SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
March 13, 1998 (February 26, 1998)
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Advanced Communication Systems, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-22737 54-1421222
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(Commission File Number) (IRS Employer Identification No.)
10089 Lee Highway, Fairfax, Virginia 22030
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(Address of Principal Executive Offices) (Zip Code)
(703) 934-8130
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(Registrant's Telephone Number, Including Area Code)
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Item 2. Acquisition or Disposition of Assets.
On February 26, 1998, Advanced Communication Systems, Inc., a Delaware
corporation ("ACS"), acquired all the outstanding shares of Advanced Management,
Incorporated, a Virginia corporation ("AMI") pursuant to a Stock Purchase
Agreement, effective as of January 31, 1998, by and between ACS and John Lin
(the "Shareholder") for the initial consideration paid of $19.5 million in cash.
In addition, ACS may pay additional amounts to the shareholder based on the
achievement of certain financial goals by AMI for each of two consecutive twelve
month periods following the closing date of the acquisition. The amount and type
of consideration was determined on the basis of negotiations between ACS and the
Shareholder. ACS financed the acquisition with proceeds from its revolving
credit facility with Nationsbank, N.A. (as described below).
On February 17, 1998, ACS replaced its existing $6.5 million credit facilities
with a $35 million revolving credit facility to finance the acquisition of AMI
and to provide for its other working capital needs. The new facility is secured
by all assets of ACS and its subsidiaries, including contract receivables, and
has various financial covenants which require ACS to maintain specific financial
ratios and imposes certain restrictions on, among other things, the creation or
incurrence of certain indebtedness, preferred stock or liens, the payment of
dividends, mergers and the sale of assets, certain capital expenditures and
certain transactions with and investments in affiliates.
AMI provides a wide range of information technology services including complex
computer solutions and management services that address full project life-cycle
from systems planning and requirements analysis to implementation and ongoing
operational support. AMI is headquartered in McLean, Virginia, and has
operations in California, Connecticut, Georgia, Illinois, Maryland,
Massachusetts, New York, Tennessee, Texas, Virginia and Washington, DC.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
It is not practicable to provide the required financial
statements for AMI at this time. The statements will be filed
as an amendment to this report on Form 8-K as soon as they are
prepared and not later than 60 days after the deadline for
filing this Form 8-K.
(b) Pro Forma Financial Information.
It is not practicable to provide the required pro forma
financial statements for ACS at this time. The statements
will be filed as an amendment to this report on Form 8-K as
soon as they are prepared and not later than 60 days after the
deadline for filing this Form 8-K.
(c) Exhibits
10.1 Stock Purchase Agreement by and between ACS and the
Shareholder, dated as of January 31, 1998.
10.2 Credit Agreement between ACS and Nationsbank, N.A.
dated as of February 17, 1998.
10.3 Security Agreement between ACS and Nationsbank, N.A.
dated as of February 17, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 13 , 1998 ADVANCED COMMUNICATION SYSTEMS, INC.
/S/ Dev Ganesan
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Dev Ganesan
Executive Vice-President, Chief Financial
Officer and Treasurer
Exhibit 10.1
STOCK PURCHASE AGREEMENT
EFFECTIVE AS OF
JANUARY 31, 1998
BETWEEN
ADVANCED COMMUNICATION SYSTEMS, INC.
AND
JOHN LIN
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TABLE OF CONTENTS
Page
1. Definitions...................................................... 1
2 Purchase and Sale of Company Shares.............................. 7
2.1 Basic Transaction....................................... 7
2.2 Preliminary Purchase Price.............................. 7
2.3 The Closing............................................. 7
2.4 Deliveries at the Closing............................... 7
2.5 Contingent Purchase Price............................... 7
2.6 Contingent Purchase Price Determination Procedures...... 9
3. Representations and Warranties Concerning the Transaction........ 9
3.1 Representations and Warranties of the Seller............ 9
3.2 Representations and Warranties of the Buyer............. 10
4. Representations and Warranties Concerning the Company ........... 11
4.1 Organization, Qualification, and Corporate Power........ 11
4.2 Capitalization.......................................... 11
4.3 Noncontravention........................................ 12
4.4 Brokers' Fees........................................... 12
4.5 Title to Assets......................................... 12
4.6 Financial Statements.................................... 12
4.7 Events Subsequent to the Interim Balance Sheet Date..... 13
4.8 Undisclosed Liabilities................................. 15
4.9 Legal Compliance........................................ 15
4.10 Tax Matters............................................. 15
4.11 Real Property........................................... 16
4.12 Intellectual Property................................... 17
4.13 Tangible Assets......................................... 19
4.14 Inventory............................................... 19
4.15 Contracts............................................... 19
4.16 Notes and Accounts Receivable........................... 20
4.17 Powers of Attorney...................................... 20
4.18 Insurance............................................... 20
4.19 Litigation.............................................. 21
4.20 Product Warranty........................................ 21
4.21 Product Liability....................................... 22
4.22 Employees............................................... 22
4.23 Employee Benefits....................................... 22
4.24 Guaranties.............................................. 24
4.25 Government Contracts.................................... 24
4.26 Environment, Health, and Safety Matters................. 26
4.27 Subsidiaries............................................ 26
4.28 Disclosure.............................................. 26
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Page
5. Pre-Closing Covenants............................................ 27
5.1 General................................................. 27
5.2 Notices and Consents.................................... 27
5.3 Operation of Business................................... 27
5.4 Preservation of Business................................ 27
5.5 Full Access, Confidentiality............................ 28
5.6 Notice of Developments.................................. 29
5.7 Exclusivity............................................. 29
6. Post-Closing Covenants........................................... 29
6.1 General................................................. 29
6.2 Litigation Support...................................... 29
6.3 Transition.............................................. 30
6.4 Covenant Not to Compete................................. 30
7. Conditions to Obligation to Close................................ 32
7.1 Conditions to Obligation of the Buyer................... 32
7.2 Conditions to Obligation of the Seller.................. 33
8. Remedies for Breaches of This Agreement.......................... 34
8.1 Survival of Representations and Warranties.............. 34
8.2 Indemnity............................................... 35
8.3 Notice of Claim......................................... 35
8.4 Limitation.............................................. 37
8.5 Recoupment.............................................. 37
9. Tax Matters...................................................... 37
9.1 Section 338(h)(10) Election............................. 37
9.2 Tax Periods Ending on or Before the Closing Date....... 38
9.3 Allocation of Purchase Price ........................... 38
9.4 S Corporation Status.................................... 38
9.5 Tax Period Beginning Before and Ending After
the Closing Date........................................ 39
9.6 Cooperation on Tax Matters.............................. 39
10. Termination and Miscellaneous.................................... 40
10.1 Termination of Agreement................................ 40
10.2 Effect of Termination................................... 40
10.3 Cooperation............................................. 41
10.4 Successors and Assigns.................................. 41
10.5 Entire Agreement........................................ 41
10.6 Counterparts............................................ 41
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Page
10.7 Expenses................................................ 42
10.8 Notices................................................. 42
10.9 Governing Law........................................... 43
10.10 Severability............................................ 43
10.11 Absence of Third-Party Beneficiary Rights............... 43
10.12 Mutual Drafting......................................... 43
10.13 Further Representations................................. 43
10.14 Amendment; Waiver....................................... 43
10.15 Public Disclosure....................................... 44
Exhibit A--Form of Employment Agreement for John Lin
Exhibit B--Form of Employment Agreement for Grace Lee
Exhibit C--Form of Opinion of Counsel to the Seller
Exhibit D--List of Executive Level Employees
Schedule 4.1--Organization, Qualification and Corporate Power
Schedule 4.3--Noncontravention
Schedule 4.4--Broker's Fees
Schedule 4.6--Financial Statements
Schedule 4.7--Events Subsequent to Interim Balance Sheet Date
Schedule 4.8--Undisclosed Liabilities
Schedule 4.10--Tax Matters
Schedule 4.11--Real Property
Schedule 4.12--Intellectual Property
Schedule 4.15--Contracts
Schedule 4.16--Notes and Accounts Receivable
Schedule 4.18--Insurance
Schedule 4.19--Litigation
Schedule 4.20--Product Warranties
Schedule 4.23--Employee Benefits
Schedule 4.25--Government Contracts
Schedule 4.28--Disclosure
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of this thirty-first day of
January, 1998, (the "Effective Date") by and between Advanced Communication
Systems, Inc., a Delaware corporation (the "Buyer"), and John Lin (the
"Seller"), and shall be deemed to be effective and the "Purchase," as defined
below, shall be deemed to have occurred as of the date hereof as between the
parties hereto, upon the satisfaction and/or waiver of the conditions to closing
set forth in Section 7. The Buyer and the Seller are referred to collectively
herein as the "Parties."
RECITALS
WHEREAS, the Seller owns all of the outstanding capital stock of
Advanced Management, Inc., a Virginia corporation (the "Company"); and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase from the Seller, and the Seller will sell to the Buyer, all of the
outstanding capital stock of the Company in return for cash (the "Purchase").
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS
"ACS Allocations" means any allocations expenses or costs of the Buyer
to the Company after the Closing Date, except for and excluding any charges by
the Buyer to the Company at cost (not to exceed the cost of the same services
performed on an outsourced basis) for services performed by the Buyer directly
for the Company.
"Adverse Consequences" has the meaning set forth in Section 8.2.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in Section 2.3 below.
"Closing Date" has the meaning set forth in Section 2.3 below.
"Closing Date Balance Sheet" means the balance sheet of the Company as
of January 31, 1998, prepared in accordance with GAAP applied on a basis
consistent with the preparation of the Financial Statements, reviewed by the
Company's independent certified public accountant and adjusted to take into
account any transactions occurring between January 31, 1998, and the Closing
date that are determined to be outside the Ordinary Course of Business by the
Buyer with the concurrence of the Company's independent certified public
accountant and such other items as the Parties may agree, and delivered by the
Seller to the Buyer within 45 days subsequent to the Closing Date.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Shares" means any share of the Company common stock, par value
$5 per share.
"Confidential Information" means any information concerning the
businesses and affairs of the Company or the Buyer that is not already generally
available to the public.
"Contingent Purchase Price" has the meaning set forth in Section 2.5
below.
"Controlled Group" has the meaning set forth in Code section 1563.
"Earn Out Period" means the Initial Earn Out Period and the Second Earn
Out Period.
"EBITDA" means earnings, determined in accordance with GAAP, before
interest, income taxes, depreciation and amortization determined before (i) any
ACS Allocations, (ii) any Excess Executive Salary, (iii) any Executive Bonus and
(iv) the Excess Employee Benefits, and reduced by any amount contributed to
earnings from any discretionary management reserves existing on the Closing
Date.
"Effective Date" has the meaning set forth in the preface, above.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as
now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity that is treated as a single
employer with the Company for purposes of Code Section 414.
"Estimated Net Book Value" means $4 million.
"Excess Employee Benefits" means excess of bonuses paid to or accrued
with respect to the employees of the Company (exclusive of the amount of any
bonus paid to the Seller or Grace Lee) over $375,000.
"Excess Executive Salary" means any annual amount in excess of $150,000
of ordinary salary or wages (including fringe benefits and all other types of
compensations) paid to or accrued during the Earn Out Period on behalf of an
individual hired by the Company to serve initially as Vice President of the
Company reporting to the Seller and expected to eventually serve as President of
the Company upon the retirement of the Seller.
"Excess Purchase Price Adjustment" means the positive excess, if any,
of the Purchase Price Adjustment over the amount of any Initial Product (as
defined in Section 2.5).
"Executive Bonus" means the amount of any bonus payments made to the
Seller or Grace Lee during the Earn Out Period in accordance with the terms of
their employment agreements with the Company.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statement" has the meaning set forth in Section 4.6 below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Entity" means any government or agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal state or local,
domestic or foreign.
"Government Contract" means any Contract between the Company and any
Governmental Entity, and any bids or proposals for any Contract between the
Company and any Governmental Entity.
"Government Subcontract" means any Contract that is a subcontract
between the Company and any third party relating to a prime contract with any
Governmental Entity and any bids or proposals for any Contract that is a
subcontract between the Company and any third party relating to a prime contract
with any Governmental Entity.
"Indemnified Party" has the meaning set forth in Section 8.2 below.
"Indemnifying Party" has the meaning set forth in Section 8.2 below.
"Initial Earn Out Period" means the period commencing on the day after
the Closing Date and ending on the twelfth full month anniversary of the Closing
Date.
"Initial Earn Out Period EBITDA" shall mean EBITDA for the Initial Earn
Out Period as determined by a nationally recognized accounting firm to be in
accordance with GAAP applied on a basis consistent with the preparation of the
Financial Statements and agreed to by the Seller in accordance with the
procedures set forth in Section 2.6 up to a maximum amount of $4.8 million.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Interim Balance Sheet" means the balance sheet contained within the
Interim Financial Statements.
"Interim Financial Statements" has the meaning set forth in Section 4.6
below.
"Knowledge of the Seller" or the "Seller's Knowledge" means the actual
knowledge of the Seller, Grace Lee, and any of the individuals set forth on
Exhibit D.
"Law" means any constitutional provision, statute, law, rule,
regulation, permit, decree, injunction, judgment, order, ruling, determination,
finding or writ of any Governmental Entity.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Effect" means any change, event or effect that is
materially adverse to the business, assets (including intangible assets),
liabilities, condition (financial or otherwise), results of operations or
financial projections of the Company.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Net Book Value" means the excess of assets over liabilities (excluding
any liabilities shown thereon for expenses incurred by the Company with respect
to any transactions contemplated by this Agreement to the extent that such
liabilities will be satisfied on or prior to the Closing Date) as shown on the
Closing Date Balance Sheet.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Distribution" means cash and property having an aggregate
combined fair market value up to $7.4 million distributed from the Company to
the Seller during the period commencing January 1, 1998, and ending on the
Closing Date and including the distribution of any split-dollar life insurance
policy in which the Seller is the Beneficiary and the cash surrender value of
which has not been recorded on the Financial Statements.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Preliminary Purchase Price" has the meaning set forth in section 2.2
below.
"Purchase Price Adjustment" means the positive excess, if any, of
Estimated Net Book Value over Net Book Value.
"Reportable Event" has the meaning set forth in ERISA section 4043.
"Second Earn Out Period" means the period commencing on the day after
the end of the Initial Earn Out Period and ending on the twenty-fourth full
month anniversary of the Closing Date.
"Second Earn Out Period EBITDA" shall mean EBITDA for the Second Earn
Out Period as determined by a nationally recognized accounting firm to be in
accordance with GAAP applied on a basis consistent with the preparation of the
Financial Statements and agreed to by the Seller in accordance with the
procedures set forth in Section 2.6 up to a maximum amount of $5.4 million and
increased (but not so that the Second Earn Out Period EBITDA exceeds $5.4
million) by the excess, if any, of the Initial Earn Out Period EBITDA over the
amount of $4.8 million (such Initial Earn Out Period EBITDA to be determined,
solely for purposes of this sentence, without regard to the to the $4.8 million
maximum amount).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or (c) purchase
money liens and liens securing rental payments under capital lease arrangements.
"Seller" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Year End Financial Statements" has the meaning set forth in Section
4.6 below.
2. PURCHASE AND SALE OF COMPANY SHARES.
2.1. Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all of his Company Shares for the consideration
specified below in this Section 2.
2.2 Preliminary Purchase Price. The Buyer agrees to pay to the Seller
at the Closing $19.5 million (the "Preliminary Purchase Price") by delivery of
cash by wire transfer to a bank account designated by the Seller. In the event
that the Closing (as defined below) occurs after February 28, 1998, then, within
30 days of the Closing, the Buyer shall pay to the Seller, by delivery of cash
by wire transfer to a bank account designated by the Seller an amount equal to
the lesser of (i) the excess, if any, of Net Book Value over $4.4 million or
(ii) the product of $13,333 multiplied by the number of days that the Closing
occurs after February 28, 1998 (the "Additional Purchase Price").
2.3 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Venable, Baetjer,
Howard & Civiletti in Washington, DC, commencing at 9:00 a.m. local time on the
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself) or such other date as the Parties may determine, however,
the Closing Date shall be no later than March 15, 1998.
2.4 Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 7.1 below, (ii) the Buyer will deliver to the Seller the
various certificates, instruments, and documents referred to in Section 7.2
below, (iii) the Seller will deliver to the Buyer stock certificates
representing all of the Company Shares, endorsed in blank or accompanied by duly
executed assignment documents, and (iv) the Buyer will deliver to the Seller the
consideration specified in Section 2.2 above.
2.5 Contingent Purchase Price. The Contingent Purchase Price means the
sum of the Initial Contingent Purchase Price and the Second Contingent Purchase
Price determined and paid as follows:
(a) Subject to the procedures set forth and adjusted in
accordance with the provisions of Section 2.6, below, the Buyer shall pay to the
Seller (by delivery of cash by wire transfer to a bank account selected by the
Seller) the "Initial Contingent Purchase Price," which shall be equal to the
product of seven and one-half (7.5) multiplied by any excess of Initial Earn Out
Period EBITDA over $4.1 million the (the "Initial Product"), such Initial
Product being reduced (but not below zero) by the amount of any Purchase Price
Adjustment. Interest shall accrue on any portion of the Initial Contingent
Purchase Price not paid by the Buyer when due to the Seller in accordance with
the provisions of this Section 2.5 at the rate of the regular commercial prime
rate of interest of NationsBank N.A., which NationsBank N.A. uses as a standard
for determining actual interest rates charged commercial borrowers, beginning on
the date on which such amount was due to the Seller and ending on the date on
which Buyer pays such amount to the Seller, which payment shall include any
interest accrued thereon. The Buyer shall pay the Initial Contingent Purchase
Price to the Seller by the later of (i) 45 days subsequent to the end of the
Initial Earn Out Period (applicable to all amounts not then in dispute), (ii)
the date that is five days after the date on which the Buyer and the Seller
resolve all disputes with respect to the determination the Initial Earn Out
Period EBITDA in accordance with Section 2.6, below, or (iii) the date that is
five days after the date on which the Seller receives the written determination
of the Arbitrator resolving any dispute between the Buyer and the Seller
concerning the calculation of the Initial Earn Out Period EBITDA.
(b) Subject to the procedures set forth and adjusted in
accordance with the provisions of Section 2.6, below, the Buyer shall pay to the
Seller (by delivery of cash by wire transfer to a bank account selected by the
Seller)) the "Second Contingent Purchase Price," which shall be equal to the
product of seven and one-half (7.5) multiplied by any excess of Second Earn Out
Period EBITDA over the amount of $4.7 million (the "Second Product"), such
Second Product being reduced (but not below zero) by the amount of any Excess
Purchase Price Adjustment. Interest shall accrue on any portion of the Second
Contingent Purchase Price not paid by the Buyer when due to the Seller in
accordance with the provisions of this Section 2.5 at the rate of the regular
commercial prime rate of interest of NationsBank N.A., which NationsBank N.A.
uses as a standard for determining actual interest rates charged commercial
borrowers, beginning on the date on which such amount was due to the Seller and
ending on the date on which Buyer pays such amount to the Seller, which payment
shall include any interest accrued thereon. The Buyer shall pay the Second
Contingent Purchase Price, and any interest thereon, to the Seller by the later
of (i) 45 days subsequent to the end of the Second Earn Out Period (applicable
to all amounts not then in dispute), (ii) the date that is five days after the
date on which the Buyer and the Seller resolve all disputes with respect to the
determination the Second Earn Out Period EBITDA in accordance with Section 2.6,
below, or (iii) the date that is five days after the date on which the Seller
receives the written determination of the Arbitrator resolving any dispute
between the Buyer and the Seller concerning the calculation of the Second Earn
Out Period EBITDA.
The Preliminary Purchase Price increased by the amount of any Contingent
Purchase Price and any Additional Purchase Price is referred to herein as the
"Purchase Price."
2.6 Contingent Purchase Price Determination Procedures. Within 30 days
from the end of each of the Earn Out Periods, the Buyer shall deliver to the
Seller a draft calculation of either the Initial Earn Out Period EBITDA or the
Second Earn Out Period EBITDA, as the case may be, (the "Draft EBITDA
Calculations") prepared by a nationally recognized accounting firm. If the
Seller has any objection to the Draft EBITDA Calculations, the Seller shall
deliver a detailed statement describing his objections to the Buyer within 15
days after receiving either of the Draft EBITDA Calculations. The Buyer and the
Seller will use reasonable efforts to resolve any such objections themselves. If
the Buyer and Seller do not finally resolve any of the objections within 15 days
after the Buyer has received the statement of objections, however, the Buyer and
the Seller will select, within 5 days, a nationally recognized independent
accounting firm mutually acceptable to each party (the agreement to the
selection of which shall not be unreasonably withheld) to resolve any such
differences (the "Arbitrator"). The Arbitrator shall settle any remaining
dispute by selecting the position of the party that the Arbitrator determines,
in its sole discretion, to be the most correct. The determination of the
Arbitrator shall be set forth in writing, delivered to each of the Buyer and the
Seller and shall be conclusive and binding on the parties and shall be
non-appealable. The party whose position is not chosen by the Arbitrator shall
pay all expenses of the Arbitrator. The Draft EBITDA Calculations, as adjusted
for any items of dispute resolved by the Buyer and the Seller and for any
determinations of the Arbitrator shall constitute the Initial Earn Out Period
EBITDA and the Second Earn Out Period EBITDA, as the case may be.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
3.1 Representations and Warranties of the Seller. The Seller represents
and warrants to the Buyer as of the Effective Date and as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
Effective Date throughout this Section 3.1) as follows:
(a) Authorization of Transaction. The Seller has full power
and authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms and
conditions. The Seller need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any Governmental Entity in
order to consummate the transactions contemplated by this Agreement.
(b) Noncontravention. Neither the execution or the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
Governmental Entity, or court to which the Seller is subject or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a party or by which he
is bound or to which any of his assets is subject.
(c) Brokers' Fees. The Seller has no Liability or obligation
to pay any fees or commissions to any accountant, lawyer, broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
(d) Company Shares. The Seller holds of record and owns
beneficially all of the Company Shares free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), Taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. The Seller is not a party
to any option, warrant, purchase right, or other contract or commitment that
could require the Seller to sell, transfer, or otherwise dispose of any capital
stock of the Company (other than this Agreement). The Seller is not a party to
any voting trust, proxy, or other agreement or understanding with respect to the
voting of any capital stock of the Company.
3.2 Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller as of the Effective Date and as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
Effective Date of this Agreement throughout this Section 3.2) as follows:
(a) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. The Buyer has all requisite power and
authority to own, operate and lease its properties and to carry on its business
as now being conducted.
(b) Authorization of Transaction. The representatives of the
Buyer executing this Agreement have all requisite corporate power and authority
to enter into and bind the Buyer to the terms of this Agreement. The Buyer has
full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions. The Buyer need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any Governmental Entity in order to consummate the
transactions contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or subject or any provision of its
charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject.
(d) Brokers' Fees. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
(e) Investment. The Buyer is not acquiring the Company Shares
with a view to distribute or offer for sale in connection with any distribution
thereof within the meaning of the Securities Act.
(f) Financing. The Buyer has, or will have at the Closing
Date, sufficient funds available to make payment of the Preliminary Purchase
Price.
(g) Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending or, to the knowledge of the Buyer,
threatened against the Buyer that in any manner challenges or seeks to prevent,
enjoin, alter or delay any of the transaction contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
The Seller represents and warrants to the Buyer as of the Effective
Date and as of the Closing Date (as though made then and as though the Effective
Date were substituted for the date of this Agreement throughout this Section 4)
as follows:
4.1 Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. As of the Closing Date, the
Company will be duly authorized to conduct business and will be in good standing
under the laws of each jurisdiction in which the failure to be so qualified
would have a Material Adverse Effect. Schedule 4.1 lists all jurisdictions in
which the Company is qualified to do business as a foreign corporation. The
Company has full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged and
in which it presently proposes to engage and to own and use the properties owned
and used by it. Schedule 4.1 lists the directors and officers of the Company.
The Seller has delivered to the Buyer correct and complete copies of the charter
and bylaws of the Company (as amended to date). The minute books (containing the
records of meetings of the stockholders, the board of directors, and any
committees of the board of directors), the stock certificate books, and the
stock record books of the Company are correct and complete. The Company is not
in default under or in violation of any provision of its charter or bylaws.
4.2 Capitalization. The entire authorized capital stock of the Company
consists of 1,000 Company Shares, of which 1,000 shares are issued and
outstanding and no shares are held in treasury. All of the issued and
outstanding Company Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the Seller. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Company. There are no voting trusts, proxies, or other agreements
or understandings with respect to the voting of the capital stock of the
Company. All of the issued and outstanding Company Shares were offered, issued,
sold and delivered by the Company in compliance with all applicable federal laws
and in material compliance with applicable state laws concerning the issuance of
securities. None of the Company Shares was issued in violation of any preemptive
rights created by statute, or by the charter and bylaws of the Company (as
amended to date) or by any agreement to which the Company may be bound. Neither
the voting stock structure of the Company nor the relative ownership of the
Company has been altered or changed in contemplation of this Agreement. To the
Knowledge of the Seller, there is no reason to believe that as a result of the
transactions contemplated by this Agreement, the Buyer will not be the record
and beneficial owner of all outstanding capital stock of the Company and rights
to acquire capital stock of the Company.
4.3 Noncontravention. Except as set forth on Schedule 4.3, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) conflict with or violate any
provision of the charter or bylaws of the Company as now in effect, (ii) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any Governmental Entity or court
to which the Company is subject or any provision of the charter or bylaws of the
Company or (iii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Company is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). Except as set forth on Schedule 4.3, the Company is not required to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Entity in order for the Parties to consummate
the transactions contemplated by this Agreement.
4.4 Brokers' Fees. As of the Closing Date, the Company will not have
any Liability or obligation to pay any fees or commissions to any accountant,
lawyer, broker, finder, or agent with respect to the transactions contemplated
by this Agreement.
4.5 Title to Assets. The Company has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located on
its premises, shown on the Interim Balance Sheet or acquired after the date
thereof, free and clear of all Security Interests, except for properties
constituting equipment furnished by Governmental Entities and property or assets
disposed of in the Ordinary Course of Business since the date of the Interim
Balance Sheet.
4.6 Financial Statements. Except for the financial statements described
in 4.6(ii) below, which will be delivered to the Buyer on or before February 20,
1998, Schedule 4.6 includes the following financial statements of the Company
(collectively the "Financial Statements"): (i) audited balance sheets as of, and
statements of income, changes in stockholders' equity and cash flow for the
fiscal years ended, December 31, 1995 and 1996 (the 1996 Financial Statements
being referred to herein as the "Year End Financial Statements") for the
Company; and (ii) unaudited balance sheets as of and statements of income (the
"Interim Financial Statements") for the year ended December 31, 1997 (the
"Interim Balance Sheet Date"). The Financial Statements (including the notes
thereto) have been and, in the case of the Interim Financial Statements, will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of the Company
in all material respects as of such dates and the results of operations of the
Company for such periods, are correct and complete, and are consistent with the
books and records of the Company (which books and records are correct and
complete).
4.7 Events Subsequent to the Interim Balance Sheet Date. Since the
Interim Balance Sheet Date, there has not been any material adverse change in
the business, condition (financial or otherwise), operations, results of
operations, or financial projections of the Company. Without limiting the
generality of the foregoing, except as set forth in Schedule 4.7, since that
date:
(a) the Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;
(b) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $10,000 or outside the Ordinary Course of
Business;
(c) no party (including the Company) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) involving more
than $10,000 to which the Company is a party or by which it is bound;
(d) the Company has not imposed any Security Interest upon any
of its assets, tangible or intangible;
(e) the Company has not made any capital expenditure (or
series of related capital expenditures) either involving more than $10,000 or
outside the Ordinary Course of Business;
(f) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either involving
more than $10,000 or outside the Ordinary Course of Business;
(g) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation involving more than $10,000.;
(h) the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of Business;
(i) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) either
involving more than $10,000 or outside the Ordinary Course of Business;
(j) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(k) there has been no change made or authorized in the charter
or bylaws of the Company;
(l) the Company has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(m) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind, and except for the Permitted Distribution) or redeemed,
purchased, or otherwise acquired any of its capital stock;
(n) the Company has not experienced any damage, destruction,
or loss (whether or not covered by insurance) to its property;
(o) the Company has not made any loan to, or entered into any
other transaction with, any of its directors, officers, or employees outside the
Ordinary Course of Business or in excess of $10,000 singly or $50,000 in
aggregate;
(p) the Company has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(q) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business (except for 1997 employee bonuses and pension plan
contributions not to collectively exceed $350,000);
(r) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(s) the Company has not made any other change in employment
terms for any of its directors, officers, and employees outside the Ordinary
Course of Business;
(t) the Company has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business; and
(v) the Company has not committed to any of the foregoing.
4.8 Undisclosed Liabilities. The Company does not have any material
Liability or obligation, except for (i) Liabilities and obligations set forth on
the face of the Interim Balance Sheet (rather than in any notes thereto) and
(ii) Liabilities and obligations which have arisen after the Interim Balance
Sheet Date in the Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law).
4.9 Legal Compliance. The Company has complied in all material respects
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
to the Seller's Knowledge, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
4.10 Tax Matters.
(a) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all respects. All
Taxes owed by the Company (whether or not shown on any Tax Return) have been
paid. The Company is not currently the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an authority
in a jurisdiction where the Company does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There are no Security Interests on
any of the assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Tax.
(b) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(c) Neither the Seller nor any director or officer (or
employee responsible for Tax matters) of the Company expects any authority to
assess any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of the Company
either (i) claimed or raised by any authority in writing to the Company or to
the Seller or (ii) as to which the Seller has Knowledge based upon personal
contact with any agent of such authority. The Seller has made available to the
Buyer correct and complete copies of all federal income Tax Returns previously
filed, examination reports, and statements of deficiencies assessed against or
agreed to by the Company since January 1, 1995.
(d) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The Company has not filed a consent under Code section
341(f) concerning collapsible corporations. The Company has not been a United
States real property holding corporation within the meaning of Code section
897(c)(2) during the applicable period specified in Code section
897(c)(1)(A)(ii). The Company has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Code section 6662. The Company is
not a party to any Tax allocation or sharing agreement. The Company has not been
and will not be required to include any material adjustment in Taxable income
for any Tax period (or portion thereof) ending on or after the Closing Date
pursuant to Code sections 481 or 263A as a result of transactions, events or
accounting methods employed prior to the Closing Date.
(f) The Company has been classified as an S Corporation,
within the meaning of Code section 1361, since August 1, 1987, and will be an S
corporation up to and including the date of closing.
(g) The Company will not be liable for any Tax under Code
section 1374 in connection with the deemed sale of the Company's assets caused
by the Section 338(h)(10) Election (as defined herein). The Company has not, in
the last 10 years, acquired assets from another corporation in a transaction in
which the Company's Tax basis in the acquired assets was determined, in whole or
in part, by reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor.
4.11 Real Property. The Company currently does not own and has never
owned any real property. Schedule 4.11 lists and describes briefly all real
property leased or subleased to the Company. The Seller has delivered to the
Buyer correct and complete copies of the leases and subleases listed in Schedule
4.11 (as amended to date). With respect to each lease and sublease listed in
Section 4.11:
(a) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(b) to the Seller's Knowledge, there is no reason to believe
that the lease or sublease will not continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
(c) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification, or acceleration
thereunder;
(d) no party to the lease or sublease has repudiated any
provision thereof;
(e) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(f) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(g) to the Knowledge of the Seller, all facilities leased or
subleased thereunder have received all approvals of governmental authorities
(including licenses and permits) required in connection with the operation
thereof and have been operated and maintained in accordance with applicable
laws, rules, and regulations; and
(h) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
4.12 Intellectual Property.
(a) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the Company as presently
conducted and as presently proposed to be conducted. Each item of Intellectual
Property owned or used by any of the Company immediately prior to the Closing
hereunder will be owned or available for use by the Company on identical terms
and conditions immediately subsequent to the Closing hereunder. The Company has
taken all commercially reasonable action to maintain and protect each item of
Intellectual Property that it owns or uses.
(b) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and neither the Seller nor the directors or officers
(and employees with responsibility for Intellectual Property matters) of the
Company has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of the
Seller, no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of any of the
Company.
(c) Schedule 4.12 identifies each patent or registration which
has been issued to the Company with respect to any of its Intellectual Property,
identifies each pending patent application or application for registration which
the Company has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which the Company has
granted to any third party with respect to any of its Intellectual Property
(together with any exceptions). The Seller has delivered to the Buyer correct
and complete copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date) and have made available to the
Buyer correct and complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. Schedule 4.12 also
identifies each trade name or unregistered trademark used by the Company in
connection with any of its businesses. With respect to each item of Intellectual
Property required to be identified in Schedule 4.12:
(i) the Company possesses all right, title, and
interest in and to the item, free and clear of any Security Interest, license,
or other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, enforceability, use, or ownership
of the item; and
(iv) the Company has never agreed to indemnify any
Person for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(d) Schedule 4.12 identifies each item of Intellectual
Property that any third party owns and that the Company uses pursuant to
license, sublicense, agreement, or permission. With respect to each item
required to be identified in Schedule 4.12, the Seller has listed:
(i) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and in
full force and effect;
(ii) to the Seller's Knowledge, the license,
sublicense, agreement, or permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby (including the assignments
and assumptions referred to in Section 2 above);
(iii) no party to the license, sublicense, agreement,
or permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense, agreement,
or permission has repudiated any provision thereof;
(v) the underlying item of Intellectual Property is
not subject to any outstanding injunction, judgment, order, decree, ruling,
or charge;
(vi) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and
(vii) the Company has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, or permission.
(e) To the Knowledge of the Seller, the Seller has no reason
to believe that the Company will interfere with, infringe upon, misappropriate,
or otherwise come into conflict with, any Intellectual Property rights of third
parties as a result of the continued operation of its businesses as presently
conducted and as presently proposed to be conducted.
(f) The Seller has no Knowledge of any new products,
inventions, procedures, or methods of manufacturing or processing that any
competitors or other third parties have developed which reasonably could be
expected to supersede or make obsolete any product or process of the Company.
4.13 Tangible Assets. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of its
businesses as presently conducted and as presently proposed to be conducted.
Each such tangible asset is free from defects (patent and, to the Seller's
Knowledge, latent), has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it presently is used and
presently is proposed to be used.
4.14 Inventory. The Company has no inventory other than supplies to be
consumed in the Ordinary Course of Business.
4.15 Contracts. Schedule 4.15 lists the following contracts and
other agreements to which the Company is a party:
(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of $10,000 per annum;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which extends over a period of more than one year, expected to result in a
loss to the Company, or involve consideration in excess of $10,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $10,000 or under which
it has imposed a Security Interest on any of its assets, tangible or intangible;
(e) any agreement concerning confidentiality or
noncompetition;
(f) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers, and employees;
(g) any collective bargaining agreement;
(h) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $50,000 or providing severance benefits;
(i) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(j) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect; or
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
The Seller has delivered or made available to the Buyer a correct and complete
copy of each written agreement listed in Schedule 4.15 (as amended to date) and
a written summary setting forth the terms and conditions of each oral agreement
referred to in Schedule 4.15. With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(B) the agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
4.16 Notes and Accounts Receivable. Schedule 4.16 sets forth an
accounts receivable aging schedule as of January 31, 1998. All notes and
accounts receivable of the Company are reflected properly on its books and
records and are bona fide receivables subject to no setoffs or counterclaims.
The amount of any reserve for bad debts set forth on the Interim Balance Sheet,
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Company, is sufficient to cover the amount
of any note or account receivable thereon not collected within 180 days.
4.17 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company.
4.18 Insurance. Schedule 4.18 sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which the Company has been a party, a named insured, or
otherwise the beneficiary of coverage at any time since August 1, 1994:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(e) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (i) the policy is legal, valid,
binding, enforceable, and in full force and effect; (ii) to the Knowledge of the
Seller, there is no reason to believe that the policy will not continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (iii)
neither the Company nor any other party to the policy is in default or material
breach (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a default or material breach, or permit termination,
modification, or acceleration, under the policy; and (iv) no party to the policy
has repudiated any provision thereof. The Company has been covered during the
past 10 years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. Schedule
4.18 describes any self-insurance arrangements affecting the Company.
4.19 Litigation. Schedule 4.19 sets forth each instance in which the
Company: (a) is subject to any outstanding injunction, judgment, order, decree,
ruling, or charge or (b) is a party or is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator.
4.20 Product Warranty. Except as set forth on Schedule 4.20, each
service delivered by the Company has been in conformity with all applicable
contractual commitments and all express and implied warranties, and the Company
has no Liability for replacement or repair thereof or other damages in
connection therewith, subject only to the reserve for product warranty claims
set forth on the face of the Interim Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company. Schedule 4.20
includes the terms and conditions of all warranties to which the services of the
Company are subject.
4.21 Product Liability. The Company does not have any material
Liability arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased, or
delivered by the Company.
4.22 Employees. To the Knowledge of the Seller, no executive, key
employee, or group of employees has any plans to terminate employment with the
Company. The Company is not a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes. The Company has
not committed any unfair labor practice. The Seller has no Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
4.23 Employee Benefits.
(a) Schedule 4.23 lists each Employee Benefit Plan that the
Company maintains or to which the Company contributes or has any obligation to
contribute.
(i) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in operation in all
material respects with the applicable requirements of ERISA, the Code, and
other applicable laws.
(ii) All required reports and descriptions (including
Form 5500 Annual Reports, summary annual reports, PBGC-1's, and summary plan
descriptions) have been timely filed and distributed appropriately with respect
to each such Employee Benefit Plan. The requirements of COBRA have been met
with respect to each suchEmployee Benefit Plan which is an Employee Welfare
Benefit Plan.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions for any period ending on or before the
Closing Date which are not yet due have been paid to each such Employee Pension
Benefit Plan or accrued in accordance with the past custom and practice of the
Company. All premiums or other payments for all periods ending on or before the
Closing Date have been paid with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
(iv) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a "qualified plan" under
Code section 401(a), has received, within the last two years, a favorable
determination letter from the Internal Revenue Service that it is a "qualified
plan," and the Seller is not aware of any facts or circumstances that could
result in the revocation of such determination letter.
(v) The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested and
nonvested Liabilities thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
(vi) The Seller has made availabe to the Buyer
correct and complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each such
Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that the
Company or any ERISA Affiliate maintains or ever has maintained or to which any
of them contributes, ever has contributed, or ever has been required to
contribute:
(i) Except as set forth in Schedule 4.23, no such
Employee Benefit Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be such Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been instituted or
threatened.
(ii) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or threatened. The Seller
has no Knowledge of any Basis for any such action, suit, proceeding, hearing, or
investigation.
(iii) The Company has not incurred, and neither the
Seller nor any of the directors or officers (and employees with responsibility
for employee benefits matters) of the Company has any reason to expect that the
Company will incur, any Liability to the PBGC (other than PBGC premium payments)
or otherwise under Title IV of ERISA (including any withdrawal liability as
defined in ERISA section 4201) or under the Code with respect to any such
Employee Benefit Plan which is an Employee Pension Benefit Plan.
(c) None of the Company or the other members of the Controlled
Group that includes the Company contributes to, ever has contributed to, or ever
has been required to contribute to any Multiemployer Plan or has any Liability
(including withdrawal liability as defined in ERISA section 4201) under any
Multiemployer Plan.
(d) The Company does not maintain and has never maintained and
does not contribute, and has never contributed, and never has been required to
contribute to any Employee Welfare Benefit Plan providing medical, health, or
life insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with COBRA).
4.24 Guaranties. The Company is not a guarantor or otherwise liable for
any Liability or obligation (including indebtedness) of any other Person.
4.25 Government Contracts.
(a) To the Seller's Knowledge, except as set forth on Schedule
4.25: (i) the Company has complied with all material terms and conditions of
each Government Contract or Government Subcontract, including all clauses,
provisions and requirements incorporated expressly, by reference or by operation
of Law therein, (ii) the Company has complied in all material respects with all
requirements of all Laws or agreements pertaining to each Government Contract or
Government Subcontract and (iii) all representations and certifications
executed, acknowledged or set forth in or pertaining to each Government Contract
or Government Subcontract were complete and correct in all material respects as
of their effective date and the Company has complied in all material respects
with all such representations and certifications.
(b) Except as set forth on Schedule 4.25: (i) neither the U.S.
Government nor any prime contractor, subcontractor or other Person has notified
the Seller or the Company, either in writing or orally, that the Company has
breached or violated any Law, certification, representation, clause, provision
or requirement pertaining to any Government Contract or Government Subcontract
and (ii) no termination for convenience is in effect and no, termination for
default, cure notice or show cause notice has been received pertaining to any
Government Contract or Government Subcontract, (iii) no material cost incurred
by the Company pertaining to any Government Contract or Government Subcontract
has been questioned or challenged by representatives of Governmental Entity, is
the subject of any investigation, or has been disallowed by the U.S. Government,
and (iv) no amount of money due to the Company pertaining to any Government
Contract or Government Subcontract has been withheld or set off nor has any
claim been made to withhold or set off money and the Company is entitled to all
progress payments received with respect thereto.
(c) To the Seller's Knowledge, except as set forth on Schedule
4.25: (i) neither the Company nor any of its directors, officers, employees,
consultants or agents is or during the past three years has been under
administrative, civil or criminal investigation, indictment or information by
any Governmental Entity or any audit or investigation by the Seller or the
Company or any other Person with respect to any alleged irregularity,
misstatement or omission arising under or relating to any Government Contract or
Government Subcontract, and (ii) during the past three years, neither the
Company nor any Affiliate of the Company has conducted or initiated any internal
investigation or made a voluntary disclosure to any Governmental Entity with
respect to any alleged irregularity, misstatement or omission arising under or
relating to a Government Contract or Government Subcontract. There exists no
irregularity, misstatement or omission arising under or relating to any
Government Contract or Government Subcontract that has led during the last three
years to any of the consequences set forth in clause (i) or (ii) of the
immediately preceding sentence or any other damage, penalty assessment,
recoupment of payment or disallowance of cost.
(d) To the Seller's Knowledge, except as set forth on Schedule
4.25, there exist: (i) no outstanding claims against the Company, either by any
Governmental Entity or by any prime contractor, subcontractor, vendor or other
Person, arising under or relating to any Government Contract or Government
Subcontract and (ii) no material disputes between the Company and any
Governmental Entity under the Contract Disputes Act or any other federal statute
or regulation or between the Company and any prime contractor, subcontractor or
vendor arising under or relating to any Government Contract or Government
Subcontract. Except as set forth in Schedule 4.25, the Company does not have any
interest in any pending or potential claim against any Governmental Entity or
any prime contractor, subcontractor or vendor arising under or relating to any
Government Contract or Government Subcontract. Schedule 4.25 lists each
Government Contract or Government Subcontract which is currently under audit by
any Governmental Entity or any other Person that is a party to such Government
Contract or Government Subcontract. Except as set forth in Schedule 4.25, the
Company has not received any draft or final post award audit report, any draft
or final notice of cost disallowance, or any draft or final notice of
noncompliance with any Cost Accounting Standard and there exists no Basis upon
which any Government Entity could disallow any costs in any pending audits, and
that all information provided by the Company for any such audits was current,
complete and accurate and in compliance with applicable regulations and Cost
Accounting Standards.
(e) Except as set forth on Schedule 4.25, the Company has not
been debarred or suspended from participation in the award of contracts with any
Governmental Entity (excluding for this purpose ineligibility to bid on certain
contracts due to generally applicable bidding requirements). There exist no
facts or circumstances that would warrant suspension or debarment or the finding
of nonresponsibility or ineligibility on the part of the Company or any director
or officer of the Company. No payment has been made by the Company or by any
Person on behalf of the Company in connection with any Government Contract or
Government Subcontract in violation of applicable procurement Laws or in
violation of, or requiring disclosure pursuant to, the Foreign Corrupt Practices
Act. Except as set forth on Schedule 4.25, the Company's cost accounting and
procurement systems and the associated entries reflected in the Company's
financial statements with respect to the Government Contracts and Government
Subcontracts are in compliance in all material respects with all applicable
Laws.
(f) Except as set forth in Schedule 4.25, all material test
and inspection results provided by the Company to any Governmental Entity
pursuant to any Government Contract or Government Subcontract or to any other
Person pursuant to a Government Contract or Government Subcontract or as a part
of the delivery to any Governmental Entity or to any other Person pursuant to a
Government Contract or Government Subcontract of any article designed,
engineered or manufactured by the Company were complete and correct in all
material respects as of the date so provided. Except as set forth in Schedule
4.25, the Company has provided all material test and inspection results to the
Department of Defense or to any other Person pursuant to a Government Contract
or Government Subcontract as required by Law and the terms of the applicable
Government Contracts or Government Subcontracts.
(g) Except as set forth in Schedule 4.25, (i) the Company has
obtained or will obtain from any Governmental Entity all authorizations and
consents that are necessary or required because of the change of ownership of
the Company, (ii) the Company has made or will make to any Governmental Entity
all notifications that are necessary or required because of the change of
ownership of the Company, (iii) until the Closing Date, the Company and the
Seller have complied with all requirements to maintain the Company's status as a
small business concern, and (iv) through and including the Company's date of
graduation from the Section 8(a) program administered by the U.S. Small Business
Administration ("SBA"), the Company and the Seller complied with all
requirements to obtain and maintain the Company's status as a concern certified
under the SBA's Section 8(a) program.
4.26 Environmental, Health, and Safety Matters.
(i) To the Knowledge of the Seller, the Company is in
compliance with Environmental, Health, and Safety Requirements, except for such
noncompliance as would not have a Material Adverse Effect on the Company.
(ii) To the Knowledge of the Seller, the Company has not
received any written notice, report or other information regarding any actual or
alleged material violation of Environmental, Health, and Safety Requirements, or
any material liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to the Company or its facilities
arising under Environmental, Health, and Safety Requirements, the subject of
which would have a Material Adverse Effect on the Company.
4.27 Subsidiaries. The Company has no subsidiaries and does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation association or business entity (except for publicly
traded corporations in which the Company owns less than 5% of the outstanding
equity interests therein), nor is the Company, directly or indirectly, a
participant in any joint venture, partnership or other entity.
4.28 Disclosure. No representation or warranty made by the Seller in
this Agreement, nor any financial statement, certificate, schedule or exhibit
delivered with or attached to this Agreement and furnished by the Company, the
Seller or its representative pursuant hereto or in connection with the
transaction contemplated hereby, contains or will contain any untrue statement
of material fact, or omits or will omit to state a material fact necessary to
make the statement of facts contained herein or therein not misleading in the
light of the circumstances under which they were furnished. The historical
information, financial projections, listing of Government Contract backlog and
information concerning Government Contracts relating to the Company that was
delivered to the Buyer prior to the date of this Agreement and included in
Schedule 4.28 ("Financial Projections") was delivered in good faith and
constitutes, to the Seller's Knowledge, a good faith estimate of the information
purported to be shown therein. The Seller caused the Company to prepare such
projections and provide such information in good faith based upon reasonable
assumptions, and believes that there is a reasonable basis for such projections.
The Seller has no Knowledge of any fact or information that would lead him to
believe that the Financial Projections are misleading in any material respect.
5. PRE-CLOSING COVENANTS.
The Parties agree as follows with respect to the period between the
date hereof and the Closing Date.
5.1 General. Each of the Parties will use his or its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Section 7 below).
5.2 Notices and Consents. The Seller will cause the Company to give any
notices to third parties, and will cause the Company to use its reasonable best
efforts to obtain any third party consents, that the Buyer reasonably may
request in connection with the matters referred to in Section 4.3 above. Each of
the Parties will (and the Seller will cause the Company to) give any notices to,
make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of Governmental Entities in connection
with the matters referred to in Section 3.1(b), Section 3.2(c), and Section 4.3
above.
5.3 Operation of Business. The Seller will not cause or permit the
Company to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Seller will not cause or permit the Company to
(i) declare, set aside, or pay any dividend in an or make any distribution with
respect to its capital stock or redeem, purchase, or otherwise acquire any of
its capital stock (except that the Company shall be entitled to pay the
Permitted Distribution to the Seller) or (ii) otherwise engage in any practice,
take any action, or enter into any transaction of the sort described in Section
4.7 above.
5.4 Preservation of Business. The Seller will cause the Company to keep
its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
5.5 Full Access, Confidentiality.
(a) The Seller will permit, and the Seller will cause the
Company to permit, representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Company, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of or
pertaining to the Company.
(b) The Seller recognizes and acknowledges that he has had in
the past, currently has, and in the future may possibly have, access to certain
confidential information of the Company and the Buyer, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company's and the Buyer's respective
businesses. The Seller agrees that it will not disclose Confidential Information
with respect to the Company or the Buyer to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of the Buyer and to counsel and other advisers;
provided, however, that such advisors (other than counsel) agree to the
confidentiality provisions of this Section 5.5(b), unless (i) such information
becomes known to the public generally through no fault of the Seller, (ii)
disclosure is required by law or the order of any Governmental Entity under
color of law, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party; and provided further, that prior to disclosing any information
pursuant to clause (i), (ii) or (iii) above, the Seller shall, if possible, give
prior written notice thereof to the Buyer and provide the Buyer with the
opportunity to contest such disclosure.
(c) The Buyer recognizes and acknowledges that it has had in
the past, currently has, and in the future may possibly have, access to certain
confidential information of the Company, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the Company's business. The Buyer agrees that, prior to the Closing,
it will not disclose confidential information with respect to the Company to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of the Company and the Seller
and to counsel and other advisers and that they will not disclose confidential
information with respect to the Seller to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of the Company and the Seller and to counsel and
other advisers; provided, however, that such advisers (other than counsel) agree
to the confidentiality provisions of this Section 5.5(c), unless (i) such
information becomes known to the public generally through no fault of the Buyer,
(ii) disclosure is required by law or the order of any Governmental Entity under
color of law, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party; and provided further, that prior to disclosing any information
pursuant to clause (i), (ii) or (iii) above, the Buyer shall, if possible, give
prior written notice thereof to the Company and the Seller and provide the
Company and the Seller with the opportunity to contest such disclosure.
5.6 Notice of Developments. The Seller will give prompt written notice
to the Buyer of any material adverse development causing a breach of any of the
representations and warranties in Section 4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or its own representations and warranties in Section 3
above. No disclosure by any Party pursuant to this Section 5.6, however, shall
be deemed to amend or supplement any Schedule or Exhibit hereto or to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant.
5.7 Exclusivity. The Seller will not (and the Seller will not cause or
permit the Company or any of the officers, directors, agents, representatives,
or affiliates of the Company to) (a) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of the Company (including any acquisition structured as a merger,
consolidation, or share exchange) or (b) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. The Seller will not vote his Company
Shares in favor of any such acquisition structured as a merger, consolidation,
or share exchange. The Seller will notify the Buyer immediately if any Person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
6. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following the
Closing.
6.1 General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 8 below).
The Seller acknowledges and agrees that from and after the Closing the Buyer
will be entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the Company .
6.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 8 below).
6.3 Transition.
(a) The Seller will not take any action that is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of the Company from maintaining the same business
relationships with the Company after the Closing as it maintained with the
Company prior to the Closing. The Seller will use his best efforts to cooperate
with the Buyer to cause the Company to employ an individual to serve initially
as a vice president of the Company and expected to serve eventually as president
of the Company upon the termination of the Seller's employment with the Company.
(b) The Parties intend and expect that subsequent to the Closing and
until the expiration of the Second Earn Out Period, the Company will operate as
a separate subsidiary of the Buyer and that the Company shall be operated in
accordance with its historic business practices. The Parties understand and
acknowledge that Buyer will provide certain administrative support to the
Company and that it is anticipated that the Company will benefit from mutually
beneficial business synergies created by the transactions contemplated by this
Agreement. Except for certain administrative staff provided to the Company by
the Buyer, the parties acknowledge that the Buyer has no obligation to provide
additional support or capital to the Company from the Closing Date through the
end of the Second Earn Out Period. Within 30 days subsequent to the Closing, the
Seller shall submit a proposed detailed budget for each month of 1998 and 1999
to the Company's Board of Directors for approval. The parties anticipate that
such budget will demonstrate sufficient levels revenues and expenditures to
achieve the projected net income levels included in Schedule 4.6 for 1998 and
1999. During any Earn Out Period Buyer will not take any actions, without the
prior approval of the Board of Directors of AMI and the Buyer, which would
prevent the Buyer from performing its obligations under this Agreement.
6.4 Covenant Not to Compete.
(a) Until the later of (x) the end of the four year period
following the Closing Date or (y) two years subsequent to the date on which the
Seller's employment with the Company Terminates, the Seller shall not, for any
reason whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation,
business or other entity of whatever nature:
(i) engage, as a shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an independent contractor,
consultant or advisor, or as a sales representative, in any business selling any
products or services in direct competition with the current business of the
Company;
(ii) call upon any person who is, at that time, an
employee of the Buyer or the Company for the purpose or with the intent of
enticing such employee away from or out of the employ of the Buyer or the
Company; or
(iii) call upon any person or entity which is, at
that time, or which has been, within one year prior to that time, a customer of
the Company for the purpose of soliciting or selling products or services in
competition with the Company.
Notwithstanding the above, the foregoing covenant shall not be
deemed to prohibit the Seller from acquiring as an investment not more than five
percent (5%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
(b) Damages. Because of the difficulty of measuring economic
losses to the Buyer as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to the
Buyer for which it would have no other adequate remedy, the Seller agrees that
the foregoing covenant may be enforced by the Buyer in the event of breach by
the Seller, by injunctions and restraining orders.
(c) Reasonable Restraint. The parties agree that the foregoing
covenants in this Section 6.4 impose a reasonable restraint on the Seller in
light of the activities and business of the Buyer on the date of the execution
of this Agreement and the current plans of the Buyer; but it is also the intent
of the Buyer and the Seller that such covenants be construed and enforced in
accordance with the changing activities and business of the Buyer throughout the
term of this covenant. The parties further agree that in the event the Seller
shall enter into a business or pursue other activities not in competition with
the Buyer or similar activities or business in locations the operation of which,
under such circumstances, does not violate Section 6.4(a), the Seller shall not
be chargeable with a violation of this Section 6.4 if the Buyer shall thereafter
enter the same, similar or a competitive (i) business, (ii) course of activities
or (iii) location, as applicable.
(d) Severability; Reformation. The covenants in this Section
6.4 are severable and separate, and the unenforceability of any specific
covenant shall not affect the provisions of any other covenant. Moreover, in the
event any court of competent jurisdiction shall determine that the scope, time
or territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall thereby be reformed.
(e) Independent Covenant. All of the covenants in this Section
6.4 shall be construed as an agreement independent of any other provision in
this Agreement, and the existence of any claim or cause of action of the Seller
against the Buyer, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Buyer of such covenants. It is
specifically agreed that the period of noncompetition stated at Section 6.4(a),
during which the agreements and covenants of the Seller made in this Section 6.4
shall be effective, shall be computed by excluding from such computation any
time during which the Seller is found by a court of competent jurisdiction to
have been in violation of any provision of this Section 6.4. The covenants
contained in Section 6.4 shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
(f) Materiality. The Seller hereby agrees that the covenants
set forth in this Section 6.4 are a material and substantial part of the
transactions contemplated by this Agreement.
(g) Internet Business. Notwithstanding the foregoing, this
Section 6.4 shall not prohibit the Seller from entering into business activities
in which Internet dial-up access services and Web hosting services (the "Lin
Internet Business") are provided to customers ("Internet Customers") so long as
none of any such Internet Customers are customers or prospective customers of
ACS or the Company, as discussed by the Parties from time to time.
7. Conditions to Obligation to Close.
7.1 Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Section
3.1 and Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(b) the Seller shall have performed and complied with all of
his covenants hereunder in all material respects through the Closing;
(c) the Company shall have procured all of the third party
consents specified in Section 5.2 above.
(d) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect adversely the right of the Buyer
to own the Company Shares and to control the Company , or (iv) affect adversely
the right of the Company to own its assets and to operate its businesses (and no
such injunction, judgment, order, decree, ruling, or charge shall be in effect);
(e) no material adverse change in the business operations,
affairs, prospects, properties, assets, existing or potential liabilities,
obligations, profits or condition (financial or otherwise) of the Company shall
have occurred;
(f) the Seller shall have delivered to the Buyer a certificate
dated as of the Closing Date to the effect that each of the conditions specified
in Section 7.1(a) through (e) above is satisfied in all respects;
(g) the Seller and Grace Lee shall have entered into
employment agreements with the Company substantially in the form attached hereto
as Exhibits A and B. All other employment agreements with any employees of the
Company shall have been terminated and be of no further force or effect;
(h) the Buyer shall have received from counsel to the Seller
an opinion in form and substance as set forth in Exhibit C attached hereto,
addressed to the Buyer, and dated as of the Closing Date;
(i) the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of the Company other than John
Lin;
(j) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer; and
(k) the Company shall of obtained a release from its financial
advisors in a form satisfactory to the Buyer stating that that the Company has
no existing or future Liability to such financial advisors with respect to any
fees, commissions or other amounts payable with respect to the transactions
contemplated by this Agreement;
(l) the Buyer shall have received a favorable opinion from
A.G. Edwards & Sons, Inc., as to the fairness of consideration paid with respect
to the transactions contemplated by this Agreement; and
(m) Reserved
(n) the Buyer's board of directors shall have authorized and
approved the transactions contemplated by this Agreement.
The Buyer may waive any condition specified in this Section 7.1 if it executes a
writing so stating at or prior to the Closing.
7.2 Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by them in connection with
the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Section
3.2 above shall be true and correct in all material respects at and as of the
Closing Date;
(b) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(d) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller; and
(e) the Buyer shall have delivered to the Seller a certificate
dated as of the Closing Date to the effect that each of the conditions specified
in Section 7.2(a) through (d) above is satisfied in all respects.
The Seller may waive any condition specified in this Section 7.2 if they execute
a writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
8.1 Survival of Representations and Warranties. Except with respect to
Sections 4.10 (Taxes), 4.23 (Employee Benefits), 4.25 (Government Contracts) and
4.26 (Environmental, Health and Safety Matters) all representations and
warranties contained in this Agreement, including those contained in the
exhibits, schedules and other documents delivered pursuant to this Agreement,
above shall survive the Closing hereunder and continue in full force and effect
for a period of eighteen months thereafter. All covenants contained in this
Agreement likewise shall survive the Closing, but shall not be subject to the
limitation on survival set forth in the preceding sentence. Representations and
warranties contained in Section 4.25 and 4.26 shall survive Closing and shall
remain in full force and effect for a period of twenty-four months.
Representations and warranties contained in Sections 4.10 and 4.23 shall survive
Closing and shall remain in full force and effect for a period of three years.
So long as a claim arising out of a breach of a representation or warranty is
made prior to the expiration of such representation or warranty, indemnification
may be had (subject to the other provisions of this Section 8) notwithstanding
that the scope of loss may not be determined, remedial work completed or claim
otherwise resolved prior to such expiration.
8.2 Indemnity. Each party hereto (the "Indemnifying Party") shall
indemnify and hold the other party hereto (each, an "Indemnified Party")
harmless to the extent provided in this Section 8 from and against any and all
losses (consequential or otherwise), Liabilities, claims, disputes, proceedings,
demands, cost unallowability determinations, judgments, settlements, liens,
costs and expenses of any nature whatsoever (including reasonable fees and
disbursements of attorneys, accountants, or other professional advisors relating
to investigation, prosecution, negotiation, defense, settlement, or appeal) (the
foregoing referred to individually as an "Adverse Consequence" and collectively
as "Adverse Consequences") resulting from or arising out of
(i) any breach of any representation or warranty of the Indemnifying
Party contained in this Agreement or in any schedule, exhibit, certificate,
document or other item delivered by the Indemnifying Party or its
representative(s) in connection with this Agreement;
(ii) the nonperformance, partial or total, of any covenant of the
Indemnifying Party contained in this Agreement; and
(iii) the scheduled items set forth on 4.10 or 4.19;
(iv) any and all Adverse Consequences incidental to any of the
foregoing or to the enforcement of this section 8.2. Without limiting the
foregoing, the Seller's indemnification liabilities arising from Section 4 of
this Agreement shall include Adverse Consequences consisting of any and all
Taxes of the Company with respect to any period (or any portion thereof) up to
and including the Closing Date, except for Taxes of the Company (if any) that
are reflected as current or deferred liabilities for Taxes on the Interim
Balance Sheet Date. The Seller hereby agrees that he will not make any claim for
indemnification against the Company by reason of the fact that he was a
director, officer, employee, or agent of the Company or was serving at the
request of the Company as a partner, trustee, director, officer, employee, or
agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such claim is pursuant to any statute, charter document,
bylaw, agreement, or otherwise) prior to the Closing Date with respect to any
action, suit, proceeding, complaint, claim, or demand brought by the Buyer
against the Seller (whether such action, suit, proceeding, complaint, claim, or
demand is pursuant to this Agreement, applicable law, or otherwise).
8.3 Notice of Claim.
(a) If an Indemnified Party makes any claim against an Indemnifying
Party for indemnification, such claim shall be in writing and shall state in
general terms the facts upon which the Indemnified Party makes such claim.
(b) In the event of any claim or demand asserted against the
Indemnified Party by a third party upon which the Indemnified Party may claim
indemnification, the Indemnifying Party shall give written notice to the
Indemnified Party within 15 days after receipt of notice from the Indemnified
Party indicating whether the Indemnifying Party intends to assume the defense of
such claim or demand. If the Indemnifying Party does assume such defense, it
shall indemnify and hold the Indemnified Party harmless from and against any and
all losses, damages and liabilities caused by or arising out of any settlement
or judgment of such claim and may not claim that it does not have an
indemnification obligation with respect thereto. Notwithstanding such
assumption, the Indemnified Party shall have the right to participate in such
defense, by written notice given to the Indemnifying Party within 15 days from
the date of the Indemnifying Party's notice, provided that such participation
shall be at the expense of the Indemnified Party unless there is a conflict of
interest between the Indemnified Party and the Indemnifying Party, in which case
the cost of such participation (including attorneys' fees for counsel selected
by the Indemnified Party) shall be reimbursed by the Indemnifying Party. If the
Indemnifying Party assumes the defense and the Indemnified Party elects not to
participate, the Indemnifying Party shall have the right fully to control and to
settle the proceeding. If the Indemnified Party elects to participate in such
defense, the parties shall cooperate in the defense of the proceeding, and shall
not settle the same without the consent of each, which consent shall not be
unreasonably withheld or delayed. If the Indemnifying Party elects not to assume
the defense, the Indemnified Party shall have the right to do so (at the expense
of the Indemnifying Party), and may settle the same without the consent of the
Indemnifying Party.
(c) In the event an Indemnified Party has a claim against an
Indemnifying Party hereunder which does not involve a claim being asserted
against or sought to be collected by a third party, the Indemnifying Party shall
give written notice to the Indemnified Party within 15 days after receipt of
notice from the Indemnified Party indicating whether the Indemnifying Party
disputes such claim. If the Indemnifying Party does not notify the Indemnified
Party within such 15 day period that the Indemnifying Party disputes such claim,
the amount of such claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder. In the event that the Indemnifying Party shall
object in writing to any claim made in accordance with this Section 8.3(c), the
Indemnified Party shall have 15 days to respond in a written statement to the
objection of the Indemnifying Party. If after such 15 day period there remains a
dispute as to any claims, the parties shall attempt in good faith for 30 days to
agree upon the rights of the respective parties with respect to each of such
claims. If the parties should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties. If the parties cannot
agree within such 30 day period, the parties shall jointly select a single
arbitrator (the "Indemnification Arbitrator"), the selection of which will not
be unreasonably withheld by either party, who shall have substantial experience
with respect to the substance of the matters in dispute and shall have the
authority to hold hearings and to render a decision in accordance with the
arbitration rules of the American Arbitration Association. The Indemnification
Arbitrator shall settle any remaining dispute by selecting the position of the
party that the Arbitrator determines, in its sole discretion, to be the most
correct. The determination of the Indemnification Arbitrator shall be set forth
in writing, delivered to each of the Buyer and the Seller and shall be
conclusive and binding on the parties and shall be non-appealable. The party
whose position is not chosen by the Indemnification Arbitrator shall pay all
expenses of the Indemnification Arbitrator.
8.4 Limitation. Notwithstanding the above, and except for (i)
misrepresentations and breaches of warranties by the Seller under Sections
4.25(g)(iv) and (ii) Adverse Consequences resulting from or arising out of the
scheduled items set forth on 4.10 or 4.19, the Seller shall not be liable under
this Section 8 (y) until the aggregate amount of Adverse Consequences in respect
of misrepresentations and breaches of warranties to the Buyer exceeds $200,000,
and only to the extent of such excess, and (z) to the extent that the Adverse
Consequences to the Buyer exceeds $10 million.
8.5 Recoupment. The Buyer shall have the option of recouping all or any
part of any Adverse Consequences it may suffer (in lieu of seeking any
indemnification to which it is entitled under this Section 8) by notifying the
Seller within 30 days from the end of the applicable Earn Out Period that the
Buyer is reducing the amount of any Contingent Purchase Price otherwise payable
to the Seller. Any amount of the Contingent Purchase Price not in dispute shall
be paid in accordance with Section 2.5. The written notice shall specify the
general, factual basis for such claim and the amount the Contingent Purchase
Price is to be reduced. If the Seller has any objection to the reduction, the
Seller shall have 30 days to make such investigation of the claim as Seller
deems necessary or desirable. For the purposes of such investigation, Buyer
agrees to make available to Seller or its authorized representatives the
information relied upon by Buyer to substantiate the reduction. If the Buyer and
Seller do not agree within such 30 day period, the matter shall be submitted to
arbitration in accordance with the arbitration rules of the American Arbitration
Association then in effect. Within such 30 day period, the parties shall jointly
select a single arbitrator (the "Recoupment Arbitrator"), the selection of which
will not be unreasonably withheld by either party, who shall have substantial
experience with respect to the substance of the matters in dispute and shall
have the authority to hold hearings and to render a decision in accordance with
the arbitration rules of the American Arbitration Association. The Recoupment
Arbitrator shall settle any remaining dispute by selecting the position of the
party that the Arbitrator determines, in its sole discretion, to be the most
correct. The determination of the Recoupment Arbitrator shall be set forth in
writing, delivered to each of the Buyer and the Seller and shall be conclusive
and binding on the parties and shall be non-appealable. The party whose position
is not chosen by the Recoupment Arbitrator shall pay all expenses of the
Recoupment Arbitrator and interest accruing on the amount of reduction, at the
rate of the regular commercial prime rate of interest of NationsBank N.A., which
NationsBank N.A. uses as a standard for determining actual interest rates
charged commercial borrowers, beginning on the date the Contingent Purchase
Price was otherwise due to be paid to the Seller.
9. TAX MATTERS.
The following provisions shall govern the allocation of responsibility
as between the Buyer and the Seller for certain tax matters following the
Closing Date:
9.1 Section 338(h)(10) Election. The Seller agrees, if so directed by
the Buyer, to join with the Buyer in making an election under Code section
338(h)(10) (and any corresponding elections under state, local, or foreign tax
law) (collectively, a "Section 338(h)(10) Election") with respect to the
purchase and sale of the Company Shares. The Seller shall pay any "Tax" (as
defined in Section 4.10 above), including any liability of the Company for any
Tax resulting from application to it of applicable regulations, attributable to
the making of the Section 338(h)(10) Election and will indemnify the Buyer and
the Company against any Adverse Consequences arising out of any failure to pay
such Tax. The Seller shall also pay any state, local or foreign Tax (and
indemnify the Buyer and the Company against any Adverse consequences arising out
of any failure to pay such Tax) attributable to an election under state, local
or foreign law similar to the election available under Section 338(h)(10) of the
Code (or which results from the making of an election under Section 338(h)(10)
of the Code) with respect to the purchase and sale of the Company hereunder.
9.2 Tax Periods Ending on or Before the Closing Date. The Seller shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company for all periods ending on or prior to the Closing Date that are
filed after the Closing Date. The Seller shall permit the Buyer to review and
comment on each such Tax Return described in the preceding sentence prior to
filing. Seller shall pay any Taxes shown on any such Tax Returns.
9.3 Allocation of Purchase Price. Within 15 days from the Closing Date,
the Buyer shall deliver to the Seller a draft schedule allocating the Purchase
Price and the liabilities of the Company among the assets of the Company for all
purposes (including Tax and financial accounting) in a manner consistent with
the fair market values of such assets (the "Draft Purchase Price Allocation").
If the Seller has any objection to the Draft Purchase Price Allocation, the
Seller shall deliver a detailed statement describing his objections to the Buyer
within 5 days after receiving the Draft Purchase Price Allocation. The Buyer and
the Seller will use reasonable efforts to resolve any such objections
themselves. If the Buyer and Seller do not finally resolve any of the objections
within 5 days after the Buyer has received the statement of objections, however,
the Buyer and the Seller will select, within 5 days, a nationally recognized
independent accounting firm mutually acceptable to each party, the agreement to
the selection which shall not be unreasonably withheld, to resolve any such
differences (the "Arbitrator"). The Arbitrator shall settle any remaining
dispute by selecting the position of the party that the Arbitrator determines,
in its sole discretion, to be the most correct. The determination of the
Arbitrator shall be set forth in writing, delivered to each of the Buyer and the
Seller and shall be conclusive and binding on the parties and shall be
non-appealable. The party whose position is not chosen by the Arbitrator shall
pay all expenses of the Arbitrator. The Draft Purchase Price Allocation, as
adjusted for any items of dispute resolved by the Buyer and the Seller and for
any determinations of the Arbitrator shall be referred to herein as the "Final
Purchase Price Allocation." The Buyer and the Seller will file and the Seller
will cause the Company to file all Tax Returns (including amended returns and
claims for refund) and information reports in a manner consistent with the Final
Purchase Price Allocation.
9.4 S Corporation Status. The Seller will not, and will not allow the
Company to, revoke the Company's election to be taxed as an S corporation within
the meaning of Code sections 1361 and 1362. The Seller will not, and will not
allow the Company to, take or allow any action that would result in the
termination of the Company's status as a validly existing S corporation within
the meaning of Code sections 1361 and 1362.
9.5 Tax Periods Beginning Before and Ending After the Closing Date. The
Buyer shall prepare, or cause to be prepared, and file, or cause to be filed,
any Tax Returns of the Company for Tax periods which begin before the Closing
Date and end after the Closing Date. The Buyer shall permit the Seller to review
and comment upon each such Tax Return described in the preceding sentence prior
to filing. The Seller shall pay to the Buyer within fifteen (15) days after the
date on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such Taxable period ending
on the Closing Date to the extent such Taxes are not reflected in the reserve
for Tax Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) shown on the face of the
Closing Date Balance Sheet. For purposes of this Section, in the case of any
Taxes that are imposed on a periodic basis and are payable for a Taxable period
that includes (but does not end on) the Closing Date, the portion of such Tax
which relates to the portion of such Taxable period ending on the Closing Date
shall (x) in the case of any Taxes other than Taxes based upon or related to
income or receipts, be deemed to be the amount of such Tax for the entire
Taxable period multiplied by a fraction the numerator of which is the number of
days in the Taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire Taxable period and (y) in the case of
any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant Taxable period ended on the
Closing Date. Any credits relating to a Taxable period that begins before and
ends after the Closing Date shall be taken into account as though the relevant
Taxable period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the Company .
9.6 Cooperation on Tax Matters.
(a) The Buyer and the Seller shall, and the Seller shall cause
the Company to, cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Seller agrees (i) to retain all books
and records with respect to Tax matters pertinent to the Company relating to any
taxable period beginning before the Closing Date (except those books and records
in the custody of the Company) until the expiration of the statute of
limitations (and, to the extent notified by Buyer, any extensions thereof) of
the respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (ii) to give the Buyer reasonable
written notice prior to transferring, destroying or discarding any such books
and records and, if the Buyer requests, the Seller shall allow the Buyer to take
possession of such books and records.
(b) Buyer and Seller further agree, upon request, to use their
best efforts to obtain any certificate or other document from any Governmental
Entity or any other Person as may be necessary to mitigate, reduce or eliminate
any Tax that could be imposed (including, but not limited to, with respect to
the transactions contemplated hereby).
(c) Buyer and Seller further agree, upon request, to provide
the other party with all information that either party may be required to report
pursuant to Section 6043 of the Code and all Treasury Department Regulations
promulgated thereunder.
10. TERMINATION AND MISCELLANEOUS.
10.1 Termination of Agreement. This Agreement may be terminated
at any time prior to the Closing Date solely:
(a) by mutual consent of the Buyer and the Seller; or
(b) by the Seller or by the Buyer if the Closing shall not
have occurred on or before March 15, 1998; provided, however, that the right to
terminate this Agreement under this Section 10.1(b) shall not be available to
either party whose material misrepresentation, breach of warranty or failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date; or
(c) by the Seller or by the Buyer if there is or has been a
material breach, failure to fulfill or default on the part of the other party of
any of the representations and warranties contained herein or in the due and
timely performance and satisfaction of any of the covenants, agreements or
conditions contained herein, and the curing of such default shall not have been
made or shall not reasonably be expected to occur before the Closing Date; or
(d) by the Seller or by the Buyer if there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Purchase; or there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Purchase by any Governmental Entity which would make the
consummation of the Purchase illegal.
10.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 10.1, this Agreement shall forthwith become void,
and there shall be no liability or obligation on the part of any party hereto or
its officers, directors, stockholders or members. Notwithstanding the foregoing
sentence, (i) the provisions of this Section 10.2, Sections 5.5(b) and 5.5(c)
(confidentiality) and the other provisions of Section 10 (including without
limitation brokers and expenses), shall remain in full force and effect and
survive any termination of this Agreement; (ii) each party shall remain liable
for any breach of this Agreement prior to its termination; and (iii) in the
event of termination of this Agreement pursuant to Section 10.1(c) above, then
notwithstanding the provisions of Section 10.7 below, the breaching party shall
be liable to the other party to the extent of the expenses incurred by such
other party in connection with this Agreement and the transactions contemplated
hereby, as well as any damages in accordance with applicable law.
10.3 Cooperation. The Seller and the Buyer, for no further
consideration, shall each deliver or cause to be delivered to the other on the
Closing Date, and either before or after the Closing Date at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, the President or Chief Financial Officer of
the Company will execute any documentation reasonably required by the Buyer's
independent public accountants (in connection with such accountant's audit of
the Company) or the Nasdaq National Market. Without limitation of the foregoing,
the Seller will cooperate and use its reasonable efforts to cause the Company's
present officers, directors and employees cooperate with the Buyer before, on
and after the Closing Date in furnishing information, evidence, testimony and
other assistance in connection with any, actions, proceedings, arrangements or
disputes of any nature with respect to matters pertaining to all periods prior
to the Closing Date and the Buyer will cooperate and use its reasonable efforts
to cause its present officers, directors and employees cooperate with the Seller
before, on and after the Closing Date in furnishing any such information to
employees of the Seller and/or the Company who will be continuing employment
with the Company after the sale, regarding such continued employment. Without
limitation of the foregoing, in connection with any securities filing required
of the Buyer as a result of the Purchase, (i) the Seller will cooperate and use
its reasonable efforts to assist the Buyer and the Company in the preparation of
audited and unaudited (as required) financial statements for the Company and
(ii) the Seller will use its reasonable efforts to cause its accountants at the
Buyer's sole cost and expense, to assist the Buyer and the Company in the
preparation of such financial statements.
10.4 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of the Buyer, and the heirs and legal representatives of the Seller.
10.5 Entire Agreement. This Agreement (which includes the Schedules and
Exhibits hereto) sets forth the entire understanding of the parties hereto with
respect to the transactions contemplated hereby. It shall not be amended or
modified except by a written instrument duly executed by each of the parties
hereto. Any and all previous agreements and understandings between or among the
parties regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement.
10.6 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which deliveries may be
by telefax) by the parties.
10.7 Expenses. The Buyer has paid and will pay the fees, expenses and
disbursements of the Buyer and its agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement. The
Seller has paid and will pay the fees, expenses and disbursements of the Seller
and the Company and their agents, representatives, financial advisors,
accountants and counsel incurred in connection with the subject matter of this
Agreement.
10.8 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to the Buyer, to:
Advanced Communication Systems, Inc.
10089 Lee Highway
Fairfax, Virginia 22030
Attn: Dev Ganesan, Chief Financial Officer
Fax No.: (703) 385-8684
with a required copy to:
Venable, Baetjer, Howard and Civiletti, LLP
1201 New York Avenue, Suite 1000
Washington, DC 20005
Attn: Wallace E. Christner, Esq.
Fax No.: (202) 962-8300
If to the Seller, to:
John Lin
10721 Falls Pointe Drive
Great Falls, Virginia 22066
Fax No. (703) 759-6145
with a required copy to:
Jenner & Block
601 Thirteenth Street, N.W.
12th Floor
Washington, DC 20005
Attn: Leslie H. Lepow, Esq.
Fax No.: (202) 639-6066
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
10.9 Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the Commonwealth of
Virginia, without regard to conflicts of laws provisions.
10.10 Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any jurisdiction, shall not be
affected thereby, and to this end the provisions of this Agreement shall be
severable. The preceding sentence is in addition to and not in place of the
severability provisions in Section 6.4(d).
10.11 Absence of Third-Party Beneficiary Rights. No provision of this
Agreement is intended, nor will be interpreted, to provide or to create any
third-party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, member, employee, partner of any party hereto
or any other person or entity.
10.12 Mutual Drafting. This Agreement is the mutual product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not be
construed for or against any party hereto.
10.13 Further Representations. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
10.14 Amendment; Waiver. This Agreement may be amended by the parties
hereto at any time prior to the Closing by execution of an instrument in writing
signed on behalf of each of the parties hereto. Any extension or waiver by any
party of any provision hereto shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
10.15 Public Disclosure. Prior to the Closing Date, no party shall make
any disclosure (whether or not in response to an inquiry) of the subject matter
of this Agreement unless previously approved by the Buyer and the Seller in
writing. Each party agrees to keep the others apprised in advance of any planned
disclosure of the subject matter of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
this __ day of ______, 1998.
ADVANCED COMMUNICATION SYSTEMS, INC.
By:_____________________________________
George A. Robinson
President and Chief Executive Officer
-----------------------------------------
John Lin
Exhibit 10.2
CREDIT AGREEMENT, dated as of February 17, 1998, among:
(a) ADVANCED COMMUNICATION SYSTEMS, INC., INTEGRATED SYSTEMS CONTROL,
INC. and RF MICROSYSTEMS, INC. (together with any other Person that has
become a borrower hereto as provided herein, collectively, the "Borrowers"
and individually, each a "Borrower");
(b) the banks and other financial institutions from time to time parties to
this Agreement (the "Lenders"); and
(c) NATIONSBANK, N.A., as agent (in such capacity, the "Agent") for the Lenders
hereunder.
WITNESSETH:
WHEREAS, the Borrowers have requested that the Lenders make
available to them revolving credit facilities of up to $35,000,000 in the
aggregate upon the terms, and subject to the conditions, set forth herein to
finance future acquisitions, provide ongoing working capital and for other
general corporate purposes permitted by this Agreement;
WHEREAS, the Agent and the Lenders are willing to provide such
financing to the Borrowers only upon the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1. Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Acquired Business": any Person, or a business unit or other asset
group of a Person, that has been acquired by ACS Inc. or its Subsidiaries in a
manner permitted hereunder.
"Additional Borrower": as defined in subsection 7.12(c).
"ACS Inc." Advanced Communication Systems, Inc., a Delaware corporation
of which each other Borrower is directly or indirectly a wholly owned
Subsidiary.
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to
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(a) vote 5% or more of the securities having ordinary voting power for
the election of directors of such Person or (b) direct or cause the direction of
the management and policies of such Person, whether by contract or otherwise.
"Agent": as defined in the preamble to this Agreement.
"Aggregate Outstanding Extensions of Credit": as to any Lender, at any
time, its Facility A Aggregate Extensions of Credit or its Facility B Aggregate
Extensions of Credit, as the context may require.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Applicable Margin": for each Type of Loan outstanding under each
Facility, the rate per annum set forth below opposite the quarterly ratio of
Borrowers' (a) Debt to (b) EBITDA:
(a) for Facility A:
Debt/EBITDA Prime Eurodollar
greater than 3.50 0% 2.20%
0% 2.00%
3.50 but greater than 2.50
0% 1.65%
less than 2.50 but greater than 2.00
less than 2.00 0% 1.25%
(b) for Facility B:
Debt/EBITDA Prime Eurodollar
greater than 3.50 0% 2.45%
0% 2.25%
less than 3.50 greater than 2.50
less than 2.50 greater than 2.00 0% 1.90%
less than 2.00 0% 1.50%
The Applicable Margin shall, in each case, be determined and adjusted
quarterly on the date that is the first (1st) Business Day of the month
immediately following the date by which the Borrowers' are required to provide
quarterly financial information in accordance with the provisions of subsection
7.1(b) (each, an "Interest Determination Date") provided that in the event that
the financial statements required to be delivered pursuant to subsection 7.1(b)
and the related certificates required pursuant to 7.2 (b) are not delivered when
due, then, during the period from the date upon which such financial statements
are required to be delivered until one (1) Business Day following the date upon
which they actually are delivered, the highest rate shall be determined to be in
effect for the purposes of determining Applicable Margins during such period.
Such Applicable Margins shall be effective from such Interest Determination Date
until the next such Interest Determination Date. Notwithstanding the foregoing,
the initial Applicable Margin shall be determined as if the ratio of the
Borrowers' (a) Debt to (b) EBITDA is greater than 3.50.
"Application": an application, in such form as the relevant Issuing
Bank may specify from time to time, requesting such Issuing Bank to open a
Letter of Credit.
"Assignee": as defined in subsection 11.8(c).
"Available Facility A Commitment": as to any Lender at any time, an
amount equal to the excess, if any, of (a) the lesser of (i) Facility A
Commitment and (ii) the Lender's Facility A Commitment Percentage of the Loan
Value minus (b) the Facility A Aggregate Outstanding Extensions of Credit of
such Lender.
"Available Facility B Commitment": as to any Lender at any time, an
amount equal to the excess, if any, of the Facility B Commitment minus the
Facility B Aggregate Outstanding Extensions of Credit of such Lender.
"Bank Default": means (i) the refusal (which has not been retracted) of
a Lender to make available an amount equal to its Lender's Commitment Percentage
of any borrowing or its Lender's Commitment Percentage of any L/C Participation
or (ii) a Lender having notified the Agent and or the Borrowers that such Lender
does not intend to comply with the obligations under subsections 2.1(a) or
2.1(b), in the case of either (i) or (ii) above including as a result of the
appointment of a receiver or conservator with respect to such Lender at the
direction or request of any regulatory agency or authority.
"Borrowing Base Certificate": a certificate in form and substance
similar to the form of Exhibit E hereto, duly completed and certified by a
Responsible Officer of ACS Inc.
"Business": as defined in subsection 5.16(a).
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in Charlotte, North Carolina are authorized or required
by law to close; provided that, with respect to matters relating to Eurodollar
Loans, the term "Business Day" shall mean a day other than a Saturday, Sunday or
other day on which commercial banks in London, England are authorized or
required by law to close.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
"Cash Equivalents": (a) securities with maturities of one (1) year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit and
eurodollar time deposits with maturities of one (1) year or
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less from the date of acquisition and overnight bank deposits of any Lender or
of any commercial bank having capital and surplus in excess of $500,000,000, (c)
repurchase obligations of any Lender or of any commercial bank or investment
bank satisfying the requirements of clause (b) of this definition, having a term
of not more than thirty (30) days with respect to securities issued or fully
guaranteed or insured by the United States Government or any agency thereof, (d)
commercial paper issued in the United States which is rated at least A-2 by S&P
or P-2 by Moody's, (e) securities with maturities of one (1) year or less from
the date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing authority
of any such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government are rated at least A by S&P or A by
Moody's, (f) securities with maturities of one (1) year or less from the date of
acquisition backed by standby letters of credit issued by any Lender or any
commercial bank satisfying the requirements of clause (b) of this definition or
(g) shares of money market mutual or similar funds which invest substantially
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition.
"Change in Control": (a) the failure of ACS Inc. to continue to own,
directly or indirectly, free and clear of all Liens except for Liens in favor of
the Agent, one hundred percent (100%) of the Capital Stock of the Subsidiaries,
(b) prior to the date of the next public offering by ACS Inc. of its Capital
Stock providing ACS Inc. with gross proceeds of not less than twenty million
dollars ($20,000,000) to occur after the date hereof, the failure of George A.
Robinson, Charles G. Martinache and Thomas A. Costello to continue to own,
directly or indirectly, free and clear of all Liens except for Liens in favor of
the Agent, thirty percent (30%) or more of the issued and outstanding voting
shares of ACS Inc. and (c) on any date after such public offering, (i) any
Person shall have acquired beneficial ownership of twenty percent (20%) or more
of any outstanding Capital Stock having ordinary voting power in the election of
directors of ACS Inc. or (ii) the Board of Directors of ACS Inc. shall not
consist of a majority of Continuing Directors.
"Closing Date": the date on which the conditions precedent set forth
in subsection 6.1 shall be satisfied but in any event no later than February 28,
1998.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all assets of the Loan Parties (including but not limited
to the following tangible and intangible assets of each Borrower and any of its
Subsidiaries: accounts receivable, chattel paper, inventory, fixed assets,
equipment, investments and general intangibles), now owned or hereinafter
acquired, upon which a Lien is purported to be created by any Security Document.
"Commercial Letter of Credit": as defined in subsection 3.1(b)(i)(B).
"Commitment": as to any Lender, its Facility A Commitment or its
Facility B Commitment, as the context shall require; collectively the
"Commitments".
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"Commitment Percentage": as to any Lender at any time, its Facility A
Commitment Percentage or its Facility B Commitment Percentage, as the context
shall require.
"Commitment Period": the Facility A Commitment Period or the Facility
B Commitment Period, as the context shall require.
"Commonly Controlled Entity": an entity, whether or not incorporated,
which is under common control with any Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes any Borrower and which is
treated as a single employer under Section 414 of the Code.
"Consolidated Charges": for any fiscal period, the sum of the
following, determined on a consolidated basis in accordance with GAAP: (a) the
amount of interest expense, both expensed and capitalized, for such period on
the aggregate principal amount of the consolidated Indebtedness of ACS Inc. and
its Subsidiaries owed with respect to such Indebtedness during such period plus
(b) the amount of scheduled principal payments of Indebtedness of such ACS Inc.
and its Subsidiaries for such period plus (c) the amount of the Facility B
Aggregate Amount of Outstanding Extensions of Credit for such period divided by
six plus (d) the aggregate amount of cash dividends, payments or distributions
made with respect to the Capital Stock of ACS Inc. and its Subsidiaries.
"Consolidated Net Income" or "Consolidated Net Loss": for any fiscal
period, the amount which, in conformity with GAAP, would be set forth opposite
the caption "net income" (or any like caption) or "net loss" (or any like
caption), as the case may be, on a consolidated statement of earnings of ACS
Inc. and its Subsidiaries for such fiscal period.
"Consolidated Net Worth": for any fiscal period, the sum of (a) Capital
Stock and additional paid-in capital plus (b) retained earnings (or minus
accumulated deficits) of ACS Inc. and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
"Continuing Directors": the directors of ACS Inc. on the date hereof
and each other director, if such director's nomination for election to the Board
of Directors is recommended by a majority of the then Continuing Directors.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Debt": of any Person, at any date, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) the deferred purchase price
of property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary practices),
(c) any other indebtedness of such Person which is evidenced by a note,
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bond, debenture or similar instrument, and (d) all Indebtedness of the
types referred to in clauses (a) through (c) above which is guaranteed directly
or indirectly by such Person.
"Default": any of the events specified in Section 9, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Defaulting Lender": any Lender with respect to which a Bank Default
is in effect.
"Deferred Purchase Consideration": with respect to the Acquisition of
any Acquired Business, the amount contractually agreed by any Borrower or one of
its Subsidiaries to be paid to the sellers of such Acquired Business after the
closing of the acquisition thereof, provided that all Deferred Purchase
Consideration (other than any such Deferred Purchase Consideration paid by ACS
Inc. and its Subsidiaries pursuant to ACS Inc.'s acquisition of Advanced
Management, Inc.) shall be subordinated to the obligations of the Loan Parties
hereunder on terms and pursuant to documentation containing other terms
(including interest, amortization, covenants and events of default) in form and
substance satisfactory to the Agent. Deferred Purchase Consideration shall not
include purchase price adjustments based on net working capital or net book
value required or permitted to be made within six months of the acquisition of
an Acquired Business by the agreements governing such acquisition.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Domestic Subsidiary": any Subsidiary of a Borrower organized under
the laws of any jurisdiction within the United States.
"EBIDA": for any fiscal period, for any Person, the Consolidated Net
Income or Consolidated Net Loss, as the case may be, for such fiscal period,
after excluding therefrom amounts included therein on account of extraordinary
gain and restoring thereto (a) depreciation and amortization (including
write-offs or write-downs of amortizable and depreciable items), (b) the amount
of interest expense of such Person, determined on a consolidated basis in
accordance with GAAP, for such period on the aggregate principal amount of its
consolidated Indebtedness and (c) with respect to any fiscal period from
September 30, 1997 until and including September 30, 1998, the amount
attributable to RF Microsystems, Inc., which in conformity with GAAP, would be
set forth opposite the caption "acquired in process research and development
cost" (or any like caption) on the consolidating income statement of ACS Inc.
for such period.
"EBITDA": for any fiscal period for any Person, the Consolidated Net Income or
Consolidated Net Loss, as the case may be, for such fiscal period, after
excluding therefrom amounts included therein on account of extraordinary gain
and restoring thereto (a) depreciation and amortization (including write-offs or
write-downs of amortizable and depreciable items), (b) the amount of interest
expense of such Person, determined on a consolidated basis in accordance with
GAAP, for such period on the aggregate principal amount of its consolidated
Indebtedness, (c) the amount of tax expense of such Person, determined on a
consolidated basis in accordance with GAAP, for such period and (d) with respect
to any fiscal period from September 30, 1997
<PAGE>
until and including September 30, 1998, the amount attributable to RF
Microsystems, Inc., which in conformity with GAAP, would be set forth opposite
the caption "acquired in process research and development cost" (or any like
caption) on the consolidating income statement of ACS Inc. for such period.
"Eligible Receivables": means any Receivables owned by the Borrowers or
any Subsidiaries free and clear of all Liens (other than the Liens permitted
herein and Liens in favor of the Agent securing the Secured Obligations) other
than the following:
(a) Receivables that do not arise out of sales of goods or
rendering of services in the ordinary course of the business of a Borrower or
its Subsidiaries;
(b) Receivables on terms other than those normal or customary in a
Borrower's business;
(c) Receivables owing from any Person that is an Affiliate of a
Borrower;
(d) Receivables more than ninety (90) days past original invoice date;
(e) Receivables owing from any Person other than the United States
Government or any department, agency or instrumentality or agents thereof or any
state or local government or ant department, agency or instrumentality or agent
thereof from which an aggregate amount of more than fifty percent (50%) of the
Receivables owing from such Person are more than ninety (90) days past original
invoice date;
(f) Receivables owing from any Person that has asserted any claim,
demand or liability, by action, suit, counterclaim or other judicial or
arbitrable proceeding with respect to such Receivable;
(g) Receivables owing from any Person that shall have taken or be the
subject of any action or proceeding of a type described in subsection 9(f);
(h) Receivables (i) owing from any Person (other than the United States
Government or any department, agency or instrumentality thereof) that is also a
supplier to or creditor of a Borrower (to the extent such Person has any right
of setoff but only to the extent of such setoff) unless such Person has waived
any right of set-off in a manner acceptable to the Lenders or (ii) representing
any manufacturer's or supplier's credits, discounts, incentive plans or similar
arrangements entitling a Borrower to discounts on future purchase therefrom;
(i) Receivables arising out of sales to account debtors outside the
United States other than those Receivables arising out of sales to account
debtors approved by the Agent in its sole discretion and other than those
Receivables backed by a letter of credit issued by a financial institution
organized under the laws of the United States which is rated at least A-2 by S&P
or P-2 by
<PAGE>
Moody's or other credit support otherwise satisfactory in form and substance
satisfactory to the Agent;
(j) Receivables arising out of sales on a bill-and-hold, guaranteed
sale, sale-or-return, sale on approval or consignment basis or subject to any
right of return, set-off or charge-back to the extent of such right of return,
set-off or charge-back;
(k) Receivables in respect of which the Security Agreement, after
giving effect to the related filings of financing statements that have then been
made, if any, does not or has ceased to create a valid and perfected first
priority lien or security interest in favor of the Lenders, as secured parties,
securing the Secured Obligations or as to which any other Lien exists, other
than liens permitted herein;
(l) Receivables due in a currency other than U.S. dollars other than
those non-U.S. dollar Receivables approved by the Agent in its sole discretion;
and
(m) Receivables determined in whole or in part by the Agent to be
unacceptable, doubtful or impaired in accordance with the Agent's standard
practices for the evaluation of Receivables.
The value of such Eligible Receivables shall be their book value
determined in accordance with GAAP unless valued at a lower value as provided
above.
"Environmental Laws": as may be applicable to any Borrower or any Loan
Party, any and all foreign, Federal, state, local or municipal laws, rules,
orders, regulations, statutes, ordinances, codes, decrees or other Requirements
of Law regulating, relating to or imposing liability or standards of conduct
concerning pollution or protection of the environment (including protection of
human health from environmental hazards), as now or may at any time hereafter be
in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Eurodollar Base Rate": with respect to any Eurodollar Loan for any
Interest Period, the rate per annum determined by the Agent to be the average of
the respective rates per annum posted by each of the principal London office of
banks posting rates as displayed on the Telerate screen, page 3750 or such other
page as may replace such page on such service for the purpose of
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displaying the London interbank offered rate of major banks for
deposits in US dollars at approximately 11:00 A.M. (London Time) two (2)
Business Days prior to the beginning of such Interest Period, as specified in
the Notice of Borrowing (and rounded, if necessary, upward to the next whole
multiple of 1/16 of 1%); provided that, to the extent an interest rate is not
ascertainable pursuant to the foregoing provisions of this definition, the
"Eurodollar Base Rate" shall be the interest rate per annum determined by the
Agent to be the average (rounded, if necessary, upward to the nearest whole
multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the
rates per annum at which deposits in Dollars are offered for such relevant
Interest Period to major banks in the London interbank market in London, England
by such other major banks in the London interbank market in London, England at
approximately 11:00 a.m. (London time) on the date which is two (2) Business
Days prior to the beginning of such Interest Period.
"Eurodollar Loans": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, a rate per annum determined for such day in
accordance with the following formula (rounded, if necessary, upward to the
nearest whole multiple of 1/16th of 1%).
Eurodollar Base Rate
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1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 9, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Facility": Facility A or Facility B, as the context shall require.
"Facility A": the revolving credit facility provided for in Section 2
hereof.
"Facility A Aggregate Outstanding Extensions of Credit": as to any
Lender at any time, an amount equal to the sum of (a) the aggregate principal
amount of all Facility A Loans made by such Lender then outstanding and (b) such
Lender's Commitment Percentage of the aggregate amount of all L/C Obligations
then outstanding.
"Facility A Commitment": as to any Lender, the obligation of such
Lender to make Loans to the Borrowers hereunder in an aggregate principal amount
not to exceed the amount set forth opposite such Lender's name on Schedule II;
as the same may be reduced from time to time pursuant to subsection 4.4 and 4.5
as to all Lenders collectively, the "Facility A Commitments."
"Facility A Fee": a fee of .25% of the average daily unused portion of
Facility A from the Closing Date until the Maturity Date.
<PAGE>
"Facility A Commitment Percentage": as to any Lender at any date, the
percentage which such Lender's Facility A Commitment then constitutes of the
aggregate Facility A Commitments or, at any time after the Facility A
Commitments shall have expired or terminated, the percentage which the Facility
A Aggregate Outstanding Extensions of Credit of such Lender then constitutes of
the Facility A Aggregate Outstanding Extensions of Credit of all Lenders.
"Facility A Commitment Period": the period from and including the date
hereof but not including the Maturity Date or such earlier date on which the
Facility A Commitments shall terminate as provided herein.
"Facility A Loans": as defined in subsection 2.1(a).
"Facility A Note": as defined in subsection 4.1(e).
"Facility B": the revolving credit facility provided for in Section 2
hereof.
"Facility B Aggregate Outstanding Extensions of Credit": as to any
Lender at any time, an amount equal to the sum of the aggregate principal amount
of all Facility B Loans made by such Lender then outstanding.
"Facility B Commitment": as to any Lender, the obligation of such
Lender to make Loans to the Borrowers hereunder in an aggregate principal amount
not to exceed the amount set forth opposite such Lender's name on Schedule II;
as the same may be reduced from time to time pursuant to subsection 4.4 and 4.5;
as to all Lenders collectively, the "Facility B Commitments."
"Facility B Fee": a fee of .35% of the principal amount of each Loan
made under Facility B.
"Facility B Commitment Percentage": as to any Lender at any date, the
percentage which such Lender's Facility B Commitment then constitutes of the
aggregate Facility B Commitments or, at any time after the Facility B
Commitments shall have expired or terminated, the percentage which the Facility
B Aggregate Outstanding Extensions of Credit of such Lender then constitutes of
the Facility B Aggregate Outstanding Extensions of Credit of all Lenders.
"Facility B Commitment Period": the period from and including the date
hereof but not including the Maturity Date or such earlier date on which the
Facility B Commitments shall terminate as provided herein.
"Facility B Loans": as defined in subsection 2.1(b).
"Facility B Notes": as defined in subsection 4.1(e).
"Facility Fees": as provided for in subsection 4.2.
<PAGE>
"Federal Funds Effective Rate": for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it.
"Financing Lease": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"Foreign Subsidiary": any Subsidiary of a Borrower organized under the
laws of any jurisdiction outside the United States of America.
"GAAP": generally accepted accounting principles in the United States
of America as in effect from time to time.
"Government Contract": as defined in the Security Agreement.
"Government Receivables": all Receivables arising under any Government
Contract.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counter indemnity
or similar obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person incurred for the purpose of providing credit support,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof, provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business and guarantees by any Borrower or any Subsidiary of obligations of a
Borrower or a Subsidiary to suppliers, licensers or lessors to the extent the
underlying obligation is incurred in the ordinary course of business and
otherwise permitted hereunder. The amount of any Guarantee Obligation of any
<PAGE>
guaranteeing person shall be deemed to be the lower of (a) an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation shall be
such guaranteeing person's maximum reasonably anticipated liability in respect
thereof as determined by the Agent in good faith.
"Indebtedness": of any Person, at any date, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (c) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (d) all obligations of such Person
under Financing Leases, (e) all obligations of such Person in respect of letters
of credit and acceptances and letters of credit issued or created for the
account of such Person (including without limitation all issued and outstanding
Letters of Credit), (f) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof, (g) all Indebtedness of the types referred to in
clauses (a) through (f) above which is guaranteed directly or indirectly by such
Person.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Interest Payment Date": as to any Loan, the last Business Day of each
month.
"Interest Period": with respect to any Eurodollar Loan: (a) initially,
the period commencing on the borrowing or conversion date, as the case may be,
with respect to such Eurodollar Loan and ending one, two or three months
thereafter, as selected by a Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two or three months
thereafter, as selected by a Borrower in a Notice of Borrowing delivered to the
Agent by 10:00 A.M., Charlotte, North Carolina time, not less than three (3)
Business Days prior to the last day of the then current Interest Period with
respect thereto;
provided that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period pertaining to a Eurodollar Loan
would otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless the
result of such extension would be to carry such
<PAGE>
Interest Period into another calendar month in which event
such Interest Period shall end on the immediately preceding Business
Day;
(2) any Interest Period that would otherwise extend
beyond the Maturity Date shall end on the Maturity Date or such date
of final payment, as the case may be;
(3) any Interest Period pertaining to a Eurodollar Loan
that begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the
last Business Day of a calendar month.
(4) the Borrowers shall select Interest Periods so as
not to require a payment or prepayment of any Eurodollar Loan during
an Interest Period for such Loan.
"Issuing Bank": with respect to any Letter of Credit, NationsBank, N.A.
(or any affiliate thereof) upon its agreement to serve in such capacity with
respect to such Letter of Credit.
"Joinder Agreement": the Joinder Agreement to be executed and delivered
by each Person that, subsequent to the Closing Date, becomes a Domestic
Subsidiary, substantially in the form of Exhibit D, as the same may be amended,
supplemented or otherwise modified from time to time.
"L/C Collateral Account": the "Collateral Account", as defined in the
Security Agreement.
"L/C Commitment": $1,000,000.
"L/C Fee Payment Date": the last Business Day of each June, September,
December and March.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to subsection 3.4(a).
"L/C Participants": with respect to each Letter of Credit, the
collective reference to all the Lenders other than the Issuing Bank with respect
thereto.
"Letter of Credit": a Commercial Letter of Credit or a Standby Letter
of Credit, as the context shall require; collectively, the "Letters of Credit".
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation,
<PAGE>
any conditional sale or other title retention agreement and any Financing Leases
having substantially the same economic effect as any of the foregoing).
"Loan": a Facility A Loan or a Facility B Loan, as the context shall
require; collectively, the "Loans".
"Loan Documents": this Agreement, the Notes, the Applications, and the
Security Documents.
"Loan Parties": ACS Inc. and its Subsidiaries.
"Loan Value": means with respect to Eligible Receivables, the sum of
(i) ninety percent (90%) of billed Government Receivables plus (ii) eighty-five
percent (85%) of billed commercial accounts receivables plus (iii) fifty percent
(50%) of amounts that would but for the delivery of an invoice for work
performed within thirty (30) days of the date of calculation of Loan Value,
otherwise be considered Eligible Receivables, provided, that the amount
described in clause (iii) (fifty percent (50%) of amounts that would but for the
delivery of an invoice for work performed within thirty (30) days of the date of
calculation of Loan Value, otherwise be considered Eligible Receivables) shall
not exceed $6,000,000, each of (i), (ii) and (iii) as determined based on the
most recent Borrowing Base Certificate delivered to the Agent hereunder,
provided; however, that the Agent in its reasonable discretion based on an
analysis of changes in the Borrowers' credit and collection experience arising
after the date hereof, may dilute the value of the Borrowers' Eligible
Receivables that shall be used in determining Loan Value.
"Majority Lenders": at any time (i) NationsBank, N.A. and (ii) any
other Lenders having Commitments (or if Commitments have terminated, Aggregate
Outstanding Extensions of Credit) which, when taken together with the
Commitments of NationsBank, N.A., aggregate more than fifty-one percent (51%) of
the sum of the Commitments of the Non-Defaulting Lenders (or Aggregate
Outstanding Extensions of Credit of the Non-Defaulting Lenders as the case may
be) then in effect, provided that, if at any time, there are two or more Lenders
hereunder, any action required by Majority Lenders shall require the consent of
not less than two Lenders.
"Management Change": (a) George A. Robinson or (b) any two or more of
the following individuals Charles G. Martinache, Thomas A. Costello and Dev
Ganesan, ceasing to be active full time in the management of ACS Inc. and such
Person or such Persons not being replaced to the reasonable satisfaction of the
Majority Lenders within ninety (90) days of any such Person ceasing to be so
active.
"Material Adverse Amount": an amount payable by ACS Inc. and/or its
Subsidiaries in excess of $500,000 for remedial costs, non-routine compliance
costs, compensatory damages, punitive damages, fines, penalties or any
combination thereof.
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property, financial condition or prospects of a Borrower
and its Subsidiaries taken as a whole, (b) the validity or enforceability
<PAGE>
of this or any of the other Loan Documents or (c) the rights or remedies of the
Agent or the Lenders hereunder or under any of the other Loan Documents.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"Maturity Date": February 28, 2000.
"Moody's": Moody's Investors Service, Inc.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Proceeds": with respect to any Net Proceeds Event, (a) the gross
cash consideration, and all cash proceeds (as and when received) of non-cash
consideration (including, without limitation, any such cash proceeds in the
nature of principal and interest payments on account of promissory notes or
similar obligations), received by a Borrower and its Subsidiaries in connection
with such Net Proceeds Event, minus the sum, without duplication, of (i) any
taxes which are paid or actually payable to any federal, state, local or foreign
taxing authority by a Borrower and its Subsidiaries and are directly
attributable to the receipt of such Net Proceeds, (ii) the amount of fees and
commissions (including reasonable investment banking fees), legal, accounting,
consulting, survey, title and recording tax expenses and other costs and
expenses directly incident to such Net Proceeds Event which are paid or payable
by a Borrower and its Subsidiaries, (iii) the amount of any reserve reasonably
maintained by a Borrower and its Subsidiaries with respect to indemnification
obligations owing pursuant to the definitive documentation pursuant to which the
Net Proceeds Event is consummated (with any unused portion of such reserve to
constitute Net Proceeds on the date upon which the indemnification obligations
terminates) and (iv) the amount of Indebtedness (other than intercompany
Indebtedness), if any, which is required to be repaid at the time or as a result
of such Net Proceeds Event out of the proceeds thereof.
"Net Proceeds Event": (a) the incurrence by a Borrower or any of its
Subsidiaries of any Indebtedness (other than Indebtedness permitted pursuant to
clauses (a) through (h) of subsection 8.2);
(b) the issuance or sale of any equity securities by a Borrower or any
of its Subsidiaries to any Person, other than (i) the issuance or sale of any
such equity securities to a Borrower or any of its Subsidiaries, (ii) the
issuance of Capital Stock upon the sale or exercise of stock options, (iii) the
issuance and sale of Capital Stock under employee stock purchase plans, (iv) the
issuance and sale of Capital Stock and/or stock options under employee stock
ownership and incentive plans and similar programs or individual arrangements,
(v) the issuance and sale of Capital Stock in connection with an acquisition
permitted pursuant to subsection 8.9(f);
<PAGE>
(c) the sale, transfer or other disposition by a Borrower or any of its
Subsidiaries of any real or personal, tangible or intangible, property
(including, without limitation, any capital stock, but other than inventory
sold, transferred or otherwise disposed of in the ordinary course of business)
of a Borrower or such Subsidiary to any Person (other than any such sale,
transfer or disposition permitted pursuant to subsection 8.6); and
(d) the recovery by a Borrower of amounts owing to it under property
insurance policies.
"Non-Defaulting Lender": any lender other than a Defaulting Lender.
"Non-Excluded Taxes": as defined in subsection 4.16(a).
"Notes": the collective reference to the Facility A Notes and the
Facility B Notes.
"Notice of Borrowing": means (a) with respect to a request for a
borrowing hereunder, a request in the form of Exhibit H-1 hereto, (b) with
respect to a request for continuation of a Eurodollar Loan hereunder, a request
in the form of Exhibit H-2 hereto and (c) with respect to a request for
conversion of or to a Eurodollar Loan hereunder, a request in the form of
Exhibit H-3 hereto, in each case delivered by a Responsible Officer of a
Borrower to any such Lender hereunder.
"Participant": as defined in subsection 11.8(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan or other plan
established, maintained or contributed to by any Borrower or a Commonly
Controlled Entity that is covered by Title IV of ERISA.
"Prime Rate": the rate of interest per annum publicly announced from
time to time by the Agent at its principal office in the State of North Carolina
as its prime rate on a particular day in effect for domestic (United States)
commercial loans; such rate is not necessarily intended to be the lowest rate of
interest charged by the Lenders in connection with extensions of credit. Each
change in the Prime Rate shall be effective on the date such change is publicly
announced.
"Properties": as defined in subsection 5.16(a).
"Receivables": means all Receivables referred to in Section 7 of the
Security Agreement.
<PAGE>
"Regulation G": Regulation G of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Regulation U": Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"Reimbursement Obligation": with respect to any Letter of Credit, the
joint and several obligation of the Borrowers to reimburse the Lenders with
respect thereto pursuant to subsection 3.5(a) for amounts drawn thereunder.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty (30) day notice period is
waived under subsections .22, .25, .27 or .28 of PBGC Reg. ss.4043.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer": the chief executive officer, the president, the
executive vice president, the chief financial officer or the treasurer of a
Borrower.
"Restricted Payment": as defined in subsection 8.7.
"SEC": the United States Securities and Exchange Commission and any
Governmental Authority succeeding to any of its principal functions.
"S&P": Standard and Poor's Ratings Group, a division of McGraw Hill
Companies Inc.
"Secured Obligations": as defined in the Security Documents.
"Security Agreement": the Security Agreement to be executed and
delivered by the Borrowers, substantially in the form of Exhibit C, as the same
may be amended, supplemented or otherwise modified from time to time.
"Security Documents": the collective reference to the Security
Agreement and the Joinder Agreement, and all other security documents hereafter
delivered to the Lenders granting a Lien on any asset or assets of any Person to
secure the obligations and liabilities of any Borrower hereunder and under
<PAGE>
any of the other Loan Documents or to secure any guarantee of any such
obligations and liabilities.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"Standby Letter of Credit": as defined in paragraph 3.1(b)(i)(1).
"Subordinated Indebtedness": any debt for which any Borrower is liable
that is subordinated to the obligations of the Loan Parties hereunder on terms
and pursuant to documentation containing other terms (including interest,
amortization, covenants and events of default) in form and substance
satisfactory to the Agent.
"Subsidiary": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries
of the Borrowers.
"Tranche": the collective reference to Eurodollar Loans having then
current Interest Periods which began on the same date and end on the same later
date (whether or not such Loans shall originally have been made on the same
day).
"Transferee": as defined in subsection 11.8(f).
"Type": as to any Loan, its nature as a Prime Rate Loan or a Eurodollar
Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
1.2. Other Definitional Provisions:
(a) Unless otherwise specified therein, all terms defined in this Agreement
shall have the defined meanings when used in any Notes or any certificate or
other document made or delivered pursuant hereto.
(b) Unless otherwise specified herein, all accounting terms used herein (and in
any other Loan Document and any certificate or other document made or delivered
pursuant hereto or thereto) shall be interpreted, all accounting determinations
shall be made, and all financial
<PAGE>
statements required to be delivered hereunder shall be
prepared, in accordance with GAAP as in effect from time to time.
(c) The words "hereof," "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Section, subsection, Schedule
and Exhibit references are to this Agreement unless otherwise specified. (d) In
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding". Periods of days referred to in this Agreement
shall be counted in calendar days unless Business Days are expressly prescribed.
Any period determined hereunder by reference to a month or months or year or
years shall end on the day in the relevant calendar month in the relevant year,
if applicable, immediately preceding the date numerically corresponding to the
first day of such period, provided, that if such period commences on the last
day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month during which such period is to end),
such period shall, unless otherwise expressly required by the other provisions
of this Agreement, end on the last day of the calendar month. (e) The meanings
given to terms defined herein shall be equally applicable to both the singular
and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENT
2.1 Commitments.
(a) Subject to the terms and conditions hereof, each Lender
severally agrees to make revolving credit loans (the "Facility A Loans")
immediately available to the Borrowers from time to time during the Facility A
Commitment Period in an aggregate principal amount at any one time outstanding
which, when added to such Lender's Facility A Commitment Percentage of the then
outstanding L/C Obligations does not exceed such Lender's Facility A Commitment
provided; that such Lender shall have no obligation to make any Facility A Loan
in excess of the Available Facility A Commitment. During the Facility A
Commitment Period the Borrowers may use the Facility A Commitments by borrowing,
prepaying the Facility A Loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof.
(b) Subject to the terms and conditions hereof, each Lender
severally agrees to make revolving credit loans (the "Facility B Loans")
immediately available to the Borrowers from time to time during the Facility B
Commitment Period in an aggregate principal amount at any one time outstanding
which, when added to such Lender's Facility B Commitment Percentage of the then
outstanding L/C Obligations does not exceed such Lender's Facility B Commitment
provided; that such Lender shall have no obligation to make any Facility B Loan
in excess of the Available Facility B Commitment. During the Facility B
Commitment Period the Borrowers
<PAGE>
may use the Facility B Commitments by borrowing, prepaying the Revolving B
Credit Loans in whole or in part, and reborrowing, all in accordance with the
terms and conditions hereof.
(c) The Loans may from time to time be (i) Eurodollar Loans,
(ii) Prime Rate Loans or (iii) a combination thereof, as determined by the
Borrowers and notified to the Agent in accordance with subsections 2.2 and 4.8,
provided that no Loan shall be made as a Eurodollar Loan after the day that is
one month prior to the Maturity Date.
2.2 Procedure for Borrowing. A Borrower may borrow under the
Commitments during the Commitment Period on any Business Day, provided that such
Borrower shall deliver to the Agent the Borrower's irrevocable Notice of
Borrowing which notice must be in writing or by telephone promptly confirmed in
writing prior to 10:00 A.M., Charlotte, North Carolina time, (a) three (3)
Business Days prior to the requested borrowing date, if all or any part of the
requested Loans are to be initially Eurodollar Loans or (b) on the requested
borrowing date, otherwise. Upon receipt of any such Notice of Borrowing from a
Borrower, the Agent shall promptly notify each Lender thereof. Each Lender will
make the amount of its pro rata share of each borrowing available to the Agent
for the account of such Borrower at the office of the Agent specified in
subsection 11.3 prior to 12:00 P.M., Charlotte, North Carolina time on the
borrowing date, in funds immediately available to the Agent. Such borrowing will
then be made available to such Borrower by the Agent transferring to an account
(which shall be maintained for such purpose by the Agent) with the aggregate of
the amounts made available to the Agent by the Lenders and in like funds as
received by the Agent.
2.3 Use of Proceeds of Loans.
(a) The proceeds of the Facility A Loans shall be utilized by
the Borrowers (i) to finance future acquisitions permitted hereunder, (ii) to
provide working capital and (iii) for other general corporate purposes.
(b) The proceeds of the Facility B Loans shall be utilized by
the Borrowers to finance future acquisitions permitted hereunder.
SECTION 3. AMOUNT AND TERMS OF LETTER OF CREDIT SUB-FACILITY
3.1 L/C Commitment.
(a) Subject to the terms and conditions hereof, each Issuing
Bank, in reliance on the agreements of the other Lenders set forth in subsection
3.4(a) agrees to issue any Letters of Credit requested to be issued by it and so
issued by it for the account of the Borrowers on any Business Day during the
Facility A Commitment Period in such form as may be approved from time to time
by such Issuing Bank; provided that such Issuing Bank shall have no obligation
to issue any Letter of Credit if, after giving effect to such issuance, such
Issuing Bank has knowledge that (i) the L/C Obligations would exceed the L/C
Commitment, or (ii) the Available Facility A Commitment would be less than zero.
<PAGE>
(b) Each Letter of Credit shall:
(i) be either (A) a standby letter of credit issued
to support obligations of the Borrowers and the Subsidiaries, contingent or
otherwise, for which Loans would be available (a "Standby Letter of Credit"), or
(B) a commercial letter of credit issued in respect of the purchase of goods or
services by the Borrowers and the Subsidiaries in the ordinary course of
business for which Loans would be available (a "Commercial Letter of Credit");
(ii) be (A) issued from an office of the Issuing Bank
in the United States and (B)
denominated in Dollars; and
(iii) expire no later than the earlier of (A) one (1)
year following the date of issuance
thereof and (B) five (5) days prior to the Maturity Date; provided that any
Letter of Credit may provide for renewal thereof for additional one-year periods
on an "evergreen" basis (but not, in any event, beyond the date referred to in
clause (B) of this subparagraph (iii)).
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the
Commonwealth of Virginia.
(d) No Issuing Bank shall at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
such Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letters of Credit. The Borrowers
shall request that such Issuing Bank issue a Letter of Credit by delivering to
such Issuing Bank at its address for notices specified herein an Application
therefor, completed to the satisfaction of the Issuing Bank, and such other
certificates, documents and other papers and information as the Issuing Bank may
request. Upon receipt of any Application, the Issuing Bank will process such
Application and the certificates, documents and other papers and information
delivered to it in connection therewith in accordance with its customary
procedures and shall promptly issue the Letter of Credit requested thereby by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Bank and the Borrowers; provided that the
Issuing Bank shall in no event be required to issue any Letter of Credit earlier
than three (3) Business Days after its receipt of the Application therefor and
all such other certificates, documents and other papers and information relating
thereto. In the event that the Letter of Credit to be issued is a Standby Letter
of Credit, the Issuing Bank shall furnish a copy of such Standby Letter of
Credit to each of the Agent and the Borrowers promptly following the issuance
thereof.
3.3 Fees, Commissions and Other Charges.
(a) The Borrowers, jointly and severally, shall pay to the Agent, for
the account of each Issuing Bank and the L/C Participants, with respect to each
Commercial Letter of Credit
<PAGE>
issued by such Issuing Bank a fee in an amount equal to 1% per annum on the
amount available to be drawn under each Commercial Letter of Credit payable on
the date of issuance of such Commercial Letter of Credit and shall be
nonrefundable.
(b) The Borrowers, jointly and severally, shall pay to the
Agent, for the account of each Issuing Bank and the L/C Participants, a letter
of credit commission with respect to each Standby Letter of Credit issued by
such Issuing Bank, computed for each day during the period for which payment is
due at the rate per annum equal to the Applicable Margin for the Facility in
effect for Eurodollar Loans on such date (calculated on the basis of a 360 day
year) times the aggregate amount available to be drawn under such Standby Letter
of Credit on such date. Such commissions shall be payable quarterly, in advance,
on each L/C Fee Payment Date and shall be nonrefundable.
(c) The Borrowers, jointly and severally, shall pay to the
relevant Issuing Bank, for its own account a fronting fee in the amount equal to
1/4 of 1% per annum on the face amount of each Standby Letter of Credit issued
by it. The fronting fee shall be calculated on the basis of a 360 day year and
shall be payable quarterly, in advance, on each L/C Fee Payment Date.
(d) In addition to the foregoing fees and commissions, the
Borrowers, jointly and severally, shall pay or reimburse each Issuing Bank for
such normal and customary costs and expenses as are incurred or charged by such
Issuing Bank issuing, effecting payment under, amending or otherwise
administering any Letter of Credit issued by it.
(e) The Agent shall, promptly following its receipt thereof,
distribute to the relevant Issuing Bank and the L/C Participants all fees and
commissions received by the Agent for their respective accounts pursuant to this
subsection 3.3.
3.4 L/C Participations.
(a) Each Issuing Bank irrevocably agrees to grant and hereby
grants to each L/C Participant, and, to induce such Issuing Bank to issue
Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept
and purchase and hereby accepts and purchases from the Issuing Bank, on the
terms and conditions hereinafter stated, for such L/C Participant's own account
and risk an undivided interest equal to such L/C Participant's Commitment
Percentage in the Issuing Bank's obligations and rights under each Letter of
Credit issued by it hereunder and the amount of each draft paid by the Issuing
Bank thereunder. Each L/C Participant unconditionally and irrevocably agrees
with such Issuing Bank that, if a draft is paid under any Letter of Credit for
which such Issuing Bank is not reimbursed in full by the Borrowers in accordance
with the terms of this Agreement, such L/C Participant shall pay to such Issuing
Bank (through the Agent) upon demand an amount equal to such L/C Participant's
Commitment Percentage of the amount of such draft, or any part thereof, which is
not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to an Issuing Bank pursuant to paragraph 3.4(a) in respect of any unreimbursed
portion of any payment made by such
<PAGE>
Issuing Bank under any Letter of Credit issued by it is paid to such Issuing
Bank within three (3) Business Days after the date such payment is due, such L/C
Participant shall pay to such Issuing Bank (through the Agent) on demand an
amount equal to the product of (i) such amount, times (ii) the daily average
Federal Funds Effective Rate, as quoted by such Issuing Bank, during the period
from and including the date such payment is required to the date on which such
payment is immediately available to such Issuing Bank, times (iii) a fraction
the numerator of which is the number of days that elapse during such period and
the denominator of which is 360. If any such amount required to be paid by any
L/C Participant pursuant to paragraph 4.4(a) is not in fact made available to
such Issuing Bank by such L/C Participant within three (3) Business Days after
the date such payment is due, such Issuing Bank shall be entitled to recover
from such L/C Participant, on demand, such amount with interest thereon
calculated from such due date at the rate per annum applicable to Prime Rate
Loans hereunder. A certificate of such Issuing Bank submitted to any L/C
Participant (through the Agent) shall, to the extent permitted by applicable
law, be prima facie evidence of any amounts owing under this subsection 3.4.
(c) Whenever, at any time after an Issuing Bank has made
payment under any Letter of Credit and has received from any L/C Participant its
pro rata share of such payment in accordance with subsection 3.4(a), such
Issuing Bank receives any payment related to such Letter of Credit (whether
directly from the Borrowers or otherwise, including proceeds of collateral
applied thereto by such Issuing Bank), or any payment of interest on account
thereof, such Issuing Bank will distribute to the Agent (for the account of such
L/C Participant) such L/C Participant's pro rata share thereof; provided,
however, that in the event that any such payment received by such Issuing Bank
shall be required to be returned by such Issuing Bank, such L/C Participant
shall return to such Issuing Bank (through the Agent) the portion thereof
previously distributed by such Issuing Bank to it.
3.5 Reimbursement Obligation of the Borrowers.
(a) The Borrowers, jointly and severally, agree to reimburse
each Issuing Bank on each date on which such Issuing Bank notifies the Borrowers
of the date and amount of a draft presented under any Letter of Credit issued by
such Issuing Bank and paid by such Issuing Bank for the amount of (i) such draft
so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by
the Lenders in connection with such payment. Each such payment shall be made to
such Issuing Bank at its address for notices specified herein in Dollars and in
immediately available funds.
(b) Interest shall be payable on any and all amounts remaining
unpaid by the Borrowers under this subsection 3.5 from the date such amounts
become payable (whether at stated maturity, by acceleration or otherwise) until
payment in full at the rate which would be payable on any outstanding Prime Rate
Loans which were then overdue.
(c) Each drawing under any Letter of Credit shall (unless it
is reimbursed by the Borrowers on the date of drawing) constitute a request by
the Borrowers to the Agent for a
<PAGE>
borrowing pursuant to subsection 2.2 of Prime Rate Loans under Facility A in the
amount of such drawing. The borrowing date with respect to such borrowing shall
be the date of such drawing.
3.6 Obligations Absolute.
(a) The Borrowers' obligations under this Section 3 shall be
absolute and unconditional under any and all circumstances and irrespective of
any set-off, counterclaim or defense to payment which any Borrower may have or
have had against any Issuing Bank or any beneficiary of a Letter of Credit.
(b) The Borrowers also agree with each Issuing Bank that such
Issuing Bank shall not be responsible for, and the Borrowers' Reimbursement
Obligations under subsection 3.5(a) shall not be affected by, among other
things, (i) the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or (ii) any dispute between or among any Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or (iii) any claims whatsoever of any Borrower against
any beneficiary of such Letter of Credit or any such transferee.
(c) No Issuing Bank shall be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit issued by
such Issuing Bank, except for errors or omissions caused by such Issuing Bank's
gross negligence or willful misconduct.
(d) The Borrowers agree that any action taken or omitted by an
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the Commonwealth of Virginia, shall be binding on the
Borrowers and shall not result in any liability of such Issuing Bank to the
Borrowers.
(e) Notwithstanding the foregoing, in the event a Bank Default
exists, the Issuing Bank shall not be required to issue any Letter of Credit
unless the Issuing Bank has entered into arrangements satisfactory to it and the
Borrowers to eliminate the Issuing Bank's additional risk with respect to the
participation in the Letters of Credit of the Defaulting Lender or Defaulting
Lenders, including, without limitation, by cash collateralizing such Defaulting
Lender or Lender's Commitment Percentage of the applicable outstanding L/C
Obligations or by a Non-Defaulting Lender or Non-Defaulting Lenders replacing
such Defaulting Lender or Defaulting Lenders with respect to such participation.
3.7 Letter of Credit Payments. The responsibility of each
Issuing Bank to the Borrowers in connection with any draft presented for payment
under any Letter of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to
<PAGE>
determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with such
Letter of Credit.
3.8 Application. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. PROVISIONS RELATING TO THE EXTENSIONS OF CREDIT; FEES AND
PAYMENTS.
4.1 Repayment of Loans; Evidence of Debt.
(a) The Borrowers, jointly and severally, hereby
unconditionally promise to pay to the Agent for the account of each applicable
Lender (i) the then unpaid principal amount of each Loan on the Maturity Date
(or such earlier date on which the Loans become due and payable pursuant to
Section 9). The Borrowers, jointly and severally, hereby further agree to pay
interest on the unpaid principal amount of the Loans from time to time
outstanding from the date hereof until payment in full thereof at the rates per
annum, and on the dates, set forth in subsection 4.10.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing debt of the Borrowers to the Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Agent shall maintain the Register pursuant to
subsection 11.8(d) and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Facility A Loan and Facility B Loan made
hereunder, the Type thereof and each Interest Period applicable thereto, (ii)
the amount of any principal or interest due and payable or to become due and
payable from the Borrowers to the Lenders hereunder and (iii) the amount of any
sum received by the Agent hereunder from the Borrowers.
(d) The entries made in the Register and the accounts of each
Lender maintained pursuant to subsection 11.8(d) shall, to the extent permitted
by applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrowers therein recorded; provided, however, that the
failure of any Lender or the Agent to maintain the Register or any such account,
or any error therein, record or any error in any record shall not in any manner
affect the obligation of the Borrowers to repay (with applicable interest) the
Loans made to the Borrowers by the Lenders in accordance with the terms of this
Agreement.
(e) The Borrowers agree that, upon request of any Lender
through the Agent, the Borrowers will execute and deliver to such Lender (i) a
promissory note of the Borrowers evidencing the Facility A Loan of the Lender to
the Borrowers, substantially in the form of Exhibit A ("Facility A Note") and
(ii) a promissory note of the Borrowers evidencing the Facility B Loan of the
Lender to the Borrowers, substantially in the form of Exhibit B ("Facility B
Note").
4.2 Facility Fees.
(a) The Borrowers, jointly and severally, agree to pay to the
Agent, for the account of each Lender, the (i) Facility A Fees and (ii) the
Facility B Fees (the "Facility Fees").
(b) Such Facility Fees shall be calculated on the basis of a
365/366 day year as the case may be.
(c) Such Facility A Fees shall be payable quarterly, in
arrears, on the last Business Day of each June, September, December and March
and the Maturity Date or such earlier date as the Facility A Commitments shall
terminate as provided herein, commencing on June 30, 1998.
(d) Such Facility B Fees shall be payable, in advance, on or
before each borrowing date of a Borrower under Facility B.
4.3 Optional Prepayments.
(a) The Borrowers may at any time and from time to time prepay
the Prime Rate Loans, in whole or in part, without premium or penalty, subject
to the provisions of 4.6.
(b) The Borrowers, with the consent of the Agent (which in
each case shall not be unreasonably withheld), may at any time and from time to
time prepay the Eurodollar Loans, in whole or in part, without premium or
penalty (subject to the provisions of subsections 4.7 and 4.17), upon at least
three (3) Business Days' notice to the Agent (which notice must be received by
the Agent prior to 11:00 A.M., Charlotte, North Carolina time, on the date upon
which such notice is due and shall be irrevocable by the Borrowers except in
connection with prepayments that are contingent on Net Proceeds to the extent of
such contingency) specifying the date and amount of prepayment. Upon receipt of
any such notice, the Agent shall promptly notify each Lender and the Borrowers
of its consent or its rejection thereof. If any such notice is given by the
Borrowers and not withdrawn or rejected prior to the date upon which such
payment is made, the amount specified in such notice shall be due and payable on
the date specified therein, together with any amounts payable pursuant to
subsection 4.17.
(c) Partial prepayments shall be in an aggregate principal
amount of $100,000 or an integral multiple thereof or in the amount of the
outstanding Loans.
(d) For so long as no Default or Event of Default has occurred
and is continuing, the Borrowers may elect the application of prepayments to the
Facilities made pursuant to this subsection 4.3, provided that unless the
Borrowers otherwise elect, the application of prepayments under each Facility
made pursuant to this subsection 4.3 shall be made, first, to Prime Rate and
second, to Eurodollar Loans.
4.4 Optional Termination or Reduction of Commitments. The
Borrowers shall have the right, upon not less than three (3) Business Days'
notice to the Agent, to terminate the Commitments or, from time to time, to
reduce the amount of the Commitments; provided that with respect to either
Facility A or Facility B, no such termination or reduction shall be permitted
with respect to the Commitments of such Facility to the extent that after giving
effect thereto and to any prepayments of the Loans made thereunder on the
effective date thereof, the aggregate principal amount of such Loans then
outstanding when added to the then outstanding L/C Obligations, would exceed the
Commitments then in effect. Any such reduction shall be in an amount equal to
$100,000 or an integral multiple in excess thereof and shall reduce permanently
the affected Commitments then in effect.
4.5 Mandatory Reduction of Commitments and Prepayments.
(a) If at any time the Facility A Aggregate Extensions of
Credit for all Lenders exceed the lesser of the Loan Value of Eligible
Receivables and the aggregate Facility A Commitments, the Borrowers, jointly and
severally, shall immediately repay the aggregate Facility A Loans and/or deposit
in the L/C Collateral Account an amount equal to the amount that may be drawn
under outstanding Letters of Credit (whether or not the beneficiaries of the
then outstanding Letters of Credit shall have presented the documents required
thereunder), such repayments and deposits to be in an aggregate amount equal to
such excess.
(b) If at any time the Facility B Aggregate Outstanding
Extensions of Credit of all Lenders exceed the aggregate Facility B Commitments,
the Borrowers, jointly and severally, shall immediately repay the Facility B
Loans, such repayments to be in an aggregate amount equal to such excess.
(c) The Borrowers, jointly and severally, shall as promptly as
is practicable (and, in any event, within one (1) Business Day following the
receipt thereof), repay the Facility A Loans, repay the Facility B Loans and
reduce the Facility B Commitments by the amount equal to the aggregate amount of
Net Proceeds received from any Net Proceeds Event; provided that no such
repayment and reduction shall be due pursuant to this subsection 4.5(c) with
respect to any Net Proceeds Event on account of:
(i) the sale, transfer or other disposition by a
Borrower or any of its Subsidiaries of any real or personal, tangible
or intangible, property of a Borrower and its Subsidiaries, to the
extent that the Net Proceeds from such sale, transfer or other
disposition (in the aggregate with the Net Proceeds from all other
sales, transfers and other dispositions occurring during the fiscal
year) is less than $250,000; or
(ii) the recovery by a Borrower of amounts owing to
it under property insurance policies except, to the extent that (1)
such recoveries exceed the reasonably estimated cost of replacing the
property on account of which such amounts were paid to such Borrower
and its Subsidiaries or (2) such Borrower and its Subsidiaries do not
replace such property within one hundred eighty (180) days.
(d) Any payments of the Loans and reductions of the
Commitments made pursuant to subsection 4.5(c) shall be applied, first, to repay
the Facility B Loans and to reduce the Facility B Commitments and second to
repay the Facility A Loans. Unless the Borrowers otherwise elect, the
application of prepayments under each Facility made pursuant to this subsection
4.5 shall be made, first, to Prime Rate Loans and second, to Eurodollar Loans.
4.6 Application of Payments. Any payments of the Loans and
reductions of the Commitments made pursuant to subsections 4.3, 4.4 or 4.5 shall
not be applied to the prepayment of the Loans of a Defaulting Lender at any time
under the Facility when the aggregate amount of Loans of any Non-Defaulting
Lender exceeds such Non-Defaulting Lender's Commitment Percentage of all Loans
then outstanding.
4.7 Prepayment Premium. If any Borrower prepays any portion of
the Loans with the proceeds of a loan from a commercial bank, finance company or
other lender of a type that is a competitor of the Agent, the Borrowers, jointly
and severally, shall pay to the Agent, not later than the next Business Day
after the date of such prepayment, a prepayment premium of 1% on any outstanding
obligations so repaid.
4.8 Conversion and Continuation Options.
(a) A Borrower may elect from time to time to convert
Eurodollar Loans to Prime Rate Loans by delivering to the Agent an irrevocable
Notice of Borrowing by 10:00 A.M., Charlotte, North Carolina time, on the
requested date of conversion; provided that any such conversion of Eurodollar
Loans may only be made on the last day of an Interest Period with respect
thereto. A Borrower may elect from time to time to convert Prime Rate Loans to
Eurodollar Loans by delivering to the Agent an irrevocable Notice of Borrowing
by 10:00 A.M., Charlotte, North Carolina time, at least three (3) Business Days
prior to the requested conversion date. Any such Notice of Borrowing with
respect to a conversion to Eurodollar Loans shall specify the length of the
initial Interest Period or Interest Periods therefor. Upon receipt of any such
Notice of Borrowing the Agent shall promptly notify each Lender thereof. All or
any part of outstanding Eurodollar Loans and Prime Rate Loans may be converted
as provided herein, provided that (i) no Loan may be converted into a Eurodollar
Loan when any Default or Event of Default has occurred and is continuing and the
Agent has or the Majority Lenders have determined that such a conversion is not
appropriate and (ii) no Loan may be converted into a Eurodollar Loan after the
date that is one (1) month prior to the Maturity Date. Any Prime Rate Loan not
converted to a Eurodollar Loan hereunder shall continue as an Prime Rate Loan.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by a
Borrower delivering to the Agent an irrevocable Notice of Borrowing, in
accordance with the applicable provisions of the term "Interest Period" set
forth in subsection 1.1, of the length of the next Interest Period to be
applicable to such Loans, provided that no Eurodollar Loan may be continued as
such (i) when any Event of Default has occurred and is continuing and the Agent
has or the Majority Lenders have determined that such a continuation is not
appropriate or (ii) after the date that is one (1) month prior to the Maturity
Date, and provided, further, that if a Borrower shall fail to give such notice
or if such continuation is not permitted such Loans shall be automatically
converted to Prime Rate Loans
<PAGE>
on the last day of such then expiring Interest Period. Upon receipt of any such
Notice of Borrowing the Agent shall promptly notify each Lender thereof.
4.9 Minimum Amounts and Maximum Number of Tranches.
(a) All borrowings, conversions and continuations of
Eurodollar Loans hereunder and all selections of Interest Periods hereunder
shall be in such amounts and be made pursuant to such elections so that, after
giving effect thereto, the aggregate principal amount of the Eurodollar Loans
comprising each Tranche shall be equal to $100,000 or a whole multiple in excess
thereof. In no event shall there be more than ten (10) Tranches of Eurodollar
Loans outstanding at any time.
(b) All borrowings and repayments of Prime Rate Loans
hereunder shall be in such amounts so that, after giving effect thereto, the
aggregate principal amount of the Prime Rate Loans shall be equal to $100,000 or
a whole multiple in excess thereof, or if less, the remaining available
Commitments hereunder.
4.10 Interest Rates and Payment Dates.
(a) Each Eurodollar Loan shall bear interest for each day
during each Interest Period with respect thereto at a rate per annum equal to
the Eurodollar Rate determined for such day plus the Applicable Margin in effect
for such day.
(b) Each Prime Rate Loan shall bear interest for each day at a
rate per annum equal to the Prime Rate plus the Applicable Margin in effect for
such day.
(c) If all or a portion of any principal of any Loan shall not
be paid when due (whether at the stated maturity, by acceleration or otherwise),
such principal amount of the Loan shall bear interest at a rate per annum which
is the rate that would otherwise be applicable thereto pursuant to the foregoing
provisions of this subsection 4.10(c) plus 2%.
(d) Interest on each Loan shall be payable in arrears on each
Interest Payment Date provided that interest accruing pursuant to paragraph (c)
of this subsection 4.10 shall be payable from time to time on demand.
(e) Notwithstanding anything to the contrary contained herein,
in no event shall the Borrowers be obligated to pay interest in excess of the
maximum amount which is chargeable under applicable law.
4.11 Computation of Interest and Facility Fees.
(a) Facility Fees shall be calculated in accordance with
subsection 4.2.
<PAGE>
(b) Interest shall be calculated on the basis of a 360-day
year for the actual days elapsed. The Agent shall as soon as practicable notify
the Borrowers and the Lenders of each determination of a Eurodollar Rate. Any
change in the interest rate on a Loan resulting from a change in the Prime Rate
or the Eurocurrency Reserve Requirements shall become effective as of the
opening of business on the day on which such change becomes effective.
(c) Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrowers and the Lenders in the absence of manifest error. The Agent shall,
at the request of the Borrowers, deliver to the Borrowers a statement showing
the quotations used by the Agent in determining any interest rate pursuant to
subsection 4.10(a).
4.12 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:
(a) the Agent shall have determined (which determination shall
be conclusive and binding upon the Borrowers in the absence of manifest error)
that, by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period; or
(b) the Agent shall have received notice from the Majority
Lenders that the Eurodollar Rate determined or to be determined for such
Interest Period will not adequately and fairly reflect the cost to such Lenders
(as conclusively certified by such Lenders), of making or maintaining their
affected Loans during such Interest Period;
the Agent shall give telecopy or telephonic notice thereof to the Borrowers and
the Lenders as soon as practicable thereafter. If such notice is given (x) any
Eurodollar Loans requested to be made on the first day of such Interest Period
shall be made as Prime Rate Loans and (y) any Loans that on the first day of
such Interest Period were to have been continued as, or converted to, Eurodollar
Loans shall be converted to or continued as Prime Rate Loans. Until such notice
has been withdrawn by the Agent, no further Eurodollar Loans shall be made, or
as of the first day of the immediately succeeding Interest Period, continued as
such, nor shall any Borrower have the right to convert Loans to Eurodollar
Loans. .
4.13 Pro Rata Treatment and Payments. Each borrowing by a
Borrower from the Lenders hereunder, each payment by a Borrower on account of
any Facility Fee hereunder and any reduction of the Commitments of the Lenders
shall be made pro rata according to the respective relevant Commitment
Percentages of the Lenders holding obligations in respect of which such amounts
were paid. Each payment (including each prepayment) by a Borrower on account of
principal of and (subject to the provisions of subsection 4.14) interest on the
Loans shall be made pro rata according to the respective outstanding principal
amounts of such Loans then held by the Lenders. Except as otherwise set forth
herein, all payments (including prepayments) to be made by the Borrowers
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without set off or counterclaim
<PAGE>
and shall be made prior to 2:00 P.M., Charlotte, North Carolina time, on the due
date thereof to the Agent, for the account of the applicable Lenders, at the
Agent's office specified in subsection 11.3, in Dollars and in immediately
available funds. The Agent shall distribute such payments to the Lenders holding
obligations on account of which such amounts were paid promptly upon receipt in
like funds as received. If any payment hereunder becomes due and payable on a
day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
(b) Unless the Agent shall have been notified in writing by
any Lender prior to a borrowing that such Lender will not make the amount that
would constitute its relevant Commitment Percentage of such borrowing available
to the Agent, the Agent may assume that such Lender is making such amount
available to the Agent, and the Agent may, in reliance upon such assumption,
make available to the Borrowers a corresponding amount. If such amount is not
made available to the Agent by the required time on the borrowing date therefor,
such Lender shall pay to the Agent, on demand, such amount with interest thereon
at a rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Agent. A
certificate of the Agent submitted to any Lender shall, to the extent permitted
by applicable law, be prima facie evidence of any amounts owing under this
subsection 4.13. If such Lender's relevant Commitment Percentage of such
borrowing is not made available to the Agent by such Lender within three (3)
Business Days of such borrowing date, the Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
Prime Rate Loans hereunder, on demand, jointly and severally, from the
Borrowers.
4.14 Illegality. Notwithstanding any other provision herein,
if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof, in each case after the Closing Date,
shall make it unlawful for any Lender to make or maintain Eurodollar Loans as
contemplated by this Agreement, (a) the commitment of such Lender hereunder to
make Eurodollar Loans, continue Eurodollar Loans as such and convert Prime Rate
Loans to Eurodollar Loans shall forthwith be suspended and (b) the Loans of such
Lender then outstanding as Eurodollar Loans, if any, shall be converted
automatically to Prime Rate Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Loan occurs on
a day which is not the last day of the then current Interest Period with respect
thereto, the Borrowers, jointly and severally, shall pay to such Lender such
amounts, if any, as may be required pursuant to subsection 4.17.
4.15 Requirements of Law.
I
(a) If the adoption of or any change in any Requirement of Law or in
the interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority, in each case, made subsequent to the date
hereof:
<PAGE>
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Letter of
Credit, any Application or any Eurodollar Loan made by it, or change
the basis of taxation of payments to such Lender in respect thereof
(except for Non-Excluded Taxes covered by subsection 4.16 and changes
in the rate of net income taxes or franchise taxes (imposed in lieu of
net income taxes) of such Lender);
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other
condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by a material amount of making, converting into, continuing or maintaining
Eurodollar Loans or issuing or participating in Letters of Credit or to reduce
any amount receivable hereunder in respect thereof, then, in any such case, the
Borrowers, jointly and severally, shall promptly pay such Lender within fifteen
(15) days after written request therefor such additional amount or amounts as
will compensate such Lender for such increased cost or reduced amount
receivable.
(b) If any Lender shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof, in each case, after the date hereof, or
compliance by any corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law, if
compliance therewith is a customary banking practice) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under any Letter of Credit to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance by the Lender (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by a material amount, then from time to time, the Borrowers, jointly and
severally, shall pay to such Lender such additional amount or amounts as will
compensate such Lender within fifteen (15) days after written request therefor
for such reduction.
(c) If any Lender becomes entitled to claim any additional
amounts pursuant to this subsection 4.15, such Lender shall promptly notify the
Borrowers (with a copy to the Agent) of the event by reason of which it has
become so entitled. The agreements in this subsection 4.15 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
<PAGE>
4.16 Taxes.
(a) All payments made by the Borrowers under this Agreement
and any Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Agent or any Lender as a result of a
present or former connection between the Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from the Lenders having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to Agent or any Lender hereunder or under
any Note, the amounts so payable to the Agent or such Lender shall be increased
to the extent necessary to yield to the Agent or such Lender (after payment of
all Non-Excluded Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement. Whenever any
Non-Excluded Taxes are payable by any Borrower, as promptly as possible
thereafter the Borrowers shall send to the Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Borrowers showing payment thereof. If the
Borrowers fail to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fail to remit to the Agent the required receipts or other required
documentary evidence, the Borrowers, jointly and severally, shall indemnify the
Agent and the Lenders for any incremental taxes, interest or penalties that
become payable by the Agent or any Lender as a result of any such failure. The
agreements in this subsection 4.16 shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) deliver to the Borrowers and the Agent (A) two
duly completed copies of the United States Internal Revenue Service
Form 1001 or 4224, or successor applicable form, as the case may be,
and (B) an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be;
(ii) deliver to the Borrowers and the Agent two
further copies of any such form or certification on or before the date
that any such form or certification expires or becomes obsolete and
after the occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrowers; and
(iii) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be requested by
the Borrowers or the Agent;
<PAGE>
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrowers and the Agent.
Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Lender or a Participant
pursuant to subsection 11.8 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms and statements required
pursuant to this subsection 4.16, provided that in the case of a Participant
such Participant shall furnish all such required forms and statements to the
Lender from which the related participation shall have been purchased.
(c) If any Lender shall receive a credit or refund from a
taxing authority with respect to, and actually resulting from, an amount of
Non-Excluded Taxes actually paid to or on behalf of such Lender by the Borrowers
(a "Tax Credit"), such Lender shall promptly notify the Borrowers of such Tax
Credit. If such Tax Credit is received by such Lender in the form of cash, such
Lender shall promptly pay to the Borrowers the amount so received with respect
to the Tax Credit. If such Tax Credit is not received by such Lender in the form
of cash, such Lender shall pay the amount of such Tax Credit not later than the
time prescribed by applicable Law for filing the return (including extensions of
time) for such Lenders' taxable period which includes the period in which such
Lender receives the economic benefit of such Tax Credit. In any event, the
amount of any Tax Credit payable by a Lender to the Borrowers pursuant to this
clause (c) shall not exceed the actual amount of cash refunded to, or credits
received and usable (in accordance with the actual practices then in use by such
Lender) by, such Lender from a taxing authority. In determining the amount of
any Tax Credit, a Lender may use such apportionment and attribution rules as
such Lender customarily employs in allocating taxes among its various operations
and income sources and such determination shall be conclusive absent manifest
error. The Borrowers, jointly and severally, further agree promptly to return to
a Lender the amount paid to the Borrowers with respect to a Tax Credit by such
Lender if such Lender is required to repay, or is determined to be ineligible
for, a Tax Credit for such amount. Notwithstanding anything to the contrary
contained herein, the Borrowers hereby acknowledge and agree that (i) neither
the Agent nor any Lender shall be obligated to provide the Borrowers with
details of the tax position of the Agent or such Lender (as the case may be) and
(ii) the Borrowers shall have no right to inspect any records (including tax
returns) of the Agent or such Lender (as the case may be).
4.17 Indemnity. The Borrowers, jointly and severally, agree to
indemnify each Lender and to hold each Lender harmless from any loss or expense
which such Lender sustains or incurs as a consequence of (a) failure by a
Borrower to make a borrowing of, conversion into or continuation of Eurodollar
Loans after such Borrower has given a notice requesting the same in accordance
with the provisions of this Agreement, (b) failure by a Borrower to make any
prepayment after such Borrower has given a notice thereof in accordance with the
provisions of this Agreement or (c) the making of a prepayment or payment of the
principal amount of any Eurodollar Loans on a day which is not the last day of
an Interest Period with respect thereto.
<PAGE>
Such indemnification may include an amount equal to the excess, if any, of (i)
the amount of interest which would have accrued on the amount so prepaid, or not
so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. This covenant shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
4.18 Change of Lending Office. Each Lender agrees that if it
makes any demand for payment under subsection 4.15 or 4.16(a), or if any
adoption or change of the type described in subsection 4.14 shall occur with
respect to it, it will use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions and so long as such efforts would
not be disadvantageous to it, as determined in its good faith discretion) to
designate a different lending office if the making of such a designation would
reduce or obviate the need for the Borrowers to make payments under subsection
4.15 or 4.16(a), or would eliminate or reduce the effect of any adoption or
change described in subsection 4.14.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make
the Loans and issue or participate in the Letters of Credit the Borrowers
hereby, jointly and severally, represent and warrant to the Agent and each
Lender that:
5.1 Financial Condition. The consolidated balance sheet of ACS
Inc. and its consolidated Subsidiaries as at September 30, 1997, and the related
consolidated statements of income and cash flows for the fiscal year ended on
such date, as reported on by Arthur Andersen, LLP, a copy of which has
heretofore been furnished to the Agent, is complete and correct and presents
fairly in all material respects the consolidated financial condition of such
Borrower and its consolidated Subsidiaries as at such date, and the consolidated
results of their operations for the fiscal year then ended. All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP. Neither ACS Inc. nor any of its consolidated
Subsidiaries had, at the date of the most recent balance sheet referred to
above, any material Guarantee Obligation, contingent liability or liability for
taxes, or any long-term lease or unusual forward or long-term commitment,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction, which is not reflected in the foregoing statements or in
the notes thereto. Except to the extent permitted under this Agreement or as
disclosed to the Agent prior to the date hereof, or as otherwise separately
disclosed to the Agent in writing prior to the date hereof, there has been no
sale, transfer or other disposition by ACS Inc. or any of its consolidated
Subsidiaries of any part of its business or property (including any capital
stock of any other Person) material in relation to the consolidated financial
condition of ACS Inc. and its consolidated Subsidiaries at September 30, 1997
<PAGE>
during the period from September 30, 1997 and including the date hereof.
5.2 No Change. Since September 30, 1997, there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect.
5.3 Disclosure. No information, schedule, exhibit or report or
other document furnished by each Borrower or any of its Subsidiaries to the
Agent or any Lender in connection with the negotiation of this Agreement or any
other Loan Document (or pursuant to the terms hereof or thereof), as such
information, schedule, exhibit or report or other document has been amended,
supplemented or superseded by any other information, schedule, exhibit or report
or other document later delivered to the same parties receiving such
information, schedule, exhibit or report or other document, contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained therein, in light of the
circumstances when made, not materially misleading. Any projections so furnished
by each Borrower or any of its Subsidiaries (the "Projections") at the time
delivered, were based on good faith estimates and assumptions made by the
management of such Borrower and, as of the date of their delivery, management of
such Borrower believed that the Projections were reasonable, it being
recognized, however, that projections as to future events are not to be viewed
as facts and that the actual results during the period or periods covered by the
Projections may differ from the projected results and that the differences may
be material.
5.4 Corporate Existence; Compliance with Law. Each of the
Borrowers and each of its respective Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified as
a foreign corporation and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification, except to the extent that all failures to
be so qualified could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect and (d) is in compliance with all Requirements of Law
except to the extent that all failures to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
5.5 Corporate Power, Authorization, Enforceable Obligations.
Each Borrower has the corporate power and authority, and the legal right, to
make, deliver and perform the Loan Documents to which it is a party and to
borrow hereunder and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and any Notes and to
authorize the execution, delivery and performance of the Loan Documents to which
it is a party. No consent or authorization of, filing with, notice to or other
act by or in respect of, any Governmental Authority or any other Person is
required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of the Loan Documents to which
the Borrower is a party (other than filings to perfect security interests
granted pursuant to the Security Agreements). This Agreement has been, and each
other Loan Document to which it
<PAGE>
is a party will be, duly executed and delivered on behalf of each Borrower. This
Agreement constitutes, and each other Loan Document to which it is a party when
executed and delivered will constitute, a legal, valid and binding obligation of
each Borrower enforceable against each Borrower in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
5.6 No Legal Bar. The execution, delivery and performance of
the Loan Documents to which each Borrower is a party, the borrowings hereunder
and the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of such Borrower or of any of its Subsidiaries, except
any violation which would not have a Material Adverse Effect and will not result
in, or require, the creation or imposition of any Lien on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation other than any Lien which would not have a Material
Adverse Effect.
5.7 No Material Litigation. Except as otherwise disclosed to
the Agent, as listed on Schedule IX, no litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of any Borrower, threatened by or against any Borrower or any of its
Subsidiaries or against any of its or their respective properties or revenues
(a) with respect to any of the Loan Documents or any of the transactions
contemplated hereby or thereby, or (b) which could reasonably be expected to
have a Material Adverse Effect.
5.8 No Default. Neither any Borrower nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
5.9 Ownership of Property, Liens. Each of the Borrowers and
each of its respective Subsidiaries has good and marketable title in fee simple
to, or a valid leasehold interest in, all its real property, and good title to,
or a valid leasehold interest in all its other property, and none of such
property is subject to any Lien except as permitted by subsection 8.3.
5.10 Intellectual Property. Each of the Borrowers and each of
its respective Subsidiaries owns, or is licensed to use, all trademarks, trade
names, copyrights, technology, know-how and processes necessary for the conduct
of its business as currently conducted, except for those for which the failure
to own or license which could not be expected to have a Material Adverse Effect
(the "Intellectual Property"). No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property which, if
accurate, could reasonably be expected to have a Material Adverse Effect nor
does any Borrower know of any valid basis for any such claim. To the best
knowledge of each Borrower, the use of such Intellectual Property by each
Borrower and its Subsidiaries does not infringe on the rights of any Person,
except for such claims and infringements that, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
5.11 Taxes. Each of the Borrowers and each of its respective
Subsidiaries has filed or caused to be filed all material tax returns which, to
the knowledge of such Borrower, are required to be filed and has paid all
material taxes shown to be due and payable on said returns or on any assessments
made against it or any of its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority
(other than any the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Borrower or its
Subsidiaries, as the case may be and other than any failure to pay of which
would not have a Material Adverse Effect); no tax Lien has been filed, other
than Liens permitted by subsection 8.3, and, to the knowledge of each Borrower,
no claim is being asserted, with respect to any such tax, fee or other charge.
5.12 Federal Regulations. No part of the proceeds of any Loans
will be used in any manner which would violate, or result in the violation of,
Regulation D, Regulation G or Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect. If
requested by any Lender or the Agent, each Borrower will furnish to the Agent
and each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-3 or FR Form U-1 referred to in said Regulation G or
Regulation U, as the case may be.
5.13 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has occurred,
and no Lien in favor of the PBGC or a Plan has arisen, during such five-year
period. The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits. Neither any Borrower nor any Commonly Controlled Entity
has had a complete or partial withdrawal from any Multiemployer Plan, and
neither any Borrower nor any Commonly Controlled Entity would become subject to
any liability under ERISA if any such Borrower or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No such Multiemployer Plan is in Reorganization or
Insolvent. The present value (determined using actuarial and other assumptions
which are reasonable in respect of the benefits provided and the employees
participating) of the liability of each Borrower and each Commonly Controlled
Entity for post retirement benefits to be provided to their current and former
employees under Plans which are welfare benefit plans (as defined in Section
3(l) of ERISA) does not, in the aggregate, exceed the assets under all such
Plans allocable to such benefits by an amount in excess of $100,000.
5.14 Investment Company Act; Other Regulations. No Borrower
is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
<PAGE>
No Borrower is subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
5.15 Subsidiaries. Schedule III hereto sets forth all of the
Subsidiaries of each Borrower at the date hereof, together with the ownership
and jurisdiction of each.
5.16 Environmental Matters.
(a) The facilities and properties owned, leased or operated by
any Borrower or any of its Subsidiaries (the "Properties") and all operations at
the Properties are in compliance, and have been in compliance, in all material
respects, with all applicable Environmental Laws, and there is no contamination
at or under (or, to the knowledge of any Borrower about) the Properties or
violation of any Environmental Law with respect to the Properties or the
business operated by any Borrower or any of its Subsidiaries (the "Business")
except insofar as such violation or failure to be in compliance or
contamination, or any aggregation thereof, is not reasonably likely to result in
a payment of a Material Adverse Amount.
(b) Neither any Borrower nor any of its Subsidiaries has
received any notice of violation, alleged violation, non-compliance, liability
or potential liability regarding compliance with Environmental Laws with regard
to any of the Properties or the Business, nor does any Borrower have knowledge
that any such notice will be received or is being threatened, except insofar as
such notice or threatened notice, or any aggregation thereof, does not involve a
matter or matters that is or are reasonably likely to result in the payment of a
Material Adverse Amount.
(c) Materials of Environmental Concern have not been
transported or disposed of from the Properties in violation of, or in a manner
or to a location which could reasonably be expected to give rise to liability
under, any Environmental Law, nor have any Materials of Environmental Concern
been generated, treated, stored or disposed of at, on or under any of the
Properties in violation of, or in a manner that could reasonably be expected to
give rise to liability under, any applicable Environmental Law, except insofar
as any such violation or liability referred to in this paragraph, or any
aggregation thereof, is not reasonably likely to result in the payment of a
Material Adverse Amount.
(d) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of any Borrower, threatened, under any
Environmental Law to which any Borrower, any of its Subsidiaries is or will be
named as a party with respect to the Properties or the Business, nor are there
any consent decrees or other decrees, consent orders, administrative orders or
other orders, or other administrative or judicial requirements outstanding under
any Environmental Law which are binding upon any Borrower or any of its
Subsidiaries with respect to the Properties or the Business, except insofar as
such proceeding, action, decree, order or other requirement, or any aggregation
thereof, is not reasonably likely to result in the payment of a Material Adverse
Amount.
<PAGE>
(e) There has been no release or threat of release of
Materials of Environmental Concern at or from the Properties, or arising from or
related to the operations of any Borrower or any Subsidiary in connection with
the Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could reasonably give rise to liability under
Environmental Laws, except insofar as any such violation or liability referred
to in this paragraph, or any aggregation thereof, is not reasonably likely to
result in a payment of a Material Adverse Amount.
5.17 Security Agreements.
(a) Each Security Agreement constitutes a legal, valid and
binding obligation of the grantor party thereto, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
(b) Upon proper filing by the Agent of the financing
statements listed on Schedule IV hereto (and, after the Closing Date, any
additional filings required to be made pursuant to the Loan Documents), the
security interests granted pursuant to the Security Agreements will constitute a
valid, perfected first priority security interest on the Collateral in which a
security interest can be perfected by the filing of financing statements (as
described therein) enforceable as such against all creditors of any grantor and
any Persons purporting to purchase any such Collateral from the Loan Party who
is the grantor with respect thereto (except purchasers of Inventory in the
ordinary course of business).
5.18 Joinder Agreements. Each Joinder Agreement on and after
the date of execution thereof, constitutes a legal, valid and binding obligation
of the Loan Party who is a party thereto, enforceable against it in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles.
5.19 Solvency. The aggregate value of all of the assets of ACS
Inc. and its Subsidiaries on a consolidated basis, at a fair valuation, exceeds
the total liabilities of ACS Inc. and its Subsidiaries on a consolidated basis
(including contingent, subordinated, unmatured and unliquidated liabilities).
ACS Inc. and its Subsidiaries have the ability to pay their respective debts as
they mature and do not have unreasonably small capital with which to conduct
their respective businesses. For purposes of this subsection 5.19, the "fair
valuation" of such assets is the price at which the assets would change hands
between a willing buyer and a willing seller, both being adequately informed of
the relevant facts, and neither being under any compulsion to buy or to sell.
SECTION 6. CONDITIONS PRECEDENT.
6.1 Conditions to Initial Extensions of Credit. The agreement
of each Lender to make the initial extension of credit requested to be made by
it is subject to the satisfaction, immediately prior to or concurrently
<PAGE>
with the making of such extension of credit on the Closing Date, of the
following conditions precedent:
(a) Loan Documents. The Agent shall have received (i) this
Agreement, executed and delivered by a duly authorized officer of each Borrower,
(ii) the Notes (to the extent so requested by any Lender), executed and
delivered by a duly authorized officer of the Borrower, and (iii) each Security
Agreement, executed and delivered by a duly authorized officer of the party
thereto.
(b) Agreements. The Agent shall have received true and correct
copies, certified as to authenticity by each Borrower, of such documents or
instruments as may be reasonably requested by the Agent.
(c) Closing Certificate of Borrowers. The Agent shall have
received a certificate of the President or any Vice President and the Secretary
or an Assistant Secretary of each Borrower, dated the Closing Date, (i)
attaching the Charter and By-Laws (of such Borrower), (ii) attaching the
resolutions of the Board of Directors of such Borrower with respect to the
transactions contemplated hereby, (iii) certifying that such resolutions have
not been amended, modified, revoked or rescinded as of the date of such
certificate and (iv) certifying as to the incumbency and signature of the
officers of such Borrower executing any Loan Document; such certificate (and the
attachments thereto) shall be in form and substance satisfactory to the Agent.
(d) Fees. The Borrowers shall have paid the accrued fees and
expenses owing hereunder or in connection herewith (including, without
limitation, accrued fees and disbursements of counsel to the Agent), to the
extent that such fees and expenses have been presented for payment a reasonable
time prior to the Closing Date.
(e) Legal Opinions. The Agent shall have received, with a
counterpart for each Lender, the executed legal opinion of Venable, Baetjer and
Howard, LLP, counsel to the Borrowers and the other Loan Parties, substantially
in the form of Exhibit F. Such legal opinion shall cover such other matters
incident to the transactions contemplated by this Agreement as the Agent may
reasonably require.
(f) Termination of Existing Credit Facilities. The Agent shall
have received evidence reasonably satisfactory to it of (i) (A) the termination
by the Borrowers of the Revolving Credit and Security Agreement dated as of
March 1, 1997 (as the same has been amended, supplemented or otherwise modified
from time to time), by and between ACS Inc. and First Union National Bank, (B)
the payments of all amounts which are then due and payable thereunder and (C)
all Liens related thereto shall have been terminated and released; (ii) (A) the
termination by the Borrowers of the Loan Agreement, dated as of January 27, 1998
(as the same has been amended, supplemented or otherwise modified from time to
time), between Crestar Bank and Integrated Systems Control, Inc., (B) the
payments of all amounts which are then due and payable thereunder and (C) all
Liens related thereto shall have been terminated and released.
<PAGE>
(g) Actions to Perfect Liens. The Agent shall have received
such duly executed financing statements on form UCC-1 as may be necessary or, in
the reasonable opinion of the Agent, desirable to perfect the Liens created by
the Security Documents.
(h) Lien Searches. The Agent shall have received the results
of a recent search by a Person reasonably satisfactory to the Agent, of the
Uniform Commercial Code, judgment and tax lien filings which may have been filed
with respect to personal property of the Borrowers, and the results of such
search shall be reasonably satisfactory to the Agent.
(i) Insurance. The Agent shall have received evidence in form
and substance satisfactory to the Agent of the existence of the insurance
required under subsection 7.5.
(j) Borrowing Base Certificate. The Agent shall have received
a Borrowing Base Certificate dated as of December 31, 1997.
(k) Additional Information. The Agent shall have received such
additional agreements, opinions, certifications, instruments, documents, orders,
consents, financing statements, reports, studies, audits and other information
in form and substance satisfactory to the Agent, as the Agent may reasonably
request.
6.2 Conditions to Each Extension of Credit. The agreement of
each Lender to make any extension of credit requested to be made by it on any
date (including, without limitation, its initial extension of credit) is subject
to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by each of the Borrowers and each other Loan
Party in or pursuant to the Loan Documents shall be true and correct in all
material respects on and as of such date as if made on and as of such date
(unless stated to relate to a specific earlier date, in which case, such
representations and warranties shall be true and correct in all material
respects as of such earlier date).
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the extensions
of credit requested to be made on such date.
(c) Conditions to Each Facility A Loan. The Agent shall have
received a certificate, in form and substance satisfactory to the Agent, duly
executed and delivered by a Responsible Officer of the Borrowers and dated no
earlier than thirty (30) days prior to the requested borrowing date (i) stating
that, to the best of such Officer's knowledge, after giving effect to the
extensions of credit requested to be made on such date, the Lenders' Aggregate
Outstanding Extensions of Credit shall not exceed the Loan Value of the Eligible
Receivables and (ii) setting forth on a Borrowing Base Certificate dated of even
date therewith and attached thereto, the computations used to determine the Loan
Value. Such certificates shall be in form and substance satisfactory to the
Agent.
<PAGE>
(d) Conditions to Each Acquisition Loan. For each acquisition
to be financed by the Loans:
(i) the Majority Lenders shall have provided
written approval of the acquisition pursuant to subsection 8.9(f); and
(ii) for each such acquisition to be financed in
whole or in part by Facility B Loans, the Agent shall have received, in
form and substance satisfactory to the Agent, a certificate duly
executed and delivered by a Responsible Officer of the Borrowers and
dated as of the requested borrowing date, stating that, to the best of
such Officer's knowledge, after giving effect to the acquisition of the
Acquired Business, the Borrowers shall be in compliance on a pro forma
basis with the covenants of subsection 8.1 of this Agreement and
setting forth the computations used to determine such compliance.
(e) The Agent shall have received such other approvals,
opinions or documents as the Agent or the Majority Lenders through the Agent may
reasonably request.
Each borrowing by, and Letter of Credit issued on behalf of,
each Borrower hereunder shall constitute a joint and several representation and
warranty by the Borrowers as of the date thereof that the applicable conditions
contained in this subsection 6.2 have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrowers hereby agree that, so long as the Commitments
remain in effect or any amount is owning to any Lender or the Agent hereunder or
under any other Loan Document, ACS Inc. shall and (except in the case of
delivery of financial information and reports and notices) shall cause each of
its Subsidiaries to:
7.1 Financial Statements. Furnish to the Agent:
(a) as soon as available, but in any event within one hundred
twenty (120) days after the end of each fiscal year of ACS Inc., a copy of the
consolidated balance sheet of ACS Inc. and its consolidated Subsidiaries as at
the end of such year and the related consolidated statements of income and
retained earnings and of cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification arising out of the
scope of the audit, by an independent certified public accountants of nationally
recognized standing; as soon as available, but in any event within ninety-five
(95) days after the end of each fiscal year of ACS Inc., a copy of the unaudited
consolidating balance sheets of ACS Inc. and its consolidated Subsidiaries as at
the end of such fiscal year together with consolidating statements of income and
retained earnings and of cash flows of ACS Inc. and its consolidated
Subsidiaries for such fiscal year as customarily prepared by the management of
ACS Inc. for internal use, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit adjustments
<PAGE>
and, in the case of interim financial statements, subject to year-end
adjustments and the absence of footnotes);
(b) as soon as available, but in any event not later than
fifty (50) days after the end of each fiscal quarter of ACS Inc., the unaudited
consolidated and consolidating balance sheets of ACS Inc. and its consolidated
Subsidiaries as at the end of such quarter and the related unaudited
consolidated and consolidating statements of income of ACS Inc. and its
consolidated Subsidiaries for such quarter and the portion of ACS Inc.'s fiscal
year through the end of such quarter, setting forth in each case in comparative
form the figures for the previous year, certified by a Responsible Officer as
being fairly stated in all material respects (subject to normal year-end audit
adjustments and, in the case of interim financial statements, subject to
year-end adjustments and the absence of footnotes);
(c) all such financial statements shall be complete and
correct in all material respects and shall be prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods reflected
therein and with prior periods ending after the Closing Date (except as approved
by such accountants or officer, as the case may be, and disclosed therein).
7.2 Certificates; Other Information. Furnish to the Agent:
(a) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of a Responsible
Officer (i) stating that, to the best of such Officer's knowledge, during such
period (A) if any Subsidiary has been formed or acquired, the Borrowers have
complied with the requirements of subsection 7.12 with respect thereto, (B)
neither any of the Borrowers nor any of the Subsidiaries has changed its name,
its principal place of business, its chief executive office or the location of
any material item of tangible Collateral without complying with the requirements
of this Agreement and the Security Documents with respect thereto and (C) each
of the Borrowers has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Agreement and the
other Loan Documents to be observed, performed or satisfied by it, and that such
Officer has obtained no knowledge of any Default or Event of Default except as
specified in such certificate and (ii) setting forth the computations used by
ACS Inc. in determining (as of the end of such fiscal period) compliance with
the covenants contained in subsection 8.1;
(b) as soon as available and in any event within twenty (20)
days after the end of each month, a Borrowing Base Certificate, an Accounts
Aging Schedule and an Unbilled Report Schedule as at the end of such month,
certified by a Responsible Officer of the Borrowers;
(c) as soon as available and in any event within fifty (50)
days after the end of each fiscal quarter, a quarterly backlog report as of the
end of such quarter, certified by a Responsible Officer of the Borrowers;
(d) as soon as available and in any event, within five (5)
days after the same are sent, copies of all financial statements and reports
which ACS Inc. sends to its stockholders;
<PAGE>
as soon as available and in any event, within one hundred twenty (120) days
after the end of each fiscal year of ACS Inc., a copy of all financial
statements and regular, periodical or special reports that ACS Inc. may make to,
or file with the SEC on an annual basis and (ii) within fifty days after the end
of each fiscal quarter, a copy of all financial statements and regular,
periodical or special reports that the Borrower may make to, or file with, the
SEC on a quarterly basis; and promptly, such additional financial and other
information as any Lender may from time to time reasonably request.
7.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity in accordance with customary terms or before they
become delinquent or in default, as the case may be, all of its material
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
any Borrower or its Subsidiaries, as the case may be.
7.4 Conduct of Business and Maintenance of Existence. Continue
to engage in business of the same general type as now conducted by it and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or (in the reasonable judgment of a Borrower) desirable in the normal
conduct of its business except as otherwise permitted pursuant to subsection
8.5; comply with all Contractual Obligations and Requirements of Law except to
the extent that failure to comply therewith could not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.
7.5 Maintenance of Property; Insurance. Keep all material
property useful and necessary in its business in good working order and
condition;
(a) Maintain with financially sound and reputable insurance
companies insurance policies insuring all its tangible property (including, in
any event, all material Collateral) and business against loss by fire,
explosion, theft and such other casualties as may be reasonably satisfactory to
the Agent, such policies to be in at least such form, amounts and having
coverage against at least such risks as are customarily insured against in the
same general area by companies engaged in the same or a similar business as may
be reasonably satisfactory to the Agent with losses payable to the Borrowers and
the Agent, as their respective interests may appear;
(b) Each insurance policy described in subsection 7.5(a) shall
(i) contain endorsements, in form satisfactory to each Lender, (ii) name the
Agent, as an insured party, (iii) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least thirty (30) days after receipt by the Agent of written notice
thereof and (iv) be reasonably satisfactory in all other respect to the Agent.
In the event of any termination or notice of non-payment by any insurer with
respect to any policy or any lapse in the coverage
<PAGE>
thereunder, the Borrowers shall cause such insurer to give prompt written notice
to each Lender of the occurrence of such termination, nonpayment or lapse.
(c) The Borrowers shall deliver to the Agent a report of a
reputable insurance broker with respect to such insurance in each calendar year
and such supplemental reports with respect thereto as the Agent may from time to
time reasonably request.
7.6 Inspection of Property; Books and Records; Discussions.
Keep proper books of records and accounts in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities; and permit
representatives of the Agent or any Lender accompanied by the Agent to visit and
inspect any of its properties and examine and make abstracts from any of its
books and records at any reasonable time (upon reasonable advance notice when no
Default or Event of Default has occurred and is continuing) and, with respect to
the Agent, as often as may reasonably be desired or, with respect to any Lender
other than the Agent, not more than once per calendar year at the expense of
such Lender (or, if an Event of Default has occurred and is continuing, at any
reasonable time and as often as may be desired at the expense of the Borrowers),
and to discuss the business, operations, properties and financial and other
condition of each Borrower and its Subsidiaries with officers and employees of
each Borrower and its Subsidiaries and upon reasonable prior notice to provide
the representatives of each Borrower an opportunity to attend such discussions,
with its independent certified public accountants.
7.7 Notices. Promptly give notice to the Agent (who
shall give prompt notice thereof to the Lenders) of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of a Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between any Borrower or
any of its Subsidiaries and any Governmental Authority, which in either case, if
not cured or if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting any Borrower or any
of its Subsidiaries in which the amount involved is $250,000 or more and not
covered by insurance or in which injunctive or similar relief is sought which
could have a Material Adverse Effect;
(d) the following events, as soon as possible and in any event
within thirty (30) days after any Borrower knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with respect
to any Plan that is an employee pension benefit plan (as defined in Section 3(2)
of ERISA), a failure to make any required contribution to a Plan, the creation
of any Lien in favor of the PBGC or a Plan that is an employee pension benefit
plan (as defined in Section 3(2) of ERISA) or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any
<PAGE>
other action by the PBGC or any Borrower or any Commonly Controlled Entity or
any Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan that is an employee pension benefit
plan (as defined in Section 3(2) of ERISA);
(e) the acquisition or creation of any Subsidiary which has
Capital Stock that is directly or indirectly owned by a Borrower or any
Subsidiary;
(f) any Lien (other than security interests created by the
Security Agreement or Liens permitted under this Agreement) on any of the
Collateral and the occurrence of any other event which could reasonably be
expected to have a Material Adverse Effect on the aggregate value of the
Collateral or on the security interests created by the Security Agreement or
this Agreement; and
(g) the occurrence of (i) any material adverse change in the
business, operations, property, condition (financial or otherwise) or prospects
of a Borrower and its Subsidiaries taken as a whole or (ii) any development or
event which could reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this subsection 7.7 shall be accompanied by a statement
of a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrowers propose to take with respect
thereto.
7.8 Environmental Laws.
(a) Comply with and use reasonable efforts to ensure
compliance by all tenants and subtenants, if any, with all applicable
Environmental Laws and obtain and comply with and maintain, and use reasonable
efforts to ensure that all tenants and subtenants obtain and comply with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws, except to the extent that
failure to do so could not be reasonably expected to have a Material Adverse
Effect.
(b) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws, except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings, could not
reasonably be expected to have a Material Adverse Effect.
<PAGE>
7.9 Assignments of Government Receivables. Execute and deliver
to the Agent, for the benefit of the Lenders, within five (5) Business Days
after entering into or acquiring any Government Contract hereafter, all
statements of assignment and/or notification, in form and substance satisfactory
to the Agent, which are deemed necessary by the Agent in connection with the
assignment to the Agent of the Government Receivables of a Borrower and its
Subsidiaries, provided, however that such Borrower and its Subsidiaries shall
not be required to execute and deliver such statements of assignment and/or
notification with respect to Government Receivables that arise (i) under a
contract with a maximum ceiling value of $500,000 or less or (ii) under a
contract (including all options, extensions and other like provisions with
respect thereto) of six (6) months or less in duration.
7.10 Maintenance of Primary Deposit Account.
(a) Furnish to the Agent, the name of the Lender with whom the
Borrowers shall maintain a primary deposit account until the Maturity Date.
(b) As soon as possible, but in any event not later than five
(5) Business Days after the date hereof, furnish to the Agent evidence in form
and scope satisfactory to the Agent of the establishment of the primary deposit
account with a Lender.
7.11 Further Assurances.
(a) Upon the request of the Agent, promptly perform or cause
to be performed any and all acts and execute or cause to be executed any and all
documents (including, without limitation, financing statements and continuation
statements) for filing under the provisions of the Uniform Commercial Code or
any other Requirement of Law which are necessary or reasonably advisable to
maintain in favor of the Agent, for the benefit of the Lenders, Liens on the
Collateral that are duly perfected in accordance with all applicable
Requirements of Law.
(b) Upon request of the Agent, promptly provide such documents
and legal opinions in order to carry out the transactions contemplated hereby as
the Agent shall reasonably request.
7.12 Additional Collateral; Additional Subsidiaries.
(a) With respect to any assets (other than assets having a de
minimis value) acquired after the Closing Date by any Borrower or any of its
Subsidiaries that are intended to be subject to the Lien created by any of the
Security Documents but which are not so subject (other than (y) any assets
described in paragraph (b) or (c) of this subsection 7.12 and (z) immaterial
assets a Lien on which cannot be perfected by filing UCC-1 financing
statements), promptly (and in any event within thirty (30) days after the
acquisition thereof): (i) execute and deliver to the Agent such amendments to
the relevant Security Documents or such other documents as the Agent may
reasonably deem necessary or advisable to grant to the Agent, for the benefit of
the Lenders, a Lien on such assets, (ii) take all actions necessary or advisable
to cause such Lien to be duly perfected in accordance with all applicable
Requirements of Law, including, without limitation, the filing of financing
<PAGE>
statements in such jurisdictions as may be requested by the Agent, and (iii) if
requested by the Agent, deliver to the Agent legal opinions relating to the
matters described in clauses (i) and (ii) immediately preceding, which opinions
shall be in form and substance, and from counsel, reasonably satisfactory to the
Agent.
(b) With respect to any Subsidiary (other than a Foreign
Subsidiary) created or acquired after the Closing Date by any Borrower, (i)
cause such Subsidiary to promptly become a party to the Security Agreement
pursuant to documentation to be in form and substance reasonably satisfactory to
the Agent, (ii) execute and deliver such amendments to this Agreement requested
by the Agent to reflect the existence of such new Subsidiary and (iii) if so
requested by the Agent, deliver to the Agent legal opinions relating to the
matters described in clauses (i), (ii) and (iii) immediately preceding, which
opinions shall be in form and substance, and from counsel reasonably
satisfactory to the Agent.
(c) With respect to any Subsidiary (other than a Foreign
Subsidiary) created or acquired after the Closing Date by any Borrower, the
Borrowers may from time to time, with the prior written consent of the Agent
(which shall not be unreasonably withheld) (i) designate such Subsidiary as a
Borrower hereunder (an "Additional Borrower"), (ii) cause such Additional
Borrower to promptly become a party to this Agreement pursuant to documentation
to be in form and substance reasonably satisfactory to the Agent, (iii) execute
and deliver such amendments to this Agreement and the other Loan Documents
(including without limitation, the Notes evidencing the Loans of the Lenders)
requested by the Agent to reflect the existence of such Additional Borrower,
(iv) execute and deliver such other approvals, certificates or documents
requested by the Agent in its reasonable discretion and (v) if so requested by
the Agent, deliver to the Agent legal opinions relating to the matters described
in clauses (i), (ii), (iii) and (iv) immediately preceding, which opinions shall
be in form and substance, and from counsel reasonably satisfactory to the Agent.
SECTION 8. NEGATIVE COVENANTS
The Borrowers hereby agree that, so long as the Commitments
remain in effect or any amount is owing to any Lender or the Agent hereunder or
under any other Loan Document, the Borrowers shall not, and (except with respect
to subsection 8.1) shall not permit any Subsidiaries to, directly or indirectly:
8.1 Financial Condition Covenants.
(a) Debt to EBITDA. Permit, for any period of four consecutive
fiscal quarters, ending on the last day of any fiscal quarter, the ratio of the
Debt of ACS Inc. and its Subsidiaries determined on a consolidated basis in
accordance with GAAP on such day to EBITDA to be greater than the ratio set
forth opposite such fiscal period below:
<PAGE>
Fiscal Period Ratio
Closing Date to 12/31/98 4.00
01/01/99 to 12/30/99 3.50
12/31/99 and thereafter 3.00
(b) EBIDA Coverage. Permit, for any period of four consecutive
fiscal quarters, ending on the last day of any fiscal quarter, the ratio of
EBIDA to Consolidated Charges to be less than 1.25 to 1.00.
(c) Minimum Net Worth. Permit the Consolidated Net Worth to be
less than (i) $17,000,000.
8.2 Limitation on Indebtedness and Preferred Stock. Create,
incur, assume or suffer to exist any Indebtedness or preferred stock (other than
preferred stock which, by its terms, does not (so long as any Loans or
Commitments are outstanding) require the payment of any cash dividends thereon
or redemption/reimbursement obligations or impose any cash penalties (other than
accrual of dividends on unpaid dividends) for the failure to declare cash
dividends thereon), except:
(a) Indebtedness of the Borrowers under this Agreement or
any other Loan Document;
(b) Indebtedness of any Subsidiary to a Borrower or any other
Subsidiary, provided that such other Subsidiary has become a party to the
Security Agreement;
(c) Indebtedness outstanding on the date hereof and listed on
Schedule V and any refinancings, refundings, renewals or extensions thereof in
an amount not to exceed the then current principal amount thereof;
(d) Indebtedness of a corporation which becomes a Subsidiary,
after the date hereof, provided that (i) such Indebtedness existed at the time
such corporation became a Subsidiary and was not created in anticipation thereof
and (ii) immediately after giving effect to the acquisition of such corporation
by any Borrower, no Default or Event of Default shall have occurred and be
continuing;
(e) additional Indebtedness not exceeding in aggregate
principal amount at any one time outstanding: $500,000;
(f) Guarantee Obligations permitted pursuant to subsection 8.4
(g) Subordinated Indebtedness and Deferred Purchase
Consideration incurred pursuant to any acquisition permitted under subsection
8.9(f); and
<PAGE>
(h) Indebtedness under interest rate protection agreements
entered into to protect any Borrower against fluctuations in interest rates and
otherwise acceptable to the Majority Lenders.
8.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of a Borrower or its Subsidiaries,
as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business for
sums which are not overdue for a period of more than ninety (90) days or which
are being contested in good faith by appropriate proceedings;
(c) landlords or mortgages of landlords or other like Liens
arising by operation of law, in the ordinary course of business, for sums which
are not overdue for a period of more than ninety (90) days or which are being
contested in good faith by appropriate proceedings;
(d) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(e) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case materially
detract from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of such Borrower or such Subsidiary;
(g) Liens in existence on the date hereof listed on Schedule
VI and other Liens, securing Indebtedness permitted by subsection 8.2(c),
provided that no such Lien is spread to cover any additional property after the
date hereof and that the amount of Indebtedness secured thereby is not
increased;
(h) Liens on the property or assets of a corporation which
becomes a Subsidiary after the date hereof securing Indebtedness permitted by
subsection 8.2(d), provided that (i) such Liens existed at the time such
corporation became a Subsidiary and were not created in anticipation thereof,
(ii) any such Lien is not spread to cover any additional property or assets of
such corporation after the time such corporation becomes a Subsidiary, and (iii)
the amount of Indebtedness secured thereby is not increased;
<PAGE>
(i) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to ACS Inc. and all Subsidiaries), in an aggregate
amount, at any one time outstanding of: $500,000.
8.4 Limitation on Guarantee Obligations. Create, incur,
assume or suffer to exist any Guarantee Obligation, except:
(a) Guarantee Obligations in existence on the date hereof
and listed on Schedule VII;
(b) Guarantee Obligations incurred after the date hereof, in
an aggregate amount not to exceed, at any one time outstanding: $100,000;
(c) performance bonds and other obligations of a like nature
incurred in the ordinary course of business incurred after the date hereof, in
an aggregate amount not to exceed, at any one time outstanding $500,000;
(d) guarantees made by a Loan Party of obligations of any of
any other Loan Party, which obligations are otherwise permitted under this
Agreement; and
(e) guarantees made by Subsidiaries of any Borrower of
obligations of any Borrower or any other Subsidiaries, which obligations are
otherwise permitted under this Agreement.
8.5 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, except:
(a) any Subsidiary of any Borrower may be merged or
consolidated with or into any Borrower (provided that such Borrower shall be the
continuing or surviving corporation) or with or into any one or more wholly
owned Domestic Subsidiaries of any Borrower (provided that the wholly owned
Domestic Subsidiary or Domestic Subsidiaries shall be the continuing or
surviving corporation);
(b) any wholly owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to any Borrower or any other wholly owned Domestic Subsidiary of any
Borrower;
(c) any Borrower or any Subsidiary may merge with another
Person if (i) such merger is in connection with a transaction permitted under
subsection 8.9(f) hereof, (ii) in the case of a Borrower, such Borrower is the
entity surviving such merger, and in the case of a Subsidiary, the requirements
of subsection 7.12 have been satisfied and the entity surviving such merger is,
immediately after giving effect to such merger, the wholly-owned subsidiary of a
Borrower, (iii) immediately after giving effect to such merger, no Default or
Event of Default shall have occurred and be continuing and (iv) the joint and
several warranties of the Borrowers contained in this Agreement shall be true
<PAGE>
and correct in all material respects as if made immediately after such merger;
and
(d) any Borrower or any Subsidiary may enter into any
transaction permitted by subsection 8.6 or 8.9.
8.6 Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests) whether now
owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell
any shares of such Subsidiary's Capital Stock to any Person other than any
Borrower or any wholly owned Domestic Subsidiary, except:
(a) the sale or other disposition of obsolete or worn out
property (including, without limitation, any property which is no longer used or
useful in the business of a Borrower and its Subsidiaries) in the ordinary
course of business and for fair market value;
(b) the sale or other disposition of any property, provided
that the fair market value of all assets so sold or disposed of (other than
inventory) in any period of twelve consecutive months shall not exceed $700,000;
(c) the sale of inventory (including, without limitation,
"out-of-date" and "less than first quality" inventory) in the ordinary course of
business;
(d) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection with the
compromise or collection thereof; and
(e) liquidation of Cash Equivalents and other investments
permitted by this Agreement.
8.7 Limitation on Dividends. Declare or pay any dividend on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of any Borrower or any
warrants or options to purchase any such Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary (such declarations, payments, setting apart, purchases,
redemptions, defeasances, retirements, acquisitions and distributions being
herein called "Restricted Payments"), provided; however, that any Subsidiary may
declare, make or pay dividends, payments or other distributions to any Borrower.
8.8 Limitation on Capital Expenditures. Make or commit to make
(by way of the acquisition of securities of a Person or otherwise) any
expenditure in respect of the purchase or other acquisition of fixed or capital
assets (excluding any such asset acquired in connection with normal replacement
and maintenance programs properly charged to current operations), except for:
<PAGE>
(a) expenditures in the ordinary course of business;
(b) expenditures made to repair or replace assets which are
damaged or destroyed, in an aggregate amount not to exceed the amount (if any)
of any proceeds of insurance received on account of such damage or destruction;
and
(c) expenditures on account of the making of any investment
permitted pursuant to subsection 8.9.
8.9 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any Person,
except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) loans and advances to employees of a Borrower or its
Subsidiaries for travel, entertainment and relocation expenses in the ordinary
course of business in an aggregate amount not to exceed $500,000;
(d) investments in existence on the date hereof which are
described on Schedule VIII hereof;
(e) investments by a Borrower in, and loans by a Borrower to,
its Domestic Subsidiaries and investments by such Subsidiaries in, and loans by
Domestic Subsidiaries to other Domestic Subsidiaries, in existence on the date
hereof or hereafter acquired pursuant to subsection 8.9(f);
(f) during such time as no Default or Event of Default has
occurred and is continuing or would result therefrom, investments (which
investments may be made by any Borrower or indirectly through one or more wholly
owned domestic Subsidiaries of such Borrower organized under the laws of any
jurisdiction within the United States, and which may occur as the result of a
merger of a Borrower or a Subsidiary) in Capital Stock or assets of an Acquired
Business whose principal office is located in (and in the case of an investment
in Capital Stock, in an entity organized under the laws of any jurisdiction
within) the United States, provided that any such investment shall be approved
in writing by the Majority Lenders, such approval to be in each such Majority
Lender's sole discretion;
(g) a Borrower may make intercompany loans and advances to its
wholly owned Domestic Subsidiaries and such Subsidiaries may make intercompany
loans and advances to the Borrower;
<PAGE>
(h) (i) intercompany loans and advances made by ACS Inc. to
its wholly owned Foreign Subsidiary in existence on the date hereof in an
aggregate amount not to exceed $675,000 and (ii) any additional intercompany
loans and advances by ACS Inc. to such wholly owned Foreign Subsidiary made
after the date hereof in an aggregate amount not to exceed $500,000;
(i) Subordinated Indebtedness permitted under section
8.2(g); and
(j) other advances, loans and extensions of credit in an
aggregate amount not to exceed: $250,000.
8.10 Limitation on Transactions with Affiliates. (a) Enter
into any transaction, including, without limitation, any purchase, sale, lease
or exchange of property or the rendering of any service, with any Affiliate
unless such transaction is (i) otherwise permitted under this Agreement, (ii) in
the ordinary course of any such Borrower's or any such Subsidiary's business and
(iii) upon fair and reasonable terms no less favorable to such Borrower or such
Subsidiary, as the case may be, than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate;
8.11 Limitation on Sales and Leasebacks. Enter into any
arrangement with any Person providing for the leasing by any Borrower or any
Subsidiary of real or personal property which has been or is to be sold or
transferred by such Borrower or such Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of such Borrower or such
Subsidiary.
8.12 Limitation on Changes in Fiscal Year. Permit the
fiscal year of any of the Borrowers to end on a day other than September 30.
8.13 Limitation on Negative Pledge Clauses. Enter into with
any Person any agreement, other than this Agreement, purchase money mortgages,
Financing Leases and other similar fixed asset financings permitted by this
Agreement (in which cases, any prohibition or limitation shall only be effective
against the assets financed thereby), which prohibits or limits the ability of
any Borrower or any Subsidiaries to create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired.
8.14 Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for (a) the businesses in
which any Borrower and any Subsidiaries are engaged on the date hereof and
businesses of a similar type and (b) other activities relating thereto.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
<PAGE>
(a) Any Borrower shall fail to pay (i) any principal of any
Loan or any Reimbursement Obligation when due in accordance with the terms
hereof or any other Loan Document; (ii) any interest on any Loan within five (5)
Business Days after any such interest comes due in accordance with the terms
hereof or (iii) any other amount payable hereunder or any other Loan Document
within ten (10) Business Days after any other amount becomes due in accordance
with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by any
Borrower or any other Loan Party herein or in any other Loan Document or which
is contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement or any
such other Loan Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) Any Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in Section 8 or any
negative covenant contained in any other Loan Document; or
(d) Any Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this Agreement or
any other Loan Document (other than as provided in paragraphs (a) through (c) of
this Section 9), and such default shall continue unremedied for a period of
thirty (30) days after the earlier of (i) the date upon which an executive
officer of any Borrower has actual knowledge thereof and (ii) the date upon
which the Agent or any Lender gives notice to the Borrowers thereof; or
(e) Any Borrower or any of its Subsidiaries shall (i) default
in any payment of principal of or interest of any Indebtedness (other than the
Loans) or in the payment of any Guarantee Obligation, beyond the period of grace
(not to exceed sixty (60) days), if any, provided in the instrument or agreement
under which such Indebtedness or Guarantee Obligation was created; or (ii)
default in the observance or performance of any other agreement or condition
relating to any such Indebtedness or Guarantee Obligation or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a
trustee or Agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice or the passage of time if
required, such Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable; provided, however, that no Default or
Event of Default shall exist under this paragraph unless the aggregate amount of
Indebtedness and/or Guarantee Obligations in respect of which any default or
other event or condition referred to in this paragraph shall have occurred shall
be equal to at least $500,000; or
(f) (i) Any Borrower or any Subsidiary shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking
<PAGE>
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets, or any
Borrower or any Subsidiary shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against any Borrower or any
Subsidiary any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (iii) there shall be commenced
against any Borrower or any Subsidiary any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days from the
entry thereof, or (iv) any Borrower or any Subsidiary shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii) above; or (v) such
Borrower or any Subsidiary shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of any
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Majority Lenders, likely to result
in the termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any
Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion
of the Majority Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or
(vi) any other adverse event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could
reasonably be expected to involve an aggregate amount of liability to any
Borrower or any Subsidiary in excess of (a) $500,000; or
(h) One or more judgments or decrees shall be entered against
any Borrower or any Subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance) of $500,000 or more and all such judgments
or decrees shall not have been vacated, discharged, stayed or bonded pending
appeal within sixty (60) days from the entry thereof; or
(i) of the Security Documents shall cease, for any reason to
be in full force and effect, or any Borrower or any other Loan Party which is a
party to any of the Security Documents shall so assert or (ii) the Lien created
by any of the Security Documents shall cease to be enforceable and of the same
effect and priority purported to be created thereby except as permitted by this
Agreement or other Loan Documents;
<PAGE>
(j) Any change in Control or Management Change shall occur;
(k) any Borrower is debarred, suspended or proposed for
debarment or is declared ineligible for the award of contracts by any
Governmental Authority and such debarment, suspension or proposed debarment or
declaration is reasonably expected to have a Material Adverse Effect on the
business, operations, property, financial condition or prospects of ACS Inc. and
its Subsidiaries taken as a whole;
then, and in any such event, (i) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section 9 with respect to any
Borrower, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and payable, and (ii) if such event is any other Event of Default,
either or both of the following actions may be taken: (A) with the consent of
the Majority Lenders, the Agent may, or upon the request of the Majority
Lenders, the Agent shall, by notice to the Borrowers declare the Commitments to
be terminated forthwith, whereupon the Commitments shall immediately terminate;
and (B) with the consent of the Majority Lenders, the Agent may, or upon the
request of the Majority Lenders, the Agent shall, by notice to the Borrowers,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement (including, without limitation, all amounts
of L/C Obligations, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder) to be
due and payable forthwith, whereupon the same shall immediately become due and
payable. Except as expressly provided above in this Section 9, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
With respect to all Letters of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrowers shall at such time deposit in the L/C
Collateral Account, opened by the Lenders hereunder) an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. Each
Borrower hereby grants to the Agent, for the benefit of the holders of the
Secured Obligations, the Issuing Banks and the L/C Participants, a security
interest in such cash collateral to secure the Secured Obligations and to secure
all other obligations of each Borrower under this Agreement and the other Loan
Documents. Amounts held in such cash collateral account shall be applied by the
Agent in accordance with the provisions of the Security Agreements. Each
Borrower shall execute and deliver to the Agent such further documents and
instruments as the Agent may request to evidence the creation and perfection of
its security interest in such cash collateral account.
SECTION 10. THE AGENT
10.1 Appointment. (a) Each Lender hereby irrevocably
designates and appoints NationsBank, N.A. as the Agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
<PAGE>
authorizes the Agent, in such capacity, to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and to exercise
such powers and perform such duties as are expressly delegated to the Agent by
the terms of this Agreement and the other Loan Documents, together with such
other powers as are reasonably incidental thereto. Notwithstanding any provision
to the contrary elsewhere in this Agreement, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
10.2 Delegation of Duties. The Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through Agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any Agents or attorneys-in-fact selected by it with
reasonable care.
10.3 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except for its or such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Borrower or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of any Borrower to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrowers.
10.4 Reliance by Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any Borrower), independent accountants and other experts
selected by the Agent. Without limiting the foregoing or the obligation of each
Borrower to confirm in writing any telephonic notice permitted to be given
hereunder, the Agent may prior to receipt of written confirmation act without
liability upon the basis of such telephonic notice, believed by the Agent in
good faith to be from a Responsible Officer of any Borrower or any Subsidiary.
The Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document
<PAGE>
unless it shall first receive such advice or concurrence of the Majority Lenders
as it deems appropriate or it shall first be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Majority Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of
the Loans.
10.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or a Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give notice thereof to the Lenders. The
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Majority Lenders; provided that unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
10.6 Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, Agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of any Borrower, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of each Borrower and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of each Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
each Borrower which may come into the possession of the Agent or any of its
officers, directors, employees, Agents, attorneys-in-fact or Affiliates.
10.7 Indemnification. The Lenders agree to indemnify the Agent
in its capacity as such (to the extent not reimbursed by the Borrowers and
without limiting the obligation of the Borrowers to do so), ratably according to
their respective Commitment Percentages in effect on the date on which
indemnification is sought (such Commitment Percentage to be determined as if
<PAGE>
there are not Defaulting Lenders), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of, the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent's gross negligence or
willful misconduct. To the extent that any Lender would be required to indemnify
the Agent pursuant to this subsection 10.7 but for the fact that it is a
Defaulting Lender, such Defaulting Lender shall not be entitled to receive any
portion of any payment or other distribution hereunder until each other Lender
shall have been reimbursed for the excess, if any, of the aggregate amount paid
by such Lender under this subsection 10.7 over the aggregate amount that such
Lender would have been obligated to pay had such first Lender not been a
Defaulting Lender. The agreements in this subsection 10.7 shall survive the
payment of the Loans and all other amounts payable hereunder.
10.8 Agent in its Individual Capacity. The Agent and each of
its respective Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with any Borrower as though the Agent were not
the Agent hereunder and under the other Loan Documents. With respect to its
Loans made or renewed by it and any Note issued to it and with respect to any
Letter of Credit issued or participated in by it, the Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any
Lender and may exercise the same as though it were not the Agent, and the terms
"Lender" and "Lenders" shall include the Agent in its respective individual
capacity.
10.9 Successor Agent. The Agent may resign as Agent upon ten
(10) days' notice to the Lenders and the Borrowers. If the Agent shall resign as
Agent under this Agreement and the other Loan Documents, then the Majority
Lenders shall appoint from among the Lenders a successor Agent for the Lenders,
which successor Agent (provided that it shall have been approved by the
Borrowers), shall succeed to the rights, powers and duties of the Agent
hereunder. Effective upon such appointment and approval, the term "Agent" shall
mean such successor Agent, and the former Agent's rights, powers and duties as
Agent shall be terminated, without any other or further act or deed on the part
of such former Agent or any of the parties to this Agreement or any holders of
the Loans. After any retiring Agent's resignation as Agent, the provisions of
this Section 10 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement and the other Loan
Documents.
SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement nor any
other Loan Document, nor any terms hereof or thereof, may be amended,
supplemented or modified except in accordance with the provisions of this
subsection 11.1. The Majority Lenders may, or, with the written
<PAGE>
consent of the Majority Lenders, the Agent may, from time to time, with the
consent of the Borrowers (a) enter into with the Borrowers written amendments,
supplements or modifications hereto and to the other Loan Documents for the
purpose of adding any provisions to this Agreement or the other Loan Documents
or changing in any manner the rights of the Lenders or of the Borrowers
hereunder or thereunder or (b) waive, on such terms and conditions as the
Majority Lenders or the Agent, as the case may be, may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall:
(i) reduce the amount or extend the scheduled date of
maturity of any Loan or of any installment thereof, or reduce the
stated rate of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof or increase the amount or extend
the expiration date of any Lender's Commitment, in each case without
the consent of each Non-Defaulting Lender directly affected thereby;
(ii) amend, modify or waive any provision of this
subsection 11.1 or reduce the percentage specified in the definition of
Majority Lenders, in each case without the written consent of all the
Non-Defaulting Lenders;
(iii) consent to the assignment or transfer by any
Borrower of any of its rights and obligations under this Agreement and
the other Loan Documents, in each case without the written consent of
all the Non-Defaulting Lenders;
(iv) release of any of the material collateral or
material guarantee obligations provided for in a Security Document,
without the written consent of the Non-Defaulting Lenders except in
connection with permitted dispositions of Collateral;
(v) amend, modify or waive any provision of Section 3
without the written consent of each Issuing Bank directly affected
thereby (provided that, such Issuing Bank is a Non-Defaulting Lender);
or
(vi) amend, modify or waive any provision of Section
11 without the written consent of the
then Agent.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders (including Defaulting Lenders) and shall be
binding upon each Borrower, the Lenders (including Defaulting Lenders), the
Agent and all future holders of the Loans. In the case of any waiver, the
Borrowers, the Lenders (including Defaulting Lenders) and the Agent shall be
restored to their former positions and rights hereunder and under the other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon.
11.2 Releases of Collateral Security. Notwithstanding
anything to the contrary contained herein or in any Security Document, upon
request of the Borrowers, the Agent shall (without any notice to or vote
<PAGE>
or consent of any Lender) take any action which has the effect of releasing any
collateral security and/or guarantee obligations provided for in any Loan
Document to the extent necessary to permit the consummation of any Net Proceeds
Event or any asset dispositions permitted by subsection 8.6; provided that
(unless the Majority Lenders shall otherwise consent) the Net Proceeds of any
Net Proceeds Event are applied in the manner contemplated by subsection 4.5 (if
so required).
u 11.3 Notices. Unless otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by facsimile transmission) and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made (a) in the case of delivery by hand, when delivered, (b) in the case of
delivery by mail, three (3) days after being deposited in the mails, postage
prepaid, or (c) in the case of delivery by facsimile transmission, when sent and
receipt has been confirmed, addressed as follows in the case of the Borrowers
and the Agent, and as set forth in Schedule I in the case of the other parties
hereto, or to such other address as may be hereafter notified by the respective
parties hereto:
The Borrowers:
Advanced Communication Systems, Inc.
10089 Lee Highway
Fairfax, VA 22030
Attention: Dev Ganesan
Telecopy: (703) 369-0698
Phone: (703) 934-8130
with a copy to:
Venable, Baetjer and Howard, LLP
2010 Corporate Ridge, Suite 400
McLean, VA 22102-7847
Attention: Joseph C. Schmelter, Esq.
Telecopy: (703) 821-8949
Phone: (703) 760-1920
<PAGE>
The Agent:
NationsBank, N.A.
8300 Greensboro Drive
McLean, VA 22102
Attention: Jennifer B. Lathrop
Telecopy: (703) 761-8246
Phone: (703) 761-8022
with a copy to:
Shaw Pittman Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Attention: M. David Krohn, Esq.
Telecopy: (212) 603-6801
Phone: (212) 603-6824
provided that any notice, request or demand to or upon the Agent pursuant to
subsection 2.2, 3.2, 4.3, 4.4 or 4.8 shall not be effective until received.
11.4 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising on the part of the Agent or any Lender, any right,
remedy, power or privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
11.5 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder and shall continue until the termination
of this Agreement pursuant to subsection 11.7.
11.6 Payment of Expenses and Taxes. The Borrowers, jointly and
severally, agree (a) to pay or reimburse the Agent for all of its reasonable
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of any amendment, supplement or modification to, this
Agreement and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Agent, (b) to pay or
reimburse each Lender and the Agent for all its costs and expenses incurred in
connection with the enforcement or with respect to the Agent, the preservation
of any rights under this Agreement, the other Loan Documents and any
<PAGE>
such other documents, including, without limitation, the reasonable fees and
disbursements of counsel to each Lender and of counsel to the Agent, (c) to pay,
indemnify, and hold each Lender and the Agent harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, indemnify, and hold each Lender and
the Agent harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to any Letters of
Credit or the execution, delivery, enforcement, performance and administration
of this Agreement, the other Loan Documents or the use of the proceeds of the
Loans and any such other documents, including, without limitation, any of the
foregoing relating to the violation of, noncompliance with or liability under,
any Environmental Law applicable to the operations of any Borrower, any
Subsidiary or any of the Properties (all the foregoing in this clause (d),
collectively, the "indemnified liabilities"), provided that the Borrowers shall
have no obligation hereunder to the Agent or any Lender with respect to
indemnified liabilities to the extent arising from the gross negligence, bad
faith or willful misconduct of the Agent or such Lender. The agreements in this
subsection 11.6 shall survive repayment of the Loans and all other amounts
payable hereunder.
11.7 Termination. This Agreement shall terminate upon the
termination of all Commitments and the irrevocable repayment in full of the
aggregate outstanding principal amount of the Loans, accrued interest thereon,
and all fees and expenses and other amounts due and payable at such time under
any of the Loan Documents; provided that all indemnities set forth herein
including, without limitation, in subsections 4.14, 4.15, 4.16, 4.17, 10.7 and
11.6 shall survive such termination.
11.8 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the
benefit of the Borrowers, the Lenders, the Agent and their respective successors
and assigns, except that no Borrower may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to one
or more banks or other financial institutions ("Participants") participating
interests in any Loan owing to such Lender, any Commitment of such Lender or any
other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Loan for all purposes
under this Agreement and the other Loan Documents, and the Borrowers and the
Agent shall continue to deal solely and directly with such Lender in connection
<PAGE>
with such Lender's rights and obligations under this Agreement and the other
Loan Documents. No Lender shall be entitled to create in favor of any
Participant, in the participation agreement pursuant to which such Participant's
participating interest shall be created or otherwise, any right to vote on,
consent to or approve any matter relating to this Agreement or any other Loan
Document except for those specified in clauses (i) and (ii) of the proviso to
subsection 11.1. The Borrowers agree that if amounts outstanding under this
Agreement are due or unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall, to the maximum extent permitted by applicable law, be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement, provided that, in
purchasing such participating interest, such Participant shall be deemed to have
agreed to share with the Lenders the proceeds thereof as fully as if it were a
Lender hereunder. The Borrowers also agree that each Participant shall be
entitled to the benefits of subsections 4.14, 4.15, 4.16 and 4.17 with respect
to its participation in the Commitments and the Loans outstanding from time to
time as if it was a Lender; provided that, in the case of subsection 4.16, such
Participant shall have complied with the requirements of said subsection and
provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such subsection than the Lenders would have been entitled
to receive in respect of the amount of the participation transferred by such
Lender to such Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time and from
time to time assign to any Lender or any affiliate thereof or, with the consent
of the Borrowers and the Agent (which in each case shall not be unreasonably
withheld), to an additional bank or financial institution (an "Assignee") all or
any part of its rights and obligations under this Agreement and the other Loan
Documents pursuant to an Assignment and Acceptance, substantially in the form of
Exhibit G, executed by such Assignee, such assigning Lender (and, in the case of
an Assignee that is not then a Lender or an affiliate thereof, by the Borrowers
and the Agent) and delivered to the Agent for its acceptance and recording,
provided that, in the case of any such assignment to an additional bank or
financial institution, (x) the aggregate amount of the Commitments being
assigned are not less than $1,000,000 (or such lesser amount as may be agreed to
by the Borrowers and the Agent) and (y) if such assignment is of less than all
of the rights and obligations of the assigning Lender, the aggregate amount of
the Commitment remaining with the assigning Lender are each not less than
$1,000,000 (or such lesser amount as may be agreed to by the Borrowers and the
Agent). Notwithstanding the foregoing, so long as no event described in
subsection 9(f) shall have occurred and be continuing, unless the Borrowers
shall have otherwise consented, NationsBank, N.A. shall at all times retain (i)
not less than thirty percent (30%) of the sum of the Commitments of the Lenders
and (ii) a Commitment Percentage of each Facility greater than that of any other
single Lender hereunder. Upon such execution, delivery, acceptance and recording
(and the payment of the registration and processing fee described in clause (e)
below), from and after the effective date determined pursuant to such Assignment
and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein,
<PAGE>
and (y) the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of the Lenders' rights and obligations under this Agreement, such
assigning Lender shall cease to be a party hereto). Notwithstanding any
provision of this paragraph (c) of this subsection, the consent of the Borrowers
shall not be required for any assignment which occurs at any time when any of
the events described in subsection 9(f) shall have occurred and be continuing.
(d) The Agent, on behalf of the Borrowers, shall maintain at
the address of the Agent referred to in subsection 11.3 a copy of each
Assignment and Acceptance delivered to it and a register (the "Register") for
the recordation of the names and addresses of the Lenders and the Commitments
of, and principal amounts of the Loans owing to, each Lender from time to time.
The entries in the Register shall, to the extent permitted by applicable law, be
prima facie evidence of the information contained therein, and the Borrowers,
the Agent and the Lenders may (and, in the case of any Loan or other obligation
hereunder not evidenced by a Note, shall) treat each Person whose name is
recorded in the Register as the owner of a Loan or other obligation hereunder as
the owner thereof for all purposes of this Agreement and the other Loan
Documents, notwithstanding any notice to the contrary. Any assignment of any
Loan or other obligation hereunder not evidenced by a Note shall be effective
only upon appropriate entries with respect thereto being made in the Register.
The Register shall be available for inspection by any Borrower or any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender or an affiliate thereof, by the Borrowers and the Agent),
together with payment to the Agent of a registration and processing fee of
$2,500 by such Assignee, the Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such acceptance
and recordation to the Lenders and the Borrowers; provided that no such fee
shall be payable with respect to any assignment from an assigning Lender to an
affiliate thereof.
(f) The Borrowers authorize each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee
any and all financial information in such Lenders' possession concerning any
Borrower or any Affiliate of a Borrower which has been delivered to such Lender
by or on behalf of such Borrower pursuant to this Agreement or which has been
delivered to such Lender by or on behalf of any such Borrower in connection with
such Lenders' credit evaluation of any such Borrower and its Affiliates prior to
becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection 11.8 concerning assignments
of Loans and Notes relate only to absolute assignments and that such provisions
do not prohibit assignments creating security interests,
<PAGE>
including, without limitation, any pledge or assignment by a Lender of any Loan
or Note to any Federal Reserve Bank in accordance with applicable law.
11.9 Adjustments; Set-off.
(a) If any Lender (a "Benefited Lender") at any time shall
receive any payment of all or part of its Loans or the Reimbursement Obligations
owing to it, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in subsection 9(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lenders' Loans or the Reimbursement
Obligations owing to it (as the case may be), or interest thereon, such
benefited Lender shall purchase for cash from the other Lenders such portion of
each such other Lenders' Loans or the Reimbursement Obligations owing to it (as
the case may be), or shall provide such other Lenders with the benefits of any
such collateral, or the proceeds thereof, as shall be necessary to cause such
benefited Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders, and if after taking into account such
sharing the benefited Lender continues to have access to addition funds of or
collateral granted by any Borrower for application on account of its debt, then
the benefited Lender shall use such funds or collateral to reduce Indebtedness
of any such Borrower held by it and share such payments and the benefits of such
collateral with the other Lenders; provided, however, that if all or any portion
of such excess payment or benefits is thereafter recovered from such benefited
Lender, such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest. The Borrowers,
jointly and severally, agree that each Lender so purchasing a portion of another
Lenders' Loans or Reimbursement Obligations may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to any
Borrower, any such notice being expressly waived by each Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by any
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch, agency or (to
the extent permitted by applicable law) banking affiliate thereof to or for the
credit or the account of any Borrower. Each Lender agrees promptly to notify the
Borrowers and the Agent or any Lender after any such set-off and application
made by such Lender, provided that the failure to give such notice shall not
affect the validity of the set-off and application.
11.10 Joint and Several Liability. WHETHER OR NOT EXPRESSLY
STATED HEREIN OR IN ANY OTHER LOAN DOCUMENT, ALL OBLIGATIONS OF THE BORROWERS
(OR OF ANY BORROWER) HEREUNDER AND UNDER EACH OTHER LOAN DOCUMENT (WHETHER IN
CONNECTION WITH LOANS, LETTERS OF CREDIT OR
<PAGE>
OTHER OBLIGATIONS) ARE JOINT AND SEVERAL OBLIGATIONS OF ALL BORROWERS.
11.11 Maximum Amount of Joint and Several Liability. To the
extent that applicable Law otherwise would render the full amount of the joint
and several obligations of any Subsidiary of ACS Inc. hereunder and under the
other Loan Documents invalid or unenforceable, such Subsidiary's obligations
hereunder and under the Loan Documents shall be limited to the maximum amount
which does not result in such invalidity or unenforceability, provided, however,
that each Borrower's obligations hereunder and under the other Loan Documents
shall be presumptively valid and enforceable to their fullest extent in
accordance with the terms hereof or thereof, as if this subsection 11.11 were
not a part of this Agreement.
11.12 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of the
copies of this Agreement signed by all the parties shall be lodged with ACS Inc.
and the Agent.
11.13 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.14 Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrowers, the Agent and the Lenders with respect
to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other Loan
Documents. For the avoidance of doubt, the terms and conditions of that certain
commitment letter dated as of January 28, 1998 from NationsBank, N.A. to
Advanced Communication Systems, Inc. shall be deemed to have been superceded
hereby as of the date hereof and such commitment letter shall be terminated and
of no further force and effect.
11.15 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE COMMONWEALTH OF VIRGINIA.
11.16 Submission To Jurisdiction; Waivers. Each Borrower
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts
<PAGE>
of the Commonwealth of Virginia, the courts of the United States of America for
the 4th circuit, and appellate courts from any thereof,
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to a Borrower
at its address set forth in subsection 11.3 or at such other address of which
the Lenders shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, except in the case of bad faith (and otherwise to
the maximum extent not prohibited by law), any right it may have to claim or
recover in any legal action or proceeding referred to in this subsection 11.16
any special, exemplary, punitive or consequential damages.
11.17 Acknowledgments. The Borrowers hereby acknowledge that:
(a) each Borrower has been advised by counsel in the
negotiation, execution and delivery of this Agreement and the other Loan
Documents;
(b) neither the Agent nor any Lender has any fiduciary
relationship with or duty to any Borrower arising out of or in connection with
this Agreement or any of the other Loan Documents, and the relationship between
Agent and Lenders, on the one hand, and the Borrowers, on the other hand, in
connection herewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among any Borrower and the Lenders.
11.18 WAIVERS OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED
BY APPLICABLE LAW, EACH BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
NATIONSBANK, N.A.
as Agent and a Lender
By: /s/ Jennifer B. Lathrop
Jennifer B. Lathrop
Assistant Vice President
ADVANCED COMMUNICATION
SYSTEMS, INC.
INTEGRATED SYSTEMS CONTROL, INC.
RF MICROSYSTEMS, INC.
as Borrowers
By: /s/ Dev Ganesan
Dev Ganesan
Chief Financial Officer
Exhibit 10.3
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of February 17, 1998, made by ADVANCED
COMMUNICATIONS SYSTEMS, INC., INTEGRATED SYSTEMS CONTROL, INC. and RF
MICROSYSTEMS, INC., (together with any other Person that has become a party
hereto as provided herein, collectively the "Borrowers" and individually, each a
"Borrower"), in favor of NATIONSBANK, N.A., as agent (in such capacity, the
"Agent"), for the benefit of the Lenders, as the holders of the Secured
Obligations and as parties to the Credit Agreement described below.
WITNESSETH:
WHEREAS, the Borrowers are parties to the Credit Agreement, dated as of
the date hereof (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among the Borrowers, the banks and other
financial institutions from time to time parties thereto (the "Lenders") and the
Agent;
WHEREAS, pursuant to the Credit Agreement, the Lenders, have agreed to
make certain extensions of credit to the Borrowers upon the terms and subject to
the conditions set forth therein;
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrowers under the Credit
Agreement that the Borrowers shall have executed and delivered this Security
Agreement to the Agent;
NOW, THEREFORE, in consideration of the premises and to induce the
Agent and the Lenders to enter into the Credit Agreement and to induce the
Lenders to make their respective extensions of credit under the Credit
Agreement, the Borrowers hereby agree with the Agent, for the benefit of the
Lenders as follows:
1. Defined Terms
1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement, and the following terms which are defined in the
Uniform Commercial Code in effect in the Commonwealth of Virginia on the date
hereof are used herein as so defined: Accounts, Chattel Paper, Documents,
Equipment, Farm Products, Fixtures, General Intangibles, Instruments, Inventory
and Proceeds.
(b) The following terms shall have the following meanings:
"Agreement": this Security Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
<PAGE>
"Code": the Uniform Commercial Code as from time to time in
effect in the Commonwealth of Virginia.
"Collateral": as defined in Section 2.
"Collateral Account": the Collateral Account as defined in
Section 3.
"Copyrights" means all of the following to the extent that
any Borrower now or hereafter has any right, title or interest therein: (i) all
United States copyrights in all Works, whether published or unpublished, now
existing or hereafter created or acquired, including, without limitation, the
copyrights in the Works listed in Schedule 2 hereto, all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, registrations, recordings and applications in the United
States Copyright Office, and (ii) all renewals thereof.
"Copyright Licenses" means any written agreement, naming any
Borrower as licensor or licensee, granting any right under any Copyright,
including, without limitation, the agreements described in Schedule 2 hereto, as
the same may be amended, supplemented or otherwise modified from time to time,
including, without limitation, (i) all rights of any Borrower to receive moneys
due and to become due to it thereunder or in connection therewith, (ii) all
rights of any Borrower to damages arising out of or for breach or default in
respect thereof and (iii) all rights of any Borrower to exercise all remedies
thereunder.
"Government Contract" means all contracts of any Borrower or
any of its Subsidiaries with respect to which the United States or any
department, agency or instrumentality or agent thereof, or any state or local
government or any department, agency or instrumentality or agent thereof is a
debtor or obligor (including any guarantor) in any way in connection with any
Receivable or obligation to such Borrower or any of its Subsidiaries.
"Patents": means all of the following to the extent that any
Borrower now or hereafter has any right, title or interest therein (a) all
letters patent of the United States or any other country and all reissues and
extensions thereof, including, without limitation, any thereof referred to in
Schedule 3, and (b) all applications for letters patent of the United States or
any other country and all divisions, continuations and continuations-in-part
thereof, including, without limitation, any thereof referred to in Schedule 3.
"Patent Licenses": any written agreement providing for the
grant by or to any Borrower of any right to manufacture, use or sell any
invention covered by a Patent, including, without limitation, any thereof
referred to in Schedule 3.
"Receivable": any right to payment for goods sold or leased
or for services rendered, whether or not such right is evidenced by an
Instrument or Chattel Paper and whether or not it has been earned by
<PAGE>
performance (including, without limitation, any Account).
"Secured Obligations": shall be the collective reference to
the unpaid principal of and interest on the Notes and all other obligations and
liabilities (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of the Loans
and interest accruing at the then applicable rate provided in the Credit
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to any Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding), of such Borrower to the Agent and the Lenders (including,
without limitation, any affiliate of a Lender with respect to any Letter of
Credit issued by such affiliate) whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, this
Agreement, the Notes, the other Loan Documents or any other document made,
delivered or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all reasonable fees and
disbursements of counsel to the Agent or to the Lenders as are required to be
paid by such Borrower pursuant to the terms of the Credit Agreement, this
Agreement or any other Loan Document);
"Termination Date": the date on which the Commitments and
the Credit Agreement have been terminated and the Secured Obligations have been
irrevocably paid in full other than indemnification obligations not then due and
payable, including, without limitation, in subsections 4.14, 4.15, 4.16, 4.17,
10.7 and 11.6 of the Credit Agreement.
"Trademarks": means all of the following to the extent that
any Borrower now or hereafter has any right, title or interest therein (a) all
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos and other source
or business identifiers, and the goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in Schedule 4,
and (b) all renewals thereof.
"Trademark Licenses": means any written agreement providing
for the grant by or to any Borrower of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 4.
"Works": any tangible expression of an idea of any Person.
<PAGE>
1.2 Other Definitional Provisions.
(a) The words "hereof," "herein", "hereto" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section, subsection and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Secured Obligations, each Borrower hereby
grants to the Agent, for the benefit of the Lenders, a security interest in all
of the following property now owned or at any time hereafter acquired by such
Borrower or in which such Borrower now has or at any time in the future may
acquire any right, title or interest (collectively, together with all amounts on
deposit in the Collateral Account from time to time, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses;
(e) all Documents;
(f) all Equipment;
(g) all Fixtures;
(h) all General Intangibles;
(i) all Instruments;
(j) all Inventory;
(k) all Patents;
(l) all Patent Licenses;
(m) all Trademarks;
<PAGE>
(n) all Trademark Licenses;
(o) all books and records pertaining to the Collateral;
and
(p) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing.
3. Collateral Account
3.1 Establishment of Collateral Accounts. At the request of the
Agent, there shall be established and at all times thereafter there shall be
maintained by the Borrowers, a non-interest bearing cash collateral account with
NationsBank, N.A., account number to be determined (the "Collateral Account"),
subject to the terms of this Agreement.
3.2 Rights, Title and Interest of Collateral Accounts. All right,
title and interest in and to the Collateral Account shall vest exclusively in
the Agent, for the benefit of the Lenders. The Borrowers shall have no rights
with respect to the Collateral Account and the Agent, shall have sole dominion
and control over the Collateral Account and the monies deposited therein. Monies
deposited in the Collateral Account shall constitute security for the Secured
Obligations. Each Borrower hereby pledges and assigns to the Agent, and hereby
grants to the Agent, for the benefit of the Lenders, a security interest in, all
right, title or interest (if any) which any Borrower now has or may hereafter
have or purport or claim to have in or to the Collateral Account and all monies
held therein, any investments made with such monies and any and all certificates
or instruments from time to time representing or evidencing such investments
(and all proceeds thereof).
3.3 Maintaining the Collateral Account. To the extent required by
Section 3.1, until the Termination Date of this Agreement:
(a) The Borrowers will maintain the Collateral Account with
NationsBank, N.A.
(b) All monies received by the Agent, while a Default or an
Event of Default has occurred and is continuing, all monies received pursuant to
subsection 4.5(a) and Section 9 of the Credit Agreement, and any monies received
as a result of investments made as contemplated by Section 4 hereof, shall be
deposited in the Collateral Account.
4. Investment of Monies. Pending the disbursement thereof pursuant to
the terms of this Agreement, all monies in the Collateral Account shall (to the
extent it is practical to do so) be invested by the Agent in Cash Equivalents
(as defined in the Credit Agreement). All such investments shall be evidenced
either (a) by negotiable certificates or instruments which are held by or for
the account of the Agent, or (b) by book entries maintained in a Commonwealth,
District or State in which the Agent may be granted by book entries a security
interest in the securities relating thereto. In the absence of its gross
negligence, or willful misconduct, the Agent shall not have any ability out of
or in connection with any investment made in accordance with the
<PAGE>
provisions herein or for any loss or decline in value of any investment or from
any loss resulting directly or indirectly from any investment made pursuant to
and in accordance with the provisions hereof.
5. Representations and Warranties. Each Borrower hereby represents and
warrants that:
5.1 Title; No Other Liens. Except for the security interests
granted to the Agent pursuant to this Agreement and the other Liens permitted to
exist on the Collateral pursuant to the Credit Agreement, such Borrower owns
each item of the Collateral free and clear of any and all Liens or claims of
others. No financing statement or other public notice with respect to all or any
part of the Collateral is on file or of record in any public office, except such
as have been filed in favor of the Agent pursuant to this Agreement or as are
permitted pursuant to the Credit Agreement.
5.2 Perfected First Priority Liens. The security interests granted
pursuant to this Agreement (a) constitute perfected security interests in the
Collateral in favor of the Agent for the benefit of the Lenders of the Secured
Obligations, as collateral security for the Secured Obligations and (b) are
prior to all other Liens on the Collateral in existence on the date hereof.
5.3 Inventory and Equipment. The Inventory and the Equipment
are kept at the locations listed on Schedule 5.
5.4 Chief Executive Office. On the date hereof, each Borrower's
chief executive office is located is as specified on Schedule 1.
5.5 Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
6. Covenants. Each Borrower covenants and agrees with the Agent that,
from and after the date of this Agreement until the Termination Date:
6.1 Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument or Chattel Paper, such Instrument or Chattel Paper
shall be immediately delivered to the Agent duly endorsed in a manner
satisfactory to the Agent to be held as Collateral pursuant to this Agreement.
6.2 Maintenance of Insurance. Each Borrower will maintain
insurance in accordance with subsection 7.5 of the Credit Agreement.
6.3 Maintenance of Perfected Security Interest; Further
Documentation.
(a) Each Borrower shall maintain the security interests
created by this Agreement as perfected security interests having at least the
priority described in subsection 5.2 and shall defend such security interests
against the claims and demands of all Persons whomsoever.
<PAGE>
(b) At any time and from time to time, upon the written
request of the Agent and at the sole expense of each Borrower affected thereby,
each Borrower will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements under
the Uniform Commercial Code in effect in any jurisdiction with respect to the
security interests created hereby.
6.4 Changes in Locations, Name, etc. Each Borrower will not unless
it shall have given the Agent at least thirty (30) days prior written notice of
such change (or, in the case of Inventory and Equipment, at least ten (10) days
prior written notice, to the extent that such Borrower has taken such action as
reasonably may be required of it to maintain the continuous perfection of the
Agent's security interests in such Inventory or Equipment, as the case may be):
(a) permit any of the Inventory (other than goods-in-transit
and immaterial amounts of goods in temporary locations in the ordinary course of
business) or Equipment to be kept at a location other than those listed on
Schedule 5; or
(b) change the location of their chief executive offices
from that specified in subsection 5.4; or
(c) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Agent in connection with
this Agreement would become seriously misleading.
6.5 Further Identification of Collateral. Each Borrower will
furnish to the Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Agent may reasonably request, all in reasonable
detail.
6.6 Notices. Each Borrower will advise the Agent promptly, in
reasonable detail of (a) any Lien (other than security interests created hereby
or Liens permitted under the Credit Agreement) on any of the Collateral and (b)
the occurrence of any other event which could reasonably be expected to have a
material adverse effect on the aggregate value of the Collateral or on the
security interests created hereby.
7. Provisions Relating to Receivables.
7.1 Borrowers Remain Liable under Receivables. Anything herein to
the contrary notwithstanding, each Borrower shall remain liable under each of
the Receivables to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Receivable. Neither the Agent nor any Lender
shall have any obligation or liability under any Receivable (or any agreement
giving rise thereto) by reason of or arising out of this Agreement or the
receipt by the Agent, or any Lender of any payment relating to such Receivable
pursuant hereto, nor shall the Agent or any Lender be obligated in any
<PAGE>
manner to perform any of the obligations of any Borrower under or pursuant to
any Receivable (or any agreement giving rise thereto), to make any payment, to
make any inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party under any Receivable
(or any agreement giving rise thereto), to present or file any claim, to take
any action to enforce any performance or to collect the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time or
times.
7.2 Analysis of Receivables. The Agent shall have the right to
make test verifications of the Receivables in any manner and through any medium
that it reasonably considers advisable, and each Borrower shall furnish all such
assistance and information as the Agent, may reasonably require in connection
with such test verifications. The Agent in its own name or in the name of others
may during such time as a Default or an Event of Default shall have occurred and
be continuing communicate with the obligors on the Receivables to verify with
them to the Agent's satisfaction the existence, amount and terms of any
Receivables. Collections on Receivables.
7.3 Collections on Receivables.
(a) The Agent hereby authorizes each Borrower to collect the
Receivables subject to the Agent's direction and control, and the Agent may
curtail or terminate said authority at any time when an Event of Default has
occurred and is continuing and may then direct that payments on the Receivables
be made directly to the Agent, in accordance with the provisions of subsection
11.1. If any Borrower is required by the Agent, at any time when a Default or an
Event of Default has occurred and is continuing, any payments of Receivables,
when collected by such Borrower, (1) shall be forthwith (and, in any event,
within two Business Days) deposited by such Borrower in the exact form received,
duly endorsed by such Borrower to the Agent, if required, in a Collateral
Account maintained under the sole dominion and control of the Agent, subject to
withdrawal by the Agent only as provided in subsection 10.3, and (2) until so
turned over, shall be held by such Borrower in trust for the Agent, segregated
from other funds of such Borrower.
(b) Each such deposit of Proceeds of Receivables shall be
accompanied by a report (in the form customarily prepared by such Borrower for
its internal purposes) identifying in reasonable detail the nature and source of
the payments included in the deposit.
(c) At the Agent's request at any time when a Default or an
Event of Default has occurred and is continuing any or all Borrowers shall
deliver to the Agent, all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Receivables,
including, without limitation, all original orders, invoices and shipping
receipts.
7.4 Government Contracts.
(a) The Borrower represents and warrants that each
Government Contract set forth on Schedule 6 (i) does not and will not contain
any provision prohibiting assignment thereof as provided herein, and (ii)
contains a "no set-off" clause or does not permit any set-off against or
<PAGE>
reduction of the obligation to make payments thereunder for liability of such
Borrower to the government because of renegotiation, fine, penalty (other than
as specifically permitted by the Federal Assignment of Claims Act with respect
to Government Contracts with the Federal government), taxes, social security
contributions, or withholding or failing to withhold taxes, social security
contributions or similar amounts, whether arising from or independent of the
Contract except as indicated on Schedule 6. Each Borrower shall promptly notify
the Agent of any material claimed set-off or reduction or the disallowance of
progress payment requests. Without limiting the foregoing, with respect to each
Government Contract (including, if required by applicable law, each purchase
order or delivery order), each Borrower shall, except as otherwise consented to
by the Agent concurrently with the execution of this Agreement with respect to
existing Government Contracts (or purchase orders or delivery orders, if
applicable) and within five (5) Business Days after entering into any new
Government Contract (or purchase order or delivery order, if applicable)
complete, execute and deliver to or as directed by the Agent with respect to
such contract, at such Borrower's expense, a Notice of Assignment substantially
in the form of Exhibit A hereto and an Instrument of Assignment substantially in
the form of Exhibit B hereto, or in such other forms as the Agent may specify
from time to time, each in form and substance satisfactory to the Agent;
provided, however, that the Borrower shall not be required to execute and
deliver any assignments and/or notices of assignment and letters of
representation with respect to Receivables identified in subsection 7.9 of the
Credit Agreement. The provisions of this Section shall not limit or supersede
any other provisions of this Agreement.
(b) All Government Contracts have been, or if arising
hereafter will be, legally awarded and binding on the parties thereto; no
payment has been or will be made by any Borrower or any of its respective
affiliates, or any Person acting on its behalf, to any Person that was, is or
will be contingent upon the award of any Government Contract in violation of
applicable procurement law or that would otherwise be in violation of applicable
procurement law (including, but not limited to, the Federal Acquisition
Regulation, the Defense Acquisition Regulations, the Federal Procurement
Regulations and the Armed Services Procurement Regulations); there is no claim
that has been asserted by any government agency or authority concerning the
award or performance of any Government Contract and each Borrower shall promptly
notify the Agent upon becoming aware of the assertion of any such claim or the
existence of any basis therefor; none of the Borrowers or any of its respective
directors, employees or affiliates have been debarred or suspended from
participation in the award of contracts with the Federal government or any state
or local government, or any agency or instrumentality thereof, or is a party to
or the subject of any pending or to any Borrower's knowledge threatened
proceeding or investigation relating to debarment or suspension or of any
complaint issued by or before any such Person relating thereto, and each
Borrower shall promptly notify the Agent upon becoming aware of the occurrence
of any of the foregoing or the existence of any basis therefore; and none of the
Borrowers or any of its respective affiliates, or any of its officers, directors
or employees is permanently or temporarily enjoined or barred from engaging in
or continuing any conduct or practice relating to the conduct of their business,
or enjoining or requiring any of them to take any action of any kind relating
thereto, and each Borrower shall promptly notify the Agent upon becoming aware
of the occurrence of any of the foregoing or the existence of any basis
therefor.
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(c) Each Borrower's cost accounting and procurement systems
are and at all times have been, and will continue to be, in compliance with all
requirements relating or applicable to the Government Contracts.
(d) No Borrower has assigned any of the Government Contracts
or any rights or proceeds thereunder to any other Person.
7.5 Additional Representations and Warranties.
(a) No amount payable to any Borrower under or in connection
with any Receivable is evidenced by any Instrument or Chattel Paper which has
not been delivered to the Agent.
(b) The amounts represented by each Borrower to the Agent
from time to time as owing to such Borrower in respect of the Receivables will
at such times be accurate in all material respects.
7.6 Covenants.
(a) Other than in the ordinary course of business, no
Borrower will (i) grant any extension of the time of payment of any Receivable,
(ii) compromise or settle any Receivable for less than the full amount thereof,
(iii) release, wholly or partially, any Person liable for the payment of any
Receivable, (iv) allow any credit or discount whatsoever on any Receivable, (v)
amend, supplement or modify any Receivable in any manner that could adversely
affect the value thereof or (vi) fail to exercise promptly and diligently each
and every material right which it may have under each agreement giving rise to a
Receivable (other than any right of termination).
(b)Each Borrower will deliver to the Agent a copy of each
material demand, notice or document received by it that questions the validity
or enforceability of more than 5% of the aggregate amount of the then
outstanding Receivables.
8. Provisions Relating to Patents and Trademarks.
8.1 Representations and Warranties.
(a) Schedule 3 refers to all Patents and material Patent
Licenses owned by each Borrower in its own name on the date hereof.
(b) Schedule 4 refers to all Trademarks registered with
Governmental Authorities and material Trademark Licenses owned by each Borrower
in its own name on the date hereof.
(c) To the best of each Borrower's knowledge, each Patent
and Trademark is on the date hereof valid, subsisting, unexpired, enforceable
and has not been abandoned, except where such abandonment would not reasonably
be expected to have a Material Adverse Effect.
<PAGE>
(d) Except as set forth in either Schedule 3 or Schedule 4,
none of such Patents and Trademarks is on the date hereof the subject of any
exclusive licensing or franchise agreement.
(e) No holding, decision or judgment has been rendered by
any Governmental Authority which would limit, cancel or question the validity or
enforceability of any Patent or Trademark in any respect that could reasonably
be expected to have a Material Adverse Effect.
(f) No action or proceeding is pending on the date hereof
seeking to limit, cancel or question the validity of any Patent or Trademark,
which, if adversely determined, would have a Material Adverse Effect.
8.2 Covenants.
(a) Each Borrower (either itself or through licensees) will
(1) maintain each Trademark which is material to its business (as reasonably
determined by such Borrower) in full force free from any claim of abandonment
for non-use, (2) maintain as in the past the quality of products and services
offered under such Trademark, (3) employ such Trademark with the appropriate
notice of registration (if deemed advisable by management in its reasonable
discretion) and (4) not (and not permit any licensee or sublicensee thereof to)
do any act or knowingly omit to do any act whereby such Trademark may become
invalidated.
(b) No Borrower will knowingly do any act, or omit to do any
act, whereby any Patent which is material to such Borrower's business (as
reasonably determined by such Borrower) may become abandoned or dedicated to the
public.
(c) Each Borrower will notify the Agent promptly if it knows
that any application or registration relating to any material Patent or
Trademark may become abandoned or dedicated to the public, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office or any court or tribunal in any country) regarding
such Borrower's ownership of any material Patent or Trademark or its right to
register the same or to keep and maintain the same.
(d) Whenever any Borrower, either by itself or through any
agent, employee, licensee or designee, shall file an application for the
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, such Borrower shall report such filing to the
Agent within five (5) Business Days after the last day of the fiscal quarter in
which such filing occurs. Upon request of the Agent, such Borrower shall execute
and deliver any and all additional agreements, instruments, documents, and
papers as the Agent may reasonably request to evidence the Agent's security
interest in any such Patent or Trademark and the goodwill and general
intangibles of such Borrower relating thereto or represented thereby.
<PAGE>
(e) Each Borrower will take all reasonable and necessary
steps, including, without limitation, in any proceeding before the United States
Patent and Trademark Office, or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue each
material application (and to obtain the relevant registration) and to maintain
each registration of the material Patents and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability.
(f) In the event that any Borrower becomes aware that any
Patent or Trademark is infringed, misappropriated or diluted by a third party,
each Borrower affected thereby shall (i) take such actions as such Borrower
shall deem appropriate under the circumstances to protect such Patent or
Trademark and (ii) if such Patent or Trademark is of economic value, promptly
notify the Agent after it learns thereof and where appropriate in accordance
with its business judgment, sue for infringement, misappropriation or dilution,
to seek injunctive relief, and to recover any and all damages for such
infringement, misappropriation or dilution.
9. Copyrights.
9.1 Representations and Warranties.
(a) Schedule 2 refers to all material Copyrights registered
with or for which an application has been filed with a Governmental Authority
and Copyright Licenses owned by each Borrower in its own name on the date
hereof.
(b) To the best of each Borrower's knowledge, each Copyright
is on the date hereof valid, subsisting, unexpired, enforceable and has not been
abandoned.
(c) Except as set forth in Schedule 2, none of such
Copyrights is on the date hereof the subject of any exclusive licensing or
franchise agreement.
(d) No holding, decision or judgment has been rendered by
any Governmental Authority which would limit, cancel or question the validity of
any Copyright in any respect that could reasonably be expected to have a
Material Adverse Effect.
(e) No action or proceeding is pending on the date hereof
seeking to cancel or question the validity of any Copyright which, if adversely
determined, would have a Material Adverse Effect.
9.2 Covenants.
(a) Each Borrower (either itself or through licensees) will
(i) employ the appropriate notice of copyright for each work subject to
copyright protection to the extent necessary to protect any registered Copyright
relating to such work and (ii) not (and not permit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby any Copyright may
become invalidated.
<PAGE>
(b) No Borrower will knowingly (either itself or through
licensees) do any act, or omit to do any act, whereby any Copyright may become
injected into the public domain; unless in its business judgment, such Copyright
is no longer used or useful in the business of such Borrower and such Borrower
decides to do so.
(c) Each Borrower will notify the Agent promptly if it
knows, or has reason to know, that any Copyright may become injected into the
public domain or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
court or tribunal in the United States or any political subdivision thereof)
regarding such Borrower's ownership of any such Copyright or its validity.
(d) If any Borrower owns any Copyrights, such Borrower
either itself or through any agent, employee, licensee or designee, shall
provide to the Agent, a document confirming the Agent's security interest in
each registered Copyright with respect to which such Borrower acquires an
interest during the two preceding calendar quarters, duly executed and in proper
form for filing in the United States Copyright Office or other applicable United
States Governmental Authority. Upon request of the Agent, each Borrower shall
execute and deliver any and all additional agreements, instruments, documents,
and papers as the Agent may reasonably request to confirm the Agent's security
interest in such Copyright, and each Borrower hereby constitutes the Agent as
its attorney-in-fact to file all such writings for the foregoing purposes, all
lawful acts of such attorney being hereby ratified and confirmed; such power
being coupled with an interest is irrevocable until the Termination Date (as
defined herein).
(e) Each Borrower will take all necessary steps, as it shall
deem appropriate under the circumstances, in accordance with its business
judgment, to maintain and pursue each application filed (and to obtain the
relevant registration) and to maintain to the extent permitted by law each
registration of each Copyright owned by such Borrower including, without
limitation, filing of applications for renewal, where necessary.
(f) Each Borrower will promptly notify the Agent of any
material infringement of any Copyright owned by it of which it becomes aware and
will take such actions as it shall deem appropriate under the circumstances to
protect such Copyright, including, where appropriate in accordance with its
business judgment, the bringing of suit or the settling of actual or potential
suits for infringement, seeking injunctive relief and seeking to recover any and
all damages for such infringement.
10. Remedies.
10.1 Notice to Obligors. Upon the request of the Agent at any time
when a Default or an Event of Default has occurred and is continuing each
Borrower shall notify obligors on the Receivables that the Receivables have been
assigned to the Agent and that payments in respect thereof shall be made
directly to the Agent.
10.2 Proceeds to be Turned Over To The Agent. In addition to the
rights of the Agent specified in subsection 7.3 with respect to payments of
Receivables, when a Default or an Event
<PAGE>
of Default has occurred and is continuing all Proceeds received by any Borrower
consisting of cash, checks and other near-cash items shall be held by such
Borrower in trust for the Agent, segregated from other funds of such Borrower,
and shall, forthwith upon receipt by such Borrower, be turned over to the Agent,
in the exact form received by such Borrower (duly endorsed by such Borrower to
the Agent, if required) and held by the Agent in the Collateral Account. All
Proceeds while held by the Agent in the Collateral Account (or by such Borrower
in trust for the Agent) shall continue to be held as collateral security for all
the Secured Obligations and shall not constitute payment thereof until applied
as provided in subsection 10.3.
10.3 Application of Proceeds. At such intervals as may be agreed
upon by any Borrower and the Agent or, if an Event of Default has occurred and
is continuing at any time at the Agent's election, the Agent may apply all or
any part of Proceeds held in any Collateral Account in payment of the Secured
Obligations in such order as the Agent may elect, and any part of such funds
which the Agent elects not so to apply and deems not required as collateral
security for the Secured Obligations shall be paid over from time to time by the
Agent to each Borrower or to whomsoever may be lawfully entitled to receive the
same. Any balance of such Proceeds when no Default or Event of Default is
continuing shall be paid over to each Borrower or to whomsoever may be lawfully
entitled to receive the same. Any balance of such Proceeds remaining after the
Secured Obligations shall have been paid in full and the Commitments under (and
as defined in) the Credit Agreement shall have expired or otherwise been
terminated shall be paid over to the Borrowers or to whomsoever may be lawfully
entitled to receive the same.
10.4 Code Remedies. If an Event of Default has occurred and is
continuing, the Agent on behalf of the Lenders may exercise, in addition to all
other rights and remedies granted to it in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, if an Event of Default has occurred
and is continuing, the Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Borrower or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Agent or any Lender or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Agent shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity of redemption in any Borrower, which right or equity is hereby waived
or released. Each Borrower further agrees, if an Event of Default has occurred
and is continuing at the Agent's request, to assemble the Collateral and make it
available to the Agent, at places which the Agent shall reasonably select,
whether at each Borrower's premises or elsewhere. To the extent permitted by
applicable law, each Borrower waives all claims, damages and demands it may
acquire against the Agent or any Lender arising out of the exercise by them of
any rights hereunder. If any notice of a
<PAGE>
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least ten (10) days
before such sale or other disposition.
11. Agent, Appointment as Attorney-in-Fact; Agent, Performance of
Borrowers' Obligations.
11.1 Powers. Each Borrower hereby irrevocably constitutes and
appoints the Agent and any officer or agent, thereof, 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 such Borrower and in the name of
such Borrower or in its own name, 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, such Borrower hereby gives the Agent, the power and right, on behalf
of such Borrower, without notice to or assent by such Borrower, to do any or all
of the following:
(a) at any time when a Default or an Event of Default has
occurred and is continuing in the name of any Borrower or its own name, or
otherwise, take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or with respect to any other Collateral and file any claim or take
any other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any and all such moneys
due under any Receivable or with respect to any other Collateral whenever
payable;
(b) in the case of any Copyright, Patent or Trademark,
execute and deliver any and all agreements, instruments, documents and papers as
the Agent may request to evidence the Agent's security interests in such
Copyright, Patent or Trademark and the goodwill and general intangibles of any
Borrower relating thereto or represented thereby;
(c) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance called
for by the terms of this Agreement and pay all or any part of the premiums
therefor and the costs thereof;
(d) execute, in connection with any sale provided for in
subsection 10.4, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(e) at any time when a Default or an Event of Default has
occurred and is continuing (1) direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Agent or as the Agent shall direct; (2) ask or demand
for, collect, receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising out of
any Collateral; (3) sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with any
of the Collateral; (4) commence and prosecute any suits,
<PAGE>
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any thereof and to enforce any other
right in respect of any Collateral; (5) defend any suit, action or proceeding
brought against any Borrower with respect to any Collateral; (6) settle,
compromise or adjust any such suit, action or proceeding and, in connection
therewith, to give such discharges or releases as the Agent may deem
appropriate; (7) assign any Copyright, Patent or Trademark (along with the
goodwill of the business to which any such Copyright, Patent or Trademark
pertains), throughout the world for such term or terms, on such conditions, and
in such manner, as the Agent, shall in its sole discretion determine; and (8)
generally, sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though the
Agent were the absolute owner thereof for all purposes, and do, at the Agent's
option and at the expense of each Borrower affected thereby , at any time, or
from time to time, all acts and things which the Agent deems necessary to
protect, preserve or realize upon the Collateral and the Agent's security
interest therein and to effect the intent of this Agreement, all as fully and
effectively as any Borrower might do.
11.2 Performance by Agent of Borrowers' Obligations. If any
Borrower fails to perform or comply with any of its agreements contained herein,
the Agent, at its option, but without any obligation so to do, may perform or
comply, or otherwise cause performance or compliance, with such agreement.
11.3 Borrowers' Reimbursement Obligation. The expenses of the
Agent incurred in connection with actions undertaken as provided in this
Section, together with interest thereon at a rate equal to the rate per annum at
which interest would then be payable on past due Prime Rate Loans under the
Credit Agreement, from the date of payment by the Agent, to the date reimbursed
by each Borrower, shall be payable by such Borrower to the Agent on demand.
11.4 Ratification; Power Coupled With An Interest. Each Borrower
hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof in accordance with the terms of this Agreement. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security
interests created hereby are released.
12. Duty of the Agent. The Agent's sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Code or otherwise, shall be to deal with
it in the same manner as the Agent, deals with similar property for its own
account. Neither the Agent, nor any Lender nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Borrower or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Agent and the Lenders hereunder are solely to protect the
Agent's and such Lenders' interests in the Collateral and shall not impose any
duty upon the Agent to exercise any such powers. The Agent, and the Lenders,
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors,
<PAGE>
employees or agents shall be responsible to any Borrower for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
13. Execution of Financing Statements. Pursuant to Section 9-402 of the
Code, each Borrower authorizes the Agent to file financing statements with
respect to the Collateral without the signature of each Borrower affected
thereby in such form and in such filing offices as the Agent, reasonably
determines appropriate to perfect the security interests of the Agent, under
this Agreement. A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement for filing in any jurisdiction.
14. Authority of Agent. Each Borrower acknowledges that the rights and
responsibilities of the Agent under this Agreement with respect to any action
taken by the Agent, or the exercise or non-exercise by the Agent of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the Agent, and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Agent and such Borrower, the Agent shall be conclusively presumed to be acting
as agent, for the Agent, with full and valid authority so to act or refrain from
acting, and neither such Borrower nor any Issuer shall be under any obligation
or entitlement, to make any inquiry respecting such authority.
15. Notices. All notices, requests and demands to or upon the Agent or
any Borrower hereunder shall be effected in the manner provided for in
subsection 11.3 of the Credit Agreement.
16. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. Amendments in Writing; No Waiver; Cumulative Remedies.
17.1 Amendments in Writing. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified except
by a written instrument executed by each Borrower and the Agent, provided that
any provision of this Agreement imposing obligations on any Borrower may be
waived by the Agent in a written instrument executed by the Agent.
17.2 No Waiver by Course of Conduct. Neither the Agent nor any
Lender shall by any act (except by a written instrument pursuant to subsection
17.1) delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Default or in any breach
of any of the terms and conditions hereof. No failure to exercise, nor any delay
in exercising, on the part of the Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any
<PAGE>
other right, power or privilege. A waiver by the Agent or any Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Agent or such Lender would otherwise have on any
future occasion.
17.3 Remedies Cumulative. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
18. Additional Borrowers. Each Subsidiary of the Borrowers required to
become a party to this Agreement pursuant to subsection 7.12 of the Credit
Agreement, shall become a Borrower for all purposes of this Agreement upon
execution and delivery by such Subsidiary of a Joinder Agreement in the form of
Exhibit D to the Credit Agreement.
19. Joint and Several Liability. WHETHER OR NOT EXPRESSLY STATED HEREIN
OR IN ANY OTHER LOAN DOCUMENT, ALL OBLIGATIONS OF THE BORROWERS (OR OF ANY
BORROWER) HEREUNDER AND UNDER EACH OTHER LOAN DOCUMENT (WHETHER IN CONNECTION
WITH LOANS, LETTERS OF CREDIT OR OTHER OBLIGATIONS) ARE JOINT AND SEVERAL
OBLIGATIONS OF ALL BORROWERS.
20. Maximum Amount of Joint and Several Liability. To the extent that
applicable Law otherwise would render the full amount of the joint and several
obligations of any Subsidiary of ACS Inc. hereunder and under the other Loan
Documents invalid or unenforceable, such Subsidiary's obligations hereunder and
under the Loan Documents shall be limited to the maximum amount which does not
result in such invalidity or unenforceability, provided, however, that each
Borrower's obligations hereunder and under the other Loan Documents shall be
presumptively valid and enforceable to their fullest extent in accordance with
the terms hereof or thereof, as if this Section 20 were not a part of this
Agreement.
21. Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with ACS Inc. and the Agent.
22. Section Headings. The Section and subsection headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
23. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Borrower and shall inure to the benefit of the
Agent and its successors and assigns.
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24. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF VIRGINIA.
25. Release of Collateral and Termination. The Agent shall release the
Collateral from the Lien created hereby, and this Agreement and all obligations
of the Agent and each Borrower hereunder shall terminate on the Termination
Date.
IN WITNESS WHEREOF, the undersigned has caused this Security Agreement
to be duly executed and delivered as of the date first above written.
ADVANCED COMMUNICATION SYSTEMS, INC.
INTEGRATED SYSTEMS CONTROL, INC.
RF MICROSYSTEMS, INC.
By: /s/ Dev Ganesan
Dev Ganesan
Chief Financial Officer
DC1DOCS1.68408
