BUSINESS LOAN AND SECURITY AGREEMENT
Exhibit
10.1
THIS
BUSINESS LOAN AND SECURITY AGREEMENT (this "Agreement") is made and entered into
effective for all purposes as of the 1st day of July, 2009, by and between (a)
CALEDONIA CAPITAL CORPORATION, a Delaware corporation ("Lender"), having an
address at 00000 Xxxx Xxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, XX 00000; and (b)
STEELCLOUD, INC., a Virginia corporation (the "Borrower"), having an address at
00000 Xxxx Xxxxxx Xxxx, Xxxxxxx, XX 00000.
WITNESSETH
WHEREAS,
Lender has agreed to make a loan (the "Loan") to the Borrower in the maximum
principal amount of TWO HUNDRED FIFTY THOUSAND AND 001100 DOLLARS ($250,000.00),
which Loan is evidenced by that certain Secured Promissory Note ("Note") of even
date herewith by Borrower payable to Lender's order, bearing interest from the
date thereof on the outstanding balances at the rate or rates set forth in the Note,
with interest and principal being payable in accordance with the terms contained
in the Note for the purpose of financing Borrower's
short-term working capital needs; and
WHEREAS,
as a further inducement to Lender's agreement to make the Loan to Borrower, the
Lender has required that Borrower execute this Agreement for the purposes of
further securing the due performance of the indebtedness evidenced by the
Note.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements of the
parties hereinafter set forth, it is hereby mutually covenanted and agreed as
follows:
1. Borrower's Representations and
Warranties. Borrower hereby represents and warrants to Lender as
follows:
1.1 Borrower
is a corporation, duly formed, validly existing and in good standing under the
laws of the Commonwealth of Virginia and is in good standing and qualified to do
business in all other jurisdictions in which the conduct of its business
requires it to be qualified.
1.2 All
actions on the part of Borrower which are necessary or appropriate to permit
consummation of the Loan, granting the security therefore contemplated hereby,
and all other transactions and undertakings relating to the Loan have been duly
authorized by all necessary and appropriate action.
1.3 The
consummation of the Loan, execution of this Agreement and all other agreements
or undertakings entered into by Borrower in connection with the Loan
(collectively the "Loan Documents") do not
contravene, violate or cause a default under, and will not contravene, violate
or cause a default under any other covenant, agreements, arrangement, venture,
undertaking, law, order, ordinance or regulation entered into by or binding upon
Borrower. No consent or approval of any governmental or public body or any other
party is required in connection with the consummation of the Loan, delivery of
the security for the Loan or execution and delivery of the documents evidencing
and securing the Loan.
1.4 Borrower
is not in default under any loan, covenant, agreement, undertaking, order,
regulation or the like which may affect the validity or enforceability of the
Loan, nor is Borrower the subject of any pending or, to Borrower's
knowledge, threatened litigation, the violation or adverse determination of
which would have a material adverse affect on the financial condition of the
Borrower.
1.5 This
Agreement, has been properly executed and constitutes valid and legally binding
obligations of Borrower, and is fully enforceable against Borrower in accordance
with its terms.
1.6 Except
as otherwise disclosed in the Borrower's filings with the Securities and
Exchange Commission (the "SEC"), there are no claims, losses, contingencies,
litigation or other proceedings pending or, to the best of Borrower's knowledge,
threatened against Borrower before any court or administrative agency which
would adversely affect the ability of Borrower to enter into and perfoiin under
this Agreement.
1.7 All
balance sheets, profit and loss statements, projections and other financial
information submitted by Borrower to the Lender (including without limitation
(i) all financial information concerning the Borrower as set forth in the Form
S-1 Registration Statement of the Borrower filed with the SEC on April 22, 2009,
and as thereafter amended, (ii) quarterly operating expense and cash flow
statements for the third and fourth quarters of 2009 which represent estimates
that the Borrower has prepared based on the available information as of the date
thereof, and (iii) financial projection for the period commencing as of the
fourth quarter of 2009 through the fourth quarter of 2011 which represent
estimates that the Borrower has prepared based on the available information as
of the date thereof) are true, correct and complete as of the date thereof and
present fairly the Borrower's financial condition as of the date thereof, and
since the date of such financial statements there has been no material adverse
change in the condition of Borrower, financial or otherwise.
1.8
Borrower is the sole legal and beneficial owner of
the Collateral (defined below) all of which is free and clear of all liens or
encumbrances of any form or nature.
1.9
Borrower has filed all U.S., state and local tax returns
required to be filed or has obtained extensions and has paid or made provision
for payment of all taxes due pursuant thereto.
1.10
Borrower is not a party to any agreement or other
instrument or subject to any other restriction which materially adversely
affects its business, properties, assets, operations or conditions, financial or
otherwise, except as disclosed to the Lender regarding the potential transition
of its Integration and Services businesses.
1.11
This Agreement does not contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading; and there is no other
fact not disclosed in writing to Lender which, to the knowledge of Borrower,
materially and adversely affects the business, properties or condition
(financial or otherwise) of Borrower.
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1.12 Borrower's
SEC filings adequately represent the state of the Borrower's business and
financial condition, which the Borrower has represented to the Lender to be
dire.
1.13 All
e-mail correspondence provided by Borrower to Lender regarding (i) a proposed
host licensing program between Borrower and Research in Motion, and (ii)
proposed agreement between the Borrower and Dell Computers regarding production
and distribution of the SteelWorks® Mobile appliance, is true, correct and
complete.
1.14 All
representations and warranties made by Borrower herein shall survive the making
and delivery of the Note contemplated hereby.
2. Security
Interest in Collateral. As collateral security for the Loan and
any and all other liabilities and obligations of the Borrower to Lender
hereunder and/or any documents evidencing or securing 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 (hereinafter
collectively referred to as the "Obligations"), Borrower does hereby pledge and
assign, unto Lender, and does hereby grant unto Lender a security interest
pursuant to the Uniform Commercial Code as enacted in the Commonwealth of
Virginia (the "UCC") in and to all of Borrower's right, title and interest in
and to the SteelWorks® Mobile integrated server appliance, whether now owned or
hereafter acquired by Borrower, including without limitation, corporate and
business books and records related thereto, inventions, designs, patents, patent
applications, trademarks, trade names, service marks, service names, trade
secrets, copyrights, registrations, licenses, franchises, customer lists,
computer programs, source codes, mask works, hardware, software, web servers,
website service contracts, internet connection contract or line lease, website
hosting service contract, website license agreements, back-up copies of website
content, scripts, codes, technology escrow agreements, website content
development agreements, all rights, of whatever form, in and to instructional
material, and connectors and all parts, accessories, additions, substitutions,
or options together with all property or equipment used in connection with any
of the above or which are used to operate or cause to operate any features,
special applications, format controls, options or software of any or all of the
above-mentioned items and all present and future proceeds and products thereof,
in any form whatsoever (collectively, the "Collateral").
3. Covenants Regarding
Collateral. Borrower warrants to and
covenants with Lender as follows:
(a)
Payment. To pay and
perform all of the Obligations secured by this Agreement according to their
respective terms.
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(b) Defend. To defend the
title to the Collateral against all persons and all claims and demands
whatsoever, which Collateral, except for the security interest granted hereby,
is lawfully owned by the Borrower. The Borrower agrees not to transfer legal or
equitable title to the Collateral to any other party without the Lender's prior
written consent. No financing statement covering any of the Collateral is on
file in any public office other than those which reflect the security interest
created by this Agreement or otherwise to Lender or to which the Lender has
specifically consented in writing.
(c) Assurance of Title.
On demand of the Lender, to do the following: furnish further assurance of
title, execute any written agreement or do any other acts necessary to
effectuate the purposes and provisions of this Agreement, execute any instrument
or statement required by law or otherwise in order to perfect, continue or
terminate the security interest of the Lender in the Collateral and pay all
costs of filing in connection therewith. Borrower hereby appoints Lender as its
irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue the security interest granted in this
Agreement. Lender may at any time, and without further authorization from
Borrower, file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Borrower hereby
authorizes Assignee to file from time to time such UCC-1 financing statements
and documents with the United States Patent and Trademark Office as may be
necessary or desirable in order to perfect Lender's security interest in the
Collateral. To the extent the Collateral consists of receivables due from the
United States of America or any agency thereof, Borrower agrees to execute and
deliver such other instruments as may be necessary or advisable to comply with
the Assignment of Claims Act of 1940 (as amended).
(d)
Possession. To retain
possession of the Collateral during the existence of this Agreement and not to
sell, exchange, assign, loan, deliver, lease, or otherwise dispose of same
except in the ordinary course of Borrower's business or mortgage any of the
Collateral without the written consent of the Lender.
(e) Location. To keep the
Collateral at the Borrower's principal place of business described above and at
the addresses set forth in the introductory paragraph of this Agreement, as the
same may be amended from time to time, and not remove same without the prior
written consent of the Lender.
(f) Liens. To keep the
Collateral free and clear of all liens, charges, encumbrances, taxes and
assessments.
(g) Taxes. To pay, when
due, all taxes, assessments and license fees relating to the
Collateral.
(h) Repairs. To keep the
Collateral, at the Borrower's own cost and expense, in good repair and condition
and not to misuse, abuse, waste or allow same to deteriorate except for normal
wear and tear and to make same available for inspection by the Lender at all
reasonable times.
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(i)
Insurance. To keep
the Collateral insured against loss by fire (including extended coverage), theft
and other hazards as the Lender may require and to obtain collision insurance if
applicable. Policies shall be obtained from responsible insurers acceptable to
the Lender. Certificates of insurance or policies naming the Lender as a loss
payee shall be deposited with the Lender which is authorized, but under no duty,
to obtain such insurance upon failure of the Borrower to do so, and any
insurance so obtained by the Lender may insure the Lender's interest in such
Collateral only or the Borrower's and the Lender's interests therein, at the
Lender's sole and exclusive option. The Borrower shall promptly reimburse the
Lender for the cost of obtaining such insurance upon demand. The Borrower shall
give immediate written notice to the Lender and to insurers of loss or damage to
the Collateral and shall promptly file proofs of loss with insurers. The
Borrower hereby appoints the Lender the attorney for the Borrower in obtaining,
adjusting, and cancelling any such insurance and endorsement of settlement
drafts, provided such terms are commercially reasonable, and hereby assigns to
the Lender all sums which may become payable under such insurance, including
return premiums and dividends, as additional security for the
Obligations.
(j)
Change of Address. To
immediately notify the Lender in writing of any change in or discontinuance of
the Borrower's places of business.
(k) Enforceability of
Collateral. To the extent the Collateral consists of accounts, contract
rights, chattel paper, or general intangibles, the Collateral is enforceable in
accordance with its terms, is genuine, and complies with applicable laws
concerning form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the
Collateral.
(1) Inspections. Lender
and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect and audit the Collateral wherever
located.
(m) ERISA. Borrower
represents and warrants that except with respect to liabilities which may result
from recent reductions in staff, Borrower has not incurred (a) any material
accumulated funding deficiency within the meaning of the Employee Retirement
Income Security Act of 1974, as amended from time to time ("ERISA"), or (b) any
liability to the Pension Benefit Guaranty Corporation established under ERISA,
in connection with any "Plan" (hereinafter defined) established or maintained by
Borrower. As used herein, the term "Plan" shall mean any plan subject to Title
IV of ERISA and maintained for employees of Borrower, or of any member of a
controlled group of corporations as defined in Section 1563 of the Internal
Revenue Code of 1986, as amended, of which Borrower is a part.
(n) Environmental
Provisions. Borrower covenants and agrees that the conduct of Borrower's
business operations will not violate any present or future federal, state or
local laws, rules or ordinances pertaining to environmental protection (the
"Environmental Laws"). Borrower hereby indemnifies and agrees to hold harmless
Lender and its present and future directors, officers, employees and agents from
any and all clean-up costs, fines, charges, expenses, fees, including any
attorneys' fees, now or hereafter incurred by Lender in the event that Borrower
or its conduct is determined to be or to have been in violation of any of the
Environmental Laws. Borrower's obligations under this paragraph shall survive
the repayment of the Obligations and the termination, satisfaction or release of
this Agreement.
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4. Borrower's
Operations. Until the Obligations secured hereby have been paid in
full:
4.1 Preservation of
Collateral. Borrower shall not sell,
exchange, assign,
deliver, in or otherwise dispose of all or any portion of the Collateral except
in the ordinary course of Borrower's business or pledge, hypothecate or grant
additional security interests in all or any portion of the Collateral without
the prior written consent of Lender.
4.2 Borrower's
Existence and Rights. Borrower shall
maintain its corporate
existence and qualification in the Commonwealth of Virginia and in all other
states in which the conduct of its business requires it to be qualified and
shall not, without the prior written consent of the Lender in each instance,
amend or modify any provision of Borrower's Articles of Incorporation or
By-laws.
4.3 Adverse
Claims. Borrower shall
immediately advise Lender, in writing, of any claims made against Borrower by
any person or entity which, if adversely determined, would or might have a
material adverse affect on the business prospects or financial condition of the
Borrower.
4.4 Use of Loan Proceeds.
The proceeds of the Loan shall be used only for working capital
purposes.
4.5 Transfer of Assets.
Borrower shall not sell, exchange, assign, loan, deliver, lease, mortgage or
otherwise dispose of any of its assets.
4.6 Merger, Acquisition, Change
of Status. Borrower shall not merge or consolidate with any company or
enterprise, nor acquire or purchase any other company or enterprise, nor enter
into any partnership, joint venture or otherwise substantially change its legal
structure, nor create any subsidiaries, nor change the general character of its
business as it is presently conducted, nor dissolve or cease to be a going
concern, except as disclosed to the lender regarding the potential transition of
its Integration and Services businesses without the prior written consent of the
Lender which consent shall not be unreasonably withheld.
5. Financial Records -
Inspection. The Borrower will maintain or cause to be maintained full,
complete, accurate and adequate records and books of account in accordance with
generally accepted accounting principles consistently applied and will permit
the Lender and the duly authorized agents, attorneys and accountants of the
Lender to examine, copy and inspect its records and books of account at all
reasonable times during business hours upon reasonable notice. In addition, the
Borrower will furnish or cause to be furnished to the Lender with reasonable
promptness, such financial information, reports or statements as the Lender may
from time to time reasonably request.
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6. Warrants. As
a condition of Lender's agreeing to make the Loan, Borrower has agreed to grant
to Lender the right to purchase from time to time up to 625,000 shares of Common
Stock par value $0.001 per share, of the Company (the "Common Stock") at a
purchase price of $0.15 for each share of Common Stock so purchased, in
accordance with the terms of a certain Common Stock warrant in the form set
forth as Schedule A hereof (the "Warrant").
7. Events of
Default. Any one or more of the following events
shall be considered an Event of Default hereunder and under each of the Loan
Documents:
(a) If
Borrower shall fail to pay when due any principal, interest or other sum owing
on any of the Obligations when due; or
(b) If
Borrower shall fail to perform any other covenant or agreement herein, in the
Warrant or in any of the other Loan Documents and such default continues
uncorrected for a period of thirty (30) days after written notice of such
default from Lender to Borrower; or
(c) If
any warranty or representation of Borrower made to the Lender shall be untrue or
misleading in any material respect; or
(d) If
a trustee or receiver is appointed for Borrower or for all or a substantial part
of Borrower's assets; or if Borrower makes a general assignment for the benefit
of creditors; or if Borrower files for bankruptcy; or if an involuntary
bankruptcy petition is filed against Borrower and such petition is not dismissed
within forty-five (45) days after the filing of the same; or
(e) If
any property of Borrower pledged or hypothecated to Lender, or any deposit
account held by Lender, is levied upon or attached or further encumbered, or
garnished or the Collateral shall otherwise be impaired and same is not removed
within thirty (30) days after written notice thereof from Lender to Borrower, as
determined by Lender; or
(1) If
there occurs any material adverse change in the financial condition of the
Borrower or value of the Collateral, as determined by Lender; or
(g) If
a final judgment is entered against Borrower, and the same is not discharged,
appealed (provided such appeal stays such judgment) or satisfied within thirty
(30) calendar days; or
(h) If
Borrower is liquidated or dissolved.
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8. Remedies Upon Event of
Default.
At any
time after the occurrence of an Event of Default, Lender may, without any
further notice or demand, exercise the following rights and remedies, in
addition to the rights and remedies available to Lender under any of the other
Loan Documents, the rights and remedies of a secured party under the Uniform
Commercial Code and all other rights and remedies available to the Lender under
law, all such rights and remedies being cumulative and enforceable
alternatively, successively or concurrently; (a) declare any or all of the
Obligations not already due to be immediately due and payable; (b) enforce, by
any proceedings or otherwise, any of the Obligations; (c) take exclusive
possession of any or all of the Collateral from time to time and/or place a
custodian in exclusive possession of any or all of the Collateral from time to
time, and so far as Borrower may give authority therefore, enter upon any
premises on which any of the Collateral may be situated and remove the same
therefrom, Borrower hereby waiving any and all rights to prior notice and to
judicial hearing with respect to repossession of Collateral, and/or require
Borrower, at Borrower's expense, to assemble and deliver any or all of the
Collateral to such place or places as Lender may reasonably request; (d) enforce
any liens or security interests securing the Obligations, including collecting
or liquidating all or any part of the Collateral or other security or selling,
assigning, leasing, renting, licensing or otherwise disposition of all or any
part of the Collateral or other security or any interest therein, in one or more
parcels, at the same or different times, at public of private sale or
disposition, or otherwise; (e) demand, compromise, collect, xxx for and receive
any money or property at any time due, payable or receivable on account of any
or all accounts, promissory notes or other instruments, guaranties, letters of
credit, chattel paper, security agreements, contract rights, tax refunds or
general intangibles of Borrower constituting Collateral, or on account of any or
all other debts, liabilities or obligations payable to Borrower constituting
Collateral; (f) endorse Borrower's name on any promissory notes or other
instruments, checks, drafts, money orders or other items of payment constituting
Collateral, or collections or other proceeds of Collateral, that may come into
Lender's possession or control from time to time; and/or (g) terminate, or cease
extending credit under, any or all outstanding commitments or credit
accommodations of Lender to Borrower. Borrower agrees that commercial
reasonableness and good faith require Lender to give Borrower no more than ten
days prior written notice of the time and place of any public disposition or any
other intended disposition is to be made. All sales or other dispositions of
Collateral may be made for cash, upon credit or for future delivery. In no event
shall Borrower be credited with any part of the proceeds of liquidation, sale or
other disposition of any Collateral until final payment thereon has been
received by Lender in immediately available funds, and Lender shall have no
obligation to delay any liquidation, sale or other disposition because the same
may result in the imposition of any forfeiture, premium or penalty.
9. Lender's Right to
Perform. If Borrower shall default in the
performance when due of any other provisions of this Agreement, Lender may
perform the same for Borrower's account and any moneys expended in so doing
shall be chargeable with interest at the rate after default provided in the
Note, and shall be added to the indebtedness secured hereby.
10. Miscellaneous.
(a) No Oral Modification.
No provision hereof may be waived or modified orally, but all such waivers or
modifications shall be in writing and shall be mutually agreed to by both
parties hereto.
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(b)
Merger and
Integration. This Agreement and the other Loan Documents constitute the
entire agreement of the parties with respect to the matters covered and the
transactions contemplated hereby and thereby, and no other agreement, statement
or promise made by any party hereto, or by any employee, officer, agent or
attorney of any party hereto, which is not contained herein or therein shall be
valid or binding upon any party.
(c) Termination. This
Agreement shall continue in full force and effect for so long as Borrower shall
be indebted to Lender, and thereafter until Lender shall have actually received
written notice of the termination hereof from Borrower and until all liabilities
of Borrower to Lender incurred or contracted before receipt of such notice shall
have been fully and irrevocably paid, plus applicable interest, fees, costs and
attorneys' fees, if any.
(d)
Costs of
Collection. In addition to any other sums payable by Borrower with
reference to the Obligations, after the occurrence of any Event of Default,
Borrower agrees to pay Lender's costs of collection and reasonable attorneys'
fees incurred in the enforcement of any provision hereof or collection of any of
the Obligations, whether suit be brought or not.
(e) Survival and
Redating. All representations, warranties, covenants and agreements made
in the Loan Documents shall survive the making of the lom or loans contemplated
hereby, shall continue in full force and effect until this Agreement shall have
been terminated.
(f) Notices. Any notice
or other communication in connection with this Agreement shall be in writing and
shall be delivered personally or sent by mail, and shall be deemed to have been
given when personally delivered or deposited in the mail, postage prepaid,
provided that any such notice or communication shall be addressed to a party
hereto to the address set forth in the introductory paragraph of this Agreement
(or at such other address as such party shall specify
in writing to the other parties hereto).
(g)
Captions.
Caption headings in this Agreement are for convenience purposes only and are not
to be used to interpret or define the provisions of this Agreement.
(h) Time of
Essence.
Time is of the essence with respect to the provisions of
(i) Multiple
Debtors. The term "Borrower", if more than one, shall mean each and every
party comprising the Debtor, and each such party shall be jointly and severally
liable for the payment of the Obligations and the performance of the terms
hereof.
(j) Gender,
Number. Whenever used herein, the singular shall include the plural, the
plural shall include the singular, and the use of the masculine, feminine or
neuter gender shall include all genders.
(k) Governing
Law; Successors and Assigns. This Agreement shall be governed in all
respects by the laws of the Commonwealth of Virginia and shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and
assigns.
this
Agreement.
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(1) Fees and Expenses.
The Borrower agrees to pay reasonable costs and expenses (not to exceed
$10,000.00) incurred by the Lender in connection with the Note, this Agreement
and the other Loan Documents including, but not limited to, reasonable
attorneys' fees and expenses, recording costs, title search fees and the
like.
IN
WITNESS WHEREOF, this Agreement has been executed under seal as of the day and
year first above written.
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LENDER:
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CALEDONIA
CAPITAL CORPORATION
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By:
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/s/ Xxxxxx X. Xxxxxxx
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Xxxxxx
X. Xxxxxxx, President
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BORROWER:
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STEELCLOUD,
INC.
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By:
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/s/ Xxxxx X. Xxxxxx
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Xxxxx
X. Xxxxxx
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President
& CEO
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