<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 10, 1998
CONDOR TECHNOLOGY SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-23635 54-1814931
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
170 JENNIFER ROAD, SUITE 325
ANNAPOLIS, MARYLAND 21401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 266-8700
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As previously disclosed in a Current Report on Form 8-K filed
December 22, 1998, on December 10, 1998, Condor Technology Solutions, Inc.
(the "Company") through its wholly owned subsidiary, Global Core Strategies
Acquisition, Inc., a Delaware corporation (the "Purchaser") acquired
substantially all of the assets and going business of Global Core Strategies,
Inc., a Connecticut corporation ("Global"). The purchase was made under the
terms of an asset purchase agreement, dated as of December 10, 1998, by and
among the Company, Global, and Jerry Ward, the sole stockholder of Global
(the "Purchase Agreement"). The purchase price consisted of $24,000,000 in
cash and 738,178 shares of Company Common Stock (value of $8,000,000) par
value $.01 per share (the "Common Stock"). In addition, the Purchase
Agreement provides for the payment of an earnout amount in the event that
Global achieves certain 1999 earnings based financial performance targets, in
an amount up to $9,000,000, to be paid twenty five percent in cash and
seventy five percent in shares of Common Stock.
The purchase price for all of the assets and ongoing business
of Global was determined through arms' length negotiations between the
Company and Mr. Ward and took into consideration various factors concerning
the value of the business of Global. Funding for the acquisition, including
related expenses, was obtained primarily from borrowing under an existing
revolving credit agreement with the Company's bank, First Union Commercial
Corporation.
Global is engaged in the business of providing information
technology services related to the installation and implementation of enterprise
resource planning software solutions, particularly SAP R/3, for middle market
companies and divisions of Fortune 1000 companies. Global has strategic
alliances with SAP America, Inc., a provider of enterprise resource planning
software and systems, and others. Purchaser intends to continue that business.
The financial statements of Global and pro forma information
relating to the acquisition, required to be filed in connection with the
acquisition pursuant to items 7(a) and (b) of Form 8-K, are included herewith.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
(i) Financial Statements of Global Core Strategies, Inc.
as of December 31, 1997 and for the year ended
December 31, 1997.
(b) Pro Forma Financial Information
(i) Unaudited Pro Forma Combined Balance Sheet as of
September 30, 1998.
(ii) Unaudited Pro Forma Statements of Operations for the
year ended December 31, 1997 and for the nine months
ended September 30, 1998
(c) Exhibits
* Exhibit 2.1 Press Release dated December 7, 1998
* Exhibit 2.2 Purchase Agreement, among Condor Technology
Solutions, Inc., Global Core Strategies,
Inc., and Jerry Ward, dated December 10,
1998
* Exhibit 2.3 Press Release dated December 22, 1998
** Exhibit 10.1.1 First Modification to Business Loan and
Security Agreement between the Company and
First Union Commercial Corporation and
related ancillary documents.
** Exhibit 23.1 Consent of PricewaterhouseCoopers LLP
------------------------------------------------------------------------------
* Previously filed as part of the Company's Current
Report on Form 8-K, filed on December 22, 1998 (File
No. 000-23635), and omitted pursuant to General
Instruction B.3 of Form 8-K.
** Filed herewith
SIGNATURE
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.
CONDOR TECHNOLOGY SOLUTIONS, INC.
Date: February 22, 1999 By: /S/ WILLIAM J. CARAGOL, JR.
--------------------------------
William J. Caragol, Jr.
Vice President and Chief Financial
Officer
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONDOR TECHNOLOGY SOLUTIONS, INC. UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Introduction to Unaudited Pro Forma Combined Financial Statements....................................................... F-2
Unaudited Pro Forma Combined Balance Sheet.............................................................................. F-3
Unaudited Pro Forma Combined Statements of Operations................................................................... F-4
Notes to Unaudited Pro Forma Combined Financial Statements.............................................................. F-6
GLOBAL CORE STRATEGIES, INC.
Report of Independent Accountants....................................................................................... F-12
Balance Sheets.......................................................................................................... F-13
Statements of Operations................................................................................................ F-14
Statements of Changes in Stockholder's Equity........................................................................... F-15
Statements of Cash Flows................................................................................................ F-16
Notes to the Financial Statements....................................................................................... F-17
</TABLE>
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC. AND FOUNDING COMPANIES
INTRODUCTION TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give
effect to the acquisitions completed through December 31, 1998 by Condor
Technology Solutions, Inc. ("Condor"). Specifically, they give effect to the
acquisition of (i) substantially all of the assets and going business of Global
Core Strategies, Inc. ("Global") consummated on December 10, 1998, which is
considered significant under the rules and regulations of the Securities and
Exchange Commission; (ii) Decision Support Technology, Inc. ("DST"), Louden
Associates, Inc. ("Louden"), and LINC Systems Corporation ("LINC"), collectively
"Other Acquisitions", each of which is considered insignificant and all of which
were consummated prior to September 30, 1998; and (iii) Management Support
Technology Corp., Computer Hardware Maintenance Company, Inc., Federal Computer
Corporation, Corporate Access, Inc., Interactive Software Systems Incorporated,
U.S. Communications, Inc., InVenture Group, Inc. and MIS Technologies, Inc.
(including Kinnaird Technical Resources, Inc.) collectively "Founding
Companies", each of which was consummated on February 10, 1998.
The unaudited pro forma combined balance sheet gives effect to the
acquisition of Global as if it had occurred as of the Company's most recent
balance sheet date, September 30, 1998.
The unaudited pro forma combined statements of operations give effect
to (i) Condor's initial public offering ("IPO") of Common Stock on February 5,
1998 as if such offering had occurred on January 1, 1997; (ii) the acquisition
of the Founding Companies which were business combinations accounted for under
the purchase method of accounting as if such acquisitions had been consummated
on January 1, 1997; (iii) the acquisition of Global, which was a business
combination accounted for under the purchase method of accounting, as if such
acquisition had occurred on January 1, 1997; and (iv) the acquisitions of the
Other Acquisitions which were business combinations accounted for under the
purchase method of accounting, as if such acquisitions had occurred on January
1, 1997. Certain reclassifications of amounts included in the statements of
operations of acquired companies have been made to conform with Condor's
financial statement presentation.
The pro forma adjustments are based on estimates, available information
and certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what
Condor's financial position or results of operations would actually have been if
such transactions in fact had occurred on those dates and are not necessarily
representative of Condor's financial position or results of operations for any
future period. Since the acquired companies were not under common control or
management, historical combined results may not be comparable to, or indicative
of, future performance. The unaudited pro forma combined financial statements
should be read in conjunction with the other financial statements and notes
thereto included herein in this Form 8-K/A and Condor's consolidated financial
statements and notes thereto included in its Annual Report on Form 10-K for the
year ended December 31, 1997 and its Quarterly Reports on Form 10-Q for the
periods ended March 31, 1998, June 30, 1998 and September 30, 1998.
These pro forma combined financial statements do not include the
effects of Condor's acquisition of PowerCrew, Inc. on November 4, 1998, which is
considered insignificant. Aggregate consideration paid for the acquisition was
approximately $3.7 million (excluding potential additional consideration under
earnout agreements of $5.5 million) consisting of $2.9 in cash and 72,522 shares
with a value of $800,000. Goodwill arising from this acquisition, which will be
accounted for under the purchase method of accounting is expected to approximate
$4.0 million.
F-2
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AT SEPTEMBER 30, 1998
(in thousands)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CONDOR GLOBAL ADJUSTMENTS COMBINED
------ ------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,885 $ 190 $ - $ 7,075
Marketable Securities 167 - - 167
Accounts receivable, net 34,809 6,754 - 41,563
Inventory, net 481 - - 481
Prepaids and other current assets 2,415 189 (189) 2,415
---------- -------- ---------- --------
Total current assets 44,757 7,133 (189) 51,701
PROPERTY AND EQUIPMENT, NET 3,637 81 - 3,718
GOODWILL AND OTHER INTANGIBLES, NET 89,619 - 27,862 117,481
OTHER ASSETS 1,326 757 (757) 1,326
---------- -------- ---------- --------
TOTAL ASSETS 139,339 7,971 26,916 174,226
---------- -------- ---------- --------
---------- -------- ---------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 16,257 1,140 - 17,397
Accrued expenses and other current liabilities 11,566 2,222 (475) 13,313
Deferred revenue 6,054 - - 6,054
Current portion of long-term obligations 444 - - 444
---------- -------- ---------- --------
Total current liabilities 34,321 3,362 (475) 37,208
LONG-TERM DEBT 410 - 24,000 24,410
OTHER LONG-TERM OBLIGATIONS 2,980 - - 2,980
---------- -------- ---------- --------
Total liabilities 37,711 3,362 23,525 64,598
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock 112 - 7 119
Additional paid-in capital 102,427 1 7,992 110,420
Accumulated deficit (682) 4,608 (4,608) (682)
Cumulative translation adjustment (35) - - (35)
Treasury stock, at cost (194) - - (194)
---------- -------- ---------- --------
Total stockholders' equity 101,628 4,609 3,391 109,628
---------- -------- ---------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 139,339 $ 7,971 $ 26,916 $ 174,226
---------- -------- ---------- --------
---------- -------- ---------- --------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined financial statements.
F-3
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOUNDING OTHER PRO FORMA PRO FORMA
CONDOR COMPANIES GLOBAL ACQUISITIONS ADJUSTMENTS COMBINED
---------- ------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
IT service revenues $ - $ 50,232 $ 13,417 $ 17,450 $ - $ 81,099
Hardware procurement revenues - 94,045 - - - 94,045
-------- ------------- ---------- ------------- ----------- ---------
Total revenues - 144,277 13,417 17,450 - 175,144
-------- ------------- ---------- ------------- ----------- ---------
Cost of IT services - 23,284 8,905 11,533 - 43,722
Cost of hardware procurement - 85,656 - - - 85,656
-------- ------------- ---------- ------------- ----------- ---------
Total cost of revenues - 108,940 8,905 11,533 - 129,378
-------- ------------- ---------- ------------- ----------- ---------
Gross profit - 35,337 4,512 5,917 - 45,766
Selling, general & administrative
expenses 544 27,373 2,793 5,498 (8,649) 27,559
Depreciation and amortization - 1,071 2 218 4,154 5,445
One-time merger charges 2,171 - - - (1,771) 400
-------- ------------- ---------- ------------- ----------- ---------
Income (loss) from operations (2,715) 6,893 1,717 201 6,266 12,362
Interest and other income (expense),
net - 1,628 7 (2) (1,632) 1
-------- ------------- ---------- ------------- ----------- ---------
Income (loss) before taxes (2,715) 8,521 1,724 199 4,634 12,363
Provision for taxes - 2,279 258 (182) 3,208 5,563
-------- ------------- ---------- ------------- ----------- ---------
Net income (loss) $(2,715) $ 6,242 $ 1,466 $ 381 $ 1,426 $ 6,800
-------- ------------- ---------- ------------- ----------- ---------
-------- ------------- ---------- ------------- ----------- ---------
Net income per share $ 0.72
---------
---------
Shares used in computing pro forma
net income per share (See Note 5) 9,439
---------
---------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined financial statements.
F-4
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOUNDING OTHER PRO FORMA PRO FORMA
CONDOR COMPANIES GLOBAL ACQUISITIONS ADJUSTMENTS COMBINED
------ --------- ------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
IT service revenues $59,369 $ 4,275 $ 21,961 $ 11,476 $ (340) $ 96,741
Hardware procurement revenues 54,989 10,786 - - - 65,775
------- ----------- ---------- ------------- ----------- ----------
Total revenues 114,358 15,061 21,961 11,476 (340) 162,516
------- ----------- ---------- ------------- ----------- ----------
Cost of IT services 28,680 1,851 15,266 7,934 (340) 53,391
Cost of hardware procurement 49,814 9,828 - - - 59,642
------- ----------- ---------- ------------- ----------- ----------
Total cost of revenues 78,494 11,679 15,266 7,934 (340) 113,033
------- ----------- ---------- ------------- ----------- ----------
Gross profit 35,864 3,382 6,695 3,542 - 49,483
Selling, general & administrative expenses 22,124 6,192 4,157 4,067 (6,248) 30,292
Depreciation and amortization 3,125 121 13 105 1,404 4,768
One-time merger charges 5,000 - - - (5,000) -
------- ----------- ---------- ------------- ----------- ----------
Income (loss) from operations 5,615 (2,931) 2,525 (630) 9,844 14,423
Interest and other income (expense), net 560 117 29 (26) (1,212) (532)
------- ----------- ---------- ------------- ----------- ----------
Income (loss) before taxes 6,175 (2,814) 2,554 (656) 8,632 13,891
Provision for taxes 4,152 87 201 - 1,811 6,251
------- ----------- ---------- ------------- ----------- ----------
Net income (loss) $ 2,023 $ (2,901) $ 2,353 $ (656) $ 6,821 $ 7,640
------- ----------- ---------- ------------- ----------- ----------
------- ----------- ---------- ------------- ----------- ----------
Net income per basic share $ 0.64
----------
----------
Net income per dilutive share $ 0.63
----------
----------
Shares used in computing pro forma net
income per basic share (See Note 5) 11,937
----------
----------
Shares used in computing pro forma net
income per dilutive share (See Note 5) 12,108
----------
----------
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined financial statements.
F-5
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. ACQUISITION OF FOUNDING COMPANIES
Concurrently with and as a condition to the closing of the IPO,
Condor acquired all of the outstanding capital stock of the Founding
Companies. The acquisitions are accounted for using the purchase method of
accounting with Condor identified as the accounting acquiror. The carrying
value of intangible assets is periodically reviewed by the Company based on
the expected future undiscounted operating cash flows of the related business
unit.
The following table sets forth the consideration paid in cash and in
shares of Common Stock to the stockholders of each of the Founding Companies.
For purposes of computing the purchase price for accounting purposes, the value
of shares was determined using a fair value of $10.40 per share, which
represents a discount of 20 percent from the initial public offering price of
$13.00 per share due to restrictions on the sale and transferability of the
shares issued.
<TABLE>
<CAPTION>
SHARES OF ALLOCATION
COMMON VALUE TOTAL ADJUSTED OF PURCHASE
CASH STOCK OF SHARES CONSIDERATION NET ASSETS PRICE GOODWILL LIFE
---- --------- --------- ------------- ---------- ----------- -------- ----
(in thousands, except share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MST $ 9,750 603,846 $ 6,280 $ 16,030 $ 262 $ 15,768 35
CHMC 17,100 146,154 1,520 18,620 1,847 16,773 35
Federal 7,500 576,923 6,000 13,500 3,841 9,659 35
Corporate Access 5,200 200,000 2,080 7,280 427 6,853 30
ISSI 5,000 538,462 5,600 10,600 1,641 5,000(a) 1,459 7
2,500(b) 5
US Comm 600 46,154 480 1,080 144 936 30
InVenture 750 57,692 600 1,350 (101) 1,451 35
MIS 1,200 138,462 1,440 2,640 (375) 3,015 35
--------- ----------- ---------- ------------- ------------- ------------- ------------
$ 47,100 2,307,693 $24,000 $ 71,100 $ 7,686 $7,500 $ 55,914
--------- ----------- ---------- ------------- ------------- ------------- ------------
--------- ----------- ---------- ------------- ------------- ------------- ------------
</TABLE>
Pursuant to contingent payment agreements entered into as part of the
transaction, six of the Founding Companies are eligible to receive contingent
consideration in the form of additional common stock and cash. Such contingent
consideration is based on a multiple of earnings and may be paid if these
companies achieve a level of earnings in excess of projected earnings. As of
December 31, 1998 the Founding Companies have earned approximately $18.4 million
of contingent consideration of which $6.0 million is payable in cash. The
remaining maximum consideration equals $18.4 million covering a period from 1999
to 2000.
- -------------
(a) Represents amount allocated to in-process research and development.
(b) Represents amount allocated to existing technology.
F-6
<PAGE>
2. ACQUISITIONS
In May 1998, Condor acquired all of the outstanding common stock of
DST. In June 1998, Condor acquired all of the outstanding common stock of
Louden. In July 1998, Condor acquired all of the outstanding common stock of
LINC. In November 1998, Condor acquired all of the outstanding common stock
of PowerCrew. In December 1998, Condor acquired substantially all of the
assets and going business of Global through its wholly owned subsidiary,
Global Core Strategies Acquisition, Inc., a Delaware corporation.
The following table sets forth the consideration paid in cash and in
shares of Common Stock to the stockholder of Global, the allocation of the
consideration to net assets acquired and the resulting goodwill.
<TABLE>
<CAPTION>
SIGNIFICANT SHARES OF ALLOCATION
ACQUISITION COMMON VALUE TOTAL ADJUSTED OF PURCHASE
CASH STOCK OF SHARES CONSIDERATION NET ASSETS PRICE GOODWILL LIFE
-------- ---------- --------- ------------- ---------- ----------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Global $ 24,000 738,178 $ 8,000 $ 32,000 $ 4,138 $ 24,462 35
3,400 (a) 10
-------- ---------- ---------- -------------- ----------- ------------ ----------
$ 24,000 738,178 $ 8,000 $ 32,000 $ 4,138 $ 3,400 $ 24,462
-------- ---------- ---------- -------------- ----------- ------------ ----------
-------- ---------- ---------- -------------- ----------- ------------ ----------
</TABLE>
During 1998, Condor purchased the Other Acquisitions for a total
purchase price of $28.3 million, consisting of $25.1 million in cash
consideration and 227,086 shares of common stock resulting in goodwill of $27.6
million which is amortized over a period of 35 years.
Pursuant to contingent payment agreements entered into as part of
these transactions, three of these businesses are eligible to receive
contingent consideration in the form of additional common stock and cash.
Such contingent consideration is based on a multiple of earnings and may be
paid if these companies achieve a level of earnings in excess of projected
earnings. As of December 31, 1998 these Companies have earned approximately
$6.3 million of contingent consideration of which $1.26 million is payable in
cash. The remaining maximum consideration equals $11.6 million covering a
period from 1999 to 2001.
- ------------
(a) Represents amount allocated to a management agreement with a third
party SAP reseller.
F-7
<PAGE>
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
The following table summarizes unaudited pro forma combined balance
sheet adjustments:
<TABLE>
<CAPTION>
(A) (B) TOTAL
----------- ----------- ---------------
(in thousands)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......... $ 24,000 $ (24,000) $ -
Prepaids and other current assets. - (189) (189)
----------- ----------- ---------------
Total current assets............ 24,000 (24,189) (189)
Goodwill, net..................... - 27,862 27,862
Other assets...................... - (757) (757)
----------- ----------- ---------------
Total assets.................... $ 24,000 $ 2,916 $ 26,916
----------- ----------- ---------------
----------- ----------- ---------------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accrued Expense and other
current liabilities............. $ - $ (475) $ (475)
----------- ----------- ---------------
Total current liabilities... - (475) (475)
LONG-TERM DEBT.................. 24,000 - 24,000
----------- ----------- ---------------
Total liabilities............... 24,000 (475) 23,525
Stockholders' equity..............
Common Stock.................... - 7 7
Additional paid-in capital...... - 7,992 7,992
Retained earnings............... - (4,608) (4,608)
----------- ----------- ---------------
Total stockholders' equity...... - 3,391 3,391
----------- ----------- ---------------
Total liabilities and stockholders'
equity.......................... $ 24,000 $ 2,916 $ 26,916
----------- ----------- ---------------
----------- ----------- ---------------
</TABLE>
- -----------
(A) Reflects the borrowing under Condor's revolving credit
facility for the purchase of Global.
(B) Reflects the acquisition of Global, consisting of
$24,000,000 of cash, 738,178 shares of common stock
valued at $8,000,000 for a total purchase price of
$32,000,000. The adjustment also reflects the write
of assets not purchased and liabilities not assumed
by Condor.
F-8
<PAGE>
4. UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS
The following tables summarize unaudited adjustments to the pro forma
combined statements of operations:
For the year ended December 31, 1997:
<TABLE>
<CAPTION>
TOTAL
PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
---------- ----------- ----------- ----------- ----------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Selling, general and $ (8,649) $ - $ - $ - $ - $ (8,649)
administrative
Intangible amortization - 4,154 - - - 4,154
One-time merger charges - - - (1,771) - (1,771)
---------- ----------- ----------- ----------- ------------ ------------
Income (loss) from operations 8,649 (4,154) - 1,771 - 6,266
Other income (expense):
Interest income (expense) - - (1,632) - - (1,632)
---------- ----------- ----------- ----------- ------------ ------------
Income (loss) before income taxes 8,649 (4,154) (1,632) 1,771 - 4,634
Provision for income taxes - - - - 3,208 3,208
---------- ----------- ----------- ----------- ------------ ------------
Net income (loss) $ 8,649 $ (4,154) $ (1,632) $ 1,771 $ (3,208) $ 1,426
---------- ----------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ----------- ------------ ------------
</TABLE>
- -----------
(A) Reflects the reductions in salaries, bonuses and benefits to
the stockholders and managers of the acquired businesses to
which they have agreed prospectively. On a prospective basis,
bonuses will only be paid if earnings increase to a level well
in excess of 1997 pro forma levels.
(B) Reflects the amortization of goodwill to be recorded as a
result of these acquisitions over a period of seven- to
35-years. These amortization periods were determined based on
an analysis of the characteristics of the individual acquired
companies.
(C) Reflects the interest expense to be recorded as a result of
borrowing $24,000,000 to purchase Global, determined based on
Condor's current borrowing rate under its Revolving Credit
Facility.
(D) Reflects the reduction in compensation expense related to the
non-recurring, non-cash compensation charge of $1,771,000
recorded by Condor in 1997 related to Common Stock issued to
management of and consultants to the Company. The issuances of
Common Stock were made in contemplation of the Mergers and the
Offering, and no future issuances of this nature are
anticipated.
(E) Reflects (i) the incremental provision for federal and state
income taxes assuming all entities were subject to federal and
state income taxes; (ii) federal and state income taxes
relating to the other statements of operations' adjustments;
(iii) income taxes on S corporation income; and (iv) that the
majority of intangible amortization is not tax deductible.
F-9
<PAGE>
For the nine months ended September 30, 1998:
<TABLE>
<CAPTION>
TOTAL
PRO FORMA
(A) (B) (C) (D) (E) (F) ADJUSTMENTS
---------- ---------- ----------- ----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ (340) $ - $ - $ - $ - $ - $ (340)
Cost of revenues (340) - - - - - (340)
---------- ---------- ----------- ----------- ------------ ----------- ---------------
Gross profit - - - - - - -
Selling, general and - (6,248) - - - - (6,248)
administrative
Intangible amortization - - 1,404 - - - 1,404
In process R&D - - - - (5,000) - (5,000)
---------- ---------- ----------- ----------- ------------ ----------- ---------------
Income (loss) from operations - 6,248 (1,404) - 5,000 - 9,844
Other income (expense):
Interest income (expense) - - - (1,212) - - (1,212)
---------- ---------- ----------- ----------- ------------ ----------- ---------------
Income (loss) before income taxes - 6,248 (1,404) (1,212) 5,000 - 8,632
Provision for income taxes - - - - - 1,811 1,811
---------- ---------- ----------- ----------- ------------ ----------- ---------------
Net income (loss) $ - $ 6,248 $(1,404) $ (1,212) $ 5,000 $ (1,811) $ 6,821
---------- ---------- ----------- ----------- ------------ ----------- ---------------
---------- ---------- ----------- ----------- ------------ ----------- ---------------
</TABLE>
- -----------
(A) Reflects the elimination of intercompany revenues and cost of
revenues between one of the Founding Companies and one of the
Other Acquisitions for work performed prior to the acquisition
of both entities.
(B) Reflects the reductions in salaries, bonuses and benefits to
the stockholders and managers of the acquired businesses to
which they have agreed prospectively. On a prospective basis,
bonuses will only be paid if earnings increase to a level well
in excess of 1998 pro forma levels.
(C) Reflects the amortization of goodwill to be recorded as a
result of these acquisitions over a period of seven- to
35-years. These amortization periods were determined based on
an analysis of the characteristics of the individual acquired
companies.
(D) Reflects the interest expense to be recorded as a result of
borrowing $24,000,000 to purchase Global, determined based on
Condor's current borrowing rate under its Revolving Credit
Facility.
(E) Reflects the elimination of a $5,000,000 non-recurring charge
for purchased research and development related to the purchase
of one of the Founding Companies.
(F) Reflects (i) the incremental provision for federal and state
income taxes assuming all entities were subject to federal and
state income taxes; (ii) federal and state income taxes
relating to the other statements of operations' adjustments;
(iii) income taxes on S corporation income; and (iv) that the
majority of intangible amortization is not tax deductible.
F-10
<PAGE>
5. UNAUDITED PRO FORMA SHARES USED IN COMPUTING PRO FORMA NET INCOME PER SHARE
FOR THE YEAR ENDED DECEMBER 31, 1997:
Includes (i) 1,682,240 weighted average shares issued to founders,
consultants and management of Condor; (ii) 2,307,693 shares issued to owners of
the Founding Companies; (iii) 4,484,067 of the 6,785,000 shares sold in the
Offering necessary to pay the cash portion of the Merger consideration and to
pay expenses of the Offering; (iv) 738,178 shares issued to the sole stockholder
of Global Core Strategies, Inc.; and (v) 227,086 shares issued to the owners of
the Other Acquisitions.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998:
Pro forma shares used in computing Pro Forma Net Income Per Basic Share
includes (i) 1,892,307 shares issued to founders, consultants and management of
Condor; (ii) 2,307,693 shares issued to owners of the Founding Companies; (iii)
6,785,000 shares sold in the Offering necessary to pay the cash portion of the
Merger consideration and to pay expenses of the Offering; (iv) 738,178 shares
issued to the sole stockholder of Global Core Strategies, Inc.; and (v) 227,086
shares issued to the owners of the Other Acquisitions less 13,178 of treasury
shares.
Pro Forma shares used in computing pro forma net income per diluted
shares includes all shares used in computing pro forma net income per basic
share plus shares assumed for stock options and weighted average earnout shares
earned through September 30, 1998.
F-11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Global Core Strategies, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholder's equity and of cash flows present fairly,
in all material respects, the financial position of Global Core Strategies, Inc.
at December 31, 1997, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
McLean, VA
February 8, 1999
F-12
<PAGE>
GLOBAL CORE STRATEGIES, INC.
BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
------------------ -------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,192 $ 190
Accounts receivable, net of allowance for doubtful accounts of
$0 and $150 2,502 6,754
Accounts receivable - affiliate 154 92
Employee loans 17 97
------------------ -------------------
Total current assets 3,865 7,133
------------------ -------------------
Fixed assets, net 14 81
Due from affiliate 792 732
Other non-current assets 20 25
------------------ -------------------
------------------ -------------------
Total assets $ 4,691 $ 7,971
------------------ -------------------
------------------ -------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Bank line of credit $ 550 $ -
Accounts payable 371 1,140
Accrued liabilities 1,149 1,748
State income tax payable 135 351
------------------ -------------------
Total current liabilities 2,205 3,239
------------------ -------------------
Deferred state income tax payable 123 123
------------------ -------------------
Total liabilities 2,328 3,362
------------------ -------------------
Commitments and contingencies (Note 5)
Stockholder's equity:
Common stock, no par value; 20,000 shares authorized,
100 shares issued and outstanding - -
Additional paid-in capital 1 1
Retained earnings 2,362 4,608
------------------ -------------------
Total stockholder's equity 2,363 4,609
------------------ -------------------
Total liabilities and stockholder's equity $ 4,691 $ 7,971
------------------ -------------------
------------------ -------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
GLOBAL CORE STRATEGIES, INC.
STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED -----------------------------
DECEMBER 31,
1997 1997 1998
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenue $ 13,417 $ 9,260 $ 21,961
------------- ----------- ------------
Cost of services and expenses 8,905 5,956 15,266
------------- ----------- ------------
Gross profit 4,512 3,304 6,695
Selling, general and administrative expenses 2,795 1,969 4,170
------------- ----------- ------------
Income from operations 1,717 1,335 2,525
------------- ----------- ------------
Other (expense) income:
Interest expense (30) (18) (13)
Interest income 37 28 42
------------- ----------- ------------
Total other (expense) income 7 10 29
------------- ----------- ------------
Income before provision for State income tax 1,724 1,345 2,554
------------- ----------- ------------
Provision for taxes
Current 135 102 201
Deferred 123 93
------------- ----------- ------------
258 195 201
------------- ----------- ------------
Net income $ 1,466 $ 1,150 $ 2,353
------------- ----------- ------------
------------- ----------- ------------
Unaudited pro forma information:
Pro forma net income before provision for income taxes $ 1,724 $ 1,345 $ 2,554
Provision for income taxes 776 605 1,149
------------- ----------- ------------
Pro forma income (see Note 2) $ 948 $ 740 $ 1,405
------------- ----------- ------------
------------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
GLOBAL CORE STRATEGIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
COMMON ADDITIONAL
STOCK PAID-IN RETAINED STOCKHOLDER'S
SHARES CAPITAL EARNINGS EQUITY
-------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 100 $ 1 $ 1,001 $ 1,002
Net Income 1,466 1,466
Distribution to stockholder (105) (105)
-------------- ------------- -------------- -----------------
Balance, December 31, 1997 100 1 $ 2,362 $ 2,363
Net Income 2,353 2,353
Distribution to stockholder (107) (107)
-------------- ------------- -------------- -----------------
-------------- ------------- -------------- -----------------
Balance, September 30, 1998 (unaudited) 100 $ 1 $ 4,608 $ 4,609
-------------- ------------- -------------- -----------------
-------------- ------------- -------------- -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
GLOBAL CORE STRATEGIES, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------------
YEAR ENDED
DECEMBER 31,
------------------------------------
1997 1997 1998
------------------ ---------------- -----------------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 1,466 $ 1,150 $ 2,353
Adjustments to reconcile net income to cash provided
by (used in) operating activities:
Bad debt - - 150
Depreciation 2 - 13
Deferred income tax 123 93 -
Changes in assets and liabilities:
Accounts receivable (1,919) (1,493) (4,402)
Accounts receivable - affiliate (141) 13 62
Increase in other non-current assets (20) - (5)
Increase in employee loans (8) - (80)
Accounts payable and accrued liabilities 701 30 1,368
State income tax payable 144 102 216
------------------ ---------------- -----------------
Net cash provided by (used in) operating activities 348 (105) (325)
------------------ ---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (16) (16) $ (80)
Decrease (increase) in due from affiliate (640) (633) 60
------------------ ---------------- -----------------
Net cash used in investing activities (656) (649) (20)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank line of credit 550 550 (550)
Distribution to stockholder (105) - (107)
------------------ ---------------- -----------------
Net cash provided by (used in) financing activities 445 550 (657)
------------------ ---------------- -----------------
Net increase (decrease) in cash 137 (204) (1,002)
------------------ ---------------- -----------------
Cash, beginning of period 1,055 1,055 1,192
------------------ ---------------- -----------------
Cash, end of period $ 1,192 $ 851 $ 190
------------------ ---------------- -----------------
------------------ ---------------- -----------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid in interest $ 22 $ 10 $ 43
------------------ ---------------- -----------------
------------------ ---------------- -----------------
Cash paid for income taxes $ 3 $ - $ -
------------------ ---------------- -----------------
------------------ ---------------- -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE>
GLOBAL CORE STRATEGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
Global Core Strategies, Inc. (the "Company") is an S
Corporation headquartered in Stamford, Connecticut. The Company,
incorporated in July 1991, installs and implements SAP R/3, a computer
software package. In addition, the Company provides related consulting
services and complementary computer hardware and software. The Company
sells to customers throughout the United States.
On December 10, 1998, Condor Technology Solutions, Inc.
("Condor"), through its wholly owned subsidiary, Global Core Strategies
Acquisition, Inc., a Delaware corporation acquired substantially all of
the assets and going business of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL INFORMATION
The balance sheet as of September 30, 1998 and the
statements of operations, of changes in stockholder's equity and
of cash flows for the nine months ended September 30, 1998 and
1997, are unaudited, and certain information and footnote
disclosures related thereto, normally included in financial
statements prepared in accordance with generally accepted
accounting principles, have been omitted. In the opinion of
management, all adjustments, consisting only of normal recurring
adjustments necessary to fairly present the financial position,
results of operations and cash flows with respect to the interim
financial statements, have been included. The results of
operations for the interim periods are not necessarily indicative
of the results for the entire fiscal year.
CONCENTRATION OF CREDIT RISK
The Company maintains its cash balances in accounts which,
at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes there is
little or no exposure to any significant credit risk beyond the
normal credit risk attendant in its business.
The Company had six significant customers which accounted
for approximately 88% of total 1997 revenues. Accounts receivables
included approximately $1,878,176 from these customers at December
31, 1997.
F-17
<PAGE>
GLOBAL CORE STRATEGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS (continued)
REVENUE RECOGNITION
Revenues are recognized for installation, implementation,
consulting services and maintenance at the time work is performed
and the services are rendered.
FIXED ASSETS
Fixed assets are recorded at cost and depreciated using the
straight-line method over the estimated useful lives which range
up to five years. Repair and maintenance costs are expensed as
incurred.
INCOME TAXES
The Company has elected S Corporation status as defined by
the Internal Revenue Code whereby the stockholder reports his
proportionate share of the taxable earnings or losses of the
Company on his individual Federal income tax returns. Therefore,
no provision or liability for Federal income taxes has been
included in the financial statements. If the Company were subject
to taxation, deferred tax assets and liabilities would be
established based on temporary differences between the book and
tax basis of assets and liabilities. The Company's S Corporation
status terminated when it was acquired by Condor.
The Company is liable for state income tax. The Company
files income tax returns using the cash-basis method. Under this
method, revenue is recognized as received and expenses are
reported as paid. Current income taxes are based on the year's
income taxable for state tax reporting purposes. Deferred state
income tax liabilities are computed annually for differences
between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable
income.
Due to differences in book and tax accounting treatment
for certain items, including accounts receivable, fixed assets,
and accrued liabilities, the stockholder's basis in the Company's
net assets for book purposes exceed the related tax basis by
$122,962.
The unaudited pro forma income tax information included
in the Statement of Operations is presented in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," as if the Company had been subject to federal
and state income taxes for the entire periods presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the
F-18
<PAGE>
GLOBAL CORE STRATEGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS (continued)
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
ADVERTISING COSTS
Advertising and promotion costs are charged to operations
as incurred and total $67,692.
3. FIXED ASSETS
Fixed Assets consists of the following (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Vehicle $ 16
Less: Accumulated depreciation (2)
----------------
$ 14
----------------
----------------
</TABLE>
4. RELATED PARTY TRANSACTIONS
Granite Complete Solutions, LLC ("Granite") is an affiliated
company related through the Company's 20% minority interest in Granite.
At December 31, 1997, the Company has a loan receivable from
Granite of $791,529. The receivable is considered to be long-term in
nature. Interest is being charged at the Company's incremental
borrowing rate (8.75% at December 31, 1997).
The Company participates in a 401(k) plan jointly with Granite
(see Note 6), and the two companies share a joint line of credit with a
bank. (see Note 7).
F-19
<PAGE>
GLOBAL CORE STRATEGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS (continued)
Financial information of Granite is as follows (in thousands):
Balance sheet as of December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 1,584
-----------
-----------
Current liabilities 983
Noncurrent 792
-----------
1,775
Members' equity (191)
-----------
$ 1,584
-----------
-----------
</TABLE>
Results of operations for the year ended December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
Revenue $ 3,408
Cost of services 3,046
-----------
Operating income 362
Selling, general and administrative expenses 374
-----------
Net loss $ (12)
-----------
-----------
</TABLE>
The Company shares personnel with Granite and charged interest
on its loan to Granite. Billings for personnel and interest were
$103,425 and $37,459, respectively, for 1997 and are included in
accounts receivable - affiliate.
The minority interest in Granite was not conveyed to Global
Core Strategies Acquisition, Inc. in the December 10, 1998 transaction
with the Company (described in Note 1).
5. LEASE COMMITMENTS
The Company leases certain facilities under a long-term lease
which is accounted for as an operating lease extending through October
31, 2002.
F-20
<PAGE>
At December 31, 1997, future minimum rental payments under the lease
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 46,230
1999 46,565
2000 48,240
2001 48,575
2002 41,875
Rent expense for 1997 was $12,703.
</TABLE>
6. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) savings plan which includes the
employees of Granite. Under the plan, eligible employees may elect to
defer up to 15% of their salary subject to Internal Revenue Code
limits. For the year ended December 31, 1997, the Company contributed
$0.
7. BANK LINE OF CREDIT
The Company, jointly with Granite, has a $1,000,000 line of
credit with a bank which bears interest (8.75% at December 31, 1997) at
the bank's prime rate plus .25% and matures on September 30, 1998. The
maximum borrowings are limited to the Company's "borrowing base" as
defined in the loan agreement. In addition, the terms of the loan
require compliance with certain restrictive covenants. The facility is
collateralized by all assets of the Company and its affiliate. At
December 31, 1997, the Company had outstanding indebtedness under the
line of credit of $550,000.
F-21
<PAGE>
Exhibit 10.1.1
FIRST MODIFICATION
TO BUSINESS LOAN AND SECURITY AGREEMENT
THIS FIRST MODIFICATION TO BUSINESS LOAN AND SECURITY AGREEMENT
(this "Modification") is made as of the 22nd day of December, 1998, by and among
(i) FIRST UNION COMMERCIAL CORPORATION, a North Carolina corporation (the
"Lender"), having offices at 1970 Chain Bridge Road, 9th Floor, McLean, Virginia
22102; (ii) CONDOR TECHNOLOGY SOLUTIONS, INC., a Delaware corporation (the
"Parent Company"); MANAGEMENT SUPPORT TECHNOLOGY CORP., a Delaware corporation,
COMPUTER HARDWARE MAINTENANCE COMPANY, INC., a Pennsylvania corporation, FEDERAL
COMPUTER CORPORATION, a Virginia corporation, CORPORATE ACCESS, INC., a
Massachusetts corporation, INTERACTIVE SOFTWARE SYSTEMS INCORPORATED, a Colorado
corporation, U.S. COMMUNICATIONS, INC., a Maryland corporation, INVENTURE GROUP,
INC., a Pennsylvania corporation, and MIS TECHNOLOGIES, INC., an Oklahoma
corporation (collectively, with all persons or entities described in clause
(iii) below, the "Borrowers"), all such corporations having principal offices at
the locations set forth on SCHEDULE 3 to the hereinafter defined Loan Agreement;
and (iii) each other person or entity hereafter becoming a "Borrower" party to
the Loan Agreement by having executed and delivered, among other things, a
"Joinder Agreement" pursuant to the Loan Agreement. Capitalized terms used, but
not defined, in this Modification shall have the meanings attributed to such
terms in the Loan Agreement.
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the terms and conditions of a certain
Business Loan and Security Agreement dated as of April 15, 1998 (the "Loan
Agreement"), by and among the Borrowers and the Lender, the Borrowers obtained a
loan (the "Loan") from the Lender in the maximum principal amount of Thirty-five
Million and No/100 Dollars ($35,000,000.00), evidenced by a certain Revolving
Promissory Note dated April 15, 1998 (together with all extensions, renewals,
modifications and substitutions thereof or therefor, the "Note"), made by the
Borrowers and payable to the order of the Lender, in the maximum principal
amount of Thirty-five Million and No/100 Dollars ($35,000,000.00), and secured
by, among other things, certain collateral more fully described in Article III,
Section 1 of the Loan Agreement; and
WHEREAS, the Borrowers have requested, and the Lender has agreed,
to increase the maximum principal amount of the Loan from Thirty-five Million
and No/100 Dollars ($35,000,000.00) to Fifty Million and No/100 Dollars
($50,000,000.00); and
WHEREAS, the Lender has requested, and the Borrowers have agreed,
to modify the interest rate payable pursuant to the Note and amend certain
covenants set forth in the Loan Agreement; and
WHEREAS, the Lender and the Borrowers desire to confirm their
agreements, as hereinafter provided.
<PAGE>
NOW THEREFORE, for Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The foregoing recitals are hereby incorporated herein by this
reference and made a part hereof, with the same force and effect as if fully set
forth herein.
2. The aggregate maximum principal amount of the Loan shall be
increased to Fifty Million and No/100 Dollars ($50,000,000.00), and the Margin
(as defined in the Note) shall be amended, in each case effective simultaneously
with the execution and delivery of (a) this Modification; (b) the Allonge
(hereinafter defined); (c) the Ancillary Loan Document Modification (hereinafter
defined); (d) the Stock Security Agreement Modification (hereinafter defined);
(e) duly adopted resolutions of the Board of Directors of each Borrower,
certified as true, correct and complete by the applicable corporate secretary of
each Borrower, authorizing the execution and delivery of this Modification and
all other documents, instruments and agreements described herein, and the
performance by each Borrower of its obligations contemplated hereby; and (f) an
opinion of the Borrowers' counsel (including, without limitation, the opinion
required pursuant to Section 8 hereof), in form and substance satisfactory to
the Lender in all respects.
3. Simultaneously with the effectiveness of the increase to the maximum
principal amount of the Loan referenced in Section 2 above, the definitions of
"Commitment Amount", "Facility", "Loan", "Note", and "Stock Security Agreement",
set forth in the "Certain Definitions" section of the Loan Agreement shall be
automatically deleted in their entirety and the following substituted in lieu
thereof:
""COMMITMENT AMOUNT" shall mean Fifty Million and No/100
Dollars ($50,000,000.00), or if the maximum aggregate
commitment of the Lender hereunder is reduced pursuant to
the terms of this Agreement (including, without limitation,
the terms of Section 5 of Article I of this Agreement), such
lesser amount.
"FACILITY" shall mean the revolving credit facility being
extended pursuant to this Agreement in the maximum principal
amount of Fifty Million and No/100 Dollars ($50,000,000.00),
with a sub-limit of Fifteen Million and No/100 Dollars
($15,000,000.00) for Letters of Credit.
"LOAN" shall mean the loans made by the Lender to the
Borrowers in the aggregate maximum principal amount of Fifty
Million and No/100 Dollars ($50,000,000.00), or so much
thereof as shall be advanced or readvanced from time to
time, which are represented by the Facility, and which shall
be evidenced by, bear interest and be payable in accordance
with the terms and provisions set forth in the Note."
2
<PAGE>
"NOTE" shall mean that certain Revolving Promissory Note
dated April 15, 1998, made by the Borrowers and payable to
the order of the Lender in the original maximum principal
amount of Thirty-five Million and No/100 Dollars
($35,000,000.00), as modified and increased pursuant to that
certain Allonge and First Modification to Revolving
Promissory Note dated December 22, 1998, by and among the
Borrowers and the Lender, and/or any other promissory
note(s) executed, issued and delivered pursuant to this
Agreement, together with all extensions, renewals,
modifications and substitutions thereof or therefor.
"STOCK SECURITY AGREEMENT" shall mean that certain Stock
Security Agreement dated as of April 15, 1998, by and
between the Parent Company and the Lender, as amended by
that certain First Modification to Stock Security Agreement
dated December 22, 1998, by and between the Parent Company
and the Lender, together with any and all other amendments
and/or modifications thereof."
4. Simultaneously with the effectiveness of the increase to the maximum
principal amount of the Loan referenced in Section 2 above, Section 7 of Article
I of the Loan Agreement shall be automatically deleted in its entirety and the
following substituted in lieu thereof:
"7. COMMITMENT FEE. So long as any amounts remain outstanding in
connection with the Facility, or the Lender has any obligation to
make any advance in connection therewith, the Borrowers agree to
pay to the Lender, in addition to principal, interest and other
sums payable under the Note, a quarter-annual commitment fee (the
"Commitment Fee"), at the annual percentage rate of one-half of
one percent (.50%), calculated on the difference between (i) the
Commitment Amount, and (ii) the average daily outstanding
principal balance of the Facility (including the face amounts of
all outstanding Letters of Credit) during the applicable
quarter-annual period. The Commitment Fee shall be calculated on
the basis of the actual number of days elapsed and a three
hundred sixty (360) day year, shall be due for any quarter during
which the Lender has any obligation in connection with the
Facility, and shall be payable in arrears, commencing on December
31, 1998 and continuing on the last day of every third (3rd)
calendar month thereafter so long as this Agreement remains in
effect."
It is expressly understood and agreed that the Commitment Fee payable on
December 31, 1998 shall be calculated using the formula set forth in the Loan
Agreement (prior to giving effect to this Modification) for the period,
commencing on October 1, 1998 and ending on the day immediately preceding the
date of this Modification, and shall be calculated using the formula
3
<PAGE>
set forth in this Section 4 above for the period, commencing on the date of this
Modification and ending on December 31, 1998.
5. Simultaneously with the effectiveness of the increase to the maximum
principal amount of the Loan referenced in Section 2 above, EXHIBIT 1 attached
to the Loan Agreement shall be automatically deleted in its entirety and the
EXHIBIT 1 attached hereto shall be substituted in lieu thereof.
6. Simultaneously with the execution and delivery of this Modification,
the Borrowers shall execute and deliver an Allonge and First Modification to
Revolving Promissory Note (the "Allonge"), in form and substance acceptable to
the Lender in all respects, pursuant to which the aggregate maximum principal
amount of the Note shall be increased from Thirty-five Million and No/100
Dollars ($35,000,000.00) to Fifty Million and No/100 Dollars ($50,000,000.00),
and the Margin shall be amended, as more fully set forth in the Allonge; it
being understood and agreed that the Allonge shall automatically become
effective and in full force and effect upon the effectiveness of the increase in
the maximum principal amount of the Loan, as contemplated by Section 2 above.
7. Simultaneously with the execution and delivery of this Modification,
the Borrowers shall execute and deliver to the Lender a First Modification to
Ancillary Loan Documents (the "Ancillary Loan Document Modification"), in form
and substance acceptable to the Lender in all respects, pursuant to which the
Borrowers shall acknowledge, agree and confirm, among other things, that any and
all documents, instruments and agreements heretofore executed, issued and/or
delivered by one or more of the Borrowers in connection with the Loan, and which
secured repayment of the Loan, shall secure repayment of the Loan, as modified
and increased pursuant to the terms of this Modification.
8. Simultaneously with the execution and delivery of this Modification,
the Parent Company shall execute and deliver to the Lender (i) a First
Modification to Stock Security Agreement in form and substance satisfactory to
the Lender in all respects (the "Stock Security Agreement Modification"),
pursuant to which, among other things, the Parent Company shall acknowledge and
confirm that all of its right, title and interest in and to all of the issued
and outstanding capital stock of Linc Systems Corporation, a Connecticut
corporation ("Linc"), PowerCrew, Inc., a Pennsylvania corporation ("PowerCrew"),
Louden Associates, Inc., a Maryland corporation ("Louden"), Decisions Support
Technology, Inc., a Delaware corporation ("DST") and Global Core Strategies
Acquisition, Inc., a Delaware corporation ("Global Core", and together with
Linc, PowerCrew, Louden and DST, collectively, the "New Companies"), together
with all conversion, voting or other rights appurtenant thereto, secures
repayment of the Loan; (ii) blank stock powers, together with all of the
original stock certificates evidencing the Parent Company's ownership of all of
the issued and outstanding capital stock of the New Companies; and (iii) an
opinion of counsel with respect to the execution, delivery and performance by
the Parent Company of the Stock Security Agreement Modification, in form and
substance acceptable to the Lender in all respects.
4
<PAGE>
9. Notwithstanding anything set forth in the Loan Agreement to the
contrary (including, without limitation, anything to the contrary set forth in
Section 1(d) of Article VII of the Loan Agreement), no Borrower shall directly
or indirectly (i) merge with or acquire any entity, or (ii) purchase all or
substantially all of the assets of any person or entity, in either case without
the prior written consent of the Lender; it being understood and agreed that (a)
the Lender shall grant or deny its consent to the proposed acquisition of
certain assets or ownership interests of a company known as Dimensional, within
five (3) business days of the Lender's receipt of the Borrower's written request
for such consent, accompanied by any and all documents, instruments and
agreements relating to such acquisition deemed necessary or appropriate by the
Lender to grant or deny its consent; and (b) on or about April 1, 1999, the
Borrowers and the Lender shall amend or modify Section 1(d) of Article VII of
the Loan Agreement, in accordance with Section 10 of Article XII of the Loan
Agreement (the "Acquisition Criteria Modification"), by adopting mutually
agreeable terms and conditions for acquisitions by any Borrower of the assets or
ownership interests of any company or entity, in form and substance
substantially similar to the acquisition criteria set forth in Section 1(d) of
Article VII of the Loan Agreement (prior to giving effect to this Modification).
Notwithstanding the foregoing, any dollar limitations that may be imposed by the
Acquisition Criteria Modification need not be substantially similar to the
dollar limitations set forth in Section 1(d)(i) of Article VII of the Loan
Agreement (prior to giving effect to this Modification).
10. The Borrowers hereby represent, warrant, acknowledge and agree that
(i) there are no set-offs or defenses against the Note (as modified pursuant to
the Allonge), the Loan Agreement (as modified hereby) or any other Loan Document
(as modified pursuant to the Ancillary Loan Document Modification); (ii) except
as specifically amended hereby, all of the terms and conditions of the Note, the
Loan Agreement and the other Loan Documents (including, without limitation, that
certain letter agreement dated December 10, 1998, issued by the Lender and
accepted by the Borrowers, pursuant to which the Lender granted its consent to
Global Core's acquisition of certain assets, subject to the terms thereof) shall
remain unmodified and in full force and effect; (iii) the Note (as modified
pursuant to the Allonge), the Loan Agreement (as modified hereby) and the other
Loan Documents (as modified pursuant to the Ancillary Loan Document
Modification) are hereby expressly approved, ratified and confirmed; (iv) the
additional proceeds of the Loan made available to the Borrowers pursuant to the
terms of this Modification and the Allonge shall be used solely for the purposes
expressly permitted pursuant to the Loan Agreement (as modified hereby); and (v)
the execution, delivery and performance by each Borrower of this Modification,
the Allonge, and the Ancillary Loan Document Modification, and by the Parent
Company of the Stock Security Agreement Modification, (a) is within its
corporate powers, (b) has been duly authorized by all necessary corporate
action, and (c) does not require the consent or approval of any other person or
entity.
11. Concurrent with the execution of this Modification, the Borrowers
shall pay all of the Lender's costs and expenses associated with this
Modification and the transactions referenced herein or contemplated hereby,
including, without limitation, the Lender's reasonable legal fees and expenses.
5
<PAGE>
12. This Modification shall be governed by the laws of the Commonwealth
of Virginia and shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
13. This Modification may be executed in any number of counterparts,
each of which shall be deemed an original and all of which together shall be
deemed one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Modification on the day and year first above written.
BORROWERS:
ATTEST: CONDOR TECHNOLOGY SOLUTIONS,
[Corporate Seal] INC., a Delaware corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: MANAGEMENT SUPPORT
[Corporate Seal] TECHNOLOGY CORP., a Delaware
corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: COMPUTER HARDWARE
[Corporate Seal] MAINTENANCE COMPANY, INC.,
a Pennsylvania corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: FEDERAL COMPUTER
[Corporate Seal] CORPORATION, a Virginia corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
7
<PAGE>
ATTEST: CORPORATE ACCESS, INC., a
[Corporate Seal] Massachusetts corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: INTERACTIVE SOFTWARE SYSTEMS
[Corporate Seal] INCORPORATED, a Colorado
corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: U.S. COMMUNICATIONS, INC., a
[Corporate Seal] Maryland corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: INVENTURE GROUP, INC., a
[Corporate Seal] Pennsylvania corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: MIS TECHNOLOGIES, INC., an
[Corporate Seal] Oklahoma corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
8
<PAGE>
LENDER:
FIRST UNION COMMERCIAL CORPORATION,
a North Carolina corporation
By: /s/ Richard S. Schmersal
Name: Richard S. Schmersal
Title: Vice President
9
<PAGE>
ALLONGE AND FIRST MODIFICATION TO REVOLVING PROMISSORY NOTE
THIS ALLONGE AND FIRST MODIFICATION TO REVOLVING PROMISSORY NOTE
(this "Allonge") is made as of the 22nd day of December, 1998, by and among (i)
FIRST UNION COMMERCIAL CORPORATION, a North Carolina corporation (the "Lender"),
having offices at 1970 Chain Bridge Road, 9th Floor, McLean, Virginia 22102;
(ii) CONDOR TECHNOLOGY SOLUTIONS, INC., a Delaware corporation (the "Parent
Company"); MANAGEMENT SUPPORT TECHNOLOGY CORP., a Delaware corporation, COMPUTER
HARDWARE MAINTENANCE COMPANY, INC., a Pennsylvania corporation, FEDERAL COMPUTER
CORPORATION, a Virginia corporation, CORPORATE ACCESS, INC., a Massachusetts
corporation, INTERACTIVE SOFTWARE SYSTEMS INCORPORATED, a Colorado corporation,
U.S. COMMUNICATIONS, INC., a Maryland corporation, INVENTURE GROUP, INC., a
Pennsylvania corporation, and MIS TECHNOLOGIES, INC., an Oklahoma corporation
(collectively, with all persons or entities described in clause (iii) below, the
"Borrowers"), all such corporations having principal offices at the locations
set forth on SCHEDULE 3 to the hereinafter defined Loan Agreement; and (iii)
each other person or entity hereafter becoming a "Borrower" party to the Loan
Agreement by having executed and delivered, among other things, a "Joinder
Agreement" pursuant to the Loan Agreement. Capitalized terms used, but not
defined, in this Allonge shall have the meanings attributed to such terms in the
Loan Agreement.
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the terms and conditions of a certain
Business Loan and Security Agreement dated as of April 15, 1998 (as amended by
the hereinafter defined First Modification, the "Loan Agreement"), by and among
the Borrowers and the Lender, the Borrowers obtained a loan (the "Loan") from
the Lender in the maximum principal amount of Thirty-five Million and No/100
Dollars ($35,000,000.00), evidenced by a certain Revolving Promissory Note dated
April 15, 1998 (together with all extensions, renewals, modifications and
substitutions thereof or therefor, the "Note"), made by the Borrowers and
payable to the order of the Lender, in the maximum principal amount of
Thirty-five Million and No/100 Dollars ($35,000,000.00), and secured by, among
other things, certain collateral more fully described in Section 1 of Article
III of the Loan Agreement; and
WHEREAS, the Borrowers and the Lender have entered into a certain
First Modification to Business Loan and Security Agreement of even date herewith
(the "First Modification"), pursuant to which, among other things, the Borrowers
and the Lender have agreed to increase the maximum principal amount of the Loan
and amend the interest rate payable under the Note; and
WHEREAS, the Borrowers and the Lender desire to enter into this
Allonge to evidence such increase of the maximum principal amount of the Loan
and amendment to the interest rate payable under the Note, as hereinafter
provided.
<PAGE>
NOW THEREFORE, for Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The foregoing recitals are hereby incorporated herein by this
reference and made a part hereof, with the same force and effect as if fully set
forth herein.
2. Subject to the terms and conditions of the Loan Agreement (as
modified by the First Modification), the maximum principal amount of the Note is
hereby increased to Fifty Million and No/100 Dollars ($50,000,000.00). From and
after the date hereof, the Borrowers shall have the right to borrow and
re-borrow an amount not to exceed the maximum principal amount of the Note, as
increased pursuant to this Allonge, subject to the terms and conditions of the
Loan Agreement (as modified by the First Modification).
3. Notwithstanding anything to the contrary set forth in the Note,
during the period from the date hereof until April 1, 1999, the applicable
Additional Base Rate Interest Margin and the applicable Additional LIBOR
Interest Rate Margin (referred to collectively in the Note as the "Margin")
shall be as follows:
<TABLE>
<CAPTION>
Additional Base Rate Additional LIBOR
Interest Margin Interest Rate Margin
Pricing Ratio
- ------------------------------------- ----------------------- ----------------------
<S> <C> <C>
Less than 2.5 to 1.0 1.00% 2.25%
Equal to or greater than 2.5 to 1.25% 2.50%
1.0, but less than 3.0 to 1.0
Equal to or greater than 3.0 to 1.0 1.50% 2.75%
</TABLE>
2
<PAGE>
From and after April 1, 1999, the Margin shall be as follows:
<TABLE>
<CAPTION>
Additional Base Rate Additional LIBOR
Interest Margin Interest Rate Margin
Pricing Ratio
- ------------------------------------- ----------------------- ----------------------
<S> <C> <C>
Less than 1.5 to 1.0 .50% 1.75%
Equal to or greater than 1.5 to 1.0, .75% 2.00%
but less than 2.0 to 2.0
Equal to or greater than 2.0 to 1.00% 2.25%
1.0, but less than 2.5 to 1.0
Equal to or greater than 2.5 to 1.25% 2.50%
1.0, but less than 3.0 to 1.0
Equal to or greater than 3.0 to 1.0 1.50% 2.75%
</TABLE>
4. This Allonge shall be physically annexed to the Note and shall
evidence the increase in the maximum principal amount and amendment to the
Margin table.
5. The Borrowers hereby acknowledge and agree that as of the date
hereof, (i) there are no set-offs or defenses against and no defaults under the
Note (as modified hereby) or any other Loan Document; and (ii) no act, event or
condition has occurred which, with notice or the passage of time, or both, would
constitute a default under the Note or any other Loan Document.
6. Except as hereby expressly modified, the Note shall be and remain
unchanged and in full force and effect, and the same is hereby expressly
approved, ratified and confirmed.
7. This Allonge shall be governed by the laws of the Commonwealth of
Virginia and shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, personal
representatives, successors and assigns.
8. This Allonge may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall be deemed one
and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - SIGNATURE PAGES FOLLOW]
3
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Allonge on the
day and year first above written.
BORROWERS:
ATTEST: CONDOR TECHNOLOGY SOLUTIONS,
[Corporate Seal] INC., a Delaware corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: MANAGEMENT SUPPORT
[Corporate Seal] TECHNOLOGY CORP., a Delaware
corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: COMPUTER HARDWARE
[Corporate Seal] MAINTENANCE COMPANY, INC.,
a Pennsylvania corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: FEDERAL COMPUTER
[Corporate Seal] CORPORATION, a Virginia corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: CORPORATE ACCESS, INC., a
[Corporate Seal] Massachusetts corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
4
<PAGE>
ATTEST: INTERACTIVE SOFTWARE SYSTEMS
[Corporate Seal] INCORPORATED, a Colorado
corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: U.S. COMMUNICATIONS, INC., a
[Corporate Seal] Maryland corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: INVENTURE GROUP, INC., a
[Corporate Seal] Pennsylvania corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: MIS TECHNOLOGIES, INC., an
[Corporate Seal] Oklahoma corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
LENDER:
FIRST UNION COMMERCIAL CORPORATION,
a North Carolina corporation
By: /s/ Richard S. Schmersal
Name: Richard S. Schmersal
Title: Vice President
5
<PAGE>
FIRST MODIFICATION TO ANCILLARY LOAN DOCUMENTS
THIS FIRST MODIFICATION TO ANCILLARY LOAN DOCUMENTS (this
"Modification") is made as of the 22nd day of December, 1998, by and among (i)
FIRST UNION COMMERCIAL CORPORATION, a North Carolina corporation (the "Lender"),
having offices at 1970 Chain Bridge Road, 9th Floor, McLean, Virginia 22102;
(ii) CONDOR TECHNOLOGY SOLUTIONS, INC., a Delaware corporation (the "Parent
Company"); MANAGEMENT SUPPORT TECHNOLOGY CORP., a Delaware corporation, COMPUTER
HARDWARE MAINTENANCE COMPANY, INC., a Pennsylvania corporation, FEDERAL COMPUTER
CORPORATION, a Virginia corporation, CORPORATE ACCESS, INC., a Massachusetts
corporation, INTERACTIVE SOFTWARE SYSTEMS INCORPORATED, a Colorado corporation,
U.S. COMMUNICATIONS, INC., a Maryland corporation, INVENTURE GROUP, INC., a
Pennsylvania corporation, and MIS TECHNOLOGIES, INC., an Oklahoma corporation
(collectively, with all persons or entities described in clause (iii) below, the
"Borrowers"), all such corporations having principal offices at the locations
set forth on SCHEDULE 3 to the hereinafter defined Loan Agreement; and (iii)
each other person or entity hereafter becoming a "Borrower" party to the Loan
Agreement by having executed and delivered, among other things, a "Joinder
Agreement" pursuant to the Loan Agreement. Capitalized terms used, but not
defined, in this Modification shall have the meanings attributed to such terms
in the Loan Agreement.
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the terms and conditions of a certain Business
Loan and Security Agreement dated as of April 15, 1998 (as amended by the
hereinafter defined First Modification, the "Loan Agreement"), by and among the
Borrowers and the Lender, the Borrowers obtained a loan (the "Loan") from the
Lender in the maximum principal amount of Thirty-five Million and No/100 Dollars
($35,000,000.00), evidenced by a certain Revolving Promissory Note dated April
15, 1998 (together with all extensions, renewals, modifications and
substitutions thereof or therefor, the "Note"), made by the Borrowers and
payable to the order of the Lender in the maximum principal amount of
Thirty-five Million and No/100 Dollars ($35,000,000.00), and secured by, among
other things, certain collateral more fully described in Section 1 of Article
III of the Loan Agreement; and
WHEREAS, pursuant to the terms of a certain First Modification to
Business Loan and Security Agreement of even date herewith (the "First
Modification"), the Borrowers and Lender agreed to, among other things, increase
the maximum principal amount of the Loan to Fifty Million and No/100 Dollars
($50,000,000.00); and
WHEREAS, the Lender requires the Borrowers to execute and deliver this
Modification to confirm that certain Loan Documents executed and delivered by
the Borrowers in connection with the Loan Agreement and securing repayment of
the Loan shall secure repayment of the Loan, as increased pursuant to the terms
of the First Modification.
<PAGE>
NOW THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
1. The foregoing recitals are hereby incorporated herein by this
reference and made a part hereof, with the same force and effect as if fully set
forth herein.
2. The Borrowers hereby acknowledge and agree that any and all
documents, instruments and agreements heretofore executed, issued and/or
delivered by one or more of the Borrowers in connection with the Loan, and which
secured repayment of the Loan (collectively, the "Ancillary Loan Documents"),
shall secure repayment of the Loan, as modified and increased pursuant to the
terms of the First Modification, and all references to the "Loan" and "Note" set
forth in the Ancillary Loan Documents shall mean the Loan (as modified and
increased pursuant to the First Modification), and the Note (as modified and
increased pursuant to that certain Allonge and First Modification to Revolving
Promissory Note of even date herewith by and among the Borrowers and the
Lender).
3. Except as expressly modified hereby, the Ancillary Loan Documents
shall be and remain unchanged and in full force and effect, and as so modified,
the same are hereby expressly approved, ratified and confirmed.
4. This Modification shall be governed by the laws of the Commonwealth
of Virginia and shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, personal
representatives, successors and assigns.
5. This Modification may be executed in any number of counterparts,
each of which shall be deemed an original and all of which together shall be
deemed one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Modification on
the day and year first above written.
BORROWERS:
ATTEST: CONDOR TECHNOLOGY SOLUTIONS,
[Corporate Seal] INC., a Delaware corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: MANAGEMENT SUPPORT
[Corporate Seal] TECHNOLOGY CORP., a Delaware
corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: COMPUTER HARDWARE
[Corporate Seal] MAINTENANCE COMPANY, INC.,
a Pennsylvania corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: FEDERAL COMPUTER
[Corporate Seal] CORPORATION, a Virginia corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
3
<PAGE>
ATTEST: CORPORATE ACCESS, INC., a
[Corporate Seal] Massachusetts corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: INTERACTIVE SOFTWARE SYSTEMS
[Corporate Seal] INCORPORATED, a Colorado
corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: U.S. COMMUNICATIONS, INC., a
[Corporate Seal] Maryland corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: INVENTURE GROUP, INC., a
[Corporate Seal] Pennsylvania corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
ATTEST: MIS TECHNOLOGIES, INC., an
[Corporate Seal] Oklahoma corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, JR.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
4
<PAGE>
LENDER:
FIRST UNION COMMERCIAL CORPORATION,
a North Carolina corporation
By: /s/ Richard S. Schmersal
Name: Richard S. Schmersal
Title: Vice President
5
<PAGE>
FIRST MODIFICATION TO STOCK SECURITY AGREEMENT
THIS FIRST MODIFICATION TO STOCK SECURITY AGREEMENT (this
"Modification") is made as of the 22nd day of December, 1998, by and between (i)
FIRST UNION COMMERCIAL CORPORATION, a North Carolina corporation (the "Lender"),
having offices at 1970 Chain Bridge Road, 9th Floor, McLean, Virginia 22102; and
(ii) CONDOR TECHNOLOGY SOLUTIONS, INC., a Delaware corporation, having its
principal place of business at Annapolis Office Plaza, 170 Jennifer Road, Suite
325, Annapolis, Maryland 21401 (the "Pledgor"). Capitalized terms used but not
defined in this Modification shall have the meanings attributed to such terms in
the hereinafter defined Loan Agreement.
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the terms and conditions of a certain Business
Loan and Security Agreement dated as of April 15, 1998 (as amended by the
hereinafter defined First Modification, the "Loan Agreement"), by and among the
Borrowers (as defined and listed on SCHEDULE 1 hereto) and the Lender, the
Borrowers obtained a loan (the "Loan") from the Lender in the maximum principal
amount of Thirty-five Million and No/100 Dollars ($35,000,000.00), evidenced by
a certain Revolving Promissory Note dated April 15, 1998 (together with all
extensions, renewals, modifications and substitutions thereof or therefor, the
"Note"), made by the Borrowers and payable to the order of the Lender in the
maximum principal amount of Thirty-five Million and No/100 Dollars
($35,000,000.00), and secured by, among other things, certain shares of stock
more fully described in that certain Stock Security Agreement dated as of April
15, 1998 (the "Stock Security Agreement"), made by and between the Pledgor and
the Lender; and
WHEREAS, pursuant to the terms of a certain First Modification to
Business Loan and Security Agreement of even date herewith (the "First
Modification"), the Borrowers and Lender have agreed to, among other things,
increase the maximum principal amount of the Loan to Fifty Million and No/100
Dollars ($50,000,000.00); and
WHEREAS, the Lender requires that the Pledgor acknowledge and confirm
that (i) all of its right, title and interest in and to all of the issued and
outstanding capital stock of Linc Systems Corporation, a Connecticut
corporation, PowerCrew, Inc., a Pennsylvania corporation, Louden Associates,
Inc., a Maryland corporation, Decisions Support Technology, Inc., a Delaware
corporation and Global Core Strategies Acquisition, Inc., a Delaware corporation
(each, a "New Company" and collectively, the "New Companies"), and any other
common or preferred stock of the New Companies, whether now or hereafter issued
or outstanding, and whether now or hereafter acquired by the Pledgor, together
with all conversion, voting or other rights appurtenant thereto, including, but
not limited to, the right to receive all dividends and/or other distributions
payable to the Pledgor by virtue of the Pledgor's ownership of such capital
stock, and all proceeds thereof, additions thereto and substitutions thereof
(collectively, the "New Company Stock"), secures repayment of the Loan (as
increased pursuant to the First Modification); and (ii) the New Company Stock is
subject to the terms and conditions of the Stock Security Agreement, as
hereinafter provided.
<PAGE>
NOW THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. The foregoing recitals are hereby incorporated herein by this
reference and made a part hereof, with the same force and effect as if fully set
forth herein.
2. The Pledgor hereby expressly acknowledges, agrees and confirms that
the Pledgor has heretofore granted a conveyed to the Lender a valid and binding
first lien security interest in and to the New Company Stock pursuant to the
Stock Security Agreement and the Loan Agreement, and that the New Company Stock
shall be and remain subject to all terms and provisions of such documents and
all other Loan Documents, as applicable. The Pledgor shall deliver to the Lender
the original New Company Stock certificate(s), together with a fully executed
blank stock power in favor of the Lender (i) concurrent with the execution of
this Modification, as to the shares of the New Company Stock acquired by the
Pledgor on or prior to the date hereof, and (ii) immediately following the
acquisition by the Pledgor, as to any and all other New Company Stock acquired
by Pledgor after the date of hereof.
3. The Pledgor hereby represents and warrants as follows:
(a) That the Pledgor owns the New Company Stock free and clear of
any and all liens, security interests, claims, charges and other encumbrances
whatsoever (except for the security interest granted to the Lender);
(b) That the New Company Stock has been duly authorized and
validly issued, and is fully paid and nonassessable;
(c) That the Lender's possession of the certificates for the New
Company Stock establishes a valid and perfected first lien priority interest
therein, securing repayment of the Obligations in accordance with the terms of
the Stock Security Agreement; and
(d) That the Pledgor has the right to vote, pledge and grant a
security interest in the New Company Stock pursuant to the terms of the Stock
Security Agreement.
4. SCHEDULE A to the Stock Security Agreement is hereby deleted in its
entirety and SCHEDULE A attached hereto is substituted in lieu thereof.
5. The Pledgor hereby acknowledges and agrees that, except as
specifically amended hereby, all of the terms and conditions of the Stock
Security Agreement shall remain unmodified and in full force and effect.
6. This Modification shall be governed by the laws of the Commonwealth
of Virginia and shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, personal
representatives, successors and assigns.
7. This Modification may be executed in any number of counterparts,
each of which shall be deemed an original and all of which together shall be
deemed one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Modification on
the day and year first above written.
PLEDGOR:
ATTEST: CONDOR TECHNOLOGY SOLUTIONS,
[Corporate Seal] INC., a Delaware corporation
By: /s/ John F. McCabe By: /s/ William J. Caragol, Jr.
Name: John F. McCabe Name: William J. Caragol, Jr.
Title: Secretary Title: Vice President
LENDER:
FIRST UNION COMMERCIAL
CORPORATION, a North Carolina
corporation
By: /s/ Richard M. Schmersal
Name: Richard M. Schmersal
Title: Vice President
3
<PAGE>
SCHEDULE 1
For purposes of this Modification, "Borrowers" shall mean,
collectively, Condor Technology Solutions, Inc., a Delaware corporation,
Management Support Technology Corp., a Delaware corporation, Computer Hardware
Maintenance Company, Inc., a Pennsylvania corporation, Federal Computer
Corporation, a Virginia corporation, Corporate Access, Inc., a Massachusetts
corporation, Interactive Software Systems Incorporated, a Colorado corporation,
U.S. Communications, Inc., a Maryland corporation, InVenture Group, Inc., a
Pennsylvania corporation, and MIS Technologies, Inc., an Oklahoma corporation,
and each other person or entity joined as a "Borrower" pursuant to Section 10 of
Article I of the Loan Agreement.
4
<PAGE>
SCHEDULE A TO STOCK SECURITY AGREEMENT
All of the right, title and interest of Condor Technology Solutions,
Inc. ("Pledgor") in and to all of the capital stock of the companies listed
below (collectively, the "Companies"), whether common and/or preferred, and
whether now or hereafter issued or outstanding, and whether now or hereafter
acquired by Pledgor, together with all voting or other rights appurtenant
thereto, including, but not limited to, the right to receive all dividends
and/or other distributions payable to Pledgor by virtue of Pledgor's ownership
of such capital stock, and all proceeds thereof, additions thereto and
substitutions thereof.
For the purposes hereof, the Companies shall mean the following:
(a) Management Support Technology Corp., a Delaware corporation;
(b) Computer Hardware Maintenance Company, Inc., a Pennsylvania
corporation;
(c) Federal Computer Corporation, a Virginia corporation;
(d) Corporate Access, Inc., a Massachusetts corporation;
(e) Interactive Software Systems Incorporated, a Colorado corporation;
(f) U.S. Communications, Inc., a Maryland corporation;
(g) InVenture Group, Inc., a Pennsylvania corporation;
(h) MIS Technologies, Inc., an Oklahoma corporation;
(i) Global Core Strategies, Inc., a Connecticut corporation;
(j) Linc Systems Corporation, a Connecticut corporation;
(k) PowerCrew, Inc., a Pennsylvania corporation;
(l) Louden Associates, Inc., a Maryland corporation;
(m) Decisions Support Technology, Inc., a Delaware corporation; and
(n) Any future wholly-owned subsidiary of Pledgor.
5
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (SEC File Nos. 333-57413 and 333-64505) of Condor
Technology Solutions, Inc. of our report dated February 8, 1999, relating to the
financial statements of Global Core Strategies, Inc. which appears in this
Current Report on Form 8-K/A.
PricewaterhouseCoopers LLP
McLean, VA
February 22, 1999
