EXHIBIT 10.19
SECURITY AGREEMENT
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THIS SECURITY AGREEMENT, dated as of 18 April, 2002, and to become
effective in accordance with the provisions set forth below, from THE XXXXXXX
XXXXXX GROUP LTD., a Virginia corporation (the "New Subsidiary"), in favor of
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SUNTRUST BANK, a Georgia banking corporation (the "Lender"), recites and
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provides as follows:
RECITALS
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A. Lender entered into a Loan Agreement, dated as of August 15, 2001
(as amended, modified or supplemented from time to time, the "Loan Agreement")
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with SRA International, Inc., a Delaware corporation (the "Company"), Systems
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Research And Applications Corporation, a Virginia corporation ("SRA"), SRA
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Technical Services Center, Inc., a Delaware corporation ("STSC"), and each other
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Subsidiary (as defined below) that becomes a party to the Loan Agreement, as
such term is defined below, in accordance with the terms and conditions set
forth therein (together with the Company, SRA, STSC, collectively, the
"Borrowers", and individually, a "Borrower").
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B. Simultaneously herewith, the New Subsidiary shall enter into the
Assumption Agreement, dated as of 18 April 2002 with the Lender, thereby
becoming a Borrower under the Loan Agreement in accordance with the terms and
conditions thereof.
C. It is a condition precedent to the making of the Loans and the
issuance of Letters of Credit by Lender under the Loan Agreement that the New
Subsidiary shall grant the security interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lender to make the Loans and to issue Letters of Credit under the Loan
Agreement, the New Subsidiary hereby represents, warrants, covenants and agrees
as follows:
SECTION 1. Definitions. All capitalized terms used herein without
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definitions shall have the respective meanings provided therefor in the Loan
Agreement. The term "State", as used herein, means the Commonwealth of Virginia.
All terms defined in the Uniform Commercial Code of the State and used herein
shall have the same definitions herein as specified therein. However, if a term
is defined in Article 9 of the Uniform Commercial Code of the State differently
than in another Article of the Uniform Commercial Code of the State, the term
has the meaning specified in Article 8.9A of the Uniform Commercial Code of the
State. In addition, as used in this Agreement, the following terms shall have
the meanings assigned to them below, which meanings shall be equally applicable
to the singular and plural forms of the terms defined.
"Accounts Receivable" means, collectively, and includes all of the
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following, whether now owned or hereafter acquired by the New Subsidiary: all
property included within the
definitions of "accounts," "chattel paper," "documents" and "instruments" and
"payment intangibles" set forth in the UCC.
"Collateral" means the following properties, assets and rights of the
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New Subsidiary, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof: all personal and fixture
property of every kind and nature including without limitation all goods
(including inventory, equipment and any accessions thereto), instruments
(including promissory notes), documents, accounts (including
health-care-insurance receivables), chattel paper (whether tangible or
electronic), deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort claims, securities
and all other investment property, supposing obligations, any other contract
rights or rights to the payment of money, insurance claims and proceeds, tort
claims, and all general intangibles (including all payment intangibles and
Intellectual Property).
"UCC" means the Uniform Commercial Code as adopted in the State, and
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all amendments thereto.
SECTION 2. Grant of Security. The New Subsidiary hereby assigns and
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pledges to Lender, and hereby grants to Lender a security interest in all of its
right, title and interest in and to the Collateral, whether now owned or
hereafter acquired by the New Subsidiary, including all proceeds of any and all
of the foregoing or hereinafter-described Collateral (including, without
limitation, proceeds that constitute property of the types described herein)
and, to the extent not otherwise included, all policies of insurance on any
property of the New Subsidiary and all payments and proceeds under any such
insurance (whether or not Lender is the loss payee thereof), or any indemnity,
warranty or guaranty payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral; all cash; all books of account and
records, including all computer software relating thereto; provided that the
foregoing assignment, pledge and grant shall not attach to the Collateral unless
and until a Security Event shall occur under the Loan Agreement.
SECTION 3. Security for Obligations. This Agreement secures the payment
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of all Obligations of the New Subsidiary now or hereafter existing or arising.
Without limiting the generality of the foregoing, this Agreement secures the
payment of all amounts that constitute part of the Obligations and would be owed
by the New Subsidiary to Lender under the Loan Agreement and the Notes but for
the fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the New Subsidiary.
SECTION 4. Borrowers Remain Liable. Anything herein to the contrary
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notwithstanding, (a) the New Subsidiary shall remain liable under the contracts
and agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Lender of any of the
rights hereunder shall not release any of the Borrowers from any of their
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respective duties or obligations under the contracts and agreements included in
the Collateral, and (c) Lender shall not have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Lender be obligated to perform any of the obligations or
duties of any of Borrowers thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.
SECTION 5. Representations and Warranties. The New Subsidiary
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represents and warrants as follows:
(a) All items of equipment and inventory of the New Subsidiary
are located at the places specified in Schedule 1 hereto. During the five years
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immediately preceding the date of this Agreement, neither the New Subsidiary nor
any predecessor of the New Subsidiary has used any corporate or fictitious name
other than its current corporate name. The New Subsidiary has no trade names.
The chief executive office and mailing address of the New Subsidiary is 0000
Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000. The New Subsidiary's
exact legal name is that indicated on the signature pages hereof. The New
Subsidiary is an organization of the type, and is organized in the jurisdiction
set forth herein. The signature pages hereof accurately set forth the New
Subsidiary's organizational identification number or accurately states that it
has none.
(b) The New Subsidiary is the legal and beneficial owner of
the Collateral free and clear of any lien, security interest, option or other
charge or encumbrance except for the security interest created by this Agreement
or liens or other encumbrances permitted by the Loan Agreement. No effective
financing statement or other document similar in effect covering all or any part
of the Collateral is on file in any recording office, except such as may have
been filed in favor of Lender relating to this Agreement or otherwise permitted
by the Loan Agreement.
(c) The New Subsidiary has exclusive possession and control of
the Collateral.
(d) This Agreement creates a valid security interest in the
Collateral, securing the payment of the Obligations and, when properly
perfected, shall constitute a valid perfected security interest in such
Collateral, free and clear of all Liens except as permitted by the Loan
Agreement.
(e) No consent of any other person or entity and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body, other than the filing of UCC-1
financing statements in the applicable filing offices and such documentation as
is required to comply with the Assignment of Claims Act, is required (1) for the
grant by the New Subsidiary of the security interest granted hereby or for the
execution, delivery or performance of this Agreement by the New Subsidiary, or
(2) for the exercise by Lender of its rights and remedies hereunder. No consent
of any other person or entity and no
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authorization or approval by any governmental authority or regulatory body is
required for the perfection or maintenance of the security interest created
hereby (including the first priority nature of such security interest).
(f) The inventory of the New Subsidiary has been produced by
the New Subsidiary in compliance with all requirements of the Fair Labor
Standards Act.
(g) The New Subsidiary represents and warrants as to each and
every Account Receivable now existing that: (1) it is a bona fide existing
obligation, valid and enforceable against the Customer, (2) it is subject to no
dispute, defense or offset except as disclosed in writing to Lender; (3) all
instruments, chattel paper and other evidences of indebtedness issued to the New
Subsidiary with respect to any Account Receivable have been delivered to Lender,
and, together with all supporting documents delivered to Lender, are genuine,
complete, valid and enforceable in accordance with their terms; (4) it is not
subject to any discount, allowance or special terms of payment except as
permitted hereby or by the Loan Agreement or as disclosed in writing to Lender;
and (5) it is not and shall not be subject to any prohibition or limitation upon
assignment. The New Subsidiary covenants and agrees that each Account Receivable
arising after the date of this Agreement will be in conformance with the
foregoing representations.
SECTION 6. Further Assurances. The New Subsidiary agrees as follows:
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(a) The New Subsidiary hereby irrevocably authorizes the
Lender at any time and from time to time to file in any Uniform Commercial Code
jurisdiction any initial financing statements and amendments thereto that (1)
indicate the Collateral (i) as all assets of the New Subsidiary or words of
similar effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9A of the Uniform Commercial Code
of the State or such jurisdiction, or (ii) as being of an equal or lesser scope
or with greater detail, and (2) contain any other information required by part 5
of Article 9A of the Uniform Commercial Code of the State for the sufficiency or
filing office acceptance of any financing statement or amendment, including (i)
whether the New Subsidiary is an organization, the type of organization and any
organization identification number issued to the New Subsidiary and, (ii) in the
case of a financing statement filed as a fixture filing or indicating Collateral
as as-extracted collateral or timber to be cut, a sufficient description of real
property to which the Collateral relates. The New Subsidiary agrees to furnish
any such information to the Lender promptly upon request. The New Subsidiary
also ratifies its authorization for the Lender to have filed in any Uniform
Commercial Code jurisdiction any like initial financing statements or amendments
thereto if filed prior to the date hereof.
(b) The New Subsidiary will furnish to Lender from time to
time statements and schedules further identifying and describing the Collateral
and such other information and reports in connection with the Collateral as
Lender reasonably may request, all in form and substance satisfactory to Lender.
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(c) Without providing at least 30 days prior written notice to
Lender, the New Subsidiary will not change its name, its type of organization,
jurisdiction of organization or other legal structure, its place of business or,
if more than one, chief executive office, or its mailing address or
organizational identification number if it has one. If the New Subsidiary does
not have an organizational identification number and later obtains one, the New
Subsidiary shall forthwith notify Lender of such organizational identification
number.
SECTION 7. Other Actions. Further to insure the attachment, perfection
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and first priority of, and the ability of Lender to enforce, Lender's security
interest in the Collateral, the New Subsidiary agrees, in each case at its own
expense, to take the following actions with respect to the following Collateral:
(a) If the New Subsidiary shall at any time hold or acquire
any promissory notes or tangible chattel paper, the New Subsidiary shall
forthwith endorse, assign and deliver the same to Lender, accompanied by such
instruments of transfer or assignment duly executed in blank as Lender may from
time to time specify.
(b) For each deposit account that the New Subsidiary at any
time opens or maintains, the New Subsidiary shall, at Lender's request and
option, pursuant to an agreement in form and substance satisfactory to Lender,
either (1) cause the depositary bank to agree to comply at any time with
instructions from Lender to such depositary bank directing the disposition of
funds from time to time credited to such deposit account, without further
consent of the New Subsidiary, or (2) arrange for Lender to become the customer
of the depositary bank with respect to the deposit account, with the New
Subsidiary being permitted, only with the consent of Lender, to exercise rights
to withdraw funds from such deposit account. Lender agrees with the New
Subsidiary that Lender shall not give any such instructions or withhold any
withdrawal rights from the New Subsidiary, unless an Event of Default has
occurred and is continuing, or, after giving effect to any withdrawal not
otherwise permitted by the Loan Documents, would occur. The provisions of this
paragraph shall not apply to (i) any deposit account for which the New
Subsidiary, the depositary bank and Lender have entered into a cash collateral
agreement specially negotiated among the New Subsidiary, the depositary bank and
Lender for the specific purpose set forth therein, (ii) deposit accounts for
which Lender is the depositary and (iii) deposit accounts specially and
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of the New Subsidiary's salaried employees.
(c) If the New Subsidiary shall at any time hold or acquire
any certificated securities, the New Subsidiary shall forthwith endorse, assign
and deliver the same to Lender, accompanied by such instruments of transfer or
assignment duly executed in blank as Lender may from time to time specify. If
any securities now or hereafter acquired by the New Subsidiary are
uncertificated and are issued to the New Subsidiary or its nominee directly by
the
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issuer thereof, the New Subsidiary shall immediately notify Lender thereof and,
at Lender's request and option, pursuant to an agreement in form and substance
satisfactory to Lender, either (1) cause the issuer to agree to comply with
instructions from Lender as to such securities, without further consent of the
New Subsidiary or such nominee, or (2) arrange for Lender to become the
registered owner of the securities. If any securities, whether certificated or
uncertificated, or other investment property now or hereafter acquired by the
New Subsidiary are held by the New Subsidiary or its nominee through a
securities intermediary or commodity intermediary, the New Subsidiary shall
immediately notify Lender thereof and, at Lender's request and option, pursuant
to an agreement in form and substance satisfactory to Lender, either (i) cause
such securities intermediary or (as the case may be) commodity intermediary to
agree to comply with entitlement orders or other instructions from Lender to
such securities intermediary as to such securities or other investment property,
or (as the case may be) to apply any value distributed on account of any
commodity contract as directed by Lender to such commodity intermediary, in each
case without further consent of the New Subsidiary or such nominee, or (ii) in
the case of financial assets or other investment property held through a
securities intermediary, arrange for Lender to become the entitlement holder
with respect to such investment property, with the New Subsidiary being
permitted, only with the consent of Lender, to exercise rights to withdraw or
otherwise deal with such investment property. Lender agrees with the New
Subsidiary that Lender shall not give any such entitlement orders or
instructions or directions to any such issuer, securities intermediary or
commodity intermediary, and shall not withhold its consent to the exercise of
any withdrawal or dealing rights by the New Subsidiary, unless an Event of
Default has occurred and is continuing, or, after giving effect to any such
investment and withdrawal rights not otherwise permitted by the Loan Documents,
would occur. The provisions of this paragraph shall not apply to any financial
assets credited to a securities account for which Lender is the securities
intermediary.
(d) If any goods are at any time in the possession of a
bailee, the New Subsidiary shall promptly notify Lender thereof and, if
requested by Lender, shall promptly obtain an acknowledgement from the bailee,
in form and substance satisfactory to Lender, that the bailee holds such
Collateral for the benefit of Lender and shall act upon the instructions of
Lender, without the further consent of the New Subsidiary. Lender agrees with
the New Subsidiary that Lender shall not give any such instructions unless an
Event of Default has occurred and is continuing or would occur after taking into
account any action by the New Subsidiary with respect to the bailee.
(e) If the New Subsidiary at any time holds or acquires an
interest in any electronic chattel paper or any "transferable record," as that
term is defined in Section 201 of the federal Electronic Signatures in Global
and National Commerce Act, or in ss.l6 of the Uniform Electronic Transactions
Act as in effect in any relevant jurisdiction, the New Subsidiary shall promptly
notify Lender thereof and, at the request of Lender, shall take such action as
Lender may reasonably request to vest in Lender control, under ss.9-105 of the
Uniform Commercial Code, of such electronic chattel paper or control under
Section 201 of the federal Electronic
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Signatures in Global and National Commerce Act or, as the case may be, ss.16 of
the Uniform Electronic Transactions Act, as so in effect in such jurisdiction,
of such transferable record. Lender agrees with the New Subsidiary that Lender
will arrange, pursuant to procedures satisfactory to Lender and so long as such
procedures will not result in Lender's loss of control, for the New Subsidiary
to make alterations to the electronic chattel paper or transferable record
permitted under UCC ss.9-105 or, as the case may be, Section 201 of the federal
Electronic Signatures in Global and National Commerce Act or ss.16 of the
Uniform Electronic Transactions Act for a party in control to make without loss
of control, unless an Event of Default has occurred and is continuing or would
occur after taking into account any action by the New Subsidiary with respect to
such electronic chattel paper or transferable record.
(f) If the New Subsidiary is at any time a beneficiary under a
letter of credit now or hereafter issued in favor of the New Subsidiary, the New
Subsidiary shall promptly notify Lender thereof and, at the request and option
of Lender, the New Subsidiary shall, pursuant to an agreement in form and
substance satisfactory to Lender, either (1) arrange for the issuer and any
confirmer of such letter of credit to consent to an assignment to Lender of the
proceeds of any drawing under the letter of credit or (2) arrange for Lender to
become the transferee beneficiary of the letter of credit, with Lender agreeing,
in each case, that the proceeds of any drawing under the letter to credit are to
be applied to the payment of the Obligations.
(g) If the New Subsidiary shall at any time hold or acquire a
commercial tort claim, the New Subsidiary shall immediately notify Lender in a
writing signed by the New Subsidiary of the brief details thereof and grant to
Lender in such writing a security interest therein and in the proceeds thereof,
all upon the terms of this Agreement, with such writing to be in form and
substance satisfactory to Lender.
(h) The New Subsidiary further agrees to take any other action
reasonably requested by Lender to insure the attachment, perfection and first
priority of, and the ability of Lender to enforce, Lender's security interest in
any and all of the Collateral including, without limitation, (1) executing,
delivering and, where appropriate, filing financing statements and amendments
relating thereto under the Uniform Commercial Code, to the extent, if any, that
the New Subsidiary's signature thereon is required therefor, (2) causing
Lender's name to be noted as Lender on any certificate of title for a titled
good if such notation is a condition to attachment, perfection or priority of,
or ability of Lender to enforce, Lender's security interest in such Collateral,
(3) complying with any provision of any statute, regulation or treaty of the
United States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of Lender to
enforce, Lender's security interest in such Collateral, (4) obtaining
governmental and other third party consents and approvals, including without
limitation any consent of any licensor, lessor or other person obligated on
Collateral, (5) obtaining waivers from mortgagees and landlords in form and
substance satisfactory to Lender and (6) taking all actions required by any
earlier versions of the Uniform Commercial Code or by
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other law, as applicable in any relevant Uniform Commercial Code jurisdiction,
or by other law as applicable in any foreign jurisdiction.
SECTION 8. Covenants Concerning Collateral, Etc. The New Subsidiary
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further covenants with Lender as follows:
(a) The Collateral, to the extent not delivered to Lender
pursuant to this Agreement, will be kept at those locations listed on Schedule 1
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attached hereto and the New Subsidiary will not remove the Collateral from such
locations, without providing at least 30 days prior written notice to Lender.
(b) Except for the security interest herein granted and Liens
permitted by the Loan Agreement, the New Subsidiary shall be the owner of or
have other rights in the Collateral free from any Lien, security interest or
other encumbrance, and the New Subsidiary shall defend the same against all
claims and demands of all persons at any time claiming the same or any interests
therein adverse to Lender.
(c) The New Subsidiary shall not pledge, mortgage or create,
or suffer to exist a security interest in the Collateral in favor of any person
other than Lender except for Liens permitted by the Loan Agreement.
(d) The New Subsidiary will keep the Collateral in good order
and repair and will not use the same in violation of law or any policy of
insurance thereon.
(e) As provided in the Loan Agreement, the New Subsidiary will
permit Lender, or its designee, to inspect the Collateral at any reasonable
time, wherever located.
(f) The New Subsidiary will pay promptly when due all taxes,
assessments, governmental charges and levies upon the Collateral or incurred in
connection with the use or operation of such Collateral or incurred in
connection with this Agreement.
(g) The New Subsidiary will continue to operate, its business
in compliance with all applicable provisions of the federal Fair Labor Standards
Act, as amended, and with all applicable provisions of federal, state and local
statutes and ordinances dealing with the control, shipment, storage or disposal
of hazardous materials or substances.
(h) The New Subsidiary will not sell or otherwise dispose, or
offer to sell or otherwise dispose, of the Collateral or any interest therein
except for (1) sales and leases of inventory and licenses of general intangibles
in the ordinary course of business and (2) so long as no Event of Default has
occurred and is continuing, sales or other dispositions of obsolescent items of
equipment in the ordinary course of business consistent with past practices, and
dispositions permitted by the Loan Agreement.
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SECTION 9. Insurance. The New Subsidiary agrees as follows:
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(a) The New Subsidiary shall, at its own expense, maintain
insurance with respect to the Collateral in such amounts, against such risks, in
such form and with such insurers, as shall be satisfactory to Lender from time
to time. Each policy for liability insurance shall provide for all losses to be
paid on behalf of Lender and the New Subsidiary as their respective interests
may appear, and each policy for property damage insurance shall provide for all
losses to be paid directly to Lender. Each such policy shall in addition (1)
name the New Subsidiary and Lender as insured parties thereunder (without any
representation or warranty by or obligation upon Lender) as their interests may
appear, (2) contain the agreement by the insurer that any loss thereunder shall
be payable to Lender notwithstanding any action, inaction or breach of
representation or warranty by the New Subsidiary, (3) provide that there shall
be no recourse against Lender for payment of premiums or other amounts with
respect thereto, and (4) provide that at least ten days' prior written notice of
cancellation or of lapse shall be given to Lender by the insurer. The New
Subsidiary shall, if so requested by Lender, deliver to Lender original or
duplicate policies of such insurance, together with such endorsements as may be
required by Lender, and, as often as Lender may reasonably request, a report of
a reputable insurance broker with respect to such insurance. Further, the New
Subsidiary shall, at the request of Lender, duly execute and deliver instruments
of assignment of such insurance policies to comply with the requirements of
Section 6 and cause the insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by
the New Subsidiary pursuant to this Section 9 may be paid directly to the person
who shall have incurred liability covered by such insurance. In case of any loss
involving damage to Collateral when Section 9(c) is not applicable, the New
Subsidiary shall make or cause to be made the necessary repairs to or
replacements of such Collateral, and any proceeds of insurance maintained by the
New Subsidiary pursuant to this Section 9 shall be paid to the New Subsidiary as
reimbursement for the costs of such repairs or replacements.
(c) Upon (1) the occurrence and during the continuance of any
Event of Default, or (2) the actual or constructive total loss (in excess of
$50,000 per occurrence) of any Collateral, all insurance payments in respect of
such Equipment or Inventory shall be paid to and applied by Lender as specified
in Section 15(b).
SECTION 10. As to Accounts Receivable and General Intangibles.
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The New Subsidiary agrees as follows:
(a) The New Subsidiary shall keep its chief place of business
and chief executive office and the office where it keeps its records concerning
the Accounts Receivable and the General Intangibles at 0000 Xxxxxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000 or, upon 45 days' prior written notice to
Lender, at any other location in a jurisdiction where all
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actions required by Section 6, shall have been taken with respect to the
Accounts Receivable. The New Subsidiary will hold and preserve such records and
will permit representatives of Lender at any time during normal business hours
to inspect and make abstracts from such records.
(b) The New Subsidiary shall immediately notify Lender of (1)
any dispute in excess of $1,000,000 with a Customer, and (2) the bankruptcy,
insolvency, receivership, assignment for the benefit of creditors or suspension
of business of any such Customer of which the New Subsidiary has knowledge. The
New Subsidiary shall not compromise or discount any Account Receivable without
the prior written consent of Lender except for (i) ordinary trade discounts or
allowances for prompt payment, and (ii) prior to the occurrence of a Default or
an Event of Default, such compromises or discounts that, after giving effect
thereto, will not cause 85% of the Borrowing Base to be less than the unpaid
principal balance of Funded Debt then outstanding.
(c) If required by Lender, upon the occurrence of a Default or
an Event of Default, the New Subsidiary shall establish a lockbox for the
account of the New Subsidiary with Lender and shall direct all Customers to make
payments on Accounts Receivable to such lockbox by printing such direction on
all invoices given to Customers. The New Subsidiary also shall remit to such
lockbox all payments on Accounts Receivable received by the New Subsidiary, all
such payments to be received in trust for the benefit of Lender hereunder, and
shall be segregated from other funds of the New Subsidiary. Such payments shall
be remitted or delivered to such lockbox in their original form on the day of
receipt. All notes, checks and other instruments so received by the New
Subsidiary shall be duly endorsed to the order of Lender. The payments remitted
to the lockbox shall be credited to a cash collateral account maintained by
Lender in the name of the New Subsidiary over which Lender shall have the
exclusive power of withdrawal. After final collection, funds credited to the
cash collateral account shall be retained in the cash collateral account and be
held as security for the Obligations, and funds in the cash collateral account
may be applied to the Obligations by Lender from time to time, whether or not
such Obligations are then due.
(d) Except as otherwise provided in Section 10(c) or this
Section 10(d), the New Subsidiary shall continue to collect, at its own expense,
all amounts due or to become due to the New Subsidiary under the Accounts
Receivable. In connection with such collections, the New Subsidiary may take
(and, at Lender's direction, shall take) such action as the New Subsidiary or
Lender may deem necessary or advisable to enforce collection of the Accounts
Receivable; provided, however, that Lender shall have the right, upon the
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occurrence and during the continuance of any Event of Default, and upon written
notice to the New Subsidiary of its intention to do so, to notify Customers of
the assignment of the applicable Accounts Receivable to Lender and, at the
expense of the New Subsidiary, to enforce collection of any such Accounts
Receivable, and to adjust, settle or compromise the amount or payment thereof,
in the same manner and to the same extent as the New Subsidiary might have done.
After receipt by the
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New Subsidiary of the notice from Lender referred to in the proviso to the
preceding sentence, the New Subsidiary shall not adjust, settle or compromise
the amount or payment of any Account Receivable, release any Customer wholly or
partly with respect thereto, or allow any credit or discount thereon.
(e) Upon the occurrence of a Default or an Event of Default,
Lender shall have the right, to facilitate direct collection, to take over the
New Subsidiary's post office boxes or make other arrangements, with which the
New Subsidiary shall cooperate, to receive the New Subsidiary's mail.
(f) After the occurrence of an Event of Default, the New
Subsidiary shall execute all other agreements, instruments and documents and
shall perform all further acts that Lender may require with respect to Accounts
Receivable owing by the Government to ensure compliance with the Assignment of
Claims Act.
SECTION 11. Defense of Collateral. The New Subsidiary, at its expense,
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shall defend the Collateral against any claims or demands adverse to the
Security Party's security interest granted hereunder and shall promptly pay,
when due, all taxes or assessments levied against such the New Subsidiary on the
Collateral.
SECTION 12. Lender Appointed Attorney-in-Fact. The New Subsidiary
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hereby irrevocably appoints Lender as the New Subsidiary's attorney-in-fact
(such power being coupled with an interest), with full authority in the place
and stead of the New Subsidiary and in the name of the New Subsidiary or
otherwise, from time to time in Lender's discretion, to take any action and to
execute any instrument that Lender may deem necessary or advisable to accomplish
the purposes of this Agreement (subject to the rights of the New Subsidiary
under Section 10), including, without limitation:
(a) To obtain and adjust insurance required to be paid to
Lender pursuant to Section 9;
(b) To ask, demand, collect, xxx for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due under
or in connection with the Collateral;
(c) To receive, indorse, and collect any drafts or other
instruments, documents and chattel paper in connection therewith; and
(d) To file any claims or take any action or institute any
proceedings that Lender may deem necessary or desirable for the collection of
any of the Collateral, or otherwise to enforce the rights of the New Subsidiary
or Lender with respect to any of the Collateral.
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SECTION 13. Lender May Perform. If any Borrower fails to perform any
------------------
covenant or agreement contained herein, Lender may itself perform, or cause
performance of, such covenant or agreement, and the expenses of Lender incurred
in connection therewith, together with interest thereon at the highest per annum
interest rate in effect under the Loan Agreement plus 3.0%, shall be payable by
such Borrower to Lender on demand and shall constitute Obligations.
SECTION 14. Lender's Duties. The powers conferred on Lender hereunder
---------------
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, Lender shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which Lender accords its own property.
SECTION 15. Remedies. If any Event of Default shall have occurred and
--------
be continuing:
(a) Lender may exercise in respect of the Collateral, in
addition to any other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a Lender on default under the
UCC (to the extent that the UCC applies to the affected Collateral), and also
may (1) require the New Subsidiary to, and the New Subsidiary hereby agrees that
it shall, at its expense and upon request of Lender, forthwith assemble all or
part of the Collateral as directed by Lender and make it available to Lender at
a place to be designated by Lender that is reasonably convenient to both
parties, and (2) without notice except as specified below, sell the Collateral
or any part thereof, whether in its then-condition or after further preparation
or processing, either at public or private sale or at any broker's board, in
lots or in bulk, at any time or place, in one or more parcels, at any of
Lender's offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as Lender may deem commercially reasonable. The New
Subsidiary agrees that, to the extent notice of sale shall be required by law,
at least ten days' notice to the New Subsidiary of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Lender shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. Lender may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. At any such sale Lender may be
the purchaser, subject to the applicable provisions of the UCC.
(b) Any cash held by Lender as Collateral and all cash
proceeds received by Lender in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the discretion of
Lender, be held by Lender as collateral for, and then or at any time thereafter
be applied (after payment of any amounts payable to Lender pursuant to Section
17) in whole or in part by Lender against all or any part of the Obligations in
such order
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as Lender shall elect. Any deficiency shall be paid to Lender by the New
Subsidiary forthwith upon demand, and any surplus of such cash or cash proceeds
held by Lender and remaining after payment in full of all the Obligations shall
be paid over to the New Subsidiary or to whomsoever may be lawfully entitled to
receive such surplus.
(c) The New Subsidiary recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and applicable
state securities laws, Lender may be compelled, with respect to any sale of all
or any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The New
Subsidiary acknowledges that any such private sales may be at prices and on
terms less favorable to Lender than those obtainable through a public sale
without such restrictions, and, notwithstanding such circumstances, agree that
any such private sale per se shall not be deemed to have been made in a
commercially unreasonable manner and that Lender shall have no obligation to
engage in public sales and no obligation to delay the sale of any Collateral for
the period of time necessary to permit the respective issuer thereof to register
it for public sale.
SECTION 16. Private Sale. Lender shall incur no liability as a result
------------
of the sale of the Collateral, or any part thereof, at any private sale pursuant
to Section 15(c) hereof conducted in a commercially reasonable manner. The New
Subsidiary hereby waives any claims against Lender arising by reason of the fact
that the price at which the Collateral may have been sold at such a private sale
was less than the price that might have been obtained at a public sale or was
less than the aggregate amount of the Obligations, even if Lender accepts the
first offer received and does not offer the Collateral to more than one offeree
so long as such private sale was conducted in a commercially reasonable manner.
SECTION 17. Indemnity and Expenses. The New Subsidiary agrees as
----------------------
follows:
(a) The New Subsidiary agrees to indemnify Lender from and
against any and all claims, losses and liabilities (including reasonable
attorneys' fees) growing out of or resulting from this Agreement (including,
without limitation, enforcement of this Agreement), except claims, losses or
liabilities resulting from Lender's gross negligence or willful misconduct.
(b) The New Subsidiary shall pay to Lender, upon demand, the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that Lender may incur in
connection with (1) the administration of this Agreement, (2) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (3) the exercise or enforcement of any
of the rights of Lender hereunder, or (4) the failure by the New Subsidiary to
perform or observe any of the provisions hereof.
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(c) In any suit, proceeding or action brought by Lender
relating to the Collateral, the New Subsidiary will save, indemnify and keep
Lender harmless from and against all expense, loss or damage suffered by reason
of any defense, setoff, counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder, arising out of a breach by the New
Subsidiary of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such obligor or
its successors from the New Subsidiary, and all such obligations of the New
Subsidiary shall be and remain enforceable against and only against the New
Subsidiary and shall not be enforceable against Lender.
(d) The provisions of this Section 17 shall survive the
termination of this Agreement and the repayment of the Notes and all other
Obligations in full.
SECTION 18. Security Interest Absolute. All rights of Lender and
--------------------------
security interests hereunder, and all obligations of the New Subsidiary
hereunder, shall be absolute and unconditional, irrespective of:
(a) Any lack of validity or enforceability of the Loan
Agreement, the Notes 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, the Notes or
any other Loan Document, including, without limitation, any increase in the
Obligations resulting from the extension of additional credit to the New
Subsidiary or any of its Subsidiaries or otherwise;
(c) Any taking, exchange, release or non-perfection of any
other collateral, or any taking, release or amendment or waiver of, consent to
or departure from any guaranty, for all or any of the Obligations;
(d) Any manner of application of collateral, or proceeds
thereof, to all or any of the Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Obligations or any other
assets of the New Subsidiary or any of its Subsidiaries;
(e) Any change, restructuring or termination of the corporate
structure or existence of the New Subsidiary or any of its Subsidiaries; or
(f) Any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the New Subsidiary or a third party
grantor of a security interest.
SECTION 19. Waivers.
-------
(a) THE NEW SUBSIDIARY, HAVING KNOWLEDGE THAT IT MAY BE
ENTITLED TO NOTICE AND A HEARING PRIOR TO REPOSSESSION OF THE
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COLLATERAL, WAIVES ANY RIGHT THAT IT MAY HAVE UNDER EXISTING OR FUTURE LAW TO
NOTICE OF FORECLOSURE (OTHER THAN NOTICES REQUIRED BY THIS AGREEMENT) AND ANY
OTHER ACT DESCRIBED HEREIN OR IN ANY LOAN DOCUMENT, TO ANY HEARING THAT MAY BE
HELD RELATING TO FORECLOSURE OR ANY OTHER SUCH ACTS, AND TO ANY NOTICE THAT MAY
BE REQUIRED TO BE GIVEN BY LENDER PRIOR TO SUCH HEARING.
(b) The New Subsidiary waives any right to insist upon or
plead or in any way take advantage of any appraisement, valuation, stay,
marshalling of assets, extension, redemption or moratorium law now or hereafter
in force and effect so as to prevent, hinder or delay the enforcement of the
provisions of this Agreement or any Loan Document or any rights or remedies
Lender may have hereunder or thereunder or at law or in equity.
SECTION 20. Amendments, etc. No amendment or waiver of any provision
----------
hereof, and no consent to any departure by the New Subsidiary herefrom, shall in
any event be effective unless the same shall be in writing and signed by Lender,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 21. Addresses for Notices. All notices and other communications
---------------------
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled, delivered by hand or sent, prepaid, by Federal Express (or a comparable
overnight delivery service) to the New Subsidiary and Lender at their respective
addresses specified in the Loan Agreement, or, as to either party, at such other
address as shall be designated by such party in a written notice to the other
party. Any such notice or other communication, when mailed, telecopied,
telegraphed, telexed, cabled, delivered by hand or sent overnight, shall be
effective on the earliest of (a) the date it is actually received or telecopied,
telexed (confirmed by telex answerback), or delivered by hand, (b) the Business
Day after the day on which it is properly delivered to a telegraph or cable
company or to Federal Express (or a comparable overnight delivery service), as
applicable, or (c) the third Business Day after the day on which it is deposited
in the United States mail.
SECTION 22. Continuing Security Interest. This Agreement shall create a
----------------------------
continuing security interest in the Collateral and shall (a) remain in full
force and effect until the later of (1) the payment in full of the Obligations,
and (2) the expiration or termination of Lender's commitment to make the Loans
and issue Letters of Credit, (b) be binding upon the New Subsidiary, its
successors and assigns, and (c) inure to the benefit of, and be enforceable by,
Lender and its successors, transferees and assigns. Upon the later of the
payment in full of the Obligations and the expiration or termination of the
commitments to make the Loans and issue Letters of Credit, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the New Subsidiary. Upon any such termination, Lender, at the New
15
Subsidiary's expense, shall execute and deliver to the New Subsidiary such
documents as the New Subsidiary shall reasonably request to evidence such
termination.
SECTION 23. Governing Law; Terms; Jury Trial Waiver. This Agreement
---------------------------------------
shall be governed by and construed in accordance with the laws of the State,
without reference to conflict of laws principles. Unless otherwise defined
herein or in the Loan Agreement, terms used in Article 9 of the UCC are used
herein as therein defined. THE NEW SUBSIDIARY HEREBY WAIVES TRIAL BY JURY IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO THIS AGREEMENT OR THE ENFORCEMENT OR
COLLECTION OF THE OBLIGATIONS.
SIGNATURES ON FOLLOWING PAGE
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IN WITNESS WHEREOF, the New Subsidiary has caused this Agreement to be
duly executed and delivered by its officers thereunto duly authorized as of the
date first above written.
THE XXXXXXX XXXXXX GROUP, a Virginia corporation
By: /s/ Xxx X. Xxxxxxx
--------------------------------------------
Name: Xxx X. Xxxxxxx
--------------------------------------------
Title: President
--------------------------------------------
Organizational No.:
---------------------------
SRA INTERNATIONAL, INC., a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxxx
--------------------------------------------
Title: SVP, CFO
--------------------------------------------
Organizational No.:
---------------------------
17
SCHEDULE 1
----------
to
Security Agreement
Locations of Equipment:
----------------------
0000 Xxxxxxxxx Xxxx., Xxxxx 000, Xxxxxxxxx, XX 00000
0000 Xxxxxx Xxxx., Xxxxxxxxx, XX 00000
Crystal Gateway, 0000 Xxxxxxxxx Xxxxx Xxx., Xxxxxx 0000 & 1208,
Xxxxxxxxx, XX 00000
000 Xxxxx Xxxxx, Xxxxxx, XX 00000
Locations of Inventory:
----------------------
0000 Xxxxxxxxx Xxxx., Xxxxx 000, Xxxxxxxxx, XX 00000
0000 Xxxxxx Xxxx., Xxxxxxxxx, XX 00000
Crystal Gateway, 0000 Xxxxxxxxx Xxxxx Xxx., Xxxxxx 0000 & 1208,
Xxxxxxxxx, XX 00000
000 Xxxxx Xxxxx, Xxxxxx, XX 00000
18
