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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of the 23rd day of April, 1998,
is made by and between CRESTAR BANK, a Virginia banking corporation (the
Lender), and ACE*COMM CORPORATION, a Maryland corporation (the Borrower).
RECITALS
The Lender has agreed to provide working capital to the Borrower, subject
to the terms and conditions of this Agreement. Accordingly, for good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the Lender and the Borrower agree as follows:
SECTION 1. DEFINITIONS. 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
following, whether now owned or hereafter acquired by the Borrower: all property
included within the definitions of "accounts," "chattel paper," "documents" and
"instruments" set forth in the UCC; all present and future rights to payments
for goods sold or leased or for services rendered, whether or not represented by
instruments or chattel paper, and whether or not earned by performance; contract
rights; all present and future rights to payments for computer software,
computer hardware or computer systems sold, leased or licensed; proceeds of any
letter of credit of which the Borrower is a beneficiary; all forms of
obligations whatsoever owed to the Borrower, together with all instruments and
documents of title representing any of the foregoing; all rights in any goods
that any of the foregoing may represent; any and all rights in any returned or
repossessed goods; and all rights, security and guaranties with respect to any
of the foregoing, including, without limitation, any right of stoppage in
transit.
"Affiliate" means, with respect to any specified Person, any other Person
that, directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership of common stock, by contract or otherwise.
"Aging" means a schedule of all outstanding Receivables of the Borrower
showing the age of such Receivables in intervals of 30 days.
"Agreement" means this Loan and Security Agreement, as the same may be
amended, modified or supplemented from time to time.
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"Assignment of Claims Act" means, collectively, the Assignment of Claims
Act of 1940, as amended, 31 U.S.C. Section 3727, 41 U.S.C. Section 15, any
applicable rules, regulations and interpretations issued pursuant thereto, and
any amendments to any of the foregoing.
"Borrowing Base" means, at the time in question, 80% of Eligible Billed
Receivables.
"Borrowing Base Certificate" means a certificate of the Borrower
containing a computation of the Borrowing Base and certifying that no Default or
Event of Default has occurred and is continuing, in form and substance
satisfactory to the Lender.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks are authorized or required to close under the laws of the
State, and, with respect to the determination of LIBOR, on which banks are open
for business in the London interbank market.
"Capital Lease" means any lease that has been or should be capitalized on
the books of the lessee in accordance with GAAP.
"Canada" means Ace*Comm Canada Corporation, a corporation organized and
existing under the laws of the Province of Quebec, Canada.
"Cash Management Agreement" means any applicable agreement between the
Borrower and the Lender pursuant to which funds are transferred automatically to
and from the Borrower's operating account or controlled disbursement account
with the Lender, as any such agreement may be amended, modified or supplemented
from time to time.
"Closing" means the initial disbursement of the Loans.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and all regulations issued pursuant thereto.
"Collateral" means, collectively, and includes all Accounts Receivable,
Deposit Accounts, Equipment, General Intangibles, Intellectual Property,
Inventory, Investment Property and all other property of the Borrower in which a
Lien is granted to the Lender pursuant to this Agreement or any other Loan
Document.
"Communications" means Ace*Comm Communications, Inc., a Barbados
corporation.
"Covenant Compliance Certificate" means a certificate executed by a
Principal Officer of the Borrower, substantially in the appropriate form of
Exhibit A attached to this Agreement, containing a calculation of the financial
covenants contained in Section 5.8 below and certifying that no Default or
Event of Default has occurred.
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"Customer" means any Person obligated on a Receivable.
"Customer List" means a schedule of all Customers of the Borrower, showing
the address of each Customer and a listing of the active contracts between the
Borrower and such Customer, which is otherwise in form and substance
satisfactory to the Lender.
"Date Affected Information Technology" means a system comprised of one or
more components including computer hardware, computer software or equipment with
computerized functions, which reads, produces or processes date data by input,
output or otherwise.
"Debt" means, collectively, and includes, without duplication, with
respect to any specified Person, (a) indebtedness or liability for borrowed
money (whether by loan, the issuance and sale of debt securities or the sale of
assets to another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such assets from such Person) or for the deferred
purchase price of property or services; (b) obligations as a lessee under a
Capital Lease; (c) obligations to reimburse the issuer of letters of credit or
acceptances; (d) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any other
Person or otherwise to assure a creditor against loss; (e) obligations under
interest rate swap, cap or collar agreements or similar agreements or
arrangements designed to protect that Person against fluctuations in interest
rates; (f) obligations under any foreign exchange contract, currency swap or
other similar agreements or arrangements designed to protect that Person against
fluctuations in currency values; and (g) obligations secured by any Lien on
property owned by the specified Person, whether or not the obligations have been
assumed.
"Default" means any event that, with the giving of notice, the lapse of
time, or both, would constitute an Event of Default.
"Default Rate" means the rate at which interest accrues on the loans upon
the occurrence of an Event of Default, determined in accordance with the
provisions of Section 2.2.
"Deposit Account" means any "deposit account", as defined in Section 9-105
of the UCC, whether now owned or hereafter acquired by the Borrower.
"Dollars" and "$" means the lawful currency of the United States of
America.
"Eligible Billed Receivables" means Eligible Receivables that have been
billed to the appropriate Customer, are aged not greater than 90 days from the
date of the initial invoice. For the purposes of this definition, the term
"initial invoice" shall mean the first invoice relating to the applicable goods
shipped or services rendered, and not any subsequent invoice relating thereto.
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"Eligible Receivables" means Accounts Receivable of the Borrower (a) that
represent valid obligations incurred by a Customer for software, goods, services
licensed, shipped and delivered, installed or completed under valid contracts of
license, sale, or service that have been formally awarded to the Borrower for
which all required contract documents have been executed by the Borrower, and,
if the Government is the Customer, for which funds have been appropriated and
allocated; (b) that are due and payable not more than 30 days from the initial
invoice; (c) on which the Customer is not an Affiliate or Subsidiary of the
Borrower; (d) with respect to which the Borrower has no knowledge or notice of
any inability of the Customer to make full payment; (e) from the face amounts of
which have been deducted all payments, setoffs, amounts subject to adverse
claims made in writing to the Borrower, contractual allowances, bad debt
reserves and other credits applicable thereto; (f) that are subject to no Liens
other than those permitted by this Agreement; (g) that continue to be in full
conformity with the representations and warranties made by the Borrower to the
Lender in this Agreement; (h) with respect to which the Lender is and continues
to be satisfied with the credit standing of the Customer; (i) on which the
Customer is not a creditor of the Borrower; and (j) on which the Customer is not
a Foreign Customer, unless the Foreign Customer's obligations are secured by a
letter of credit acceptable to the Lender; (k) that are not subject to any
dispute; (l) with respect to which the applicable software, goods or services
have been accepted by the applicable Customer on an absolute sale basis and not
on a xxxx and hold sale basis, a consignment sale basis, a guaranteed sale
basis, a sale or return basis or on the basis of any other similar understanding
pursuant to which the Borrower would repurchase or accept a return of, or give a
credit for, any such software, goods or services; and (m) that are not subject
to any contingencies; provided, however, and without limiting any other
provisions of this Agreement with respect to the exclusion of Accounts
Receivable from the category of Eligible Receivables and the Borrowing Base,
that (1) if the Lender reasonably determines that the collectibility of any
Account Receivable makes it unacceptable for inclusion in the Borrowing Base and
gives written notice to the Borrower indicating the reasons for such
determination, then such Account Receivable shall thereafter be excluded from
the category of Eligible Receivables, (2) if more than 50% of the aggregate face
amount of Accounts Receivable owed by a Customer are aged 120 days or more, then
all Accounts Receivable owed by such Customer shall be excluded from the
category of Eligible Receivables, (3) in no case shall Eligible Receivables
include any Accounts Receivable representing or arising out of retainages,
holdbacks, progress xxxxxxxx, the final payment due under a Government Contract,
revenues recognized or costs incurred in excess of approved or allowed
reimbursement rates, cost overruns, unauthorized work or work beyond the scope
of a contract, rebillings or contracts secured by surety bonds; and (4) an
Account Receivable arising out of the sale, installation, licensing or other
disposition of Intellectual Property entitled to United States copyright, patent
or trademark protection shall not be an Eligible Receivable unless such
Intellectual Property, and an appropriately completed Intellectual Property
Assignment with respect thereto, shall be duly registered and filed with the
United States Copyright Office and the United States Patent and Trademark
Office, as applicable. If required by the Lender, no Eligible Receivable shall
be included in more than three month-end Borrowing Base calculations.
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"Equipment" means collectively and includes all of the following, whether
now owned or hereafter acquired by the Borrower: equipment and fixtures,
including, without limitation, computer hardware, computer software, computer
systems, furniture, machinery, vehicles and trade fixtures together with any and
all accessories, accessions, parts and appurtenances thereto, substitutions
therefor and replacements thereof, together with all other such items that are
included within the definitions of "equipment" and "fixtures" as set forth in
the UCC.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all regulations issued pursuant thereto.
"Existing Notes" means the promissory notes made by the Borrower and held
by the Lender that are outstanding on the date hereof, as described on Schedule
1 to this Agreement.
"Event of Default" means any of the events specified as an "Event of
Default" under this Agreement, provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition, has been satisfied.
"Foreign Customer" means a Customer that is a foreign government, an
entity organized under the laws of a country other than the United States or an
individual who is not a United States citizen.
"Fully Date Capable" means the ability to correctly process date data
(including, but not limited to, reading, producing, calculating, comparing, and
sequencing date data) from, into, and between the twentieth and twenty-first
centuries) without material degradation in performance and without unusual
intervention, including correct and continuous processing during the transition
between 1999 and 2000, and correct processing of leap years.
"GAAP" means generally accepted accounting principles consistently
applied.
"General Intangibles" means, collectively, and includes all of the
following, whether now owned or hereafter acquired by the Borrower: all property
that is included within the definition of "general intangibles" as set forth in
the UCC; choses in action, causes of action and all other intangible property of
every kind and nature, including, without limitation, corporate or other
business records, inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, good will, registrations,
copyrights, licenses, franchises, customer lists, tax refunds, tax refund
claims, rights of claims against carriers and shippers, leases and rights to
indemnification.
"Government" means the United States of America or any agency or
instrumentality thereof.
"Government Contract" means any contract with the Government under which
the Borrower is a prime contractor or a subcontractor.
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"Increased Costs" means any reserve, special deposit, capital adequacy
guideline or similar requirement relating to any extensions of credit or other
assets of the Lender, or the deposits with or other liabilities of the Lender,
that (a) is imposed as a result of any Regulatory Change or as a result of the
application of existing capital adequacy guidelines (including, without
limitation, any Regulatory Change or capital adequacy guideline that requires
that letters of credit issued, or lines of credit established, by the Lender be
classified as "risk assets" for purposes of, or otherwise be subject to the
provisions of, any capital adequacy guidelines applicable to the Lender), and
(b) increases the cost to the Lender of making, issuing or maintaining any Loan,
reduces the amount receivable by the Lender in connection with any Loan, or
reduces the rate of return on the Lender's capital as a consequence of its
obligations under this Agreement.
"Intellectual Property" means all copyrights (whether registered or
unregistered), copyright registrations, trademarks, servicemarks, patents,
patent applications and other property described as the "Collateral" in the
Intellectual Property Assignment.
"Intellectual Property Assignment" means a Collateral Assignment, Patent
Mortgage and Security Agreement, in substantially the form of Exhibit B attached
hereto, as the same may be amended, modified or supplemented from time to time.
"Interest Payment Date" means the first day of each calendar month.
"Inventory" means collectively and includes all of the following, whether
now owned or hereafter acquired by the Borrower: all goods, computer hardware,
computer software and computer systems held or intended for sale, lease,
installation or licensing by the Borrower, or furnished or to be furnished under
contracts of service, all raw materials, work in process, finished goods,
materials and supplies of every nature used or usable in connection with the
manufacture, packing, shipping, advertising or sale of any such goods, together
with all property including within the definition of "inventory" set forth in
the UCC.
"Investment Property" means all of the following, whether now owned or
hereafter acquired by the Borrower: all property that is included within the
definition of "investment property" as set forth in the UCC, including all
securities, whether certificated or uncertificated, security entitlements,
securities accounts, commodity contracts and commodity accounts, and all
financial assets held in any securities account or otherwise, and any commercial
paper, securities, repurchase agreements, deposit accounts or other instruments
or obligations purchased for the Borrower pursuant to a Cash Management
Agreement.
"LIBOR" means for each calendar month, the rate at which dollar deposits
with a one-month maturity are offered to leading banks in the London interbank
market at 11:00 a.m. (London time) on the first Business Day of such calendar
month, based on the British Bankers Association quotations published by an
On-Line Information Service, selected by the Lender, plus adjustments (expressed
as a percentage) for reserve requirements, deposit insurance
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premium assessments, broker's commissions and other regulatory costs, all of the
foregoing as determined by the Lender's Funds Management Division in accordance
with its customary practices.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement, or preferential
arrangement, charge or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
Capital Lease and the filing of any financing statement under the UCC or
comparable law of any jurisdiction to evidence any of the foregoing).
"Loans" means the loans to be made to the Borrower under this Agreement.
"Loan Documents" means this Agreement, the Revolving Note, the
Intellectual Property Assignment, any Cash Management Agreement, and any other
document now or hereafter executed or delivered in connection with the
Obligations, in evidence thereof or as security therefor, including, without
limitation, any life insurance assignment, pledge agreement, security agreement,
deed of trust, mortgage, guaranty, promissory note or subordination agreement.
"Maximum Amount" means $3,500,000; provided, however, that the Maximum
Amount shall be reduced by an amount equal to the aggregate of the undrawn
amounts of any letters of credit issued by the Lender for the account of the
Borrower and outstanding at any time.
"Net Income" means, for any Person for any period, the consolidated gross
revenues of such Person and its Subsidiaries for such period less all
consolidated operating and non-operating expenses (including taxes) of such
Person and its Subsidiaries for such period, all as determined in accordance
with GAAP.
"Obligations" means the Loans, the Revolving Note, the Existing Notes and
all other indebtedness and obligations of the Borrower under this Agreement and
the other Loan Documents, now existing or hereafter arising, of every kind and
description, direct or indirect, fixed or contingent, liquidated or
unliquidated, due or to become due, secured or unsecured, joint, several or
joint and several, as amended, modified, renewed, extended or increased from
time to time, including, without limitation, any overdrafts in any Deposit
Account maintained by the Borrower.
"On-Line Information Service" means a text line or other on-line
information service provided to the Lender by any of Reuters Information
Services, Inc., Xxxxxx-Xxxxxx Financial/Americas, Dow Xxxxx Telerate, Inc. or
Bloomberg Financial Markets News Services, or any comparable reporting service
selected by the Lender.
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"Person" means an individual, partnership, corporation, business trust,
joint stock Borrower, trust, unincorporated association, joint venture,
governmental authority, limited liability company or other entity of whatever
nature.
"Primary Operating Account" means any deposit account or controlled
disbursement account on which the Borrower draws to pay all or substantially all
of its operating expenses.
"Prime Rate" means the rate of interest established and announced from
time to time by the Lender and recorded in its Central Credit Administration
Division as its Prime Rate, it being understood and agreed that the Prime Rate
is used as a reference for fixing the lending rate on commercial loans and is
not necessarily the lowest or most favorable rate of interest charged by the
Lender on such loans.
"Principal Officer" means the President, the Chief Executive Officer or
the Chief Financial Officer of the Borrower.
"Receivables" means the Accounts Receivable and the General Intangibles.
"Regulatory Change" means any change, after the date of this Agreement, in
any federal or state laws, rules and regulations, or interpretations thereof, or
the adoption after the date of this Agreement of any rules, interpretations,
directives or requests, applying to a class of financial institutions including
the Lender, under any federal or state laws or regulations by any court or
regulatory authority charged with the interpretation or administration thereof.
"Revolving Note" means the $3,500,000 promissory note, of even date
herewith, made by the Borrower and payable to the order of the Lender, as
amended, modified or supplemented from time to time.
"State" means the State of Maryland.
"Subsidiary" as to any Person, means a corporation, partnership, limited
partnership, limited liability company or other entity of which shares of stock
or other ownership interests having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other
managers of such entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary
or Subsidiaries of the Borrower.
"Tangible Net Worth" means, at any time, amounts that would be included
under stockholders' equity on the consolidated balance sheet of the Borrower and
its Subsidiaries, provided that, in any event, such amounts are to be net of
amounts carried on the books of the Borrower and its Subsidiaries for
capitalized software costs.
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"Termination Date" means December 31, 1998, and any extension or
extensions thereof granted by the Lender in accordance with the provisions of
Section 2.1((f)) below.
"UCC" means the Uniform Commercial Code as adopted in the State, and all
amendments thereto.
SECTION 2. LOANS.
SECTION 2.1. AMOUNT AND PURPOSE.
(a) Subject to the terms and conditions of this Agreement, the Lender
may, in its sole and absolute discretion, make Loans to the Borrower from time
to time until the Termination Date in an aggregate principal amount not to
exceed at any one time outstanding the Maximum Amount. Up to the Maximum Amount,
the Borrower may borrow, repay without penalty and reborrow hereunder from the
date of this Agreement until the Termination Date; provided, however, that no
Loan will be disbursed by the Lender if, after such disbursement the aggregate
principal amount of the Loans would exceed the Borrowing Base. The Borrower
acknowledges and agrees that the Lender has no obligation to make Loans, even if
the Borrower is in compliance with all terms of the Loan Documents, and the
Lender may refuse to make a Loan at any time, and for any reason, without notice
to the Borrower.
(b) The proceeds of the Loans shall be used for short-term working
capital purposes and for no other purposes.
(c) The Borrower authorizes the Lender to make Loans from time to
time in amounts sufficient to pay checks drawn on the Borrower's operating
accounts with the Lender, subject to the limitation set forth in Section Section
2.1((a)) above, all as more particularly described in the Cash Management
Agreement. In addition, the Borrower may request that a Revolving Loan be made.
Any request for a Revolving Loan must be received by the Lender no later than
12:00 noon (Washington, D.C. time) on the date on which the Revolving Loan is to
be made. Each request must specify the amount of the Revolving Loan and, at the
option of the Lender, shall be accompanied by a current Borrowing Base
Certificate and a current Aging. The Lender, in its sole discretion, may accept
requests from the Borrower by telephone. If required by the Lender, any request
made by telephone shall include all of the information required by a current
Borrowing Base Certificate and a current Aging. Requests made by telephone shall
be confirmed in writing and delivered to the Lender, and if requested by the
Lender, accompanied by the current Borrowing Base Certificate and the current
Aging, within two Business Days after the date of the request. Loans may be
requested by those individuals designated by the Borrower from time to time in
written instruments delivered to the Lender; provided, however, that the
Borrower shall remain liable with respect to any Loan disbursed by the Lender in
good faith hereunder, even if such Loan is requested by an individual who has
not been so designated. The proceeds of each Loan will be credited to a Deposit
Account maintained with the Lender by the
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Borrower pursuant to a Cash Management Agreement. The Borrower agrees to confirm
in writing from time to time, when and as requested by the Lender, the purpose
for which the proceeds of each Loan were used.
(d) The unpaid principal balance of the Loans shall bear interest at
a rate per annum equal to LIBOR plus 2.50%. The interest rate on the Loans shall
be determined based on LIBOR in effect as of the Closing Date and shall be
adjusted on the first Business Day of each calendar month thereafter to reflect
LIBOR then in effect, with each adjustment to be effective as of the first day
of such calendar month if not a Business Day. Payments of interest on each Loan
shall be made on each Interest Payment Date, beginning on the Interest Payment
Date next succeeding the date of disbursement of such Loan.
(e) The obligation of the Borrower to repay the Loans, together with
interest thereon, shall be evidenced by the Revolving Note. The unpaid principal
balance of the Revolving Note shall be payable on demand, or if demand is not
sooner made, on the Termination Date. The Borrower acknowledges that the Lender
may demand payment at any time, even if an Event of Default has not occurred.
(f) The Lender from time to time may agree, in its sole discretion,
to extend the Termination Date or increase the amount of Loans to be provided
under this Agreement, or both. During any such periods of extension, the
remaining terms and conditions of this Agreement shall remain in full force and
effect, and the Borrower shall execute and deliver any amendments or
modifications to the Loan Documents that the Lender may require in connection
with any such extension or increase. Nothing in this Section 2.1((f)) shall
obligate the Lender to grant such extensions or to increase the amount of
credit provided under this Agreement.
SECTION 2.2. PAYMENTS AND COMPUTATIONS. All payments due under this
Agreement (including any payment or prepayment of principal, interest, fees and
other charges) or with respect to the Revolving Note or the Loans shall be made
in lawful money of the United States of America, in immediately available funds,
without defense, setoff or counterclaim, to the Lender at its office at
Commercial Loan Services, X.X. Xxx 00000, Xxxxxxxx, Xxxxxxxx 00000-0000, or at
such other place as the Lender may designate, and shall be applied first to
accrued fees, next to accrued late charges, next to accrued interest and then to
principal. If any payment of principal, interest or fees is due on a day other
than a Business Day, then the due date will be extended to the next succeeding
full Business Day and interest and fees will be payable with respect to the
extension. If any payment of principal, interest or fees is not made within ten
days of its due date, the Borrower agrees to pay to the Lender a late charge
equal to 5% of the amount of the payment; provided, however, that as long as the
Borrower makes payments of principal, interest and fees through the Lender's
automatic debit service, no late charge shall be payable if the Lender fails to
debit any such payment when it is due (if sufficient collected funds are on
deposit in the Borrower's account with the Lender), and such failure shall not
constitute an Event of Default hereunder. Upon the occurrence of an Event of
Default and during the continuation of such Event of Default, interest shall
accrue on the Loans at a per annum rate of 2% above the rate
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of interest that otherwise would be applicable. Interest and fees shall be
computed on the basis of a year of 360 days and actual days elapsed. The Lender
may, but shall not be obligated to, debit the amount of any payment due from the
Borrower under this Agreement to any deposit or investment account of the
Borrower maintained with the Lender or any Affiliate of the Lender. No setoff,
claim, counterclaim, reduction or diminution of any obligation of any defense of
any kind or nature that the Borrower has or may have against the Lender (other
than the defense of payment) shall be available against the Lender in any suit
or action brought by the Lender to enforce this Agreement or any other Loan
Document. The foregoing shall not be construed as a waiver by the Borrower of
any rights or claims that the Borrower may have against the Lender, but any
recovery upon such rights and claims shall be had from the Lender separately, it
being the intent of this Agreement and the other Loan Documents that the
Borrower shall be obligated to pay, absolutely and unconditionally, all amounts
due hereunder and under the other Loan Documents.
SECTION 2.3. INCREASED COSTS. If, as a result of any Regulatory Change or
for any other reason, the Lender incurs Increased Costs, the Borrower agrees to
pay such Increased Costs to the Lender within ten Business Days after receipt by
the Borrower of the Lender's invoice therefor. The invoice will be accompanied
by a written statement of the Lender setting forth in reasonable detail the
basis and the calculation of the Increased Costs. The Lender's calculation shall
include reasonable averaging and attribution methods to determine the Increased
Costs attributable to the Loans.
SECTION 2.4. FEES.
(a) In consideration of the expenses incurred by the Lender in
connection with administering the Loans and monitoring the Borrowing Base, the
Borrower agrees to pay to the Lender and administrative fee of $17,000, of which
$9,000 shall be paid on or prior to the Closing Date and the balance of which
shall be payable in monthly installments of $1,000 per month, due on the first
day of each month, beginning on June 2, 1998.
(b) If, prior to the Termination Date, the Borrower requests that the
Lender terminate the Credit Facility provided for in this Agreement and release
it security interest in the Collateral, the Borrower shall pay to the Lender,
upon such release, a fee equal to $35,000.
SECTION 2.5. PRIMARY DEPOSITORY RELATIONSHIP. If the Borrower fails to
maintain its Primary Operating Account with the Lender, interest shall accrue on
the Loans of the Borrower at a per annum rate of 1.0% above the rate of interest
that otherwise would be applicable, effective as of the first day following the
day on which the Borrower moves its Primary Operating Account.
SECTION 2.6. MANDATORY PREPAYMENT. The Borrower shall prepay the Loans
upon the Lender's demand therefor to the extent that the aggregate amount of
outstanding Loans exceeds the Borrowing Base at any time.
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SECTION 3. COVENANTS, REPRESENTATIONS AND OTHER TERMS REGARDING
COLLATERAL.
SECTION 3.1. SECURITY INTEREST. To secure the Obligations, the Borrower
(a) grants to the Lender, its successors and assigns, a first priority security
interest in the Accounts Receivable, the Deposit Accounts, the Equipment, the
General Intangibles, the Inventory and the Investment Property, all additions
and accessions thereto and replacements thereof, all proceeds and products
thereof, all books of account and records, including all computer software
relating thereto, all policies of insurance on any property of the Borrower and
all proceeds of such policies, and (b) shall execute and deliver to the Lender
an Intellectual Property Assignment to grant to the Lender, its successors and
assigns, a first priority security interest in all Intellectual Property now
owned or hereafter acquired by the Borrower.
SECTION 3.2. RECEIVABLES.
(a) The Borrower represents and warrants as to each and every
Eligible Receivable now existing that: (1) it is a bona fide existing
obligation, valid and enforceable against the Customer, for software installed
or licensed, goods sold or leased or services rendered in the ordinary course of
business; (2) it is subject to no dispute, defense or offset except as disclosed
in writing to the Lender; (3) all instruments, chattel paper and other evidence
of indebtedness issued to the Borrower with respect to any Eligible Receivable
have been delivered to the Lender, and, together with all supporting documents
delivered to the 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 disclosed in writing to the Lender; and (5)
it is not and shall not be subject to any prohibition or limitation upon
assignment. The Borrower covenants and agrees that each Eligible Receivable
arising after the date of this Agreement will be in conformance with the
foregoing representations.
(b) The Borrower shall immediately notify the Lender of (1) any
dispute in excess of $50,000 with a Customer and (2) the bankruptcy, insolvency,
receivership, assignment for the benefit of creditors or suspension of business
of any Customer of which the Borrower has knowledge. The Borrower shall not
compromise or discount any Receivable without the prior written consent of the
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 the
Borrowing Base to be less than the unpaid principal balance of the Loans then
outstanding.
(c) The Borrower shall establish and maintain a lockbox with the
Lender and shall direct all Customers to make payments on Receivables to such
lockbox by printing such direction on all invoices given to Customers. The
Borrower also shall remit to such lockbox or deliver to the Lender all payments
on Receivables received by the Borrower. Such payments shall be remitted or
delivered in their original form on the day of receipt. All notes, checks and
other instruments so received by the Borrower shall be duly endorsed to the
order of the Lender. The payments remitted to the lockbox and all payments
delivered to the Lender shall be credited
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to a cash collateral account maintained by the Lender in the name of the
Borrower over which the Lender shall have the exclusive power of withdrawal. All
funds in the cash collateral account shall be held as security for the
Obligations, and, after final collection, funds in the cash collateral account
shall be applied to the repayment of the Obligations.
(d) Upon the occurrence of an Event of Default, to facilitate direct
collection of the Receivables, the Lender shall have the right to take over the
post office boxes of the Borrower or make other arrangements, with which the
Borrower shall cooperate, to receive the Borrower's mail containing payments on
the Receivables.
(e) The Borrower shall execute all other agreements, instruments and
documents and shall perform all further acts that the Lender may require with
respect to Receivables owing by the Government to ensure compliance with the
Assignment of Claims Act.
SECTION 3.3. INVENTORY AND EQUIPMENT.
(a) All of the Inventory and Equipment will be kept only at the
places of business listed on Schedule 2 to this Agreement. The Borrower shall
give the Lender prior written notice before any Inventory or Equipment is moved
or delivered to a location other than such designated places of business, and
the Lender's lien and security interest will be maintained despite the location
of the Inventory or Equipment. Without the prior written consent of the Lender,
the Borrower shall not move or deliver the Inventory or Equipment to a location
outside of the United States of America.
(b) The Borrower shall keep and maintain the Equipment in good
operating condition and repair, reasonable wear and tear excepted. The Borrower
shall not permit any of the Equipment to become a fixture to any real estate
unless subordination agreements satisfactory to the Lender are obtained by any
owner or mortgagee of such real estate. The Borrower, immediately on demand
therefore by the Lender, shall deliver to the Lender any and all evidence of
ownership of any of the Equipment. None of the Equipment shall be sold,
transferred, leased or otherwise disposed of without the prior written consent
of the Lender, except for (1) sales or dispositions of obsolete Equipment, and
(2) sales or dispositions of any item of Equipment that is replaced
contemporaneously with Equipment of comparable value and utility.
(c) The Lender's security interest shall extend and attach to
Inventory that is presently in existence and is owned by the Borrower or in
which the Borrower purchases or acquires an interest at any time and from time
to time in the future, whether such Inventory is in transit or in the Borrower's
constructive, actual or exclusive occupancy or possession or not and wherever
the same may be located, including, without limitation, all Inventory that may
be located at the premises of the Borrower or upon the premises of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents, finishers,
convertors or other third parties who may have possession of the Inventory.
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(d) Upon the sale, exchange, lease or disposition of the Inventory,
the security interest of the Lender, without break in continuity and without
further formality or act, shall continue in and attach to all cash and non-cash
proceeds of such sale, exchange, lease or disposition, including Inventory
returned or rejected by Customers or repossessed by either the Borrower or the
Lender. As to any such sale, exchange, lease or disposition, the Lender shall
have all of the rights of an unpaid seller, including stoppage in transit,
replevin, detinue and reclamation.
(e) Except for licenses, sales or leases made in the ordinary course
of business and Liens permitted by this Agreement, the Borrower shall not sell,
lease, encumber, license or dispose of, or permit the sale, lease, encumbrance
or disposal of, any Inventory without the prior written consent of the Lender.
(f) The Borrower shall have the Equipment and Inventory insured
against loss or damage by fire, theft, burglary, pilferage, loss in
transportation and such other hazards as the Lender shall specify, by insurers
satisfactory to the Lender, in amounts satisfactory to the Lender and under
policies containing loss payable clauses satisfactory to the Lender. Any such
insurance policies, or evidence thereof satisfactory to the Lender, shall be
deposited with the Lender. The Borrower agrees that the Lender shall have a
security interest in such policies and the proceeds thereof, and, if any loss
should occur, the proceeds may be applied to the payment of the Obligations or
to the replacement or restoration of the Inventory or Equipment damaged or
destroyed, as the Lender may elect or direct. After the occurrence of an Event
of Default, the Lender shall have the right to file claims under any insurance
policies, to receive, receipt and given acquittance for any payments that may be
made thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect to
the collection, compromise, or settlement of any claims under any of the
insurance policies.
SECTION 3.4. DEFENSE OF COLLATERAL. The Borrower, at its expense, will
defend the Collateral against any claims or demands adverse to the Lender's
security interest and will promptly pay when due all taxes or assessments levied
against the Borrower on the Collateral.
SECTION 3.5. INFORMATION REGARDING COLLATERAL. The Borrower shall provide
the Lender such information as the Lender from time to time reasonably may
request with respect to the Collateral, including, without limitation,
statements describing, designating, identifying and evaluating all Collateral.
SECTION 3.6. PERFECTION OF SECURITY INTEREST. The Borrower shall perform
any and all steps in all relevant or appropriate jurisdictions as may be
necessary or reasonably requested by the Lender to perfect, maintain and protect
the Lender's security interest in the Collateral. All instruments and chattel
paper that are part of the Collateral shall be delivered to the Lender, duly
endorsed to the order of the Lender. The Borrower shall pay the taxes and costs
of, or incidental to, any recording or filing of any financing statements
concerning the Lender's security interests.
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The Borrower agrees that a carbon, photographic, photostatic or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement.
SECTION 3.7. POWER OF ATTORNEY. The Borrower appoints the Lender and any
officer, employee or agent of the Lender, as the Lender from time to time may
designate, as attorneys-in-fact for the Borrower to perform all actions
necessary or desirable in the discretion of the Lender to effect the provisions
of this Agreement and to carry out the intent of this Agreement, to do any act
that the Borrower is required to do pursuant to the terms of this Agreement and
to exercise such rights and powers as the Borrower might exercise with respect
to the Collateral, all at the cost and expense of the Borrower. The Borrower
agrees that neither the Lender nor any other such attorney-in-fact will be
liable for any acts of omission or commission, unless such acts were willful
misconduct or grossly negligent, nor for any error of judgment or mistake of law
or fact. This power is coupled with an interest and is irrevocable so long as
any Obligations are outstanding. The Lender agrees that it shall not be entitled
to exercise its rights under this Section 3.7 prior to the occurrence of a
Default or an Event of Default.
SECTION 3.8. LIMITATIONS ON OBLIGATIONS. It is expressly agreed by the
Borrower that, notwithstanding any other provision of this Agreement, the
Borrower shall remain liable under each Receivable and contract giving rise to
each Receivable to observe and perform all the conditions and obligations to be
observed and performed by the Borrower in accordance with and pursuant to the
terms and provisions of each such Receivable and contract. The Lender shall not
have any obligation or liability under any Receivable or contract by reason of
or arising out of this Agreement or the assignment of such Receivable or
contract to the Lender or the receipt by the Lender of any payment relating to
the Receivable pursuant to this Agreement, nor shall the Lender be required or
obligated in any manner to perform or fulfill any of the obligations of the
Borrower under or pursuant to any Receivable or contract, or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party under
any Receivable, or to present or file any claim, or to take any action to
collect or enforce any performance or the payment of any amounts that may have
been assigned to it or to which it may be entitled at any time or times.
SECTION 3.9. INDEMNIFICATION. In any suit, proceeding or action brought by
or against the Lender relating to the Collateral, the Borrower will save,
indemnify and keep the 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 any obligor thereunder, arising out of a
breach by the Borrower 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 Borrower, and all such obligations of the
Borrower shall be and remain enforceable against and only against the Borrower
and shall not be enforceable against the Lender. The foregoing obligation of the
Borrower to indemnify the Lender shall not extend to any suit, proceeding or
action arising out of the Lender's gross negligence or willful or malicious
misconduct.
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SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants that:
SECTION 4.1. INCORPORATION, GOOD STANDING AND DUE QUALIFICATION. The
Borrower (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; (b) has the
power and authority to own its assets and to transact the business in which it
is now engaged or in which it is proposed to be engaged; and (c) is duly
qualified as a foreign corporation and in good standing under the laws of each
other jurisdiction in which such qualification is required, except where such
failure to be so qualified would not have a material adverse effect on the
business operation of the Borrower. As of the date of this Agreement, the
Borrower has no Subsidiaries other than Canada and Communications. Neither
Canada nor Communications generates revenues or owns material assets.
SECTION 4.2. POWER AND AUTHORITY. The execution, delivery and performance
by the Borrower of the Loan Documents have been duly authorized by all necessary
corporate actions and do not and will not (a) require any consent or approval
of, or filing or registration with, any governmental agency or authority or the
stockholders of the Borrower; (b) contravene the Borrower's articles of
incorporation or bylaws; (c) result in a breach of or constitute a default under
any material agreement or instrument to which the Borrower is a party or by
which it or its properties may be bound or affected; (d) result in or require
the creation or imposition of any Lien upon or with respect to any of the
properties now owned or hereafter acquired by the Borrower; or (e) cause the
Borrower to be in default under any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to the Borrower.
SECTION 4.3. LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms.
SECTION 4.4. FINANCIAL STATEMENTS. The financial statements of the
Borrower that have been furnished to the Lender in connection with this
Agreement are complete and correct and fairly present the financial condition of
the Borrower as of the dates of such statements. Since the dates of such
statements, there has been no material adverse change in the condition
(financial or otherwise), business or operations of the Borrower.
SECTION 4.5. LITIGATION. There is no pending or, to the Borrower's
knowledge, threatened action or proceeding against or affecting the Borrower
before any court, governmental agency or arbitrator, that, in any one case or in
the aggregate, may affect the financial condition, operations, properties or
business of the Borrower in a materially adverse manner.
SECTION 4.6. OWNERSHIP AND LIENS. The Borrower has title to all of its
assets, including the Collateral, and none of the Collateral or such assets is
subject to any Lien, except Liens permitted by this Agreement.
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SECTION 4.7. ERISA. The Borrower has not incurred any material
"accumulated funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Code, nor has the Borrower incurred any material liability to
the PBGC in connection with any "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) established or maintained by the Borrower. None of the
employee pension benefit plans (as defined above) of the Borrower, nor any
trusts created thereunder, nor any trustee or administrator thereof, has engaged
in a "prohibited transaction," as such term is defined in Section 406 of ERISA
or Section 4975 of the Code, that could subject such plans or any of them, any
such trust, or any trustee or administrator thereof, or any party dealing with
such plans or any such trust to any material liability or tax or penalty on
prohibited transactions imposed by such Sections 406 or 4975. Neither the
Borrower nor any Affiliate of the Borrower is now, or at any time in the past
has been, obligated to make contributions to a "multiemployer plan," as such
term is defined in Section 4001(a)(3) of ERISA.
SECTION 4.8. TAXES. The Borrower has filed all tax returns (federal, state
and local) required to be filed and has paid all taxes, assessments and
governmental charges and levies thereon to be due, including interest and
penalties.
SECTION 4.9. DEBT. The Borrower is in no manner directly or contingently
obligated with respect to any Debt that is not permitted by this Agreement. The
Borrower is not in default with respect to any Debt.
SECTION 4.10. CORPORATE NAME; CHIEF EXECUTIVE OFFICE. During the five
years immediately preceding the date of this Agreement, neither the Borrower nor
any predecessor of the Borrower has used any name other than its current
corporate name and "American Computer and Electronics Corporation." The chief
executive office of the Borrower, within the meaning of Section 9.103(3)(d) of
the UCC, is now at 000 Xxxxxx Xxxxxxx Xxxx, Xxxxxxxxxxxx, Xxxxxxxx 00000. Since
April 23, 1993, the only other chief executive office of the Borrower was
maintained at 000 Xxxxx Xxxxxxx, Xxxxxxxxxxxx, Xxxxxxxx 00000.
SECTION 4.11. DEBARMENT AND SUSPENSION. No event has occurred and no
condition exists that is likely to result in the debarment or suspension of the
Borrower from any contracting with the Government, and neither the Borrower nor
any Affiliate of the Borrower has been subject to any such debarment or
suspension prior to the date of this Agreement.
SECTION 4.12. YEAR 2000. The Borrower has undertaken reasonable efforts to
determine whether all material Date Affected Information Technology used in the
business operations of the Borrower is Fully Date Capable, and, to the extent
necessary, the Borrower has initiated efforts to make its material Date Affected
Information Technology Fully Date Capable prior to the date that the failure to
be Fully Date Capable would materially and adversely affect the operation
thereof.
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SECTION 5. AFFIRMATIVE COVENANTS. The Borrower covenants and agrees that:
SECTION 5.1. MAINTENANCE OF EXISTENCE. The Borrower will preserve and
maintain its corporate existence and good standing in the jurisdiction of its
formation, and qualify and remain qualified, as a foreign corporation in each
jurisdiction in which such qualification is required, except where the failure
to be so qualified would not have a material adverse effect on the business
operations of the Borrower.
SECTION 5.2. MAINTENANCE OF RECORDS. The Borrower will keep adequate
records and books of account, in which complete entries will be made in
accordance with GAAP, reflecting all financial transactions of the Borrower. The
principal records and books of account, including those concerning the
Collateral, shall be kept at the chief executive office of the Borrower
described above. The Borrower will not move such records and books of account or
change its chief executive office or the name under which it does business
without (a) giving the Lender at least 30 days' prior written notice, and (b)
executing and delivering financing statements satisfactory to the Lender prior
to such move or change.
SECTION 5.3. MAINTENANCE OF PROPERTIES. The Borrower will maintain, keep
and preserve all of its properties (tangible and intangible) necessary or useful
in the proper conduct of its business in good working order and condition,
ordinary wear and tear excepted.
SECTION 5.4. CONDUCT OF BUSINESS. The Borrower will continue to engage in
a business of the same general type as conducted by it on the date of this
Agreement.
SECTION 5.5. MAINTENANCE OF INSURANCE. The Borrower will maintain
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated,
including, without limitation, insurance covering the Inventory and Equipment as
required hereby.
SECTION 5.6. COMPLIANCE WITH LAWS. The Borrower will comply in all
material respects with all applicable laws, rules, regulations and orders
(including, without limitation, ERISA), such compliance to include, without
limitation, paying, before the same become delinquent, all taxes, assessments
and governmental charges imposed upon it or upon its property.
SECTION 5.7. RIGHT OF INSPECTION. At any reasonable time and from time to
time, with reasonable notice, the Borrower will permit the Lender or any agent
or representative of the Lender to audit, examine and verify the Collateral,
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Borrower, and to discuss the affairs,
finances and accounts of the Borrower with any of its officers and directors and
the Borrower's independent accountants. The Borrower agrees to reimburse the
Lender for all reasonable audit and Collateral verification and examination
expenses incurred by it.
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SECTION 5.8. REPORTING REQUIREMENTS. The Borrower will furnish to the
Lender:
(a) Monthly Financial Statements of the Borrower. As soon as
available and in any event within 30 days after the end of each of the first two
monthly accounting periods during each fiscal quarter of the Borrower, and
within 45 days after the end of the last such monthly accounting period during
each fiscal quarter, unaudited financial statements consisting of consolidated
and consolidating balance sheets of the Borrower and its Subsidiaries as of the
end of such month and a consolidated and consolidating statements of income and
stockholder's equity of the Borrower and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end of
such month, all in reasonable detail and stating in comparative form the
respective consolidated figures for the corresponding date and period in the
previous fiscal year, and all prepared in accordance with the GAAP. Such
financial statements shall be certified to be accurate by a Principal Officer of
the Borrower (subject to year-end adjustments) and shall be accompanied by a
Covenant Compliance Certificate for such period;
(b) Annual Financial Statements of the Borrower. As soon as available
and, in any event, within 90 days after the end of each fiscal year of the
Borrower, audited financial statements consisting of the consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries as of the end
of such fiscal year, and consolidated and consolidating statements of income,
stockholders' equity and cash flows of the Borrower and its Subsidiaries for
such fiscal year, all in reasonable detail and all prepared in accordance with
GAAP, accompanied by an opinion thereon acceptable to the Lender of Price
Waterhouse LLP, or any other independent certified public accounting firm
selected by the Borrower and acceptable to the Lender;
(c) Management Letters. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower by independent certified public accountants in
connection with examination of the financial statements of the Borrower made by
such accountants;
(d) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower, that, if determined adversely to the Borrower,
could have a material adverse effect on the financial condition, properties or
operations of the Borrower;
(e) Notice of Defaults and Events of Default. As soon as possible
and, in any event, within ten days after the occurrence of each Default and
Event of Default, a written notice setting forth the details of such Default or
Event of Default and the action that is proposed to be taken by the Borrower
with respect thereto;
(f) Proxy Statements, etc. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements and reports that
the Borrower sends to its stockholders, other than routine notices concerning
the annual meetings of the Borrower;
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(g) Borrowing Base Certificate and Receivables Detail. As soon as
available and, in any event, (1) within 15 days after the end of each calendar
week, a Borrowing Base Certificate appropriately completed and executed by a
Principal Officer of the Borrower and including a computation of the Borrowing
Base as of the last day of such calendar week, and (2) within 30 days after the
end of each monthly accounting period, (i) an Aging as of the last day of the
previous monthly accounting period, (ii) such other supporting documents as the
Lender from time to time reasonably may request, and (iii) such invoices,
instruments, chattel paper and other evidence of indebtedness representing any
Receivables, duly endorsed to the Lender, as the Lender may request; and (iv) an
unbilled Receivables report and a contract backlog report reflecting all
contracts of the Borrower, each as of the end of the previous monthly accounting
period and each in form and detail acceptable to the Lender. A copy of each item
described in this Section 5.8((g)) shall be delivered within the deadline
specified (A) to the Lender's Government Contracts Administration Division at
0000 Xxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxxxx, Xxxxxxxx 00000-0000, Attention: Xxxxx
Xxxxxxx, and (B) to Xxxxxx X. Xxxxxxx, Xx., at the address specified in Section
9.3 below;
(h) Customer List. If required by the Lender, within 90 days after
the end of each fiscal quarter of the Borrower, a current Customer List;
(i) Tax Returns. As soon as available and, in any event within 10
Business Days of filing, copies of the filed federal income tax returns of the
Borrower; and
(j) General Information. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower as the Lender
from time to time reasonably may request.
SECTION 5.9. YEAR 2000 COMPLIANCE. The Borrower shall initiate and
maintain a program to identify any Date Affected Information Technology used in
the business operations of the Borrower that is not Fully Date Capable, and, in
connection therewith, undertake in good faith to make all material Date Affected
Information Technology used in such business operations Fully Date Capable prior
to the date that the failure to be Fully Date Capable would adversely affect the
operation thereof. The Borrower shall advise the Lender in the event that the
Borrower has reason to believe that any material Date Affected Information
Technology will not be Fully Date Capable prior to the date that the failure to
be Fully Date Capable would adversely affect the operation thereof, and advise
the Lender in the event that the Borrower has reason to believe that it will be
adversely affected by the failure of any affiliated or nonaffiliated entity to
have its Date Affected Information Technology Fully Date Capable. The Borrower
agrees to provide the Lender, upon request, access to and copies of information
necessary to permit the Lender to determine whether the Borrower's Date Affected
Information Technology is, or will be, Fully Date Capable, including, without
limitation, (i) minutes, resolutions and reports to and from the Borrower's
Board of Directors or committee thereof, (ii) internally generated reports,
consultant reports or auditor's reports regarding the status of the Borrower's
Date Affected Information Technology, (iii) all documents relating to a "Year
2000" program, and (iv) officer
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certificates or other statements requested by the Lender regarding the status of
Date Affected Information Technology. The Borrower acknowledges that the
Lender's right to receive, or the Lender's receipt of, the foregoing information
does not impose any obligation on the Lender to assess the accuracy or effect of
such information, or to recommend or require remedial action of any kind. The
Borrower hereby acknowledges that the actual or potential failure or degradation
of any material Date Affected Information Technology due to its failure to be
Fully Date Capable may constitute a material adverse change in the Borrower's
business or financial condition.
SECTION 6. NEGATIVE COVENANTS. The Borrower agrees that, without first
obtaining the prior written consent of the Lender:
SECTION 6.1. LIENS. The Borrower will not create, incur, assume or permit
to exist, any Lien upon or with respect to any of their properties, now owned or
hereafter acquired, except: (a) Liens in favor of the Lender; (b) Liens that are
incidental to the conduct of the business of the Borrower, are not incurred in
connection with the obtaining of credit and do not materially impair the value
or use of assets of the Borrower; and (c) purchase-money Liens, whether now
existing or hereafter arising (including those arising out of a Capital Lease)
on any fixed assets provided that (1) any property subject to a purchase-money
Lien is acquired by the Borrower in the ordinary course of its respective
business and the Lien on any such property is created contemporaneously with
such acquisition, (2) each such Lien shall attach only to the property so
acquired, (3) the Debt secured by all such Liens shall not exceed the aggregate
at any time outstanding $100,000.
SECTION 6.2. DEBT. The Borrower will not create, incur, assume or permit
to exist, any Debt, except: (a) the Obligations; (b) Debt of the Borrower
subordinated to the Obligations on terms satisfactory to the Lender; (c)
ordinary trade accounts payable; and (d) Debt of the Borrower (including Debt
arising out of a Capital Lease) secured by purchase-money Liens permitted by
this Agreement.
SECTION 6.3. MERGERS, ETC. The Borrower will not merge or consolidate with
any Person.
SECTION 6.4. SALE AND LEASEBACK. The Borrower will not sell, transfer or
otherwise dispose of, any real or personal property to any Person and
thereafter, directly or indirectly, lease back the same or similar property.
SECTION 6.5. DIVIDENDS AND DISTRIBUTIONS. The Borrower will not declare or
pay any dividends or distributions; or purchase, redeem, retire or otherwise
acquire for value any of its capital stock now or hereafter outstanding; or make
any distribution of assets to its stockholders as such whether in cash, assets
or obligations of the Borrower; or allocate or otherwise set apart any sum for
the payment of any dividend or distribution on, or for the purchase, redemption
or retirement of, any shares of its capital stock; or make any other
distribution by reduction of capital or otherwise in respect of any shares of
its capital stock.
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SECTION 6.6. SALE OF ASSETS. The Borrower will not sell, lease, assign,
transfer or otherwise dispose of, any of its now owned or hereafter acquired
assets, except for (a) Inventory sold or leased in the ordinary course of
business and (b) the sale or other disposition of assets other than Inventory no
longer used or useful in the conduct of its business and not exceeding $100,000
in the aggregate for the Borrower during any fiscal year.
SECTION 6.7. LOANS. The Borrower will not make any loan or advance to any
Person, or purchase any notes or other Debt issued by any Person, except for
travel advances or other advances in an aggregate amount not to exceed $100,000
at any one time outstanding, which are made to any employee of the Borrower in
the ordinary course of the Borrower's business and in furtherance of such
employee's performance under a contract with a Customer.
SECTION 6.8. GUARANTIES, ETC. The Borrower will not assume, guarantee,
endorse or otherwise be or become directly or contingently responsible or liable
(including, but not limited to, any liability arising out of any agreement to
purchase any obligation, stock, assets, goods or services, or to supply or
advance any funds, assets, goods or services, or to maintain or cause such
Person to maintain a minimum working capital or net worth or otherwise to assure
the creditors of any Person against loss) for obligations of any Person, or
permit any such guaranties or liabilities to exist, except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
SECTION 6.9. ACQUISITIONS. The Borrower will not form or acquire a
Subsidiary, become a partner or joint venturer with any person, or purchase or
acquire all or substantially all of the assets of any Person, or any capital
stock of, ownership interest in or equity securities issued by any other Person.
The Borrower will not permit Canada or Communications to generate revenues or
own assets without the Lender's consent. If the Lender consents to the
acquisition or formation of a Subsidiary by the Borrower, or to the generation
of revenues or ownership of assets by Canada or Communications, the Borrower
will cause such Subsidiary to (a) execute and deliver to the Lender a written
instrument, in form and substance satisfactory to the Lender, pursuant to which
such Subsidiary shall (1) become jointly and severally with the Borrower liable
for all of the Obligations, (2) grant a security interest to the Lender in all
of its assets on the same terms as are set forth in this Agreement and the
Intellectual Property Assignment, and (3) agrees to perform, observe and comply
with all of the representations, warranties, covenants and agreements contained
in the Loan Documents, and (b) satisfy all of the conditions set forth in
Section 7.1 as though such conditions were applicable to such Subsidiary.
SECTION 6.10. TRANSACTIONS WITH AFFILIATES. The Borrower will not enter
into any transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any Affiliate, except
in the ordinary course of and pursuant to the reasonable requirements of the
Borrower's business and upon fair and reasonable terms no less favorable to the
Borrower than would be applicable in a comparable arm's-length transaction with
a Person not an Affiliate.
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SECTION 6.11. TANGIBLE NET WORTH. The Borrower shall not permit, as of the
end of each of its fiscal quarters, Tangible Net Worth to be less than
$13,400,000.
SECTION 6.12. NET INCOME. The Borrower shall not permit its Net Income for
any fiscal quarter, beginning with the fiscal quarter ending on June 30, 1998,
to be less than $0.00.
SECTION 7. CONDITIONS OF LENDING. The making of the Loans shall be subject
to the following conditions:
SECTION 7.1. CONDITIONS PRECEDENT TO CLOSING. The initial disbursement
of the Loans shall be subject to the following conditions precedent:
(a) The Loan Documents shall have been appropriately completed, duly
executed by the parties thereto, recorded where necessary and delivered to the
Lender.
(b) No Default or Event of Default shall have occurred and be
continuing.
(c) All representations and warranties contained herein shall be true
and correct in all material respects at the Closing Date.
(d) All legal matters incident to the Loans shall be reasonably
satisfactory to counsel for the Lender, and the Borrower agrees to execute and
deliver to the Lender such additional documents and certificates relating to the
Loans as the Lender reasonably may request.
(e) Financing statements in form and substance satisfactory to the
Lender shall have been properly filed in each office where necessary to perfect
the Lender's security interest in the Collateral, termination statements shall
have been filed with respect to any other financing statements covering all or
any portion of the Collateral and all taxes and fees with respect to such
recording and filing shall have been paid by the Borrower.
(f) All Intellectual Property subject to United States copyright,
patent or trademark protection, and an Intellectual Property Assignment with
respect thereto, shall have been duly registered with the United States Patent
and Trademarks Office or the Register of Copyrights, as applicable, and the
Lender shall have received a search report confirming that it has a perfected
first priority lien with respect thereto.
(g) The Borrower shall have delivered to the Lender (1) certified
copies of evidence of all corporate action taken by the Borrower to authorize
the execution and delivery of the Loan Documents, (2) certified copies of the
article of incorporation and bylaws of the Borrower, (3) a certificate of
incumbency for the officers of the Borrower executing the Loan Documents, (4) a
good standing certificate, dated not more than 30 days prior to the Closing
Date, from the appropriate state official of any state in which the Borrower is
incorporated or
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qualified to do business, and (5) such additional supporting documents as the
Lender or counsel for the Lender reasonably may request.
(h) The Lender shall have received (1) a Borrowing Base Certificate,
(2) an Aging, and (3) the financial statements of the Borrower for the period
ended on March 31, 1998.
(i) The Lender shall have received a field examination report of the
Collateral in form and substance acceptable to it.
(j) If required by the Lender, it shall have received the written
opinion of counsel to the Borrower, in form and substance satisfactory to the
Lender.
(k) The Lender shall have received financing statement, judgment and
tax lien searches reflecting that there are no Liens outstanding against the
Collateral other than those permitted by the Agreement.
SECTION 7.2. CONDITIONS PRECEDENT TO SUBSEQUENT DISBURSEMENTS. The
disbursement and issuance of subsequent Loans shall be subject to the following
conditions precedent:
(a) No Default or Event of Default shall have occurred and be
continuing.
(b) No material adverse change shall have occurred in the financial
condition of the Borrower since March 31, 1998.
(c) All representations and warranties shall be true and correct in
all material respects at the date of such disbursement.
(d) No change shall have occurred in any law or regulations
thereunder or interpretations thereof that, in the opinion of counsel for the
Lender, would make it illegal for the Lender to make Loans hereunder.
(e) If required by the Lender, the Borrower shall have delivered to
the Lender a current Borrowing Base Certificate and a current Aging, duly
executed by the president or treasurer of the Borrower and appropriately
completed, and such other supporting data and documentation relating to the
Collateral as may be required by the Lender in its reasonable discretion.
SECTION 8. DEFAULT.
SECTION 8.1. EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
(a) Failure of the Borrower to pay any Obligation to the Lender,
including, without limitation, the principal of or interest on the Revolving
Note or the Loans, when the
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same shall become due and payable, whether at maturity, or otherwise, and such
failure shall continue for a period of ten days after written notice to the
Borrower from the Lender, which may be a computer generated late payment notice;
or
(b) If the Borrower refuses to permit the Lender to inspect, examine,
verify or audit the Collateral in accordance with the provisions of this
Agreement; or
(c) Failure of the Borrower to perform or observe any covenant
contained in Section 6 of this Agreement; or
(d) Failure of the Borrower to perform or observe any other term,
condition, covenant, warranty, agreement or other provision contained in this
Agreement (except any such failure resulting in the occurrence of another Event
of Default described in this Section), within 30 days after the earlier of
actual knowledge thereof by the Borrower or written notice from the Lender to
the Borrower specifying such failure; or
(e) If any representation or warranty made or deemed made by the
Borrower in this Agreement, any Loan Document or any statement or representation
made in any certificate, report or opinion delivered pursuant to this Agreement
(including any Borrowing Base Certificate or financial statements) or in
connection with any borrowing under this Agreement was materially untrue or is
breached in any material respect; or
(f) If, as a result of default, any other obligation of the Borrower
for the payment of any Debt becomes or is declared to be due and payable prior
to the expressed maturity thereof, unless and to the extent that the declaration
is being contested in good faith in a court of appropriate jurisdiction; or
(g) The Borrower makes an assignment for the benefit of creditors,
files a petition in bankruptcy, petitions or applies to any tribunal for any
receiver or any trustee of the Borrower or any substantial part of its property,
or commences any proceeding relating to the Borrower under any reorganization,
arrangement, readjustments of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or
(h) If, within 60 days after the filing of a bankruptcy petition or
the commencement of any proceeding against the Borrower seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation, the
proceeding shall not have been dismissed, or, if, within 60 days after the
appointment, without the consent or acquiescence of the Borrower, of any
trustee, receiver or liquidator of the Borrower or of all or any substantial
part of the properties of the Borrower, the appointment shall not have been
vacated; or
(i) Any judgment against the Borrower in excess of $50,000 or any
attachment in excess of $50,000 against any property of the Borrower that
remains unpaid,
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undischarged, unbonded or undismissed for a period of 30 days, unless and to the
extent that the judgment or attachment is appealed in good faith in a court of
higher jurisdiction and the appeal remains pending; or
(j) If the Lender, in good faith, deems itself insecure or determines
that material adverse change has occurred in the financial or business condition
of the Borrower, and the cause for such determination is not cured to the
Lender's satisfaction within 30 days after notice from the Lender to the
Borrower specifying the Lender's basis therefor; or
(k) The dissolution, liquidation or termination of existence of the
Borrower; or
(l) If the Borrower fails to give the Lender any notice required by
this Agreement within ten days after the occurrence of the event giving rise to
the obligation to give such notice, provided that such failure to give notice
shall not constitute an Event of Default if the applicable Event of Default or
breach is cured within any grace period that otherwise would have been
applicable had the notice been timely given; or
(m) If there is a material change in the executive management of the
Borrower that is not acceptable to the Lender; or
(n) The occurrence of an event of default under any other Loan
Document and the expiration of all applicable cure periods.
SECTION 8.2. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of
Default, the following provisions shall be applicable:
(a) The Lender, at its option, may terminate its obligation to make
Loans under this Agreement and declare all Obligations, whether incurred prior
to, contemporaneous with or subsequent to the date of this Agreement, and
whether represented in writing or otherwise, immediately due and payable and may
exercise all of its rights and remedies against the Borrower and any Collateral.
(b) The Lender may foreclose its lien and security interest in the
Collateral in any way permitted by law and shall have, without limitation, the
remedies of a secured party under the UCC. The Lender may enter the premises of
the Borrower without legal process and without incurring liability to the
Borrower and remove the Collateral to such place or places as the Lender may
deem advisable, or the Lender may require the Borrower to assemble the
Collateral and make the Collateral available to the Lender at a convenient place
and, with or without having the Collateral at the time or place of sale, the
Lender may sell or otherwise dispose of all or any part of the Collateral
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, for cash
or for credit, at any time or place, in one or more sales and upon such terms
and conditions as the Lender may elect. The Lender shall give not less than ten
Business Days' prior
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written notice to the Borrower of the time and place of any public sale of the
Collateral or the time after which the Collateral may be sold in a private sale,
which the Borrower agrees constitutes commercially reasonable notice. At any
such sale the Lender may be the purchaser, subject to the applicable provisions
of the UCC.
(c) The proceeds from any sale of the Collateral by the Lender shall
first be applied to any costs and expenses in securing possession of the
Collateral and to any expenses in connection with the sale. The net proceeds
will be applied toward the payment of the Obligations. Application of the net
proceeds as to particular Obligations or as to principal, interest and fees
shall be in the Lender's absolute discretion. Any deficiency will be paid to the
Lender by the Borrower forthwith upon demand, and any surplus will be paid to
the Borrower, as applicable.
(d) To the extent that the Obligations are now or hereafter secured
by property other than the Collateral described herein or by the guarantee,
endorsement or property of any other Person, the Lender shall have the right to
proceed against such other guarantee, endorsement or property upon the
occurrence of an Event of Default, and the Lender shall have the right, in its
sole discretion, to determine which rights, security, liens, security interests
or remedies the Lender shall at any time pursue, relinquish, subordinate, modify
or take any other action with respect thereto, without in any way modifying or
affecting any of them or any of the Lender's rights hereunder.
(e) The Lender is hereby authorized at any time or from time to time,
without notice to the Borrower (any such notice being expressly waived by the
Borrower), to setoff and apply any deposit (general or special, time or demand,
provisional or final) or investment account at any time held, including any
certificate of deposit, and other indebtedness at any time owed by the Lender or
any of its affiliates, whether or not any such deposit or indebtedness is then
due, to or for the credit or account of the Borrower against any and all of the
Obligations.
(f) THE BORROWER, HAVING KNOWLEDGE THAT IT MAY BE ENTITLED TO NOTICE
AND A HEARING PRIOR TO REPOSSESSION OF THE COLLATERAL, WAIVES ANY RIGHT THAT IT
MAY HAVE UNDER EXISTING OR FUTURE LAW TO NOTICE OF FORECLOSURE AND ANY OTHER ACT
DESCRIBED HEREIN, 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 THE
LENDER PRIOR TO SUCH HEARING, OTHER THAN THE NOTICES REQUIRED BY THE LOAN
DOCUMENTS OR THE UCC. THE LENDER AND THE BORROWER EXPRESSLY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
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(g) The Lender itself may perform or comply, or otherwise cause
performance or compliance, with the obligations of the Borrower contained in
this Agreement, including, without limitation, the obligations of the Borrower
to defend and insure the Collateral. The expenses of the Lender incurred in
connection with such performance or compliance, together with interest thereon
at the Prime Rate plus 2%, shall be payable by the Borrower to the Lender on
demand and shall constitute Obligations.
SECTION 9. MISCELLANEOUS.
SECTION 9.1. COLLECTION COSTS. The Borrower shall pay all of the
reasonable costs and expenses incurred by the Lender in connection with the
enforcement of this Agreement and the other Loan Documents, including, without
limitation, reasonable attorneys' fees and expenses.
SECTION 9.2. MODIFICATION AND WAIVER. Except for the other documents
expressly referred to in this Agreement, this Agreement contains the entire
agreement between the parties and supersedes all prior agreements between the
Lender and the Borrower concerning the subject matter hereof. No modification or
waiver of any provision of this Agreement or any other Loan Document and no
consent by the Lender to any departure therefrom by the Borrower shall be
effective unless such modification or waiver shall be in writing and signed by
an officer of the Lender with a title of vice president or any higher office,
and the same shall then be effective only for the period and on the conditions
and for the specific instances and purposes specified in such writing. No notice
to or demand on the Borrower in any case shall entitle the Borrower to any other
or further notice or demand in similar or other circumstances. No failure or
delay by the Lender in exercising any right, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies of the Lender contained in
this Agreement and the other Loan Documents are cumulative and not exclusive of
any rights or remedies otherwise provided by law.
SECTION 9.3. NOTICES. All notices, requests, demands or other
communications provided for in this Agreement (except for requests for Loans
made by telephone as described in Section 2.1 above) shall be in writing and
shall be delivered by hand, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, to the Lender, at Crestar Bank, 0000
Xxxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxx, Xx., or
to the Borrower at 000 Xxxxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxxx
00000, Attention: Xxxxxx X. Xxxxxxx, Vice President and Chief Financial Officer.
Any notice, request, demand or other communication delivered or sent in the
foregoing manner shall be deemed given or made (as the case may be) upon the
earliest of (a) the date it is actually received, (b) the business day after the
day on which it is delivered by hand, (c) the business day after the day on
which it is properly delivered to Federal Express (or a comparable overnight
delivery service), or (d) the third business day after the day on which it is
deposited in the United States mail. The Borrower or the Lender may
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change its address by notifying the other party of the new address in any manner
permitted by this Section 9.3. Rejection or other refusal to accept or the
inability to deliver because of a changed address of which no notice was given
shall not affect the date of such notice, election or demand sent in accordance
with the foregoing provisions.
SECTION 9.4. COUNTERPARTS. This Agreement may be executed by the parties
hereto individually or in any combination, in one or more counterparts, each of
which shall be an original and all of which together constitute one and the same
agreement.
SECTION 9.5. CAPTIONS. The captions of the various sections and paragraphs
of this Agreement have been inserted only for the purposes of convenience; such
captions are not a part of this Agreement and shall not be deemed in any manner
to modify, explain, enlarge or restrict any of the provisions of this Agreement.
SECTION 9.6. SURVIVAL OF AGREEMENTS. All agreements, representations and
warranties made herein shall survive the delivery of this Agreement and the
making and renewal of the Loans hereunder.
SECTION 9.7. FEES AND EXPENSES. Whether or not any Loans are made
hereunder, the Borrower shall pay on demand all reasonable out-of-pocket costs
and expenses incurred by the Lender in connection with the preparation,
negotiation, execution, delivery, filing, recording and enforcement of this
Agreement and any of the documents executed or delivered in connection herewith,
including, without limitation, the reasonable fees and expenses of counsel to
the Lender, and local counsel who may be retained by the Lender, with respect to
this Agreement and such documents and any amendments thereof and with respect to
advising the Lender as to its rights and responsibilities thereunder.
SECTION 9.8. USE OF DEFINED TERMS. All terms defined in this Agreement
shall have the defined meanings when used in certificates, reports or other
documents made or delivered pursuant to this Agreement, unless the context shall
otherwise require.
SECTION 9.9. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and bind the respective parties hereto and their successors and
assigns; provided, however, that no Borrower may assign its rights hereunder
without the prior written consent of the Lender.
SECTION 9.10. ACCOUNTING TERMS. All accounting terms used herein that are
not otherwise expressly defined in this Agreement shall have the meanings
respectively given to them in accordance with GAAP in effect on the date of this
Agreement. Except as otherwise provided herein, all financial computations made
pursuant to this Agreement shall be made in accordance with GAAP and all balance
sheets and other financial statements shall be prepared in accordance with GAAP.
Except as otherwise provided herein, whenever reference is made in any provision
of this Agreement to a balance sheet or other financial statement or financial
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computation with respect to the Borrower, such terms shall mean a consolidated
balance sheet or other financial statement or financial computation, as the case
may be, with respect to the Borrower and its Subsidiaries.
SECTION 9.11. CONFIDENTIALITY. Except as otherwise provided by applicable
law, the Lender shall utilize all non-public information obtained pursuant to
the requirements of this Agreement which has been identified as confidential or
proprietary by the Borrower in accordance with its customary procedure for
handling confidential information of this nature and in accordance with safe and
sound banking practices but in any event may make disclosure: (a) to any of its
affiliates (provided they shall agree to keep such information confidential in
accordance with the terms of this Section); (b) as reasonably required by any
bona fide assignee, participant or other transferee in connection with the
contemplated transfer of any Loan or participations therein (provided they shall
agree to keep such information confidential in accordance with the terms of this
Section); (c) as required by any governmental authority or representative
thereof or pursuant to legal process; (d) to the Lender's independent auditors,
counsel and other professional advisors (provided they shall be notified of the
confidential nature of the information); and (e) after the happening and during
the continuance of an Event of Default, to any other Person, in connection with
the exercise by the Lender of rights hereunder or under any of the other Loan
Documents.
SECTION 9.12. INTERPRETATION. This Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the laws of the State of Maryland, without reference to conflict
of laws principles.
SECTION 9.13. NATURE OF CREDIT FACILITY. The Borrower acknowledges and
agrees that the enumerated Events of Default are merely examples of the types of
occurrences that may cause the Lender to make a demand for payment or to refuse
to make a Loan, and neither they nor any other provision of this Agreement shall
limit the Lender's rights to demand payment or refuse to make a Loan whenever it
chooses.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Borrower and the Lender have caused this Agreement
to be signed by their duly authorized representatives all as of the day and year
first above written.
LENDER:
CRESTAR BANK,
a Virginia banking corporation
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
BORROWER:
ACE*COMM CORPORATION,
a Maryland corporation
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
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LIST OF SCHEDULES & EXHIBITS
Exhibit A - Covenant Compliance Certificate
Exhibit B - Intellectual Property Assignment
Schedule 1 - Existing Notes
Schedule 2 - Equipment and Inventory Locations
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EXHIBIT A
COVENANT COMPLIANCE CERTIFICATE
In connection with the terms of the Loan and Security Agreement, dated as
of April 23, 1998 (as amended, supplemented or modified from time to time, the
Agreement), between ACE*COMM Corporation, a Maryland corporation (the Borrower)
and Crestar Bank, a Virginia banking corporation (the Lender), the undersigned
certifies that the following information is true and correct as of the date of
this Covenant Compliance Certificate:
1. No Default or Event of Default has occurred and is continuing;
2. Tangible Net Worth as of _______________________ was $__________,
calculated as follows:
3. Net Income for the fiscal quarter ended on ________________ was
$__________, calculated as follows:
Capitalized terms used in this Covenant Compliance Certificate shall have
the same meanings as those assigned to them in the Agreement. The foregoing is
true and correct as of _______________, 19___.
Dated ______________, 19___.
---------------------------------
Name:
---------------------------
Title:
---------------------------
34
SCHEDULE 1
EXISTING NOTES
DATE ORIGINAL AMOUNT
---- ---------------
June 27, 1997 $1,000,000
May 16, 1996 $80,000
January 2, 1996 $50,000
April 29, 1994 $323,493.19
35
SCHEDULE 2
EQUIPMENT AND INVENTORY LOCATIONS
