LOAN AND SECURITY AGREEMENT
June 29, 1999
This Loan and Security Agreement (as amended, supplemented
or modified from time to time, this "Agreement"), is between
HADRON, INC., a New York corporation, AVENUE TECHNOLOGIES, INC.,
a Virginia corporation, VAIL RESEARCH AND TECHNOLOGY CORPORATION,
a Virginia corporation, SYCOM SERVICES, INC., a Delaware
corporation, and ENGINEERING & INFORMATION SERVICES, INC., a
Virginia corporation (hereinafter individually and collectively
called the "Borrower") and UNITED BANK, a Virginia banking
corporation (hereinafter called the "Bank").
I. DEFINITIONS.
(A) As used herein, the terms "Default", "Loan
Documents" and other terms defined in the Notes shall have their
defined meanings herein as set forth in the Notes, and the
following terms shall have the following meanings:
"Account Debtor" means, with respect to any Receivable or
Other Intangible, any Person obligated to make payment
thereunder, including without limitation any account debtor
thereon.
"Advances" has the meaning set forth in Section II(A).
"Affiliate" means (i) any person that directly, or
indirectly through one or more intermediaries, controls the
Borrower (a "Controlling Person") or (ii) any person (other than
the Borrower) which is controlled by or is under common control
with a Controlling Person. As used herein, the term "control"
means possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, by contract,
or otherwise.
"Available Credit" means that amount (which must be a
positive number) obtained by subtracting the outstanding
principal balance of the Revolving Note from the Commitment.
"Billed Accounts" means Receivables for which a xxxx has
been rendered to the Account Debtor and which are unpaid for no
more than (i) ninety (90) days from the date of the original
xxxx, in the case of Eligible Assigned Government Accounts and
Eligible Other Government Accounts, and (ii) sixty (60) days from
the date of the original xxxx, in the case of Eligible Commercial
Accounts.
"Borrowing Base" means, without duplication, the sum of (i)
90% of the Net Unpaid Balance of Eligible Assigned Government
Accounts, (ii) 85% of the Net Unpaid Balance of Eligible Other
Government Accounts, (iii) 75% of the Net Unpaid Balance of
Eligible Commercial Accounts, and (iv) 50% of the Net Unpaid
Balance of Eligible Unbilled Accounts. No item of Collateral
will be included in the Borrowing Base unless the Bank has a
valid and perfected first priority Lien on it.
"Borrowing Base Certificate" has the meaning set forth in
Section II(A)(5).
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in Virginia are authorized to
close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning set forth in Section III(A).
"Commitment" means the lesser of (i) the Principal Sum and
(ii) the Borrowing Base.
"Commitment Period" means the period from and including the
Effective Date to but excluding the Date of Maturity.
"Consolidated Subsidiary" means at any date any Subsidiary
or other entity the accounts of which would be consolidated with
those of the Borrower in its consolidated financial statements as
of such date.
"Date of Maturity" has the meaning set forth in the
Revolving Note.
"Debt" has the meaning set forth in Section VI(A)(1).
"Effective Date" means the date on which the Bank receives a
fully completed and executed copy of this Agreement.
"Eligible Accounts" means such Billed Accounts, or Unbilled
Accounts, as the case may be, for goods delivered or services
rendered owing to the Borrower as the Bank, in its reasonable
discretion, shall from time to time elect to consider Eligible
Accounts for purposes of this Agreement. Without limiting the
discretion of the Bank to consider any such accounts not to be
Eligible Accounts, and by way of example only of the types of
accounts that the Bank may consider not to be Eligible Accounts,
the Bank may consider the following classes of accounts not to be
Eligible Accounts:
(i) accounts arising out of sales that are not in the
ordinary course of the business of the Borrower;
(ii) accounts on terms other than those normal or
customary in the business of the Borrower;
(iii) accounts owing from any person that is an
Affiliate of the Borrower unless arising in the ordinary
course of business conducted on an arm's-length basis;
(iv) accounts of any account debtor if any portion
of such accounts are unpaid more than 60 days after the date
of the original xxxx;
(v) accounts, the liability for which has
been disputed by the Account Debtor;
(vi) accounts owing from any person that shall
file or have filed against it a petition or other pleading
under any bankruptcy, reorganization, arrangement,
insolvency, liquidation or similar law for the relief of
debtors;
(vii) accounts owing from any person that is also a
supplier to or creditor of the Borrower;
(viii) accounts arising out of sales to an Account
Debtor outside the United States, unless the account is (A)
fully backed by an irrevocable letter of credit containing
terms acceptable to the Bank issued by a financial
institution satisfactory to the Bank or (B) on terms
acceptable to the Bank;
(ix) accounts arising out of sales on a xxxx-and-
hold guaranteed sale, sale-and-return, sale on approval or
consignment basis or subject to any right of return, set-off
or charge-back;
(x) accounts, the full and timely collection
of which the Bank, in its sole judgment, believes to be
doubtful; and
(xi) accounts in respect of which this Agreement
does not or has ceased to create a valid and perfected first
priority Lien in favor of the Bank.
"Eligible Commercial Accounts" means Eligible Accounts that
are Billed Accounts owing from Account Debtors other than the
United States or a state or local Government.
"Eligible Assigned Government Accounts" means Eligible
Accounts that are Billed Accounts owing from the United States or
a state or local Government and where (i) the contract price
giving rise to the account is $500,000 or more, and (ii) the
Borrower has satisfied the requirements of the Assignment of
Claims Act of 1940, as amended, and any similar state legislation
in respect thereof and the Bank is satisfied as to the absence of
set-offs, counterclaims and other defenses to payment on the part
of the United States or such state Government.
"Eligible Other Government Accounts" means Eligible Accounts
that are Billed Accounts owing from (i) the United States or a
state or local Government and which are not Eligible Assigned
Government Accounts, or (ii) a prime contractor with an agency,
department or instrumentality of the United States or any state
Government in the United States.
"Eligible Unbilled Accounts" means Eligible Accounts that
are Unbilled Accounts.
"Equipment" means all equipment now owned or hereafter
acquired by the Borrower, including all items of machinery,
equipment, furnishings and fixtures of every kind, whether
affixed to real property or not, as well as all automobiles,
trucks and vehicles of every description, trailers, handling and
delivery equipment, all additions to, substitutions for,
replacements of or accessions to any of the foregoing, all
attachments, components, parts (including spare parts) and
accessories whether installed thereon or affixed thereto and all
fuel for any thereof.
"GAAP" means generally accepted accounting principles in the
United States.
"Government" means any Federal, state or local government,
authority, agency, court or other body, officer or entity, and
any arbitrator with authority to bind a party at law.
"Inventory" means all inventory now owned or hereafter
acquired by the Borrower, including (i) all goods and other
personal property which are held for sale or lease or are
furnished or are to be furnished under a contract of service or
which constitute raw materials, work in process or materials used
or consumed or to be used or consumed in the Borrower's business,
(ii) all inventory, wherever located, evidenced by negotiable and
non-negotiable documents of title, warehouse receipts and bills
of lading, (iii) all of the Borrower's rights in, to and under
all purchase orders now owned or hereafter received or acquired
by it for goods or services and (iv) all rights of the Borrower
as an unpaid seller, including rescission, replevin, reclamation
and stopping in transit.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in
respect of such asset. For the purposes of this Agreement, the
Borrower shall be deemed to own subject to a Lien any asset which
it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or
other title retention agreement relating to such asset.
"Lockbox Agreement" means that certain Lockbox Agreement of
even date between the Borrower and the Bank, as such agreement
may be supplemented, amended or modified from time to time.
"Net Unpaid Balance" means at any date the unpaid balance of
an Eligible Account at such date not including any unearned
finance charges, late payment charges or other similar charges,
or any extension, service or collection fees in respect thereof.
"Note" means the Term Note or the Revolving Note, and
"Notes" means both of said notes.
"Obligations" means (i) all amounts now or hereafter payable
by the Borrower to the Bank on the Notes, (ii) all other
obligations or liabilities now or hereafter payable by the
Borrower pursuant to this Agreement, (iii) all obligations and
liabilities now or hereafter payable by the Borrower under,
arising out of or in connection with any other Loan Documents and
any other instrument or agreement executed in connection with
either Note or this Agreement, and (iv) all other indebtedness,
obligations and liabilities of the Borrower to the Bank, now
existing or hereafter arising or incurred, whether or not
evidenced by notes or other instruments, and whether such
indebtedness, obligations and liabilities are direct or indirect,
fixed or contingent, liquidated or unliquidated, due or to become
due, secured or unsecured, joint, several or joint and several,
related or unrelated to the loan evidenced by either Note,
similar or dissimilar to the indebtedness arising out of or in
connection with either Note or this Agreement or of the same or a
different class of indebtedness as the indebtedness arising out
of or in connection with either Note or this Agreement,
including, without limitation, any overdrafts in any deposit
accounts maintained by the Borrower with the Bank, all
obligations of the Borrower with respect to letters of credit, if
any, issued by the Bank, for the account of the Borrower, any
indebtedness of the Borrower that is purchased by or assigned to
the Bank, and any indebtedness of the Borrower to any assignee of
all or a portion of either Note or any other obligation referred
to in this definition.
"Other Intangibles" means all accounts, accounts receivable,
contract rights, documents, instruments, chattel paper,
investment property, money and general intangibles now owned or
hereafter acquired by the Borrower including, without limitation,
all customer lists, permits, federal and state Tax refunds,
reversionary interests in pension plan assets, trademarks,
patents, licenses, copyrights and other rights in intellectual
property, other than Receivables.
"Permitted Liens" means the Liens referred to in
subparagraphs (a)-(f), inclusive, of Section VI(C)(8).
"Principal Sum" has the meaning set forth in the Revolving
Note.
"Proceeds" means all proceeds, including (i) whatever is
received upon any collection, exchange, sale or other disposition
of any of the Collateral and any property into which any of the
Collateral is converted, whether cash or non-cash, (ii) any and
all payments or other property (in any form whatsoever) made or
due and payable on account of any insurance, indemnity, warranty
or guaranty payable to the Borrower with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever)
made or due and payable in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental body, authority,
bureau or agency (or any person, corporation, agency, authority
or other entity acting under color of any Government), (iv) any
claim of the Borrower against third parties for past, present or
future infringement of any patent or for past, present or future
infringement or dilution of any trademark or for injury to the
goodwill associated with any trademark or for the breach of any
license, and (v) any and all other amounts from time to time paid
or payable under or in connection with any of the Collateral.
"Receivables" means all accounts now or hereafter owing to
the Borrower, and all accounts receivable, contract rights,
documents, instruments or chattel paper representing amounts
payable or monies due or to become due to the Borrower, arising
from the sale of Inventory or the rendition of services in the
ordinary course of business or otherwise (whether or not earned
by performance), together with all Inventory returned by or
reclaimed from customers wherever such Inventory is located, and
all guaranties, securities and Liens held for the payment of any
such account, account receivable, contract right, document,
instrument or chattel paper.
"Revolving Note" means that certain Revolving Commercial
Note of even date with this Agreement made by the Borrower and
payable to the order of the Bank, in the amount of the Principal
Sum, as such note may be modified, extended, or renewed from time
to time
"Subordination Agreement" means a subordination agreement
substantially in the form of Exhibit A and appropriately
completed, and Subordination Agreements means all of said
agreements.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or
indirectly owned by the Borrower.
"Tax" means any fee (including license, filing and
registration fee), tax (including any income, gross receipts,
franchise, sales, use or real, personal, tangible or intangible
property tax), interest equalization or stamp tax, assessment,
levy, impost, duty, charge or withholding of any kind or nature
whatsoever, imposed or assessed by any Government, together with
any penalty, fine or interest thereon.
"Term Loan" has the meaning set forth in Section II(B).
"Term Note" means that certain Commercial Note of even
date with this Agreement made by the Borrower and payable to the
order of the Bank, in the amount of $1,500,000.00, as such note
may be modified, extended, or renewed from time to time
"UCC" means at any time the Uniform Commercial Code as the
same may from time to time be in effect in the Commonwealth of
Virginia, provided that, if, by reason of mandatory provisions of
law, the validity or perfection of any security interest granted
herein is governed by the Uniform Commercial Code as in effect in
a jurisdiction other than Virginia then, as to the validity or
perfection of such security interest, "UCC" shall mean the
Uniform Commercial Code in effect in such other jurisdiction.
"Unbilled Accounts" means Receivables (i) for which a xxxx
is to be rendered to an Account Debtor within 30 days after the
Certificate Date (as defined in Section II(A)(5)(b)) of the first
Borrowing Base Certificate containing such Receivable, and (ii)
for which the related goods have been delivered, or services
rendered, less than 90 days prior to such date.
(B) UCC Definitions. The uncapitalized terms "account",
"account debtor", "chattel paper", "contract right", "document",
"warehouse receipt", "xxxx of lading", "document of title",
"instrument", "inventory", "investment property", "equipment"
"general intangible", "money", "proceeds" and "purchase money
security interest" as used in this Section I or elsewhere in this
Agreement have the meanings of such terms as defined in the UCC.
(C) Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered
hereunder shall be prepared, in accordance with GAAP as in effect
from time to time, applied on a basis consistent with the most
recent audited financial statements of the Borrower delivered to
the Bank.
(D) Other Terms. Terms specifically defined in other
sections of this Agreement shall have the meanings given to such
terms in such sections.
II. THE LOANS.
(A) Advances.
(1) The Bank agrees, on the terms and conditions set
forth in this Agreement, the Lockbox Agreement and the Revolving
Note, to make advances under the Revolving Note ("Advances") to
the Borrower from time to time during the Commitment Period in an
aggregate principal amount not to exceed, at any one time
outstanding, the Commitment. Subject to the foregoing, the
Borrower may borrow under this paragraph (1), prepay and re-
borrow during the Commitment Period.
(2) The aggregate amount of Advances made by the Bank
during the period a Borrowing Base Certificate is effective (as
provided in paragraph (5)(b)) shall not exceed the Available
Credit set forth in such Borrowing Base Certificate,
notwithstanding the receipt by the Bank, during such period, of
payments applied to the principal balance of the Revolving Note.
(3) The Advances shall be evidenced by, and repayable
with interest in accordance with, the Revolving Note.
(4) Advances in Excess of Commitment. To the extent,
at any time, the aggregate outstanding principal amount of
Advances exceeds the Commitment, such excess amount shall be
immediately due and payable by the Borrower without notice or
demand.
(5) Borrowing Base Certificates.
(a) The Borrowing Base shall be established by a
certificate ("Borrowing Base Certificate") prepared by the
Borrower and in form satisfactory to the Bank. Presentation of a
Borrowing Base Certificate shall constitute the Borrower's
representation to the Bank that, as of the date thereof, the
Eligible Collateral included in the Borrowing Base Certificate
qualifies as such in accordance with the terms of this Agreement,
and that all other information contained therein is accurate and
complete.
(b) A Borrowing Base Certificate dated as of the
last Business Day of each month (the "Certificate Date") shall be
presented by the Borrower to the Bank on or before the fifteenth
(15th) day of the month next following the Certificate Date, or
if such day is not a Business Day, the next following Business
Day (the "Delivery Date"). A Borrowing Base Certificate shall be
effective from and including the date the Bank receives it on or
before the Delivery Date, until the Bank receives the next
Borrowing Base Certificate on or before the next following
Delivery Date.
(c) If the Borrower fails to present a Borrowing
Base Certificate on or before the applicable Delivery Date, the
Borrowing Base shall be deemed to be zero, and shall remain zero
until the Bank accepts in writing a Borrowing Base Certificate.
(B) The Term Loan. The Bank agrees to make a loan (the
"Term Loan") in the amount of $1,500,000.00 to the Borrower on
the Effective Date. The Term Loan shall be evidenced by, and
repayable with interest in accordance with, the Term Note.
(C) Fees.
(1) Revolving Fee. The Borrower agrees to pay the to
the Bank a monthly fee of $625.00 in connection with the Advances
under the Revolving Note (the "Revolving Fee"), which Revolving
Fee shall be due and payable on the Effective Date and thereafter
on the first day of each calendar month, beginning August 1,
1999, until the Date of Maturity.
(2) Term Loan Fee. The Borrower agrees to pay to the
Bank a fee of $11,250.00 in connection with the Term Loan (the
"Term Loan Fee"), which Term Loan Fee shall be due and payable
on the Effective Date.
III. THE SECURITY INTERESTS.
(A) Grant of Security Interests. To secure the due and
punctual payment of all Obligations, howsoever created, arising
or evidenced, whether direct or indirect, absolute or contingent,
now or hereafter existing or due or to become due, in accordance
with the terms thereof and to secure the due and punctual
performance of all of the obligations of the Borrower contained
in the Notes and this Agreement and in the other Loan Documents
to which it is a party and in order to induce the Bank to enter
into this Agreement and make the Advances and the Term Loan
provided for therein and herein in accordance with the terms
hereof and thereof, the Borrower hereby grants to the Bank a
security interest in all of the Borrower's right, title and
interest in, to and under the following, whether now existing or
hereafter acquired (all of which are herein collectively called
the "Collateral"):
(1) all Receivables;
(2) all Other Intangibles;
(3) all Equipment;
(4) all Inventory;
(5) to the extent not included in the foregoing, all
other personal property, whether tangible or intangible, and
wherever located, including, but not limited to, the balance of
every deposit account now or hereafter existing of the Borrower
with any bank and all monies of the Borrower and all rights to
payment of money of the Borrower;
(6) to the extent not included in the foregoing, all
books, ledgers and records and all computer programs, tapes,
discs, data processing software, transaction files, master files
and related property and rights (including computer and
peripheral equipment) necessary or helpful in enforcing,
identifying or establishing any item of Collateral; and
(7) to the extent not otherwise included, all Proceeds
and products of any or all of the foregoing, whether existing on
the date hereof or arising hereafter.
(B) Continuing Liability of the Borrower. Anything herein
to the contrary notwithstanding, the Borrower shall remain liable
to observe and perform all the terms and conditions to be
observed and performed by it under any contract, agreement,
warranty or other obligation with respect to the Collateral, and
shall do nothing to impair the security interests herein granted.
The Bank shall not have any obligation or liability under any
such contract, agreement, warranty or obligation by reason of or
arising out of this Agreement or the receipt by the Bank of any
payment relating to any Collateral, nor shall the Bank be
required to perform or fulfill any of the obligations of the
Borrower with respect to the Collateral, to make any inquiry as
to the nature or sufficiency of any payment received by it or the
sufficiency of the performance of any party's obligations with
respect to any Collateral. Furthermore, the Bank shall not be
required to file any claim or demand to collect any amount due,
or to enforce the performance of any party's obligations with
respect to, the Collateral.
(C) Sales and Collections.
(1) The Borrower is authorized (a) to sell in the
ordinary course of its business for fair value and on an arm's-
length basis any of its Inventory normally held by it for such
purpose and (b) to use and consume, in the ordinary course of its
business, any raw materials, supplies and materials normally held
by it for such purpose. The Bank may upon the occurrence of any
Default, without cause or notice, curtail or terminate such
authority at any time.
(2) All Account Debtors shall be notified to make
payments under Receivables constituting "Remittances" under the
Lockbox Agreement directly to the Bank in accordance with the
terms of the Lockbox Agreement. The Borrower will use all
reasonable efforts to cause each Account Debtor to comply with
the foregoing instruction. In furtherance of the foregoing, the
Borrower authorizes the Bank (a) to ask for, demand, collect,
receive and give acquittances and receipts for any and all
amounts due and to become due under any Collateral and, in the
name of the Borrower or its own name or otherwise, (b) to take
possession of, indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due
under any Collateral and (c) to file any claim or take any other
action in any court of law or equity or otherwise which it may
deem appropriate for the purpose of collecting any amounts due
under any Collateral. The Bank shall have no obligation to
obtain or record any information relating to the source of such
funds or the obligations in respect of which payments have been
made, other than as required by the Lockbox Agreement.
(D) Segregation of Proceeds.
(1) The Bank shall have the right at any time
(regardless of whether or not a Default shall have occurred) to
cause to be opened and maintained at the principal office of the
Bank a non-interest bearing bank account (the "Cash Collateral
Account") which will contain only Proceeds (other than those
collected pursuant to the Lockbox Agreement). Any cash proceeds
(as such term is defined in Section 9-306(1) of the UCC) received
by the Bank from the Borrower pursuant to paragraph (2) of this
subsection (D), whether consisting of checks, notes, drafts,
bills of exchange, money orders, commercial paper or other
Proceeds received on account of any Collateral, shall be promptly
deposited in the Cash Collateral Account, and until so deposited
shall be held in trust for and as the Bank's property and shall
not be commingled with any funds of the Borrower not constituting
Proceeds of Collateral. The name in which the Cash Collateral
Account is carried shall clearly indicate that the funds
deposited therein are the property of the Borrower, subject to
the security interest of the Bank hereunder. Such Proceeds, when
deposited, shall continue to be security for the Obligations and
shall not constitute payment thereof until applied as hereinafter
provided. The Bank shall have sole dominion and control over the
funds deposited in the Cash Collateral Account, and such funds
may be withdrawn therefrom only by the Bank; provided, however,
that until a Default shall occur, all collected funds on deposit
in the Cash Collateral Account, or so much thereof as is not
required to make payment of the Obligations which have become due
and payable, shall be withdrawn by the Bank on the Business Day
next following the day on which the Bank considers the funds
deposited therein to be collected funds and disbursed to the
Borrower or its order.
(2) Upon notice by the Bank to the Borrower that
the Cash Collateral Account has been opened, the Borrower shall
cause all cash Proceeds collected by it pursuant to paragraph
(1), above, to be delivered to the Bank forthwith upon receipt,
in the original form in which received (with such indorsements or
assignments as may be necessary to permit collection thereof by
the Bank), and for such purpose the Borrower hereby irrevocably
authorizes and empowers the Bank, its officers, employees and
authorized agents to indorse and sign the name of the Borrower on
all checks, drafts, money orders or other media of payment so
delivered, and such indorsements or assignments shall, for all
purposes, be deemed to have been made by the Borrower prior to
any indorsement or assignment thereof by the Bank. The Bank may
use any convenient or customary means for the purpose of
collecting such checks, drafts, money orders or other media of
payment.
(E) Verification of Receivables. The Bank shall have the
right to make test verifications of Receivables in any manner and
through any medium that it considers advisable, and the Borrower
agrees to furnish all such assistance and information as the Bank
may require in connection therewith. The Borrower at its expense
will cause either independent certified public accountants or, if
agreeable to the Bank in its sole discretion, the Borrower's
chief financial officer, to furnish to the Bank at any time and
from time to time promptly upon the Bank's request, the following
reports: (i) a reconciliation of all Receivables, (ii) an aging
of all Receivables, (iii) trial balances and (iv) a test
verification of such Receivables as the Bank may request.
(F) Release of Collateral.
(1) The Borrower may sell or realize upon or
transfer or otherwise dispose of Collateral as permitted by
Section VI(B)(13), and the security interests of the Bank in such
Collateral so sold, realized upon or disposed of (but not in the
Proceeds arising from such sale, realization or disposition)
shall cease immediately upon such sale, realization or
disposition, without any further action on the part of the Bank.
The Bank, if requested in writing by the Borrower but at the
expense of the Borrower, is hereby authorized and instructed to
deliver to the Account Debtor or the purchaser or other
transferee of any such Collateral a certificate stating that the
Bank no longer has a security interest therein, and such Account
Debtor or such purchaser or other transferee shall be entitled to
rely conclusively on such certificate for any and all purposes.
(2) Upon the payment in full of all of the
Obligations and if there is no commitment by the Bank to make
further Advances, incur obligations or otherwise give value, the
Bank will (as soon as reasonably practicable after receipt of
notice from the Borrower requesting the same but at the expense
of the Borrower) send the Borrower, for each jurisdiction in
which a UCC financing statement is on file to perfect the
security interests granted to the Bank hereunder, a termination
statement to the effect that the Bank no longer claims a security
interest under such financing statement.
IV. CONDITIONS PRECEDENT.
(A) Each Advance. The obligation of the Bank to make each
Advance is subject to the satisfaction of the following
conditions:
(1) no Default has occurred and is continuing or would
result from such Advance;
(2) such Advance is subject to all of the Loan
Documents; and
(3) the representations and warranties contained in
Section V are true on and as of the date of such Advance.
(B) The First Advance and the Term Loan. The obligation of
the Bank to make the first Advance and the Term Loan is subject
to the satisfaction of the following conditions:
(1) receipt by the Bank of the duly executed Notes,
Lockbox Agreement, and any other Loan Document required by the
Bank;
(2) receipt by the Bank of evidence satisfactory to
the Bank that each document (including, without limitation, each
UCC financing statement) requested by the Bank to be filed,
registered or recorded has been so filed, registered or recorded
and that all other requirements in order to create in favor of
the Bank a perfected first priority security interest in the
Collateral have been satisfied;
(3) receipt by the Bank of certified copies of
Requests for Information or Copies (Form UCC-11), or equivalent
reports from an independent search service satisfactory to the
Bank, listing the documents referred to in paragraph (2) of this
subsection (B), and all other effective financing statements that
name the Borrower (under its present name and any and all
previous names) as debtor or seller, together with copies of such
other financing statements (none of which shall cover any of the
Collateral);
(4) receipt by the Bank of any and all landlord's
waivers, and any other consents required by the Bank; provided
that such landlord's waivers or other consents may be delivered
to the Bank within thirty (30) days of the Effective Date;
(5) receipt by the Bank of evidence of the insurance
required by this Agreement;
(6) receipt by the Bank of a Borrowing Base
Certificate; and
(7) receipt by the Bank of all documents and all
opinions of counsel (all in form and substance satisfactory to
the Bank) it may require relating to (a) the existence of the
Borrower and its authority to execute, deliver and perform the
Note, this Agreement, the Lockbox Agreement and the other Loan
Documents; (b) the validity of the Note, this Agreement, the
Lockbox Agreement and the other Loan Documents; and (c) any other
matters relevant hereto.
V. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants that:
(A) Corporate Existence and Power. Said Borrower is duly
organized, validly existing and in good standing under the laws
of the state of its incorporation, and has all powers and all
material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
Said Borrower is duly qualified as a foreign corporation,
licensed and in good standing in each jurisdiction where
qualification or licensing is required by the nature of its
business or the character and location of its property, business
or customers and in which the failure to so qualify or be
licensed, as the case may be, in the aggregate, could have a
material adverse effect on the business, financial position,
results of operations, properties or prospects of said Borrower.
(B) Organizational and Governmental Authorization;
Contravention. The execution, delivery and performance by said
Borrower of this Agreement, the Notes and the other Loan
Documents to which it is a party are within its organizational
power, have been duly authorized by all necessary action, require
no action by or in respect of, or filing with, any governmental
body, agency or official and do not contravene, or constitute
(with or without the giving of notice or lapse of time or both) a
default under, any provision of applicable law or of the
organizational documents of said Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding
upon or affecting said Borrower or result in the creation or
imposition of any Lien (other than the Lien of this Agreement and
the other Loan Documents) on any of its assets.
(C) Binding Effect. This Agreement constitutes a valid and
binding agreement of said Borrower and the Notes, when executed
and delivered in accordance with this Agreement, will constitute
valid and binding obligations of said Borrower, in each case
enforceable against said Borrower in accordance with its terms,
except as (1) the enforceability hereof and thereof may be
limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (2) rights of acceleration and
the availability of equitable remedies may be limited by
equitable principles of general applicability.
(D) Title to Collateral. Except for the security interests
granted to the Bank pursuant to this Agreement, the Borrower is
the sole owners of each item of the Collateral, having good and
marketable title thereto, free and clear of any and all Liens,
except Permitted Liens.
(E) Validity, Perfection and Priority of Security
Interests.
(1) By complying with Section VI(B)(1), said
Borrower will have created a valid security interest in favor of
the Bank in all existing Collateral and in all identifiable
Proceeds of such Collateral, which security interest (except in
respect of motor vehicles for which the exclusive manner of
perfecting a security interest therein is by noting such security
interest on the certificate of title in accordance with local
law) would be prior to the claims of a trustee in bankruptcy
under Section 544(a) of the federal Bankruptcy Code. Continuing
compliance by said Borrower with the provisions of Section
VI(B)(2) will also (a) create valid security interests in all
Collateral acquired after the date hereof and in all identifiable
Proceeds of such Collateral and (b) cause such security interests
in all Collateral and in all Proceeds which are (i) identifiable
cash Proceeds of Collateral covered by financing statements
required to be filed hereunder, (ii) identifiable Proceeds in
which a security interest may be perfected by such filing under
the UCC and (iii) any Proceeds in the Cash Collateral Account and
the account used in connection with the Lockbox Agreement to be
duly perfected under the UCC, in each case prior to the claims of
a trustee in bankruptcy under the federal Bankruptcy Code.
(2) The security interests of the Bank in the
Collateral rank first in priority. Other than financing
statements or other similar documents perfecting the security
interests of the Bank, no financing statements or similar
documents covering all or any part of the Collateral are on file
or of record in any government office in any jurisdiction in
which such filing or recording would be effective to perfect a
security interest in such Collateral, nor is any of the
Collateral in the possession of any person (other than said
Borrower) asserting any claim thereto or security interest
therein.
(F) Enforceability of Receivables and Other Intangibles.
To the best knowledge of said Borrower, each Receivable and Other
Intangible is a valid and binding obligation of the related
Account Debtor in respect thereof, enforceable in accordance with
its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and by general provisions of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law), and complies with any applicable legal
requirements.
(G) Place of Business; Location of Collateral. Appendix 1
hereto correctly sets forth said Borrower's current chief
executive office, any and all chief executive offices of said
Borrower within the previous four (4) months, all other places of
business of said Borrower and the offices of said Borrower where
records concerning Receivables and Other Intangibles are kept.
Appendix 2 hereto correctly sets forth the location of all
Equipment and Inventory, other than rolling stock, aircraft,
goods in transit and Inventory sold in the ordinary course of
business as permitted by Section VI(B)(13) of this Agreement.
Except as otherwise specified in Appendix 2 hereto, all Inventory
and Equipment has been located at the address specified on said
Appendix 2 at all times during the four-month period prior to the
date hereof while owned by said Borrower. All Inventory has been
and will be produced in compliance with the Fair Labor Standards
Act, 29 U.S.C. SS 201-219. No Inventory is evidenced by a
negotiable document of title, warehouse receipt or xxxx of
lading. No non-negotiable document of title, warehouse receipt
or xxxx of lading has been issued to any person other than said
Borrower, and said Borrower has retained possession of all of
such non-negotiable documents, warehouse receipts and bills of
lading. No amount payable under or in connection with any of the
Collateral is evidenced by promissory notes or other instruments.
(H) Trade Names. Any and all trade names, division names,
assumed names or other names under which said Borrower transacts,
or within the four-month period prior to the date hereof has
transacted, business are specified on Appendix 3 hereto.
(I) Financial Information.
(1) The most recent fiscal year end balance sheet
of said Borrower and the related financial statements, reported
on by said Borrower's independent public accountants, copies of
which have been delivered to the Bank, fairly present, in
conformity with GAAP, the financial position of said Borrower as
of the date thereof and its results of operations and cash flows
for such fiscal year. As of the date of such financial
statements, said Borrower did not have any material contingent
obligation, contingent liability or liability for Taxes, long-
term lease or unusual forward or long-term commitment, which is
not reflected in any of such financial statements or notes
thereto.
(2) Since the date of the most recent balance sheet,
there has been no material adverse change in the business,
financial position, results of operations or prospects of said
Borrower.
(J) Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of said Borrower threatened
against or affecting, said Borrower before any Government in
which there is a reasonable possibility of an adverse decision
which could materially adversely affect the business, financial
position or results of operations of said Borrower or which in
any manner draws into question the validity of this Agreement,
the Notes, or any other Loan Document and there is no basis known
to said Borrower for any such action, suit or proceeding.
(K) Marketable Title. Said Borrower has good and
marketable title to all its properties and assets subject to no
Lien, except Permitted Liens.
(L) Filings. All actions by or in respect of, and all
filings with, any governmental body, agency or official required
in connection with the execution, delivery and performance of
this Agreement, the Notes and the other Loan Documents, or
necessary for the validity or enforceability thereof or for the
protection or perfection of the rights and interests of the Bank
thereunder, will, prior to the date of delivery thereof, have
been duly taken or made, as the case may be, and will at all
times thereafter remain in full force and effect.
(M) Regulation U. The proceeds of the Term Loan and the
Advances will be used by the Borrower only for the purposes set
forth in Section VI(C)(14) hereof. None of the proceeds of any
Advance or the Term Loan will be used, directly or indirectly,
for the purpose of purchasing or carrying any "margin stock" or
for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry margin stock or for
any other purpose which might constitute the loans evidenced by
the Notes, or any Advance, a "purpose credit" within the meaning
of Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System.
(N) Taxes. Said Borrower has filed all United States
Federal income Tax returns and all other material Tax returns
which are required to be filed by it and has paid all Taxes due
pursuant to such returns or pursuant to any assessment received
by the Borrower. The charges, accruals and reserves on the books
of said Borrower in respect of Taxes or other governmental
charges are adequate.
(O) Year 2000. To the knowledge of said Borrower, the
computer systems used by and licensed by said Borrower and its
Subsidiaries are Year 2000 Compliant. As used herein, "Year
2000 Compliant" means that neither performance nor functionality
of any computer hardware or software is affected by dates prior
to, during, or after, the year 2000; and, in particular, (i) no
value for current date will cause any interruption in operation,
(ii) date-based functionality must behave consistently for dates
prior to, during, and after, the year 2000, (iii) in all
interfaces and data storage, the century in any date must be
specified either explicitly or by unambiguous algorithms or
interfacing rules, and (iv) the year 2000 must be recognized as a
leap year.
(P) Disclosure. None of this Agreement, any other Loan
Document, any schedule or exhibit thereto or document,
certificate, report, statement or other information furnished to
the Bank in connection herewith or therewith or in connection
with the consummation of the transactions contemplated hereby or
thereby contains any material misstatement of fact or omits to
state a material fact necessary to make the statements contained
herein or therein not misleading. There is no fact materially
adversely affecting the assets, business, financial position,
results of operations or prospects of the Borrower which has not
been set forth in a footnote included in the financial statements
referred to in subsection (I)(1), above, or any exhibit or
schedule thereto.
VI. COVENANTS.
(A) Financial Covenants. The Borrower agrees that so long
as the Bank is committed to make Advances or any amount payable
under either Note or any other Loan Document remains unpaid:
(1) Certain Definitions. As used in this paragraph
(1) and hereafter in this Agreement, the following terms have the
following meanings:
"Adjusted Debt" means, as of any date, the result
derived by subtracting the outstanding principal balance of the
Borrower's $254,629.00 Convertible Note and its $260,000.00
Convertible Note, each payable to Six Nations, Inc. and dated
May 12, 1999, from the Borrower's total Debt.
"Adjusted Net Worth" means, as of any date, the sum of
the Borrower's Net Worth and its Subordinated Debt.
"Capital Lease" means a lease that should be
capitalized on the balance sheet of the lessee prepared in
accordance with GAAP.
"Current Assets" means at any date the current assets
of the Borrower determined at such date.
"Current Liabilities" means at any date (i) the current
liabilities of the Borrower plus (ii) the current liabilities of
any person (other than the Borrower) that are Guaranteed by the
Borrower, all determined as of such date.
"Debt" of any person means at any date, without
duplication, (i) all obligations of such person for borrowed
money, (ii) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of such person to pay the deferred purchase price of
property or services (other than trade accounts payable arising
in the ordinary course of business), (iv) all obligations of such
person as lessee under Capital Leases, (v) all obligations of
such person to purchase securities or other property which arise
out of or in connection with the sale of the same or
substantially similar securities or property, (vi) all non-
contingent obligations of such person to reimburse any bank or
other person in respect of amounts paid under a letter of credit
or similar instrument, (vii) all obligations of others secured by
a Lien on any asset of such person, whether or not such
obligation is assumed by such person and (viii) all obligations
of others Guaranteed by such person.
"EBITDA" means for any period, the sum of the
Borrower's (a) Net Income for such period, plus (b) Taxes,
Interest Expense, depreciation, amortization and other non-cash
charges (to the extent deducted to determine Net Income) for such
period.
"Funded Debt" means at any date, all of the Borrower's
Debt which is not a Current Liability as of such date.
"Guaranty" by any person means any obligation,
contingent or otherwise, of such person directly or indirectly
guarantying any Debt or other obligation of any other person and,
without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such person (i)
to purchase or pay (or advance or supply funds for the purchase
or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part); provided that the term Guaranty
shall not include indorsements for collection or deposit in the
ordinary course of business. The term "Guaranty" used as a verb
has a corresponding meaning.
"Net Income" means, for any period, the Borrower's
entire net income (including, without limitation, income from
discontinued operations and extraordinary items) for such period
determined in accordance with GAAP.
"Net Worth" means the excess of the Borrower's assets
over its liabilities.
"Interest Expense" means for any period the aggregate
interest expense of the Borrower for such period including,
without limitation, the portion of any obligation under Capital
Leases allocable to interest expense in accordance with GAAP.
"Subordinated Debt" means Debt of the Borrower, the
creditors of which have claims against the Borrower and its
assets which are inferior, subordinated, or junior to the claims
thereto of the Bank.
"Working Capital" means the excess of Current Assets
over Current Liabilities
(2) Adjusted Debt to Adjusted Net Worth Ratio. The
ratio of Adjusted Debt to Adjusted Net Worth will at no time be
greater than 4.0 to 1.0.
(3) Funded Debt to EBITDA. The ratio of Funded Debt
to EBITDA will at no time be greater than 6.0 to 1.0.
(4) Minimum Working Capital. Working Capital will at
no time be less than $200,000.00.
(5) Minimum Adjusted Net Worth. Adjusted Net Worth
will at no time be less than $1,200,000.00.
(6) For purposes of this Section VI(A), references
herein to "the Borrower" shall mean the aggregate of each
Borrower and its Consolidated Subsidiaries considered as a whole.
(B) Covenants Relating to the Collateral. The Borrower
agrees that so long as the Bank is committed to make Advances or
any amount payable under either Note or any other Loan Document
remains unpaid:
(1) Perfection of Security Interests. The Borrower
will, at its expense, cause all filings and recordings and other
actions specified on Appendix 4 hereto to have been completed on
or prior to the date of the first Advance.
(2) Further Actions.
(a) At all times after the date of the first
Advance, the Borrower will, at its expense, comply with the
following:
(i) as to all Receivables, Other
Intangibles, Equipment and Inventory, it will cause UCC financing
statements and continuation statements to be filed and to be on
file in all applicable jurisdictions as required to perfect the
security interests granted to the Bank hereunder, to the extent
that applicable law permits perfection of a security interest by
filing under the UCC;
(ii) as to all Proceeds, it will cause
all UCC financing statements and continuation statements filed in
accordance with clause (i) above to include a statement or a
checked box indicating that Proceeds of all items of Collateral
described therein are covered;
(iii) upon the request of the Bank, it
will ensure that the provisions of Section III(D) are complied
with;
(iv) as to any amount payable under or
in connection with any of the Collateral which shall be or shall
become evidenced by any promissory note or other instrument, the
Borrower will immediately pledge and deliver such note or other
instrument to the Bank as part of the Collateral, duly indorsed
in a manner satisfactory to the Bank.
(b) The Borrower will, from time to time and at
its expense, execute, deliver, file or record such financing
statements pursuant to the UCC, applications for certificates of
title and such other statements, assignments, instruments,
documents, agreements or other papers and take any other action
that may be necessary or desirable, or that the Bank may
reasonably request, in order to create, preserve, perfect,
confirm or validate the security interests, to enable the Bank to
obtain the full benefits of this Agreement or to enable it to
exercise and enforce any of its rights, powers and remedies
hereunder, including, without limitation, its right to take
possession of the Collateral, and will use its best efforts to
obtain such waivers from landlords and mortgagees as the Bank may
request.
(c) To the fullest extent permitted by law, the
Borrower authorizes the Bank to sign and file financing and
continuation statements and amendments thereto with respect to
the Collateral without its signature thereon.
(3) Change of Name, Identity or Structure. The
Borrower will not change its name, identity or structure in any
manner and, except as set forth on Appendix 3 hereto, will not
conduct its business under any trade, assumed or fictitious name
unless it shall have given the Bank at least thirty days' prior
written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously
with such change if it is impossible to take such action in
advance) necessary or reasonably requested by the Bank to amend
any financing statement or continuation statement relating to the
security interests granted hereby in order to preserve such
security interests and to effectuate or maintain the priority
thereof against all persons.
(4) Place of Business and Collateral. The Borrower
will not change the location of (i) its places of business, (ii)
its chief executive office or (iii) the office or other locations
where it keeps or holds any Collateral or any records relating
thereto from the applicable location listed on Appendices 1 or 2
hereto unless, prior to such change, it notifies the Bank of such
change, makes all UCC filings required by paragraph (2) of this
subsection (B), and takes all other action necessary or that the
Bank may reasonably request to preserve, perfect, confirm and
protect the security interests granted hereby. The Borrower will
in no event change the location of any Collateral if such change
would cause the security interest granted hereby in such
Collateral to lapse or cease to be perfected. The Borrower will
at all times maintain its chief executive office within one of
the forty-eight contiguous states in which Article 9 of the UCC
is in effect.
(5) Fixtures. The Borrower will not permit any
Equipment to become a fixture unless it shall have given the Bank
at least ten days' prior written notice thereof and shall have
taken all such action and delivered or caused to be delivered to
the Bank all instruments and documents, including, without
limitation, waivers and subordination agreements by any landlords
and mortgagees, and filed all financing statements necessary or
reasonably requested by the Bank, to preserve and protect the
security interest granted herein and to effectuate or maintain
the priority thereof against all persons.
(6) Maintenance of Records. The Borrower will keep and
maintain at its own cost and expense complete books and records
relating to the Collateral which are satisfactory to the Bank
including, without limitation, a record of all payments received
and all credits granted with respect to the Collateral and all of
its other dealings with the Collateral. The Borrower will xxxx
its books and records pertaining to the Collateral to evidence
this Agreement and the security interests granted hereby. For
the Bank's further security, the Borrower agrees that the Bank
shall have a special property interest in all of the Borrower's
books and records pertaining to the Collateral and the Borrower
shall deliver and turn over any such books and records to the
Bank or to its representatives at any time on demand of the Bank.
(7) Compliance with Laws, etc. The Borrower will
comply, in all material respects, with all acts, rules,
regulations, orders, decrees and directions of any Government
applicable to the Collateral or any part thereof or to the
operation of the Borrower's business except to the extent that
the failure to comply would not have a material adverse effect on
the financial or other condition of the Borrower; provided,
however, that the Borrower may contest any act, regulation,
order, decree or direction in any reasonable manner which shall
not in the sole opinion of the Bank adversely affect the Bank's
rights or the first priority of its security interest in the
Collateral.
(8) Payment of Taxes, etc. The Borrower will pay
promptly when due, all Taxes, assessments and governmental
charges or levies imposed upon the Collateral or in respect of
its income or profits therefrom, as well as all claims of any
kind (including claims for labor, materials and supplies), except
that no such charge need be paid if (a) the validity thereof is
being contested in good faith by appropriate proceedings and (b)
such charge is adequately reserved against in accordance with
GAAP.
(9) Compliance with Terms of Accounts, Contracts and
Licenses. The Borrower will perform, and comply in all material
respects with, all of its obligations under all agreements
relating to the Collateral to which it is a party or by which it
is bound.
(10) Limitation on Liens on Collateral. The Borrower
will not create, permit or suffer to exist, and will defend the
Collateral and the Borrower's rights with respect thereto against
and take such other action as is necessary to remove, any Lien,
security interest, encumbrance, or claim in or to the Collateral
other than the security interests created hereunder.
(11) Limitations on Modifications of Receivables and
Other Intangibles; No Waivers or Extensions. The Borrower will
not (a) amend, modify, terminate or waive any provision of any
material Receivable or Other Intangible in any manner which might
have a materially adverse effect on the value of such Receivable
or Other Intangible as Collateral, (b) fail to exercise promptly
and diligently each and every material right which it may have
under each Receivable and Other Intangible or (c) fail to deliver
to the Bank a copy of each material demand, notice or document
received by it relating in any way to any Receivable or Other
Intangible. The Borrower will not, without the Bank's prior
written consent, grant any extension of the time of payment of
any Receivable or amounts due under any material Other
Intangible, compromise, or settle the same for less than the full
amount thereof, release, wholly or partly, any person liable for
the payment thereof or allow any credit or discount whatsoever
thereon other than trade discounts granted in the normal course
of business, except such as in the reasonable judgment of the
Borrower are advisable to enhance the collectability thereof.
(12) Maintenance of Insurance. The Borrower will
maintain with financially sound insurance companies licensed to
do business where the Borrower is located insurance policies (a)
insuring the Inventory and Equipment against loss by fire,
explosion, theft and such other casualties as are usually insured
against by companies engaged in the same or similar business for
an amount satisfactory to the Bank and (b) insuring the Borrower
and the Bank against liability for personal injury arising from,
and property damage relating to, such Inventory and Equipment,
such policies to be in such form and to cover such amounts as may
be satisfactory to the Bank, with losses payable to the Borrower
and the Bank as their respective interests may appear. The
Borrower shall, if so requested by the Bank, deliver to the Bank
as often as the Bank may reasonably request a report of the
Borrower or, if requested by the Bank, of an insurance broker
satisfactory to the Bank of the insurance on the Inventory and
Equipment. All insurance with respect to the Inventory and the
Equipment shall (w) contain a standard mortgagee clause in favor
of the Bank, (x) provide that any loss shall be payable in
accordance with the terms thereof notwithstanding any act of the
Borrower which might otherwise result in forfeiture of such
insurance and that the insurer waives all rights of set-off,
counterclaim, deduction or subrogation against the Borrower, (y)
provide that no cancellation, reduction in amount or change in
coverage therefor shall be effective until at least 30 days after
receipt by the Bank of written notice thereof and (z) provide
that the Bank may, but shall not be obligated to, pay premiums in
respect thereof.
(13) Limitations on Dispositions of Collateral. The
Borrower will not directly or indirectly (through the sale of
stock, merger or otherwise) without the prior written consent of
the Bank sell, transfer, lease or otherwise dispose of any of the
Collateral, or attempt, offer or contract to do so except for (a)
sales of Inventory in the ordinary course of its business for
fair value in arm's-length transactions and (b) so long as no
Default has occurred and is continuing, dispositions in a
commercially reasonable manner of Equipment which has become
redundant, worn out or obsolete or which should be replaced so as
to improve productivity, so long as the proceeds of any such
disposition are (i) used to acquire replacement equipment which
has comparable or better utility and equivalent or better value
and which is subject to a first priority security interest in
favor of the Bank therein, except as permitted by paragraph (9)
of this subsection (B), and except for Permitted Liens, or (ii)
applied to repay the Obligations. The inclusion of Proceeds of
the Collateral under the security interests granted hereby shall
not be deemed a consent by the Bank to any sale or disposition of
any Collateral other than as permitted by this paragraph (13).
(14) Further Identification of Collateral. The
Borrower will furnish to the Bank from time to time statements
and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the
Bank may reasonably request.
(15) Notices. The Borrower will advise the Bank
promptly and in reasonable detail (a) of any Lien, security
interest, encumbrance or claim made or asserted against any of
the Collateral, (b) of any material change in the composition of
the Collateral, and (c) of the occurrence of any other event
which would have a material effect on the aggregate value of the
Collateral or on the security interests granted to the Bank in
this Agreement.
(16) Right of Inspection. The Bank shall at all times
have full and free access during normal business hours to all the
books, correspondence and records of the Borrower, and the Bank
or its representatives may examine the same, take extracts
therefrom, make photocopies thereof and have such discussions
with officers, employees and public accountants of the Borrower
as the Bank may deem necessary, and the Borrower agrees to render
to the Bank, at the Borrower's cost and expense, such clerical
and other assistance as may be reasonably requested with regard
thereto. The Bank and its representatives shall at all times
also have the right to enter into and upon any premises where any
of the Inventory or Equipment is located for the purpose of
inspecting the same, observing its use or protecting interests of
the Bank therein.
(17) Maintenance of Equipment. The Borrower will, at
its expense, generally maintain the Equipment in good operating
condition, ordinary wear and tear excepted.
(18) Reimbursement Obligation. Should the Borrower
fail to comply with the provisions of either Note, this
Agreement, any other Loan Document to which it is a party or any
other agreement relating to the Collateral such that the value of
any Collateral or the validity, perfection, rank or value of any
security interest granted to the Bank hereunder or thereunder is
thereby diminished or potentially diminished or put at risk (as
reasonably determined by the Bank), the Bank on behalf of the
Borrower may, but shall not be required to, effect such
compliance on behalf of the Borrower, and the Borrower shall
reimburse the Bank for the cost thereof on demand, and interest
shall accrue on such reimbursement obligation from the date the
relevant costs are incurred until reimbursement thereof in full
at the interest rate provided in the Term Note.
(C) Other Covenants. The Borrower agrees that so long as
the Bank is committed to make Advances or any amount payable
under either Note or under any other Loan Document remains
unpaid:
(1) Information. The Borrower will deliver or cause
to be delivered to the Bank:
(a) as soon as available and in any event within
120 days after the end of each fiscal year of the Borrower, (i) a
copy of the Borrower's most recent report to the Securities and
Exchange Commission on Form 10-K, (ii) a copy of the Borrower's
most recent annual report and (iii) a consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of the end
of such fiscal year and the related consolidated financial
statements for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by an opinion thereon by an
independent public accountant satisfactory to the Bank, which
opinion shall state that such financial statements present fairly
the financial position of the Borrower and its Consolidated
Subsidiaries as of the date of such financial statements and the
results of its operations for the period covered by such
financial statements in conformity with GAAP applied on a
consistent basis (except for changes in the application of which
such accountants concur) and shall not contain any "going
concern" or like qualification or exception or qualifications
arising out of the scope of the audit;
(b) as soon as available and in any event within
45 days after the end of each of the first three quarters of each
fiscal year of the Borrower, (i) a copy of the Borrower's most
recent report to the Securities and Exchange Commission on Form
10-Q, and (ii) a consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries and the related consolidated
financial statements for such quarter and for the portion of the
Borrower's and such Subsidiaries' fiscal year ended at the end of
such quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding
portion of the Borrower's and such Subsidiaries' previous fiscal
year, all certified (subject to normal year-end audit
adjustments) as complete and correct by the chief financial
officer or chief accounting officer of the Borrower;
(c) simultaneously with the delivery of each set
of financial statements referred to in subparagraphs (a) and (b)
above, (i) a certificate of the chief financial officer or chief
accounting officer of the Borrower, (x) setting forth in
reasonable detail the calculations required to establish whether
the Borrower was in compliance with the requirements of
paragraphs (2)-(5), inclusive, of subsection (A), above, on the
date of such financial statements, (y) stating whether there
exists on the date of such certificate any Default and, if any
Default then exists, setting forth the details thereof and the
action which the Borrower is taking or proposes to take with
respect thereto and (z) stating whether, since the date of the
most recent previous delivery of financial statements pursuant to
subparagraph (a) or (b) of this paragraph (1) there has been any
material adverse change in the business, financial position,
results of operations or prospects of the Borrower, and, if so,
the nature of such material adverse change; and (ii) the
Borrower's current contract backlog report;
(d) simultaneously with the delivery of each set
of financial statements referred to in subparagraph (a) of this
paragraph (1), (i) a statement of the firm of independent public
accountants that reported on such statements (A) stating that
their audit examination has included a review of this Agreement
and the Notes as they relate to financial or accounting matters,
(B) whether anything has come to their attention to cause them to
believe that there existed on the date of such statements any
Default and (C) confirming the calculations set forth in the
officer's certificate delivered simultaneously therewith pursuant
to subparagraph (c) of this paragraph (1); and (ii) the
Borrower's projections and cash flow forecast for the then
current fiscal year of the Borrower;
(e) forthwith upon the occurrence of any Default,
a certificate of the chief financial officer or chief accounting
officer of the Borrower setting forth the details thereof and the
action which the Borrower is taking or proposes to take with
respect thereto;
(f) as soon as reasonably practicable after
obtaining knowledge of the commencement of, or of a material
threat of the commencement of, an action, suit or proceeding
against the Borrower which could materially adversely affect the
business, properties, financial position, results of operations
or prospects of the Borrower or which in any manner questions the
validity of this Agreement, either Note, any other Loan Document
or any of the transactions contemplated hereby or thereby, the
nature of such pending or threatened action, suit or proceeding
and such additional information as may be reasonably requested by
the Bank;
(g) promptly upon transmission thereof, copies of
all press releases and other statements made available generally
by the Borrower to the public concerning material developments in
the results of operations, financial condition, business or
prospects of the Borrower;
(h) Promptly upon receipt thereof, copies of each
report submitted to the Borrower by independent public
accountants in connection with any annual, interim or special
audit made by them of the books of the Borrower including,
without limitation, each report submitted to the Borrower
concerning its accounting practices and systems and any final
comment letter submitted by such accountants to management in
connection with the annual audit of the Borrower;
(i) on or before the fifteenth day of each month,
a Borrowing Base Certificate of the Borrower, and the most recent
report of the aging of the Borrower's Receivables; and
(j) from time to time such additional information
regarding the financial position, results of operations or
business of the Borrower as the Bank may reasonably request.
(2) Payment of Obligations. The Borrower will pay and
discharge, and will cause each of its Subsidiaries to pay and
discharge, as the same shall become due and payable, (a) all its
obligations and liabilities, including all claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and
other like persons which, in any such case, if unpaid, might by
law give rise to a Lien upon any of its property or assets, and
(b) all lawful Taxes, assessments and charges or levies made upon
it or its property or assets, by any governmental body, agency or
official except where any of the items in subparagraphs (a) or
(b) of this paragraph (2) may be diligently contested in good
faith by appropriate proceedings, and the Borrower shall have set
aside on its books, if required under GAAP, appropriate reserves
for the accrual of any such items.
(3) Maintenance of Property; Insurance. In addition
to the specific requirements of subsection (B)(12) above, the
Borrower generally will keep, and will cause each of its
subsidiaries to keep, all property useful and necessary in its
business in good working order and condition, subject to ordinary
wear and tear; will maintain (either in the name of the Borrower
or in the name of the Bank if required by subsection (B)(12)
above) with financially sound and reputable insurance companies,
insurance on all its properties in at least such amounts and
against at least such risks (and with such risk retentions) as
are usually insured against by companies engaged in the same or a
similar business; and will furnish to the Bank upon request full
information as to the insurance carried.
(4) Conduct of Business and Maintenance of Existence.
The Borrower will continue, and will cause each of its
Subsidiaries to continue, to engage in business of the same
general type as now conducted by the Borrower or said Subsidiary,
and will preserve, renew and keep in full force and effect its
corporate existence and its rights, privileges and franchises
necessary or desirable in the normal conduct of business.
(5) Compliance with Laws. The Borrower will comply,
and will cause each of its Subsidiaries to comply, with all
applicable laws, ordinances, rules, regulations, and requirements
of Government (including, without limitation, the Employee
Retirement Income Security Act of 1974, as amended (ERISA) and
the rules and regulations thereunder) except where the necessity
of compliance therewith is contested in good faith by appropriate
proceedings.
(6) Accounting; Inspection of Property, Books and
Records. In addition to the specific requirements of subsection
(B)(6), above, the Borrower generally will keep, and will cause
its Subsidiaries to keep, proper books of record and account in
which full, true and correct entries in conformity with GAAP
shall be made of all dealings and transactions in relation to its
business and activities, will maintain its fiscal reporting
periods on the present basis and will permit representatives of
the Bank to visit and inspect any of its properties, to examine
and make abstracts from any of its books and records and to
discuss its affairs, finances and accounts with its officers,
employees and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
(7) Debt. The Borrower will not incur or at any time
be liable with respect to any Debt except (i) Debt outstanding
under this Agreement, the Notes and the other Loan Documents,
(ii) Debt secured by a Lien pursuant to paragraph (8) of this
subsection (C), (iii) Subordinated Debt and (iv) Debt incurred in
the Borrower's ordinary course of business, not to exceed at any
one time outstanding $150,000 in the aggregate of all such Debt.
(8) Restriction on Liens. The Borrower will not at
any time create, assume or suffer to exist any Lien on any
property or asset now owned or hereafter acquired by it or assign
or subordinate any present or future right to receive assets
except:
(a) any Liens created by the this Agreement and
all other Loan Documents;
(b) any purchase money security interest on any
capital asset of the Borrower if such purchase money security
interest attaches to such capital asset concurrently with the
acquisition thereof and if the Debt secured by such purchase
money security interest does not exceed the lesser of the cost or
fair market value as of the time of acquisition of the asset
covered thereby to the Borrower; provided, that the aggregate
amount of Debt secured by all such Liens does not exceed $150,000
in the aggregate at any one time outstanding and provided, that
no such purchase money security interest shall extend to or cover
any property or asset of the Borrower other than the related
asset;
(c) Liens securing Taxes, assessments or
governmental charges or levies or the claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and
other like persons; provided (i) with respect to Liens securing
Taxes, assessments or governmental charges, such Taxes are not
yet payable pursuant to subsection (C)(2) above, or are not
required to be paid, or (ii) with respect to Liens securing
claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and the like, such Liens are unfiled and
no other action has been taken to enforce the same;
(d) Liens not securing Debt which are incurred in
the ordinary course of business in connection with workmen's
compensation, unemployment insurance, social security and other
like laws;
(e) any Lien arising pursuant to any order of
attachment, distraint or similar legal process arising in
connection with court proceedings so long as the execution or
other enforcement thereof is effectively stayed and the claims
secured thereby are being contested in good faith by appropriate
proceedings; and
(f) zoning restrictions, easements, licenses,
reservations, covenants, conditions, waivers, restrictions on the
use of property or other minor encumbrances or irregularities of
title which do not materially impair the use of any property in
the operation or business of the Borrower or the value of such
property for the purpose of such business.
(9) Consolidations, Mergers and Sales of Assets. The
Borrower will not, and will not permit any of its Subsidiaries
to, (a) consolidate or merge with or into any other person or (b)
sell, lease or otherwise transfer all or any substantial part of
its assets to any other person.
(10) Transactions with Affiliates. The Borrower will
not directly or indirectly, and will not permit any of its
Subsidiaries to, pay any funds to or for the account of, make any
investment in, engage in any transaction with or effect any
transaction in connection with any joint enterprise or other
joint arrangement with, any Affiliate of the Borrower or such
Subsidiary, except that the Borrower or such Subsidiary may make
payment or provide compensation (including without limitation the
establishment of customary employee benefit plans) for personal
services rendered by employees and other persons on terms fair
and reasonable in light of the circumstances under which such
services were or are to be rendered.
Nothing in this paragraph (10) shall prohibit the Borrower or
such Subsidiary from making sales to or purchases from any
Affiliate and, in connection therewith, extending credit or
making payments, or from making payments for services rendered by
any Affiliate, if such sales or purchases are made or such
services are rendered in the ordinary course of business and on
terms and conditions at least as favorable to the Borrower or
such Subsidiary as the terms and conditions which would apply in
a similar transaction with a person not an Affiliate, or prohibit
the Borrower or such Subsidiary from participating in, or
effecting any transaction in connection with, any joint
enterprise or other joint arrangement with any Affiliate if the
Borrower or such Subsidiary participates in the ordinary course
of its business and on a basis no less advantageous than on the
basis on which such Affiliate participates.
(11) Restricted Payments. The Borrower will not, and
will not permit any of its Subsidiaries to (a) declare or pay any
dividend or other distribution on any shares of the Borrower's or
such Subsidiary's capital stock, (except dividends payable solely
in shares of its capital stock), (b) make any payment on account
of the purchase, redemption, retirement or acquisition of (i) any
shares of the Borrower's or such Subsidiary's capital stock
(except shares acquired upon the conversion thereof into other
shares of its capital stock) or (ii) any option, warrant or other
right to acquire shares of the Borrower's or such Subsidiary's
capital stock.
(12) Investments. The Borrower will not make or
acquire, and will not permit any of its Subsidiaries to make or
acquire, any investment in any person (whether by share purchase,
capital contribution, loan, time deposit or otherwise) other than
(a) in direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any
agency thereof, (b) in commercial paper rated in the highest
grade by a nationally recognized credit rating agency, (c) in
time deposits with, including certificates of deposit issued by,
any office located in the United States of any bank or trust
company which is organized under the laws of the United States or
any state thereof and has capital, surplus and undivided profits
aggregating at least $200,000,000 (provided in each case that
such investment matures within one year from the date of
acquisition thereof by the Borrower), and (d) loans and advances
to employees for travel in the ordinary course of business and in
an amount consistent with past practice and satisfactory to the
Bank.
(13) Transactions with Other Persons. The Borrower
shall not, and shall permit any of its Subsidiaries to, enter
into any agreement with any person whereby any of them shall
agree to any restriction on the Borrower's or such Subsidiary's
right to amend or waive any of the provisions of this Agreement.
(14) Use of Proceeds. The proceeds of the Advances
will be used by the Borrower for working capital and general
corporate purposes of the Borrower. The proceeds of the Term
Loan shall be used to finance the cash portion of the acquisition
of Avenue Technologies, Inc. by Hadron, Inc. None of the
proceeds of the Advances will be used, directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve
System.
(15) Changes in Management. The Borrower shall
preserve and maintain, and shall cause each of its Subsidiaries
to preserve and maintain, its senior management as currently
constituted.
(D) Independence of Covenants. All covenants contained in
this Agreement shall be given independent effect so that if a
particular action or condition is not permitted by any of such
covenants, the fact that such action or condition would be
permitted by an exception to, or otherwise be within the
limitations of another covenant shall not avoid the occurrence of
a Default if such action is taken or condition exists.
VII. REMEDIES.
(A) UCC Rights. If any Default shall have occurred, the
Bank may in addition to all other rights and remedies granted to
it in this Agreement, either Note, any and all other Loan
Documents and in any other instrument or agreement securing,
evidencing or relating to the Obligations, exercise all rights
and remedies of a secured party under the UCC and all other
rights available to the Bank at law or in equity.
(B) Payments on Collateral. Without limiting the rights of
the Bank under any other provision of this Agreement, if a
Default shall occur and be continuing:
(1) all payments received by the Borrower under or in
connection with any of the Collateral and not subject to the
Lockbox Agreement shall be held by the Borrower in trust for the
Bank, shall be segregated from other funds of the Borrower and
shall forthwith upon receipt by the Borrower be turned over to
the Bank, in the same form as received by the Borrower (duly
indorsed by the Borrower to the Bank, if required to permit
collection thereof by the Bank); and
(2) all such payments received by the Bank (whether
from the Borrower or otherwise) may, in the sole discretion of
the Bank, be held by the Bank as collateral security for, and
then or at any time thereafter applied in whole or in part by the
Bank to the payment of the expenses and Obligations as set forth
in subsection (J), below.
(C) Possession of Collateral. In furtherance of the
foregoing, the Borrower expressly agrees that, if a Default shall
occur and be continuing, the Bank may (i) by judicial powers, or
without judicial process if it can be done without breach of the
peace, enter any premises where any of such Collateral is or may
be located, and without charge or liability to the Bank seize and
remove such Collateral from such premises and (ii) have access to
and use of the Borrower's books and records relating to such
Collateral.
(D) Sale of Collateral.
(1) The Borrower expressly agrees that if a
Default shall occur and be continuing, the Bank, without demand
of performance or other demand or notice of any kind (except the
notice specified below of the time and place of any public or
private sale) to the Borrower or any other person (all of which
demands and notices are hereby waived by the Borrower), may
forthwith collect, receive, appropriate and realize upon the
Collateral and forthwith sell, lease, assign, give an option or
options to purchase or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do so) in one or
more parcels at public or private sale, at any exchange, broker's
board or at any office of the Bank or elsewhere in such manner as
is commercially reasonable and as the Bank may deem best, for
cash or on credit or for future delivery without assumption of
any credit risk. The Bank shall have the right upon any such
public sale, and, to the extent permitted by law, upon any such
private sale, to purchase the whole or any part of the Collateral
so sold. The Borrower further agrees, at the Bank's request, to
assemble the Collateral, and to make it available to the Bank at
places which the Bank may reasonably select. To the extent
permitted by applicable law, the Borrower waives all claims,
damages and demands against the Bank arising out of the
foreclosure, repossession, retention or sale of the Collateral.
(2) Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold in a
recognized market, the Bank shall give the Borrower five (5)
days' written notice of its intention to make any such public or
private sale or sale at a broker's board or on a securities
exchange. Such notice shall (a) in the case of a public sale,
state the time and place fixed for such sale, (b) in the case of
a sale at a broker's board or on a securities exchange, state
the board or exchange at which such sale is to be made and the
day on which the Collateral, or any portion thereof being sold,
will first be offered for sale and (c) in the case of a private
sale, state the day after which such sale may be consummated.
The Bank shall not be required or obligated to make any such sale
pursuant to any such notice. The Bank may adjourn any public or
private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the same may
be so adjourned. In the case of any sale of all or any part of
the Collateral for credit or for future delivery, the Collateral
so sold may be retained by the Bank until the selling price is
paid by the purchaser thereof, but the Bank shall not incur any
liability in case of failure of such purchaser to pay for the
Collateral so sold and, in the case of such failure, such
Collateral may again be sold upon like notice.
(E) Rights of Purchasers. Upon any sale of the Collateral
(whether public or private), the Bank shall have the right to
deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser (including the Bank) at any
such sale shall hold the Collateral so sold free from any claim
or right of whatever kind, including any equity or right of
redemption of the Borrower, and the Borrower, to the extent
permitted by law, hereby specifically waives all rights of
redemption and any right to a judicial or other stay or approval
which it has or may have under any law now existing or hereafter
adopted.
(F) Additional Rights of the Bank.
(1) The Bank shall have the right and power to
institute and maintain such suits and proceedings as it may deem
appropriate to protect and enforce the rights vested in it by
this Agreement and may proceed by suit or suits at law or in
equity to enforce such rights and to foreclose upon and sell the
Collateral or any part thereof pursuant to the judgment or decree
of a court of competent jurisdiction.
(2) The Bank shall, to the extent permitted by
law and without regard to the solvency or insolvency at the time
of any Person then liable for the payment of any of the
Obligations or the then value of the Collateral, and without
requiring any bond from any party to such proceedings, be
entitled to the appointment of a special receiver or receivers
(who may be the Bank) for the Collateral or any part thereof and
for the rents, issues, tolls, profits, royalties, revenues and
other income therefrom, which receiver shall have such powers as
the court making such appointment shall confer, and to the entry
of an order directing that the rents, issues, tolls, profits,
royalties, revenues and other income of the property constituting
the whole or any part of the Collateral be segregated,
sequestered and impounded for the benefit of the Bank, and the
Borrower irrevocably consents to the appointment of such receiver
or receivers and to the entry of such order.
(G) Remedies Not Exclusive.
(1) No remedy conferred upon or reserved to the
Bank in this Agreement is intended to be exclusive of any other
remedy or remedies, but every such remedy shall be cumulative and
shall be in addition to every other remedy conferred herein or
now or hereafter existing at law, in equity or by statute.
(2) If the Bank shall have proceeded to enforce any
right, remedy or power under this Agreement and the proceeding
for the enforcement thereof shall have been discontinued or
abandoned for any reason or shall have been determined adversely
to the Bank, the Borrower and the Bank shall, subject to any
determination in such proceeding, severally and respectively be
restored to their former positions and rights under this
Agreement, and thereafter all rights, remedies and powers of the
Bank shall continue as though no such proceedings had been taken.
(3) All rights of action under this Agreement may be
enforced by the Bank without the possession of any instrument
evidencing any Obligation or the production thereof at any trial
or other proceeding relative thereto, and any suit or proceeding
instituted by the Bank shall be brought in its name and any
judgment shall be held as part of the Collateral.
(H) Waiver and Estoppel.
(1) The Borrower, to the extent it may lawfully
do so, agrees that it will not at any time in any manner
whatsoever claim or take the benefit or advantage of any
appraisement, valuation, stay, extension, moratorium, turnover or
redemption law, or any law now or hereafter in force permitting
it to direct the order in which the Collateral shall be sold
which may delay, prevent or otherwise affect the performance or
enforcement of this Agreement and the Borrower hereby waives the
benefits or advantage of all such laws, and covenants that it
will not hinder, delay or impede the execution of any power
granted to the Bank in this Agreement but will permit the
execution of every such power as though no such law were in
force; provided that nothing contained in this subsection (H)
shall be construed as a waiver of any rights of the Borrower
under any applicable federal bankruptcy law.
(2) The Borrower, to the extent it may lawfully do so,
on behalf of itself and all who may claim through or under it,
including without limitation any and all subsequent creditors,
vendees, assignees and lienors, waives and releases all rights to
demand or to have any marshalling of the Collateral upon any
sale, whether made under any power of sale granted herein or
pursuant to judicial proceedings or upon any foreclosure or any
enforcement of this Agreement and consents and agrees that all
the Collateral may at any such sale be offered and sold as an
entirety.
(3) The Borrower, to the extent it may lawfully do so,
waives presentment, demand, protest and any notice of any kind
(except notices explicitly required hereunder) in connection with
this Agreement and any action taken by the Bank with respect to
the Collateral.
(I) Power of Attorney. The Borrower hereby irrevocably
constitutes and appoints the Bank, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the
Borrower and in the name of the Borrower or in its own name, from
time to time in the Bank's reasonable discretion for the purpose
of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the
purposes of this Agreement and, without limiting the generality
of the foregoing, hereby gives the Bank the power and right, on
behalf of the Borrower, without notice to or assent by the
Borrower to do the following:
(1) to pay or discharge Taxes, Liens, security
interests or other encumbrances levied or placed on or threatened
against the Collateral;
(2) to effect any repairs or any insurance called for
by the terms of this Agreement and to pay all or any part of the
premiums therefor and the costs thereof; and
(3) upon the occurrence and continuance of any Default
and otherwise to the extent provided in this Agreement, (a) to
direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due and to come
due thereunder directly to the Bank or as the Bank shall direct;
(b) to receive payment of and receipt for any and all moneys,
claims and other amounts due and to become due at any time in
respect of or arising out of any Collateral; (c) to sign and
indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with
accounts and other documents relating to the Collateral; (d) to
commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect
the Collateral or any part thereof and to enforce any other right
in respect of any Collateral; (e) to defend any suit, action or
proceeding brought against the Borrower with respect to any
Collateral; (f) to settle, compromise and adjust any suit, action
or proceeding described above and, in connection therewith, to
give such discharges or releases as the Bank may deem
appropriate; (g) to assign any patent or trademark (along with
the goodwill of the business to which such trademark pertains),
for such term or terms, on such conditions, and in such manner,
as the Bank shall in its sole discretion determine; and (h)
generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully
and completely as though the Bank were the absolute owner thereof
for all purposes, and to do, at the Bank's option and the
Borrower's expense, at any time, or from time to time, all acts
and things which the Bank deems necessary to protect, preserve or
realize upon the Collateral and the Bank's security interest
therein, in order to effect the intent of this Agreement, all as
fully and effectively as the Borrower might do.
The Borrower hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of
attorney is a power coupled with an interest and shall be
irrevocable.
(J) Application of Proceeds. The Bank shall retain the net
proceeds of any collection, recovery, receipt, appropriation,
realization or sale of the Collateral and, after deducting all
reasonable costs and expenses of every kind incurred therein or
incidental to the care and safekeeping of any or all of the
Collateral or in any way relating to the rights of the Bank
hereunder, including reasonable attorneys' fees and legal
expenses, apply such net proceeds to the payment in whole or in
part of the Obligations in such order as the Bank may elect, the
Borrower remaining liable for any amount remaining unpaid (and
any attorneys' fees paid by the Bank in collecting such
deficiency) after such application. Only after applying such net
proceeds and after the payment by the Bank of any other amount
required by any provision of law, including Section 9-504(1)(c)
of the UCC, need the Bank account for the surplus, if any, to the
Borrower or to whomsoever may be lawfully entitled to the same.
VIII. MISCELLANEOUS.
(A) Notices. Unless otherwise specified herein, all
notices, requests or other communications to any party hereunder
shall be in writing and shall be given to such party at its
address set forth on the signature page hereof or any other
address which such party shall have specified for the purpose of
communications hereunder by notice to the other parties
hereunder. Each such notice, request or other communication
shall be effective (1) if given by mail, three days after such
communication is deposited, certified or registered, in the mails
with first class postage prepaid, addressed as aforesaid; or (2)
if given by other means, when delivered at the address specified
in this subsection (A). The Bank shall provide a copy of any
notice to the Borrower to McGuire, Woods, Battle & Xxxxxx LLP,
0000 Xxxxxx Xxxxxxxxx, Xxxxx 0000, XxXxxx, Xxxxxxxx 00000, Attn:
Xxxxxxx X. Xxxxxxx, Esquire.
(B) No Waivers. No failure on the part of the Bank to
exercise, no course of dealing with respect to, and no delay in
exercising any right, power or privilege under this Agreement or
any document or agreement contemplated hereby shall operate as a
waiver thereof nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.
(C) Compensation and Expenses of the Bank. The Borrower
shall pay to the Bank from time to time upon demand, all of the
fees, costs and expenses incurred by the Bank (including, without
limitation, the reasonable fees and disbursements of counsel and
any amounts payable by the Bank to any of its agents, whether on
account of fees, indemnities or otherwise) (1) arising in
connection with the preparation, administration, modification,
amendment, waiver or termination of this Agreement or any
document or agreement contemplated hereby or any consent or
waiver hereunder or thereunder or (2) incurred in connection with
the administration of this Agreement, or any document or
agreement contemplated hereby, or in connection with the adminis-
tration, sale or other disposition of Collateral hereunder or
under any document or agreement contemplated hereby or the
preservation, protection or defense of the rights of the Bank in
and to the Collateral.
(D) Indemnification. The Borrower shall at all times
hereafter indemnify, hold harmless and, on demand, reimburse the
Bank, its subsidiaries, affiliates, successors, assigns,
officers, directors, employees and agents, and their respective
heirs, executors, administrators, successors and assigns (all of
the foregoing parties, including, but not limited to, the Bank,
being hereinafter collectively referred to as the "Indemnitees"
and individually as an "Indemnitee") from, against and for any
and all liabilities, obligations, claims, damages, actions,
penalties, causes of action, losses, judgments, suits, costs,
expenses and disbursements, including, without limitation,
attorney's fees (any and all of the foregoing being hereinafter
collectively referred to as the "Liabilities" and individually as
a "Liability") which the Indemnitees, or any of them, might be or
become subjected, by reason of, or arising out of the
preparation, execution, delivery, modification, administration or
enforcement of, or performance of the Bank's rights under, this
Agreement or any other document, instrument or agreement
contemplated hereby or executed in connection herewith; provided
that the Borrower shall not be liable to any Indemnitee for any
Liability caused solely by the gross negligence or willful
misconduct of such Indemnitee. In no event shall any Indemnitee,
as a condition to enforcing its rights under this subsection (D)
or otherwise, be obligated to make a claim against any other
person (including, without limitation, the Bank) to enforce its
rights under this subsection (D).
(E) Amendments, Supplements and Waivers. The parties
hereto may, from time to time, enter into written agreements
supplemental hereto for the purpose of adding any provisions to
this Agreement, waiving any provisions hereof or changing in any
manner the rights of the parties.
(F) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of each of the parties
hereto and shall inure to the benefit of the Bank's successors
and assigns. Nothing herein is intended or shall be construed to
give any other person any right, remedy or claim under, to or in
respect of this Agreement or any Collateral.
(G) Waiver of Jury Trial; Submission to Jurisdiction. THE
BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY SUIT, ACTION, PROCEEDING, OR COUNTERCLAIM
ARISING OUT OF OR RELATED TO THIS AGREEMENT, EITHER NOTE OR ANY
OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. Borrower irrevocably (i) submits to the
jurisdiction of any Virginia state court or federal court sitting
in the state of Virginia with respect to any suit, action, or
proceeding relating to this Agreement, either Note, or any other
Loan Document, (ii) waives any objection which it may now or
hereafter have to the laying of venue of any such suit, action,
or proceeding brought in any such court has been brought in an
inconvenient forum, and (iii) waives the right to object that any
such court does not have jurisdiction over it. Nothing in this
paragraph shall affect the Bank's right to serve process in any
other manner permitted by law or to bring proceedings against the
Borrower in any other court having jurisdiction.
(H) Termination; Survival. This Agreement shall terminate
when the security interests granted hereunder have terminated and
the Collateral has been released as provided in Section III(F);
provided that the obligations of the Borrower under any of
Section VI(B)(18), VIII(C) and VIII(D) shall survive any such
termination.
(I) Entire Agreement. This Agreement, the Lockbox
Agreement, the Subordination Agreements, the Notes and the other
Loan Documents set forth the entire agreement of the parties with
respect to the subject matter hereof and thereof and supersede
all previous understandings, written or oral, in respect thereof.
(J) Limitation of Law; Severability.
(1) All rights, remedies and powers provided in this
Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all
the provisions of this Agreement are intended to be subject to
all applicable mandatory provisions of law which may be
controlling and to be limited to the extent necessary so that
they will not render this Agreement invalid, unenforceable in
whole or in part, or not entitled to be recorded, registered or
filed under the provisions of any applicable law.
(2) If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (a) the other provisions hereof shall remain in
full force and effect in such jurisdiction and shall be liberally
construed in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (b) the invalidity or
unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such
provisions in any other jurisdiction.
(K) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Virginia.
[Signatures begin on following page]
WITNESS the following signatures and seals:
HADRON, INC.
[SEAL]
Suite 404 West
0000 Xxxxxx Xxxxx Xxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
/S/ X.X. XXXXXXX
By: ___________________________________
Name: X.X. Xxxxxxx
Title: Chairman and Chief Executive Officer
AVENUE TECHNOLOGIES, INC.
[SEAL]
Xxxxx 000
0000 Xxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
/S/ C. Xxxxx Xxxxxxx
By: ____________________________________
Name: C. Xxxxx Xxxxxxx
Title: Chief Operating Officer
VAIL RESEARCH AND TECHNOLOGY
CORPORATION
[SEAL]
Address:
/S/ XXXXXXX XXXXXX
By: ____________________________________
Name: Xxxxxxx Xxxxxx
Title: Chief Operating Officer
SYCOM SERVICES, INC.
[SEAL]
Address:
/S/ X.X. XXXXXXX
By: ____________________________________
Name: X.X. Xxxxxxx
Title: Chief Executive Officer
ENGINEERING & INFORMATION SERVICES, INC.
[SEAL]
Address:
/S/ X.X. XXXXXXX
By: ____________________________________
Name: X.X. Xxxxxxx
Title: Chief Executive Officer
UNITED BANK
[SEAL]
0000 Xxxxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
/S/ XXXX X. XXXXX
By: ____________________________________
Xxxx X. Xxxxx, Senior Vice President
APPENDIX 1
Borrower's Current Chief Executive Office:
1. Hadron, Inc. and Vail Research and Technology Corporation
0000 Xxxxxx Xxxxx Xxxxxxxx, Xxxxx 000 Xxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
2. Sycom Services, Inc. and Engineering & Information Services, Inc.
0000 Xxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
3. Avenue Technologies, Inc.
0000 Xxxxxxxx Xxxxxxx
Xxxxx 000 and 300
Xxxxxxxxxx, Xxxxxxxx 00000
Previous Chief Executive Offices (last 4 months only):
None.
Locations of Records of Receivables
and Other Intangibles:
1. Hadron, Inc. and Vail Research and Technology Corporation
0000 Xxxxxx Xxxxx Xxxxxxxx, Xxxxx 000 Xxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
2. Sycom Services, Inc. and Engineering & Information Services, Inc.
0000 Xxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
3. Avenue Technologies, Inc.
0000 Xxxxxxxx Xxxxxxx
Xxxxx 000 and 300
Xxxxxxxxxx, Xxxxxxxx 00000
All Other Places of Business:
Avenue Technologies, Inc.
0000 Xxxxxxxxx Xxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
APPENDIX 2
Locations of Equipment and Inventory:
1. Hadron, Inc. and Vail Research and Technology Corporation
0000 Xxxxxx Xxxxx Xxxxxxxx, Xxxxx 000 Xxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
2. Sycom Services, Inc. and Engineering & Information Services, Inc.
0000 Xxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
3. Avenue Technologies, Inc.
0000 Xxxxxxxx Xxxxxxx
Xxxxx 000 xxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
0000 Xxxxxxxxx Xxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
APPENDIX 3
Trade Names, Division Names, Etc.:
None.
APPENDIX 4
Required Filings and Recordings:
