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EXHIBIT 10.6
REVOLVING CREDIT AND SECURITY AGREEMENT
BETWEEN
ADVANCED COMMUNICATIONS SYSTEMS, INC.
"BORROWER"
AND
FIRST UNION COMMERCIAL CORPORATION
"BANK"
Dated: March 1, 1997
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REVOLVING CREDIT AND SECURITY AGREEMENT
THIS REVOLVING CREDIT AND SECURITY AGREEMENT (the "Agreement"),
dated as of March 1, 1997 between ADVANCED COMMUNICATIONS SYSTEMS, INC., a
Delaware corporation (the"Borrower"), and FIRST UNION COMMERCIAL CORPORATION, a
North Carolina banking corporation, its successors and assigns (the "Bank");
W I T N E S S E T H :
In consideration of the premises and of the mutual covenants herein
contained and to induce the Bank to extend credit to the Borrower, the parties
agree as follows:
1. DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
1.1 Defined Terms.
"Account" shall mean any account receivable, including any
rights of payment for goods sold or leased or for services rendered, which is
not evidenced by an instrument or chattel paper, whether or not it has been
earned by performance, and in addition includes all property included in the
definition of "accounts" as used in the Code, together with any guaranties,
letters of credit and other security therefor.
"Account Debtor" shall mean a Person who is obligated under
any Account, Chattel Paper, General Intangible or instrument (as instrument is
defined in the Code).
"Advance" shall mean an advance of proceeds of the Revolving
Loan to the Borrower pursuant to this Agreement, on any given Advance Date.
"Advance Date" shall mean the date as of which an Advance is
made.
"Advance Request" shall mean the written request for an
Advance under the Revolving Loan as identified in Section 3.3 ("Notice and
Manner of Borrowing") hereof.
"Affiliate" of a named Person shall mean (a) any Person owning
5% more of the voting stock or rights of such named Person or of which the
named Person owns 5% or more of such voting stock or rights; (b) any Person
controlling, controlled by or under common control with such named Person; (c)
any officer or director of such named Person or any Affiliates of the named
Person; and (d) any family member of the named Person or any Affiliate of such
named Person.
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"Borrowing Base" shall have the meaning set forth in Section
3.2 hereof ("Limitations on Advances").
"Business Day" shall mean a weekday on which commercial banks
are open for business in Fairfax, Virginia.
"Cash Flow" means as to the Borrower for any period of
determination thereof, the sum of (a) EBIT, plus (b) non-cash expenses and cash
rent, less (c) the sum of unfinanced capital expenditures, dividends (other
than distributions made in connection with the initial public offering and
permitted under Section 5.9 hereof) and cash taxes; all calculated in
accordance with generally accepted accounting principles consistently applied.
"Chattel Paper" shall mean all writing or writings which
evidence both a monetary obligation and a security interest in or the lease of
specific goods and in addition includes all property included in the definition
of "chattel paper" as used in the Code, together with any guaranties, letters
of credit and other security therefor.
"Code" shall mean the Uniform Commercial Code, as in effect in
the Commonwealth of Virginia from time to time.
"Collateral" means the following property of the Borrower,
wherever located and whether now owned by Borrower or hereafter acquired: (a)
all Inventory; (b) all General Intangibles; (c) all Accounts and Chattel Paper
and any other instrument or intangible representing payment for goods or
services; (d) all Equipment; (e) all funds in the Special Loan Account or
otherwise on deposit with or under the control of the Bank or its agents or
correspondents; and (f) all parts, replacements, substitutions, profits,
products and cash and non-cash proceeds of any of the foregoing (including
insurance proceeds payable by reason of loss or damage thereto) in any form and
wherever located. Collateral shall include all written or electronically
recorded records relating to any such Collateral and other rights relating
thereto.
"Debt" shall mean all liabilities of a Person as determined
under generally accepted accounting principles and all obligations which such
Person has guaranteed or endorsed or is otherwise secondarily or jointly
liable, and shall include, without limitation (a) all obligations for borrowed
money or purchased assets, (b) obligations secured by assets whether or not any
personal liability exists, (c) the capitalized amount of any capital or finance
lease obligations, (d) the unfunded portion of pension or benefit plans or
other similar liabilities, (e) obligations as a general partner, (f) contingent
obligations pursuant to guaranties, endorsements, letters of credit and other
secondary liabilities, and (g) obligations for deposits.
"Debt Service" means for any period of determination thereof,
an amount equal to the total of (a) the aggregate amount of all payments of
interest in respect of Indebtedness of the Borrower scheduled to be due and
payable during such period, plus (b) current maturities of long
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term debt and capitalized leases to be due and payable during such period, plus
(c) rent paid for such period.
"Debt Service Coverage Ratio" means for any period of
determination the ratio of (a) Cash Flow to (b) Debt Service for the prior
twelve month period.
"Default Rate" shall mean the highest lawful rate of interest
per annum specified in any Note to apply after a default under such Note or, if
no such rate is specified, a rate equal to the lesser of (a) five (5)
percentage points above the rate on the Loan otherwise in effect from time to
time, or (b) the highest rate of interest allowed by law.
"EBIT" shall mean as to the Borrower for any period of
determination thereof, the sum of (a) the net profit (or loss) determined in
accordance with generally accepted accounting principles consistently applied,
plus (b) interest expense and federal and state taxes for such period.
"EBITDA" shall mean as to the Borrower for any period of
determination thereof, the sum of (a) the net profit (or loss) determined in
accordance with generally accepted accounting principles consistently applied,
plus (b) interest expense and federal and state taxes for such period, plus (c)
depreciation and amortization of assets for such period, all as determined on a
consolidated basis for the twelve (12) month period then ending.
"Eligible Accounts" shall mean all Accounts (valued net of any
sales tax included in the invoiced amount, the maximum amount of any discounts
or other reductions) of the Borrower as to which the Bank has a first priority
perfected security interest subject only to Permitted Liens, excluding (a)
Accounts outstanding for ninety (90) days or more from the date of invoice; (b)
all Accounts owed by an Account Debtor if more than fifty percent (50%) of the
Accounts owed by such Account Debtor (or any Affiliate) to the Borrower are
ineligible because they are aged beyond ninety (90) days (provided, however,
with respect to Eligible Government Accounts, such exclusion shall apply on a
contract by contract basis - not to the agency or department as a whole); (c)
Accounts owing from any Affiliate of the Borrower; (d) Accounts owed by a
creditor of the Borrower or which are in dispute or subject to any
counterclaim, contra-account or offset; (e) Accounts owing by any Account
debtor which is insolvent or generally unable to pay its debts as they become
due; (f) Accounts arising from a sale on a ▇▇▇▇-and-hold, guaranteed sale,
sale-or-return, sale-on-approval, consignment or similar basis or which is
subject to repurchase, return, rejection, repossession, loss or damage; (g)
accounts owed by an Account Debtor outside the United States; (i) Accounts as
to which the goods giving rise to the Account have not been delivered to and
accepted by the Account Debtor or the service giving rise to the Account has
not been completely performed or which do not represent a final sale; (j) the
total Accounts owed by an Account Debtor and its Affiliates exceeds a credit
limit established by the Bank in its discretion (to the extent of such excess);
(k) the Account is evidenced by a note or other instrument, or Chattel Paper or
reduced to judgment; (l) Accounts which, by contract, subrogation, mechanics'
lien laws or otherwise, are subject to claims by the Borrower's creditors or
other third parties or which are owed by Account Debtors as to whom any
creditor of the borrower (including any bonding
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company) has lien rights; and (m) Accounts of the type described in Exhibit
1.1B (if any) and other Accounts the validity, collectibility or amount of
which is determined in good faith by the Borrower or the Bank to be doubtful.
No Accounts shall be Eligible Accounts if any representation, warranties or
covenants herein relating thereto shall be in default.
"Eligible Commercial Accounts" shall mean all Eligible
Accounts, other than Eligible Government Accounts, but will include all
Eligible Accounts which are from subcontractors on contracts with the United
States of America or any department or agency thereof or any state government
or any department or agency thereof.
"Eligible Government Accounts" shall mean all Eligible
Accounts due from the United States of America, or any department or agency
thereof, plus all Eligible Accounts owed by the government of any State (other
than the District of Columbia).
"Equipment" shall mean all furniture, fixtures, equipment,
motor vehicles, rolling stock and other tangible property of a Person of every
description, except Inventory and in addition includes all property included
in the definition of "equipment" as used in the Code.
"Event of Default" shall mean any event specified as such in
Section 6.1 hereof ("Events of Default"), provided that there shall have been
satisfied any requirement in connection with such event for the giving of
notice or the lapse of time, or both; "Default" or "default" shall mean any of
such events, whether or not any such requirement for the giving of notice or
the lapse of time or the happening of any further condition, event or act shall
have been satisfied.
"General Intangibles" shall mean all intangible personal
property (including things in action) except Accounts, Chattel Paper and
instruments (as defined in the Code), including all contract rights,
copyrights, trademarks, trade names, service marks, patents, patent drawings,
designs, formulas, rights to a Person's name itself, customer lists, rights to
all prepaid expenses, marketing expenses, rights to receive future contracts,
fees, commissions and orders relating in any respect to any business of a
Person, all licenses and permits, all computer programs and other software
owned by a Person, or which a Person has the right to use, and all rights
for breach of warranty or other claims for funds to which a Person may be
entitled, and in addition includes all property included in the definition of
"general intangibles" as used in the Code.
"Indebtedness" shall mean all obligations now or hereafter
owed to the Bank by the Borrower, whether related or unrelated to the Loan,
including, without limitation, amounts owed or to be owed under the terms of
the Loan Documents, or arising out of the transactions described therein,
including, without limitation, the Loans, sums advanced to pay overdrafts on
any account maintained by the Borrower with the Bank, reimbursement obligations
for outstanding letters of credit or banker's acceptances issued to the account
of the Borrower, or its Subsidiaries, amounts paid by the Bank under letters of
credit or drafts accepted by the Bank for the account of the Borrower or its
Subsidiaries, together with all interest accruing thereon, all fees, all costs
of collection, attorneys' fees and expenses of or advances by the Bank which
the Bank pays or incurs
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in discharge of obligations of the Borrower or to repossess, protect, preserve,
store or dispose of any Collateral, whether such amounts are now due or
hereafter become due, direct or indirect and whether such amounts due are from
time to time reduced or entirely extinguished and thereafter re-incurred.
"Inventory" means all goods, merchandise and other personal
property of a Person which is held for sale or lease or furnished or to be
furnished under a contract for services or raw materials, and all work in
process and materials used or consumed or to be used or consumed in a Person's
business, and in addition, includes all property included in the definition of
"inventory" as used in the Code.
"Lien" (collectively "Liens") shall mean any mortgage, pledge,
statutory lien or other lien arising by operation of law, security interest,
trust arrangement, financing lease, collateral assignment or other encumbrance,
or any segregation of assets or revenues (whether or not constituting a
security interest) with respect to any present or future assets, revenues or
rights to the receipt of income of the Person referred to in the context in
which the term is used.
"Loan" shall mean the Revolving Loan identified in Section 3.1
hereof ("Revolving Loan").
"Loan Documents" shall mean this Agreement, any other Security
Agreement, any Note, any Guaranty Agreement, the Advance Requests, UCC-l
financing statements and all other documents and instruments now or hereafter
evidencing, describing, guaranteeing or securing the Indebtedness contemplated
hereby or delivered in connection herewith, as they may be modified.
"Maximum Loan Amount" shall mean Five Million Dollars
($5,000,000) such other amount as the Bank may consent to in writing from time
to time.
"Note" shall mean the Revolving Note, as defined in Section
3.1 ("Revolving Loan"), and any other promissory note now or hereafter
evidencing any Indebtedness, and all modifications, extensions and renewals
thereof.
"Permitted Debt" shall mean (a) the Indebtedness; and (b) any
other Debt listed on Exhibit 1.1C hereto (if any) and any extensions, renewals,
replacements, modifications and refundings of any such Debt if, and to the
extent, permitted by Exhibit 1.1C; provided, however, that the principal amount
of such Debt may not be increased from the amount shown as outstanding on such
exhibit; and (c) such other Debt as the Bank may consent to in writing from
time to time.
"Permitted Liens" shall mean (a) Liens securing the
Indebtedness; (b) Liens for taxes and other statutory Liens, landlord's Liens
and similar Liens arising out of operation of law (provided they are
subordinate to the Bank's Liens on Collateral) so long as the obligations
secured thereby are not past due or are being contested as permitted herein;
(c) Liens described on Exhibit 1.1D hereto (if any), provided, however, that no
debt not now secured by such Liens shall become secured by
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such Liens hereafter and such Liens shall not encumber any other assets; and
(d) such other Liens as the Bank may consent to in writing from time to time.
"Person" shall mean any natural person, corporation,
unincorporated organization, trust, joint-stock company, joint venture,
association, company, limited or general partnership, any government, or any
agency or political subdivision of any government.
"Prime Rate" shall mean that index rate of interest per annum
announced from time to time by the Bank (or its successor) as its "prime rate"
or "prime lending rate" (which rate shall not necessarily be the best or lowest
rate for any particular type of loan or for loans to any particular class or
category of customer). A change in the Prime Rate shall become effective from
the beginning of the day on which such change is announced by the Bank.
"Security Agreement" shall mean this Agreement as it relates
to a security interest in the Collateral, and any other mortgage, security
agreement or similar instrument now or hereafter executed by the Borrower or
other Person granting the Bank a security interest in any Collateral to secure
the Indebtedness.
"Special Loan Account" shall mean the demand deposit account
established pursuant to Section 3.5 hereof ("Special Loan Account").
"Subsidiary" shall mean any corporation, partnership or other
Person in which the Borrower, directly or indirectly, owns more than fifty
percent (50%) of the stock, capital or income interests, or other beneficial
interests, or which is effectively controlled by the Borrower.
"Tangible Net Worth" shall mean the net worth of the Borrower
according to generally accepted accounting principles, less leasehold
improvements; debt service to shareholders; deferred assets other than prepaid
insurance and prepaid taxes; patents, copyrights, trademarks, trade names,
noncompete agreements, franchises and other intangibles; goodwill or other
amounts representing the excess of the purchase price of assets or stock over
the value assigned thereto on the books of such Person; unamortized debt
discount and expense; Accounts other than the Eligible Accounts and any
Accounts, notes or other amounts due from Affiliates; and any other amounts
categorized as intangibles under generally accepted accounting principles.
"Total Funded Debt" shall mean for any period of determination
thereof, an amount equal to the aggregate amount of all payments in principal
in respect of Indebtedness of the Borrower scheduled to be due and payable
during such period together with all other interest bearing liabilities of the
Borrower.
1.2 Financial Terms. All financial terms used herein shall have
the meanings assigned to them under generally accepted accounting principles
unless another meanings shall be specified.
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2. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this Agreement and to make the Loans provided for herein, the Borrower
makes the following representations and warranties, all of which shall survive
the execution and delivery of the Loan Documents. Unless otherwise specified,
such representations and warranties shall be deemed made as of the date hereof
and as of the Advance Date of any Advance by the Bank to the Borrower:
2.1 Valid Existence and Power. The Borrower and each Subsidiary
is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization is duly qualified or licensed
to transact business in all places where the failure to be so qualified would
have a material adverse effect on it. The Borrower and each other Person which
is a party to any Loan Document (other than the Bank) has the power to make and
perform the Loan Documents executed by it and all such instruments will
constitute the legal, valid and binding obligations of such Person, enforceable
in accordance with their respective terms, subject only to bankruptcy and
similar laws affecting creditors' rights generally.
2.2 Authority. The execution, delivery and performance thereof by
the Borrower and each other Person (other than the Bank) executing any Loan
Document have been duly authorized by all necessary action of such Person, and
do not and will not violate any provision of law or regulation, or any writ,
order or decree of any court or governmental or regulatory authority or agency
or any provision of the governing instruments of such Person, and do not and
will not, with the passage of time or the giving of notice, result in a breach
of, or constitute a default or require any consent under, or result in the
creation of any Lien upon any property or assets of such Person pursuant to,
any law, regulation, instrument or agreement to which any such Person is a
party or by which any such Person or its respective properties may be subject,
bound or affected.
2.3 Financial Condition. Other than as disclosed in financial
statements delivered on or prior to the date hereof to the Bank, neither the
Borrower nor any Subsidiary has any direct or contingent obligations or
liabilities (including any guarantees or leases) or any material unrealized or
anticipated losses from any commitments of such Person, except as described on
Exhibit 2.3 (if any). The Borrower is not aware of any material adverse fact
(other than facts which are generally available to the public and not
particular to the Borrower, such as general economic or industry trends)
concerning the conditions or future prospects of the Borrower or any Subsidiary
which has not been fully disclosed to the Bank, including any adverse change in
the operations or financial condition of such Person since the date of the most
recent financial statements delivered to the Bank.
2.4 Litigation. Except as disclosed on Exhibit 2.4 (if any),
there are no suits or proceedings pending, or to the knowledge of the Borrower
threatened, before any court or by or before any governmental or regulatory
authority, commission, bureau of agency or public regulatory body against or
affecting the Borrower, any Subsidiary or their assets, which if adversely
determined would have a material adverse effect on the financial condition or
business of the Borrower or such Subsidiary.
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2.5 Agreements, Etc. Neither the Borrower nor any Subsidiary is a
party to any agreement or instrument or subject to any court order,
governmental decree or any charter or other corporate restriction, adversely
affecting its business, properties or assets, operations or condition
(financial or otherwise) nor is any such Person in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party, or any law,
regulation, decree, order or the like.
2.6 Authorizations. All authorizations, consents, approvals and
licenses required under applicable law or regulation for the ownership or
operation of the property owned or operated by the Borrower or any Subsidiary
or for the conduct of any business in which it is engaged have been duly issued
and are in full force and effect, and it is not in default, nor has any event
occurred which with the passage of time or the giving of notice, or both, would
constitute a default, under any of the terms or provisions of any part thereof,
or under any order, decree, ruling, regulation, closing agreement or other
decision or instrument of any governmental commission, bureau or other
administrative agency or public regulatory body having jurisdiction over such
Person, which default would have a material adverse effect on such Person.
Except as noted herein, no approval, consent or authorization of, or filing or
registration with, any governmental commission, bureau or other regulatory
authority or agency is required with respect to the execution, delivery or
performance of any Loan Document.
2.7 Title. The Borrower and each Subsidiary has good title to all
of the assets shown in its financial statements free and clear of all Liens,
except Permitted Liens. The Borrower alone has full ownership rights in all
Collateral.
2.8 Collateral. The security interests granted to the Bank herein
and pursuant to any other Security Agreement (a) constitute and, as to
subsequently acquired property included in the Collateral covered by the
Security Agreement, will constitute, security interests under the Code entitled
to all of the rights, benefits and priorities provided by the Code and (b) are,
and as to such subsequently acquired Collateral will be fully perfected,
superior and prior to the rights of all third persons, now existing or
hereafter arising, subject only to Permitted Liens. All of the Collateral is
intended for use solely in the Borrower's business.
2.9 Location. The chief executive office of the Borrower where
the Borrower's business records are located is the address designated for
notices in Section 8.4 ("Notices") and the Borrower has no other places of
business except as shown on Exhibit 2.9 (if any).
2.10 Taxes. The Borrower and each Subsidiary has filed all federal
and state income and other tax returns which, to the best knowledge of the
Borrower, are required to be filed, and have paid all taxes as shown on said
returns and all taxes, including ad valorem taxes, shown on all assessments
received by it to the extent that such taxes have become due. Neither the
Borrower nor any Subsidiary is subject to any federal, state or local tax Liens
nor has such Person received any notice of deficiency or other official notice
to pay any taxes. The Borrower and each Subsidiary has paid all sales and
excise taxes payable by it.
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2.11 Withholding Taxes. The Borrower and each Subsidiary has paid
all withholding, FICA and other payments required by federal, state or local
governments with respect to any wages paid to employees.
2.12 Labor Law Matters. No goods or services have been or will be
produced by the Borrower or any Subsidiary in violation of any applicable labor
laws or regulations or any collective bargaining agreement or other labor
agreements or in violation of any minimum wage, wage-and-hour or other similar
laws or regulations.
2.13 Accounts. Each Account, instrument, Chattel Paper and other
writing constituting any portion of the Collateral is (a) genuine and
enforceable in accordance with its terms except for such limits thereon arising
from bankruptcy and similar laws relating to creditors' rights;(b) not subject
to any defense, setoff, claim or counterclaim of a material nature against the
Borrower except as to which the Borrower has notified the Bank in writing; and
(c) not subject to any other circumstances that would impair the validity,
enforceability or amount of such Collateral except as to which the Borrower has
notified the Bank in writing. Each Account included in any Advance Request,
report or other document as an Eligible Account meets all the requirements of
an Eligible Account set forth herein.
2.14 Use and Location of Collateral. The Collateral is located
only, and shall at all times be kept and maintained only, at the Borrower's
location or locations as described herein. No such Collateral is attached or
affixed to any real property so as to be classified as a fixture unless the
Bank has otherwise agreed in writing.
2.15 Judgment Liens. Neither the Borrower nor any Subsidiary, nor
any of their assets, are subject to any unpaid judgments (whether or not
stayed) or any judgment liens in any jurisdiction.
2.16 Intent and Effect of Transactions. This Agreement and the
transactions contemplated herein (a) are not made or incurred with intent to
hinder, delay or defraud any person to whom the Borrower has been, is now, or
may hereafter become indebted; (b) do not render the Borrower insolvent nor is
the Borrower insolvent on the date of this Agreement; (c) do not leave the
Borrower with an unreasonably small capital with which to engage in its
business or in any business or transaction in which it intends to engage; and
(d) are not entered into with the intent to incur, or with the belief that the
Borrower would incur, debts that would be beyond its ability to pay as such
debts mature.
2.17 Subsidiaries. If the Borrower has any Subsidiaries, they are
listed on Exhibit 2.17. As of January 1, 1997, the Borrower will acquire
Fairfax Communications Ltd.
2.18 Hazardous Materials. Except as set forth herein, the
Borrower's property and improvements thereon have not in the past been used,
are not presently being used, and will not in the future be used for, nor does
the Borrower or any Subsidiary engage in, the handling, storage,
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manufacture, disposition, processing, transportation, use or disposal of
hazardous or toxic materials. The Bank acknowledges that the Borrower leases a
portion of its property to a print shop. Borrower shall cause said print shop
to use all hazardous materials in accordance with all applicable laws.
2.19 ERISA. The Borrower has furnished to the Bank true and
complete copies of the latest annual report required to be filed pursuant to
Section 104 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), with respect to each employee benefit plan or other plan maintained
for employees of the Borrower or any Subsidiary and covered by Title IV of
ERISA (a "Plan"), and no Termination Event (as hereinafter defined) with
respect to any Plan has occurred and is continuing. For the purposes of this
Agreement, a "Termination Event" shall mean a "reportable event" as defined in
Section 4043(b) of ERISA ("Reportable Event"), or the filing of a notice of
intent to terminate under Section 4041 of ERISA. Neither the Borrower nor any
Subsidiary has any unfunded liability with respect to any such plan.
2.20 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" as defined in the Investment Company Act
of 1940, as amended.
3. THE LOAN
3.1 Revolving Loan. The Bank will lend to the Borrower a total
principal amount not to exceed the Maximum Loan Amount (the "Revolving Loan")
for working capital to be used in the operation of the Borrower's business.
The Revolving Loan shall be evidenced by and payable in accordance with the
terms of a promissory note in the face amount of the Maximum Loan Amount (the
"Revolving Note"). The Revolving Note shall evidence the outstanding principal
balance of the Loan, as it may change from time to time. Advances under the
Revolving Loan shall be subject to the following terms:
(a) Advances of proceeds of the Revolving Loan shall be limited to
the Maximum Loan Amount at any time outstanding;
(b) Should there occur any overdraft of any deposit account
maintained by the Borrower with the Bank, the Bank may, at its option, disburse
funds (whether or not in excess of the Maximum Loan Amount) to eliminate such
overdraft and such disbursement shall be deemed an Advance of Loan proceeds
hereunder entitled to all of the benefits of the Loan Documents. Nothing herein
shall be deemed an authorization of or consent to the creation of an overdraft
in any account or create any obligations on the part of the Bank;
(c) All Advances by the Bank to or for the account of the
Borrower, whether or not in excess of the Maximum Loan Amount, shall be
considered part of the Indebtedness under the Note, shall bear interest as
provided in the Note, and shall be entitled to all rights and benefits
hereunder and under all other Loan Documents; and
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(d) The Borrower shall not request and the Bank will not be
required to consider requests for Advances after January 31, 1998; provided
that the Bank may in its discretion extend such date in writing and further
provided that the repayment obligations of the Borrower for Advances made by
the Bank after such date (as it may be extended) shall be binding on the
Borrower or other persons liable for any Indebtedness to the same extent as
obligations with respect to Advances made prior to such date.
3.2 Limitations on Advances. The outstanding balance of the
Revolving Loan may increase and decrease from time to time, and Advances
thereunder may be repaid and reborrowed, but the total of Advances outstanding
at any one time under the Revolving Loan shall never exceed the lesser of:
(a) The Maximum Loan Amount; or
(b) the "Borrowing Base," which shall be calculated by: (i)
adding (A) a sum equal to ninety percent (90%)of the total amount of Eligible
Government Accounts to (B) a sum equal to eighty percent (80%) of Eligible
Commercial Accounts.
The Borrower shall immediately pay to the Bank any amount by which the Loan
exceeds the Borrowing Base or the Maximum Loan Amount, whichever is less. The
Bank may, in its discretion, make, or permit to remain outstanding, Advances to
the Borrower in excess of the Borrowing Base and/or the Maximum Loan Amount and
all such amounts shall be part of the Loan and Indebtedness, shall bear
interest as provided in the Note, shall be payable on demand and shall be
entitled to all rights and security provided for herein, the Security Agreement
and all other Loan Documents.
3.3 Notice and Manner of Borrowing. All requests for advances
shall be made not later than 12:00 noon, Charlotte, N.C. time, on the Business
Day of the proposed Advance Date.
3.4 Calculation of Interest. All interest under the Note or
hereunder shall be calculated on the basis of a 360-day year for the actual
number of days elapsed in an interest period (actual/360 method), unless the
Bank shall otherwise elect.
3.5 Special Loan Account. The Borrower shall establish and
maintain with the Bank, during the term of the Loan, a demand deposit account
(the "Special Loan Account") into which the Borrower shall deposit, as
received, all proceeds from the sale of Inventory and collection of Accounts
and other Collateral in the form of checks, drafts, cash or the like, and all
such proceeds shall constitute Collateral. The Bank shall debit collected
funds from the Special Loan Account and apply the balance thereof against the
outstanding balance of the Revolving Note on or after the Business Day
following the Business Day of deposit. The Bank may, but shall not be required
to, apply to the Loan any amounts represented by uncleared checks, subject to
collection. Unless the Bank shall agree to other arrangements, the Borrower
shall direct (by instruction on invoices and otherwise) all Account Debtors to
make payments to a designated post office box under the control of the Bank,
which payments shall be deposited directly into the Special Loan Account. The
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Borrower shall pay the Bank's reasonable fees and charges in connection with
such lock-box arrangement.
3.6 Revolving Credit Unused Line Fee. The Borrower shall pay to
the Bank a quarterly revolving credit facility fee (collectively, the
"Revolving Credit Unused Line Fees" and individually, a "Revolving Credit
Unused Line Fee") in an amount equal to one quarter of one percent (.25%) per
annum on the average daily unused and undisbursed portion of the Loan in effect
from time to time accruing during each calendar quarter. The accrued and
unpaid portion of the Revolving Credit Unused Line Fee shall be paid by the
Borrower to the Bank on the first day of the next calendar quarter, commencing
on the first such date following the date hereof, and at the maturity of the
Loan.
3.7 Administration Fee. The Borrower agrees to pay to the Bank an
administration fee (the "Administration Fee") for administrative services
performed in conjunction with the Loan. The Administration Fee will be in the
amount of $1,667.00 per month and shall be payable on a monthly basis, in
advance, on the first day of each month until all Indebtedness have been paid
in full.
3.8 Debit for Interest and Expenses. The Bank may debit the
Special Loan Account and/or make Advances to the Borrower (whether or not in
excess of the Maximum Loan Amount and/or the Borrowing Base) and apply such
amounts to the payment of interest, fees, expenses and other amounts to which
the Bank may be entitled from time to time and the Bank is hereby irrevocably
authorized to do so without consent of the Borrower.
3.9 Overdue Amounts. Any payments not made as and when due shall
bear interest from the date due until paid at the Default Rate.
3.10 Sales Tax. The Borrower shall notify the Bank if any Account
includes any sales or other similar tax and the Bank may, but shall not be
obligated to, remit any such taxes directly to the taxing authority and make
Advances or charge the Special Loan Account therefor. In no event shall the
Bank be liable for any such taxes.
4. CONDITIONS PRECEDENT TO BORROWING. Prior to any Advance of the
proceeds of any Loan, the following conditions shall have been satisfied, in
the sole opinion of the Bank and its counsel:
4.1 Conditions Precedent to Initial Advance. In addition to any
other requirement set forth in this Agreement, the Bank will not make the
initial Advance under the Revolving Loan unless and until the following
conditions shall have been satisfied:
(a) Loan Documents. The Borrower and each other party to
any Loan Documents, as applicable, shall have executed and delivered this
Agreement, the Note, and other required Loan Documents, all in form and
substance satisfactory to the Bank.
(b) Supporting Documents. The Borrower shall cause to be
delivered to the Bank the following documents:
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(i) A copy of the governing instruments of the
Borrower and each Subsidiary, and a good standing certificate of the Borrower
and each Subsidiary, certified by the appropriate official of its state of
incorporation and the State of Virginia, if different;
(ii) Incumbency certificate and certified
resolutions of the board of directors (or other appropriate Persons) of the
Borrower and each other Person executing any Loan Documents authorizing the
execution, delivery and performance of the Loan Documents; and
(iii) UCC-11 searches and other Lien searches
showing no existing security interests in or Liens on the Collateral other than
the security interests of the Bank.
(c) Insurance. The Borrower shall have delivered to the
Bank satisfactory evidence of insurance meeting the requirements of Section 5.3
("Insurance").
(d) Perfection of Liens. UCC-l financing statements and,
if applicable, certificates of title covering the Collateral executed by the
Borrower shall duly have been recorded or filed in the manner and places
required by law to establish, preserve, protect and perfect the interests and
rights created or intended to be created by this Agreement and any other
Security Agreement; and all taxes, fees and other charges in connection with
the execution, delivery and filing of this Agreement, the Security Agreement
and the financing statements shall duly have been paid.
(e) Additional Documents. The Borrower shall have
delivered to the Bank all additional opinions, documents, certificates and
other assurances that the Bank or its counsel may require.
4.2 Conditions Precedent to Each Advance. The following
conditions, in addition to any other requirements set forth in this Agreement,
shall have been met or performed by the Advance Date with respect to any
Advance Request:
(a) Advance Request. The Borrower shall have delivered
to the bank an Advance Request and other information, as required under in
Section 3.3 ("Notice and Manner of Borrowing").
(b) No Default. No default shall have occurred and be
continuing or will occur upon the making of the Advance in question and the
Borrower shall have delivered to the Bank an officer's certificate to such
effect, which may be incorporated in the Advance Request.
(c) Correctness of Representations. All representations
and warranties made by the Borrower herein or otherwise in writing in
connection herewith shall be true and correct with the same effect as though
the representations and warranties had been made on and as of the proposed
Advance Date, and the Borrower shall have delivered to the Bank an officer's
certificate to such effect, which may be incorporated in the Advance Request.
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(d) No Adverse Change. There shall have been no material
adverse change in the condition, financial or otherwise, of the Borrower or any
Subsidiary from such condition as it existed on the date of the most recent
financial statements of such Person delivered prior to date hereof.
(e) Periodic Report. The Bank shall have received a
current Accounts Receivable Report and a current Inventory Report (as required
by Section 5.6 ("Financial Information") sufficient in form and substance to
calculate and verify the Borrowing Base.
(f) Further Assurances. The Borrower shall have
delivered such further documentation or assurances as the Bank may reasonably
require.
5. COVENANTS OF THE BORROWER. The Borrower covenants and agrees that
from the date hereof and until payment in full of the Indebtedness and the
formal termination of this Agreement, unless the Bank shall otherwise consent
in writing, the Borrower and each Subsidiary:
5.1 Use of Loan Proceeds. Shall use the proceeds of the Loan only
for the commercial purposes permitted herein or otherwise permitted by the Bank
and furnish the Bank all evidence that it may reasonably require with respect
to such use.
5.2 Maintenance of Business and Properties. Shall at all times
maintain, preserve and protect all Collateral and all the remainder of its
material property used or useful in the conduct of its business, and keep the
same in good repair, working order and condition, and from time to time make,
or cause to be made, all material needful and proper repairs, renewals,
replacements, betterments and improvements thereto so that the business carried
on in connection therewith may be conducted properly and in accordance with
standards generally accepted in businesses of a similar type and size at all
times, and maintain and keep in full force and effect all licenses and permits
necessary to the proper conduct of its business.
5.3 Insurance. Shall maintain such liability insurance, workers'
compensation insurance, business interruption insurance and casualty insurance
as may be required by law, customary and usual for prudent businesses in its
industry or as may be reasonably required by the Bank and shall insure and keep
insured all Collateral and other properties in good and responsible insurance
companies satisfactory to the Bank. All hazard insurance covering Collateral
shall be in amounts and shall contain co-insurance and deductible provisions
approved by the Bank, shall name and directly insure the Bank as secured party
and loss payee under a long-form New York standard loss payee clause, or its
equivalent, and shall not be terminable except upon 30 days' written notice to
the Bank.
5.4 Notice of Default. Shall provide to the Bank immediate notice
of (a) the occurrence of a Default, (b) any material litigation or material
changes in existing litigation or any judgment against it or its assets, (c)
any material damage or loss to property, (d) any notice from taxing authorities
as to claimed deficiencies or any tax lien or any notice relating to alleged
ERISA violations, (e) any Reportable Event, as defined in ERISA, (f) any
rejection, return, offset, dispute,
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loss or other circumstance having a material adverse effect on any Collateral,
and (g) any loss or threatened loss of material licenses or permits.
5.5 Inspections. Shall permit inspections of the Collateral and
the records of such Person pertaining thereto, at such times and in such manner
as may be reasonably required by the Bank and shall further permit such
inspection, review and audits of its other records and its properties (with
such reasonable frequency and at such reasonable times as the Bank may desire)
by the Bank as the Bank may deem necessary or desirable from time to time.
Each such audits, reviews and inspections shall be borne by the Borrower, at
the cost of $1,500 per audit, provided, that prior to the occurrence of a
Default, no more than two (2) audits will be performed in any calendar year.
5.6 Financial Information. Shall maintain books and records in
accordance with generally accepted accounting principles and shall furnish to
the Bank the following periodic financial information:
(a) Periodic Borrowing Base Reports. Within twenty (20)
days of the end of each calendar month (or more frequently if required by the
Bank), a report listing Accounts and all Eligible Accounts of the Borrower as
of the last Business Day of such month (the "Accounts Receivable Report") which
shall include the amount and age of each Account, the name and mailing address
of each Account Debtor and such other information as the Bank may require in
order to verify the Eligible Accounts, all in reasonable detail and in form
acceptable to the Bank;
(b) Monthly Reports. Within twenty (20) days after the
end of each calendar month, an income statement and a balance sheet prepared in
accordance with generally accepted accounting principles, as at the end of any
for such month and year-to-date, each certified by the chief financial officer
of the Borrower as being true and accurate;
(c) Quarterly Reports. Within forty five (45) days after
the end of each calendar quarter, a contract backlog report in form and
substance satisfactory to the Bank, certified by the chief financial officer or
president of the Borrower as being true and accurate;
(d) Annual Reports. Within ninety (90) days after the
end of each fiscal year, an income statement, balance sheet and cash flow
statement of the Borrower for such year, and a balance sheet as of the end of
such year, prepared in accordance with generally accepted accounting
principles, certified by independent certified public accountants of recognized
standing selected by the Borrower and satisfactory to the Bank; and
(e) No Default Certificates. Together with each report
required by Subsection (b) and (c), shall submit a certificate of its president
or chief financial officer that no Default or Event of Default then exists or
if a Default or Event of Default exists, the nature and duration thereof and
the Borrower's intention with respect thereto, and in addition, shall cause the
Borrower's independent auditors (if applicable) to submit to the Bank, together
with its audit report, a statement that, in the course of such audit, it
discovered no circumstances which it believes would result in a
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Default or Event of Default or if it discovered any such circumstances, the
nature and duration thereof. If the Borrower has Subsidiaries, the financial
statements required above shall be in consolidated and, if required by the
Bank, consolidating form for the Borrower and all Subsidiaries required by
generally accepted accounting principles to be consolidated for financial
reporting purposes. In addition to the financial statements required herein,
the Bank reserves the right to require other or additional financial or other
information concerning the Borrower, its Subsidiaries, and/or the Collateral.
5.7 Debt. Shall not create or permit to exist any Debt, including
any guaranties or other contingent obligations, except Permitted Debt.
5.8 Liens. Shall not create or permit to exist any Liens on any
of its property except Permitted Liens.
5.9 Dividends. Shall not pay or declare any dividends (other than
stock dividends and S Corporation distributions in connection with any initial
public offering of the Borrower) or other distribution or purchase, redeem or
otherwise acquire any stock or other equity interests or pay or acquire any
debt subordinate to the Indebtedness unless, after giving effect thereto, there
shall be no Default hereunder.
5.10 Merger, Sale, Etc. Shall maintain its corporate existence,
good standing and necessary qualifications to do business and shall not merge
or consolidate with any Person or sell, lease, assign or otherwise dispose of
any Collateral or substantial portion of its other assets (other than sales of
obsolete or worn-out equipment and sales of Inventory in the ordinary course of
business), or sell or otherwise dispose of stock of any Subsidiary. The
Borrower can acquire all or substantially all of the assets of, or fifty
percent (50%) or more of any class of equity interest of, any Person, with the
prior written approval of the Bank.
5.11 Loans and Other Investments. Shall not make or permit to
exist any advances or loans to, or guarantee or become contingently liable,
directly or indirectly, in connection with the obligations, leases, stock or
dividends of, or own, purchase or make any commitment to purchase any stock,
bonds, notes, debentures or other securities of, or any interest in, or make
any capital contributions to (all of which are sometimes collectively referred
to herein as "Investments") any Person except for (a) purchases of direct
obligations of the federal government, (b) deposits in commercial banks, (c)
commercial paper of any U.S. corporation having the highest ratings then given
by ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's Corporation, (d)
existing investments in Subsidiaries, and (e) endorsement of negotiable
instruments for collection in the ordinary course of business.
5.12 Change in Business. Shall not enter into any business which
is substantially different from the business or businesses in which it is
presently engaged.
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5.13 Accounts. (a) shall not sell, assign or discount any of its
Accounts, Chattel Paper or any promissory notes held by it other than the
discount of such notes in the ordinary course of business for collection; and
(b) shall notify the Bank promptly in writing with any discount, offset or
other deductions not shown on the face of an Account invoice and any dispute
over an Account, and any information relating to an adverse change in any
Account Debtor's financial condition or ability to pay its obligations.
5.14 Transactions with Affiliates. Shall not directly or
indirectly purchase, acquire or lease any property from, or sell, transfer or
lease any property to, or otherwise deal with, in the ordinary course of
business or otherwise, any Affiliate (other than a Subsidiary); provided,
however, that any acts or transactions prohibited by this Section may be
performed or engaged in, after written notice to the Bank, if upon terms not
less favorable to the Borrower or such Subsidiary than if no such relationship
existed. Any such Affiliate may be a director, officer, employee of the
Borrower or any Subsidiary, subject to the limitations on compensation
contained in this section and elsewhere in this Agreement.
5.15 No Change in Name, Offices; Removal of Collateral. Shall
not, unless it shall have given sixty (60) days' advance written notice thereof
to the Bank, (a) change its name or the location of its chief executive office
or other office where books or records are kept or (b) permit any Inventory or
other tangible Collateral to be located at any location other than as specified
in Section 2.9. ("Location").
5.16 No Sale, Leaseback. Shall not enter into any
sale-and-leaseback or similar transaction.
5.17 Margin Stock. Shall not use any proceeds of the Loan to
purchase or carry any margin stock (within the meaning of Regulation U of the
Board of Governors of Federal Reserve System) or extend credit to others for
the purpose of purchasing or carrying any margin stock.
5.18 Payment of Taxes, Etc. Shall pay before delinquent all of
its debts and taxes except that the Bank shall not unreasonably withhold its
consent to nonpayment of taxes being actively contested in accordance with law
(provided that the Bank may require bonding or other assurances).
5.19 Subordination. Shall cause all debt and other obligations
now or hereafter owed to any Guarantor or Affiliate to be subordinated in right
of payment and security to the Indebtedness in accordance with subordination
agreements satisfactory to the Bank.
5.20 Compliance; Hazardous Materials. Shall strictly comply with
all laws, regulations, ordinances and other legal requirements, specifically
including, without limitation, ERISA, all securities laws and all laws relating
to hazardous materials and the environment. Unless approved in writing by the
Bank, neither the Borrower nor any Subsidiary shall engage in the storage,
manufacture, disposition, processing, handling, use or transportation of any
hazardous or toxic materials, whether or not in compliance with applicable laws
and regulations.
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5.21 Subsidiaries. Shall not acquire, form or dispose of any
Subsidiaries or permit any Subsidiary to issue capital stock except to its
parent, other than the acquiring of Fairfax Communications Ltd.
5.22 Compliance with Assignment Laws. Shall if required by the
Bank comply with the Federal Assignment of Claims Act and any other applicable
law relating to assignment of government contracts.
5.23 Further Assurances. Shall take such further action and
provide to the Bank such further assurances as may be reasonably requested to
ensure compliance with the intent of this Agreement and the other Loan
Documents.
5.24 Withholding Taxes. Pay as and when due all employee
withholding, FICA and other payments required by federal, state and local
governments with respect to wages paid to employees.
5.25 Financial Covenants. At all times, the Borrower shall be in
compliance with the following financial covenants tested quarterly on a
consolidated basis:
(a) The Tangible Net Worth of the Borrower shall
not be less than $3,750,000 at any time, except for any temporary decrease in
equity due to the S Corporation distributions at the time of any initial public
offering as permitted under Section 5.9 hereof, provided, however that any
such deficiency shall be eliminated immediately after the completion of such
initial public offering;
(b) The ratio of Total Liabilities of the
Borrower to Tangible Net Worth of the Borrower shall not be more than 3.50 to
1.0 at all times;
(c) The ratio of Total Funded Debt of the
Borrower to EBITDA shall not be exceed 3.00 to 1.00 at all times; and
(d) The Borrower shall maintain a Debt Service
Coverage of not less than the following amounts at the following times:
Debt Service Coverage: Quarter Ending:
--------------------- --------------
1.4 to 1.0 March 31, 1997;
1.4 to 1.0 June 30, 1997;
1.4 to 1.0 September 30, 1997; and
1.5 to 1.0 December 31 and at all times thereafter.
5.26 Government Accounts. Immediately notify the Bank if any of
the Accounts arise out of contracts with the United States or with any state or
political subdivision thereof or any department, agency or instrumentality of
the United States, or any state or political subdivision thereof, and execute
any instruments and take any steps required by the Bank in order that all
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moneys due and to become due under such contracts having a value in excess of
$500,000 and a term in excess of six months shall be assigned to the Bank and
notice thereof given to the government under the Federal Assignment of Claims
Act or any other applicable law.
6. DEFAULT.
6.1 Events of Default. Each of the following shall constitute an
Event of Default:
(a) Any representation or warranty made by the Borrower
or any other party to any Loan Document (other than the Bank) herein or therein
or in any certificate or report furnished in connection herewith or therewith
shall prove to have been untrue or incorrect in any material respect when made;
or
(b) There shall occur any default by the Borrower in the
payment, when due, of any principal of or interest on the Note, any amounts due
hereunder or any other Loan Document or any other Indebtedness (not cured
within any grace period provided in such Note or in the document or instrument
evidencing such Indebtedness); or
(c) There shall occur any default by the Borrower or any
other party to any Loan Document (other than the Bank) in the performance of
any agreement, covenant or obligation contained in this Agreement or such Loan
Document not provided for elsewhere in this Section 6 and such default is not
cured within any grace period provided in this Agreement or such other Loan
Document; or
(d) Any other obligation now or hereafter owed by the
Borrower or any Subsidiary or Guarantor to the Bank shall be in default and not
cured within any period of grace provided therein or any such Person shall be
in default under any obligation in excess of $25,000 owed to any other obligee,
which default entitles the obligee to accelerate any such obligations or
exercise other remedies with respect thereto; or
(e) The Borrower or any Subsidiary shall (i) voluntarily
liquidate or terminate operations or apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of such Person or of all or of a substantial part of its assets,
(ii) admit in writing its inability, or be generally unable, to pay its debts
as the debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the federal Bankruptcy Code (as
now or hereafter in effect), (v) file a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization, winding-up,
or composition or adjustment of debts, (vi) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it
in an involuntary case under the Bankruptcy Code, or (vii) take any corporate
action for the purpose of effecting any of the foregoing; or
(f) Without its application, approval or consent, a
proceeding shall be commenced, in any court of competent jurisdiction, seeking
in respect of such Person any remedy under the
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federal Bankruptcy Code, the liquidation, reorganization, dissolution,
winding-up, or composition or readjustment of debt, the appointment of a
trustee, receiver, liquidator or the like of such Person, or of all or any
substantial part of the assets of such Person, or other like relief under any
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts; or
(g) Any security interest or Lien of the Bank hereunder
or under any other Security Agreement shall not constitute a perfected security
interest of first priority in the Collateral thereby encumbered, subject only
to Permitted Liens; or
(h) There shall occur any material loss, theft, damage or
destruction of any of the Collateral, which loss is not fully insured; or
(i) A judgment in excess of $25,000 shall be rendered
against the Borrower or any Subsidiary or Guarantor and shall remain
undischarged, undismissed and unstayed for more than ten days (except judgments
validly covered by insurance with a deductible of not more than $25,000) or
there shall occur any levy upon, or attachment, garnishment or other seizure
of, any material portion of the Collateral or other assets of the Borrower or
any Subsidiary by reason of the issuance of any tax levy, judicial attachment
or garnishment or levy of execution; or
(j) The Borrower or any Subsidiary shall fail to pay, on
demand, any returned or dishonored draft, check, or other item which has been
deposited to the Special Loan Account or otherwise presented to the Bank and
for which the Borrower has received provisional credit; or
(k) The Bank, in good faith, shall deem itself insecure.
6.2 Remedies. If any Default shall occur, the Bank may, without
notice to the Borrower, at its option, withhold further Advances to the
Borrower of proceeds of the Loans. Should (a) any Event of Default under
Sections 6.1(g), (h), (k) or (l) occur and not be cured within thirty (30) days
following delivery of written notice thereof by the Bank to the Borrower (which
notice shall be complete upon hand or overnight delivery or upon facsimile
delivery or mailing by certified mail, return receipt requested) or (b) any
other Event of Default occur, the Bank may declare any or all Indebtedness to
be immediately due and payable (if not earlier demanded), bring suit against
the Borrower to collect the Indebtedness, exercise any remedy available to the
Bank hereunder and take any action or exercise any remedy provided herein or in
any other Loan Document or under applicable law. No remedy shall be exclusive
of other remedies or impair the right of the Bank to exercise any other
remedies.
6.3 Receiver. In addition to any other remedy available to it,
the Bank shall have the absolute right, upon the occurrence of an Event of
Default, to seek and obtain the appointment of a receiver to take possession of
and operate and/or dispose of the business and assets of the Borrower and any
costs and expenses incurred by the Bank in connection with such receivership
shall bear interest at the Default Rate and shall be secured by all Collateral.
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7. SECURITY AGREEMENT.
7.1 Security Interest.
(a) As security for the payment and performance of any
and all of the Indebtedness and the performance of all other obligations and
covenants of the Borrower hereunder and under the other Loan Documents, certain
or contingent, now existing or hereafter arising, which are now, or may at any
time or times hereafter be owing by the Borrower to the Bank, the Borrower
hereby pledges to the Bank and gives the Bank a continuing security interest in
and general Lien upon and right of set-off against, all right, title and
interest of the Borrower in and to the Collateral, whether now owned or
hereafter acquired by the Borrower.
(b) Except as herein or by applicable law otherwise
expressly provided, the Bank shall not be obligated to exercise any degree of
care in connection with any Collateral in its possession, to take any steps
necessary to preserve any rights in any of the Collateral or to preserve any
rights therein against prior parties, and the Borrower agrees to take such
steps. In any case the Bank shall be deemed to have exercised reasonable care
if it shall have taken such steps for the care and preservation of the
Collateral or rights therein as the Borrower may have reasonably requested the
Bank to take and the Bank's omission to take any action not requested by the
Borrower shall not be deemed a failure to exercise reasonable care. No
segregation or specific allocation by the Bank of specified items of Collateral
against any liability of the Borrower shall waive or affect any security
interest in or Lien against other items of Collateral or any of the Bank's
options, powers or rights under this Agreement or otherwise arising.
(c) The Bank may at any time and from time to time, with or
without notice to the Borrower, (i) transfer into the name of the Bank or the
name of the Bank's nominee any of the Collateral, (ii) notify any Account
Debtor or other obligor of any Collateral to make payment thereon direct to the
Bank of any amounts due or to become due thereon and (iii) receive and after a
default direct the disposition of any proceeds of any Collateral.
7.2 Remedies.
(a) If an Event of Default shall have occurred and be
continuing, without waiving any of its other rights hereunder or under any
other Loan Documents, the Bank shall have all rights and remedies of a secured
party under the Code (and the Uniform Commercial Code of any other applicable
jurisdiction) and such other rights and remedies as may be available hereunder,
under other applicable law or pursuant to contract. If requested by the Bank,
the Borrower will promptly assemble the Collateral and make it available to the
Bank at a place to be designated by the Bank. The Borrower agrees that any
notice by the Bank of the sale or disposition of the Collateral or any other
intended action hereunder, whether required by the Code or otherwise, shall
constitute reasonable notice to the Borrower if the notice is mailed to the
Borrower by regular or certified mail, postage prepaid, at least five days
before the action to be taken. The Borrower shall be liable for any
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deficiencies in the event the proceeds of the disposition of the Collateral do
not satisfy the Indebtedness in full.
(b) If an Event of Default shall have occurred and be
continuing, the Bank may demand, collect and ▇▇▇ for all amounts owed pursuant
to Accounts, General Intangibles, Chattel paper or for proceeds of any
Collateral (either in the Borrower's name or the Bank's name at the latter's
option), with the right to enforce, compromise, settle or discharge any such
amounts. The Borrower appoints the Bank as the Borrower's attorney-in-fact to
endorse the Borrower's name on all checks, commercial paper and other
instruments pertaining to Collateral or proceeds.
7.3 Power of Attorney. The Borrower authorizes the Bank at the
Borrower's expense to file any financing statements relating to the Collateral
(without the Borrower's signature thereon) which the Bank deems appropriate and
the Borrower irrevocably appoints the Bank as its attorney-in-fact to execute
any such financing statements in the Borrower's name and to perform all other
acts which the Bank deems appropriate to perfect and to continue perfection of
the security interest of the Bank. The Borrower hereby appoints the Bank as
the Borrower's attorney-in-fact to endorse, present and collect on behalf of
the Borrower and in the Borrower's name any draft, checks or other documents
necessary or desirable to collect any amounts which the Borrower may be owed.
7.4 Entry. The Borrower hereby irrevocably consents to any act by
the Bank or its agents in entering upon any premises for the purposes of either
(i) inspecting the Collateral or (ii) taking possession of the Collateral and
the Borrower hereby waives its right to assert against the Bank or its agents
any claim based upon trespass or any similar cause of action for entering upon
any premises where the Collateral may be located.
7.5 Deposits; Insurance. Upon the occurrence and continuance of
an Event of Default, the Borrower authorizes the Bank to collect and apply
against the Indebtedness when due any cash or deposit accounts in its
possession, and any refund of insurance premiums or any insurance proceeds
payable on account of the loss or damage to any of the Collateral and
irrevocably appoints the Bank as its attorney-in-fact to endorse any check or
draft or take other action necessary to obtain such funds.
7.6 Other Rights. The Borrower authorizes the Bank without
affecting the Borrower's obligations hereunder or under any other Loan Document
from time to time (i) to take from any party and hold additional Collateral or
guaranties for the payment of the Indebtedness or any part thereof, and to
exchange, enforce or release such collateral or guaranty of payment of the
Indebtedness or any part thereof and to release or substitute any endorser or
guarantor or any party who has given any security interest in any collateral as
security for the payment of the Indebtedness or any part thereof or any party
in any way obligated to pay the Indebtedness or any part thereof; and (ii) upon
the occurrence of any Event of Default to direct the manner of the disposition
of the Collateral and the enforcement of any endorsements, guaranties, letters
of credit or other security relating to the Indebtedness or any part thereof as
the Bank in its sole discretion may determine.
22
24
7.7 Accounts. Before or after any Event of Default, the Bank may
notify any Account Debtor of the Bank's security interest and may direct such
Account Debtor to make payment directly to the Bank for application against the
Indebtedness. Any such payments received by or on behalf of the Borrower at
any time, whether before or after default, shall be the property of the Bank,
shall be held in trust for the Bank and not commingled with any other assets of
any Person (except to the extent they may be commingled with other assets of
the Borrower in an account with the Bank) and shall be immediately delivered to
the Bank in the form received. The Bank shall have the right to apply any
proceeds of Collateral to such of the Indebtedness as it may determine.
7.8 Tangible Collateral. Except as otherwise provided herein or
agreed to in writing by the Bank, no Inventory or other tangible collateral
shall be commingled with, or become an accession to or part of, any property of
any other Person so long as such property is Collateral. Upon the occurrence
of any Event of Default, the Borrower shall, upon the request of the Bank,
promptly assemble all tangible Collateral for delivery to the Bank or its
agents. No tangible Collateral shall be allowed to become a fixture unless the
Bank shall have given its prior written authorization.
7.9 Waiver of Marshalling. The Borrower hereby waives any right
it may have to require marshalling of its assets.
7.10 Waiver of Automatic Stay. The Borrower hereby waives the
application of the automatic stay of enforcement provided in ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code and agrees that the Bank may proceed with
enforcement and collection notwithstanding the filing of a petition in
bankruptcy.
8. MISCELLANEOUS.
8.1 No Waiver, Remedies Cumulative. No failure on the part of the
Bank to exercise, and no delay in exercising, any right hereunder or under any
other Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and are in addition to any other remedies provided by law, any Loan
Document or otherwise.
8.2 Survival of Representations. All representations and
warranties made herein shall survive the making of the Loans hereunder and the
delivery of the Notes, and shall continue in full force and effect so long as
any Indebtedness is outstanding, there exists any commitment by the Bank to the
Borrower, and until this Agreement is formally terminated in writing.
8.3 Expenses. Whether or not the Loans herein provided for shall
be made, the Borrower shall pay all reasonable costs and expenses in connection
with the preparation, execution, delivery, amendment and enforcement of this
Agreement and any Loan Document, including the reasonable fees and
disbursements of counsel for the Bank in connection therewith, whether suit be
brought or not and whether incurred at trial or on appeal, and all costs of
repossession, storage, disposition,
23
25
protection and collection of Collateral. If the Borrower should fail to pay
any tax or other amount required by this Agreement to be paid or which may be
reasonably necessary to protect or preserve any Collateral or the Borrower's or
Bank's interests therein, the Bank may make such payment and the amount thereof
shall be payable on demand, shall bear interest at the Default Rate from the
date of demand until paid and shall be deemed to be Indebtedness entitled to
the benefit and security of the Loan Documents. In addition, the Borrower
agrees to pay and save the Bank harmless against any liability for payment of
any state documentary stamp taxes, intangible taxes or similar taxes (including
interest or penalties, if any) which may now or hereafter be determined to be
payable in respect to the execution, delivery or recording of any Loan Document
or the making of any Advance, whether originally thought to be due or not, and
regardless of any mistake of fact or law on the part of the Bank or the
Borrower with respect to the applicability of such tax. The provisions of this
section shall survive payment in full of the Loans and termination of this
Agreement.
8.4 Notices. Any notice or other communication hereunder to any
party hereto shall be by hand delivery, overnight delivery, facsimile,
telegram, telex or registered or certified mail and unless otherwise provided
herein shall be deemed to have been given or made when delivered, telegraphed,
telexed, faxed or deposited in the mails, postage prepaid, addressed to the
party at its address specified below (or at any other address that the party
may hereafter specify to the other parties in writing):
The Bank: FIRST UNION COMMERCIAL CORPORATION
Government Contracting and Technology Group
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ 1942
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
The Borrower: ADVANCED COMMUNICATION SYSTEMS, INC.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Dev Ganesan, Chief Financial Officer
8.5 Governing Law. This Agreement and the Loan Documents shall be
deemed contracts made under the laws of the Commonwealth of Virginia and shall
be governed by and construed in accordance with the laws of said state except
insofar as the laws of another jurisdiction may govern the perfection, priority
and enforcement of security interests in Collateral located in another
jurisdiction.
8.6 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the Borrower and the Bank, and their
respective successors and assigns; provided, that the Borrower may not assign
any of its rights hereunder without the prior written consent of the Bank, and
any such assignment made without such consent will be void.
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26
8.7 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which when taken together shall constitute but one and the same instrument.
8.8 No Usury. Notwithstanding anything contained in this
Agreement, the Note, or in any other Loan Document to the contrary, in no event
will interest or other charges deemed to be interest be chargeable against the
Borrower if such amount (combined with any other amounts considered to be in
the nature of interest) would exceed the maximum amount permitted by law from
time to time while any of the Indebtedness is outstanding, and in the event any
amount in excess of the lawful maximum is charged or collected by the Bank or
paid by the Borrower, the Borrower shall be entitled to the reimbursement of
such excess together with interest thereon at the highest lawful rate at the
time of such overcharge.
8.9 Powers. All powers of attorney granted to the Bank are
coupled with an interest and are irrevocable.
8.10 Approvals. If this Agreement calls for the approval or
consent of the Bank, such approval or consent may be given or withheld in the
discretion of the Bank unless otherwise specified herein.
8.11 Jurisdiction, Service of Process.
(a) Any suit, action or proceeding against the Borrower
with respect to this Agreement, the Collateral or any Loan Document or any
judgment entered by any court in respect thereof may be brought in the courts
of Fairfax County, Virginia or in the U.S. District court for the Eastern
District of Virginia as the Bank (in its sole discretion) may elect, and the
Borrower hereby accepts the nonexclusive jurisdiction of those courts for the
purpose of any suit, action or proceeding. Service of process in any such case
may be had against the Borrower by delivery in accordance with the notice
provisions herein or as otherwise permitted by law, and the Borrower agrees
that such service shall be valid in all respects for establishing personal
jurisdiction over it.
(b) In addition, the Borrower hereby irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement, the Loan Documents, the Collateral or any
judgment entered by any court in respect thereof brought in Fairfax County,
Virginia or the U.S. District Court for the Eastern District of Virginia, as
selected by the Bank, and hereby further irrevocably waives any claim that any
suit, action or proceedings brought in Fairfax County, Virginia or in such
District Court has been brought in an inconvenient forum.
8.12 Waiver of Jury Trial. THE BORROWER AND THE BANK HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER OF THEM MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
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27
BASED UPON THIS AGREEMENT OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT AND ANY OTHER LOAN DOCUMENT AND ANY OTHER AGREEMENT CONTEMPLATED TO
BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS
AGREEMENT.
8.13 ARBITRATION. Upon demand of any party hereto, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Agreement and
other Loan Documents ("Disputes") between or among parties to this Agreement
shall be resolved by binding arbitration as provided herein. Institution of a
judicial proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration,
claims brought as class actions, claims arising from Loan Documents executed in
the future, or claims arising out of or connected with the transaction
reflected by this Agreement.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which the office of
Lender first stated above is located. The expedited procedures set forth in
Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of less
than $1,000,000. All applicable statutes of limitation shall apply to any
Dispute. A judgment upon the award may be entered in any court having
jurisdiction. The panel from which all arbitrators are selected shall be
comprised of licensed attorneys. The single arbitrator selected for expedited
procedure shall be a retired judge from the highest court of general
jurisdiction, state or Federal, of the state where the hearing will be
conducted or if such person is not available to serve, the single arbitrator
may be a licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to Disputes under or related to swap agreements.
8.14 Preservation and Limitation of Remedies. Notwithstanding the
preceding binding arbitration provisions, the Bank and the Borrower agree to
preserve, without diminution, certain remedies that any party hereto may employ
or exercise freely, independently or in connection with an arbitration
proceeding or after an arbitration action is brought. The Bank and the Borrower
shall have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any real or personal property or other security
by exercising a power of sale granted under Loan Documents or under applicable
law or by judicial foreclosure and sale, including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment.
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28
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
The Borrower and the Bank agree that they shall not have a remedy of punitive
or exemplary damages against the other in any Dispute and hereby waive any
right or claim to punitive or exemplary damages they have now or which may
arise in the future in connection with any Dispute whether the Dispute is
resolved by arbitration or judicially.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
FIRST UNION COMMERCIAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
ADVANCED COMMUNICATIONS SYSTEMS, INC.
By: /s/ DEV GANESAN
----------------------------------
Name: Dev Ganesan
Title: Chief Financial Officer
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29
SCHEDULE OF EXHIBITS
(IF ANY EXHIBIT IS OMITTED, THE INFORMATION CALLED FOR THEREIN
SHALL BE CONSIDERED "NONE" OR "NOT APPLICABLE")
Exhibit Section Reference Title
------- ----------------- -----
1.1B 1.1 ("Eligible Accounts") Ineligible Accounts
1.1C 1.1 ("Permitted Debt") Permitted Debt
1.1D 1.1 ("Permitted Liens") Permitted Liens
2.3 2.3 ("Financial Condition") Contingent Liabilities
2.4 2.4 ("Litigation") Litigation
2.9 2.9 ("Location") Offices of Borrower
2.17 2.17 ("Subsidiaries") List of Subsidiaries
30
EXHIBIT 1.1B
ADDITIONAL INELIGIBLE ACCOUNTS
The following shall be additional ineligible accounts:
1. Those amounts invoiced whose payment is retained by
account debtor pending final inspection and acceptance, sometimes referred to
as "retainage".
2. Those portions of any account that are milestone ▇▇▇▇▇▇▇▇
(other than authorized billed milestones) final ▇▇▇▇▇▇▇▇, or rate variances.
31
EXHIBIT 1.1C
PERMITTED DEBT
The following shall be additional Permitted Debt:
1. Debt payable to suppliers and other trade creditors
in the ordinary course of business on ordinary and customary trade terms and
which is not past due.
2. Debt of any Subsidiary to the Borrower or another
Subsidiary.
32
EXHIBIT 1.1D
PERMITTED LIENS
The following shall be additional Permitted Liens:
1. Deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance, social security and similar
laws.
2. Attachment, judgment and other similar non-tax Liens arising
in connection with court proceedings but only if and for so long as (a) the
execution or enforcement of such Liens is and continues to be effectively
stayed and bonded on appeal, (b) the validity and/or amount of the claims
secured thereby are being actively contested in good faith by appropriate legal
proceedings and (c) such Liens do not, in the aggregate, materially detract
from the value of the assets of the Person whose assets are subject to such
Lien or materially impair the use thereof in the operation of such Person's
business.
3. Liens securing Permitted Debt incurred solely for the purpose
of financing the acquisition of equipment, provided that such Lien does not
secure more than the purchase price of such equipment and does not encumber
property other than the purchased property.
33
EXHIBIT 2.3
CONTINGENT LIABILITIES
The following are contingent liabilities of the Borrower,
Subsidiaries and/or Guarantors:
[DESCRIBE LISTING LIABLE PARTY, MAXIMUM POTENTIAL LIABILITY, NATURE OF
LIABILITY AND ITS CURRENT STATUS]
34
EXHIBIT 2.4
LITIGATION
Describe any suit or proceeding pending or threatened :
[DESCRIBE ANY SUIT OR PROCEEDING PENDING OR THREATENED BEFORE ANY COURT,
GOVERNMENTAL OR REGULATORY AUTHORITY, COMMISSION, BUREAU OR AGENCY OR PUBLIC
REGULATORY BODY.]
35
EXHIBIT 2.9
OFFICES OF BORROWER
List any offices of Borrower or Subsidiary not listed in Section 8.4.
Advanced Communication Systems, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
36
EXHIBIT 2.17
LIST OF SUBSIDIARIES
Fairfax Communications Ltd.
37
IMPORTANT NOTICE
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH
CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS
THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
REVOLVING PROMISSORY NOTE
$5,000,000.00
McLean, Virginia
March 1, 1997
FOR VALUE RECEIVED, ADVANCED COMMUNICATIONS SYSTEMS, INC., a
corporation organized under the laws of the State of Delaware (the "Borrower"),
promises to pay to the order of FIRST UNION COMMERCIAL CORPORATION, a North
Carolina banking corporation, its successors and assigns (the "Lender"), the
principal sum of FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) (the
"Principal Sum"), or so much thereof as has been or may be advanced or
readvanced to or for the account of the Borrower pursuant to the terms and
conditions of the Financing Agreement (as hereinafter defined), together with
interest thereon at the rate or rates hereinafter provided, in accordance with
the following:
1. INTEREST. Commencing as of the date hereof and continuing
until repayment in full of all sums due hereunder, the unpaid Principal Sum
shall bear interest at the fluctuating prime rate of interest established and
declared by the Lender from time to time (the "Prime Rate") plus the Additional
Percentage (as hereinafter defined). The Prime Rate does not necessarily
represent the lowest rate of interest charged by the Lender to borrowers. The
rate of interest charged under this Note shall change immediately and
contemporaneously with any change in the Prime Rate. All interest payable
under the terms of this Note shall be calculated on the basis of a 360-day year
and the actual number of days elapsed.
38
For purposes hereof, the "Additional Percentage" shall mean
the percentage applicable to this Note in accordance with the following:
(x) If the Borrower's Total Funded Debt divided
by EBITDA is greater than or equal to 2.0 to 1.0, the Additional Percentage
shall be one quarter of one percent (.25%); and
(y) If the Borrower's Total Funded Debt divided
by EBITDA is less than 2.0 to 1.0, the Additional Percentage shall be zero
percent (0.00%).
For purposes of this Note, the terms Total Funded Debt and EBITDA
shall have the meanings attributed to such terms in the Financing Agreement
(hereinafter defined).
The initial Additional Percentage shall be calculated based on the
Borrower's financial statements for the quarter ending December 31, 1996.
Thereafter, the applicable Additional Percentage shall be calculated and
adjusted quarterly, based on the quarterly financial statements required to be
submitted to the Lender pursuant to Section 5.6 (c) of the Financing Agreement.
Such quarterly changes shall be effective commencing five (5) Business Days
after submission by the Borrower of the required financial statements; it being
understood, however, that in the event the quarterly financial statements are
not submitted when due, the Applicable Percentage shall be one quarter of one
percent (.25%) until such financial statements are submitted as required, at
which time the Applicable Percentage (for the balance of the calendar quarter)
shall be determined as set forth above.
(c) All interest payable under the terms of this Note
shall be calculated on the basis of a 360-day year and the actual number of
days elapsed.
(d) In respect to any interest rate election hereunder
and any transactions contemplated hereby, the Borrower authorizes the Lender to
accept, rely upon, act upon and comply
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39
with, any verbal or written instructions, requests, confirmations and orders of
▇▇▇▇▇ ▇▇▇▇▇▇▇ on behalf of the Borrower. The Borrower acknowledges that the
transmission between the Borrower and the Lender of any such instructions,
requests, confirmations and orders involves the possibility of errors,
omissions, mistakes and discrepancies and agrees to adopt such internal
measures and operational procedures to protect its interests. By reason
thereof, the Borrower hereby assumes all risk of loss and responsibility for,
release and discharge the Lender from any and all responsibility or liability
for, and agree to indemnify, reimburse on demand and hold the Lender harmless
from, any and all claims, actions, damages, losses, liability and expenses by
reason of, arising out of or in any way connected with or related to, (i) the
Lender's acceptance, reliance and actions upon, compliance with or observation
of any such instructions, requests, confirmations or orders, and (ii) any such
errors, omissions, mistakes and discrepancies, except those caused by the
Lender's gross negligence or willful misconduct.
2. PAYMENTS AND MATURITY. The unpaid Principal Sum, together
with interest thereon at the rate or rates provided above, shall be payable as
follows:
(a) Interest only on the unpaid Principal Sum shall be
due and payable monthly, commencing March 31, 1997, and on the last day of each
month thereafter to maturity; and
(b) Unless sooner paid, the unpaid Principal Sum,
together with interest accrued and unpaid thereon, shall be due and payable in
full on February 28, 1998.
The fact that the balance hereunder may be reduced to zero from time
to time pursuant to the Financing Agreement will not affect the continuing
validity of this Note or the Financing Agreement, and the balance may be
increased to the Principal Sum after any such reduction to zero.
3
40
3. DEFAULT INTEREST. Upon the occurrence of an Event of Default
(as hereinafter defined), the unpaid Principal Sum shall bear interest
thereafter at a rate (the "Default Rate") two percent (2%) per annum in excess
of the then current rate or rates of interest hereunder until such Event of
Default is cured.
4. LATE CHARGES. If the Borrower shall fail to make any payment
under the terms of this Note within ten (10) days after the date such payment
is due, the Borrower shall pay to the Lender on demand a late charge equal to
five percent (5%) of such payment.
5. APPLICATION AND PLACE OF PAYMENTS. All payments, made on
account of this Note shall be applied first to the payment of any late charge
then due hereunder, second to the payment of any prepayment fee then due
hereunder, third to the payment of accrued and unpaid interest then due
hereunder, and the remainder, if any, shall be applied to the unpaid Principal
Sum. All payments on account of this Note shall be paid in lawful money of the
United States of America in immediately available funds during regular business
hours of the Lender at its principal office in McLean, Virginia or at such
other times and places as the Lender may at any time and from time to time
designate in writing to the Borrower.
6. FINANCING AGREEMENT AND OTHER FINANCING DOCUMENTS. This Note
is the "Note" described in a Financing and Security Agreement of even date
herewith by and between the Borrower and the Lender (as amended, modified,
restated, substituted, extended and renewed at any time and from time to time,
the "Financing Agreement"). The indebtedness evidenced by this Note is
included within the meaning of the term "Obligations" as defined in the
Financing Agreement. The term "Financing Documents" as used in this Note shall
mean collectively this Note, the Financing Agreement and any other instrument,
agreement, or document previously, simultaneously,
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41
or hereafter executed and delivered by the Borrower and/or any other person,
singularly or jointly with any other person, evidencing, securing,
guaranteeing, or in connection with the Principal Sum, this Note and/or the
Financing Agreement.
7. SECURITY. This Note is secured as provided in the Financing
Agreement.
8. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an event of default (individually, an "Event
of Default" and collectively, the "Events of Default") under the terms of this
Note:
(a) The failure of the Borrower to pay to the Lender when
due any and all amounts payable by the Borrower to the Lender under the terms
of this Note; or
(b) The occurrence of an event of default (as defined
therein) under the terms and conditions of any of the other Financing
Documents.
9. REMEDIES. Upon the occurrence of an Event of Default, at the
option of the Lender, all amounts payable by the Borrower to the Lender under
the terms of this Note shall immediately become due and payable by the Borrower
to the Lender without notice to the Borrower or any other person, and the
Lender shall have all of the rights, powers, and remedies available under the
terms of this Note, any of the other Financing Documents and all applicable
laws. The Borrower and all endorsers, guarantors, and other parties who may
now or in the future be primarily or secondarily liable for the payment of the
indebtedness evidenced by this Note hereby severally waive presentment, protest
and demand, notice of protest, notice of demand and of dishonor and non-payment
of this Note and expressly agree that this Note or any payment hereunder may be
extended from time to time without in any way affecting the liability of the
Borrower, guarantors and endorsers.
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42
10. CONFESSED JUDGMENT. (a) The Borrower hereby appoints and
designates ▇▇▇▇▇▇▇ ▇. English, Jr. Esquire, as its duly constituted
attorney-in-fact to confess judgment against the Borrower pursuant to the
provisions hereof and of Section 8.01-432 of the Code of Virginia of 1950, as
amended, which judgment shall be confessed in the Clerk's Office of the Circuit
Court of Fairfax County, Virginia. The Borrower shall, upon the Lender's
request, name such additional or alternative persons designated by the Lender
as the Borrower's duly constituted attorney or attorneys-in-fact to confess
judgment against the Borrower in accordance with the terms hereof.
Furthermore, upon the Lender's request, the Borrower shall agree to the
designation of any additional circuit courts in the Commonwealth of Virginia in
which judgment may be confessed against the Borrower.
(b) Upon the occurrence of an Event of Default, the Borrower
hereby authorizes the above designated attorney-in-fact or any successor named
therefor to confess judgment against the Borrower for the amount of the unpaid
Principal Sum, all interest accrued and unpaid thereon, and all other amounts
payable by the Borrower to the Lender under the terms of this Note or any of
the other Financing Documents, together with court costs and attorneys' fees of
fifteen percent (15%) of the unpaid Principal Sum and interest then due
hereunder. The Borrower hereby releases, to the extent permitted by applicable
law, all errors and all rights of exemption, appeal, stay of execution,
inquisition, and other rights to which the Borrowers may otherwise be entitled
under the laws of the United States of America or of any state or possession of
the United States of America now in force or which may hereafter be enacted.
The authority and power to appear for and enter judgment against the Borrower
shall not be exhausted by one or more exercises thereof or by any imperfect
exercise thereof and shall not be extinguished by any judgment entered pursuant
thereto. Such
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43
authority may be exercised on one or more occasions or from time to time as
often as the Lender shall deem necessary or desirable, for all of which this
Note shall be a sufficient warrant.
(c) The Borrower represents and warrants that it is not a
natural person and that the obligations evidenced by this Note were not
incurred for personal, family or household purposes
11. MISCELLANEOUS. Each right, power, and remedy of the Lender as
provided for in this Note or any of the other Financing Documents, or now or
hereafter existing under any applicable law or otherwise shall be cumulative
and concurrent and shall be in addition to every other right, power, or remedy
provided for in this Note or any of the other Financing Documents or now or
hereafter existing under any applicable law, and the exercise or beginning of
the exercise by the Lender of any one or more of such rights, powers, or
remedies shall not preclude the simultaneous or later exercise by the Lender of
any or all such other rights, powers, or remedies. No failure or delay by the
Lender to insist upon the strict performance of any term, condition, covenant,
or agreement of this Note or any of the other Financing Documents, or to
exercise any right, power, or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, condition, covenant, or agreement or of
any such breach, or preclude the Lender from exercising any such right, power,
or remedy at a later time or times. By accepting payment after the due date of
any amount payable under the terms of this Note, the Lender shall not be deemed
to waive the right either to require prompt payment when due of all other
amounts payable under the terms of this Note or to declare an Event of Default
for the failure to effect such prompt payment of any such other amount. No
course of dealing or conduct shall be effective to amend, modify, waive,
release, or change any provisions of this Note.
12. PARTIAL INVALIDITY. In the event any provision of this Note
(or any part of any provision) is held by a court of competent jurisdiction to
be invalid, illegal, or unenforceable in any
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44
respect, such invalidity, illegality, or unenforceability shall not affect any
other provision (or remaining part of the affected provision) of this Note; but
this Note shall be construed as if such invalid, illegal, or unenforceable
provision (or part thereof) had not been contained in this Note, but only to
the extent it is invalid, illegal, or unenforceable.
13. CAPTIONS. The captions herein set forth are for convenience
only and shall not be deemed to define, limit, or describe the scope or intent
of this Note.
14. APPLICABLE LAW. The Borrower acknowledges and agrees that
this Note shall be governed by the laws of the Commonwealth of Virginia even
though for the convenience and at the request of the Borrower, this Note may be
executed elsewhere.
15. CONSENT TO JURISDICTION. The Borrower irrevocably submits to
the jurisdiction of any state or federal court sitting in the Commonwealth of
Virginia over any suit, action, or proceeding arising out of or relating to
this Note or any of the other Financing Documents. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection that the Borrower
may now or hereafter have to the laying of venue of any such suit, action, or
proceeding brought in any such court and any claim that any such suit, action,
or proceeding brought in any such court has been brought in an inconvenient
forum. Final judgment in any such suit, action, or proceeding brought in any
such court shall be conclusive and binding upon the Borrower and may be
enforced in any court in which the Borrower is subject to jurisdiction by a
suit upon such judgment, provided that service of process is effected upon the
Borrower as provided in this Note or as otherwise permitted by applicable law.
16. SERVICE OF PROCESS. The Borrower hereby consents to
process being served in any suit, action, or proceeding instituted in
connection with this Note by (i) the mailing of a copy thereof
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by certified mail, postage prepaid, return receipt requested, to the Borrower
and (ii) serving a copy thereof upon Dev Ganesan, the agent hereby designated
and appointed by the Borrower as the Borrower's agent for service of process.
The Borrower irrevocably agrees that such service shall be deemed in every
respect effective service of process upon the Borrower in any such suit, action
or proceeding, and shall, to the fullest extent permitted by law, be taken and
held to be valid personal service upon the Borrower. Nothing in this Section
shall affect the right of the Lender to serve process in any manner otherwise
permitted by law or limit the right of the Lender otherwise to bring
proceedings against the Borrower in the courts of any jurisdiction or
jurisdictions.
17. WAIVER OF TRIAL BY JURY. THE BORROWER HEREBY WAIVES TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE
PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS NOTE OR (B) THE
FINANCING DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES
A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE
BORROWER, AND THE BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR
OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY
OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWER FURTHER REPRESENTS
THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE
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MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE
WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
18. ARBITRATION. Upon demand of any party hereto, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Note and other
Financing Documents ("Disputes") between or among parties to this Note shall be
resolved by binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration,
claims brought as class actions, claims arising from Financing Documents
executed in the future, or claims arising out of or connected with the
transaction reflected by this Note.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in the city in which the office of
Lender first stated above is located. The expedited procedures set forth in
Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of less
than $1,000,000.00. All applicable statutes of limitation shall apply to any
Dispute. A judgment upon the award may be entered in any court having
jurisdiction. The panel from which all arbitrators are selected shall be
comprised of licensed attorneys. The single arbitrator selected for expedited
procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted or if such person is not available to serve, the single arbitrator
may be a licensed attorney.
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Notwithstanding the foregoing, this arbitration provision does not apply to
disputes under or related to swap agreements.
19. PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the
preceding binding arbitration provisions, the Lender and the Borrower agree to
preserve, without diminution, certain remedies that any party hereto may employ
or exercise freely, independently or in connection with an arbitration
proceeding or after an arbitration action is brought. The Lender and the
Borrower shall have the right to proceed in any court of proper jurisdiction or
by self-help to exercise or prosecute the following remedies, as applicable:
(i) all rights to foreclose against any real or personal property or other
security by exercising a power of sale granted under Financing Documents or
under applicable law or by judicial foreclosure and sale, including a
proceeding to confirm the sale; (ii) all rights of self-help including peaceful
occupation of real property and collection of rents, set-off, and peaceful
possession of personal property; (iii) obtaining provisional or ancillary
remedies including injunctive relief, sequestration, garnishment, attachment,
appointment of receiver and filing an involuntary bankruptcy proceeding; and
(iv) when applicable, a judgment by confession of judgment. Preservation of
these remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a Dispute.
The Borrower and the Lender agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby waive
any right or claim to punitive or exemplary damages they have now or which may
arise in the future in connection with any Dispute whether the Dispute is
resolved by arbitration or judicially.
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20. Transferability. Nothing in this or any other documents
regarding the transaction herein shall prohibit the Lender from pledging or
assigning this Note including any of the collateral therefor, to any Federal
Reserve Bank in accordance with applicable law.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
under seal by its duly authorized officers as of the date first written above.
WITNESS OR ATTEST: ADVANCED COMMUNICATIONS SYSTEMS, INC.
By: /s/ DEV GANESAN (SEAL)
------------------------------ --------------------------
Name: Dev Ganesan
Title: Chief Financial Officer
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