker thereof; (iii) upon an Event of Default, compromise,
extend or renew any of the Collateral constituting Receivables or deal with any
of the Collateral as the Agent may deem
64
advisable; (iv) upon an Event of Default, release its interest in, make
exchanges or substitutions for and/or surrender, all or any part of any
Borrower's interest in all or any part of the Collateral; (v) upon an Event of
Default, remove from any Borrower's place(s) of business all books, records,
ledger sheets, correspondence, invoices and documents relating to or evidencing
any of the Collateral, or without cost or expense to the Agent or any Lender,
make such use of any Borrower's place(s) of business as may be reasonably
necessary to administer, control and/or collect the Collateral; (vi) upon an
Event of Default, repair, alter or supply goods, if any, necessary to fulfill in
whole or in part the purchase order of any Account Debtor; (vii) demand, collect
receipt for and upon an Event of Default, give renewals, extensions, discharges
and releases of all or any part of the Collateral; (viii) upon an Event of
Default, institute and prosecute legal and equitable proceedings to enforce
collection of, or realize upon, all or any part of the Collateral; (ix) upon an
Event of Default, settle, renew, extend, compromise, compound, exchange or
adjust claims with respect to all or any part of the Collateral or any legal
proceedings brought with respect thereto; and (x) receive and open all mail
addressed to any Borrower, and if an Event of Default exists hereunder, notify
the Post Office authorities to change the address for the delivery of mail to
any Borrower to such address as the Agent may designate; it being understood
that the rights granted to the Agent in this clause (x), which are operative on
the occurrence of an Event of Default, shall not in any way limit or impair the
other rights provided to the Agent or any Lender in this Agreement or any other
Loan Document, including, without limitation, their rights with respect to the
Collateral Account and the below-referenced lockbox. Furthermore, each Borrower
hereby irrevocably appoints the Agent as its agent and attorney-in-fact, with
power of substitution, having full power and authority, in its own name, in the
name of the Agent, in the name of such Borrower or otherwise (but at the cost
and expense of the Borrowers and without notice to the Borrowers) and regardless
of whether an Event of Default has occurred or any act, event or condition which
with notice or the lapse of time, or both, would constitute an Event of Default
has occurred, to (a) file financing statements and continuation statements
covering the Collateral and execute the same on behalf of any Borrower; (b)
charge against any banking account of any Borrower any item of payment credited
to any Borrower's account which is dishonored by the drawee or maker thereof;
and/or (iii) endorse the name of any Borrower upon any items of payment relating
to the Collateral or upon any proof of claim in bankruptcy against any Account
Debtor.
Section 11.2 Lockbox. Each Borrower agrees that, upon the Agent's request
-------
following the occurrence of an Event of Default which has continued unremedied
beyond any applicable notice and/or cure period, the Borrowers shall establish
and continually maintain on terms and conditions reasonably satisfactory to the
Agent, one or more lockboxes (and, if required by the Agent, one or more blocked
accounts) for the collection of Receivables. Each Borrower hereby authorizes the
Agent to receive and collect any amount or amounts due or to become due on
account of any Receivables following the occurrence of an Event of Default and,
at its discretion, to apply the same to the repayment of the Notes. Except as
otherwise may be approved by the Agent in writing, any checks or other
remittances received by any Borrower in payment of the Receivables shall be held
in
65
trust by such Borrower for the Agent and Lender(s). Each Borrower shall, in
writing, within thirty (30) days from the date the Agent shall have requested
that one or more lockboxes be established and maintained, direct all of its
customers (other than certain customers as may be approved by the Agent in
writing) to make payments directly to the Agent pursuant to the form of Payment
Direction Letter attached as Exhibit 8 hereto, and shall include on all of its
---------
invoices, a direction to its customer to make all payments directly to the
lockbox designated by the Agent in writing.
Section 11.3 Other Agreements. Except as may otherwise be expressly
----------------
permitted by the terms of this Agreement, and without limiting any other
restrictions or provisions of this Agreement, each Borrower will (i) on demand,
subject to any confidentiality and secrecy requirements imposed by any
Government agency, make available in form reasonably acceptable to the Agent,
shipping documents and delivery receipts evidencing the shipment of goods which
gave rise to the sale or lease of inventory or of an account, contract right or
chattel paper, completion certificates or other proof of the satisfactory
performance of services which gave rise to the sale or lease of inventory or of
an account, contract right or chattel paper, and each Borrower's copy of any
written contract or order from which a sale or lease of inventory, an account,
contract right or chattel paper arose; and (ii) when requested, advise the Agent
when an Account Debtor returns or refuses to retain any goods, the sale or lease
of which gave rise to an account, contract right or chattel paper, and of any
delay in delivery or performance, or claims made in regard to any sale or lease
of inventory, account, contract right or chattel paper. Upon reasonable notice,
all such records will be available for examination by authorized agents of the
Agent.
It is expressly understood and agreed, however, that neither the Agent nor
any Lender shall be required or obligated in any manner to make any inquiries as
to the nature or sufficiency of any payment received by it or to present or file
any claims or take any other action to collect or enforce a payment of any
amounts which may have been assigned to it or to which it may be entitled
hereunder at any time or times.
ARTICLE 12
----------
MISCELLANEOUS
-------------
Section 12.1 Remedies Cumulative. Each right, power and remedy of the
-------------------
Agent and/or Lender(s) provided for in this Agreement or in any other Loan
Document or now or hereafter existing at law or in equity, by statute or
otherwise, shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy provided for in this Agreement or in any other Loan
Document, or now or hereafter existing at law or in equity, by statute or
otherwise, and the exercise or beginning of the exercise by the Agent and/or any
Lender of any one or more of such rights, powers or remedies shall not
66
preclude the simultaneous or later exercise by the Agent and/or any Lender of
any or all such other rights, powers or remedies.
Section 12.2 Waiver. No failure or delay by the Agent or any Lender to
------
insist upon the strict performance of any term, condition, covenant or agreement
set forth in this Agreement or any other Loan Document, or to exercise any
right, power or remedy consequent upon a breach thereof, shall constitute a
waiver of such term, condition, covenant or agreement or of any such breach, or
preclude the Agent or any Lender from exercising any such right, power or remedy
at any later time or times. By accepting payment after the due date of any of
the Obligations, neither the Agent nor any Lender shall be deemed to have waived
either the right to require prompt payment when due of all other Obligations, or
the right to declare a default for failure to make payment of any such other
Obligations.
Section 12.3 Notices. Notices to any party shall be in writing and shall
-------
be delivered personally or by first-class mail or nationally-recognized
overnight delivery service addressed to the parties at the addresses set forth
below or otherwise designated in writing:
If to the Borrowers: AverStar, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Chief Executive Officer
If to the Agent: First Union Commercial Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Director
If to the Lender(s): First Union Commercial Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Director
and to the other Lender parties hereto from time
to time
with a copy of all
notices to the Agent
and/or Lender to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
67
with a copy of all
notices to the
Borrowers to: ▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Section 12.4 Entire Agreement. This Agreement and the other Loan
----------------
Documents constitute the entire agreement of the parties with respect to the
Loan and supersede all prior agreements and understandings (except that the
terms and provisions set forth in (i) the Commitment Letter and attached term
sheet with respect to the right of First Union and/or First Union Capital
Markets Corp., exercisable in connection with its syndication of the Loan, to
alter or amend the Loan, including, but not limited to any change in structure,
pricing, financial covenants or maturity of the Loan, and the Borrowers'
agreement to develop an alternative structure with First Union and/or First
Union Capital Markets Corp. that will permit syndication of the Loan to the
satisfaction of First Union and/or First Union Capital Markets Corp., and (ii)
the Fee Letter, shall in each case survive the execution and delivery of this
Agreement). This Agreement and the other Loan Documents shall continue in full
force and effect for so long as any Borrower shall be indebted hereunder or
under any Note, and thereafter until the Agent shall have actually received
written notice of the termination hereof from the Borrowers and all Obligations
incurred or contracted before receipt of such notice shall have been fully paid.
Section 12.5 Relationship of the Parties. This Agreement provides for the
---------------------------
extension of financial accommodations by the Lender(s), in their capacity as
lender, to each Borrower, in its capacity as a borrower, and for the payment of
interest and repayment of the Obligations by the Borrowers. Certain provisions
herein, such as those relating to compliance with the financial covenants,
delivery to the Agent and/or Lender(s) of financial statements, and compliance
with other affirmative and negative covenants are for the benefit of the
Lender(s) to protect the interests of the Lender(s) in assuring repayment of the
Obligations. Nothing contained in this Agreement shall be construed as
permitting or obligating the Agent or any Lender to act as a financial or
business advisor or consultant to any Borrower, as permitting or obligating the
Agent or any Lender to control any Borrower or to conduct any Borrower's
operations, as creating any fiduciary obligation on the part of the Agent or any
Lender to any Borrower, or as creating any joint venture, agency or other
relationship between the parties other than as explicitly and specifically
stated in this Agreement. Each Borrower acknowledges that it has had the
opportunity to obtain the advice of experienced counsel of its own choosing in
connection with the negotiation and execution of this Agreement and to obtain
the advice of such counsel with respect to all matters contained herein,
including, without limitation, the provision in this Agreement for waiver of
trial by jury. Each Borrower further acknowledges that it is experienced with
respect to financial and credit matters and has made its own independent
decision to request the Obligations and execute and deliver this Agreement.
68
Section 12.6 Waiver of Jury Trial; Punitive Damages. Each Borrower
--------------------------------------
hereby (a) covenants and agrees not to elect a trial by jury of any issue
triable by a jury, and (b) waives any right to trial by jury and any right to
claim punitive damages, in each case, fully to the extent that any such right
shall now or hereafter exist. This waiver of right to trial by jury and right to
claim punitive damages is separately given by each Borrower, knowingly and
voluntarily, and this waiver is intended to encompass individually each instance
and each issue as to which the right to a jury trial or any claim of punitive
damages would otherwise accrue. The Agent or any Lender is hereby authorized and
requested to submit this Agreement to any court having jurisdiction over the
subject matter and the parties hereto, so as to serve as conclusive evidence of
the Borrower's herein contained waiver of the right to jury trial and any right
to claim punitive damages. Further, each Borrower hereby certifies that no
representative or agent of the Agent or any Lender (including counsel for the
Agent and/or and Lender) has represented, expressly or otherwise, to the
undersigned that the Agent or any Lender will not seek to enforce this provision
waiving the right to a trial by jury or any right to claim punitive damages.
Section 12.7 Submission to Jurisdiction; Service of Process; Venue. Any
-----------------------------------------------------
judicial proceeding brought against any Borrower with respect to this Agreement
or any other Loan Document may be brought in any court of competent jurisdiction
in the Commonwealth of Virginia, and by execution and delivery of this
Agreement, each party accepts for themselves and in connection with their
properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid court, and irrevocably agree to be bound by any judgment rendered by
such court in connection with this Agreement. Each Borrower irrevocably
designates and appoints AverStar whose address is ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as its agent to receive on its behalf service of all
process in any such proceeding in any court in the Commonwealth of Virginia,
such service being hereby acknowledged by each Borrower to be effective and
binding on it in every respect. A copy of any such process so served shall be
mailed by registered or certified mail to the Borrowers at the address to which
notices are to be addressed in accordance with this Agreement, except that any
failure to mail such copy shall not affect the validity of service of process.
Each Borrower shall at all times maintain an agent for service of process
pursuant to this provision. If any Borrower fails to appoint such an agent, or
if such agent refuses to accept service, such Borrower hereby agrees that
service upon it by mail shall constitute sufficient notice. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of the Agent or any Lender to bring proceedings against any
Borrower in the courts of any other jurisdiction.
Section 12.8 Changes in Capital Requirements. If after the date of this
-------------------------------
Agreement any Lender shall determine that the adoption of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof, or compliance by such
Lender with any request or directive regarding capital adequacy of any
authority, central bank or comparable agency, which adoption, change or
compliance has or would have the effect of reducing the rate of return on such
Lender's capital as a consequence of such Lender's obligations hereunder to
69
a level below that which such Lender could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's policies with
respect to capital adequacy), then the interest rate on the Notes shall be
increased to a rate which shall retain such Lender's original rate of return on
such Lender's capital.
Section 12.9 Captions. The paragraph headings of this Agreement are for
--------
convenience of reference only, and in no way define, limit or describe the scope
of this Agreement or the intent of any provision hereof.
Section 12.10 Modification And Waiver. Neither this Agreement nor any
-----------------------
term, condition, covenant or agreement hereof may be changed, waived, discharged
or terminated orally, but that may be accomplished only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
Section 12.11 Transferability.
---------------
(a) No Borrower shall assign any of its rights, interests or
Obligations under this Agreement.
(b) No Lender shall sell, assign or otherwise transfer its interests
under this Agreement to any person or entity (other than an Eligible Assignee),
without the prior written consent of the Agent and the Borrowers; it being
understood and agreed that the Borrowers' consent shall not be (i) unreasonably
withheld; or (ii) required if an Event of Default exists or any act, event or
condition has occurred which with notice or the lapse of time, or both, would
constitute an Event of Default. Furthermore, no sale, assignment or transfer
shall be made by any Lender (other than First Union) unless (i) if the proposed
assignee of the transferring Lender is not an affiliate of the transferring
Lender, at least thirty (30) days' prior written notice of such sale, assignment
or transfer shall have been issued by such transferring Lender to the Agent and
the Borrowers, and such notice identifies the proposed assignee; (ii) if the
proposed assignee of the transferring Lender is an affiliate of the transferring
Lender, written notice of such sale, assignment or transfer shall have been
issued by such transferring Lender to the Agent and the Borrowers simultaneously
with such sale, assignment or transfer, and such notice identifies the proposed
assignee; (iii) the dollar equivalent of the Percentage of the transferring
Lender being assigned equals or exceeds Five Million and No/100 Dollars
($5,000,000.00); (iv) the Agent shall have received a duly executed Assignment
and Acceptance agreement, in the form attached as Exhibit 9 hereto; and (v) if
---------
the proposed assignee of the transferring Lender is not an affiliate of the
transferring Lender, an assignment fee in the amount of Five Thousand and No/100
Dollars ($5,000.00) shall have been paid to the Agent.
Section 12.12 Governing Law; Binding Effect. This Agreement shall be
-----------------------------
governed by the laws of the Commonwealth of Virginia and be binding upon the
Borrower
70
and inure to the benefit of the parties hereto and their respective personal
representatives, successors and assigns.
Section 12.13 Gender; Number. As used herein, the singular number shall
--------------
include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may require.
Section 12.14 Materiality. Unless the context clearly indicates to the
-----------
contrary, determinations regarding the materiality of any act, event, condition
or circumstance shall be in the reasonable judgment of the Agent.
Section 12.15 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed an original and all of which
together shall be deemed one and the same instrument.
[Remainder of page intentionally left blank]
71
This Agreement is signed, sealed and delivered as of the date first above-
written.
ATTEST: Borrowers:
---------
[Corporate Seal] AVERSTAR, INC., a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------- ------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Title: Secretary Title: Chairman and CEO
--------------------------
ATTEST:
[Corporate Seal] COMPUTER BASED SYSTEMS, INC.,
a Virginia corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------- ------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Title: Asst. Secretary Title: President and Secretary
--------------------------
ATTEST:
[Corporate Seal] COMPUTING APPLICATIONS SOFTWARE TECHNOLOGY,
INC., a California corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------- ------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Title: Secretary Title: Vice President
--------------------------
ATTEST:
[Corporate Seal] INTERMETRICS SECURITIES, INC.,
a Massachusetts corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------- ------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Title: V.P., CFO Treasurer Title: Vice President
--------------------------
ATTEST:
[Corporate Seal] INTERMETRICS INTERNATIONAL, INC.,
a Massachusetts corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------- ------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Title: V.P., CFO, Treasurer Title: Vice President
--------------------------
72
Agent:
-----
FIRST UNION COMMERCIAL CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director
Lenders:
-------
FIRST UNION COMMERCIAL CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director
STATE STREET BANK & TRUST COMPANY, N.A.
By: ________________________
Name:
Title:
CRESTAR BANK
By: ________________________
Name:
Title:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: ________________________
Name:
Title:
73
Agent:
-----
FIRST UNION COMMERCIAL CORPORATION
By: ___________________________
Name:
Title:
Lenders:
-------
FIRST UNION COMMERCIAL CORPORATION
By: ___________________________
Name:
Title:
STATE STREET BANK & TRUST COMPANY, N.A.
By: ▇▇▇▇▇▇▇ ▇.▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
CRESTAR BANK
By: ___________________________
Name:
Title:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: ___________________________
Name:
Title:
Agent:
-----
FIRST UNION COMMERCIAL CORPORATION
By: ___________________________
Name:
Title:
Lenders:
-------
FIRST UNION COMMERCIAL CORPORATION
By: ___________________________
Name:
Title:
STATE STREET BANK & TRUST COMPANY, N.A.
By: ___________________________
Name:
Title:
CRESTAR BANK
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: ___________________________
Name:
Title:
Agent:
-----
FIRST UNION COMMERCIAL CORPORATION
By: ___________________________
Name:
Title:
Lenders:
-------
FIRST UNION COMMERCIAL CORPORATION
By: ___________________________
Name:
Title:
STATE STREET BANK & TRUST COMPANY, N.A.
By: ___________________________
Name:
Title:
CRESTAR BANK
By: ___________________________
Name:
Title:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director