Exhibit 10.1
BUSINESS LOAN AND SECURITY AGREEMENT
dated April 15, 1998
by and among
FIRST UNION COMMERCIAL CORPORATION,
a North Carolina corporation, as Lender,
and
CONDOR TECHNOLOGY SOLUTIONS, INC.,
a Delaware corporation, and its subsidiaries, as Borrowers
TABLE OF CONTENTS
-----------------
CERTAIN DEFINITIONS...............................................................
ARTICLE I - COMMITMENT........................................................
1. Maximum Loan Amount...................................................
2. Use of Proceeds.......................................................
3. Intentionally Omitted.................................................
4. Advances..............................................................
5. Mandatory Payments; Reduction of Commitment...........................
6. Field Audits..........................................................
7. Certain Fees..........................................................
8. Intentionally Omitted.................................................
9. Appointment of the Parent Company.....................................
10. Joinder of New Subsidiaries and Affiliates............................
ARTICLE II - LETTERS OF CREDIT................................................
ARTICLE III - SECURITY........................................................
1. Security Generally....................................................
2. Stock Security Agreement..............................................
3. No Preference or Priority.............................................
ARTICLE IV - CONDITIONS TO THE LENDER'S OBLIGATIONS...........................
1. Satisfaction of Commitment Letter Conditions; Compliance
with Agreements.......................................................
2. Financial Condition...................................................
3. Opinion of Counsel....................................................
4. No Default............................................................
5. Documentation.........................................................
6. Closing Costs and Expenses............................................
ARTICLE V - REPRESENTATIONS AND WARRANTIES....................................
1. Corporate Existence and Qualification.................................
2. Corporate Authority; Noncontravention.................................
3. Financial Position....................................................
4. Payment of Taxes......................................................
5. Accuracy of Submitted Information; Omissions..........................
6. Government Contracts..................................................
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7. No Defaults or Liabilities............................................
8. No Violations of Law..................................................
9. Litigation and Proceedings............................................
10. Security Interest in the Collateral...................................
11. Principal Place of Business; Location of Books and Records............
12. Fiscal Year...........................................................
13. Pension Plans.........................................................
14. O.S.H.A. and Environmental Compliance.................................
15. Intellectual Property.................................................
16. Existing or Pending Defaults; Material Contracts......................
17. Leases and Real Property..............................................
18. Labor Relations.......................................................
19. Assignment of Government Contracts....................................
20. Intentionally Omitted.................................................
21. Subsidiaries..........................................................
22. Ownership of the Borrowers............................................
23. Solvency..............................................................
24. Survival of Representations and Warranties............................
ARTICLE VI - AFFIRMATIVE COVENANTS OF THE BORROWER............................
1. Payment of Loan Obligations...........................................
2. Payment of Taxes......................................................
3. Delivery of Financial and Other Statements............................
4. Maintenance of Records; Review by the Lender..........................
5. Maintenance of Insurance Coverage.....................................
6. Maintenance of Property/Collateral; Performance of Contracts..........
7. Maintenance of Corporate Existence....................................
8. Maintenance of Certain Accounts with Lender...........................
9. Maintenance of Management.............................................
10. Disclosure of Defaults, Etc...........................................
11. Security Perfection; Assignment of Claims Act; Payment of Costs.......
12. Defense of Title to Collateral........................................
13. Compliance with Law...................................................
14. Further Assurances; Additional Requested Information..................
15. Financial Covenants of the Borrowers..................................
16. Additional Financial Arrangements.....................................
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17. Landlord Waivers; Subordination.......................................
18. Substitute Notes......................................................
ARTICLE VII - NEGATIVE COVENANTS OF THE BORROWER..............................
1. Change of Control; Disposition of Assets; Acquisition and Merger......
2. Margin Stock..........................................................
3. Change of Operations..................................................
4. Judgments; Attachments................................................
5. Further Assignments; Performance and Modification of Contracts; etc...
6. Affect Rights of the Lender...........................................
7. Indebtedness; Granting of Security Interests..........................
8. Dividends; Loans; Advances; Investments and Similar Events............
9. Lease Obligations.....................................................
10. Intentionally Omitted.................................................
11. Fiscal Year and Accounting Changes....................................
12. Lockbox Deposits......................................................
ARTICLE VIII - COLLATERAL ACCOUNT.............................................
ARTICLE IX - DEFAULT AND REMEDIES.............................................
1. Events of Default.....................................................
2. Remedies..............................................................
ARTICLE X - INTENTIONALLY OMITTED.............................................
ARTICLE XI - CERTAIN ADDITIONAL RIGHTS AND OBLIGATIONS
REGARDING THE COLLATERAL..........................................
1. Power of Attorney.....................................................
2. Lockbox...............................................................
3. Other Agreements......................................................
ARTICLE XII - MISCELLANEOUS...................................................
1. Remedies Cumulative...................................................
2. Waiver................................................................
3. Notices...............................................................
4. Entire Agreement......................................................
5. Relationship of the Parties...........................................
6. Waiver of Jury Trial..................................................
7. Submission to Jurisdiction; Service of Process; Venue.................
8. Changes in Capital Requirements.......................................
9. Captions..............................................................
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10. Modification and Waiver...............................................
11. Transferability.......................................................
12. Governing Law; Binding Effect.........................................
13. Gender; Number........................................................
14. Joint and Several Liability...........................................
15. Materiality...........................................................
16. Confidentiality.......................................................
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EXHIBIT 1 - Request for Advance and Certification
EXHIBIT 2 - LIBOR Election Procedure and Requirements
EXHIBIT 3 - LIBOR Election Form and Certification
EXHIBIT 4 - Joinder Agreement
EXHIBIT 5 - Quarterly Covenant Compliance/Non-Default Certificate Form
EXHIBIT 6 - List of Financial Statements
SCHEDULE 1 - Government Contracts
SCHEDULE 2 - Litigation and Proceedings
SCHEDULE 3 - Principal Offices
SCHEDULE 4 - Business Locations
SCHEDULE 5 - Intellectual Property
SCHEDULE 6 - Royalties for Intellectual Property
SCHEDULE 7 - Material Contracts
SCHEDULE 8 - Material Contract Disputes, Litigation and Proceedings
SCHEDULE 9 - Collective Bargaining Agreements, Employment Agreements and
Professional Service Contracts
SCHEDULE 10 - Subsidiaries
SCHEDULE 11 - Existing Liens
* Exhibits and Schedules have been omitted
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BUSINESS LOAN AND SECURITY AGREEMENT
THIS BUSINESS LOAN AND SECURITY AGREEMENT is executed as of
the 15th day of April, 1998 and is by and among (i) FIRST UNION COMMERCIAL
CORPORATION, a North Carolina corporation, having offices at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; (ii) CONDOR TECHNOLOGY
SOLUTIONS, INC., a Delaware corporation; MANAGEMENT SUPPORT TECHNOLOGY CORP.,
a Delaware corporation, COMPUTER HARDWARE MAINTENANCE COMPANY, INC., a
Pennsylvania corporation, FEDERAL COMPUTER CORPORATION, a Virginia
corporation, CORPORATE ACCESS, INC., a Massachusetts corporation, INTERACTIVE
SOFTWARE SYSTEMS INCORPORATED, a Colorado corporation, U.S. COMMUNICATIONS,
INC., a Maryland corporation, INVENTURE GROUP, INC., a Pennsylvania
corporation, and MIS TECHNOLOGIES, INC., an Oklahoma corporation, all such
corporations having principal offices at the locations set forth on Schedule
3 hereto; and (iii) each other person or entity hereafter executing a
"Joinder Agreement" pursuant to this Agreement.
W I T N E S S E T H T H A T:
In consideration of the mutual covenants and agreements herein
contained, Ten Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree, represent and warrant as follows:
CERTAIN DEFINITIONS
For the purposes of this Business Loan and Security Agreement,
the terms set forth below shall have the following definitions:
"Acquired Entities" shall mean the entities to be acquired by the
Parent Company at Closing.
"Agreement" or "Loan Agreement" shall mean this Business Loan and
Security Agreement.
"Applicable Interest Rate" shall mean either (i) LIBOR or (ii)
Base Rate, as set forth in the Note.
"Applicable Laws" shall mean any federal, state or local law,
ordinance, rule or regulation to which any Borrower or the property of any
Borrower is subject, whether domestic or international.
"Base Rate" shall mean the higher of the (i) Federal Funds Rate
plus one-half of one percent (.50%) or (ii) Prime Rate.
"Borrower" or "Borrowers" shall mean each and all of the
following entities: Condor Technology Solutions, Inc., a Delaware corporation,
Management Support Technology Corp., a Delaware corporation, Computer Hardware
Maintenance Company, Inc., a Pennsylvania corporation, Federal Computer
Corporation, a Virginia corporation, Corporate Access, Inc., a Massachusetts
corporation, Interactive Software Systems Incorporated, a Colorado corporation,
U.S. Communications, Inc., a Maryland corporation, InVenture Group, Inc., a
Pennsylvania corporation, and MIS Technologies, Inc., an Oklahoma corporation,
and each other person or entity hereafter executing a Joinder Agreement pursuant
to Section 10 of Article I of this Agreement, individually or collectively, as
the context may require.
"Business Day" shall mean any day other than a Saturday, Sunday,
or public holiday under the laws of the Commonwealth of Virginia or other day on
which banking institutions are authorized or obligated to close in the city in
which the Lender's office is located.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601 et
seq.).
"Closing" shall mean the settlement of the transactions
contemplated hereby.
"Closing Date" shall mean the date on which Closing occurs.
"Collateral" shall have the meaning assigned to such term in
Article III of this Agreement.
"Collateral Account" shall have the meaning assigned to such term
in Article VIII of this Agreement.
"Commercial Contract" shall mean any written contract to which
any Borrower is a party (other than a Government Contract) which gives rise or
may give rise to Receivables.
"Commitment Amount" shall mean Thirty-five Million Dollars
($35,000,000.00), or if the maximum aggregate commitment of the Lender hereunder
is reduced pursuant to the terms of this Agreement (including, without
limitation, the terms of Section 5 of Article I of this Agreement), such lesser
amount.
"Commitment Fee" shall have the meaning assigned to such term in
Section 7 of Article I of this Agreement.
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"Commitment Letter" shall mean that certain letter dated November
17, 1997 from the Lender to the Parent Company relating to the Loan.
"Consolidated Company" shall mean the Borrowers on a consolidated
basis.
"Deutsche" shall mean Deutsche Financial Services Corporation, a
Nevada corporation, together with its successors and assigns.
"Deutsche Borrowers" shall mean Corporate Access, Inc., a
Massachusetts corporation, U.S. Communications, Inc., a Maryland corporation,
and Computer Hardware Maintenance Company, Inc., a Pennsylvania corporation.
"Deutsche Financing" shall mean that certain financing provided
by Deutsche to the Deutsche Borrowers from time to time in an amount not to
exceed Fifteen Million Dollars ($15,000,000.00) for the Deutsche Borrowers'
acquisition or purchase of Floor Plan Inventory Collateral, pursuant to the
Deutsche Financing Agreement.
"DFS Financing Agreement" shall mean that certain Agreement for
Wholesale Financing dated April 15, 1998, by and between Deutsche and the
Deutsche Borrowers, pursuant to which Deutsche agreed to provide the Deutsche
Financing to the Deutsche Borrowers.
"Deutsche Floor Plan Inventory Collateral" shall mean Inventory
(as such term is defined in the applicable Uniform Commercial Code) heretofore
or hereafter purchased or acquired by the Deutsche Borrowers with the proceeds
of the Deutsche Financing, together with all cash and insurance proceeds arising
from Inventory (but not accounts receivable, cash proceeds of accounts
receivable or any other proceeds of Inventory), all substitutions,
repossessions, exchanges, replacements and returns of Inventory, .all parts
thereof, attachments, additions, accessories and accessions of Inventory, and
all price protection credits, rebates, discounts and incentive payments relating
to any of the foregoing.
"Deutsche Subordination Agreement" shall mean that certain
Intercreditor and Subordination Agreement dated April 15, 1998, by and between
Deutsche and the Lender, pursuant to which (i) the Lender subordinated its
security interest in and to the Floor Plan Inventory Collateral, to the security
interest in favor of Deutsche, (ii) and Deutsche subordinated its security
interest in and to any and all Collateral (other than Floor Plan Inventory
Collateral), to the security interest in favor of the Lender, in each case for
so long as the Deutsche Financing Agreement remains in full force and effect.
"Event of Default" shall have the meaning assigned to such term
in Section 1 of Article IX of this Agreement.
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"Facility" shall mean the revolving credit facility being
extended pursuant to this Agreement in the maximum principal amount of
Thirty-five Million Dollars ($35,000,000.00), with a sub-limit of Fifteen
Million Dollars ($15,000,000.00) for Letters of Credit.
"Federal Funds Rate" for any day shall mean the rate per annum
(rounded upward to the nearest 1/8 of 1%) determined by the Lender to be the
rate (and such rate shall be equal to or as nearly as possible equal to such
rate) per annum announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
Federal Funds transactions arranged by Federal Funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided that if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Rate for
the last day on which such rate was announced.
"Fixed Charge Coverage Ratio" shall have the meaning assigned to
such term in Section 15(b) of Article VI of this Agreement.
"GAAP" shall mean generally accepted accounting principles.
"Government" shall mean the United States government or any
department, instrumentality or agency thereof, and any state government or any
department, instrumentality or agency thereof.
"Government Contract Assignments" shall have the meaning assigned
to such term in Section 11 of Article VI of this Agreement.
"Government Contracts" shall mean any and all (i) written
contracts between any Borrower and the Government; and (ii) written subcontracts
between any Borrower and a prime contractor who is providing goods or services
to the Government pursuant to a written contract with the Government (the "Prime
Contract"), provided that the subcontract relates only to goods or services
being provided to the Government pursuant to the Prime Contract.
"Hazardous Substance" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances,
pollutants or contaminants as defined in CERCLA, HMTA, RCRA or any other
applicable environmental law, rule, order or regulation.
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"Hazardous Wastes" shall mean, without limitation, all waste
materials subject to regulation under CERCLA, RCRA or analogous state law,
and/or any other applicable Federal and/or state law now in force or hereafter
enacted relating to hazardous waste treatment or disposal.
"HMTA" shall mean the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Sections 1801 et seq.).
"IBM" shall mean IBM Credit Corporation, a Delaware corporation,
together with its successors and assigns.
"IBM Borrower" shall mean Corporate Hardware Maintenance Company,
Inc., a Pennsylvania corporation.
"IBM Financing" shall mean that certain financing provided by IBM
to the IBM Borrower from time to time in an amount not to exceed Seven Hundred
Fifty Thousand Dollars ($750,000.00) for the IBM Borrower's acquisition or
purchase of Floor Plan Inventory Collateral, pursuant to the IBM Financing
Agreement.
"IBM Financing Agreement" shall mean the Agreement for Wholesale
Financing to be entered into by and between IBM and the IBM Borrower, in form
and substance acceptable to the Lender, pursuant to which IBM agreed to provide
the IBM Financing to the IBM Borrower.
"IBM Floor Plan Inventory Collateral" shall mean Inventory (as
such term is defined in the Uniform Commercial Code in effect in the
Commonwealth of Virginia) acquired or purchased with the proceeds of the IBM
Financing.
"IBM Subordination Agreement" shall mean that certain
Subordination Agreement dated April 14, 1998, by and between IBM and the Lender,
pursuant to which IBM subordinated its security interest in and to any and all
assets of the IBM Borrower (other than the IBM Floor Plan Inventory Collateral),
whether now owned or hereafter acquired, to the security interest in favor of
the Lender, in each case for so long as the IBM Financing Agreement remains in
full force and effect.
"Interest Period" means as to any Loan proceeds for which LIBOR
based interest has been elected in accordance with this Agreement, the period
commencing on and including the date such LIBOR election is effective (or the
effective date of the election to convert any portion of the Loan to a LIBOR
interest basis in accordance with the provisions of this Agreement) and ending
on and including the day which is 30, 90 or 180 days thereafter, as available,
and as selected in accordance with the provisions of this Agreement; provided,
however, that: (i) the first day of any Interest Period shall be a Business Day;
(ii) if any Interest Period would end on a day that would not be a Business
5
Day, such Interest Period shall be extended to the next succeeding Business Day;
and (iii) no Interest Period shall extend beyond the Maturity Date.
"Lender" shall mean First Union Commercial Corporation, a North
Carolina corporation.
"Letter of Credit" and "Letters of Credit" shall mean,
respectively, each and all of the standby letters of credit issued pursuant to
this Agreement.
Letter of Credit Application" shall have the meaning assigned to
term in Section 3 of Article II of this Agreement.
"Letter of Credit Fee" shall have the meaning assigned to such
term in Section 3 of Article II of this Agreement.
"LIBOR" shall mean for any Interest Period with respect to any
Loan proceeds for which a LIBOR election has been made, the per annum interest
rate (rounded upward, if necessary, to the nearest next 1/8 of 1%) quoted to the
Lender, on an immediately available funds basis, at or about 11:00 a.m. (London
time) on the date that is two (2) Business Days prior to the first day of such
Interest Period, for the offering by leading banks in the London Interbank
Eurodollar market of Dollar Deposits for a period comparable in time to the
duration of such Interest Period and in amounts comparable to the amounts for
which LIBOR is to be determined, adjusted for reserve requirements, if any. If
the Lender shall be unable or otherwise fails to so obtain the LIBOR quotes,
LIBOR shall be the average of those rates quoted on the REUTERS "LIBO" page for
a period comparable to the applicable Interest Period (rounded upward, if
necessary, to the nearest next 1/8 of 1%).
"Loan" shall mean the loans made by the Lender to the Borrowers
in the aggregate maximum principal amount of Thirty-five Million Dollars
($35,000,000.00), or so much thereof as shall be advanced or readvanced from
time to time, which are represented by the Facility, and which shall be
evidenced by, bear interest and be payable in accordance with the terms and
provisions set forth in the Note.
"Loan Document" and "Loan Documents" shall mean, respectively,
each and all of this Agreement, the Note, the Stock Security Agreement, the
Commitment Letter and each other document, instrument or certificate now or
hereafter executed and/or delivered by any Borrower in connection with the Loan.
"Mandatory Payments" shall mean the mandatory payments required
to be made on the Loan pursuant to Section 5 of Article I of this Agreement.
"Margin" shall have the meaning ascribed to such term in the
Note.
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"Material Contract" shall mean any and all (i) Government
Contracts and/or (ii) contracts or agreements to which any Borrower is a party
and pursuant to which such Borrower is or may be (a) entitled to receive
payments, in the aggregate, in excess of (i) Five Hundred Thousand and No/100
Dollars ($500,000.00), per annum or (ii) One Million Dollars ($1,000,000),
throughout the term of the applicable contract or agreement and any renewal or
extension thereof, or (b) obligated to make payments or have any other
obligation or liability thereunder (direct or contingent), in the aggregate, in
excess of (i) Five Hundred Thousand and No/100 Dollars ($500,000.00), per annum
or (ii) One Million Dollars ($1,000,000), throughout the term of the applicable
contract or agreement and any renewal or extension thereof.
"Maturity Date" shall mean April 15, 2001.
"Note" shall mean that certain Revolving Promissory Note of even
date herewith made by the Borrowers and payable to the order of the Lender in
the maximum principal amount of Thirty-five Million Dollars ($35,000,000.00),
and/or any other promissory note(s) executed, issued and delivered pursuant to
this Loan Agreement, together with all extensions, renewals, modifications and
substitutions thereof or therefor.
"Obligation" and "Obligations" shall mean, respectively, any and
all obligations or liabilities of any Borrower to the Lender in connection with
the Loan, whether now existing or hereafter created or arising, direct or
indirect, matured or unmatured, and whether absolute or contingent, joint,
several or joint and several, and no matter how the same may be evidenced or
shall arise.
"Parent Company" shall mean Condor Technology Solutions, Inc., a
Delaware corporation, together with its successors and assigns.
"Permitted Liens" shall mean: (a) liens for taxes which are being
contested in good faith and by appropriate proceedings, which (i) the Borrowers
have the financial ability to pay, including penalties and interest, and (ii)
the non-payment thereof will not result in the execution of any such tax lien or
otherwise jeopardize the interests of the Lender in any part of the Collateral;
(b) deposits or pledges to secure obligations under workers' compensation,
social security or similar laws, incurred in the ordinary course of business;
(c) liens securing indebtedness of the Borrowers permitted by Section 7 of
Article VII of this Agreement; (d) cash deposits pledged to secure the
performance of bids, tenders, contracts (other than contracts for the payment of
money), leases, statutory obligations, surety and appeal bonds and other
obligations of like nature made in the ordinary course of business; (e)
mechanics', workmen's, repairmen's, warehousemen's, vendors' or carriers' liens
or other similar liens; provided that such liens arise in the ordinary course of
the Borrowers' business and secure sums which are not past due, or which are
separately secured by cash deposits or pledges in an amount adequate to obtain
the release of such liens; (f) except as otherwise provided in this Agreement,
statutory or contractual landlord's liens on the Borrowers' tangible personal
property located in the
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demised premises; (g) zoning or other similar and customary land use
restrictions, which do not materially impair the use or value of the subject
property; (h) judgment liens which are not prohibited by Section 4 of Article
VII of this Agreement; (i) other liens expressly permitted by the terms and
provisions of this Agreement; (j) liens in favor of Deutsche granted in
accordance with the terms and provisions of the Deutsche Financing Agreement and
encumbering only the Deutsche Floor Plan Inventory Collateral, and other liens
in favor of Deutsche which have been granted in accordance with the terms and
provisions of the Deutsche Financing Agreement and made expressly subordinate in
all respects to the liens in favor of the Lender pursuant to the Deutsche
Subordination Agreement; (k) liens in favor of IBM granted in accordance with
the terms and provisions of the IBM Financing Agreement and encumbering only the
IBM Floor Plan Inventory Collateral, and other liens in favor of IBM which have
been granted in accordance with the terms and provisions of the IBM Financing
Agreement and made expressly subordinate in all respects to the liens in favor
of the Lender pursuant to the IBM Subordination Agreement; and (l) liens in
favor of the Lender.
"Prime Rate" shall mean the rate of interest from time to time
established and publicly announced by the Lender as its prime rate, in the
Lender's sole discretion, which rate of interest may be greater or less than
other interest rates charged by the Lender to other borrowers and is not solely
based or dependent upon the interest rate which the Lender may charge any
particular borrower or class of borrowers.
"Pro Forma" shall mean financial results calculated in accordance
with SEC Regulation S-X, Article 11, as amended.
"RCRA" shall mean the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 6901 et. seq.).
"Receivables" shall mean all of the Borrowers' respective present
and future accounts, contracts, contract rights, chattel paper, general
intangibles, notes, drafts, acceptances, chattel mortgages, conditional sale
contracts, bailment leases, security agreements, contribution rights and other
forms of obligations now or hereafter arising out of or acquired in the course
of or in connection with any business any Borrower conducts, together with all
liens, guaranties, securities, rights, remedies and privileges pertaining to any
of the foregoing, whether now existing or hereafter created or arising, and all
rights with respect to returned and repossessed items of inventory.
"Request for Advance and Certification" shall mean the form
Request for Advance and Certification attached as Exhibit 1 hereto.
"SEC" shall mean the Securities and Exchange Commission.
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"Stock Security Agreement" shall mean that certain Stock Security
Agreement of even date herewith, by and between the Lender and the Parent
Company, together with any and all amendments and/or modifications thereof.
"Total Funded Debt to Pro Forma EBITDA Ratio" shall mean the
ratio described in Section 15 of Article VI of this Agreement.
ARTICLE I
COMMITMENT
1. Maximum Loan Amount. Subject to the terms and conditions of
this Agreement, the Lender agrees to make the Loan to the Borrowers. The Loan
shall bear interest and be payable in accordance with the terms and provisions
of the Note. At Closing, the Borrowers shall execute and deliver to the Lender
the Note, which shall be payable to the order of the Lender in the maximum
principal amount of Thirty-five Million Dollars ($35,000,000.00), or so much
thereof as shall be advanced and readvanced.
2. Use of Proceeds. The Loan shall be used by the Borrowers only
for the following purposes: (i) for working capital (including, without
limitation, to support accounts receivable under Government Contracts) and
general corporate needs of the Borrowers; and (ii) subject to the terms and
conditions of this Agreement, to finance (a) certain capital expenditures
incurred by any Borrower, and (b) the acquisition by any Borrower of other
businesses or entities. Each Borrower agrees that it will not use or permit the
Loan proceeds to be used for any other purpose without the Lender's prior
written consent.
3. Intentionally Omitted.
4. Advances.
(a) Agreement to Advance and Readvance; Procedure. So long as
no Event of Default exists, and no act, event or condition shall have occurred
which with notice or the lapse of time, or both, shall constitute an Event of
Default, and subject to the terms and provisions of this Agreement, the Lender
shall advance and readvance the proceeds of the Facility from time to time in
accordance with this Agreement. Requests for advances shall be in the form of
Exhibit 1 hereto. Requests for advances of Loan proceeds may be made via
facsimile on any given Business Day if the Borrowers provide the Lender, in
advance, with a written list of the names of the specific officers authorized to
request disbursements by facsimile. Upon request by the Lender, the Borrowers
shall confirm in an original writing each facsimile request for advance made by
any Borrower. The Lender shall have no obligation to make any advance after the
Maturity Date.
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(b) Certain Advance Procedures and Limits. Amounts advanced in
connection with the Loan shall bear interest on a Base Rate basis or a LIBOR
basis, as more fully set forth in the Note. Advances bearing interest on a Base
Rate basis shall be in minimum and incremental amounts of One Hundred Thousand
Dollars ($100,000.00), and shall be made available on a same-day basis, if
requested by 12:00 Noon Washington, D.C. time on a Business Day. Advances
bearing interest on a LIBOR basis shall also be in minimum and incremental
amounts of One Hundred Thousand Dollars ($100,000.00), and shall be made
available three (3) Business Days after request therefor. The Borrowers' right
to request LIBOR based interest, as well as certain additional terms, conditions
and requirements relating thereto, are set forth in the Note and Exhibit 2 of
this Agreement, and each Borrower expressly acknowledges and consents to such
additional terms and provisions. The Borrowers' election of LIBOR based interest
for any outstanding amounts shall be in the form of Exhibit 3 of this Agreement.
5. Mandatory Payments; Reduction of Commitment. In addition to
all other sums payable by the Borrowers pursuant to the Note, this Agreement or
any other Loan Document, the Borrowers shall also make mandatory payments on the
Note in the amount of one hundred percent (100%) of the cash proceeds (net of
reasonable and customary costs paid to unrelated and unaffiliated third parties
in connection with the particular transaction) arising from (i) any Substantial
Sale or Substantial Disposition of any of the assets of any Borrower which is
(a) not in the ordinary course of business; or (b) prohibited by the terms of
this Agreement; (ii) the issuance by any Borrower after the Closing Date of debt
securities or other debt obligations (other than in connection with debt
permitted by Section 7 of Article VII of this Agreement); (iii) the receipt by
or on behalf of any Borrower of insurance proceeds (other than recoveries due to
damage to property, which recoveries are promptly applied toward repair or
replacement of the damaged property, or recoveries for business interruption
loss or workers compensation insurance proceeds); and/or (iv) the reversion of
any pension plan assets. Any payment(s) made or required to be made by the
Borrowers pursuant to this Section 5 shall permanently reduce the Commitment
Amount by the amount of such payment(s). For purposes hereof, a Substantial Sale
and/or Substantial Disposition shall mean any sale of assets involving amounts
in excess of Five Hundred Thousand Dollars ($500,000.00).
6. Field Audits. The Lender shall have the right, following the
occurrence of an Event of Default, to conduct field audits with respect to the
Collateral and each Borrower's accounts receivable, inventory, business and
operations. All such field audits shall be at the sole cost and expense of the
Borrowers.
7. Certain Fees. In addition to principal, interest and other
sums payable under the Note, the Borrowers shall pay the following fees:
(a) Commitment Fee. So long as any amounts remain outstanding
in connection with the Facility, or the Lender has any obligation to make any
advance in connection therewith, the Borrowers agree to pay to the Lender, a
quarter-annual
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commitment fee (the "Commitment Fee"), at the annual percentage rate set forth
below (which is based on the Total Funded Debt to Pro Forma EBITDA Ratio),
calculated on the difference between (i) the Commitment Amount, and (ii) the
average daily outstanding principal balance of the Facility (including the face
amounts of all outstanding Letters of Credit) during the applicable
quarter-annual period, as follows:
Total Funded Debt to Annual
Pro Forma EBITDA Ratio Percentage Rate
---------------------- ---------------
less than 1.5 .25%
equal to or greater than
1.5 but less than 2.0 .30%
equal to or greater than
2.0 but less than 2.5 .35%
equal to or greater than
2.5 but less than 3.0 .40%
greater than 3.0 .50%
The Commitment Fee shall be calculated on the basis of the actual number of days
elapsed and a three hundred sixty (360) day year, shall be due for any quarter
during which the Lender has any obligation in connection with the Facility, and
shall be payable in arrears, commencing on June 30, 1998 and continuing on the
last day of every third (3rd) calendar month thereafter so long as this
Agreement remains in effect.
8. Intentionally Omitted.
9. Appointment of the Parent Company. Each Borrower acknowledges
that (i) the Lender has agreed to extend credit to each of the Borrowers on an
integrated basis for the purposes herein set forth; (ii) it is receiving direct
and/or indirect benefits from each such extension of credit; and (iii) the
obligations of the "Borrower" or "Borrowers" under this Agreement are the joint
and several obligations of each Borrower. To facilitate the administration of
the Loan, each Borrower hereby irrevocably appoints the Parent Company as its
true and lawful agent and attorney-in-fact with full power and authority to
execute, deliver and acknowledge on each such Borrower's behalf, each Request
for Advance and Certification, LIBOR Election Form and Certification,
Non-Default Certificate and all other Loan Documents or other instruments or
materials provided or to be provided to the Lender pursuant to this Agreement or
in connection with the Loan. This power-of-attorney is coupled with an interest
and cannot be revoked, modified or amended without the prior written consent of
the Lender, which consent shall
11
not be unreasonably withheld. Upon request of the Lender, each Borrower shall
execute, acknowledge and deliver to the Lender a Power of Attorney, in form
satisfactory to the Lender, confirming and restating the power-of-attorney
granted herein.
10. Joinder of New Subsidiaries and Affiliates. Any present or
future subsidiary of any Borrower in which any Borrower now or hereafter owns,
directly or indirectly, an ownership interest of greater than fifty percent
(50%) shall, at the Lender's option, execute a Joinder Agreement in the form
attached hereto as Exhibit 4 (a "Joinder Agreement"), pursuant to which such
existing or newly created or acquired subsidiary shall (i) join in and become a
party to this Agreement and the other Loan Documents; (ii) agree to comply with
and be bound by the terms and conditions of this Agreement and all of the other
Loan Documents; and (iii) become a "Borrower" and thereafter be jointly and
severally liable for the performance of all the past, present and future
obligations and liabilities of the Borrowers hereunder and under the Loan
Documents.
ARTICLE II
LETTERS OF CREDIT
1. Issuance. The Borrowers and Lender acknowledge that from time
to time the Borrowers may request that the Lender issue or amend Letter(s) of
Credit. Subject to the terms and conditions of this Agreement, and any other
reasonable requirements for letters of credit normally and customarily imposed
by the Lender, the Lender agrees to issue such requested letters of credit,
provided that no Event of Default has occurred, and no act, event or condition
which with notice or the passage of time, or both, would constitute an Event of
Default has occurred. The Lender shall have no obligation to issue any Letter of
Credit which has an expiration date beyond the Maturity Date, unless the
Borrowers shall have deposited with the Lender, concurrent with the issuance of
any such Letter of Credit, cash security therefor in an amount equal to the face
amount of the Letter of Credit. Any request for a Letter of Credit shall be made
by the Borrowers submitting to the Lender an Application and Letter of Credit
Agreement or Amendment to Letter of Credit (each being herein referred to as a
"Letter of Credit Application") on the Lender's standard form, at least three
(3) Business Days prior to the date on which the issuance or amendment of the
Letter of Credit shall be required, which Letter of Credit Application shall be
executed by an authorized officer of the Borrowers, and be accompanied by such
other supporting documentation and information as the Lender may from time to
time reasonably request. Each Letter of Credit Application shall be deemed to
govern the terms of issuance of the subject Letter of Credit, except to the
extent inconsistent with the terms of this Agreement. It is understood and
agreed that Letters of Credit shall not be issued for durations of longer than
one (1) year. Any outstanding Letter of Credit may be renewed from time to time;
provided that (i) at least thirty (30) days' prior written notice thereof shall
have been given by the Borrowers to the Lender; and (ii) no default or Event of
Default exists under the terms and provisions of the particular Letter of Credit
or this Agreement.
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2. Amounts Advanced Pursuant to Letters of Credit. Upon the
issuance of any Letter(s) of Credit any amounts drawn under any Letter of Credit
shall be deemed advanced under the Note, shall bear interest and be payable in
accordance with the terms of the Note and shall be secured by the Collateral (in
the same manner as all other sums advanced under the Note). It is expressly
understood and agreed that all obligations and liabilities of the Borrowers to
the Lender in connection with any such Letter(s) of Credit shall be deemed to be
"Obligations," and the Lender shall not be required to release the Lender's
security interest in the Collateral until (i) the Note and all other sums due to
the Lender in connection with the Loan have been paid and satisfied in full,
(ii) all Letters of Credit have been canceled or expired, and (iii) the Lender
has no further obligation or responsibility to make additional Loan advances or
issue additional Letters of Credit. Furthermore, in no event whatsoever shall
the Lender have any obligation to issue any Letter of Credit which would cause
the face amount of all then outstanding Letters of Credit issued for the benefit
of the Borrowers, in the aggregate, to exceed Fifteen Million Dollars
($15,000,000.00).
3. Letter of Credit Fees. The Borrowers shall be liable for the
payment of (i) a per annum fee equal to the applicable Additional LIBOR Interest
Rate Margin set forth in the Note as of the date of such calculation, multiplied
by the face amount of each Letter of Credit issued or amended pursuant to this
Agreement (the "Letter of Credit Fee"), calculated on the basis of the actual
number of days elapsed and a three hundred sixty (360) day year; and (ii)
customary issuance and administrative charges (the "Letter of Credit
Administration Fee"). The Letter of Credit Fee shall be due and payable, in
advance, on the date the Letter of Credit is issued or amended, and on each
anniversary date of such Letter of Credit. The Letter of Credit Administration
Fee shall be due and payable simultaneously with the Lender's issuance or
amendment of the particular Letter of Credit.
ARTICLE III
SECURITY
1. Security Generally. As collateral security for the Loan and
all other Obligations, the Borrowers hereby grant and convey to the Lender a
security interest in all of the following (collectively, the "Collateral"):
Receivables. All of each Borrower's present and
future accounts, contracts, contract rights,
chattel paper, general intangibles, notes,
drafts, acceptances, chattel mortgages,
conditional sale contracts, bailment leases,
security agreements and other forms of
obligations now or hereafter arising out of or
acquired in the course of or in connection with
any business each Borrower conducts, together
with all liens, guaranties, securities, rights,
remedies and privileges
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pertaining to any of the foregoing, whether now
existing or hereafter created or arising, and
all rights with respect to returned and
repossessed items of inventory;
Inventory. All of each Borrower's inventory and
goods (as defined in the Uniform Commercial Code
in effect in the Commonwealth of Virginia) now
or hereafter owned by each Borrower, whenever
acquired and wherever located, and whether held
for sale or lease or furnished or to be
furnished under contracts of service, and all
raw materials, work in process and materials now
or hereafter owned by each Borrower, wherever
located, and used or consumed in its business,
including all returned and repossessed items;
and all other property now or hereafter
constituting inventory (as defined in the
Uniform Commercial Code in effect in the
Commonwealth of Virginia);
Other Collateral. All of each Borrower's present
and future furniture, fixtures, equipment,
machinery, supplies and other assets and
personal property of every type or nature
whatsoever, including without limitation, all of
each Borrower's present and future instruments,
documents, inventions, designs, patents, patent
applications, trademarks, trademark
applications, trade names, trade secrets,
goodwill, registrations, copyrights, licenses,
franchises, customer lists, tax refunds, tax
refund claims, rights of claims against carriers
and shippers, leases and rights to
indemnification;
Leases. All of each Borrower's present and
future right, title and interest in and to any
and all leases, occupancy agreements, subleases,
contracts, licenses, agreements and other
understandings of or relating to the use,
enjoyment and occupancy of real property or any
improvements thereon;
Stock. All of the Parent Company's right, title
and interest in and to all of the issued and
outstanding capital stock of all of its present
or future subsidiaries, whether common or
preferred, and whether now or hereafter issued
or outstanding and whether now or hereafter
acquired by the Parent Company, together with
all voting or other rights appurtenant thereto,
including, without limitation, the right to
receive all dividends and/or distributions, and
all proceeds thereof, pursuant to the terms of
the Stock Security Agreement;
14
Records. All of each Borrower's records, documents
and files, in whatever form, pertaining to the
Collateral; and
Proceeds, Etc. Any and all cash and non-cash proceeds,
increases, substitutions, replacements and/or additions
to any or all of the foregoing.
Notwithstanding the foregoing, the above described conveyance
shall not be deemed to include the conveyance of any Government Contract or
other contractual agreement, which by its terms or applicable law may not be
conveyed; it being understood, however, that in any such situation(s), the
Lender's security interest shall include (i) the entirety of each Borrower's
right, title and interest in and to all accounts receivable and all other
proceeds directly or indirectly arising from such Government Contract or other
contractual agreement, and (ii) all other rights and interests which any
Borrower may lawfully convey to the Lender.
2. Stock Security Agreement. Each Borrower's full and faithful
performance of its obligations under this Agreement, this Note and all other
Loan Documents is secured by, in addition to the other Collateral, the Stock
Security Agreement, pursuant to which the Parent Company has pledged to the
Lender a first lien security interest in all of the Parent Company's right,
title and interest in and to the stock of each of its subsidiaries.
3. No Preference or Priority. It is expressly understood and
agreed that if there is more than one note secured by this Agreement, all such
notes shall be secured without preference or priority; it being the intention of
the parties that all notes secured by this Agreement shall be co-equal and
coordinate in right of payment of principal, interest, late charges and other
sums due thereunder.
4. Release of Security Interest. At such time as (i) the Note(s)
and all other sums due to the Lenders in connection with the Loan have been paid
and satisfied in full, (ii) all Letters of Credit have been canceled or expired,
and (iii) the Lender has no further obligation or responsibility hereunder to
make additional Loan advances or issue additional Letters of Credit, the Lender
shall, upon request of the Borrowers and at no cost or expense to the Lender,
execute and deliver such documentation as the Borrowers may reasonably request
to release the Collateral from the Lender's lien (including, without limitation,
the execution of UCC termination statements), and the termination of record of
this Agreement.
15
ARTICLE IV
CONDITIONS TO THE LENDER'S OBLIGATIONS
The Lender's obligation to proceed to Closing shall be subject to
the following conditions:
1. Satisfaction of Commitment Letter Conditions; Compliance with
Agreements. The Borrower shall have satisfied all conditions precedent to the
initial advance of the Loan proceeds set forth in the Commitment Letter,
including without limitation, each of the following items:
(i) The Lender's satisfaction with its review of the
business, financial, accounting and legal condition
of the Parent Company and the Acquired Entities.
(ii) The Lender's satisfaction with the structure of the
public equity offering contemplated by the Borrowers
(the "Public Offering") and the structure of the
acquisition of the Acquired Entities.
(iii) The successful completion of the Public Offering,
raising net proceeds equal to or greater than Sixty
Million Dollars ($60,000,000.00), and the acquisition
of the Acquired Entities.
(iv) The Lender's review of and satisfaction with the (a)
organizational structure of each of the Borrowers
after the completion of the Public Offering and the
acquisition of the Acquired Entities, (b) manner in
which Loan proceeds will be made available to the
various Borrowers, and (c) loan structure.
(v) Evidence satisfactory to the Lender of the repayment
in full of all outstanding indebtedness, both direct
or contingent, of the Borrowers, other than trade
payables, operating leases and/or inter-company
indebtedness (including inter-company guarantees)
incurred in the ordinary course of business, and
other indebtedness permitted pursuant to the terms
and provisions of this Agreement.
(vi) The Lender's satisfaction that the Loan shall be in
full compliance with all legal requirements, and that
all regulatory, governmental, shareholder, corporate
and third party consents and approvals shall have
been obtained.
16
(vii) The Lender's satisfaction with the Borrowers'
environmental risk assessment of its properties
(including any potential levels of environmental
liability set forth therein).
(viii) No litigation by any entity (private or governmental)
shall be pending or threatened against any Borrower
at Closing (i) with respect to the Loan, Loan
Documents or transactions contemplated thereby
(except for litigation disclosed to and not objected
to by the Lender prior to Closing); or (ii) which in
the Lender's good faith judgment could reasonably be
expected to have a materially adverse effect on the
business, property, assets, liabilities, condition
(financial or otherwise), results of operations or
prospects of any Borrower going forward.
(ix) No bankruptcy or other proceeding shall be pending or
threatened against any Borrower.
(x) The Lender shall have a perfected first lien security
interest in all collateral described herein, with
such exceptions as shall be satisfactory to the
Lender. The Borrowers shall have obtained landlord
lien waivers for each location leased by a Borrower,
in form and substance satisfactory to the Lender.
Additionally, for each Government Contract the Lender
elects to have specifically assigned to the Lender
pursuant to the Assignment of Claims Act of 1940 as
of the date of Closing, the Borrowers shall have
executed all documents necessary to be executed by
the Borrowers in order to cause compliance with such
act.
(xi) All reasonable costs, fees and expenses (including,
without limitation, reasonable legal fees and
expenses) and other reasonable compensation payable
to the Lender shall have been paid in full, to the
extent due.
(xii) No material adverse change in the business, assets,
properties, condition (financial or otherwise),
liabilities (actual or contingent), operations or
prospects of any Borrower or any subsidiary or
affiliate of any Borrower, or any of the Acquired
Entities, shall have occurred since the issuance of
the Commitment Letter.
(xiii) No material adverse change in the Government
contracting status of any Borrower shall have
occurred.
(xiv) Each Borrower's compliance in all material respects
with all applicable federal, state, local and foreign
laws and
17
regulations, including all applicable labor and
environmental laws and regulations.
(xv) Receipt of appropriate and satisfactory legal
opinions and, if requested by the Lender, evidence of
solvency, after giving effect to the Loan transaction
contemplated hereby.
(xvi) The Lender's satisfaction with the terms, conditions
and existence of insurance coverage appropriate to
the conduct of each Borrower's business.
(xvii) The Lender's satisfaction with the terms and
conditions of all material supply and sale agreements
and management contracts.
(xviii) The Lender's review and satisfaction with the final
terms and conditions of, and all documentation
relating to, the Borrowers, the Loan, the Public
Offering (including all representations, warranties
and indemnities contained therein) and the
acquisition of the Acquired Entities.
Additionally, the Borrowers shall have performed all agreements theretofore to
be performed by the Borrowers, and shall not be in breach of any covenant,
representation or warranty made in this Agreement or any other Loan Document.
2. Financial Condition. There shall have been no material adverse
change in the financial condition of any Borrower between the date of the most
recent financial statement(s) listed in Exhibit 6 hereto and the Closing Date.
3. Opinion of Counsel. The Lender shall have received an opinion
of counsel (the "Opinion of Counsel") for the Borrowers in form and substance
satisfactory to the Lender.
4. No Default. There shall exist no Event of Default, and no act,
event or condition shall have occurred which with notice or the lapse of time,
or both, would constitute an Event of Default.
5. Documentation. The Lender shall have received such
certificates of good standing, corporate resolutions, opinions and
certifications, in such form and content and from such parties, as the Lender
shall require. All documentation relating to the Public Offering, the
acquisition of the Acquired Entities, the Loan and all related transactions must
be satisfactory in all respects to the Lender and its counsel.
18
6. Closing Costs and Expenses. Each of the Borrowers shall have
paid all closing costs and expenses incurred by the Lender in connection with
the transactions contemplated hereby, including, without limitation, all
recording costs.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, each Borrower
jointly and severally represents, warrants, covenants and agrees as follows:
1. Corporate Existence and Qualification. Each Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation, with all corporate power and authority and
all necessary licenses and permits to own, operate and lease its properties and
carry on its business as now being conducted, and as it may in the future be
conducted. Each Borrower is duly qualified and authorized to do business and is
in good standing in each jurisdiction in which the nature of its activities or
the character of its properties makes qualification necessary or desirable.
2. Corporate Authority; Noncontravention. The execution, delivery
and performance of the obligations of the Borrowers set forth in this Agreement,
the Note and the other Loan Documents (i) have been duly authorized by all
necessary corporate and/or stockholder action; (ii) do not require the consent
of any governmental body, agency or authority; (iii) will not violate or result
in (and with notice or the lapse of time will not violate or result in) the
breach of any provision of the Articles of Incorporation/Certificate of
Incorporation or By-laws of any Borrower, any indenture, instrument, agreement
or other undertaking to which any Borrower is a party or by which any Borrower
is bound, or any order or regulation of any governmental authority or
arbitration board or tribunal; and (iv) except as permitted by the terms and
provisions of this Agreement, result in the creation of a lien, charge or
encumbrance of any nature upon any of the properties or assets of any Borrower.
When the Loan Documents are executed and delivered, they will constitute legal,
valid and binding obligations of each of the Borrowers, enforceable against each
of the Borrowers in accordance with their respective terms.
3. Financial Position. The financial statements listed on Exhibit
6 hereto, copies of which have been delivered to the Lender, present fairly the
financial condition of the Borrowers as of the date thereof and the results of
each Borrower's operations for the periods indicated therein, were prepared in
accordance with GAAP, are true and accurate in all material respects, and are
not misleading in any material respect. All liabilities, fixed or contingent,
are fully shown or provided for on the referenced financial statements or the
notes thereto as of the dates thereof. There has been no material adverse change
in the business, property or condition (financial or otherwise) of any Borrower
since the date of the most recent financial statements listed on Exhibit 6.
19
4. Payment of Taxes. Each of the Borrowers has filed all tax
returns and reports required to be filed by it with the United States Government
and/or with all state and local governments, and has paid in full or made
adequate provision on its books for the payment of all taxes, interest,
penalties, assessments or deficiencies shown to be due or claimed to be due on
or in respect of such tax returns and reports, except to the extent that the
validity or amount thereof is being contested in good faith by appropriate
proceedings and the non-payment thereof pending such contest will not result in
the execution of any tax lien or otherwise jeopardize the Lender's interests in
any part of the Collateral.
5. Accuracy of Submitted Information; Omissions. All documents,
certificates, information, materials and financial statements furnished or to be
furnished to the Lender pursuant to this Agreement or otherwise in connection
with the Loan (i) are and will be true and correct in all material respects;
(ii) do not and will not contain any untrue statement of a material fact; and
(iii) do not and will not omit any material fact necessary to make the
statements contained therein or herein not misleading. No Borrower is aware of
any fact which has not been disclosed to the Lender in writing which materially
adversely affects, or so far as any Borrower can now reasonably foresee, could
reasonably be expected to materially adversely affect, the properties, business,
profit or condition (financial or otherwise) of any Borrower or the ability of
any Borrower to perform its obligations under this Agreement or any other Loan
Documents.
6. Government Contracts. No notice of suspension, debarment, cure
notice, show cause notice or notice of termination for default has been issued
by the Government to any Borrower, and none of the Borrowers is a party to any
pending, or to any Borrower's knowledge threatened, suspension, debarment,
termination for default issued by the Government or other adverse Government
action or proceeding in connection with any Government Contract. All Government
contracts which constitute Material Contracts and have a remaining term of six
(6) months or longer are listed on Schedule 1 hereto.
7. No Defaults or Liabilities. No Borrower is in default in the
performance of any obligation, covenant or condition contained in any agreement
to which it is a party. Additionally, none of the Borrowers is aware of any
condition, act, event or occurrence, including, without limitation, any pending
or threatened litigation, legal or administrative proceeding or investigation,
not disclosed to the Lender in writing which could reasonably be expected to
prejudice the Lender's rights under any Loan Document in any respect.
8. No Violations of Law. No Borrower is in violation of any
Applicable Laws; none of the Borrowers has failed to obtain any license, permit,
franchise or other governmental authorization necessary to the ownership of its
properties or to the conduct of its business (unless the failure to obtain the
same would not have a material adverse effect on the condition (financial or
otherwise) or the operations of any Borrower), and each of the Borrowers has
conducted its business and operations in compliance in all material respects
with all Applicable Laws.
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9. Litigation and Proceedings. Except for the matters set forth
on Schedule 2 attached hereto, no action, suit or proceeding against or
affecting any Borrower is presently pending, or to the knowledge of any
Borrower, threatened, in any court, before any governmental agency or
department, or before any arbitration board or tribunal, which involves the
possibility of any judgment or liability not fully covered by insurance and
which could reasonably expected to have a material adverse effect on the
business, property, assets, liabilities or condition (financial or otherwise) of
any Borrower. No Borrower is aware of any existing basis for any such action,
suit or proceeding. No Borrower is in default with respect to any order, writ,
injunction or decree of any court, governmental authority or arbitration board
or tribunal.
10. Security Interest in the Collateral. Each Borrower is the
sole legal and beneficial owner of the Collateral owned or purported to be owned
by it, free and clear of all liens, claims and encumbrances of any nature,
except for the Permitted Liens and other liens permitted by the terms and
provisions of this Agreement. The Borrowers have provided to the Lender written
landlord waivers from each lessor/landlord of any premises at which any
Borrower's assets having a book value in excess of One Hundred Thousand Dollars
($100,000.00) is now or hereafter located. Each such landlord waiver
subordinates any statutory, contractual or other lien the lessor/landlord may
have in any of the Collateral to the lien, operation and effect of the lien
being granted to the Lender pursuant to this Agreement, except to the extent
otherwise expressly set forth in such landlord waiver and approved by the
Lender.
11. Principal Place of Business; Location of Books and Records.
Each Borrower maintains its principal place of business and the office where it
keeps its books and records with respect to accounts and contracts rights at the
locations listed on Schedule 3 hereto. Set forth on Schedule 4 hereto is a list
of each Borrower's business locations as of the Closing Date, and all places
where any of the Collateral is located. Each Borrower agrees to notify the
Lender in writing at least ten (10) days prior to any change in its principal
place of business, or any change in the location of the office where it keeps
its books and records with respect to accounts and contract rights, or any
change of or addition to the locations where any Collateral is located.
12. Fiscal Year. The Borrowers' fiscal year ends on December 31.
13. Pension Plans.
(a) The present value of all benefits vested under all
"employee pension benefit plans", as such term is defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), from time to time
maintained by any Borrower (individually, a "Pension Plan" and collectively, the
"Pension Plans") did not, as of December 31, 1997, exceed the value of the
assets of the Pension Plans allocable to such vested benefits;
21
(b) No Pension Plan, trust created thereunder or other person
dealing with any Pension Plan has engaged in a non-exempt transaction proscribed
by Section 406 of ERISA or a non-exempt "prohibited transaction", as such term
is defined in Section 4975 of the Internal Revenue Code;
(c) No Pension Plan or trust created thereunder has been
terminated within the last three (3) years, and there have been no "reportable
events" (as such term is defined in Section 4043 of ERISA and the regulations
thereunder) with respect to any pension plan or trust created thereunder after
the effective date of ERISA; and
(d) No Pension Plan or trust created thereunder has incurred
any "accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA or Section 412 of the Internal Revenue Code) as of the end of any plan
year, whether or not waived, since the effective date of ERISA.
14. O.S.H.A. and Environmental Compliance.
(a) Each Borrower has duly complied with, and its facilities,
business assets, property, leaseholds and equipment are in compliance with, the
provisions of the Federal Occupational Safety and Health Act ("O.S.H.A."), the
Environmental Protection Act, RCRA and all other environmental laws which
non-compliance with could result in a material adverse effect on the business,
condition (financial or otherwise) or results of operations of any Borrower; and
there have been no citations, notices, notifications or orders of any such
non-compliance issued to any Borrower or relating to its business, assets,
property, leaseholds or equipment under any such laws, rules or regulations;
(b) each Borrower has been issued all required federal, state
and local licenses, certificates and permits necessary or appropriate in the
operation of its facilities, businesses, assets, property, leaseholds and
equipment, unless the failure to obtain any such license, certificate or permit
would not have a material adverse effect on the business condition (financial or
otherwise) or results of operations of any Borrower; and
(c) (i) there are no releases, spills, discharges, leaks or
disposal (collectively referred to herein as "Releases") of Hazardous Substances
at, upon, under or within any Real Property owned, or to the knowledge of any
Borrower any premises leased, by any Borrower, except in compliance with
Applicable Law; (ii) there are no underground storage tanks or polychlorinated
biphenyls on any Real Property owned or, to the knowledge of any Borrower, any
premises leased by any Borrower; (iii) no Real Property owned or, to the
knowledge of any Borrower, premises leased by any Borrower have ever been used
by a Borrower (and to the best of each Borrower's knowledge, any other person)
as a treatment, storage or disposal facility for Hazardous Waste, except in
compliance with Applicable Law; and (iv) no Hazardous Substances are present on
any Real Property owned or, to the knowledge of any Borrower, the premises
leased by any Borrower, except for
22
such quantities of Hazardous Substances as are handled in accordance with all
applicable manufacturer's instructions and governmental regulations, and as are
necessary or appropriate for the operation of the business of the Borrowers.
Each Borrower, for itself and its successors and assigns, hereby covenants and
agrees to indemnify, defend and hold harmless the Lender from and against any
and all liabilities, losses, claims, damages, suits, penalties, costs and
expenses of every kind or nature, including, without limitation, reasonable
out-of-pocket attorneys' fees arising from or in connection with (i) the
presence or alleged presence of any Hazardous Substance or Hazardous Waste on,
under or about any property of any Borrower (including, without limitation, any
property or premises now or hereafter owned or leased by any Borrower), or which
is caused by or results from, directly or indirectly, any act or omission to act
by any Borrower; and (ii) any Borrower's violation of any environmental statute,
ordinance, order, rule or regulation of any governmental entity or agency
thereof (including, without limitation, any liability arising under CERCLA,
RCRA, HMTA or any Applicable Laws).
15. Intellectual Property. All patents, patent applications,
trademarks, trademark applications, copyrights, copyright applications,
tradenames, trade secrets and licenses necessary for the conduct of the business
of each Borrower are (i) owned or utilized by such Borrower, (ii) valid and,
except with respect to licenses, have been duly registered or filed with all
appropriate governmental authorities, and (iii) listed on Schedule 5 hereto;
there is no objection or pending challenge to the validity of any such patent,
trademark, copyright, tradename, trade secret or license; no Borrower is aware
of any grounds for any such challenge or objection thereto; except as disclosed
in Schedule 6 hereto, no Borrower pays any royalty to anyone in connection with
any patent, trademark, copyright, tradename, trade secret or license; and each
Borrower has the right to bring legal action for the infringement of any such
patent, trademark, copyright, tradename, trade secret or license.
16. Existing or Pending Defaults; Material Contracts. All
Material Contracts are listed on Schedule 7 hereto. Except as set forth on
Schedule 8 attached hereto, no Borrower is aware of any pending or threatened
litigation, or any other legal or administrative proceeding or investigation
pending or threatened, against any Borrower arising from or related to any
Material Contract, or otherwise, which could reasonably be expected to have a
material adverse effect on the Lender's rights in connection with such Material
Contract or on any Borrower's ability to perform its obligations hereunder or
under any of the Loan Documents.
17. Leases and Real Property. All material leases and other
agreements under which any Borrower occupies real property are in full force and
effect and constitute legal, valid and binding obligations of, and are legally
enforceable against, the Borrower party thereto, and, to such Borrower's
knowledge, are the binding obligations of and legally enforceable against, the
other parties thereto. All necessary governmental approvals, if any, have been
obtained for each such material lease or agreement, and there have been
23
no threatened cancellations thereof or outstanding material disputes with
respect thereto. No Borrower owns any interest in real property.
18. Labor Relations. There are no strikes, work stoppages,
material grievance proceedings, union organization efforts or other
controversies pending, or to any Borrower's knowledge, threatened or reasonably
anticipated, between any Borrower and (i) any current or former employee of any
Borrower, or (ii) any union or other collective bargaining unit representing any
such employee. Each Borrower has complied and is in compliance in all material
respects with all Applicable Laws relating to employment or the workplace,
including, without limitation, provisions relating to wages, hours, collective
bargaining, safety and health, work authorization, equal employment opportunity,
immigration, withholding, unemployment compensation, employee privacy and right
to know. Except as set forth on Schedule 9 hereto, there are no collective
bargaining agreements, employment agreements between any Borrower and any of its
respective employees, or professional service agreements not terminable at will
relating to the businesses or assets of any Borrower. The consummation of the
transactions contemplated hereby will not cause any Borrower to incur or suffer
any liability relating to, or obligation to pay, severance, termination or other
similar payments to any person or entity.
19. Assignment of Government Contracts. No existing Government
Contract of any Borrower (and no present or future interest of any Borrower, in
whole or in part, in, to or under any such Government Contract) is currently
assigned, pledged, hypothecated or otherwise transferred to any person or
entity.
20. Intentionally Omitted.
21. Subsidiaries. All of the Subsidiaries of any of the Borrowers
are listed on Schedule 10 hereto.
22. Ownership of the Borrowers. All of the issued and outstanding
capital stock of the Borrowers (other than the Parent Company) is owned by the
Parent Company, free and clear of all liens, claims and encumbrances (other than
the security interest in favor of the Lender).
23. Solvency. Both prior to and after giving effect to the
transactions contemplated by the terms and provisions of this Agreement, (i)
each Borrower owned and owns property whose fair salable value is greater than
the amount required to pay all of such Borrower's Indebtedness (including
contingent debts), as applicable, (ii) each Borrower was and is able to pay all
of its Indebtedness as such Indebtedness matures, and (iii) each Borrower had
and has capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage. For purpose hereof,
"Indebtedness" means, without duplication (a) all items which in accordance with
GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of such Borrower as of the date on which
Indebtedness is to be determined, (b) all
24
obligations of any other person or entity which such Borrower has guaranteed,
and (c) the Obligations.
24. Survival of Representations and Warranties. All
representations and warranties made herein shall survive the making of the Loan,
and shall be deemed remade and redated as of the date of each request for an
advance or readvance of any Loan proceeds, unless the Borrower is unable to
remake and/or redate any such representation or warranty, discloses the same to
the Lender in writing, and such inability does not constitute or give rise to an
Event of Default or has been waived by the Lender in writing.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or this Agreement
remains in effect, each Borrower jointly and severally covenants and agrees with
the Lender that:
1. Payment of Loan Obligations. Each Borrower will duly and
punctually pay all sums to be paid to the Lender in accordance with the terms
and conditions of the Loan Documents, and will comply with, perform and observe
all of the terms thereof.
2. Payment of Taxes. Each Borrower will promptly pay and
discharge when due all federal, state and other governmental taxes, assessments,
fees and charges imposed upon it, or upon any of its properties or assets,
except to the extent that that validity or amount thereof is being contested in
good faith by appropriate proceedings and the non-payment thereof will not
result in the execution of any tax lien or otherwise jeopardize the Lender's
interest in any part of the Collateral.
3. Delivery of Financial and Other Statements. The Borrowers
shall deliver to the Lender financial and other statements, each of which shall,
unless otherwise expressly provided to the contrary, be prepared in accordance
with GAAP consistently applied, as follows:
(a) on or before the one hundred twentieth (120th) day
following the close of each fiscal year, the
Borrowers will submit to the Lender (i) annual
audited and unqualified consolidated financial
statements of the Consolidated
25
Company, which shall be accompanied by consolidated
schedules (if necessary) and management letters (if
issued) and certified by a nationally recognized
independent certified public accountant reasonably
acceptable to the Lender, (ii) internally prepared
annual consolidating balance sheets and income
statements of the Consolidated Company, which shall
be accompanied by consolidating schedules (as
necessary) and management letters (if issued) and
certified by the Parent Company's Chief Financial
Officer or another duly authorized executive officer
of the Parent Company and (iii) an annual budget for
the then current year, in form reasonably
satisfactory to the Lender, certified by the Parent
Company's Chief Financial Officer or another duly
authorized executive officer of the Parent Company;
(b) on or before the thirtieth (30th) day following the
close of each calendar month (except for the close of
any calendar month which coincides with the close of
a calendar quarter), the Borrowers will submit to the
Lender internally prepared financial statements of
the Consolidated Company, including a consolidated
balance sheet and income statement, reporting the
Consolidated Company's current financial position and
the results of its operations for the month then
ended and year-to-date, in form reasonably
satisfactory to the Lender, certified by the Parent
Company's Chief Financial Officer or another duly
authorized executive officer of the Parent Company;
(c) on or before the forty-fifth (45th) day following the
close of each calendar quarter, the Borrowers will
submit to the Lender a consolidating balance sheet,
income statement and a consolidated statement of cash
flows and a Quarterly Covenant Compliance/Non-Default
Certificate in the form of Exhibit 5 hereto, each of
which shall be certified by the Parent Company's
Chief Financial Officer or another duly authorized
executive officer of the Parent Company;
(d) within five (5) days of issuance, distribution,
receipt or filing, as applicable, the Borrowers will
submit to the Lender copies of all public filings,
prospectuses, disclosure statements and/or
registration statements (including, without
limitation, any amendments and supplements thereto,
any regular and periodic reports (i.e., Form 10-K,
Form 10-Q or Form 8-K), any letters of comment or
correspondence to or from the SEC, and any other
material reports) which any Borrower issues to,
distributes to or files with the SEC or any state
agency or department regulating securities (or any
stockholder or other person or entity,
26
pursuant to the rules and/or regulations of the SEC
or any state agency or department regulating
securities); and
(e) within five (5) days of Lender's request therefor,
the Borrowers will provide to the Lender such other
information and/or reports relating to any Borrower's
business, operations, properties or prospects as the
Lender may from time to time reasonably request.
4. Maintenance of Records; Review by the Lender. Each Borrower
will maintain at all times proper books of record and account in accordance with
GAAP, consistently applied, and, subject to any confidentiality and secrecy
requirements imposed by any Government agency, will permit the Lender's officers
or any of the Lender's authorized representatives or accountants to visit and
inspect each of the Borrowers' offices and properties, examine its books of
account and other records, and discuss its affairs, finances and accounts with
the officers of any Borrower all at such reasonable times during normal business
hours, and as often as the Lender may deem reasonably necessary or appropriate;
it being understood and agreed that, in the absence of an Event of Default, the
Lender shall provide five (5) days notice to the Borrower prior to any such
visit, inspection, examination or discussion described in this Section above.
5. Maintenance of Insurance Coverage. Each Borrower will maintain
in effect fire and extended coverage insurance, public liability insurance,
workmen's compensation insurance and insurance on the Collateral, with
responsible insurance companies, in such amounts and against such risks as are
customary for similar businesses, required by governmental authorities, if any,
having jurisdiction over all or part of its operations, or otherwise reasonably
required by the Lender, and will furnish to the Lender certificates evidencing
such continuing insurance. The Lender shall be named as loss payee on all hazard
and casualty insurance policies by means of a standard noncontributory mortgagee
clause and as an additional insured on all liability insurance policies. All
insurance policies shall also provide for (i) not less than thirty (30) days
written notice to the Lender prior to expiration, cancellation or material
change; and (ii) waiver of subrogation.
6. Maintenance of Property/Collateral; Performance of Contracts.
Each Borrower will at all times maintain the Collateral and its tangible
property, both real and personal, in good order and repair (subject to ordinary
wear and tear), and will permit the Lender's officers or authorized
representatives to visit and inspect all or any part of the Collateral at such
reasonable times during normal business hours, as and when the Lender deems
reasonably necessary or appropriate; provided, however, that (i) the Lender's
review of any and all "classified contracts" shall be subject to compliance with
Applicable Laws; and (ii) in the absence of an Event of Default, the Lender
shall provide five (5) days notice to the Borrower prior to any such visit or
inspection. Each Borrower shall perform all obligations under all material
contracts to which it is a party (including, without limitation,
27
all obligations of the Borrower as a contractor under any Material Contract),
including all exhibits and other attachments to such contracts, all
modifications thereto and all documents and instruments delivered pursuant
thereto, and will comply in all respects with all laws, rules and regulations
governing the execution, delivery and performance thereof. Each Borrower shall,
upon request by the Lender, provide the Lender with a list and description of
all Government Contracts to which such Borrower is a party.
7. Maintenance of Corporate Existence. Each Borrower will
maintain its corporate existence and will provide the Lender with evidence of
the same from time to time upon the Lender's request.
8. Maintenance of Certain Accounts with Lender. Each Borrower
will maintain its primary operating accounts, including all depository accounts
(time and demand), disbursement accounts and collection accounts with the
Lender; it being understood and agreed that the Lender shall provide normal and
customary banking services in connection with such accounts at rates comparable
to and competitive with rates charged by similarly situated banking institutions
for such services.
9. Maintenance of Management. Each Borrower shall notify the
Lender in writing of any change in the board of directors or the senior
management of the Parent Company, or change in the office of the chief executive
officer of Management Support Technology Corp., a Delaware corporation, Federal
Computer Corporation, a Virginia corporation, Computer Hardware Maintenance
Company, Inc., a Pennsylvania corporation, or Interactive Software Systems,
Incorporated, a Colorado corporation, at least ten (10) days prior to the date
of any such change.
10. Disclosure of Defaults, Etc. Promptly upon the occurrence
thereof, the Borrowers will provide the Lender with written notice of any Event
of Default, or any act, event or occurrence that upon the giving of any required
notice or the lapse of time, or both, would constitute an Event of Default. In
addition, each Borrower will promptly advise the Lender in writing of any
condition, act, event or occurrence which comes to such Borrower's attention
that would or could reasonably be expected to prejudice the Lender's rights in
connection with any Material Contract, the Collateral, this Agreement, the Note
or any other Loan Document, including, without limitation, the details of any
pending or threatened suspension, debarment or other governmental action or
proceeding, any material pending or threatened litigation, and any other legal
or administrative proceeding or investigation pending or threatened against any
Borrower, including the entry of any judgment or lien (other than a Permitted
Lien) against any Borrower, its assets or property.
11. Security Perfection; Assignment of Claims Act; Payment of
Costs. The Borrowers will execute and deliver and pay the costs of recording and
filing financing statements, continuation statements, termination statements,
assignments and other documents, as the Lender may from time to time deem
necessary or appropriate for the
28
perfection of any liens granted to the Lender pursuant hereto or pursuant to any
other Loan Document, including, without limitation, at the Lender's option, all
documents or materials necessary or appropriate in order to comply with the
Assignment of Claims Act of 1940, as amended, 31 U.S.C. Section 3727 and 41
U.S.C. Section 15 (the "Government Contract Assignments") in connection with
each Government Contract which is a Material Contract and which is required by
the Lender to be assigned to the Lender. All costs and expenses incurred in
connection with the Government Contract Assignments shall be borne solely by the
Borrowers. Additionally, the Borrowers will pay any and all of the Lender's
reasonable out-of-pocket costs incurred in connection with or relating to the
consummation of the transactions contemplated hereby, as well as any and all
taxes (other than the Lender's income and franchise taxes), which may be payable
as a result of the execution of this Agreement or any agreement supplemental
hereto, or as a result of the execution and/or delivery of the Note or other
Loan Document.
12. Defense of Title to Collateral. The Borrowers will at all
times defend the Lender's and each Borrower's rights in the Collateral, subject
to the Permitted Liens, against all persons and all claims and demands
whatsoever, and will, upon request of the Lender (i) furnish such further
assurances of title as may be reasonably required by the Lender, and (ii) do any
other acts necessary to effectuate the purposes and provisions of this
Agreement, or as required by law or otherwise in order to perfect, preserve,
maintain or continue the interests of the Lender in the Collateral.
13. Compliance with Law. Each Borrower will conduct its
businesses and operations in full compliance with (i) all Applicable Laws and
requirements of all federal, state and local regulatory authorities having
jurisdiction, (ii) the provisions of its charter documents and by-laws, (iii)
all agreements and instruments by which it or any of its properties may be
bound, and (iv) all applicable decrees, orders and judgments.
14. Further Assurances; Additional Requested Information. Each
Borrower will provide to the Lender such further assurances and additional
documents regarding the Collateral and the Lender's security interest therein as
the Lender may from time to time reasonably request, and each Borrower will
promptly provide the Lender with such additional information, reports and
statements respecting its business, operations, properties and financial
condition, and respecting its affiliated businesses and investments, as the
Lender may from time to time reasonably request.
15. Financial Covenants of the Borrowers. So long as any
Obligation remains outstanding or this Agreement remains in effect, the
Borrowers will comply with each of the financial covenants set forth below:
(a) NetWorth. The Borrowers will maintain on a
consolidated basis for each quarter commencing with
and including the quarter ending immediately after
the Closing, Net Worth of
29
not less than (i) 75% of net income for all fiscal
quarters commencing with and including the fiscal
quarter ending March 31, 1998 (but excluding net
income for any fiscal quarter for which net income is
a negative number), plus (ii) 75% of the net proceeds
from the issuance or sale by the Borrower of any of
its equity securities (excluding the proceeds from
the exercise of employee stock options), plus (iii)
$85,000,000.
For purposes of this Agreement, "Net Worth" shall
mean total assets minus all liabilities, all to be
determined on a consolidated basis in accordance with
GAAP. The Net Worth shall be measured on the last day
of each fiscal quarter throughout the term of the
Loan.
(b) Fixed Charge Coverage Ratio. The Borrowers will
maintain on a consolidated basis for each quarter
commencing with and including the quarter ending
immediately after the Closing, a fixed charge
coverage Ratio of not less than 2.00 to 1.00.
For purposes of the foregoing, "fixed charge coverage
Ratio" shall mean the Borrowers' Pro Forma earnings
before interest, taxes, depreciation and amortization
("EBITDA"), plus rent expense, minus cash taxes paid,
minus cash capital expenditures, minus cash dividends
paid, divided by the Borrowers' rent expense, plus
interest expense, plus required principal payments on
debt and capital leases. The Fixed Charge Coverage
Ratio shall be measured on the last day of each
fiscal quarter throughout the term of the Loan.
(c) Total Funded Debt to EBITDA Ratio. The Borrowers will
maintain on a consolidated basis for each quarter
commencing with and including the quarter ending
immediately after the Closing, a Total Funded Debt to
EBITDA ratio of not more than 3.50 to 1.00.
For purposes of the foregoing, "Total Funded Debt"
shall mean any and all interest-bearing obligations,
including without limitation, the face amount of all
outstanding Letters of Credit. The Total Funded Debt
to EBITDA
30
Ratio shall be measured on the last day of each
fiscal quarter throughout the term of the Loan.
(d) Senior Funded Debt to EBITDA Ratio. The Borrowers
will maintain on a consolidated basis for each
quarter commencing with and including the quarter
ending immediately after the Closing, a Senior Funded
Debt to EBITDA ratio of not more than 3.00 to 1.00.
For purposes of the foregoing, "Senior Funded Debt"
shall mean Total Funded Debt less all debt expressly
subordinated to repayment of the Loan in full
pursuant to written subordination agreements
acceptable to the Lender in all respects. The Senior
Funded Debt to EBITDA Ratio shall be measured on the
last day of each fiscal quarter throughout the term
of the Loan.
(e) Ratio of Earnings Before Interest and Taxes ("EBIT")
to Interest Expense. The Borrowers will maintain on a
consolidated basis for each quarter commencing with
and including the quarter ending immediately after
the Closing, an EBIT to Interest Expense ratio of not
less than 3.00 to 1.00.
The Ratio of EBIT to Interest Expense shall be
measured on the last day of each fiscal quarter
throughout the term of the Loan. The financial
covenants set forth above (other than the financial
covenant set forth in subsection (a) above) shall be
calculated and tested on the basis of twelve (12)
month trailing Pro Forma results, except that for the
quarters ending on March 31, 1998, June 30, 1998 and
September 30, 1998, the financial covenants shall be
calculated and tested on an annualized Pro Forma
cumulative basis. Unless otherwise defined, all
financial terms used on this Section 15 shall have
the meanings attributed to such terms in accordance
with GAAP and SEC Regulation S-X, Article 11, as
amended.
16. Additional Financial Arrangements. In the event that any of
the Borrowers or any subsidiary or affiliate of any Borrower seeks to obtain
additional financial arrangements or financial services, including, without
limitation, (i) any interest rate caps, currency swaps or other hedging
transaction, (ii) any cash management, funds transfer, trade, corporate trust or
securities services or (iii) any public or private debt or equity
31
instruments or securities to be issued by any Borrower or any subsidiary or
affiliate of any Borrower, such Borrower shall give the Lender and its
affiliates an opportunity to make a bid to provide, arrange, underwrite or
administer such additional financial arrangements or financial services and
such Borrower shall determine whether such bid is in its best interests.
17. Landlord Waivers; Subordination. The Borrowers shall
provide to the Lender written landlord waivers from each lessor/landlord of
any premises at which any Borrower's assets having a book value in excess of
One Hundred Thousand Dollars ($100,000.00) is now or hereafter located. Each
landlord waiver shall subordinate any statutory, contractual or other lien
the lessor/landlord may have in any Collateral to the lien, operation and
effect of the lien granted to the Lender pursuant to this Agreement (except
to the extent otherwise expressly set forth in such landlord waiver and
approved by the Lender), and shall be in form and substance acceptable to the
Lender.
18. Substitute Notes. Upon request of the Lender, each
Borrower shall execute and deliver to the Lender substitute promissory notes,
in form and substance satisfactory to the Lender in all respects, payable to
the order of such person or entity as may be designated by the Lender.
ARTICLE VII
NEGATIVE COVENANTS OF THE BORROWERS
So long as any Obligation remains outstanding or this
Agreement remains in effect, each Borrower jointly and severally covenants
and agrees that, without the prior written consent of the Lender, the
Borrowers will not:
1. Change of Control; Disposition of Assets; Acquisition and
Merger.
(a) Permit majority or effective control of any Borrower to
be sold, assigned or otherwise transferred, legally or equitably, to any
person or entity (other than another Borrower); or
(b) suffer or permit the issuance of any capital stock of
any Borrower (other than the Parent Company); it being understood and agreed
that this negative covenant shall not be deemed violated by the issuance of
capital stock by any Borrower in connection with (i) the purchase or
acquisition of any company or entity pursuant to the terms of this Agreement,
(ii) stock options granted to key employees of any Borrower (including,
without limitation, prospective employees, consultants, directors,
prospective directors or any other persons eligible for stock options
pursuant to the Parent Company's 1997 Long-Term Incentive Plan, as amended in
November 1997), and/or (iii) earn outs included in purchase transactions
described in (i) above and other earn-outs acceptable to the Lender in
writing; or
32
(c) sell, assign, loan, deliver, lease, transfer or
otherwise dispose of property or assets, except for the disposition of assets
in the ordinary course of the Borrowers' business, provided that such
dispositions of assets, in the aggregate, do not exceed Five Hundred Thousand
Dollars ($500,000.00) per annum; or
(d) permit any Borrower to merge or consolidate with any
company or enterprise which is not a Borrower party to this Agreement, or
acquire or purchase any company or enterprise which is not a Borrower party
to this Agreement; it being understood and agreed, however, that the Lender
agrees to grant its consent in connection with acquisitions by a Borrower of
other entities so long as:
(i) the aggregate cost/purchase price/total
consideration (i.e., the value of cash paid,
stock exchanged, debt assumed and other
actual consideration paid) for any single
acquisition does not exceed Twenty Million
Dollars ($20,000,000.00) and for all such
acquisitions does not exceed Fifty Million
Dollars ($50,000,000.00) on an annual basis
and One Hundred Twenty Million Dollars
($120,000,000.00) during the term of the
Loan;
(ii) the Pro Forma financials of the Borrowers,
after taking into effect the acquisition(s),
are not projected to cause the Borrowers to
fail to comply with any of the financial
covenants set forth in Section 15 of Article
VI of this Agreement; and
(iii) the following parameters/conditions are
satisfied:
A. the entity to be acquired is a
going concern;
B. the entity to be acquired is in a
line of business similar or
complementary to the Borrowers';
C. the entity to be acquired has
positive EBITDA on a Pro Forma
basis for the preceding twelve (12)
month period;
D. there is no assumption of
indebtedness, other than trade
liabilities in the ordinary course
of business and/or other debt
expressly consented to by the
Lender and expressly subordinated
to the Loan;
E. in the case of a merger, the
Borrower is the surviving,
controlling corporation;
F. the acquisition is not hostile;
33
G. the entity to be acquired is not,
in the Lender's judgment, subject
to material pending litigation; and
H. no Event of Default exists, and no
act, event or condition which with
notice or the passage of time, or
both, would constitute an Event of
Default, has occurred under this
Agreement or any other Loan
Document.
In the event a written request for the Lender's consent to a
particular acquisition is made by a Borrower pursuant to this Section, such
Borrower shall submit to the Lender (a) a written certification that the
proposed acquisition meets the criteria described in this Section 1 of
Article VII, (b) the Pro Forma financials described above, together with (i)
a Pro Forma calculation of the financial covenants set forth in Section 15 of
Article VI of this Agreement, after taking into effect such acquisition, and
(ii) the most recent financial statements of the entity to be acquired by a
Borrower (for the preceding twelve (12) month period), and (c) such other
information as may be reasonably required by the Lender. The Borrowers
acknowledge and agree that in preparing the Pro Forma statements required to
be submitted hereunder, actual prior expenses shall not be adjusted except to
reflect changes in owner/executive compensation and other expenses that
qualify as Pro Forma adjustments.
2. Margin Stocks. Use all or any part of the proceeds of any
advance made hereunder to purchase or carry, or to reduce or retire any loan
incurred to purchase or carry, any margin stocks (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any such
margin stocks.
3. Change of Operations. Change the general character of any
Borrower's business as conducted on the date hereof, or engage in any type of
business not directly related to, complementary to or compatible with such
business as presently and normally conducted.
4. Judgments; Attachments. Suffer or permit any judgment in
excess of Two Hundred Fifty Thousand Dollars ($250,000.00) against any
Borrower or any attachment against any Borrower's property (for an amount not
fully covered by insurance) to remain unpaid, undischarged or undismissed for
a period of ten (10) days, unless enforcement thereof shall be effectively
stayed or bonded;
5. Further Assignments; Performance and Modification of
Contracts; etc. Except as may be expressly permitted by the Loan Documents
(i) make any further assignment, pledge or disposition of the Collateral or
any part thereof; (ii) permit any set-off or reduction, delay the timing of
any payment under, or otherwise modify any Material Contract, if such
set-off, reduction, delay or modification would adversely affect any Borrower
in any material respect; (iii) create, incur or permit to exist any lien or
34
encumbrance on any real property now or hereafter owned by any Borrower; or
(iv) do or permit to be done anything to impair the Lender's security in any
Collateral or the payments due to any Borrower thereunder;
6. Affect Rights of the Lender. At any time do or perform any
act or permit any act to be performed which would or reasonably could
materially adversely affect the interests or rights of the Lender under any
Loan Document;
7. Indebtedness; Granting of Security Interests. Suffer or
permit any Borrower to incur any new indebtedness, except for (i) trade debt
and operating leases incurred in the ordinary course of business; (ii)
performance bonds issued on behalf of the Borrowers in the ordinary course of
business; (iii) indebtedness secured by liens listed on Schedule 11 hereto,
or other indebtedness secured by Permitted Liens; (iv) indebtedness incurred
to finance (by purchase or lease) equipment constituting capital
expenditures, provided that all capital leases permitted hereby do not, in
the aggregate, exceed Two Million Dollars ($2,000,000.00) per annum; (v)
indebtedness incurred pursuant to the Deutsche Financing Agreement in an
amount not to exceed, at any time, Fifteen Million Dollars ($15,000,000.00),
in the aggregate; (vi) indebtedness incurred pursuant to the IBM Financing
Agreement in an amount not to exceed, at any time, Seven Hundred Fifty
Thousand Dollars ($750,000.00), in the aggregate; and (vii) indebtedness
subordinated to the Loan and subordinated to the liens in favor of the Lender
on terms and conditions acceptable to the Lender. Except as otherwise
expressly permitted herein, no Borrower shall mortgage, assign, pledge,
hypothecate or otherwise encumber or permit any lien, security interest or
other encumbrance, including purchase money liens, whether under conditional
or installment sales arrangements or otherwise, to affect the Collateral or
any other assets or properties of any Borrower (except for Permitted Liens),
nor shall any Borrower guarantee or otherwise become obligated for any
indebtedness of others or make any optional prepayments or any material
amendments or modifications of any existing indebtedness; it being understood
and agreed that the Parent Company's guaranty of the Deutsche Financing shall
not constitute a violation of this negative covenant. Furthermore, each
Borrower agrees that it will not enter into any agreement or understanding
with any person or entity pursuant to which any Borrower agrees to be bound
by a covenant not to encumber all or any part of the property or assets of
such Borrower, unless such agreement or understanding is entered into in
connection with the granting of purchase money security interests permitted
pursuant to the terms and provisions of this Agreement.
8. Dividends; Loans; Advances; Investments and Similar Events.
(a) Permit the Parent Company to declare or pay any
dividends on its capital stock of any class.
(b) Permit any Borrower to alter or amend any Borrower's
capital structure, purchase, redeem or otherwise retire any shares of any
Borrower's capital stock (other than the Parent Company's capital stock),
voluntarily prepay, acquire or anticipate
35
any sinking fund requirement of any indebtedness, or make any distributions
in cash or assets to any Borrower's shareholders; it being understood and
agreed that none of the transactions described in this subsection (b) shall
violate this negative covenant so long as all of the assets of any Borrower
party to such transaction shall continue to be under the sole and exclusive
control and ownership of a Borrower after giving affect to the applicable
transaction.
(c) Make any loans, salary advances or other payments to
(i) any shareholders of any Borrower; (ii) any corporation or other
enterprise directly or indirectly owned in whole or in part by any
shareholder of a Borrower; or (iii) any other person or entity; it being
understood and agreed that loans, salary advances and other payments between
Borrowers and trade credit extended to customers of a Borrower in the
ordinary course of business shall not be a violation of this covenant.
9. Lease Obligations. Enter into any new lease of real or
personal property, except in the ordinary course of business.
10. Deutsche Financing and IBM Financing.
(a) Permit the aggregate of the outstanding principal
balance of the Deutsche Financing, together with any and all accrued and
unpaid interest thereon and any other sums payable in connection therewith to
exceed, at any time, Fifteen Million Dollars ($15,000,000.00); or
(b) Permit the aggregate of the outstanding principal
balance of the IBM Financing, together with any and all accrued and unpaid
interest thereon and any other sums payable in connection therewith to
exceed, at any time, Seven Hundred Fifty Thousand Dollars ($750,000.00).
11. Fiscal Year and Accounting Changes. Change its fiscal year
from December 31 or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment
except as required by law.
12. Lockbox Deposits. Permit or cause any and all payments
required to be made directly to the Lender, pursuant to Section 2 of Article
XI of this Agreement, to be made or directed to any other person or entity,
without the prior approval of the Lender.
ARTICLE VIII
COLLATERAL ACCOUNT
From and after the occurrence of an Event of Default, upon the
request of the Lender, the Borrowers will deposit or cause to be deposited
into a collateral account (the
36
"Collateral Account") designated by the Lender, all checks, drafts, cash and
other remittances received by the Borrowers, and shall deposit such items for
credit to the Collateral Account within one (1) Business Day of the receipt
thereof and in precisely the form received. Pending such deposit, the Borrowers
will not commingle any such items of payment with any of their other funds or
property, but will hold them separate and apart.
Each of the Borrowers hereby covenants and agrees that the
Collateral Account shall secure the Obligations and hereby grants, assigns
and transfers to the Lender, a continuing security interest in all of the
Borrowers' right, title and interest in and to the Collateral Account.
Notwithstanding anything to the contrary under state law, the Lender may
apply funds in the Collateral Account to any of the Obligations, including,
without limitation, any principal, interest or other payment(s) not made when
due, whether arising under this Loan Agreement and/or any other Loan
Document, or any other Obligation of any Borrower, without notice to the
Borrowers, without regard to the origin of the deposits in the account, the
beneficial ownership of the funds therein or whether such Obligations are
owed jointly with another or severally; the order and method of such
application to be in the sole discretion of the Lender. The Lender's right to
deduct sums due under the Loan Documents from the Borrowers' account(s) shall
not relieve the Borrowers from their obligation to make all payments required
by the Loan Documents as and when required by the Loan Documents, and the
Lender shall not have any obligation to make any such deductions or any
liability whatsoever for any failure to do so.
ARTICLE IX
DEFAULT AND REMEDIES
1. Events of Default. Any one of the following events shall be
considered an "Event of Default":
(a) if any Borrower shall fail to pay any principal,
interest or other sum owing on the Note or any other
Obligation within five (5) days of the date when the
same shall become due and payable, whether by reason
of acceleration or otherwise;
(b) if any Borrower shall fail to pay and satisfy in
full, within ten (10) days of the rendering thereof,
any judgment against such Borrower in excess of Two
Hundred Fifty Thousand Dollars ($250,000.00) which is
not, to the reasonable satisfaction of the Lender,
fully bonded, stayed, covered by insurance or covered
by appropriate reserves;
37
(c) if any warranty or representation set forth herein or
in any other Loan Document made by any Borrower or
any other party to any of the Loan Documents shall be
untrue in any respect as of the date when made,
including, without limitation, any information
contained in any financial statement, application,
schedule, report or other document given by any
Borrower or any other party in connection with any of
the Obligations or Loan Documents, or if any Borrower
or such other party omitted to state any fact
necessary to make such information not misleading in
any material respect;
(d) if there shall be non-compliance with or a breach of
any of the Affirmative Covenants contained in this
Agreement (other than a default in the payment of any
sum due and payable hereunder, which shall be
governed by subsection (a) above, or a breach or
violation of any of the financial covenants set forth
in Section 15 of Article VI hereof, which shall be
governed by subsection (f) below), and such
non-compliance or breach remains uncured for a period
of five (5) days;
(e) if there shall be non-compliance with or a breach of
any affirmative covenants or agreements of any
Borrower or any other person set forth in the Note or
in any other Loan Document (other than (i) the
non-compliance with or breach of any Affirmative
Covenants set forth in this Agreement, which shall be
governed by subsection (d) above, or (ii) a default
in the payment of any sum due and payable pursuant to
the Note or any other Loan Document, which shall be
governed by subsection (a) above), and such
non-compliance or breach remains uncured beyond any
applicable notice/grace period set forth therein;
(f) if there shall be non-compliance with or a breach of
any of the Negative Covenants contained in this
Agreement or if there shall be non-compliance with or
a breach of any of the financial covenants set forth
in Section 15 of Article VI of this Agreement, or if
there shall be non-compliance with or a breach of any
other negative covenants of any Borrower or any other
person set forth herein, in any Note or in any other
Loan Document;
38
(g) if (i) without the prior written consent of the
Lender, any Borrower shall be liquidated or dissolved
or shall discontinue its business, and the assets of
such Borrower have not been transferred to another
Borrower; (ii) a trustee or receiver is appointed for
any Borrower or for all or a substantial part of its
assets; (iii) any Borrower makes a general assignment
for the benefit of creditors; (iv) any Borrower files
or is the subject of any insolvency proceeding or
petition in bankruptcy, which in the case of an
involuntary bankruptcy, remains undismissed for sixty
(60) days; (v) any Borrower shall become insolvent or
at any time fail generally to pay its debts as such
debts become due; or (vi) any governmental agency or
bankruptcy court or other court of competent
jurisdiction shall assume custody or control of the
whole or any part of the assets of any Borrower;
(h) if any Borrower's property or assets, including,
without limitation, any deposit accounts, are levied
upon, attached or subject to any other enforcement
proceeding, which is not fully bonded or stayed;
(i) themerger, consolidation or reorganization of any
Borrower not otherwise permitted pursuant to the
terms of this Agreement, without the prior written
consent of the Lender;
(j) ifany obligation of any Borrower for the payment of
borrowed money, which involves amounts in excess of
Two Hundred Fifty Thousand Dollars ($250,000.00),
whether now existing or hereafter created, incurred
or arising, becomes or is declared to be due and
payable prior to the expressed maturity thereof,
whether such obligation is owed to the Lender or any
other person;
(k) if(i) there shall be a default by a Borrower under
any Material Contract; (ii) a notice of termination
shall have been issued to a Borrower under any
Material Contract; or (iii) a cure notice issued to a
Borrower under any Material Contract shall remain
uncured beyond (x) the expiration of the time period
available to any Borrower pursuant to such Material
Contract and/or such cure notice, to cure the noticed
default, or (y) the date on which the other
contracting party is entitled to exercise its rights
and
39
remedies under the Material Contract as a consequence
of such default;
(l) if(i) any Borrower is debarred or suspended from
contracting with any part of the Government; (ii) a
notice of debarment or suspension shall have been
issued to any Borrower; (iii) a notice of termination
or the actual termination of any Government Contract
shall have been issued to or received by any Borrower
(other than a termination for convenience approved by
the Lender); or (iv) a Government investigation or
inquiry relating to any Borrower shall have been
commenced in connection with (a) any Borrower's
activities, which investigation could reasonably
result in criminal or civil liability, suspension,
debarment or any other adverse administrative action
arising by reason of alleged fraud, willful
misconduct, neglect, default or other wrongdoing; or
(b) any Government Contract;
(m) if any Letter of Credit issued for the benefit of
Deutsche, IBM or any other beneficiary is drawn upon
and/or presented to the Lender for payment;
(n) if any Borrower shall be in default under the
Deutsche Financing Agreement, the IBM Financing
Agreement or any other agreement, document or
instrument entered into in connection with the
Deutsche Financing or IBM Financing, or if any person
or entity (other than the Lender) shall be in breach
or in violation of the Deutsche Subordination
Agreement or IBM Subordination Agreement; and/or
(o) if any Borrower is in default under any contract or
agreement, financial or otherwise, between such
Borrower, as the case may be, and any other person,
involving amounts in excess of Five Hundred Thousand
Dollars ($500,000.00), and the other party thereto
commences exercise of its rights and remedies under
such contract or agreement as a consequence of such
default.
2. Remedies. Upon the occurrence of any Event of Default, the
Lender may exercise any or all of the following remedies:
(a) Withhold disbursement of all or any part of the Loan
proceeds; it being understood and agreed that
40
notwithstanding the foregoing, the Lender shall have
no obligation to make any advance or disbursement
pursuant to the terms of this Agreement or otherwise
if any act, event or condition exists which with
notice or the lapse of time, or both, would
constitute an Event of Default;
(b) Terminate the Lender's obligation to make further
disbursements of the Loan proceeds;
(c) Declare all principal, interest and other sums owing
on the Obligations to be immediately due and payable
without demand, protest, notice of protest, notice of
default, presentment for payment or further notice of
any kind; provided, however, that payments of amounts
hereunder shall not be accelerated by reason of (i) a
default in the payment of any sum due and payable
hereunder or pursuant to any other Loan Document (a
"Payment Default"), unless such Payment Default
remains uncured for five (5) days (with no notice of
default being required); and (ii) a default other
than a Payment Default (a "Non-Payment Default"),
unless such Non-Payment Default remains uncured for
ten (10) days following notice thereof from the
Lender to the Borrowers. Notwithstanding the
foregoing, no notice of a Non-Payment Default shall
be required prior to acceleration or prior to the
Lender exercising any other right or remedy under
this Agreement or any other Loan Document, if (i) the
Lender in good faith believes that any such delay
would jeopardize the Lender's security or the
Lender's lien priority or (ii) the default is a
violation of Section 3(c) of Article VI of this
Agreement;
(d) Without notice, offset and apply against all or any
part of the Obligations then owing by any Borrower to
the Lender, any and all money, credits, stocks, bonds
or other securities or property of any Borrower of
any kind or nature whatsoever on deposit with, held
by or in the possession of the Lender in any capacity
whatsoever, including, without limitation, any
deposits with any Lender or any of its affiliates, to
the credit of or for the account of any Borrower.
Notwithstanding any applicable state law to the
contrary, the Lender is authorized at any time to
charge the Obligations against any Borrower's
account(s) in Lender's possession or in the
possession of any other person or entity for and on
behalf of the Lender, without regard to the
41
origin of deposits to the account or beneficial
ownership of the funds;
(e) Exercise all rights, powers and remedies of a secured
party under the Uniform Commercial Code in effect in
the Commonwealth of Virginia, any other jurisdiction
in which the Collateral is located and/or any other
applicable law(s), including, without limitation, the
right to (i) require any Borrower to assemble the
Collateral (to the extent that it is movable) and
make it available to the Lender at a place to be
designated by the Lender, and (ii) enter upon any
Borrower's premises, peaceably by the Lender's own
means or with legal process, and take possession of,
render unusable or dispose of the Collateral on such
premises; each Borrowers hereby agreeing not to
resist or interfere with any such action. The Lender
agrees to give the Borrowers written notice of the
time and place of any public sale of the Collateral
or any part thereof, and the time after which any
private sale or any other intended disposition of the
Collateral is to be made, and such notice will be
mailed, postage prepaid, to the principal place of
business of the Parent Company, at least ten (10)
days before the time of any such sale or disposition.
Each Borrower hereby authorizes and appoints the
Lender and its successors and assigns to (x) sell the
Collateral, and (y) declare that each Borrower
assents to the passage of a decree by a court of
proper jurisdiction for the sale of the Collateral.
Any such sale pursuant to (x) or (y) above is to be
made in accordance with the applicable provisions of
the laws and rules of procedure of the Commonwealth
of Virginia or other applicable law; and/or
(f) Proceed to enforce such other and additional rights
and remedies as the Lender may have hereunder, and/or
under any of the other Loan Documents, or as may be
provided by applicable law.
It is expressly understood and agreed that the Lender may
exercise its rights under this Agreement or under any other Loan Document
without exercising the rights or affecting the security afforded by any other
Loan Document, and it is further understood and agreed that the Lender may
proceed against all or any portion of the Collateral in such order and at
such times as the Lender, in its sole discretion, sees fit; and each Borrower
hereby expressly waives, to the extent permitted by law, all benefit of
valuation, appraisement, marshaling of assets and all exemptions under the
laws of the
42
Commonwealth of Virginia and/or any other state, district or territory of the
United States. Furthermore, if any Borrower shall default in the performance
when due of any of the provisions of this Agreement, the Lender, without
notice to or demand upon any Borrower (and without any grace or cure period)
and without waiving or releasing any of the Obligations or any default
hereunder, under the Note or under any other Loan Document, may (but shall be
under no obligation to) perform the same for such Borrower's account, and any
monies expended in so doing shall be chargeable to such Borrower with
interest, at the rate of interest payable under Note, plus three percent
(3%), and added to the indebtedness secured by the Collateral.
All sums paid or advanced by the Lender in connection with the
foregoing or otherwise in connection with the Loan, and all court costs and
expenses of collection, including without limitation, reasonable
out-of-pocket attorneys' fees and expenses (and out-of-pocket fees and
expenses resulting from the taking, holding or disposition of the Collateral)
incurred in connection therewith shall be paid by the Borrowers upon demand
and shall become a part of the Obligations secured by the Collateral. The
Borrowers agree to bear the expense of each lien search, property and
judgment report or other form of Collateral ownership investigation as the
Lender in its discretion, shall deem necessary or desirable to assure or
further assure to the Lender its interests in the Collateral.
ARTICLE X
[INTENTIONALLY OMITTED]
ARTICLE XI
CERTAIN ADDITIONAL RIGHTS AND OBLIGATIONS
REGARDING THE COLLATERAL
1.Power of Attorney. Each Borrower hereby irrevocably appoints
the Lender as its agent and attorney-in-fact, with power of substitution,
having full power and authority, in its own name, in the name of any Borrower
or otherwise (but at the cost and expense of the Borrowers and without notice
to the Borrowers), to (i) notify account debtors obligated on any of the
Receivables to make payments thereon directly to the lockbox referenced in
Section 2 of this Article XI, and to take control of the cash and non-cash
proceeds of any such Receivables and apply the same to the Obligations as and
when due (whether by acceleration or otherwise), which right the Lender may
exercise at any time whether or not the Borrowers are then in default
hereunder or were theretofore making collections thereon; (ii) charge against
any bank account of any Borrower any item of payment credited to the
Collateral Account which is dishonored by the drawee or the Maker thereof;
(iii) compromise, extend or renew any of the Collateral constituting
Receivables or deal with any of the Collateral as the Lender may deem
reasonably necessary or advisable; (iv) release its interest in, make
exchanges or substitutions for and/or
43
surrender, all or any part of any Borrower's interest in all or any part of
the Collateral; (v) remove from any Borrower's place(s) of business all
books, records, ledger sheets, correspondence, invoices and documents
relating to or evidencing any of the Collateral, or without cost or expense
to the Lender, make such use of any Borrower's place(s) of business as may be
reasonably necessary to administer, control and/or collect the Collateral (it
being understood and agreed, that in the absence of an Event of Default, the
Lender shall provide five (5) days prior notice to the Borrower before taking
any action pursuant to this subsection (v)); (vi) repair, alter or supply
goods, if any, necessary to fulfill in whole or in part the purchase order of
any account debtor; (vii) demand, collect receipt for and give renewals,
extensions, discharges and releases of all or any part of the Collateral;
(viii) institute and prosecute legal and equitable proceedings to enforce
collection of, or realize upon, all or any part of the Collateral; (ix)
settle, renew, extend, compromise, compound, exchange or adjust claims with
respect to all or any part of the Collateral or any legal proceedings brought
with respect thereto; and (x) receive and open all mail addressed to any
Borrower, and if a default exists hereunder, notify the Post Office
authorities to change the address for the delivery of mail to any Borrower to
such address as the Lender may designate; it being understood that the rights
granted to the Lender in this Article XI, which are operative on the
occurrence of an Event of Default, shall not in any way limit or impair the
other rights provided to the Lender in this Agreement or any other Loan
Document, including, without limitation, its rights with respect to the
Collateral Account and the below-referenced lockbox. Furthermore, each
Borrower hereby irrevocably appoints the Lender as its agent and
attorney-in-fact, with power of substitution, having full power and
authority, in its own name, in the name of the Lender, in the name of any
Borrower or otherwise (but at the cost and expense of the Borrowers and
without notice to any Borrower) and regardless of whether an Event of Default
has occurred or any act, event or condition which with notice or the lapse of
time, or both, would constitute an Event of Default has occurred, to (a) file
financing statements and continuation statements covering the Collateral and
execute the same on behalf of any Borrower; (b) charge against any banking
account of any Borrower any item of payment credited to any Borrower's
account which is dishonored by the drawee or maker thereof; and/or (iii)
endorse the name of any Borrower upon any items of payment relating to the
Collateral or upon any proof of claim in bankruptcy against any account
debtor of a Borrower. This power of attorney is coupled with an interest and
cannot be revoked, modified or amended without the prior written consent of
the Lender.
2. Lockbox. Each Borrower hereby authorizes the Lender to
receive and collect any amount or amounts due or to become due on account of
any Receivables and, at its discretion following the occurrence of an Event
of Default, to apply the same to the repayment of the Note, and each Borrower
agrees that, upon Lender's request, it shall establish and shall continually
maintain on terms and conditions satisfactory to the Lender in all respects,
one or more lockboxes (and, if required by the Lender, one or more blocked
accounts) for the collection of Receivables. Except as otherwise may be
approved by the Lender in writing, any checks or other remittances received
by any Borrower in payment of
44
the Receivables shall be held in trust by such Borrower for the Lender. Each
Borrower shall, within thirty (30) days from the date hereof (or within such
longer period as may be reasonably required by a Borrower), direct all of its
customers (other than certain customers as may be approved by the Lender) to
make payments directly to the Lender, and/or include on all of its invoices, a
direction to its customer to make all payments directly to the Lender, at the
address and account number provided by the Lender to the Borrower in writing.
3. Other Agreements. Except as may otherwise be expressly
permitted by the terms of this Agreement, and without limiting any other
restrictions or provisions of this Agreement, each Borrower will (i) on demand
(during the occurrence of an Event of Default) or within five (5) days of
Lender's request therefor (in the absence of an Event of Default), subject to
any confidentiality and secrecy requirements imposed by any Government agency,
make available in form reasonably acceptable to the Lender, shipping documents
and delivery receipts evidencing the shipment of goods which gave rise to the
sale or lease of inventory or of an account, contract right or chattel paper,
completion certificates or other proof of the satisfactory performance of
services which gave rise to the sale or lease of inventory or of an account,
contract right or chattel paper, and each Borrower's copy of any written
contract or order from which a sale or lease of inventory, an account, contract
right or chattel paper arose; and (ii) when requested, advise the Lender when an
account debtor returns or refuses to retain any goods, the sale or lease of
which gave rise to an account, contract right or chattel paper, and of any delay
in delivery or performance, or claims made in regard to any sale or lease of
inventory, account, contract right or chattel paper. Upon reasonable notice, all
such records will be available for examination by authorized agents of the
Lender.
It is expressly understood and agreed, however, that the Lender
shall not be required or obligated in any manner to make any inquiries as to the
nature or sufficiency of any payment received by it or to present or file any
claims or take any other action to collect or enforce a payment of any amounts
which may have been assigned to it or to which it may be entitled hereunder at
any time or times.
ARTICLE XII
MISCELLANEOUS
1. Remedies Cumulative. Each right, power and remedy of the
Lender provided for in this Agreement or in any other Loan Document or now or
hereafter existing at law or in equity, by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other right, power
or remedy provided for in this Agreement or in any other Loan Document, or now
or hereafter existing at law or in equity, by statute or otherwise, and the
exercise or beginning of the exercise by the Lender of any one or
45
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.
2. Waiver. Time is of the essence of this Agreement. No failure
or delay by the Lender to insist upon the strict performance of any term,
condition, covenant or agreement set forth in this Agreement or any other Loan
Document, or to exercise any right, power or remedy consequent upon a breach
thereof, shall constitute a waiver of such term, condition, covenant or
agreement or of any such breach, or preclude the Lender from exercising any such
right, power or remedy at any later time or times. By accepting payment after
the due date of any of the Obligations, the Lender shall not be deemed to have
waived either the right to require prompt payment when due of all other
Obligations, or the right to declare a default for failure to make payment of
any such other Obligations.
3. Notices. Notices to any party shall be in writing and shall be
delivered personally or by first-class mail or nationally-recognized overnight
delivery service addressed to the parties at the addresses set forth below or
otherwise designated in writing:
If to the Borrowers: Condor Technology Solutions, Inc.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Financial Officer
If to the Lender: First Union Commercial Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
with a copy of all notices
to the Lender to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
with a copy of all notices
to the Borrowers to: ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
46
4. Entire Agreement. This Agreement and the other Loan Documents
constitute the entire agreement of the parties with respect to the Loan and
shall continue in full force and effect for so long as any Borrower shall be
indebted hereunder or under the Note, and thereafter until the Lender shall have
actually received written notice of the termination hereof from the Borrowers
and all Obligations incurred or contracted before receipt of such notice shall
have been fully paid. In the event of any inconsistency between the terms and
conditions of this Agreement and the terms and conditions of the Commitment
Letter, the terms and conditions of this Agreement shall control.
5. Relationship of the Parties. This Agreement provides for the
extension of financial accommodations by the Lender, in its capacity as lender,
to the Borrowers, in their capacity as Borrowers, and for the payment of
interest and repayment of the Obligations by the Borrowers. Certain provisions
herein, such as those relating to compliance with the financial covenants,
delivery to the Lender of financial statements, and compliance with other
affirmative and negative covenants are for the benefit of the Lender to protect
the Lender's interests in assuring repayment of the Obligations. Nothing
contained in this Agreement shall be construed as permitting or obligating the
Lender to act as a financial or business advisor or consultant to any Borrower,
as permitting or obligating the Lender to control any Borrower or to conduct any
Borrower's operations, as creating any fiduciary obligation on the part of the
Lender to any Borrower, or as creating any joint venture, agency or other
relationship between the parties other than as explicitly and specifically
stated in this Agreement. Each Borrower acknowledges that it has had the
opportunity to obtain the advice of experienced counsel of its own choosing in
connection with the negotiation and execution of this Agreement and to obtain
the advice of such counsel with respect to all matters contained herein,
including, without limitation, the provision in this Agreement for waiver of
trial by jury. Each Borrower further acknowledges that it is experienced with
respect to financial and credit matters and has made its own independent
decision to request the Obligations and execute and deliver this Agreement.
6. Waiver of Jury Trial. Each Borrower hereby (a) covenants and
agrees not to elect a trial by jury of any issue triable by a jury, and (b)
waives any right to trial by jury fully to the extent that any such right shall
now or hereafter exist. This waiver of right to trial by jury is separately
given by each Borrower, knowingly and voluntarily, and this waiver is intended
to encompass individually each instance and each issue as to which the right to
a jury trial would otherwise accrue. The Lender is hereby authorized and
requested to submit this Agreement to any court having jurisdiction over the
subject matter and the parties hereto, so as to serve as conclusive evidence of
each Borrower's herein contained waiver of the right to jury trial. Further,
each Borrower hereby certifies that no representative or agent of the Lender
(including the Lender's counsel) has represented, expressly or otherwise, to the
undersigned that the Lender will not seek to enforce this provision waiving the
right to a trial by jury.
47
7. Submission to Jurisdiction; Service of Process; Venue. Any
judicial proceeding brought against any Borrower with respect to this Agreement
or any other Loan Document may be brought in any court of competent jurisdiction
in the Commonwealth of Virginia, and by execution and delivery of this
Agreement, each Borrower accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid court, and irrevocably agree to be bound by any judgment rendered by
such court in connection with this Agreement. Each Borrower irrevocably
designates and appoints ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ whose address is c/o Condor Technology
Solutions, Inc., ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as their agent to receive on its behalf service of
all process in any such proceeding in any court in the Commonwealth of Virginia,
such service being hereby acknowledged by each Borrower to be effective and
binding on each of them in every respect. A copy of any such process so served
shall be mailed by registered or certified mail to the Borrowers at the address
to which notices are to be addressed in accordance with this Agreement, except
that any failure to mail such copy shall not affect the validity of service of
process. The Borrowers shall at all times maintain an agent for service of
process pursuant to this provision. If the Borrowers fail to appoint such an
agent, or if such agent refuses to accept service, each Borrower hereby agrees
that service upon each of them by mail shall constitute sufficient notice.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of the Lender to bring proceedings
against any Borrower in the courts of any other jurisdiction.
8. Changes in Capital Requirements. If after the date of this
Agreement the Lender shall determine that the adoption of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof, or compliance by the
Lender with any request or directive regarding capital adequacy of any
authority, central bank or comparable agency, which adoption, change or
compliance is applicable to all banks generally or to banks similar in size, has
or would have the effect of reducing the rate of return on the Lender's capital
as a consequence of the Lender's obligations hereunder to a level below that
which the Lender could have achieved but for such adoption, change or compliance
(taking into consideration the Lender's policies with respect to capital
adequacy), then the interest rate on the Note shall be increased to a rate which
shall retain the Lender's original rate of return on the Lender's capital.
9. Captions. The paragraph headings of this Agreement are for
convenience of reference only, and in no way define, limit or describe the scope
of this Agreement or the intent of any provision hereof.
10. Modification and Waiver. Neither this Agreement nor any term,
condition, covenant or agreement hereof may be changed, waived, discharged or
terminated orally, but that may be accomplished only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought.
48
11. Transferability.
(a) No Borrower shall assign any of its rights, interests or
Obligations under this Agreement.
(b) The Lender may assign its interest, in the ordinary course
of its commercial banking business, at any time, or sell participations in some
but not all of its rights and obligations under this Agreement and the other
Loan Documents; provided that the Lender and any assignee or purchaser under
such assignment or sale shall have agreed that, except as otherwise expressly
provided below, the right to approve amendments or waivers pursuant to this
Agreement or the other Loan Documents shall require the vote of the such Lender
parties hereto holding, in the aggregate, at least fifty-one percent (51%) of
the Commitment Amount. Notwithstanding the foregoing, if at any time more than
one Lender shall be a party to this Agreement, the consent or approval of all of
the Lender parties hereto shall be required to (i) extend the final maturity of
the Loan or any Note, reduce the interest rate payable on or extend the time of
payment for any installment of principal, interest or fees payable in connection
with the Loan beyond the grace period applicable thereto (if any), or issue
Letters of Credit (A) having an expiration date beyond the Maturity Date, except
as otherwise expressly provided in this Agreement, or (B) causing the aggregate
outstanding amount of all such Letters of Credit issued to exceed Fifteen
Million Dollars ($15,000,000); (ii) change the percentage of the Commitment
Amount of any Lender, (iii) release all or a substantial portion of the
Collateral, except in accordance with the provisions of any applicable Loan
Document, (iv) amend the definition of the Required Lenders (which will be
defined concurrent with the joinder of a Lender party hereto), (v) consent to
the assignment or transfer by any Borrower of any of its rights or obligations
hereunder (other than assignments or transfers expressly permitted by the terms
of this Agreement), (vi) amend, modify or waive any provisions of this Section,
(vii) change the manner of application by the Lender of payments made under the
Loan Documents, or (viii) change the method of calculation used in connection
with the computation of interest, commissions or fees payable to the Lender
parties hereto.
12. Governing Law; Binding Effect. This Agreement shall be
governed by the laws of the Commonwealth of Virginia and be binding upon each
Borrower and inure to the benefit of the parties hereto and their respective
personal representatives, successors and assigns.
13. Gender; Number. As used herein, the singular number shall
include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may require.
14. Joint and Several Liability. Each Borrower shall be jointly
and severally liable for the payment and performance of all obligations and
liabilities hereunder.
49
15. Materiality. Unless the context clearly indicates to the
contrary, determinations regarding the materiality of any act, event, condition
or circumstance shall be in the reasonable judgment of the Lender.
16. Confidentiality. The Lender shall keep confidential, and will
cause its directors, officers, employees, counsel, agents and representatives to
keep confidential, all confidential or proprietary information of any Borrower
(the proprietary nature of which shall be promptly determined by the Borrower
following the Lender's request therefor) and documents obtained by it in
connection with the consummation of the transactions contemplated hereby
(including, without limitation this Agreement and the other Loan Documents) from
all persons, including, without limitation, its affiliates, unless such
information is disclosed following the Lender's receipt of the Parent Company's
consent to such disclosure. Information shall not be deemed to be confidential
or proprietary if (i) it is or becomes generally available in the public domain
(other than as a result of its disclosure after the date of this Agreement by
the Lender or its directors, officers, employees, counsel, agents or
representatives), (ii) it is or has become generally available to the public
without violating the terms of this Section 16, (iii) it is or becomes lawfully
obtainable from other sources, or (iv) it is required to be disclosed to comply
with applicable law, rules or regulations or a court order issued by a court of
competent jurisdiction; it being understood and agreed that (a) any such
disclosure pursuant to this clause (iv) shall be limited to confidential or
proprietary information which the Lender may be legally required to disclose
pursuant to such law, rule, regulation or court order; and (b) unless otherwise
prohibited by court order or applicable law, the Lender shall promptly notify
the Borrower of Lender's receipt of any court order requiring disclosure of
confidential or proprietary information of the Borrower. The Lender acknowledges
and agrees that all confidential and proprietary information in Lender's
possession, custody or control shall be returned to the Parent Company upon
payment in full of all Obligations and termination of this Agreement. The
Lender's obligations under this Section 16 shall survive the payment in full of
the Obligations.
[Remainder of page intentionally left blank]
50
This Agreement is signed, sealed and delivered this as of the
date and year first above written.
WITNESS: Borrowers:
[Corporate Seal] CONDOR TECHNOLOGY SOLUTIONS,
INC., a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------- -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Secretary and Chief Financial Officer
WITNESS: MANAGEMENT SUPPORT
[Corporate Seal] TECHNOLOGY, a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
[Corporate Seal] COMPUTER HARDWARE
MAINTENANCE COMPANY, INC.,
a Pennsylvania corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
[Corporate Seal] FEDERAL COMPUTER
CORPORATION, a Virginia corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
[Signatures continue on following page]
51
[Corporate Seal] CORPORATE ACCESS, INC., a
Massachusetts corporation
a Pennsylvania corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
[Corporate Seal] INTERACTIVE SOFTWARE SYSTEMS
INCORPORATED, a Colorado corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
[Corporate Seal] U.S. COMMUNICATIONS, INC., a
Maryland corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
[Corporate Seal] INVENTURE GROUP, INC., a
Pennsylvania corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
[Corporate Seal] MIS TECHNOLOGIES, INC., an
Oklahoma corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
[Signatures continue on following page]
52
LENDER:
FIRST UNION COMMERCIAL
CORPORATION, a North Carolina
corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
53
REVOLVING PROMISSORY NOTE
$35,000,000.00 April 15, 1998
FOR VALUE RECEIVED, on or before April 15, 2001, the
undersigned, CONDOR TECHNOLOGY SOLUTIONS, INC., a Delaware corporation,
MANAGEMENT SUPPORT TECHNOLOGY CORP., a Delaware corporation, COMPUTER HARDWARE
MAINTENANCE COMPANY, INC., a Pennsylvania corporation, FEDERAL COMPUTER
CORPORATION, a Virginia corporation, CORPORATE ACCESS, INC., a Massachusetts
corporation, INTERACTIVE SOFTWARE SYSTEMS INCORPORATED, a Colorado corporation,
U.S. COMMUNICATIONS, INC., a Maryland corporation, INVENTURE GROUP, INC., a
Pennsylvania corporation, and MIS TECHNOLOGIES, INC., an Oklahoma corporation
(collectively, the "Maker"), jointly and severally promise to pay to the order
of First Union Commercial Corporation, a North Carolina corporation ("the
Lender"), at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or to
such other person or address as the Lender may from time to time designate in
writing, the principal sum of Thirty-five Million and No/100 Dollars
($35,000,000.00), or so much thereof as shall be advanced or readvanced and from
time to time remain unpaid, plus interest on the principal balance thereof from
time to time outstanding from the date of this Note until the date paid, at the
rates set forth below. This Note shall bear interest on either a LIBOR or Base
Rate basis as more fully set forth herein and in the hereinafter defined Loan
Agreement. Unless otherwise defined herein, capitalized terms shall have the
meanings attributed to such terms in the Loan Agreement.
The entire principal balance of this Note, together with all
accrued and unpaid interest thereon and other sums payable hereunder or pursuant
to the Loan Documents shall, unless sooner accelerated in accordance with the
terms of this Note, the Loan
Agreement or any other Loan Document, be due and payable in full on April 15,
2001 (the "Maturity Date"). Interest on this Note shall be payable in
installments as follows:
(i) Amounts bearing interest on a Base Rate basis shall
be payable in monthly installments of accrued
interest only, commencing on May 1, 1998, and
continuing on the first day of each succeeding
calendar month thereafter until the Maturity Date;
and
(ii) Amounts bearing interest on a LIBOR basis shall be
due and payable on the last day of the applicable
Interest Period (whether such last day shall occur by
reason of acceleration, declaration, extension or
otherwise), and if such applicable Interest Period is
longer than ninety (90) days, also on the ninetieth
(90th) day of each applicable Interest Period.
Base Rate interest shall be calculated on a 365-day year basis
and the actual number of days elapsed. LIBOR interest shall be calculated on a
360-day year basis and the actual number of days elapsed.
In addition to the above-scheduled installments of accrued
interest only, the Maker shall also make the Mandatory Payments required to be
paid in accordance with Section 5 of Article I of the Loan Agreement. Such
Mandatory Payments shall be made simultaneously with the occurrence of the event
giving rise to the Mandatory Payment. All payments hereunder shall be payable in
lawful currency of the United States and in immediately available funds, and
payments shall be applied first to late charges and costs of collection, if any,
then to accrued and unpaid interest, and then to reduce the principal balance
hereof.
Except for amounts bearing interest on a LIBOR basis in
accordance with the terms and provisions of this Note and the Loan Agreement,
amounts outstanding under this Note shall bear interest at a floating rate which
is at all times equal to the Base Rate from time to time in effect, plus the
applicable Additional Base Rate Interest Margin (hereinafter defined). For
purposes of this Note, the term Base Rate shall mean the higher
2
of (i) the Federal Funds Rate, plus one-half of one percent (.50%), or (ii) the
Prime Rate. The Base Rate of interest payable hereunder shall be adjusted as and
when any change in the Base Rate shall occur.
So long as no Event of Default or any act, event or condition
which with notice or the passage of time, or both, would constitute an Event of
Default, has occurred and is continuing, the Maker shall have the right to elect
that specified amounts advanced under this Note bear interest at LIBOR, plus the
applicable Additional LIBOR Interest Rate Margin (hereinafter defined) in effect
at the commencement of the particular Interest Period. The Maker must elect a
LIBOR based interest rate in accordance with the specific procedures set forth
in the Loan Agreement (including the Exhibits thereto), and any amounts bearing
interest on a LIBOR basis shall be subject to the conditions, requirements and
other terms of the Loan Documents applicable to amounts bearing interest on such
basis, including the prepayment limitations and provisions regarding the payment
of associated costs, as more fully set forth in the Loan Agreement. The Maker
may not revoke any LIBOR election without the Lender's written consent. Upon the
expiration of an applicable Interest Period, unless the Maker is then entitled
to again elect a LIBOR based rate and the Lender has received a notice of LIBOR
election from the Maker in the form of Exhibit 2 to the Loan Agreement (the
"LIBOR Election Notice"), the rate of interest applicable to any amounts for
which a LIBOR based rate is expiring shall from and after the end of the
applicable Interest Period, bear interest at the Base Rate plus the applicable
Additional Base Rate Interest Margin; it being understood and agreed, however,
that such amount may, at any time thereafter, bear interest at the LIBOR based
rate, plus the applicable Additional LIBOR Interest Rate Margin, provided that
(i) the Maker is then entitled to elect a LIBOR based rate, and (ii) the Lender
has received a LIBOR Election Notice from the Maker.
For purposes of this Note, the Additional Base Rate Interest
Margin and the Additional LIBOR Interest Rate Margin shall be determined on the
basis of the Maker's
3
ratio (the "Pricing Ratio") of Total Funded Debt to Pro Forma EBITDA, calculated
in accordance with Section 15 of Article VI of the Loan Agreement. During the
period from the date of this Note through Setember 30, 1998, the Pricing Ratio
shall be calculated by annualizing the Pro Forma EBITDA for the period which has
elapsed since the date of this Note. Thereafter, the Pricing Ratio shall be
calculated on a four (4) quarter Pro Forma trailing basis. The applicable
Additional Base Rate Interest Margin and Additional LIBOR Interest Rate Margin
(collectively, the "Margin") shall be as follows:
Additional Base Rate Additional LIBOR
Pricing Ratio Interest Margin Interest Rate Margin
------------------------------------- ---------------------- ---------------------
Less than 1.5 to 1.0 .25% 1.50%
Equal to or greater than 1.5 to .50% 1.75%
1.0, but less than 2.0 to 1.0
Equal to or greater than 2.0 to .75% 2.00%
1.0, but less than 2.5 to 1.0
Equal to or greater than 2.5 to 1.00% 2.25%
1.0, but less than 3.0 to 1.0
Greater than 3.0 to 1.0 1.25% 2.50%
Interest rate adjustments hereunder shall be applicable on a prospective basis.
The Additional Base Rate Interest Margin and Additional LIBOR Interest Rate
Margin shall be calculated by and become effective on the fifth (5th) Business
Day after submission by the Maker of the quarterly financial statements required
by the Loan Agreement; it being understood, however, that in the event the
quarterly financial statements are not submitted when due, the Maker shall not
be entitled to any reduction in the interest rate for the ensuing period.
Upon the occurrence of an Event of Default hereunder or under the
Loan Agreement (i) the entire outstanding principal balance of this Note shall
thereafter bear interest at a rate which is three percent (3%) per annum above
the Base Rate or LIBOR, as applicable, plus the highest Margin, regardless of
the Pricing Ratio at such time; and (ii)
4
subject to Section 2(c) of Article IX of the Loan Agreement, the entire
principal balance of this Note and all accrued and unpaid interest thereon shall
at once become due and payable in full at the option of the holder of this Note.
Failure to exercise the foregoing option to accelerate payment shall not
constitute a waiver of the right to exercise the same at any future point in
time.
Subject to the terms and provisions set forth below in this
paragraph, amounts outstanding hereunder which bear interest on a Base Rate
basis may be prepaid, in whole or in part, without penalty or premium. Amounts
outstanding which bear interest on a LIBOR basis may also be prepaid, in whole
or in part, after two (2) Business Days' prior notice (i) without penalty or
premium, if such prepayment is made on the last day of the applicable Interest
Period, or (ii) provided such prepayment is accompanied by the required
Prepayment Fee (as defined in Exhibit 3 to the Loan Agreement), if such
prepayment is made at any time other than on the last day of the applicable
Interest Period, and provided that all accrued and unpaid interest on the
amounts being prepaid are also paid with such prepayment. Furthermore, each
principal prepayment, whether the amount being prepaid bears interest on a Base
Rate basis or a LIBOR basis, (a) must be in an amount not less than One Hundred
Thousand and No/100 Dollars ($100,000.00) and must be in increments of One
Hundred Thousand and No/100 Dollars ($100,000.00) and (b) shall be subject to
the additional conditions, requirements, terms and provisions of the Loan
Agreement relating to prepayment. Partial prepayments of this Note shall not
relieve the Maker of the obligation to pay periodic installments of principal
and/or interest hereunder as and when the same would otherwise be due hereunder.
Unless otherwise specified by the Maker in writing at the time of payment, all
prepayments (and Mandatory Payments) shall be applied first to amounts
outstanding bearing interest on a Base Rate basis, and then to amounts
outstanding bearing interest on a LIBOR basis.
The Maker hereby acknowledges and agrees that the Lender has the
right (but not the obligation) to deduct from any account(s) of any Maker, any
amounts necessary in
5
order for the Lender to pay when due any sum payable by the Maker hereunder or
under any other Loan Document. The Lender's right to deduct such sums from any
Maker's account(s) shall not relieve the Maker from its obligation to make all
payments required hereunder or under any other Loan Document as and when
required pursuant to the terms hereof or thereof, and the Lender shall have no
obligation to make any such deductions and no liability whatsoever for any
failure to do so.
Each party liable under this Note in any capacity, whether as
maker, endorser, surety, guarantor or otherwise: (i) waives presentment, demand,
protest and notice of presentment, notice of protest and notice of dishonor of
this debt and each and every other notice of any kind with respect to this Note,
(ii) agrees that the holder of this Note, at any time or times, without notice
to it or its consent, may grant extensions of time, without limit as to the
number or the aggregate period of such extensions, for the payment of any
principal, interest or other sums due hereunder, and (iii) to the extent not
prohibited by law, waives the benefit of any law or rule of law intended for its
advantage or protection as an obligor hereunder or providing for its release or
discharge from liability under this Note, in whole or in part, on account of any
facts or circumstances other than full and complete payment of all amounts due
hereunder.
The Maker promises to pay all costs of collection, including
reasonable out-of-pocket attorneys' fees, upon default in the payment when due
of the principal of this Note, interest or other sums due hereon, whether at
maturity as herein provided, or by reason of acceleration of maturity under the
terms of this Note or any other Loan Document, whether suit be brought or not.
In the event any one or more of the provisions contained in this
Note or any other Loan Document shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Note or such other
Loan Document, but this Note and the other Loan Documents
6
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein or therein.
This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom any waiver, change, modification or
discharge is sought to be enforced.
This Note is issued pursuant to the terms and conditions of a
certain Business Loan and Security Agreement of even date herewith (the "Loan
Agreement"), by and among the Lender and the Maker, and is secured by, among
other things, a certain Stock Security Agreement of even date herewith made by
Condor Technology Solutions, Inc. for the benefit of the Lender.
All of the terms, covenants, provisions, conditions,
stipulations, promises and agreements contained in the Loan Documents to be
kept, observed and performed by the Maker are hereby made a part of this Note
and incorporated herein by reference to the same extent and with the same force
and effect as if they were fully set forth herein, and the Maker promises and
agrees to keep, observe and perform them, or cause them to be kept, observed and
performed, strictly in accordance with the terms and provisions thereof.
WAIVER OF JURY TRIAL; VENUE; SERVICE OF PROCESS The Maker hereby
(i) covenants and agrees not to elect a trial by jury of any issue triable by a
jury, and (ii) waives any right to trial by jury, to the extent that any such
right shall now or hereafter exist. This waiver of right to trial by jury is
separately given by the Maker, knowingly and voluntarily, and this waiver is
intended to encompass individually each instance and each issue as to which the
right to a jury trial would otherwise accrue. The Lender is hereby authorized
and requested to submit this Note to any court having jurisdiction over the
subject matter of this Note and the parties hereto, so as to serve as conclusive
evidence of the undersigned's herein contained waiver of the right to jury
trial. Further, the Maker hereby certifies that no representative or agent of
the Lender (including its counsel) has
7
represented to any of the undersigned, expressly or otherwise, that the Lender
will not seek to enforce the waiver of right to jury trial set forth herein. Any
judicial proceeding brought against the Maker with respect to this Note or any
other Loan Document may be brought in any court of competent jurisdiction in the
Commonwealth of Virginia, and by execution and delivery of this Note, the Maker
accepts for itself and in connection with its properties, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid court, and
irrevocably agrees to be bound by any judgment rendered by such court in
connection with this Note, subject to its right to appeal such judgment pursuant
to applicable law. The Maker irrevocably designates and appoints ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, whose address is c/o Condor Technology Solutions, Inc., ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as its
agent to receive on its behalf service of all process in any such proceeding in
any court in the Commonwealth of Virginia, such service being hereby
acknowledged by the Maker to be effective and binding on it in every respect. A
copy of any such process so served shall be mailed by registered or certified
mail to the Maker at the address to which notices are to be addressed in
accordance with the Loan Agreement, except that any failure to mail such copy
shall not affect the validity of service of process. The Maker shall at all
times maintain an agent for service of process pursuant to this provision. If
the Maker fails to appoint such an agent, or if such agent refuses to accept
service, the Maker hereby agrees that service upon it by mail shall constitute
sufficient notice. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of the Lender to bring
proceedings against the Maker in the courts of any other jurisdiction.
The relationship between the Lender and the Maker is limited to
that of creditor and secured party, on the one hand, and debtor, on the other
hand. Certain provisions of the Loan Documents, such as those relating to
compliance with the financial covenants, delivery to the Lender of financial
statements, and compliance with other affirmative and negative covenants are for
the benefit of the Lender to protect its interests in assuring payments of
interest and repayment of principal. Nothing contained in this
8
Note shall be construed as permitting or obligating the Lender to act as a
financial or business advisor or consultant to the Maker, as permitting or
obligating the Lender to control the Maker or to conduct the Maker's operations,
as creating any fiduciary obligation on the part of the Lender to the Maker, or
as creating any joint venture, agency or other relationship between the parties
other than as explicitly and specifically stated in this Note. The Maker
acknowledges that it has had the opportunity to obtain the advice of experienced
counsel of its own choosing in connection with the negotiation and execution of
this Note and to obtain the advice of such counsel with respect to all matters
pertaining hereto, including, without limitation, the provision set forth herein
for waiver of trial by jury. The Maker further acknowledges that it is
experienced with respect to financial and credit matters and has made its own
independent decision to apply for credit and to execute and deliver this Note.
The Maker warrants and represents that the loan evidenced hereby
is being made for business or investment purposes.
[remainder of page intentionally left blank]
9
This Note shall be governed in all respects by the laws of the
Commonwealth of Virginia and shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
ATTEST: CONDOR TECHNOLOGY
[Corporate Seal] SOLUTIONS, INC., a Delaware
corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------- -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Secretary and Chief Financial Officer
ATTEST: MANAGEMENT SUPPORT
[Corporate Seal] TECHNOLOGY, a Delaware
corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
ATTEST: COMPUTER HARDWARE
[Corporate Seal] MAINTENANCE COMPANY, INC.,
a Pennsylvania corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
ATTEST: FEDERAL COMPUTER
[Corporate Seal] CORPORATION, a Virginia
corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
[Signatures continue on following page]
10
ATTEST: CORPORATE ACCESS, INC., a
[Corporate Seal] Massachusetts corporation
a Pennsylvania corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
ATTEST: INTERACTIVE SOFTWARE SYSTEMS
[Corporate Seal] INCORPORATED, a Colorado
corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
ATTEST: U.S. COMMUNICATIONS, INC., a
[Corporate Seal] Maryland corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
ATTEST: INVENTURE GROUP, INC., a
[Corporate Seal] Pennsylvania corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
ATTEST: MIS TECHNOLOGIES, INC., an
[Corporate Seal] Oklahoma corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
------------------------------ -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Attorney-in-Fact
11
STOCK SECURITY AGREEMENT
THIS STOCK SECURITY AGREEMENT ("Security Agreement"), made as of
the ____ day of April, 1998, by and between (i) FIRST UNION COMMERCIAL
CORPORATION, a North Carolina corporation having offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("First Union") and (ii) CONDOR
TECHNOLOGY SOLUTIONS, INC., a Delaware corporation, having its principal place
of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Pledgor").
WITNESSETH:
1. DEFINITIONS. All capitalized terms used but not otherwise defined
herein shall have the meanings attributed to such terms in that certain Business
Loan and Security Agreement of even date herewith (together with any extensions,
renewals and modifications thereof, the "Loan Agreement"), by and between (i)
First Union and any other "Lender" party thereto from time to time
(collectively, the "Lender"), and (ii) Pledgor, certain subsidiaries of Pledgor
and any other entity which becomes a party pursuant to the Loan Agreement
(collectively, the "Borrowers").
2. GRANT OF SECURITY. To secure (i) the payment and performance of the
obligations of Pledgor and the other Borrowers with respect to a certain
Thirty-five Million Dollar ($35,000,000) loan (the "Loan"), made to Pledgor and
the other Borrowers pursuant to the Loan Agreement, including all interest, fees
and other charges payable in connection therewith, which Loan is evidenced by
the Note in the maximum principal amount of Thirty-five Million Dollars
($35,000,000); and (ii) any other indebtedness or liability of Pledgor or the
Borrowers to Lender whether direct or indirect, joint, several or joint and
several, absolute or contingent, due or to become due or now existing or
hereafter created or arising, including without limitation all future advances
or loans which may be made by Lender (all of the foregoing being herein
collectively referred to as the "Obligations"), Pledgor hereby grants and
conveys to Lender a security interest in the property described in Schedule A
hereto, together with all proceeds thereof (the "Collateral").
3. LIEN PRIORITY. As a result of the foregoing grant by Pledgor to
Lender of a security interest in the Collateral, Lender shall have a first lien
security interest in the Collateral, free and clear of any and all liens,
security interests, claims, charges and other encumbrances whatsoever.
4. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and
warrants as follows:
(a) That Pledgor is the owner and holder of one hundred percent (100%)
of the issued and outstanding common stock of each of the following companies
(collectively, the "Companies"), and there is no other class or type of stock in
the Companies issued and outstanding:
% of Stock
Company # of Shares of Company Certif. #
------- ------------ ----------- ---------
Management Support Technology Corp., a
Delaware corporation 10 100% 3
Computer Hardware Maintenance Company, Inc.,
a Pennsylvania corporation 10 100% 11
Federal Computer Corporation, a Virginia
corporation 10 100% 32
Corporate Access, Inc., a Massachusetts corporation 10.00 100% 9.00
Interactive Software Systems Incorporated, a Colorado corporation 10 100% CS 001
U.S. Communications, Inc., a Maryland corporation 10 100% 2
InVenture Group, Inc., a Pennsylvania corporation 10.00 100% 3.00
MIS Technologies, Inc., an Oklahoma corporation 10.00 100% 3.00
(b) That the Collateral is legally and equitably owned by Pledgor free
and clear of any and all liens, security interests, claims, charges and other
encumbrances whatsoever;
(c) That all of the Collateral has been duly authorized and validly
issued and is fully paid and nonassessable;
(d) That this Security Agreement constitutes a valid security interest
in the Collateral, securing the Obligations for the benefit of Lender, that all
of the Collateral has been delivered to Lender, and that Lender's possession of
the Collateral establishes a perfected first lien security interest in the
Collateral; and
(e) That Pledgor has the right to vote, pledge and grant a security
interest in the Collateral as provided by this Security Agreement.
5. COVENANTS. So long as any of the Obligations remain unpaid or the Lender
has any obligation to make advances under the Loan, Pledgor covenants and agrees
that it will:
2
(a) Pay and perform, and cause the other Borrowers to pay and perform,
all of the Obligations according to their terms;
(b) Defend all right and title to the Collateral against any and all
claims and demands whatsoever;
(c) Upon the request of Lender do the following: furnish further
assurance of title, execute any written agreement and do all other acts
necessary to effectuate the intent, purposes and provisions of this Security
Agreement, execute any instrument or statement required by law or otherwise in
order to perfect, continue or terminate the security interest of Lender in the
Collateral and pay all filing or other costs incurred in connection therewith;
(d) Unless otherwise required by Lender, retain legal and beneficial
ownership of the Collateral and not sell, exchange, assign, loan, deliver,
mortgage or otherwise encumber or dispose of the Collateral or any portion
thereof without the Lender's prior written consent;
(e) Keep the Collateral free and clear of all liens, charges,
encumbrances, taxes and assessments (other than the lien in favor of Lender),
and pay when due all taxes, payments and/or assessments in any way relating to
the Collateral or any part thereof;
(f) Keep and maintain satisfactory, complete and current records of the
Collateral. Upon request of Lender, Pledgor will provide Lender with written
reports of the status of the Collateral, or any part thereof, as of the period
specified, in form and substance reasonably satisfactory to Lender. The Pledgor
shall not change the location of its books and records relating to any of the
Collateral without giving Lender at least thirty (30) days' prior written notice
and
(g) Comply in all material respects with all federal, state and local
laws and regulations applicable to the Collateral, whether now in effect or
hereafter enacted, and upon request of Lender, furnish to Lender evidence of
such compliance therewith.
6. EVENTS OF DEFAULT. For purposes of this Security Agreement, each of the
following shall constitute an "Event of Default" hereunder:
(a) An Event of Default under the Loan Agreement;
(b) If any representation or warranty made or given by Pledgor in
connection with this Security Agreement shall prove to have been incorrect or
misleading or breached in any respect on or as of the date when made;
3
(c) If Pledgor fails to observe or perform any of the covenants and
agreements set forth in this Security Agreement, and such failure continues
unremedied for a period of five (5) days; or
(d) If all or any part of the Collateral is subject to levy of
execution or other judicial process.
7. REMEDIES UPON DEFAULT. Following the occurrence of an Event of Default
and the lapse of any applicable notice and/or grace period set forth in the Loan
Agreement, the Lender may, at its option, exercise one or more of the following
rights and remedies:
(a) Lender shall have all of the rights, remedies and privileges with
respect to repossession, retention and sale of the Collateral and disposition of
the proceeds thereof as are accorded to Lender by the applicable sections of the
Uniform Commercial Code in effect in the Commonwealth of Virginia (as the same
may be amended from time to time, the "UCC").
(b) Without limiting the scope of the foregoing clause (a), it is
expressly understood and agreed that:
(i) Lender shall have the right to sell, resell, assign, and deliver
all or any of the Collateral at any exchange or broker's board or at public or
private sale. Lender agrees that unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give Pledgor at least five (5) days' prior
written notice by registered or certified mail (at the address of Pledgor set
forth above) of the time an place of any public sale of the Collateral or the
time after which any private sale or any other intended disposition of the
Collateral is to be made. Any such notice shall be deemed to meet any
requirement hereunder or under any applicable law (including the UCC) that
reasonable notification be given of the time and place of such sale or other
disposition. Such notice may be given without any demand for performance or
other demand, all such demands being hereby expressly waived by Pledgor. All
sales o the Collateral shall be at such price or prices as Lender shall deem
best and either for cash, on credit or for future delivery (without assuming any
responsibility for credit risk);
(ii) At any such sale or sales, Lender may purchase any or all of
the Collateral upon such terms as such purchaser may deem best. The Collateral
so purchased shall be held by the purchaser absolutely free from any and all
claims or rights of Pledgor of every kind and nature whatsoever, including,
without limitation, any equity of redemption or similar rights, all such equity
of redemption and similar rights being hereby expressly waived and released by
Pledgor. The proceeds of the sale of any Collateral, together with any other
additional collateral security at the time received and held
4
hereunder, shall be received and applied: first, to the payment of all costs and
expenses of sale, including reasonable attorneys' fees; second, to the payment
of the Obligations, in such order of priority as Lender shall determine; and
third, any remaining proceeds shall be paid to Pledgor, unless otherwise
provided by law or directed by a court of competent jurisdiction;
(iii) Pledgor recognizes that Lender may be unable to effect a
public sale of all or any part of the Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), or other applicable laws, rules or regulations, but may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will, among other things, be obliged to agree to acquire the
Collateral or any part thereof for their own account, for investment and not
with a view to the distribution or resale thereof. Pledgor agrees that private
sales so made may be at prices and on terms less favorable than if the
Collateral were sold at public sales, and that Lender has no obligation to delay
the sale of any Collateral for the period of time necessary to permit the
Collateral to be registered for public sale under the Securities Act or any
other applicable law, rule or regulation. Pledgor agrees that private sales made
under the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner; and
(iv) Pledgor and each of the other Borrowers shall remain liable for
any deficiency resulting from any sale of the Collateral, or any part thereof,
and shall pay any such deficiency forthwith on demand.
(c) Without limiting any of the rights granted to Lender elsewhere in
this Security Agreement, Lender shall be entitled to (i) exercise the voting
power appurtenant to the Collateral, (ii) receive and retain as collateral
security for the Obligations any and all dividends or other distributions at any
time or from time to time declared or made upon any of the Collateral (all cash
dividends or other distributions payable in respect of the Collateral which are
receive by Pledgor after the occurrence of an Event of Default (subject to any
applicable notice and/or grace period set forth in the Loan Agreement) shall be
paid directly to Lender and, if received by Pledgor, shall be received in trust
for the benefit of Lender, shall be segregated from other funds of Pledgor and
shall be immediately paid over to Lender as Collateral in the same form as
received, with any necessary endorsements), and (iii) exercise any and all
rights of payment, conversion, exchange, subscription or other rights,
privileges or options appurtenant to the Collateral, as if Lender were the
absolute owner thereof, including without limitation the right to exchange, at
its reasonable discretion, any and all of the Collateral upon the merger,
consolidation, reorganization, recapitalization or other readjustment of
Pledgor. Upon the exercise of any such right, privilege or option pertaining to
the Collateral, and in connection therewith, Lender may deliver and deposit any
or all of the Collateral with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as Lender
may determine, all without liability, except to account for property actually
5
received, but Lender shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing.
(d) Subject to the provisions of the UCC, Lender may cause all or
any of the Collateral to be transferred into its name or into the name of its
nominee or nominees; provided, however, that until such time as there occurs
an Event of Default (subject to any applicable notice and/or grace period set
forth in the Loan Agreement), Pledgor shall be entitled to exercise as it
shall think fit, but in a manner not inconsistent with the terms of this
Security Agreement, the Loan Agreement, any other Loan Document or the
Obligations, the voting power appurtenant to the Collateral, and to receive
cash dividends paid to Pledgor (subject to any applicable prohibitions in the
Loan Documents).
8. OTHER RIGHTS OF LENDER.
(a) Notwithstanding anything contained herein to the contrary, if upon
any dissolution, winding up, liquidation or reorganization of Pledgor, whether
in bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or any other marshaling of the assets and liabilities
of Pledgor, any sum shall be paid or any property shall be distributed upon or
with respect to any of the Collateral, such sum shall be paid or property
distributed over to Lender, to be held by Lender or applied against the
Obligations, as Lender determines in its sole discretion. In case any stock
dividend shall be declared o any of the Collateral, or any share of stock or
fraction thereof shall be issued pursuant to any stock split involving any of
the Collateral, or any distribution of capital shall be made on any of the
Collateral, or any property shall be distributed upon or with respect to the
Collateral pursuant to recapitalization or reclassification of the capital of
Pledgor, or otherwise, the shares or other property so distributed shall
constitute Collateral and be delivered to Lender to be held as collateral
securit for the Obligations.
(b) Upon the occurrence of an Event of Default (subject to any
applicable notice and/or grace period set forth in the Loan Agreement), Lender
shall have the right, for and in the name, place and stead of Pledgor, to
execute endorsements, assignments and other instruments of conveyance or
transfer with respect to all or any of the Collateral (including, without
limitation, the right to fill in the name of the Lender or the name of any
foreclosure purchaser of the Collateral as well as the name of the transfer
attorney, and the date and to fill in any other blanks thereon on the blank
stock power(s) executed in connection with this Agreement).
9. SECURITY INTEREST ABSOLUTE. Except as otherwise provided herein, all
rights of Lender and security interests hereunder, and all obligations of
Pledgor hereunder, shall be absolute and unconditional irrespective of, and
unaffected by:
6
(a) Any lack of validity or enforceability of the Loan Agreement or any
other Loan Document;
(b) Any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Loan Agreement and/or any other Loan
Document;
(c) Any exchange, surrender, release or non-perfection of any
Collateral for all or any of the Obligations; or
(d) Any other circumstance which might otherwise constitute a defense
available to, or a discharge of, Pledgor in respect of the Obligations or this
Security Agreement.
10. GENERAL PROVISIONS.
(a) Except as otherwise provided herein, Lender may exercise its
rights with repect to the Collateral held hereunder without first or
simultaneously resorting to any other collateral or sources of repayment or
reimbursement, and without being obligated to consider or take notice of any
right of contribution, reimbursement, subrogation or marshaling of assets
which Pledgor may have or claim to have against any person or persons or with
respect to any other collateral. Lender may release any and all other
collateral it may now or hereafter have to secure repayment of the
Obligations, all without affecting or impairing its right with respect to the
Collateral. No delay or omission on the part of Lender in exercising any
right hereunder shall operate as a waiver of such right or any other right
under this Security Agreement. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right and/or remedy on any future
occasion.
(b) If Pledgor shall default in the performance of any provision of
this Security Agreement on Pledgor's part to be performed, Lender may perform
the same for Pledgor's account and any monies expended in so doing shall be
chargeable with interest and added to the indebtedness secured hereby.
(c) If in connection with the exercise by Lender of any power,
right, provision or remedy granted pursuant to this Security Agreement, or in
order to effectuate the purposes and intent of this Security Agreement, any
consent, approval, registration, filing, qualification or authorization of
any governmental authority is required, Pledgor will execute and deliver all
applications, certificates, instruments and other documents and papers that
Lender may be required to obtain for such governmental consent, approval,
registration, filing, qualification or authorization.
7
(d) The rights and powers granted to Lender hereunder are being
granted in order to preserve and protect Lender's security interest in and to
the Collateral granted hereby and shall not be interpreted to, and shall not,
impose any duties on Lender in connection therewith.
(e) Lender shall have no duty as to the collection or protection of
the Collateral held hereunder or of any income thereon, or as to the
preservation of any rights pertaining thereto, beyond the safe custody of the
Collateral. Lender shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral if it complies with Pledgor's
requests in such regard made to Lender in writing, but failure to comply with
any such request shall no in and of itself be deemed a failure to exercise
reasonable care in such custody and preservation of the Collateral.
(f) Upon enforcement of Lender's rights hereunder, Lender's
reasonable attorneys' fees and the legal and other expenses of pursuing,
searching for, receiving, taking, keeping, storing, advertising and selling
the Collateral shall be chargeable to Pledgor.
(g) Lender may assign its interests in this Security Agreement and,
if assigned, the assignee shall be entitled (to the same extent as Lender) to
performance of all of Pledgor's obligations and agreements hereunder, and the
assignee shall also be entitled (to the same extent as Lender) to all of the
rights and remedies of Lender hereunder. Pledgor will not assert a claim or
defense against the assignee which Pledgor may have against Lender.
(h) WAIVER OF JURY TRIAL. Each party hereby (a) covenants and agrees
not to elect a trial by juryof any issue triable by a jury, and (b) waives
any right to trial by jury fully to the extent that any such right shall now
or hereafter exist. This waiver of right to trial by jury is separately given
by each party, knowingly and voluntarily, and this waiver is intended to
encompass individually each instance and each issue as to which the right to
a jury trial would otherwise accrue. Each party is hereby authorized and
requested to submit this Security Agreement to any court having jurisdiction
over the subject matter and the parties hereto, so as to serve as conclusive
evidence of each of the parties' herein contained waiver of the right to jury
trial. Further, each party hereby certifies that no representative or agent
of the other parties (including their legal counsel) has represented,
expressly or otherwise, to such party that the other parties will not seek to
enforce this provision waiving the right to a trial by jury.
(i) VENUE; SERVICE OF PROCESS. Any judicial proceeding brought
against Pledgor with respect to this Security Agreement or any other Loan
Document may be brought in any court of competent jurisdiction in the
Commonwealth of Virginia, and by execution and delivery of this Security
Agreement, Pledgor accepts for
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itself and in connection with its properties, generally and unconditionally,
the non-exclusive jurisdiction of the aforesaid court, and irrevocably agrees
t be bound by any judgment rendered by such court in connection with this
Agreement. A copy of any process served shall be mailed by registered or
certified mail to Pledgor at the address to which notices are to be addressed
in accordance with this Security Agreement, such service being hereby
acknowledged by Pledgor to be effective and binding on it in every respect.
Pledgor hereby agrees that service upon it by mail shall constitute
sufficient notice. Nothing herein shall affect the right to serve process in
any other manner permitted by law or shall limit the right of the Lender to
bring proceedings against Pledgor in the courts of any other jurisdiction.
(j) The terms, warranties and agreements contained in this Security
Agreement shall bind and inure to the benefit of the parties hereto, and
their respective successors and assigns.
(k) This Security Agreement may not be changed orally, but may be
changed only by an agreement in writing signed by the parties against whom
enforcement of any waiver, change, modification or discharge is sought.
(l) Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this Security
Agreement or the intent of any provision hereof. The gender and number used
in this Security Agreement are used as reference terms only and shall apply
with the same effect whether the parties are of the masculine or feminine
gender, corporate or other form, and the singular shall likewise include the
plural. If there shall be more than one Pledgor, their liability shall be
joint and several.
(m) Any provision in this Security Agreement declared invalid under any
law shall not invalidate any other provision of this Security Agreement. This
Security Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia.
(n) This Security Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken
together shall be deemed one and the same instrument.
(o) Notices to either party shall be in writing and shall be delivered
personally or by mail addressed to the party at the address and in the manner
set forth in the Loan Agreement or as otherwise designated in writing.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have respectively signed and
sealed these presents on the day and year first above written.
PLEDGOR:
WITNESS/ATTEST: CONDOR TECHNOLOGY SOLUTIONS,
INC., a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------- -------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Witness Title: Secretary and Chief Financial Officer
LENDER:
FIRST UNION COMMERCIAL
CORPORATION, a North Carolina
corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
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SCHEDULE A TO STOCK SECURITY AGREEMENT
All of the right, title and interest of Condor Technology
Solutions, Inc. ("Pledgor") in and to all of the capital stock of the companies
listed below (collectively, the "Companies"), whether common and/or preferred,
and whether now or hereafter issued or outstanding, and whether now or hereafter
acquired by Pledgor, together with all voting or other rights appurtenant
thereto, including, but not limited to, the right to receive all dividends
and/or other distributions payable to Pledgor by virtue of Pledgor's ownership
of such capital stock, and all proceeds thereof, additions thereto and
substitutions thereof.
For the purposes hereof, the Companies shall mean the following:
(i) Management Support Technology Corp., a Delaware
corporation;
(ii) Computer Hardware Maintenance Company, Inc., a
Pennsylvania corporation;
(iii) Federal Computer Corporation, a Virginia corporation;
(iv) Corporate Access, Inc., a Massachusetts corporation;
(v) Interactive Software Systems Incorporated, a Colorado
corporation;
(vi) U.S. Communications, Inc., a Maryland corporation;
(vii) InVenture Group, Inc., a Pennsylvania corporation;
(viii) MIS Technologies, Inc., an Oklahoma corporation; and
(ix) Any future wholly-owned subsidiary of Pledgor.
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