<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
COMMISSION FILE NO. 0-23635
CONDOR TECHNOLOGY SOLUTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 54-1814931
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
170 JENNIFER ROAD, SUITE 325, ANNAPOLIS, MARYLAND 21401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(410) 266-8700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO __
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<CAPTION>
Outstanding as of
Class May 11, 1999
----- ------------
<S> <C>
COMMON STOCK , $.01 PAR VALUE 13,148,560
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets................................................................1
Consolidated Statements of Operations......................................................2
Consolidated Condensed Statements of Cash Flows............................................3
Notes to Consolidated Financial Statements...............................................4-9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................................................10-14
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK......................................................................14
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.........................................................................15
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ................................................15
Item 3. DEFAULTS UPON SENIOR SECURITIES...........................................................15
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................................15
Item 5. OTHER INFORMATION.........................................................................15
Item 6. EXHIBITS AND REPORTS ON FORM 8-K..........................................................16
SIGNATURES..................................................................................................17
EXHIBIT INDEX...............................................................................................18
</TABLE>
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
CONDOR TECHNOLOGY SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
------------ ----------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,053 $ 2,729
Restricted cash 2,756 2,513
Accounts receivable, net 39,814 46,530
Prepaids and other current assets 3,284 2,590
-------- --------
Total current assets 48,907 54,362
PROPERTY AND EQUIPMENT, NET 4,329 5,824
GOODWILL AND OTHER INTANGIBLES, NET 145,163 143,705
OTHER ASSETS 2,243 2,870
-------- --------
TOTAL ASSETS $200,642 $206,761
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 13,838 $ 18,025
Accrued expenses and other current liabilities 16,524 15,779
Deferred revenue 4,915 5,578
Current portion of contingent purchase liability 4,308 7,960
Current portion of long-term debt 442 459
-------- --------
Total current liabilities 40,027 47,801
LONG-TERM DEBT 24,296 23,190
NON-CURRENT CONTINGENT PURCHASE LIABILITY 20,348 16,696
OTHER LONG-TERM OBLIGATIONS 1,929 1,819
-------- --------
Total liabilities 86,600 89,506
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 10) -- --
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par, 1,000,000 authorized; none outstanding -- --
Common stock, $.01 par value; authorized 49,000,000 shares;
issued and outstanding, 12,009,608 shares at December 31, 1998
and 12,101,488 shares at March 31, 1999 120 121
Additional paid-in capital 111,278 111,591
Retained earnings 2,818 5,821
Other comprehensive income 20 (84)
Treasury stock, at cost (13,178 shares at March 31, 1999) (194) (194)
-------- --------
Total stockholders' equity 114,042 117,255
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $200,642 $206,761
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
1
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1999
------- -------
(unaudited)
<S> <C> <C>
IT service revenues $12,950 $38,749
Hardware procurement revenues 12,713 20,941
------- -------
Total revenues 25,663 59,690
Cost of IT services 6,681 21,319
Cost of hardware procurement 11,756 18,780
------- -------
Total cost of revenues 18,437 40,099
------- -------
Gross profit 7,226 19,591
Selling, general and administrative expenses 4,730 11,645
Depreciation and amortization 746 2,159
In process research and development 5,000 --
------- -------
Income (loss) from operations (3,250) 5,787
Interest and other income (expense), net 228 (425)
------- -------
Income (loss) before income taxes (3,022) 5,362
Income tax (benefit) provision (15) 2,359
------- -------
Net income (loss) $(3,007) $ 3,003
------- -------
------- -------
Net income (loss) per basic share $ (0.42) $ 0.25
------- -------
------- -------
Net income (loss) per diluted share $ (0.42) $ 0.22
------- -------
------- -------
Basic shares outstanding 7,117 12,043
------- -------
------- -------
Diluted shares outstanding 7,117 13,563
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
( in thousands )
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1999
-------- --------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(3,007) $ 3,003
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Research and development charge 5,000 --
Depreciation and amortization 746 2,159
Deferred income taxes (1,032) --
Changes in assets and liabilities 1,121 (2,792)
Other -- 241
-------- --------
Net cash provided by operating activities 2,828 2,611
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (179) (1,656)
Purchase of short term investments, net (21,822) --
Acquisition of subsidiaries, net of cash (40,823) --
Other (40) (257)
-------- --------
Net cash used in investing activities (62,864) (1,913)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt, net (1,174) (1,161)
Proceeds from initial public offering 73,131 --
Purchase of treasury shares (194) --
-------- --------
Net cash provided by (used in) financing activities 71,763 (1,161)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES (67) (104)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,660 (567)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH,
BEGINNING OF PERIOD 26 5,809
-------- --------
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH,
END OF PERIOD $11,686 $ 5,242
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
CONDOR TECHNOLOGY SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
Condor Technology Solutions, Inc., a Delaware corporation ("Condor" or the
"Company"), was founded in August 1996. The Company is an information
technology ("IT") service provider of strategic IT business solutions to
middle market organizations, Fortune 1000 companies and public sector
organizations. In order to become an end-to-end provider of a wide range of
IT services and solutions, Condor entered into agreements (the "Mergers") to
acquire all of the common stock of eight established IT service providers
(the "Founding Companies") and concurrently completed an initial public
offering (the "Offering") of its common stock (the "Common Stock"). On
February 5, 1998 and February 10, 1998, respectively, the Offering and the
Mergers were completed.
Between February 10, 1998 and December 31, 1998, the Company acquired five
additional IT service providers. The Founding Companies along with the newly
acquired companies are referred to herein as "operating companies". All
acquisitions have been accounted for using the purchase method of accounting
and are reflected as of their respective acquisition dates. The Company
intends to continue to pursue strategic acquisitions as a means to expand
the breadth of IT service it provides.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial reporting and Securities and Exchange Commission
regulations. Certain information and footnote disclosures normally included
in the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. In the opinion of management, the financial statements
reflect all adjustments (of a normal and recurring nature) which are
necessary to present fairly the financial position, results of operations
and cash flows for the interim periods. The results for the three months
ended March 31, 1999 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1999.
The financial statements should be read in conjunction with the Company's
audited consolidated financial statements included in the Company's most
recently filed Form 10-K.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
For a description of the Company's accounting policies, refer to the Notes
to the Financial Statements of the Company included in the Company's most
recently filed Form 10-K.
(3) ACQUISITIONS
The results of operations of the operating companies have been reflected in
the financial statements as of their respective acquisition dates. The
following table reflects unaudited pro forma combined results of operations
of the operating companies on the basis that the acquisitions of all of the
operating companies had taken place at the beginning of the period
presented:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998
------------------
(in thousands, except
per share amounts)
<S> <C>
Revenues $52,078
Net income 2,639
Net income per basic share $ 0.22
Net income per diluted share $ 0.22
</TABLE>
4
<PAGE>
The unaudited pro forma amounts reflect the results of operations for all of
the operating companies as well as the following purchase accounting
adjustments for the periods presented: reductions in salaries, bonuses,
profit sharing and other benefits to the stockholders of the operating
companies to which they have agreed prospectively; interest on assumed
borrowings; reduction of in-process research and development; elimination
of revenues and cost of revenues on transactions between operating
companies occurring prior to the acquisition by the Company; amortization
of goodwill recorded as a result of the acquisitions; income taxes on
S-corporation income; and the estimated income tax effect on the pro
forma adjustments. Total pro forma adjustments included as of March 31,
1998 were approximately $6,059,000 and resulted in a net increase to net
income.
The unaudited pro forma combined results of operations may not be comparable
to and may not be indicative of the actual results that would have occurred
had the acquisitions been consummated at the beginning of 1998 or of future
operations of the combined companies because the companies were not under
common control or management and had different tax and capital structures
during the period presented.
(4) INVESTMENT IN AFFILIATE
On February 15, 1999, the Company acquired 48% of the ownership interests of
Dimensional Systems LLC, a Cambridge, Massachusetts consulting firm focusing
on the development of a decision support lab, for an initial
purchase price of $120,000 in cash and 10,703 shares of Common Stock. The
agreement also contains an option, exercisable by the Company, to
purchase the remaining 52% of Dimensional Systems LLC for an additional
purchase price of $130,000 in cash and Common Stock valued at $130,000 as
set forth in the purchase agreement. The Company is accounting for this
transaction using the equity method.
(5) EARNINGS PER SHARE
The Company calculates earnings per share ("EPS") on both a basic and
diluted basis. Dilutive securities are excluded from the computation in
periods which they have an anti-dilutive effect. Net income available to
common stockholders and common equivalent stockholders is equal to net
income for all periods presented.
The following table represents reconciliations between the weighted average
common stock outstanding used in basic EPS and the weighted average common
and common equivalent shares outstanding used in diluted EPS for each of the
periods presented:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1999
----- ------
(in thousands)
<S> <C> <C>
Weighted average common stock
outstanding 7,117 12,043
Stock options, as if converted -- 3
Contingent purchase price adjustment -- 1,517
----- ------
Weighted average common and common
equivalent shares outstanding 7,117 13,563
----- ------
----- ------
</TABLE>
5
<PAGE>
(6) COMPREHENSIVE INCOME
Comprehensive income includes net income, foreign currency translation
adjustments and unrealized gains on marketable securities and is detailed as
follows for the periods presented:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1999
-------- --------
(in thousands)
<S> <C> <C>
Net income (loss) $(3,007) $ 3,003
Foreign currency translation adjustments (67) (84)
Unrealized gains on marketable securities 1 --
-------- --------
Comprehensive income $(3,073) $ 2,919
-------- --------
-------- --------
</TABLE>
(7) STOCK COMPENSATION
On January 1, 1999, the Company granted restricted stock awards to certain
key employees to purchase 58,500 shares of the Company's Common Stock at a
purchase price of $0.01 per share. These restricted stock awards vest in
four installments every six months beginning June 30, 1999. The Company
records compensation expense ratably over the vesting period based on the
current fair value of the Common Stock.
(8) SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1999
-------- -------
(in thousands)
<S> <C>
Cash paid during the year for:
Federal income tax payments $ -- $1,475
State income tax payments 347 723
Interest payments 29 99
Supplemental disclosure of non-cash transactions:
Liability incurred for technology license $ 3,100 $ --
Business acquisitions:
Cash paid for business acquisitions $47,100 $ --
Less cash acquired (4,677) --
-------- -------
Cash paid for business acquisitions, net 42,423 --
Issuance of common stock for business acquisition 24,000 --
-------- -------
Total purchase price 66,423 --
In-process research and development (5,000) --
Less fair value of net assets acquired, net of cash (927) --
-------- -------
Excess of fair value over net assets acquired $60,496 $ --
-------- -------
-------- -------
</TABLE>
The excess of fair value over net assets acquired includes goodwill,
internally developed software and other intangibles acquired in conjunction
with the acquisitions of the operating companies.
(9) SEGMENT REPORTING
The Company has four reportable segments: Consulting Services, System
Services, Enterprise Resource Planning ("ERP") Services, and Desktop
Services. These four segments correspond to the Company's existing
divisional structure.
6
<PAGE>
The Consulting Services Division provides strategic IT planning, decision
support, management consulting, and interactive media services. These
services involve the development of near and long-term technology plans that
help clients achieve specific strategic business objectives and include
interactive business solutions, IT needs analysis, technology infrastructure
design, future technology planning and refreshment, systems architecture
development, decision support planning and analysis, business process
automation and Year 2000 consulting.
The System Services Division offers its clients a single source for a wide
range of IT services required to successfully design, develop and implement
integrated IT solutions in diverse computing environments. The division's
services include custom application development, software package
implementation, contract staffing and recruiting, sale and implementation of
the Safari InfoTOOLS software and training and continuing education.
The ERP Services Division is a new division in the first quarter of 1999
which offers its clients a single source for enterprise resource planning
solutions focusing on the implementation and consulting related to the SAP,
Peoplesoft, BAAN, and Made2Manage enterprise software packages. The Division
focuses on the following service lines: installation, business process
design, configuration and implementation, and staff augmentation.
The Desktop Services Division provides customer management solutions and
support services, help-desk operations, as well as a complete array of
desktop systems maintenance and support services to its clients, including
hardware and software maintenance, systems testing and engineering, and
hardware procurement.
The accounting policies of the reportable segments are the same as those
described in Note 2. The Company evaluates the performance of its operating
segments based on operating income after intercompany transactions have been
eliminated. The "Other" column includes corporate related items not
allocated to the divisions. Corporate selling, general and administrative
costs have been allocated to the divisions based on a three factor formula
based on total revenue, operating income and total assets.
Summarized financial information concerning the Company's reportable
segments is shown in the following tables (in thousands).
For the period ended March 31, 1999:
<TABLE>
<CAPTION>
Consulting System ERP Desktop
Services Services Services Services Other Consolidated
-------- -------- -------- -------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
IT service revenues $ 5,271 $15,834 $10,311 $ 7,333 $ -- $ 38,749
Hardware procurement revenues -- -- -- 20,941 -- 20,941
------- ------- ------- ------- ------- --------
Total revenues 5,271 15,834 10,311 28,274 -- 59,690
Income from operations 527 1,377 839 3,044 -- 5,787
Total Assets $38,199 $70,367 $44,600 $39,197 $14,398 $206,761
</TABLE>
7
<PAGE>
For the period ended March 31, 1998:
<TABLE>
<CAPTION>
Consulting System ERP Desktop
Services Services Services Services Other Consolidated
-------- -------- -------- -------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
IT service revenues $ 2,192 $ 8,172 $ -- $ 2,586 $ -- $ 12,950
Hardware procurement revenues -- -- -- 12,713 -- 12,713
------- ------- -------- ------- ------- --------
Total revenues 2,192 8,172 -- 15,299 -- 25,663
Income (loss) from operations 189 1,154 -- 407 (5,000)(a) (3,250)
Total Assets $19,835 $43,134 $ -- $37,984 $24,885 $125,838
</TABLE>
- --------------------------
(a) Represents a charge of $5 million for in-process research and development.
(10) COMMITMENTS AND CONTINGENCIES
LAWSUIT
In the course of Condor's consolidation efforts, SCM LLC d/b/a The
Commonwealth Group ("Commonwealth"), the promoter of the Offering, and
Condor negotiated with Emtec, Inc. ("Emtec"), an IT service company based in
Pennsylvania, with a view to Emtec becoming one of the Founding Companies.
As part of the process, Emtec's investment banker and Commonwealth executed
two confidentiality agreements pursuant to which each agreed, among other
things, not to disclose certain confidential information and Commonwealth
agreed that it would not seek to enter into a business transaction with any
companies to be introduced to it by Emtec's investment banker for a period
of two years without such investment banker's prior written consent. On
October 28, 1997, Emtec filed a Complaint in the United States District
Court for the Eastern District of Pennsylvania against Condor, Commonwealth,
J. Marshall Coleman, a Managing Director of Commonwealth and the former
Chairman of the Board of Condor, and Kennard F. Hill, the Company's Chairman
of the Board and Chief Executive Officer, alleging breach of contract,
tortuous interference with Emtec's business relationship with Corporate
Access, Inc. ("Corporate Access") and Computer Hardware Maintenance
Corporation ("CHMC"), two of the Founding Companies, and misappropriation of
a trade secret arising out of the participation of CHMC and Corporate Access
in the consolidation and the Offering without Emtec's written consent. In
connection with the three causes of action, Emtec demands that the
defendants disgorge the financial benefits that they have and will obtain as
a result of their breach of contract and seeks compensatory and punitive
damages. On December 31, 1997, the defendants filed an Answer, denying the
allegations and asserting various affirmative defenses. The court denied
Emtec's claim for unjust enrichment. A motion by Condor for partial summary
judgment was granted in part to eliminate Emtec's claim for misappropriation
of a trade secret. Trial of this matter could be scheduled in the near
future. Condor believes that Emtec's allegations are without merit and that,
in any event, the ultimate resolution of this action will not have a
material adverse effect on the Company's financial position or results of
operations. The Company has agreed to indemnify CHMC's directors, officers
and stockholders against any liability such persons may incur as a result of
any claims brought by Emtec against any of them that directly related to
CHMC's participation as a Founding Company. Commonwealth has agreed to
indemnify the Company with regard to any final judgment or settlement
arising out of the above action or any similar action. Commonwealth's
obligations under such agreement have been guaranteed by the three members
of Commonwealth. The Company is a party to other legal proceedings and
disputes related to the Company's day to day business operations, none of
which, in the opinion of management, are material to the financial position
or results of operations of the Company.
8
<PAGE>
(11) SUBSEQUENT EVENTS
ACQUISITION
In April 1999, the Company acquired the outstanding ownership interests of a
company which provides enterprise resource planning services and software
for middle market companies in the Northeast. The initial purchase price
included $6.8 million in cash and 245,264 shares of Common Stock. The
Company will account for this transaction as a purchase business
combination. The purchase agreement also contains additional payments
contingent on the future earnings performance of the company. Any additional
payments made when the contingency is resolved will be accounted for as
goodwill and will be amortized over the remaining estimated life of such
goodwill.
CONTINGENT PURCHASE LIABILITY
Pursuant to contingent payment agreements entered into as part of the
acquisitions of the operating companies, approximately $24,656,000 of
contingent consideration was accrued at March 31, 1999. On April 15, 1999,
the Company paid $7 million in cash and $7 million of Common Stock (782,123
shares) related to the accrued contingent consideration. The remaining
balance will be paid in 2000 and 2001 in accordance with the original
purchase agreements.
CREDIT FACILITY
In April 1999, the Company entered into a $100 million credit facility
underwritten and arranged by a major commercial bank. This credit facility
includes a three-year, $75 million revolving line of credit (the "Revolver")
and a five-year, $25 million term loan (the "Term Loan"). The Term Loan
includes repayments of principle in quarterly installments with final
payment due March 31, 2004. Interest accrues on the Term Loan at the Base
Rate (which is the greater of Prime Rate or the Federal Funds Rate plus
0.50%) plus 1.5% or the London Interbank Offering Rate ("LIBOR") plus 3.0%,
at the option of the Company. Borrowings under the Revolver bear interest
beginning at the Base Rate plus 0.50% to 1.50% or the LIBOR Rate plus 1.75%
to 2.75% basis points, at the option of the Company. The Company is also
required to pay a commitment fee based on the unused portion of the Revolver
at an annual percentage rate ranging from 0.50% to 0.75% as defined in the
agreement. The Company must comply with various loan covenants including:
(i) maintenance of certain financial ratios; (ii) limits on capital
expenditures; (iii) restrictions on additional indebtedness; (iv)
restrictions on liens, guarantees, advances and dividends; and (v)
restrictions on the type, size and number of acquisitions. The credit
facility is intended to be used to finance acquisitions, refinance existing
indebtedness and fund working capital requirements.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is qualified in its entirety by reference to and
should be read in conjunction with the Annual Report on Form 10-K of the
Company for its fiscal year ended December 31, 1998 (the "Form 10-K"). A
number of statements in this Quarterly Report on Form 10-Q address
activities, events or developments which the Company anticipates may occur
in the future, including such matters as the Company's strategy for internal
growth, additional capital expenditures (including the amount and nature
thereof), acquisitions of assets and businesses, industry trends and other
such matters. For a discussion of important factors which could cause actual
results to differ materially from the forward-looking statements see
"Special Note Regarding Forward Looking Statements."
INTRODUCTION
The Company earns revenues from the provision of IT services and hardware
procurement. The Company recognizes IT service revenues using formulas based
on time and materials, whereby revenues are recognized as costs are incurred
at agreed-upon billing rates. For projects billed on a fixed-price basis,
revenue is recognized using the percentage of completion method. Percentage
of completion is determined using total costs as a cost input measure.
Revenues from license fees on proprietary software are recognized when a
non-cancelable license agreement has been signed, the product has been
delivered, collection is probable and all significant obligations relating
to the license have been satisfied. There are no significant post-sales
support obligations related to the Company's license fees. Revenues from
hardware procurement are recognized upon shipment or acceptance of the
equipment. When installation services are an integral component of the
hardware procurement, revenue is recognized at the customer's acceptance of
the equipment.
Cost of revenues includes the provision of services and material directly
related to the revenues, costs of acquisition of hardware resold to clients,
subcontracted labor or other outside services and other direct costs
associated with revenues, as well as an allocation of certain indirect
costs.
Selling, general and administrative costs include salaries, benefits,
commissions payable to the Company's sales and marketing personnel,
recruiting, finance and other general and administrative costs.
In July 1996, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 97 ("SAB 97") relating to business combinations immediately
prior to an initial public offering. SAB 97 requires that these combinations
be accounted for using the purchase method of acquisition accounting. Condor
was identified as the "accounting acquiror" for financial statement
presentation purposes.
RESULTS OF OPERATIONS
The Company's consolidated financial statements have been prepared based on
accounting for all companies acquired using the purchase method of
acquisition accounting. All operating companies that previously used fiscal
year financial reporting basis have converted to a calendar year financial
reporting basis and because all individual operating companies are now
included in the consolidated tax return of Condor, all have converted their
tax status to be taxed under subchapter C of the Internal Revenue Code of
1986, as amended. The financial statements include operations of the
operating companies from their respective dates of acquisition.
Financial statement audits of the Founding Companies were completed through
January 31, 1998. As there were no significant transactions from February 1,
1998 to the February 10, 1998 closing of the Mergers, January 31, 1998 is
considered to represent the pre-merger closing balance sheet. On February 1,
1998 (the date of post-Merger balance sheet), Condor began reporting on a
consolidated basis. As a result, for the period ended March 31, 1998,
Condor's consolidated operating results include the Founding Companies'
operations for only two months.
10
<PAGE>
The following table sets forth certain selected financial data for the
Company and as a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1999
------------------- --------------------
(in thousands, except percentages)
<S> <C> <C> <C> <C>
IT service revenues $12,950 50.5% $38,749 64.9%
Hardware procurement revenues 12,713 49.5 20,941 35.1
------- ------ ------- ------
Total revenues 25,663 100.0 59,690 100.0
------- ------ -------
Cost of IT services 6,681 51.6 21,319 55.0
Cost of hardware procurement 11,756 92.5 18,780 89.7
------- ------- ------
Total cost of revenues 18,437 71.9 40,099 67.2
------- -------
Gross profit 7,226 28.1 19,591 32.8
Selling, general and administrative expenses 4,730 18.4 11,645 19.5
Depreciation and amortization 746 2.9 2,159 3.6
In process research and development 5,000 19.5 -- --
------- ------ ------- ------
Income from operations $(3,250) (12.7)% $5,787 9.7%
------- ------ ------- ------
------- ------ ------- ------
</TABLE>
REVENUES. Revenue increased $34.0 million or 133%, from $25.7 million for
the three months ended March 31, 1998 to $59.7 million for the three months
ended March 31, 1999. This increase is partly a result of the inclusion of
only two of the three months of operations of the Founding Companies in 1998
compared to the three months ended March 31, 1999, in which all of the
operating companies' revenues were included for January through March.
The increase is also the result of organic revenue growth and the
acquisition of five additional operating companies subsequent to
the initial public offering. IT service revenue grew approximately
$25.8 million, or 199%, while hardware procurement revenue increased
$8.2 million, or 65%.
IT service revenue increased in each of the Company's divisions. The
Consulting Services division revenue growth was primarily attributable to
increases in consulting and planning services within the division and the
acquisition of Decision Support Technologies in May 1998 and Louden
Associates, Inc. in June 1998. The System Services division revenue growth
was primarily attributable to increased systems development projects during
the first quarter of 1999 and the acquisition of LINC Systems Corporation in
July 1998, but is offset by a decrease in sales of the Company's SafariTOOLS
software licenses during the first quarter of 1999. The ERP division
includes operations of PowerCrew, Inc. and Global Core Strategies, Inc. each
of which were acquired in the fourth quarter of 1998. The Desktop Services
division revenue growth was primarily attributable to growth in the
Company's customer management solutions, help desk and support services.
The increase in hardware procurement revenue was primarily attributable to
the inclusion of only two of the three months of operations of the Founding
Companies in 1998. In general, the Company has shifted its focus from
hardware procurement to higher margin IT service revenues.
COST OF REVENUES. Cost of revenues increased $21.7 million or 117% from
$18.4 million for the three months ended March 31, 1998 to $40.1 million for
the three months ended March 31, 1999. This increase is primarily
attributable to the revenue growth discussed above. Cost of revenues as a
percentage of revenues decreased from 71.9% of revenues for the three months
ended March 31, 1998 to 67.2% for the three months ended March 31, 1999.
This decrease was primarily attributable to the shift in revenue mix toward
higher margin IT service revenues.
11
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $6.9 million, or 146%, from $4.7 million
to $11.6 million for the three months ended March 31, 1998 and 1999,
respectively. The increase is attributable to the inclusion of only two of
the three months of operations of the Founding Companies in 1998; the
acquisitions of the additional five operating companies subsequent to the
Mergers; the hiring of additional sales and marketing staff and
administrative personnel; and recruiting and hiring additional personnel in
the consulting, systems and ERP services areas in anticipation of future
revenue growth. Selling, general and administrative costs increased from
18.4% of revenues to 19.5% of revenues for the three months ended March 31,
1998 and 1999, respectively. This increase primarily resulted from the
incremental selling, general and administrative costs associated with the
execution of the Company's growth strategies.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $1.4
million, or 189%, from $746,000 for the three months ended March 31, 1998 to
$2.2 million for the three months ended March 31, 1999. The increase is
attributable to the amortization of goodwill of the Founding Companies
beginning at the time of the Mergers which included only two of the three
months in 1998; an increase in goodwill and other intangible amortization
associated with the acquisitions of the additional five operating companies
subsequent to the Mergers; additional amortization on goodwill related to
the contingent purchase consideration earned at December 31, 1998; and the
increase of property and equipment.
LIQUIDITY AND CAPITAL RESOURCES
Condor is a holding company that conducts its operations through its
subsidiaries. Accordingly, Condor's principal sources of liquidity are the
cash flows of its operating divisions and cash available from its credit
facilities. At March 31, 1999 the Company had $2.7 million in cash and cash
equivalents and $23.6 of indebtedness outstanding, which consists primarily
of borrowings on its revolving credit facility (the "Revolver"). The Company
entered into a $100 million credit facility (the "Credit Facility") in April
1999 to give it additional funding to pursue strategic acquisition
opportunities.
Net cash provided by operating activities was $2.6 million for the three
months ended March 31, 1999. Net cash used in investing activities was $1.9
million for the three months ended March 31, 1999 which included $1.7
million for purchases of property and equipment and costs of obtaining
and developing the Company's ERP system.
Net cash used in financing activities was $1.2 million for the three months
ended March 31, 1999 which is comprised of net repayments of debt most of
which paid down the Company's borrowings on its Revolver.
The Company intends to continue to pursue acquisition opportunities. The
timing, size or success of any acquisition effort and the associated
potential capital commitments are unpredictable. The Company expects to fund
future acquisitions primarily through a combination of cash flows from
operations and borrowings, including borrowings under the Credit Facility,
as well as issuances of additional shares of Common Stock.
The Company believes that its cash flows from operations and borrowings
under its Credit Facility will be sufficient to fund its cash flow
requirements for at least the next 12 months. To the extent that the Company
is successful in consummating acquisitions, it may be necessary to finance
such acquisitions through the issuance of additional equity securities,
incurrence of indebtedness or both.
12
<PAGE>
YEAR 2000 READINESS
IMPACT OF YEAR 2000 ISSUE. The Year 2000 issue is the result of certain
computer programs being written using two digits rather than four to define
the applicable year. Any computer programs or hardware that have
date-sensitive software or embedded chips may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
Based on recent assessments, the Company determined that it will be required
to modify or replace portions of hardware and software so that those systems
will properly utilize dates beyond December 31, 1999. The Company presently
believes that with modifications and replacement of some of the existing
hardware and software, the Year 2000 issue can be mitigated. However, if
such modifications and replacements are not made, or are not completed
timely, the Year 2000 issue could have a small to moderate impact on the
Company's operations. The Company currently does not have a formal
contingency plan in place, however a plan is expected to be completed by
September 1999.
The Company's plan to resolve the Year 2000 issues involves four phases:
assessment, remediation, testing and implementation.
ASSESSMENT. The Company has fully completed its assessment of all material
systems and Company products that could be affected by the Year 2000 issue.
The completed assessment indicated that a portion of the Company's
information technology systems could be affected. That assessment also
indicated that the current accounting system is at risk of not being Year
2000 compliant. If not resolved on a timely basis, this could affect the
Company's ability to provide adequate and timely billing information.
REMEDIATION. The Company estimates that it is 90% complete in the
remediation phase of all material hardware systems and expects to complete
corporate remediation by June 1999. After completing remediation, the
Company's plans include testing and implementing its information technology
systems.
TESTING AND IMPLEMENTATION. The Company estimates it has completed 80% of
the testing and implementation of its remediated systems. Completion of the
testing phase is expected by August 1999 with all remediated systems fully
implemented by October 1999. In certain cases, the remedy is a replacement
of the system or software. The Company has begun the implementation of a
Year 2000 compliant enterprise resource planning ("ERP") accounting and
management information system to remediate the risk of the current
accounting software. The completion of this implementation is scheduled for
October 1999.
THIRD PARTIES. With respect to third parties, the Company has completed its
assessment, remediation and testing phases. Implementation is 90% complete
and is expected to be completed by July 1999.
The Company is in the process of surveying its significant suppliers that do
not involve system interface. The Company has no means of ensuring that
these suppliers will be Year 2000 ready, and the inability of those parties
to complete the Year 2000 resolution process could materially impact the
Company. The effect of non-compliance by third parties, where no system
interface exists, is not determinable. The Company is not aware of any
problems with third parties that would materially impact results of
operations, liquidity, or capital resources. To the extent that certain
licensed products proprietary to the Company are non-compliant, the Company
is offering to provide upgrades to its customers.
13
<PAGE>
COST. The Company will utilize both internal and external resources to
update or replace, test, and implement the affected information technology
systems for Year 2000 modifications. The total cost of the Year 2000 project
is estimated at $1.6 million and is being funded through operating cash
flows. Expenditures to date have related to all phases of the Year 2000
project. As of March 31, 1999, the cost incurred to date was approximately
$1.3 million. Remaining costs relate to the resources to complete
implementation of new systems.
The Company's plans to complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources and other factors. Estimates on the status of completion and the
expected completion dates are based on costs incurred to date compared to
total expected costs. However, there can be no guarantee that these
estimates will be achieved, and actual results could differ materially from
those plans. Special factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel
trained in this area, the ability to locate and correct all relevant
computer codes, and similar uncertainties.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Statements in this Form 10-Q based on current expectations that are not
strictly historical statements, such as the Company's or management's
intentions, hopes, beliefs, expectations, strategies, or predictions, are
forward-looking statements. Such statements, or any other variation thereof
regarding the Company's future activities or other future events or
conditions within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934, as amended, are intended
to be covered by the safe harbors for forward-looking statements created
thereby. Investors are cautioned that all forward-looking statements involve
risks and uncertainty, including without limitation, the sufficiency of the
Company's working capital and the ability of the Company to realize benefits
from consolidating certain general and administrative functions, to pursue
strategic acquisitions and alliances, to retain management and to implement
its focused business strategy, to leverage consulting services, secure
full-service contracts, to expand client relationships, successfully
recruit, train and retain personnel, expand services and geographic reach
and successfully defend itself in ongoing and future litigation.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK. The Company is exposed to market risk from adverse changes in
interest rates and foreign currency exchange rates.
INTEREST RATE RISKS. The Company is exposed to risk from changes in interest
rates as a result of its borrowing activities. At March 31, 1999, the
Company had total debt of $23.6 million of which $23 million represents
borrowings on its Credit Facility. Management does not believe that the
Company's exposure to interest rate fluctuations is material.
FOREIGN CURRENCY EXCHANGE RISK. The Company's international operations are
subject to foreign exchange rate fluctuations. The Company derived 1.9% of
its revenue for the three months ended March 31, 1999 from services
performed in the Netherlands, the United Kingdom and Germany, all of which
have traditionally had relatively stable currencies. Management does not
believe that the Company's exposure to foreign currency rate fluctuations is
material.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the course of Condor's consolidation efforts, SCM LLC d/b/a The
Commonwealth Group ("Commonwealth"), the promoter of the Offering, and
Condor negotiated with Emtec, Inc. ("Emtec"), an IT service company based in
Pennsylvania, with a view to Emtec becoming one of the Founding Companies.
As part of the process, Emtec's investment banker and Commonwealth executed
two confidentiality agreements pursuant to which each agreed, among other
things, not to disclose certain confidential information and Commonwealth
agreed that it would not seek to enter into a business transaction with any
companies to be introduced to it by Emtec's investment banker for a period
of two years without such investment banker's prior written consent. On
October 28, 1997, Emtec filed a Complaint in the United States District
Court for the Eastern District of Pennsylvania against Condor, Commonwealth,
J. Marshall Coleman, a Managing Director of Commonwealth and the former
Chairman of the Board of Condor, and Kennard F. Hill, the Company's Chairman
of the Board and Chief Executive Officer, alleging breach of contract,
tortuous interference with Emtec's business relationship with Corporate
Access, Inc. ("Corporate Access") and Computer Hardware Maintenance
Corporation ("CHMC"), two of the Founding Companies, and misappropriation of
a trade secret arising out of the participation of CHMC and Corporate Access
in the consolidation and the Offering without Emtec's written consent. In
connection with the three causes of action, Emtec demands that the
defendants disgorge the financial benefits that they have and will obtain as
a result of their breach of contract and seeks compensatory and punitive
damages. On December 31, 1997, the defendants filed an Answer, denying the
allegations and asserting various affirmative defenses. The court denied
Emtec's claim for unjust enrichment. A motion by Condor for partial summary
judgment was granted in part to eliminate Emtec's claim for misappropriation
of a trade secret. Trial of this matter could be scheduled in the near
future. Condor believes that Emtec's allegations are without merit and that,
in any event, the ultimate resolution of this action will not have a
material adverse effect on the Company's financial position or results of
operations. The Company has agreed to indemnify CHMC's directors, officers
and stockholders against any liability such persons may incur as a result of
any claims brought by Emtec against any of them that directly related to
CHMC's participation as a Founding Company. Commonwealth has agreed to
indemnify the Company with regard to any final judgment or settlement
arising out of the above action or any similar action. Commonwealth's
obligations under such agreement have been guaranteed by the three members
of Commonwealth. The Company is a party to other legal proceedings and
disputes related to the Company's day to day business operations, none of
which, in the opinion of management, are material to the financial position
or results of operations of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the first quarter of the year ending December 31, 1999, no matters
were submitted to a vote of the Company's security holders.
ITEM 5. OTHER INFORMATION
Not applicable.
15
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (see index on page 18)
(b) Reports on Form 8-K:
The Company filed a Form 8-K/A Current Report on February 22, 1999
related to the acquisition of Global Core Strategies Acquisition, Inc.
16
<PAGE>
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 thereunto duly authorized.
CONDOR TECHNOLOGY SOLUTIONS, INC.
Date May , 1999 By:
--------------- --------------------------------
Kennard F. Hill
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
Date May , 1999 By:
--------------- -----------------------------------
William J. Caragol, Jr.
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
17
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------- -------------
<S> <C>
10.14 Credit Agreement by and among the Company and First Union
National Bank, as Issuing Lender, Collateral Agent and
Administrative Agent, and First Union Commercial Corporation,
as Swingline Lender and Lender and related ancillary documents.
10.15 Purchase Agreement dated as of April 1, 1999, by and among the
Company and the Interest Holders of Titan Technologies Group,
LLC.
27 Financial Data Schedule for the three months ended March 31, 1999.
</TABLE>
18
<PAGE>
EXECUTION COPY
Exhibit 10.14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
dated as of April 16, 1999
by and among
CONDOR TECHNOLOGY SOLUTIONS, INC.,
the Subsidiary Borrowers referenced herein,
as Borrowers,
the Lenders referred to herein,
and
FIRST UNION NATIONAL BANK,
as Issuing Lender, Collateral Agent and Administrative Agent, and
FIRST UNION COMMERCIAL CORPORATION,
as Swingline Lender and Lender
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS............................................................................................1
SECTION 1.1 DEFINITIONS........................................................................1
SECTION 1.2 GENERAL...........................................................................15
SECTION 1.3 OTHER DEFINITIONS AND PROVISIONS..................................................16
ARTICLE II REVOLVING CREDIT FACILITY............................................................................16
SECTION 2.1 REVOLVING CREDIT LOANS............................................................16
SECTION 2.2 SWINGLINE LOANS...................................................................16
SECTION 2.3 PROCEDURE FOR ADVANCES OF REVOLVING CREDIT AND SWINGLINE LOANS....................18
SECTION 2.4 REPAYMENT OF LOANS................................................................19
SECTION 2.5 NOTES.............................................................................19
SECTION 2.6 PERMANENT REDUCTION OF REVOLVING CREDIT FACILITY..................................20
SECTION 2.7 TERMINATION OF REVOLVING CREDIT FACILITY..........................................20
SECTION 2.8 USE OF PROCEEDS...................................................................21
ARTICLE III LETTER OF CREDIT FACILITY...........................................................................21
SECTION 3.1 L/C COMMITMENT....................................................................21
SECTION 3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT.......................................21
SECTION 3.3 COMMISSIONS AND OTHER CHARGES.....................................................22
SECTION 3.4 L/C PARTICIPATIONS................................................................22
SECTION 3.5 REIMBURSEMENT OBLIGATION OF THE BORROWERS.........................................23
SECTION 3.6 OBLIGATIONS ABSOLUTE..............................................................24
SECTION 3.7 EFFECT OF APPLICATION.............................................................24
SECTION 3.8 LETTERS OF CREDIT ISSUED PURSUANT TO THE EXISTING FACILITY........................24
ARTICLE IV TERM LOAN FACILITY...................................................................................25
SECTION 4.1 TERM LOAN.........................................................................25
SECTION 4.2 PROCEDURE FOR ADVANCE OF TERM LOAN................................................25
SECTION 4.3 REPAYMENT OF TERM LOAN............................................................25
SECTION 4.4 OPTIONAL PREPAYMENT OF TERM LOAN..................................................26
SECTION 4.5 TERM NOTES........................................................................26
ARTICLE V GENERAL LOAN PROVISIONS...............................................................................26
SECTION 5.1 INTEREST..........................................................................26
SECTION 5.2 NOTICE AND MANNER OF CONVERSION OR CONTINUATION OF LOANS..........................29
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 5.3 FEES..............................................................................29
SECTION 5.4 MANNER OF PAYMENT.................................................................30
SECTION 5.5 CREDITING OF PAYMENTS AND PROCEEDS................................................30
SECTION 5.6 ADJUSTMENTS.......................................................................31
SECTION 5.7 NATURE OF OBLIGATIONS OF LENDERS REGARDING EXTENSIONS OF CREDIT; ASSUMPTION BY THE
ADMINISTRATIVE AGENT..............................................................31
SECTION 5.8 CHANGED CIRCUMSTANCES.............................................................32
SECTION 5.9 INDEMNITY.........................................................................34
SECTION 5.10 CAPITAL REQUIREMENTS..............................................................34
SECTION 5.11 TAXES.............................................................................34
SECTION 5.12 SECURITY..........................................................................36
SECTION 5.13 JOINT AND SEVERAL LIABILITY; CONTRIBUTION.........................................36
SECTION 5.14 MITIGATION OF OBLIGATIONS; REPLACEMENT OF LENDERS.................................37
ARTICLE VI CLOSING; CONDITIONS OF CLOSING AND BORROWING.........................................................37
SECTION 6.1 CLOSING...........................................................................37
SECTION 6.2 CONDITIONS TO CLOSING AND INITIAL EXTENSIONS OF CREDIT............................38
SECTION 6.3 CONDITIONS TO ALL EXTENSIONS OF CREDIT............................................41
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE BORROWERS.....................................................41
SECTION 7.1 REPRESENTATIONS AND WARRANTIES....................................................41
SECTION 7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC...................................47
ARTICLE VIII FINANCIAL INFORMATION AND NOTICES..................................................................48
SECTION 8.1 FINANCIAL STATEMENTS AND PROJECTIONS..............................................48
SECTION 8.2 OFFICER'S COMPLIANCE CERTIFICATE..................................................49
SECTION 8.3 ACCOUNTANTS'CERTIFICATE...........................................................49
SECTION 8.4 OTHER REPORTS.....................................................................49
SECTION 8.5 NOTICE OF LITIGATION AND OTHER MATTERS............................................50
SECTION 8.6 ACCURACY OF INFORMATION...........................................................50
ARTICLE IX AFFIRMATIVE COVENANTS................................................................................51
SECTION 9.1 PRESERVATION OF CORPORATE EXISTENCE AND RELATED MATTERS...........................51
SECTION 9.2 MAINTENANCE OF PROPERTY...........................................................51
SECTION 9.3 INSURANCE.........................................................................51
SECTION 9.4 ACCOUNTING METHODS AND FINANCIAL RECORDS..........................................51
SECTION 9.5 PAYMENT AND PERFORMANCE OF OBLIGATIONS............................................51
SECTION 9.6 COMPLIANCE WITH LAWS AND APPROVALS................................................52
SECTION 9.7 ENVIRONMENTAL LAWS................................................................52
SECTION 9.8 COMPLIANCE WITH ERISA.............................................................52
SECTION 9.9 COMPLIANCE WITH AGREEMENTS........................................................53
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 9.10 CONDUCT OF BUSINESS...............................................................53
SECTION 9.11 VISITS AND INSPECTIONS............................................................53
SECTION 9.12 ADDITIONAL SUBSIDIARIES...........................................................53
SECTION 9.13 YEAR 2000 COMPATIBILITY...........................................................53
SECTION 9.14 FURTHER ASSURANCES................................................................53
ARTICLE X FINANCIAL COVENANTS...................................................................................54
SECTION 10.1 LEVERAGE RATIO....................................................................54
SECTION 10.2 INTEREST COVERAGE RATIO...........................................................54
SECTION 10.3 LIMITATIONS ON CAPITAL EXPENDITURES...............................................54
SECTION 10.4 MINIMUM NET WORTH.................................................................54
SECTION 10.5 MINIMUM PRO FORMA EBITDA..........................................................54
ARTICLE XI NEGATIVE COVENANTS...................................................................................55
SECTION 11.1 LIMITATIONS ON DEBT...............................................................55
SECTION 11.2 LIMITATIONS ON GUARANTY OBLIGATIONS...............................................56
SECTION 11.3 LIMITATIONS ON LIENS..............................................................56
SECTION 11.4 LIMITATIONS ON LOANS, ADVANCES, INVESTMENTS AND ACQUISITIONS......................57
SECTION 11.5 LIMITATIONS ON MERGERS AND LIQUIDATION............................................58
SECTION 11.6 LIMITATIONS ON SALE OF ASSETS.....................................................59
SECTION 11.7 LIMITATIONS ON DIVIDENDS AND DISTRIBUTIONS........................................59
SECTION 11.8 LIMITATIONS ON EXCHANGE AND ISSUANCE OF CAPITAL STOCK.............................59
SECTION 11.9 TRANSACTIONS WITH AFFILIATES......................................................60
SECTION 11.10 CERTAIN ACCOUNTING CHANGES; ORGANIZATIONAL DOCUMENTS..............................60
SECTION 11.11 AMENDMENTS; PAYMENTS AND PREPAYMENTS OF SUBORDINATED DEBT.........................60
SECTION 11.12 RESTRICTIVE AGREEMENTS............................................................60
SECTION 11.13 OWNERSHIP OF SUBSIDIARIES; LIMITATIONS ON THE COMPANY AND ITS SUBSIDIARIES........61
SECTION 11.14 IMPAIRMENT OF SECURITY INTERESTS..................................................61
ARTICLE XII DEFAULT AND REMEDIES................................................................................61
SECTION 12.1 EVENTS OF DEFAULT.................................................................61
SECTION 12.2 REMEDIES..........................................................................64
SECTION 12.3 RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC...................................65
ARTICLE XIII THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT..................................................65
SECTION 13.1 APPOINTMENT.......................................................................65
SECTION 13.2 DELEGATION OF DUTIES..............................................................65
SECTION 13.3 EXCULPATORY PROVISIONS............................................................65
SECTION 13.4 RELIANCE BY THE AGENTS............................................................66
SECTION 13.5 NOTICE OF DEFAULT.................................................................66
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 13.6 NON-RELIANCE ON THE AGENTS AND OTHER LENDERS......................................67
SECTION 13.7 INDEMNIFICATION...................................................................67
SECTION 13.8 THE AGENTS IN THEIR INDIVIDUAL CAPACITY...........................................68
SECTION 13.9 RESIGNATION OF THE AGENTS; SUCCESSOR AGENTS.......................................68
ARTICLE XIV MISCELLANEOUS.......................................................................................68
SECTION 14.1 NOTICES...........................................................................68
SECTION 14.2 EXPENSES; INDEMNITY...............................................................69
SECTION 14.3 SET-OFF...........................................................................70
SECTION 14.4 GOVERNING LAW.....................................................................70
SECTION 14.5 CONSENT TO JURISDICTION...........................................................70
SECTION 14.6 BINDING ARBITRATION; WAIVER OF JURY TRIAL.........................................71
SECTION 14.7 REVERSAL OF PAYMENTS..............................................................72
SECTION 14.8 INJUNCTIVE RELIEF; PUNITIVE DAMAGES...............................................72
SECTION 14.9 ACCOUNTING MATTERS................................................................72
SECTION 14.10 SUCCESSORS AND ASSIGNS; PARTICIPATIONS............................................73
SECTION 14.11 AMENDMENTS, WAIVERS AND CONSENTS..................................................76
SECTION 14.12 PERFORMANCE OF DUTIES.............................................................77
SECTION 14.13 ALL POWERS COUPLED WITH INTEREST..................................................77
SECTION 14.14 SURVIVAL OF INDEMNITIES...........................................................77
SECTION 14.15 TITLES AND CAPTIONS...............................................................77
SECTION 14.16 SEVERABILITY OF PROVISIONS........................................................77
SECTION 14.17 COUNTERPARTS......................................................................77
SECTION 14.18 TERM OF AGREEMENT.................................................................77
SECTION 14.19 INCONSISTENCIES WITH OTHER DOCUMENTS; INDEPENDENT EFFECT OF COVENANTS.............78
SECTION 14.20 COMPANY AS AGENT FOR SUBSIDIARY BORROWERS.........................................78
</TABLE>
<PAGE>
EXHIBITS
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Swingline Note
Exhibit A-3 - Form of Term Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Account Designation
Exhibit D - Form of Notice of Prepayment
Exhibit E - Form of Notice of Conversion/Continuation
Exhibit F - Form of Officer's Compliance Certificate
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Collateral Agreement
Exhibit I - Form of Joinder Agreement
Exhibit J - Form of Intercompany Note
SCHEDULES
Schedule 1 - Lenders and Commitments
Schedule 7.1(a) - Jurisdictions of Organization and Qualification
Schedule 7.1(b) - Subsidiaries and Capitalization
Schedule 7.1(i) - ERISA Plans
Schedule 7.1(l) - Material Contracts
Schedule 7.1(m) - Labor and Collective Bargaining Agreements
Schedule 7.1(t) - Debt and Guaranty Obligations
Schedule 7.1(u) - Litigation
Schedule 11.3 - Existing Liens
Schedule 11.4 - Existing Loans, Advances and Investments
Schedule 11.9 - Transactions with Affiliates
<PAGE>
CREDIT AGREEMENT dated as of the 16th day of April, 1999, by and among
CONDOR TECHNOLOGY SOLUTIONS, INC., a Delaware corporation (the "COMPANY"), each
of the Subsidiaries of the Company listed on the signature pages hereto and each
additional Subsidiary of the Company which hereafter becomes a Borrower pursuant
to SECTION 9.12 (collectively, the "SUBSIDIARY BORROWERS"; together with the
Company being herein collectively referenced as the "BORROWERS"), the Lenders
who are or may become a party to this Agreement, and FIRST UNION NATIONAL BANK,
as Collateral Agent and Administrative Agent for the Lenders and as Issuing
Lender and FIRST UNION COMMERCIAL CORPORATION, as Swingline Lender and Lender.
STATEMENT OF PURPOSE
The Borrowers have requested, and the Lenders have agreed, to extend
certain credit facilities to the Borrowers on the terms and conditions of this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. The following terms when used in this
Agreement shall have the meanings assigned to them below:
"ACQUIRED EBITDA" means, for any period, Pro Forma EBITDA LESS EBITDA.
"ADMINISTRATIVE AGENT" means First Union in its capacity as
administrative agent hereunder, and any successor thereto appointed pursuant to
SECTION 13.9.
"ADMINISTRATIVE AGENT'S OFFICE" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of SECTION
14.1(c).
"AFFILIATE" means, with respect to any Person, any other Person (other
than a Subsidiary) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person or any of its Subsidiaries. The term "CONTROL" means (a) the
power to vote five percent (5%) or more of the securities or other equity
interests of a Person having ordinary voting power, or (b) the possession,
directly or indirectly, of any other power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
"AGENTS" means the collective reference to the Administrative Agent and
the Collateral
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Agent.
"AGGREGATE COMMITMENT" means the aggregate amount of the Lenders'
Revolving Credit Commitments and Term Loan Commitments hereunder, as such amount
may be reduced or modified at any time or from time to time pursuant to the
terms hereof. On the Closing Date, the Aggregate Commitment shall be One Hundred
Million Dollars ($100,000,000).
"AGREEMENT" means this Credit Agreement, as amended, restated,
supplemented or otherwise modified from time to time.
"APPLICABLE LAW" means all applicable provisions of constitutions,
laws, statutes, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of courts or Governmental Authorities and
all orders and decrees of all courts and arbitrators.
"APPLICABLE MARGIN" has the meaning assigned thereto in SECTION 5.1(c).
"APPLICATION" means an application, in the form specified by the
Issuing Lender from time to time, requesting the Issuing Lender to issue a
Letter of Credit.
"ARBITRATION RULES" has the meaning assigned thereto in SECTION 14.6.
"ASSIGNMENT AND ACCEPTANCE" shall have the meaning assigned thereto in
SECTION 14.10.
"AVERAGE UTILIZATION" means, for any fiscal quarter, the sum of the
average aggregate amount of Revolving Credit Loans and L/C Obligations
outstanding during each of the three (3) calendar months (calculated for each
such month on the basis of actual daily outstandings) comprising such fiscal
quarter divided by three (3).
"BASE RATE" means, at any time, the higher of (a) the Prime Rate and
(b) the sum of (i) the Federal Funds Rate and (ii) 1/2 of 1%; each change in the
Base Rate shall take effect simultaneously with the corresponding change or
changes in the Prime Rate or the Federal Funds Rate.
"BASE RATE LOAN" means any Loan bearing interest at a rate based upon
the Base Rate as provided in SECTION 5.1(a).
"BORROWERS" has the meaning assigned to such term in the preamble.
"BUSINESS DAY" means (a) for all purposes other than as set forth in
clause (b) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Charlotte, North Carolina and New York, New York, are open for
the conduct of their commercial banking business, and (b) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, any LIBOR Rate Loan, any day that is a Business Day described in
clause (a) and that is also a day for trading by and between banks in Dollar
deposits in the London
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interbank market.
"CAPITAL ASSET" means, with respect to the Borrowers and their
Subsidiaries, any asset that should, in accordance with GAAP, be classified and
accounted for as a capital asset on a Consolidated balance sheet of the
Borrowers.
"CAPITAL EXPENDITURES" means, with respect to the Borrowers and their
Subsidiaries for any period, the aggregate cost of all Capital Assets acquired
by the Borrowers during such period determined on a Consolidated basis in
accordance with GAAP; PROVIDED, that Capital Expenditures shall not include the
purchase price paid in connection with a Permitted Acquisition, or expenditures
for the repair, restoration or replacement of any asset that was damaged or
destroyed, in an amount equal to any insurance proceeds received in connection
with such damage or destruction.
"CAPITAL LEASE" means, with respect to the Borrowers, any lease of any
property that should, in accordance with GAAP, be classified and accounted for
as a capital lease on a Consolidated balance sheet of the Borrowers.
"CHANGE IN CONTROL" has the meaning assigned thereto in SECTION
12.1(i).
"CLOSING DATE" means the date of this Agreement or such later Business
Day upon which each condition described in SECTION 6.2 shall be satisfied or
waived in all respects in a manner acceptable to the Administrative Agent, in
its sole discretion.
"CODE" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended, supplemented or otherwise modified.
"COLLATERAL" means any and all property or assets, whether real,
personal or otherwise, described in or covered by the Security Documents as
security for the Obligations and shall include, but not be limited to, all
"COLLATERAL" as described in any Security Documents.
"COLLATERAL AGREEMENT" means the Collateral Agreement of even date
executed by the Borrowers and their Subsidiaries in favor of the Collateral
Agent for the benefit of the Agents and the Lenders in substantially the form of
EXHIBIT H, as amended, restated, supplemented or otherwise modified from time to
time.
"COLLATERAL AGENT" means First Union in its capacity as collateral
agent hereunder, and any successor thereto appointed pursuant to SECTION 13.9.
"COMMITMENT" means, as to any Lender, the sum of such Lender's
Revolving Credit Commitment and Term Loan Commitment as set forth opposite such
Lender's name on SCHEDULE 1, as the same may be reduced or modified at any time
or from time to time pursuant to the terms hereof.
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"COMMITMENT FEE RATE" has the meaning set forth in SECTION 5.3.
"COMPANY" has the meaning assigned to such term in the preamble.
"CONSOLIDATED" means, when used with reference to financial statements
or financial statement items of the Borrowers and their Subsidiaries, such
statements or items on a consolidated basis in accordance with applicable
principles of consolidation under GAAP.
"CREDIT FACILITY" means the collective reference to the Revolving
Credit Facility, the Term Loan Facility and the L/C Facility.
"DEBT" means, with respect to the Borrowers at any date and without
duplication, the sum of the following calculated in accordance with GAAP: (a)
all liabilities, obligations and indebtedness including, but not limited to,
obligations evidenced by bonds, debentures, notes or other similar instruments
of any such Person, but excluding intercompany indebtedness (b) all obligations
to pay the deferred purchase price of property or services of any such Person,
except trade payables arising in the ordinary course of business not more than
ninety (90) days past due (c) all obligations of any such Person as lessee under
Capital Leases, (d) the total cash amount of all earn out obligations at such
time the conditions precedent to such obligation are met and the obligation is
deemed earned, (e) all Debt of any other Person secured by a Lien on any asset
of any such Person, (f) all Guaranty Obligations of any such Person, (g) all
obligations, contingent or otherwise, of any such Person relative to the face
amount of letters of credit, whether or not drawn, including without limitation
any Reimbursement Obligation, and banker's acceptances issued for the account of
any such Person, (h) all obligations of any such Person to redeem, repurchase,
exchange, defease or otherwise make payments in respect of capital stock or
other securities of such Person and (i) all obligations incurred by any such
Person pursuant to Hedging Agreements.
"DEFAULT" means any of the events specified in SECTION 12.1 which with
the passing of time, the giving of notice or any other condition, would
constitute an Event of Default.
"DOLLARS" OR "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"EBITDA" means, for any period, the sum of the following determined on
a Consolidated basis, without duplication, for the Borrowers and their
Subsidiaries in accordance with GAAP: (a) Net Income for such period PLUS (b)
the sum of the following to the extent deducted in determining Net Income: (i)
income, franchise and other taxes, (ii) Interest Expense, (iii) amortization,
depreciation and other non-cash charges, (iv) extraordinary losses LESS (c)
interest income and any extraordinary gains which were included in determining
Net Income.
"ELIGIBLE ASSIGNEE" means, with respect to any assignment of the
rights, interest and obligations of a Lender hereunder, a Person that is at the
time of such assignment (a) a commercial bank organized under the laws of the
United States or any state thereof, having
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combined capital and surplus in excess of $500,000,000, (b) a commercial bank
organized under the laws of any other country that is a member of the
Organization of Economic Cooperation and Development, or a political subdivision
of any such country, having combined capital and surplus in excess of
$500,000,000, (c) a finance company, insurance company or other financial
institution which in the ordinary course of business extends credit of the type
extended hereunder and that has total assets in excess of $1,000,000,000, (d)
already a Lender hereunder (whether as an original party to this Agreement or as
the assignee of another Lender), (e) the successor (whether by transfer of
assets, merger or otherwise) to all or substantially all of the commercial
lending business of the assigning Lender, or (f) any other Person that has been
approved in writing as an Eligible Assignee by the Borrowers and the
Administrative Agent.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of the
Borrowers or any ERISA Affiliate or (b) has at any time within the preceding six
years been maintained for the employees of the Borrowers or any current or
former ERISA Affiliate.
"ENVIRONMENTAL LAWS" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
the rules and regulations thereunder, each as amended, supplemented or otherwise
modified.
"ERISA AFFILIATE" means any Person who together with the Borrowers are
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"EURODOLLAR RESERVE PERCENTAGE" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of eurocurrency liabilities or any similar category of liabilities for a
member bank of the Federal Reserve System in New York City.
"EVENT OF DEFAULT" means any of the events specified in SECTION 12.1,
provided that any requirement for passing of time, giving of notice, or any
other condition, has been satisfied.
"EXISTING FACILITY" means collectively, (i) that certain Business Loan
and Security Agreement dated as of April 15, 1998 by and among First Union
Commercial Corporation, the Company and certain Subsidiaries of the Company, as
amended and (ii) that certain Loan Agreement dated August 10, 1998 by and
between First Union and Titan Technologies Group,
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LLC.
"EXTENSIONS OF CREDIT" means, as to any Lender at any time, an amount
equal to the sum of (a): (i) the aggregate principal amount of all Revolving
Credit Loans made by such Lender then outstanding, (ii) such Lender's Revolving
Credit Commitment Percentage of the L/C Obligations then outstanding, (iii) such
Lender's Revolving Credit Commitment Percentage of the Swingline Loans then
outstanding and (iv) the aggregate principal amount of all Term Loans made by
such Lender then outstanding; or (b) the making of any Loan or participation in
any Letter of Credit, as the context requires.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"FEDERAL FUNDS RATE" means, the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not available, then "FEDERAL FUNDS RATE" shall mean a daily rate
which is determined, in the opinion of the Administrative Agent, to be the rate
at which federal funds are being offered for sale in the national federal funds
market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be
the same as the rate for the most immediate preceding Business Day.
"FEDERAL GOVERNMENTAL AUTHORITY" means any nation and any government or
any Person exercising executive, legislative, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"FIRST UNION" means First Union National Bank, a national banking
association, and its successors.
"FISCAL YEAR" means the fiscal year of the Borrowers ending on December
31.
"FOREIGN SUBSIDIARY" has the meaning ascribed to such term in the
Collateral Agreement.
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Borrowers and their Subsidiaries throughout the period indicated
and consistent with the prior financial practice of the Borrowers and their
Subsidiaries.
"GOVERNMENTAL APPROVALS" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"GOVERNMENTAL AUTHORITY" means the collective reference to the Federal
Governmental Authority and the State Governmental Authority.
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"GOVERNMENT CONTRACT" means any contract between any Grantor (as such
term is defined in the Guarantee and Collateral Agreement) and any agency,
department or instrumentality of the United States or any state, municipal or
local Governmental Authority in the United States where such Grantor is the
prime contractor, as the same may be amended, restated, supplemented or
otherwise modified and which involves monetary liability of or to any such
Person in an amount in excess of $500,000 per annum.
"GUARANTY OBLIGATION" means, with respect to the Borrowers and their
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Debt or other obligation of any other Person or of itself with
respect to any reimbursement obligation or other contingent obligation incurred
in connection with a performance of tenders, statutory obligation, bid, lease,
government contract or performance and return-of-money bonds and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); PROVIDED, that the term Guaranty
Obligation shall not include endorsements for collection or deposit in the
ordinary course of business.
"HAZARDOUS MATERIALS" means any substances or materials (a) which are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Applicable Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Applicable Law, (d) the discharge or emission or release of which requires a
permit or license under any Applicable Law or other Governmental Approval, (e)
which are deemed to constitute a nuisance, a trespass or pose a health or safety
hazard to persons or neighboring properties, (f) which consist of underground or
aboveground storage tanks, whether empty, filled or partially filled with any
substance, or (g) which contain, without limitation, asbestos, polychlorinated
biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum
derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic
gas.
"HEDGING AGREEMENT" means any agreement with respect to an interest
rate swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrowers, and any confirming letter
executed pursuant to such hedging agreement, all as amended, restated or
otherwise modified.
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"IMMATERIAL SUBSIDIARY" means any Wholly-Owned Subsidiary of a Borrower
the aggregate book value of the total assets of which do not exceed $3,000,000,
as reflected on the financial statements for such period delivered in accordance
with SECTION 8.1 or SECTION 8.2, as the case may be; PROVIDED, HOWEVER, that
notwithstanding the foregoing, the aggregate EBITDA of all such Immaterial
Subsidiaries shall not at any time exceed five percent (5%) of EBITDA, as
reflected on the financial statements most recently delivered in accordance with
SECTION 8.1 or SECTION 8.2, as the case may be.
"INTERCOMPANY NOTES" means the promissory notes of the Immaterial
Subsidiaries in substantially the form of EXHIBIT J, as amended, restated,
supplemented or otherwise modified from time to time.
"INTEREST EXPENSE" means, for any period, total interest expense
(including, without limitation, interest expense attributable to capital leases)
determined on a consolidated basis, without duplication, for the Borrowers and
their Subsidiaries in accordance with GAAP.
"INTEREST PERIOD" shall have the meaning assigned thereto in SECTION
5.1(b).
"ISPA98" means the International Standby Practices (1998 Revision,
effective January 1, 1999), International Chamber of Commerce Publication No.
590.
"ISSUING LENDER" means First Union, in its capacity as issuer of any
Letter of Credit, or any successor thereto.
"L/C COMMITMENT" means the lesser of (a) Fifteen Million Dollars
($15,000,000) and (b) the Revolving Credit Commitment.
"L/C FACILITY" means the letter of credit facility established pursuant
to ARTICLE III.
"L/C OBLIGATIONS" means at any time, an amount equal to the sum of (a)
the aggregate 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 SECTION 3.5.
"L/C PARTICIPANTS" means the collective reference to all the Lenders
other than the Issuing Lender.
"LENDER" means each Person executing this Agreement as a Lender set
forth on the signature pages hereto and each Person that hereafter becomes a
party to this Agreement as a Lender pursuant to SECTION 14.10.
"LENDING OFFICE" means, with respect to any Lender, the office of such
Lender maintaining such Lender's Revolving Credit Commitment Percentage or Term
Loan Commitment Percentage, as applicable, of the Extensions of Credit.
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"LETTERS OF CREDIT" shall have the meaning assigned thereto in SECTION
3.1.
"LEVERAGE RATIO" has the meaning assigned to such term in SECTION 10.1.
"LIBOR" means the rate of interest per annum determined on the basis of
the rate for deposits in Dollars in minimum amounts of at least $5,000,000 for a
period equal to the applicable Interest Period which appears on the Dow Jones
Market Screen 3750 at approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period. If, for any
reason, such rate does not appear on Dow Jones Market Screen 3750, then "LIBOR"
shall be determined by the Administrative Agent to be the arithmetic average of
the rate per annum at which deposits in Dollars in minimum amounts of at least
$5,000,000 are offered by first class banks in the London interbank market to
the Administrative Agent at approximately 11:00 a.m. (London time) two (2)
Business Days prior to the first day of the applicable Interest Period for a
period equal to such Interest Period.
"LIBOR RATE" means a rate per annum (rounded upwards, if necessary, to
the next higher 1/100th of 1%) determined by the Administrative Agent pursuant
to the following formula:
LIBOR Rate = LIBOR
-----
1.00-Eurodollar Reserve Percentage
"LIBOR RATE LOAN" means any Loan bearing interest at a rate based upon
the LIBOR Rate as provided in SECTION 5.1(a).
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"LOANS" means the collective reference to the Revolving Credit Loans,
the Term Loans and the Swingline Loans and "LOAN" means any of such Loans.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the
Applications, any Hedging Agreement with any Lender (which such Hedging
Agreement is permitted or required hereunder), the Security Documents, the Side
Letter and each other document, instrument, certificate and agreement executed
and delivered by the Borrowers or their counsel in connection with this
Agreement or otherwise referred to herein or contemplated hereby, all as may be
amended, restated or otherwise modified.
"MATERIAL ADVERSE EFFECT" means, with respect to the Borrowers and
their Subsidiaries, a material adverse effect on the properties, business,
prospects, operations or condition (financial or otherwise) of any such Person
or the ability of any such Person to perform its obligations
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under the Loan Documents or Material Contracts, in each case to which it is a
party.
"MATERIAL CONTRACT" means (a) any Government Contract, or (b) any other
contract or other agreement, written or oral, of any Borrower involving monetary
liability of or to any such Person in an amount in excess of $500,000 per annum,
or (c) any other contract or agreement, written or oral, of any Borrower the
failure to comply with which could reasonably be expected to have a Material
Adverse Effect.
"MATERIAL SUBSIDIARY" means (i) each Subsidiary of Systems executing
this Agreement on the Closing Date and (ii) any Subsidiary of a Borrower which
is not an Immaterial Subsidiary.
"MINIMUM COMPLIANCE LEVEL" has the meaning assigned to such term in
SECTION 10.4.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which a Borrower or any ERISA Affiliate is making, or is
accruing an obligation to make, contributions within the preceding six years.
"NET CASH PROCEEDS" means, as applicable, (a) with respect to any sale
or other disposition of assets, the gross cash proceeds received by the
Borrowers from such sale LESS the sum of (i) all income taxes and other taxes
assessed by a Governmental Authority as a result of such sale and any other fees
and expenses incurred in connection therewith and (ii) the principal amount of,
premium, if any, and interest on any Debt secured by a Lien on the asset (or a
portion thereof) sold, which Debt is required to be repaid in connection with
such sale, (b) with respect to any offering of capital stock or issuance of
Debt, the gross cash proceeds received by the Borrowers therefrom LESS all
legal, underwriting and other fees and expenses incurred in connection therewith
and (c) with respect to any payment under an insurance policy or in connection
with a condemnation proceeding, the amount of cash proceeds received by the
Borrowers from an insurance company or Governmental Authority, as applicable,
net of all expenses of collection.
"NET INCOME" means, with respect to the Borrowers and their
Subsidiaries for any period, on a Consolidated basis, the net income (or loss)
thereof for such period determined with out duplication in accordance with GAAP;
PROVIDED, that there shall be excluded from net income (or loss) the income (or
loss) of any other Person (other than any Wholly-Owned Subsidiary) in which any
Borrower has an ownership interest unless received by such Borrower.
"NET WORTH" means, as of any date, the total of all amounts which
would, in accordance with GAAP, be included on a Consolidated balance sheet of
the Borrowers and their Subsidiaries as of such date as (a) the par or stated
value of all outstanding capital stock of Borrowers and their Subsidiaries, (b)
paid-in capital or capital surplus relating to such capital stock and (c) any
retained earnings or earned surplus, less any accumulated deficit.
"NOTES" means the collective reference to the Revolving Credit Notes,
the Term Notes and Swingline Note and "NOTE" means any of such Notes.
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"NOTICE OF ACCOUNT DESIGNATION" shall have the meaning assigned thereto
in SECTION 2.3(b).
"NOTICE OF BORROWING" shall have the meaning assigned thereto in
SECTION 2.3(a).
"NOTICE OF CONVERSION/CONTINUATION" shall have the meaning assigned
thereto in SECTION 5.2.
"NOTICE OF PREPAYMENT" shall have the meaning assigned thereto in
SECTION 2.4(c).
"OBLIGATIONS" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loans, (b)
the L/C Obligations, (c) all payment and other obligations owing by the
Borrowers to any Lender or the Administrative Agent under any Hedging Agreement
with any Lender (which such Hedging Agreement is permitted or required
hereunder), and (d) all other fees and commissions (including attorney's fees),
charges, indebtedness, loans, liabilities, financial accommodations,
obligations, covenants and duties owing by the Borrowers to the Lenders or the
Administrative Agent, of every kind, nature and description, direct or indirect,
absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note, in each
case under or in respect of this Agreement, any Note, any Letter of Credit or
any of the other Loan Documents.
"OFFICER'S COMPLIANCE CERTIFICATE" shall have the meaning assigned
thereto in SECTION 8.2.
"OTHER TAXES" shall have the meaning assigned thereto in SECTION
5.11(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for employees of the
Borrowers or any ERISA Affiliates or (b) has at any time within the preceding
six years been maintained for the employees of the Borrowers or any of their
current or former ERISA Affiliates.
"PERMITTED ACQUISITIONS" means those acquisitions permitted pursuant to
SECTION 11.4(c) or otherwise consented to by the Required Lenders.
"PERMITTED LIENS" has the meaning assigned to such term in the
Collateral Agreement.
"PERSON" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity
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or group thereof.
"PRIME RATE" means, at any time, the rate of interest per annum
publicly announced from time to time by First Union as its prime rate. Each
change in the Prime Rate shall be effective as of the opening of business on the
day such change in the Prime Rate occurs. The parties hereto acknowledge that
the rate announced publicly by First Union as its Prime Rate is an index or base
rate and shall not necessarily be its lowest or best rate charged to its
customers or other banks.
"PRO FORMA EBITDA" means EBITDA as adjusted in a manner reasonably
satisfactory to the Administrative Agent, consistent with SEC pro forma rules
including adjustments of nonrecurring and non cash charges, to take into account
on a PRO FORMA basis, as of the first day of any calculation period, the effect
of any acquisition consummated, or asset sold, during such period.
"REAL PROPERTY SECURITY DOCUMENTS" means any landlord agreement,
landlord consent, collateral assignment of lease, fee mortgagee consent or
agreement, landlord estoppels, and any other agreement or writing pursuant to
which any Borrower or Subsidiary grants a security interest in any real property
interest securing the Obligations.
"REGISTER" shall have the meaning assigned thereto in SECTION 14.10(d).
"REIMBURSEMENT OBLIGATION" means the obligation of the Borrowers to
reimburse the Issuing Lender pursuant to SECTION 3.5 for amounts drawn under
Letters of Credit.
"REQUIRED LENDERS" means, at any date, any combination of Lenders (i)
whose Revolving Credit Commitment Percentages and Term Loan Commitment
Percentages aggregate at least sixty-six and two-thirds percent (66%) of
the Aggregate Commitment or, if the Commitments have been terminated, any
combination of Lenders holding at least sixty-six and two-thirds percent
(66 2/3%) of the aggregate Extensions of Credit and (ii) at least one (1)
such Lender is the holder of a Term Loan Commitment or, if the Term Loan
Commitment has been terminated, is the holder of an outstanding Term Loan.
"RESPONSIBLE OFFICER" means any of the following: the chief executive
officer or chief financial officer of each Borrower or any other officer of such
Borrower reasonably acceptable to the Administrative Agent.
"REVOLVING CREDIT COMMITMENT" means (a) as to any Lender, the
obligation of such Lender to make Revolving Credit Loans to the account of the
Borrowers hereunder in an aggregate principal amount at any time outstanding not
to exceed the amount set forth opposite such Lender's name on SCHEDULE 1 hereto
as such amount may be reduced or modified at any time or from time to time
pursuant to the terms hereof and (b) as to all Lenders, the aggregate commitment
of all Lenders to make Revolving Credit Loans, as such amount may be reduced at
any time or from time to time pursuant to the terms hereof. The Revolving Credit
Commitment
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of all Lenders on the Closing Date shall be Seventy-Five Million Dollars
($75,000,000).
"REVOLVING CREDIT COMMITMENT PERCENTAGE" means, as to the Revolving
Credit Commitment, at any time the ratio of (a) the amount of the Revolving
Credit Commitment, if any, of such Lender to (b) the aggregate Revolving Credit
Commitments of all Lenders.
"REVOLVING CREDIT FACILITY" means the revolving credit facility
established pursuant to ARTICLE II.
"REVOLVING CREDIT LOANS" means any revolving loan made to the Borrowers
pursuant to SECTION 2.1, and all such revolving loans collectively as the
context requires.
"REVOLVING CREDIT NOTES" means the collective reference to the
Revolving Credit Notes made by the Borrowers payable to the order of each
Lender, substantially in the form of EXHIBIT A-1 hereto, evidencing the
Revolving Credit Facility, and any amendments and modifications thereto, any
substitutes therefor, and any replacements, restatements, renewals or extension
thereof, in whole or in part; "REVOLVING CREDIT NOTE" means any of such
Revolving Credit Notes.
"REVOLVING CREDIT TERMINATION DATE" means the earliest of the dates
referred to in SECTION 2.7.
"SECURITY DOCUMENTS" means the collective reference to the Collateral
Agreement, the Real Property Security Documents and each other agreement or
writing pursuant to which the Borrowers and, as applicable, their Subsidiaries
purport to pledge or grant a security interest in any property or assets
securing the Obligations or any such Person purports to guaranty the payment
and/or performance of the Obligations.
"SIDE LETTER" that certain letter agreement by and between the Company
on behalf of itself and the other Borrowers and the Administration Agent dated
April 16, 1999.
"SOLVENT" means, as to the Borrowers and their Subsidiaries on a
particular date, that any such Person (a) has capital sufficient to carry on its
business and transactions and all business and transactions in which it is about
to engage and is able to pay its debts as they mature, (b) owns property having
a value, both at fair valuation and at present fair saleable value, greater than
the amount required to pay its probable liabilities (including contingencies),
and (c) does not believe that it will incur debts or liabilities beyond its
ability to pay such debts or liabilities as they mature.
"STATE GOVERNMENTAL AUTHORITY" means any province, state, or political
subdivision thereof, and any government of such Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"SUBORDINATED DEBT" means the collective reference to Debt on SCHEDULE
6.1(t)
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designated as Subordinated Debt and any other Debt of the Borrowers and
their Subsidiaries subordinated in right and time of payment to the Obligations
on terms satisfactory to the Required Lenders.
"SUBSIDIARY" means as to any Person, any corporation, partnership,
limited liability company or other entity of which more than fifty percent (50%)
of the outstanding capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other managers of
such corporation, partnership, limited liability company or other entity is at
the time, directly or indirectly, owned by or the management is otherwise
controlled by such Person (irrespective of whether, at the time, capital stock
or other ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have
voting power by reason of the happening of any contingency). Unless otherwise
qualified references to "SUBSIDIARY" or "SUBSIDIARIES" herein shall refer to
those of the Borrowers.
"SUBSIDIARY BORROWERS" means Systems and all Subsidiaries of Systems
which are signatories to this Agreement on the Closing Date together with any
Subsidiary which becomes a Borrower pursuant to SECTION 9.12 after the Closing
Date.
"SUBSTANTIALLY SIMILAR LINE OF BUSINESS" means any business which is
involved in one or more of the following activities: (i) strategic planning,
(ii) management consulting, (iii) strategic marketing communications, (iv)
development, integration and installation of informational technology systems,
(v) contract, staffing, recruiting, and training, (vi) continuing education,
(vii) desktop and system maintenance and support, and (viii) procurement of
computer hardware and software.
"SWINGLINE COMMITMENT" means the lesser of (a) Five Million Dollars
($5,000,000) and (b) the Revolving Credit Commitment.
"SWINGLINE LENDER" means First Union Commercial Corporation in its
capacity as swingline lender hereunder.
"SWINGLINE LOAN" has the meaning assigned to such term in SECTION 2.2.
"SWINGLINE MATURITY DATE" means the first to occur of (a) the
resignation of First Union as Administrative Agent in accordance with SECTION
13.9, and (b) the Revolving Credit Termination Date.
"SWINGLINE NOTE" means the Swingline Note made by the Borrowers payable
to the order of the Swingline Lender, substantially in the form of EXHIBIT A-2
hereto, evidencing the Swingline Loans, and any amendments and modifications
thereto, any substitutes therefor, and any replacements, restatements, renewals
or extension thereof, in whole or in part.
"SYSTEMS" means Condor System Solutions, Inc., a Delaware corporation.
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"TAXES" shall have the meaning assigned thereto in SECTION 5.11(a).
"TERM LOANS" shall mean the term loans to be made to the Borrowers by
the Lenders pursuant to SECTION 4.1.
"TERM LOAN COMMITMENT" means (a) as to any Lender, the obligation of
such Lender to make the Term Loans to the account of the Borrowers hereunder in
an aggregate principal amount not to exceed the amount set forth opposite such
Lender's name on SCHEDULE 1 hereto, as such amount may be reduced or modified at
any time or from time to time pursuant to the terms hereof and (b) as to all
Lenders, the aggregate commitment to make Term Loans. The Term Loan Commitment
of all Lenders as of the Closing Date shall be Twenty-Five Million Dollars
($25,000,000).
"TERM LOAN COMMITMENT PERCENTAGE" means, as to any Lender, (a) prior to
making the Term Loans, the ratio of (i) the Term Loan Commitment, if any of such
Lender to (ii) the aggregate Term Loan Commitments of all Lenders, and (b) after
the making of the Term Loans, the ratio of (i) the outstanding principal balance
of the Term Loans of such Lender to (ii) the aggregate outstanding principal
balance of the Term Loans of all Lenders.
"TERM LOAN FACILITY" shall mean the term loan facility established
pursuant to ARTICLE IV.
"TERM LOAN MATURITY DATE" means the first to occur of (a) that date
which is five (5) years from the Closing Date, and (b) the date of termination
by the Administrative Agent on behalf of the Lenders pursuant to SECTION
12.2(a).
"TERM NOTES" means the Term Notes made by the Borrowers payable to the
order of each of the Lenders, substantially in the form of EXHIBIT A-3 hereto,
evidencing the Debt incurred by the Borrowers pursuant to the Term Loan
Facility, and any amendments, modifications and supplements thereto, any
substitute therefor, and any replacement, restatements, renewals or extensions
thereof, in whole or in part.
"TERMINATION EVENT" means: (a) a "REPORTABLE EVENT" described in
Section 4043 of ERISA, or (b) the withdrawal of the Borrowers or any ERISA
Affiliate from a Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (c) the termination of a
Pension Plan, the filing of a notice of intent to terminate a Pension Plan or
the treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate, or the appointment of
a trustee with respect to, any Pension Plan by the PBGC, or (e) any other event
or condition which would constitute grounds under Section 4042(a) of ERISA for
the termination of, or the appointment of a trustee to administer, any Pension
Plan, or (f) the partial or complete withdrawal of the Borrowers or any ERISA
Affiliate from a Multiemployer Plan, or (g) the imposition of a Lien pursuant to
Section 412 of the Code or Section 302 of ERISA, or (h) any event or condition
which results in the reorganization or insolvency of a Multiemployer Plan under
Sections 4241
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or 4245 of ERISA, or (i) any event or condition which results in the termination
of a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC
of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.
"TOTAL DEBT" means, as of any date of determination with respect to the
Borrowers and their Subsidiaries on a Consolidated basis without duplication,
the sum of all Debt of the Borrowers and their Subsidiaries.
"UNIFORM CUSTOMS" the Uniform Customs and Practice for Documentary
Credits (1993 Revision, effective January 1, 1994), International Chamber of
Commerce Publication No. 500.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York, as amended, restated or otherwise modified.
"UNITED STATES" means the United States of America.
"WHOLLY-OWNED" means, with respect to a Subsidiary, that all of the
shares of capital stock or other ownership interests of such Subsidiary are,
directly or indirectly, owned or controlled by one or more of the Borrowers
and/or one or more of their Wholly-Owned Subsidiaries.
SECTION 1.2 GENERAL. Unless otherwise specified, a reference in this
Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the masculine, the
feminine and the neuter. Any reference herein to "Charlotte time" shall refer to
the applicable time of day in Charlotte, North Carolina.
SECTION 1.3 OTHER DEFINITIONS AND PROVISIONS.
(a) USE OF CAPITALIZED TERMS. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings when
used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) MISCELLANEOUS. 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.
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ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.1 REVOLVING CREDIT LOANS. Subject to the terms and conditions
of this Agreement, each Lender severally agrees to make Revolving Credit Loans
to the Borrowers from time to time from the Closing Date through the Revolving
Credit Termination Date as requested by any Borrower in accordance with the
terms of SECTION 2.3; PROVIDED, that (a) the aggregate principal amount of all
outstanding Revolving Credit Loans (after giving effect to any amount requested)
shall not exceed the Revolving Credit Commitment LESS the sum of all outstanding
Swingline Loans and L/C Obligations and (b) the principal amount of outstanding
Revolving Credit Loans from any Lender to the Borrowers shall not at any time
exceed such Lender's Revolving Credit Commitment LESS such Lender's Revolving
Credit Commitment Percentage of outstanding L/C Obligations. Each Revolving
Credit Loan by a Lender shall be in a principal amount equal to such Lender's
Revolving Credit Commitment Percentage of the aggregate principal amount of
Revolving Credit Loans requested on such occasion. Subject to the terms and
conditions hereof, the Borrowers may borrow, repay and reborrow Revolving Credit
Loans hereunder until the Revolving Credit Termination Date.
SECTION 2.2 SWINGLINE LOANS.
(a) AVAILABILITY. Subject to the terms and conditions of this
Agreement, the Swingline Lender agrees to make certain revolving credit loans in
Dollars ("SWINGLINE LOANS") to the Borrowers from time to time from the Closing
Date through, but not including, the Swingline Maturity Date; PROVIDED, that the
aggregate principal amount of all outstanding Swingline Loans (after giving
effect to any amount requested), shall not exceed the lesser of (i) the
Revolving Credit Commitment less the sum of all outstanding Revolving Credit
Loans and the L/C Obligations and (ii) the Swingline Commitment.
(b) REFUNDING.
(i) Swingline Loans shall be refunded by the Lenders on demand
by the Swingline Lender. Such refundings shall be made by the Lenders in
accordance with their respective Revolving Credit Commitment Percentages and
shall thereafter be reflected as Revolving Credit Loans of the Lenders on the
books and records of the Administrative Agent. Each Lender shall fund its
respective Revolving Credit Commitment Percentage of Revolving Credit Loans as
required to repay Swingline Loans outstanding to the Swingline Lender upon
demand by the Swingline Lender but in no event later than 2:00 p.m. (Charlotte
time) on the next succeeding Business Day after such demand is made. No Lender's
obligation to fund its respective Revolving Credit Commitment Percentage of a
Swingline Loan shall be affected by any other Lender's failure to fund its
Revolving Credit Commitment Percentage of a Swingline Loan, nor shall any
Lender's Revolving Credit Commitment Percentage be increased as a result of any
such failure of any other Lender to fund its Revolving Credit Commitment
Percentage.
(ii) The Borrowers shall pay to the Swingline Lender on demand
the amount
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of such Swingline Loans to the extent amounts received from the Lenders are not
sufficient to repay in full the outstanding Swingline Loans requested or
required to be refunded. In addition, the Borrowers hereby authorize the
Administrative Agent to charge any account maintained with the Swingline Lender
(up to the amount available therein) in order to immediately pay the Swingline
Lender the amount of such Swingline Loans to the extent amounts received from
the Lenders are not sufficient to repay in full the outstanding Swingline Loans
requested or required to be refunded. If any portion of any such amount paid to
the Swingline Lender shall be recovered by or on behalf of the Borrowers from
the Swingline Lender in bankruptcy or otherwise, the loss of the amount so
recovered shall be ratably shared among all the Lenders in accordance with their
respective Revolving Credit Commitment Percentages (unless the amounts so
recovered by or on behalf of the Borrowers pertain to a Swingline Loan extended
after the occurrence and during the continuance of an Event of Default of which
the Administrative Agent has received actual notice and which such Event of
Default has not been waived by the Required Lenders or the Lenders, as
applicable).
(iii) Each Lender acknowledges and agrees that its obligation
to refund Swingline Loans in accordance with the terms of this SECTION 2.2 is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, non-satisfaction of the conditions
set forth in ARTICLE VI. Further, each Lender agrees and acknowledges that if
prior to the refunding of any outstanding Swingline Loans pursuant to this
SECTION 2.2, one of the events described in SECTION 12.1(j) or (k) shall have
occurred, each Lender will, on the date the applicable Revolving Credit Loan
would have been made, purchase an undivided participating interest in the
Swingline Loan to be refunded in an amount equal to its Revolving Credit
Commitment Percentage of the aggregate amount of such Swingline Loan. Each
Lender will immediately transfer to the Swingline Lender, in immediately
available funds, the amount of its participation and upon receipt thereof the
Swingline Lender will deliver to such Lender a certificate evidencing such
participation dated the date of receipt of such funds and for such amount.
Whenever, at any time after the Swingline Lender has received from any Lender
such Lender's participating interest in a Swingline Loan, the Swingline Lender
receives any payment on account thereof, the Swingline Lender will distribute to
such Lender its participating interest in such amount (appropriately adjusted,
in the case of interest payments, to reflect the period of time during which
such Lender's participating interest was outstanding and funded).
SECTION 2.3 PROCEDURE FOR ADVANCES OF REVOLVING CREDIT AND SWINGLINE
LOANS.
(a) REQUESTS FOR BORROWING. The Borrowers shall give the Administrative
Agent irrevocable prior written notice in the form attached hereto as EXHIBIT B
(a "NOTICE OF BORROWING") not later than 11:00 a.m. (Charlotte time) (i) on the
same Business Day as each Base Rate Loan and each Swingline Loan and (ii) at
least three (3) Business Days before each LIBOR Rate Loan, of its intention to
borrow, specifying (A) the date of such borrowing, which shall be a Business
Day, (B) the amount of such borrowing, which shall be (x) with respect to Base
Rate Loans in an aggregate principal amount of $3,000,000 or a whole multiple of
$1,000,000 in excess thereof, (y) with respect to LIBOR Rate Loans in an
aggregate principal
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amount of $3,000,000 or a whole multiple of $1,000,000 in excess thereof and (z)
with respect to Swingline Loans in an aggregate principal amount of $500,000 or
a whole multiple of $100,000 in excess thereof, (C) whether such Loan is to be a
Revolving Credit Loan, (D) in the case of a Revolving Credit Loan whether the
Loans are to be LIBOR Rate Loans or Base Rate Loans, and (E) in the case of a
LIBOR Rate Loan, the duration of the Interest Period applicable thereto. Notices
received after 11:00 a.m. (Charlotte time) shall be deemed received on the next
Business Day. The Administrative Agent shall promptly notify the Lenders of each
Notice of Borrowing.
(b) DISBURSEMENT OF REVOLVING CREDIT AND SWINGLINE LOANS. Not later
than 2:00 p.m. (Charlotte time) on the proposed borrowing date, (i) each Lender
will make available to the Administrative Agent, for the account of the
Borrowers, at the office of the Administrative Agent in funds immediately
available to the Administrative Agent, such Lender's Revolving Credit Commitment
Percentage of the Revolving Credit Loans to be made on such borrowing date and
(ii) the Swingline Lender will make available to the Administrative Agent, for
the account of the Borrowers, at the office of the Administrative Agent in funds
immediately available to the Administrative Agent, the Swingline Loans to be
made on such borrowing date. The Borrowers hereby irrevocably authorize the
Administrative Agent to disburse the proceeds of each borrowing requested
pursuant to this SECTION 2.2 in immediately available funds by crediting or
wiring such proceeds to the deposit account of the Borrowers identified in the
most recent notice substantially in the form of EXHIBIT C hereto (a "NOTICE OF
ACCOUNT DESIGNATION") delivered by the Borrowers to the Administrative Agent or
may be otherwise agreed upon by the Borrowers and the Administrative Agent from
time to time. Subject to SECTION 5.7, the Administrative Agent shall not be
obligated to disburse the portion of the proceeds of any Revolving Credit Loan
requested pursuant to this SECTION 2.3 to the extent that any Lender has not
made available to the Administrative Agent its Revolving Credit Commitment
Percentage of such Loan. Revolving Credit Loans to be made for the purpose of
refunding Swingline Loans shall be made by the Lenders as provided in SECTION
2.2(b).
SECTION 2.4 REPAYMENT OF LOANS.
(a) REPAYMENT ON REVOLVING CREDIT TERMINATION DATE. The Borrowers shall
repay the outstanding principal amount of (i) all Revolving Credit Loans in full
on the Revolving Credit Termination Date, and (ii) all Swingline Loans in
accordance with SECTION 2.2(b), together, in each case, with all accrued but
unpaid interest thereon.
(b) MANDATORY REPAYMENT OF EXCESS LOANS. If at any time the sum of (i)
the aggregate principal amount of all Revolving Credit Loans outstanding at such
time, PLUS (ii) the aggregate principal amount of Swingline Loans outstanding at
such time PLUS (iii) the aggregate principal amount of L/C Obligations
outstanding at such time exceeds the Revolving Credit Commitment, the Borrowers
shall repay immediately upon notice from the Administrative Agent, by payment to
the Administrative Agent for the account of the Lenders, Revolving Credit Loans,
Swingline Loans, furnishing cash collateral reasonably satisfactory to the
Administrative Agent and/or repay the L/C Obligations in an amount equal to such
excess with each such
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repayment applied FIRST to the principal amount of outstanding Swingline Loans,
SECOND to the principal amount of outstanding Revolving Credit Loans and THIRD
to the principal amount of the L/C Obligations. Such cash collateral shall be
applied in accordance with SECTION 12.2(b). Each such repayment shall be
accompanied by any amount required to be paid pursuant to SECTION 5.9.
(c) OPTIONAL REPAYMENTS. The Borrowers may at any time and from time to
time repay the Loans, in whole or in part, upon at least three (3) Business
Days' irrevocable notice to the Administrative Agent with respect to LIBOR Rate
Loans and one (1) Business Day irrevocable notice with respect to Base Rate
Loans and Swingline Loans, in the form attached hereto as EXHIBIT D (a "NOTICE
OF PREPAYMENT") specifying the date and amount of repayment and whether the
repayment is of LIBOR Rate Loans, Base Rate Loans, Swingline Loans or a
combination thereof, and, if of a combination thereof, the amount allocable to
each. Upon receipt of such notice, the Administrative Agent shall promptly
notify each Lender. If any such notice is given, the amount specified in such
notice shall be due and payable on the date set forth in such notice. Partial
repayments shall be in an aggregate amount of $3,000,000 or a whole multiple of
$1,000,000 in excess thereof with respect to Base Rate Loans, $3,000,000 or a
whole multiple of $1,000,000 in excess thereof with respect to LIBOR Rate Loans
and $500,000 or a whole multiple of $100,000 in excess thereof with respect to
Swingline Loans. Each such repayment shall be accompanied by any amount required
to be paid pursuant to SECTION 5.9.
(d) LIMITATION ON REPAYMENT OF LIBOR RATE LOANS. The Borrowers may not
repay any LIBOR Rate Loan on any day other than on the last day of the Interest
Period applicable thereto unless such repayment is accompanied by any amount
required to be paid pursuant to SECTION 4.9.
SECTION 2.5 NOTES.
(a) REVOLVING CREDIT NOTES. Each Lender's Revolving Credit Loans and
the obligation of the Borrowers to repay such Revolving Credit Loans shall be
evidenced by a separate Revolving Credit Note executed by the Borrowers payable
to the order of such Lender representing the Borrowers' obligation to pay such
Lender's Commitment or, if less, the aggregate unpaid principal amount of all
Revolving Credit Loans made and to be made by such Lender to the Borrowers
hereunder, PLUS interest and all other fees, charges and other amounts due
thereon. Each Revolving Credit Note shall be dated the date hereof and shall
bear interest on the unpaid principal amount thereof at the applicable interest
rate per annum specified in SECTION 5.1.
(b) SWINGLINE NOTE. The Swingline Loans and the obligations of the
Borrowers to repay such Swingline Loans shall be evidenced by a Swingline Note
executed by the Borrowers payable to the order of the Swingline Lender
representing the Borrowers' obligation to pay the Swingline Lender's Swingline
Commitment or, if less, the aggregate unpaid principal amount of all Swingline
Loans made by the Swingline Lender to the Borrowers hereunder, PLUS interest on
such principal amounts and all other fees, charges and other amounts due
thereon. The Swingline
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Note shall be dated the date hereof and shall bear interest on the unpaid
principal amount thereof at the applicable interest rate per annum specified in
SECTION 5.1.
SECTION 2.6 PERMANENT REDUCTION OF REVOLVING CREDIT FACILITY.
(a) VOLUNTARY REDUCTION. The Borrowers shall have the right at any time
and from time to time, upon at least five (5) Business Days prior written notice
to the Administrative Agent, to permanently reduce, without premium or penalty,
(i) the entire Revolving Credit Commitment at any time or (ii) portions of the
Revolving Credit Commitment, from time to time, in an aggregate principal amount
not less than $3,000,000 or any whole multiple of $1,000,000 in excess thereof.
(b) Each permanent reduction permitted or required pursuant to this
SECTION 2.6 shall be accompanied by a payment of principal sufficient to reduce
the aggregate outstanding Extensions of Credit of the Lenders after such
reduction to the Revolving Credit Commitment as so reduced and if the Revolving
Credit Commitment as so reduced is less than the aggregate amount of all
outstanding Letters of Credit, the Borrowers shall be required to deposit in a
cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit. Any
reduction of the Revolving Credit Commitment to zero shall be accompanied by
payment of all outstanding Obligations (and furnishing of cash collateral
satisfactory to the Administrative Agent for all L/C Obligations) and shall
result in the termination of the Revolving Credit Commitments and Revolving
Credit Facility. Such cash collateral shall be applied in accordance with
SECTION 12.2(b). If the reduction of the Revolving Credit Commitment requires
the repayment of any LIBOR Rate Loan, such repayment shall be accompanied by any
amount required to be paid pursuant to SECTION 5.9.
SECTION 2.7 TERMINATION OF REVOLVING CREDIT FACILITY. The Revolving
Credit Facility shall terminate on the earliest of (a) that date which is three
(3) years from the Closing Date, (b) the date of termination by the Borrowers
pursuant to SECTION 2.6(a), and (c) the date of termination by the
Administrative Agent on behalf of the Lenders pursuant to SECTION 12.2(a).
SECTION 2.8 USE OF PROCEEDS. The Borrowers shall use the proceeds of
the Extensions of Credit (a) to finance Permitted Acquisitions, (b) to refinance
certain existing indebtedness including, without limitation, the Existing
Facility, and (c) for working capital and general corporate requirements of the
Borrowers and their Subsidiaries, including the payment of certain fees and
expenses incurred in connection with the transactions.
ARTICLE III
LETTER OF CREDIT FACILITY
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SECTION 3.1 L/C COMMITMENT. Subject to the terms and conditions hereof,
the Issuing Lender, in reliance on the agreements of the other Lenders set forth
in SECTION 3.4(a), agrees to issue standby letters of credit ("LETTERS OF
CREDIT") for the account of the Borrowers on any Business Day from the Closing
Date through but not including the Revolving Credit Termination Date in such
form as may be approved from time to time by the Issuing Lender; PROVIDED, that
the Issuing Lender shall have no obligation to issue any Letter of Credit if,
after giving effect to such issuance, (a) the L/C Obligations would exceed the
L/C Commitment or (b) the aggregate principal amount of outstanding Revolving
Credit Loans, PLUS the aggregate principal amount of outstanding Swingline
Loans, PLUS the aggregate amount of the L/C Obligations would exceed the
Revolving Credit Commitment. Each Letter of Credit shall (i) be denominated in
Dollars in a minimum amount of $1,000,000, (ii) be a standby letter of credit
issued to support obligations of any Borrower, contingent or otherwise, incurred
in the ordinary course of business, (iii) have an original expiry date of, or
prior to that date which is one (1) year from the date of issuance, (iv) as
originally issued or extended, have an expiry date on, or prior to the Revolving
Credit Termination Date and (v) be subject to the Uniform Customs and/or ISPA98,
as applicable in the sole discretion of the Issuing Lender, and, to the extent
not inconsistent therewith, the laws of the State of New York. The Issuing
Lender shall not at any time be obligated to issue any Letter of Credit
hereunder if such issuance would conflict with, or cause the Issuing Lender or
any L/C Participant to exceed any limits imposed by, any Applicable Law.
References herein to "ISSUE" and derivations thereof with respect to Letters of
Credit shall also include extensions or modifications of any existing Letters of
Credit, unless the context otherwise requires.
SECTION 3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Borrowers
may from time to time request that the Issuing Lender issue a Letter of Credit
by delivering to the Issuing Lender at the Administrative Agent's Office an
Application therefor, completed to the satisfaction of the Issuing Lender, and
such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing Lender
shall 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, subject to SECTION 3.1 and ARTICLE VI hereof,
promptly issue the Letter of Credit requested thereby (but in no event shall the
Issuing Lender 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) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Lender and such Borrowers. The Issuing
Lender shall promptly furnish to such Borrower a copy of such Letter of Credit
and promptly notify each Lender of the issuance and upon request by any Lender,
furnish to such Lender a copy of such Letter of Credit and the amount of such
Lender's L/C Participation therein.
SECTION 3.3 COMMISSIONS AND OTHER CHARGES.
(a) The Borrowers shall pay to the Administrative Agent, for the
account of the
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Issuing Lender and the L/C Participants, a letter of credit commission with
respect to each Letter of Credit in an amount equal to the Applicable Margin
then in effect for LIBOR Rate Loans on a per annum basis on the face amount of
such Letter of Credit. Such commission shall be payable quarterly in arrears on
the last Business Day of each calendar quarter and on the Revolving Credit
Termination Date.
(b) In addition to the foregoing commission, the Borrowers shall pay
the Issuing Lender an issuance fee of 0.125% per annum on the face amount of
each Letter of Credit, payable quarterly in arrears on the last Business Day of
each calendar quarter and on the Revolving Credit Termination Date.
(c) In addition to the fees set forth in SECTIONS 3.3(a) and (b), the
Borrowers promise to pay to or reimburse the Issuing Lender, for its own account
without sharing by the other Lenders, for such normal and customary costs and
expenses as are incurred or charged by the Issuing Lender in Issuing, effecting
payment under, amending or otherwise administering any Letter of Credit.
(d) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Lender and the L/C Participants all
commissions received by the Administrative Agent in accordance with their
respective Revolving Credit Commitment Percentages.
SECTION 3.4 L/C PARTICIPATIONS.
(a) The Issuing Lender irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Issuing Lender, 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 Revolving Credit
Commitment Percentage in the Issuing Lender's obligations and rights under each
Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably
agrees with the Issuing Lender that, if a draft is paid under any Letter of
Credit for which the Issuing Lender is not reimbursed in full by the Borrowers
in accordance with the terms of this Agreement, such L/C Participant shall pay
to the Issuing Lender upon demand at the Issuing Lender's address for notices
specified herein an amount equal to such L/C Participant's Revolving Credit
Commitment Percentage of the amount of such draft, or any part thereof, which is
not so reimbursed.
(b) Upon becoming aware of any amount required to be paid by any L/C
Participant to the Issuing Lender pursuant to SECTION 3.4(a) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit, the Issuing Lender shall notify each L/C Participant of the amount
and due date of such required payment and such L/C Participant shall pay to the
Issuing Lender the amount specified on the applicable due date. If any such
amount is paid to the Issuing Lender after the date such payment is due, such
L/C
23
<PAGE>
Participant shall pay to the Issuing Lender on demand, in addition to such
amount, the product of (i) such amount, TIMES (ii) the daily average Federal
Funds Rate as determined by the Administrative Agent during the period from and
including the date such payment is due to the date on which such payment is
immediately available to the Issuing Lender, 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. A certificate of the Issuing Lender with respect to
any amounts owing under this SECTION 3.4(b) shall be conclusive in the absence
of manifest error. With respect to payment to the Issuing Lender of the
unreimbursed amounts described in this SECTION 3.4(b), if the L/C Participants
receive notice that any such payment is due (A) prior to 1:00 p.m. (Charlotte
time) on any Business Day, such payment shall be due that Business Day, and (B)
after 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due
on the following Business Day.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its
Revolving Credit Commitment Percentage of such payment in accordance with this
SECTION 3.4, the Issuing Lender receives any payment related to such Letter of
Credit (whether directly from the Borrowers or otherwise) or any payment of
interest on account thereof, the Issuing Lender will distribute to such L/C
Participant its PRO RATA share thereof; PROVIDED, that in the event that any
such payment received by the Issuing Lender shall be required to be returned by
the Issuing Lender, such L/C Participant shall return to the Issuing Lender the
portion thereof previously distributed by the Issuing Lender to it.
SECTION 3.5 REIMBURSEMENT OBLIGATION OF THE BORROWERS. In the event of
any drawing under any Letter of Credit, the Borrowers agree to reimburse (either
with the proceeds of a Revolving Credit Loan obtained as provided herein or with
funds from other sources), in same day funds, the Issuing Lender on each date on
which the Issuing Lender notifies the Borrowers of the date and amount of a
draft paid under any Letter of Credit for the amount of (a) such draft so paid
and (b) any taxes, fees, charges or other costs or expenses incurred by the
Issuing Lender in connection with such payment. Unless the Borrowers shall
immediately notify the Issuing Lender that the Borrowers intend to reimburse the
Issuing Lender for such drawing from other sources of funds, the Borrowers shall
be deemed to have timely given a Notice of Borrowing to the Administrative Agent
requesting that the Lenders make a Base Rate Loan on such date in the amount of
(a) such draft so paid and (b) any taxes, fees, charges or other costs or
expenses incurred by the Issuing Lender in connection with such payment,
regardless of whether or not the conditions precedent specified in ARTICLE VI
have been satisfied, and the Lenders shall make Base Rate Loans in such amount,
the proceeds of which shall be applied to reimburse the Issuing Lender for the
amount of the related drawing and costs and expenses. If the Borrowers shall
fail to reimburse the Issuing Lender as provided above, the unreimbursed amount
of such drawing shall bear interest at the rate which would be payable on any
outstanding Base Rate Loans which were then overdue from the date such amounts
become payable (whether at stated maturity, by acceleration or otherwise) until
payment in full.
SECTION 3.6 OBLIGATIONS ABSOLUTE. The Borrowers' obligations under this
Article III (including without limitation the
24
<PAGE>
Reimbursement Obligation) shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which the Borrowers may have or have had against the Issuing Lender or
any beneficiary of a Letter of Credit. The Borrowers also agree with the Issuing
Lender that the Issuing Lender shall not be responsible for, and the Borrowers'
Reimbursement Obligation under SECTION 3.5 shall not be affected by, among other
things, 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 any dispute between or among the Borrowers and any beneficiary of any
Letter of Credit or any other party to which such Letter of Credit may be
transferred or any claims whatsoever of a Borrower against any beneficiary of
such Letter of Credit or any such transferee. The Issuing Lender shall not 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, except for errors or omissions caused by the Issuing
Lender's gross negligence or willful misconduct. The Borrowers agree that any
action taken or omitted by the Issuing Lender 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 Customs and, to the extent not inconsistent
therewith, the UCC shall be binding on the Borrowers and shall not result in any
liability of the Issuing Lender to the Borrowers. The responsibility of the
Issuing Lender 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 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.
SECTION 3.7 EFFECT OF APPLICATION. To the extent that any provision of
any Application related to any Letter of Credit is inconsistent with the
provisions of this Article III, the provisions of this Article III shall apply.
SECTION 3.8 LETTERS OF CREDIT ISSUED PURSUANT TO THE EXISTING FACILITY.
The Borrowers, the Administrative Agent and each Lender agree that on the
Closing Date each letter of credit issued by First Union Commercial Corporation
pursuant to the terms of the Existing Facility shall, notwithstanding the
provision of SECTION 3.1 (i) or SECTION 3.2, be deemed to be a Letter of Credit
issued under and pursuant to and shall be subject to the terms of this Agreement
as if originally issued pursuant to the terms of this Agreement.
ARTICLE IV
TERM LOAN FACILITY
SECTION 4.1 TERM LOAN. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make a Term Loan to the Borrowers on
the Closing Date. The Term Loan shall be funded by each Lender in a principal
amount equal to such Lender's Term Loan Commitment Percentage of the aggregate
principal amount of the Term Loans made on the Closing Date, which aggregate
25
<PAGE>
principal amount shall equal the total Term Loan Commitment.
SECTION 4.2 PROCEDURE FOR ADVANCE OF TERM LOAN. The Borrowers shall
give the Administrative Agent an irrevocable Notice of Borrowing prior to 10:00
a.m. (Charlotte time) on the Closing Date requesting that the Lenders make the
Term Loans as a Base Rate Loan on such date. Upon receipt of such Notice of
Borrowing from the Borrowers, the Administrative Agent shall promptly notify
each Lender thereof. Not later than 2:00 p.m. (Charlotte time) on the Closing
Date, each Lender will make available to the Administrative Agent for the
account of the Borrowers, at the office of the Administrative Agent in
immediately available funds, the amount of such Term Loan to be made by such
Lender on such borrowing date. The Borrowers hereby irrevocably authorize the
Administrative Agent to disburse the proceeds of the Term Loan in immediately
available funds by wire transfer to such Person or Persons as may be designated
by the Borrowers.
SECTION 4.3 REPAYMENT OF TERM LOAN. The Borrowers shall repay the
aggregate outstanding principal amount of the Term Loan in consecutive quarterly
installments on the last Business Day of each fiscal quarter commencing with the
fiscal quarter ending June 1999 as set forth below:
<TABLE>
<CAPTION>
- -------------------------- ----------------- -----------------------
PRINCIPAL TERM LOAN
INSTALLMENT COMMITMENT
FISCAL QUARTER ($) ($)
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
<S> <C> <C>
June 1999 62,500 24,937,500
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
September 1999 62,500 24,875,000
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
December 1999 62,500 24,812,500
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
March 2000 62,500 24,750,000
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
June 2000 62,500 24,687,500
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
September 2000 62,500 24,625,000
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
December 2000 62,500 24,562,500
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
March 2001 62,500 24,500,000
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
June 2001 62,500 24,437,500
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
September 2001 62,500 24,375,000
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
December 2001 62,500 24,312,500
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
March 2002 62,500 24,250,000
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
June 2002 62,500 24,187,500
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
September 2002 62,500 24,125,000
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
December 2002 62,500 24,062,500
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
March 2003 62,500 24,000,000
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
June 2003 6,000,000 18,000,000
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
September 2003 6,000,000 12,000,000
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
December 2003 6,000,000 6,000,000
- -------------------------- ----------------- -----------------------
- -------------------------- ----------------- -----------------------
March 2004 6,000,000 -0-
- -------------------------- ----------------- -----------------------
</TABLE>
26
<PAGE>
If not sooner paid, the Term Loan shall be paid in full, together with accrued
interest and all other fees, charges and amounts due thereon, on the Term Loan
Maturity Date.
SECTION 4.4 OPTIONAL PREPAYMENT OF TERM LOAN. The Borrowers shall have
the right at any time and from time to time, upon delivery to the Administrative
Agent of a Notice of Prepayment at least three (3) Business Days prior to any
repayment, to prepay the Term Loan in whole or in part without premium or
penalty except as provided in SECTION 5.9. Each optional prepayment of the Term
Loan hereunder shall be in an aggregate principal amount of at least $3,000,000
or any whole multiple of $1,000,000 in excess thereof and shall be applied to
the outstanding principal installments of the Term Loan in inverse order of
maturity thereof. Amounts prepaid under the Term Loan pursuant to this SECTION
4.4 may not be reborrowed and will constitute a permanent reduction in such Term
Loan Commitment.
SECTION 4.5 TERM NOTES. Each Lender's Term Loan and the obligation of
the Borrowers to repay such Term Loan shall be evidenced by a separate Term Note
executed by the Borrowers payable to the order of such Lender representing the
Borrowers' obligation to pay such Term Loan, PLUS interest and all other fees,
charges and other amounts due thereon. Each Term Note shall bear interest on the
unpaid principal amount thereof at the applicable interest rate per annum
specified in SECTION 5.1.
ARTICLE V
GENERAL LOAN PROVISIONS
SECTION 5.1 INTEREST.
(a) INTEREST RATE OPTIONS. Subject to the provisions of this SECTION
5.1, at the election of the Borrowers, the aggregate principal balance of (i)
the Revolving Credit Loans shall bear interest at (A) the Base Rate PLUS the
Applicable Margin as set forth in SECTION 5.1(c), or (b) the LIBOR Rate PLUS the
Applicable Margin as set forth in SECTION 5.1(c); PROVIDED that the LIBOR Rate
shall not be available until three (3) Business Days after the Closing Date
unless the Borrowers and the Administrative Agent have executed an
indemnification agreement in form and substance satisfactory to the
Administrative Agent, (ii) any Swingline Loan shall bear interest at the Base
Rate PLUS the Applicable Margin as set forth in SECTION 5.1(c); and (iii) the
Term Loans shall bear interest at (A) the Base Rate PLUS one and one half
percent (1.5%), or (B) the LIBOR Rate PLUS three percent (3%); provided that the
LIBOR Rate shall not be available until three (3) Business Days after the
Closing Date unless the Borrowers and the Administrative Agent have executed an
indemnification agreement in form and substance satisfactory to the
Administrative Agent. The Borrowers shall select the rate of interest and
Interest Period, if any, applicable to any Loan at the time a Notice of
Borrowing is given pursuant to SECTION 2.3 or at the time a Notice of
Conversion/Continuation is given pursuant to SECTION 5.2. Each Loan or portion
thereof bearing interest based on the Base Rate shall be a "BASE RATE LOAN",
each Loan
27
<PAGE>
or portion thereof bearing interest based on the LIBOR Rate shall be a "LIBOR
RATE LOAN." Any Loan or any portion thereof as to which the Borrowers have not
duly specified an interest rate as provided herein shall be deemed a Base Rate
Loan.
(b) INTEREST PERIODS. In connection with each LIBOR Rate Loan, the
Company, by giving notice at the times described in SECTION 5.1(a), shall elect
an interest period (each, an "INTEREST PERIOD") to be applicable to such Loan,
which Interest Period shall be a period of one (1), two (2), three (3), or six
(6) months with respect to each LIBOR Rate Loan; PROVIDED that:
(i) the Interest Period shall commence on the date of advance
of or conversion to any LIBOR Rate Loan and, in the case of immediately
successive Interest Periods, each successive Interest Period shall commence on
the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; PROVIDED, that if any Interest Period with respect to a
LIBOR Rate Loan would otherwise expire on a day that is not a Business Day but
is a day of the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(iii) any Interest Period with respect to a LIBOR Rate 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 the relevant
calendar month at the end of such Interest Period;
(iv) no Interest Period shall extend beyond (i) with respect
to a Revolving Credit Loan, the Revolving Credit Termination Date or, (ii) with
respect to a Term Loan, the Term Loan Maturity Date; and
(v) there shall be no more than five (5) Interest Periods in
effect at any time.
(c) APPLICABLE MARGIN. The Applicable Margin provided for in SECTION
5.1(a) with respect to the Loans (excluding the Term Loans) (the "APPLICABLE
MARGIN") shall (i) for the period commencing on the Closing Date through the
receipt by the Administrative Agent of the Officer's Compliance Certificate for
the fiscal quarter ending June 30, 1999, be at a level not lower than Level II
and (ii) for each quarter thereafter be determined by reference to the Leverage
Ratio as of the end of the fiscal quarter immediately preceding the delivery of
the applicable Officer's Compliance Certificate as follows:
<TABLE>
<CAPTION>
- ------------------------------- ---------------------------------------- ---------------------------------------------
Level Leverage Ratio Applicable Margin Per Annum
- ------------------------------- ---------------------------------------- ---------------------------------------------
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
Base Rate + LIBOR Rate +
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
<S> <C> <C> <C>
Level I Greater than or equal to 3.0 to 1.0 1.500% 2.750%
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
Level II Greater than or equal to 2.5 to 1.0 but 1.250% 2.500%
Less than 3.0 to 1.0
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
Level III Greater than or equal to 2.0 to 1.0 but 1.00% 2.250%
Less than 2.5 to 1.0
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
<S> <C> <C> <C>
Level IV Greater than or equal to 1.5 to 1.0 but 0.750% 2.000%
Less than 2.0 to 1.0
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
Level V Less than 1.5 to 1.0 0.500% 1.750%
- ------------------------------- ---------------------------------------- ----------------------- ---------------------
</TABLE>
Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent on the tenth (10th) Business Day after receipt by the
Administrative Agent of (i) quarterly financial statements for the Borrowers and
their Subsidiaries and the accompanying Officer's Compliance Certificate setting
forth the Leverage Ratio of the Borrowers as of the most recent fiscal quarter
end or (ii) written evidence of compliance with SECTION 11.4(c)(ix). Subject to
SECTION 5.1(d), in the event the Borrowers fail to deliver such financial
statements and certificate within the time required by SECTION 8.2(c), the
Applicable Margin shall be the highest Applicable Margin set forth above until
the delivery of such financial statements and certificate.
(d) DEFAULT RATE. Subject to SECTION 12.2 and SECTION 12.3, at the
discretion of the Administrative Agent and Required Lenders, upon the occurrence
and during the continuance of an Event of Default, (i) the Borrowers shall no
longer have the option to request LIBOR Rate Loans or Swingline Loans, (ii) all
outstanding LIBOR Rate Loans shall bear interest at a rate per annum of two
percent (2%) in excess of the rate then applicable to LIBOR Rate Loans, as
applicable, until the end of the applicable Interest Period and thereafter at a
rate equal to two percent (2%) in excess of the rate then applicable to Base
Rate Loans, and (iii) all outstanding Base Rate Loans and any fees owing
hereunder or under any other Loan Document shall bear interest at a rate per
annum equal to two percent (2%) in excess of the rate then applicable to Base
Rate Loans. Interest shall continue to accrue on the Notes after the filing by
or against the Borrowers of any petition seeking any relief in bankruptcy or
under any act or law pertaining to insolvency or debtor relief, whether state,
federal or foreign.
(e) INTEREST PAYMENT AND COMPUTATION. Interest on each Base Rate Loan
shall be payable in arrears on the last Business Day of each calendar quarter
commencing March 31, 1999; and interest on each LIBOR Rate Loan shall be payable
on the last day of each Interest Period applicable thereto, and if such Interest
Period extends over three (3) months, at the end of each three (3) month
interval during such Interest Period. Interest on LIBOR Rate Loans and all fees
payable hereunder shall be computed on the basis of a 360-day year and assessed
for the actual number of days elapsed and interest on Base Rate Loans shall be
computed on the basis of a 365/66-day year and assessed for the actual number of
days elapsed.
(f) MAXIMUM RATE. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Notes
charged or collected pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible under any Applicable Law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate permitted by Applicable Law and the Lenders shall at the Administrative
Agent's option (i) promptly refund to the Borrowers any interest received by
Lenders in excess of the maximum lawful rate or (ii) shall apply such excess to
the principal balance of the Obligations. It is the intent hereof that the
Borrowers not pay or
29
<PAGE>
contract to pay, and that neither the Administrative Agent nor any Lender
receive or contract to receive, directly or indirectly in any manner whatsoever,
interest in excess of that which may be paid by the Borrowers under Applicable
Law.
SECTION 5.2 NOTICE AND MANNER OF CONVERSION OR CONTINUATION OF LOANS.
Provided that no Event of Default has occurred and is then continuing, the
Borrowers shall have the option to (a) convert at any time following the third
Business Day after the Closing Date all or any portion of its outstanding Base
Rate Loans (other than Swingline Loans) in a principal amount equal to
$3,000,000 or any whole multiple of $1,000,000 in excess thereof into one or
more LIBOR Rate Loans and (b) upon the expiration of any Interest Period, (i)
convert all or any part of its outstanding LIBOR Rate Loans in a principal
amount equal to $3,000,000 or a whole multiple of $1,000,000 in excess thereof
into Base Rate Loans or (ii) continue such LIBOR Rate Loans as LIBOR Rate Loans.
Whenever the Borrowers desire to convert or continue Loans as provided above,
the Borrowers shall give the Administrative Agent irrevocable prior written
notice in the form attached as EXHIBIT E (a "NOTICE OF CONVERSION/
CONTINUATION") not later than 11:00 a.m. (Charlotte time) three (3) Business
Days before the day on which a proposed conversion or continuation of such Loan
is to be effective specifying (A) the principal amount of the Loans to be
converted or continued, and, in the case of any LIBOR Rate Loan to be converted
or continued, the last day of the Interest Period therefor, (B) the effective
date of such conversion or continuation (which shall be a Business Day), (C) the
principal amount of such Loans to be converted or continued, and (D) the
Interest Period to be applicable to such converted or continued LIBOR Rate Loan.
The Administrative Agent shall promptly notify the Lenders of such Notice of
Conversion/Continuation.
SECTION 5.3 FEES.
(a) COMMITMENT FEE. Commencing on the Closing Date, the Borrowers shall
pay to the Administrative Agent, for the account of the Lenders, a
non-refundable commitment fee on the average daily amount of the Revolving
Credit Commitment LESS the outstanding principal balance of all Revolving Credit
Loans and L/C Obligations, at a rate per annum equal to the product of (i) the
Commitment Fee Rate and (ii) the average daily amount of the Revolving Credit
Commitment LESS the outstanding principal balance of all Revolving Credit Loans
and L/C Obligations. The "COMMITMENT FEE RATE" shall be the rate per annum set
forth below opposite the Average Utilization as of the most recent calendar
quarter end.
<TABLE>
<CAPTION>
-------------------------------------------------- ------------------------------------------
AVERAGE UTILIZATION COMMITMENT FEE RATE
-------------------------------------------------- ------------------------------------------
-------------------------------------------------- ------------------------------------------
<S> <C>
Less than $18,750,000 0.750%
-------------------------------------------------- ------------------------------------------
-------------------------------------------------- ------------------------------------------
Equal to or greater than $18,750,000, but less 0.625%
than $37,500,000
-------------------------------------------------- ------------------------------------------
-------------------------------------------------- ------------------------------------------
Greater than or equal to $37,500,000 0.500%
-------------------------------------------------- ------------------------------------------
</TABLE>
The amount of outstanding Swingline Loans shall not be considered usage of the
Revolving Credit Commitment for the purpose of calculating such commitment fee.
The commitment
30
<PAGE>
fee shall be payable in arrears on the last Business Day of each calendar
quarter during the term of this Agreement commencing March 31, 1999, and on the
Revolving Credit Termination Date. Such commitment fee shall be distributed by
the Administrative Agent to the Lenders PRO RATA in accordance with the Lenders'
respective Revolving Credit Commitment Percentages.
(b) ADMINISTRATIVE AGENT'S AND OTHER FEES. In order to compensate the
Administrative Agent for structuring and syndicating the Loans and for its
obligations hereunder, the Company agrees to pay to the Administrative Agent,
for its account, the fees set forth in the separate fee letter agreement
executed by the Company and First Union Commercial Corporation dated December
16, 1998.
SECTION 5.4 MANNER OF PAYMENT. Each payment by the Borrowers on account
of the principal of or interest on the Loans or of any fee, commission or other
amounts (including the Reimbursement Obligation) payable to the Lenders under
this Agreement or any Note shall be made not later than 1:00 p.m. (Charlotte
time) on the date specified for payment under this Agreement to the
Administrative Agent at the Administrative Agent's Office for the account of the
Lenders (other than as set forth below) PRO RATA in accordance with their
respective Revolving Credit Commitment Percentages or Term Loan Commitment
Percentages, as applicable, (except as specified below), in Dollars, in
immediately available funds and shall be made without any set-off, counterclaim
or deduction whatsoever. Any payment received after such time but before 2:00
p.m. (Charlotte time) on such day shall be deemed a payment on such date for the
purposes of SECTION 12.1, but for all other purposes shall be deemed to have
been made on the next succeeding Business Day. Any payment received after 2:00
p.m. (Charlotte time) shall be deemed to have been made on the next succeeding
Business Day for all purposes. Upon receipt by the Administrative Agent of each
such payment, the Administrative Agent shall distribute to each Lender at its
address for notices set forth herein its PRO RATA share of such payment in
accordance with such Lender's Revolving Credit Commitment Percentage or Term
Loan Commitment Percentage, as applicable, (except as specified below) and shall
wire advice of the amount of such credit to each Lender. Each payment to the
Administrative Agent of the Issuing Lender's fees or L/C Participants'
commissions shall be made in like manner, but for the account of the Issuing
Lender or the L/C Participants, as the case may be. Each payment to the
Administrative Agent of Administrative Agent's fees or expenses shall be made
for the account of the Administrative Agent and any amount payable to any Lender
under SECTIONS 5.8, 5.9, 5.10, 5.11 or 14.2 shall be paid to the Administrative
Agent for the account of the applicable Lender. Subject to SECTION 5.1(b)(ii) in
any payment under this Agreement or any Note shall be specified to be made upon
a day which is not a Business Day, it shall be made on the next succeeding day
which is a Business Day and such extension of time shall in such case be
included in computing any interest if payable along with such payment.
SECTION 5.5 CREDITING OF PAYMENTS AND PROCEEDS. In the event that the
Borrowers shall fail to pay any of the Obligations when due and the Obligations
have been accelerated pursuant to SECTION 12.2, all payments received by the
Lenders upon the Notes and the other Obligations and all net proceeds from the
enforcement of the
31
<PAGE>
Obligations shall be applied first to all expenses then due and payable by the
Borrowers hereunder, then to all indemnity obligations then due and payable by
the Borrowers hereunder, then to all Administrative Agent's and Issuing Lender's
fees then due and payable, then to all commitment and other fees and commissions
then due and payable, then to accrued and unpaid interest on the Swingline Note
to the Swingline Lender, then to the principal amount outstanding under the
Swingline Note to the Swingline Lender, then to accrued and unpaid interest on
all other Notes, the Reimbursement Obligation and any termination payments due
in respect of a Hedging Agreement with any Lender (which such Hedging Agreement
is permitted or required hereunder) (PRO RATA in accordance with all such
amounts due), then to the principal amount of all other Notes and Reimbursement
Obligation (PRO RATA in accordance with all such amounts due) and then to the
cash collateral account described in SECTION 12.2(b) to the extent of any L/C
Obligations then outstanding, in that order.
SECTION 5.6 ADJUSTMENTS. If any Lender (a "BENEFITED LENDER") shall at
any time receive any payment of all or part of the Obligations owing to it, or
interest thereon, or if any Lender shall at any time receive any collateral in
respect to the Obligations owing to it (whether voluntarily or involuntarily, by
set-off or otherwise) in a greater proportion than any such payment to and
Collateral received by any other Lender, if any, in respect of the Obligations
owing to such other Lender, or interest thereon, such Benefited Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Extensions of Credit, 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; PROVIDED, 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 agree that each Lender so purchasing a portion of another Lender's
Extensions of Credit 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.
SECTION 5.7 NATURE OF OBLIGATIONS OF LENDERS REGARDING EXTENSIONS OF
CREDIT; ASSUMPTION BY THE ADMINISTRATIVE AGENT. The obligations of the Lenders
under this Agreement to make the Loans and issue or participate in Letters of
Credit are several and are not joint or joint and several. Unless the
Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the proposed borrowing date in
accordance with SECTION 2.3(b) and the Administrative Agent may, in reliance
upon such assumption, make available to the Borrowers on such date a
corresponding amount. If such amount is made available to the Administrative
Agent on a date after such borrowing date, such Lender shall pay to the
Administrative Agent on demand an amount, until paid, equal to the product of
(a) the amount not made available by such Lender in accordance with the terms
hereof, TIMES (b)
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the daily average Federal Funds Rate during such period as determined by the
Administrative Agent, TIMES (c) a fraction the numerator of which is the number
of days that elapse from and including such borrowing date to the date on which
such amount not made available by such Lender in accordance with the terms
hereof shall have become immediately available to the Administrative Agent and
the denominator of which is 360. A certificate of the Administrative Agent with
respect to any amounts owing under this SECTION 5.7 shall be conclusive, absent
manifest error. If such Lender's Revolving Credit Commitment Percentage or Term
Loan Commitment Percentage, as applicable, of such borrowing is not made
available to the Administrative Agent by such Lender within three (3) Business
Days of such borrowing date, the Administrative Agent shall be entitled to
recover such amount made available by the Administrative Agent with interest
thereon at the rate per annum applicable to Base Rate Loans hereunder, on
demand, from the Borrowers. The failure of any Lender to make available its
Revolving Credit Commitment Percentage or Term Loan Commitment Percentage, as
applicable, of any Loan requested by any Borrower shall not relieve it or any
other Lender of its obligation, if any, hereunder to make its Revolving Credit
Commitment Percentage or Term Loan Commitment Percentage, as applicable, of such
Loan available on the borrowing date, but no Lender shall be responsible for the
failure of any other Lender to make its Revolving Credit Commitment Percentage
or Term Loan Commitment Percentage, as applicable, of such Loan available on the
borrowing date.
SECTION 5.8 CHANGED CIRCUMSTANCES.
(a) CIRCUMSTANCES AFFECTING LIBOR RATE AVAILABILITY . If with respect
to any Interest Period the Administrative Agent or any Lender (after
consultation with Administrative Agent) shall determine that, by reason of
circumstances affecting the foreign exchange and interbank markets generally,
deposits in eurodollars, in the applicable amounts are not being quoted via Dow
Jones Market Screen 3750 or offered to the Administrative Agent or such Lender
for such Interest Period, then the Administrative Agent shall forthwith give
notice thereof to the Borrowers. Thereafter, until the Administrative Agent
notifies the Borrowers that such circumstances no longer exist, the obligation
of the Lenders to make LIBOR Rate Loans and the right of the Borrowers to
convert any Loan to or continue any Loan as a LIBOR Rate Loan shall be
suspended, and the Borrowers shall repay in full (or cause to be repaid in full)
the then outstanding principal amount of each such LIBOR Rate Loans together
with accrued interest thereon, on the last day of the then current Interest
Period applicable to such LIBOR Rate Loan or convert the then outstanding
principal amount of each such LIBOR Rate Loan to a Base Rate Loan as of the last
day of such Interest Period.
(b) LAWS AFFECTING LIBOR RATE AVAILABILITY. If, after the date hereof,
the introduction of, or any change in, any Applicable Law or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or any of their respective Lending
Offices) with any request or directive (whether or not having the force of law)
of any such Authority, central bank or comparable agency, shall make it unlawful
or impossible for any of the Lenders (or any of their respective Lending
Offices) to honor its
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obligations hereunder to make or maintain any LIBOR Rate Loan, such Lender shall
promptly give notice thereof to the Administrative Agent and the Administrative
Agent shall promptly give notice to the Borrowers and the other Lenders.
Thereafter, until the Administrative Agent notifies the Borrowers that such
circumstances no longer exist, (i) the obligations of the Lenders to make LIBOR
Rate Loans and the right of the Borrowers to convert any Loan or continue any
Loan as a LIBOR Rate Loan shall be suspended and thereafter the Borrowers may
select only Base Rate Loans hereunder, and (ii) if any of the Lenders may not
lawfully continue to maintain a LIBOR Rate Loan to the end of the then current
Interest Period applicable thereto as a LIBOR Rate Loan, the applicable LIBOR
Rate Loan shall immediately be converted to a Base Rate Loan for the remainder
of such Interest Period.
(c) INCREASED COSTS. If, after the date hereof, the introduction of, or
any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the
Lenders (or any of their respective Lending Offices) with any request or
directive (whether or not having the force of law) of such Authority, central
bank or comparable agency:
(i) shall subject any of the Lenders (or any of their
respective Lending Offices) to any tax, duty or other charge with respect to any
Note, Letter of Credit or Application or shall change the basis of taxation of
payments to any of the Lenders (or any of their respective Lending Offices) of
the principal of or interest on any Note, Letter of Credit or Application or any
other amounts due under this Agreement in respect thereof (except for changes in
the rate of tax on the overall net income of any of the Lenders or any of their
respective Lending Offices imposed by the jurisdiction in which such Lender is
organized or is or should be qualified to do business or such Lending Office is
located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit, insurance or capital or similar
requirement against assets of, deposits with or for the account of, or credit
extended by any of the Lenders (or any of their respective Lending Offices) or
shall impose on any of the Lenders (or any of their respective Lending Offices)
or the foreign exchange and interbank markets any other condition affecting any
Note; and the result of any of the foregoing is to increase the costs to any of
the Lenders of maintaining any LIBOR Rate Loan or issuing or participating in
Letters of Credit or to reduce the yield or amount of any sum received or
receivable by any of the Lenders under this Agreement or under the Notes in
respect of a LIBOR Rate Loan or Letter of Credit or Application, then such
Lender shall promptly notify the Administrative Agent, and the Administrative
Agent shall promptly notify the Borrowers of such fact and demand compensation
therefor and, within fifteen (15) days after such notice by the Administrative
Agent, the Borrowers shall pay to such Lender such additional amount or amounts
as will compensate such Lender or Lenders for such increased cost or reduction.
The Administrative Agent will promptly notify the Borrowers of any event of
which it has knowledge which will entitle such Lender to compensation pursuant
to this SECTION 5.8(c); PROVIDED, that the Administrative Agent shall incur no
liability whatsoever to the Lenders or the Borrowers in the
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event it fails to do so. The amount of such compensation shall be determined, in
the applicable Lender's sole discretion, based upon the assumption that such
Lender funded its Revolving Credit Commitment Percentage or Term Loan Commitment
Percentage, as applicable, of the LIBOR Rate Loans in the London interbank
market and using any reasonable attribution or averaging methods which such
Lender deems appropriate and practical. A certificate of such Lender setting
forth the basis for determining such amount or amounts necessary to compensate
such Lender shall be forwarded to the Borrowers through the Administrative Agent
and shall be conclusively presumed to be correct save for manifest error.
SECTION 5.9 INDEMNITY. The Borrowers hereby indemnify each of the
Lenders against any loss or expense which may arise or be attributable to each
Lender's obtaining, liquidating or employing deposits or other funds acquired to
effect, fund or maintain any Loan (a) as a consequence of any failure by the
Borrowers to make any payment when due of any amount due hereunder in connection
with a LIBOR Rate Loan, (b) due to any failure of the Borrowers to borrow on a
date specified therefor in a Notice of Borrowing or Notice of
Continuation/Conversion or (c) due to any payment, prepayment or conversion of
any LIBOR Rate Loan on a date other than the last day of the Interest Period
therefor. The amount of such loss or expense shall be determined, in the
applicable Lender's sole discretion, based upon the assumption that such Lender
funded its Revolving Credit Commitment Percentage or Term Loan Commitment
Percentage, as applicable, of the LIBOR Rate Loans in the London interbank
market and using any reasonable attribution or averaging methods which such
Lender deems appropriate and practical. A certificate of such Lender setting
forth the basis for determining such amount or amounts necessary to compensate
such Lender shall be forwarded to the Borrowers through the Administrative Agent
and shall be conclusively presumed to be correct save for manifest error.
SECTION 5.10 CAPITAL REQUIREMENTS. If either (a) the introduction of,
or any change in, or in the interpretation of, any Applicable Law or (b)
compliance with any guideline or request from any central bank or comparable
agency or other Governmental Authority (whether or not having the force of law),
has or would have the effect of reducing the rate of return on the capital of,
or has affected or would affect the amount of capital required to be maintained
by, any Lender or any corporation controlling such Lender as a consequence of,
or with reference to the Commitments and other commitments of this type, below
the rate which the Lender or such other corporation could have achieved but for
such introduction, change or compliance, then within five (5) Business Days
after written demand by any such Lender, the Borrowers shall pay to such Lender
from time to time as specified by such Lender additional amounts sufficient to
compensate such Lender or other corporation for such reduction. A certificate as
to such amounts submitted to the Borrowers and the Administrative Agent by such
Lender, shall, in the absence of manifest error, be presumed to be correct and
binding for all purposes.
SECTION 5.11 TAXES.
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(a) PAYMENTS FREE AND CLEAR. Any and all payments by the Borrowers
hereunder or under the Notes or the Letters of Credit shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholding, and all liabilities with respect
thereto excluding, (i) in the case of each Lender and the Administrative Agent,
income and franchise taxes imposed by the jurisdiction under the laws of which
such Lender or the Administrative Agent (as the case may be) is organized or is
or should be qualified to do business or any political subdivision thereof and
(ii) in the case of each Lender, income and franchise taxes imposed by the
jurisdiction of such Lender's Lending Office or any political subdivision
thereof (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "TAXES"). If the
Borrowers shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note or Letter of Credit to any Lender or the
Administrative Agent, (A) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this SECTION 5.11) such Lender or the
Administrative Agent (as the case may be) receives an amount equal to the amount
such party would have received had no such deductions been made, (B) the
Borrowers shall make such deductions, (C) the Borrowers shall pay the full
amount deducted to the relevant taxing authority or other authority in
accordance with applicable law, and (D) the Borrowers shall deliver to the
Administrative Agent evidence of such payment to the relevant taxing authority
or other authority in the manner provided in SECTION 5.11(d).
(b) STAMP AND OTHER TAXES. In addition, the Borrowers shall pay any
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes, levies of the United
States or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Loans, the Letters of Credit, the other Loan Documents, or the perfection of any
rights or security interest in respect thereto (hereinafter referred to as
"OTHER TAXES").
(c) INDEMNITY. The Borrowers shall indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this SECTION 5.11) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Such indemnification shall be made within thirty (30) days from the date such
Lender or the Administrative Agent (as the case may be) makes written demand
therefor.
(d) EVIDENCE OF PAYMENT. Within thirty (30) days after the date of any
payment of Taxes or Other Taxes, the Borrowers shall furnish to the
Administrative Agent, at its address referred to in SECTION 14.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.
(e) DELIVERY OF TAX FORMS. Each Lender organized under the laws of a
jurisdiction
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other than the United States or any state thereof shall deliver to the
Borrowers, with a copy to the Administrative Agent, on the Closing Date or
concurrently with the delivery of the relevant Assignment and Acceptance, as
applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms
1001, as applicable (or successor forms) properly completed and certifying in
each case that such Lender is entitled to a complete exemption from withholding
or deduction for or on account of any United States federal income taxes, and
(ii) an Internal Revenue Service Form W-8 or W-9, or successor applicable form,
as the case may be, to establish an exemption from United States backup
withholding taxes. Each such Lender further agrees to deliver to the Borrowers,
with a copy to the Administrative Agent, a Form 1001 or 4224 and Form W-8 or W-9
or successor applicable forms or manner of certification, as the case may be, on
or before the date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Borrowers, certifying in the case of a Form 1001 or 4224
that such Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes (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 such forms inapplicable or the exemption to
which such forms relate unavailable and such Lender notifies the Borrowers and
the Administrative Agent that it is not entitled to receive payments without
deduction or withholding of United States federal income taxes) and, in the case
of a Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(f) SURVIVAL. Without prejudice to the survival of any other agreement
of the Borrowers hereunder, the agreements and obligations of the Borrowers
contained in this SECTION 5.11 shall survive the payment in full of the
Obligations and the termination of the Commitments.
SECTION 5.12 SECURITY. The Obligations of the Borrowers shall be
secured as provided in the Security Documents.
SECTION 5.13 JOINT AND SEVERAL LIABILITY; CONTRIBUTION.
(a) The Obligations of the Borrowers under this Agreement and the Notes
shall be joint and several.
(b) To the extent any Borrower is required, by reason of its
Obligations hereunder, to pay to the Administrative Agent and the Lenders an
amount greater than the amount of Loans actually made available to or for the
account of such Borrower, such Borrower shall have an enforceable right of
contribution against the remaining Borrowers, and the remaining Borrowers shall
be jointly and severally liable, for repayment of the full amount of such excess
payment. Subject only to the subordination provided in the following subsection
(e), such Borrower further shall be subrogated to any and all rights of the
Administrative Agent and the Lenders against the remaining Borrowers to the
extent of such excess payment.
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(c) To the extent that any Borrower would, but for the operation of
this SECTION 5.13 and by reason of its Obligations hereunder or its obligations
to other Subsidiaries under this SECTION 5.13, be rendered insolvent for any
purpose under Applicable Law, each Borrower hereby agrees to indemnify such
Borrower in an amount at least equal to the amount necessary to prevent such
Borrower from having been rendered insolvent by reason of the incurring of any
such obligations.
(d) To the extent that any Borrower would, but for the operation of
this SECTION 5.13, be rendered insolvent under any Applicable Law by reason of
its incurring of obligations to any other Borrower under the foregoing
subsections (b) and (c) above, such Borrower shall, in turn, have rights of
contribution and indemnity, to the full extent provided in the foregoing
subsections (b) and (c) above, against the remaining Borrowers, such that all
Obligations of all of the Borrowers hereunder and under this SECTION 5.13 shall
be allocated in a manner such that no Borrower shall be rendered insolvent for
any purpose under Applicable Law by reason of its incurring of such obligations.
(e) The rights of any Borrower to contribution, subrogation and
indemnity under this SECTION 5.13 or under Applicable Law shall in all events
and all respects be subject and subordinate to the rights of the Administrative
Agent and the Lenders under this Agreement and subject to the prior full, final
and indefeasible payment to the Administrative Agent and the Lenders of all
Obligations and no such right may be exercised until all of such Obligations
have been fully, finally and indefeasibly paid and such payments are in no event
subject to avoidance under Title 11 of the United States Code or any other
Applicable Law.
SECTION 5.14 MITIGATION OF OBLIGATIONS; REPLACEMENT OF LENDERS.
(a) DESIGNATION OF A DIFFERENT LENDING OFFICE. If any Lender requests
compensation or if a Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
SECTION 5.8 or SECTION 5.10, then such Lender shall use reasonable efforts to
designate a different Lending Office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to SECTION 5.8
or SECTION 5.10, as the case may be, in the future and (ii) would not subject
such Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender. The Borrowers hereby agree to pay all reasonable
costs and expenses incurred by any Lender in connection with any such
designation or assignment.
(b) REPLACEMENT OF LENDERS. If any Lender requests compensation or if a
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to SECTION 5.8 or
SECTION 5.10, or if any Lender defaults in its obligation to fund Loans
hereunder, then such Borrower may, at its sole expense and effort, upon notice
to such Lender and the Administrative Agent, require such Lender to assign and
delegate,
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without recourse (in accordance with and subject to the restrictions contained
in SECTION 12.10), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment). A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling such
Borrower to require such assignment and delegation cease to apply.
ARTICLE VI
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 6.1 CLOSING. The closing shall take place at the offices of
Kennedy Covington Lobdell & Hickman, L.L.P. at 10:00 a.m. on April 16, 1999, or
on such other date and at such other place as the parties hereto shall mutually
agree.
SECTION 6.2 CONDITIONS TO CLOSING AND INITIAL EXTENSIONS OF CREDIT. The
obligation of the Lenders to close this Agreement and to make the initial
Extensions of Credit is subject to the satisfaction of each of the following
conditions:
(a) EXECUTED LOAN DOCUMENTS. This Agreement, the Revolving Credit
Notes, the Term Notes, the Swingline Note, the Collateral Agreement, the Side
Letter and the other Security Documents shall have been duly authorized,
executed and delivered to the Administrative Agent or the Collateral Agent, as
applicable, by the parties thereto, shall be in full force and effect and no
default shall exist thereunder, and the Borrowers shall have delivered original
counterparts thereof to the Administrative Agent.
(b) CLOSING CERTIFICATES; ETC.
(i) OFFICER'S CERTIFICATE OF THE BORROWERS. The Administrative
Agent shall have received a certificate from a Responsible Officer of each
Borrower, in form and substance satisfactory to the Administrative Agent, to the
effect that all representations and warranties of the Borrowers contained in
this Agreement and the other Loan Documents are true, correct and complete; that
the Borrowers are not in violation of any of the covenants contained in this
Agreement and the other Loan Documents; that, after giving effect to the
transactions contemplated by this Agreement, no Default or Event of Default has
occurred and is continuing; and that the Borrowers have satisfied each of the
closing conditions.
(ii) CERTIFICATE OF SECRETARY OF THE BORROWERS. The
Administrative Agent shall have received a certificate of the secretary or
assistant secretary of each Borrower certifying as to the incumbency and
genuineness of the signature of each officer of such Borrower executing Loan
Documents to which it is a party and certifying that attached thereto is a true,
correct and complete copy of (A) the articles of incorporation of such Borrower
and all amendments thereto, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of
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incorporation, (B) the bylaws of such Borrower as in effect on the date of such
certifications, (C) resolutions duly adopted by the Board of Directors of such
Borrower authorizing the borrowings contemplated hereunder and the execution,
delivery and performance of this Agreement and the other Loan Documents to which
it is a party, and (D) each certificate required to be delivered pursuant to
SECTION 6.2(b)(iii).
(iii) CERTIFICATES OF GOOD STANDING. To the extent requested
by the Administrative Agent, the Administrative Agent shall have received
long-form certificates as of a recent date of the good standing of each Borrower
under the laws of its jurisdiction of organization and each other jurisdiction
where such Borrower is qualified to do business and, if separately available, a
certificate of the relevant taxing authorities of such jurisdictions certifying
that such Person has filed required tax returns and owes no delinquent taxes.
(iv) OPINIONS OF COUNSEL. The Administrative Agent shall have
received favorable opinions of counsel to the Borrowers and their Subsidiaries
addressed to the Administrative Agent and the Lenders with respect to the
Borrowers, the Loan Documents and such other matters as the Lenders shall
request.
(v) TAX FORMS. The Administrative Agent shall have received
copies of the United States Internal Revenue Service forms required by SECTION
5.11(e).
(c) COLLATERAL.
(i) FILINGS AND RECORDINGS. All filings and recordations that
are necessary to perfect the security interests of the Lenders in the collateral
described in the Security Documents shall have been received by the Collateral
Agent and the Collateral Agent shall have received evidence satisfactory to the
Administrative Agent that upon such filings and recordations such security
interests constitute valid and perfected first priority Liens therein.
(ii) PLEDGED COLLATERAL. The Collateral Agent shall have
received (A) original stock certificates or other certificates evidencing the
capital stock or other ownership interests pledged pursuant to the Collateral
Agreement, together with an undated stock power for each such certificate duly
executed in blank by the registered owner thereof and (B) as applicable, each
original promissory note pledged pursuant to the Collateral Agreement.
(iii) LIEN SEARCH. The Collateral Agent shall have received
the results of a Lien search (including a search as to judgments, pending
litigation and tax matters) made against the Borrowers under the Uniform
Commercial Code (or applicable judicial docket) as in effect in any state in
which any of its assets are located, indicating among other things that its
assets are free and clear of any Lien except for Liens permitted hereunder.
(iv) HAZARD AND LIABILITY INSURANCE. The Collateral Agent
shall have received certificates of insurance designating the Collateral Agent
as loss payee and additional insured and in form and substance reasonably
satisfactory to the Collateral Agent.
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(d) CONSENTS; DEFAULTS.
(i) GOVERNMENTAL AND THIRD PARTY APPROVALS. The Borrowers
shall have obtained all necessary approvals, authorizations and consents of any
Person and of all Governmental Authorities and courts having jurisdiction with
respect to the transactions contemplated by this Agreement and the other Loan
Documents.
(ii) NO INJUNCTION, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of this
Agreement or the other Loan Documents or the consummation of the transactions
contemplated hereby or thereby, or which, in the Administrative Agent's sole
discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement and such other Loan Documents.
(iii) NO EVENT OF DEFAULT. No Default or Event of Default
shall have occurred and be continuing.
(e) FINANCIAL MATTERS.
(i) FINANCIAL STATEMENTS. The Administrative Agent shall have
received the most recent audited Consolidated financial statements of the
Borrowers and their Subsidiaries, all in form and substance satisfactory to the
Administrative Agent.
(ii) FINANCIAL CONDITION CERTIFICATE. The Borrowers shall have
delivered to the Administrative Agent a certificate, in form and substance
satisfactory to the Administrative Agent, and certified as accurate by a
Responsible Officer of the Company on behalf of itself and the other Borrowers,
that (A) the Borrowers and their Subsidiaries are each Solvent, (B) the
Borrowers' payables are current and not past due, (C) attached thereto is a PRO
FORMA balance sheet of the Borrowers and their Subsidiaries setting forth on a
PRO forma basis the financial condition of the Borrowers and their Subsidiaries
on a Consolidated basis as of December 31, 1998, reflecting a PRO FORMA basis
the effect of the transactions contemplated herein, including all fees and
expenses in connection therewith, and evidencing compliance on a PRO FORMA basis
with the covenants contained in Articles X and XI, and (D) attached thereto are
the financial projections previously delivered to the Administrative Agent
representing the good faith opinions of the Borrowers and senior management
thereof as to the projected results contained therein.
(iii) PAYMENT AT CLOSING; FEE LETTERS. The Borrowers shall
have paid the fees set forth or referenced in SECTION 5.3 and any other accrued
and unpaid fees or commissions due hereunder (including, without limitation,
legal fees and expenses) to the Administrative Agent and Lenders, and to any
other Person such amount as may be due thereto in connection with the
transactions contemplated hereby, including all taxes, fees and other charges in
connection with the execution, delivery, recording, filing and registration of
any of the Loan Documents. The
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Administrative Agent shall have received duly authorized and executed copies of
the fee letter agreement referred to in SECTION 5.3(b).
(f) MISCELLANEOUS.
(i) NOTICE OF BORROWING. The Administrative Agent shall have
received a Notice of Borrowing from the Borrowers in accordance with SECTION
2.3(a) and SECTION 4.2, and a Notice of Account Designation specifying the
account or accounts to which the proceeds of any Loans made after the Closing
Date are to be disbursed.
(ii) PROCEEDINGS AND DOCUMENTS. All opinions, certificates and
other instruments and all proceedings in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and substance to
the Administrative Agent. The Lenders shall have received copies of all other
instruments and other evidence as any Lender may reasonably request, with
respect to the transactions contemplated by this Agreement and the taking of all
actions in connection therewith.
(iii) EXISTING FACILITY. The Existing Facility shall be repaid
in full and terminated and all collateral security therefor shall be released,
and the Administrative Agent shall have received a pay-off letter in form and
substance satisfactory to it evidencing such repayment, termination,
reconveyance and release.
(iv) DUE DILIGENCE AND OTHER DOCUMENTS. The Borrowers shall
have delivered to the Administrative Agent such other documents, certificates
and opinions as the Administrative Agent may reasonably request.
SECTION 6.3 CONDITIONS TO ALL EXTENSIONS OF CREDIT. The obligations of
the Lenders to make any Extension of Credit is subject to the satisfaction of
the following conditions precedent on the relevant borrowing or issue date, as
applicable:
(a) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in ARTICLE VII shall be true and correct on and as of
such borrowing or issuance date with the same effect as if made on and as of
such date; except for any representation and warranty made as of an earlier
date, which representation and warranty shall remain true and correct as of such
earlier date.
(b) NO EXISTING DEFAULT. No Default or Event of Default shall have
occurred and be continuing hereunder (i) on the borrowing date with respect to
such Loan or after giving effect to the Loans to be made on such date or (ii) on
the issue date with respect to such Letter of Credit or after giving affect to
such Letters of Credit on such date.
(c) OFFICER'S COMPLIANCE CERTIFICATE; ADDITIONAL DOCUMENTS. The
Administrative Agent shall have received the current Officer's Compliance
Certificate and each additional document, instrument, legal opinion or other
item of information reasonably requested by it.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
SECTION 7.1 REPRESENTATIONS AND WARRANTIES. To induce the
Administrative Agent and Lenders to enter into this Agreement and to induce the
Lenders to make Extensions of Credit, the Borrowers and their Subsidiaries
hereby represent and warrant to the Agents and Lenders both before and after
giving effect to the transactions contemplated hereunder that:
(a) ORGANIZATION; POWER; QUALIFICATION. Each of the Borrowers and each
of their respective Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, has the corporate power and authority to own its
properties and to carry on its business as now being and hereafter proposed to
be conducted and is duly qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification and authorization. The jurisdictions in
which the Borrowers and their Subsidiaries are organized and qualified to do
business as of the Closing Date are listed on SCHEDULE 7.1(a).
(b) OWNERSHIP. Each of the Borrowers and their Subsidiaries as of the
Closing Date is listed on SCHEDULE 7.1(b). As of the Closing Date, the
capitalization of the Borrowers and their Subsidiaries consists of the number of
shares, authorized, issued and outstanding, of such classes and series, with or
without par value, described on SCHEDULE 7.1(b). All outstanding shares have
been duly authorized and validly issued and are fully paid and nonassessable.
The shareholders of the Borrowers and their Subsidiaries and the number of
shares owned by each as of the Closing Date are described on SCHEDULE 7.1(b). As
of the Closing Date, there are no outstanding stock purchase warrants,
subscriptions, options, securities, instruments or other rights of any type or
nature whatsoever, which are convertible into, exchangeable for or otherwise
provide for or permit the issuance of capital stock of the Borrowers and their
Subsidiaries, except as described on SCHEDULE 7.1(b).
(c) AUTHORIZATION OF AGREEMENT, LOAN DOCUMENTS AND BORROWING. Each of
the Borrowers has the right, power and authority and has taken all necessary
corporate and other action to authorize the execution, delivery and performance
of this Agreement and each of the other Loan Documents to which it is a party in
accordance with their respective terms. This Agreement and each of the other
Loan Documents have been duly executed and delivered by the duly authorized
officers of the Borrowers party thereto, and each such document constitutes the
legal, valid and binding obligation of the Borrowers party thereto, enforceable
in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar state or federal
debtor relief laws from time to time in effect which affect the enforcement of
creditors' rights in general and the availability of equitable remedies.
(d) COMPLIANCE OF AGREEMENT, LOAN DOCUMENTS AND BORROWING WITH LAWS,
ETC. The
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execution, delivery and performance by each Borrower of the Loan Documents to
which it is a party, in accordance with their respective terms, the borrowings
hereunder and the transactions contemplated hereby do not and will not, by the
passing of time, the giving of notice or otherwise, (i) require any Governmental
Approval or violate any Applicable Law relating to the Borrowers, (ii) conflict
with, result in a breach of or constitute a default under the articles of
incorporation, bylaws or other organizational documents of the Borrowers or any
indenture, agreement or other instrument to which any Borrower is a party or by
which any of its properties may be bound or any Governmental Approval relating
to such Person, or (iii) result in or require the creation or imposition of any
Lien upon or with respect to any property now owned or hereafter acquired by
such Person other than Liens arising under the Loan Documents.
(e) COMPLIANCE WITH LAW; GOVERNMENTAL APPROVALS. Except to the extent
the failure to obtain such approval or comply with any Applicable Law would not
reasonably be expected to have a Material Adverse Effect, each of the Borrowers
and each of their respective Subsidiaries (i) has all Governmental Approvals
required by any Applicable Law for it to conduct its business, each of which is
in full force and effect, is final and not subject to review on appeal and is
not the subject of any pending or, to the best of its knowledge, threatened
attack by direct or collateral proceeding, and (ii) is in compliance with each
Governmental Approval applicable to it and in compliance with all other
Applicable Laws relating to it or any of its respective properties.
(f) TAX RETURNS AND PAYMENTS. Each of the Borrowers and each of their
respective Subsidiaries has duly filed or caused to be filed all federal, state,
local and other tax returns required by Applicable Law to be filed, and has
paid, or made adequate provision for the payment of, all federal, state, local
and other taxes, assessments and governmental charges or levies upon it and its
property, income, profits and assets which are due and payable, except where the
failure to do so would not reasonably be expected to have a Material Adverse
Effect. No Governmental Authority has asserted any Lien or other claim against
any Borrower or Subsidiary with respect to unpaid taxes which has not been
discharged or resolved. The charges, accruals and reserves on the books of the
Borrowers and their Subsidiaries in respect of federal, state, local and other
taxes for all Fiscal Years and portions thereof since the organization of the
Borrowers and their Subsidiaries are in the judgment of the Borrowers adequate,
and the Borrowers do not anticipate any additional taxes or assessments for any
of such years.
(g) INTELLECTUAL PROPERTY MATTERS. Each of the Borrowers and each of
their respective Subsidiaries owns or possesses rights to use all franchises,
licenses, copyrights, copyright applications, patents, patent rights or
licenses, patent applications, trademarks, trademark rights, trade names, trade
name rights, copyrights and rights with respect to the foregoing which are
required to conduct its business. No event has occurred which permits, or after
notice or lapse of time or both would permit, the revocation or termination of
any such rights, and no Borrower is liable to any Person for infringement under
Applicable Law with respect to any such rights as a result of its business
operations, except where such event, revocation or termination would not
reasonably be expected to have a Material Adverse Effect.
(h) ENVIRONMENTAL MATTERS.
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(i) The properties owned, leased or operated by the Borrowers
and their Subsidiaries now or in the past do not contain, and to their knowledge
have not previously contained, any Hazardous Materials in amounts or
concentrations which (A) constitute or constituted a violation of applicable
Environmental Laws or (B) could give rise to liability under applicable
Environmental Laws;
(ii) The Borrowers, each Subsidiary and such properties and
all operations conducted in connection therewith are in compliance, and have
been in compliance, with all applicable Environmental Laws, except where the
failure to so comply would not reasonably be expected to have a Material Adverse
Effect, and there is no contamination at, under or about such properties or such
operations which could interfere with the continued operation of such properties
or impair the fair saleable value thereof;
(iii) Neither the Borrowers nor any Subsidiary has received
any notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters, Hazardous Materials, or
compliance with Environmental Laws which would reasonably be expected to have a
Material Adverse Effect, nor do the Borrowers or any Subsidiary have knowledge
or reason to believe that any such notice will be received or is being
threatened;
(iv) Hazardous Materials have not been transported or disposed
of to or from the properties owned, leased or operated by the Borrowers and
their Subsidiaries in violation of, or in a manner or to a location which could
give rise to liability under, Environmental Laws, nor have any Hazardous
Materials been generated, treated, stored or disposed of at, on or under any of
such properties in violation of, or in a manner that could give rise to
liability under, any applicable Environmental Laws which would reasonably be
expected to have a Material Adverse Effect;
(v) No judicial proceedings or governmental or administrative
action is pending, or, to the knowledge of the Borrowers, threatened, under any
Environmental Law to which the Borrowers or any Subsidiary is or will be named
as a party, 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 with respect to Borrowers,
any Subsidiary or such properties or operations; and
(vi) There has been no release, or to the best of the
Borrowers' knowledge, threat of release, of Hazardous Materials at or from
properties owned, leased or operated by the Borrowers or any Subsidiary, now or
in the past, in violation of or in amounts or in a manner that could give rise
to liability under Environmental Laws.
(i) ERISA.
(i) As of the Closing Date, neither the Borrowers nor any
ERISA Affiliate
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maintains or contributes to, or has any obligation under, any Employee Benefit
Plans other than those identified on SCHEDULE 7.1(i);
(ii) the Borrowers and each ERISA Affiliate are in compliance
with all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans except for
any required amendments for which the remedial amendment period as defined in
Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that
is intended to be qualified under Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified, and each trust related to
such plan has been determined to be exempt under Section 501(a) of the Code. No
liability has been incurred by the Borrowers or any ERISA Affiliate which
remains unsatisfied for any taxes or penalties with respect to any Employee
Benefit Plan or any Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412 of the Code) been
incurred (without regard to any waiver granted under Section 412 of the Code),
nor has any funding waiver from the Internal Revenue Service been received or
requested with respect to any Pension Plan, nor have the Borrowers or any ERISA
Affiliate failed to make any contributions or to pay any amounts due and owing
as required by Section 412 of the Code, Section 302 of ERISA or the terms of any
Pension Plan prior to the due dates of such contributions under Section 412 of
the Code or Section 302 of ERISA, nor has there been any event requiring any
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any
Pension Plan;
(iv) Neither the Borrowers nor any ERISA Affiliate has: (A)
engaged in a nonexempt prohibited transaction described in Section 406 of the
ERISA or Section 4975 of the Code, (B) incurred any liability to the PBGC which
remains outstanding other than the payment of premiums and there are no premium
payments which are due and unpaid, (C) failed to make a required contribution or
payment to a Multiemployer Plan, or (D) failed to make a required installment or
other required payment under Section 412 of the Code;
(v) No Termination Event has occurred or is reasonably
expected to occur; and
(vi) No proceeding, claim, lawsuit and/or investigation is
existing or, to the best knowledge of the Borrowers after due inquiry,
threatened concerning or involving any (A) employee welfare benefit plan (as
defined in Section 3(1) of ERISA) currently maintained or contributed to by the
Borrowers or any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan.
(j) MARGIN STOCK. No Borrower is engaged principally, or as one of its
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" (as each such term is defined or used in
Regulation U of the Board of Governors of the Federal Reserve System). No part
of the proceeds of any of the Loans or Letters of Credit will be used for
purchasing or carrying margin stock or for any purpose which violates, or which
would
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be inconsistent with, the provisions of Regulation T, U or X of such Board of
Governors.
(k) GOVERNMENT REGULATION. No Borrower is an "investment company" or a
company "controlled" by an "investment company" (as each such term is defined or
used in the Investment Company Act of 1940, as amended) and no Borrower is, or
after giving effect to any Extension of Credit will be, subject to regulation
under the Public Utility Holding Company Act of 1935 or the Interstate Commerce
Act, each as amended, or any other Applicable Law which limits its ability to
incur or consummate the transactions contemplated hereby.
(l) MATERIAL CONTRACTS. SCHEDULE 7.1(l) sets forth a complete and
accurate list of all Material Contracts of the Borrowers and their Subsidiaries
in effect as of the Closing Date not listed on any other Schedule hereto; other
than as set forth in SCHEDULE 7.1(l), each such Material Contract is, and after
giving effect to the consummation of the transactions contemplated by the Loan
Documents will be, in full force and effect in accordance with the terms thereof
except where the failure thereto would not reasonably be expected to have a
Material Adverse Effect. The Borrowers have delivered or caused their
Subsidiaries to deliver to the Administrative Agent a true and complete copy of
each Material Contract required to be listed on SCHEDULE 7.1(l) or any other
Schedule hereto.
(m) EMPLOYEE RELATIONS. Each of the Borrowers and each of their
respective Subsidiaries has a stable work force in place and is not, as of the
Closing Date, party to any collective bargaining agreement nor has any labor
union been recognized as the representative of its employees except as set forth
on SCHEDULE 7.1(m). No Borrower knows of any pending, threatened or contemplated
strikes, work stoppage or other collective labor disputes involving its
employees.
(n) BURDENSOME PROVISIONS. No Borrower is a party to any indenture,
agreement, lease or other instrument, or subject to any corporate or partnership
restriction, Governmental Approval or Applicable Law which is so unusual or
burdensome as in the foreseeable future could be reasonably expected to have a
Material Adverse Effect. The Borrowers and their Subsidiaries do not presently
anticipate that future expenditures needed to meet the provisions of any
statutes, orders, rules or regulations of a Governmental Authority will be so
burdensome as to have a Material Adverse Effect.
(o) FINANCIAL STATEMENTS. The (i) Consolidated balance sheets of the
Borrowers and their Subsidiaries as of December 31, 1997, and the related
statements of income and retained earnings and cash flows for the Fiscal Year
then ended and (ii) unaudited Consolidated balance sheet of the Borrowers and
their Subsidiaries as of September 30, 1998, and related unaudited interim
statements of revenue and retained earnings, copies of which have been furnished
to the Administrative Agent and each Lender, are true and accurate in all
material respects, and are not misleading in any material respect and fairly
present the assets, liabilities and financial position of the Borrowers and
their Subsidiaries as at such dates, and the results of the operations and
changes of financial position for the periods then ended. All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP. The
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Borrowers and their Subsidiaries have no Debt, obligation or other unusual
forward or long-term commitment which is not fairly reflected in the foregoing
financial statements or in the notes thereto.
(p) NO MATERIAL ADVERSE CHANGE. Since December 31, 1998, there has been
no material adverse change in the properties, business, operations or condition
(financial or otherwise) of the Borrowers and their Subsidiaries and no event
has occurred or condition arisen that could reasonably be expected to have a
Material Adverse Effect.
(q) SOLVENCY. As of the Closing Date and after giving effect to each
Extension of Credit made hereunder, each of the Borrowers and each of their
respective Subsidiaries will be Solvent.
(r) TITLES TO PROPERTIES. Each of the Borrowers and each of their
respective Subsidiaries has such title to the real property owned by it as is
necessary or desirable to the conduct of its business and valid and legal title
to all of its personal property and assets, including, but not limited to, those
reflected on the balance sheets of the Borrowers and their Subsidiaries
delivered pursuant to SECTION 7.1(o), except those which have been disposed of
by the Borrowers and their Subsidiaries subsequent to such date which
dispositions have been in the ordinary course of business or as otherwise
expressly permitted hereunder.
(s) LIENS. None of the properties and assets of the Borrowers and their
Subsidiaries is subject to any Lien, except Liens permitted pursuant to SECTION
11.3. No financing statement under the Uniform Commercial Code of any state
which names any Borrower or any Subsidiary or any of their respective trade
names or divisions as debtor and which has not been terminated, has been filed
in any state or other jurisdiction and no Borrower has signed any such financing
statement or any security agreement authorizing any secured party thereunder to
file any such financing statement, except to perfect those Liens permitted by
SECTION 11.3.
(t) DEBT AND GUARANTY OBLIGATIONS. SCHEDULE 7.1(t) is a complete and
correct listing of all Debt and Guaranty Obligations of the Borrowers and their
Subsidiaries as of the Closing Date in excess of $1,000,000. The Borrowers and
their Subsidiaries have performed and are in compliance with all of the terms of
such Debt and Guaranty Obligations and all instruments and agreements relating
thereto, and no default or event of default, or event or condition which with
notice or lapse of time or both would constitute such a default or event of
default on the part of the Borrowers and their Subsidiaries exists with respect
to any such Debt or Guaranty Obligation.
(u) LITIGATION. Except for matters existing on the Closing Date and set
forth on SCHEDULE 7.1(u), there are no actions, suits or proceedings pending
nor, to the knowledge of the Borrowers and their Subsidiaries, threatened
against or in any other way relating adversely to or affecting the Borrowers,
their Subsidiaries, or any of their respective properties in any court or before
any arbitrator of any kind or before or by any Governmental Authority which
involves the possibility of any judgment or liability not fully covered by
insurance and which could
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reasonably be expected to have a Material Adverse Effect.
(v) ABSENCE OF DEFAULTS. No event has occurred or is continuing which
constitutes a Default or an Event of Default, or which constitutes, or which
with the passing of time or giving of notice or both would constitute, a default
or event of default by the Borrowers and their Subsidiaries under any Material
Contract or a violation of any judgment, decree or order to which any Borrower
or Subsidiary is a party or by which the Borrowers, their Subsidiaries, or any
of their respective properties may be bound or which would require the Borrowers
or their Subsidiaries to make any payment thereunder prior to the scheduled
maturity date therefor.
(w) ACCURACY AND COMPLETENESS OF INFORMATION. All written information,
reports and other papers and data produced by or on behalf of the Borrowers and
their Subsidiaries and furnished to the Lenders (except for projections) were,
at the time the same were so furnished, complete and correct in all respects to
the extent necessary to give the recipient a true and accurate knowledge of the
subject matter. No document furnished or written statement made to the
Administrative Agent or the Lenders by the Borrowers and their Subsidiaries in
connection with the negotiation, preparation or execution of this Agreement or
any of the Loan Documents contains or will contain any untrue statement of a
fact material to the creditworthiness of the Borrowers and their Subsidiaries or
omits or will omit to state a fact necessary in order to make the statements
contained therein not misleading. The Borrowers and their Subsidiaries are not
aware of any facts which they have not disclosed in writing to the
Administrative Agent having a Material Adverse Effect, or insofar as the
Borrowers and their Subsidiaries can now foresee, could reasonably be expected
to have a Material Adverse Effect.
SECTION 7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties set forth in this Article VII and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this Agreement. All representations and warranties
made under this Agreement shall be made or deemed to be made at and as of the
Closing Date, shall survive the Closing Date and shall not be waived by the
execution and delivery of this Agreement, any investigation made by or on behalf
of the Lenders or any borrowing hereunder.
ARTICLE VIII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in SECTION 14.11, the Borrowers will furnish or cause to be furnished to the
Administrative Agent and to the Lenders at their respective addresses as set
forth on SCHEDULE 1, or such other office as may be designated by the
Administrative Agent and Lenders from time to time:
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SECTION 8.1 FINANCIAL STATEMENTS AND PROJECTIONS.
(a) QUARTERLY FINANCIAL STATEMENTS. As soon as practicable and in any
event within forty-five (45) days after the end of the first three (3) fiscal
quarters on each Fiscal Year, an unaudited Consolidated balance sheet of the
Borrowers and their Subsidiaries as of the close of such fiscal quarter and
unaudited Consolidated statements of income, and cash flows for the fiscal
quarter then ended and that portion of the Fiscal Year then ended, including the
notes thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by the
Borrowers and their Subsidiaries in accordance with GAAP and SEC quarterly
requirements and, if applicable, containing disclosure of the effect on the
financial position or results of operations of any change in the application of
accounting principles and practices during the period, and certified by the
chief financial officer of the Company to present fairly in all material
respects the financial condition of the Borrowers and their Subsidiaries as of
their respective dates and the results of operations of the Borrowers and their
Subsidiaries for the respective periods then ended, subject to normal year-end
adjustments.
(b) ANNUAL FINANCIAL STATEMENTS. As soon as practicable and in any
event within one hundred twenty (120) days after the end of each Fiscal Year,
audited Consolidated and consolidating balance sheets of the Borrowers and their
Subsidiaries as of the close of such Fiscal Year and audited Consolidated and
consolidating statements of income, Consolidated statements of stockholder's
equity and Consolidated statements of cash flows for the Fiscal Year then ended,
including the notes thereto, all in reasonable detail setting forth in
comparative form the corresponding figures for the preceding Fiscal Year and
audited by a nationally recognized public accounting firm in accordance with
GAAP and, if applicable, containing disclosure of the effect on the financial
position or results of operation of any change in the application of accounting
principles and practices during the year, and accompanied by a report thereon by
such certified public accountants that is not qualified with respect to scope
limitations imposed by the Borrowers and their Subsidiaries or with respect to
accounting principles followed by the Borrowers and their Subsidiaries not in
accordance with GAAP.
(c) ANNUAL BUSINESS PLAN AND FINANCIAL PROJECTIONS. As soon as
practicable and in any event within forty-five (45) days prior to the beginning
of each Fiscal Year, a business plan of the Borrowers and their Subsidiaries for
the ensuing four (4) fiscal quarters, such plan to be prepared in accordance
with GAAP and to include, on a quarterly basis, the following, on a Consolidated
basis,: a projected income statement, statement of cash flows and balance sheet
and a report containing management's discussion and analysis of such
projections, accompanied by a certificate from the chief financial officers of
the Company on behalf of itself and the other Borrowers to the effect that, to
the best of such officers' knowledge, such projections are good faith estimates
of the financial condition and operations of the Borrowers and their
Subsidiaries for such four (4) quarter period.
SECTION 8.2 OFFICER'S COMPLIANCE CERTIFICATE.
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At each time financial statements are delivered pursuant to SECTIONS 8.1 (a) or
(b) and at such other times as the Administrative Agent shall reasonably
request, a certificate of the chief financial officer or the treasurer of the
Company on behalf of itself and the other Borrowers in the form of EXHIBIT F
attached hereto (an "OFFICER'S COMPLIANCE CERTIFICATE").
SECTION 8.3 ACCOUNTANTS' CERTIFICATE. At each time financial statements
are delivered pursuant to SECTION 8.1(b), a certificate of the independent
public accountants certifying such financial statements addressed to the
Administrative Agent for the benefit of the Lenders:
(a) stating that in making the examination necessary for the
certification of such financial statements, they obtained no knowledge of any
Default or Event of Default or, if such is not the case, specifying such Default
or Event of Default and its nature and period of existence; and
(b) including the calculations prepared by such accountants required to
establish whether or not the Borrowers and their Subsidiaries are in compliance
with the financial covenants set forth in Article X as at the end of each
respective period.
SECTION 8.4 OTHER REPORTS.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrowers and their Subsidiaries or its Board of Directors by
its independent public accountants in connection with their auditing function,
including, without limitation, any management report and any management
responses thereto; and
(b) Such other information regarding the operations, business affairs
and financial condition of the Borrowers or any of their Subsidiaries as the
Administrative Agent or any Lender may reasonably request including, without
limitation, copies of Forms 10-Q and 10-K and any other annual or periodic
reports required to be delivered to a shareholder pursuant to the Securities
Exchange Act of 1934.
SECTION 8.5 NOTICE OF LITIGATION AND OTHER MATTERS. Prompt (but in no
event later than ten (10) days after an officer of the Borrowers obtains
knowledge thereof) telephonic and written notice of:
(a) the commencement of all proceedings and investigations by or before
any Governmental Authority and all actions and proceedings in any court or
before any arbitrator against or involving the Borrowers and their Subsidiaries
or any of their respective properties, assets or businesses;
(b) any notice of any violation received by the Borrowers and their
Subsidiaries from any Governmental Authority including, without limitation, any
notice of violation of
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Environmental Laws which in any such case could reasonably be expected to have a
Material Adverse Effect;
(c) any labor controversy that has resulted in, or threatens to result
in, a strike or other work action against the Borrowers and their Subsidiaries;
(d) any attachment, judgment, lien, levy or order exceeding $1,000,000
that may be assessed against or threatened against the Borrowers and their
Subsidiaries;
(e) any Default or Event of Default, or any event which constitutes or
which with the passing of time or giving of notice or both would constitute a
default or event of default under any Material Contract to which the Borrowers
and their Subsidiaries is a party or by which the Borrowers and their
Subsidiaries or any of their respective properties may be bound;
(f) (i) any unfavorable determination letter from the Internal Revenue
Service regarding the qualification of an Employee Benefit Plan under Section
401(a) of the Code (along with a copy thereof), (ii) all notices received by the
Borrowers or any ERISA Affiliate of the PBGC's intent to terminate any Pension
Plan or to have a trustee appointed to administer any Pension Plan, (iii) all
notices received by any Borrowers or any ERISA Affiliate from a Multiemployer
Plan sponsor concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA and (iv) the Borrowers obtaining knowledge or
reason to know that the Borrowers or any ERISA Affiliate has filed or intends to
file a notice of intent to terminate any Pension Plan under a distress
termination within the meaning of Section 4041(c) of ERISA; and
(g) any event which makes any of the representations set forth in
SECTION 7.1 inaccurate in any respect.
SECTION 8.6 ACCURACY OF INFORMATION. All written information, reports,
statements and other papers and data furnished by or on behalf of the Borrowers
to the Administrative Agent or any Lender (other than financial forecasts)
whether pursuant to this Article VIII or any other provision of this Agreement,
or any of the Security Documents, shall be, at the time the same is so
furnished, complete and correct in all material respects to the extent necessary
to give the Administrative Agent or any Lender complete, true and accurate
knowledge of the subject matter based on the Borrowers' knowledge thereof.
ARTICLE IX
AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner
provided for in SECTION 14.11 each of the Borrowers will:
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SECTION 9.1 PRESERVATION OF CORPORATE EXISTENCE AND RELATED MATTERS.
Except as permitted by SECTION 11.5, preserve and maintain its separate
corporate existence and all rights, franchises, licenses and privileges
necessary to the conduct of its business, and qualify and remain qualified as a
foreign corporation and authorized to do business in each jurisdiction in which
the failure to so qualify would have a Material Adverse Effect.
SECTION 9.2 MAINTENANCE OF PROPERTY. In addition to the requirements of
any of the Security Documents and, except where the failure to do so would not
reasonably be expected to have a Material Adverse Effect, protect and preserve
all properties useful in and material to its business, including copyrights,
patents, trade names and trademarks; maintain in good working order and
condition all buildings, equipment and other tangible real and personal
property; and from time to time make or cause to be made all renewals,
replacements and additions to such property necessary for the conduct of its
business, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
SECTION 9.3 INSURANCE. Maintain insurance with financially sound and
reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses and as may be required by
Applicable Law and as are required by any Security Documents, and on the Closing
Date and from time to time thereafter deliver to the Administrative Agent upon
its request a detailed list of the insurance then in effect, stating the names
of the insurance companies, the amounts and rates of the insurance, the dates of
the expiration thereof and the properties and risks covered thereby.
SECTION 9.4 ACCOUNTING METHODS AND FINANCIAL RECORDS. Maintain a system
of accounting, and keep such books, records and accounts (which shall be true
and complete in all material respects) as may be required or as may be necessary
to permit the preparation of financial statements in accordance with GAAP and in
compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.
SECTION 9.5 PAYMENT AND PERFORMANCE OF OBLIGATIONS. Pay and perform all
Obligations under this Agreement and the other Loan Documents, and pay or
perform (a) all taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property, and (b) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices; PROVIDED, that any Borrower may contest any item described in clauses
(a) or (b) of this SECTION 9.5 in good faith so long as adequate reserves are
maintained with respect thereto in accordance with GAAP.
SECTION 9.6 COMPLIANCE WITH LAWS AND APPROVALS. Observe and remain in
compliance with all Applicable Laws and maintain in full force and effect all
Governmental Approvals, in each case applicable to the conduct of its business
except where the failure to so comply would not reasonably be expected to have a
Material Adverse
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Effect.
SECTION 9.7 ENVIRONMENTAL LAWS. In addition to and without limiting the
generality of SECTION 9.6 and to the extent that the failure to so comply would
not reasonably be expected to have a Material Adverse Effect, (a) comply with,
and ensure such compliance by all tenants and subtenants with all applicable
Environmental Laws and obtain and comply with and maintain, and 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, (b) conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and other actions
required under Environmental Laws, and promptly comply with all lawful orders
and directives of any Governmental Authority regarding Environmental Laws, and
(c) defend, indemnify and hold harmless the Administrative Agent and the
Lenders, and their respective parents, Subsidiaries, Affiliates, employees,
agents, officers and directors, from and against any claims, demands, penalties,
fines, liabilities, settlements, damages, costs and expenses of whatever kind or
nature known or unknown, contingent or otherwise, arising out of, or in any way
relating to the presence of Hazardous Materials, or the violation of,
noncompliance with or liability under any Environmental Laws applicable to the
operations of the Borrowers or such Subsidiary, or any orders, requirements or
demands of Governmental Authorities related thereto, including, without
limitation, reasonable attorney's and consultant's fees, investigation and
laboratory fees, response costs, court costs and litigation expenses, except to
the extent that any of the foregoing directly result from the gross negligence
or willful misconduct of the party seeking indemnification therefor.
SECTION 9.8 COMPLIANCE WITH ERISA. In addition to and without limiting
the generality of SECTION 9.6, (a) comply with all applicable provisions of
ERISA and the regulations and published interpretations thereunder with respect
to all Employee Benefit Plans, (b) not take any action or fail to take action
the result of which could be a liability to the PBGC or to a Multiemployer Plan,
(c) not participate in any prohibited transaction that could result in any civil
penalty under ERISA or tax under the Code, (d) operate each Employee Benefit
Plan in such a manner that will not incur any tax liability under Section 4980B
of the Code or any liability to any qualified beneficiary as defined in Section
4980B of the Code and (e) furnish to the Administrative Agent upon the
Administrative Agent's request such additional information about any Employee
Benefit Plan as may be reasonably requested by the Administrative Agent.
SECTION 9.9 COMPLIANCE WITH AGREEMENTS. Comply in all respects with
each term, condition and provision of all leases, agreements and other
instruments entered into in the conduct of its business including, without
limitation, any Material Contract; PROVIDED, that any Borrower may contest any
such lease, agreement or other instrument in good faith through applicable
proceedings so long as adequate reserves are maintained in accordance with GAAP.
SECTION 9.10 CONDUCT OF BUSINESS.
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Engage only in businesses in substantially the same fields as the businesses
conducted on the Closing Date.
SECTION 9.11 VISITS AND INSPECTIONS. Permit representatives of the
Administrative Agent, the Collateral Agent or any Lender, from time to time, to
visit and inspect its properties; inspect, audit and make extracts from its
books, records and files, including, but not limited to, management letters
prepared by independent accountants; and discuss with its principal officers,
and its independent accountants, its business, assets, liabilities, financial
condition, results of operations and business prospects.
SECTION 9.12 ADDITIONAL SUBSIDIARIES. Within ten (10) days after any
Subsidiary of the Company or of any other Borrower, which is created or acquired
after the Closing Date, becomes a Material Subsidiary, cause to be executed and
delivered to the Administrative Agent (a) a duly executed joinder agreement in
substantially the form of EXHIBIT I, (b) a duly executed Collateral Agreement or
supplement thereto, with such changes as the Administrative Agent may reasonably
request, such that all of the assets, capital stock or other equity interests of
such Subsidiary are pledged to the Administrative Agent for the ratable benefit
of itself and the Lenders and (c) favorable legal opinions addressed to the
Administrative Agent and Lenders in form and substance satisfactory thereto with
respect to such Collateral Agreement and such other documents and closing
certificates as may be requested by the Administrative Agent.
SECTION 9.13 YEAR 2000 COMPATIBILITY. Take all actions reasonably
necessary to assure that Borrowers and their Subsidiaries' computer based
systems are able to operate and effectively process data which includes dates on
and after January 1, 2000. At the request of the Administrative Agent, the
Borrowers and their Subsidiaries shall provide reasonable assurances
satisfactory to the Administrative Agent of the Borrowers and their
Subsidiaries' Year 2000 compatibility.
SECTION 9.14 FURTHER ASSURANCES. Make, execute and deliver all such
additional and further acts, things, deeds and instruments as the Administrative
Agent or any Lender may reasonably require to document and consummate the
transactions contemplated hereby and to vest completely in and insure the
Administrative Agent and the Lenders their respective rights under this
Agreement, the Notes, the Letters of Credit and the other Loan Documents.
ARTICLE X
FINANCIAL COVENANTS
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner set
forth in SECTION 14.11, the Borrowers and their Subsidiaries on a Consolidated
basis will not:
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SECTION 10.1 LEVERAGE RATIO. As of any fiscal quarter end, permit the
ratio of (a) Total Debt on such date TO (b) Pro Forma EBITDA for the period of
four (4) consecutive fiscal quarters ending on or immediately prior to such date
to exceed the corresponding ratio set forth below (the "LEVERAGE RATIO"):
<TABLE>
<CAPTION>
From and Including To and Including Ratio
------------------ ---------------- -----
<S> <C> <C>
Closing Date March 31, 2000 3.25 to 1.00
April 1, 2000 March 31, 2001 3.00 to 1.00
April 1, 2001 all times thereafter 2.75 to 1.00
</TABLE>
SECTION 10.2 INTEREST COVERAGE RATIO. As of any fiscal quarter end,
permit the ratio of (a) EBITDA for the period of four (4) consecutive fiscal
quarters ending on or immediately prior to such date to (b) Interest Expense for
the period of four (4) consecutive fiscal quarters ending on or immediately
prior to such date to be less than 3.0 to 1.0.
SECTION 10.3 LIMITATIONS ON CAPITAL EXPENDITURES. Permit Capital
Expenditures in the aggregate in any Fiscal Year to exceed the corresponding
number set forth below:
Fiscal Year 1999 $ 8,000,000
Fiscal Year 2000 $ 10,000,000
Fiscal Year 2001 $ 12,000,000
SECTION 10.4 MINIMUM NET WORTH. Permit Net Worth as of the last day of
any fiscal quarter of the Borrowers and their Subsidiaries commencing after
Fiscal Year 1998, to be less than the "MINIMUM COMPLIANCE LEVEL." The Minimum
Compliance Level shall be the actual Net Worth as of December 31, 1998; and
shall be increased as of the last day of each fiscal quarter of the Borrowers
and their Subsidiaries ending after December 31, 1998, by an amount equal to (i)
50% of Net Income (if positive) for such fiscal quarter and (ii) 75% of the Net
Cash Proceeds of any equity issuance occurring after the December 31, 1998. The
foregoing increases in the Minimum Compliance Level shall be made to reflect
negative Net Income for such period.
SECTION 10.5 MINIMUM PRO FORMA EBITDA . As of any fiscal quarter end,
permit Pro Forma EBITDA for the period of four (4) consecutive fiscal quarters
ending on or immediately prior to such date to be less than the sum of (x) 85%
of Acquired EBITDA for the period commencing on the Closing Date and at all
times thereafter through the applicable fiscal quarter end and (y) the amount
set forth below which corresponds to such fiscal quarter:
<TABLE>
<CAPTION>
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
FISCAL YEAR 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- ----------- -----------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
1999 26,000,000 29,000,000 32,000,000 34,000,000
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>
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<TABLE>
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
2000 35,000,000 36,000,000 38,000,000 40,000,000
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
2001 and thereafter 40,000,000 40,000,000 40,000,000 40,000,000
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>
ARTICLE XI
NEGATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner set
forth in SECTION 14.11, the Borrowers have not and will not permit their
Subsidiaries to:
SECTION 11.1 LIMITATIONS ON DEBT. Create, incur, assume or suffer to
exist any Debt except:
(a) the Obligations;
(b) Debt incurred in connection with a Hedging Agreement with a
counterparty and upon terms and conditions (including interest rate) reasonably
satisfactory to the Administrative Agent;
(c) Subordinated Debt in an aggregate amount not to exceed $10,000,000
on any date of determination;
(d) Debt existing on the Closing Date and not otherwise permitted under
this SECTION 11.1, as set forth on SCHEDULE 7.1(t) and the renewal and
refinancing (but not the increase in the aggregate principal amount thereof)
thereof;
(e) Debt of the Borrowers and their Subsidiaries incurred in connection
with Capitalized Leases in an aggregate amount not to exceed $3,000,000 on any
date of determination;
(f) purchase money Debt of the Borrowers and their Subsidiaries in an
aggregate amount not to exceed $2,000,000 on any date of determination;
(g) Debt consisting of Guaranty Obligations permitted by SECTION 11.2;
(h) Debt evidenced by Intercompany Notes to the extent permitted
pursuant to SECTION 11.4(d); and
(i) Debt consisting of loans and advances to the extent permitted by
SECTION 11.4(e);
PROVIDED, that no agreement or instrument with respect to Debt permitted to be
incurred by this SECTION 11.1 shall restrict, limit or otherwise encumber (by
covenant or otherwise) the ability of
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any Subsidiary of the Borrowers to make any payment to the Borrowers or any of
their Subsidiaries (in the form of dividends, intercompany advances or
otherwise) for the purpose of enabling the Borrowers to pay the Obligations.
SECTION 11.2 LIMITATIONS ON GUARANTY OBLIGATIONS. Create, incur, assume
or suffer to exist any Guaranty Obligations except (i) Guaranty Obligations in
favor of the Administrative Agent for the benefit of the Administrative Agent
and the Lenders and (ii) Guaranty Obligations incurred in connection with
performance of tenders, statutory obligations, bids, leases, government
contracts, or performance and return-of-money bonds in an aggregate amount not
to exceed $5,000,000.
SECTION 11.3 LIMITATIONS ON LIENS. Create, incur, assume or suffer to
exist, any Lien on or with respect to any of its assets or properties (including
without limitation shares of capital stock or other ownership interests), real
or personal, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges or
levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) not yet due or as to which the period of grace (not to
exceed thirty (30) days), if any, related thereto has not expired or which are
being contested in good faith and by appropriate proceedings if adequate
reserves are maintained to the extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers, warehousemen,
processors or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, (i) which are not overdue for a period of more
than thirty (30) days or (ii) which are being contested in good faith and by
appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the ordinary course
of business in connection with, or to secure payment of, obligations under
workers' compensation, unemployment insurance or similar legislation or
obligations under customer service contracts;
(d) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use of real
property, which in the aggregate are not substantial in amount and which do not,
in any case, detract from the value of such property or impair the use thereof
in the ordinary conduct of business;
(e) Liens in favor of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders;
(f) Liens not otherwise permitted by this SECTION 11.3 and in existence
on the Closing Date and described on SCHEDULE 11.3;
(g) Liens securing Debt permitted under SECTION 11.1(f); PROVIDED that
(i) such Liens shall be created substantially simultaneously with the
acquisition of the related asset, (ii) such
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Liens do not at any time encumber any property other than the property financed
by such Debt, (iii) the amount of Debt secured thereby is not increased and (iv)
the principal amount of Debt secured by any such Lien shall at no time exceed
one hundred percent (100%) of the original purchase price of such property at
the time it was acquired; and
(h) Liens to secure or incurred in connection with the performance of
tenders, statutory obligations, bids, leases, government contracts, or
performance and return-of-money bonds in an aggregate amount not to exceed
$5,000,000.
SECTION 11.4 LIMITATIONS ON LOANS, ADVANCES, INVESTMENTS AND
ACQUISITIONS. Purchase, own, invest in or otherwise acquire, directly or
indirectly, any capital stock, interests in any partnership or joint venture
(including without limitation the creation or capitalization of any Subsidiary),
evidence of Debt or other obligation or security, substantially all or a portion
of the business or assets of any other Person or any other investment or
interest whatsoever in any other Person, or make or permit to exist, directly or
indirectly, any loans, advances or extensions of credit to, or any investment in
cash or by delivery of property in, any Person except:
(a) investments not otherwise permitted by this SECTION 11.4 in
Subsidiaries existing on the Closing Date and the other existing loans, advances
and investments not otherwise permitted by this SECTION 11.4 described on
SCHEDULE 11.4; provided that there shall be no investment in Foreign
Subsidiaries except as disclosed on Schedule 11.4 unless otherwise consented to
by the Required Lenders.
(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within 120 days from the date of acquisition thereof, (ii) commercial
paper maturing no more than 120 days from the date of creation thereof and
currently having the highest rating obtainable from either Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. or Moody's
Investors Service, Inc., (iii) certificates of deposit maturing no more than 120
days from the date of creation thereof issued by commercial banks incorporated
under the laws of the United States of America, each having combined capital,
surplus and undivided profits of not less than $500,000,000 and having a rating
of "A" or better by a nationally recognized rating agency; PROVIDED, that the
aggregate amount invested in such certificates of deposit shall not at any time
exceed $5,000,000 for any one such certificate of deposit and $10,000,000 for
any one such bank, or (iv) time deposits maturing no more than 30 days from the
date of creation thereof with commercial banks or savings banks or savings and
loan associations each having membership either in the FDIC or the deposits of
which are insured by the FDIC and in amounts not exceeding the maximum amounts
of insurance thereunder;
(c) acquisitions of all or substantially all of the business or line of
business (whether by acquisition of capital stock, other equity interest, assets
or any combination thereof) in an aggregate amount not to exceed, over the term
of the Credit Facilities $40,000,000 in total cash consideration (including, the
gross amount of potential cash payments associated with any earn out obligation
incurred in connection with such acquisition); PROVIDED that the following
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conditions are met: (i) the entity to be acquired is a going concern; (ii) the
entity to be acquired is in a Substantially Similar Line of Business; (iii) the
Company on behalf of itself and the other Borrowers shall have delivered written
evidence to the Administrative Agent that the acquisition does not have a
negative impact on Pro Forma EBITDA of the Borrowers and their Subsidiaries
taken as a whole for the four (4) consecutive fiscal quarter period ending on or
immediately prior to the date of such proposed acquisition; (iv) a Borrower is
the surviving, controlling corporation upon the consummation of any such
acquisition; (v) the Required Lenders shall have previously consented in writing
to any single acquisition or series of related acquisitions having total cash
consideration in excess of $40,000,000; (vi) the Company on behalf of itself and
the other Borrowers shall have delivered evidence in form and substance
satisfactory to the Administrative Agent that the board of directors of the
entity or entities to be acquired have approved such proposed acquisition; (vii)
the entity to be acquired is not subject to material pending litigation which
could reasonably be expected to have a Material Adverse Effect; (viii) no
Default and no Event of Default has occurred and is continuing or would result
from the consummation of such proposed acquisition, (ix) the Company on behalf
of itself and the other Borrowers shall have delivered to the Administrative
Agent written evidence of compliance on a PRO FORMA basis with the financial
covenants set forth in Article X, (x) the Borrowers shall have delivered to the
Administrative Agent written evidence that the Leverage Ratio (after giving PRO
FORMA effect to the proposed acquisition) will not exceed (I) 3.00 to 1.00 for
the period commencing on the Closing Date through March 31, 2000, (II) 2.75 to
1.00 for the period commencing April 1, 2000 through March 31, 2001, and (III)
2.50 to 1.00 for the period commencing April 1, 2001 and at all times
thereafter, and (xi) the total aggregate consideration for any acquisition or
series of related acquisitions (including, without limitation, all cash
payments, Debt and other obligations assumed, earn out payments, seller
financing or equity issued, actual liabilities assumed and potential future
liabilities assumed as reasonably valued by the Borrowers and their Subsidiaries
and recorded on the balance sheet of the Borrowers and their Subsidiaries) shall
not exceed (I) $20,000,000 (of which the total cash consideration paid shall not
exceed $10,000,000) if the Leverage Ratio is greater than or equal to 2.00 to
1.00 and (II) $45,000,000 (of which the total cash consideration paid shall not
exceed $20,000,000) if the Leverage Ratio is less than 2.00 to 1.00;
(d) without duplication, intercompany loans made after the Closing Date
by Systems to Immaterial Subsidiaries; PROVIDED, that (i) each such intercompany
loan is evidenced by an Intercompany Note pledged and delivered to the
Collateral Agent pursuant to the Collateral Agreement, (ii) any such
intercompany loan shall be permitted only so long as such Person remains an
Immaterial Subsidiary and (iii) the aggregate principal amount of all such
intercompany loans shall at no time exceed $2,000,000; and
(e) without duplication and after the Closing Date, intercompany loans
or advances made by Condor or Systems to another Borrower; provided that any
such intercompany loan or advance is characterized as a loan on the financial
statements of such borrower and lender.
SECTION 11.5 LIMITATIONS ON MERGERS AND LIQUIDATION. Merge, consolidate
or enter into any similar combination with any other Person or liquidate,
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wind-up or dissolve itself (or suffer any liquidation or dissolution) except:
(a) any Wholly-Owned Subsidiary of the Company may merge with any other
Wholly-Owned Subsidiary of the Company or System;
(b) any Wholly-Owned Subsidiary may merge into the Person such
Wholly-Owned Subsidiary was formed to acquire in connection with an acquisition
permitted by SECTION 11.4(c); and
(c) any Wholly-Owned Subsidiary of the Company may wind-up into a
Borrower or any other Wholly-Owned Subsidiary of the Company or System.
SECTION 11.6 LIMITATIONS ON SALE OF ASSETS. Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, the sale of any receivables and leasehold
interests and any sale-leaseback or similar transaction), whether now owned or
hereafter acquired except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale of obsolete assets no longer used or usable in the
business of the Borrowers or any of their Subsidiaries;
(c) the transfer of assets to a Borrower or any Wholly-Owned Subsidiary
of the Company or System pursuant to SECTION 11.5(c);
(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) the sale or other disposition of assets in the ordinary course of
business not otherwise permitted pursuant to this SECTION 11.6 in an aggregate
amount not to exceed $5,000,000.
SECTION 11.7 LIMITATIONS ON DIVIDENDS AND DISTRIBUTIONS. Declare or pay
any dividends upon any of its capital stock; purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its capital stock, or
make any distribution of cash, property or assets among the holders of shares of
its capital stock, or make any change in its capital structure that could
reasonably be expected to have a Material Adverse Effect; PROVIDED that:
(a) a Borrower or any Wholly-Owned Subsidiary may pay dividends in
shares of its own capital stock; and
(b) any Wholly-Owned Subsidiary may pay cash dividends to the
Borrowers.
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SECTION 11.8 LIMITATIONS ON EXCHANGE AND ISSUANCE OF CAPITAL STOCK.
Issue, sell or otherwise dispose of any class or series of capital stock that,
by its terms or by the terms of any security into which it is convertible or
exchangeable, is, or upon the happening of an event or passing of time would be,
(a) convertible or exchangeable into Debt or (b) required to be redeemed or
repurchased, including at the option of the holder, in whole or in part, or has,
or upon the happening of an event or passing of time would have, a redemption or
similar payment due; PROVIDED, that, any Borrower may issue its own capital
stock in connection with (i) any Permitted Acquisition, (ii) stock options
granted to key employees of any Borrower (including, without limitation,
prospective employees, consultants, directors, prospective directors or any
other persons eligible for stock options pursuant to the Company's 1997
Long-Term Incentive Plan, as amended in November 1997), and (iii) earn outs (in
form and substance reasonably satisfactory to the Administrative Agent and the
Required Lenders) incurred in connection with a Permitted Acquisition.
SECTION 11.9 TRANSACTIONS WITH AFFILIATES. Directly or indirectly (a)
make any loan (other than an intercompany loan permitted pursuant to the terms
of SECTION 11.4(d) or (e)) or advance to, or purchase or assume any note or
other obligation to or from, any of its officers, directors, shareholders or
other Affiliates, or to or from any member of the immediate family of any of its
officers, directors, shareholders or other Affiliates, or subcontract any
operations to any of its Affiliates, or (b) enter into, or be a party to, any
other transaction with any of its Affiliates, except (i) (A) pursuant to the
reasonable requirements of its business and upon fair and reasonable terms which
are no less favorable to it than it would obtain in a comparable arm's length
transaction with a Person not its Affiliate and (B) with respect to any
transaction in excess of $1,000,000, that are fully disclosed to and approved in
writing by the Required Lenders prior to the consummation thereof and (ii) those
agreements existing on the Closing Date, not otherwise permitted under this
SECTION 11.9 and set forth on SCHEDULE 11.9 hereto.
SECTION 11.10 CERTAIN ACCOUNTING CHANGES; ORGANIZATIONAL DOCUMENTS. (a)
Change its Fiscal Year end, or make any change in its accounting treatment and
reporting practices except as required by GAAP or (b) amend, modify or change
its articles of incorporation (or corporate charter or other similar
organizational document) in any respect or amend, modify or change its bylaws
(or other similar document) in any manner adverse in any respect to the rights
or interests of the Lenders.
SECTION 11.11 AMENDMENTS; PAYMENTS AND PREPAYMENTS OF SUBORDINATED
DEBT. Amend or modify (or permit the modification or amendment of) any of the
terms or provisions of any Subordinated Debt, or cancel or forgive, make any
voluntary or optional payment or prepayment on, or redeem or acquire for value
(including without limitation by way of depositing with any trustee with respect
thereto money or securities before due for the purpose of paying when due) any
Subordinated Debt.
SECTION 11.12 RESTRICTIVE AGREEMENTS. Enter into any Debt which
contains any negative pledge on assets or any covenants more
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restrictive than the provisions of Articles IX, X and XI, or which restricts,
limits or otherwise encumbers its ability to incur Liens on or with respect to
any of its assets or properties other than the assets or properties securing
such Debt. Enter into any amendment or modification or waiver that is adverse in
any respect to the Lenders to any Material Contract in effect on the Closing
Date. Notwithstanding the preceding, without duplication, and with respect to
any agreement existing on the Closing Date which contains an earn out
obligation, waive, modify, supplement or amend any of the terms agreements,
covenants or conditions applicable to such earn out without the approval of all
the Lenders.
SECTION 11.13 OWNERSHIP OF SUBSIDIARIES; LIMITATIONS ON THE COMPANY AND
ITS SUBSIDIARIES. The Company will not permit any Person (other than a Borrower
or a Wholly-Owned Subsidiary of a Borrower) to own any capital stock of any
Subsidiary of a Borrower or any Borrower.
SECTION 11.14 IMPAIRMENT OF SECURITY INTERESTS. No Borrower will take
or omit to take any action, which action or omission might or would have the
result of materially impairing the security interests in favor of the Collateral
Agent on behalf of the Agents and the Lenders with respect to the Collateral and
no Borrower will grant to any Person (other than the Collateral Agent pursuant
to the Security Documents) any interest whatsoever in the Collateral, except for
Permitted Liens.
ARTICLE XII
DEFAULT AND REMEDIES
SECTION 12.1 EVENTS OF DEFAULT. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) DEFAULT IN PAYMENT OF PRINCIPAL OF LOANS AND REIMBURSEMENT
OBLIGATIONS. The Borrowers shall default in any payment of principal of any
Loan, Note or Reimbursement Obligation when and as due (whether at maturity, by
reason of acceleration or otherwise).
(b) OTHER PAYMENT DEFAULT. The Borrowers shall default in the payment
when and as due (whether at maturity, by reason of acceleration or otherwise) of
interest on any Loan, Note or Reimbursement Obligation or the payment of any
other Obligation, and such default shall continue unremedied for five (5)
Business Days.
(c) MISREPRESENTATION. Any representation or warranty made or deemed to
be made by the Borrowers or any of their Subsidiaries under this Agreement, any
Loan Document or any amendment hereto or thereto, shall at any
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time prove to have been incorrect or misleading in any material respect when
made or deemed made.
(d) DEFAULT IN PERFORMANCE OF CERTAIN COVENANTS. The Borrowers shall
default in the performance or observance of any covenant or agreement contained
in SECTIONS 2.8, 8.1, 8.2, 8.5(e) or 9.12 or Articles X or XI of this Agreement.
(e) DEFAULT IN PERFORMANCE OF OTHER COVENANTS AND CONDITIONS. (i) The
Borrowers or any Subsidiary shall default in the performance or observance of
any term, covenant, condition or agreement contained in this Agreement (other
than as specifically provided for otherwise in this SECTION 12.1) or any other
Loan Document and such default shall continue for a period of thirty (30) days
after the earlier of (A) the date on which written notice thereof has been given
to the Borrowers by the Administrative Agent or (B) the date on which any
Responsible Officer of any Borrower first learns of such default or (ii) any
Loan Document shall fail to be in full force and effect or to give the
Administrative Agent or the Collateral Agent, as the case may be, or any other
secured party the Liens, rights, power and privileges purported to be created
thereby.
(f) [RESERVED]
(g) DEBT CROSS-DEFAULT. The Borrowers or any of their Subsidiaries
shall (i) default in the payment of any Debt (other than the Notes or any
Reimbursement Obligation) the aggregate outstanding amount of which Debt is in
excess of $1,000,000 beyond the period of grace if any, provided in the
instrument or agreement under which such Debt was created, or (ii) default in
the observance or performance of any other agreement or condition relating to
any Debt (other than the Notes or any Reimbursement Obligation) the aggregate
outstanding amount of which Debt is in excess of $1,000,000 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 Debt (or a
trustee or agent on behalf of such holder or holders) to cause, with the giving
of notice if required, any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).
(h) OTHER CROSS-DEFAULTS. The Borrowers or any of their Subsidiaries
shall default in the payment when due, or in the performance or observance, of
any material obligation or material condition of any Material Contract unless,
but only as long as, the existence of any such default is being contested by the
Borrowers or such Subsidiary in good faith by appropriate proceedings and
adequate reserves in respect thereof have been established on the books of the
Borrowers or such Subsidiary to the extent required by GAAP.
(i) CHANGE IN CONTROL. Any person or group of persons (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended)
shall obtain ownership or control in one or more series of transactions of more
than thirty-five percent (35.0%) of the common stock or thirty-five percent
(35.0%) of the voting power of the Borrowers entitled to vote in the election of
members of the board of directors of the Borrowers or there shall have occurred
under any indenture or other instrument evidencing any Debt in excess of
$1,000,000
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any "CHANGE IN CONTROL" (as defined in such indenture or other evidence of Debt)
obligating the Borrowers to repurchase, redeem or repay all or any part of the
Debt or capital stock provided for therein (any such event, a "CHANGE IN
CONTROL").
(j) VOLUNTARY BANKRUPTCY PROCEEDING. The Borrowers or any Subsidiary
shall (i) commence a voluntary case under the federal bankruptcy laws (as now or
hereafter in effect), (ii) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts, (iii) consent
to or fail to contest in a timely and appropriate manner any petition filed
against it in an involuntary case under such bankruptcy laws or other laws, (iv)
apply for or consent to, or fail to contest in a timely and appropriate manner,
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its property,
domestic or foreign, (v) admit in writing its inability to pay its debts as they
become due, (vi) make a general assignment for the benefit of creditors, or
(vii) take any corporate action for the purpose of authorizing any of the
foregoing.
(k) INVOLUNTARY BANKRUPTCY PROCEEDING. A case or other proceeding shall
be commenced against the Borrowers or any Subsidiary in any court of competent
jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or
hereafter in effect) or under any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or
(ii) the appointment of a trustee, receiver, custodian, liquidator or the like
for the Borrowers or any Subsidiary or for all or any substantial part of their
respective assets, domestic or foreign, and such case or proceeding shall
continue without dismissal or stay for a period of sixty (60) consecutive days,
or an order granting the relief requested in such case or proceeding (including,
but not limited to, an order for relief under such federal bankruptcy laws)
shall be entered.
(l) TERMINATION EVENT. The occurrence of any of the following events:
(i) the Borrowers or any ERISA Affiliate fails to make full payment when due of
all amounts which, under the provisions of any Pension Plan or Section 412 of
the Code, the Borrowers or any ERISA Affiliate is required to pay as
contributions thereto, (ii) an accumulated funding deficiency in excess of
$100,000 occurs or exists, whether or not waived, with respect to any Pension
Plan, (iii) a Termination Event or (iv) the Borrowers or any ERISA Affiliate as
employers under one or more Multiemployer Plan makes a complete or partial
withdrawal from any such Multiemployer Plan and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding
$100,000.
(m) JUDGMENT. A judgment or order for the payment of money which causes
the aggregate amount of all such judgments to exceed $1,000,000 in any Fiscal
Year shall be entered against the Borrowers or any of their Subsidiaries by any
court and such judgment or order shall continue without discharge or stay for a
period of thirty (30) days.
(n) DEBARMENT AND/OR SUSPENSION WITH A GOVERNMENTAL AUTHORITY. (i) The
debarment
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or suspension of any Borrower from contracting with (A) any Federal Governmental
Authority or (B) any State Governmental Authority to the extent it would
reasonably be expected to have a Material Adverse Effect; (ii) the issuance of a
notice of debarment or suspension to any Borrower (excluding any notice from a
State Governmental Authority to the extent that debarment or suspension of such
Borrower by such State Governmental Authority would not reasonably be expected
to have a Material Adverse Effect); (iii) a notice of termination or the actual
termination of any Government Contract shall have been issued to or received by
any Borrower (other than a termination for convenience approved by the
Administrative Agent) (except to the extent that such notice of termination or
termination of a Governmental Contract with a State Governmental Authority would
not reasonably be expected to have a Material Adverse Effect); (iv) an
investigation or inquiry by a Federal Governmental Authority relating to any
Borrower shall have been commenced in connection with (A) any Borrower's
activities, which investigation could reasonably result in criminal or civil
liability, suspension, debarment or any other adverse administrative action
arising by reason of alleged fraud, willful misconduct, neglect, default or
other wrongdoing; or (B) any Government Contract with a Federal Governmental
Authority; or (v) to the extent it would reasonably be expected to have a
Material Adverse Effect, an investigation or inquiry by a State Governmental
Authority relating to any Borrower shall have been commenced in connection with
(A) any Borrower's activities, which investigation could reasonably result in
criminal or civil liability, suspension, debarment or any other adverse
administrative action arising by reason of alleged fraud, willful misconduct,
neglect, default or other wrongdoing; or (B) any Government Contract with a
State Governmental Authority.
SECTION 12.2 REMEDIES. Upon the occurrence of an Event of Default, with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrowers:
(a) ACCELERATION; TERMINATION OF FACILITIES. Declare the principal of
and interest on the Loans, the Notes and the Reimbursement Obligations at the
time outstanding, and all other amounts owed to the Lenders and to the
Administrative Agent under this Agreement or any of the other Loan Documents
(other than any Hedging Agreement) (including, without limitation, all L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) and all other
Obligations (other than obligations owing under any Hedging Agreement), to be
forthwith due and payable, whereupon the same shall immediately become due and
payable without presentment, demand, protest or other notice of any kind, all of
which are expressly waived, anything in this Agreement or the other Loan
Documents to the contrary notwithstanding, and terminate the Credit Facility and
any right of the Borrowers to request borrowings or Letters of Credit
thereunder; PROVIDED, that upon the occurrence of an Event of Default specified
in SECTION 12.1(j) or (k), the Credit Facility shall be automatically terminated
and all Obligations (other than obligations owing under any Hedging Agreement)
shall automatically become due and payable.
(b) LETTERS OF CREDIT. 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
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preceding paragraph, require the Borrowers at such time to deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts
held in such cash collateral account shall be applied by the Administrative
Agent to the payment of drafts drawn under such Letters of Credit, and the
unused portion thereof after all such Letters of Credit shall have expired or
been fully drawn upon, if any, shall be applied to repay the other Obligations.
After all such Letters of Credit shall have expired or been fully drawn upon,
the Reimbursement Obligation shall have been satisfied and all other Obligations
shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrowers.
(c) RIGHTS OF COLLECTION. Exercise on behalf of the Lenders all of its
other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Borrowers' Obligations.
SECTION 12.3 RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrowers, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default.
ARTICLE XIII
THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT
SECTION 13.1 APPOINTMENT. Each of the Lenders hereby irrevocably
designates and appoints First Union as Administrative Agent and Collateral Agent
of such Lender under this Agreement and the other Loan Documents for the term
hereof and each such Lender irrevocably authorizes First Union as Administrative
Agent and Collateral Agent for such Lender, 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
Administrative Agent by the terms of this Agreement and such other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement or
such other Loan Documents, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship
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with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or the other Loan
Documents or otherwise exist against the Administrative Agent. Any reference to
the Administrative Agent or Collateral Agent, as applicable, in this Article
XIII shall be deemed to refer to the Administrative Agent solely in its capacity
as Administrative Agent or Collateral Agent, as applicable, and not in its
capacity as a Lender.
SECTION 13.2 DELEGATION OF DUTIES. The Agents may execute any of their
respective 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 Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by such Agent with reasonable care.
SECTION 13.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement or the other Loan Documents (except for actions occasioned solely by
its or such Person's own gross negligence or willful misconduct), or (b)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrowers or any of their Subsidiaries
or any officer thereof contained in this Agreement or the other Loan Documents
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Administrative Agent under or in connection
with, this Agreement or the other Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
the other Loan Documents or for any failure of the Borrowers or any of their
Subsidiaries to perform their obligations hereunder or thereunder. The
Administrative 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 to inspect the
properties, books or records of the Borrowers or any of their Subsidiaries.
SECTION 13.4 RELIANCE BY THE AGENTS. The Agents shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, 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 the
Borrowers), independent accountants and other experts selected by such Agent.
The Agents may deem and treat the payee of any Note as the owner thereof for all
purposes unless such Note shall have been transferred in accordance with hereof.
The Agents shall be fully justified in failing or refusing to take any action
under this Agreement and the other Loan Documents unless it shall first receive
such advice or concurrence of the Required Lenders (or, when expressly required
hereby or by the relevant other Loan Documents, all the Lenders) as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and
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expense which may be incurred by it by reason of taking or continuing to take
any such action except for its own gross negligence or willful misconduct. The
Agents shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the Notes in accordance with a request of the
Required Lenders (or, when expressly required hereby, all the 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 Notes.
SECTION 13.5 NOTICE OF DEFAULT. No Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless it has received notice from a Lender or the Borrowers 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 any Agent receives such
a notice, it shall promptly give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
PROVIDED that unless and until such Agent shall have received such directions,
the Administrative 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, EXCEPT
to the extent that other provisions of this Agreement expressly require that any
such action be taken or not be taken only with the consent and authorization or
the request of the Lenders or Required Lenders, as applicable.
SECTION 13.6 NON-RELIANCE ON THE AGENTS AND OTHER LENDERS. Each Lender
expressly acknowledges that neither Agent nor any of such Agent's officers,
directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates has
made any representations or warranties to it and that no act by any Agent
hereinafter taken, including any review of the affairs of the Borrowers or any
of their Subsidiaries, shall be deemed to constitute any representation or
warranty by such Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon any
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 the Borrowers and their Subsidiaries and made its own
decision to make its Loans and issue or participate in Letter of Credit
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative 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 the Borrowers and their Subsidiaries. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agents hereunder or by the other Loan Documents, the Agents shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, financial and
other condition or creditworthiness of the Borrowers or any of their
Subsidiaries which may come into the possession of any Agent or any of its
respective officers, directors, employees, agents, attorneys-
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in-fact, Subsidiaries or Affiliates.
SECTION 13.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent and in its respective capacity as such and (to the extent
not reimbursed by the Borrowers and without limiting the obligation of the
Borrowers to do so), ratably according to the respective amounts of their
Revolving Credit Commitment Percentages and Term Loan Commitment Percentages, as
applicable, 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 Notes or any Reimbursement Obligation) be
imposed on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or 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
Administrative 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 Administrative
Agent's bad faith, gross negligence or willful misconduct. The agreements in
this SECTION 13.7 shall survive the payment of the Notes, any Reimbursement
Obligation and all other amounts payable hereunder and the termination of this
Agreement.
SECTION 13.8 THE AGENTS IN THEIR INDIVIDUAL CAPACITY. Each Agent and
its respective Subsidiaries and Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Borrowers as though
such Agent were not an Agent hereunder. With respect to any Loans made or
renewed by it and any Note issued to it and with respect to any Letter of Credit
issued by it or participated in by it, such 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 an Agent, and the terms "LENDER" and
"LENDERS" shall include such Agent in its individual capacity.
SECTION 13.9 RESIGNATION OF THE AGENTS; SUCCESSOR AGENTS. Subject to
the appointment and acceptance of a successor as provided below, any Agent may
resign at any time by giving notice thereof to the Lenders and the Borrowers.
Upon any such resignation, the Required Lenders shall, with the consent of the
Company on behalf of itself and the other Borrowers, so long as no Default or
Event of Default has occurred and is continuing, have the right to appoint a
successor Agent, which successor shall have minimum capital and surplus of at
least $500,000,000. If no successor Agent shall have been so appointed by the
Required Lenders and shall have accepted such appointment within thirty (30)
days after such Agent's giving of notice of resignation, then such Agent may, on
behalf of the Lenders, appoint a successor Agent, which successor shall have
minimum capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all rights, powers, privileges and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations hereunder. After any retiring Agent's resignation
hereunder as
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Agent, the provisions of this SECTION 13.9 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 NOTICES.
(a) METHOD OF COMMUNICATION. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to the
Administrative Agent as understood by the Administrative Agent will be deemed to
be the controlling and proper notice in the event of a discrepancy with or
failure to receive a confirming written notice.
(b) ADDRESSES FOR NOTICES. Notices to any party shall be sent to it at
the following addresses, or any other address as to which all the other parties
are notified in writing.
If to the Borrowers: Condor Technology Solutions, Inc.
Annapolis Office Plaza
170 Jennifer Road, Suite 325
Annapolis, Maryland 21401
Attention: Mr. William J. Caragol
Telephone No.: 410-266-8700
Telecopy No.: 410-266-8400
With copies to: Morgan, Lewis & Bockius, LLP
101 Park Avenue
New York, New York 10178
Attention: Christopher T. Jensen, Esq.
Telephone No.: 212-309-6134
Telecopy No.: 212-309-6273
If to First Union as First Union National Bank
Administrative Agent One First Union Center, TW-4
or as Collateral Agent: 301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
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Telephone No.: (704) 374-2698
Telecopy No.: (704) 383-0288
If to any Lender: To the Address set forth on SCHEDULE 1 hereto
(c) ADMINISTRATIVE AGENT'S OFFICE. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrowers and Lenders, as the Administrative Agent's Office referred to herein,
to which payments due are to be made and at which Loans will be disbursed and
Letters of Credit issued.
SECTION 14.2 EXPENSES; INDEMNITY. The Borrowers will (a) pay all
out-of-pocket expenses of the Agent in connection with (i) the preparation,
execution and delivery of this Agreement and each other Loan Document, whenever
the same shall be executed and delivered, including without limitation all
out-of-pocket syndication and due diligence expenses and reasonable fees and
disbursements of counsel for the Agents and (ii) the preparation, execution and
delivery of any waiver, amendment or consent by the Agents or the Lenders
relating to this Agreement or any other Loan Document, including without
limitation reasonable fees and disbursements of counsel for the Agents, (b) pay
all reasonable out-of-pocket expenses of the Agents and each Lender actually
incurred in connection with the administration and enforcement of any rights and
remedies of the Agents and Lenders under the Credit Facility, including
consulting with appraisers, accountants, engineers, attorneys and other Persons
concerning the nature, scope or value of any right or remedy of the
Administrative Agent or any Lender hereunder or under any other Loan Document or
any factual matters in connection therewith, which expenses shall include
without limitation the reasonable fees and disbursements of such Persons, and
(c) defend, indemnify and hold harmless the Agents and the Lenders, and their
respective parents, Subsidiaries, Affiliates, employees, agents, officers and
directors, from and against any losses, penalties, fines, liabilities,
settlements, damages, costs and expenses, suffered by any such Person in
connection with any claim, investigation, litigation or other proceeding
(whether or not the Agents or any Lender is a party thereto) and the prosecution
and defense thereof, arising out of or in any way connected with the Agreement,
any other Loan Document or the Loans, including without limitation reasonable
attorney's and consultant's fees, except to the extent that any of the foregoing
directly result from the gross negligence or willful misconduct of the party
seeking indemnification therefor.
SECTION 14.3 SET-OFF. In addition to any rights now or hereafter
granted under Applicable Law and to the extent permitted by law, and not by way
of limitation of any such rights, upon and after the occurrence of any Event of
Default and during the continuance thereof, the Lenders and any assignee or
participant of a Lender in accordance with SECTION 14.10 are hereby authorized
by the Borrowers at any time or from time to time, without notice to the
Borrowers or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and to apply any and all deposits (general or
special, time or demand, including, but not limited to, indebtedness evidenced
by certificates of deposit, whether matured or unmatured) and any other
indebtedness
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at any time held or owing by the Lenders, or any such assignee or participant to
or for the credit or the account of the Borrowers against and on account of the
Obligations irrespective of whether or not (a) the Lenders shall have made any
demand under this Agreement or any of the other Loan Documents or (b) the
Administrative Agent shall have declared any or all of the Obligations to be due
and payable as permitted by SECTION 12.2 and although such Obligations shall be
contingent or unmatured.
SECTION 14.4 GOVERNING LAW. This Agreement, the Notes and the other
Loan Documents, unless otherwise expressly set forth therein, shall be governed
by, construed and enforced in accordance with the laws of the State of New York,
without regard to the conflicts or choice of law principles thereof.
SECTION 14.5 CONSENT TO JURISDICTION. The Borrowers hereby irrevocably
consent to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, and in New York, New York, in any action,
claim or other proceeding arising out of any dispute in connection with this
Agreement, the Notes and the other Loan Documents, any rights or obligations
hereunder or thereunder, or the performance of such rights and obligations. The
Borrowers hereby irrevocably consent to the service of a summons and complaint
and other process in any action, claim or proceeding brought by the
Administrative Agent or any Lender in connection with this Agreement, the Notes
or the other Loan Documents, any rights or obligations hereunder or thereunder,
or the performance of such rights and obligations, on behalf of itself or its
property, in the manner specified in SECTION 14.1. Nothing in this SECTION 14.5
shall affect the right of the Administrative Agent or any Lender to serve legal
process in any other manner permitted by Applicable Law or affect the right of
the Administrative Agent or any Lender to bring any action or proceeding against
the Borrowers or their properties in the courts of any other jurisdictions.
SECTION 14.6 BINDING ARBITRATION; WAIVER OF JURY TRIAL.
(a) BINDING ARBITRATION. Upon demand of any party, whether made before
or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to the Notes or any other
Loan Documents ("DISPUTES"), between or among parties to the Notes or any other
Loan Document shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
Loan Documents executed in the future, disputes as to whether a matter is
subject to arbitration, or claims concerning any aspect of the past, present or
future relationships arising out of or connected with the Loan Documents.
Arbitration shall be conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the "ARBITRATION RULES") of the American Arbitration
Association and Title 9 of the U.S. Code. All arbitration hearings shall be
conducted in Charlotte, North Carolina. The expedited procedures set forth in
Rule 51, ET SEQ. of the Arbitration Rules shall be applicable to claims of less
than $1,000,000. All applicable statutes of limitation shall apply to
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any Dispute. A judgment upon the award may be entered in any court having
jurisdiction. Notwithstanding anything foregoing to the contrary, any
arbitration proceeding demanded hereunder shall begin within ninety (90) days
after such demand thereof and shall be concluded within one-hundred twenty (120)
days after such demand. These time limitations may not be extended unless a
party hereto shows cause for extension and then such extension shall not exceed
a total of sixty (60) days. The panel from which all arbitrators are selected
shall be comprised of licensed attorneys. The single arbitrator selected for
expedited procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted. The parties hereto do not waive any applicable Federal or state
substantive law except as provided herein. Notwithstanding the foregoing, this
paragraph shall not apply to any Hedging Agreement that is a Loan Document.
(b) JURY TRIAL. THE ADMINISTRATIVE AGENT, EACH COLLATERAL AGENT, EACH
LENDER AND THE BORROWERS HEREBY ACKNOWLEDGE THAT BY AGREEING TO BINDING
ARBITRATION THEY HAVE IRREVOCABLY WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY
RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS
AND OBLIGATIONS.
(c) PRESERVATION OF CERTAIN REMEDIES. Notwithstanding the preceding
binding arbitration provisions, the parties hereto and the other Loan Documents
preserve, without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute. Each
such Person shall have and hereby reserves the right to proceed in any court of
proper jurisdiction or by self help to exercise or prosecute the following
remedies: (i) all rights to foreclose against any real or personal property or
other security by exercising a power of sale granted in the Loan Documents or
under applicable law or by judicial foreclosure and sale, (ii) all rights of
self help including peaceful occupation of property and collection of rents, set
off, and peaceful possession of property, (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and in filing an involuntary bankruptcy
proceeding, and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
SECTION 14.7 REVERSAL OF PAYMENTS. To the extent the Borrowers make a
payment or payments to the Administrative Agent for the ratable benefit of the
Lenders or the Administrative Agent receives any payment or proceeds of the
collateral which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such
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payment or proceeds had not been received by the Administrative Agent.
SECTION 14.8 INJUNCTIVE RELIEF; PUNITIVE DAMAGES.
(a) The Borrowers recognize that, in the event the Borrowers fail to
perform, observe or discharge any of their obligations or liabilities under this
Agreement, any remedy of law may prove to be inadequate relief to the Lenders.
Therefore, the Borrowers agree that the Lenders, at the Lenders' option, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
(b) Each of the Administrative Agent, Lenders and Borrowers (on behalf
of itself and its Subsidiaries) hereby agree that no such Person shall have a
remedy of punitive or exemplary damages against any other party to a Loan
Document and each such Person hereby waives any right or claim to punitive or
exemplary damages that they may now have or may arise in the future in
connection with any Dispute, whether such Dispute is resolved through
arbitration or judicially.
(c) The parties agree that they shall not have a remedy of punitive or
exemplary damages against any other party in any Dispute and hereby waive any
right or claim to punitive or exemplary damages they have now or which may arise
in the future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
SECTION 14.9 ACCOUNTING MATTERS. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrowers or any Subsidiary to determine compliance with any covenant contained
herein, shall, except as otherwise expressly contemplated hereby or unless there
is an express written direction by the Administrative Agent to the contrary
agreed to by the Borrowers, be performed in accordance with GAAP as in effect on
the Closing Date. In the event that changes in GAAP shall be mandated by the
Financial Accounting Standards Board, or any similar accounting body of
comparable standing, or shall be recommended by the Borrowers' certified public
accountants, to the extent that such changes would modify such accounting terms
or the interpretation or computation thereof, such changes shall be followed in
defining such accounting terms only from and after the date the Borrowers and
the Lenders shall have amended this Agreement to the extent necessary to reflect
any such changes in the financial covenants and other terms and conditions of
this Agreement.
SECTION 14.10 SUCCESSORS AND ASSIGNS; PARTICIPATIONS.
(a) BENEFIT OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the Borrowers, the Agents and the Lenders, all future
holders of the Notes, and their respective successors and assigns, except that
the Borrowers shall not assign or transfer any of
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their rights or obligations under this Agreement without the prior written
consent of each Lender.
(b) ASSIGNMENT BY LENDERS. Each Lender may, with the consent of the
Borrowers (so long as no Default or Event of Default has occurred and is
continuing) and the consent of the Administrative Agent, which consents shall
not be unreasonably withheld, assign to one or more Eligible Assignees all or a
portion of its interests, rights and obligations under this Agreement
(including, without limitation, all or a portion of the Extensions of Credit at
the time owing to it and the Notes held by it); PROVIDED that:
(i) if less than all of the assigning Lender's Revolving
Credit Commitment or Term Loan Commitment is to be assigned, the Commitment so
assigned shall not be less than $5,000,000;
(ii) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance in the form of EXHIBIT G attached hereto
(an "ASSIGNMENT AND ACCEPTANCE"), together with any Note or Notes subject to
such assignment;
(iii) each Eligible Assignee must, concurrent with the
delivery by such Eligible Assignee of the Assignment and Acceptance, have
available to it and deliver the forms required pursuant to SECTION 5.11(e);
(iv) such assignment shall not, without the consent of the
Borrowers, require the Borrowers to file a registration statement with the
Securities and Exchange Commission or apply to or qualify the Loans or the Notes
under the blue sky laws of any state; and
(v) the assigning Lender shall pay to the Administrative Agent
an assignment fee of $3,500 upon the execution by such Lender of the Assignment
and Acceptance; PROVIDED that no such fee shall be payable upon any assignment
by a Lender to an Affiliate thereof.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business Days after the execution thereof, (A) 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 hereby
and (B) the Lender thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.
(c) RIGHTS AND DUTIES UPON ASSIGNMENT. By executing and delivering an
Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.
(d) REGISTER. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of
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the Lenders and the amount of the Extensions of Credit with respect to each
Lender from time to time (the "REGISTER"). The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrowers, the
Administrative Agent and the Lenders may treat each person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrowers or
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) ISSUANCE OF NEW NOTES. Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Eligible Assignee together
with any Note or Notes subject to such assignment and the written consent to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is substantially in the form of EXHIBIT G:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the
Borrowers; and
(iv) promptly deliver a copy of such Assignment and Acceptance
to the Borrowers.
Within five (5) Business Days after receipt of notice, the Borrowers shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes, a new Note or Notes to the order of such Eligible Assignee in
amounts equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and a new Note or Notes to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of the assigned Notes delivered to the assigning Lender. Each surrendered Note
or Notes shall be canceled and returned to the Borrowers.
(f) PARTICIPATIONS. Each Lender may sell participations to one or more
banks or other entities in all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Extensions of Credit and the Notes held by it); PROVIDED that:
(i) each such participation shall be in an amount not less
than $5,000,000;
(ii) such Lender's obligations under this Agreement
(including, without limitation, its Revolving Credit Commitment or Term Loan
Commitment, as applicable) shall remain unchanged;
(iii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations;
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(iv) such Lender shall remain the holder of the Notes held by
it for all purposes of this Agreement;
(v) the Borrowers, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement;
(vi) such Lender shall not permit such participant the right
to approve any waivers, amendments or other modifications to this Agreement or
any other Loan Document other than waivers, amendments or modifications which
would reduce the principal of or the interest rate on any Loan or Reimbursement
Obligation, extend the term or increase the amount of the Commitment, reduce the
amount of any fees to which such participant is entitled, extend any scheduled
payment date for principal of any Loan or, except as expressly contemplated
hereby or thereby, release substantially all of the Collateral; and
(vii) any such disposition shall not, without the consent of
the Borrowers, require the Borrowers to file a registration statement with the
Securities and Exchange Commission to apply to qualify the Loans or the Notes
under the blue sky law of any state.
(g) DISCLOSURE OF INFORMATION; CONFIDENTIALITY. The Agents and the
Lenders shall hold all non-public information with respect to the Borrowers
obtained pursuant to the Loan Documents in accordance with their customary
procedures for handling confidential information; PROVIDED, that the Agents may
disclose information relating to this Agreement to GOLD SHEETS and other similar
bank trade publications, such information to consist of deal terms and other
information customarily found in such publications and PROVIDED FURTHER, that
the Agents and Lenders may disclose any such information to the extent such
disclosure is required by law or requested by any regulatory authority. Any
Lender may, in connection with any assignment, proposed assignment,
participation or proposed participation pursuant to this SECTION 14.10, disclose
to the assignee, participant, proposed assignee or proposed participant, any
information relating to the Borrowers furnished to such Lender by or on behalf
of the Borrowers; PROVIDED, that prior to any such disclosure, each such
assignee, proposed assignee, participant or proposed participant shall agree
with the Borrowers or such Lender to preserve the confidentiality of any
confidential information relating to the Borrowers received from such Lender.
(h) CERTAIN PLEDGES OR ASSIGNMENTS. Nothing herein shall prohibit any
Lender from pledging or assigning any Note to any Federal Reserve Bank in
accordance with Applicable Law.
SECTION 14.11 AMENDMENTS, WAIVERS AND CONSENTS. Except as set forth
below, any term, covenant, agreement or condition of this Agreement or any of
the other Loan Documents may be amended or waived by the Lenders, and any
consent given by the Lenders, if, but only if, such amendment, waiver or consent
is in writing signed by the Required Lenders (or by the Administrative Agent or
Collateral Agent, as applicable, with the consent of the Required Lenders) and
delivered to the Administrative Agent and, in the case of
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an amendment, signed by the Borrowers; PROVIDED, that no amendment, waiver or
consent shall:
(a) (i) increase the Revolving Credit Commitment of any Lender, (ii)
reduce the rate of interest or fees payable on any Revolving Credit Loan or
Reimbursement Obligation, (iii) reduce or forgive the principal amount of any
Revolving Credit Loan or Reimbursement Obligation, (iv) extend the originally
scheduled time or times of payment of the principal of any Revolving Credit Loan
or Reimbursement Obligation or the time or times of payment of interest on any
Revolving Credit Loan or Reimbursement Obligation or any fee or commission with
respect thereto, (v) permit any subordination of the principal or interest on
any Revolving Credit Loan or Reimbursement Obligation or (vi) extend the time of
the obligation of the Revolving Commitment Lenders to make or issue or
participate in Letters of Credit, in any case, without the written consent of
each Lender holding Revolving Credit Loans or a Revolving Credit Commitment;
(b) (i) increase the Term Loan Commitment of any Lender, (ii) reduce
the rate of interest or fees payable on any Term Loan, (iii) reduce or forgive
the principal amount of any Term Loan, (iv) permit any subordination of the
principal or interest on any Term Loan or (v) extend the originally scheduled
time or times of payment of the principal of any Term Loan or the time or times
of payment of interest on any Term Loan or any fee or commission with respect
thereto, in any case, without the consent of each Lender holding a Term Loan or
a Term Loan Commitment;
(c) (i) release the Borrowers from the Obligations hereunder, (ii)
permit any assignment (other than as specifically permitted or contemplated in
this Agreement) of any of the Borrowers' rights and obligations hereunder, (iii)
release any material portion of the Collateral or release any Security Document
(other than asset sales permitted pursuant to SECTION 11.6 and as otherwise
specifically permitted or contemplated in this Agreement or this applicable
Security Document) or (iv) amend the provisions of this SECTION 14.11 or the
definition of Required Lenders, without the prior written consent of each
Lender.
In addition, (a) no amendment, waiver or consent to the provisions of (i)
Article XIII shall be made without the written consent of the Administrative
Agent and (ii) Article III without the written consent of the Issuing Lender and
(b) with respect to the primary syndication of the Term Loan Facility, any
amendment of this Agreement solely effecting an increase in the rate of interest
or fees payable in connection with any Term Loan shall not require the consent
of the Required Lenders or Lenders solely holding Revolving Credit Loans or a
Revolving Credit Commitment.
SECTION 14.12 PERFORMANCE OF DUTIES. The Borrowers' obligations under
this Agreement and each of the Loan Documents shall be performed by the
Borrowers at their sole cost and expense.
SECTION 14.13 ALL POWERS COUPLED WITH INTEREST. All powers of attorney
and other authorizations granted to the Lenders, the Agents and any
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Persons designated by the Agents or any Lender pursuant to any provisions of
this Agreement or any of the other Loan Documents shall be deemed coupled with
an interest and shall be irrevocable so long as any of the Obligations remain
unpaid or unsatisfied or the Credit Facility has not been terminated.
SECTION 14.14 SURVIVAL OF INDEMNITIES. Notwithstanding any termination
of this Agreement, the indemnities to which the Agents and the Lenders are
entitled under the provisions of this Article XIV and any other provision of
this Agreement and the Loan Documents shall continue in full force and effect
and shall protect the Agents and the Lenders against events arising after such
termination as well as before.
SECTION 14.15 TITLES AND CAPTIONS. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 14.16 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 14.17 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
SECTION 14.18 TERM OF AGREEMENT. This Agreement shall remain in effect
from the Closing Date through and including the date upon which all Obligations
shall have been indefeasibly and irrevocably paid and satisfied in full. The
Collateral Agent is hereby permitted to release all Liens on the Collateral upon
repayment of the outstanding principal of and all accrued interest on the Loans,
payment of all outstanding fees and expenses hereunder and the termination of
the Lender's Commitments. No termination of this Agreement shall affect the
rights and obligations of the parties hereto arising prior to such termination.
SECTION 14.19 INCONSISTENCIES WITH OTHER DOCUMENTS; INDEPENDENT EFFECT
OF COVENANTS. (a) In the event there is a conflict or inconsistency between this
Agreement and any other Loan Document, the terms of this Agreement shall
control; PROVIDED, that any provision of the Security Documents which imposes
additional burdens on the Borrowers or their Subsidiaries or further restricts
the rights of the Borrowers or their Subsidiaries or gives the Agents or Lenders
additional rights shall not be deemed to be in conflict or inconsistent with
this Agreement and
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shall be given full force and effect.
(b) The Borrowers expressly acknowledge and agree that each covenant
contained in Articles IX, X, or XI shall be given independent effect.
Accordingly, the Borrowers shall not engage in any transaction or other act
otherwise permitted under any covenant contained in Articles IX, X, or XI if,
before or after giving effect to such transaction or act, the Borrowers shall or
would be in breach of any other covenant contained in Articles IX, X, or XI.
SECTION 14.20 COMPANY AS AGENT FOR SUBSIDIARY BORROWERS. Each
Subsidiary Borrower hereby irrevocably appoints and authorizes the Company (a)
to provide the Agents with all notices with respect to Loans obtained for the
benefit of any Subsidiary Borrower and all other notices and instructions under
this Agreement and (b) to take such action on behalf of any Subsidiary Borrower
it deems appropriate on their behalf to obtain Loans and to exercise such other
powers as are reasonably incidental thereto to carry out the purposes of this
Agreement.
[Signature pages to follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers, all as of the day and
year first written above.
CONDOR TECHNOLOGY SOLUTIONS, INC., COMPUTER
HARDWARE MAINTENANCE COMPANY, INC.,
CORPORATE ACCESS, INC., DECISION SUPPORT
TECHNOLOGY, INC., FEDERAL COMPUTER
CORPORATION, GLOBAL CORE STRATEGIES
ACQUISITION, INC., INTERACTIVE SOFTWARE
SYSTEMS INCORPORATED, INVENTURE GROUP, INC.,
LINC SYSTEMS CORPORATION, LOUDEN ASSOCIATES,
INC., MANAGEMENT SUPPORT TECHNOLOGY CORP.,
MIS TECHNOLOGIES, INC., POWERCREW, INC.,
TITAN TECHNOLOGIES GROUP L.L.C., and U.S.
COMMUNICATIONS, INC., as Borrowers
[CORPORATE SEAL] By: /s/ William J. Caragol
Name: William J. Caragol
Title: Vice President
CONDOR SYSTEM SOLUTIONS, INC., as Borrower
By: /s/ William J. Caragol
Name: William J. Caragol
Title: President
FIRST UNION NATIONAL BANK,
as Collateral Agent, Administrative Agent and
Issuing Lender
By: /s/ Richard M. Schmersal
Name: Richard M. Schmersal
Title: Vice President
FIRST UNION COMMERCIAL CORPORATION,
as Swingline Lender, and Lender
By: /s/ Richard M. Schmersal
Name: Richard M. Schmersal
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Title: Vice President
FLEET NATIONAL BANK, as Lender
By: /s/ Thomas Engels
Name: Thomas Engels
Title: Senior Vice President
MELLON BANK, N.A., as Lender
By: /s/ David Reed
Name: David Reed
Title: First Vice President
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SCHEDULE 1
(Lenders and Commitments)
<TABLE>
<CAPTION>
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
LENDER REVOLVING CREDIT REVOLVING CREDIT TERM LOAN COMMITMENT TERM LOAN
COMMITMENT COMMITMENT COMMITMENT
PERCENTAGE PERCENTAGE
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
First Union Commercial Corporation
One First Union Center, TW- 4
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services $30,000,000.00 40% $25,000,000.00 100%
Telephone No.: (704) 374-2698
Telecopy No.: (704) 383-0288
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
Fleet National Bank
One Federal Street
MA OF DO4J
Boston, Massachusetts 02110
Attn: Thomas Engels $15,000,000.00 20% - -
Senior Vice President
Phone: (617) 346-4236
Fax: (617) 346-4667
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
State Street Bank and Trust
225 Franklin Street
Boston, Massachusetts 02110
Attn: William S. Rowe* $15,000,000.00 20% - -
Phone: (617) 664-8715
Fax: (617) 664-6527
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
Mellon Bank, N.A.
1901 Research Boulevard
6th Floor
Rockville, Maryland 20850
Attn: Peter Heller $15,000,000.00 20% - -
Vice President
Phone: (301) 217-0687
Fax: (301) 309-3458
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
TOTALS $75,000,000.00 100% $25,000,000.00 100%
- ---------------------------------------- ---------------------- -------------------- --------------------- --------------------
</TABLE>
<PAGE>
Exhibit 10.15
- --------------------------------------------------------------------------------
PURCHASE AGREEMENT
dated as of April 1, 1999
between
CONDOR TECHNOLOGY SOLUTIONS, INC.,
and
The Interest Holders of TITAN TECHNOLOGIES GROUP, LLC
- --------------------------------------------------------------------------------
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of April 1, 1999
by and among CONDOR TECHNOLOGY SOLUTIONS, INC., a Delaware corporation
("CONDOR"), MICHAEL CRAWFORD ("CRAWFORD"), STEVEN BELLI ("BELLI"), DIRK FLOTE
("FLOTE") and RAECO INVESTMENT PARTNERSHIP ("RAECO") (CRAWFORD, BELLI, and FLOTE
shall be referred to collectively as the "INDIVIDUAL SELLERS," and the
INDIVIDUAL SELLERS and RAECO shall be referred to collectively as the
"SELLERS"). SELLERS are the sole interest holders of TITAN TECHNOLOGIES GROUP,
LLC, a New Jersey limited liability company ("TITAN").
WHEREAS, SELLERS desire to sell to CONDOR, and CONDOR desires to
purchase from SELLERS, all of the issued and outstanding ownership interests of
TITAN for the consideration, and on the terms, set forth in this Agreement.
WHEREAS, unless the context otherwise requires, capitalized terms used
in this Agreement or in any schedule or exhibit attached hereto and not
otherwise defined herein shall have the following meanings for all purposes of
this Agreement:
"Affiliate" means a Person that directly or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, a specified Person. For the purposes hereof, the term "control" (including
the terms "controlling," "controlled by" and "under common control with") means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"A/R Aging Reports" has the meaning set forth in Section 6.11.
"Balance Sheet Date" means February 28, 1999.
"Benefit Plan" means any Plan, existing at the Closing Date or prior
thereto, established or to which contributions have at any time been made by
TITAN, any ERISA Affiliate, or any predecessor of any of the foregoing, under
which any employee or former employee of TITAN, or any beneficiary thereof, is
covered, is eligible for coverage or has benefit rights.
"CONDOR" has the meaning set forth in the first paragraph of this
Agreement.
"CONDOR Charter Documents" has the meaning set forth in Section 3.1.
"CONDOR's Closing Documents" has the meaning set forth in Section
1.7(b)
"CONDOR Stock" means the common stock, par value $.01 per share, of
CONDOR.
"Closing" means the consummation of the transactions contemplated by
this Agreement on the Closing Date.
"Closing Date" has the meaning set forth in Section 1.6.
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended.
"Contingent Payment Date" has the meaning set forth in Section 1.4(c).
"Contingent Purchase Price" has the meaning set forth in Section 1.4.
"Environmental Requirements" has the meaning set forth in Section 2.10.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person who is, or at any time was, a member
of a controlled group (within the meaning of Section 412(n)(6) of the Code) that
includes, or at any time included, TITAN or any predecessor of TITAN.
"Expiration Date" has the meaning set forth in Section 2.
"GAAP" means generally accepted accounting principles of the United
States.
"Governmental Authority" means any governmental, regulatory or
administrative body, agency, subdivision or authority, any court or judicial
authority, or any public, private or industry regulatory authority, whether
national, federal, state, local or otherwise.
"Hazardous Materials" has the meaning set forth in Section 2.10(b).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (15 U.S.C. ss. 18a) and the rules and regulations promulgated
thereunder.
"Intellectual Property" means all trademarks, service marks, trade
dress, trade names, patents and copyrights and any registration or application
for any of the foregoing, and any trade secret, invention, process, know-how,
computer software or technology systems.
"Knowledge," "knowledge," "the best knowledge of," "known to" or words
of similar import used herein with respect to TITAN or the INDIVIDUAL SELLERS
shall mean the actual knowledge of INDIVIDUAL SELLERS, together with the
knowledge a reasonable business person would have obtained after making
reasonable inquiry and after exercising reasonable diligence with respect to the
matters at hand.
"Laws" has the meaning set forth in Section 2.18.
"Material Adverse Effect" means, with respect to any Person, any event
or occurrence which would have a material adverse effect on such Person's
business, condition (financial or other), properties, business prospects or
financial results.
"Material Contract" means any lease, instrument, agreement, license or
permit set forth on
<PAGE>
SCHEDULE 2.9, 2.10, 2.11, 2.12, 2.13, 2.15 OR 2.16 or any other material
agreement to which TITAN is a party or by which its properties are bound.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"1933 Act" means the Securities Act of 1933, as amended.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any natural person, corporation, partnership,
proprietorship, other business organization, trust, union, association or
Governmental Authority.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA.
"Price Determination Period" has the meaning set forth in Section
1.3(b).
"Returns" has the meaning set forth at the end of Section 2.19.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"SELLERS" has the meaning set forth in the first paragraph of this
Agreement.
"SELLERS' Closing Documents" has the meaning set forth in Section
1.7(a).
"Tax" or "Taxes" has the meaning set forth at the end of Section 2.19.
"Taxing Authority" has the meaning set forth at the end of Section
2.19.
"Third Person" has the meaning set forth in Section 8.3.
"TITAN" has the meaning set forth in the first paragraph of this
Agreement.
"TITAN Interests" means all of the outstanding ownership interests of
TITAN.
"TITAN Interim Balance Sheet" is a statement which fairly presents
TITAN's financial condition,
<PAGE>
assets and liabilities, and owners' equity as of February 28, 1999, and which is
attached hereto as SCHEDULE 1.2.
"TITAN Organizational Documents" has the meaning set forth in Section
2.1.
"Year 2000 Compliant" means, with respect to TITAN's information
technology (including computer software, computer firmware, and computer
hardware, as well as similar or related items of automated, computerized or
software systems that are used or relied on by TITAN in the conduct of its
business), that such information technology is designed to be used prior to,
during and after the calendar Year 2000 A.D., and the information technology
used during each such time period will accurately receive, provide and process
date/time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the 20th and 21st centuries, including the
years 1999 and 2000, and leap year calculations, and will not malfunction, cease
to function, or provide invalid or incorrect results as a result of date/time
data.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. SALE AND TRANSFER OF TITAN INTERESTS; CLOSING
1.1 TITAN INTERESTS. Subject to the terms and conditions of this
Agreement, at the Closing, SELLERS will sell and transfer TITAN Interests to
CONDOR, and CONDOR will purchase TITAN Interests from SELLERS.
1.2 PURCHASE PRICE.
(a) The purchase price (the "Purchase Price") for TITAN
Interests will be equal to (a) the "Closing Price," as defined in Section 1.2(b)
below, plus (b) the "Contingent Purchase Price" as defined in Section 1.4, minus
(c) the "Net Worth Adjustment," as defined in Section 1.5. The Purchase Price
shall be allocated among TITAN Interests and paid to the SELLERS in proportion
to their ownership of TITAN Interests set forth in SCHEDULE 1.2(a) hereto.
(b) The Closing Price shall be equal to Nine Million Dollars
($9,000,000).
1.3 PAYMENT OF THE CLOSING PRICE. The Closing Price shall be paid as
follows:
(a) An amount equal to Six Million Five Hundred Fifty Thousand
Dollars ($6,550,000) shall be payable at Closing by wire transfer of immediately
available funds to the SELLERS.
.
(b) CONDOR shall deliver to the SELLERS shares of CONDOR Stock
valued at One Million Nine Hundred Fifty Thousand Dollars ($1,950,000). The
value of CONDOR Stock shall be determined based on the average of the closing
price per share for CONDOR Stock for the ten (10) trading days immediately
preceding the date which is three (3) trading days immediately prior to the
Closing Date, the Contingent Payment Date, or other payment date, as applicable,
as reported on the Nasdaq National Market. The foregoing ten (10) day period
shall be referred to as the "Price Determination Period." In the
<PAGE>
event that there shall be no trade on any trading day within the Price
Determination Period, or if the Nasdaq National Market shall fail to report a
closing price on any such day, the closing price for such day shall be the
average of the closing bid price and the closing asked price as reported by the
Nasdaq National Market. In the event of a dividend payable in shares of CONDOR
Stock, or the combination or subdivision of CONDOR Stock, the calculation for
determining the value per share of CONDOR Stock shall be proportionately
adjusted to reflect such event.
(c) An amount equal to Five Hundred Thousand Dollars
($500,000), Two Hundred Fifty Thousand Dollars ($250,000) shall be in cash, and
Two Hundred Fifty Thousand Dollars ($250,000) of which shall be CONDOR Stock,
valued in the manner described in Section 1.3(b) above (the "Escrow Deposit")
shall be retained in escrow by CONDOR pursuant to an Escrow Agreement in the
form attached hereto as EXHIBIT 1.3(c) (the "Escrow Agreement"), subject to
preparation of the Closing Date Balance Sheet and any Net Worth Adjustment to
the Purchase Price determined and effectuated in accordance with Section 1.5 of
this Agreement.
1.4 CONTINGENT PURCHASE PRICE.
(a) The Contingent Purchase Price shall be determined as
follows: For the nine (9) month period ending December 31, 1999, the Contingent
Purchase Price shall be the lesser of $5,400,000 or Four (4) times the amount of
TITAN's "EBIT" (as defined in Section 1.4(b) below) that exceeds $2,250,000 but
is less than $3,600,000, if any, for said nine-month period.
(b) For purposes of this Agreement, "Pre-tax Earnings" shall
mean, as to the nine-month period ending December 31, 1999, TITAN's earnings
before interest and federal and state taxes, calculated in accordance with GAAP,
but without deduction for (x) any intercompany costs or charges imposed by
CONDOR or any of its Affiliates for services provided to TITAN (other than
charges for services provided by CONDOR that were previously arranged for and
independently paid by TITAN) or (y) the amortization of intangible assets
resulting from the transactions contemplated by this Agreement, and (z) to which
is added the "Incremental Benefit Cost" (defined in Section 1.4(d) below).
Notwithstanding the foregoing, EBIT shall include all costs or other charges
imposed for services or products provided by CONDOR to TITAN for use in
connection with the servicing of TITAN's customers.
EBIT shall be determined by TITAN in accordance with GAAP as reported on
financial statements prepared at the direction of the SELLERS and shall be
subject to review and audit by CONDOR or its representatives if there are any
questions which cannot be resolved directly between CONDOR and TITAN management
personnel. CONDOR's auditors' determination of EBIT shall not be dispositive,
and in the event the parties are unable to agree on a determination of EBIT
within thirty (30) days after CONDOR's audit, they shall mutually and in good
faith seek resolution of their dispute.
(c) The Contingent Purchase Price, if any, payable for 1999
shall be paid ninety (90) days after the end of 1999 (the "Contingent Payment
Date"). The Contingent Purchase Price shall be paid as follows: (i) Thirty
Percent (30%) of the Contingent Purchase Price shall be paid by wire transfer of
immediately available day funds to the SELLERS, and (ii) Seventy Percent (70%)
of the Contingent Purchase Price shall be paid by CONDOR's delivery of CONDOR
Stock valued at the greater of (A) the value determined in accordance with
Section 1.3(b), or (B) Eleven Dollars and Twenty Five Cents ($11.25)
<PAGE>
per share.
(d) For the purposes hereof, "Incremental Benefit Cost" shall
mean (i) the cost, per capita, to TITAN, of providing benefits to TITAN's
employees under CONDOR's Plans after the Closing, less (ii) the cost, per
capita, to TITAN, of providing benefits under Benefit Plans to TITAN's employees
under TITAN's Plans immediately prior to the Closing, multiplied by (iii) the
average number of TITAN's employees (calculated in the manner set forth in the
following sentence), provided that in no event shall the result of the foregoing
calculation be less than zero (0). For the purposes of this Section 1.4(d), the
average number of employees of TITAN shall be determined by adding together the
number of employees of TITAN at the Closing Date, and as of the end of each
remaining month in 1999, and the result so determined shall be divided by ten
(10).
1.5. NET WORTH ADJUSTMENT. The "Net Worth Adjustment" shall be the
amount, if any, by which negative One Hundred Thousand Dollars (-$100,000)
exceeds TITAN's "Net Worth" (defined below).
(a) For the purposes hereof, "Net Worth" shall be determined
based upon the balance sheets prepared for TITAN as of the Closing Date (the
"Closing Date Balance Sheet") and shall be equal to interestholders' equity
(within the meaning of GAAP) as of the Closing Date. Closing Date Net Worth
shall be determined by TITAN in accordance with GAAP as reported on the Closing
Date Balance Sheet prepared at the direction of the SELLERS within fifteen (15)
days after the Closing, and shall be subject to review and audit by CONDOR or
its representatives if there are any questions which cannot be resolved directly
between CONDOR and TITAN's management personnel. CONDOR shall complete such
audit within thirty (30) days after receipt of the Closing Date Balance Sheet.
(b) CONDOR shall deduct the Net Worth Adjustment, if any,
from the Escrow Deposit, provided that if the amount paid to the Escrow Agent is
less than the Net Worth Adjustment after final determination thereof, the
SELLERS shall, upon demand, pay the amount of the shortfall to CONDOR.
1.6. CLOSING. The purchase and sale (the "Closing") provided for in
this Agreement will take place on April 1, 1999, or such other date as the
parties shall mutually determine (the "Closing Date").
1.7 CLOSING OBLIGATIONS. At the Closing:
(a) SELLERS shall deliver or cause to be delivered to CONDOR
the following ("SELLERS' Closing Documents"):
(i) An Assignment of Limited Liability Company
Interests, evidencing the transfer of ownership of TITAN Interests;
(ii) Employment agreements (the "Employment
Agreements") in the form of EXHIBIT 1.7(a)(ii), executed by CRAWFORD and such
other key employees of TITAN as shall be identified and listed on SCHEDULE
1.7(a)(ii) hereto;
(iii) The Escrow Agreement, executed by the SELLERS;
<PAGE>
(iv) A certificate executed by SELLERS to the effect
that (A) except as otherwise stated in such certificate, SELLERS'
representations and warranties in this Agreement were accurate in all material
respects as of the date of this Agreement and are accurate in all material
respects as of the Closing Date as if made on the Closing Date; and (B) SELLERS
have performed and complied with all covenants and conditions required to be
performed or complied with by the SELLERS prior to or at the Closing; and
(v) A Good Standing Certificate for TITAN as of a
recent date from the New Jersey Secretary of State and from all states in which
TITAN is authorized to do business.
(b) CONDOR shall deliver or cause to be delivered to SELLERS
the following ("CONDOR's Closing Documents"):
(i) A certificate executed by CONDOR to the effect
that (A) except as otherwise stated in such certificate, CONDOR's
representations and warranties in this Agreement were accurate in all material
respects as of the date of this Agreement and are accurate in all material
respects as of the Closing Date as if made on the Closing Date; (B) CONDOR has
performed and complied with all covenants and conditions required to be
performed or complied with by it prior to or at the Closing; and (C) attesting
to the incumbency of officers executing documents on behalf of CONDOR;
(ii) The portions of the Purchase Price described in
Sections 1.3(a) and 1.3(b);
(iii) The Escrow Deposit to the Escrow Agent in
accordance with Section 1.3(c), together with the Escrow Agreement executed by
CONDOR and the Escrow Agent;
(iv) The Employment Agreements executed by CONDOR;
and
(v) A good standing certificate for CONDOR from the
State of Delaware.
(c) CONDOR on the one hand, and SELLERS on the other hand,
shall also deliver such other documents, instruments, certificates, and opinions
as may be required by this Agreement or as otherwise necessary to consummate the
transactions contemplated hereby.
2. REPRESENTATIONS AND WARRANTIES OF INDIVIDUAL SELLERS
The INDIVIDUAL SELLERS, jointly and severally, represent and warrant to
CONDOR that all of the following representations and warranties in this Section
2 are true and correct at the date of this Agreement and shall be true and
correct at the time of the Closing Date, and that such representations and
warranties shall survive the Closing Date for a period of eighteen (18) months
(the last day of such period being the "Expiration Date"), except that the
representations and warranties set forth in Section 2.19 hereof shall survive
until such time as the statute of limitations period has run for all tax periods
ended on or prior to the Closing Date, which shall be deemed to be the
Expiration Date for Section 2.19. Except as set forth in this Agreement, the
Schedules and the Exhibits hereto, the SELLERS do not make any representations
<PAGE>
or warranties to CONDOR.
2.1 DUE ORGANIZATION. TITAN is a limited liability company, duly
organized, validly existing and in good standing under the laws of its state of
its organization, and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted, to own
or hold under lease the properties and assets it now owns or holds under lease,
and to perform all of its obligations under the Material Contracts; TITAN is
duly qualified to do business in the jurisdictions listed in SCHEDULE 2.1 and
there are no other jurisdictions in which the conduct of TITAN's business or
activities or its ownership of assets requires any other qualification under
applicable law, the absence of which would have a Material Adverse Effect on
TITAN. True, complete and correct copies of the Certificate of Formation and
Amended and Restated Operating Agreement, each as amended, of TITAN (the "TITAN
Organizational Documents") will be delivered to CONDOR pursuant to Section 6.4
hereof.
2.2 AUTHORIZATION. Each of the INDIVIDUAL SELLERS has the authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and binding obligation of the INDIVIDUAL
SELLERS, enforceable in accordance with its terms.
2.3 OWNERSHIP INTERESTS OF TITAN. All of the issued and outstanding
ownership interests of TITAN are owned by the SELLERS, as set forth in SCHEDULE
2.3, and except as set forth in SCHEDULE 2.3, are free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. All of the ownership interests of TITAN have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the INDIVIDUAL SELLERS and were offered, issued, sold
and delivered by TITAN in compliance with all applicable state and federal laws
concerning the issuance of securities. None of such shares were issued in
violation of the preemptive rights of any past or present interestholders.
2.4 CAPITAL STRUCTURE OF TITAN. Except as set forth on SCHEDULE 2.4:
(i) no option, warrant, call, conversion right or commitment of any kind exists
which obligates TITAN to issue any of its ownership interests; and (ii) TITAN
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. SCHEDULE 2.4 includes a
complete listing of all option or interest or ownership purchase plans,
including a list of all outstanding options, warrants or other rights to acquire
TITAN Interests and a description of the material terms of such outstanding
options, warrants or other rights, true, correct and complete copies of which
have been supplied to CONDOR.
2.5 SUBSIDIARIES. SCHEDULE 2.5 attached hereto lists the name of each
of TITAN's subsidiaries and sets forth the number and class of the authorized
capital stock or ownership interests of TITAN's subsidiaries and the interests
of each of TITAN's subsidiaries which are issued and outstanding, all of which
interests are owned by TITAN, free and clear of all liens, security interests,
pledges, voting trusts, equities, restrictions, encumbrances and claims of every
kind. Except as set forth on SCHEDULE 2.5, TITAN does not presently own, of
record or beneficially, or control, directly or indirectly, any capital stock,
ownership interests, securities convertible into capital stock or any other
equity interest in any corporation, association or business entity nor is TITAN,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
<PAGE>
2.6 FINANCIAL STATEMENTS. INDIVIDUAL SELLERS have delivered to CONDOR
copies of the following financial statements: Balance Sheets and Income
Statements, at and for each of the years ended December 31, 1997, 1998, and for
the two-month period ended February 28, 1999 prepared by or on behalf of TITAN
(the "TITAN Financial Statements"). Each of the TITAN Financial Statements is
consistent with the books and records of TITAN (which, in turn, are accurate and
complete in all material respects) and fairly presents TITAN's financial
condition, assets and liabilities as of their respective dates and the results
of operations and cash flows for the periods related thereto in compliance with
GAAP, consistently applied among the periods which are the subject of TITAN
Financial Statements, except as set forth on SCHEDULE 1.2.
2.7 LIABILITIES AND OBLIGATIONS. The INDIVIDUAL SELLERS have delivered
to CONDOR an accurate list (which is set forth on SCHEDULE 2.7) as of the
Balance Sheet Date of (i) all liabilities of TITAN in excess of $10,000 which
are not reflected in the TITAN Financial Statements at the Balance Sheet Date,
and (ii) all loan agreements, indemnity or guaranty agreements, bonds,
mortgages, liens, pledges or other security agreements to which TITAN is a
party. Except as set forth on SCHEDULE 2.7, since the Balance Sheet Date, TITAN
has not incurred any material liabilities of any kind, character and
description, whether accrued, absolute, secured or unsecured, contingent or
otherwise, other than liabilities incurred in the ordinary course of business.
The INDIVIDUAL SELLERS have also set forth on SCHEDULE 2.7, in the case of those
contingent liabilities related to pending or threatened litigation, or other
liabilities which are not fixed or are being contested, the following
information:
(a) a summary description of the liability, together with: (i)
copies of all relevant documentation relating thereto; (ii) amounts claimed and
any other action or relief sought; and (iii) name of claimant and all other
parties to the claim, suit or proceeding;
(b) the name of each court or agency before which such claim,
suit or proceeding is pending;
(c) the date such claim, suit or proceeding was instituted;
and
(d) a good faith and reasonable estimate of the maximum
amount, if any, which is likely to become payable with respect to each such
liability. If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
2.8 ACCOUNTS AND NOTES RECEIVABLE. The INDIVIDUAL SELLERS have
delivered to CONDOR an accurate list (which is set forth on SCHEDULE 2.8) of the
accounts and notes receivable of TITAN as of the Balance Sheet Date, including
any such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date, and including receivables from and advances to employees and the
INDIVIDUAL SELLERS. Except to the extent reflected on SCHEDULE 2.8 or as
disclosed to CONDOR in a writing accompanying the A/R Aging Reports, as the case
may be, the accounts, notes and other receivables shown on SCHEDULE 2.8 and on
the A/R Aging Reports are and shall be, and the INDIVIDUAL SELLERS have no
reason to believe that any such account receivable is not or shall not be,
collectible in the amounts shown (in the case of the accounts and notes
receivable set forth on SCHEDULE 2.8, net of reserves reflected in the balance
sheet calculated consistent with the reserves as of the Balance Sheet
<PAGE>
Date).
2.9 INTELLECTUAL PROPERTY; PERMITS AND INTANGIBLES.
(a) TITAN owns or has licenses to all Intellectual Property
the absence of any of which would have a Material Adverse Effect on TITAN, and
TITAN has delivered to CONDOR an accurate list (which is set forth on SCHEDULE
2.9(a)) of all Intellectual Property owned by TITAN. Each item of Intellectual
Property owned by or licensed by TITAN is valid and in full force and effect.
Except as set forth on SCHEDULE 2.9(a), all right, title and interest in and to
each item of Intellectual Property owned by TITAN is not subject to any license,
royalty arrangement or pending or threatened claim or dispute. To INDIVIDUAL
SELLERS' knowledge, none of the Intellectual Property owned by or licensed by
TITAN nor any product sold or licensed by TITAN, infringes any Intellectual
Property right of any other entity and to INDIVIDUAL SELLERS' knowledge, no
Intellectual Property owned by TITAN is infringed upon by any other entity.
Except as specifically provided in SCHEDULE 2.9(a) or 2.9(b), the transactions
contemplated by this Agreement will not (i) to the INDIVIDUAL SELLERS'
knowledge, result in the infringement by TITAN of any Intellectual Property
right of any other entity, (ii) infringe any Intellectual Property listed on
SCHEDULE 2.9(a), or (iii) result in a default under or a breach or violation of,
or adversely affect the rights and benefits afforded to TITAN by, any licenses,
franchises, permits or government authorizations listed on SCHEDULE 2.9(b).
Except as provided on SCHEDULE 2.9(b), TITAN is Year 2000 Compliant.
(b) TITAN holds all licenses, franchises, permits and other
governmental authorizations the absence of any of which could have a Material
Adverse Effect on TITAN, and TITAN has delivered to CONDOR an accurate list and
description (which is set forth on SCHEDULE 2.9(b)) of all governmental
licenses, franchises, permits and other governmental authorizations, including
permits, titles, licenses, franchises and certificates (it being understood that
a list of all environmental permits and other environmental approvals is set
forth on SCHEDULE 2.10). The licenses, franchises, permits and other
governmental authorizations listed on SCHEDULE 2.9(b) and SCHEDULE 2.10 are
valid, and TITAN has not received any notice that any Governmental Authority
intends to cancel, terminate or not renew any such license, franchise, permit or
other governmental authorization. TITAN has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the licenses, franchises, permits and other governmental
authorizations listed on SCHEDULE 2.10 and is not in violation of any of the
foregoing except where such non-compliance or violation would not have a
Material Adverse Effect on TITAN.
2.10 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 2.10,
(i) TITAN is and at all times has been in compliance
in all material respects with, and has not been in violation of or liable under,
all Environmental Requirements, and
(ii) TITAN possesses all permits, licenses and
certificates required by all Environmental Requirements, and has filed all
notices or applications required thereby, the absence of which would have a
Material Adverse Effect.
<PAGE>
As used herein, "Environmental Requirements" shall mean all applicable federal,
state and local laws, rules, regulations, ordinances and requirements relating
to pollution and protection of the environment, all as amended to date.
(b) Except as disclosed on SCHEDULE 2.10:
(i) TITAN has not been subject to, or received any
notice of any private, administrative or judicial action, or notice of any
intended private, administrative or judicial action relating to the presence or
alleged presence of Hazardous Materials in, under or upon any real property
currently or formerly owned, leased or used by (A) TITAN or (B) any other person
that has, at any time, disposed of Hazardous Materials on behalf of TITAN;
(ii) To the knowledge of the INDIVIDUAL SELLERS,
there is no basis for any such notice or action; and
(iii) There are no pending or, to the knowledge of
the INDIVIDUAL SELLERS, threatened actions or proceedings (or notices of
potential actions or proceedings) from any Governmental Authority or any other
entity regarding any matter relating to health, safety or protection of the
environment against TITAN.
"Hazardous Materials" for purposes of this Agreement shall include, without
limitation: (A) hazardous materials, hazardous substances, extremely hazardous
substances or hazardous wastes, as those terms are defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.9601 et
seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. ss.6901
et seq. ("RCRA"), and any other Environmental and Safety Requirements; (B)
petroleum, including, without limitation, crude oil or any fraction thereof
which is liquid at standard conditions of temperature and pressure (60 degrees
Fahrenheit and 14.7 pounds per square inch absolute); (C) any radioactive
material, including, without limitation, any source, special nuclear, or
by-product material as defined in 42 U.S.C. ss. 2011 et seq.; and (D) asbestos
in any form or condition.
(c) To the knowledge of the INDIVIDUAL SELLERS, there are and
have been no past or present events, conditions, circumstances, activities,
practices, incidents or actions which could reasonably be expected to interfere
with or prevent continued compliance with any Environmental Requirements, give
rise to any legal obligation or liability, or otherwise form the basis of any
claim, action, suit, proceeding, hearing or investigation against or involving
TITAN under any Environmental Requirements or related common law theories except
as identified on SCHEDULE 2.10.
(d) SCHEDULE 2.10 sets forth the name and address of every
off-site waste disposal organization, and each of the haulers, transporters or
cartage organization engaged now or in the preceding three years by TITAN to
dispose of Hazardous Materials to any such off-site waste disposal location on
behalf of TITAN or any of its predecessors.
2.11 PERSONAL PROPERTY. TITAN has delivered to CONDOR an accurate list
(which is set forth on SCHEDULE 2.11) of (a) all personal property with a fair
market value individually in excess of $5,000 which is included (or that will be
included) in "depreciable plant, property and equipment" (or similarly
<PAGE>
named line item) on the balance sheet of TITAN as of the Balance Sheet Date, (b)
all other personal property owned by TITAN with a value individually in excess
of $5,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance
Sheet Date and (c) all leases and agreements in respect of personal property
with a value individually in excess of $5,000, including, in the case of each of
(a), (b) and (c), (1) true, complete and correct copies of all such leases which
have been provided to CONDOR's counsel, (2) a listing of the capital costs of
all such assets which are subject to capital leases and (3) an indication as to
which assets are currently owned, or, to INDIVIDUAL SELLERS' knowledge, were
formerly owned, by the INDIVIDUAL SELLERS or other Affiliates of TITAN. Except
as set forth on SCHEDULE 2.11, (i) all personal property with a value
individually in excess of $5,000 used by TITAN in its business is either owned
by TITAN or leased by TITAN pursuant to a lease included on SCHEDULE 2.11, (ii)
all of the personal property listed on SCHEDULE 2.11 is in good working order
and condition, ordinary wear and tear excepted, and (iii) all leases and
agreements included on SCHEDULE 2.11 are in full force and effect and constitute
valid and binding agreements of the respective TITAN which is a party thereto,
and to INDIVIDUAL SELLERS' knowledge, of the other parties (and their
successors) thereto in accordance with their respective terms.
2.12 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. TITAN
has delivered to CONDOR an accurate list (which is set forth on SCHEDULE 2.12)
of all of its significant customers, it being understood and agreed that a
"significant customer," for purposes of this Section 2.12, means a customer (or
Person or entity) representing 5% or more of TITAN's annual revenues as of the
Balance Sheet Date. Except to the extent set forth on SCHEDULE 2.12, none of
TITAN's significant customers has canceled or substantially reduced or, to the
knowledge of INDIVIDUAL SELLERS, is currently attempting or threatening to
cancel, a contract or substantially reduce utilization of the services provided
by TITAN. TITAN has supplied to CONDOR true, correct and complete copies of its
contracts with customers, or, to the extent that a contract has not been
supplied, represents and warrants that each of such contracts with customers is
in substantially the form of, and contains terms substantially as favorable to
TITAN as, the customer contracts supplied to CONDOR.
Except as listed or described on SCHEDULE 2.12, as of or on the date
hereof, TITAN is not a party to or bound by, nor do there exist any, contracts
relating to or in any way affecting the operation or ownership of TITAN's
business that are of a type described below:
(a) any collective bargaining arrangement with any labor union
or any such agreement currently in negotiation or proposed;
(b) any contract for capital expenditures or the acquisition
or construction of fixed assets for or in respect of real property other than in
a TITAN's ordinary course of business in excess of $5,000;
(c) any contract with a term in excess of one year for the
purchase, maintenance, acquisition, sale or furnishing of materials, supplies,
merchandise, machinery, equipment, parts or other property or services which
requires aggregate future payments of greater than $5,000;
(d) any contract relating to the borrowing of money, or the
guaranty of another person's borrowing of money, including, without limitation,
all notes, mortgages, indentures and other
<PAGE>
obligations, agreements and other instruments for or relating to any lending or
borrowing, including assumed indebtedness;
(e) any contract granting any person a lien on any of the
assets of TITAN, in whole or in part;
(f) any contract for the cleanup, abatement or other actions
in connection with Hazardous Materials (as defined in Section 2.10), the
remediation of any existing environmental liabilities or relating to the
performance of any environmental audit or study;
(g) any contract granting to any person a first-refusal,
first-offer or similar preferential right to purchase or acquire any of the
assets of TITAN's business other than in the ordinary course of business;
(h) any contract under which TITAN is
(i) a lessee or sublessee of any machinery,
equipment, vehicle or other tangible personal property or real property, or
(ii) a lessor of any real property or tangible
personal property owned by TITAN, in either case having an original value in
excess of $5,000;
(i) any contract providing for the indemnification of any
officer, director, employee or other person, where such indemnification may
exceed the sum of $5,000;
(j) any joint venture or partnership contract; and
(k) any other contract with a term in excess of one year,
whether or not made in the ordinary course of business, which involves payments
in excess of $5,000.
Except as provided above, TITAN has provided CONDOR with a true and complete
copy of each written Material Contract, including all amendments or other
modifications thereto. Except as set forth on SCHEDULE 2.12, each Material
Contract is a valid and binding obligation of TITAN that is a party thereto,
enforceable against TITAN in accordance with its terms, and is in full force and
effect. Except as set forth on SCHEDULE 2.12, TITAN has performed all
obligations required to be performed by it under each Material Contract and
neither TITAN nor, to the knowledge of INDIVIDUAL SELLERS, any other party to
any Contract, are (with or without the lapse of time or the giving of notice or
both) in breach or default in any material respect thereunder; and there exists
no condition which, to the knowledge of INDIVIDUAL SELLERS, would constitute a
breach or default thereunder. TITAN has not been notified that any party to any
Material Contract intends to cancel, terminate, not renew or exercise an option
under any Material Contract, whether in connection with the transactions
contemplated hereby or otherwise.
2.13 REAL PROPERTY. TITAN owns no real property. SCHEDULE 2.13 includes
an accurate list of
<PAGE>
real property leases to which TITAN is a party and an indication as to which
such properties, if any, are currently owned, or were formerly owned, by the
INDIVIDUAL SELLERS or other Affiliates of TITAN. Counsel to CONDOR has been
provided with true, complete and correct copies of all leases and agreements in
respect of such real property leased by TITAN. Except as set forth on SCHEDULE
2.13, all of such leases included on SCHEDULE 2.13 are in full force and effect
and constitute valid and binding agreements of TITAN which is a party thereto
and, to INDIVIDUAL SELLERS' knowledge, of the parties (and their successors)
thereto in accordance with their respective terms.
2.14 INSURANCE.
(a) TITAN has delivered to CONDOR:
(i) true and complete copies of all policies of
insurance to which TITAN is a party or under which TITAN, or any director of
TITAN (in his capacity as a director), is or has been covered at any time within
two years preceding the date of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of TITAN's
financial statements with regard to the adequacy of such entity's coverage or of
the reserves for claims.
(b) SCHEDULE 2.14(b) describes:
(i) any self-insurance arrangement by or affecting
TITAN, including any reserves established thereunder; any contract or
arrangement, other than a policy of insurance, for the transfer or sharing of
any risk by TITAN; and
(ii) all obligations of TITAN to third parties with
respect to insurance (including such obligations under leases and service
agreements), and identifies the policy under which such coverage is provided.
(c) SCHEDULE 2.14(c) sets forth, by year, for the current
policy year and each of the preceding two policy years:
(i) a summary of the loss experience under each
policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $5,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer,
type of insurance and period of coverage; and
(C) the amount and a brief description of
the claim; and
<PAGE>
(iii) a statement describing the loss experience for
all claims that were self-insured, including the number and aggregate cost of
such claims.
(d) Except as set forth on SCHEDULE 2.14(d):
(i) All policies to which TITAN is a party or that
provide coverage to TITAN:
(A) are valid, outstanding and enforceable;
(B) taken together, provide customary
insurance for the assets and the operations of TITAN for all risks normally
insured against by a person carrying on the same business or businesses of
TITAN;
(C) are sufficient for compliance with all
legal requirements and Material Contracts to which TITAN is a party or by which
it is bound; and
(D) will continue in full force and effect
following the Closing in accordance with their respective terms;
(ii) TITAN has not received:
(A) any refusal of coverage or any notice
that a defense will be afforded with reservation of rights, or
(B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or effect or
will not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder;
(iii) TITAN has paid all premiums due, and has
otherwise performed all of its obligations, under each policy to which it is a
party or that provides coverage to it or any director thereof
(iv) TITAN has given notice to the insurer of all
claims known by it to be insured thereby.
2.15 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
(a) TITAN has delivered to CONDOR an accurate list (which is
set forth on SCHEDULE 2.15(a)) showing all officers, directors, and employees of
TITAN receiving annual compensation in excess of Forty Thousand Dollars
($40,000), listing all employment agreements with all officers, directors and
employees and the rate of compensation (and the portions thereof attributable to
salary, bonus and other compensation, respectively) of such persons as of (i)
the Balance Sheet Date, and (ii) if different, the date hereof. TITAN has
provided to CONDOR true, complete and correct copies of any employment
agreements for persons listed on SCHEDULE 2.15(a). Since the Balance Sheet Date,
there have been no increases in the compensation payable or any special bonuses
to any officer, director, key employee or other employee, except ordinary salary
increases implemented on a basis consistent with past practices.
(b) Except as set forth on SCHEDULE 2.15(b), there is no, and
within the last three years TITAN has not experienced any, strike, picketing,
boycott, work stoppage or slowdown, other labor dispute, union organizational
activity, allegation, charge or complaint of unfair labor practice, employment
<PAGE>
discrimination or other matters relating to the employment of labor, pending or,
to INDIVIDUAL SELLERS' knowledge, threatened against TITAN; nor is there, to the
knowledge of INDIVIDUAL SELLERS, any basis for any such allegation, charge or
complaint. There is no request directed to TITAN for union or similar
representation pending and, to INDIVIDUAL SELLERS' knowledge, no question
concerning representation has been raised. To INDIVIDUAL SELLERS' knowledge, no
key employee and no group of employees has any plans to terminate employment
with TITAN. TITAN has complied in all material respects with all applicable laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
security and other taxes. TITAN is not liable for any arrearages of wages or any
taxes or penalties for failure to comply with any such laws, ordinances or
regulation.
2.16 EMPLOYEE PLANS. TITAN has delivered to CONDOR an accurate listing
(which is set forth on SCHEDULE 2.16) showing all Benefit Plans of TITAN,
together with true, complete and correct copies of such Benefit Plans,
agreements and any trusts related thereto, and classifications of employees
covered thereby as of the Balance Sheet Date. TITAN is not required to
contribute to any Benefit Plan pursuant to the provisions of any collective
bargaining agreement establishing the terms and conditions of employment of any
of TITAN's employees.
2.17 COMPLIANCE WITH ERISA. All Benefit Plans that are intended to
qualify under Section 401(a) of the Code are and have been so qualified and have
been determined by the Internal Revenue Service to be qualified in form, and
copies of such determination letters have been delivered to CONDOR's counsel.
All reports and other documents required to be filed with any Governmental
Authority or distributed to plan participants or beneficiaries (including, but
not limited to, actuarial reports, audits or tax returns) have been timely filed
or distributed, and copies thereof have been provided to CONDOR. Neither the
INDIVIDUAL SELLERS, any such Benefit Plan, TITAN, nor any "disqualified person"
or "party in interest" as such terms are defined in Section 4975 of the Code or
Section 3(14) of ERISA has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Benefit Plan
has incurred an accumulated funding deficiency, as defined in Section 412(a) of
the Code and Section 302(1) of ERISA, and TITAN has not incurred any liability
for excise tax or penalty due to the Internal Revenue Service nor any liability
to the PBGC. The INDIVIDUAL SELLERS further represent that:
(a) There have been no terminations, partial terminations or
discontinuance of contributions to any such Benefit Plan intended to qualify
under Section 401 (a) of the Code without notice to and approval by the Internal
Revenue Service;
(b) No such Benefit Plan subject to the provisions of Title IV
of ERISA has been terminated;
(c) There have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Benefit Plan;
(d) TITAN has not incurred liability under Section 4062 of
ERISA;
(e) No circumstances exist pursuant to which TITAN could have
any direct or indirect liability whatsoever (including, but not limited to, any
liability to any multi-employer plan or the PBGC under
<PAGE>
Title IV of ERISA or to the Internal Revenue Service for any excise tax or
penalty, or being subject to any statutory lien to secure payment of any such
liability) with respect to any Benefit Plan now or heretofore maintained or
contributed to by any entity other than TITAN that is, or at any time was, a
member of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code)
that includes TITAN;
(f) TITAN is not now, nor can it as a result of its past
activities become, liable to the PBGC or to any multi-employer employee pension
benefit plan under the provisions of Title IV of ERISA;
(g) All Benefit Plans and the administration thereof are in
substantial compliance with their terms and all applicable provisions of ERISA
and the regulations issued thereunder, as well as with all other applicable
federal, state and local statutes, ordinances and regulations;
(h) All accrued contribution obligations of TITAN with respect
to any Benefit Plan have either been fulfilled in their entirety or are fully
reflected on the balance sheet of TITAN as of the Balance Sheet Date.
(i) No claim, lawsuit, arbitration or other action has been
threatened, asserted, or instituted against any Benefit Plan or related trust,
any trustee or fiduciaries thereof, TITAN, or any director, officer or employee
thereof;
(j) No Benefit Plan is under audit or investigation by any
Governmental Authority and no such completed audit, if any, has resulted in the
imposition of any tax or penalty;
(k) Each Benefit Plan intended to meet requirements for
tax-favored treatment under Sections 79, 106, 117, 120, 125, 127, 129 or 132 of
the Code satisfies the applicable requirements under the Code;
(l) With respect to each Benefit Plan that is funded fully or
partially through an insurance policy, TITAN has no liability in the nature of
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring on or
before the Balance Sheet Date;
(m) The consummation of the transactions contemplated by this
Agreement will not give rise to any liability, including, without limitation,
liability for severance pay, unemployment compensation or termination pay, or
accelerate the time of payment or vesting or increase the amount of compensation
or benefits due to any current, former, or retired employee or their
beneficiaries solely by reason of such transactions;
(n) Neither TITAN nor any member of a "controlled group" which
includes TITAN maintains, contributes to, or in any way provides for any
benefits of any kind whatsoever (other than under Section 4980B of the Code or
Title I, Subtitle B, Part 6 of ERISA, the federal Social Security Act or a plan
qualified under Section 401(a) of the Code) to any current or future retiree or
terminated employee;
(o) Neither TITAN nor any officer or employee thereof, has
made any promises or commitments, whether legally binding or not, to create any
additional plan, agreement or arrangement, or
<PAGE>
to modify or change any existing Benefit Plan; and
(p) TITAN has complied in all respects with the requirements
of Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA.
2.18 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.10 or SCHEDULE 2.18, TITAN has complied with all laws, rules, regulations,
writs, injunctions, decrees, and orders applicable to it or to the operation of
its Business (collectively, "Laws") and has not received any notice of any
alleged claim or threatened claim, violation of, liability or potential
responsibility under, any such Law which has not heretofore been cured and for
which there is no remaining liability other than, in each case, those not having
a Material Adverse Effect on TITAN. Without limiting the generality of the
foregoing, TITAN has complied with all applicable federal, state and local Laws
relating to antitrust and trade regulations.
Except to the extent set forth on SCHEDULE 2.7 or SCHEDULE 2.10 or as set forth
on SCHEDULE 2.18 (which shall disclose the parties to, nature of, and relief
sought for each matter to be disclosed on SCHEDULE 2.18):
(a) There is no suit, action, proceeding, claim, order or, to
INDIVIDUAL SELLERS' knowledge, investigation pending or, to INDIVIDUAL SELLERS'
knowledge, threatened against either TITAN or any Benefit Plan, or any fiduciary
of any such Benefit Plan or, to the knowledge of INDIVIDUAL SELLERS, pending or
threatened against any of the officers, directors or employees of TITAN with
respect to its business or proposed business activities or to which TITAN is
otherwise a party, which would have a Material Adverse Effect on TITAN, before
any court, or before any Governmental Authority (collectively, "Claims"); nor,
to INDIVIDUAL SELLERS' knowledge, is there any basis for any such Claims.
(b) TITAN is not subject to any judgment, order or decree of
any court or Governmental Authority; TITAN has not received any opinion or
memorandum from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to its
business. TITAN is engaged in any legal action to recover monies due it or for
damages sustained by it.
(c) TITAN's current insurance is adequate to cover all pending
or threatened Claims, TITAN has given all required notice of such Claims to its
appropriate insurance carrier(s), and/or all such claims have been fully
reserved for on the TITAN Financial Statements. SCHEDULE 2.18 lists the insurer
for each Claim covered by insurance or designates each Claim, or portion of each
Claim, as uninsured and the individual and aggregate policy limits for the
insurance covering each insured Claim and the applicable policy deductibles for
each insured Claim.
SCHEDULE 2.18 sets forth all closed litigation matters to which TITAN was a
party during the three years preceding the Closing, the date such litigation was
commenced and concluded, and the nature of the resolution thereof (including
amounts paid in settlement or judgment).
2.19 TAXES. Except as set forth on SCHEDULE 2.19:
(a) All Returns required to have been filed by or with respect
to TITAN has been duly
<PAGE>
filed, and each such Return correctly and completely reflects the Tax liability
and all other information required to be reported thereon. All Taxes with
respect to items or periods covered by all such Returns (whether or not shown on
any Return) owed by TITAN has been paid.
(b) The provisions for Taxes due by TITAN in the TITAN
Financial Statements are sufficient for all unpaid Taxes, being current taxes
not yet due and payable, of TITAN.
(c) TITAN is not a party to any agreement extending the time
within which to file any Return. No claim has ever been made by any Taxing
Authority in a jurisdiction in which a TITAN does not file Returns that it is or
may be subject to taxation by that jurisdiction that is unresolved or if
adversely determined would have a Material Adverse Effect on TITAN.
(d) TITAN has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other third party.
(e) There is no dispute or claim concerning any Tax liability
of TITAN either (i) claimed or raised by any Taxing Authority or (ii) otherwise
known to TITAN. No issues have been raised in any examination by any Taxing
Authority with respect to TITAN which, by application of similar principles,
reasonably could be expected to result in a proposed deficiency for any other
period not so examined. SCHEDULE 2.19(e) lists all federal, state, local and
foreign income Tax Returns filed by TITAN for all taxable periods ended on or
after January 1, 1991, indicates those Returns, if any, that have been audited,
and indicates those Returns that currently are the subject of audit. TITAN has
delivered to CONDOR complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, TITAN since January
1, 1991.
(f) TITAN has not waived any statute of limitations, the
waiver of which remains in effect on the date hereof, in respect of Taxes or
agreed to any extension of time with respect to any Tax assessment or
deficiency.
(g) TITAN has not made any payments, is not obligated to make
any payments, and is not a party to any agreement that under certain
circumstances could require it to make any payments, that are not deductible (i)
under Section 280G of the Code or (ii) as compensation under Section 162(m) of
the Code or any similar provision under state and/or local law.
(h) TITAN is not a party to any Tax allocation or sharing
agreement.
(i) TITAN is not a party to any joint venture, partnership or
other arrangement that is treated as a partnership for federal income Tax
purposes.
(j) To TITAN's and the INDIVIDUAL SELLERS' knowledge, the
Internal Revenue Service has not proposed or threatened accounting method
changes of TITAN that could give rise to an adjustment under Section 481 of the
Code for periods after the Closing Date.
<PAGE>
(k) TITAN has not received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(l) TITAN has disclosed (in accordance with Section
6662(d)(2)(B)(ii) of the Code) on their federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of federal
income Tax within the meaning of Section 6662(d) of the Code.
(m) TITAN is treated as a partnership for federal and New
Jersey and New York state income tax purposes, and is treated as a corporation
for Pennsylvania state income tax purposes.
For purposes of this Section 2.19, the following definitions
shall apply:
"RETURNS" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax
with any Taxing Authority or Governmental Authority.
"TAX" or "TAXES" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, deed, stamp, alternative or add-on minimum, environmental or other
taxes, assessments, duties, fees, levies or other governmental charges similar
to taxes, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"TAXING AUTHORITY" means any Governmental Authority, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction or any foreign jurisdiction, having jurisdiction with respect
to any Tax.
2.20 NO VIOLATIONS. TITAN is not in violation of TITAN Organizational
Documents, and TITAN is not in default under any Material Contract. Except as
set forth on SCHEDULE 2.20, (a) the rights and benefits of TITAN under the
Material Contracts will not be adversely affected by the transactions
contemplated hereby, and (b) the execution of this Agreement and the performance
by INDIVIDUAL SELLERS of their obligations hereunder and the consummation by the
INDIVIDUAL SELLERS of the transactions contemplated hereby will not (i) result
in any violation or breach of, or constitute a default under, any of the terms
or provisions of the Material Contracts or TITAN Organizational Documents, or
(ii) require the consent, approval, waiver of any acceleration, termination or
other right or remedy or action of or by, or make any filing with or give any
notice to, any other party. Except as set forth on SCHEDULE 2.20, none of the
Material Contracts requires notice to, or consent or approval of, any
Governmental Authority or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any material right
or benefit. Except as set forth on SCHEDULE 2.20, none of the Material Contracts
prohibits or restricts TITAN from freely providing services to any other
customer or potential customer of TITAN.
2.21 GOVERNMENT CONTRACTS. Except as set forth on SCHEDULE 2.21, TITAN
is not a party to any governmental contract subject to price predetermination or
renegotiation.
2.22 BUSINESS CONDUCT. Except as set forth on SCHEDULE 2.22, since
December 31, 1998,
<PAGE>
TITAN has conducted its business only in the ordinary course consistent with
past custom and practices and has incurred no liabilities other than in the
ordinary course of business consistent with past custom and practices. Except as
forth on SCHEDULE 2.22, since December 31, 1998, there has not been any:
(a) Material adverse change in TITAN's operations, condition
(financial or otherwise), operating results, assets, liabilities, employee,
customer or supplier relations or business prospects;
(b) Damage, destruction or loss of any property owned by TITAN
or used in the operation of the business, whether or not covered by insurance,
having a replacement cost or fair market value in excess of $10,000 affecting
TITAN's property, financial status or business;
(c) Voluntary or involuntary sale, transfer, surrender,
abandonment or other disposition of any kind by TITAN of any assets or property
rights (tangible or intangible), having a replacement cost or fair market value
in excess of $10,000, except in each case the sale of inventory and collection
of accounts in the ordinary course of business consistent with past custom and
practices;
(d) Loan or advance by TITAN to any party other than sales to
customers on credit in the ordinary course of business consistent with past
custom and practices;
(e) Declaration, setting aside, or payment of any dividend or
other distribution in respect to TITAN's ownership interests, any direct or
indirect redemption, purchase, or other acquisition of such interests, or the
payment of principal or interest on any note, bond, debt instrument or debt to
any Affiliate;
(f) Incurrence of debts, liabilities or obligations except
current liabilities incurred in connection with or for services rendered or
goods supplied in the ordinary course of business consistent with past custom
and practices, liabilities on account of taxes and governmental charges but not
penalties, interest or fines in respect thereof, and obligations or liabilities
incurred by virtue of the execution of this Agreement;
(g) Issuance by TITAN of any notes, bonds, or other debt
securities or any equity securities or securities convertible into or
exchangeable for any equity securities;
(h) Cancellation, waiver or release by TITAN of any debts,
rights or claims, except in each case in the ordinary course of business
consistent with past custom and practices;
(i) Amendment of TITAN Organizational Documents;
(j) Amendment or termination of any Material Contract, other
than expiration of such contract in accordance with its terms;
(k) Change in accounting principles, methods or practices
(including, without limitation, any change in depreciation or amortization
policies or rates) utilized by TITAN;
(l) Discharge or satisfaction of any material liability,
encumbrance or payment of any
<PAGE>
material obligation or liability, other than current liabilities paid in the
ordinary course of business consistent with past custom and practices or
cancellation of any debts or claims;
(m) Sale or assignment by TITAN of any tangible assets other
than in the ordinary course of business;
(n) Capital expenditures or commitments therefor by TITAN
other than in the ordinary course of business in excess of $10,000 in the
aggregate;
(o) Charitable contributions or pledges by TITAN in excess of
$5,000 in the aggregate;
(p) Mortgage, pledge or other encumbrance of any asset of
TITAN other than in the ordinary course of business;
(q) Adoption, amendment or termination of any Benefit Plan;
(r) Increase in the benefits provided under any Benefit Plan;
or
(s) An occurrence or event not included in clauses (a) through
(r) that has resulted in or might be expected to have a Material Adverse Effect
on TITAN.
2.23 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. TITAN has delivered to
CONDOR an accurate schedule (which is set forth on SCHEDULE 2.23) as of the date
of this Agreement of:
(a) the name of each financial institution in which TITAN has
accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account and account number; and
(d) the name of each person authorized to draw thereon or have
access thereto.
SCHEDULE 2.23 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from TITAN and a
description of the terms of such power of attorney.
2.24 RELATIONS WITH GOVERNMENTS. TITAN has not made, offered or agreed
to offer anything of value to any governmental official, political party or
candidate for government office nor has it otherwise taken any action which
would cause TITAN to be in violation of the Foreign Corrupt Practices Act of
1977, as amended, or any law of similar effect.
2.25 PROHIBITED ACTIVITIES. Except as set forth on SCHEDULE 2.25, TITAN
has not, between the Balance Sheet Date and the date hereof, taken any of the
following actions:
<PAGE>
(a) made any change in TITAN Organizational Documents;
(b) granted or issued any securities, options, warrants,
calls, conversion rights or commitments of any kind relating to securities of
any kind;
(c) declared or paid any dividend, or made any distribution in
respect of the TITAN Interests, whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any of the TITAN
Interests;
(d) entered into any contract or commitment or incurred or
agreed to incur any liability or made any capital expenditure, except if it is
in the ordinary course of business (consistent with past practice) or involves
an amount not in excess of $5,000;
(e) created, assumed or permitted to exist any mortgage,
pledge or other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (i) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate cost
not in excess of $5,000 necessary or desirable for the conduct of the business
of TITAN, (ii)(A) liens for Taxes either not yet due or being contested in good
faith and by appropriate proceedings (and for which adequate reserves have been
established and are being maintained) or (B) materialmen's, mechanics',
workers', repairmen's, employees' or other like liens arising in the ordinary
course of business, or (iii) liens set forth on SCHEDULE 2.7 OR 2.12 hereto;
(f) sold, assigned, leased or otherwise transferred or
disposed of any property or equipment except in the ordinary course of business;
(g) negotiated for the acquisition of any business or the
start-up of any new business;
(h) merged or consolidated or agreed to merge or consolidate
with or into any other entity;
(i) waived any material right or claim of TITAN, provided that
TITAN may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice, provided, further, that
such adjustments shall not be deemed to be included on SCHEDULE 2.8 unless
specifically listed thereon;
(j) committed a material breach, materially amended or
terminated any Material Contract;
(k) entered into any other transaction outside the ordinary
course of its business or prohibited hereunder; or
(l) except in the ordinary course of business or as required
by Law or contractual obligations, (i) increased in any manner the base
compensation of, or enter into any new bonus or incentive agreement or
arrangement with, any of the employees engaged in TITAN's business, (ii) paid or
agreed to pay any additional pension, retirement allowance or other employee
benefit to any such
<PAGE>
employee, whether past or present, (iii) entered into any new employment,
severance, consulting, or other compensation agreement with any existing
employee engaged in TITAN's business, (iv) amended or entered into a new Plan
(except as required by Law) or amended or entered into a new collective
bargaining agreement, or (v) engaged in any Affiliate Transaction.
2.26 AFFILIATE TRANSACTIONS. SCHEDULE 2.26 sets forth the parties to
and the date, nature and amount of (a) each transaction or series of similar
transactions (other than payments of salary and bonus which are reflected as
line items in the TITAN Financial Statements) involving the transfer of any
cash, property or rights in which the amount involved individually or
collectively exceeded $5,000 to or from TITAN from, to, or for the benefit of
any INDIVIDUAL SELLERS, former interestholder, Affiliate or former Affiliate of
TITAN ("Affiliate Transactions") during the period commencing March 20, 1997,
through the date hereof, and (b) any existing commitments of TITAN to engage in
the future in any Affiliate Transactions. Each Affiliate Transaction was
effected on terms equivalent to those which would have been established in an
arm's-length negotiation, except as disclosed on SCHEDULE 2.26.
2.27 HSR COMPLIANCE. TITAN is not engaged in manufacturing, has less
than $10 million in total assets, and has less than $100 million in annual
revenues (all as determined in accordance with the HSR Act).
2.28 MISREPRESENTATION. None of the representations and warranties set
forth in this Agreement, the certificates and the other documents furnished to
CONDOR pursuant hereto, taken as a whole, contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained herein or therein not misleading. The representations and warranties
of the INDIVIDUAL SELLERS contained in this Agreement, the schedules to this
Agreement provided by the INDIVIDUAL SELLERS, the certificates and the other
documents furnished by the INDIVIDUAL SELLERS to CONDOR pursuant hereto, taken
as a whole, present fairly the business and operations of TITAN for the time
periods with respect to which such information was requested. TITAN's rights
under the documents delivered pursuant hereto would not be materially adversely
affected by, and no statement made herein would be rendered untrue in any
material respect by, any other document to which TITAN is a party, or to which
its properties are subject, or by any other fact or circumstance regarding TITAN
(which fact or circumstance was, or should reasonably, after due inquiry, have
been known to the INDIVIDUAL SELLERS) that is not disclosed pursuant hereto or
thereto.
2A. REPRESENTATIONS AND WARRANTIES OF RAECO
RAECO represents and warrants to CONDOR that all of the following
representations and warranties in this Section 2A are true and correct at the
date of this Agreement and shall be true and correct at the time of the Closing
Date, and that such representations and warranties shall survive the Closing
Date for a period of eighteen (18) months (the last day of such period being the
"Expiration Date").
2A.1 AUTHORIZATION. RAECO has the authority to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and binding obligation of RAECO, enforceable in accordance with its
terms.
2A.2 OWNERSHIP INTERESTS OF TITAN. All of the issued and outstanding
ownership interests of
<PAGE>
TITAN owned by RAECO are as set forth in SCHEDULE 2.3, free and clear of all
liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind.
3. REPRESENTATIONS OF CONDOR
CONDOR represents and warrants to SELLERS that all of the following
representations and warranties in this Section 3 are true and correct at the
date of this Agreement and shall be true and correct on the Closing Date, and
that such representations and warranties shall survive the Closing Date for a
period of eighteen (18) months.
3.1 DUE ORGANIZATION. CONDOR is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
and is duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted, to own or hold under
lease the properties and assets it now owns or holds under lease, and to perform
all of its obligations under any material agreement to which it is a party or by
which its properties are bound. True, complete and correct copies of the
Certificate of Incorporation and By-Laws, each as amended, of CONDOR (the
"CONDOR Charter Documents") are attached to the Secretary's Certificate
delivered to SELLERS in accordance with Section 5.6 hereof.
3.2 AUTHORIZATION. The representatives of CONDOR executing this
Agreement have the authority to execute and deliver this Agreement and to bind
CONDOR to perform its obligations hereunder. The execution and delivery of this
Agreement by CONDOR and the performance by CONDOR of its obligations under this
Agreement and the consummation by CONDOR of the transactions contemplated hereby
have been, or will have been on or before the date of the Closing, duly
authorized by all necessary corporate action in accordance with applicable law
and the Certificate of Incorporation and By-Laws of CONDOR. Each share of CONDOR
Stock to be issued to the SELLERS on the Closing Date and the Contingent Payment
Date will be duly and validly authorized and issued, free and clear of all
liens, claims and other encumbrances and fully paid and nonassessable. This
Agreement constitutes the valid and binding obligation of CONDOR, enforceable in
accordance with its terms.
3.3 TRANSACTION NOT A BREACH. Neither the execution and delivery of
this Agreement by CONDOR nor its performance will violate, conflict with, or
result in a breach of any provision of any Law, rule, regulation, order, permit,
judgment, injunction, decree or other decision of any court or other tribunal or
any Governmental Authority binding on CONDOR or conflict with or result in the
breach of any of the terms, conditions or provisions of the Certificate of
Incorporation or the By-Laws of CONDOR or of any contract, agreement, mortgage
or other instrument or obligation of any nature to which CONDOR is a party or by
which CONDOR is bound.
3.4. DELIVERY OF DOCUMENTS; SECURITIES LAW MATTERS. CONDOR has
delivered to the SELLERS its 1998 Annual Report on Form 10-K (the "CONDOR
Commission Report"). As of its date, the CONDOR Commission Report did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. CONDOR
has filed all forms, reports and documents with the SEC required to be filed by
it pursuant to the 1933 Act and the 1934 Act and the rules and regulations
promulgated thereunder, each of which complied as to form, at the time such
form,
<PAGE>
document or report was filed, in all material respects with the applicable
requirements of the 1933 Act and the 1934 Act and the applicable rules and
regulations promulgated thereunder. Since December 31, 1998 to the date hereof,
CONDOR and its subsidiaries have not incurred any material liability, except in
the ordinary course of their business consistent with their past practices, or
as would not have a Material Adverse Effect, and there has not been any change
in the business, financial condition, or results of operations of CONDOR and its
subsidiaries taken as a whole which has had, or could have a Material Adverse
Effect, and CONDOR and its subsidiaries taken as a whole have conducted their
respective business in the ordinary course consistent with their past practices.
3.5. REGULATORY APPROVALS. CONDOR's entry into, and consummation of,
this Agreement and the transactions contemplated hereby does not require notice
to, or consent or approval of, any Governmental Authority or other third party.
3.6. DUE DILIGENCE INVESTIGATION. CONDOR has had an opportunity to
investigate the business of TITAN and to independently verify the value of the
TITAN Interests, and to ask questions of the SELLERS, provided that nothing in
this Section 3.6 shall be construed as limiting CONDOR's right to seek remedies
in accordance with Section 8.1 hereof.
3.7. MISREPRESENTATION. None of the representations and warranties set
forth in this Agreement, the certificates and the other documents furnished to
SELLERS pursuant hereto, taken as a whole, contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained herein or therein not misleading. The representations and warranties
of CONDOR contained in this Agreement, the schedules to this Agreement provided
by CONDOR, the certificates and the other documents furnished by CONDOR to
SELLERS pursuant hereto, taken as a whole, present fairly the business and
operations of CONDOR for the time periods with respect to which such information
was requested. CONDOR's rights under the documents delivered pursuant hereto
would not be materially adversely affected by, and no statement made herein
would be rendered untrue in any material respect by, any other document to which
CONDOR is a party, or to which its properties are subject, or by any other fact
or circumstance regarding CONDOR (which fact or circumstance was, or should
reasonably, after due inquiry, have been known to CONDOR) that is not disclosed
pursuant hereto or thereto.
4. [INTENTIONALLY OMITTED.]
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligations of the SELLERS with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the conditions set forth in this Section 5. As of the
Closing Date, all conditions not satisfied shall be deemed to have been waived
by the SELLERS unless they have objected by notifying CONDOR in writing of such
objection on or before the consummation of the transactions on the Closing Date,
except that no such waiver shall be deemed to affect the survival of the
representations and warranties of CONDOR contained in Section 3 hereof.
5.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties
of CONDOR contained in the Agreement shall be true and correct in all material
respects as of the Closing Date as
<PAGE>
though such representations and warranties had been made on and as of that date;
and a certificate to the foregoing effect dated the Closing Date and signed by
the President or any Vice President of CONDOR shall have been delivered to the
SELLERS.
5.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by CONDOR on or
before the Closing Date shall have been duly complied with and performed in all
material respects on or before the Closing Date; and certificates to the
foregoing effect dated on the Closing Date and signed by the President or any
Vice President of CONDOR shall have been delivered to the SELLERS.
5.3 NO LITIGATION. No action or proceeding before a court or any other
Governmental Authority or body shall have been instituted or threatened to
restrain or prohibit the performance of this Agreement or the consummation of
the transactions contemplated herein.
5.4 CONSENTS AND APPROVALS. All necessary consents of and filings
required to be obtained or made by CONDOR with any Governmental Authority or
agency relating to the consummation of the transactions contemplated herein
shall have been obtained and made.
5.5 GOOD STANDING CERTIFICATES. CONDOR shall have delivered to the
SELLERS a certificate, dated as of a date no earlier than 10 days prior to the
Closing Date, duly issued by the Delaware Secretary of State, showing that
CONDOR is in good standing.
5.6 SECRETARY'S CERTIFICATE. The SELLERS shall have received a
certificate or certificates, dated the Closing Date and signed by the corporate
secretary of CONDOR, certifying the truth and correctness of attached copies of
the CONDOR's Certificate of Incorporation (including amendments thereto),
By-Laws (including amendments thereto), and resolutions of the boards of
directors approving CONDOR's entering into this Agreement and the consummation
of the transactions contemplated hereby.
5.7 CONDOR'S CLOSING DOCUMENTS. CONDOR shall have executed and
delivered CONDOR's Closing Documents.
5.8. OPINION OF COUNSEL. SELLERS shall have received an opinion from
Counsel to CONDOR, dated the Closing Date, substantially in the form attached
hereto as EXHIBIT 5.8.
5.9 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall have been approved by counsel to SELLERS.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF CONDOR
The obligations of CONDOR with respect to actions to be taken on the
Closing Date, are subject to the satisfaction or waiver on or prior to the
Closing Date, as the case may be, of all of the conditions set forth in this
Section 6. As of the Closing Date all conditions not satisfied shall be deemed
to have been waived by CONDOR unless it has objected by notifying the SELLERS in
writing of such objection on or before the consummation of the transactions on
the Closing Date, except that no such waiver shall be
<PAGE>
deemed to affect the survival of the representations and warranties of the
SELLERS contained in Section 2 hereof.
6.1 REPRESENTATIONS AND WARRANTIES. All the representations and
warranties of the SELLERS contained in this Agreement shall be true and correct
in all material respects as of the Closing Date; and the SELLERS shall have
delivered to CONDOR certificates dated the Closing Date and signed by them to
such effect.
6.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and
conditions of this Agreement to be complied with or performed by the SELLERS on
or before the Closing Date shall have been duly performed or complied with in
all material respects on or before the Closing Date and the SELLERS shall have
delivered to CONDOR certificates dated the Closing Date and signed by them to
such effect.
6.3 NO LITIGATION. No action or proceeding before a court or any other
Governmental Authority or body shall have been instituted or threatened to
restrain or prohibit the performance of this Agreement or the consummation of
the transactions contemplated herein.
6.4 CERTIFICATES. CONDOR shall have received a copy of TITAN's
Certificate of Formation, and all amendments thereto, certified by the New
Jersey Secretary of State, and a copy of TITAN's Operating Agreement, certified
by the appropriate officer of TITAN.
6.5 NO MATERIAL ADVERSE CHANGE. As of the Closing Date, no event or
circumstance shall have occurred with respect to TITAN which would constitute a
Material Adverse Effect on TITAN, and TITAN shall not have suffered any material
loss or damages to any of its properties or assets, whether or not covered by
insurance, which change, loss or damage materially affects or impairs the
ability of TITAN to conduct its business.
6.6 SELLERS' RELEASES. Each of SELLERS shall have delivered to CONDOR
an instrument dated the Closing Date releasing TITAN and CONDOR from any and all
(i) claims prior to the Closing Date of SELLERS against TITAN and (ii)
obligations prior to the Closing Date, of TITAN to SELLERS, except for (A) items
specifically identified on SCHEDULES 2.7 AND 2.12 as being claims of or
obligations to SELLERS, (B) continuing obligations to SELLERS relating to their
employment by TITAN and (C) obligations arising under this Agreement or the
transactions contemplated hereby.
6.7 TERMINATION OF AGREEMENTS. (a) All existing agreements between
TITAN and the SELLERS, and (b) all agreements granting rights to purchase TITAN
Interests, shall have been terminated, canceled or otherwise released prior to
or as of the Closing Date.
6.8 OPINION OF COUNSEL. CONDOR shall have received an opinion from
Counsel to the SELLERS, dated the Closing Date, substantially in the form
attached hereto as EXHIBIT 6.8.
6.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any Governmental Authority relating to the consummation of the transactions
contemplated herein shall have been obtained and made and all necessary consents
and approvals of third parties, including those listed on SCHEDULE
<PAGE>
2.20.
6.10 GOOD STANDING CERTIFICATES. SELLERS shall have delivered to CONDOR
a certificate, dated as of a date no earlier than ten (10) days prior to the
Closing Date, duly issued by the appropriate Governmental Authority in TITAN's
state of incorporation or organization, as the case may be, and, unless waived
by CONDOR, in each state in which TITAN is authorized to do business, showing
TITAN is in good standing and authorized to do business and that all state
franchise and/or income tax returns and taxes for TITAN for all periods prior to
the Closing have been filed and paid.
6.11. A/R AGING REPORTS. Within ten (10) days prior to Closing, the
SELLERS shall have provided CONDOR (a) an accurate list of all outstanding
receivables obtained subsequent to the Balance Sheet Date and as of a date which
is within ten (10) calendar days of the Closing Date and (b) an aging of all
such accounts and notes receivable showing amounts due in 30 day aging
categories (the "A/R Aging Reports").
6.12. SELLERS' CLOSING DOCUMENTS. The SELLERS and TITAN shall have
executed and delivered the SELLERS' Closing Documents.
6.13 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall have been approved by counsel to CONDOR.
7. COVENANTS OF CONDOR AND THE SELLERS AFTER CLOSING
7.1. RESTRICTIONS ON CONDOR STOCK. The SELLERS agree that, for a period
of one (1) year after the delivery of CONDOR Stock, they will not transfer, or
permit the transfer of, any of their CONDOR Stock. For the purposes of this
Section 7.1, "transfer" shall mean any voluntary or involuntary act by which the
SELLERS make, or attempt or purport to make, or suffer to occur, any gift, sale,
mortgage, pledge, assignment, hypothecation, encumbrance or other disposition of
any CONDOR Stock, or interest therein, owned by any of them. The term "transfer"
includes any purported transfer, assignment, sale or other disposition by
assignment or operation of law, as a result of the appointment of a trustee in
bankruptcy for SELLERS, under any judgment or order, as the result of the
appointment of a receiver for SELLERS, or as a result of any assignment for the
benefit of creditors. Notwithstanding the foregoing, and subject to the
requirements of Section 11.2 hereof, SELLERS shall be permitted to transfer
certain portions of the CONDOR Stock received as part of the Contingent Purchase
Price to James Surber and Fernando de Allende, who will receive such CONDOR
Stock subject to the same restrictions upon transfer.
7.2. CONDOR'S 1997 LONG-TERM INCENTIVE PLAN. James Surber, Fernando
DeAllende, Vince Howerdel, and Lucille Penn shall be entitled to participate in
CONDOR's 1997 Long-Term Incentive Plan on such terms as CONDOR and CRAWFORD
shall mutually determine.
7.3. SAP AGREEMENT. TITAN is a party, by assignment from Data Dynamics,
Inc. ("DATA DYNAMICS"), of a Certified Business Solutions Provider Agreement
with SAP America, Inc., on its own behalf and on behalf of SAP, AG
(collectively, "SAP"), dated March 20, 1997 (the "SAP Agreement"), which has a
term ending December 31, 2000, and under which the INDIVIDUAL SELLERS hereby
represent and
<PAGE>
warrant that TITAN is in compliance with all performance conditions and
thresholds. Since the continuation of the SAP Agreement is a material asset of
TITAN, without which CONDOR would not be willing to pay the Purchase Price, in
the event the SAP Agreement is terminated within ninety (90) days of the Closing
Date, SELLERS shall within fifteen (15) days after the date of written notice to
SELLERS (a) deliver and transfer to CONDOR all shares of CONDOR Stock previously
delivered to SELLERS in connection with this transaction (valued at $2,200,000
at the Closing Date), with stock powers signed by each of the SELLERS in blank,
and (b) pay to CONDOR the amount of One Million Eight Hundred Thousand Dollars
($1,800,000), in cash.
7.4. RESTRICTIVE COVENANTS. Except to the extent that an INDIVIDUAL
SELLER is bound by restrictive covenants contained in an employment agreement
with TITAN entered into as of or after the Closing Date, in which case the
restrictive covenants contained therein shall apply and the provisions of this
Section 7.4 shall not apply, each of the INDIVIDUAL SELLERS and DATA DYNAMICS
(each, a "COVENANTOR") agrees as follows:
(a) Non-Competition. The COVENANTOR shall not, during the
Applicable Restricted Term (defined below), directly or indirectly, alone or as
principal, partner, joint venturer, officer, director, employee, consultant,
agent, independent contractor or stockholder (other than as provided below) of
any company or business, engage in any "Competitive Business" within the United
States. Notwithstanding the foregoing, the COVENANTOR shall not be prohibited
during the Applicable Restricted Term from acting as a passive investor where he
owns not more than five percent (5%) of the issued and outstanding capital stock
of any publicly-held company. During the Applicable Restricted Term, the
COVENANTOR shall not solicit or encourage any employee of TITAN, any current or
future subsidiary or affiliate thereof, or any Restricted Entity, to terminate
his or her employment. For purposes hereof, the following terms shall be defined
as follows:
(i) "Competitive Business" shall mean:
(A) any business engaged in enterprise
resource planning (ERP) services and licensing, including, without limitation,
businesses engaged in or related to SAP licensing and implementation (the "ERP
Business"), and
(B) any business (other than the ERP
Business) involved in providing information technology solutions, including, but
not limited to, desktop services, software development, systems design and
integration, large scale survey research, recruiting and comprehensive marketing
and sales (the "IT Business"), to the extent that such IT Business is in direct
competition with (x) TITAN, or (y) a "Restricted Entity" (defined below).
(ii) "Restricted Entity" shall mean CONDOR and any of
CONDOR's subsidiaries, to the extent that the COVENANTOR has had significant
contacts or involvement with, or obtained knowledge of or had access to
proprietary or confidential information or trade secrets of, such entity.
(iii) "Applicable Restricted Term" shall mean:
<PAGE>
(A) in the case of DATA DYNAMICS, (1) with
respect to the ERP Business, the period commencing as of the Closing Date and
ending three (3) years after the date thereof, and (2) with respect to the IT
Business, the period commencing as of the Closing Date and ending one (1) year
after the date thereof; and
(B) in the case of the INDIVIDUAL SELLERS,
(1) with respect to the ERP Business, the period commencing as of the Closing
Date and ending as of the later to occur of three (3) years after the date
hereof, or one (1) year after the expiration of the COVENANTOR's employment by
TITAN or CONDOR for any reason; and (2) with respect to the IT Business, the
period commencing as of the Closing Date and ending one (1) year after the
expiration of the COVENANTOR's employment by TITAN or CONDOR for any reason
(b) Non-Solicitation of Employees. The COVENANTOR shall not
during Applicable Restricted Term, directly or indirectly, alone or as
principal, partner, joint venturer, officer, director, employee, consultant,
agent, independent contractor or stockholder, or in any other capacity
whatsoever, employ, retain, or enter into any employment, agency, consulting or
other similar arrangement with, any person who, within the twelve-month period
prior to the termination of the COVENANTOR's employment by TITAN, was an
employee of TITAN or any Restricted Entity, or, induce or attempt to induce such
person to terminate his employment with TITAN or such Restricted Entity.
(c) Non-Solicitation of Clients or Customers. The COVENANTOR
shall not during the Applicable Restricted Term, directly or indirectly, alone
or as principal, partner, joint venturer, officer, director, employee,
consultant, agent, independent contractor or stockholder, or in any other
capacity whatsoever, directly or indirectly, for his or her own account, or for
the account of others, solicit orders for services of a kind or nature like or
similar to services performed by TITAN or any Restricted Entity, from any party
that was a customer or client of TITAN or such Restricted Entity during the
preceding twelve (12) month period.
(d) Breach of Restrictive Covenants. The parties agree that a
breach or violation of Section 7.4 hereof may result in immediate and
irreparable injury and harm to the innocent party, which party shall have, in
addition to any and all remedies of law and other consequences under this
Agreement, the right to an injunction, specific performance or other equitable
relief to prevent the violation of the obligation hereunder.
7.5. CONSENTS. SCHEDULE 2.20 lists certain consent requirements. In the
event that CONDOR elects to proceed with Closing notwithstanding SELLERS' not
having obtained one or more of the consents listed on SCHEDULE 2.20, SELLERS
shall cooperate with CONDOR, and initiate discussions with the Persons from whom
consent is sought, to obtain such consents as soon after Closing as practicable,
it being understood and agreed that CONDOR's election will not have the effect
of excusing SELLERS' obligation to provide indemnity for such failure pursuant
to Section 8.1. Any costs related to obtaining such consents shall be borne by
CONDOR.
7.6. RELEASE FROM PERSONAL GUARANTIES. CONDOR shall take all steps
necessary to remove CRAWFORD and BELLI from the personal guaranties executed by
them for a certain line of credit extended to TITAN by First Union National
Bank.
<PAGE>
7.7. RULE 144 REPORTING. With a view to making available to SELLERS the
benefits of certain rules and regulations of the SEC which may permit the sale
of CONDOR Stock to the public without registration, CONDOR agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the 1933 Act;
(b) File with the SEC in a timely manner all reports and other
documents required of CONDOR under the 1933 Act and 1934 Act;
(c) Furnish to any SELLER so long as such SELLER owns any
CONDOR Stock forthwith upon request a written statement by CONDOR that it has
complied with the reporting requirements of said Rule 144, and of the 1934 Act,
a copy of the most recent annual or quarterly report of CONDOR, and such other
reports and documents so filed by CONDOR as may be reasonably requested in
availing any SELLER of any rule or regulation of the SEC permitting the selling
of any such securities without registration.
7.8. NO PUBLIC ANNOUNCEMENT. Except as required by law, no party shall
make a public announcement regarding this transaction without the other party's
express written consent.
8. INDEMNIFICATION
The SELLERS and CONDOR, agree as follows:
8.1 GENERAL INDEMNIFICATION BY SELLERS. SELLERS covenant and agree that
they will indemnify, defend, protect and hold harmless CONDOR and TITAN at all
times, from and after the date of this Agreement until the Expiration Date, from
and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and reasonable expenses of
investigation) incurred by CONDOR and TITAN as a result of or arising from:
(a) Any breach of the representations and warranties of the
INDIVIDUAL SELLERS or RAECO, as the case may be, set forth herein or on the
schedules or certificates delivered in connection herewith;
(b) Any breach of any agreement on the part of the SELLERS
under this Agreement; and
(c) Any obligations for payment or performance under any
Material Contract which, as of the Closing Date, is in an "overrun" (defined
below) position, to the extent of such overrun, and only if such overrun was not
accrued or otherwise reflected on TITAN Financial Statements or the Closing Date
Balance Sheet. For the purposes hereof, a Material Contract shall be deemed to
be in an "overrun" position if the cost of TITAN's performance thereunder
exceeds the consideration payable thereunder, and the "overrun" shall be the
amount of such excess.
<PAGE>
8.2 INDEMNIFICATION BY CONDOR. CONDOR covenants and agrees that it will
indemnify, defend, protect and hold harmless SELLERS at all times from and after
the date of this Agreement until the Expiration Date, from and against all
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by the SELLERS as a
result of or arising from (a) any breach by CONDOR of its representations and
warranties set forth herein or on the schedules or certificates delivered in
connection herewith, or (b) any breach of any agreement on the part of CONDOR
under this Agreement.
8.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a Third Person or of the commencement of any action or proceeding by a Person
not a party to this Agreement (a "Third Person"), the Indemnified Party shall,
as a condition precedent to a claim with respect thereto being made against any
party obligated to provide indemnification pursuant to Section 8.1 or 8.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the written consent of the Indemnified Party, such consent not to be
unreasonably withheld or delayed. If the Indemnifying Party undertakes to defend
or settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate, at the Indemnifying Party's
expense, with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall
endeavor to use the same counsel, which shall be the counsel selected by the
Indemnifying Party, provided that if counsel to the Indemnifying Party shall
have a conflict of interest in the opinion of such counsel that prevents counsel
for the Indemnifying Party from representing the Indemnified Party, the
Indemnified Party shall have the right to participate in such matter through
counsel of its own choosing and the Indemnifying Party will reimburse the
Indemnified Party for the reasonable expenses of its counsel and experts. After
the Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested by the Indemnifying Party, in which event
the Indemnified Party shall be reimbursed by the Indemnifying Party for
reasonable additional legal expenses and out-of-pocket expenses. If the
Indemnifying Party desires to accept a final and complete settlement of any such
Third Person claim and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement to said Third Person, plus all indemnifiable costs and expenses
incurred to date, the Indemnifying Party shall be relieved of its duty to defend
and shall tender the Third Person claim back to the Indemnified Party, who shall
thereafter, at its own expense, be responsible for the defense and negotiation
of such Third Person claim. If the Indemnifying Party does not undertake to
defend such matter
<PAGE>
to which the Indemnified Party is entitled to indemnification hereunder, or
fails diligently to pursue such defense, the Indemnified Party may undertake
such defense through counsel of its choice, at the cost and expense of the
Indemnifying Party, and the Indemnified Party may settle such matter, and the
Indemnifying Party shall reimburse the Indemnified Party for the amount paid in
such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for any Tax benefits, Tax detriments or insurance proceeds in
determining the amount of any indemnification obligation under this Section,
provided that no Indemnifying Party shall be obligated to seek any payment
pursuant to the terms of any insurance policy.
8.4. LIMITATIONS ON INDEMNIFICATION. Except as otherwise specifically
provided in this Agreement:
(a) Except for liability for breaches of the representations
and warranties contained in Section 2.19 hereof, for which there shall be no
minimum claim, CONDOR and the other Persons or entities indemnified pursuant to
Section 8.1 (other than the SELLERS) shall not assert any claim for
indemnification hereunder against the SELLERS until such time as, and with
respect to any individual claim, unless and until such claim or claims,
individually or in the aggregate, and solely to the extent that such claim or
claims, exceed Fifty Thousand Dollars ($50,000). Except for claims for payment
of Purchase Price, for which there shall be no minimum claim, the SELLERS shall
not assert any claim for indemnification hereunder against CONDOR until such
time as, and solely to the extent that, the aggregate of all claims which the
SELLERS may have against CONDOR exceeds Fifty Thousand Dollars ($50,000).
(b) CONDOR shall have the right, upon written notice, to
offset indemnification amounts due to it pursuant to this Agreement against
payments due to the SELLERS under (i) this Agreement (including, without
limitation, the obligation to pay the Contingent Purchase Price) and/or (ii) any
contract contemplated by, or referred to in, this Agreement.
(c) Notwithstanding any other term of this Agreement, SELLERS
shall not be liable under this Section 8 for an amount which exceeds the sum of
(i) Four Million Dollars ($4,000,000) (payable in cash, CONDOR Stock, or a
combination thereof), and (ii) the Contingent Purchase Price.
(d) Indemnity obligations hereunder may be satisfied through
the payment of cash or the delivery of CONDOR Stock, or a combination thereof.
For purposes of calculating the value of the CONDOR Stock received or delivered
by SELLERS (for purposes of determining the amount of any indemnity paid), the
value of CONDOR Stock shall be determined as of the date of payment of the
indemnity claim in the manner described in Section 1.4(c) hereof.
(e) The provisions of this Article 8 shall be the sole remedy
for money damages of the parties hereto with respect to the matters herein.
9. TERMINATION OF AGREEMENT
<PAGE>
9.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
(a) by mutual consent of CONDOR and the SELLERS;
(b) by CONDOR, on the one hand, or the SELLERS, on the other
hand, if the transactions contemplated by this Agreement to take place at the
Closing shall not have been consummated by April 30. 1999, unless the failure of
such transactions to be consummated is due to the willful failure of the party
seeking to terminate this Agreement to perform any of its obligations under this
Agreement to the extent required to be performed by it prior to or on the
Closing Date; or
(c) by the SELLERS on the one hand, or by CONDOR, on the other
hand, if a material breach or default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein, and the curing of such default shall
not have been made on or before the Closing Date.
9.2 LIABILITIES IN EVENT OF TERMINATION. The termination of this
Agreement will in no way limit any obligation or liability of any party based on
or arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements contained in this
Agreement, including, but not limited to, legal and audit costs and out of
pocket expenses.
10. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
10.1 SELLERS. SELLERS recognize and acknowledge that they have in the
past, currently have, and in the future may have, access to certain confidential
information of TITAN such as operational policies, and pricing and cost policies
that are valuable, special and unique assets of TITAN's business. SELLERS agree
that they will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of CONDOR who need to know information
in connection with the transactions contemplated hereby, who have been informed
of the confidential nature of such information and who have agreed to keep such
information confidential as provided hereby, (b) following the Closing, such
information may be disclosed by SELLERS as is required in the course of
performing their duties for CONDOR or TITAN, and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 10.1, unless (i) such information
becomes known to the public generally through no fault of the SELLERS, (ii)
disclosure is required by law or the order of any Governmental Authority under
color of law; provided, that prior to disclosing any information pursuant to
this clause (ii), the SELLERS shall, if possible, give prior written notice
thereof to CONDOR and provide CONDOR with the opportunity to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event the transactions contemplated by this Agreement
are not consummated, the SELLERS shall no longer be subject to all of the
above-mentioned restrictions with respect to their ability to disseminate
confidential information regarding TITAN.
10.2 CONDOR. CONDOR recognizes and acknowledges that it had in the
past, currently has,
<PAGE>
and in the future may have, access to certain confidential information of TITAN,
such as operational policies, and pricing and cost policies that are valuable,
special and unique assets of TITAN's business. CONDOR agrees that, prior to the
Closing, or if the transactions contemplated by this Agreement are not
consummated, they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to the SELLERS and to authorized representatives of
TITAN, (b) to counsel and other advisers, provided that such advisors (other
than counsel) agree to the confidentiality provisions of this Section 10.2,
unless (i) such information becomes known to the public generally through no
fault of CONDOR, (ii) disclosure is required by law or the order of any
Governmental Authority under color of law; provided, that, prior to disclosing
any information pursuant to this clause (ii), CONDOR shall, if possible, give
prior written notice thereof to TITAN and the SELLERS and provide TITAN and the
SELLERS with the opportunity to contest such disclosure, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party. In the event of a breach
or threatened breach by CONDOR of the provisions of this Section, TITAN and the
SELLERS shall be entitled to an injunction restraining CONDOR from disclosing,
in whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting TITAN and the SELLERS from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
10.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Sections 10.1 and 10.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
Nothing herein shall be construed as prohibiting a party hereto from pursuing
any other available remedy for such breach or threatened breach of Sections 10.1
and 10.2, including the recovery of damages.
10.4 SURVIVAL. The obligations of the parties under this Article 10
shall survive the termination of this Agreement for a period of five years from
the Closing Date.
11. GENERAL
11.1 COOPERATION. SELLERS and CONDOR shall each deliver or cause to be
delivered to the other on the Closing Date, and 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. SELLERS will
cooperate and use their reasonable efforts to have the present officers,
directors and employees of TITAN cooperate with CONDOR on and after the Closing
Date in furnishing information, evidence, testimony and other assistance in
connection with any Tax Return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
11.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (including by operation of law) without
the consent of the other party and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of CONDOR, and the heirs and legal
representatives of the SELLERS. Notwithstanding the foregoing, the parties
acknowledge and agree that the SELLERS shall have the right to assign all, or
any part, of their rights to receive payment of the
<PAGE>
Contingent Purchase Price to key employees of TITAN or an entity of which such
key employees are the owners, provided that in no event shall payments of
Contingent Purchase Price be conditioned upon continuing or future employment by
TITAN or CONDOR. The form and organizational documents related to such entity,
as well as any associated documents, shall be subject to the prior approval of
CONDOR.
11.3 ENTIRE AGREEMENT. This Agreement (including the Schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the SELLERS and
CONDOR and supersede any prior agreement and understanding relating to the
subject matter of this Agreement. This Agreement, upon execution, constitutes a
valid and binding agreement of the parties hereto enforceable in accordance with
its terms and may be modified or amended only by a written instrument executed
by the SELLERS and CONDOR.
11.4 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute but one and the same
instrument. Signatures may be exchanged by telecopy, and each party agrees that
it will be bound by its telecopied signature and that it accepts the telecopied
signatures of the other parties to this Agreement.
11.5 BROKERS AND AGENTS. Each party represents and warrants that,
except as set forth on SCHEDULE 11.5, it employed no broker or agent in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for fees
or commissions of brokers employed or alleged to have been employed by such
indemnifying party.
11.6 EXPENSES. Each party shall each bear its own expenses incurred in
connection with the transactions contemplated by this Agreement.
11.7 NOTICES. All notices or communications required or permitted
hereunder shall be in writing and shall be deemed to have been given when
personally delivered or upon receipt if sent by first class certified mail,
return receipt requested or the next business day if sent by telex (receipt
confirmed and followed up by one of the other delivery methods discussed herein
as well), or upon delivery if sent by express mail, in each case postage prepaid
and addressed as follows:
(a) If to CONDOR:
Annapolis Office Plaza
170 Jennifer Road
Suite 325
Annapolis, Maryland 21401
Attention: John F. McCabe, Esquire
with copies to:
Whiteford, Taylor & Preston L.L.P.
Seven Saint Paul Street
Baltimore, Maryland 21202
<PAGE>
Attn: William M. Davidow, Jr.
(b) If to the SELLERS:
MICHAEL CRAWFORD
P.O. Box 8309
Red Bank, NJ 07701
STEVEN BELLI
56 Fallingston Place
Freehold, NJ 07728
DIRK FLOTE
1 Brook Drive West
Princeton, NJ 08540
RAECO INVESTMENT PARTNERSHIP
c/o Richard A. Eisner Company, LLP
Attn: Ralph Anderson
100 Campus Drive
Florham Park, NJ 07932
with copies to:
Berkowitz, Lichstein, Kuritsky, Giasullo & Gross, LLC
443 Northfield Avenue
West Orange, NJ 07052
Attn: Jonathan M. Gross, Esquire
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 11.7 from time to time.
11.8 GOVERNING LAW; VENUE. This Agreement shall be construed in
accordance with the laws of the State of Delaware, without reference to
conflicts of laws principles. The parties agree that any action brought by
either party in connection with any rights or obligations arising out of this
Agreement shall be instituted in a federal or state court of competent
jurisdiction with venue only in the State of New Jersey. If either party is not
a resident of, or does not maintain a presence in, the State of New Jersey, then
such party hereby agrees to submit personally to the jurisdiction of a court of
competent subject matter jurisdiction located in the State of New Jersey.
11.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any
<PAGE>
other breach or default occurring before or after that waiver.
11.10 TIME. Time is of the essence with respect to this Agreement.
11.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
11.12 REMEDIES CUMULATIVE. Except as provided herein, no right, remedy
or election given by any term of this Agreement shall be deemed exclusive but
each shall be cumulative with all other rights, remedies and elections available
at law or in equity.
11.13. CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
11.14 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of CONDOR and the SELLERS. Any amendment or waiver effected in
accordance with this Section 11.14 shall be binding upon each of the parties
hereto and their successors or assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CONDOR:
CONDOR TECHNOLOGY SOLUTIONS, INC.
By: /s/ William J. Caragol. Jr.
-------------------------------------------
SELLERS:
/s/ Michael Crawford
-------------------------------------------
Michael Crawford
/s/ Steven Belli
-------------------------------------------
Steven Belli
/s/ Dirk Flote
-------------------------------------------
Dirk Flote
RAECO INVESTMENT PARTNERSHIP
By: /s/ Ralph Anderson
-----------------------------------------
The undersigned executes this Agreement solely for the purpose of
consenting to the provisions of Section 7.4 hereof.
DATA DYNAMICS, INC.
By: /s/ Michael Crawford
-----------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1999 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,242
<SECURITIES> 0
<RECEIVABLES> 47,023
<ALLOWANCES> (493)
<INVENTORY> 571
<CURRENT-ASSETS> 54,362
<PP&E> 7,569
<DEPRECIATION> (1,745)
<TOTAL-ASSETS> 206,761
<CURRENT-LIABILITIES> 47,801
<BONDS> 0
0
0
<COMMON> 121
<OTHER-SE> 117,134
<TOTAL-LIABILITY-AND-EQUITY> 200,761
<SALES> 20,941
<TOTAL-REVENUES> 59,690
<CGS> 18,780
<TOTAL-COSTS> 40,099
<OTHER-EXPENSES> 13,746
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 483
<INCOME-PRETAX> 5,362
<INCOME-TAX> 2,359
<INCOME-CONTINUING> 3,003
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,003
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.22
</TABLE>
