LOAN MODIFICATION AND EXTENSION AGREEMENT
THIS LOAN
MODIFICATION AND EXTENSION AGREEMENT (“Agreement”) is made as of
the 31st day of
March, 2010, by and between STEELCLOUD, INC., a Virginia corporation
(hereinafter referred to as the “Maker”, the “Company” or the "Borrower") and
CALEDONIA CAPITAL CORPORATION, a Delaware corporation (hereinafter called the
"Lender").
WITNESSETH:
WHEREAS,
Borrower heretofore executed and delivered to the Lender its one certain Secured
Promissory Note dated July 1, 2009 in the original principal amount of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) (together with all
amendments, modifications, substitutions, extensions or renewals thereof
hereinafter referred to as "Note 1"); and
WHEREAS,
Note 1 is governed and secured by that certain Business Loan and Security
Agreement dated July 1, 2009 between Borrower and Lender (the "Loan Agreement"),
encumbering Borrower’s interest in certain business asset, as more particularly
described in the Loan Agreement (the "SteelWorks Mobile System");
and
WHEREAS,
Borrower heretofore executed and delivered to the Lender its one certain
Revolving Line of Credit Promissory Note dated November 3, 2009 in the original
principal amount of One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00)
(together with all amendments, modifications, substitutions, extensions or
renewals thereof hereinafter referred to as "Note 2" and, together with Note 1
sometimes collectively referred to herein as the “Notes”); and
WHEREAS,
Note 2 is governed and secured by that certain Line of Credit and Security
Agreement dated November 3, 2009 between Borrower and Lender (the "Line of
Credit Agreement"), encumbering all of Borrower’s business asset, as more
particularly described in the Loan Agreement (the "Business Assets");
and
WHEREAS,
the Maturity Date of Note 1 and Note 2 is currently March 31, 2010;
and
WHEREAS,
Borrower and Lender have agreed hereby upon the terms and conditions for the
extension of the Maturity date of Note 1 and Note 2, as hereinafter set
forth.
NOW,
THEREFORE, the parties hereto in consideration of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, do hereby agree as
follows:
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2. Extension of Maturity
Date. The Maturity Date of both Notes is hereby extended to
December 31, 2011 (the “Extended Maturity Date”), when the entire principal
balance remaining unpaid, together with interest accrued thereon, shall be due
and payable in full.
3. Interest. From and
after April 1, 2010, interest shall accrue on the unpaid principal
balance of both Notes at the rate of twenty percent (20.00%) per annum until
paid. Interest shall continue to be due and payable in monthly installments of
accrued interest on the 1st day of each month hereafter until the Extended
Maturity Date. Section 1.2 of Note 1 is hereby deleted in its entirety without
replacement. The following provision is hereby deleted from Note 2 without
replacement:
“or (b)
the date that the Borrower shall have raised a total of not less than $1,000,000
in New Equity Capital (defined below) from one or more investors
(“Capitalization Date”). For the purposes of this clause, New Equity Capital
shall be defined as capital invested in the equity of the Borrower accompanied
by the issuance by Borrower of shares of stock which were not trading in the
public markets prior to the date of this Note.”
4. Outstanding
Obligations. Maker hereby represent that as of the date
hereof the outstanding principal indebtedness evidenced by Note 1 is $250,000.00
and Note 2 is $150,000.00.
5. Extension Fee/Accrued Late
Fees. In consideration of Lender’s agreement to extend the
Maturity Date of the Notes and in satisfaction of certain accrued late fees due
pursuant to the Notes, Borrower shall, concurrent with its execution of this
Agreement shall issue and deliver to Lender certificate(s) evidencing 500,000
fully paid and non-assessable shares of the Borrower’s Common Stock, par value
$0.001 per share (“Common
Stock”).
6. Modification of Existing
Warrants. It is recognized and acknowledged that Borrower has
previously issued to Lender (i) that certain Common Stock Purchase Warrant dated
November 4, 2009 granting to Lender the right to purchase from time to time up
to 150,000 shares of Common Stock at a purchase price of $0.25 for each share of
Common Stock so purchased, and (ii) that certain Common Stock Purchase Warrant
dated November 23, 2009 granting to Lender the right to purchase from time to
time up to 225,000 shares of Common Stock at a purchase price of $0.25 for each
share of Common Stock so purchased (said Common Stock Purchase Warrants being
collectively referred to herein as the “Existing Warrants”). Borrower and Lender
do hereby agree that the Existing Warrants are both hereby amended to provide
that the Exercise Price (as defined in such Existing Warrants) shall hereafter
be $0.15 per share rather than $0.25 per share, subject to adjustment as
provided in the Existing Warrants.
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7. Confirmation of
Liens. The Maker hereby acknowledge and agree that (i) the
SteelWorks Mobile System is and shall remain in all respects subject to the
lien, charge and encumbrance of the Loan Agreement, (ii) the
Business Assets are and shall remain in all respects subject to the lien, charge
and encumbrance of the Line of Credit Agreement, (iii) and nothing herein
contained, and nothing done pursuant hereto, shall adversely affect or be
construed to adversely affect the lien, charge, or encumbrance of, or conveyance
effected by the Loan Agreement or the Line of Credit Agreement or the priority
thereof over other liens, charges, encumbrances or conveyances, or to release or
adversely affect the liability of any party or parties whomsoever who may now or
hereafter be liable under or on account of the Notes or any of the Loan
Documents (as hereinafter defined), nor shall anything herein contained or done
in pursuance hereof adversely affect or be construed to adversely affect any
other security or instrument held by the Lender as security for or evidence of
the indebtedness evidenced and secured thereby.
8. Continuation of Loan
Terms. Except as otherwise expressly set forth herein, the outstanding
principal balance of the Notes shall continue to bear interest and to be repaid
on the terms and subject to the conditions set forth in the Notes and the other
documents evidencing and securing the Notes (this Agreement, the Notes, the Loan
Agreement, the Line of Credit Agreement and all such other documents, whether
currently existing or hereafter executed, and all modifications thereto,
extensions or renewals thereof and substitutions therefor being hereinafter
collectively referred to as the "Loan Documents"). All capitalized terms used
but not defined in this Agreement shall have the meaning given to such terms in
the Loan Documents.
9. Expenses. The
Maker covenants and agrees to pay all fees, costs, charges and expenses incurred
by the Lender in connection with the preparation of this Agreement and the
extension of the Notes, including without limitation, the Lender's reasonable
attorneys fees.
10. Release of
Claims. The Maker hereby releases and waives all claims and/or defenses it now
or hereafter may have against the Lender and its successors and assigns on
account of any occurrence relating to the Notes and/or the other Loan Documents
which accrued prior to the date hereof, including, but not limited to, any claim
that the Lender (a) breached any obligations to the Maker in connection with the
indebtedness evidenced by the Notes, (b) was or is in any way involved with the
Maker as a partner, joint venturer, or in any other capacity whatsoever other
than as a lender, (c) failed to timely respond to any offers to cure any
defaults under any document or agreement executed by the Maker or any third
party or parties in favor of the Lender. This release and waiver shall be
effective as of the date of this Agreement and shall be binding upon the Maker,
and shall inure to the benefit of the Lender and its successors and assigns. The
term "Lender" as used herein shall include, but shall not be limited to, its
present and former officers, directors, employees, agents and
attorneys.
11. Continuing Agreements;
Novation. Except as expressly modified hereby, the parties hereto
ratify and confirm each and every provision of the Notes and each of the other
Loan Documents as if the same were set forth herein. In the event that any of
the terms and conditions in the Notes or in any of the other Loan Documents
conflict in any way with the terms and provisions hereof, the terms and
provisions hereof shall prevail. The parties hereto covenant and agree that the
execution of this Agreement is not intended to and shall not cause or result in
a novation with regard to the Notes and/or the other Loan Documents and that the
existing indebtedness of the Maker to the Lender evidenced by the
Notes is continuing, without interruption, and has not been discharged by a new
agreement.
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12. Captions. The
captions herein set forth are for convenience only and shall not be deemed
to define, limit or describe the scope or intent of this Agreement.
13. Governing Law. The
provisions of this Agreement shall be construed, interpreted and
enforced in accordance with the laws of the Commonwealth of Virginia as the same
may be in effect from time to time.
14. Counterparts. This
Agreement may be executed in any number of counterparts,
and each such counterpart shall be deemed to be an original. It shall not be
necessary that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on more than one
counterpart.
15. Additional Financial
Covenants. Anything contained in the
Loan Documents to
the contrary notwithstanding, until Note 1 and Note 2 have been paid in full,
Borrower covenants and agrees as follows:
Limitation on
Indebtedness. Without the Lender’s prior written consent, Borrower shall not
incur, create, contract for, waive, assume, have outstanding, guarantee or
otherwise become liable with respect to any indebtedness other than (i) the
indebtedness evidenced by the Notes, and (ii) unsecured trade payables incurred
by Borrower in the ordinary course of operating its business.
16. Lender’s Conversion
Option. The Lender shall have the right at any time and from time to time
to convert the all, or any part, of the outstanding balance due under the Notes
into shares of Common Stock of the Borrower at the conversion rate of $0.10 per
share of Common Stock (subject to adjustment in the event of stock splits or
combinations). To exercise such conversion right, Lender must give written
notice to Borrower (“Conversion Notice”) of such intent at least five (5) days
prior to such conversion and specifying the portion of the outstanding principal
balance of the Notes to be so converted. No fractional shares of the Company's
Common Stock shall be issued upon conversion of the Notes. In lieu of the
Company issuing any fractional shares to the Lender upon the conversion of the
Notes, the Company shall pay to the Lender the amount of outstanding principal
that is not so converted in cash. Within five (5) days after receipt of the
Conversion Notice, (a) the Company at its expense will issue and deliver to the
Lender a certificate or certificates for the number of full shares of Common
Stock issuable upon such conversion and pay any outstanding interest accrued
under the Notes, (b) the principal balance of the Notes shall be reduced by the
amount so converted, and (c) upon conversion of all of the outstanding principal
balance due under the Notes, the Lender shall concurrently surrender the Notes,
marked paid, at the principal office of the Company. Upon conversion of all of
the outstanding principal balance due under the Notes, and payment of any
accrued and outstanding interest thereon, the Company shall be forever released
from all its obligations and liabilities under the Notes. Anything contained in
the Notes to the contrary notwithstanding, neither of the Notes may be prepaid
without the Borrower providing the Lender not less than thirty (30) days prior
written notice of such prepayment and the Lender shall not be
required to accept any prepayment of the Notes if following receipt of such
written notice Lender has delivered a Conversion Notice to the
Company.
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and year
first above written.
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BORROWER:
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SteelCloud,
Inc.
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By:
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/s/ Xxxxx Xxxxxx | |
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Xxxxx
Xxxxxx, President
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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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