EXHIBIT 10.29
FOURTH AMENDMENT TO MODIFICATION AGREEMENT
THIS FOURTH AMENDMENT TO MODIFICATION AGREEMENT (this "Amendment") is
made as of the 18th day of January, 2002 by and among STEELCLOUD, INC. (formerly
known as Xxxx Computer Corporation and changed to SteelCloud, Inc. pursuant to a
certificate of amendment issued by the Virginia State Corporation Commission
effective as of July 30, 2001), a Virginia corporation, XXXX COMPUTER
CORPORATION, a Delaware corporation, INTERNATIONAL DATA PRODUCTS, CORP., STMS,
INC., PUERTO RICO INDUSTRIAL MANUFACTURING OPERATIONS ACQUISITION, CORP. and
XXXX COMPUTER OPERATING COMPANY (collectively, the "Borrower") and FIRST UNION
NATIONAL BANK, holder of the Note (as defined below) pursuant to an assignment
from First Union Commercial Corporation to First Union National Bank (the
"Lender").
Recitals
R-1. The Borrower and the Lender entered into a Modification Agreement
dated February 11, 2000, as modified by an Amendment to Modification Agreement
dated on or about November, 2000, a Second Amendment to Modification Agreement
dated July 26, 2001 and a Third Amendment to Modification Agreement dated
November 28, 2001 (collectively, the "Modification Agreement"), with respect to
the Line of Credit.
R-2. Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Modification Agreement. The
Modification Agreement, the Modification of Revolving Note, the Second
Modification of Revolving Note, the Third Modification of Revolving Note and any
other documents executed in connection with the Modification Agreement shall be
deemed to be included within the definition of "Loan Documents" as defined in
the Modification Agreement.
R-3. As of January 11, 2002, there is due under the Line of Credit
principal of Four Million Six Hundred Twenty-two Thousand Seven Hundred
Sixty-two and 48/100 Dollars ($4,622,762.48) and interest of Five Thousand Eight
Hundred Twenty and 38/100 Dollars ($5,820.38), plus attorneys' fees and other
costs which are payable under the Loan Documents.
R-4. Pursuant to the Modification Agreement, the Line of Credit expires
on February 28, 2002 (the "Maturity Date"), at which time all principal,
interest and other sums then outstanding shall be immediately due and payable.
R-5. The Borrower has requested that the Lender extend the Maturity
Date until March 31, 2003 and the Lender is agreeable to doing so subject to the
terms and conditions set forth in the Modification Agreement, as amended by this
Amendment.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements set forth herein, the sum of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties, the parties hereto covenant and agree as follows.
1. Recitals. The Recitals set forth above are a material part of this
Amendment. The Borrower acknowledges and affirms the accuracy of the Recitals
set forth above.
2. Increase in Line of Credit. Upon execution of this Amendment, the
availability under the Line of Credit shall be increased from a maximum of
$5,000,000 to a maximum of $7,500,000, with Advances to be made in strict
compliance with the Line of Credit Agreement, as modified by the Modification
Agreement and this Amendment.
3. Monthly Interest Payments and Fee; Maturity.
(a) Interest shall be paid on the last day of each month in
arrears for such month.
(b) In addition to interest, a monthly fee of One Thousand
Dollars ($1,000) shall be paid on the last day of each month in arrears for such
month.
(c) Subject to the terms and conditions set forth in the
Modification Agreement and this Amendment, the Maturity Date is extended until
March 31, 2003, on which date, if not sooner paid, the entire principal balance
of the Note, all accrued and unpaid interest thereon and all other sums due
thereunder shall be due and payable in full.
4. Interest Rate. Commencing as of the date hereof and continuing until
repayment in full of all sums due under the Note, the unpaid principal
outstanding from time to time under the Note shall bear interest at a
fluctuating rate which is the lower of (a) the Lender's Prime Rate (as
hereinafter defined) per annum or (b) the LIBOR Market Index Rate (as
hereinafter defined) plus two and one-half percent (2 1/2%) per annum, as that
rate may change from day to day in accordance with changes in the LIBOR Market
Index Rate. Interest shall be calculated daily on the basis of the actual number
of days elapsed over a 360 day year.
"Prime Rate" means the rate of interest announced by the
Lender from time to time as its prime rate. The Borrower acknowledges that the
Lender's Prime Rate is not represented to be the lowest rate of interest offered
by the Lender. The rate of interest shall change automatically and immediately
as of the date of any change in the Prime Rate, without notice to the Borrower
or any endorser, surety or guarantor.
"LIBOR Market Index Rate" means, for any day, the rate for
1-month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m.,
London time, on such day, or if such day is not a London business day, then the
immediately preceding London business day (or if not so reported, then as
determined by the Lender from another recognized source or interbank quotation).
2
5. Default Interest. Upon the occurrence of an Event of Default (as
hereinafter defined), the principal amount outstanding shall bear interest
thereafter, until the Event of Default is cured, at a rate equal to the then
applicable interest rate plus two percent (2%).
6. Modification of Note. Contemporaneously with the execution of this
Agreement, the Borrower shall execute and deliver to the Lender a modification
of the Note reflecting the modified Maturity Date and the modified interest rate
as set forth in paragraphs 3(a) and (c), 4 and 5 above, respectively,
substantially in the form attached hereto as Exhibit A.
7. Automatic Debit of Checking Account for Interest and Fees. The
Borrower authorizes the Lender to continue to debit on the last day of each
month account number 2065204298279 and/or any successor account with the Lender
(routing number 000000000) (the "Account") for all interest and fees then due
under the Note, the other Loan Documents, the Modification Agreement and/or this
Amendment. The Borrower represents and warrants to the Lender that the Borrower
is the sole owner of this account and preauthorizes these periodic debits
pursuant to its right of said ownership.
8. Borrowing Base.
(a) Effective upon the execution of this Amendment, "Borrowing
Base" shall mean at the time in question the sum of: (a) ninety percent (90%) of
the Borrower's Eligible Government Accounts plus (b) eighty percent (80%) of the
Borrower's Eligible Commercial Accounts, provided that all Accounts of IDP and
PRIMO are Ineligible Accounts and shall not be included in the Borrowing Base.
No Advances shall be made against Inventory.
(b) "Ineligible Accounts" shall mean "Ineligible Accounts" as
defined in the Modification Agreement and in addition shall include Accounts
which are owing by any account debtor whose accounts, in face amount, with the
Borrower exceed twenty-five percent (25%) of the Borrower's Eligible Accounts,
but only to the extent of such excess, provided that Accounts which are owing by
any account debtor that maintains an investment grade rating of at least BBB-
from Standard & Poor's and Baa3 from Xxxxx'x Investor Services shall be capped
at thirty-five percent (35%) and Accounts owing by shall be capped at fifty
percent (50%) and provided further that the Lender shall have the right to set a
cap lower than the applicable cap for or any other account debtor in the event
that in the Lender's opinion there has been a material, adverse change in the
financial condition, results of operations, business or properties of or any
other account debtor. The Lender agrees to consider, at the Borrower's request,
a cap higher than twenty-five percent (25%) on a case by case basis, provided
that the Lender shall have no obligation whatsoever to agree to such higher cap
and that the Lender's determination shall be conclusive.
(c) In the absence of manifest error, the Lender's
determination of the amount of the Borrowing Base shall be conclusive.
3
9. Federal Tax Refunds. In the Second Amendment to Modification
Agreement dated July 26, 2001, the Borrower represented to the Lender that the
Borrower would receive a federal tax refund (collectively, the "Federal Tax
Refund") by September 16, 2001. In the Third Amendment to Modification Agreement
dated November 28, 2001, the Borrower represented to the Lender that the
Borrower would receive the Federal Tax Refund within sixty (60) days thereafter.
As of the date of this Amendment, the Borrower has not received the Federal Tax
Refund. The Borrower represents to the Lender that the Federal Tax Refund will
be in the aggregate amount of $1,100,000 and that the Borrower will receive the
Federal Tax Refund within the next ninety (90) days. Within two (2) Business
Days after receipt of such Federal Tax Refund, the Borrower shall deliver such
Federal Tax Refund to the Lender (in the form received together with any
necessary endorsements to the Lender) to be applied against the amounts
outstanding under the Line of Credit in such order as the Lender determines in
its sole discretion, provided that the Lender agrees to apply part of the
proceeds of the Federal Tax Refund against the Overadvance in the event that the
Overadvance has not been sooner repaid in accordance with paragraph 10 below. In
the event that the Federal Tax Refund delivered by the Borrower to the Lender
exceeds the amounts then outstanding under the Line of Credit, the Lender agrees
to deposit such excess funds in the Borrower's account with the Lender within
two (2) business days after the Lender's receipt of immediately available funds
from the Federal Tax Refund.
10. Additional Availability Over Borrowing Base. From the date of this
Amendment until the earlier of (a) the date the Federal Tax Refund is received
by the Borrower or (b) March 18, 2002, the Lender agrees, at the request of the
Borrower and pursuant to the terms and conditions of the Line of Credit
Agreement, to make an Advance to the Borrower in the maximum principal amount of
Five Hundred Thousand Dollars ($500,000) over the Borrowing Base (the
"Overadvance"). The Overadvance shall bear interest at the rate applicable to
other Advances and the interest accrued thereon shall be due and payable at the
same time as the interest on other Advances. The Overadvance shall be secured by
the Collateral (as defined in the Line of Credit Agreement) and shall be repaid
in full on the earlier of (y) two (2) Business Days after the Borrower's receipt
of the Federal Tax Refund (in accordance with paragraph 8 above) from the
proceeds of same or (z) March 18, 2002, provided that the Borrower shall have
until March 19, 2002 to repay the Overadvance in the event that the Overadvance
is made on March 18, 2002.
11. Termination for Convenience Monies. On April 11, 2001, the Borrower
filed a claim against the U.S. Air Force/U.S. Government (collectively, the
"Government") relating to the termination for convenience clause in contract
number N00140-98-C-H189, which was terminated by the Government on or about
August 31, 1999 (the "Claim"). In the Second Amendment to Modification Agreement
dated July 26, 2001, the Borrower represented to the Lender that the Claim was
in the amount of approximately , that the Borrower was currently negotiating
with the Government regarding the Claim and that the Borrower believed that the
Claim would result in a settlement by October 31, 2001. In the Third Amendment
to Modification Agreement dated November 28, 2001, the Borrower represented to
the Lender that the Borrower and the Government were continuing to negotiate and
that the Borrower believed that the Claim would result in a settlement within
sixty (60) days thereafter. As of the date of this Amendment, the Claim has not
resulted in a settlement and neither the Borrower nor any other party has
received any monies or any other consideration as a result of the Claim. The
Borrower again represents to the Lender that the Claim is in the amount of
approximately and further represents that the Borrower and the Government are
continuing to negotiate and that the Borrower believes that the Claim will
result in a settlement within the next sixty (60) days. Within two (2) Business
Days after receipt of all monies and any other consideration received by or on
behalf of the Borrower as a result of the Claim (the "Termination for
Convenience Monies") (or if such Termination for Convenience Monies are paid
over time, within two (2) Business Days after receipt of each such installment),
the Borrower shall deliver such Termination for Convenience Monies to the Lender
(in the form received together with any necessary endorsements to the Lender) to
be applied against the amounts outstanding under the Line of Credit in such
order as the Lender determines in its sole discretion. In the event that the
Termination for Convenience Monies delivered by the Borrower to the Lender
exceeds the amounts then outstanding under the Line of Credit, the Lender agrees
to deposit such excess funds in the Borrower's account with the Lender within
two (2) business days after the Lender's receipt of immediately available funds
from the Termination for Convenience Monies.
4
12. Resolutions of the Borrower/Good Standing. Contemporaneously with
the execution of this Amendment, the Borrower shall deliver to the Lender
resolutions prepared by the Borrower evidencing their consent to the execution
of this Amendment and the documents executed in connection with this Amendment.
Contemporaneously with the execution of this Amendment, the Borrower shall also
obtain and deliver to the Lender current good standing certificates for all of
the jurisdictions in which the Borrower is incorporated or doing business.
13. Reaffirmation of Representations and Warranties. In order to induce
the Lender to enter into this Amendment, the Borrower represents and warrants to
the Lender that all representations and warranties set forth in the Modification
Agreement are true and correct as of the date of this Amendment.
14. Events of Default. In addition to the Events of Default set forth
in the Modification Agreement, the occurrence of one or more of any of the
following events shall also constitute Events of Default under the Modification
Agreement:
(a) Failure to comply with or perform as and when required, or
to observe, any of the terms, conditions or covenants of this Amendment within
five (5) Business Days after written notice from the Lender.
(b) If any representation or warranty made herein or in any
report, certificate, financial statement or other instrument furnished in
connection with this Amendment, shall prove to have been materially false or
misleading on the date as of which it was made.
(c) Failure to deliver to the Lender the Federal Tax Refund
and/or the Termination for Convenience Monies in accordance with paragraphs 9
and 11, respectively, above.
(d) Failure to repay the Overadvance in accordance with
paragraph 10 above.
5
(e) If an Event of Default occurs under any note or other
document executed and delivered in connection with any other indebtedness of the
Borrower to the Lender, whether now existing or hereafter incurred.
15. Release. Each Borrower, for itself and its directors, officers,
employees, agents, members, predecessors, successors and assigns, hereby
releases and forever waives and relinquishes all claims, demands, obligations,
liabilities and causes of action of whatsoever kind or nature, whether known or
unknown, which it or he has, may have or might have or assert now or in the
future as a result of events occurring prior to or contemporaneously with the
execution of this Amendment against the Lender (which term for the purpose of
this paragraph shall mean both First Union National Bank and First Union
Commercial Corporation) and/or any affiliates or entities related to such
entity, and any of the directors, officers, employees, agents, successors and
assigns, as the case may be, of all such entities, in connection with, directly
or indirectly, this Amendment, the Loan Documents, any document executed in
connection with this Amendment or any transactions contemplated hereby or
thereby, any prior loan made or credit extended to the Borrower by the Lender or
otherwise to any relationship between any Borrower and the Lender.
Notwithstanding the foregoing, the Borrower does not release First Union
National Bank from any claims, if any, the Borrower may have against First Union
National Bank in connection with the handling of check nos. 009786, 009787 and
009788 made by the Borrower to various payees in the aggregate amount of
approximately $58,000, provided that the Borrower shall not have the right to
claim any consequential or incidental damages.
16. Further Assurances and Corrective Instruments. The Borrower will
execute, acknowledge and deliver or cause to be executed, acknowledged and
delivered, from time to time, such supplements hereto and such further
instruments and documents, as the Lender may require in its reasonable
discretion to protect, perfect and enforce the Lender's interest in any
collateral security for the Line of Credit or to facilitate the carrying out of
the intentions of the parties to this Amendment.
17. Costs and Expenses. Upon execution of this Amendment, the Borrower
shall pay to the Lender in immediately available funds all actual costs and
expenses, including, without limitation, costs and expenses incurred in
connection with filing the amendments to the existing financing statements as
referenced above and attorneys' fees incurred by the Lender in connection with
the preparation of this Amendment and otherwise in connection with the Line of
Credit.
18. Fee. Upon execution of this Amendment, the Borrower shall pay to
the Lender a fee of $5,000 in immediately available funds. The foregoing fee is
in consideration of the Lender's entering into this Amendment and shall not be
deemed a payment under the Line of Credit.
19. Miscellaneous.
(a) Waivers by the Lender. Neither any failure nor any delay
on the part of the Lender in exercising any right, power or remedy under this
Amendment or the Loan Documents, or under applicable law shall operate as a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other or further exercises thereof or the exercise of any other right, power or
remedy. No waiver or forbearance by the Lender as to any Borrower shall waive or
release any rights or claims which the Lender may now have or hereafter have
against any other person, firm or individual. The Lender reserves all rights
except to the extent expressly provided herein.
6
(b) Modifications. No modification or waiver of any provision
of this Amendment or the Loan Documents, and no consent by the Lender to any
departure by the Borrower therefrom shall in any event be effective unless the
modification, waiver or consent shall be in writing. Any such waiver or consent
shall be effective only in the specific instance or for the purpose for which
given. No notice to, or demand upon the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
(c) No Novation. Nothing set forth in this Amendment shall
cause a novation nor shall it extinguish, terminate, or impair the Borrower's
obligations under the Loan Documents, as amended by this Amendment, or affect
the priority of the lien of the Lender established by the Loan Documents.
(d) Applicable Law. The performance, construction and
enforcement of this Amendment and the Loan Documents shall be governed by the
laws of the Commonwealth of Virginia.
(e) Survival; Successors and Assigns. All covenants,
agreements, representations and warranties made herein and in the Loan Documents
shall continue in full force and effect. Whenever in this Amendment any of the
parties is referred to, such reference shall be deemed to include the successors
and assigns of such party. All covenants, agreements, representations and
warranties by or on behalf of the Borrower which are contained in this Amendment
and the Loan Documents shall inure to the benefit of the Lender and its
successors and assigns.
(f) Severability. If any term, provision or condition, or any
part thereof, of this Amendment or the Loan Documents shall for any reason be
found or held to be invalid or unenforceable by any court or governmental agency
of competent jurisdiction, such invalidity or enforceability shall not affect
the remainder of such term, provision or condition or any other term, provision
or condition, and this Amendment and the Loan Documents shall survive and be
construed as if such invalid or unenforceable term, provision or condition had
not been contained therein.
(g) Merger and Integration. This Amendment and the Loan
Documents contain the entire agreement of the parties hereto with respect to the
matters covered and the transactions contemplated hereby, and no other
agreement, statement or promise made by any party hereto, or any employee,
officer, agent or attorney of any party hereto, shall be valid or binding.
7
(h) Headings. The headings and subheadings contained in the
titling of this Amendment are intended to be used for convenience only and shall
not be used or deemed to limit or diminish any of the provisions hereof.
(i) Gender, Singular. All references made (a) in the neuter,
masculine or feminine gender shall be deemed to have been made in all such
genders, and (b) in the singular or plural number shall be deemed to have been
made, respectively, in the plural or singular number as well.
(j) Time of Essence. Time is of the essence of this Amendment.
20. No Modification of Loan Documents. Except as expressly modified by
this Amendment, the Loan Documents shall remain unchanged and shall be ratified
and confirmed to be and remain in full force and effect, without defense, offset
or counterclaim.
21. Counterparts. This Amendment may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same agreement. Copies of this Amendment
which have been executed and which are delivered by facsimile will be valid and
effective for all purposes.
22. Closing. Closing on this Agreement must occur on or before January
18, 2002.
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed, this Amendment under seal as of the date first written above.
WITNESS/ATTEST: BORROWERS:
STEELCLOUD, INC.,
a Virginia corporation
By: /s/ Xxxxxx Xxxxx
---------------------------- ---------------------------------------
Xxxxxx X. Xxxxx
President
XXXX COMPUTER CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx Xxxxx
---------------------------- ---------------------------------------
Xxxxxx X. Xxxxx
President
8
INTERNATIONAL DATA PRODUCTS,
CORP.
By: /s/ Xxxxxx Xxxxx
---------------------------- ---------------------------------------
Xxxxxx X. Xxxxx
President
STMS, INC.
By: /s/ Xxxxxx Xxxxx
---------------------------- ---------------------------------------
Xxxxxx X. Xxxxx
President
PUERTO RICO INDUSTRIAL
MANUFACTURING OPERATIONS
ACQUISITION, CORP.
By: /s/ Xxxxxx Xxxxx
---------------------------- ---------------------------------------
Xxxxxx X. Xxxxx
President
XXXX COMPUTER OPERATING
COMPANY
By: /s/ Xxxxxx Xxxxx
---------------------------- ---------------------------------------
Xxxxxx X. Xxxxx
President
LENDER:
FIRST UNION NATIONAL BANK
By: /s/ Xxxxxxx X. Xxxxx
---------------------------- ---------------------------------------
Xxxxxxx X. Xxxxx
Vice President
9
