<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(mark one)
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
- --- Exchange Act of 1934
For the quarterly period ended December 31, 1999 or
-----------------
Transition report pursuant to Section 13 or 15 (d) of the Securities
- --- Exchange Act of 1934
For the transition period from to
--------------- ---------------
Commission file number 0-18603
----------------------------
INTEGRAL SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its chapter)
Maryland 52-1267968
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5000 Philadelphia Way, Suite A, Lanham, MD 20706
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 731-4233
-----------------------------
- --------------------------------------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Indicate by checkmark 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
----- -----
As of December 31, 1999 the aggregate market value of the Common Stock of the
Registrant (based upon the closing price of the Common Stock on the NASDAQ Stock
Exchange at December 31, 1999) held by non-affiliates of the Registrant was
$275,054,202.
Registrant had 7,243,544 shares of common stock outstanding as of December 31,
1999
<PAGE>
PART I. FINANCIAL INFORMATION
- --------------------------------
ITEM 1. FINANCIAL STATEMENTS
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and September 30, 1999
<TABLE>
<CAPTION>
ASSETS December 31, September 30,
1999 1999
(unaudited)
------------------- -------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 6,751,045 $ 7,027,446
Marketable Securities 18,136,000 18,136,000
Accounts Receivable 15,099,636 13,052,820
Prepaid Expenses 27,425 78,123
------------------- -------------------
TOTAL CURRENT ASSETS 40,014,106 38,294,389
FIXED ASSETS
Electronic Equipment 490,366 655,272
Furniture & Fixtures 382,118 380,904
Leasehold Improvements 152,857 132,110
Software Purchases 109,245 67,861
Equip. Under Capital Lease 1,911,463 1,911,463
------------------- -------------------
SUBTOTAL 3,046,049 3,147,610
Less: Accumulated Depreciation 1,276,660 1,322,169
------------------- -------------------
TOTAL FIXED ASSETS 1,769,389 1,825,441
OTHER ASSETS
Software Development Costs 2,176,279 2,006,194
Deposits 65,348 13,666
------------------- -------------------
TOTAL OTHER ASSETS 2,241,627 2,019,860
TOTAL ASSETS $44,025,122 $42,139,690
=================== ===================
</TABLE>
See Notes to Financial Statements
-1-
<PAGE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and September 30, 1999
<TABLE>
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY December 31, September 30,
1999 1999
(unaudited)
------------------ -------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 2,183,837 $ 2,838,639
Accrued Expenses 2,552,949 2,555,850
Capital Leases Payable 734,664 601,327
Billings in Excess of Cost 2,267,911 1,666,484
Income Taxes Payable 666,781 173,637
Deferred Income Taxes 146,890 146,890
------------------ -------------------
TOTAL CURRENT LIABILITIES 8,553,032 7,982,827
LONG TERM LIABILITIES
Capital Leases Payable 431,053 714,106
------------------ -------------------
TOTAL LONG TERM LIABILITIES 431,053 714,106
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value,
40,000,000 shares authorized, and
7,243,544 and 7,163,908 shares issued
and outstanding at December 31, 1999
and September 30, 1999, respectively 72,435 71,639
Additional Paid-in Capital 22,330,993 21,993,620
Retained Earnings 12,637,609 11,377,498
------------------ -------------------
TOTAL STOCKHOLDERS' EQUITY 35,041,037 33,442,757
------------------ -------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $44,025,122 $42,139,690
================== ===================
</TABLE>
See Notes to Financial Statements
-2-
<PAGE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
(unaudited) (unaudited)
------------- -------------
<S> <C> <C>
Revenue $10,021,861 $7,676,486
Cost of Revenue
Direct Labor 2,323,124 2,071,440
Overhead Costs 1,910,044 1,661,728
Travel and Other Direct Costs 394,743 259,946
Direct Equipment & Subcontracts 1,932,242 1,658,672
------------- -------------
Total Cost of Revenue 6,560,153 5,651,786
------------- -------------
Gross Margin 3,461,708 2,024,700
------------- -------------
Selling, General & Administrative 1,461,186 1,046,658
Product Amortization 237,500 165,000
------------- -------------
Income From Operations 1,763,022 813,042
Other Income (Expense)
Interest Income 254,117 38,148
Interest Expense (28,563) (30,409)
Miscellaneous, net (43,165) (76,340)
------------- -------------
Total Other Income (Expense) 182,389 (68,601)
Income Before Income Taxes 1,945,411 744,441
Provision for Income Taxes 685,300 287,500
------------- -------------
Net Income $ 1,260,111 $ 456,941
============= =============
Weighted Average Number of Common
Shares Outstanding During Period 7,203,997 5,857,499
============= =============
Earnings per Share $0.17 $0.08
============= =============
Diluted Shares Outstanding 7,749,530 6,647,766
============= =============
Diluted Earnings per Share $0.16 $0.07
============= =============
</TABLE>
See Notes to Financial Statements
-3-
<PAGE>
INTEGRAL SYSTEMS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
(unaudited)
<TABLE>
<CAPTION>
Common
Number Stock Additional
of at Par Paid-in Retained
Shares Value Capital Earnings Total
------------ ----------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance September 30, 1999 7,163,908 $71,639 $21,993,620 $11,377,498 $33,442,757
.
Exercise of Stock Options 79,636 796 337,373 - 338,169
Net income - - - 1,260,111 1,260,111
------------ ----------- ------------- ------------- --------------
Balance December 31, 1999 7,243,544 $72,435 $22,330,993 $12,637,609 $35,041,037
============ =========== ============= ============= ==============
</TABLE>
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<PAGE>
INTEGRAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1999 1998
(unaudited) (unaudited)
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,260,111 $ 456,941
------------- -------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 461,382 308,189
(Increase) decrease in:
Accounts receivable (2,046,816) 855,595
Prepaid expenses 50,698 3,769
(Decrease) increase in:
Accounts payable (654,802) (650,169)
Accrued expneses (2,901) (302,517)
Billings in excess of cost 601,427 (258,855)
Income taxes payable 493,144 (460,529)
------------- -------------
Total adjustments (1,097,868) (504,517)
------------- -------------
Net cash provided (used) by operations 162,243 (47,576)
------------- -------------
Cash flow from investing activities:
Acquisition of fixed assets (167,830) (3,992)
Increase in software development costs (407,585) (270,152)
Increase in other assets (51,682) 0
------------- -------------
Net cash provided (used) in investing activities (627,097) (274,144)
------------- -------------
Cash flow from financing activities:
Proceeds from issuance of common stock 338,169 101,887
Payments on capital lease obligations (149,716) (98,974)
------------- -------------
Net cash provided by financing activities 188,453 2,913
------------- -------------
Net increase (decrease) in cash (276,401) (318,807)
Cash - beginning of year 7,027,446 3,055,144
------------- -------------
Cash - end of period $ 6,751,045 $2,736,337
============= =============
</TABLE>
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<PAGE>
INTEGRAL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
---------------------
The interim financial statements include the accounts of Integral Systems,
Inc. (ISI or the Company) and its two wholly-owned subsidiaries, Integral
Marketing, Inc. (IMI) and InterSys, Inc. (INTSYS). In the opinion of
management, the financial statements reflect all adjustments consisting
only of normal recurring accruals necessary for a fair presentation of
results for such periods. The financial statements, which are condensed
and do not include all disclosures included in the annual financial
statements, should be read in conjunction with the consolidated financial
statements of the Company for the fiscal year ended September 30, 1999.
The results of operations for any interim period are not necessarily
indicative of results for the full year.
Certain accounts in the prior period financial statements have been
reclassified for comparative purposes to conform with the presentation in
the current year financial statements.
2. Accounts Receivable
-------------------
Accounts receivable at December 31, 1999 and September 30, 1999 consist of
the following:
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
---------------- -----------------
<S> <C> <C>
Billed $ 9,233,676 $ 7,758,571
Unbilled 5,790,673 5,231,611
Other 75,287 62,638
---------------- -----------------
Total $15,099,636 $13,052,820
================ =================
</TABLE>
The Company uses the direct write-off method for bad debts.
The Company's accounts receivable consist of amounts due on prime contracts
and subcontracts with the U.S. Government and contracts with various
private organizations. Unbilled accounts receivable consist principally of
amounts that are billed in the month following the incurrence of cost or
when milestones are delivered under fixed price contracts. All unbilled
receivables are expected to be billed and collected within one year.
3. Line of Credit
--------------
The Company has access to a general line of credit facility through which
it can borrow up to $9,000,000 for operating purposes and has an additional
line of credit amounting to $6,000,000, which can be used for corporate
acquisitions. The lines of credit are secured by the Company's billed and
unbilled accounts receivable. The lines also have certain financial
covenants, including minimum net worth and liquidity ratios. The lines
expire February 28, 2002. At December 31, 1999, the Company had no amounts
outstanding under the lines of credit.
4. Capital Lease
-------------
The Company has access to a $2.0 million equipment lease line of credit
that had a balance of $1,165,717 at December 31, 1999. The balance is
payable over 36 months and bears interest at a rate of 8.89% per annum.
-6-
<PAGE>
5. Stock Splits
------------
On June 4, 1997, the Company's stockholders approved an increase to the
Company's authorized shares from 2.0 million to 10.0 million and also
authorized a three-for-one stock split which became effective in July 1997.
On May 29, 1998, the Company's board of directors declared a two-for-one
stock split in the form of a 100% stock dividend for stockholders of record
as of June 9, 1998.
On April 27, 1999, the Company's stockholders approved an amendment to the
Company's charter increasing the total number of shares of stock which the
Corporation is authorized to issue from 10.0 million to 40.0 million.
Stockholders' equity has been restated to give retroactive recognition to
the stock splits for all periods presented by reclassifying from additional
paid-in capital to common stock the par value of the additional shares
arising from the splits. In addition, all references to number of shares,
per share amounts, stock option data, and market prices of common stock
have been restated.
6. Business Segment Information
----------------------------
During the periods ended December 31, 1999 and December 31, 1998, the
Company's operations included two reportable segments: Satellite ground
systems and electronic test instrumentation and equipment marketing.
The Company builds satellite ground systems for command and control,
integration and test, data processing, and simulation. Customers for these
systems include U.S. Government organizations such as the National
Aeronautics and Space Administration (NASA), the National Oceanic and
Atmospheric Administration (NOAA), and the U.S. Air Force, as well as
commercial satellite operators, both domestic and foreign.
Through its wholly-owned subsidiary, IMI, the Company acts as a
manufacturer's representative, selling electronic test instrumentation and
equipment to customers primarily in Maryland, Virginia and the District of
Columbia. (The Company's other wholly-owned subsidiary, InterSys, provides
consulting services for satellite design and procurement, but is presently
inactive.) Summarized financial information is as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
December 31, 1999 December 31, 1998
-------------------- --------------------
<S> <C> <C>
Net Sales
Satellite ground systems $9,663,106 $7,344,112
Equipment marketing $ 358,756 $ 332,374
Income before taxes
Satellite ground systems $1,810,117 $ 639,856
Equipment marketing $ 135,295 $ 104,585
</TABLE>
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
---------------------------------------------------------------
Overview
Integral Systems, Inc. builds satellite ground systems for command and control,
integration and test, data processing, and simulation. Since its inception in
1982, the Company has provided ground systems for over 100 different satellite
missions for communications, science, meteorology, and earth resource
applications. The Company has an established domestic and international
customer base that includes government and commercial satellite operators,
spacecraft and payload manufacturers, and aerospace systems integrators.
The Company has developed innovative software products that reduce the cost and
minimize the development risk associated with traditional custom-built ground
systems. The Company believes that it was the first to offer a comprehensive
COTS (Commercial-Off-The-Shelf) software product line for command and control.
As a systems integrator, the Company leverages these products to provide turnkey
satellite control facilities that can operate multiple satellites from any
manufacturer. These systems offer significant cost savings for customers that
have traditionally purchased a separate custom control center for each of their
satellites.
Results of Operations
The components of the Company's income statement as a percentage of revenue are
depicted in the following table for the three months ended December 31, 1999 and
December 31, 1998:
<TABLE>
<CAPTION>
Three Months Ended December 31,
% of % of
1999 Revenue 1998 Revenue
-------------- -------------- -------------- --------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Revenue $10,022 100.0 $7,676 100.0
Cost of Revenue 6,560 65.5 5,651 73.6
------- ----- ------ -----
Gross Margin 3,462 34.5 2,025 26.4
Operating Expenses
SG&A 1,461 14.6 1,047 13.6
Prod. Amortization 238 2.4 165 2.2
------- ----- ------ -----
Income from Operations 1,763 17.6 813 10.6
Other (net) 182 1.8 -69 -.9
------- ----- ------ -----
Income Before Income
Taxes 1,945 19.4 744 9.7
------- ----- ------ -----
Income Taxes 685 6.8 287 3.7
------- ----- ------ -----
Net Income $ 1,260 12.6 $ 457 6.0
======= ===== ====== =====
</TABLE>
-8-
<PAGE>
Revenue
The Company earns revenue from sales of its products and services through
contracts that are funded by the U.S. Government, both as a prime contractor or
a subcontractor, as well as commercial and international organizations. The
Company, through its wholly-owned subsidiary IMI, earns commission revenue by
representing a number of electronic product manufacturers in Maryland, Virginia
and the District of Columbia, principally in space related markets.
Internally, the Company classifies revenues in two separate categories on the
basis of the contracts' procurement and development requirements: (i) contracts
which require compliance with Government procurement and development standards
("Government Services") are classified as government revenue, and (ii) contracts
conducted according to commercial practices ("Commercial Products and Services")
are classified as commercial revenue, regardless of whether the end customer is
a commercial or government entity. Sales of the Company's COTS products are
classified as Commercial Products and Services revenue. IMI sales of third-
party hardware and software are also classified as Commercial Products and
Services revenue.
For the three months ended December 31, 1999 and 1998, the Company's revenues
were generated from the following sources:
<TABLE>
<CAPTION>
Three Months Ended December 31,
Revenue Type 1999 1998
------------------------------ ---------- ----------
<S> <C> <C>
Commercial Products & Services
Commercial Users 41% 22%
U.S. Government Users 1 5
---- ----
Subtotal 42 27
Government Services
NOAA 46 54
NASA 8 9
Other U.S. Government Users 4 10
---- ----
Subtotal 58 73
Total 100% 100%
==== ====
</TABLE>
Based on the Company's revenue categorization system, the Company classified 42%
and 27% of its revenue as Commercial Products and Services revenue with the
remaining 58% and 73% classified as Government Services revenue for the three
months ended December 31, 1999 and 1998 respectively. By way of comparison, if
the revenues were classified strictly according to end-user (independent of the
Company's internal revenue categorization system), the U.S. Government would
account for 59% and 78% of the total revenues for the three months ended
December 31, 1999 and 1998, respectively.
On a consolidated basis, revenue increased 31%, or $2.3 million, to $10.0
million for the three months ended December 31, 1999, from $7.7 million for the
three months ended December 31, 1998. The increase was primarily due to
increases in the Company's Commercial Products and Services revenues, which
accounted for approximately $2.1 million of the increase. Government Services
revenue increased approximately $200,000 during the three months ended
December 31, 1999 compared to the three months ended December 31, 1998. This
increase was achieved despite a decline of $400,000 in revenues related to
equipment and subcontract pass-throughs for government customers in the first
quarter of fiscal year 2000 as compared to the first quarter of fiscal year
1999.
-9-
<PAGE>
Cost of Revenue/Gross Margin
The Company computes gross margin by subtracting cost of revenue from revenue.
Included in cost of revenue are direct labor expenses, overhead charges
associated with the Company's direct labor base and other costs that can be
directly related to specific contract cost objectives, such as travel,
consultants, equipment, subcontracts and other direct costs.
Gross margins on contract revenues vary depending on the type of product or
service provided. Generally, license revenues (related to the sale of the
Company's COTS products) have the greatest gross margins because of the minimal
associated marginal costs to produce. By contrast, gross margins rates for
equipment and subcontract pass-throughs seldom exceed 20%. Engineering service
gross margins typically range between 20% and 40%, while gross margins for IMI
vary considerably depending on sales volume achieved.
During the three months ended December 31, 1999, cost of revenue increased to
$6.6 million from $5.7 million during the three months ended December 31, 1998,
which increase was due primarily to increases in direct labor and related
overhead costs necessary to staff the Company's new contracts and revenue
growth. Cost of revenue expressed as a percentage of revenues, declined to
65.5% for the three months ended December 31, 1999 from 73.6% for the three
months ended December 31, 1998. The percentage improvement with respect to cost
of revenue was primarily due a lower percentage of equipment and subcontract
costs in the fiscal year 1999 cost of revenue mix.
The Company's gross margin increased 71%, or $1.4 million, to $3.5 million for
the three months ended December 31, 1999 from $2.0 million for the three months
ended December 31, 1998. The increase was due to margin percentage improvements
in all of the Company's revenue components (i.e. licenses, engineering services,
pass-throughs and IMI) coupled with revenue growth. As a result of the
foregoing factors, gross margin as a percentage of revenue was 34.5% during the
three months ended December 31, 1999 compared to 26.4% for the three months
ended December 31, 1998.
Operating Expenses/Income from Operations
Selling, General & Administrative expenses (SG&A) increased to approximately
$1.5 million during the three months ended December 31, 1999 from $1.0 million
in the quarter ended December 31, 1998. The change was primarily due to
increases in the Company's selling and marketing infrastructure costs combined
with increased bid and proposal activity. As a percentage of revenue, SG&A
accounted for 14.6% of revenue the three months ended December 31, 1999 compared
to 13.6% in the quarter ended December 31, 1998. Product amortization increased
from $165,000 for the three months ended December 31, 1998 to $238,000 for the
three months ended December 31, 1999.
Income from operations increased 117% to $1.8 million for the three months ended
December 31, 1999 from $800,000 for the three months ended December 31, 1998
primarily due to increases in gross margin dollars described above. As a
percentage of revenue, income from operations increased to 17.6% for the three
months ended December 31, 1999 from 10.6% for the prior year's first quarter.
This increase was principally the result of improved gross margin rates
partially offset by a higher percentage of SG&A expense against revenue.
The Company's effective tax rate declined from 38.6% for the three months ended
December 31, 1998 to 35.2% for the three months ended December 31, 1999. The
decrease was a result of approximately $170,000 of tax-free interest income
recorded in the current quarter.
-10-
<PAGE>
Outlook
The Company's strong first quarter results represent a continued trend from
prior fiscal years of increased sales and profitability on those sales. At this
time the Company has a significant backlog of work to be performed, as well as
potential contract awards it believes are probable based on proposals in the
pipeline. Management believes that operating results for future periods will
continue to improve based on the following assumptions:
. Demand for satellite technology and related products and services will
continue to expand
. Sales of its software products and engineering services will continue to
increase
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Since the Company's inception in 1982, it has been profitable on an annual basis
and has generally financed its working capital needs through internally
generated funds, supplemented by borrowings under the Company's general line of
credit facility with a commercial bank and the proceeds from the Company's
initial public offering in 1988.
For the three months ended December 31, 1999, the Company generated
approximately $160,000 of cash from operating activities and used approximately
$600,000 for investing activities, including approximately $410,000 for newly
capitalized software development costs. The Company anticipates that it will
spend more money for software development in fiscal year 2000 than in fiscal
year 1999, as it completes NT versions of its software products.
The Company has access to a general line of credit facility through which it can
borrow up to $9.0 million for operating purposes and has an additional line of
credit amounting to $6.0 million, which can be used for corporate acquisitions.
The lines of credit are secured by the Company's billed and unbilled accounts
receivable. The lines also have certain financial covenants, including minimum
net worth and liquidity ratios. The lines expire February 28, 2002. At
December 31, 1999, the Company had no amounts outstanding under the lines of
credit.
The Company also has access to a $2.0 million equipment lease line of credit
under which it had $1.2 million outstanding as of December 31, 1999.
The Company currently anticipates that its current cash balances, amounts
available under its credit facilities and net cash provided by operating
activities will be sufficient to meet its working capital and capital
expenditure requirements for at least the next twelve months. The Company
believes that inflation did not have a material impact on the Company's revenues
or income from operations during the quarter ended December 31, 1999 or in past
fiscal years.
Year 2000 Compliance
Many currently installed computer systems, software products, and
microprocessor-dependent equipment are coded to accept only two digit entries in
the date code field. To distinguish 21st century dates from 20th century dates,
these date code fields must be able to accept four digit entries.
The Company may realize exposure and risk if its suppliers or the systems it
relies upon to conduct day-to-day operations are not year 2000 compliant. The
potential areas of exposure include electronic data exchange systems operated by
third parties with whom the Company transacts business, products purchased from
third parties and computers, software, telephone systems and other equipment
used internally. To minimize the potential adverse effects of the year 2000
problem, the Company established an internal project team comprised of all
functional disciplines. This project team has implemented a three-phase process
of:
-11-
<PAGE>
. identifying the Company's internal information and non-information technology
systems that are not year 2000 compliant;
. determining their significance in the effective operation of the Company; and
. developing plans to resolve the issues where necessary.
After review of the Company's internal computer systems, software products and
microprocessor dependent equipment, management has determined the Company to be
year 2000 compliant and, as such, does not anticipate any material adverse
operational issues to arise.
In addition to its internal review, the Company has communicated with its
suppliers and others with whom it does business to coordinate year 2000
readiness. The responses received by the Company to date indicate that steps
have been taken to address this concern. However, if those third parties have
not been able to make all systems year 2000 compliant, there could be a material
adverse impact on the Company.
Although the rollover from December 31, 1999 to January 1, 2000 has occurred,
the Company still faces risks to the extent that suppliers of products,
services, and systems purchased by the Company or the suppliers of others with
whom the Company transacts business cannot timely provide the Company with
products, components, services, or systems that meet year 2000 requirements. In
the event that any such third parties cannot timely provide the Company with
products, services, or systems that meet the year 2000 requirements, the
Company's business could be harmed. For example, if one of the Company's major
vendors experiences a material disruption in business due to a failure to
achieve year 2000 compliance, the Company could experience a material disruption
in business.
The Company has not yet developed a contingency plan with respect to any
potential failure of third parties to have become year 2000 compliant by
January 1, 2000, nor has it formulated a timetable to create a contingency plan.
If either the internal systems material to the Company's operations or the
internal systems, products, or services of one or more of the Company's major
vendors fail to achieve year 2000 compliance, the year 2000 issue could have a
material adverse effect on the Company's business, financial condition and
results of operations.
To date the Company has not experienced any problems associated with Year 2000
computer issues nor does it anticipate any material adverse operational issues
to arise.
Forward Looking Statements
Certain of the statements contained in this section, including those under the
headings "Outlook" and "Liquidity and Capital Resources," are forward looking.
In addition, from time to time, the Company may publish forward looking
statements relating to such matters as anticipated financial performance,
business prospects, technological developments, new products, research and
development activities and similar matters. These forward-looking statements
are predictions. No assurances can be given that the future results indicated,
whether expressed or implied, will be achieved. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. While the Company believes that these statements are and will be
accurate, a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's statements. The Company's business is
dependent upon general economic conditions and upon various conditions specific
to its industry, and future trends cannot be predicted with certainty.
Particular risks and uncertainties that may effect the Company's business
including the following:
. A significant portion of the Company's revenue is derived from contracts
or subcontracts funded by the U.S. government.
. The presence of competitors with greater financial resources and their
strategic response to the Company's new services.
-12-
<PAGE>
. The potential obsolescence of the Company's services due to the
introduction of new technologies.
. The response of customers to the Company's marketing strategies and
services.
. Changes in activity levels in the Company's core markets.
While sometimes presented with numerical specificity, these forward-looking
statements are based upon a variety of assumptions relating to the business of
the Company, which although considered reasonable by the Company, may not be
realized. Because of the number and range of the assumptions underlying the
Company's forward-looking statements, many of which are subject to significant
uncertainties and contingencies beyond the reasonable control of the Company,
some of the assumptions inevitably will not materialize and unanticipated events
and circumstances may occur subsequent to the date of this document. These
forward-looking statements are based on current information and expectation, and
the Company assumes no obligation to update. Therefore, the actual experience
of the Company and the results achieved during the period covered by any
particular forward-looking statement should not be regarded as a representation
by the Company or any other person that these estimates will be realized, and
actual results may vary materially. There can be no assurance that any of these
expectations will be realized or that any of the forward-looking statements
contained herein will prove to be accurate.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
-13-
<PAGE>
Part II. Other Information
- ----------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
--------
10.1 Loan Agreement and Security Agreement dated December 9, 1999
between Bank of America, N.A. and Integral Systems, Inc.
10.2 Second Amendment dated December 30, 1999 to Lease dated June 1,
1999, between Integral Systems, Inc. and ASP Washington, L.L.C.
(Incorporated by reference to the Company's June 30, 1999 10-QSB
filed by the Company on August 11, 1999).
11.1 Computation of Per Share Earnings.
27.1 Financial Data Schedule.
b. Reports on Form 8-K
-------------------
None.
-14-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTEGRAL SYSTEMS, INC.
---------------------
(Registrant)
Date: February 11, 2000 By: /s/
----------------- ------------------------------------------
Thomas L. Gough
President & Chief Operating Officer
Date: February 11, 2000 By: /s/
----------------- ------------------------------------------
Elaine M. Parfitt
Vice President & Chief Financial Officer
-15-
<PAGE>
Exhibit 10.1
LOAN AGENDA
Bank of America, N.A.
I. SUMMARY OF TRANSACTION:
A. Transaction date: December 9, 1999
B. Amount: $9,000,000.00 Revolving Line of Credit
$6,000,000.00 Guidance Line of Credit
C. Lender: Bank of America, N.A.
D. Borrower:
1. Integral Systems, Inc., a Maryland corporation
E. Guarantors:
1. Integral Marketing, Inc., a Maryland corporation
2. Intersys, Inc., a Delaware corporation
II. LENDER'S OFFICER(S) RESPONSIBLE FOR THE TRANSACTION:
Lindsey S. Rheaume, Vice President
Bank of America, N.A.
8300 Greensboro Drive
Suite 550
McLean, Virginia 22102-3604
Telephone: (703) 761-8346
E-Mail: [email protected]
III. LEGAL REPRESENTATION:
A. Legal Counsel: Bank of America, N.A.
James R. Schroll, Esquire
Daryl S. Taylor, Esquire
Bean, Kinney & Korman, P.C.
2000 N. 14th Street, #100
Arlington, VA 22201
<PAGE>
(703) 525-4000
(703) 525-2207 (fax)
B. Borrower's Counsel:
Wallace Christner, Esquire
Venable, Baetjer, Howard & Civiletti, LLP
1201 New York Avenue, N.W., Suite 1000
Washington, DC 20005
(202) 962-4988
(202) 962-8300 (fax)
IV. PRE-CLOSING REQUIREMENTS:
A. Integral Systems, Inc.'s Organizational Documents and UCC searches:
1. Borrowing Resolution and Certification (duplicate originals
required)
2. Maryland good standing certificate for Integral Systems, Inc.
3. UCC filing searches:
a. Maryland State Department of Assessments and Taxation
b. Prince George's County, Maryland
B. Integral Marketing, Inc.'s Organizational Documents:
1. Resolution and Certification of Guarantor (duplicate originals
required)
2. Maryland good standing certificate for Integral Marketing, Inc.
C. Intersys, Inc.'s Organizational Documents:
1. Resolution and Certification of Guarantor (duplicate originals
required)
2. Delaware good standing certificate for Intersys, Inc.
D. Certificates of Insurance (to be obtained directly from Borrowers by
Lindsey S. Rheaume)
E. Summary Terms and Conditions for Integral Systems.
<PAGE>
V. CLOSING DOCUMENTS:
1. Revolving Line of Credit Loan Agreement and Security Agreement
2. Revolving Line of Credit Note
3. Guaranty (Integral Marketing, Inc.)
4. Guaranty (Intersys, Inc.)
5. Documentation of Assignments of Government Contracts (to be performed
by Lender)
6. Statement of Charges
7. Side letter regarding post-closing requirements (if applicable)
<PAGE>
REVOLVING LINE OF CREDIT LOAN AGREEMENT AND SECURITY AGREEMENT
--------------------------------------------------------------
THIS REVOLVING LINE OF CREDIT LOAN AGREEMENT AND SECURITY AGREEMENT
("Agreement") is made as of December 9, 1999, by and between INTEGRAL SYSTEMS,
INC., having an address at 5000 Philadelphia Way, Suite A, Lanham, Maryland
20706, and BANK OF AMERICA, N.A.
RECITALS
--------
A. The Borrower has applied to the Lender for a Revolving Loan facility
(defined below) in the maximum principal amount of Nine Million and No/100
Dollars ($9,000,000.00) to be used by the Borrower for working capital, letter
of credit issuances, to facilitate certain acquisitions and to finance the
performance of government contracts, the payments under which may be assigned as
security for the Revolving Loan.
B. The Borrower has also applied to the Lender for an acquisition Guidance
Line of Credit facility (defined below) in the maximum principal amount of Six
Million and No/100 Dollars ($6,000,000.00) to be used by the Borrower to finance
80% of Lender approved acquisitions.
C. The Lender is willing to make the Revolving Loan and the Guidance Line
of Credit on the terms and conditions hereinafter set forth.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
ARTICLE 1. DEFINITIONS.
-----------------------
1.1 Defined Terms. Certain capitalized terms not otherwise defined herein
-------------
are used in this Agreement with the following meanings, unless the context
otherwise requires:
"Account" means collectively and includes any of the following, whether now
-------
owned or hereafter acquired by the Borrower: all present and future rights to
payments for goods sold or leased or for services rendered, whether or not
represented by instruments or chattel paper, and whether or not earned by
performance; all present and future rights to payments arising out of the
licensing of computer software and systems; all accounts, contract rights,
chattel paper, instruments and documents; proceeds of any letter of credit of
which the Borrower is a beneficiary; all forms of obligations whatsoever owed to
the Borrower, together with all instruments and documents of title representing
any of the foregoing; all rights in any returned or repossessed goods; all
rights, security and guaranties with respect to any of the foregoing, including,
without limitation, any right of stoppage in transit; together with all property
included within the definitions of "accounts", "chattel paper", "documents" and
"instruments" set forth in the UCC.
<PAGE>
"Advance" means an advance of funds under either the Revolving Loan or the
-------
Guidance Line of Credit, as applicable.
"Affiliate" means, with respect to any specified Person, any other Person
---------
which, directly or indirectly, through one or more intermediaries, controls or
is controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of a Person, whether
through ownership of common stock, by contract, or otherwise.
"Agreement" means this Revolving Line of Credit Loan Agreement and Security
---------
Agreement as the same may be amended, modified or supplemented from time to
time.
"Assignment" means a direct assignment of Payments under a Government
----------
Contract pursuant to and in compliance with the Assignment of Claims Act.
Lender reserves the right to require a direct assignment of Payments under all
Government Contracts pursuant to and in compliance with the Assignment of Claims
Act. An Instrument of Assignment shall be substantially in the form of Exhibit
-------
A attached hereto and made a part hereof. Notices of Assignment to be delivered
- -
to the Government shall be in the form of Exhibit B attached hereto and made a
---------
part hereof.
"Assignment of Claims Act" means Title 31, United States Code (S) 3727, and
------------------------
Title 41, United States Code (S) 15, as revised or amended, and any rules or
regulations issued pursuant thereto, and also shall be deemed to include any
other laws, rules or regulations governing the assignment of payments under
Government Contracts or claims against a Government.
"Billed" means that Borrower has submitted an invoice to a Customer
------
requesting payment for goods or services provided by Borrower.
"Borrower" means Integral Systems, Inc. and any other person or entity that
--------
becomes a co-maker of the Revolving Note (hereinafter defined).
"Borrowing Base" means the sum of: (a) ninety percent (90%) on Eligible
--------------
Prime Government Accounts, plus (b) eighty percent (80%) on Eligible
Subcontractor and Commercial Accounts, plus (c) fifty percent (50%) on Eligible
Timing Difference Unbilled Accounts not to exceed One Million and No/100 Dollars
($1,000,000.00), as of the date the Borrowing Base is measured. In the absence
of manifest error, Lender's determination of the amount of the Borrowing Base
shall be conclusive.
"Borrowing Base Certificate" means a certificate substantially in the form
--------------------------
of Exhibit C attached hereto and made a part hereof (or such subsequent form as
---------
the Lender shall require).
"Borrowing Date" means the date on which an Advance is made.
--------------
<PAGE>
"Business Day(s)" means any day that is not a Saturday, Sunday or banking
---------------
holiday in the Commonwealth of Virginia.
"Capital Lease" means any lease which has been or should be capitalized on
-------------
the books of the lessee in accordance with GAAP.
"Cash Collateral Account" means an account which Lender reserves the right
-----------------------
to establish in Borrower's name, with the Lender, for the purpose of receiving
Payments, which shall constitute part of the Collateral unless and until
disbursed to the Borrower or applied for the Borrower's account in accordance
with this Agreement.
"Closing Date" means December 9, 1999.
------------
"Code" means the Internal Revenue Code of the United States, as amended.
----
"Collateral" means all of the following kinds of property now owned or
----------
hereafter acquired by the Borrower:
1. all Accounts;
2. all payments or rights to payment due or to become due under
any Government Contract to which the Borrower is a party;
3. all deposit accounts and other obligations or indebtedness
owed to Borrower from whatever source arising;
4. all rights to receive any payment in money or in kind;
5. all chattel paper;
6. all General Intangibles;
7. all books and records (including all records contained on
any magnetic device or other type of computer recording
device), and computer software and systems;
8. all policies of insurance and the proceeds thereof;
9. all additions and accessions to and replacements of the
collateral described above; and
10. all products and proceeds of all of the collateral described
above.
<PAGE>
"Commercial Accounts" means all Accounts due from Customers other than the
-------------------
Government.
"Contra Account" means an Account due from an account debtor to which the
--------------
Borrower owes money.
"Customer" means any governmental entity (federal, state, county, municipal
--------
or otherwise) or business entity (corporation, association, partnership, limited
liability company or partnership, sole proprietorship or otherwise) or
individual(s) to which Borrower provides goods or services for compensation;
however, certain individual agencies of the United States Government and certain
branches of certain major corporations, as determined by the Lender in its sole
discretion, shall be treated as Customers in their own right, separate and
distinct from other such agencies or branches and from the United States
Government or the corporation of which they are a part.
"Debt" means (a) indebtedness or liability for borrowed money, or for the
----
deferred purchase price of property or services; (b) obligations as a lessee
under a Capital Lease; (c) obligations to reimburse the issuer of letters of
credit or acceptances; (d) all guaranties, endorsements (other than for
collection or deposit in the ordinary course of business), and other contingent
obligations to purchase, to provide funds for payment, to supply funds to invest
in any Person, or otherwise to assure a creditor against loss; and (e)
obligations secured by any lien or Encumbrance on property owned by the
Borrower.
"EBIT" means the Borrower's earnings before interest and taxes.
----
"EBITDA" means the Borrower's earnings before interest, taxes, depreciation
------
and amortization.
"Eligible" when used to describe an Account, means that the Account
--------
conforms to the following criteria:
1. the Account has been Billed or is a Timing Difference
Unbilled Account;
2. in the case of a Commercial Account or any Government
Account, less than ninety-one (91) days have passed from the
original billing date;
3. at Lender's option, in the case of a Government Account,
Borrower has made an Assignment of all Payments due or to
become due under the Government Contract giving rise to the
Account;
4. the Account arose from a bona fide sale of goods or services
---------
to a Customer; the goods or services have been delivered or
provided to the Customer; Borrower possesses receipts from
the Customer acknowledging delivery of the goods or
performance of the services; and Customer has not returned
or rejected the goods or services;
<PAGE>
5. the Account is based upon an enforceable written order or
contract for goods or services;
6. the Borrower's title to the Account is absolute and is not
subject to any prior assignment, claim, escrow agreement or
amendment; lien or security interest, and Borrower otherwise
has the full and unqualified right and power to assign and
grant a security interest in the Account to the Lender;
7. the amount shown on the books of Borrower and on any
invoice, certificate, schedule or statement delivered to the
Lender is owing to Borrower and no partial payment has been
received;
8. the Account is not subject to any claim of reduction,
counterclaim, set-off, recoupment or other defense in law or
equity, or any claim for credits, allowances or adjustments
by the Customer because of returned, inferior or damaged
goods, unsatisfactory services or for any other reason;
9. the Customer has not notified Borrower of any dispute
concerning any of the goods or services giving rise to the
Account, nor made claim that the goods or services fail to
conform to the requirements of the Customer's order or
contract, nor notified Borrower to cure any default under
the Customer's order or contract;
10. the Account does not arise out of a Customer's contract or
order that by its terms forbids or makes void or
unenforceable the Borrower's assignment of the Account to
the Lender;
11. Borrower has not received any note, trade acceptance draft
or other instrument tendered in payment of the Account;
12. Borrower has not received any notice of the death of the
Customer or any partner in a Customer that is a partnership;
nor has Borrower received any notice of dissolution,
termination of existence, insolvency, business failure,
appointment of a receiver for any part of the property of,
assignment for the benefit of creditors by, or the filing of
a petition in bankruptcy or the commencement of any
proceeding under any bankruptcy or insolvency laws by or
against the Customer;
13. the Customer is not incorporated in any jurisdiction outside
the United States and is not conducting its business
primarily outside the United States;
14. Borrower is not indebted in any manner to the Customer;
<PAGE>
15. no bond has been issued or is contemplated with respect to
the goods or services furnished by the Borrower or with
respect to the project or contract for which those goods or
services were furnished; and
16. the Account is not an Ineligible Account.
In the event of any dispute, under the foregoing criteria, as to whether an
Account is, or has ceased to be, an Eligible Account, the Lender's reasonable
decision shall control.
"Encumbrance" means any mortgage, pledge, deed of trust, assignment,
-----------
security interest, hypothecation, lien or charge of any kind (including any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction).
"Environmental Laws" mean all laws relating to Hazardous Wastes, Toxic
------------------
Substances or materials that might be emitted, released or discharged into the
environment or other laws or regulations protecting the environment.
"Ending Date" means February 28, 2002.
-----------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"ERISA Affiliate" means an entity, whether or not incorporated, which is
---------------
under common control with the Borrower or any of its subsidiaries within the
meaning of Section 4001(a)(14) of ERISA, or is a member of a group which
includes the Borrower or any of its subsidiaries and which is treated as a
single employer under Sections 414(b), (c), (m), or (o) of the Code.
"Event of Default" means any one of the events specified as an "Event of
----------------
Default" under this Agreement.
"Fixed Charge Coverage Ratio" means the sum of EBITDA and rent expense,
---------------------------
less current period capitalized software development costs; divided by the sum
of: (i) the current maturities of long term debt in accordance with GAAP, (ii)
interest, (iii) rent expense, (iv) cash taxes, and (v) dividends paid.
"Funded Debt" means the sum of all obligations and indebtedness of Borrower
-----------
to Lender and all interest bearing obligations of Borrower (including
subordinated debt, if any), plus any projected obligation arising from the
acquisition of a target company based on the target company's performance (the
"Earn-out obligation"). The Earn-out obligation shall be determined by the
annualized quarterly performance of the target company based on projected
liability, as solely determined by Lender. In addition, Borrower is allowed to
offset the Earn-out
<PAGE>
obligation with cash and cash equivalent investments, in excess of Three Million
and No/100 Dollars ($3,000,000.00), which it holds during the applicable
reporting period. Equity earn-out obligations are not included in this formula.
"GAAP" means Generally Accepted Accounting Principals.
----
"General Intangibles" means collectively and includes all of the following,
-------------------
whether now owned or hereafter acquired by the Borrower: chooses in action,
causes of action, all contract rights and all other intangible property of every
kind and nature, including, without limitation, corporate or other business
records, inventions, designs, patents, patent applications, trademarks,
trademark applications, trade names, trade secrets, goodwill, registrations,
copyrights, licenses, franchises, customer lists, tax refunds, tax refund
claims, rights of claims against carriers and shippers, leases and rights to
indemnification, together with all property which is included within the
definition of "general intangibles" as set forth in the UCC.
"Governance Documents" means the Borrower's Articles or Certificate of
--------------------
Incorporation and Bylaws or other documents or agreements affecting the
Borrower's corporate governance.
"Government" means the government for the United States of America or the
----------
departments or agencies of the United States, but does not include the
government of any state or the District of Columbia or any departments or
agencies of any state or of the District of Columbia.
"Government Accounts" means all Accounts arising out of any Government
-------------------
Contract.
"Government Contracts" means all contracts with a Government, including all
--------------------
renewals, extensions, modifications, change orders and amendments thereof and
thereto.
"Guarantor" means Integral Marketing, Inc., and Intersys, Inc., or any one
---------
of them, as the context may require.
"Guaranty" means the Unconditional Guaranty or Unconditional Guarantees of
--------
even date herewith executed by Guarantors.
"Guidance Line of Credit" shall mean the Guidance Line of Credit facility
-----------------------
granted to the Borrower pursuant to this Agreement, in the original principal
amount of Six Million and No/100 Dollars ($6,000,000.00), or so much thereof as
shall be advanced or readvanced and from time to time remain unpaid, as
evidenced by the Guidance Note(s).
"Guidance Note(s)" shall have the meaning assigned to such term in Section
----------------
2.2 hereof.
"Hazardous Wastes" mean all waste materials subject to regulation under the
----------------
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
(S)(S) 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
(S)(S) 6901 et seq., or applicable state law and any other applicable federal,
state or local laws and their regulations now in force or hereafter enacted
relating to hazardous wastes.
<PAGE>
"Ineligible Accounts" shall include the following Accounts:
-------------------
1. Accounts that do not conform with the criteria set forth for
Eligible Accounts;
2. An Account owing by any account debtor for which the Lender has
deemed fifty percent (50%) or more of the account debtor's other
Accounts to be non-Eligible;
3. Accounts payable by the District of Columbia;
4. Government Accounts arising under Government Contracts which
contain an express prohibition against assignment of Borrower's
rights to Payment;
5. The last payment due on a Government Account, unless such
Government Account arises from a Government Contract which is a
"fixed price contract" (as defined in the Federal Acquisition
Regulations) which does not include any provision for progress
payments, incentive arrangements or price redetermination;
6. Contra Accounts;
7. Accounts receivable from Affiliates of subsidiaries of the
Borrower; and
8. Any Account deemed by the Lender, in the exercise of its sole and
reasonable discretion, to be an Ineligible Account because of
uncertainty as to the creditworthiness of the Customer or because
the Lender otherwise considers the collateral value thereof to
the Lender to be impaired or its ability to realize such value to
be insecure.
However, Borrower may request that Lender regard as Eligible any Account that
would otherwise be classified an Ineligible Account. Lender may grant or deny
any such request in its sole discretion.
"Intellectual Property" shall mean all patents, licenses, trade names,
---------------------
trademarks, copyrights, inventions, service marks, trademark registrations,
service mark registrations and copyright registrations, whether domestic or
foreign and applications for any of the foregoing, and all proprietary
technology, know-how, trade secrets or other intellectual property rights owned
or used by the Borrower or any subsidiary in the operation of their respective
businesses.
"Item" means any "item" as defined in Section 4-104 of the Uniform
----
Commercial Code, to include, without exclusion or limitation, checks, drafts,
money orders or other media by which Payment may be made.
"Lender" means Bank of America, N.A. and its successors and assigns.
------
<PAGE>
"Letter of Credit" means a letter of credit issued by the Lender for the
----------------
account of the Borrower under this Agreement.
"Loan" shall mean either the Revolving Loan or the Guidance Line of Credit,
----
as applicable.
"Loan Documents" mean this Agreement, the Revolving Note, the Guidance
--------------
Note(s), if any, the Guaranty, or any other document executed by the Borrower or
any other Person evidencing, securing, guaranteeing or relating to either the
Revolving Loan or the Guidance Line of Credit, as applicable.
"LOC Obligations" means, at any time, the sum of (i) the maximum amount
---------------
which is, or at any time thereafter may become, available to be drawn under
Letters of Credit then outstanding, assuming compliance with all requirements
for drawings referred to in such Letters of Credit; plus (ii) the aggregate
amount of all drawings under Letters of Credit honored by Lender but not
reimbursed.
"Maximum Revolving Commitment Amount" means Nine Million and No/100 Dollars
-----------------------------------
($9,000,000.00), or such lesser amount that Borrower may request as hereinafter
provided.
"Multiemployer Plan" means a Plan which is a multiemployer plan as defined
------------------
in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which the Borrower or any of its
----------------------
subsidiaries or any ERISA Affiliate and at least one employer other than the
Borrower or any of its subsidiaries or any ERISA Affiliate are contributing
sponsors.
"Net Worth" shall have the meaning assigned to such term in accordance with
---------
GAAP.
"Operating Account" means a demand deposit account to be established by the
-----------------
Borrower with the Lender for the Borrower's use in connection with its business
operations and with the Revolving Loan.
"Payment" or "Payments" means any check, draft, cash or any other
------- --------
remittance or credit in payment or on account of any or all of the Accounts
applied pursuant to the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA and any successor thereto.
"Person" means any individual, partnership, association, trust,
------
corporation, limited liability company or partnership, or other entity.
<PAGE>
"Plan" means any employee benefit plan (as defined in Section 3(3) of
----
ERISA) which is covered by ERISA and with respect to which the Borrower or any
of its subsidiaries or any ERISA Affiliate is (or, if such plan were terminated
at such time, would under Section 4069 of ERISA be deemed to be) an "employer"
within the meaning of Section 3(5) of ERISA.
"Prime Government Account" means a Government Account which arises from
------------------------
Borrower's performance of a Government Contract as a prime contractor to the
Government.
"Reportable Event" means a "reportable event" as defined in Section 4043 of
----------------
ERISA with respect to which the notice requirements to the PBGC have not been
waived.
"Revolving Loan" means the Revolving Loan facility made available by Lender
--------------
to Borrower in the maximum principal amount of Nine Million and No/100 Dollars
($9,000,000.00), evidenced by the Revolving Note.
"Revolving Note" means the Borrower's promissory note, of even date, in the
--------------
amount of Nine Million and No/100 Dollars ($9,000,000.00), payable to the order
of the Lender, and evidencing Borrower's obligation to repay the Revolving Loan.
"Single Employer Plan" means any Plan which is covered by Title IV of
--------------------
ERISA, but which is not a Multiemployer Plan.
"Subcontractor Government Account" means a Government Account which arises
--------------------------------
from Borrower's performance of a Government Contract as a subcontractor.
"Termination Event" means (i) with respect to any Plan, the occurrence of a
-----------------
Reportable Event or the substantial cessation of operations (within the meaning
of Section 4062(e) of ERISA); (ii) the withdrawal of the Borrower or any of its
subsidiaries or any ERISA Affiliate from a Multiple Employer Plan during a plan
year in which it was a substantial employer (as such term is defined in Section
4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the
distribution of a notice of intent to terminate or the actual termination of a
Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of
proceedings to terminate or the actual termination of a Plan by the PBGC under
Section 4042 of ERISA; (v) any event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan; (vi) the complete or partial withdrawal of the
Borrower or any of its subsidiaries or any ERISA Affiliate from a Multiemployer
Plan.
"Timing Difference Unbilled Account" means an Unbilled Account which (i)
----------------------------------
meets all criteria for an Eligible Account and (ii) will be billed within thirty
(30) days of the date the goods or services were delivered or provided by
Borrower to Customer and received and accepted by Customer.
"Toxic Substances" mean any materials which have been shown to have
----------------
significant adverse effects on human health or which are subject to regulation
under the Toxic Substances Control Act, 15 U.S.C. (S)(S) 2601 et seq.,
applicable state law, or any other applicable federal, state or local laws now
in force or hereafter enacted relating to toxic substances. "Toxic Substances"
<PAGE>
includes, but is not limited to, asbestos, polychlorinated biphenyls (PCBs),
petroleum products, and lead-based paints.
"Unbilled" means that Borrower has not submitted an invoice to a Customer
--------
requesting payment for goods or services provided by Borrower.
1.2 Accounting Terms. Accounting terms used in this Agreement but
----------------
not defined in this Agreement shall have the meanings given to them under GAAP.
1.3 Use of Defined Terms. All terms defined in this Agreement shall
--------------------
have the same defined meanings when used in any certificate, report or other
document made or delivered in connection with this Agreement, unless otherwise
set forth therein.
1.4 UCC Terms. Terms that incorporate definitions provided in the
---------
Uniform Commercial Code ("UCC") of a particular state have the meanings ascribed
to them in the Uniform Commercial Code as adopted in that state. Terms not
otherwise defined herein and not incorporating a definition under the Uniform
Commercial Code of any particular state, but which are defined in the Uniform
Commercial Code as adopted by the Commonwealth of Virginia, shall have the
meanings ascribed to them under the Uniform Commercial Code as adopted by the
Commonwealth of Virginia.
ARTICLE 2. LOAN.
----------------
2.1 Revolving Line of Credit. The Lender agrees to extend the
------------------------
Revolving Loan to Borrower, subject to the terms and conditions of this
Agreement. Until the Ending Date, Borrower may borrow, repay and reborrow
Advances in accordance with this Agreement.
a. Amount of Credit. The maximum outstanding aggregate principal
----------------
amount of all Advances under the Revolving Loan shall not at any time exceed the
(i) lesser of the Maximum Revolving Commitment Amount or the Borrowing Base,
------
less (ii) any LOC Obligations.
- ----
b. Pre-Approval for acquisitions. Borrower is pre-approved to make
-----------------------------
acquisitions so long as:
(1) Total cash consideration for any one or all acquisitions do not
exceed Fifteen Million and No/100 Dollars ($15,000,000.00). Borrower will
maintain at least Three Million and No/100 Dollars ($3,000,000.00) cushion for
working capital advances following the cash advances required to complete the
transaction.
(2) On a proforma basis, Borrower meets all covenants as outlined
in this Agreement.
(3) The target company is within the same general line of
business as the Borrower.
(4) The target company may not be an unwilling participant in the
<PAGE>
acquisition.
(5) The target company is located within the United States of
America.
(6) The target company's sellers will not gain more than a 20%
ownership stake in the Borrower as a result of the transaction.
(7) The target company is added as a Borrower within thirty (30)
days of completion of the transaction, to the satisfaction of the Lender. No
assets of the target company may be used to calculate the Borrowing Base until
such time that the target company has been added as a Borrower.
c. Mandatory Prepayments. If at any time the outstanding
---------------------
principal balance under the Revolving Note exceeds the maximum amount of credit
then available under the Revolving Loan, Borrower shall make an immediate
principal payment on the Revolving Loan in an amount sufficient to reduce the
outstanding principal balance to the amount permitted under this Agreement.
d. Procedure for Advances. Borrower may request Advances by
----------------------
telephone through its designated employee or employees as hereinafter provided.
Each Advance request must be for more than Twenty-five Thousand and No/100
Dollars ($25,000.00) and received by Lender not later than 1:00 p.m. (Eastern
Standard time) on the date the Advance is to be made and must specify the amount
of the Advance. Lender shall deposit the Advance into Borrower's Operating
Account with Lender if Borrower is entitled to the Advance subject to the terms
and conditions of this Agreement.
e. Letter of Credit Subfacility. Lender shall issue Letters
----------------------------
of Credit for the account of the Borrower from time to time upon request from
the Closing Date until the Ending Date, subject to the following terms and
conditions:
(1) the aggregate amount of LOC Obligations shall at no time exceed
One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00);
(2) any request for a Letter of Credit to be issued must be
delivered and received by Lender not later than five (5) business days prior to
the date that Borrower wishes to have the Letter of Credit issued;
(3) no Letter of Credit shall have an original expiration date more
than one year from the date of issuance or extending beyond the Ending Date;
(4) the form of each Letter of Credit must be satisfactory to the
Lender, in its sole judgment. At Lender's option, Letters of Credit shall be
subject to The Uniform Customs and Practice for Documentary Credits, as
published as of the date of issue by the International Chamber of Commerce
(Publication No. 500 or the most recent publication, the "UCP");
(5) issuance of the Letter of Credit shall not cause the amount
<PAGE>
outstanding under the Revolving Loan to exceed the Borrowing Base, taking into
account the reduction in the Borrowing Base that would result from the issuance
of the Letter of Credit;
(6) issuance of the Letter of Credit shall not cause the sum of:
(i) LOC Obligations; plus (ii) the principal amount outstanding under the
Revolving Note to exceed the Maximum Revolving Commitment Amount;
(7) Lender shall not be required to issue any Letter of Credit if
any circumstance exists that would entitle Lender not to honor a request for an
Advance under the Revolving Loan;
(8) Lender shall promptly notify the Borrower of any drawing under
any Letter of Credit, and the Borrower shall immediately reimburse Lender for
the amount of the drawing. The Borrower's obligation to reimburse the Lender for
any drawing under a Letter of Credit shall be absolute and unconditional,
irrespective of any rights of set-off, counterclaim or defense to payment the
Borrower may claim or have against the Lender, the beneficiary of the Letter of
Credit or any other Person;
(9) Unless the Borrower makes reimbursement from another source on
the day of the drawing under any Letter of Credit, the Borrower shall be deemed
to have requested an Advance under the Revolving Loan in the amount of the
drawing, and (i) Lender, at its option, may make such an Advance and apply the
proceeds of the Advance to satisfy the Borrower's obligation to reimburse Lender
for the amount drawn on the Letter of Credit; and (ii) the Advance shall be
repayable, with interest, in accordance with the terms and conditions of the
Revolving Note; and
(10) no Event of Default has occurred and remains uncured, and no
event has occurred or circumstance exists which, with the passage of time or the
giving of notice or both, would constitute an Event of Default.
f. Repayment of Revolving Loan. Borrower promises to repay the
---------------------------
Revolving Loan, with interest, at the time and in the manner and in accordance
with the terms provided in the Revolving Note. Borrower authorizes Lender to
effect payment of sums due under the Revolving Note by means of debiting
Borrower's Operating Account. This authorization shall not affect the obligation
of Borrower to pay such sums when due, without notice, if there are insufficient
funds in Borrower's Operating Account to make such payment in full on the due
date thereof, or if Lender fails to debit Borrower's Operating Account.
g. Use of Revolving Loan Proceeds. The proceeds of the Revolving
------------------------------
Loan shall be used for working capital, letter of credit issuances, to
facilitate certain acquisitions and to finance the performance of Government
Contracts.
h. Revolving Loan Fees. Borrower promises to pay Lender the
-------------------
following fees in consideration of entering into this Agreement. These fees are
in addition to interest payable under the Revolving Note:
(1) an annual commitment fee of .15%, payable in equal quarterly
installments over the term of the Revolving Loan based on the Maximum
Revolving
<PAGE>
Commitment Amount, with the first payment payable on the Closing
Date.
(2) a unused fee based per annum on the unused portion of the
Maximum Revolving Commitment Amount, calculated in accordance with the
following pricing grid:
<TABLE>
<CAPTION>
Total Funded Debt to EBITDA Unused Fee
<S> <C>
2.75:1 Less than Pricing Ratio (hereinafter defined) 35
1.5:1 Less than Pricing Ratio Less than = 2.75:1 30
1.0:1 Less than Pricing Ratio Less than = 1.5:1 25
Pricing Ratio Less than = 1.0:1 20
</TABLE>
and payable quarterly, in arrears, commencing on the first day following
the end of the first fiscal quarter of Borrower after the date of this
Agreement. Pricing Ratio is Funded Debt divided by Net Income plus
Interest Expense, Taxes, Depreciation, and Amortization minus current
period Capitalized Software Development Costs. The unused fee shall be
determined by applying a per-diem rate of interest based on the interest
rate set forth herein, calculated on the basis of a 360 day year, to the
actual number of days that the portion of the Maximum Revolving Commitment
Amount is unused.
(3) The fee for each Letter of Credit issued shall be an amount
equal to 1.5% per draw to be paid in advance. In addition, Borrower shall
reimburse Lender for any other fees incurred by Lender in connection with
each Letter of Credit. The Lender is authorized to make an Advance on
behalf of Borrower in an amount equal to all sums required to be paid by
Borrower to Lender in respect of any such Letter of Credit pursuant to the
terms of the Letter of Credit agreement (including the fee set forth
above), provided that the Lender may, but shall not be obligated to make
such Advance if, after the disbursement thereof, the aggregate principal
amount on the Revolving Loan then outstanding would exceed the Maximum
Revolving Commitment Amount. The provisions of the Letter of Credit
agreement are deemed incorporated in this Agreement by this reference and
shall be binding upon the Lender and Borrower as if fully set forth herein.
If a conflict exists between the terms of the Letter of Credit agreement
and any other Loan Document, the terms of the Letter of Credit agreement
shall control with respect to any Letter of Credit issued pursuant to such
Letter of Credit agreement but not as to other matters governed by this
Agreement or such Loan Document.
(4) The Lender reserves the right to perform field examinations
at any time, in its sole discretion. Each field examination will be at the
Borrower's expense.
<PAGE>
(5) The Lender reserves the right to conduct a collateral
business audit of a target company when the acquisition of such target
company does not meet the pre-approval characteristics noted in subsection
(b) of this Section. The cost of such an audit shall be the responsibility
of the Borrower; provided, that the cost of said collateral business audit
shall not exceed Seven Thousand Five Hundred and No/100 Dollars
($7,500.00), unless agreed upon in advance by the Lender and the Borrower.
2.2 Guidance Line of Credit. The Lender agrees to extend to Borrower
-----------------------
a Guidance Line of Credit, which shall be in the original principal amount of
Six Million and No/100 Dollars ($6,000,000.00), or so much thereof as shall be
advanced or readvanced and from time to time remain unpaid, and bear interest
and be payable in accordance with the terms of certain Guidance Line of Credit
Note(s) (together with all renewals, extensions, modifications and substitutions
thereof or therefor, the "Guidance Note(s)"). The form of such Guidance Note(s)
shall be satisfactory to Lender. It is understood and agreed that advances
under the Guidance Line of Credit shall be in the sole discretion of the Lender,
and the Lender shall have no obligation to advance sums in connection with the
Guidance Line of Credit unless the Lender, in its sole discretion, desires to do
so (even if the Borrower is in compliance with all terms and conditions of this
Agreement and the other Loan Documents). Borrower promises to pay Lender, in
addition to the interest due under the Guidance Note(s), a commitment fee of
.35% payable in advance of each draw under the Guidance Note(s), based on the
amount of each draw under the Guidance Note(s).
ARTICLE 3. CONDITIONS PRECEDENT TO LOAN.
----------------------------------------
3.1 Conditions Precedent to Initial Advance. The obligation of the
---------------------------------------
Lender to make any Advance under either the Revolving Loan or the Guidance Line
of Credit, as applicable, is subject to the satisfaction (in the sole judgment
of the Lender) of the following conditions on or before the Closing Date:
a. Representations and Warranties; Compliance. All
------------------------------------------
representations and warranties made by Borrower in or in connection with this
Agreement or any of the other Loan Documents or otherwise made in writing in
connection with this Agreement shall be true and correct on the Closing Date,
and the Borrower shall have performed all of the promises or undertakings under
this Agreement and satisfied all of the conditions of this Agreement that the
Borrower was required to perform or to satisfy as of the Closing Date.
b. Documents Concerning the Borrower. Borrower
---------------------------------
shall deliver to the Lender copies of all documents requested by the Lender,
including a complete, correct and current copy of the Borrower's Articles of
Incorporation, certified by the Secretary of State of the Borrower's state of
incorporation; a complete, correct and current copy of its Bylaws, certified by
Borrower's corporate secretary; a complete, correct and current copy of all
resolutions of Borrower's Board of Directors authorizing the execution, delivery
and performance of this Agreement and of the other Loan Documents, certified by
Borrower's corporate secretary; and appropriate certificates of incumbency for
those officers of Borrower executing this Agreement or any of the other Loan
Documents, certified by Borrower's corporate secretary and president. In
addition, the following documents and materials shall have been delivered to the
Lender, and must be satisfactory to the Lender in form and substance:
<PAGE>
(1) All supporting documentation with regard to the Borrower, the
Revolving Loan and the Guidance Line of Credit as the Lender may require;
(2) Such additional information, instruments, opinions,
documents, certificates and reports relating to the Borrower or the
Collateral as the Lender may deem necessary;
(3) Such lien releases or termination statements as Lender may
deem necessary to remove any Encumbrances on the Collateral; and
(4) Results of a field examination conducted by the Lender or by
a certified public accounting firm engaged by the Lender.
c. Executed Notes, Guaranty and Loan Documents. Borrower shall
-------------------------------------------
deliver to the Lender, fully executed: this Agreement, the Revolving Note, the
Guidance Note(s), the Guaranty, Assignments of Government Contracts and such
other documents, instruments and certificates as the Lender may reasonably
require, in form and substance satisfactory to the Lender. All taxes, fees and
charges with respect to the preparation, filing and recording of the Loan
Documents shall have been paid by Borrower. The Lender shall have received such
landlord and mortgagee waivers as it shall request with respect to any landlord
or mortgagee which may claim or have an interest in any of the Collateral.
d. Financing Statements. All Financing Statements deemed necessary
--------------------
by the Lender to perfect its security interest in the Collateral or any other
collateral securing the Loan.
e. Operating Account. The Borrower shall establish the Operating
-----------------
Account with the Lender.
f. Compliance with Covenants. Borrower shall establish to Lender's
-------------------------
satisfaction that the Advance will not cause Borrower to cease to comply with
Borrower's financial covenants as set forth hereinafter.
g. Borrowing Base Certificate. Borrower shall deliver to the Lender
--------------------------
a Borrowing Base Certificate dated as of the Closing Date with supporting
schedules attached thereto, including without limitation, current Accounts
Receivable and Accounts Payable reports.
3.2 Future Advances. The obligation of the Lender to make any Advance under
---------------
the Revolving Loan subsequent to the Closing Date is further conditional on:
a. the Lender's determination, in its sole and reasonable judgment,
that the conditions precedent to the first Advance are satisfied as of the
Borrowing Date for the subsequent Advance;
b. the Lender's receipt of a Borrowing Base Certificate, executed
by a duly authorized officer of the Borrower with supporting updated schedules
attached thereto;
<PAGE>
c. all representations and warranties contained herein shall be
true and correct in all material respects at the date of such disbursement;
d. the Lender's determination, in its sole discretion, that no
material adverse change has occurred in the financial condition of the Borrower
from that disclosed in the most recent financial statements furnished to the
Lender prior to the Closing Date; and
e. no Event of Default has occurred and remains uncured, and no
event has occurred or circumstance exists which, with the passage of time or the
giving of notice or both, would constitute an Event of Default.
3.3 Lender's Right To Rely On Communications. Borrower shall provide
----------------------------------------
the Lender with written notice designating employees or agents of the Borrower
who are authorized to communicate with Lender on the Borrower's behalf regarding
Advances and other matters pertaining to this Agreement. Until further notice,
Borrower designates Gary Prince and Elaine M. Parfitt, or any one of them, as
individuals authorized to communicate with the Lender. The Borrower authorizes
the Lender to accept, rely upon, act upon and comply with, any verbal or written
instructions, requests, confirmations and orders of any employee or agent so
designated by the Borrower. The Borrower acknowledges that the transmission
between the Borrower and the Lender of any such instructions, requests,
confirmations and orders involves the possibility of errors, omissions, mistakes
and discrepancies and agrees to adopt such internal measures and operational
procedures as Borrower deems necessary to protect its interests. The Borrower
hereby assumes all risk of loss arising out of: (i) the Lender's acceptance,
reliance on, compliance with or observation of any such instructions, requests,
confirmations or orders; and (ii) any such errors, omissions, mistakes and
discrepancies, except those caused by the Lender's gross negligence or willful
misconduct. Borrower agrees to indemnify Lender and to hold Lender harmless for
and from all claims, demands, suits, actions, judgments, decrees, losses or
damages, including attorneys' fees and expenses, that Lender may incur as a
result of the foregoing events or occurrences for which the Borrower has assumed
the risk of loss.
ARTICLE 4. SECURITY.
--------------------
4.1 Grant of Security Interest. As security for (i) the payment of
--------------------------
the Loan, and any other extensions of credit, loans, letters of credit or other
financial accommodations now or hereafter made by the Lender for the benefit of
the Borrower, and (ii) for any other liability or obligation of Borrower to
Lender whether now or hereafter existing, of every kind and description, whether
or not evidenced by notes or other instruments, and whether or not such
liability or obligations are direct or indirect, fixed or contingent, liquidated
or unliquidated, the Borrower hereby assigns, grants and conveys to the Lender a
security interest in the Collateral. In addition, except as prohibited by law,
Borrower grants to Lender a security interest in all accounts of Borrower with
Lender or any of Lender's Affiliates. The Borrower further agrees that the
Lender shall have in respect of the Collateral all of the rights and remedies of
a secured party under the Uniform Commercial Code, other applicable law and this
Agreement. The Borrower covenants and agrees to execute and deliver such
financing statements and other instruments and filings or perform any and all
acts as are necessary in the opinion of the Lender to perfect, maintain and
protect the security interest hereby granted. The Borrower shall not
<PAGE>
dispose of the Collateral, or any part thereof, other than in the ordinary
course of its business or as otherwise may be permitted by this Agreement.
4.2 Certain Rights of the Lender. The Lender shall have the right,
----------------------------
but not the obligation, (i) to pay any taxes or levies on the Collateral or any
costs to repair or to preserve the Collateral; and (ii) to cure any defaults by
Borrower on contracts by the Borrower intended to give rise to Accounts. Such
payments and the costs of curing such defaults shall constitute Advances under
either the Revolving Note or the Guidance Line of Credit, as applicable, and
shall be secured pursuant to this Agreement notwithstanding that such Advances
may cause the unpaid principal balance of the Loan to exceed the Maximum
Revolving Commitment Amount.
4.3 Financing Statements. At the request of the Lender, Borrower
--------------------
will join with the Lender in executing financing statements, continuation
statements and other documents with respect to the Collateral pursuant to the
Uniform Commercial Code or otherwise, in form satisfactory to the Lender, and
Borrower will pay the cost of filing the same in all public offices wherever the
Lender deems filing to be necessary or desirable. Borrower agrees that a
carbon, photographic, photostatic or other reproduction of this Agreement or of
a financing statement is sufficient as a financing statement; provided, however,
that it shall not limit the obligations of Borrower as previously set forth
herein. Borrower grants the Lender the right, at the Lender's option, to file
any or all such financing statements, continuation statements and other
documents pursuant to the Uniform Commercial Code and otherwise, without
Borrower's signature, and irrevocably appoints the Lender as Borrower's
attorney-in-fact to execute any such statements and documents in Borrower's name
and to perform all other acts which the Lender deems appropriate to perfect and
to continue the security interests conferred by this Agreement.
4.4 Records of Collateral; Information. Borrower at all times will
----------------------------------
maintain accurate books and records covering the Collateral. Borrower
immediately will mark all books and records with an entry showing the absolute
assignment of and granting of a security interest in all Collateral to Lender,
and hereby grants the Lender the right to audit the books and records of
Borrower relating to Collateral at any time and from time to time. Borrower
shall (i) promptly furnish the Lender with any information with respect to
Collateral requested by Lender; (ii) allow the Lender or its representatives to
inspect the Collateral, at any time and wherever located, and to inspect and
copy, or furnish the Lender or its representatives with copies of all records
relating to the Collateral; (iii) furnish the Lender or its representatives such
information as the Lender may request to identify the Collateral, at the time
and in the form requested by Lender; and (iv) deliver upon request to Lender
shipping and delivery receipts evidencing the shipment of goods and invoices
evidencing the receipt of the Collateral and payment for the Collateral.
4.5 No Release. No injury to the Collateral, loss or destruction of
----------
the Collateral, failure to perfect or to continue the perfection of Lender's
security interest in the Collateral, or release of Lender's security interest in
the Collateral, or any part of it, shall relieve Borrower of any obligation
under this Agreement or under any of the other Loan Documents. Borrower
expressly waives all defenses based on suretyship or impairment of collateral,
and shall not be released or discharged of any obligation under the Loan
Documents, in whole or in part, by Lender's failure to protect or preserve the
Collateral. No Person, in deciding to enter into this Loan Agreement, has
relied on the execution of this Loan Agreement or the granting of a
<PAGE>
security interest in Collateral by any other Person. Each Person comprised by
the term Borrower waives notice of any change in financial condition of any
Person liable for the Loans or any part thereof, and agrees that maturity of the
Loans or any part thereof may be accelerated, extended or renewed one or more
times by Lender in its discretion, without notice to the Person and without
affecting Lender's security interest in the Collateral. Lender shall not be
required to bring any action against any other Person or to resort to any other
security or to any balance of any deposit account as a condition of enforcing
its rights against any of the Collateral.
4.6 Assignment of Payments Under Certain Government Contracts and
-------------------------------------------------------------
Government Accounts. Lender may, in its sole discretion, require that Borrower
- -------------------
execute and deliver to the Lender specific Assignments of Payments due or to
become due with respect to any Government Account designated by the Lender.
Borrower shall execute and deliver any and all documents and take any and all
steps necessary to provide the Lender with an Assignment. The separate
Assignment to the Lender of a right to payment under specific Government
Contracts, as contemplated under this Section, shall not be deemed to limit the
Lender's security interest to Payments under those particular Government
Contracts and the related Government Accounts, but rather the Lender's security
interest, as stated above, shall extend to Payments under any and all Government
Contracts and the related Government Accounts and proceeds thereof, now or
hereafter owned or acquired by Borrower.
4.7 Additional Remedy for Failure to Assign Payments. Borrower
------------------------------------------------
acknowledges that the Lender will be irreparably harmed if Borrower fails to
assign Payments due or to become due under any Government Contract when required
by this Agreement, and that the Lender shall have no adequate remedy at law.
Therefore, the Borrower agrees that the Lender shall be entitled, in addition to
all other remedies allowed by law or under this Agreement, to injunctive or
other equitable relief to compel Borrower's compliance with the provisions of
this Agreement requiring the Borrower to assign Payments due or to become due
under any Government Contract.
4.8 Indemnification. In any suit, proceeding or action brought by or
---------------
against the Lender relating to the Collateral, the Borrower will save, indemnify
and keep the Lender harmless from and against all reasonable expense, loss or
damage suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction of liability whatsoever of any obligor thereunder, arising out of a
breach by the Borrower of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of such
obligor or its successors from the Borrower, and all such obligations of the
Borrower shall be and remain enforceable against and only against the Borrower
and shall not be enforceable against the Lender. The foregoing obligation of
the Borrower to indemnify the Lender shall survive the payment of the Loans and
the termination of this Agreement but shall not extend to any suit, proceeding
or action arising out of the Lender's gross negligence or willful misconduct.
<PAGE>
ARTICLE 5. BORROWER'S REPRESENTATIONS AND WARRANTIES.
-----------------------------------------------------
To induce the Lender to enter into this Agreement and to extend the
Revolving Loan and the Guidance Line of Credit to Borrower, Borrower makes the
following representations and warranties to the Lender. These representations
and warranties are continuing, and each request for an Advance shall be deemed
to be an affirmation of these representations and warranties are true in all
material respects as of the date of the most recent Borrowing Base Certificate
submitted prior to the request.
5.1 Corporate Authority; Subsidiaries.
---------------------------------
a. Borrower (i) is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Maryland, (ii) is qualified
to do business as a foreign corporation and is in good standing in all
jurisdictions where its activities or ownership of property require such
qualification, and (iii) has the full and unrestricted power and authority,
corporate and otherwise, to own, operate and lease its properties, to carry on
its business as currently conducted, to execute and deliver and perform the Loan
Documents, to incur the obligations provided for herein and therein, and to
perform the transactions contemplated hereby and thereby (including without
limitation, the creation of the lien and security interest in favor of the
Lender in the Collateral, the Assignments and any other Collateral required by
this Agreement), all of which have been duly and validly authorized by all
proper and necessary action (all of which actions are in full force and effect).
Borrower has no subsidiaries other than those previously disclosed in writing to
the Lender. The Borrower maintains its chief executive office at the following
location:
Integral Systems, Inc.
5000 Philadelphia Way
Suite A
Lanham, Maryland 20706
b. Integral Marketing, Inc., as a guarantor, (i) is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Maryland, (ii) is qualified to do business as a foreign corporation and
is in good standing in all jurisdictions where its activities or ownership of
property require such qualification, and (iii) has full corporate power and
authority to own its assets, to transact the business in which it is now engaged
or in which it is proposed to be engaged, and to execute, deliver and perform
the Guaranty.
c. Intersys, Inc., as a guarantor, (i) is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, and (ii) has full corporate power and authority to execute, deliver
and perform the Guaranty.
5.2 Approvals. Borrower has provided Lender with a true and accurate
---------
certificate of a Resolution of the Borrower's Board of Directors authorizing the
loan transactions contemplated by this Agreement. No further approval, consent
or other action by the stockholders of Borrower, by any governmental authority
or by any other Person is or will be necessary to permit the valid execution,
delivery or performance by Borrower of this Agreement or any of the other Loan
Documents.
<PAGE>
5.3 Binding Effect, No Violations. Each of the Loan Documents, upon its
-----------------------------
execution and delivery, will constitute a legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms. The
execution, delivery and performance of the Loan Documents will not (i) violate,
conflict with or constitute a default (with due notice, lapse of time or both)
under any law, regulation, order or any other requirement of any court,
tribunal, arbitrator or governmental authority, any terms of the Articles or
Certificate of Incorporation or Bylaws of Borrower, or any contract, agreement
or other arrangement binding upon or affecting Borrower or any of its
properties, or (ii) result in the creation, imposition or acceleration of any
indebtedness or any Encumbrance of any nature upon, or with respect to, Borrower
or any of its properties, except such Encumbrances in favor of Lender.
5.4 Litigation. Except as set forth in Exhibit D attached hereto and made
---------- ---------
a part hereof, previously disclosed to the Lender in writing, there is no claim,
litigation, proceeding or investigation pending, threatened or reasonably
anticipated against or affecting Borrower, its properties or business, this
Agreement, any of the other Loan Documents, or any of the transactions
contemplated hereby or thereby, before or by any court, tribunal, arbitrator or
governmental authority, and there is no possibility of any judgment, liability
or award which reasonably may be expected to result in any material adverse
change in the business, operations, prospects, properties or assets or
condition, financial or otherwise, of Borrower. Borrower is not in default with
respect to any judgment, order, writ, injunction, decree, rule, award or
regulation of any court, governmental instrumentality or agency, commission,
board, bureau, arbitrator or arbitration panel.
5.5 Title to and Condition of Assets. Except as previously disclosed to
--------------------------------
the Lender by Borrower in writing, the Borrower has good, valid and marketable
title to all of its properties and assets (whether real or personal), and there
exist no Encumbrances on any of Borrower's properties or assets, including
without limitation, the Collateral. All personal property of Borrower which is
necessary for Borrower's operations is in good operating condition and repair,
and is suitable and adequate for the uses for which it is being used. Upon the
execution and delivery of this Agreement, and upon the filing of financing
statements or the Lender's taking possession of the Collateral, as the case may
be, the Lender will have a good, valid and perfected first priority lien and
security interest in the Collateral, subject to no Encumbrance in favor of any
other Person.
5.6 Loan Application. The statements made and the documents delivered by
----------------
Borrower to the Lender in connection with its application for the Revolving Loan
and the Guidance Line of Credit, and in connection with this Agreement and the
other Loan Documents are true, correct and complete, in all material respects,
omit no material facts, are not misleading, and present fairly the condition
(financial or otherwise) of Borrower.
5.7 No Change. No change in the business, operations, properties or
---------
condition (financial or otherwise) of Borrower or Guarantor, or any other event,
has occurred since the date of the most recent financial statements submitted to
the Lender by Borrower, which change might adversely affect the ability of
Borrower to perform or comply with all terms, conditions and agreements to be
performed or complied with by Borrower under this Agreement or under any of the
other Loan Documents, or to perform the transactions contemplated by this
<PAGE>
Agreement or the other Loan Documents.
5.8 Taxes. Borrower has timely filed all tax returns and reports required
-----
by any governmental authority to be filed by Borrower, and such returns and
reports are true and correct. Borrower has paid all taxes, assessments and
other government charges imposed upon it or its income, profits or properties,
or upon any part thereof, other than those presently payable without penalty or
interest and Borrower has timely filed all claims for refunds to which Borrower
is entitled. The amounts reserved as a liability for income and other taxes
payable in the most recent financial statements of Borrower provided to the
Lender are sufficient for the payment of all unpaid federal, state, county and
local income, excise, property and other taxes, whether or not disputed, of
Borrower accrued for or applicable to the period and on the dates of such
financial statements and all years and periods prior thereto, and for which
Borrower may be liable in its own right or as a transferee of the assets of, or
as successor to, any other Person.
5.9 No Event of Default. As of the date this representation and warranty
-------------------
is made (or remade), no Event of Default, and no event which with notice, lapse
of time or other condition would constitute an Event of Default, has occurred
and is continuing.
5.10 Compliance with Laws, Governance Documents and Agreements. Borrower
---------------------------------------------------------
has complied and is in full compliance in all material respects with all
applicable laws, ordinances, rules, regulations, orders and other requirements
of any governmental authority or arbitrator, and with all terms and conditions
of its Governance Documents, and with each agreement binding upon or affecting
Borrower or any of its properties. Borrower is not in default with respect to
any Debt. Borrower will take all necessary actions to remain in full compliance
with such laws, ordinances, rules, regulations, orders and any other
requirements, the Governance Documents and all other agreements. Should
Borrower be deemed by any governmental authority or deem itself to be in
violation of any relevant law, ordinance, rule, regulation, orders or other
requirement, Governance Document or agreement, Borrower shall notify the Lender
promptly of such violation and take all necessary remedial actions. Without
limiting the generality of the foregoing, Borrower represents to Lender that:
(1) Borrower has previously disclosed to Lender all of Borrower's activities
that involve the use, manufacturing, storage, disposal, emission, discharge,
generation or transportation of Hazardous Wastes, Toxic Substances or other
materials regulated by Environmental Laws; (2) Borrower has complied and is in
full compliance with all Environmental Laws; (3) Borrower maintains in full
force and effect all permits required by Environmental Laws; and (4) there
exists no pending or threatened litigation, order, ruling, notice or
investigation regarding the Borrower's use, manufacturing, storage, disposal,
emission, discharge generation or transportation of Hazardous Wastes or Toxic
Substances or regarding any violation or alleged violation of any Environmental
Laws.
5.11 Licenses and Contracts. All franchises, licenses, trademarks, trade
----------------------
names, copyrights, patents, permits, certificates, consents, approvals,
authorizations, agreements and contracts necessary to operate Borrower's
business as it currently is being operated and to own or lease Borrower's
property have been obtained, are in effect, have been complied with in all
material respects by Borrower, are free from challenge, and to the best of
Borrower's knowledge are fully assignable to the Lender for the purpose of
securing the Revolving Loan and the Guidance Line of Credit. Borrower has no
knowledge and has not received any notice to the effect that any product it
manufactures or sells, or any service it renders, or any process, method,
<PAGE>
know-how, trade secret, part or material it employs in the manufacture of any
product it makes or sells or any service it renders, or the marketing or use by
it or another of any such product or service, may infringe any trademark, trade
name, copyright, patent, trade secret or legally protected right of any other
Person.
5.12 Intellectual Property. The Borrower owns all right, title and
---------------------
interest in and to all Intellectual Property used in and material to the
operation of its business or, for such Intellectual Property that is not owned,
possesses adequate licenses or other legally enforceable rights to use the same.
The Borrower has no reason to believe that any valid basis exists upon which a
claim adversely affecting any such Intellectual Property may be asserted against
the Borrower or any subsidiary. To the best knowledge of the Borrower, no
Person is infringing upon the Intellectual Property used by the Borrower or any
subsidiary material to the operation of their respective businesses. The
Borrower has taken appropriate steps to protect the secrecy, confidentiality and
value of its and all subsidiaries' rights in and to such Intellectual Property
and to prevent others from using such Intellectual Property without consent.
5.13 Disclosure. No representation or warranty of Borrower contained in
----------
this Agreement or any of the Loan Documents and no written statement of fact
furnished or to be furnished by Borrower to the Lender pursuant to this
Agreement or any of the Loan Documents, when viewed together, contains or will
contain any untrue statement of a fact material to the financial condition of
Borrower, or omits or will omit to state any material fact necessary in order to
make the statements contained herein or therein, or furnished herewith or
therewith, not misleading.
5.14 Trade Name; Merger. During the five years immediately preceding the
------------------
date of this Agreement, neither the Borrower nor any predecessor of the Borrower
has used any corporate or fictitious name other than its current corporate name.
Borrower utilizes no trade names in the conduct of its business, except as
disclosed in writing to the Lender, and has not changed its name, or been the
surviving entity in a merger or acquired any business.
5.15 Payment of Employees and Subcontractors. Borrower is not in default
---------------------------------------
with regard to the payment of any employee or subcontractor.
5.16 ERISA Borrower is in compliance with Borrower's obligations under
-----
ERISA. Without limiting the generality of the foregoing:
a. During the five-year period prior to the date on which this
representation is made or deemed made; (i) no Termination Event has occurred,
and, to the best of the Borrower's knowledge, no event or condition has occurred
or exists as a result of which any Termination Event could reasonably be
expected to occur, with respect to any Plan; (ii) no "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA and Section 412 of
the Code, whether or not waived, has occurred with respect to any Plan; (iii)
each Plan has been maintained, operated and funded in compliance with its own
terms and in material compliance with the provisions of ERISA, the Code, and any
other applicable federal or state laws; and (iv) no lien in favor of the PBGC or
a Plan has arisen or is reasonably likely to arise on account of any Plan.
<PAGE>
b. The actuarial present value of all "benefit liabilities"
under each Single Employer Plan (determined within the meaning of Section
401(a)(2) of the Code, utilizing the actuarial assumptions used to fund such
Plans), whether or not vested, did not, as of the last annual valuation date
prior to the date on which this representation is made or deemed made, exceed
the current value of the assets of such Plan allocable to such accrued
liabilities.
c. Neither the Borrower nor any of its subsidiaries nor any
ERISA Affiliate has incurred, or, to the best of the Borrower's knowledge, are
reasonably expected to incur any withdrawal liability under ERISA to any
Multiemployer Plan or Multiple Employer Plan. Neither the Borrower, any of its
subsidiaries nor any ERISA Affiliate has received any notification that any
Multiemployer Plan is in reorganization (within the meaning of Section 4241 of
ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been
terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan
is, to the best knowledge of the Borrower, reasonably expected to be in
reorganization, insolvent or terminated.
d. No prohibited transaction (within the meaning of Section 406
of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has
occurred with respect to a Plan which has subjected or may subject the Borrower
or any of its subsidiaries or any ERISA Affiliate to any liability under
Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or
under any agreement or other instrument pursuant to which the Borrower or any of
its subsidiaries or any ERISA Affiliate has agreed or is required to indemnify
any Person against any such liability.
5.17 Supporting Documentation is Correct. All documents, financial
-----------------------------------
statements and other matters delivered to the Lender pursuant to this Agreement
are and will be true and correct in all material respects.
5.18 Regarding the Representations and Warranties. The representations
--------------------------------------------
and warranties made in this Agreement and all of the other Loan Documents (i) do
not and will not contain, at the time furnished, any untrue statement of a
material fact; and (ii) do not and will not omit to state any material fact
necessary in order to make the statements contained therein not misleading.
5.19 Representations and Warranties Deemed Redated and Remade. The
--------------------------------------------------------
representations and warranties made in this Agreement and all of the other Loan
Documents are made as of the date of this Agreement and shall be deemed remade
and redated as of the date of each advance of proceeds under any of the Loans
and date of issuance of each Letter of Credit.
5.20 Government Contracts. Borrower is not currently in default as to the
--------------------
terms of any Government Contract, and no Government Contract has been canceled
or terminated by the Government in the past ten years. No Government Contract
for which Payments have been assigned to the Lender as Collateral is dependent
on appropriations, except as previously disclosed to the Lender in writing.
5.21 No Debarment. Borrower is not subject to any pending or threatened
------------
debarment proceedings.
<PAGE>
5.22 Assignment of Payments. Borrower has the right to assign to Lender
----------------------
all Payments due or to become due under each of Borrower's Government Contracts,
and there exists no uncancelled prior Assignment of Payments under any of
Borrower's Government Contracts.
5.23 Assignment of Claims Act. In the event that Lender receives a
------------------------
direct assignment of Payments under a Government Contract, Borrower shall be in
compliance with any and all of the requirements of the Assignment of Claims Act,
where such statutes are applicable to any Government Contract, and shall take
all such other action as may be necessary to facilitate the assignment and
perfection of the Lender's interest in Payments under any Government Contract.
ARTICLE 6. BORROWER'S AFFIRMATIVE COVENANTS.
---------------------------------------------
Until all obligations of Borrower under this Agreement and the other Loan
Documents are paid in full and performed, Borrower covenants and agrees that it
shall:
6.1 Payment of Loan. Punctually make the payments on the Loan at the
---------------
times and places and in the manner specified in either the Revolving Note or the
Guidance Note(s), as applicable.
6.2 Corporate Existence. Preserve, maintain and keep in full force and
-------------------
effect its corporate existence and good standing in the jurisdiction of its
incorporation.
6.3 Corporate Rights and Franchises; Qualification; Orderly Conduct of
------------------------------------------------------------------
Business. Preserve, maintain and keep in full force and effect all franchises,
- --------
licenses, permits, certificates, consents, approvals, authorizations, agreements
and contracts material to the operation of Borrower's business as it currently
is being conducted, whether now existing or hereafter granted to or obtained by
Borrower; qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is necessary or desirable in view of
its activities and ownership of property; continue to engage in a business of
the same general type as now conducted by it; and conduct such business in an
orderly, efficient and regular manner consistent with the conduct of its
business prior to the date of this Agreement.
6.4 Taxes, Charges and Obligations. Pay and discharge all taxes,
------------------------------
assessments and governmental charges or levies imposed upon it or upon its
income, profits, properties or any part thereof, prior to the date on which
penalties attach thereto, as well as all claims which, if unpaid, might become
an Encumbrance upon any properties of Borrower, and pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all of the indebtedness and other obligations of whatever nature of
Borrower; however, Borrower shall not be required to pay any such tax,
assessment, charge, levy, claim, indebtedness or obligation so long as (i) the
validity thereof is being contested by Borrower in good faith and by proper
proceedings, (ii) Borrower sets aside on its books adequate reserves therefor,
and (iii) in the case where any such tax, assessment, charge, claim or levy
might become an Encumbrance upon any item of the Collateral or any part thereof,
Borrower makes arrangements acceptable to the Lender to secure the payment
thereof.
6.5 Maintenance of Property. Preserve and keep all property necessary for
-----------------------
its
<PAGE>
business, including without limitation, the Collateral, in good repair,
working order and condition, and from time to time make all necessary or
desirable repairs, renewals and replacements thereof.
6.6 Insurance. Maintain and keep in full force and effect, with
---------
financially sound and reputable insurance companies reasonably acceptable to the
Lender, insurance in such amounts and covering such risks as is usually carried
by companies engaged in similar businesses and owning similar properties in the
same general areas in which Borrower operates (but in any event, casualty
insurance covering the Borrower's tangible personal property and real estate for
their full replacement value and comprehensive public liability insurance
coverage with limits reasonably acceptable to Lender, for a policy period of no
more than one (1) year), all such insurance policies to be in form and substance
reasonably satisfactory to the Lender. If requested by the Lender, Borrower
shall also procure, maintain and keep in full force and effect business
interruption insurance in an amount, in form and issued by companies reasonably
acceptable to the Lender in all respects. All liability insurance policies
shall name the Lender as an additional insured, and all casualty insurance or
business interruption insurance policies shall name Lender as the loss payee.
All insurance policies shall prohibit cancellation (including cancellation for
nonpayment of premium) or reduction of coverage except with thirty (30) days'
prior written notice to and consent of the Lender. At least thirty (30) days
prior to the expiration date of each and every insurance policy required by this
Agreement, Borrower shall obtain and deliver to the Lender a renewal or
substitution policy in form and substance satisfactory to the Lender.
6.7 Contract Obligations. Perform in accordance with its terms every
--------------------
contract, agreement, obligation or other arrangement to which Borrower is a
party or by which it or any of its property is bound. In the event that any
default or performance deficiency occurs, Borrower shall notify the Lender
promptly in writing. Borrower shall provide the Lender promptly with copies of
any cure notices or stop work notices it may receive from the Government on any
Government Contract and detail the proposed corrective action.
6.8 Compliance with Laws. Comply with all applicable laws, regulations,
--------------------
orders and other requirements of any court, tribunal, arbitrator or governmental
authority, non-compliance with which could have a material adverse effect on the
business, operations, property or condition (financial or otherwise) of
Borrower. Without limiting the generality of the foregoing, Borrower shall: (1)
comply strictly and in all respects with all Environmental Laws affecting the
Borrower or its property; (2) promptly forward to the Lender copies of all
orders, notices, permits, applications or other communications and reports
finding or alleging that Borrower or its property does not comply with any of
the Environmental Laws; (3) promptly provide a proposed response action, or plan
with respect to any failure to comply with Environmental Laws; and (4) defend
the Lender, indemnify the Lender, and hold the Lender harmless from and against
any claims, demands, suits, actions, judgments, decrees, losses or damages,
including attorneys' fees, arising out of the failure of Borrower of any of its
properties to comply with any of the Environmental Laws.
6.9 Books and Records. Keep and maintain at its chief executive offices
-----------------
adequate and proper records and books of account, in which complete entries are
made in accordance with GAAP, consistently applied, and in accordance with all
laws, regulations, orders and other requirements of any court, tribunal,
arbitrator or governmental authority, reflecting all financial
<PAGE>
and other transactions of Borrower normally and customarily included in records
and books of account of companies engaged in the same or similar businesses and
activities as Borrower.
6.10 Access to Borrower's Properties, Books and Records. Permit the
--------------------------------------------------
Lender and any agents or representatives thereof to visit and inspect the
Borrower's properties to examine and make abstracts from any of Borrower's books
and records at any and all reasonable times and as often as the Lender or such
agents or representatives may reasonably desire, and to discuss the business,
operations, properties and condition (financial and otherwise) of Borrower with
any of the officers, directors, agents or representatives (including without
limitation, the independent certified public accountants) of Borrower. In
addition to having the right to perform field audits of the Borrower's books and
records, Lender shall have the right, but not the obligation, to contact the
contracting officer under any Government Contract directly to determine
Borrower's contract performance status on the Government Contract.
6.11 Financial and Other Statements. Furnish to the Lender:
------------------------------
a. Annual Financial Statements and Report. As soon as available,
--------------------------------------
but in no event more than one hundred twenty (120) days after the close of each
of the Borrower's fiscal years, audited financial statements for that year,
stating the Borrower's financial condition, and a contract backlog report. The
financial statements shall be prepared by an independent certified public
accountant acceptable to Lender, in accordance with GAAP consistently applied.
The financial statements must be acceptable to Lender in form and substance, and
shall contain such detail as Lender may require. The financial statements shall
include a consolidated balance sheet as of the end of such fiscal year, a profit
and loss statement, a cash flow statement and copies of Form 10-K or any other
SEC filings. Borrower shall also furnish to Lender within one hundred twenty
(120) days after the close of each of Borrower's fiscal years, an internally
generated consolidating balance sheet and income statement consistent with
Borrower's audited financial statements.
b. Management Letters. Promptly upon receipt thereof, copies of any
------------------
reports submitted to the Borrower by independent certified public accountants in
connection with examination of the financial statements of the Borrower made by
such accountants;
c. Quarterly Financial Statements. As soon as available, but in
------------------------------
no event more than sixty (60) days after the close of each of the Borrower's
fiscal quarters, consolidating interim financial statements for that quarter,
stating the Borrower's financial condition. The financial statements shall be
prepared in accordance with GAAP consistently applied. The financial statements
must be acceptable to Lender in form and substance, and shall contain such
detail as Lender may require. The financial statements shall include a
consolidating balance sheet and a profit and loss statement as of the end of
such fiscal quarter, a cash flow statement and copies of Form 10-Q or any other
SEC filings.
<PAGE>
d. Borrowing Base Certificates. Borrower shall submit a fully
---------------------------
completed Borrowing Base Certificate not later than twenty (20) days after the
end of each month, stating the Borrowing Base as of the last day of the
preceding month. At Lender's request, the Borrower shall furnish to the Lender
such schedules, certificates, lists, records, reports, information and documents
to enable the Lender to verify the Borrowing Base.
e. Monthly Reports. Borrower shall deliver to the Lender, as soon
---------------
as available, but not later than twenty (20) days after the end of each month,
an accounts receivable aging schedule in intervals of not more than thirty (30)
days.
f. Government Contract Audits. Upon reasonable request by Lender,
--------------------------
Borrower shall deliver all written results of any and all audits by the Defense
Contract Audit Agency, or any other government agency, conducted before the
award of a contract, before the final payment on a contract, or at any other
time, to Lender within ten (10) days of a request by Lender.
g. Additional Reports and Information. With reasonable promptness,
----------------------------------
such additional information, reports or statements as the Lender may from time
to time request.
h. Compliance Certificate. With the submission of any financial
----------------------
statements to be provided pursuant to this Agreement, Borrower shall deliver a
compliance certificate signed by a principal financial officer of the Borrower
stating whether any Event of Default has occurred, or any event which, upon
notice or lapse of time or both, would constitute an Event of Default. At
Lender's request, the Borrower shall furnish to the Lender such schedules,
certificates, lists, records, reports, information and documents to enable the
Lender to verify the compliance certificate.
6.12 Accounts. Upon the creation of Accounts, or from time to time as the
--------
Lender may require, Borrower shall deliver to the Lender schedules of all
outstanding Accounts. Such schedules shall be in form and detail reasonably
satisfactory to the Lender, shall show the age of such Accounts in intervals not
greater than thirty (30) days, and shall contain such other information and be
accompanied by such supporting documents as the Lender may from time to time
reasonably prescribe. Borrower also shall deliver to the Lender copies of
Borrower's invoices, evidences of shipment or delivery and such other schedules
and information as the Lender may reasonably require. The items to be provided
under this Section are to be prepared and delivered to the Lender from time to
time solely for its convenience in maintaining records of the Collateral, and
Borrower's failure to give any of such items to the Lender shall not affect,
terminate, modify or otherwise limit the Lender's security interest granted in
the Accounts. Without limiting the generality of the foregoing, Borrower shall
promptly notify the Lender when Borrower obtains any new Government Contract or
Government Account for which Payments are to be specifically assigned to the
Lender pursuant to this Agreement, and Borrower shall furnish to the Lender,
upon request, a copy of each Government Contract of Borrower and a copy of each
amendment thereto or modification thereof which changes the price of such
contract or the amount funded to pay for such contract, except to the extent
that furnishing such copies may be prohibited by government security
regulations.
<PAGE>
6.13 Collateral. Maintain all tangible Collateral in good condition;
----------
insure insurable Collateral for its full replacement cost under an insurance
policy acceptable to Lender that names Lender as loss payee; execute, deliver
and file, or cause the execution, delivery and filing of, any and all documents
(including without limitation, financing statements and continuation
statements), necessary or desirable for the Lender to create, perfect, preserve,
validate or otherwise protect a first priority lien and security interest in the
Collateral; maintain, or cause to be maintained, at all times, the Lender's
first priority lien and security interest in the Collateral; immediately upon
learning thereof, report to the Lender any reclamation, return or repossession
of any goods forming a part of the Collateral, any claim or dispute asserted by
any debtor or other obligor owing an obligation to Borrower, and any other
matters affecting the value or enforceability or collectibility of any of the
Collateral; defend the Collateral against all claims and demands of all persons
at any time claiming the same or any interest therein adverse to the Lender, and
pay all costs and expenses (including attorneys' fees and expenses) incurred in
connection with such defense; at Borrower's sole cost and expense (including
attorneys' fees and expenses), settle any and all claims, demands and disputes,
and indemnify and protect the Lender against any liability, loss or expenses
arising from any such claims, demands or disputes or out of any such
reclamation, return or repossession of goods forming a part of the Collateral;
however, if the Lender shall so elect, the Lender shall have the right at all
times to settle, compromise, adjust or litigate all claims and disputes directly
with the Customer or other obligor owing an obligation to Borrower upon such
terms and conditions as the Lender deems advisable, and all costs and expenses
thereof (including attorneys' fees and expenses) shall be incurred for the
account of Borrower and shall constitute a part of the obligations owed to the
Lender and secured pursuant to this Agreement.
6.14 Financial Covenants. Maintain:
-------------------
a. Net Worth. A minimum Net Worth of $28,500,000.00, tested
---------
quarterly.
b. Funded Debt to EBITDA. A maximum ratio of Funded Debt to EBITDA,
---------------------
less current period capitalized software development costs, as follows:
4.0 to 1.0 for the fiscal quarters ending before February 28, 2000;
3.5 to 1.0 for the fiscal quarters ending on or after February 28, 2000,
and before February 28, 2001; and
3.0 to 1.0 for the fiscal quarters ending on February 28, 2001, and for all
times thereafter.
c. Fixed Charge Coverage Ratio. A minimum Fixed Charge Coverage
---------------------------
Ratio of 1.25 to 1.0, tested quarterly on a rolling four fiscal quarter basis.
6.15 Notice of Litigation, Default and Loss. Give immediate notice to the
--------------------------------------
Lender upon the occurrence of any Event of Default or event which with notice or
lapse of time or otherwise could be reasonably expected to constitute an Event
of Default, and of any loss or damage to any of the Collateral. Borrower also
shall give immediate notice to the Lender of any action, suit or proceeding at
law or in equity or by or before any governmental instrumentality or agency
(domestic or foreign), commission, board, bureau, arbitrator or arbitration
panel which, if
<PAGE>
adversely determined, could materially impair or affect the right of Borrower to
carry on its business substantially as now conducted or could materially affect
its respective business, operations, prospects, properties, assets (including
the Collateral) or condition, financial or otherwise. Immediately upon becoming
aware that the holder of any Debt or Encumbrance has given notice or taken any
action with respect to a claimed breach, default or event of default, a written
notice shall be given by Borrower to Lender specifying the notice given or
action taken by such holder and the nature of the claimed breach, default or
event of default by the Borrower thereunder, and the action being taken or
proposed to be taken with respect thereto.
6.16 Proxy Statements, Etc. Promptly after the sending or filing thereof,
---------------------
provide copies of all proxy statements, financial statements and reports which
the Borrower sends to its stockholders, and provide copies of all regular,
periodic and special reports, and all registration statements which the Borrower
files with the Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or with any national securities exchange.
6.17 ERISA. Give prompt notice to Lender of any of the following: (i) of
-----
any event or condition, including, but not limited to, any Reportable Event,
that constitutes, or might reasonably lead to, a Termination Event; (ii) with
respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA
or otherwise of any withdrawal liability assessed against the Borrower, any of
its subsidiaries or any of its ERISA Affiliates, or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within the meaning of
Title IV of ERISA); (iii) the failure to make full payment on or before the due
date (including extensions) thereof of all amounts which the Borrower or any of
its subsidiaries or ERISA Affiliate is required to contribute to each Plan
pursuant to its terms and as required to meet the minimum funding standard set
forth in ERISA and the Code with respect thereto; or (iv) any change in the
funding status of any Plan that could have a material adverse effect on the
Borrower's financial condition; together, with a description of any such event
or condition or a copy of any such notice and a statement by the principal
financial officer of the Borrower briefly setting forth the details regarding
such event, condition, or notice, and the action, if any, which has been or is
being taken or is proposed to be taken by Borrower with respect thereto.
Promptly upon request, the Borrower shall furnish to Lender such additional
information concerning any Plan as may be reasonably requested, including, but
not limited to, copies of each annual report/return (Form 5500 series), as well
as all schedules and attachments thereto required to file with the Department of
Labor or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each "plan year" (within the meaning of Section 3(39) of
ERISA). Such notice shall be given in any event within five (5) business days
after the occurrence of any event that Borrower is required to report to Lender
under this clause.
6.18 Place of Business; Location of Records. Maintain its chief executive
--------------------------------------
office, and the office where its records are kept, at the address of Borrower
previously set forth herein. The Borrower shall provide Lender with fourteen
(14) days' advance written notice of any change in the location of its chief
executive offices or the office where the Borrower's records are kept.
<PAGE>
6.19 Computer Systems: Year 2000 Compliance. The Borrower has (i)
--------------------------------------
initiated a review and assessment of all areas within its and each of its
subsidiaries' business and operations (including those affected by suppliers and
vendors) that could be adversely affected by the "Year 2000 Problem" (that is,
the risk that computer applications used by the Borrower or any of its
subsidiaries (or its suppliers and vendors) may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999), (ii) developed a plan and time line for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable. The Borrower
reasonably believes that all computer applications (including those of its
suppliers and vendors) that are material to its or any of its subsidiaries'
business and operations will on a timely basis be able to perform properly date-
sensitive functions for all dates before and after January 1, 2000 (that is, be
"Year 2000 compliant"), except to the extent that a failure to do so could not
reasonably be expected to have material adverse effect on the Borrower's
business operations, business prospects, perspective or future condition.
6.20 Payments to Borrower. If Borrower has assigned Payments under any
--------------------
Government Contract to the Lender, remit to the Lender promptly any Payments
erroneously sent directly to Borrower by the Government, and until so remitted,
hold those Payments in trust for the Lender.
ARTICLE 7. BORROWER'S NEGATIVE COVENANTS.
-----------------------------------------
Until all obligations of Borrower under this Agreement and the other Loan
Documents are paid in full and performed, Borrower covenants and agrees that it
shall not, unless the Lender otherwise consents in advance in writing:
7.1 Indebtedness and Contingent Obligations. Contract for any additional
---------------------------------------
Debt; or agree to assume, guarantee, indorse or otherwise in any way be or
become responsible or liable, directly or indirectly, for any contingent
obligation, which in the aggregate exceeds Five Hundred Thousand and No/100
Dollars ($500,000.00), of any other Person. Borrower agrees to inform Lender
immediately of any actual or potential contingent liabilities which in the
aggregate exceed Five Hundred Thousand and No/100 Dollars ($500,000.00).
7.2 Encumbrances. Create, incur, assume or suffer to exist any
------------
Encumbrance upon any of its properties or assets (including without limitation,
the Collateral), whether now owned or hereafter acquired.
7.3 Fundamental Changes. Amend its Articles or Certificate of
-------------------
Incorporation by any amendment which would adversely affect Borrower's ability
to perform or comply with any of the terms, conditions or agreements to be
performed or complied with by Borrower hereunder or to perform any of the
transactions contemplated hereby; change its name, ownership or management;
convert its organizational form into another entity form or establish any new
entity to perform the business or similar business of Borrower; reorganize,
consolidate or merge with any other corporation; or purchase, lease or otherwise
acquire all or substantially all of the assets of any other entity, including
shares of stock of other corporations, except as otherwise noted herein and
except that Borrower may own notes and other receivables acquired in the
ordinary course of business.
<PAGE>
7.4 Transfer of Assets. Transfer to any Guarantor assets having a value
------------------
in the aggregate of more than Two Hundred Fifty Thousand Dollars ($250,000.00).
Sell, lease, assign, pledge or otherwise dispose of any of its properties, stock
or assets (including without limitation, the Collateral), whether now owned or
hereafter acquired, to any other person or entity, except in the ordinary course
of business and for fair market value.
7.5 Loans. Make any loan or advance which in the aggregate exceeds Five
-----
Hundred Thousand and No/100 ($500,000.00) to any person, except reasonable
advances for business expenses of Borrower's employees that would be
reimbursable under Borrower's existing expense reimbursement policy.
7.6 Repurchase of Securities. Purchase, redeem or otherwise acquire any
------------------------
of its own capital stock or purchase, acquire, redeem, retire or make any
payment on account of the principal of any indebtedness of Borrower, except at
the stated maturity of such indebtedness, and except payments of indebtedness
incurred under this Agreement.
7.7 Use of Proceeds. Use, or allow the use of, the proceeds of either the
---------------
Revolving Loan or the Guidance Line of Credit for any purpose which would cause
this Agreement to violate any Regulations of the Board of Governors of the
Federal Reserve System; or for any purpose other than the purposes or purposes
specified hereinabove.
7.8 Other Agreements. Enter into any agreement or undertaking containing
----------------
any provision which would be violated or breached by Borrower's performance of
its obligations under the Loan Documents.
7.9 Sale and Leaseback. Enter into any arrangement whereby Borrower sells
------------------
or transfers all or any substantial part of its fixed assets then owned by it
and thereupon, or within one (1) year thereafter, rents or leases the assets so
sold or transferred from the purchaser or transferor (or their respective
successors in interest).
7.10 Dividends. Declare or pay dividends on account of any class of stock
---------
in the Borrower, or make any distribution of assets to Borrower's stockholders,
whether in cash, assets or obligations of Borrower.
7.11 Transactions with Affiliate. Except as specifically permitted by the
---------------------------
terms of this Agreement, enter into any transaction, including without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate, except in the ordinary course of and pursuant to
the reasonable requirements of the Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than would be applicable in a
comparable arm's-length transaction with a Person not an Affiliate.
ARTICLE 8. COLLECTION, DEPOSIT AND ASSIGNMENT OF PAYMENTS.
----------------------------------------------------------
8.1 Cash Collateral Account. Lender retains the right to require Borrower
-----------------------
to cause all Payments to be deposited into the Cash Collateral Account. In
furtherance of this covenant, Borrower shall instruct all Customers to make all
Payments either by electronic funds transfer
<PAGE>
directly to the Cash Collateral Account or by check to a post office box or
other collection facility under Lender's control for deposit into the Cash
Collateral Account. If any Payments are made directly to the Borrower or
otherwise come into the Borrower's possession, the Borrower shall not commingle
any such Payment with the Borrower's other funds or property, but shall hold the
Payment separate and apart in trust for the Lender and shall promptly deliver
the Payment to the Lender (appropriately endorsed, if the Payment is in the form
of a check) for deposit into the Cash Collateral Account. Interest (if any)
earned on sums on deposit in the Cash Collateral Account shall be added to the
Cash Collateral Account. The Borrower hereby appoints the Lender and any
officer, employee or agent of the Lender as the Lender may from time to time
designate as attorneys-in-fact for the Borrower to endorse and sign the name of
the Borrower on all checks, drafts, money orders or other Items delivered to the
Lender for deposit into the Cash Collateral Account. The Cash Collateral Account
shall constitute part of the Collateral, and funds on deposit in the Cash
Collateral Account shall be disbursed to the Borrower only by a disbursement to
the Operating Account by Lender in its discretion.
8.2 Rights and Responsibilities in Collection of Accounts. The Lender
-----------------------------------------------------
shall not, under any circumstances, be liable for any error or omission or delay
of any kind occurring in the settlement, collection or payment of any Accounts
or any instrument received in payment thereof or for any damage resulting
therefrom. The Lender is authorized to accept the return of the goods
represented by any of the Accounts, without notice to or consent by Borrower, or
without discharging or in any manner affecting either the Revolving Loan or the
Guidance Line of Credit, as applicable. Upon receipt of any returned or
rejected goods, Borrower shall immediately issue and deliver a credit memo to
the Lender with respect thereto or, at the Lender's election, Borrower may set
aside such goods, mark them in the Lender's name and hold them in trust for the
benefit of the Lender at Borrower's expense and, upon the Lender's request,
shall pay the Lender the sales price thereof. If the Lender shall request
Borrower to pay the sales price of such goods and Borrower fails to pay
forthwith the sales price to the Lender, the Lender may take possession of such
goods and sell or cause such goods to be sold at public or private sale, at such
prices, to such purchasers, and upon such terms as the Lender deems advisable.
Borrower shall remain liable to the Lender for any deficiency and shall pay the
costs and expenses of such sale, including reasonable attorneys' fees. Borrower
shall use its best efforts and shall take any and all steps necessary to collect
any Accounts which are not directly assigned to the Lender, including without
limitation, the filing and pursuit of legal action in furtherance of said
collection efforts. Borrower acknowledges that any failure to comply with the
requirements of this Section 8.2 shall cause irreparable harm to the Lender for
which the Lender has no adequate remedy at law, and agrees that the Lender shall
be entitled to injunctive or other equitable relief to compel Borrower's
compliance with the provisions of this Section.
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES.
------------------------------------------
9.1 Events of Default. The occurrence of any one or more of the following
-----------------
events shall constitute an Event of Default hereunder:
a. Borrower shall fail to pay, when due, any sum payable under either
the Revolving Note or the Guidance Note(s); or
<PAGE>
b. Borrower shall fail to observe or perform any other term, covenant
or agreement contained in this Agreement (except any such failure resulting in
the occurrence of a separate Event of Default described in this Section for
which no notice of default or cure period applies) or in any other Loan Document
to be observed or performed on its part; or
c. Borrower shall fail to observe or perform the financial covenants
contained in Section 6.14 hereof; or
d. any representation or warranty made by or on behalf of Borrower
herein or in any of the other Loan Documents which, in the Lender's judgment,
shall prove to have been materially incorrect or misleading or breached in any
respect on or as of any date as of which made; or
e. a decree or order for relief of Borrower shall be entered by a
court of competent jurisdiction in any involuntary case involving Borrower under
any bankruptcy, insolvency or similar law now or hereafter in effect, or a
receiver, liquidator or other similar agent for Borrower or for any substantial
part of Borrower's assets or property shall be appointed, or the winding up or
liquidation of Borrower's affairs shall be ordered, or any action by any
creditor (other than the Lender) of Borrower preparatory to or for the purpose
of commencing any such involuntary case, appointment, winding up or liquidation
shall be taken, and such proceeding shall not have been dismissed within thirty
(30) days after the date it commenced; or
f. Borrower shall commence a voluntary case under any bankruptcy,
insolvency or similar law now or hereafter in effect, or Borrower shall consent
to the entry of an order for relief in an involuntary case under any such law or
to the appointment of or taking possession by a receiver, liquidator or other
similar agent for Borrower or for any substantial part of Borrower's assets or
property, or Borrower shall make any general assignment for the benefit of
creditors, or Borrower shall take any action preparatory to or otherwise in
furtherance of any of the foregoing, or Borrower shall fail generally to pay its
debts as such debts come due; or
g. any default by Borrower occurs under the terms of any of the other
Loan Documents or under any obligation to Lender arising other than under the
Loan Documents or any breach in Borrower's performance obligations occurs under
any of the other Loan Documents; or
h. any investigative proceeding, audit or other action shall be
initiated by or on behalf of any Customer, which is based upon a claim or
contest with respect to any Government Contract or Government Account that, if
adversely determined to the Borrower, would have a material adverse effect on
the Borrower's financial condition, as determined by the Lender in its sole
discretion; or
i. the issuance to the Borrower of any cure notice, show-cause
notice, or notice of whole or partial termination, for default or alleged
default, under any contract which is either a Government Contract or is a
subcontract (at any tier) which is related to a contract between a third party
and the Government; or
<PAGE>
j. with respect to the Borrower, the occurrence of any debarment or
suspension from contracting or subcontracting with the Government; or
k. any material default by Borrower occurs under the terms of any
Government Contract or any material breach in Borrower's performance obligations
occurs under any Government Contract; or
l. any Government Contract is terminated for default, provided that
said Government Contract is material to the financial performance of Borrower,
said determination of materiality to be in Lender's sole discretion; or
m. any loss, theft, damage or destruction of any material portion of
the Collateral for which there is either no insurance coverage or for which, in
the opinion of the Lender, there is insufficient insurance coverage; or
n. any of the following events or conditions shall occur: (1) any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA and Section 412 of the Code, whether or not waived, shall exist with
respect to any Plan, or any lien shall arise on the assets of the Borrower or
any of its subsidiaries or any ERISA Affiliate in favor of the PBGC or a Plan;
(2) a Termination Event shall occur with respect to a Single Employer Plan,
which, in the Lender's opinion, is likely to result in the termination of such
Plan for purposes of Title IV of ERISA; (3) a Termination Event shall occur with
respect to a Multiemployer Plan or Multiple Employer Plan, which in the Lender's
opinion, is likely to result in (i) the termination of such Plan for purposes of
Title IV of ERISA, or (ii) the Borrower or any of its subsidiaries or any ERISA
Affiliate incurring any liability in connection with a withdrawal from,
reorganization of (within the meaning of Section 4241 of ERISA), or insolvency
or (within the meaning of Section 4245 of ERISA) such Plan; or (4) any
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) or breach of fiduciary responsibility shall occur which may
subject the Borrower or any of its subsidiaries or any ERISA Affiliate to any
liability under Section 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of
the Code, or under any agreement or other instrument pursuant to which the
Borrower or any of its subsidiaries or any ERISA Affiliate has agreed or is
required to indemnify any person against any such liability.
9.2 Rights and Remedies of the Lender. Upon the occurrence of any Event
---------------------------------
of Default, the Lender may, at its option, exercise any one or more of the
following rights and remedies:
a. Declare this Agreement and the Lender's obligation to make or
extend any Advances on the Revolving Loan and the Guidance Line of Credit to be
terminated, and declare the entire unpaid principal amounts of the Revolving
Loan and the Guidance Line of Credit, all interest accrued and unpaid thereon,
and all other amounts payable under this Agreement and the other Loan Documents
to be accelerated, and to be immediately due and payable (except that upon the
occurrence of an Event of Default arising out of voluntary or involuntary
bankruptcy proceedings in which the Borrower is the debtor, such acceleration
shall occur automatically and immediately without any declaration or other
action on the part of the Lender) whereupon the Revolving Loan and the Guidance
Line of Credit, all such accrued interest, and all such amounts shall become and
be immediately due and payable, without presentment, demand, protest or
<PAGE>
further notice of any kind, all of which are hereby expressly waived by
Borrower, anything contained herein or in any of the other Loan Documents to the
contrary notwithstanding;
b. Take possession or control of, store, lease, operate, manage, sell
or otherwise dispose of all or any part of the Collateral in accordance with the
remedies provided to secured parties under the Uniform Commercial Code, this
Agreement, the Loan Documents or other applicable law. In taking possession of
the Collateral, the Lender may enter the Borrower's premises and otherwise
proceed without legal process, and the Borrower shall on the Lender's demand,
promptly assemble and make the Collateral available to the Lender at a place
designated by the Lender. The Lender shall be entitled to immediate possession
of all books and records evidencing or pertaining to any of the Collateral;
c. Notify any or all Customers to make any Payments due to Borrower
from such Customers directly to the Lender. To facilitate direct collection,
Borrower hereby appoints the Lender and any officer or employee of the Lender,
as the Lender may from time to time designate, as attorney-in-fact for Borrower
to (i) receive, open and dispose of all mail addressed to Borrower and take
therefrom any Payments on or proceeds of Accounts; (ii) take over Borrower's
post office boxes or make such other arrangements, in which Borrower shall
cooperate, to receive Borrower's mail, including notifying the post office
authorities to change the address for delivery of mail addressed to Borrower to
such address as the Lender shall designate; (iii) endorse the name of Borrower
in favor of the Lender upon any and all checks, drafts, money orders, notes,
acceptances or other evidences of payment or Collateral that may come into the
Lender's possession; (iv) sign and endorse the name of Borrower on any invoice
or bill of lading relating to any of the Accounts, on verifications of Accounts
sent to any Customer, to drafts against any Customer, to assignments of
Accounts, and to notices to any Customer; and (v) do all acts and things
necessary to carry out this Agreement and the transactions contemplated hereby,
including signing the name of Borrower on any instruments required by law in
connection with the transactions contemplated hereby and on financing statements
as permitted under the Uniform Commercial Code of any appropriate state.
Borrower hereby ratifies and approves all acts of such attorneys-in-fact, and
neither the Lender nor any other such attorney-in-fact shall be liable for any
acts of commission or omission, or for any error of judgment or mistake of fact
or law of any such attorney-in-fact unless such acts are due to willful
misconduct. This power, being coupled with an interest and given to secure an
obligation, is irrevocable so long as the Revolving Loan and the Guidance Line
of Credit remain unsatisfied, or any Loan Document remains effective, as solely
determined by the Lender;
d. In the Lender's own name, or in the name of Borrower, demand,
collect, receive, sue for and give receipts and releases for, any and all
amounts due on Accounts, but the Lender shall not, under any circumstances, be
liable for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any Accounts or any instrument received in
payment thereof or for any damage resulting therefrom unless caused by Lender's
willful misconduct;
e. Endorse as the agent of Borrower any chattel paper, documents or
instruments forming all or any part of the Collateral;
<PAGE>
f. Make formal application for the transfer of all of Borrower's
permits, licenses, approvals, agreements and the like relating to the Collateral
or to Borrower's business to the Lender or to any assignee of the Lender or to
any purchaser of any of the Collateral;
g. Obtain appointment of a receiver for all or any of the Collateral,
Borrower hereby consenting to the appointment of such a receiver and agreeing
not to oppose any such appointment. Any receiver so appointed shall have such
powers as may be conferred by the appointing authority including any or all of
the powers, rights and remedies which the Lender is authorized to exercise by
the Loan Documents, and shall have the right to incur such obligations and to
issue such certificates therefor as the appointing authority shall authorize;
h. Take any other action which the Lender deems necessary or
desirable to protect and realize upon its security interest in the Collateral;
i. Borrower acknowledges that any failure to comply with its
obligation regarding the Collateral, including (without limiting the generality
of the foregoing) granting of Assignments and collection of the Accounts, shall
cause irreparable harm to the Lender for which the Lender has no adequate remedy
at law, and agrees that the Lender shall be entitled to specific performance, an
injunction or other equitable relief to enforce the Borrower's obligations under
this Agreement; and
j. In addition to the foregoing, and not in substitution therefor,
exercise any one or more of the rights and remedies exercisable by the Lender
under other provisions of this Agreement, under any of the other Loan Documents,
or provided by applicable law (including, without limiting the generality of the
foregoing, the Uniform Commercial Code).
9.3 Application of Proceeds. Any proceeds from the collection or sale or
-----------------------
other disposition of the Collateral shall be applied in the following order of
priority:
First, to the payment of all expenses of collecting, storing, leasing,
-----
operating, managing, selling or disposing of the Collateral, and to the payment
of all sums which the Lender may be required or may elect to pay, if any, for
taxes, assessments, insurance and other charges upon such Collateral or any part
thereof, and of all other payments which the Lender may be required or
authorized to make under any provision of this Agreement or of any other Loan
Document (including in each such case reasonable legal costs and attorneys' fees
and expenses);
Second, to the payment of all obligations on either the Revolving Loan
------
or the Guidance Line of Credit, as applicable, under this Agreement, and under
the other Loan Documents, and to the payment of any other obligations due to the
Lender, in such order as the Lender may determine in its sole discretion; and
Third, to the payment of any surplus then remaining to Borrower,
-----
unless otherwise provided by law or directed by a court of competent
jurisdiction; provided that Borrower shall be liable for any deficiency if the
proceeds of the Collateral are insufficient to satisfy all obligations due to
the Lender.
<PAGE>
9.4 Collection/Enforcement Costs. Borrower shall pay all costs and
----------------------------
expenses incurred by Lender in connection with the enforcement of its rights
under this Agreement and the other Loan Documents, including without limitation,
reasonable legal costs and attorneys' fees (whether or not suit is instituted)
and arbitration fees and costs, and in connection with the collection of any
sums from Borrower or any Guarantor.
ARTICLE 10. MISCELLANEOUS PROVISIONS.
-------------------------------------
10.1 Additional Actions and Documents. Borrower shall take or cause to be
--------------------------------
taken such further actions, shall execute, deliver and file or cause to be
executed, delivered and filed such further documents and instruments, and shall
obtain such consents as may be necessary or as the Lender may reasonably request
in order fully to effectuate the purposes, terms and conditions of this
Agreement and the other Loan Documents, whether before, at or after the closing
of transactions contemplated hereby and thereby or the occurrence of an Event of
Default hereunder.
10.2 Expenses. Borrower shall, whether or not the transactions
--------
contemplated hereby are consummated, (i) reimburse the Lender and save the
Lender harmless against liability for the payment of all reasonable out-of-
pocket expenses arising in connection with the preparation, execution, delivery,
administration or enforcement of, or the preservation or exercise of any rights
(including the right to collect and dispose of the Collateral) under this
Agreement or any of the other Loan Documents, including without limitation, the
fees and expenses of an audit by employees or agents of the Lender, of counsel
to the Lender and with respect to any arbitration fees and costs; and (ii) pay,
and hold the Lender and each subsequent holder of the Note harmless from and
against, any and all present and future stamp taxes or similar document taxes or
recording taxes and any and all charges with respect to or resulting from any
delay in paying, or failure to pay, such taxes.
10.3 Notices. All notices, demands, requests or other communications
-------
provided for herein or in the other Loan Documents shall be in writing and shall
be deemed to be effective one (1) day after dispatch if sent by telegram,
mailgram, Federal Express or any other commercially recognized overnight
delivery service or two (2) days after dispatch if sent by registered or
certified mail, return receipt requested and addressed as follows:
If to Borrower:
Integral Systems, Inc.
5000 Philadelphia Way
Suite A
Lanham, Maryland 20706
Attn: Elaine M. Parfitt
With copy to:
Wallace Christner, Esquire
Venable, Baetjer, Howard & Civiletti, LLP
1201 New York Avenue, N.W., Suite 1000
Washington, D.C. 20005
<PAGE>
If to Lender:
Bank of America, N.A.
8300 Greensboro Drive
Suite 550
McLean, Virginia 22102-3604
Attn: Lindsey S. Rheaume, Vice President
With copy to:
James R. Schroll, Esquire
Bean, Kinney & Korman, P.C.
2000 N. 14th Street, Suite 100
Arlington, Virginia 22201
If the Borrower comprises more than one Person, notice to the Borrower at the
address specified above in this Section for Integral Systems, Inc. shall
constitute notice to all such Persons, and each Person signing below as the
Borrower hereby irrevocably appoints Integral Systems, Inc. as that Person's
agent to receive notices from the Lender under this Agreement or the other Loan
Documents.
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication thereafter may be so given, served or sent.
Each notice, demand, request or communication which is mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent or received for all purposes at such time as it is delivered: (i)
to the United States Postal Service, in the case of a notice given by certified
mail; (ii) to Federal Express or any other commercially recognized overnight
delivery service, in accordance with the terms and procedures for such delivery
Any notices required under the Uniform Commercial Code with respect to the sale
or other disposition of the Collateral shall be deemed reasonable if mailed by
the Lender to the persons entitled thereto at their last known address at least
five (5) days prior to disposition of the Collateral and, in the case of a
private sale of Collateral, need state only that the Lender intends to negotiate
such a sale.
10.4 Severability. If fulfillment of any provision of the Loan Documents
------------
or performance of any transaction related thereto, at the time such fulfillment
or performance shall be due, shall involve transcending the limit of validity
prescribed by law, then the obligation to be fulfilled or performed shall be
reduced to the limit of such validity; and if any clause or provision contained
in any Loan Document operates or would operate prospectively to invalidate any
Loan Document, in whole or in part, then such clause or provision only shall be
held ineffective, as though not herein or therein contained, and the remainder
of the Loan Documents shall remain operative and in full force and effect.
<PAGE>
10.5 Survival. It is the express intention and agreement of the parties
--------
hereto that all covenants, agreements, statements, representations, warranties
and indemnities made by Borrower in the Loan Documents shall survive the
execution and delivery of the Loan Documents and the making of all Advances and
extensions of credit thereunder.
10.6 Waivers. No waiver by the Lender of, or consent by the Lender to, a
-------
variation from the requirements of any provision of the Loan Documents shall be
effective unless made in a written instrument duly executed on behalf of the
Lender by its duly authorized officer, and any such waiver shall be limited
solely to those rights or conditions expressly waived.
10.7 Rights Cumulative. The rights and remedies of the Lender described
-----------------
in any of the Loan Documents are cumulative and not exclusive of any other
rights or remedies which the Lender or the then holder of the Revolving Note
and/or the Guidance Line of Credit otherwise would have at law or in equity or
otherwise. No notice to or demand on Borrower in any case shall entitle
Borrower to any other notice or demand in similar or other circumstances.
10.8 Entire Agreement; Modification; Benefit. This Agreement, the
---------------------------------------
exhibits hereto, and the other Loan Documents constitute the entire agreement of
the parties hereto with respect to the matters contemplated herein, supersede
all prior oral and written agreements with respect to the matters contemplated
herein, and may not be modified, deleted or amended except by written instrument
executed by the parties. All terms of this Agreement and of the other Loan
Documents shall be binding upon, and shall inure to the benefit of and be
enforceable by, the parties hereto and their respective successors and assigns;
however, Borrower may not assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Lender. In the event of any
conflict between the terms of this Agreement and the terms of the other Loan
Documents, the terms of this Agreement shall control.
10.9 Setoff. In addition to any rights or remedies of the Lender provided
------
by law, upon the occurrence of any Event of Default hereunder, or any event or
circumstance which, with the giving of notice or the passage of time or both,
would constitute an Event of Default hereunder, the Lender is irrevocably
authorized, at any time or times without prior notice to Borrower, to set off,
appropriate and apply any and all deposits, credits, indebtedness or claims at
any time held or owing by the Lender to or for the credit or the account of
Borrower, in such amounts as the Lender may elect, against and on account of the
obligations and liabilities of Borrower to the Lender hereunder or under any of
the other Loan Documents, whether or not the Lender has made any demand for
payment, and although such obligations and liabilities may be contingent or
unmatured.
10.10 Construction. This Agreement and the other Loan Documents, the
------------
rights and obligations of the parties hereto, and any claims or disputes
relating thereto shall be governed by and construed in accordance with the laws
of the Commonwealth of Virginia (excluding the choice of law rules thereof).
Each party hereto hereby acknowledges that all parties hereto participated
equally in the negotiation and drafting of this Agreement and that, accordingly,
no court construing this Agreement shall construe it more stringently against
one party than against the other.
<PAGE>
10.11 Pronouns. All pronouns and any variations thereof shall be deemed
--------
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the Person may require.
10.12 Headings. Article, section and subsection headings contained in
--------
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
10.13 Payments. If any payment or performance of any of the obligations
--------
under this Agreement or any of the other Loan Documents becomes due on a day
other than a Business Day, the due date shall be extended to the next succeeding
Business Day, and interest thereon (if applicable) shall be payable at the then
applicable rate during such extension.
10.14 Accounting Terms. All accounting terms used herein which are not
----------------
otherwise expressly defined in this Agreement shall have the meanings
respectively given to them in accordance with GAAP in effect on the date of this
Agreement. Except as otherwise provided herein, all financial computations made
pursuant to this Agreement shall be made in accordance with GAAP, consistently
applied, and all balance sheets and other financial statements shall be prepared
in accordance with GAAP, consistently applied. Except as otherwise provided
herein, whenever reference is made in any provision of this Agreement to a
balance sheet or other financial statement or the information depicted therein
for performing a financial computation, such terms shall mean the most recent
consolidated balance sheet or other financial statement received by the Lender
pursuant to the terms hereof.
10.15 Execution. To facilitate execution, this Agreement and any of the
---------
other Loan Documents may be executed in as many counterparts as may be required;
and it shall not be necessary that the signature of, or on behalf of, each
party, or the signatures of all persons required to bind any party, appear on
each counterpart; but it shall be sufficient that the signature of, or on behalf
of, each party, or the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of
this Agreement or any other Loan Document to produce or account for any
particular number of counterparts; but rather any number of counterparts shall
be sufficient so long as those counterparts contain the respective signatures
of, or on behalf of, all of the parties hereto.
10.16 Consent to Jurisdiction. Subject to any provision of this Agreement
-----------------------
requiring that disputes be submitted to arbitration, the Borrower irrevocably
consents to the jurisdiction of any state or federal court sitting in the
Commonwealth of Virginia over any suit, action, or proceeding arising out of or
relating to this Agreement or the other Loan Documents. The Borrower
irrevocably waives, to the fullest extent permitted by law, any objection that
the Borrower may now or hereafter have to the laying of venue of any such suit,
action, or proceeding brought in any such court, or any claim that any such
suit, action, or proceeding brought in any such court has been brought in an
inconvenient forum. Final judgment in any such suit, action, or proceeding
brought in any such court shall be conclusive and binding upon the Borrower.
<PAGE>
10.17 Service of Process. The Borrower consents to process being served
-------------------
in any suit, action or proceeding by mailing a copy thereof by registered or
certified mail postage prepaid, return receipt requested, to the Borrower's
address specified in or designated in this Agreement. The Borrower agrees that
such service (i) shall be deemed in every respect effective service of process
upon the Borrower in any such suit, action or proceeding and (ii) shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon and personal delivery to the Borrower. Nothing in this Section shall affect
the right of the Lender to serve process in any manner permitted by law, or
limit any right that the Lender may have to bring proceedings against the
Borrower in the courts of any jurisdiction or to enforce in any lawful manner a
judgment obtained in one jurisdiction in any other jurisdiction.
10.18 Sale of Loan Documents; Disclosure of Information. Borrower hereby
-------------------------------------------------
consents to and agrees that Lender may disclose to any Person any and all
information connected with or related to the Revolving Loan, the Guidance Line
of Credit or other Loan Documents for the purpose of selling or assigning any
rights of Lender in the Loan Documents. The information which may be disclosed
by Lender includes but is not limited to all Loan Documents, credit files and
correspondence files and all other writings and oral communications which Lender
wishes to disclose, in its sole and absolute discretion. Borrower also hereby
consents to and agrees that Lender may sell or assign any rights of Lender in
any or all of the Loan Documents pursuant to such terms and conditions as may be
acceptable to Lender in its sole and absolute discretion, to any interested
Person, and nothing in this Agreement or the other Loan Documents shall prevent,
delay or otherwise impede or effect the right of Lender to immediately sell or
assign any rights of Lender in the Loan Documents on such terms as it deems
acceptable.
10.19 ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
-----------
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS INSTRUMENT, AGREEMENT, OR DOCUMENT MAY BRING AN ACTION, INCLUDING
A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
(i) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE
-------------
COUNTY OF ANY BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS
INSTRUMENT, AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL
APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION
WILL
<PAGE>
SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE
DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING
OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO
AN ADDITIONAL 60 DAYS.
(ii) RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION
---------------------
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
INSTRUMENT, AGREEMENT, OR DOCUMENT; OR (II) BE A WAIVER BY THE LENDER OF
THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE LENDER HERETO (A) TO
EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO
OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT
LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. THE LENDER MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON
SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE,
DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT
TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF
HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR
FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER
OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
10.20 WAIVER OF JURY TRIAL. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO
--------------------
BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY
TRIAL WITH REGARD TO A DISPUTE.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or
have caused this Agreement to be duly executed on their behalf, as of the day
and year first hereinabove set forth.
INTEGRAL SYSTEMS, INC.
[CORPORATE SEAL]
ATTEST:__________ By: /s/ Elaine M. Parfitt
______________________________
Elaine M. Parfitt
Chief Financial Officer
BANK OF AMERICA, N.A.
By: /s/ Lindsey S. Rheaume
_________________________
Lindsey S. Rheaume
Vice President
<PAGE>
EXHIBIT "A"
Form Instrument of Assignment
(To be attached)
<PAGE>
EXHIBIT "B"
Form Notice of Assignment
(To be attached)
<PAGE>
EXHIBIT "C"
Form of Borrowing Base Certificate
(To be attached)
<PAGE>
EXHIBIT "D"
LITIGATION SCHEDULE
(Description of Litigation and Amount Claimed)
NONE.
<PAGE>
REVOLVING NOTE
--------------
$9,000,000.00 McLean, Virginia
December 9, 1999
FOR VALUE RECEIVED, INTEGRAL SYSTEMS, INC. ("Borrower"), having an
address at 5000 Philadelphia Way, Suite A, Lanham, Maryland 20706, promises to
pay to the order of Bank of America, N.A., (the "Lender"), the principal sum of
Nine Million and No/100 Dollars ($9,000,000.00) (the "Principal Sum"), or so
much thereof as has been or may be advanced or readvanced to or for the account
of the Borrower pursuant to the terms and conditions of the Loan Agreement (as
hereinafter defined), together with interest thereon at the rate or rates
hereinafter provided, in accordance with the following terms:
1. Interest. Commencing as of the date hereof and continuing until
--------
repayment in full of all sums due hereunder, the unpaid Principal Sum shall bear
interest at a fluctuating rate, determined as follows:
LIBOR Rate. The LIBOR Market Index Rate (hereinafter
----------
defined), plus the applicable spread over LIBOR as determined by the
following pricing grid:
<TABLE>
<CAPTION>
Total Funded Debt to EBITDA Spread Over LIBOR
<S> <C>
2.75:1 Less than Pricing Ratio (hereinafter defined) 240 bps
1.5:1 Less than Pricing Ratio Less than = 2.75:1 210 bps
1.0:1 Less than Pricing Ratio Less than = 1.5:1 180 bps
Pricing Ratio Less than = 1.0:1 150 bps
</TABLE>
(the "LIBOR-Based Rate"). Pricing Ratio is Funded Debt divided by Net
Income plus Interest Expense, Taxes, Depreciation, and Amortization
minus current period Capitalized Software Development Costs. LIBOR
Market Index Rate is, for any day, the annual percentage rate of
interest equal to the London Interbank Offered Rate (rounded to the
next higher 1/100 of 1%) for U.S. Dollar deposits for a 1-month
maturity as reported on Telerate page 3750 as of 11:00 a.m. London
time, for such day, provided, if such day is not a London business
day, the immediately preceding London business day (or if not so
reported, then as determined by Lender from another recognized source
or interbank quotation). Absent manifest error, the Lender's
certificate to the Borrower stating the LIBOR-Based Rate for a
specific day shall be conclusive upon the Borrower.
All interest payable under the terms of this Note shall be calculated on the
basis of a 360-day factor applied to the actual number of days elapsed.
<PAGE>
2. Payments and Maturity. The unpaid Principal Sum, together with
---------------------
interest thereon at the rate or rates provided above, shall be payable as
follows:
a. interest shall be due and payable monthly, commencing on the last
day of the first calendar month commencing after the date of this Note, and
on the last day of each succeeding calendar month.
b. unless sooner paid, the unpaid Principal Sum, together with all
interest accrued and unpaid thereon, and all other amounts owing under this
Note shall be due and payable in full on February 28, 2002 (the "Maturity
Date"). If the Loan Agreement provides for the Borrower to make additional
payments on account of the Principal Sum from time to time, Borrower
promises to make those payments at the time and in the manner specified in
the Loan Agreement.
This Note evidences Borrower's promise to repay advances and readvances under
the Loan Agreement. This Note will continue in full force and effect and will
evidence Borrower's obligation to repay such advances and readvances
notwithstanding that the principal amount outstanding under the Loan Agreement
and evidenced by this Note may be reduced to zero from time to time.
3. Default Interest. Upon the occurrence of an Event of Default (as
----------------
hereinafter defined), unless otherwise required by law, the Lender shall be
entitled to interest on the unpaid balance at a rate of five percent (5%) above
Lender's "Prime Rate" of interest, being that rate of interest announced by the
Lender from time to time as being its Prime Rate, in its sole discretion.
4. Late Charges. If the Borrower fails to make any payment under the
------------
terms of this Note within ten (10) days after the date such payment is due, the
Borrower shall pay to the Lender on demand a late charge equal to five percent
(5%) of such payment.
5. Application and Place of Payments. Except as otherwise provided in
---------------------------------
the Loan Agreement (hereinafter defined), all payments, made on account of this
Note shall be applied first to the payment of accrued and unpaid interest then
due hereunder, second to the unpaid principal balance and the remainder, if any,
shall be applied to any other amounts which remain owing hereunder. All
payments on account of this Note shall be paid in lawful money of the United
States of America in immediately available funds during regular business hours
of the Lender at its office at 8300 Greensboro Drive, Suite 550, McLean,
Virginia 22102-3604, or at such other times and places as the Lender may at any
time and from time to time designate in writing to the Borrower.
6. Loan Agreement. This Note is the "Revolving Note" described in a
--------------
Revolving Line of Credit Loan Agreement and Security Agreement of even date
herewith by and between the Borrower and the Lender (the "Loan Agreement"). The
indebtedness evidenced by this Note is included within the meaning of the term
"Debt" as defined in the Loan Agreement. The term "Loan Documents" as used in
this Note shall have the meaning ascribed to that term in the Loan
<PAGE>
Agreement. Capitalized terms used in this Note but not defined herein have the
meanings ascribed to them in the Loan Agreement.
7. Security. This Note and the Guidance Note are secured by the
--------
Collateral described in the Loan Agreement.
8. Events of Default. The occurrence of any one or more of the following
-----------------
events shall constitute an event of default (individually, an "Event of Default"
and collectively, the "Events of Default") under this Note:
a. the failure of the Borrower to pay to the Lender when due any
amount payable by the Borrower to the Lender under the terms of this Note;
or
b. the occurrence of an event of default under any of the other Loan
Documents.
9. Remedies. Upon the occurrence of an Event of Default, at the option of
--------
the Lender, all principal, accrued interest and other sums payable by the
Borrower to the Lender under the terms of this Note shall become immediately due
and payable, and the Lender shall have all of the rights, powers, and remedies
available under the terms of this Note, any of the other Loan Documents and all
applicable laws. The Borrower and all endorsers hereby jointly and severally
waive presentment, protest and demand, notice of protest, notice of demand and
of dishonor and non-payment of this Note and expressly agree that this Note or
any payment hereunder may be extended from time to time without in any way
affecting the liability of the Borrower or any endorsers.
10. Expenses. The Borrower promises to pay to the Lender on demand by the
--------
Lender all reasonable costs and expenses incurred by the Lender in connection
with the collection and enforcement of this Note, including, without limitation,
all attorneys' fees and expenses, all court costs and all arbitration fees and
costs.
11. Notices. Any notice, request, or demand to or upon the Borrower or
-------
the Lender shall be deemed to have been properly given or made when delivered in
accordance with the Loan Agreement.
12. Miscellaneous. Each right, power, and remedy of the Lender as
-------------
provided for in this Note or any of the other Loan Documents, or now or
hereafter existing under any applicable law or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power, or remedy
provided for in this Note or any of the other Loan Documents or now or hereafter
existing under any applicable law, and the exercise or beginning of the exercise
by the Lender of any one or more of such rights, powers, or remedies shall not
preclude the simultaneous or later exercise by the Lender of any or all such
other rights, powers, or remedies. No failure or delay by the Lender to insist
upon the strict performance of any term, condition, covenant, or agreement of
this Note or any of the other Loan Documents, or to exercise any
<PAGE>
right, power, or remedy consequent upon a breach thereof, shall constitute a
waiver of any such term, condition, covenant, or agreement or of any such
breach, or preclude the Lender from exercising any such right, power, or remedy
at a later time or times. By accepting payment after the due date of any amount
payable under the terms of this Note, the Lender shall not be deemed to waive
the right either to require prompt payment when due of all other amounts payable
under the terms of this Note or to declare an Event of Default for the failure
to effect such prompt payment of any such other amount. No course of dealing or
conduct shall be effective to amend, modify, waive, release, or change any
provisions of this Note. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
13. Partial Invalidity. If any term or provision of this Note or the
------------------
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Note and the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Note shall be valid and be enforceable to the fullest
extent permitted by law.
14. Cross-Default. A default under any note or any other obligation of
-------------
the Borrower to the Lender shall, at the option of the holder of this Note, be
deemed a default under this Note, entitling the holder of this Note (i) to
exercise all of its rights and remedies hereunder, including the right to
accelerate payment of all sums due hereunder; and (ii) to exercise all of its
rights and remedies provided in the Loan Agreement to be exercised upon the
occurrence of an Event of Default (as defined in the Loan Agreement). In the
event that at any time this Note and any note or any other obligation to the
Lender are held by different persons, each of such persons shall have all of the
rights, privileges and options provided to the Noteholder herein and/or in the
Loan Agreement.
15. Captions. The captions herein set forth are for convenience only and
--------
shall not be deemed to define, limit, or describe the scope or intent of this
Note.
16. Governing Law. The provisions of this Note shall be construed,
-------------
interpreted and enforced in accordance with the laws of the Commonwealth of
Virginia (excluding Virginia's choice of law rules).
17. Consent to Jurisdiction. Provisions of the Loan Agreement
-----------------------
concerning the Borrower's consent to the jurisdiction of state and federal
courts sitting in the Commonwealth of Virginia are incorporated into this Note
by reference and shall have the same force and effect as if fully set forth in
this Note.
18. Waiver of Trial by Jury. Provisions of the Loan Agreement concerning
-----------------------
the Borrower's and Lender's mutual waiver of trial by jury in disputes between
the Borrower and the Lender are incorporated into this Note by reference and
shall have the same force and effect as if fully set forth in this Note.
<PAGE>
19. Arbitration. Provisions of the Loan Agreement specifying that certain
-----------
disputes between the Borrower and the Lender shall be resolved by binding
arbitration are incorporated into this Note by reference and shall have the same
force and effect as if fully set forth in this Note.
IN WITNESS WHEREOF, the Borrower has caused this instrument to be
executed by duly authorized officer or officers as of the date first written
above.
INTEGRAL SYSTEMS, INC.
[CORPORATE SEAL] By: /s/ Elaine M. Parfitt
___________________________
ATTEST:_________________ Elaine M. Parfitt
Chief Financial Officer
<PAGE>
BANK OF AMERICA, N.A. December 9, 1999
GUARANTY
--------
1. As an inducement for and in consideration of any loan(s) or other
financial accommodation(s) of even date herewith granted to Integral Systems,
Inc., a Maryland corporation (hereinafter called "Borrower"), by Bank of
America, N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102-3604
(hereinafter, together with its successors and assigns, called "Lender"), the
undersigned (hereinafter called "Guarantor"), hereby unconditionally guarantees
the full and prompt payment, observance and performance when due, whether at the
stated time, by acceleration or otherwise, of all obligations of Borrower to
Lender, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, whether or not of the same or similar class or of like
kind to any indebtedness incurred contemporaneously with the execution of this
Guaranty, and whether now or hereafter existing, or due or to become due,
including without limitation, the following:
a. Any and all amounts owed by Borrower under, in connection with,
and/or pursuant to the indebtedness evidenced by that certain Revolving
Note of even date herewith, in the original principal sum of Nine Million
and No/100 and No/100 Dollars ($9,000,000.00) (the "Revolving Note") and by
that certain Guidance Line of Credit Note of even date herewith, in the
original principal sum of Six Million and No/100 Dollars ($6,000,000.00)
(the "Guidance Note"), both with interest thereon according to the
provisions thereof, and all obligations of Borrower thereunder, in
connection therewith and/or pursuant to any and all agreements and other
documents in connection therewith; and
b. Any and all amounts owed by Borrower under, in connection with,
and/or pursuant to the indebtedness evidenced by that certain Revolving
Line of Credit Loan Agreement and Security Agreement between Borrower and
Lender of even date herewith (the "Loan Agreement"), any and all
obligations of Borrower thereunder, in connection therewith and/or pursuant
to any and all agreements and other documents in connection therewith; and
c. All sums advanced or expenses or costs paid or incurred (including
without limitation attorneys' fees and other legal expenses and arbitration
fees and costs) by Lender pursuant to or in connection with the Revolving
Note, the Guidance Note or any agreements and other documents in connection
therewith plus applicable interest on such sums, expenses or costs; and
d. Any extensions, modifications, changes, substitutions,
restatements, renewals or increases or decreases of any or all of the
indebtedness referenced above; and
e. Any and all other indebtedness, obligations and liabilities of any
kind, of Borrower to Lender, now or hereafter existing, absolute or
contingent, joint and/or several, due or not due, secured or unsecured,
arising by operation of law or otherwise, direct or indirect, including
without limitation indebtedness, obligations and liabilities of
1
<PAGE>
Borrower to Lender as a member of any partnership, syndicate or association
or other group and whether incurred by such Borrower as principal, surety,
endorser, guarantor, accommodation party or otherwise, and any obligations
which give rise to an equitable remedy for breach of performance if such
breach gives rise to an obligation by such Borrower to pay Lender.
2. All of the obligations described in paragraph 1, above, shall be
referred to hereafter as the "Liabilities." In the event any of the Liabilities
shall not be paid or performed according to their terms (subject to any
applicable grace or cure period), Guarantor shall immediately pay, perform or
cause the performance of the same, this Guaranty being a guarantee of full
payment and performance and not of collectibility and in no way conditional or
contingent. This Guaranty is an absolute, unconditional and continuing
guarantee with the Guarantor being jointly and severally liable with the
Borrower and is in no way conditioned upon any requirement that Lender first
attempt to collect payment or seek performances of any of the Liabilities from
Borrower or any other borrower or guarantor, or resort to any other security or
other means of obtaining payment or performance of any of the Liabilities, or
upon any other contingency whatsoever.
3. Guarantor further agrees to pay all expenses (including reasonable
attorneys' fees and expenses and arbitration fees and costs) paid or incurred by
Lender in endeavoring to collect the Liabilities, or any part thereof, and in
enforcing or defending this Guaranty, whether or not a lawsuit is commenced.
4. Guarantor represents and warrants that Guarantor is either financially
interested in Borrower or will receive other material economic benefits as a
result of any loan(s), leases(s) or other financial accommodation(s) made or
granted to Borrower by Lender from time to time. Guarantor further represents
and warrants that Guarantor is willing to enter into this Guaranty as a material
inducement to Lender to extend loan(s) or other financial accommodation(s), or
to enter into lease(s), from time to time with Borrower, and acknowledges that
Lender would not be willing to extend any such loan(s) or other financial
accommodation(s) or enter into such lease(s) absent this Guaranty.
5. Guarantor agrees that the occurrence of any of the following events
shall constitute a default under this Guaranty: (a) the failure of any
Guarantor to perform or observe any obligation under this Guaranty, or (b) the
dissolution or insolvency of Borrower, or (c) the inability of Borrower to pay
debts generally as they mature, or (d) an assignment by Borrower of any of the
Liabilities for the benefit of creditors, or (e) the institution of any
proceeding by or against Borrower (under the Bankruptcy Code or otherwise)
seeking to adjudicate Borrower bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors or seeking the
appointment of a receiver, trustee or custodian for itself or for all or a
substantial part of its property, which proceeding (unless instituted by
Borrower) is not dismissed within thirty (30) days thereafter, or (f) the
default by Borrower under any agreement or document concerning or relating to
the Liabilities, or (g) any representation or warranty contained herein or in
any other document delivered by or on behalf Borrower to Lender shall be false
or misleading in any material respect, or (h) there shall be a default or event
of default under any other
2
<PAGE>
agreement or document securing or guaranteeing any of the obligations secured by
this Guaranty, or (i) there shall be a default or event of default under any
indebtedness or obligation of Borrower to any third party that causes that third
party to declare such indebtedness or other obligation due prior to its
scheduled date of maturity. Upon and after the occurrence of a default
hereunder, the Liabilities shall be automatically accelerated and shall become
immediately due and payable by Guarantor, or Guarantor's successor or estate,
without presentment, demand, protest, or further notice of any kind, all of
which are hereby expressly waived by Guarantor.
6. Guarantor further agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time payment to
or for the benefit of Lender of the Liabilities, or any part thereof, is
rescinded or must otherwise be returned by Lender due to the insolvency,
bankruptcy or reorganization of Borrower or otherwise, all as though such
payment to or for the benefit of Lender had not been made.
7. Lender may, without demand or notice of any kind, at any time when any
amount shall be due and payable hereunder by Guarantor, appropriate and apply
toward the payment of such amount, and in such order of application as Lender
may from time to time elect, any property, balances, credits, deposits,
accounts, instruments or moneys of Guarantor in the possession or control of
Lender for any purpose.
8. This Guaranty shall be a continuing, absolute and unconditional
guaranty of payment and performance and not of collectibility and shall remain
in full force and effect as to Guarantor, subject to discontinuance only as
follows: Guarantor, or any person duly authorized and acting on behalf of
Guarantor, may give written notice to Lender of discontinuance of this Guaranty,
but no such notice shall be effective in any respect until it is actually
received by Lender and no such notice shall affect or impair the obligations
hereunder of Guarantor with respect to any Liabilities existing at the date of
receipt of such notice by Lender (or any Liabilities required or permitted to be
advanced by Lender on or after such date), or for renewals or extensions of such
Liabilities made after Lender receives Guarantor's notice, or any interest
thereon or any expenses paid or incurred by Lender in endeavoring to collect
such Liabilities, or any part thereof, or in enforcing this Guaranty against
Guarantor. Any such notice of discontinuance by or on behalf of any Guarantor
shall not affect, impair or release the obligations hereunder of any other
guarantor with respect to any of the Liabilities.
9. Lender may at any time and from time to time, without the consent of,
or notice to, Guarantor, and without affecting, impairing or releasing the
obligations of Guarantor hereunder, do any or all of the following: (a) retain
or obtain a security interest in any property to secure any of the Liabilities
or any obligations hereunder, (b) retain or obtain the primary or secondary
liability of any party or parties, in addition to Guarantor, with respect to any
of the Liabilities, (c) renew, extend (including extensions beyond the original
term), modify, alter, change the interest rate of, release or discharge any of
the Liabilities, (d) settle, release or compromise any liability of the Borrower
or of any of the Liabilities or any liability of any nature of any other party
or parties with respect to the Liabilities or any security therefor, (e) accept
partial payments of the Liabilities, (f) settle, release (by operation of law or
otherwise), compound, compromise, collect or liquidate any of the Liabilities
and any property securing any of the Liabilities, (g) consent to the transfer of
any property securing any of the Liabilities, (h)
3
<PAGE>
resort to Guarantor for payment of any of the Liabilities, whether or not Lender
shall have resorted to any property securing any of the Liabilities or any
obligation hereunder or shall have proceeded against any other guarantor or any
other party primarily or secondarily liable on any of the Liabilities, (i) make
any other changes in its agreements with Borrower, and (j) stop lending money or
extending other credit to Borrower.
10. Any amount received by Lender from whatsoever source and applied by it
to the payment of the Liabilities may be applied in such order of application as
Lender may from time to time elect.
11. Guarantor is now adequately informed of Borrower's financial
condition, and Guarantor agrees to keep so informed. Guarantor agrees that
Lender has no obligation to provide Guarantor with any present or future
information concerning the financial condition of Borrower. Guarantor has not
relied on financial information furnished by Lender in deciding to execute this
Guaranty.
12. Guarantor hereby agrees that any debt of Borrower to Guarantor is
expressly subordinate to the right of Lender to payment of the Liabilities, and
that Lender shall be entitled to full payment of all of the Liabilities prior to
the exercise by Guarantor of any rights to payment or performance of any debt
which the Borrower may owe Guarantor. Guarantor assigns to Lender all rights
Guarantor may have in any proceeding under the Federal Bankruptcy Code or any
receivership or insolvency proceeding of Borrower, including all rights of
Guarantor to be paid by Borrower. This assignment does not prevent Lender from
enforcing Guarantor's obligations hereunder in any way. To the extent permitted
by law, any payments or other property at any time received by Guarantor from
the Borrower in respect of any indebtedness of Borrower to Guarantor shall be
held in trust for and shall be paid or transferred to Lender upon demand.
13. Guarantor hereby expressly waives: (a) notice of the acceptance of
this Guaranty, (b) notice of the existence or creation of all or any of the
Liabilities, (c) presentment, demand, notice of dishonor, protest, and all other
notices whatsoever, (d) all diligence in collection or protection of or
realization upon the Liabilities or any part thereof, any obligation hereunder,
or any security for any of the foregoing, (e) all defenses based on suretyship
or impairment of collateral, and (f) all events and circumstances which might
otherwise constitute a defense or discharge of the obligations of Borrower,
Guarantor or any other guarantor. Guarantor shall not be released or
discharged, either in whole or in part, by Lender's failure to perfect, delay in
perfection or failure to continue the perfection of any security interest in any
property that secures any of the Liabilities or any obligation of Guarantor
hereunder, or to protect the property covered by any such security interest.
Guarantor further waives, to the extent permitted by law, (i) the benefits of
Sections 49-25 and 49-26 of the Code of Virginia (1950), as amended, and any
amendments thereto or any similar statutes or rules of law and (ii) the benefit
of any homestead or similar exemption, state or federal, with respect to the
obligations covered by this Guaranty.
14. The Lender shall have the right to set-off, at any time without notice
to the Guarantor, any and all deposits or other sums at any time or times
credited by or due from the
4
<PAGE>
Lender to the Guarantor (whether or not matured) against the obligations of the
Guarantor hereunder.
15. Lender may, without notice to Guarantor or Borrower of any kind, sell,
assign, or transfer all or any of the Liabilities, and in such event each and
every immediate and successive assignee, transferee, or holder of all or any of
the Liabilities shall have the right to enforce this Guaranty, by suit or
otherwise, for the benefit of such assignee, transferee, or holder, as fully as
if such assignee, transferee or holder were herein by name specifically given
such rights, powers and benefits. Lender shall have an unimpaired right, prior
and superior to that of any such assignee, transferee or holder, to enforce this
Guaranty for the benefit of Lender as to so much of the Liabilities as it has
not sold, assigned, or transferred.
16. No delay on the part of Lender in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Lender
of any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy.
17. No action of Lender permitted hereunder shall in any way affect,
impair or release this Guaranty.
18. Representations and Warranties of Guarantor. To induce Lender to make
-------------------------------------------
the loans evidenced by the Revolving Note and by the Guidance Note, Guarantor
makes the following representations and warranties, upon each of which Lender,
its successors, and assigns are entitled to rely and have relied,
notwithstanding any investigation heretofore or hereafter made by Lender and
such successors and assigns. All such representations and warranties are true
and complete in all respects and do not omit any material fact necessary to make
such representations and warranties not misleading.
(a) No Conflicts or Defaults. The execution and delivery of this
------------------------
Guaranty and the performance by the Guarantor of the Guarantor's obligations
hereunder will not conflict with or violate, or constitute a default or require
any consent or waiver under, any provision of any mortgage, deed of trust,
evidence of indebtedness, order, decree or agreement to which the Guarantor is a
party or for which the Guarantor or any part of the Guarantor's property is
bound.
(b) Enforceability. This Guaranty is a legal, valid and binding
--------------
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms, except as limited by bankruptcy, insolvency and other laws
affecting the rights of creditors generally and general principles of equity.
(c) Litigation; Violations of Law. There are no actions, suits or
-----------------------------
proceedings of a material nature of which Guarantor has knowledge pending or
overtly threatened against or affecting the Guarantor, and to Guarantor's
knowledge no event has occurred (including, without limitation, the execution,
acknowledgment and delivery of this Guaranty and the consummation of the
transactions contemplated hereby) which will violate, be in conflict with,
result in the breach of or constitute (with or without notice or the passage of
time, or both) a default under any judicial decision, statute, ruling,
direction, rule, regulation, permit, certificate or ordinance of any
governmental authority in any way applicable to the Guarantor. The Guarantor is
not in
5
<PAGE>
default with respect to any judgment, order, writ, injunction, decree or demand
of any court, arbitrator, administrative agency or other governmental or quasi-
governmental authority.
(d) Financial Information. All financial information furnished to
---------------------
Lender by the Guarantor is complete in all material respects, and fairly and
accurately presents such Guarantor's financial condition in all material
respects as of the dates thereof, and no material adverse change has occurred in
the financial condition reflected therein since the dates thereof.
(e) Insolvency Matters. No bankruptcy, reorganization, arrangement,
------------------
readjustment of debt, insolvency or other proceeding has been commenced or
threatened by or against the Guarantor, or consented to or acquiesced in by the
Guarantor, and no judgment has been entered against the Guarantor which has not
been satisfied or otherwise discharged.
(f) Incorporation, Good Standing and Due Qualification. The
--------------------------------------------------
Guarantor, if signing as a corporation, is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation; has full corporate power and authority to own its assets and to
transact the business in which it is now engaged or in which it is proposed to
be engaged, and to execute, deliver and perform this Guaranty; and is duly
qualified as a foreign corporation and in good standing under the laws of each
other jurisdiction in which such qualification is required.
(g) Corporate Power and Authority. If the Guarantor is a
-----------------------------
corporation, the execution, delivery and performance by the Guarantor of this
Guaranty has been duly authorized by all necessary corporate action and does not
and will not (a) require any consent or approval of the stockholders of the
Guarantor; (b) contravene such Guarantor's charter or bylaws; (c) result in, or
require, the creation or imposition of any lien, upon or with respect to any of
the properties now owned or hereafter acquired by such Guarantor; and (d) to the
Guarantor's best knowledge cause such Guarantor to be in default under any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to such Guarantor.
19. This Guaranty shall be binding upon Guarantor and the heirs, legal
representatives, successors and assigns of Guarantor. If more than one party
shall execute this Guaranty, the term "Guarantor" shall mean all parties
executing this Guaranty, or any one of them, as the context may require, and all
such parties shall be jointly and severally obligated hereunder.
20. As further consideration for the loan(s) or other financial
accommodation(s) by Lender to Borrower and as a material inducement to Lender to
make or enter into the loan(s) or other financial accommodation(s) and accept
this Guaranty, and notwithstanding anything to the contrary contained in this
Guaranty or any other document delivered in connection with this Guaranty,
Guarantor hereby irrevocably waives, disclaims and relinquishes any and all
claims, rights or remedies which Guarantor may now have or hereafter acquire
against Borrower that arise in connection with this Guaranty or the performance
by Guarantor hereunder, including without limitation any claim, remedy or right
of subrogation, reimbursement, exoneration, contribution, indemnification, or
participation in any claim, right or remedy of Lender against
6
<PAGE>
Borrower or any security which Lender now has or hereafter acquires, whether or
not such claim, right or remedy arises in equity, under contract, by statute,
under common law or otherwise.
21. All notices pursuant to this Guaranty shall be in writing and shall be
directed to the addresses set forth below or such other address as may be
specified in a notice given in accordance with the requirements of this
paragraph. Except as otherwise specifically provided herein, notices shall be
deemed to be given three (3) days after mailing by certified or registered mail,
return receipt requested, or one (1) business day after deposit with a
recognized receipted overnight courier, or when personally delivered to and
received at the required address.
GUARANTOR:
INTEGRAL MARKETING, INC.
c/o Integral Systems, Inc.
5000 Philadelphia Way, Suite A
Lanham, Maryland 20706
LENDER:
BANK OF AMERICA, N.A.
8300 Greensboro Drive
Suite 550
McLean, Virginia 22102-3604
Lindsey S. Rheaume, Vice President
22. If any term or provision of this Guaranty or the application thereof
to any person or circumstance shall be invalid or unenforceable to any extent,
the remainder of this Guaranty and the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Guaranty shall be valid and be enforceable to the fullest extent permitted
by law.
23. ARBITRATION.
ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING
BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS INSTRUMENT,
AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS,
INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE
DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT
(OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY
PARTY TO THIS
7
<PAGE>
INSTRUMENT, AGREEMENT, OR DOCUMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR
EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH
THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
(i) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY
-------------
OF BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT,
AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
(ii) RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION
---------------------
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT,
AGREEMENT, OR DOCUMENT; OR (II) BE A WAIVER BY THE LENDER OF THE PROTECTION
AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW;
OR (III) LIMIT THE RIGHT OF THE LENDER HERETO (A) TO EXERCISE SELF HELP REMEDIES
SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR
PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR
ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF
POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE LENDER MAY EXERCISE SUCH SELF
HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER
THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN
ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
24. THIS GUARANTY IS GOVERNED BY THE LAW OF THE COMMONWEALTH OF VIRGINIA,
WITHOUT REGARD FOR CONFLICTS OF LAWS PRINCIPLES. GUARANTOR CONSENTS TO THE NON-
EXCLUSIVE PERSONAL JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF VIRGINIA
AND THE FEDERAL COURTS LOCATED IN VIRGINIA SO THAT LENDER MAY SUE GUARANTOR IN
VIRGINIA TO ENFORCE THIS GUARANTY. GUARANTOR AGREES NOT TO CLAIM THAT VIRGINIA
IS AN INCONVENIENT PLACE FOR TRIAL. AT LENDER'S OPTION, THE VENUE (LOCATION) OF
ANY SUIT TO ENFORCE THIS
8
<PAGE>
GUARANTY MAY BE IN THE COUNTY OF ARLINGTON, VIRGINIA. GUARANTOR HEREBY
IRREVOCABLY AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF
PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH
SUIT, ACTION OR PROCEEDING MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, DIRECTED TO GUARANTOR AT THE ADDRESS PROVIDED FOR NOTICES
UNDER THIS GUARANTY.
25. GUARANTOR, AND LENDER BY ACCEPTANCE OF THIS GUARANTY, EACH HEREBY
WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTION UNDER OR IN
ANY WAY CONNECTED WITH THIS GUARANTY AND IN NO EVENT SHALL LENDER BE LIABLE FOR
PUNITIVE OR CONSEQUENTIAL DAMAGES.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the date
first written above.
Integral Marketing, Inc.
[Corporate Seal]
ATTEST:
/s/ Elaine M. Parfitt
_________________________ By:____________________________________
Thomas L. Gough Name: Elaine M. Parfitt
__________________________________
Title: Secretary
_________________________________
STATE OF _____________ )
) To-wit:
COUNTY/CITY OF_____________ )
I __________________________, a Notary Public in and for the jurisdiction
aforesaid, do certify that __________________, whose name is signed to the
writing above, bearing date as of December 9, 1999 has acknowledged the same
before me in my jurisdiction aforesaid.
Given under my hand and seal this ___ day of ___________, 1999.
Notary Public
My Commission Expires: ____________
BANK OF AMERICA, N.A. December 9, 1999
9
<PAGE>
BANK OF AMERICA, N.A. December 9, 1999
GUARANTY
--------
1. As an inducement for and in consideration of any loan(s) or other
financial accommodation(s) of even date herewith granted to Integral Systems,
Inc., a Maryland corporation (hereinafter called "Borrower"), by Bank of
America, N.A., 8300 Greensboro Drive, Suite 550, McLean, Virginia 22102-3604
(hereinafter, together with its successors and assigns, called "Lender"), the
undersigned (hereinafter called "Guarantor"), hereby unconditionally guarantees
the full and prompt payment, observance and performance when due, whether at the
stated time, by acceleration or otherwise, of all obligations of Borrower to
Lender, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, whether or not of the same or similar class or of like
kind to any indebtedness incurred contemporaneously with the execution of this
Guaranty, and whether now or hereafter existing, or due or to become due,
including without limitation, the following:
a. Any and all amounts owed by Borrower under, in connection with,
and/or pursuant to the indebtedness evidenced by that certain Revolving
Note of even date herewith, in the original principal sum of Nine Million
and No/100 and No/100 Dollars ($9,000,000.00) (the "Revolving Note") and by
that certain Guidance Line of Credit Note of even date herewith, in the
original principal sum of Six Million and No/100 Dollars ($6,000,000.00)
(the "Guidance Note"), both with interest thereon according to the
provisions thereof, and all obligations of Borrower thereunder, in
connection therewith and/or pursuant to any and all agreements and other
documents in connection therewith; and
b. Any and all amounts owed by Borrower under, in connection with,
and/or pursuant to the indebtedness evidenced by that certain Revolving
Line of Credit Loan Agreement and Security Agreement between Borrower and
Lender of even date herewith (the "Loan Agreement"), any and all
obligations of Borrower thereunder, in connection therewith and/or pursuant
to any and all agreements and other documents in connection therewith; and
c. All sums advanced or expenses or costs paid or incurred (including
without limitation attorneys' fees and other legal expenses and arbitration
fees and costs) by Lender pursuant to or in connection with the Revolving
Note, the Guidance Note or any agreements and other documents in connection
therewith plus applicable interest on such sums, expenses or costs; and
d. Any extensions, modifications, changes, substitutions,
restatements, renewals or increases or decreases of any or all of the
indebtedness referenced above; and
e. Any and all other indebtedness, obligations and liabilities of any
kind, of Borrower to Lender, now or hereafter existing, absolute or
contingent, joint and/or several, due or not due, secured or unsecured,
arising by operation of law or otherwise,
1
<PAGE>
direct or indirect, including without limitation indebtedness, obligations
and liabilities of Borrower to Lender as a member of any partnership,
syndicate or association or other group and whether incurred by such
Borrower as principal, surety, endorser, guarantor, accommodation party or
otherwise, and any obligations which give rise to an equitable remedy for
breach of performance if such breach gives rise to an obligation by such
Borrower to pay Lender.
2. All of the obligations described in paragraph 1, above, shall be
referred to hereafter as the "Liabilities." In the event any of the Liabilities
shall not be paid or performed according to their terms (subject to any
applicable grace or cure period), Guarantor shall immediately pay, perform or
cause the performance of the same, this Guaranty being a guarantee of full
payment and performance and not of collectibility and in no way conditional or
contingent. This Guaranty is an absolute, unconditional and continuing
guarantee with the Guarantor being jointly and severally liable with the
Borrower and is in no way conditioned upon any requirement that Lender first
attempt to collect payment or seek performances of any of the Liabilities from
Borrower or any other borrower or guarantor, or resort to any other security or
other means of obtaining payment or performance of any of the Liabilities, or
upon any other contingency whatsoever.
3. Guarantor further agrees to pay all expenses (including reasonable
attorneys' fees and expenses and arbitration fees and costs) paid or incurred by
Lender in endeavoring to collect the Liabilities, or any part thereof, and in
enforcing or defending this Guaranty, whether or not a lawsuit is commenced.
4. Guarantor represents and warrants that Guarantor is either financially
interested in Borrower or will receive other material economic benefits as a
result of any loan(s), leases(s) or other financial accommodation(s) made or
granted to Borrower by Lender from time to time. Guarantor further represents
and warrants that Guarantor is willing to enter into this Guaranty as a material
inducement to Lender to extend loan(s) or other financial accommodation(s), or
to enter into lease(s), from time to time with Borrower, and acknowledges that
Lender would not be willing to extend any such loan(s) or other financial
accommodation(s) or enter into such lease(s) absent this Guaranty.
5. Guarantor agrees that the occurrence of any of the following events
shall constitute a default under this Guaranty: (a) the failure of any
Guarantor to perform or observe any obligation under this Guaranty, or (b) the
dissolution or insolvency of Borrower, or (c) the inability of Borrower to pay
debts generally as they mature, or (d) an assignment by Borrower of any of the
Liabilities for the benefit of creditors, or (e) the institution of any
proceeding by or against Borrower (under the Bankruptcy Code or otherwise)
seeking to adjudicate Borrower bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors or seeking the
appointment of a receiver, trustee or custodian for itself or for all or a
substantial part of its property, which proceeding (unless instituted by
Borrower) is not dismissed within thirty (30) days thereafter, or (f) the
default by Borrower under any agreement or document concerning or relating to
the Liabilities, or (g) any representation or warranty contained herein or in
any other document delivered by or on behalf Borrower to Lender shall be false
or misleading
2
<PAGE>
in any material respect, or (h) there shall be a default or event of default
under any other agreement or document securing or guaranteeing any of the
obligations secured by this Guaranty, or (i) there shall be a default or event
of default under any indebtedness or obligation of Borrower to any third party
that causes that third party to declare such indebtedness or other obligation
due prior to its scheduled date of maturity. Upon and after the occurrence of a
default hereunder, the Liabilities shall be automatically accelerated and shall
become immediately due and payable by Guarantor, or Guarantor's successor or
estate, without presentment, demand, protest, or further notice of any kind, all
of which are hereby expressly waived by Guarantor.
6. Guarantor further agrees that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time payment to
or for the benefit of Lender of the Liabilities, or any part thereof, is
rescinded or must otherwise be returned by Lender due to the insolvency,
bankruptcy or reorganization of Borrower or otherwise, all as though such
payment to or for the benefit of Lender had not been made.
7. Lender may, without demand or notice of any kind, at any time when any
amount shall be due and payable hereunder by Guarantor, appropriate and apply
toward the payment of such amount, and in such order of application as Lender
may from time to time elect, any property, balances, credits, deposits,
accounts, instruments or moneys of Guarantor in the possession or control of
Lender for any purpose.
8. This Guaranty shall be a continuing, absolute and unconditional
guaranty of payment and performance and not of collectibility and shall remain
in full force and effect as to Guarantor, subject to discontinuance only as
follows: Guarantor, or any person duly authorized and acting on behalf of
Guarantor, may give written notice to Lender of discontinuance of this Guaranty,
but no such notice shall be effective in any respect until it is actually
received by Lender and no such notice shall affect or impair the obligations
hereunder of Guarantor with respect to any Liabilities existing at the date of
receipt of such notice by Lender (or any Liabilities required or permitted to be
advanced by Lender on or after such date), or for renewals or extensions of such
Liabilities made after Lender receives Guarantor's notice, or any interest
thereon or any expenses paid or incurred by Lender in endeavoring to collect
such Liabilities, or any part thereof, or in enforcing this Guaranty against
Guarantor. Any such notice of discontinuance by or on behalf of any Guarantor
shall not affect, impair or release the obligations hereunder of any other
guarantor with respect to any of the Liabilities.
9. Lender may at any time and from time to time, without the consent of,
or notice to, Guarantor, and without affecting, impairing or releasing the
obligations of Guarantor hereunder, do any or all of the following: (a) retain
or obtain a security interest in any property to secure any of the Liabilities
or any obligations hereunder, (b) retain or obtain the primary or secondary
liability of any party or parties, in addition to Guarantor, with respect to any
of the Liabilities, (c) renew, extend (including extensions beyond the original
term), modify, alter, change the interest rate of, release or discharge any of
the Liabilities, (d) settle, release or compromise any liability of the Borrower
or of any of the Liabilities or any liability of any nature of any other party
or parties with respect to the Liabilities or any security therefor, (e) accept
partial payments of the Liabilities, (f) settle, release (by operation of law or
otherwise), compound, compromise, collect or liquidate any of the Liabilities
and any property securing any
3
<PAGE>
of the Liabilities, (g) consent to the transfer of any property securing any of
the Liabilities, (h) resort to Guarantor for payment of any of the Liabilities,
whether or not Lender shall have resorted to any property securing any of the
Liabilities or any obligation hereunder or shall have proceeded against any
other guarantor or any other party primarily or secondarily liable on any of the
Liabilities, (i) make any other changes in its agreements with Borrower, and (j)
stop lending money or extending other credit to Borrower.
10. Any amount received by Lender from whatsoever source and applied by it
to the payment of the Liabilities may be applied in such order of application as
Lender may from time to time elect.
11. Guarantor is now adequately informed of Borrower's financial
condition, and Guarantor agrees to keep so informed. Guarantor agrees that
Lender has no obligation to provide Guarantor with any present or future
information concerning the financial condition of Borrower. Guarantor has not
relied on financial information furnished by Lender in deciding to execute this
Guaranty.
12. Guarantor hereby agrees that any debt of Borrower to Guarantor is
expressly subordinate to the right of Lender to payment of the Liabilities, and
that Lender shall be entitled to full payment of all of the Liabilities prior to
the exercise by Guarantor of any rights to payment or performance of any debt
which the Borrower may owe Guarantor. Guarantor assigns to Lender all rights
Guarantor may have in any proceeding under the Federal Bankruptcy Code or any
receivership or insolvency proceeding of Borrower, including all rights of
Guarantor to be paid by Borrower. This assignment does not prevent Lender from
enforcing Guarantor's obligations hereunder in any way. To the extent permitted
by law, any payments or other property at any time received by Guarantor from
the Borrower in respect of any indebtedness of Borrower to Guarantor shall be
held in trust for and shall be paid or transferred to Lender upon demand.
13. Guarantor hereby expressly waives: (a) notice of the acceptance of
this Guaranty, (b) notice of the existence or creation of all or any of the
Liabilities, (c) presentment, demand, notice of dishonor, protest, and all other
notices whatsoever, (d) all diligence in collection or protection of or
realization upon the Liabilities or any part thereof, any obligation hereunder,
or any security for any of the foregoing, (e) all defenses based on suretyship
or impairment of collateral, and (f) all events and circumstances which might
otherwise constitute a defense or discharge of the obligations of Borrower,
Guarantor or any other guarantor. Guarantor shall not be released or
discharged, either in whole or in part, by Lender's failure to perfect, delay in
perfection or failure to continue the perfection of any security interest in any
property that secures any of the Liabilities or any obligation of Guarantor
hereunder, or to protect the property covered by any such security interest.
Guarantor further waives, to the extent permitted by law, (i) the benefits of
Sections 49-25 and 49-26 of the Code of Virginia (1950), as amended, and any
amendments thereto or any similar statutes or rules of law and (ii) the benefit
of any homestead or similar exemption, state or federal, with respect to the
obligations covered by this Guaranty.
14. The Lender shall have the right to set-off, at any time without notice
to the Guarantor, any and all deposits or other sums at any time or times
credited by or due from the
4
<PAGE>
Lender to the Guarantor (whether or not matured) against the obligations of the
Guarantor hereunder.
15. Lender may, without notice to Guarantor or Borrower of any kind, sell,
assign, or transfer all or any of the Liabilities, and in such event each and
every immediate and successive assignee, transferee, or holder of all or any of
the Liabilities shall have the right to enforce this Guaranty, by suit or
otherwise, for the benefit of such assignee, transferee, or holder, as fully as
if such assignee, transferee or holder were herein by name specifically given
such rights, powers and benefits. Lender shall have an unimpaired right, prior
and superior to that of any such assignee, transferee or holder, to enforce this
Guaranty for the benefit of Lender as to so much of the Liabilities as it has
not sold, assigned, or transferred.
16. No delay on the part of Lender in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Lender
of any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy.
17. No action of Lender permitted hereunder shall in any way affect,
impair or release this Guaranty.
18. Representations and Warranties of Guarantor. To induce Lender to make
-------------------------------------------
the loans evidenced by the Revolving Note and by the Guidance Note, Guarantor
makes the following representations and warranties, upon each of which Lender,
its successors, and assigns are entitled to rely and have relied,
notwithstanding any investigation heretofore or hereafter made by Lender and
such successors and assigns. All such representations and warranties are true
and complete in all respects and do not omit any material fact necessary to make
such representations and warranties not misleading.
(a) No Conflicts or Defaults. The execution and delivery of this
------------------------
Guaranty and the performance by the Guarantor of the Guarantor's obligations
hereunder will not conflict with or violate, or constitute a default or require
any consent or waiver under, any provision of any mortgage, deed of trust,
evidence of indebtedness, order, decree or agreement to which the Guarantor is a
party or for which the Guarantor or any part of the Guarantor's property is
bound.
(b) Enforceability. This Guaranty is a legal, valid and binding
--------------
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms, except as limited by bankruptcy, insolvency and other laws
affecting the rights of creditors generally and general principles of equity.
(c) Litigation; Violations of Law. There are no actions, suits or
-----------------------------
proceedings of a material nature of which Guarantor has knowledge pending or
overtly threatened against or affecting the Guarantor, and to Guarantor's
knowledge no event has occurred (including, without limitation, the execution,
acknowledgment and delivery of this Guaranty and the consummation of the
transactions contemplated hereby) which will violate, be in conflict with,
result in the breach of or constitute (with or without notice or the passage of
time, or both) a default under any judicial decision, statute, ruling,
direction, rule, regulation, permit, certificate or ordinance of any
governmental authority in any way applicable to the Guarantor. The Guarantor is
not in
5
<PAGE>
default with respect to any judgment, order, writ, injunction, decree or demand
of any court, arbitrator, administrative agency or other governmental or quasi-
governmental authority.
(d) Financial Information. All financial information furnished to
---------------------
Lender by the Guarantor is complete in all material respects, and fairly and
accurately presents such Guarantor's financial condition in all material
respects as of the dates thereof, and no material adverse change has occurred in
the financial condition reflected therein since the dates thereof.
(e) Insolvency Matters. No bankruptcy, reorganization, arrangement,
------------------
readjustment of debt, insolvency or other proceeding has been commenced or
threatened by or against the Guarantor, or consented to or acquiesced in by the
Guarantor, and no judgment has been entered against the Guarantor which has not
been satisfied or otherwise discharged.
(f) Incorporation, Good Standing and Due Qualification. The
--------------------------------------------------
Guarantor, if signing as a corporation, is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation; and has full corporate power and authority to execute, deliver
and perform this Guaranty.
(g) Corporate Power and Authority. If the Guarantor is a
-----------------------------
corporation, the execution, delivery and performance by the Guarantor of this
Guaranty has been duly authorized by all necessary corporate action and does not
and will not (a) require any consent or approval of the stockholders of the
Guarantor; (b) contravene such Guarantor's charter or bylaws; (c) result in, or
require, the creation or imposition of any lien, upon or with respect to any of
the properties now owned or hereafter acquired by such Guarantor; and (d) to the
Guarantor's best knowledge cause such Guarantor to be in default under any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to such Guarantor.
19. This Guaranty shall be binding upon Guarantor and the heirs, legal
representatives, successors and assigns of Guarantor. If more than one party
shall execute this Guaranty, the term "Guarantor" shall mean all parties
executing this Guaranty, or any one of them, as the context may require, and all
such parties shall be jointly and severally obligated hereunder.
20. As further consideration for the loan(s) or other financial
accommodation(s) by Lender to Borrower and as a material inducement to Lender to
make or enter into the loan(s) or other financial accommodation(s) and accept
this Guaranty, and notwithstanding anything to the contrary contained in this
Guaranty or any other document delivered in connection with this Guaranty,
Guarantor hereby irrevocably waives, disclaims and relinquishes any and all
claims, rights or remedies which Guarantor may now have or hereafter acquire
against Borrower that arise in connection with this Guaranty or the performance
by Guarantor hereunder, including without limitation any claim, remedy or right
of subrogation, reimbursement, exoneration, contribution, indemnification, or
participation in any claim, right or remedy of Lender against Borrower or any
security which Lender now has or hereafter acquires, whether or not such claim,
right or remedy arises in equity, under contract, by statute, under common law
or otherwise.
6
<PAGE>
21. All notices pursuant to this Guaranty shall be in writing and shall be
directed to the addresses set forth below or such other address as may be
specified in a notice given in accordance with the requirements of this
paragraph. Except as otherwise specifically provided herein, notices shall be
deemed to be given three (3) days after mailing by certified or registered mail,
return receipt requested, or one (1) business day after deposit with a
recognized receipted overnight courier, or when personally delivered to and
received at the required address.
GUARANTOR:
INTERSYS, INC.
c/o Integral Systems, Inc.
5000 Philadelphia Way, Suite A
Lanham, Maryland 20706
LENDER:
BANK OF AMERICA, N.A.
8300 Greensboro Drive
Suite 550
McLean, Virginia 22102-3604
Lindsey S. Rheaume, Vice President
22. If any term or provision of this Guaranty or the application thereof
to any person or circumstance shall be invalid or unenforceable to any extent,
the remainder of this Guaranty and the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Guaranty shall be valid and be enforceable to the fullest extent permitted
by law.
23. ARBITRATION.
ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT
NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS INSTRUMENT, AGREEMENT OR
DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY
CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING
ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR ANY SUCCESSOR
THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF
ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO
THIS INSTRUMENT, AGREEMENT, OR DOCUMENT MAY BRING AN ACTION, INCLUDING A SUMMARY
OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
7
<PAGE>
CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
(i) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY
-------------
OF BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT,
AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
(ii) RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION
---------------------
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT,
AGREEMENT, OR DOCUMENT; OR (II) BE A WAIVER BY THE LENDER OF THE PROTECTION
AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW;
OR (III) LIMIT THE RIGHT OF THE LENDER HERETO (A) TO EXERCISE SELF HELP REMEDIES
SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR
PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR
ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF
POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE LENDER MAY EXERCISE SUCH SELF
HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER
THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN
ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
24. THIS GUARANTY IS GOVERNED BY THE LAW OF THE COMMONWEALTH OF VIRGINIA,
WITHOUT REGARD FOR CONFLICTS OF LAWS PRINCIPLES. GUARANTOR CONSENTS TO THE NON-
EXCLUSIVE PERSONAL JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF VIRGINIA
AND THE FEDERAL COURTS LOCATED IN VIRGINIA SO THAT LENDER MAY SUE GUARANTOR IN
VIRGINIA TO ENFORCE THIS GUARANTY. GUARANTOR AGREES NOT TO CLAIM THAT VIRGINIA
IS AN INCONVENIENT PLACE FOR TRIAL. AT LENDER'S OPTION, THE VENUE (LOCATION) OF
ANY SUIT TO ENFORCE THIS GUARANTY MAY BE IN THE COUNTY OF ARLINGTON, VIRGINIA.
GUARANTOR HEREBY IRREVOCABLY AGREES AND CONSENTS THAT, IN ADDITION TO ANY
8
<PAGE>
METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO GUARANTOR AT THE ADDRESS
PROVIDED FOR NOTICES UNDER THIS GUARANTY.
25. GUARANTOR, AND LENDER BY ACCEPTANCE OF THIS GUARANTY, EACH HEREBY
WAIVE, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTION UNDER OR IN
ANY WAY CONNECTED WITH THIS GUARANTY AND IN NO EVENT SHALL LENDER BE LIABLE FOR
PUNITIVE OR CONSEQUENTIAL DAMAGES.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of the date
first written above.
Intersys, Inc.
[Corporate Seal]
ATTEST:
/s/ Thomas L. Gough
- -------------------------- By: /s/ Elaine M. Parfitt
Thomas L. Gough -----------------------
Name: Elaine M. Parfitt
---------------------
Title: Treasurer
STATE OF __________________________ )
) To-wit:
COUNTY/CITY OF__________________________)
I __________________________, a Notary Public in and for the jurisdiction
aforesaid, do certify that __________________, whose name is signed to the
writing above, bearing date as of
December 9, 1999 has acknowledged the same before me in my jurisdiction
aforesaid.
Given under my hand and seal this _____ day of _______________________,
1999.
Notary Public
My Commission Expires: ____________________
9
<PAGE>
Exhibit 10.2
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE (this "Second Amendment") is made this
______ day of December, 1999, and shall be effective as of June 1, 1999, by and
between ASP WASHINGTON, L.L.C., a Delaware limited liability company
("Landlord") and INTEGRAL SYSTEMS, INC., a Maryland corporation ("Tenant").
RECITALS:
WHEREAS, Landlord and Tenant entered into that certain Lease, dated January
29, 1999 (the "Lease Date") (the "Original Lease"), which Original Lease was
amended by that certain First Amendment to Lease between Landlord and Tenant,
dated March 8, 1999 (the "First Amendment"), the Original Lease as amended by
the First Amendment being hereinafter referred to as the "Amended Lease"; and
WHEREAS, pursuant to the Amended Lease, Landlord leased to Tenant and
Tenant leased from Landlord, through May 31, 2009, those certain commercial
premises containing approximately 66,700 rentable square feet, consisting of (a)
approximately 46,700 rentable square feet in that certain building located at
5000 Philadelphia Way in the Washington Business Park in Lanham, Prince Georges
County, Maryland (the "Park"), and containing approximately 94,821 rentable
square feet (the "5000 Building") (the "5000 Premises") and (b) approximately
20,000 rentable square feet in that certain building located at 5200
Philadelphia Way in the Park and containing approximately 52,786 rentable square
feet (the "5200 Building") (the "Original 5200 Premises"), the 5000 Premises and
the Original 5200 Premises being hereinafter referred to as the "Original
Premises"; and
WHEREAS, Landlord and Tenant desire to amend the Amended Lease to, inter
-----
alia, provide for the lease by Landlord to Tenant and the lease by Tenant from
- ----
Landlord of an additional approximately 4,224 rentable square feet in the 5200
Building contiguous to the 5200 Premises (the "Expansion Premises"), the Amended
Lease, as amended hereby, being hereinafter referred to as the "Lease".
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Capitalized Terms. Except as otherwise provided herein, all
-----------------
capitalized terms contained herein shall have the meaning ascribed to such terms
in the Original Lease and the First Amendment. If the meaning ascribed to any
capitalized term in the Original Lease is inconsistent with the meaning ascribed
to such term in the First Amendment, the meaning of such term shall be that
ascribed thereto in the First Amendment.
<PAGE>
2. Definitions.
-----------
a. Leased Premises. From and after the Lease Date through the day
---------------
immediately preceding the Expansion Date, "Leased Premises" shall mean the
Original Premises only. From and after the Expansion Date (defined below),
"Leased Premises" shall mean both the Original Premises and the Expansion
Premises.
b. Project. From and after the Lease Date, "Project" shall mean such
-------
portions of the Park as may, from time to time, be owned by Landlord.
c. Expansion Date. "Expansion Date" shall mean June 1, 1999.
--------------
<PAGE>
d. Expansion Term. "Expansion Term" shall mean the period between the
--------------
Expansion Date and the Lease Termination Date.
e. Base Rent. From and after the Expansion Date, "Base Rent" shall mean
---------
that set forth in the table below and shall be payable in monthly installments
during the Expansion Term.
<TABLE>
<CAPTION>
Monthly Monthly
Monthly Oper. Costs Oper. Costs Total Monthly Rent
Period Base Rent (5000 Bldg.) (5200 Bldg.) (Base Rent + Oper. Costs)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
06/01/99 - 12/31/99 $59,694.37 $6,810.42 $3,936.40 $70,441.19
- ------------------------------------------------------------------------------------------------------
01/01/00 - 05/31/00 $59,694.37 adjusted adjusted $59,694.37 + annually
annually annually adjusted Oper. Costs
- ------------------------------------------------------------------------------------------------------
06/01/00 - 05/31/01 $61,467.47 adjusted adjusted $61,467.47 + annually
annually annually adjusted Oper. Costs
- ------------------------------------------------------------------------------------------------------
06/01/01 - 05/31/02 $63,358.77 adjusted adjusted $63,358.77 + annually
annually annually adjusted Oper. Costs
- ------------------------------------------------------------------------------------------------------
06/01/02 - 05/31/03 $65,250.08 adjusted adjusted $65,250.08 + annually
annually annually adjusted Oper. Costs
- ------------------------------------------------------------------------------------------------------
06/01/03 - 05/31/04 $67,200.49 adjusted adjusted $67,200.49 + annually
annually annually adjusted Oper. Costs
- ------------------------------------------------------------------------------------------------------
06/01/04 - 05/31/05 $69,210.00 adjusted adjusted $69,210.00 + annually
annually annually adjusted Oper. Costs
- ------------------------------------------------------------------------------------------------------
06/01/05 - 05/31/06 $71,278.62 adjusted adjusted $71,278.62 + annually
annually annually adjusted Oper. Costs
- ------------------------------------------------------------------------------------------------------
06/01/06 - 05/31/07 $73,406.34 adjusted adjusted $73,406.34 + annually
annually annually adjusted Oper. Costs
- ------------------------------------------------------------------------------------------------------
06/01/07 - 05/31/08 $75,593.16 adjusted adjusted $75,593.16 + annually
annually annually adjusted Oper. Costs
- ------------------------------------------------------------------------------------------------------
06/01/08 - 05/31/09 $77,898.19 adjusted adjusted $77,898.19 + annually
annually annually adjusted Oper. Costs
- ------------------------------------------------------------------------------------------------------
</TABLE>
f. Tenant's Estimated Share. $1.75 per rentable square foot $1.95 per
-------------------------
rentable square foot of "Tenant's Estimated Share of of the 5000 Premises and
(ii) the 5200 Premises. From and after Operating Costs" during the the Lease
Date through the day remainder of the 1999 calendar immediately preceding the
year shall be equal to the sum Expansion Date, Tenant's Estimated of (i) Share
of Operating Costs during the remainder of the 1999 calendar year shall be
payable in equal monthly installments of $10,060.42. From and after the
Expansion Date, Tenant's Estimated Share of Operating Costs during the remainder
of the 1999 calendar year shall be payable in equal monthly installments of
$10,746.82.
g. Tenant's Total Square Footage. From and after the Lease Date through
-----------------------------
the day immediately preceding the Expansion Date, "Tenant's Total Square
Footage" shall mean approximately 66,700 rentable square feet, comprised of
approximately 46,700 rentable square feet in the 5000 Building and approximately
<PAGE>
20,000 rentable square feet in the 5200 Building. From and after the Expansion
Date, "Tenant's Total Square Footage" shall mean approximately 70,924 rentable
square feet, comprised of approximately 46,700 rentable square feet in the 5000
Building and approximately 24,224 rentable square feet in the 5200 Building.
From and after the Lease Date, "Total Square Footage of the Project" shall mean
approximately 568,310 rentable square feet.
h. Pro Rata Share.
--------------
i. "Tenant's 5000 Share" shall mean a fraction (expressed as a
percentage), the numerator of which is Tenant's Total Square Footage with
respect to the 5000 Premises and the denominator of which is Total Building
Square Footage with respect to the 5000 Building. From and after the Lease
Date, Tenant's 5000 Share shall mean 49.2507% (46,700/94,821).
ii. "Tenant's 5200 Share" shall mean a fraction (expressed as a
percentage), the numerator of which is Tenant's Total Square Footage with
respect to the 5200 Premises and the denominator of which is Total Building
Square Footage with respect to the 5200 Building. From and after the Lease
Date through the day immediately preceding the Expansion Date, Tenant's
5200 Share shall mean 37.8888% (20,000/52,786). From and after the
Expansion Date, Tenant's 5200 Share shall mean 45.8910% (24,224/52,786).
iii. "Tenant's Pro Rata Share of the Project" shall mean a
fraction (expressed as a percentage), the numerator of which is Tenant's
Total Square Footage and the denominator of which is Total Square Footage
of the Project. From and after the Lease Date through the day immediately
preceding the Expansion Date, Tenant's Pro Rata Share of the Project shall
mean 11.7366% (66,700/568,310). From and after the Expansion Date,
Tenant's Pro Rata Share of the Project shall mean 12.4798%
(70,924/568,310).
Tenant's 5000 Share, Tenant's 5200 Share, and/or Tenant's Pro
Rata Share of the Project shall be subject to adjustment based on changes to the
rentable area of the 5000 Premises, the 5200 Premises, the 5000 Building, the
5200 Building, and/or the Project, as the case may be.
i. Parking. From and after the Expansion Date, "Authorized Number
-------
of Parking Spaces" shall continue to mean 170 spaces with respect to the 5000
Building and 110 spaces with respect to the 5200 Building.
j. Managing Agent. "Managing Agent" shall mean Trammell Crow
--------------
Company whose address is 4601 Forbes Boulevard, Suite 110, Lanham, Maryland
20706.
k. Landlord's Mailing Address.
--------------------------
c/o AMRESCO Management, Inc.
700 North Pearl Street, Suite 2400
Dallas, Texas 75201-7424
<PAGE>
Attention: Allyn Patrick.
l. Tenant's Mailing Address.
------------------------
5000-A Philadelphia Way
Lanham, Maryland 20706
Attention: Tom Gough
3. Lease of Expansion Premises. In consideration of the Rent and the
---------------------------
provisions of this Second Amendment, Landlord leases to Tenant and Tenant
accepts from Landlord the Expansion Premises. Tenant's Total Square Footage,
Total Building Square Footage with respect to the 5000 Building, Total Building
Square Footage with respect to the 5200 Building, and Total Square Footage of
the Project are stipulated amounts, based on Landlord's method of determining
Total Square Footage for rental purposes. Tenant's Total Square Footage may not
reflect the actual amount of floor space available for Tenant's use. By taking
possession of the Expansion Premises, Tenant shall be deemed to have examined
the Expansion Premises and accepts the same as being in the condition called for
in this Second Amendment.
4. Prior Occupancy. Tenant shall not occupy any portion of the Expansion
---------------
Premises prior to the Expansion Date except with the express prior written
consent of Landlord. If with Landlord's consent, Tenant occupies the Expansion
Premises prior to the Expansion Date, Tenant shall, from the first day of such
occupancy, pay Landlord Base Rent and Tenant's Pro Rata Share of Operating Costs
in the amounts otherwise specified in Paragraph 2(e) hereof with respect to the
first month of the Expansion Term as though such first day was the Expansion
Date. These amounts will be payable on the first day of such occupancy and
thereafter on the first day of every calendar month until the day immediately
preceding the Expansion Date and thereafter in accordance with the Amended
Lease. A prorated monthly installment shall be paid for any fractional calendar
month if Tenant's occupancy of the Expansion Premises commences on any day other
than the first day of the month. If Tenant shall occupy the Expansion Premises
prior to Expansion Date, all covenants and conditions of the Amended Lease shall
be applicable to and with respect to the Expansion Premises commencing at such
prior occupancy.
5. Rent. During the Expansion Term, Tenant shall pay each monthly
----
installment of Base Rent in advance on the Expansion Date and on the first
calendar day of each month thereafter, together with each monthly installment of
Tenant's Pro Rata Share of Operating Costs. Tenant shall pay all Rent, without
deduction or setoff, to Landlord or Managing Agent at a place specified by
Landlord.
6. Operating Costs. From and after the Lease Date, Tenant's Pro Rata
---------------
Share of Building Operating Costs shall mean the sum of (a) Tenant's 5000 Share
of Operating Costs with respect to the 5000 Building and (b) Tenant's 5200 Share
of Operating Costs with respect to the 5200 Building. Notwithstanding any
provision of the Original Lease, the First Amendment, or this Second Amendment
to the contrary:
a. "Project Operating Costs" shall also include any and all
obligations of Landlord to any neighboring or other property owner for the
maintenance, repair,
<PAGE>
replacement, operation, and/or management of any roadways, parking areas,
landscaped areas, water, sanitary sewer, storm drainage, or other site
improvement or facilities which may be in common between the Project and the
property owned by such neighboring or other property owner; and
b. In the event that any expense relating to the exterior or common
areas of the Project benefits only a portion of the Project, which portion
includes the Building, Landlord may, at Landlord's option, equitably adjust such
expense to reflect the portion of the Project so benefited.
c. In the event that any expense relating to the exterior of the
Building or common areas of the Building, if any, benefits only a portion of the
Building, which portion includes the Leased Premises, Landlord may, at
Landlord's option, equitably adjust such expense to reflect the portion of the
Building so benefited.
7. Construction Conditions.
-----------------------
a. The leasehold improvements with respect to the Expansion Premises
(the "Improvements") shall be constructed in accordance with Schedule 3-B
hereof. If any act, omission or change requested or caused by Tenant increases
the cost of work or materials or the time required for completion of
construction, Tenant shall reimburse Landlord for such increase in cost at the
time the increased cost is incurred and shall reimburse Landlord for any loss in
Rent at the time the Rent would have become due. Landlord's approval of
Tenant's plans for Improvements shall create no responsibility or liability on
the part of Landlord for their completeness, design sufficiency, or compliance
with laws, rules and regulations of governmental agencies or authorities.
b. Tenant acknowledges that, except as expressly set forth in
Schedule 3-B hereof, it has inspected and accepts the 5000 Building, the 5200
Building, the Original Premises, and the Expansion Premises in their present,
"as-is" condition, in the configuration described in Schedule 1 of the Original
Lease and Schedule 1-B hereof, and as suitable for the purpose for which the
Original Premises and the Expansion Premises are leased. Tenant further
acknowledges that no representations as to the repair of the Original Premises
or the Expansion Premises, nor promises to alter, remodel or improve the
Original Premises or the Expansion Premises have been made by Landlord, unless
such are expressly set forth in Schedule 3 of the Original Lease or Schedule 3-B
hereof.
c. Notwithstanding any provision of the Original Lease, the First
Amendment, or this Second Amendment to the contrary, in the event that a
building, zoning, fire, or other governmental law, ordinance, regulation, or
rule is enacted or otherwise becomes applicable to the Leased Premises after the
date hereof (regardless of the cause thereof or the reason therefor) and such
law, ordinance, regulation, or rule requires that alterations or improvements be
made to the Leased Premises in order to comply therewith, Tenant shall, at
Tenant's expense and subject to Paragraph 11 of the Original Lease, make such
alterations or improvements as may be required by such law, ordinance,
regulation, or rule, in which event Landlord's approval thereof shall not be
unreasonably withheld, conditioned, or delayed.
<PAGE>
8. Insurance.
---------
a. With respect to the fire insurance required under Paragraph
7(A)(1) of the Original Lease to be secured and maintained by Landlord
throughout the Lease Term and notwithstanding any provision of such paragraph to
the contrary, Landlord shall only be required to secure and maintain fire
insurance with extended coverage endorsements attached in an amount sufficient
for Landlord to not be deemed a co-insurer of the Building.
b. Notwithstanding any provision of Paragraph 8 of the Original
Lease to the contrary, Tenant and Landlord release each other and waive any
right of recovery against each other for loss or damage to the waiving party's
property which occurs in or about the Leased Premises or the Building, whether
due to the negligence of either party, their agents, employees, officers,
contractors, licensees, invitees or otherwise, to the extent that such loss or
damage would be covered by the fire and extended coverage insurance policies
required to be maintained by the waiving party hereunder. Tenant and Landlord
agree that all policies of insurance obtained by either of them in connection
with the Leased Premises shall contain appropriate waiver of subrogation
clauses.
9. Subordination and Attornment. The text of Paragraph 38 of the
----------------------------
Original Lease is hereby deleted in its entirety, and the following is hereby
inserted in place thereof:
"Tenant acknowledges that this Lease is subject and subordinate to all
leases in which Landlord is lessee and to any mortgage or deed of trust now
in force against the Building and to all advances made or hereafter to be
made thereunder, or any amendments or modifications thereof. Tenant also
agrees that this Lease shall be subject and subordinate to any future
leases in which Landlord is lessee and to any future first mortgage or deed
of trust hereafter in force against the Building and to all advances made
or hereafter to be made thereunder, or any amendments or modifications
thereof (all such existing and future leases, mortgages and deeds of trust
referred to collectively as "Superior Instruments"). Tenant also agrees
that if the holder of any Superior Instrument elects to have this Lease
superior to its Superior Instrument and gives notice of its election to
Tenant, then this Lease shall be superior to the lien of any such lease,
mortgage or deed of trust and all renewals, replacements and extensions
thereof, whether this Lease is dated before or after such lease, mortgage
or deed of trust. If requested in writing by Landlord or any first
mortgagee or ground lessor of Landlord, Tenant agrees to execute a
subordination agreement required to further effect the provisions of this
paragraph.
"In the event of (a) any transfer of the Building in lieu of foreclosure
or, (b) the termination of a lease for the Building in which Landlord is
lessee or, (c) the foreclosure of any Superior Instrument, or (d) a sale of
the Building pursuant to any Superior Instrument, Tenant shall attorn to
such purchaser, transferee or, lessor, or purchaser and shall recognize
such party as landlord under this Lease, provided such party acquires and
accepts the Leased Premises subject to this
<PAGE>
Lease. The agreement of Tenant to attorn contained in the immediately
preceding sentence shall survive any such foreclosure sale or transfer."
10. Roof Antennae.
-------------
a. Subject to (i) compliance with all rules, regulations, statutes,
and codes of any governmental authority having jurisdiction thereover and (ii)
compliance with any covenants, conditions, and restrictions applicable to the
Building and/or the Project, Tenant shall have (A) the exclusive right to
install, at any time after the date hereof, upon the roof of the 5000 Building
an Orbitron Model SX-12 mesh antennae for Tenant's exclusive use (the
"Antennae") and (B) the non-exclusive right, at any time and from time to time
thereafter, to maintain and repair the Antennae, including the non-exclusive
right to access the Antennae for maintenance and repair purposes; provided that
such maintenance, repair, and/or access does not void any roof or other warranty
applicable to the 5000 Building. Subject to Paragraph 10(e) hereof and for
purposes of this Paragraph 10, Tenant accepts the roof of the 5000 Building in
its condition as of the date hereof.
b. Tenant shall obtain any and all licenses, approvals, permits,
etc. which are necessary for the installation, maintenance, repair, and/or use
of the Antennae and that its use thereof shall not in any way conflict with any
applicable law, statute, ordinance, or governmental rules or regulation now in
force or which may hereafter be enacted. Tenant further agrees that it will, at
its sole cost and expense, promptly comply or ensure that the 5000 Building
complies with all laws, statutes, ordinances, governmental rules or regulations,
or requirements of any board of fire insurance underwriters or similar bodies
now or hereafter constituted, which laws, statutes, ordinances, rules,
regulations, or requirements relate to or affect Tenant's use, maintenance,
and/or repair of the Antennae. In addition, Tenant shall indemnify and hold
Landlord harmless from and against any and all loss, cost, damage, or liability
(including any attorney's fees incurred in defending Landlord with respect
thereto) arising out of any violations of said laws, statutes, ordinances,
rules, regulations, or requirements by Tenant or with respect to any personal
injury and/or property damage arising out of the installation, inspection,
adjustment, maintenance, repair, and/or removal of the Antennae. If the premium
payable with respect to any insurance policy carried by Landlord is increased as
a result of the presence of or Tenant's use, maintenance, and/or repair of the
Antennae, Tenant shall pay such premium increase to Landlord as additional rent
within thirty (30) days after Landlord's demand therefore.
c. Tenant shall, at its sole expense, maintain and repair the
Antennae and, from time to time as necessary, promptly repair any and all damage
to the roof and/or any other component of the 5000 Building or the Project which
may be attributable to such maintenance and/or repair. Tenant's rights
hereunder shall be exercised so as to not (i) create any hazardous condition or
interfere with or impair the operation of the heating, ventilation, air
conditioning, plumbing, electrical, fire protection, life safety, public
utilities, and/or other systems or facilities within the 5000 Building or the
Project or (ii) directly or indirectly interfere with, delay, restrict, or
impose any expense, work, or other obligation upon Landlord in the maintenance,
repair, and/or operation of the 5000 Building. In addition, the Antennae shall
be used by Tenant solely in the ordinary course of Tenant's business operations,
and Tenant shall not, directly or
<PAGE>
indirectly, sublease, license, or otherwise permit any third party to use the
Antennae for any purpose whatsoever.
d. At any time after the date hereof and provided that an Event of
Default is not then continuing under the Amended Lease, Tenant shall have the
right to remove the Antennae from the roof of the Building. Upon the expiration
or sooner termination of the Lease, Tenant shall remove the Antennae from the
roof of the Building, which removal shall be at Landlord's option in the event
that an Event of Default is then continuing under the Lease. Any removal of the
Antennae shall be at Tenant's sole cost and expense and shall include the repair
of any damage caused thereby to the 5000 Building (including the roof thereof)
or other improvements to the land on which the 5000 Building is located, and any
removal of the Antennae, except for a temporary removal for the purpose of
repair, any such removal shall include the removal of any ancillary equipment or
structures, including without limitation any concrete slab and any electrical
cables. Upon any such removal in accordance herewith, the Antennae shall be
deemed to be the personal property of Tenant for all purposes hereof.
e. Tenant hereby agrees that prior to the installation of the
Antennae upon the roof of the 5000 Building, Tenant shall make certain
structural alterations to the steel beams and joists supporting the roof of the
5000 Building, which structural alterations are necessary to support the
Antennae and are more particularly described in those certain structural
drawings entitled "Integral Systems Roof Top Dish Support Framing, Plans,
Section and Notes" and "Integral Systems, Roof Reinf." and prepared by ET&A
Consulting, Inc, a copy of which structural drawings have been delivered by
Landlord to Tenant. Such structural alterations shall be deemed "alterations"
for all purposes of the Lease, including without limitation Paragraph 11 of the
Original Lease, and notwithstanding any provision of such paragraph to the
contrary, Landlord hereby consents to such structural alterations subject to all
applicable provisions of the Lease, which consent shall not be deemed or
otherwise construed as Landlord's consent to any additional or other alterations
to the structure of the roof of the 5000 Building or otherwise.
11. Limitation of Landlord's Liability. The obligations of Landlord under
----------------------------------
the Lease do not constitute personal obligations of the individual members,
partners, shareholders, directors, officers, employees, or agents of Landlord,
and Tenant shall look solely to Landlord's interest in the Building and to no
other assets of Landlord for satisfaction of any liability in respect of the
Lease. Tenant hereby agrees that it will not seek recourse against the
individual members, partners, shareholders, directors, officers, employees, or
agents of Landlord or any of their personal assets for such satisfaction.
Notwithstanding any provision of the Original Lease, the First Amendment, or
this Second Amendment to the contrary, Landlord shall not be liable to Tenant or
its employees, agents, or contractors for any consequential damages or damages
for loss of profits.
12. Severability. The parties intend this Second Amendment, the First
------------
Amendment, and the Original Lease to be legally valid and enforceable in
accordance with all of their terms to the fullest extent permitted by law. If
any term thereof shall be invalid or unenforceable, the parties agree that such
term shall be stricken therefrom to
<PAGE>
the extent unenforceable, the same as if it never had been contained therein.
Such invalidity or unenforceability shall not extend to any other term thereof,
and the remaining terms thereof shall continue in effect to the fullest extent
permitted by law, the same as if such stricken term never had been contained
therein.
13. Construction. This Second Amendment, the First Amendment, and the
------------
Original Lease shall each be construed according to the laws of the state in
which the Leased Premises are located. Notwithstanding the drafting of the
Original Lease, the First Amendment, and this Second Amendment by Landlord,
neither this Second Amendment nor the First Amendment or the Original Lease
shall be construed against Landlord. Except as otherwise provided therein, to
the extent that any provision thereof is subject to the consent or approval of
Landlord, such consent or approval may be withheld or conditioned in Landlord's
sole, absolute, and subjective discretion.
14. Entire Agreement. The Lease and the schedules and addenda attached to
----------------
the Original Lease, the First Amendment, and this Second Amendment set forth all
of the covenants, promises, agreements, representations, conditions, statements
and understandings between Landlord and Tenant concerning the Leased Premises,
the Building, and the Project, and there are no representations, either oral or
written between them other than those in the Lease. The Lease shall not be
amended or modified further except in writing signed by both parties. Failure
to exercise any right under the Lease in one or more instances shall not be
construed as a waiver of the right to strict performance or as a further
amendment to the Lease.
15. Notices. Any notice or demand provided for or given pursuant to the
-------
Lease shall be in writing and served on the parties at the addresses listed in
Paragraphs 2(k) and (l) hereof. Any notice shall be either (i) personally
delivered to the addressee set forth above, in which case it shall be deemed
delivered on the date of delivery to said addressee; (ii) sent by registered or
certified mail/return receipt requested, in which case it shall be deemed
delivered three (3) business days after being deposited in the U.S. Mail; (iii)
sent by a nationally recognized overnight courier, in which case it shall be
deemed delivered one (1) business day after deposit with such courier; or (iv)
sent by telecopier ("Fax") during normal business hours, in which case it shall
be deemed delivered on the day sent (unless delivered outside of normal business
hours, in which case it shall be deemed delivered during the next normal
business hours), provided that an original is also sent by a nationally
recognized overnight courier and that such original is received within one (1)
business day thereafter. The addresses and telecopier numbers listed in
Paragraphs 2(k) and (l) hereof may be changed by written notice to the other
party; provided, however, that no notice of a change of address or Fax number
shall be effective until the date of delivery of such notice. Copies of notices
are for informational purposes only and a failure to give or receive copies of
any notice shall not be deemed a failure to give notice.
16. Headings. The headings contained in this Second Amendment are
--------
included for convenience only and shall not be taken into consideration in any
construction or interpretation of this Second Amendment or any of its
provisions.
17. Brokerage Commissions. Tenant and Landlord each represents to the
---------------------
other that no broker or agent was instrumental in procuring or negotiating or
<PAGE>
consummating this Second Amendment other than Trammell Crow Company and Louis
Hyatt Inc. (trading as Hyatt Real Estate), each of whose compensation shall be
paid (directly or indirectly) by Landlord pursuant to a separate written
agreement therewith, and Tenant and Landlord each agrees to defend, indemnify
and hold harmless the other party against any loss, cost, expense or liability
for any compensation, commission, fee or charge, including reasonable attorney's
fees, resulting from any claim of any other broker, agent or finder claiming
under or through the indemnifying party in connection with the Expansion
Premises, this Second Amendment, or its negotiation.
18. Authority of Tenant. If Tenant is a corporation, partnership, or
-------------------
limited liability company, the individual executing this Second Amendment on
behalf of said corporation, partnership, or limited liability company represents
and warrants that he is duly authorized to execute and deliver this Second
Amendment on behalf of said corporation, partnership, or limited liability
company and that this Second Amendment and the Lease are binding upon said
corporation, partnership, or limited liability company.
19. Schedules. The schedules listed below are incorporated into this
---------
Second Amendment by reference.
a. Schedule 1-B: Description of Expansion Premises/Floor Plan
b. Schedule 2-B: [Intentionally Deleted]
c. Schedule 3-B: Work Letter
The terms of the above schedules shall control over any inconsistent provisions
of this Second Amendment.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Second Amendment
as of the day and year first written above.
TENANT: LANDLORD:
INTEGRAL SYSTEMS, INC., a Maryland ASP WASHINGTON, L.L.C., a Delaware limited
corporation liability company
By: /s/ Thomas L. Gough By: /s/ Scott R. Fitzgerald
------------------------ ----------------------------
Name: Thomas L. Gough Name: Scott R. Fitzgerald
Title: President, C.O.O. Title: Vice President
<PAGE>
SCHEDULE 3-B
WORK LETTER
------------
1. Amendment. This Schedule 3-B is attached to and made a part of that
---------
certain Second Amendment to Lease, dated December ____, 1999, between ASP
Washington, L.L.C. ("Landlord") and Integral Systems, Inc. ("Tenant") (the
"Amendment").
2. Definitions. The terms defined in this paragraph, for purposes of this
-----------
Schedule 3-B, shall have the meanings specified below, and, in addition to the
terms defined below, terms defined in the Amendment shall, for purposes of this
Schedule 3-B, have the meanings specified in the Amendment.
2.1 Additional Improvements. "Additional Improvements" means those items
-----------------------
which are supplied, installed, and furnished by Landlord, according to and as
described in the Approved Plans (as hereinafter defined) and the Approved Finish
Schedule (as hereinafter defined), which Additional Improvements shall be paid
for by Landlord on behalf of Tenant, subject to the Allowance (defined below),
as provided for in Paragraph 3.2 below.
2.2 Approved Plans. "Approved Plans" means the floor plan and
--------------
specifications for the Additional Improvements which are attached as Exhibit A
to and made a part of this Schedule 3-B, which floor plan and specifications
have been approved by Landlord and Tenant.
2.3 Approved Finish Schedule. "Approved Finish Schedule" means the
------------------------
schedule of ceiling, floor, and wall finishes which has been prepared by Tenant
and approved by Landlord in accordance with Paragraph 3.1 of this Schedule 3-B.
2.4 Substantial Completion. "Substantial Completion" means that the
----------------------
Additional Improvements within the applicable portion of the Leased Premises
have been substantially completed according to the Approved Plans and the
Approved Finish Schedule, except for items which will not materially affect the
use of such portion of the Leased Premises or which are customarily deemed to be
"punch list work".
2.5 Total Cost. "Total Cost" shall mean and refer to all hard and soft
----------
costs associated with construction of the Additional Improvements in accordance
with the Approved Plans and the Approved Finish Schedule, including (as the
context requires) in respect of any approved change orders thereto, and shall
include, without limitation, all costs for labor, materials, general conditions
and contractor profit, all professional costs, fees and expenses associated with
preparing construction drawings, engineering drawings and/or other construction
documents, all permitting fees, all other direct costs and expenses associated
with such design and construction, and a construction management fee payable to
Trammell Crow Company in an amount equal to four percent (4%) of all of the
foregoing costs, fees and expenses.
3. Approved Finish Schedule; Estimate; Allowance.
----------------------------------------------
3.1 Approved Finish Schedule. Within three (3) days after the execution
-------------------------
and delivery of the Amendment by Landlord and Tenant, Tenant shall, at Tenant's
expense, cause to be prepared and submitted to Landlord, for Landlord's
approval, a finish schedule which shall include all interior ceiling, floor,
and/or wall finishes to be installed within each portion of the Leased Premises,
or if no such finishes are to be installed within a portion of the Leased
Premises, indicating the same, which finish schedule shall be in sufficient
detail for Landlord to obtain bids from one (1) or more general contractors or
subcontractors for all of the work described therein. Landlord shall, promptly
after its receipt of such finish schedule, approve or disapprove such schedule
or any aspect(s) thereof, stating the reasons for any such disapproval. To the
extent such finish schedule is disapproved, Tenant shall, within three (3) days
after such disapproval, revise the same in accordance with Landlord's
instructions and submit the same to Landlord, for Landlord's approval as
provided above. Upon Landlord's approval of all aspects of such finish
schedule, such finish schedule shall be deemed the Approved Finish Schedule for
all purposes of this Schedule 3-B.
<PAGE>
3.2 Estimate; Allowance. Promptly after Landlord's approval of the
-------------------
Approved Finish Schedule, Landlord shall prepare and deliver to Tenant an
estimate of the Total Cost to construct and install the Additional Improvements,
which estimate shall be supported by the bids of one (1) or more general
contractors or subcontractors. Tenant hereby acknowledges (a) that Landlord's
sole monetary obligation with respect to the Additional Improvements shall be
limited to Seventy Thousand and 00/100 Dollars ($70,000.00), which amount is
hereinafter referred to as the "Allowance", and (b) that Tenant shall be
responsible to pay (i) all costs and expenses associated with the installation
of the Additional Improvements to the extent the Total Cost thereof is in excess
of the Allowance, such excess being hereinafter referred to as "Tenant's Share",
and (ii) the Total Cost attributable to changes to and/or variations from the
Approved Plans and/or the Approved Finish Schedule which are requested by
Tenant.
4. Additional Improvements. The following provisions shall apply to the
-----------------------
construction of the Additional Improvements:
(a) All work involved in the completion of the Additional Improvements
shall be carried out by Landlord and its agents and contractors under the sole
direction of Landlord. Tenant shall cooperate with Landlord and its agents and
contractors to promote the efficient and expeditious completion of the
Additional Improvements;
(b) Landlord agrees to construct the Additional Improvements in accordance
with the Approved Plans and the Approved Finish Schedule, provided that Tenant
has complied with all the applicable provisions of this Schedule 3-B and the
Lease;
(c) If any changes to the Approved Plans, the Approved Finish Schedule,
and/or the Additional Improvements are requested by, or on behalf of, Tenant,
each such change must receive the prior written approval of Landlord, and Tenant
shall bear the cost of all such changes; and
(d) Landlord shall have no obligation to commence any work within the
Leased Premises until Landlord has (a) approved the Approved Finish Schedule, as
required by the provisions hereof, and (b) received from Tenant a payment equal
to Landlord's estimate of Tenant's Share, based on the Approved Plans and the
Approved Finish Schedule.
5. Substantial Completion. Notwithstanding any provision hereof or of the
----------------------
Lease to the contrary and except as otherwise provided in the Amendment, no
delay in the Substantial Completion of the Additional Improvements within the
Original Premises and/or the Expansion Premises, regardless of the reason(s)
therefor, shall entitle Tenant to any abatement of Rent payable under the Lease
or any extension of the Lease Term beyond that set forth in the Lease. In the
event that Tenant, prior to the Substantial Completion of the Additional
Improvements, does not, for any reason, comply with any requirement hereof or of
the Lease on or before the deadline established herein or in the Lease therefor,
the Expansion Date shall, without regard to the Substantial Completion of the
Additional Improvements or Tenant's occupancy of the Original Premises or the
Expansion Premises, be advanced by one day for each day (or portion thereof)
between such deadline and the first date thereafter on which Tenant has complied
with such requirement.
6. Access To Original Premises. Tenant will use all reasonable and
---------------------------
diligent efforts to facilitate Landlord's installation of the Additional
Improvements within the Original Premises and the Expansion Premises and to not
interfere with Landlord and/or its agents and/or contractors in the performance
of such work within the Original Premises, the Expansion Premises, and/or the
Building. Tenant will be responsible for any additional costs and expenses
incurred by Landlord as a result of Tenant's failure to facilitate such
installation or such interference, which additional costs and expenses shall be
payable by Tenant to Landlord upon demand therefor. Tenant further agrees that,
to the extent permitted by law, Landlord and its principals shall not be liable
in any way for any injury or death to any person or persons, loss or damage to
any of the Additional Improvements or other installations made within the
Expansion Premises, or loss or damage to property placed therein or thereabout,
the same being Tenant's sole risk. Nothing contained herein shall be deemed or
otherwise construed to obligate Landlord to install the Additional Improvements
within the Original Premises and/or the Expansion Premises at any time(s) other
than during normal business hours.
<PAGE>
7. Miscellaneous Provisions. Landlord and Tenant further agree as
------------------------
follows:
7.1 Other Alterations and Improvements. Except as herein expressly set
----------------------------------
forth with respect to the Additional Improvements, Landlord has no agreement
with Tenant and has no obligation to do any work with respect to the Leased
Premises. Any other work in the Leased Premises which may be permitted by
Landlord pursuant to the terms and conditions of the Lease shall be done at
Tenant's sole cost and expense and in accordance with the terms and conditions
of the Lease.
7.2 Limitation on Applicability. This Schedule 3-B shall not be deemed
---------------------------
applicable to: (a) any space added to the Leased Premises at any time, whether
by the exercise of an option under the Lease or otherwise, or (b) any portion of
the Leased Premises (including any space added thereto) in the event of a
renewal or further extension of the Lease Term beyond that stated in the Lease,
whether by the exercise of an option under the Lease or otherwise. The
construction of any alterations or improvements to all or any portion of the
Leased Premises which are not contemplated by this Schedule 3-B shall be
effected pursuant to a separate work letter agreement or other document in the
form then being used by Landlord, which agreement or other document shall
specifically address the responsibility for the costs and expenses associated
with such alterations or improvements.
23913-4
<PAGE>
SCHEDULE 3-B
WORK LETTER
------------
1. Amendment. This Schedule 3-B is attached to and made a part of that
---------
certain Second Amendment to Lease, dated December ____, 1999, between ASP
Washington, L.L.C. ("Landlord") and Integral Systems, Inc. ("Tenant") (the
"Amendment").
2. Definitions. The terms defined in this paragraph, for purposes of this
-----------
Schedule 3-B, shall have the meanings specified below, and, in addition to the
terms defined below, terms defined in the Amendment shall, for purposes of this
Schedule 3-B, have the meanings specified in the Amendment.
2.1 Additional Improvements. "Additional Improvements" means those items
-----------------------
which are supplied, installed, and furnished by Landlord, according to and as
described in the Approved Plans (as hereinafter defined) and the Approved Finish
Schedule (as hereinafter defined), which Additional Improvements shall be paid
for by Landlord on behalf of Tenant, subject to the Allowance (defined below),
as provided for in Paragraph 3.2 below.
2.2 Approved Plans. "Approved Plans" means the floor plan and
--------------
specifications for the Additional Improvements which are attached as Exhibit A
to and made a part of this Schedule 3-B, which floor plan and specifications
have been approved by Landlord and Tenant.
2.3 Approved Finish Schedule. "Approved Finish Schedule" means the
------------------------
schedule of ceiling, floor, and wall finishes which has been prepared by Tenant
and approved by Landlord in accordance with Paragraph 3.1 of this Schedule 3-B.
2.4 Substantial Completion. "Substantial Completion" means that the
----------------------
Additional Improvements within the applicable portion of the Leased Premises
have been substantially completed according to the Approved Plans and the
Approved Finish Schedule, except for items which will not materially affect the
use of such portion of the Leased Premises or which are customarily deemed to be
"punch list work".
2.5 Total Cost. "Total Cost" shall mean and refer to all hard and soft
----------
costs associated with construction of the Additional Improvements in accordance
with the Approved Plans and the Approved Finish Schedule, including (as the
context requires) in respect of any approved change orders thereto, and shall
include, without limitation, all costs for labor, materials, general conditions
and contractor profit, all professional costs, fees and expenses associated with
preparing construction drawings, engineering drawings and/or other construction
documents, all permitting fees, all other direct costs and expenses associated
with such design and construction, and a construction management fee payable to
Trammell Crow Company in an amount equal to four percent (4%) of all of the
foregoing costs, fees and expenses.
3. Approved Finish Schedule; Estimate; Allowance.
----------------------------------------------
3.1 Approved Finish Schedule. Within three (3) days after the execution
-------------------------
and delivery of the Amendment by Landlord and Tenant, Tenant shall, at Tenant's
expense, cause to be prepared and submitted to Landlord, for Landlord's
approval, a finish schedule which shall include all interior ceiling, floor,
and/or wall finishes to be installed within each portion of the Leased Premises,
or if no such finishes are to be installed within a portion of the Leased
Premises, indicating the same, which finish schedule shall be in sufficient
detail for Landlord to obtain bids from one (1) or more general contractors or
subcontractors for all of the work described therein. Landlord shall, promptly
after its receipt of such finish schedule, approve or disapprove such schedule
or any aspect(s) thereof, stating the reasons for any such disapproval. To the
extent such finish schedule is disapproved, Tenant shall, within three (3) days
after such disapproval, revise the same in accordance with Landlord's
instructions and submit the same to Landlord, for Landlord's approval as
provided above. Upon Landlord's approval of all aspects of such finish
schedule, such finish schedule shall be deemed the Approved Finish Schedule for
all purposes of this Schedule 3-B.
<PAGE>
3.2 Estimate; Allowance. Promptly after Landlord's approval of the
-------------------
Approved Finish Schedule, Landlord shall prepare and deliver to Tenant an
estimate of the Total Cost to construct and install the Additional Improvements,
which estimate shall be supported by the bids of one (1) or more general
contractors or subcontractors. Tenant hereby acknowledges (a) that Landlord's
sole monetary obligation with respect to the Additional Improvements shall be
limited to Seventy Thousand and 00/100 Dollars ($70,000.00), which amount is
hereinafter referred to as the "Allowance", and (b) that Tenant shall be
responsible to pay (i) all costs and expenses associated with the installation
of the Additional Improvements to the extent the Total Cost thereof is in excess
of the Allowance, such excess being hereinafter referred to as "Tenant's Share",
and (ii) the Total Cost attributable to changes to and/or variations from the
Approved Plans and/or the Approved Finish Schedule which are requested by
Tenant.
4. Additional Improvements. The following provisions shall apply to the
-----------------------
construction of the Additional Improvements:
(a) All work involved in the completion of the Additional Improvements
shall be carried out by Landlord and its agents and contractors under the sole
direction of Landlord. Tenant shall cooperate with Landlord and its agents and
contractors to promote the efficient and expeditious completion of the
Additional Improvements;
(b) Landlord agrees to construct the Additional Improvements in accordance
with the Approved Plans and the Approved Finish Schedule, provided that Tenant
has complied with all the applicable provisions of this Schedule 3-B and the
Lease;
(c) If any changes to the Approved Plans, the Approved Finish Schedule,
and/or the Additional Improvements are requested by, or on behalf of, Tenant,
each such change must receive the prior written approval of Landlord, and Tenant
shall bear the cost of all such changes; and
(d) Landlord shall have no obligation to commence any work within the
Leased Premises until Landlord has (a) approved the Approved Finish Schedule, as
required by the provisions hereof, and (b) received from Tenant a payment equal
to Landlord's estimate of Tenant's Share, based on the Approved Plans and the
Approved Finish Schedule.
5. Substantial Completion. Notwithstanding any provision hereof or of the
----------------------
Lease to the contrary and except as otherwise provided in the Amendment, no
delay in the Substantial Completion of the Additional Improvements within the
Original Premises and/or the Expansion Premises, regardless of the reason(s)
therefor, shall entitle Tenant to any abatement of Rent payable under the Lease
or any extension of the Lease Term beyond that set forth in the Lease. In the
event that Tenant, prior to the Substantial Completion of the Additional
Improvements, does not, for any reason, comply with any requirement hereof or of
the Lease on or before the deadline established herein or in the Lease therefor,
the Expansion Date shall, without regard to the Substantial Completion of the
Additional Improvements or Tenant's occupancy of the Original Premises or the
Expansion Premises, be advanced by one day for each day (or portion thereof)
between such deadline and the first date thereafter on which Tenant has complied
with such requirement.
6. Access To Original Premises. Tenant will use all reasonable and
---------------------------
diligent efforts to facilitate Landlord's installation of the Additional
Improvements within the Original Premises and the Expansion Premises and to not
interfere with Landlord and/or its agents and/or contractors in the performance
of such work within the Original Premises, the Expansion Premises, and/or the
Building. Tenant will be responsible for any additional costs and expenses
incurred by Landlord as a result of Tenant's failure to facilitate such
installation or such interference, which additional costs and expenses shall be
payable by Tenant to Landlord upon demand therefor. Tenant further agrees that,
to the extent permitted by law, Landlord and its principals shall not be liable
in any way for any injury or death to any person or persons, loss or damage to
any of the Additional Improvements or other installations made within the
Expansion Premises, or loss or damage to property placed therein or thereabout,
the same being Tenant's sole risk. Nothing contained herein shall be deemed or
otherwise construed to obligate Landlord to install the Additional Improvements
within the Original Premises and/or the Expansion Premises at any time(s) other
than during normal business hours.
<PAGE>
7. Miscellaneous Provisions. Landlord and Tenant further agree as
------------------------
follows:
7.1 Other Alterations and Improvements. Except as herein expressly set
----------------------------------
forth with respect to the Additional Improvements, Landlord has no agreement
with Tenant and has no obligation to do any work with respect to the Leased
Premises. Any other work in the Leased Premises which may be permitted by
Landlord pursuant to the terms and conditions of the Lease shall be done at
Tenant's sole cost and expense and in accordance with the terms and conditions
of the Lease.
7.2 Limitation on Applicability. This Schedule 3-B shall not be deemed
---------------------------
applicable to: (a) any space added to the Leased Premises at any time, whether
by the exercise of an option under the Lease or otherwise, or (b) any portion of
the Leased Premises (including any space added thereto) in the event of a
renewal or further extension of the Lease Term beyond that stated in the Lease,
whether by the exercise of an option under the Lease or otherwise. The
construction of any alterations or improvements to all or any portion of the
Leased Premises which are not contemplated by this Schedule 3-B shall be
effected pursuant to a separate work letter agreement or other document in the
form then being used by Landlord, which agreement or other document shall
specifically address the responsibility for the costs and expenses associated
with such alterations or improvements.
<PAGE>
Exhibit 11.1
INTEGRAL SYSTEMS INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
December 31,
Basic: 1999 1998
------------ ------------
<S> <C> <C>
Weighted average number of common shares 7,203,997 5,857,499
Net income $1,260,111 $ 456,941
Earnings per share $ 0.17 $ 0.08
Diluted:
Weighted average number of common shares 7,749,530 6,647,766
Net income $1,260,111 $ 456,941
Earnings per share $ 0.16 $ 0.07
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 6,751,045
<SECURITIES> 18,163,425<F1>
<RECEIVABLES> 15,099,636
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 40,014,106
<PP&E> 5,287,676<F2>
<DEPRECIATION> 1,276,660
<TOTAL-ASSETS> 44,025,122
<CURRENT-LIABILITIES> 8,984,085<F3>
<BONDS> 0
0
0
<COMMON> 72,435
<OTHER-SE> 34,968,602
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 10,021,861
<TOTAL-REVENUES> 10,021,861
<CGS> 6,560,153
<TOTAL-COSTS> 6,560,153
<OTHER-EXPENSES> 1,487,734
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,563
<INCOME-PRETAX> 1,945,411
<INCOME-TAX> 685,300
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,260,111
<EPS-BASIC> 0.17
<EPS-DILUTED> 0.16
<FN>
<F1>Includes Marketable Securities @ $18,136,000 and prepaid expenses @ $27,425
<F2>Includes PP&E @ $3,046,049 + S/W dev. Costs @ $2,176,279 + Misc. deposits @
$65,348
<F3>Includes Capital Leases Payable/Long-Term @ $431,053
</FN>
</TABLE>
