SCHEDULE 13E-4/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
CTA INCORPORATED
_____________________________________________________________
(Name of Issuer)
CTA INCORPORATED
_____________________________________________________________
(Name of Person(s) Filing Statement)
COMMON STOCK, $.01 PAR VALUE PER SHARE
_____________________________________________________________
(Title of Class of Securities)
__________________________129997714__________________________
(CUSIP Number of Class of Securities)
GREGORY H. WAGNER
Executive Vice President
CTA INCORPORATED
6116 Executive Boulevard
Rockville, Maryland 20852
(301) 816-1200
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
COPIES TO:
RICHARD A. STEINWURTZEL
Fried, Frank, Harris, Shriver & Jacobson
1001 Pennsylvania Avenue, N.W.
Suite 800
Washington, D.C. 20004-2505
(202) 639-7000
November 26, 1997
_____________________________________________________________
(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
_________________________________________________________________________
Transaction Valuation*: Amount of Filing
Fee:
$2,020,000 $404.00
__________________________________________________________________________
* Calculated solely for purposes of determining the filing fee, based upon
the purchase of 200,000 shares at the maximum tender offer price per share
of $10.10.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed N/A
<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The issuer of the securities to which this Schedule 13E-4
relates is CTA INCORPORATED, a Colorado corporation (the "Company"), and
the address of its principal executive office is 6116 Executive
Boulevard, Rockville, Maryland 20852.
(b) This Schedule 13E-4 relates to the offer by the Company to
purchase up to 200,000 shares (or such lesser number of shares as are
validly tendered and not withdrawn) of its common stock, $.01 par value
per share (the "Shares"), for a purchase price of $10.10 per Share net to
the Seller in cash upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated November 26, 1997 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together
constitute the "Offer"), copies of which are attached as Exhibits (a)(1)
and (a)(2), respectively, and incorporated herein by reference. As of
November 24, 1997, 4,551,088 Shares were issued and outstanding.
The Company completed the sale of its Space and Telecommunications
Systems business and its Mobile Information and Communications Services
business (the "Space Business") to Orbital Sciences Corporation. The
Company received approximately $47.0 million of proceeds from the sale of
the Space Business and decided to effect the Offer to allow stockholders
to benefit from such sale. The Company intends to use approximately $2.0
million (excluding expenses) from amounts drawn under its revolving line
of credit to conduct this Offer.
Officers, directors and affiliates of the Company may participate in
the Offer on the same basis as the other stockholders of the Company.
Dr. C.E. Velez, President, Chief Executive Officer and Chairman of the
Board and Messrs B.A. Claussen and Terry J. Piddington have informed the
Company that they will not tender any Shares in the Offer. The Trustees
of the Company's Employee Stock Ownership Plan (the "ESOP") and the
Company's Defined Contribution 401(k) Retirement Plan (the "401(k) Plan")
have informed the Company that they will not tender any Shares in the
Offer on behalf of the ESOP or the 401(k) Plan. As of November 24, 1997
2,321,040 Shares (approximately 51%) were owned by Dr. C.E. Velez,
359,817 shares (approximately 7.9%) were owned by Mr. B.A. Claussen and
216,001 shares (approximately 4.7%) were owned by Mr. Terry J.
Piddington. The information set forth in "Introduction," Section 1,
"Number of Shares; Proration," Section 8, "Background and Purpose of the
Offer," Section 10, "Transactions and Agreements Concerning Shares," and
Section 14, "Certain Federal Income Tax Consequences," of the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in "Introduction" and Section 7,
"Price Range of Shares; Dividends," of the Offer to Purchase is
incorporated herein by reference.
(d) Not applicable. This Statement is being filed by the Issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 9, "Source and Amount
of Funds," of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF
THE ISSUER OR AFFILIATE.
(a)-(j) The information set forth in "Introduction," Section 8,
"Background and Purpose of the Offer," Section 9, "Source and Amount of
Funds," Section 10, "Transactions and Agreements Concerning Shares,"
Section 12, "Effects of the Offer on the Market for Shares," and Section
14, "Certain Federal Income Tax Consequences," of the Offer to Purchase
is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in "Introduction," Section 8, "Background
and Purpose of the Offer," and Section 10, "Transactions and Agreements
Concerning Shares," of the Offer to Purchase is incorporated herein by
reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO THE ISSUER'S SECURITIES.
The Information set forth in "Introduction," Section 8, "Background
and Purpose of the Offer," Section 9, "Source and Amount of Funds,"
Section 10, "Transactions and Agreements Concerning Shares," Section 14,
"Certain Federal Income Tax Consequences," and Section 16, "Fees,
Expenses and Other Arrangements," of the Offer to Purchase is
incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED.
The information set forth in "Introduction," Section 8, "Background
and Purpose of the Offer," and Section 16, "Fees, Expenses and Other
Arrangements," of the Offer to Purchase is incorporated herein by
reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in Section 11, "Financial
Information Concerning the Company" of the Offer to Purchase and the
financial statements and notes related thereto contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996
and its Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, copies of which are attached hereto as Exhibits (g)(1) and (g)(2),
respectively, are incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a)-(d) Not Applicable.
(e) The information set forth in the Offer to Purchase is
incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) -- Form of Offer to Purchase dated November 26, 1997.
(2) -- Form of Letter of Transmittal (including
Certification of Taxpayer Identification Number on Substitute Form W-9).
(3) -- Form of Letter to Stockholders of the Company, dated
November 26, 1997 from Dr. C.E. Velez, Chairman of the Board and Chief
Executive Officer.
(b)(1) Financing and Security Agreement dated November 6, 1997 by
and between the Company and First Union Commercial
Corporation.
(c)(1) -- Stock Purchase Agreement between and among the ESOP and
Dr. C.E. Velez, Mr. B.A. Claussen and Mr. Terry J. Piddington dated
November 21, 1997.
(d) -- Not Applicable.
(e) -- Not Applicable.
(f) -- Not Applicable.
(g)(1) -- The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 (incorporated by reference).
(2) -- The Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 (incorporated by reference).
(3) -- Appraisal of Legg Mason Wood Walker Incorporated
dated September 10, 1997.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true,
complete and correct.
CTA INCORPORATED
By: /S/ GREGORY H. WAGNER
November 26, 1997 Name: Gregory H. Wagner
Title: Executive Vice President and
Chief Financial Officer and Treasurer
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
(a)(1) Form of Offer to Purchase dated November 26, 1997.
(2) Form of Letter of Transmittal (including Certification of
Taxpayer Identification Number on Substitute Form W-9).
(3) Form of Letter to Stockholders of the Company, dated November
26, 1997 from Dr. C.E. Velez, Chairman of the Board and Chief
Executive Officer.
(b)(1) Financing and Security Agreement dated November 6, 1997 by and
between the Company and First Union Commercial Corporation.
(c)(1) Stock Purchase Agreement between and among the ESOP and Dr.
C.E. Velez, Mr. B.A. Claussen and Mr. Terry J. Piddington,
dated November 21, 1997.
(d) Not Applicable.
(e) Not Applicable.
(f) Not Applicable.
(g)(1) The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (incorporated by reference).
(2) The Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 (incorporated by reference).
(3) Appraisal of Legg Mason Wood Walker Incorporated dated
September 10, 1997.
CTA INCORPORATED
OFFER TO PURCHASE FOR CASH
UP TO 200,000 SHARES OF ITS COMMON STOCK
AT $10.10 NET PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, ROCKVILLE, MARYLAND TIME, ON WEDNESDAY,
DECEMBER 31, 1997, UNLESS THE OFFER IS EXTENDED.
CTA INCORPORATED, a Colorado corporation (the "Company"), invites
its stockholders to tender shares of its Common Stock, par value $.01 per
share (the "Shares"), at $10.10 per Share (the "Purchase Price"), net to
the seller in cash, upon the terms and subject to the conditions set
forth herein and in the related Letter of Transmittal (which together
constitute the "Offer"). The Company will purchase any and all Shares
(up to 200,000 Shares) validly tendered and not withdrawn, upon the terms
and subject to the conditions of the Offer, including the provisions
thereof relating to proration described herein. Shares not purchased
because of proration will be returned promptly.
______________________________
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF
SHARES BEING TENDERED. THE OFFER IS, HOWEVER,
SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
______________________________
IMPORTANT
ANY STOCKHOLDER DESIRING TO TENDER ANY PORTION OF HIS OR HER SHARES
SHOULD COMPLETE AND SIGN THE LETTER OF TRANSMITTAL OR A PHOTOCOPY THEREOF
IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF TRANSMITTAL AND MAIL
OR DELIVER IT AND ANY OTHER REQUIRED DOCUMENTS TO CAPITOL SECURITIES
MANAGEMENT INCORPORATED AT THE ADDRESS SET FORTH IN THE LAST PAGE OF THIS
OFFER TO PURCHASE. IN THE EVENT A STOCKHOLDER HOLDS SHARES IN
CERTIFICATE FORM SUCH STOCKHOLDER SHOULD DELIVER TO CAPITOL THE LETTER OF
TRANSMITTAL ALONG WITH THE CERTIFICATE(S) FOR SUCH SHARES.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS, OFFICERS OR EMPLOYEES
MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING SHARES. EACH STOCKHOLDER MUST MAKE HIS OR HER OWN
DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER.
___________________________
The Shares are not listed, traded or quoted on any national
securities exchange or other market.
Questions or requests for assistance or for additional copies of
this Offer to Purchase, the Letter of Transmittal or other tender offer
materials may be directed to the Information Agent at the address and
telephone number set forth on the last page of this Offer to Purchase.
___________________________
THE INFORMATION AGENT FOR THE OFFER IS:
CAPITOL SECURITIES MANAGEMENT INCORPORATED
___________________________
November 26, 1997
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF
OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH INFORMATION
AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY.
TABLE OF CONTENTS
PAGE
SUMMARY 1
INTRODUCTION 4
THE OFFER 5
1. Number of Shares; Proration 5
2. Tenders by Holders of Ninety-Nine or Fewer Shares 7
3. Procedure for Tendering Shares 8
4. Withdrawal Rights 9
5. Acceptance for Payment of Shares and Payment
of Purchase Price 10
6. Certain Conditions of the Offer 10
7. Price Range of Shares; Dividends 12
8. Background and Purpose of the Offer 13
9. Source and Amount of Funds 15
10. Transactions and Agreements Concerning Shares 15
11. Financial Information Concerning the Company 16
12. Effects of the Offer on the Market for Shares 17
13. Regulatory Approvals 18
14. Certain Federal Income Tax Consequences 18
15. Extension of Tender Period; Termination; Amendments 22
16. Fees, Expenses and Other Arrangements 23
17. Miscellaneous 24
<PAGE>
SUMMARY
This general summary is provided solely for the convenience of
holders of Shares and is qualified in its entirety by reference to the
full text of and the more specific details contained in this Offer to
Purchase and the related Letter of Transmittal and any amendments hereto
and thereto. Capitalized terms used in this summary without definition
shall have the respective meanings ascribed to such terms in this Offer
to Purchase.
The Company CTA INCORPORATED, a Colorado corporation
with principal executive offices at 6116
Executive Boulevard, Suite 800, Rockville,
Maryland 20852.
The Shares Shares of the Company's Common Stock, par
value $.01 per Share.
Number of Shares Sought 200,000 Shares.
Purchase Price $10.10 per Share, net to the seller in
cash.
Expiration Date of Offer Wednesday, December 31, 1997, at 12:00
Midnight, Rockville, Maryland time, unless
extended by the Company pursuant to the
terms hereof.
How to Tender Shares See Section 3. For further information,
call the Information Agent, Capitol
Securities Management Incorporated, 8301
Greensboro Drive, Suite 150, McLean,
Virginia 22102, tel. (800) 878-2010.
Proration If more than 200,000 Shares have been
validly tendered and not withdrawn on or
prior to the Expiration Date, the purchase
of Shares will be subject to proration.
After the purchase of Odd Lot Shares as
described below, Shares will be purchased
on a pro rata basis. Proration of Shares
will be based on the ratio of the number of
Shares to be purchased by the Company
pursuant to the Offer (less Odd Lot Shares
purchased) to the total number of Shares
validly tendered by all stockholders and
not withdrawn (less Odd Lot Shares
purchased). This ratio will be applied to
all Shares validly tendered by each
stockholder (other than Odd Lot owners) to
determine the number of Shares that will be
purchased from each stockholder pursuant to
the Offer. Preliminary results of
proration will be announced by mail to each
stockholder as promptly as practicable
after the Expiration Date.
Odd Lot Owners There will be no proration of Shares
validly tendered and not withdrawn by any
stockholder beneficially owning ninety-nine
or fewer Shares as of the close of business
on November 24, 1997 and as of the
Expiration Date, who tenders all such
Shares and completes the box captioned "Odd
Lots" on the Letter of Transmittal.
Withdrawal Rights Tendered Shares may be withdrawn at any
time until the Expiration Date of the Offer
and, unless previously purchased, after
12:00 Midnight, Rockville, Maryland time,
Monday, January 26, 1998. See Section 4.
Price of Shares $10.10 per Share. Legg Mason Wood Walker
Incorporated ("Legg Mason"), the Company's
independent appraisers for the fiscal year
ending December 31, 1997, determined on
September 10, 1997 that the fair market
value of minority holdings of the Company's
Common Stock falls in a range of $8.60 per
Share to $11.60 per Share with an expected
value of $10.10 per Share as of June 30,
1997 (after giving effect to the sale of
the Space Business to Orbital Sciences
Corporation). In connection with the ESOP
Purchase, Legg Mason also gave its opinion
dated November 20, 1997 to the Trustee of
the Company's Employee Stock Ownership Plan
that the expected value is $10.10 per Share
as of September 30, 1997.
Brokerage Commissions Not payable by stockholders. The Company
will pay to Capitol Securities Management
Incorporated ("Capitol") a fee of $5,000
plus brokerage commissions of 1.5% of the
total purchase price of all Shares
purchased by the Company in connection with
the Offer and reimburse Capitol for certain
out-of-pocket expenses. Capitol provides
its services as a broker/dealer for all of
the Company's transactions in its
securities.
Stock Transfer Tax None, except as provided in Instruction 5
of the Letter of Transmittal.
Payment Date As promptly as practicable after the
Expiration Date of the Offer.
Further Information Any questions, requests for assistance or
requests for additional copies of this
Offer to Purchase, the Letter of
Transmittal or other tender offer materials
may be directed to the Information Agent,
Capitol Securities Management Incorporated,
8301 Greensboro Drive, Suite 150, McLean,
Virginia 22102, tel. (800) 878-2010.
<PAGE>
To the Holders of Common Stock of
CTA INCORPORATED:
INTRODUCTION
CTA INCORPORATED, a Colorado corporation (the "Company"), invites
its stockholders to tender Shares of its Common Stock, par value $.01 per
Share (the "Shares"), at $10.10 per Share (the "Purchase Price"), net to
the seller in cash, upon the terms and subject to the conditions set
forth herein and in the related Letter of Transmittal (which together
constitute the "Offer").
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS, OFFICERS OR EMPLOYEES
MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING SHARES. EACH STOCKHOLDER MUST MAKE HIS OR HER OWN
DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER.
Each stockholder who has properly tendered and not withdrawn Shares
will receive $10.10 per Share, net to the seller in cash, with respect to
all Shares purchased, upon the terms and subject to the conditions of the
Offer, including the provisions relating to proration and "odd lot"
tenders described below. The Purchase Price will be paid in cash, net to
the seller, with respect to all Shares purchased. Shares tendered and
not purchased because of proration or invalid tender will be returned
promptly to the tendering stockholders.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS.
SEE SECTION 6.
Tendering stockholders will not be obligated to pay brokerage
commissions, solicitation fees or, subject to Instruction 5 of the Letter
of Transmittal, stock transfer taxes on the sale of their Shares to the
Company pursuant to the Offer. The Company will pay to Capitol
Securities Management Incorporated ("Capitol") a fee of $5,000 plus
brokerage commissions of 1.5% of the total purchase price of all Shares
purchased by the Company in connection with the Offer and reimburse
Capitol for certain out-of-pocket expenses. See Section 16. HOWEVER,
ANY TENDERING STOCKHOLDER WHO FAILS TO COMPLY WITH THE PROCEDURES SET
FORTH IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO A REQUIRED FEDERAL
INCOME TAX BACKUP WITHHOLDING OR OTHER WITHHOLDING ON THE GROSS PAYMENTS
PAYABLE TO SUCH STOCKHOLDER PURSUANT TO THE OFFER. SEE SECTION 3.
As more fully discussed in Section 8, on August 15, 1997, the
Company completed the sale of its Space and Telecommunications Systems
business and the Mobile Information and Communications Services business
(collectively, the "Space Business") to Orbital Sciences Corporation
("Orbital"). The Company received approximately $47.0 million of
proceeds from the sale of the Space Business and decided to effect the
Offer to allow stockholders to benefit from such sale. The Company
intends to use approximately $2.0 million (excluding expenses) from
amounts drawn under its revolving line of credit to conduct this Offer.
See Section 9.
Dr. C.E. Velez, President, Chief Executive Officer and Chairman of
the Board, Mr. B.A. Claussen and Mr. Terry J. Piddington, collectively
own 2,896,858 Shares constituting 63.7% of the outstanding Common Stock.
Dr. Velez and Messrs. Claussen and Piddington have informed the Company
that they will not tender any Shares in the Offer. On November 21, 1997,
Dr. Velez and Messrs. Claussen and Piddington sold 228,960, 39,979, and
24,000 Shares, respectively, to the CTA INCORPORATED Employee Stock
Ownership Plan (the "ESOP") for a purchase price of $10.10 per Share(the
"ESOP Purchase").
The Trustees of the ESOP and the Company's Defined Contribution
401(k) Retirement Plan (the "401(k) Plan") have informed the Company that
they will not tender any Shares in the Offer. After giving effect to the
ESOP Purchase, the Trustees of the ESOP and 401(k) Plan collectively own
877,659 Shares constituting 19.3% of the outstanding Common Stock.
As of November 24, 1997, the Company had issued and outstanding
4,551,088 Shares. As of November 24, 1997, there were approximately 348
holders of record of Shares. As the Company has been informed by the
Trustees of the ESOP and 401(k) Plan and Dr. Velez and Messrs. Claussen
and Piddington that they will not tender any Shares in the Offer, the
proration factor (if every stockholder other than the foregoing
stockholders, tenders all of the Shares he or she owns in the Offer) is
anticipated to be approximately 25.7542%. The Company currently intends
to hold the Shares purchased pursuant to the Offer as treasury stock.
The Shares are not listed, traded or quoted on any national
securities exchange or other market. Legg Mason determined on September
10, 1997 that the fair market value of minority holdings of the Company's
Common Stock falls in a range of $8.60 per Share to $11.60 per Share,
with an expected value of $10.10 per Share (the "Appraisal"), as of June
30, 1997 (after giving effect to the sale of the Space Business to
Orbital). In connection with the ESOP Purchase, Legg Mason also gave its
opinion dated November 20, 1997 to the Trustee of the Company's ESOP that
the expected value is $10.10 per Share as of September 30, 1997. See
Section 7.
THE OFFER
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions described herein
and in the Letter of Transmittal, the Company will purchase up to 200,000
Shares that are validly tendered prior to the Expiration Date (and not
properly withdrawn in accordance with Section 4) at $10.10 per Share net
to the Seller in cash. The later of 12:00 Midnight, Rockville, Maryland
time, on Wednesday, December 31, 1997, or the latest time and date to
which the Offer is extended, is referred to herein as the "Expiration
Date." If the Offer is oversubscribed as described below, only Shares
validly tendered and not withdrawn prior to the Expiration Date will be
eligible for proration.
The Offer is not conditioned on any minimum number of Shares being
tendered, but is subject to certain other conditions. See Section 6.
All Shares not purchased pursuant to the Offer, including Shares not
purchased because of proration, will be returned to the tendering
stockholders at the Company's expense as promptly as practicable
following the Expiration Date.
Upon the terms and subject to the conditions of the Offer, if
200,000 or fewer Shares have been validly tendered and not withdrawn
prior to the Expiration Date, the Company will purchase all such Shares.
Upon the terms and subject to the conditions of the Offer, if more than
200,000 Shares have been validly tendered and not withdrawn prior to the
Expiration Date, the Company will purchase Shares in the following order
of priority:
(a) first, all Shares validly tendered and not withdrawn prior
to the Expiration Date by any stockholder (an "Odd Lot Owner") who was as
of the close of business on November 24, 1997, and will continue to be at
the Expiration Date, the record or beneficial owner of an aggregate of
ninety-nine or fewer Shares ("Odd Lot Shares"), all of which are being
tendered (partial tenders will not qualify for this preference), and who
completes the box captioned "Odd Lots" on the Letter of Transmittal; and
(b) then, after purchase of all of the foregoing Shares, all
Shares validly tendered and not withdrawn prior to the Expiration Date on
a pro rata basis if necessary (with appropriate adjustments to avoid
purchases of fractional Shares).
If proration of tendered Shares is required, the Company does not
expect that it will be able to announce the final proration factor or to
commence payment for any Shares purchased pursuant to the Offer until
approximately seven business days after the Expiration Date because of
the difficulty in determining the number of Shares validly tendered and
as a result of the "odd lot" procedures described in Section 2 (the "Odd
Lot Procedure"). Proration of Shares, other than Shares tendered
pursuant to the Odd Lot Procedure, will be based on the ratio of the
number of Shares to be purchased by the Company pursuant to the Offer
(less Odd Lot Shares purchased) to the total number of Shares validly
tendered by all stockholders and not withdrawn (less Odd Lot Shares
purchased). This ratio will be applied to all Shares tendered by each
stockholder (other than an Odd Lot Owner) to determine the number of
Shares that will be purchased from such stockholder pursuant to the
Offer. Preliminary results of proration will be announced by mail to
each stockholder as promptly as practicable after the Expiration Date.
Holders of Shares may obtain such preliminary information from the
Information Agent.
As described in Section 14, the number of Shares that the Company
will purchase from a stockholder may affect the United States federal
income tax consequences to the stockholder of such purchase and therefore
may be relevant to a stockholder's decision whether to tender Shares, and
if tendering, how many Shares to tender. The Letter of Transmittal
affords each tendering stockholder tendering Shares in certificate form
the opportunity to designate the order of priority in which Shares
tendered are to be purchased in the event of proration, which may also
affect the tax consequences to a stockholder.
THE COMPANY EXPRESSLY RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO
PURCHASE ADDITIONAL SHARES PURSUANT TO THE OFFER OR TO DECREASE THE
NUMBER OF SHARES BEING SOUGHT PURSUANT TO THE OFFER. If (i) the Company
increases or decreases the price to be paid for Shares, increases the
number of Shares being sought and such increase in the number of Shares
being sought exceeds 2% of the outstanding Shares, or decreases the
number of Shares being sought and (ii) the Offer is scheduled to expire
at any time earlier than the expiration of a period ending on the tenth
business day from, and including, the date that notice of such increase
or decrease is first published, sent or given in the manner described in
Section 15, the Offer will be extended until the expiration of ten
business days from the date of publication of such notice.
The Company also expressly reserves the right, in its sole
discretion, at any time or from time to time, to amend the Offer in any
respect. Any extension, delay in payment, termination or amendment will
be followed as promptly as practicable by public announcement thereof.
For purposes of the Offer, a "business day" means any day other than
a Saturday, Sunday or federal holiday and consists of the time period
from 12:01 a.m. through 12:00 midnight, Rockville, Maryland time.
Copies of this Offer to Purchase and the Letter of Transmittal are
being mailed to record holders of Shares.
2. TENDERS BY HOLDERS OF NINETY-NINE OR FEWER SHARES.
All Shares validly tendered and not withdrawn on or prior to
the Expiration Date by or on behalf of any stockholder who was, as of the
close of business on November 24, 1997, and will continue to be at the
Expiration Date, the record or beneficial owner of an aggregate of
ninety-nine or fewer Shares all of which are being tendered will be
accepted without proration, provided that the stockholder completes the
box captioned "Odd Lots" on the Letter of Transmittal. See Section 1.
Partial tenders will not qualify for this preference, and it is not
available to beneficial holders of more than ninety-nine Shares, even if
such holders have separate stock certificates for ninety-nine or fewer
Shares.
As of November 24, 1997, there were approximately 348 holders of
record of Shares. Approximately 16% of the holders of record of Shares
held individually ninety-nine or fewer Shares and held in the aggregate
approximately 1,913 Shares. Any Odd Lot Owner wishing to tender all of
his or her Shares free of proration must complete the box captioned "Odd
Lots" on the Letter of Transmittal.
3. PROCEDURE FOR TENDERING SHARES.
PROPER TENDER OF SHARES. To tender Shares validly pursuant to
the Offer the tendering stockholder must deliver a properly completed and
duly executed Letter of Transmittal or photocopy thereof and any other
documents required by the Letter of Transmittal prior to the Expiration
Date to Capitol at its address set forth in the last page of this Offer
to Purchase (by mail, by hand or by facsimile). In the event a
stockholder holds Shares in certificate form, such stockholder should
deliver to Capitol the Letter of Transmittal along with the
certificate(s) for such Shares.
The method of delivery of Shares and all other required documents is
at the election and risk of the tendering stockholder and delivery will
be deemed made only when actually received by Capitol. If delivery is by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to assure
timely delivery.
FEDERAL INCOME TAX WITHHOLDING. To prevent backup federal income
tax withholding equal to 31% of the gross payments payable pursuant to
the Offer, each stockholder who does not otherwise establish an exemption
from backup withholding must notify the Company of such stockholder's
correct taxpayer identification number (or certify that such taxpayer is
awaiting a taxpayer identification number) and provide certain other
information by completing, under penalties of perjury, the Substitute
Form W-9 included in the Letter of Transmittal.
For a discussion of certain United States federal income tax
consequences generally applicable to tendering stockholders, see Section
14.
DETERMINATION OF VALIDITY. All questions as to the Purchase Price,
the form of documents and the validity, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be
determined by the Company, in its sole discretion, and its determination
shall be final and binding on all parties. The Company reserves the
absolute right to reject any or all tenders of Shares that it determines
are not in proper form or the acceptance for payment of which or payment
for which may, in the opinion of the Company's counsel, be unlawful. The
Company also reserves the absolute right to waive any of the Conditions
of the Offer and any defect or irregularity in any tender of any
particular Shares. No tender of Shares will be deemed validly made until
all defaults or irregularities have been cured or waived. Neither the
Company, Capitol, nor any other person is or will be under any duty to
give notice of any defects or irregularities in tenders, and neither of
them will incur any liability for failure to give any such notice.
RULE 14E-4. It is a violation of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), for a
person, directly or indirectly, to tender Shares for his or her own
account unless, at the time of tender and at the end of the proration
period or period during which Shares are accepted by lot (including any
extensions thereof), the person so tendering (i) has a net long position
equal to or greater than the amount tendered (x) in Shares or (y) in
other securities immediately convertible into, or exercisable or
exchangeable for, Shares and, upon the acceptance of such tender, will
acquire such Shares for tender by conversion, exercise or exchange of
such other securities and (ii) will cause such Shares to be delivered in
accordance with the terms of the Offer. Rule 14e-4 provides a similar
restriction applicable to the tender or guarantee of a tender on behalf
of another person. The tender of Shares pursuant to any one of the
procedures described above will constitute the tendering stockholder's
representation and warranty that (i) such stockholder has a net long
position in the Shares being tendered within the meaning of Rule 14e-4
promulgated under the Exchange Act, and (ii) the tender of such Shares
complies with Rule 14e-4. The Company's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement
between the tendering stockholder and the Company upon the terms and
subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer may be withdrawn
at any time prior to the Expiration Date. Thereafter, such tenders are
irrevocable, except that they may be withdrawn after 12:00 Midnight,
Rockville, Maryland time, Monday, January 26, 1998 unless theretofore
accepted for payment as provided in this Offer to Purchase. If the
Company extends the period of time during which the Offer is open, or is
delayed in accepting for payment or paying for Shares, or is unable to
accept for payment or pay for Shares pursuant to the Offer for any
reason, then, without prejudice to the Company's rights under the Offer,
Capitol may, on behalf of the Company, retain all Shares tendered, and
such Shares may not be withdrawn except as otherwise provided in this
Section 4, subject to Rule 13e-4(f)(5) under the Exchange Act, which
provides that the issuer making the tender offer shall either pay the
consideration offered, or return the tendered securities, promptly after
the termination or withdrawal of the tender offer.
To be effective, a written or facsimile transmission notice of
withdrawal signed by the tendering stockholder must be timely received by
Capitol at its address set forth in the Summary of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person
who tendered the Shares to be withdrawn and the number of Shares to be
withdrawn. In addition, such notice must specify, the name and number of
the account at Capitol to be credited with the withdrawn Shares.
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be
deemed not validly tendered for purposes of the Offer. However,
withdrawn Shares may be re-tendered by again following the procedures
described in Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of
receipt) of any notice of withdrawal will be determined by the Company,
in its sole discretion, which determination shall be final and binding.
Neither the Company, Capitol, nor any other person will be under any duty
to give notification of any defect or irregularity in any notice of
withdrawal or incur any liability for failure to give any such
notification.
5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT
OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer, and
as promptly as practicable after the Expiration Date, the Company will
(subject to the proration provisions of the Offer) accept for payment and
pay for Shares validly tendered up to 200,000 Shares. In all cases,
payment for Shares accepted for payment pursuant to the Offer will be
made only after timely receipt by Capitol of a confirmation of a book-
entry transfer of such Shares into the Company's account at Capitol, a
properly completed and duly executed Letter of Transmittal or manually
signed photocopy thereof and any other required documents (including, if
applicable, certificates for Shares).
For purposes of the Offer, the Company will be deemed to have
accepted for payment (and thereby purchased), subject to proration,
Shares that are validly tendered and not withdrawn as, if and when it
gives oral or written notice to Capitol of the Company's acceptance for
payment of such Shares. The Company will pay for Shares that it has
purchased pursuant to the Offer by delivering the Purchase Price therefor
to Capitol. Capitol will act as agent for tendering stockholders for the
purpose of receiving payment from the Company and transmitting payment to
the tendering stockholders (by check mailed directly to the tendering
stockholders) as promptly as practicable. Under no circumstances will
interest be paid on amounts to be paid to tendering stockholders,
regardless of any delay in making such payment.
Certificates for all Shares not purchased will be returned as
promptly as practicable without expense to the tendering stockholder or
Shares will be credited to the tendering stockholder's account maintained
with Capitol by book-entry transfer.
Payment for Shares may be delayed in the event of difficulty in
determining the number of Shares properly tendered or if proration is
required. See Section 1. In addition, if certain events occur, the
Company may not be obligated to purchase Shares pursuant to the Offer.
See Section 6.
The Company will pay or cause to be paid any stock transfer taxes
with respect to the sale and transfer of any Shares to it pursuant to the
Offer. If, however, payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of,
any person other than the registered holder, or if tendered Shares are
registered in the name of any person other than the person signing the
Letter of Transmittal, the amount of any stock transfer taxes (whether
imposed on the registered holder, such other person or otherwise) payable
on account of the transfer to such person will be deducted from the
Purchase Price unless satisfactory evidence of the payment of such taxes,
or exemption therefrom, is submitted. See Instruction 5 of the Letter of
Transmittal.
6. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, the Company
shall not be required to accept for payment or, subject to the provisions
of the Offer, to pay for any Shares not theretofore accepted for payment
or paid for, and may terminate or amend the Offer, if at any time prior
to the Expiration Date any of the following events shall have occurred
(or shall have been determined by the Company in its sole judgment to
have occurred) regardless of the circumstances giving rise thereto
(including any action or omission to act by the Company):
(a) there shall have been threatened, instituted or pending
any action or proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal or any other person,
domestic or foreign, or before any court, authority, agency or tribunal
or any other person, domestic or foreign, or any judgment, order or
injunction entered, enforced or deemed applicable by any such court,
authority, agency, tribunal or other person, that (i) challenges the
acquisition of Shares pursuant to the Offer or otherwise in any manner
relates to or affects the Offer, or (ii) in the sole judgment of the
Company, would or might materially and adversely affect the business,
condition (financial or other), income, operations or prospects of the
Company or any of its subsidiaries or otherwise materially impair in any
way the contemplated future conduct of the business of the Company or any
of its subsidiaries or materially impair the contemplated benefits of the
Offer to the Company;
(b) there shall have been any action threatened, pending or
taken, or approval withheld, withdrawn or abrogated or any statute, rule,
regulation, judgment, order or injunction threatened, proposed, sought,
promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the Offer, or to the Company or any of its subsidiaries, by
any legislative body, court, authority, agency or tribunal, domestic or
foreign, which, in the Company's sole judgment, would or might directly
or indirectly (i) make the acceptance for payment of, or payment for,
some or all of the Shares illegal or otherwise restrict or prohibit
consummation of the Offer, (ii) delay or restrict the ability of the
Company, or render the Company unable, to accept for payment or pay for
some or all of the Shares, or (iii) materially and adversely affect the
business, condition (financial or other), income, operations or prospects
of the Company or any of its subsidiaries or otherwise materially impair
in any way the contemplated future conduct of the business of the Company
or any of its subsidiaries or materially impair the contemplated benefits
of the Offer to the Company;
(c) it shall have been publicly disclosed or the Company shall
have learned that (i) any new person or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) has acquired or proposes to acquire
beneficial ownership of more than 5% of the outstanding Shares whether
through the acquisition of stock, the formation of a group, the grant of
any option or right, or otherwise, (ii) any such person or group that on
or prior to November 24, 1997, has beneficial ownership of more than 5%
of the outstanding Shares thereafter shall have acquired or shall propose
to acquire whether through the acquisition of stock, the formation of a
group, the grant of any option or right, or otherwise, beneficial
ownership of additional Shares representing 2% or more of the outstanding
Shares, (iii) any new group shall have been formed which beneficially
owns more than 5% of the outstanding Shares, or (iv) any person, entity
or group shall have filed a Notification and Report Form under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 or made a public
announcement reflecting an intent to acquire the Company or any of its
subsidiaries or any of their respective assets or securities;
(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market, (ii) any
significant decline in the price of the Shares or in the general level of
market prices of equity securities in the United States or abroad, (iii)
any change in the general political, market, economic or financial
condition in the United States or abroad which, in the Company's sole
judgment, would or might have a material adverse effect on the business,
condition (financial or other), income, operations or prospects of the
Company or any of its subsidiaries or on the trading in the Shares, (iv)
the declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States or any limitation on, or any event
which, in the Company's sole judgment, might affect, the extension of
credit by lending institutions in the United States, (v) the commencement
of a war, armed hostilities or other international or national crisis
directly or indirectly involving the United States or (vi) in the case of
any of the foregoing existing at the time of the commencement of the
Offer, in the Company's sole judgment, a material acceleration or
worsening thereof;
(e) a tender or exchange offer with respect to some or all of
the Shares (other than the Offer), or a merger, acquisition or other
business combination proposal for the Company or any subsidiary, shall
have been proposed, announced or made by a person other than the Company;
or
(f) there shall have occurred any event or events that in the
Company's sole judgment would or might result in an actual or possible
change in the business, condition (financial or other), income,
operations or prospects of the Company or any of its subsidiaries or
otherwise materially impair in any way the contemplated future conduct of
the business of the Company or any of its subsidiaries or materially
impair the contemplated benefits of the Offer to the Company;
and, in the sole judgment of the Company, such event or events make it
undesirable or inadvisable to proceed with the Offer or with such
acceptance for payment or payment.
Any of the foregoing conditions may be waived by the Company, in
whole or in part, at any time and from time to time in its sole
discretion. The failure by the Company at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time. Any determination by the Company
concerning the events described above will be final and binding on all
parties.
7. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are not listed, traded or quoted on any national
securities exchange or other market. Legg Mason, the Company's
independent appraiser, has conducted appraisals of the Company's Shares
since 1986. Legg Mason determined on September 10, 1997 that the fair
market value of minority holdings of the Company's Common Stock falls in
a range of $8.60 per Share to $11.60 per Share, with an expected value of
$10.10 per Share, as of June 30, 1997 (after giving effect to the sale of
the Space Business to Orbital). In connection with the ESOP Purchase,
Legg Mason also gave its opinion dated November 20, 1997 to the ESOP that
the expected value is $10.10 per Share as of September 30, 1997.
Information on the Company's market for its Common Stock and related
shareholder matters is included under the caption "Item 5. Market for
Registrant's Common Equity and Related Stockholder Matters" of the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996 and is incorporated herein by reference.
It is the current policy of the Company to retain all earnings to
provide funds for the Company's growth. Therefore, the Company has no
current intention of paying cash dividends on the Common Stock. The
Company has not made any distributions to its shareholders since 1988.
The Company is prohibited from paying dividends under its bank credit
agreement. The agreement expires on September 30, 2000.
8. BACKGROUND AND PURPOSE OF THE OFFER.
On August 15, 1997, the Company consummated the sale of its
Space Business to Orbital. The Company received approximately $47.0
million of proceeds from the sale of the Space Business and decided to
effect the Offer to allow stockholders to benefit from such sale.
The Board of Directors decided to proceed with the Offer because (i)
it would provide participating stockholders with an opportunity to obtain
liquidity with respect to certain of their Shares in a tax advantageous
transaction; (ii) it would give the Company a capital structure in which
the Company's average after-tax cost of capital is reduced; (iii) it
should permit each Share outstanding after the Offer to participate in a
greater percentage of any earnings of the Company and (iv) to the extent
that the Offer results in a reduction in the number of stockholders of
record, it would reduce the costs to the Company for stockholder
services, including mailing and printing costs.
The Board of Directors believes that the terms of the Offer
including the Purchase Price of $10.10 per Share, is fair to unaffiliated
stockholders of the Company, including those stockholders who tender
their Shares in the Offer. The Board of Directors has received the
opinion of Legg Mason dated September 10, 1997, that the fair market
value of minority holdings of the Company's Common Stock falls in a range
of $8.60 per Share to $11.60 per Share, with an expected value of $10.10
per Share as of June 30, 1997 (after giving effect to the sale of the
Space Business to Orbital). In connection with the ESOP Purchase, Legg
Mason also gave its opinion dated November 20, 1997 to the Trustee of the
ESOP that the expected value is $10.10 per Share as of September 30,
1997. The full text of the Legg Mason written appraisal, which sets
forth the assumptions made, procedures followed, matters considered and
scope of review by Legg Mason in rendering its appraisal is on file with
the Securities and Exchange Commission as an Exhibit to the Company's
Issuer Tender Offer Statement on Schedule 13E-4 filed in connection with
the Offer. Based on the foregoing and given that stockholders are not
obligated to tender any Shares pursuant to the Offer, the Board of
Directors believes that the Offer is fair to the Company's stockholders.
Legg Mason has been the Company's independent appraiser since 1986.
The Company has paid Legg Mason a fee of $25,000 in connection with the
delivery of the Appraisal. No portion of the fee was contingent upon the
consummation of the Offer or the conclusions reached in the Appraisal.
In addition, the Company has agreed to pay Legg Mason's reasonable out-
of-pocket expenses up to $4,000 and to indemnify Legg Mason against
certain liabilities directly or indirectly in connection with, arising
out of, based upon, or in any way related to, its engagement by the
Company (including with respect to federal securities laws).
The Company currently intends to hold the Shares purchased pursuant
to the Offer as treasury stock. Although the Company has no current
plans to reissue any of such Shares, they may be reissued in the future.
Except as disclosed in this Offer to Purchase, the Company has no
plans or proposals which relate to or would result in: (a) the
acquisition by any person of additional securities of the Company, or the
disposition of securities of the Company; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation involving
the Company or any of its subsidiaries; (c) a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries; (d)
any change in the present Board of Directors or management of the
Company; (e) any material change in the present dividend rate or policy
or indebtedness or capitalization of the Company; (f) any material change
in the Company's corporate structure or business; (g) any change in the
Company's certificate of incorporation or bylaws or any action which may
impede the acquisition of control of the Company by any person; or (h)
the suspension of the Company's obligation to file reports pursuant to
Section 15(d) of the Exchange Act.
Statements contained in this Offer to Purchase, including statements
with respect to the future earnings prospects and growth in earnings per
Share are not historical facts and are forward looking statements made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Each of these items is dependent on the
earnings of the Company. A number of important factors could cause
actual results to differ materially from those expressed in any forward-
looking statements made by or on behalf of the Company. Some of the most
important factors which would impact the Company's earnings include, but
are not limited to, the Company's higher leverage, the Company's higher
debt service requirements, restrictions under the Company's debt
instruments, the concentrated ownership of the Company, the risks
associated with competition and technological innovation by competitors,
general economic conditions in industries that use the Company's
products, general business cycles, political, economic or other
disruptions in the Company's foreign markets, the Company's concentration
of customers, increases in interest rates, exchange rate fluctuations,
departures of the Company's key personnel for any reason, the uncovering
of any liability currently unknown to the Company, and new and different
legal and regulatory requirements and governmental approvals.
NEITHER THE COMPANY NOR ANY OF ITS DIRECTORS, OFFICERS OR EMPLOYEES
MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING SHARES. EACH STOCKHOLDER MUST MAKE HIS OR HER OWN
DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER.
9. SOURCE AND AMOUNT OF FUNDS.
The Company estimates that its maximum cost of purchasing
200,000 Shares pursuant to the Offer (including all fees and expenses
relating to the Offer, but excluding interest on, and fees with respect
to, funds borrowed to finance such purchase of Shares) will approximate
$2.1 million. The funds to pay all such costs will be obtained from a
$15.0 million secured revolving line of credit under a financing and
security agreement between the Company and First Union Commercial
Corporation (the "Lender") dated November 6, 1997 (the "Financing
Agreement"). The Financing Agreement provides for a $15.0 million
secured revolving line of credit ($4.0 million sublimit for letters of
credit) and a $5.0 million term loan.
Amounts drawn under the Financing Agreement bear interest at the
rate of interest from time to time established and publicly announced by
Lender as its prime rate (the "Prime Rate").
In addition, the Company may, under certain circumstances, elect to
have specified amounts drawn under the Financing Agreement bear interest
at the LIBOR rate (as defined in the Financing Agreement) plus an
additional LIBOR rate of 1.5%, 1.75% or 2%, depending on certain
circumstances. The unused line fee under the Financing Agreement is
currently .003% of the average daily unused commitment and is paid on a
quarterly basis. Additionally, letter of credit fees of 1.5% or 1.75% of
the average daily balance of outstanding letters of credit are payable to
the Lender. Interest payable on amounts outstanding under the Financing
Agreement is due and payable monthly beginning November 30, 1997 and
continuing on the last day of each month thereafter until maturity. The
principal amount outstanding under the Financing Agreement is due and
payable in full on September 30, 2000.
The Financing Agreement is secured by the Company's assets. The
Financing Agreement contains usual and customary affirmative, negative
and financial covenants, including restrictions and conditions regarding
capital expenditures, payment of dividends, asset sales, investments,
sales of stock, incurrence of additional indebtedness, and other matters.
The Company expects to repay borrowings incurred to finance the
purchases of Shares in the Offer out of the proceeds of public or private
offerings of securities, additional bank borrowings, internally generated
funds or other financings, or a combination of the foregoing, as the
Company may deem appropriate depending on business and market conditions
at the time.
10. TRANSACTIONS AND AGREEMENTS CONCERNING SHARES.
Dr. Velez, President, Chief Executive Officer and Chairman of
the Board, and Messrs. Claussen and Piddington, collectively own
2,896,858 Shares of Common Stock, constituting 63.7% of the outstanding
Common Stock. Dr. Velez and Messrs. Claussen and Piddington have
informed the Company that they will not tender any Shares in the Offer.
On November 21, 1997, Dr. Velez and Messrs. Claussen and Piddington sold
228,960, 39,979, and 24,000 Shares, respectively to the ESOP for a
purchase price of $10.10 per Share.
The Trustees of the ESOP and the 401(k) Plan have informed the
Company that they will not tender any Shares in the Offer. After giving
effect to the ESOP Purchase, the Trustees of the ESOP and 401(k) Plan
collectively own 877,659 Shares constituting 19.3% of the outstanding
Common Stock.
Except as set forth above, based upon the Company's records and upon
information provided to the Company by its directors and executive
officers, (i) neither the Company nor, to the Company's knowledge, any of
its associates, subsidiaries, directors, executive officers or any
associate of any such director or executive officer, or any director or
executive officer of its subsidiaries, has engaged in any transactions
involving the Shares during the 40 business days preceding the date
hereof and (ii) except for outstanding options to purchase Shares,
neither the Company nor, to the Company's knowledge, any of its directors
or officers is a party to any contract, arrangement, understanding or
relationship relating directly or indirectly to the Offer with any other
person with respect to the Shares.
Immediately prior to the ESOP purchase, (i) Dr. Velez owned
2,550,000 Shares, representing 56% of the then outstanding Shares, (ii)
Mr. Claussen owned 399,720 Shares, representing 8.8% of the then
outstanding Shares, and (iii) Mr. Piddington owned 240,001 Shares
representing 5.3% of the then outstanding Shares. After giving effect to
the ESOP Purchase and assuming the Company purchases 200,000 in the Offer
(i) Dr. Velez will own 2,321,040 Shares, representing 53.3% of the then
outstanding Shares, (ii) Mr. Claussen will own 359,817 Shares,
representing 8.3% of the then outstanding Shares, and (iii) Mr.
Piddington will own 216,001 Shares, representing 5.0% of the then
outstanding Shares.
11. FINANCIAL INFORMATION CONCERNING THE COMPANY.
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS)
Set forth below is certain summary historical consolidated and
certain pro forma financial information of the Company and its
subsidiaries. The historical financial information (other than the ratio
of earnings to fixed charges) has been derived from the audited
consolidated financial statements included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 (the "Company's
1996 Annual Report") and from the unaudited condensed consolidated
financial statements included in the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997 (the "Company's 1997 Third
Quarter Report"), each of which is incorporated by reference herein, and
other information and data contained in the Company's 1996 Annual Report
and the Company's 1997 Third Quarter Report. More comprehensive
financial information is included in such reports and the financial
information which follows is qualified in its entirety by reference to
such reports and all of the financial statements and related notes
contained therein, copies of which may be obtained as set forth below
under the caption "Miscellaneous." The summary pro forma consolidated
financial information is based on certain assumptions and estimates, and
therefore does not purport to be indicative of the results that would
actually have been obtained had the transactions been completed as of
such dates or indicative of future results of operations and financial
position.
<TABLE>
<CAPTION>
YEARS ENDED Nine Months Ended
DECEMBER 31, SEPTEMBER 30,
------------------------- ---------------------------
1996 Pro 1997 Pro
1995 1996 FORMA(1) 1996 1997 FORMA(1)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
Contract revenue $105,224 $96,246 $70,729 $69,650
Income(loss) from
continuing ops 2,349 276 (2) 1,497
Income(loss) from
discontinued ops (403) (11,313) (3,438) (1,490)
Gain on disposal
of segment 0 0 0 3,016
Net income (loss) 1,946 (11,037) (3,440) 3,023
Earnings (loss)
per share $0.41 ($2.49) ($2.60) ($0.78) $0.79 $0.67
Weighted average
shares
outstanding 4,709,268 4,437,543 4,237,543 4,397,973 4,684,184 4,484,184
Ratio of
earnings to
fixed charges 2.49:1 NM NM NM 1.76:1
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
DECEMBER 31, ----------------------------
1996 ACTUAL PRO FORMA(1)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $13,721 $15,227 $13,207
Total assets 92,690 48,376 46,356
Total assets, less
excess of cost of assets 87,642 48,376 46,356
acquired over book value
Short-term debt 28,335 13,106 15,126
Long-term debt 15,000 0 0
Stockholders' equity 17,793 20,729 18,709
Book value per share $3.91 $4.56 $4.12
</TABLE>
Notes to Summary Historical and Pro Forma Consolidated Financial Information:
(1) Gives effect to the purchase of 200,000 Shares of Common Stock at $10.10
per share of Common Stock pursuant to the Offer.
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES
The Company's purchase of Shares pursuant to the Offer will reduce
the number of Shares and potentially the number of holders of Shares.
Stockholders who determine not to tender Shares in the Offer or whose
Shares are not purchased in the Offer will realize an increase in their
percentage ownership interest in the common equity of the Company and thus, in
the Company's assets and any future earnings of the Company. Because of the
smaller number of Shares outstanding after consummation of the Offer, increases
or decreases in net earnings will result in proportionately greater increases
or decreases in earnings per Share.
13. REGULATORY APPROVALS.
The Company is not aware of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, that would be required for the Company's acquisition or
ownership of Shares as contemplated by the Offer or of any license or
regulatory permit that appears to be material to its business that might be
adversely affected by its acquisition of Shares as contemplated in the Offer,
except as may otherwise be required under federal or state securities laws.
Should any such approval or other action be required, the Company currently
contemplates that it will seek such approval or other action. The Company
cannot predict whether it may determine that it is required to delay the
acceptance of, or payment for, Shares tendered pursuant to the Offer pending
the outcome of any such matter. There can be no assurance that any such
approval or other action, if needed, would be obtained or would be obtained
without substantial conditions or that the failure to obtain any such approval
or other action might not result in adverse consequences to the Company's
business. The Company's obligations under the Offer to accept for payment and
pay for Shares are subject to certain conditions. See Section 6.
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following summary is a general discussion of certain of the U.S.
federal income tax consequences of the Offer. This summary is based on laws,
regulations, rulings, and decisions now in effect, all of which are subject to
change, possibly retroactively, and any such change could affect the continuing
validity of the discussion. No opinions of counsel or rulings from the
Internal Revenue Service (the "Service") as to any of the matters discussed in
this summary have been requested or received.
This summary does not discuss any aspects of state, local, foreign, or
other tax laws. Certain stockholders (including insurance companies, tax-
exempt organizations, financial institutions, broker dealers, and stockholders
who have acquired their Shares upon the exercise of options or otherwise as
compensation) may be subject to special rules not discussed below. The summary
assumes that stockholders hold their Shares as a capital asset.
EACH STOCKHOLDER IS URGED TO CONSULT AND RELY ON HIS OR HER TAX ADVISOR AS
TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER TO SUCH STOCKHOLDER, INCLUDING
THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS AND POSSIBLE TAX CHANGES.
IN GENERAL. A stockholder's exchange of Shares for cash pursuant to the
Offer will be a taxable transaction for federal income tax purposes under the
Internal Revenue Code of 1986, as amended (the "Code"). Such exchange will
constitute a "redemption" within the meaning of Section 317 of the Code, which
will result in the following federal income tax consequences.
TREATMENT AS A SALE OR EXCHANGE. If the redemption qualifies under any of
the provisions of Section 302(b) of the Code, as more fully described below,
the cash received pursuant to the Offer will be treated as a distribution from
the Company in part or full payment for the Shares exchanged. Such treatment
will result in a stockholder recognizing gain or loss equal to the difference
between (a) the cash received by the stockholder pursuant to the Offer and
(b) the stockholder's tax basis in the Shares surrendered. Assuming the Shares
are held as a capital asset, such recognized gain or loss will be capital gain
or loss. In the case of individuals, if the Shares were held longer than
eighteen months, any resulting gain will be subject to federal income tax at a
maximum rate of 20%, and if the Shares were held between twelve months but not
more than eighteen months, such capital gain will be subject to federal income
tax at a maximum rate of 28%. Gain from the sale of Shares held less than
twelve months generally will be taxed at ordinary income rates.
TREATMENT AS A DIVIDEND. If none of the provisions under Section 302(b)
of the Code is satisfied, a stockholder will be treated as having received a
dividend taxable as ordinary income in an amount equal to the cash received
pursuant to the Offer, to the extent of such stockholder's pro rata share of
the Company's earnings and profits, as calculated for U.S. federal income tax
purposes. The Company anticipates that its available earnings and profits will
be sufficient for all of the amounts distributed to be taxed as a dividend. In
the event that the transaction is treated as a dividend distribution to a
stockholder for federal income tax purposes, such stockholder's tax basis in
the Shares actually redeemed will be added to the tax basis of such
stockholder's remaining actually owned or constructively owned Shares in the
Company. No assurance can be given that any of the provisions under Section
302(b) will be satisfied as to any particular stockholder and thus no assurance
can be given that any particular stockholder will not be treated as having
received a dividend taxable as ordinary income.
CONSTRUCTIVE OWNERSHIP OF STOCK. In determining whether the provisions
under Section 302(b)(1), 302(b)(2), or 302(b)(3) of the Code, as described
below, are satisfied, a stockholder must take into account not only Shares
actually owned by such stockholder but also Shares that are constructively
owned within the meaning of Section 318 of the Code. Under Section 318, a
stockholder may constructively own Shares actually owned, and in some cases
constructively owned, by certain related individuals and certain entities in
which the stockholder has an interest and Shares that such stockholder has the
right to acquire by exercise of an option or by conversion of convertible
securities.
THE PROVISIONS OF SECTION 302(B). Under Section 302(b) of the Code, a
redemption will be taxed as a sale or exchange, and not as a dividend, if it
(1) is "not essentially equivalent to a dividend" with respect to a
stockholder; (2) is "substantially disproportionate" with respect to a
stockholder; (3) results in a "complete redemption" of all of the Shares owned
by a stockholder; or (4) is a redemption in "partial liquidation" from a
stockholder that is not a corporation. Each stockholder should be aware that,
under certain circumstances, sales or transfers of shares contemporaneously
with exchanges pursuant to the Offer as part of an overall plan to reduce a
stockholder's interest in the Company may be taken into account in determining
whether the tests under clauses (1), (2), and (3) above are satisfied. Also,
subsequent purchases by the Company may be taken into account in determining
whether the tests under clauses (1), (2), and (3) above are satisfied. If
every stockholder, excluding Dr. Velez, Messrs. Claussen and Piddington and the
Trustees of the ESOP and the 401(k) Plan, elects to tender the full amount of
their Shares available for tender, a tendering stockholder should experience a
reduction in such stockholder's interest in the Company. Under certain
circumstances, depending on whether and to what extent other tendering
stockholders tender their Shares, a stockholder who tenders less than all of
its Shares could experience an increase in its interest in the Company. In
such an event the stockholder will be treated as having received a dividend
taxable as ordinary income in an amount equal to the cash received pursuant to
the Offer, to the extent of the stockholder's pro rata share of the Company's
earnings and profits, as calculated for federal income tax purposes.
A description of each of the provisions of Section 302(b) is as follows:
(1) NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND. The receipt of cash by a
stockholder in exchange for Shares pursuant to the Offer will generally be "not
essentially equivalent to a dividend" within the meaning of Section 302(b)(1)
of the Code if the sale of Shares results in a "meaningful reduction" of the
stockholder's interest in the Company. Based on a published Service ruling,
dividend treatment will likely not apply if, taking into account the
constructive ownership rules set forth in Section 318 of the Code, (a) the
stockholder's relative stock interest in the Company is minimal, (b) the
stockholder exercises no control over the Company's affairs and (c) there is a
reduction in the stockholder's proportionate interest in the Company.
(2) A SUBSTANTIALLY DISPROPORTIONATE REDEMPTION. The receipt of cash by
a stockholder will be "substantially disproportionate" with respect to such
stockholder within the meaning of Section 302(b)(2) of the Code if the
percentage of the then outstanding Shares actually and constructively owned by
the stockholder immediately following the exchange of Shares pursuant to the
Offer is less than 80 percent of the percentage of the outstanding Shares
actually and constructively owned by such stockholder immediately before such
exchange, provided that immediately after the exchange such stockholder owns
actually and constructively less than 50 percent of the total voting power.
(3) A COMPLETE REDEMPTION OF INTEREST. The receipt of cash by a
stockholder will result in a "complete redemption" of all the Shares owned by
the stockholder within the meaning of Section 302(b)(3) of the Code if either
(a) all the Shares actually and constructively owned by the stockholder are
sold pursuant to the Offer or (b) all the Shares actually owned by the
stockholder are sold pursuant to the Offer, the only Shares the stockholder
constructively owns are actually owned by such stockholder's family members,
and the stockholder is eligible to waive and effectively waives, under
procedures described in Section 302(c), such constructive ownership.
(4) A PARTIAL LIQUIDATION. The receipt of cash by a noncorporate
stockholder pursuant to the Offer may qualify as a redemption under a plan of
"partial liquidation" under Section 302(b)(4) of the Code if the distribution
is "not essentially equivalent to a dividend (determined at the corporate level
rather than at the stockholder level)" and certain other conditions are
satisfied. Under the Code, all distributions under a plan of partial
liquidation must be made by the end of the taxable year succeeding the taxable
year of the corporation in which such plan of partial liquidation was adopted.
It is unclear whether the distribution of cash pursuant to the Offer will
qualify as distribution in partial liquidation.
APPLICATION OF SECTION 302(B) TESTS. Stockholders may qualify for sale or
exchange treatment if any of the other provisions of Section 302(b) of the
Code, as described above, are applicable, taking into account the relevant
constructive ownership rules. If none of the Code Section 302(b) tests are
satisfied, the redemption of Shares would be treated as a dividend and taxable
as described above under "Treatment as a Dividend." Holders are strongly urged
to consult their tax advisors in regard to the treatment of the redemption of
Shares in their particular situation.
SPECIAL RULES FOR CORPORATE STOCKHOLDERS. If the redemption of Shares of
a corporate stockholder of the Company is either "not essentially equivalent to
a dividend," a "substantially disproportionate" redemption, or a "complete
termination of interest," under the Code Section 302(b) provisions described
above, then such stockholder receives sale or exchange treatment. Because the
"partial liquidation" provision of Section 302(b)(4) is applicable only to
noncorporate stockholders, if the exchange qualifies only as a "partial
liquidation" or fails to qualify under any of the Section 302(b) provisions as
a redemption, then a corporate stockholder is deemed to receive a dividend.
Upon receipt of a dividend from the Company, a corporate stockholder that
owns less than 20 percent of the Company is eligible for a dividends received
deduction equal to 70 percent of the amount of the distribution, subject to
applicable limitations, including those related to "debt financed portfolio
stock" under Section 246A of the Code and to the holding period requirements of
Section 246 of the Code. In addition, any amount received by a corporate
stockholder that is treated as a dividend may constitute an "extraordinary
dividend" subject to the provisions of Section 1059 of the Code (except as may
otherwise be provided in Treasury Regulations yet to be promulgated). Under
Section 1059, a corporate stockholder must reduce the tax basis of all of such
stockholder's Shares (but not below zero) by the "nontaxed portion" of any
"extraordinary dividend" and, if such nontaxed portion exceeds the
stockholder's tax basis for the Shares, must treat any such excess as gain from
the sale or exchange of such Shares in the year the payment is received.
Section 1059 will apply to the extent that the redemption of Shares is a
redemption in partial liquidation for United States federal income tax
purposes, as described above.
BACKUP WITHHOLDING. Certain noncorporate stockholders may be subject to
backup withholding at a rate of 31% on cash received pursuant to the redemption
of Shares. Generally, backup withholding applies only when the taxpayer fails
to furnish or certify a proper taxpayer identification number or when the
taxpayer is notified by the Service that the taxpayer has failed to report
payments of interest and dividends properly. Each noncorporate stockholder
should consult its own tax advisor regarding its qualification for exemption
from backup withholding and the procedure for obtaining any applicable
exemption. For a discussion of certain withholding tax consequences to
tendering stockholders, see Section 3.
NON-U.S. HOLDERS. The Company will withhold United States federal income
tax at the rate of 30% from cash distributed to Non-U.S. Holders (as defined
below) pursuant to the redemption of Shares, unless the Company determines that
a reduced rate of withholding is applicable pursuant to a tax treaty or that an
exemption from withholding is applicable because such cash is effectively
connected with the conduct of a trade or business in the United States. For
this purpose, a "Non-U.S. Holder" is a beneficial owner of Shares other than a
beneficial owner that is for U.S. federal income tax purposes, (i) an
individual citizen or resident of the United States, (ii) a U.S. domestic
corporation or (iii) otherwise subject to U.S. federal income tax on a net
income basis in respect of the Shares. A Non-U.S. Holder may be eligible to
obtain a refund of tax withheld if such stockholder meets one of the tests for
capital gain or loss treatment described above, or is otherwise able to
establish that no tax or a reduced amount of tax was due. Backup withholding
will generally not apply to amounts subject to the 30-percent or treaty-reduced
rate of withholding.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. EACH STOCKHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER
(INCLUDING THE APPLICABILITY AND EFFECT OF THE CONSTRUCTIVE OWNERSHIP RULES AND
FOREIGN, STATE AND LOCAL TAX LAWS AND POSSIBLE TAX LAW CHANGES) OF THE SALE OF
SHARES PURSUANT TO THE OFFER.
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, in its sole discretion and
at any time or from time to time, to extend the period of time during which the
Offer is open by making a public announcement thereof. There can be no
assurance, however, that the Company will exercise its right to extend the
Offer. During any such extension, all Shares previously tendered will remain
subject to the Offer, except to the extent that such Shares may be withdrawn as
set forth in Section 4. The Company also expressly reserves the right, in its
sole discretion, (i) to terminate the Offer and not accept for payment any
Shares not theretofore accepted for payment by giving oral or written notice of
such termination to Capitol and making a public announcement thereof or,
subject to Rule 13e-4(f)(5) under the Exchange Act, which requires the Company
either to pay the consideration offered or to return the Shares tendered
promptly after the termination or withdrawal of the Offer, to postpone payment
for Shares, in each case, upon the occurrence of any of the conditions
specified in Section 6 and (ii) at any time or from time to time, to amend the
Offer in any respect. Amendments to the Offer may be effected by public
announcement. Without limiting the manner in which the Company may choose to
make public announcement of any termination or amendment, the Company shall
have no obligation (except as otherwise required by applicable law) to publish,
advertise or otherwise communicate any such public announcement, other than by
making a release to the PR Newswire, except in the case of an announcement of
an extension of the Offer, in which case the Company shall have no obligation
to publish, advertise or otherwise communicate such announcement other than by
issuing a notice of such extension by press release or other public
announcement, which notice shall be issued no later than 9:00 a.m., Rockville,
Maryland time, on the next business day after the previously scheduled
Expiration Date. Material changes to information previously provided to
holders of the Shares in this Offer or in documents furnished subsequent
thereto will be disseminated to holders of Shares in compliance with Rule 13e-
4(e)(2) promulgated under the Exchange Act.
If the Company materially changes the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Company will extend the Offer to the extent required by Rules 13e-
4(d)(2) and 13e-4(e)(2) under the Exchange Act. The minimum period during
which the Offer must remain open following material changes in the terms of the
Offer or information concerning the Offer (other than a change in price or
change in percentage of securities sought) will depend on the facts and
circumstances, including the relative materiality of such terms or information.
In a published release, the Commission has stated that in its view, an Offer
should remain open for a minimum of five business days from the date that
notice of such a material change is first published, sent or given. Pursuant
to Rule 13e-4(f)(1), the Offer will continue or be extended for at least ten
business days from the time the Company publishes, sends or gives to holders of
Shares a notice that it will (a) increase or decrease the price it will pay for
Shares or (b) increase (except for an increase not exceeding 2% of the
outstanding Shares) or decrease the number of Shares it seeks.
16. FEES, EXPENSES AND OTHER ARRANGEMENTS.
The Company has retained Capitol as Information Agent in connection
with the Offer. The Information Agent may contact stockholders by mail,
telephone, facsimile transmission and personal interviews. Capitol has not
been retained to make solicitations or recommendations in connection with the
Offer.
Certain directors, officers, or employees of the Company may, from time to
time, contact stockholders to provide them with information regarding the
Offer. Such directors, officers or employees will not make any recommendation
to any stockholder as to whether to tender all or any Shares and will not
solicit the tender of any Shares. The Company will not compensate any
director, officer or employee for this service.
Other than Capitol, the Company will not pay any solicitation fees to any
broker, dealer, bank, trust company or other person for any Shares purchased in
connection with the Offer.
The Company will pay all stock transfer taxes, if any, payable on account
of the acquisition of the Shares by the Company pursuant to the Offer. See
Instruction 5 of the Letter of Transmittal.
Legg Mason has received a fee of $25,000 in connection with the delivery
of the Appraisal. In addition, the Company has agreed to pay Legg Mason's
reasonable out-of-pocket expenses up to $4,000 and to indemnify Legg Mason
against certain liabilities, directly or indirectly, in connection with,
arising out of, based upon, or in any way related to, its engagement by the
Company (including with respect to federal securities laws).
The Company will pay to Capitol a fee of $5,000 plus brokerage commissions
of 1.5% of the total purchase price of all Shares purchased by the Company in
connection with the Offer and reimburse Capitol for certain out-of-pocket
expenses. Capitol provides its services as a broker/dealer for all of the
Company's transactions in its securities.
17. MISCELLANEOUS.
The Company is subject to certain of the informational requirements
of the Exchange Act and in accordance therewith files reports, and other
information with the Commission relating to its business, financial condition
and other matters. The Company has also filed an Issuer Tender Offer Statement
on Schedule 13E-4 with the Commission, which includes certain additional
information relating to the Offer. Such reports, as well as such other
material, may be inspected and copies may be obtained at the Commission's
public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549,
and should also be available for inspection and copying at the regional offices
of the Commission located at 7 World Trade Center, 13th Floor, New York, New
York 10048, and Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661. The Commission maintains a Web site that
contains such reports, and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov. Copies of such material may be obtained by mail, upon
payment of the Commission's customary fees, from the Commission's Public
Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Company's Schedule 13E-4 may not be available at the Commission's regional
offices.
The Offer is being made to all holders of Shares. The Company is not
aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to a valid state statute. If the
Company becomes aware of any valid state statute prohibiting the making of the
Offer, the Company will make a good faith effort to comply with such statute.
If, after such good faith effort, the Company cannot comply with such statute,
the Offer will not be made to, nor will tenders be accepted from or on behalf
of, holders of Shares in such state. In those jurisdictions whose securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Company or one or
more registered brokers or dealers licensed under the laws of such
jurisdiction.
CTA INCORPORATED
November 26, 1997
<PAGE>
The Letter of Transmittal and any other required documents should be sent or
delivered by each holder of Shares to the Information Agent at its address set
forth below.
Questions and requests for assistance may be directed to the Information Agent
at the address and telephone number set forth below. Additional copies of this
Offer to Purchase, the Letter of Transmittal and other related materials may be
obtained from the Information Agent.
THE INFORMATION AGENT FOR THE OFFER IS:
CAPITOL SECURITIES MANAGEMENT INCORPORATED
8301 GREENSBORO DRIVE
SUITE 150
MCLEAN, VIRGINIA 22102
TEL. (800) 878-2010
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
CTA INCORPORATED
PURSUANT TO THE OFFER TO PURCHASE
DATED NOVEMBER 26, 1997
THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
ROCKVILLE, MARYLAND TIME, ON WEDNESDAY, DECEMBER 31, 1997, UNLESS THE OFFER IS
EXTENDED.
TO: CAPITOL SECURITIES MANAGEMENT, INCORPORATED
BY MAIL, HAND OR OVERNIGHT DELIVERY: BY FACSIMILE TRANSMISSION
8301 Greensboro Drive, Suite 150 FACSIMILE: (703) 821-7586
McLean, VA 22102 CONFIRM BY TELEPHONE: (800) 878-2010
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO CAPITOL.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE
ACCOMPANYING INSTRUCTIONS, CAREFULLY BEFORE CHECKING ANY BOX
<TABLE>
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 2 AND 3)
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS
NAME(S) APPEAR(S) SHARES TENDERED
ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
<CAPTION>
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
TOTAL SHARES
</TABLE>
Indicate in this box the order (by certificate number) in which Shares are
to be purchased in the event of proration. (Attach an
additional signed list if necessary.) See Instruction 10.
1{st} 2{nd} 3{rd}
4{th} 5{th}
* Need not be completed by stockholders tendering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares
represented by each Share certificate delivered to Capitol
are being tendered hereby. See Instruction 3.
<PAGE>
ODD LOTS
(SEE INSTRUCTION 6)
This section is to be completed ONLY if Shares are being tendered by or on
behalf of a person who was, as of the close of business on November 24, 1997,
and who continues to be at the Expiration Date, the record or beneficial owner
of an aggregate of ninety-nine or fewer Shares and elects to have all of his or
her Shares purchased without proration.
The undersigned either (check one box):
( owned beneficially, as of the close of business on November 24, 1997, and
continues to own beneficially at the Expiration Date, an aggregate of
ninety-nine or fewer Shares, all of which are being tendered; or
( is a broker, dealer, commercial bank, trust company or other nominee that
(i) is tendering, for the beneficial owner thereof, Shares with respect to
which it is the record owner, and (ii) believes, based upon
representations made to it by such beneficial owner, that such beneficial
owner owned beneficially, as of the close of business on November 24,
1997, and continues to own beneficially at the Expiration Date, an
aggregate of ninety-nine or fewer Shares and is tendering all of his or
her Shares.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to CTA Incorporated, a Colorado
corporation (the "Company"), the above-described shares of its common stock,
par value $.01 per share (the "Shares"), at the price per Share of $10.10 net
to the seller in cash, (the "Purchase Price") upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated November 26, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which together constitute the "Offer").
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to all the Shares that are being tendered
hereby or orders the registration of such Shares tendered by book-entry
transfer that are purchased pursuant to the Offer to or upon the order of the
Company and hereby irrevocably constitutes and appoints Capitol the true and
lawful agent and attorney-in-fact of the undersigned with respect to such
Shares, with full power of substitution (such power of attorney being deemed to
be an irrevocable power coupled with an interest), to:
(i) deliver certificates for such Shares, or transfer ownership of such
Shares on the account books maintained by Capitol, together, in any
such case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Company upon receipt by
Capitol, as the undersigned's agent, of the Purchase Price with
respect to such Shares;
(ii) present certificates for such Shares for cancellation and transfer
on the books of the Company; and
(iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, all in accordance with the
terms of the Offer.
The undersigned hereby represents and warrants to the Company that the
undersigned has full power and authority to tender, sell, assign and transfer
the Shares tendered hereby and that, when and to the extent the same are
accepted for payment by the Company, the Company will acquire good, marketable
and unencumbered title thereto, free and clear of all liens, restrictions,
charges, encumbrances, conditional sales agreements or other obligations
relating to the sale or transfer thereof, and the same will not be subject to
any adverse claims. The undersigned will, upon request, execute and deliver
any additional documents deemed by Capitol or the Company to be necessary or
desirable to complete the sale, assignment and transfer of the Shares.
The undersigned represents and warrants to the Company that the
undersigned has read and agrees to all of the terms of the Offer. All
authority herein conferred or agreed to be conferred shall not be affected by
and shall survive the death or incapacity of the undersigned, and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Except as
stated in the Offer, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
Instructions will constitute the undersigned's representation and warranty to
the Company that (i) the undersigned has a net long position in the Shares
being tendered within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended, and (ii) the tender of such Shares
complies with Rule 14e-4. The Company's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Offer.
The names and addresses of the registered holders should be printed, if
they are not already printed above, exactly as they appear on the certificates
representing Shares tendered hereby, if applicable. The certificate numbers,
the number of Shares represented by such certificates and the number of Shares
that the undersigned wishes to tender should be indicated in the appropriate
boxes on this Letter of Transmittal.
The undersigned understands that upon the terms and subject to the
conditions of the Offer, the Company will pay $10.10 per Share for up to
200,000 Shares validly tendered and not withdrawn pursuant to the Offer, taking
into account the number of Shares so tendered. The undersigned understands
that all Shares validly tendered and not withdrawn will be purchased at the
Purchase Price upon the terms and subject to the conditions of the Offer,
including its proration provisions, and that the Company will return promptly
all other Shares, including Shares not purchased because of proration.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may not
be required to purchase any of the Shares tendered hereby or may accept for
payment fewer than all of the Shares tendered hereby.
Please issue and mail the check for the Purchase Price of any Shares
purchased (less the amount of any federal income or backup withholding tax
required to be withheld), and/or return any Shares (and accompanying documents,
as appropriate) not tendered or not purchased, in the name(s) of the
undersigned and mail to the undersigned at the address shown below the
undersigned's signature.
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL STOCKHOLDERS)
- ----------------------------------------------------------------------------
(Signature(s) of Owner(s))
Dated----------------------------------,1997
Name(s)--------------------------------
--------------------------------
(Please Print)
Capacity (full title)-----------------------------------------------
Address-------------------------------------------------------------
(Include Zip Code)
Area Code and
Telephone No.------------------------------------------------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share certificate(s) or on accounts of Capitol or on a security position
listing. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please set forth full title and see
Instruction 4.)
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. To
tender Shares validly pursuant to the Offer the tendering stockholder must
deliver a properly completed and duly executed Letter of Transmittal or
photocopy thereof and any other documents required by the Letter of Transmittal
prior to the Expiration Date to Capitol at its address set forth on the front
page of this Letter of Transmittal (by mail, by hand or by facsimile). In the
event a stockholder holds Shares in certificate form, such stockholder should
deliver to Capitol the Letter of Transmittal along with the certificate(s) for
such Shares.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND
RISK OF THE TENDERING STOCKHOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY CAPITOL. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative or contingent tenders will be accepted. By executing this
Letter of Transmittal (or facsimile thereof), the tendering stockholder waives
any right to receive any notice of the acceptance for payment of the Shares.
2. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule and attached to this Letter of Transmittal.
3. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-
ENTRY TRANSFER). If fewer than all the Shares represented by any certificate
delivered to Capitol are to be tendered, fill in the number of Shares that are
to be tendered in the box entitled "Number of Shares Tendered." In such case, a
new certificate for the Shares not purchased by the Company in the Offer will
be sent to the person(s) signing this Letter of Transmittal, as promptly as
practicable following the expiration or termination of the Offer. All Shares
represented by certificates delivered to Capitol will be deemed to have been
tendered unless otherwise indicated.
4. SIGNATURES ON LETTER OF TRANSMITTAL. If this Letter of Transmittal
is signed by the registered holder(s) of the Shares tendered hereby, the
signatures(s) must correspond with the name(s) as written on the face of the
certificates without alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof) as there are
different registrations of certificates.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory
to the Company of the authority of such person so to act must be submitted.
5. STOCK TRANSFER TAXES. Except as provided in this Instruction, the
Company will pay or cause to be paid any stock transfer taxes with respect to
the sale and transfer of any Shares to it or its order pursuant to the Offer.
If, however, payment of the aggregate Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder(s), or if tendered Shares are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder(s), such other person or otherwise) payable on account
of the transfer to such person will be deducted from the Purchase Price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted. See Section 5 of the Offer to Purchase. Except as provided in this
Instruction 5, it will not be necessary to affix transfer tax stamps to the
certificates representing Shares tendered hereby.
6. ODD LOTS. As described in Section 1 of the Offer to Purchase, if
fewer than all Shares validly tendered and not withdrawn prior to the
Expiration Date are to be purchased, the Shares purchased first will consist of
all Shares validly tendered and not withdrawn by any stockholder who owned of
record or beneficially, as of the close of business on November 24, 1997, and
continues to own of record or beneficially at the Expiration Date, an aggregate
of ninety-nine or fewer Shares, and who validly tendered all such Shares
(partial tenders of Shares will not qualify for this preference) and completed
the box captioned "Odd Lots" in this Letter of Transmittal.
7. SUBSTITUTE FORM W-9. To prevent backup federal income tax
withholding equal to 31% of the gross payments payable pursuant to the Offer,
each stockholder who does not otherwise establish an exemption from backup
withholding must notify Capitol of such stockholder's correct taxpayer
identification number (or certify that such taxpayer is awaiting a taxpayer
identification number) and provide certain other information by completing,
under penalties of perjury, the Substitute Form W-9 included in the Letter of
Transmittal.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or
requests for assistance may be directed to Capitol at its telephone number and
address listed below. Requests for additional copies of the Offer to Purchase,
this Letter of Transmittal or other tender offer materials may likewise be
directed to Capitol, and such copies will be furnished promptly at the
Company's expense.
9. IRREGULARITIES. All questions as to the Purchase Price, the form
of documents and the validity, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares will be determined by the
Company, in its sole discretion, which determination shall be final and binding
on all parties. The Company reserves the absolute right to reject any or all
tenders of Shares that it determines are not in proper form or the acceptance
for payment of which or payment for which may, in the opinion of the Company's
counsel, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Offer and any defect or irregularity in the tender
of any particular Shares or by any particular stockholder, and the Company's
interpretation of the terms of the Offer (including these Instructions) will be
final and binding on all parties. No tender of Shares will be deemed to be
validly made until all defects or irregularities have been cured or waived.
Neither the Company, Capitol, nor any other person is or will be under any duty
to give notice of any defects or irregularities in tenders, and none of them
will incur any liability for failure to give any such notice.
10. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in Section 1
of the Offer to Purchase, stockholders tendering Shares in certificate form may
designate the order of priority in which their Shares are to be purchased in
the event of proration. The order of purchase may have an effect on the United
States federal income tax consequences of any gain or loss on the Shares
purchased. See Sections 1 and 14 of the Offer to Purchase.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) TOGETHER
WITH SHARE CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY TRANSFER TOGETHER WITH
THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY
CAPITOL PRIOR TO THE EXPIRATION DATE. STOCKHOLDERS ARE ENCOURAGED TO RETURN A
COMPLETED SUBSTITUTE FORM W-9 WITH THEIR LETTER OF TRANSMITTAL.
<PAGE>
November 26, 1997
Dear Fellow Stockholder,
On August 15, 1997, the Company completed the sale of its Space and
Telecommunications Systems business and Mobile Information and Communications
Services business to Orbital Sciences Corporation. At that time, we informed
you that the Company may make a stockholder distribution of a portion of the
proceeds of such sale. We also have been exploring alternatives to maximize
stockholder value, and to provide stockholders with the opportunity to obtain
liquidity with respect to their shares in a tax-efficient manner. In
implementing this strategy, your Board of Directors has approved a self tender
to repurchase approximately $2.0 million of the Company's common stock. This
offer is explained in detail in the enclosed Offer to Purchase and Letter of
Transmittal. Please note that the Offer is scheduled to expire at midnight on
Wednesday, December 31, 1997.
If you wish to tender your shares, instructions on how to tender shares
are provided in the enclosed materials. I encourage you to read these
materials carefully before making any decision with respect to the Offer.
Neither the Company nor its Board of Directors makes any recommendation to any
stockholder whether to tender any or all shares.
We have retained Capitol Securities Management, Incorporated as our
Information Agent to help you respond to this tender offer. Please contact the
Information Agent at its toll free number, (800) 878-2010, if you have any
questions. Suzanne McKeown will be pleased to answer your questions and can
help you complete the correct documents.
Sincerely,
Dr. C.E. Velez
Chairman and CEO
<PAGE>
FINANCING AND SECURITY AGREEMENT
THIS FINANCING AND SECURITY AGREEMENT (this "Agreement") is made this 6th
day of November, 1997, by and between CTA INCORPORATED, a Colorado
corporation (the "Borrower") and FIRST UNION COMMERCIAL CORPORATION, a
North Carolina corporation, its successors and assigns (the "Lender").
RECITALS
A. The Borrower has applied to the Lender for credit facilities
consisting of a revolving credit facility in the maximum principal amount
of Fifteen Million Dollars ($15,000,000) to be used by the Borrower for
the Permitted Uses, with a sublimit for letters of credit in the maximum
principal amount of Four Million Dollars ($4,000,000) and a term facility
in the maximum principal amount of Five Million Dollars ($5,000,000) to
be used by the Borrower for the Permitted Uses described in this
Agreement.
B. The Lender is willing to make those credit facilities available to
the Borrower upon the terms and subject to the conditions set forth in
this Agreement.
ARTICLE
DEFINITIONS
SECTION . CERTAIN DEFINED TERMS. As used in this Agreement, the terms
defined in the Preamble and Recitals hereto shall have the respective
meanings specified therein, and the following terms shall have the
following meanings:
"Account" individually and "Accounts" collectively mean all presently
existing or hereafter acquired, arising or created:
() accounts, accounts receivable, contract rights, notes, drafts,
instruments acceptances, chattel paper, leases and writings evidencing a
monetary obligation, which arise from any right to payment for goods sold
or leased or for services rendered;
() rights to receive the payment of money or other consideration under
present or future contracts for goods sold or leased or for services
rendered (including without limitation, all rights to receive payments
under presently existing or hereafter acquired or created Letters of
Credit in connection with such a sale or lease of goods or services) and
all such rights set forth in or arising out of any present or future
chattel paper, draft, lease, acceptance, writing, instrument, document or
general intangible;
() all rights under or arising out of present or future contracts,
agreements or general interest in merchandise which gave rise to any or
all of the foregoing;
<PAGE>
() all claims or causes of action which arise in connection with a sale
or lease of goods or services;
() all books and records in whatever media (paper, electronic, or
otherwise) recorded or stored, with respect to any of the foregoing;
() all equipment and general intangibles necessary or beneficial to
retain access and/or process the information contained in those books and
records;
() and all proceeds (cash and non-cash) of the foregoing.
"Account Debtor" means any Person who is obligated on a Receivable and
"Account Debtors" mean all Persons who are obligated on the Receivables.
"Acquisition Cap" has the meaning set forth in Section 6.2.1.
"Affiliate" means, with respect to the Borrower, any Person, directly or
indirectly controlling, directly or indirectly controlled by, or under
direct or indirect common control with the Borrower or any Subsidiary, as
the case may be.
"Agreement" means this Financing and Security Agreement and all
amendments, modifications and supplements hereto which may from time to
time become effective in accordance with the provisions of Section 8.1.
"Assets" means at any date all assets that, in accordance with GAAP
consistently applied, should be classified as assets on a consolidated
balance sheet of the Borrower and its Subsidiaries.
"Assignment of Government Contracts" means those certain assignments of
government contracts as collateral now or hereafter executed and
delivered by the Borrower for the benefit of the Lender, as the same may
from time to time be amended, restated, supplemented or otherwise
modified.
"Bankruptcy Code" means the United States Bankruptcy Code, as amended
from time to time.
"Borrowing Base" has the meaning described in Section 2.1.3 (Borrowing
Base).
"Borrowing Base Deficiency" has the meaning described in Section 2.1.3
(Borrowing Base).
"Borrowing Base Report" has the meaning described in Section 2.1.4
(Borrowing Base Report).
<PAGE>
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in the State are authorized or required to
close.
"Capital Expenditure" means an expenditure for Fixed or Capital Assets.
The term also includes, whether or not required by GAAP, the entering
into of a Capital Lease.
"Capital Lease" means any lease of real or personal property, for which
the related Lease Obligations have been or should be, in accordance with
GAAP consistently applied, capitalized on the balance sheet.
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured
by the United States Government or any agency thereof, (b) certificates
of deposit with maturities of one (1) year or less from the date of
acquisition of, or money market accounts maintained with, the Lender or
any other domestic commercial bank having capital and surplus in excess
of One Hundred Million Dollars ($100,000,000.00) or such other domestic
financial institutions or domestic brokerage houses to the extent
disclosed to, and approved by, the Lender and (c) commercial paper of a
domestic issuer rated at least either A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Service, Inc. with maturities of
six (6) months or less from the date of acquisition.
"Chattel Paper" means a writing or writings which evidence both a
monetary obligation and a security interest in or lease of specific
goods; any returned, rejected or repossessed goods covered by any such
writing or writings and all proceeds (in any form including, without
limitation, accounts, contract rights, documents, chattel paper,
instruments and general intangibles) of such returned, rejected or
repossessed goods; and all proceeds (cash and non-cash) of the foregoing.
"Closing Date" means the Business Day, in any event not later than
November 6, 1997, on which the Lender shall be satisfied that the
conditions precedent set forth in Section 5.1 (Conditions) have been
fulfilled.
"Collateral" means all property of the Borrower subject from time to time
to the Liens of this Agreement, the Security Documents and the other
Financing Documents, together with any and all cash and non-cash proceeds
and products thereof.
"Collateral Account" has the meaning described in Section 2.1.8
(Collateral Account).
"Collateral Disclosure List" has the meaning described in Section 3.3
(Collateral Disclosure List).
<PAGE>
"Collection" means each check, draft, cash, money, instrument, item, and
other remittance in payment or on account of payment of the Accounts or
otherwise with respect to any Collateral, including, without limitation,
cash proceeds of any returned, rejected or repossessed goods, the sale or
lease of which gave rise to an Account, and other proceeds of Collateral;
and "Collections" means the collective reference to all of the foregoing.
"Commitment" means the Revolving Credit Commitment.
"Committed Amount" means the Revolving Loan Committed Amount or the Term
Loan Committed Amount, as the case may be, and "Committed Amounts" means
collectively the Revolving Loan Committed Amount and the Term Loan
Committed Amount.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 414(b) or (c) of the Internal Revenue Code.
"Credit Facility" means the Revolving Credit Facility, the Letter of
Credit Facility or the Term Loan Facility, as the case may be, and
"Credit Facilities" means collectively the Revolving Credit Facility, the
Letter of Credit Facility and the Term Loan Facility and any and all
other credit facilities now or hereafter extended under or secured by
this Agreement.
"Default" means an event which, with the giving of notice or lapse of
time, or both, could or would constitute an Event of Default under the
provisions of this Agreement.
"Documents" means all documents of title, whether now existing or
hereafter acquired or created, and all proceeds (cash and non-cash of the
foregoing).
"EBIT" means as to the Borrower and its Subsidiaries for any period of
determination thereof, earnings before interest and Taxes, determined in
accordance with GAAP consistently applied for such period.
Notwithstanding the preceding, for the fiscal quarter ending September
30, 1997, the Borrower's EBIT shall be calculated using an annualized
EBIT based on the EBIT for the three (3) fiscal quarters ending September
30,1997. For the fiscal quarter ending December 31, 1997 and thereafter,
EBIT shall exclude up to Three Million Two Hundred Thousand Dollars
($3,200,000) of Employee Stock Ownership Plan expense.
"EBITDA" means as to the Borrower and its Subsidiaries for any period of
determination thereof, the sum of (a)earnings before interest and Taxes,
determined in accordance with GAAP consistently applied over the last
twelve (12) month period, plus (b) depreciation and amortization of
assets for such period. Notwithstanding the preceding, for the three (3)
fiscal quarters ending September 30, 1997, the Borrower's EBITDA shall be
calculated using an annualized EBITDA based on the EBITDA for the fiscal
quarter ending September 30,1997. For the fiscal quarter ending December
31, 1997 and thereafter, EBITDA shall exclude up to Three Million Two
Hundred Thousand Dollars ($3,200,000) of Employee Stock Ownership Plan
expense.
<PAGE>
<PAGE>
"Eligibility Standards" mean, at any time of determination thereof, each
Account which conforms and continues to conform to the following criteria
to the satisfaction of the Lender: (a) the Account arose in the ordinary
course of the Borrower's business from a bona fide outright sale or lease
of goods by the Borrower, or from services performed by the Borrower, and
(i) such goods have been delivered to the appropriate Account Debtors or
their respective designees, the Borrower has in its possession shipping
and delivery receipts evidencing such shipment and delivery, no return,
rejection or repossession has occurred, and such goods have been finally
accepted by the Account Debtor, or (ii) such services have been
satisfactorily completed and accepted by the appropriate Account Debtor;
(b) the Account is based upon an enforceable order or contract, written
or oral, for goods delivered or for services performed, and the same were
shipped, held, or performed in accordance with such order or contract;
(c) the title of the Borrower to the Account and, except as to the
Account Debtor and any creditor which finances the Account Debtor's
purchase of such goods, to any goods is absolute and is not subject to
any prior assignment, claim, Lien, or security interest, except Permitted
Liens and Liens created by the Account Debtors in connection with their
interests in the goods, and the Borrower otherwise has the full and
unqualified right and power to assign and grant a security interest in it
to the Lender as security and collateral for the payment of the
Obligations; (d) the amount shown on the books of the Borrower and on any
invoice, certificate, schedule or statement delivered to the Lender is
owing to the Borrower and no partial payment has been received unless
reflected with that delivery; (e) the Account is not subject to any claim
of reduction, counterclaim, setoff, recoupment, or other defense in law
or equity, or any claim for credits, allowances, or adjustments by the
Account Debtor because of returned, inferior, or damaged goods or
unsatisfactory services, or for any other reason, other than those
adjustments which may arise as a result of regular audits performed by
any Governmental Authority; (f) the Account Debtor has not returned or
refused to retain, or otherwise notified the Borrower of any dispute
concerning, or claimed nonconformity of, any of the goods or services
from the sale of which the Account arose; (g) the Account is not owing
by any Account Debtor for which the Lender has deemed twenty five percent
(25%) or more of such Account Debtor's other Accounts (or any portion
thereof) due to the Borrower fail to conform to the Eligibility
Standards, provided, however, that with respect to Eligible Billed
Government Receivables the Account is not owing by any Account Debtor for
which the Lender has deemed fifty percent (50%) or more of such Account
Debtor's other Accounts (or portion thereof) due to the Borrower fail to
conform to the Eligibility Standards; (h) the Account does not arise out
of a contract with, or order from, an Account Debtor that, by its terms,
forbids or makes void or unenforceable the assignment by the Borrower to
the Lender of the Account arising with respect thereto; (i) the Account
Debtor is not a foreign government or agency; (j) the Borrower is not
indebted in any manner to the Account Debtor, with the exception of
customary credits, adjustments and/or discounts given to an Account
Debtor by the Borrower in the ordinary course of its business, (k) no
part of the Account represents a progress billing or a retainage, (l) the
Accounts are not Ineligible Accounts, and (m) the Lender in the exercise
of its sole but reasonable discretion has not deemed the Account
ineligible because of uncertainty as to the creditworthiness of the
Account Debtor 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. In the event of any dispute, under the foregoing
criteria, as to whether an Account is, or has ceased to satisfy the
Eligibility Standards, the decision of the Lender in the exercise of its
sole but reasonable discretion shall control.
"Eligible Billed Borrowing Base Receivable" and "Eligible Billed
Borrowing Base Receivables" mean, at any time of determination thereof,
each Account which satisfies the Eligibility Standards and where the
Account Debtor is not incorporated in or primarily conducting business in
any jurisdiction outside of the United States of America and the Account
does not constitute an Eligible Billed Government Receivable.
"Eligible Billed Government Receivables" means all Eligible Billed
Borrowing Base Receivables representing amounts due and owing from any
Governmental Authority, provided, however, that the Lender reserves the
right in its sole but reasonable discretion to adjust the advance rate on
Eligible Billed Borrowing Base Receivables from any state or any
political subdivision of any Governmental Authority, if at any time, the
credit rating of any such state or political subdivision is adjusted
below "investment grade".
"Eligible Billed Foreign Receivable" and "Eligible Billed Foreign
Receivables" means all Accounts which satisfy the Eligibility Standards
and which arise from any OECD country.
"Eligible Unbilled Borrowing Base Receivables" means all Accounts arising
out of work actually performed by the Borrower which (i) are eligible to
be billed in accordance with the applicable contract within ninety (90)
days of the "as of" date of the applicable Borrowing Base Report (with no
additional performance required by any Person, and no condition to
payment by the Account Debtor, other than receipt of an appropriate
invoice).
"Enforcement Costs" means all actual and reasonable expenses, charges,
costs and fees whatsoever (including, without limitation, attorney's fees
and expenses) of any nature whatsoever paid or incurred by or on behalf
of the Lender in connection with (a) any or all of the Obligations, this
Agreement and/or any of the other Financing Documents, (b) the creation,
perfection, collection, maintenance, preservation, defense, protection,
realization upon, disposition, sale or enforcement of all or any part of
the Collateral, this Agreement or any of the other Financing Documents,
including, without limitation, those costs and expenses more specifically
enumerated in Section 3.9 (Costs) and/or Section 8.8 (Enforcement Costs),
and (c) the monitoring, administration, processing and/or servicing of
any or all of the Obligations, the Financing Documents, and/or the
Collateral.
<PAGE>
"Equipment" means all equipment, machinery, computers, chattels, tools,
parts, machine tools, furniture, furnishings, fixtures and supplies of
every nature, presently existing or hereafter acquired or created and
wherever located, whether or not the same shall be deemed to be affixed
to real property, together with all accessions, additions, fittings,
accessories, special tools, and improvements thereto and substitutions
therefor and all parts and equipment which may be attached to or which
are necessary or beneficial for the operation, use and/or disposition of
such personal property, all licenses, warranties, franchises and general
intangibles related thereto or necessary or beneficial for the operation,
use and/or disposition of the same, together with all Accounts, Chattel
Paper, Instruments and other consideration received by the Borrower on
account of the sale, lease or other disposition of all or any part of the
foregoing, and together with all rights under or arising out of present
or future Documents and contracts relating to the foregoing and all
proceeds (cash and non-cash) of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" has the meaning described in Article 7.
"Excess Cash Flow" means for any annual period of determination thereof,
an amount equal to fifty percent (50%) of the Borrower's EBITDA, less all
of the Borrower's Capital Expenditures which are not financed, less all
cash taxes, less all principal and interest payments on Indebtedness for
Borrowed Money, less any distributions of the Borrower, all as shown on
the annual financial statements for such annual period, furnished to the
Lender in accordance with Section 6.1.1; or in the event that the
Borrower fails to deliver such financial statements to the Lender as and
when required, the Lender shall estimate, in its sole but reasonable
discretion, the amount of Excess Cash Flow for such period.
"Existing Subordinated Debt" means the subordinated debt having a current
unpaid principal balance as of the date hereof of not more than $450,000,
as more fully described in that certain Financing and Security Agreement
dated December 9, 1993 by and among the Borrower, the Lender and certain
then existing subsidiaries of the Borrower described therein
"Facilities" means the collective reference to the loan and other credit
facilities now or hereafter provided to the Borrower by the Lender
whether under this Agreement or otherwise.
"Fees" means the collective reference to each fee payable to the Lender
under the terms of this Agreement or under the terms of any of the other
Financing Documents, including, without limitation, the following:
Revolving Credit Unused Line Fees, Letter of Credit Fees, Origination
Fee, the Term Loan Origination Fee, and Field Examination Fees.
"Field Examination Fee" and "Field Examination Fees" have the meanings
described in Section 2.4.5 (Field Examination Fees).
<PAGE>
"Financing Documents" means at any time collectively this Agreement, the
Notes, the Security Documents, the Letter of Credit Documents, and any
other instrument, agreement or document previously, simultaneously or
hereafter executed and delivered by the Borrower, any Guarantor and/or
any other Person, singly or jointly with another Person or Persons,
evidencing, securing, guarantying or in connection with any of the
Obligations and/or in connection with this Agreement, any Note, any of
the Security Documents, any of the Facilities, and/or any of the
Obligations.
"First Union" means First Union National Bank, a national banking
association, its successors and assigns.
"Fixed Charges" means for any period of determination thereof, the
scheduled or required payments (including, without limitation, principal
and interest, but excluding principal on and all contingent economic
interest payments to be made on the Existing Subordinated Debt) on all
Indebtedness for Borrowed Money of the Borrower and its Subsidiaries,
plus rent of the Borrower and its Subsidiaries.
"Fixed Charge Coverage Ratio" means for the period of any determination
thereof the ratio of (a) EBITDA, minus cash Taxes, plus rent, minus
distributions (including any dividends), to (b) Fixed Charges.
"Fixed or Capital Assets" of a Person at any date means all assets which
would, in accordance with GAAP consistently applied, be classified on the
balance sheet of such Person as property, plant or equipment at such
date.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"General Intangibles" means all general intangibles of every nature,
whether presently existing or hereafter acquired or created, including
without limitation all books and records, claims (including without
limitation all claims for income tax and other refunds), choses in
action, contract rights, judgments, patents, patent licenses, trademarks,
trademark licenses, licensing agreements, rights in intellectual
property, goodwill (including goodwill of the Borrower's business
symbolized by and associated with any and all trademarks, trademark
licenses, copyrights and/or service marks), royalty payments, licenses,
contractual rights, rights as lessee under any lease of real or personal
property, literary rights, copyrights, service names, service marks,
logos, trade secrets, amounts received as an award in or settlement of a
suit in damages, deposit accounts, rights in applications for any of the
foregoing, books and records in whatever media (paper, electronic or
otherwise) recorded or stored, with respect to any or all of the
foregoing and all equipment and general intangibles necessary or
beneficial desirable to retain, access and/or process the information
contained in those books and records, and all proceeds (cash and non-
cash) of the foregoing.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government and any department, agency or instrumentality
thereof.
<PAGE>
"Government Contract" and "Government Contracts" means written contracts
of the Borrower with the United States, or any agency, department or
instrumentality thereof and on which the Borrower is the "prime"
contractor.
"Hazardous Materials" means (a) any "hazardous waste" as defined by the
Resource Conservation and Recovery Act of 1976, as amended from time to
time, and regulations promulgated thereunder; (b) any "hazardous
substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder; (c) any substance the presence of
which on any property now or hereafter owned or acquired by the Borrower
is prohibited by any Law similar to those set forth in this definition;
and (d) any other substance which by Law requires special handling in its
collection, storage, treatment or disposal.
"Hazardous Materials Contamination" means the contamination (whether
presently existing or occurring after the date of this Agreement) by
Hazardous Materials of any property owned, operated or controlled by the
Borrower or for which the Borrower has responsibility, including, without
limitation, improvements, facilities, soil, ground water, air or other
elements on, or of, any property now or hereafter owned or acquired by
the Borrower, and any other contamination by Hazardous Materials for
which the Borrower is, or is claimed to be, responsible.
"Indebtedness" of a Person means at any date the total liabilities of
such Person at such time determined in accordance with GAAP consistently
applied.
"Indebtedness for Borrowed Money" of a Person means at any time means the
sum at such time of (a) indebtedness of such Person for borrowed money or
for the deferred purchase price of property or services, (b) any
obligations of such Person in respect of letters of credit, banker's or
other acceptances or similar obligations issued or created for the
account of such Person, (c) Lease Obligations of such Person with respect
to Capital Leases, (d) all liabilities secured by any Lien on any
property owned by such Person, to the extent attached to such Person's
interest in such property, even though such Person has not assumed or
become personally liable for the payment thereof, (e) obligations of
third parties which are being guarantied or indemnified against by such
Person or which are secured by the property of such Person; (f) any
obligation of such Person under a employee stock ownership plan or other
similar employee benefit plan; and (f) any obligation of such Person or a
Commonly Controlled Entity to a Multiemployer Plan; but excluding trade
and other accounts payable in the ordinary course of business in
accordance with customary trade terms and which are not overdue (as
determined in accordance with customary trade practices) or which are
being disputed in good faith by such Person and for which adequate
reserves are being provided on the books of such Person in accordance
with GAAP.
<PAGE>
"Ineligible Accounts" means all Accounts which as determined in the
Lender's sole but reasonable discretion are (a) evidenced by a promissory
note or similar instrument; (b) owing from any Person that is the subject
of any (i) suit, lien, levy or judgment which could reasonably be
expected to affect the collectibility of said Accounts, or (ii)
bankruptcy, insolvency or similar process or proceeding; (c) unbilled as
a result of cost variances, retainage provisions, "milestone"
requirements or any other reason, except for timing differences; or (d)
with respect to otherwise Eligible Unbilled Borrowing Base Receivables,
any such Account which fails to satisfy the Eligibility Standards or is
otherwise deemed ineligible by the Lender, in its sole but reasonable
discretion.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the Income Tax Regulations issued and
proposed to be issued thereunder.
"Instrument" means a negotiable instrument (as defined under Article 3 of
the Uniform Commercial Code), a "certificated security" (as defined under
Article 8 of the Uniform Commercial Code), or any other writing which
evidences a right to payment of money and is not itself a security
agreement or lease and is of a type which is in the ordinary course of
business transferred by delivery with any necessary indorsement.
"Inventory" means all inventory of the Borrower and all right, title and
interest of the Borrower in and to all of its now owned and hereafter
acquired goods, merchandise and other personal property furnished under
any contract of service or intended for sale or lease, including, without
limitation, all raw materials, work-in-progress, finished goods and
materials and supplies of any kind, nature or description which are used
or consumed in the Borrower's business or are or might be used in
connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise and other licenses, warranties,
franchises, general intangibles, personal property and all documents of
title or documents relating to the same and all proceeds (cash and non-
cash) of the foregoing.
"Item of Payment" means each check, draft, cash, money, instrument, item,
and other remittance in payment or on account of payment of the
Receivables or otherwise with respect to any Collateral, including,
without limitation, cash proceeds of any returned, rejected or
repossessed goods, the sale or lease of which gave rise to a Receivable,
and other proceeds of Collateral; and "Items of Payment" means the
collective reference to all of the foregoing.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any Governmental Authority or political
subdivision or agency thereof, or any court or similar entity established
by any thereof.
"Lease Obligations" of a Person means at any date the rental commitments
of such Person for such period under leases for real and/or personal
property (net of rent from subleases thereof, but including taxes,
insurance, maintenance and similar expenses which the lessee is obligated
to pay under the terms of said leases, except to the extent that such
taxes, insurance, maintenance and similar expenses are payable by
sublessees), including rental commitments under Capital Leases.
<PAGE>
"Letter of Credit" and "Letters of Credit" shall have the meanings
described in Section 2.3.1 hereof.
"Letter of Credit Agreement" means the collective reference to each
letter of credit application and agreement substantially in the form of
First Union's then standard form of application for letter of credit or
such other form as may be approved by the Lender and First Union,
executed and delivered by the Borrower in connection with the issuance of
a Letter of Credit, as the same may from time to time be amended,
restated, supplemented or modified and "Letter of Credit Agreements"
means all of the foregoing in effect at any time and from time to time.
"Letter of Credit Documents" means any and all drafts under or purporting
to be under a Letter of Credit, any Letter of Credit Agreement, and any
other instrument, document or agreement executed and/or delivered by the
Borrower or any other Person under, pursuant to or in connection with a
Letter of Credit or any Letter of Credit Agreement.
"Letter of Credit Facility" means the sublimit under the Revolving Credit
Facility for the issuance of Letters of Credit established by the Lender
pursuant to Section 2.3 (Letter of Credit Facility) of this Agreement.
"Letter of Credit Fee" and "Letter of Credit Fees" have the meanings
described in Section 2.3.2 hereof.
"Letter of Credit Obligations" means all Obligations of the Borrower with
respect to the Letters of Credit and the Letter of Credit Agreements.
"Liabilities" means at any date all liabilities that in accordance with
GAAP consistently applied should be classified as liabilities on a
consolidated balance sheet of the Borrower and its Subsidiaries.
"Lien" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien, claim
or charge of any kind, whether perfected or unperfected, avoidable or
unavoidable, including, without limitation, any conditional sale or other
title retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction, excluding the precautionary filing
of any financing statement by any lessor in a true lease transaction, by
any bailor in a true bailment transaction or by any consignor in a true
consignment transaction under the Uniform Commercial Code of any
jurisdiction or the agreement to give any financing statement by any
lessee in a true lease transaction, by any bailee in a true bailment
transaction or by any consignee in a true consignment transaction.
"Loan" means each of the Revolving Loan or the Term Loan, as the case may
be, and "Loans" means the collective reference to the Revolving Loan and
the Term Loan.
<PAGE>
"Loan Notice" has the meaning described in Section 2.1.2 (Procedure for
Making Advances).
"Lockbox" has the meaning described in Section 2.1.7 (The Collateral
Account).
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Note" means the Revolving Credit Note or the Term Note, as the case may
be, and "Notes" means collectively the Revolving Credit Note and the Term
Note, and any other promissory note which may from time to time evidence
the Obligations.
"Obligations" means all present and future indebtedness, obligations, and
liabilities, whether now existing or contemplated or hereafter arising,
of the Borrower to the Lender under, arising pursuant to, in connection
with and/or on account of the provisions of this Agreement, each Note,
each Security Document, and any of the other Financing Documents, the
Loans, and any of the Credit Facilities including, without limitation,
the principal of, and interest on, each Note, late charges, the Fees,
Enforcement Costs, and other prepayment penalties (if any), letter of
credit fees or fees charged with respect to any guaranty of any letter of
credit, and also means all other present and future indebtedness,
liabilities and obligations, whether now existing or contemplated or
hereafter arising, of the Borrower to the Lender of any nature whatsoever
regardless of whether such debts, obligations and liabilities be direct,
indirect, primary, secondary, joint, several, joint and several, fixed or
contingent; and any and all renewals, extensions and rearrangements of
any such debts, obligations and liabilities.
"Origination Fee" has the meaning described in Section 2.4.3 (Origination
Fee).
"Outstanding Letter of Credit Obligations" has the meaning described in
Section 2.3.3 hereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Acquisitions" and "Permitted Acquisitions" have the meanings
given in Section 6.2.1 hereof.
<PAGE>
"Permitted Liens" means: (a) Liens for Taxes which are not delinquent or
which the Lender has determined in the exercise of its sole but
reasonable discretion (i) are being diligently contested in good faith
and by appropriate proceedings, (ii) the Borrower has the financial
ability to pay, with all penalties and interest, at all times without
materially and adversely affecting the Borrower, and (iii) are not, and
will not be with appropriate filing, the giving of notice and/or the
passage of time, entitled to priority over any Lien of the Lender; (b)
deposits or pledges to secure obligations under workers' compensation,
social security or similar laws, or under unemployment insurance in the
ordinary course of business; (c) Liens in favor of the Lender; (d)
judgment Liens to the extent the entry of such judgment does not
constitute a Default or an Event of Default under the terms of this
Agreement or result in the sale of, or levy of execution on, any of the
Collateral; (e) mechanics and materialmen liens which are not, and will
not be with appropriate filing, the giving of notice and/or the passage
of time, entitled to priority over any Liens of the Lender and further
provided that if requested by the Lender the Borrower shall cause said
mechanics or materialmen liens to be extinguished; and (f) such other
Liens, if any, as are set forth on EXHIBIT "C" attached hereto and made a
part hereof.
"Permitted Uses" means (a) with respect to the Term Loan payments of
contingent economic interest to prior subordinated debt holders, and (b)
with respect to the Revolving Loan, the payment of expenses incurred in
the ordinary course of the Borrower's business.
"Person" means and includes an individual, a limited liability company, a
corporation, a partnership, a joint venture, a trust, an unincorporated
association, a government or political subdivision or agency thereof or
any other organization or entity.
"Plan" means any pension plan which is covered by Title IV of ERISA and
in respect of which the Borrower or a Commonly Controlled Entity is an
"employer" as defined in Section 3 of ERISA.
"Post-Default Rate" means the Prime Rate in effect from time to time,
plus two percent (2.0%) per annum.
"Prime Rate" means the rate of interest from time to time established
and publicly announced by the Lender as its prime rate, in Lender's sole
discretion, which rate of interest may be greater or less than other
interest rates charged by the Lender to other borrowers and is not solely
based or dependent upon the interest rate which the Lender may charge any
particular borrower or class of borrowers.
"Prepayment" means a Revolving Loan Mandatory Prepayment or a Term Loan
Mandatory Prepayment, as the case may be, and "Prepayments" mean
collectively Revolving Loan Mandatory Prepayments and Term Loan Mandatory
Prepayments.
"Receivable" means one of the Borrower's now owned and hereafter owned,
acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments and "Receivables" means all of the Borrower's now or
hereafter owned, acquired or created Accounts, Chattel Paper, General
Intangibles and Instruments, and all cash and non-cash proceeds and
products thereof.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA or the regulations thereunder.
<PAGE>
"Responsible Officer" means the chief executive officer of the Borrower
or the president of the Borrower or his designee, or with respect to
financial matters, the chief financial officer of the Borrower.
"Revolving Credit Commitment" means the agreement of the Lender relating
to the making of the Revolving Loan and advances thereunder subject to
and in accordance with the provisions of this Agreement.
"Revolving Credit Commitment Period" means the period of time from the
Closing Date to the Business Day preceding the Revolving Credit
Termination Date.
"Revolving Credit Committed Amount" has the meaning described in Section
2.1.1 (Revolving Credit Facility).
"Revolving Credit Expiration Date" means September 30, 2000.
"Revolving Credit Facility" means the facility established by the Lender
pursuant to Section 2.1 (Revolving Credit Facility) of this Agreement.
"Revolving Credit Note" has the meaning described in Section 2.1.5
(Revolving Credit Note).
"Revolving Credit Termination Date" means the earlier of (a) the
Revolving Credit Expiration Date, or (b) the date on which the Revolving
Credit Commitment is terminated pursuant to Section 7.2.
"Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line
Fees" have the meanings described in Section 2.1.9 (Revolving Credit
Unused Line Fee).
"Revolving Loan" has the meaning described in Section 2.1.1 (Revolving
Credit Facility).
"Revolving Loan Account" has the meaning described in Section 2.1.8
(Revolving Loan Account).
"Revolving Loan Mandatory Prepayment" and "Revolving Loan Mandatory
Prepayments" have the meanings described in Section 2.1.6 (Mandatory
Prepayments).
<PAGE>
"Security Documents" means collectively any assignment, pledge agreement,
security agreement, mortgage, deed of trust, deed to secure debt,
financing statement and any similar instrument, document or agreement
under or pursuant to which a Lien is now or hereafter granted to, or for
the benefit of, the Lender on any real or personal property to secure all
or any portion of the Obligations, all as the same may from time to time
be amended, restated, supplemented or otherwise modified, including,
without limitation, this Agreement and the Assignments of Government
Contracts.
"Senior Debt" means all Indebtedness for Borrowed Money of the Borrower
which is not subordinate to the repayment of the Obligations.
"State" means the State of Maryland.
"Subordinated Debt" means all Indebtedness for Borrowed Money of the
Borrower, now or hereafter incurred, in an aggregate face principal
amount not to exceed Five Million Dollars ($5,000,000) and the Existing
Subordinated Debt.
"Subordinated Debt Loan Documents" means any and all promissory notes,
agreements, document or instruments now or at any time evidencing,
securing, guarantying or otherwise executed and delivered in connection
with the Subordinated Debt, all of which must be in form and substance
satisfactory in all material respects to the Lender, in its sole, but
reasonable discretion, as the same may from time to time be amended,
restated supplemented or modified as permitted under this Agreement.
"Subordinated Indebtedness" means the Subordinated Debt the repayment of
which is subordinated to the Obligations by a written agreement in form
and substance satisfactory to the Lender, in its sole, but reasonable
discretion.
"Subordinated Lenders" means each and every present or future lender of
Subordinated Debt to the Borrower.
"Subsidiary" means any corporation the majority of the voting shares of
which at the time are owned directly by the Borrower and/or by one or
more Subsidiaries of the Borrower.
"Taxes" means all taxes and assessments whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
(including all penalties or interest thereon), which at any time may be
assessed, levied, confirmed or imposed by any Governmental Authority on
the Borrower or any of its properties or assets or any part thereof or in
respect of any of its franchises, businesses, income or profits.
"Term Loan" has the meaning described in Section 2.2.1.
"Term Loan Commitment" has the meaning described in Section 2.2.1.
"Term Loan Committed Amount" has the meaning described in Section 2.2.1.
<PAGE>
"Term Loan Facility" means the facility established by the Lender
pursuant to Section 2.2 (Term Loan Facility) of this Agreement.
"Term Loan Mandatory Prepayment" and "Term Loan Mandatory Prepayments"
have the meanings described in Section 2.2.3.
"Term Loan Origination Fee" has the meaning described in Section 2.4.4.
"Term Note" has the meaning described in Section 2.2.2.
"Total Funded Debt" means all of the Borrower's Indebtedness for Borrowed
Money.
"Uniform Commercial Code" means, unless otherwise provided in this
Agreement, the Uniform Commercial Code as adopted by and in effect from
time to time in the State.
"Wholly Owned Subsidiary" means any domestic United States corporation
all the shares of stock of all classes of which (other than directors'
qualifying shares) at the time are owned directly or indirectly by the
Borrower and/or by one or more Wholly Owned Subsidiaries of the Borrower.
SECTION . ACCOUNTING TERMS AND OTHER DEFINITIONAL PROVISIONS. Unless
otherwise defined herein, as used in this Agreement and in any
certificate, report or other document made or delivered pursuant hereto,
accounting terms not otherwise defined herein, and accounting terms only
partly defined herein, to the extent not defined, shall have the
respective meanings given to them under GAAP. Unless otherwise defined
herein, all terms used herein which are defined by the Uniform Commercial
Code shall have the same meanings as assigned to them by the Uniform
Commercial Code unless and to the extent varied by this Agreement. The
words "hereof", "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement, and article, section,
subsection, schedule and exhibit references are references to articles,
sections or subsections of, or schedules or exhibits to, as the case may
be, this Agreement unless otherwise specified. As used herein, the
singular number shall include the plural, the plural the singular and the
use of the masculine, feminine or neuter gender shall include all
genders, as the context may require. Reference to any one or more of the
Financing Documents shall mean the same as the foregoing may from time to
time be amended, restated, substituted, extended, renewed, supplemented
or otherwise modified.
<PAGE>
ARTICLE
THE CREDIT FACILITIES
SECTION . THE REVOLVING CREDIT FACILITY
.. REVOLVING CREDIT FACILITY. Subject to and upon the provisions of
this Agreement, the Lender establishes a revolving credit facility in
favor of the Borrower. The aggregate of all advances under the Revolving
Credit Facility are sometimes referred to in this Agreement collectively
as the "Revolving Loan".
The principal amount of Fifteen Million Dollars ($15,000,000) is the
"Revolving Credit Committed Amount".
During the Revolving Credit Commitment Period, the Lender agrees to make
advances under the Revolving Credit Facility requested by the Borrower
from time to time provided that after giving effect to the Borrower's
request, the outstanding principal balance of the Revolving Loan and of
the Letter of Credit Obligations would not exceed the lesser of (a) the
Revolving Credit Committed Amount, or (b) the most current Borrowing
Base.
.. PROCEDURE FOR MAKING ADVANCES UNDER THE REVOLVING LOAN; LENDER
PROTECTION LOANS. The Borrower may borrow under the Revolving Credit
Commitment on any Business Day. Advances under the Revolving Loan shall
be deposited to the Borrower's demand deposit account with First Union or
shall be otherwise applied as directed by a Responsible Officer of the
Borrower, which direction the Lender may require to be in writing. No
later than 10:00 a.m. (Washington, D.C. time) on the date of the
requested borrowing, the Borrower shall give the Lender oral or written
notice (a "Loan Notice") of the amount and (if requested by the Lender)
the purpose of the requested borrowing. If requested by the Lender, any
oral Loan Notice shall be confirmed in writing by the Borrower within
three (3) Business Days after the making of the requested Revolving Loan.
In addition, in lieu of the procedure set forth above, the Borrower
hereby irrevocably authorizes the Lender at any time and from time to
time, without further request from or notice to the Borrower, to make
advances under the Revolving Loan which the Lender, in its sole but
reasonable discretion, deems necessary and/or appropriate to protect the
Lender's interests under this Agreement, including, without limitation,
advances under the Revolving Loan made to cover debit balances in the
Revolving Loan Account, principal of, and/or interest on, the Loan, the
Obligations, and/or Enforcement Costs, prior to, on, or after the
termination of other advances under this Agreement, regardless of whether
the outstanding principal amount of the Revolving Loan which the Lender
may make hereunder exceeds the Revolving Credit Committed Amount. The
Lender agrees that it will honor any overdrafts as directed by the
Borrower and agreed to by the Lender. All such overdrafts will be
secured by the Collateral.
<PAGE>
.. BORROWING BASE. As used in this Agreement, the term "Borrowing
Base" means at any time, an amount equal to the aggregate of (a) ninety
percent (90%) of Eligible Billed Government Receivables, which are
outstanding less than one hundred twenty-one (121) days from the date of
original invoice; plus (b) eighty percent (80%) of Eligible Billed
Borrowing Base Receivables representing amounts due and owing from
domestic Account Debtors (other than the Government), which are
outstanding less than ninety-one (91) days from the date of the original
invoice; plus (c) fifty percent (50%) of Eligible Unbilled Borrowing Base
Receivables; (d) plus the lesser of (i) seventy percent (70%) of Eligible
Billed Foreign Receivables, which are outstanding less than ninety-one
(91) days from the date of the original invoice or (ii) Two Million
Dollars ($2,000,000), MINUS (e) the amount of all outstanding Letters of
Credit.
The Borrowing Base shall be computed based on the Borrowing Base Report
most recently delivered to and accepted by the Lender in its sole but
reasonable discretion. In the event the Borrower fails to furnish a
Borrowing Base Report required by Section 2.1.4 below, or in the event
the Lender believes that a Borrowing Base Report is no longer accurate,
the Lender may, in its sole but reasonable discretion exercised from time
to time and without limiting its other rights and remedies under this
Agreement, suspend the making of or limit advances under the Revolving
Loan. The Borrowing Base shall be subject to reduction by amounts
credited to the Collateral Account since the date of the most recent
Borrowing Base Report and by the amount of any Receivable which was
included in the Borrowing Base but which the Lender determines fails to
meet the criteria applicable from time to time for Eligible Billed
Borrowing Base Receivables or Eligible Unbilled Borrowing Base
Receivables.
If at any time the total of the aggregate principal amount of the
Revolving Loan and Outstanding Letter of Credit Obligations exceed the
Borrowing Base, a borrowing base deficiency ("Borrowing Base Deficiency")
shall exist. Each time a Borrowing Base Deficiency exists, the Borrower
at the sole and absolute discretion of the Lender exercised from time to
time shall pay the Borrowing Base Deficiency ON DEMAND to the Lender from
time to time.
Without implying any limitation on the Lender's discretion with respect
to the Borrowing Base, the Eligibility Standards, incorporated within the
definitions of Eligible Billed Borrowing Base Receivables, Eligible
Billed Foreign Receivables, Eligible Billed Government Receivables and
Eligible Unbilled Borrowing Base Receivables are in part based upon the
business operations of the Borrower existing on or about the Closing Date
and upon information and records furnished to the Lender by the Borrower.
If at any time or from time to time hereafter, the business operations of
the Borrower change or such information and records furnished to the
Lender is incorrect or misleading, the Lender in its sole but reasonable
discretion, may at any time and from time to time during the duration of
this Agreement change such criteria or add new criteria. The Lender may
communicate such changed or additional criteria to the Borrower from time
to time either orally or in writing.
<PAGE>
.. BORROWING BASE REPORT. The Borrower will furnish to the Lender no
less frequently than the twentieth (20th) day of each month, and at such
other times as may be requested by the Lender a report of the Borrowing
Base (each a "Borrowing Base Report"; collectively, the "Borrowing Base
Reports") in the form required from time to time by the Lender,
appropriately completed and duly signed. The Borrowing Base Report shall
contain the amount and payments on the Receivables and the calculations
of the Borrowing Base, all in such detail, and accompanied by such
supporting and other information, as the Lender may from time to time
request. Upon the Lender's request and upon the creation of any
Receivables, or at such intervals as the Lender may require, the Borrower
will provide the Lender at the Borrower's offices during normal business
hours with: (a) confirmatory assignment schedules; (b) copies of Account
Debtor invoices; (c) evidence of shipment or delivery; and (d) such
further schedules, documents and/or information regarding the Receivables
as the Lender may reasonably require. The items to be provided under this
subsection shall be in form satisfactory to the Lender, and certified as
true and correct by a Responsible Officer, and delivered to the Lender
from time to time solely for the Lender's convenience in maintaining
records of the Collateral. The Borrower's failure to deliver any of such
items to the Lender shall not affect, terminate, modify, or otherwise
limit the Lender's security interests in the Collateral.
.. REVOLVING CREDIT NOTE. The obligation of the Borrower to pay the
Revolving Loan with interest shall be evidenced by a promissory note (as
from time to time extended, amended, restated, supplemented or otherwise
modified, the "Revolving Credit Note") substantially in the form of
EXHIBIT "A-1" attached hereto and made a part hereof, with appropriate
insertions. The Revolving Credit Note shall be dated as of the Closing
Date, shall be payable to the order of the Lender at the times provided
in the Revolving Credit Note, and shall be in the principal amount of the
Revolving Credit Committed Amount. The Borrower acknowledges and agrees
that, if the outstanding principal balance of the Revolving Loan from
time to time exceeds the face amount of the Revolving Credit Note, the
excess shall bear interest at the rates provided from time to time for
advances under the Revolving Credit Facility evidenced by the Revolving
Credit Note and shall be payable, with accrued interest, ON DEMAND. The
Revolving Credit Note shall not operate as a novation of any of the
Obligations or nullify, discharge, or release any such Obligations or the
continuing contractual relationship of the parties hereto in accordance
with the provisions of this Agreement.
.. MANDATORY PREPAYMENTS OF REVOLVING LOAN. The Borrower shall make
the mandatory prepayments of principal (each a "Revolving Loan Mandatory
Prepayment" and collectively, the "Revolving Loan Mandatory Prepayments")
of the Revolving Loan without penalty at any time and from time to time
in such amounts requested by the Lender pursuant to Section 2.1.3
(Borrowing Base) of this Agreement in order to cover any Borrowing Base
Deficiency.
<PAGE>
.. THE COLLATERAL ACCOUNT. The Borrower will deposit, or cause to be
deposited, all Items of Payment to a bank account or accounts maintained
at First Union designated by the Lender and from which the Lender and
First Union alone have power of access and withdrawal (the "Collateral
Account"). Each deposit shall be made not later than the next Business
Day after the date of receipt of the Items of Payment. The Items of
Payment shall be deposited in precisely the form received, except for the
endorsements of the Borrower where necessary to permit the collection of
any such Items of Payment, which endorsement the Borrower hereby agrees
to make. In the event the Borrower fails to do so, the Borrower hereby
authorizes the Lender to make the endorsement in the name of the
Borrower. Prior to such a deposit, the Borrower will not commingle any
Items of Payment with any of the Borrower's other funds or property, but
will hold them separate and apart in trust and for the account of the
Lender.
The Borrower shall direct the mailing of all Items of Payment from its
Account Debtors to a post-office box designated by the Lender, or to
such other additional or replacement post-office boxes pursuant to the
request of the Lender from time to time (collectively, the "Lockbox").
The Lender and First Union shall have unrestricted and exclusive access
to the Lockbox.
Upon obtaining Items of Payment, the Lender and First Union are
authorized to inspect all Items of Payment, endorse all Items of Payment
in the name of the Borrower, and deposit such Items of Payment in the
appropriate Collateral Account designated by the Borrower. For the
purpose of computing interest hereunder, all Items of Payment shall be
deemed applied by the Lender on account of the Obligations upon the
earlier of (i) the day of receipt by the Lender or First Union, if paid
in accordance with the past practice of First Union and/or the Lender.
In the event Items of Payment are returned to the Lender or First Union
for any reason whatsoever, the Lender and First Union may, in the
exercise of their discretion from time to time, forward such Items of
Payment a second time. Any returned Items of Payment shall be charged
back to the Collateral Account, the Revolving Loan Account, or other
account, as appropriate.
The Lender will, or will instruct First Union to, apply the whole or any
part of the Items of Payment deposited into the Collateral Account
against the Revolving Loan as necessary to reduce the outstanding balance
of the Revolving Loan Account to zero or as close to zero as possible (or
after a Default, against any of the Obligations) and will credit any
remaining amount of such collected funds to the depository account of the
Borrower with the Lender or First Union upon deposit.
<PAGE>
.. REVOLVING LOAN ACCOUNT. The Lender will establish and maintain a
loan account on its books (the "Revolving Loan Account") to which the
Lender will (a) DEBIT (i) the principal amount of each advance under the
Revolving Credit Facility made by the Lender hereunder as of the date
made, (ii) the amount of any interest accrued on such advance as and when
due, and (iii) any other amounts due and payable by the Borrower to the
Lender from time to time under the provisions of this Agreement in
connection with the Revolving Loan, including, without limitation,
Enforcement Costs, Fees, late charges, and service, collection and audit
fees, as and when due and payable, and (b) CREDIT all payments made by
the Borrower to the Lender or First Union on account of the Revolving
Loan as of the date made including, without limitation, funds credited to
the Revolving Loan Account from the Collateral Account. The Lender and
First Union may debit the Revolving Loan Account for the amount of any
Item of Payment which is returned to the Lender unpaid. All credit
entries to the Revolving Loan Account are conditional and shall be
readjusted as of the date made if final and indefeasible payment is not
received by the Lender in cash or solvent credits. The Borrower hereby
promises to pay to the order of the Lender, on demand, an amount equal to
the excess, if any, of all debit entries over all credit entries recorded
in the Revolving Loan Account under the provisions of this Agreement.
Any and all periodic or other statements or reconciliations, and the
information contained in those statements or reconciliations, of the
Revolving Loan Account shall be presumed conclusively to be correct and
shall constitute an account stated between the Lender, First Union and
the Borrower unless the Lender receives specific written objection
thereto from the Borrower within thirty (30) Business Days after such
statement or reconciliation shall have been sent by the Lender or First
Union.
.. REVOLVING CREDIT UNUSED LINE FEE. The Borrower shall pay to the
Lender a quarterly revolving credit facility fee (collectively, the
"Revolving Credit Unused Line Fees" and individually, a "Revolving Credit
Unused Line Fee") in an amount equal to one quarter of one percent (1/4%)
per annum on the average daily unused and undisbursed portion of the
Revolving Credit Committed Amount in effect from time to time accruing
during each calendar quarter. The accrued and unpaid portion of the
Revolving Credit Unused Line Fee shall be paid by the Borrower to the
Lender on the first day of the next calendar quarter, commencing on the
first such date following the date hereof, and on the Revolving Credit
Termination Date.
SECTION . THE TERM LOAN
.. TERM LOAN COMMITMENT. Subject to and upon the provisions of this
Agreement, the Lender agrees to make a loan (the "Term Loan") to the
Borrower on the Closing Date in the principal amount of Five Million
Dollars ($5,000,000) (herein called the "Term Loan Committed Amount").
The obligation of the Lender to make the Term Loan is herein called its
"Term Loan Commitment".
.. THE TERM NOTE. The obligation of the Borrower to pay the Term Loan
with interest shall be evidenced by a promissory note (as from time to
time extended, amended, restated, supplemented or otherwise modified, the
"Term Note") substantially in the form of EXHIBIT "A-2" attached hereto
and made a part hereof with appropriate insertions.
<PAGE>
.. MANDATORY PREPAYMENTS OF TERM LOAN. The Borrower shall make
mandatory prepayments of principal (each a "Term Loan Mandatory
Prepayment" and collectively the "Term Loan Mandatory Prepayments") of
the Term Loan to the Lender annually. Each Term Loan Mandatory
Prepayment shall be in the amount of the "Excess Cash Flow" for the then
preceding fiscal year and shall be payable on the date the Borrower
furnishes to the Lender the annual financial statements referred to in
Section 6.1.1 of this Agreement. If, however, the Borrower fails to
furnish such financial statements in any given calendar year as and when
required, the Borrowers shall be required to pay the Term Loan Mandatory
Prepayment payable during such calendar year on the date which is ninety
(90) days after the close of the Borrower's then preceding fiscal year.
The Borrower shall pay to the Lender on the date of each Term Loan
Mandatory Prepayment accrued interest to such date on the amount prepaid.
Each Partial Term Loan Mandatory Prepayment shall be applied to the
balloon payment due at maturity and then to principal against the
principal installments in the inverse order of their maturity.
SECTION . THE LETTER OF CREDIT.
.. LETTERS OF CREDIT. Subject to and upon the provisions of this
Agreement, and as a part of the Revolving Credit Commitment, the Borrower
may, upon the prior approval of the Lender and First Union, which
approval shall be in the Lender's and First Union's reasonable discretion
based on customary banking practices of the Lender and First Union and
existing Laws, obtain standby and documentary letters of credit (as the
same may from time to time be amended, supplemented or otherwise
modified, each a "Letter of Credit" and collectively the "Letters of
Credit") issued by First Union from time to time from the Closing Date
until the Business Day preceding the Revolving Credit Termination Date.
The Borrower will not be entitled to obtain a Letter of Credit hereunder
unless (a) the Borrower is then able to obtain an advance under the
Revolving Credit Facility from the Lender in an amount not less than the
amount of the Letter of Credit requested by the Borrower, and (b) the sum
of the then Outstanding Letter of Credit Obligations (including the
amount of the requested Letter of Credit) does not exceed Four Million
Dollars ($4,000,000).
.. LETTER OF CREDIT FEES. Prior to or simultaneously with the opening
of each Letter of Credit, the Borrower shall pay to the Lender, a letter
of credit fee (each a "Letter of Credit Fee" and collectively the "Letter
of Credit Fees") in an amount equal to the then applicable LIBOR Rate
Additional Percentage (as such term is defined in the Revolving Credit
Note). Such Letter of Credit Fees shall be paid upon the opening of the
Letter of Credit and upon each anniversary thereof, if any. In addition,
the Borrower shall pay to the Lender any and all additional issuance,
negotiation, processing, transfer or other fees to the extent and as and
when required by the provisions of any Letter of Credit Agreement; such
additional fees are included in and a part of the "Fees" payable by the
Borrower under the provisions of this Agreement.
<PAGE>
.. TERMS OF LETTERS OF CREDIT. Each Letter of Credit shall (a) be
opened pursuant to a Letter of Credit Agreement, and (b) expire on a date
not later than the Business Day preceding the Revolving Credit Expiration
Date; provided, however, if any Letter of Credit does have an expiration
date later than the Business Day preceding the Revolving Credit
Termination Date, as of the Business Day preceding the Revolving Credit
Termination Date an advance of the Revolving Loan Credit Facility shall
be made by the Lender in the face amount of such Letter of Credit (or
Letters of Credit) and the proceeds thereof shall be deposited in an
account titled in the name of the Lender as trustee for the Borrower.
The proceeds of the trustee account referred to in the immediately
preceding sentence shall be held as collateral for the Letter of Credit
(or Letters of Credit) and in the event of a draw under the Letter of
Credit (or Letters of Credit), used to pay any such draw. The aggregate
face amount of all Letters of Credit at any one time outstanding and
issued by the Lender pursuant to the provisions of this Agreement, plus
the amount of any unpaid Letter of Credit Fees accrued or scheduled to
accrue thereon, and less the aggregate amount of all drafts issued under
or purporting to have been issued under such Letters of Credit that have
been paid by the Lender, is herein called the "Outstanding Letter of
Credit Obligations".
.. PROCEDURE FOR LETTERS OF CREDIT. The Borrower shall give the Lender
written notice at least three (3) Business Days prior to the date on
which a Letter of Credit is requested to be opened of their request for a
Letter of Credit. Such notice shall be accompanied by a duly executed
and delivered Letter of Credit Agreement. Upon receipt of the Letter of
Credit Agreement and the Letter of Credit Fee, the Lender shall cause
First Union to process such Letter of Credit Agreement in accordance with
its customary procedures and open such Letter of Credit on the Business
Day specified in such notice. In the event of any conflict between the
provisions of this Agreement and any Letter of Credit Agreement, the
terms of this Agreement shall prevail. Any provisions in any Letter of
Credit Agreement which purport to give the Lender (i) additional rights
and remedies (other than additional rights and remedies under the Uniform
Customs and Practice for Documentary Credits as in effect on the date of
the issuance of any Letter of Credit), (ii) additional collateral for any
Letter of Credit (other than any goods relating to the Letter of Credit)
or (ii) otherwise limit any grace or cure periods set forth herein; shall
be ineffective.
SECTION . GENERAL FINANCING PROVISIONS.
.. BORROWER'S REPRESENTATIVES. The Lender is hereby irrevocably
authorized by the Borrower to make advances under the Loans to the
Borrower pursuant to the provisions of this Agreement upon the written,
oral or telephone request of any one of the Persons who is from time to
time a Responsible Officer of the Borrower under the provisions of the
most recent "Certificate" of corporate resolutions of the Borrower on
file with the Lender. The Lender assumes no responsibility or liability
for any errors, mistakes, and/or discrepancies in the oral, telephonic,
written or other transmissions of any instructions, orders, requests and
confirmations between the Lender and the Borrower in connection with the
Credit Facilities, any Loan or any other transaction in connection with
the provisions of this Agreement other than for errors, mistakes and/or
discrepancies which arise directly from the Lender's gross negligence or
willful misconduct.
<PAGE>
.. USE OF PROCEEDS OF THE LOANS.. The proceeds of each advance under
the Loans shall be used by the Borrower for Permitted Uses, and for no
other purposes except as may otherwise be agreed by the Lender in
writing. In no event may the proceeds of either Loan be advanced by the
Borrower to any Subsidiary. The Borrower shall use the proceeds of the
Loans promptly.
.. ORIGINATION FEE. The Borrower shall pay to the Lender on or before
the Closing Date a loan origination fee (the "Origination Fee") for the
Revolving Credit Facility in the amount of Fifty Six Thousand Two Hundred
Fifty Dollars ($56,250.00), which fee has been fully earned and is non-
refundable.
.. TERM LOAN ORIGINATION FEE. The Borrower shall pay to the Lender on
or before the Closing Date a loan origination fee (the "Term Loan
Origination Fee") for the Term Loan Facility in the amount of Thirty
Seven Thousand Five Hundred Dollars ($37,500.00), which fee has been
fully earned and is non-refundable.
.. FIELD EXAMINATION FEES. The Borrower shall pay to the Lender a
field examination fee (collectively, the "Field Examination Fees" and
individually a "Field Examination Fee"), which Field Examination Fees
shall be payable promptly after each such examination is completed and
such Field Examination Fee is invoiced by the Lender, provided, however,
prior to the occurrence of any Default, the cost of such Field
Examinations Fees shall not exceed Fifteen Thousand Dollars ($15,000) per
year and such audits will not be conducted more frequently than four (4)
times in any twelve (12) month period. Each Field Examination Fee shall
be in the amount customarily charged by the Lender for the type of field
examination conducted.
.. COMPUTATION OF INTEREST AND FEES. All interest under the Prime Rate
(set forth in the Notes) shall be calculated on the basis of a year of
365 days for the actual number of days elapsed. All applicable Fees
and interest under any LIBOR Rate (set forth in the Notes) shall be
calculated on the basis of a year of 360 days for the actual number of
days elapsed. Any change in the interest rate on any of the Obligations
resulting from a change in the Prime Rate shall become effective as of
the opening of business on the day on which such change in the Prime Rate
is announced.
.. PAYMENTS. All payments of the Obligations, including, without
limitation, principal, interest, Prepayments, and Fees, shall be paid by
the Borrower without setoff, recoupment or counterclaim to the Lender at
the Lender's office specified in the promissory note evidencing the
Obligations in immediately available funds not later than 12:00 noon,
Washington, D.C. time on the due date of such payment. Alternatively, at
its sole discretion, the Lender may, or may cause First Union to charge
any deposit account of the Borrower at First Union with all or any part
of any amount due hereunder to the extent that the Borrower has not
otherwise tendered payment to the Lender. All payments shall be applied
first to any unpaid Fees, second to any and all accrued and unpaid late
charges and Enforcement Costs, third to any and all accrued and unpaid
interest on the Obligations, and then to principal, all in such order and
manner as shall be determined by the Lender in its sole and absolute
discretion.
<PAGE>
.. LIENS; SETOFF. The Borrower hereby grants to the Lender and
First Union a continuing Lien for all of the Obligations of the Borrower
upon any and all monies, securities, and other property of the Borrower
and the proceeds thereof, now or hereafter held or received by or in
transit to, the Lender or First Union from or for the Borrower, and also
upon any and all deposit accounts (general or special) and credits of the
Borrower, if any, with the Lender, First Union or any affiliate of the
Lender or First Union, at any time existing, excluding any deposit
accounts held by the Borrower in its capacity as trustee for Persons who
are not Affiliates of the Borrower. Without implying any limitation on
any other rights the Lender or First Union may have under the Financing
Documents or applicable Laws, during the continuance of an Event of
Default, the Lender and First Union are each hereby authorized by the
Borrower at any time and from time to time, without prior notice to the
Borrower, to set off, appropriate and apply any or all items hereinabove
referred to against all Obligations then outstanding, all in such order
and manner as shall be determined by the Lender in its sole and absolute
discretion. In the event the Lender exercises any right of set off, the
Lender agrees to endeavor to promptly notify the Borrower of such set
off, provided, however, that the Lender shall not be liable to the
Borrower, or any Person, for any failure to provide any such notice.
ARTICLE
THE COLLATERAL
SECTION . DEBT AND OBLIGATIONS SECURED. All property and Liens assigned,
pledged or otherwise granted under or in connection with this Agreement
(including, without limitation, those under Section 3.2 (Grant of Liens)
below) or any of the Financing Documents shall secure (a) the payment of
all of the Obligations, and (b) the performance, compliance with and
observance by the Borrower of the provisions of this Agreement and all of
the other Financing Documents or otherwise under the Obligations.
<PAGE>
SECTION . GRANT OF LIENS. The Borrower hereby assigns, pledges and
grants to the Lender, and agrees that the Lender shall have a perfected
and continuing security interest in, and Lien on, () all of the
Borrower's Accounts, Inventory, Chattel Paper, Documents, Instruments,
Equipment and General Intangibles, whether now owned or existing or
hereafter acquired or arising, (it being understood and agreed, that with
respect to any Inventory and/or Equipment where perfection of the
Lender's lien requires the filing of Uniform Commercial Code financing
statements outside of the States of Maryland, Colorado, California, or
Texas, that the Lender will not, as of the Closing Date, have a perfected
lien on such Inventory and/or Equipment) () all returned, rejected or
repossessed goods, the sale or lease of which shall have given or shall
give rise to an Account or Chattel Paper, () all insurance policies
relating to the foregoing, () all books and records in whatever media
(paper, electronic or otherwise) recorded or stored, with respect to the
foregoing and all Equipment and General Intangibles necessary or
beneficial to retain, access and/or process the information contained in
those books and records, and () all cash and non-cash proceeds and
products of the foregoing. The Borrower further agrees that the Lender
shall have in respect thereof all of the rights and remedies of a secured
party under the Uniform Commercial Code as well as those provided in this
Agreement, under each of the other Financing Documents and under
applicable Laws.
SECTION . COLLATERAL DISCLOSURE LIST. On or prior to the Closing Date,
the Borrower shall deliver to the Lender a list (the "Collateral
Disclosure List") which shall contain such information with respect to
the Borrower's business and real and personal property as the Lender may
require and shall be certified by a Responsible Officer of the Borrower,
all in the form provided to the Borrower by the Lender. Promptly after
demand by the Lender, the Borrower shall furnish to the Lender an update
of the information contained in the Collateral Disclosure List at any
time and from time to time as may be requested by the Lender.
SECTION . PERSONAL PROPERTY. The Borrower acknowledges and agrees that
it is the intention of the parties to this Agreement that the Lender
shall have a first priority, perfected Lien, in form and substance
satisfactory to the Lender and its counsel, on all of the Borrower's
personal property described in Section 3.2 above, whether now owned or
hereafter acquired, subject only to the Permitted Liens, if any.
SECTION . RECORD SEARCHES. As of the Closing Date and thereafter at the
time any Financing Document is executed and delivered by the Borrower
pursuant to this Section, the Lender shall have received, in form and
substance satisfactory to the Lender, such Lien or record searches with
respect to the Borrower and/or any other Person, as appropriate, and the
property covered by such Financing Document showing that the Lien of such
Financing Document will be a perfected first priority Lien on the
property covered by such Financing Document subject only to Permitted
Liens or to such other matters as the Lender may approve.
SECTION . GOVERNMENT ASSIGNMENTS. The Borrower and each Subsidiary
acknowledge and agree that it is the intention of the parties to this
Agreement that the Lender shall have a direct first Lien against all
monies due or to become under and by virtue of all contracts now or
hereafter with the United States of America, or any department, agency,
or instrumentality thereof, under the Federal Assignment of Claims Act of
1940, notice of which Lien may be filed with the appropriate Governmental
Authority at any time with the Borrower's consent and at any time in the
Lender's sole and absolute discretion, after the occurrence of any
Default.
SECTION . COSTS. The Borrower agrees to pay, as part of the Enforcement
Costs and to the fullest extent permitted by applicable Laws, on demand
all actual costs, fees and expenses incurred by the Lender in connection
with the taking, perfection, preservation, protection and/or release of a
Lien on the Collateral, including, without limitation:
() customary fees and expenses incurred in preparing Financing
Documents from time to time (including, without limitation, reasonable
attorneys' fees incurred in connection with preparing the Financing
Documents);
<PAGE>
() all filing and/or recording taxes or fees;
() all costs of Lien and record searches;
() reasonable attorneys' fees in connection with all legal opinions
required;
() all related costs, fees and actual expenses.
SECTION . RELEASE. Upon the payment and performance of all Obligations
of the Borrower and all obligations and liabilities of each other Person,
other than the Lender, under this Agreement and all other Financing
Documents, the termination and/or expiration of the Commitments and
Outstanding Letter of Credit Obligations, upon the Borrower's request and
at the Borrower's sole cost and expense, the Lender shall release and/or
terminate any Financing Document but only if and provided that there is
no commitment or obligation (whether or not conditional) of the Lender to
re-advance amounts which would be secured thereby.
SECTION . INCONSISTENT PROVISIONS. In the event that the provisions of
any Financing Document directly conflict with any provision of this
Agreement, the provision of this Agreement governs.
ARTICLE
REPRESENTATIONS AND WARRANTIES
SECTION . REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Lender and shall be deemed to represent and warrant at
the time of each request for an advance under the Loans or request for a
Letter of Credit under the terms of this Agreement and again at the time
of the making of any advance under the Loans or the issuance of any
Letter of Credit, as follows:
.. SUBSIDIARIES. The Borrower has the Subsidiaries listed on the
Collateral Disclosure List attached hereto and made a part hereof and no
others. Each of the Subsidiaries is a Wholly Owned Subsidiary except as
shown on the Collateral Disclosure List, which correctly indicates the
nature and amount of the Borrower's ownership interests therein. None of
the Subsidiaries are operating companies.
<PAGE>
.. GOOD STANDING. The Borrower (a) is a corporation duly organized,
existing and in good standing under the laws of the jurisdiction of its
incorporation, (b) has the corporate power to own its property and to
carry on its business as now being conducted, and (c) is duly qualified
to do business and is in good standing in each jurisdiction in which the
character of the properties owned by it therein or in which the
transaction of its business makes such qualification necessary.
.. POWER AND AUTHORITY. The Borrower has full corporate power and
authority to execute and deliver this Agreement and the other Financing
Documents to which it is a party, to make the borrowings under this
Agreement, and to incur and perform the Obligations whether under this
Agreement, the other Financing Documents or otherwise, all of which have
been duly authorized by all proper and necessary corporate action. No
consent or approval of shareholders or any creditors of the Borrower, and
no consent, approval, filing or registration with or notice to any
Governmental Authority on the part of the Borrower, is required as a
condition to the execution, delivery, validity or enforceability of this
Agreement or the other Financing Documents or the performance by the
Borrower of the Obligations.
.. BINDING AGREEMENTS. This Agreement and the other Financing
Documents executed and delivered by the Borrower have been properly
executed and delivered and constitute the valid and legally binding
obligations of the Borrower and are fully enforceable against the
Borrower in accordance with their respective terms, subject to (a)
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, (b) general principles of equity
(regardless of whether such principles of equity are asserted in an
action or proceeding at law or in equity) or the discretion of the court
before which any action or proceeding may be brought and (c) other
applicable Laws which may limit the enforceability of certain of the
remedial or procedural provisions contained in the Financing Documents.
.. NO CONFLICTS. Neither the execution, delivery and performance of the
terms of this Agreement or of any of the other Financing Documents
executed and delivered by the Borrower nor the consummation of the
transactions contemplated by this Agreement will conflict with, violate
or be prevented by (a) the Borrower's charter or bylaws, (b) any existing
mortgage, indenture, contract or agreement binding on the Borrower or
affecting its property, or (c) any Laws.
.. NO DEFAULTS, VIOLATIONS.
() No Default or Event of Default has occurred and is continuing.
() The Borrower is not in default under or with respect to any
obligation under any existing mortgage, indenture, contract or agreement
binding on it or affecting its property, including, but not limited to,
the Subordinated Indebtedness, in any respect which could be materially
adverse to the business, operations, property or financial condition of
the Borrower, or which could materially adversely affect the ability of
the Borrower to perform its obligations under this Agreement or the other
Financing Documents, to which the Borrower is a party.
<PAGE>
.. COMPLIANCE WITH LAWS. The Borrower is not in violation of any
applicable Laws (including, without limitation, any Laws relating to
employment practices, to environmental, occupational and health standards
and controls) or order, writ, injunction, decree or demand of any court,
arbitrator, or any Governmental Authority affecting the Borrower or any
of its properties, the violation of which, considered in the aggregate,
could materially adversely affect the business, operations or properties
of the Borrower.
.. MARGIN STOCK. None of the proceeds of the Loans will be used,
directly or indirectly, by the Borrower for the purpose of purchasing or
carrying, or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry, any "margin security"
within the meaning of Regulation G (12 CFR Part 207), or "margin stock"
within the meaning of Regulation U (12 CFR Part 221), of the Board of
Governors of the Federal Reserve System or for any other purpose which
might make the transactions contemplated in this Agreement a "purpose
credit" within the meaning of said Regulation G or Regulation U, or cause
this Agreement to violate any other regulation of the Board of Governors
of the Federal Reserve System or the Securities Exchange Act of 1934 or
the Small Business Investment Act of 1958, as amended, or any rules or
regulations promulgated under any of such statutes.
.. INVESTMENT COMPANY ACT; MARGIN SECURITIES. Neither the Borrower nor
any of its Subsidiaries is an investment company within the meaning of
the Investment Company Act of 1940, as amended, nor is it, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company within the meaning of said Act. Neither the Borrower
nor any of its Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose
of purchasing or carrying "margin security" within the meaning of
Regulation G (12 CFR Part 207), or "margin stock" within the meaning of
Regulation U (12 CFR Part 221), of the Board of Governors of the Federal
Reserve System.
.. LITIGATION. Except as otherwise disclosed to the Lender on EXHIBIT
B attached to and made a part of this Agreement, there are no
proceedings, actions or investigations pending or, so far as the Borrower
knows, threatened before or by any court, arbitrator any Governmental
Authority which, in any one case or in the aggregate, if determined
adversely to the interests of the Borrower, would have a material adverse
effect on the business, properties, condition (financial or otherwise) or
operations, present or prospective, of the Borrower.
<PAGE>
.. FINANCIAL CONDITION. The consolidated financial statements of the
Borrower dated December 31, 1996 , when taken together with the
statements for the twelve (12) months ending June 30, 1997 are complete
and correct and fairly present the financial position of the Borrower and
its Subsidiaries and the results of their operations and transactions in
their surplus accounts as of the date and for the period referred to and
have been prepared in accordance with GAAP applied on a consistent basis
throughout the period involved. There are no liabilities, direct or
indirect, fixed or contingent, of the Borrower or its Subsidiaries as of
the date of such financial statements which are not reflected therein or
in the notes thereto. There has been no adverse change in the financial
condition or operations of the Borrower or its Subsidiaries since the
date of such financial statements and to the Borrower's knowledge no such
adverse change is pending or threatened. Neither the Borrower nor any
Subsidiary has guaranteed the obligations of, or made any investment in
or advances to, any Person, except as disclosed in such financial
statements. The representations and warranties contained in this Section
shall also cover financial statements furnished from time to time to the
Lender pursuant to Section 6.1.1 (Financial Statements) of this
Agreement.
.. FULL DISCLOSURE. The financial statements referred to in Section
4.1.11 (Financial Condition) of this Agreement, the Financing Documents
(including, without limitation, this Agreement), and the statements,
reports or certificates furnished by the Borrower in connection with the
Financing Documents (a) do not contain any untrue statement of a material
fact and (b) when taken in their entirety, do not omit any material fact
necessary to make the statements contained therein not misleading. There
is no fact known to the Borrower which the Borrower has not disclosed to
the Lender in writing prior to the date of this Agreement with respect to
the transactions contemplated by the Financing Documents which materially
and adversely affects or in the future could, in the reasonable opinion
of the Borrower materially adversely affect the condition, financial or
otherwise, results of operations, business, or assets of the Borrower.
.. INDEBTEDNESS FOR BORROWED MONEY. Except for the Obligations and the
Existing Subordinated Debt, the Borrower has no Indebtedness for Borrowed
Money.
.. TAXES. Each of the Borrower and its Subsidiaries has filed all
returns, reports and forms for Taxes which, to the knowledge of the
Borrower, are required to be filed, and has paid all Taxes as shown on
such returns or on any assessment received by it, to the extent that such
Taxes have become due, unless and to the extent only that such Taxes,
assessments and governmental charges are currently contested in good
faith and by appropriate proceedings by the Borrower, such Taxes are not
the subject of any Liens other than Permitted Liens, and adequate
reserves therefor have been established as required under GAAP. All tax
liabilities of the Borrower were as of the date of audited financial
statements referred to in Section 4.1.11 (Financial Condition) above, and
are now, adequately provided for on the books of the Borrower or its
subsidiaries, as appropriate. No tax liability has been asserted by the
Internal Revenue Service or any state or local authority against the
Borrower for taxes in excess of those already paid.
<PAGE>
.. ERISA. With respect to any "pension plan" as defined in SECTION 3(2)
of ERISA, which plan is now or previously has been maintained or
contributed to by the Borrower and/or by any commonly controlled entity:
(a) no "accumulated funding deficiency" as defined in Code <section>412
or ERISA <section>302 has occurred, whether or not that accumulated
funding deficiency has been waived; (b) no Reportable Event has occurred;
(c) no termination of any plan subject to Title IV of ERISA has occurred;
(d) neither the Borrower nor any commonly controlled entity (as defined
under ERISA) has incurred a "complete withdrawal" within the meaning of
ERISA <section>4203 from any multiemployer plan; (e) neither the Borrower
nor any commonly controlled entity has incurred a "partial withdrawal"
within the meaning of ERISA <section>4205 with respect to any
multiemployer plan; (f) no multiemployer plan to which the Borrower or
any commonly controlled entity has an obligation to contribute is in
"reorganization" within the meaning of ERISA <section>4241 nor has notice
been received by the Borrower or any commonly controlled entity that such
a multiemployer plan will be placed in "reorganization".
.. TITLE TO PROPERTIES. Subject to the Permitted Liens, the Borrower
has good and marketable title to all of its properties, including,
without limitation, the Collateral and the properties and assets
reflected in the balance sheets described in Section 4.1.11 (Financial
Condition) above. The Borrower has legal, enforceable and uncontested
rights to use freely such property and assets.
.. PATENTS, TRADEMARKS, ETC The Borrower owns, possesses, or has the
right to use all necessary patents, patent rights, licenses, trademarks,
trademark rights, trade names, trade name rights, logos, copyrights,
permits and franchises to own its properties conduct its business as now
conducted, without known conflict with the rights of any other Person.
Any and all obligations to pay royalties or other charges with respect to
such properties and assets are properly reflected on the financial
statements described in Section 4.1.11 (Financial Condition) above.
.. PRESENCE OF HAZARDOUS MATERIALS OR HAZARDOUS MATERIALS
CONTAMINATION. To the best of the Borrower's knowledge, (a) no Hazardous
Materials are located on any real property owned, controlled or operated
by of the Borrower or for which the Borrower is responsible, except for
reasonable quantities of necessary supplies for use by the Borrower in
the ordinary course of the its current line of business and stored, used
and disposed in accordance with applicable Laws; and (b) no property
owned, controlled or operated by the Borrower has ever been used as a
manufacturing, storage, or dump site for Hazardous Materials nor is
affected by Hazardous Materials Contamination at any other property.
.. PERFECTION AND PRIORITY OF COLLATERAL. The Lender has, or upon
execution and recording of this Agreement and the Security Documents will
have, and will continue to have as security for the Obligations, a valid
and perfected Lien on and security interest in all Collateral, free of
all other Liens, claims and rights of third parties whatsoever except
Permitted Liens.
<PAGE>
.. PLACES OF BUSINESS AND LOCATION OF COLLATERAL. The information
contained in the Collateral Disclosure List is complete and correct. The
Collateral Disclosure List completely and accurately identifies the
address of (a) the Borrower's chief executive office, (b) any and each
other place of business of the Borrower, (c) the location of all books
and records pertaining to the Collateral, and (d) each location, other
than the foregoing, where any of the Collateral is located. The proper
and only places to file financing statements with respect to the
Collateral within the meaning of the Uniform Commercial Code are the
filing offices for those jurisdictions in which the Borrower maintains a
place of business as identified on the Collateral Disclosure List. The
Borrower further represents and warrants to the Lender, that the value of
any Collateral kept outside of the States of Maryland, Texas, California
or Colorado is and will at all times remain minimal in the aggregate.
.. BUSINESS NAMES AND ADDRESSES. In the twelve (12) years preceding
the date hereof, the Borrower has not changed its name, identity or
corporate structure, has not conducted business under any name other than
its current name, and those of its Subsidiaries, and has not conducted
its business in any jurisdiction other than those disclosed on the
Collateral Disclosure List.
.. EQUIPMENT. All Equipment is personalty and is not and will not be
affixed to real estate in such manner as to become a fixture or part of
such real estate. No equipment is held by the Borrower on a sale on
approval basis.
.. INVENTORY. The Inventory of the Borrower, if any, is (a) of good and
merchantable quality, free from defects, (b) not stored with a bailee,
warehouseman, carrier, or similar party, (c) not on consignment, sale on
approval, or sale or return, and (d) will be located at the places of
business set forth on the Collateral Disclosure List. No goods offered
for sale by, or in the possession or control of, the Borrower are
consigned to or held on sale or return terms by the Borrower.
.. ACCOUNTS. With respect to all Accounts and to the best of the
Borrower's knowledge (a) they are genuine, and in all respects what they
purport to be, and are not evidenced by a judgment, an Instrument, or
Chattel Paper (unless such judgment has been assigned and such Instrument
or Chattel Paper has been endorsed and delivered to the Lender); (b) they
represent bona fide transactions completed in accordance with the terms
and provisions contained in the invoices, purchase orders and other
contracts relating thereto, and the underlying transaction therefor is in
accordance with all applicable Laws; (c) the amounts shown on the
Borrower's books and records, with respect thereto are actually and
absolutely owing to the Borrower and are not contingent or subject to
reduction for any reason other than regular discounts, credits or
adjustments allowed by the Borrower in the ordinary course of its
business or adjustments which may arise as a result of regular audits
performed by any Governmental Authority; (d) no payments have been or
shall be made thereon except payments turned over to the Lender by the
Borrower; (e) all Account Debtors thereon have the capacity to contract;
and (f) the goods sold, leased or transferred or the services furnished
giving rise thereto are not subject to any Liens except the security
interest granted to the Lender by this Agreement and Permitted Liens.
<PAGE>
.. COMPLIANCE WITH ELIGIBILITY STANDARDS. With respect to those Accounts
which the Lender has deemed Eligible Billed Borrowing Base Receivables or
Eligible Unbilled Borrowing Base Receivables (a) there are no facts,
events or occurrences known to the Borrower which in any way impair the
validity, collectibility or enforceability thereof or tend to reduce the
amount payable thereunder; and (b) there are no proceedings or actions
known to the Borrower which are threatened or pending against any Account
Debtor which might result in any material adverse change in the Borrowing
Base.
.. CLAIMS AND INVESTIGATIONS. There exist no pending or to the best of
the Borrower's knowledge threatened claims, investigations (whether
formal or informal), litigation, disputes, protests or other
controversies involving the Borrower or any Affiliate pertaining to or
arising out of any Government Contract which, if adversely determined,
would have a material adverse effect on the business, assets, operations
or condition, financial or otherwise, of the Borrower or any Affiliate.
Neither the Borrower nor any Affiliate has filed nor has any basis for
filing any claims or demands for payment against the United States or any
other party arising out of or in connection with any Government Contract,
other than progress billings, public vouchers, and invoices submitted in
the ordinary course of business.
.. SUBORDINATED DEBT. Except for the Existing Subordinated Debt, as of
the Closing Date there is no Subordinated Debt. None of the documents
evidencing the Existing Subordinated Debt has been amended, supplemented,
restated or otherwise modified on or before the Closing Date except as
otherwise disclosed to the Lender in writing. In addition, there does
not exist any default or any event which upon notice or lapse of time or
both would constitute a default under the terms of any of the loan
documents evidencing the Existing Subordinated Debt.
SECTION . SURVIVAL; UPDATES OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in or made under or in
connection with this Agreement and the other Financing Documents shall
survive the Closing Date, the making of any advance under the Loans and
extension of credit made hereunder, and the incurring of any other
Obligations.
ARTICLE
CONDITIONS PRECEDENT
SECTION . CONDITIONS TO THE INITIAL ADVANCE AND INITIAL LETTER OF CREDIT
The making of the initial advance under the Loans and the issuance of the
initial Letter of Credit is subject to the fulfillment of the following
conditions precedent in a manner satisfactory to the Lender on or before
the Closing Date:
<PAGE>
.. GOOD STANDING ETC. The Lender shall have received a certificate of
good standing for the Borrower certified by the Secretary of State, or
other appropriate Governmental Authority, of the state of incorporation
for the Borrower. The Lender shall have received a Certificate of
Qualification to do business for the Borrower certified by the Secretary
of State or other Governmental Authority of each state in which the
Borrower conducts business.
.. CORPORATE PROCEEDINGS OF THE BORROWER. The Lender shall have
received a certificate dated as of the Closing Date by the Secretary or
an Assistant Secretary of the Borrower covering:
( true and complete copies of the Borrower's corporate charter,
bylaws, and all amendments thereto;
( true and complete copies of the resolutions of its Board of
Directors authorizing (i) the execution, delivery and performance of the
Financing Documents to which the Borrower is a party, (ii) the borrowings
by the Borrower hereunder, and (iii) the granting of the Liens
contemplated by this Agreement and the Financing Documents to which the
Borrower is a party.
( the incumbency, authority and signatures of the officers of the
Borrower authorized to sign this Agreement and the other Financing
Documents to which the Borrower is a party.
.. COLLATERAL DISCLOSURE LIST. The Borrower shall have delivered the
Collateral Disclosure List required under the provisions of Section 3.3
(Collateral Disclosure List) hereof duly executed by a Responsible
Officer of the Borrower.
.. NOTES. The Lender shall have received the Term Note and the
Revolving Credit Note each, conforming to the requirements hereof and
executed by a Responsible Officer of the Borrower and attested by a duly
authorized representative of the Borrower.
.. FINANCING DOCUMENTS AND COLLATERAL. The Borrower shall have
executed and delivered the Financing Documents to be executed by it, and
shall have delivered all opinions, and other documents contemplated by
Article 3 hereof, all the foregoing to be in form and substance
satisfactory to the Lender.
<PAGE>
.. RECORDINGS AND FILINGS. The Borrower shall have: (a) executed and
delivered all Financing Documents (including, without limitation, UCC-1
and UCC-3 statements) required to be filed, registered or recorded in
order to create, in favor of the Lender, a perfected Lien in the
Collateral (subject only to the Permitted Liens) in form and in
sufficient number for filing, registration, and recording in each office
in each jurisdiction in which such filings, registrations and
recordations are required, and (b) delivered such evidence as the Lender
may deem satisfactory that all necessary filing fees and all recording
and other similar fees, and all Taxes and other expenses related to such
filings, registrations and recordings will be or have been paid in full.
.. OPINION OF BORROWER'S COUNSEL. The Lender shall have received the
favorable opinion of counsel for the Borrower addressed to the Lender in
form satisfactory to the Lender.
.. OTHER DOCUMENTS, ETC. The Lender shall have received such other
certificates, opinions, documents and instruments confirmatory of or
otherwise relating to the transactions contemplated hereby as may have
been reasonably requested by the Lender.
.. INSURANCE CERTIFICATE. The Lender shall have received an insurance
certificate in accordance with the provisions of Section 6.1.8
(Insurance) and Section 6.1.9 (Insurance With Respect to Equipment and
Inventory) of this Agreement.
.. PAYMENT OF FEES. The Lender shall have received payment of any Fees
due on or before the Closing Date.
.. ADDITIONAL MATTERS. All other documents and legal matters in
connection with the transactions contemplated by this Agreement and the
other Financing Documents shall be satisfactory in form and substance to
the Lender and its counsel.
.. OTHER FINANCING DOCUMENTS. In addition to the Financing Documents
to be delivered by the Borrower, the Lender shall have received the
Financing Documents duly executed and delivered by Persons other than the
Borrower.
.. FIELD EXAMINATION. The Lender shall have completed a field
examination of the Borrower' business, operations and income, the results
of which audit shall in the Lender's reasonable discretion show that the
Borrower is not in violation of any of the material terms of this
Agreement.
SECTION .. CONDITIONS TO ALL EXTENSIONS OF CREDIT. The making of all
advances under the Loans and the issuance of all Letters of Credit is
subject to the fulfillment of the following conditions precedent in a
manner satisfactory to the Lender:
.. COMPLIANCE. The Borrower shall have complied and shall then be in
compliance with all terms, covenants, conditions and provisions of this
Agreement and the other Financing Documents which are binding upon them.
<PAGE>
.. BORROWING BASE. The Borrower shall have furnished all Borrowing
Base Reports required by Section 2.1.4 (Borrowing Base Report) of this
Agreement, there shall exist no Borrowing Base Deficiency, and as
evidence thereof, the Borrower shall have furnished to the Lender such
reports, schedules, certificates, records and other papers as may be
requested by the Lender.
.. DEFAULT. There shall exist no Event of Default or Default
hereunder.
.. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Borrower contained among the provisions of this Agreement shall be
true and with the same effect as though such representations and
warranties had been made at the time of the making of each of advance
under the Loans or the issuance of each Letter of Credit, except that the
representation and warranty pertaining to balance sheets, financial
statements and other financial condition information or data shall refer
to the latest balance sheets, financial statements, and financial
condition information and data furnished to the Lender pursuant to the
provisions of this Agreement.
.. ADVERSE CHANGE. No adverse change shall have occurred in the
financial condition of the Borrower which would, in the good faith
judgment of the Lender, materially impair the ability of the Borrower to
pay or perform any of the Obligations.
.. LEGAL MATTERS. All legal documents incident to each advance under
the Loans and each of the Letters of Credit shall be reasonably
satisfactory to counsel for the Lender.
ARTICLE
COVENANTS OF THE BORROWER
SECTION . AFFIRMATIVE COVENANTS. So long as any of the Obligations (the
Commitments therefor) shall be outstanding hereunder, the Borrower agrees
with the Lender as follows:
.. FINANCIAL STATEMENTS. The Borrower shall furnish to the Lender:
<PAGE>
( Annual Statements and Certificates. The Borrower shall furnish to
the Lender as soon as available, but in no event more than ninety (90)
days after the close of the Borrower's fiscal years, (i) a copy of the
annual financial statement in reasonable detail satisfactory to the
Lender relating to the Borrower and its Subsidiaries, prepared in
accordance with GAAP and examined and certified by independent certified
public accountants satisfactory to the Lender, which financial statement
shall include a consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such fiscal year and consolidated
statements of income, cash flows and changes in shareholders equity of
the Borrower and its Subsidiaries for such fiscal year, (ii) a detailed
computation of each financial covenant in this Agreement which is
applicable for the period reported, and a cash flow projection report on
a quarterly basis along with projected income statements, each prepared
by a Responsible Officer of the Borrower in a format acceptable to the
Lender and (iii) a management letter in the form prepared by the
independent certified public accountants.
( Annual Opinion of Accountant. The Borrower shall furnish to the
Lender as soon as available, but in no event more than ninety (90) days
after the close of the Borrower's fiscal years, a letter or opinion of
the accountant who examined and certified the annual financial statement
relating to the Borrower and its Subsidiaries stating whether anything in
such accountant's examination has revealed the occurrence of a Default or
an Event of Default hereunder, and, if so, stating the facts with respect
thereto.
( Quarterly Statements and Certificates. The Borrower shall furnish
to the Lender as soon as available, but in no event more than forty-five
(45) days after the close of the Borrower's fiscal quarters, consolidated
balance sheets of the Borrower and its Subsidiaries as of the close of
such period, consolidated income, cash flows and changes in shareholders
equity statements for such period, and a detailed computation of each
financial covenant in this Agreement which is applicable for the period
reported, all as prepared and certified by a Responsible Officer of the
Borrower and accompanied by a certificate of that officer stating whether
any event has occurred which constitutes a Default or an Event of Default
hereunder (including, but not limited to, any default under any
Indebtedness of the Borrower or any Subsidiary), and, if so, stating the
facts with respect thereto.
( MONTHLY REPORTS. The Borrower shall furnish to the Lender within
thirty (30) days after the end of each fiscal month, a report containing
the following information:
( a detailed aging schedule of all Receivables by Account Debtor, in
such detail, and accompanied by such supporting information, as the
Lender may from time to time reasonably request;
( a backlog report in such detail, and accompanied by such supporting
information, as the Lender may from time to time reasonably request;
( a detailed aging of all accounts payable by
supplier, in such detail, and accompanied by such supporting information,
as the Lender may from time to time reasonably request; and
( such other information as the Lender may
reasonably request.
<PAGE>
( ADDITIONAL REPORTS AND INFORMATION. The Borrower shall furnish to
the Lender promptly, such additional information, reports or statements
as the Lender may from time to time reasonably request.
.. REPORTS TO SEC AND TO STOCKHOLDERS. The Borrower will furnish to
the Lender, promptly upon the filing or making thereof, at least one (l)
copy of all financial statements, reports, notices and proxy statements
sent by the Borrower to its stockholders, and of all regular and other
reports filed by the Borrower with any securities exchange or with the
Securities and Exchange Commission.
.. RECORDKEEPING, RIGHTS OF INSPECTION, FIELD EXAMINATION, ETC.
( The Borrower shall, and shall cause each of its Subsidiaries to,
maintain (i) a standard system of accounting in accordance with GAAP and
with the requirements of each applicable Governmental Authority, and (ii)
proper books of record and account in which full, true and correct
entries are made of all dealings and transactions in relation to its
properties, business and activities.
( The Borrower shall, and shall cause each of its Subsidiaries to,
permit authorized representatives of the Lender to visit and inspect the
properties and the properties of the Borrower and its Subsidiaries, to
review, audit, check and inspect the Collateral at any reasonable time
with notice, to review, audit, check and inspect the Borrower's other
books of record at any reasonable time with notice and to make abstracts
and photocopies thereof, and to discuss the affairs, finances and
accounts of the Borrower and its Subsidiaries, with the officers,
directors, employees and other representatives of the Borrower and its
Subsidiaries and their respective accountants, all at such times during
normal business hours and other reasonable times and as often as the
Lender may reasonably request.
( The Borrower hereby agrees that the Lender may have access to all
accountants and auditors employed by the Borrower and its Subsidiaries at
any time during the term of this Agreement and that such accountants and
auditors will be authorized to meet with the Lender and the Borrower upon
request of the Lender and exhibit and deliver to the Lender copies of any
and all of the financial statements, trial balances, management letters,
or other accounting records of any nature of the Borrower and its
Subsidiaries in the accountant's or auditor's possession, and to disclose
to the Lender any information they may have concerning the financial
status and business operations of the Borrower's and its Subsidiaries.
( Any and all actual costs and expenses incurred by, or on behalf of,
the Lender in connection with the conduct of any of the foregoing shall
be part of the Enforcement Costs and shall be payable to the Lender upon
demand. The Borrower acknowledges and agrees that such expenses may
include, but shall not be limited to, any and all out-of-pocket costs and
expenses of the Lender's employees and agents in, and when, traveling to
the Borrower's facilities.
<PAGE>
.. CORPORATE EXISTENCE. The Borrower shall maintain its corporate
existence in good standing in the jurisdiction in which it is
incorporated and in each other jurisdiction where it is required to
register or qualify to do business if the failure to do so in such other
jurisdiction might have a material adverse effect on the ability of the
Borrower to perform the Obligations, on the conduct of the Borrower's
operations, on the Borrower's financial condition, or on the value of, or
the ability of the Lender to realize upon, the Collateral.
.. COMPLIANCE WITH LAWS. The Borrower shall comply with all applicable
Laws and observe the valid requirements of Governmental Authorities, the
noncompliance with or the nonobservance of which might have a material
adverse effect on the ability of the Borrower to perform the Obligations,
on the conduct of the Borrower's operations, on the Borrower's financial
condition, or on the value of, or the ability of the Lender to realize
upon, the Collateral.
.. PRESERVATION OF PROPERTIES.. The Borrower will at all times (a)
maintain, preserve, protect and keep its properties, whether owned or
leased, in good operating condition, working order and repair (ordinary
wear and tear excepted), and from time to time will make all proper
repairs, maintenance, replacements, additions and improvements thereto
needed to maintain such properties in good operating condition, working
order and repair, and (b) do or cause to be done all things necessary to
preserve and to keep in full force and effect its material franchises,
leases of real and personal property, trade names, patents, trademarks
and permits which are necessary for the orderly continuance of its
business.
.. LINE OF BUSINESS. The Borrower will continue to engage
substantially only in its current lines of business and ancillary
businesses, including, but not limited to, the provision of professional
and technical services, consisting principally of systems engineering,
software development, and high performance systems development.
.. INSURANCE. The Borrower will at all times maintain with A-rated
insurance companies such insurance as is required by applicable Laws and
such other insurance, in such amounts, of such types and against such
risks, hazards, liabilities, casualties and contingencies as are usually
insured against in the same geographic areas by business entities engaged
in the same or similar business. Without limiting the generality of the
foregoing, the Borrower will keep adequately insured all of its property
against loss or damage resulting from fire or other risks insured against
by extended coverage and maintain public liability insurance against
claims for personal injury, death or property damage occurring upon, in
or about any properties occupied or controlled by it, or arising in any
manner out of the businesses carried on by it, all in such amounts not
less than comparable businesses in the same geographic area. The
Borrower shall deliver to the Lender on the Closing Date (and thereafter
on each date there is a material change in the insurance coverage) a
certificate of a Responsible Officer of the Borrower containing a
detailed list of the insurance then in effect and stating the names of
the insurance companies, the types, the amounts and rates of the
insurance, dates of the expiration thereof and the properties and risks
covered thereby.
<PAGE>
.. TAXES.. Except to the extent that the validity or amount thereof is
being contested in good faith and by appropriate proceedings, the
Borrower will pay and discharge all Taxes prior to the date when any
interest or penalty would accrue for the nonpayment thereof. The
Borrower shall furnish to the Lender at such times as the Lender may
require proof satisfactory to the Lender of the making of payments or
deposits required by applicable Laws including, without limitation,
payments or deposits with respect to amounts withheld by the Borrower
from wages and salaries of employees and amounts contributed by the
Borrower on account of federal and other income or wage taxes and amounts
due under the Federal Insurance Contributions Act, as amended.
.. ERISA. The Borrower will, and will cause each of its Subsidiaries
and Affiliates to, comply with the funding requirements of ERISA with
respect to employee pension benefit plans for its respective employees.
The Borrower will not permit with respect to any employee benefit plan or
plans covered by Title IV of ERISA (a) any prohibited transaction or
transactions under ERISA or the Internal Revenue Code, which results, or
may result, in any material liability of the Borrower and its
Subsidiaries and Affiliates, or (b) any Reportable Event if, upon
termination of the plan or plans with respect to which one or more such
Reportable Events shall have occurred, there is or would be any material
liability of the Borrower and its Subsidiaries and Affiliates to the
PBGC. Upon the Lender's request, the Borrower will deliver to the Lender
a copy of the most recent actuarial report, financial statements and
annual report completed with respect to any "defined benefit plan", as
defined in ERISA.
.. NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE DEVELOPMENTS. The
Borrower shall promptly notify the Lender upon obtaining knowledge of the
occurrence of:
( any Event of Default;
( any Default;
( any litigation instituted or threatened against the Borrower or its
Subsidiaries and of the entry of any judgment or Lien against any of the
assets or properties of the Borrower or any Subsidiary where the claims
against the Borrower or Subsidiary exceed Five Hundred Thousand Dollars
($500,000) and are not covered by insurance;
( any event, development or circumstance whereby the financial
statements furnished hereunder fail in any material respect to present
fairly, in accordance with GAAP, the financial condition and operational
results of the Borrower or its Subsidiaries;
<PAGE>
( any termination for convenience on any Government Contract, any
default under any Government Contract or any event which if not corrected
could have a material adverse effect on the business, assets, operations
or condition, financial or otherwise, of the Borrower or any Affiliate;
( any judicial, administrative or arbitral proceeding pending against
the Borrower or any of its Subsidiaries and any judicial or
administrative proceeding known by the Borrower to be threatened against
it or any of its Subsidiaries which, if adversely decided, could
materially adversely affect its financial condition or operations
(present or prospective);
( the receipt by the Borrower or any Subsidiary of any notice, claim
or demand from any Governmental Authority which alleges that the Borrower
or any Subsidiary is in violation of any of the terms of, or has failed
to comply with any applicable Laws regulating its operation and business,
including, but not limited to, the Occupational Safety and Health Act and
the Environmental Protection Act; and
( any other development in the business or affairs of the Borrower and
any of its Subsidiaries which may be materially adverse;
in each case describing in detail satisfactory to the Lender the nature
thereof and the action the Borrower proposes to take with respect
thereto.
.. HAZARDOUS MATERIALS; CONTAMINATION. The Borrower agrees to:
( give notice to the Lender immediately upon the Borrower's acquiring
knowledge of the presence of any Hazardous Materials on any property
owned or controlled by the Borrower or for which the Borrower is
responsible (provided that such notice shall not be required for
Hazardous Materials placed or stored on such property in accordance with
applicable Laws in the ordinary course (including, without limitation,
quantity) of the Borrower's line of business expressly described in this
Agreement) or of any Hazardous Materials Contamination with a full
description thereof;
( promptly comply with any Laws requiring the removal, treatment or
disposal of Hazardous Materials or Hazardous Materials Contamination and
upon request of the Lender or if any such actions are taken which are
other than in the normal course of its business, provide the Lender with
satisfactory evidence of such compliance;
( provide the Lender, within thirty (30) days after a demand by the
Lender, with a bond, letter of credit or similar financial assurance
evidencing to the Lender's satisfaction that the necessary funds are
available to pay the cost of removing, treating, and disposing of such
Hazardous Materials or Hazardous Materials Contamination and discharging
any Lien which may be established as a result thereof on any property
owned or controlled by the Borrower or for which the Borrower is
responsible; and
<PAGE>
( as part of the Obligations, defend, indemnify and hold harmless the
Lender and its agents, employees, trustees, successors and assigns from
any and all claims which may now or in the future (whether before or
after the termination of this Agreement) be asserted as a result of the
presence of any Hazardous Materials on any property owned or controlled
by the Borrower for which the Borrower is responsible for any Hazardous
Materials Contamination. The Borrower acknowledges and agrees that this
indemnification shall survive the termination of this Agreement and the
Commitments and the payment and performance of all of the other
Obligations.
.. DISCLOSURE OF SIGNIFICANT TRANSACTIONS. The Borrower shall deliver
to the Lender a written notice describing in detail each transaction by
it involving the purchase, sale, lease, or other acquisition or loss or
casualty to or disposition of an interest in Fixed or Capital Assets
which exceeds One Million Dollars ($1,000,000.00), said notices to be
delivered to the Lender within thirty (30) days after the occurrence of
each such transaction.
.. TOTAL FUNDED DEBT TO EBITDA. The Borrower will maintain, tested as
of the end of each of the Borrower's fiscal quarters, a ratio of Total
Funded Debt to EBITDA so that it is not more than 2.75 to 1.0.
.. OBLIGATIONS TO ACCOUNTS RECEIVABLES. The Borrower will maintain,
tested as of the last day of each of the Borrower's fiscal quarters, a
ratio of (a) outstanding Obligations to (b) the sum of (i) Eligible
Billed Government Receivables (including any Eligible Billed Borrowing
Base Receivables where the Account Debtor is a Governmental Authority,
and the Borrower is a subcontractor and the primary contractor is a
Person which the Lender in its sole, bur reasonable discretion classifies
as a major government contractor), plus (ii) gross unbilled Receivables
that are determined by the Lender in its sole but reasonable discretion
to be billable based on the Lender's most recent field exam (less
unbilled Receivables arising from final billings, retainages, work in
process and rate variances) so that it is not greater than 1.0 to 1.0.
.. FIXED CHARGE COVERAGE RATIO. The Borrower will at all times
maintain, tested as of the last day of each of the Borrower's fiscal
quarters for the four (4) quarter period ending on that date, a Fixed
Charge Coverage Ratio of not less than 1.25 to 1.0.
.. EBIT RATIO. The Borrower will maintain a ratio of EBIT to interest
expense, tested as of the last day of each of the Borrower's fiscal
quarters of not less than 2.25 to 1.0
.. PROFITABILITY. The Borrower and its Subsidiaries will have a minimum
net profit, tested as of the last day of each of the Borrower's fiscal
year end of not less than One Dollar ($1.00).
<PAGE>
.. COLLECTION OF RECEIVABLES. Except for those Receivables being
directly deposited with First Union for the benefit of the Lender
pursuant to this Agreement, until the occurrence of any Default
hereunder, the Borrower shall at its own expense have the privilege for
the account of, and in trust for, the Lender of collecting its
Receivables and receiving in respect thereto all Items of Payment and
shall otherwise completely service all of the Receivables including (a)
the billing, posting and maintaining of complete records applicable
thereto, (b) the taking of such action with respect to the Receivables as
the Lender may reasonably request or in the absence of such request, as
the Borrower may deem advisable; and (c) the granting, in the ordinary
course of business, to any Account Debtor, any rebate, refund or
adjustment to which the Account Debtor may be lawfully entitled, and may
accept, in connection therewith, the return of goods, the sale or lease
of which shall have given rise to a Receivable and may take such other
actions relating to the settling of any Account Debtor's claim as may be
commercially reasonable. The Lender may, at its option, at any time or
from time to time after and during the continuance of a Default
hereunder, revoke the collection privilege given in this Agreement to the
Borrower by either giving notice of its assignment of, and lien on the
Collateral to the Account Debtors or giving notice of such revocation to
the Borrower. Neither the Lender nor First Union shall have any duty to,
and the Borrower hereby releases the Lender and First Union from all
claims of loss or damage caused by the delay or failure to collect or
enforce any of the Receivables or to preserve any rights against any
other party with an interest in the Collateral.
.. ASSIGNMENTS OF RECEIVABLES. Except with respect to Receivables to
which Section 6.1.21 applies, the Borrower will promptly, upon request,
execute and deliver to the Lender written assignments, in form and
content acceptable to the Lender, of specific Receivables or groups of
Receivables; provided, however, the Lien and/or security interest granted
to the Lender under this Agreement shall not be limited in any way to or
by the inclusion or exclusion of Receivables within such assignments.
Receivables so assigned shall secure payment of the Obligations and are
not sold to the Lender whether or not any assignment thereof, which is
separate from this Agreement, is in form absolute.
.. GOVERNMENT ACCOUNTS. The Borrower will immediately notify
the Lender if any of the Receivables arise out of contracts with the
United States or with any other Governmental Authority having a term
exceeding six (6) months and a value exceeding $500,000, and execute any
instruments and take any steps required by the Lender in order that all
moneys due and to become due under such contracts shall be assigned to
the Lender and notice thereof given to the Governmental Authority under
the Federal Assignment of Claims Act or any other applicable Laws. In
addition, the Lender may, with prior notice to the Borrower, discuss the
status of any Government Contract with the contracting officer
responsible for such contract, and the Borrower will cooperate with the
Lender and its agents in connection with such discussions.
<PAGE>
.. INVENTORY. With respect to the Inventory, the Borrower will at such
times as the Borrower has any Inventory: (a) as soon as possible upon
demand by the Lender from time to time, prepare and deliver to the Lender
designations of Inventory specifying the Borrower's cost of Inventory,
the retail price thereof, and such other matters and information relating
to the Inventory as the Lender may reasonably request; (b) keep correct
and accurate records itemizing and describing the kind, type, quality and
quantity of Inventory, the Borrower's cost therefor and the selling price
thereof, all of which records shall be available to the officers,
employees or agents of the Lender upon demand for inspection and copying
thereof; (c) not store any of its Inventory with a bailee, warehouseman
or similar Person without the Lender's prior written consent, which
consent may be conditioned on, among other things, delivery by the
bailee, warehouseman or similar Person to the Lender of warehouse
receipts, in form acceptable to the Lender, in the name of the Lender
evidencing the storage of Inventory and the Lender's interests therein;
and (d) permit the Lender and its agents or representatives to inspect
and examine the Inventory and to check and test the same as to quality,
quantity, value and condition at any time or times hereafter during the
Borrower's usual business hours or at other reasonable times. The
Borrower shall be permitted to sell its Inventory in the ordinary course
of its business until the occurrence of a Default.
.. INSURANCE WITH RESPECT TO EQUIPMENT AND INVENTORY. The Borrower will
(a) maintain hazard insurance with fire and extended coverage and naming
the Lender as an additional insured with loss payable to the Lender as
its respective interest may appear on the Equipment and Inventory in an
amount at least equal to the lesser of the amount of the outstanding
principal amount of the Obligations or the fair market value of the
Equipment and Inventory (but in any event sufficient to avoid any co-
insurance obligations) and with a specific endorsement to each such
insurance policy pursuant to which the insurer agrees to give the Lender
at least thirty (30) days written notice before any alteration or
cancellation of such insurance policy and that no act or default of the
Borrower shall affect the right of the Lender to recover under such
policy in the event of loss or damage; and (b) file with the Lender, upon
its request, a detailed list of the insurance then in effect and stating
the names of the insurance companies, the amounts and rates of the
insurance, dates of the expiration thereof and the properties and risks
covered thereby; and, within thirty (30) days after notice in writing
from the Lender.
.. MAINTENANCE OF THE COLLATERAL. The Borrower will maintain the
Collateral in good working order, saving and excepting ordinary wear and
tear, and will not permit anything to be done to the Collateral which may
materially impair the value thereof. The Lender, or an agent designated
by the Lender, shall be permitted to enter the premises of the Borrower
and examine, audit and inspect the Collateral at any reasonable time and
from time to time with reasonable notice prior to any Default. The Lender
agrees to act in a commercially reasonable manner when inspecting the
premises of the Borrower and when examining, auditing and/or inspecting
the Collateral. The Lender shall not have any duty to, and the Borrower
hereby releases the Lender from all claims of loss or damage caused by
the delay or failure to collect or enforce any of the Receivables or to,
preserve any rights against any other party with an interest in the
Collateral.
<PAGE>
.. EQUIPMENT. The Borrower shall (a) maintain all Equipment as
personalty, (b) not affix any Equipment to any real estate in such manner
as to become a fixture or part of such real estate, and (c) shall hold no
Equipment having an aggregate value in excess of Two Hundred Fifty
Thousand Dollars ($250,000) on a sale on approval basis. The Borrower
hereby declares its intent that, notwithstanding the means of attachment,
no goods of the Borrower hereafter attached to any realty shall be deemed
a fixture, which declaration shall be irrevocable, without the Lender's
consent, until all of the Obligations have been paid in full and all of
the Commitments have been terminated,
.. DEFENSE OF TITLE AND FURTHER ASSURANCES. At its expense the
Borrower will defend the title to the Collateral (and any part thereof),
and promptly upon request execute, acknowledge and deliver any financing
statement, renewal, affidavit, deed, assignment, continuation statement,
security agreement, certificate or other document the Lender may
reasonably require in order to perfect, preserve, maintain, continue,
protect and/or extend the Lien or security interest granted to the Lender
under this Agreement, under any of the other Financing Documents and its
priority. The Borrower will from time to time do whatever the Lender may
reasonably request by way of obtaining, executing, delivering, and/or
filing financing statements, landlords' or mortgagees' waivers, and other
notices and amendments and renewals thereof and the Borrower will take
any and all steps and observe such formalities as the Lender may
reasonably request, in order to create and maintain a valid Lien upon,
pledge of, or paramount security interest in, the Collateral, subject to
the Permitted Liens. The Borrower shall pay to the Lender on demand all
taxes, costs and actual expenses incurred by the Lender in connection
with the preparation, execution, recording and filing of any such
document or instrument. The Borrower shall keep the Collateral free of
all other Liens and rights of third parties, except Permitted Liens. To
the extent that the proceeds of any of the Accounts or Receivables of the
Borrower are expected to become subject to the control of, or in the
possession of, a party other than the Borrower or the Lender, the
Borrower shall cause all such parties to execute and deliver on the
Closing Date security documents, financing statements or other documents
as requested by the Lender and as may be necessary to evidence and/or
perfect the security interest of the Lender in those proceeds. The
Borrower agrees that a copy of a fully executed security agreement and/or
financing statement shall be sufficient to satisfy for all purposes the
requirements of a financing statement as set forth in Article 9 of the
applicable Uniform Commercial Code.
.. BUSINESS NAMES; LOCATIONS. The Borrower will notify the Lender not
less than thirty (30) days prior to (a) any change in the name under
which the Borrower conducts its business, (b) any change of the location
of the chief executive office of the Borrower, and (c) the opening of any
new place of business or the closing of any existing place of business,
and any change in the location of the places where the Collateral, or any
part thereof, or the books and records, or any part thereof, are kept.
<PAGE>
.. PROTECTION OF COLLATERAL. The Borrower agrees that the Lender may
at any time take such steps as the Lender deems reasonably necessary to
protect the Lender's interest in, and to preserve the Collateral,
including, the hiring of such security guards or the placing of other
security protection measures as the Lender deems appropriate, may employ
and maintain at any of the Borrower's premises a custodian who shall have
full authority to do all acts necessary to protect the Lender's interests
in the Collateral and may lease warehouse facilities to which the Lender
may move all or any part of the Collateral to the extent commercially
reasonable. The Borrower agrees to cooperate fully with the Lender's
efforts to preserve the Collateral and will take such actions to preserve
the Collateral as the Lender may reasonably direct. All of the Lender's
expenses of preserving the Collateral, including any reasonable expenses
relating to the compensation and bonding of a custodian, shall be part of
the Enforcement Costs.
.. OPERATING ACCOUNTS. The Borrower will at all times maintain its
primary operating accounts with First Union.
.. MANAGEMENT. The Borrower will at all times keep C.E. Velez and
Gregg Wagner and other people of demonstrated competence in positions of
Senior Management and will notify the Lender of any changes in Senior
Management. The Lender agrees that it will consent to the replacement of
any of person or persons listed above, provided, such person or persons
are promptly replaced by other persons of equal or greater demonstrated
competence.
SECTION . NEGATIVE COVENANTS. So long as any of the Obligations (or
Commitments therefor) shall be outstanding hereunder, the Borrower agrees
with the Lender as follows:
.. CAPITAL STRUCTURE, MERGER, ACQUISITION OR SALE OF ASSETS. (a)
Except as permitted in subsection (b) of this Section, the Borrower shall
not alter or amend its capital structure or authorize any additional
class of equity if as a result of such action the Borrower would own less
than fifty one percent (51%) of any Subsidiary, enter into any merger or
consolidation or amalgamation, windup or dissolve itself (or suffer any
liquidation or dissolution) (except for mergers of Subsidiaries into
existing Subsidiaries or the Borrower) or acquire all or substantially
all the assets of any Person, or sell, lease or otherwise dispose of any
of its assets (except for sales or other dispositions of assets made in
the ordinary course of the Borrower's business which do not, in the
Lender's sole, but reasonable discretion, have a material effect on the
operations of the Borrower, the value of the Collateral or change the
Borrower's present line of business).
(b) The Borrower may request the Lender's consent to any acquisition by
merger, stock purchase or asset purchase of all or substantially all the
assets of any Person or make any investments in any such Person (each an
"Acquisition" and collectively, the "Acquisitions") during the existence
of this Agreement and, PROVIDED, HOWEVER, that each of the following
conditions precedent are in the Lender's discretion satisfied:
<PAGE>
(i) The Lender shall have received and reviewed the pro forma
projections of the Borrower (in form and detail satisfactory to the
Lender in its reasonable discretion) taking into effect the Acquisition,
which pro forma projections demonstrate the Borrower's continued
compliance with all of the material terms of this Agreement throughout
the term hereof, including, but not limited to, the financial covenants
set forth in Sections 6.14, 6.15, 6.16 and 6.17 hereof;
(ii) The Lender shall have received and reviewed a copy of the current
financial statement of the acquired Person (the "Target");
(iii) The Lender shall have received and reviewed a written summary of
the proposed Acquisition;
(iv) The aggregate amount of all Acquisitions does not exceed Five
Million Dollars ($5,000,000) (the "Acquisition Cap");
(v) The Lender shall have received a written certification, in form and
substance satisfactory to the Lender in its reasonable discretion, from a
Responsible Officer of the Borrower that:
(aa) the Target is a going concern;
(bb) the Target is in the same line of business as the Borrower;
(cc) after completion of the Acquisition, the Borrower or any Subsidiary
will own at all times not less than fifty-one percent (51%) of the
Target;
(dd) after giving affect to the Acquisition, the Borrower shall not be in
default under this Agreement or any of the Financing Documents;
(ee) the Borrower does not directly or indirectly assume any Indebtedness
of the Target, other than current accounts payable arising in the
ordinary course of the Target's business;
(ff) the Target is not subject to any litigation, which, if adversely
determined, could when taken as a whole, have a material adverse effect
on the financial condition of the Target; and
(gg) the Target is not subject to contingent liabilities, in an amount
which could, when taken as a whole, have a material adverse effect on
the financial condition of the Target.
<PAGE>
(c) The Bank will within ten (10) Business Days after receipt of all of
the items listed above will give the Borrower written notice if it
disapproves of such Acquisition. (Any Acquisition not disapproved by the
Lender within such ten (10) Business Day period, being called a
"Permitted Acquisition" and collectively, the "Permitted Acquisitions").
(d) For purposes hereof, all consideration incurred in connection with
each Permitted Acquisition including, but not limited to non-compete
agreements and the value of assets, stock, warrants, or other property
transferred, pledged or given in connection with any Permitted
Acquisition shall be included in the calculation of the Acquisition Cap.
(e) Upon completion of each Permitted Acquisition, the
Borrower shall at the Lender's request and at the Borrower's expense,
cause each Target to be added as a co-obligor on this Agreement and the
Financing Documents. Notwithstanding anything set forth herein to the
contrary and without affecting the Lender's right to add any Target as a
co-obligor on this Agreement and the Financing Documents, the assets of a
Target will not be included in the calculation of the Borrowing Base
until such time as such assets are approved by the Lender, which approval
may include, without limitation, the completion of a satisfactory field
examination of such assets. At the time such assets are included in the
Borrowing Base, if at all, the Lender will thereafter not include the
cost of that Permitted Acquisition in calculating the Acquisition Cap.
.. SUBSIDIARIES. Except as otherwise permitted herein, the Borrower
will not create or acquire any Subsidiaries other than the Subsidiaries
identified on the Collateral Disclosure List.
.. ISSUANCE OF STOCK. Other than those in existence as of the date
hereof, the Borrower will not issue, or grant any option or right to
purchase, any of its capital stock, other than (i) pursuant to any
existing employee stock or 401K plans (ii) pursuant to the Borrower's
internal market for stock, (iii) in connection with any Permitted
Acquisition, (iv) as part of any sale to any third party investors, or
(v) as permitted under the Subordinated Debt Loan Documents. In all such
cases, the issuance of such stock will not cause the Borrower to own less
than fifty one percent (51%) of any Subsidiary.
<PAGE>
.. PURCHASE OR REDEMPTION OF SECURITIES, DIVIDEND RESTRICTIONS. Except
(i) in connection with the repurchase of up to One Million Eight Hundred
Thousand Dollars ($1,800,000) of its common stock, including any purchase
in connection with a tender offer, (ii) in connection with any Permitted
Acquisition, or (iii) pursuant to the Borrower's internal market for
stock, the Borrower will not purchase, redeem or otherwise acquire any
shares of its capital stock or warrants now or hereafter outstanding,
declare or pay any dividends thereon (other than stock dividends or stock
splits), apply any of its property or assets to the purchase, redemption
or other retirement of, set apart any sum for the payment of any
dividends on, or for the purchase, redemption, or other retirement of,
make any distribution by reduction of capital or otherwise in respect of,
any shares of any class of capital stock of the Borrower or any
Subsidiary, or any warrants, permit any Subsidiary to purchase or acquire
any shares of any class of capital stock of, or warrants issued by, the
Borrower or any Subsidiary, make any distribution to stockholders or set
aside any funds for any such purpose, and not prepay, purchase or redeem
any Indebtedness for Borrowed Money other than the Obligations and those
prepayments required under the Subordinated Debt Loan Documents.
.. INDEBTEDNESS. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Indebtedness
for Borrowed Money, except:
() the Obligations;
() current accounts payable arising in the ordinary course of the
Borrower's business;
() Indebtedness secured by Permitted Liens;
() Subordinated Indebtedness, provided: (i) such Subordinated
Indebtedness is unsecured (ii) the aggregate amount of such Subordinated
Indebtedness does not exceed Five Million Dollars ($5,000,000) in the
aggregate at any time; and (iii) prior to incurring such additional
Indebtedness the Borrower shall have provided the Lender and the Lender
shall have reviewed and approved pro-forma projections to demonstrate the
Borrower's compliance with the financial covenants set forth in Sections
6.14, 6.15, 6.16 and 6.17 hereof after said Subordinated Indebtedness is
incurred;
() Indebtedness incurred in connection with any Permitted Acquisition
and permitted pursuant to Section 6.2.1(b)(iv)(ee);
() Indebtedness of the Borrower and its Subsidiaries existing on the
date hereof and reflected on the financial statements furnished pursuant
to Section 4.1.11 (Financial Condition); and
() Indebtedness of the Borrower and/or the Subsidiaries set forth in
EXHIBIT "D".
In addition, the Borrower will not use the proceeds of the Loan to pay
any of the outstanding principal on the Subordinated Indebtedness
described in Section 6.2.4(d) above.
<PAGE>
.. INVESTMENTS, LOANS AND OTHER TRANSACTIONS. Except as permitted in
Section 6.2.1 of this Agreement, without the prior written consent of the
Lender, the Borrower will not, and will not permit any of its
Subsidiaries to, (a) make, assume, acquire or continue to hold any
investment in any real property (unless used in connection with its
business and treated as a Fixed or Capital Asset of the Borrower or the
Subsidiary) or any Person, whether by stock purchase, capital
contribution, acquisition of indebtedness of such Person or otherwise
(including, without limitation, investments in any joint venture or
partnership, other than those investments in joint ventures or
partnerships in existence as of the date hereof or those joint ventures
or partnerships formed in the ordinary course of business in connection
with obtaining contracts where a major corporation or a Governmental
Authority is the primary contractor), (b) guaranty or otherwise become
contingently liable for the indebtedness or obligations of any Person,
other than bid bonds of the Borrower in connection with contracts of its
Subsidiaries for purposes of obtaining contracts where a major
corporation or a Governmental Authority is the primary contractor, or (c)
make any loans or advances, or otherwise extend credit to any Person,
except:
() any advance to an officer of the Borrower or of any Subsidiary for
relocation expenses, travel or other business expenses in the ordinary
course of business, provided that the aggregate amount of all such
advances to all officers of the Borrower and its Subsidiaries (taken as a
whole) outstanding at any time shall not exceed the sum of those in
existence or committed to as of the date hereof, in an aggregate amount
not to exceed $1,000,000;
() the endorsement of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business;
() any investment in Cash Equivalents;
() credit extended to customers in the ordinary course of business and
consistent with the customary industry or historical practice of the
Borrower and its Subsidiaries; and
() loans to employees and officers of the Borrower for the purpose of
exercising options to purchase stock in the Borrower and for the payment
of income taxes of such employees and officers which are directly
attributable to the exercise of such options.
.. CAPITAL EXPENDITURES. The Borrower will not, and will not permit
any Subsidiary to, directly or indirectly (by way of the acquisition of
the securities of a Person or otherwise), make any Capital Expenditures
in the aggregate for the Borrower and its Subsidiaries (taken as a whole)
in any fiscal year exceeding Two Million Five Hundred Thousand Dollars
($2,500,000).
<PAGE>
.. STOCK OF SUBSIDIARIES. The Borrower will not sell or otherwise
dispose of any shares of capital stock of any Subsidiary (except in
connection with a merger or consolidation of a Wholly Owned Subsidiary
into the Borrower or another Wholly Owned Subsidiary or with the
dissolution of any Subsidiary) or permit any Subsidiary to issue any
additional shares of its capital stock except PRO RATA to its
stockholder; if the result of such sale, disposition or issuance of
additional shares of stock would cause the Borrower to own less than
fifty one percent (51%) of such Subsidiary.
.. SUBORDINATED INDEBTEDNESS. The Borrower will not, and will not
permit any Subsidiary to make:
() any unscheduled payment of principal of, or interest on, any of the
Subordinated Indebtedness, including, without limitation, the
Subordinated Debt, if a Default then exists hereunder or would result
from such payment;
() any payment of the principal or interest due on the Subordinated
Indebtedness as a result of acceleration thereunder or a mandatory
repurchase thereunder;
() any amendment or modification of or supplement to the documents
evidencing or securing the Subordinated Indebtedness if the effect of
such amendment or modification would be to (i) reduce the maturity of any
payment of principal of or interest on the Subordinated Indebtedness,
(ii) increase the principal amount of or rate of interest on the
Subordinated Indebtedness, (iii) increase any fee payable to the holder
or holders of any Subordinated Indebtedness, (iv) cause the Subordinated
Indebtedness to become secured or collateralized in any manner
whatsoever, or (v) create additional covenants, events of default or
alter the terms of the subordination set forth in any of the Subordinated
Debt Loan Documents;
() payment of principal or interest on the Subordinated Indebtedness
other than when due (without giving effect to any acceleration of
maturity or mandatory repurchase); and
() use of the proceeds of the Loan to pay any principal on any of the
Subordinated Indebtedness.
Notwithstanding anything contained herein to the contrary, the Borrower
may after prior written notice to the Lender prepay all or a portion of
the Subordinated Indebtedness, provided that the Borrower will at the
time of such prepayment either replace that portion of the Subordinated
Indebtedness with an equity investment in the Borrower or any Subsidiary
of a like amount or substitute Subordinated Indebtedness of a like amount
at a cost to the Borrower and its Subsidiaries which is less than the
cost of maintaining the then existing Subordinated Indebtedness being
prepaid.
.. LIENS. The Borrower will not create, incur, assume or suffer to
exist any Lien upon the Collateral, whether now owned or hereafter
acquired, except for Liens securing the Obligations and Permitted Liens.
<PAGE>
.. OTHER BUSINESSES. The Borrower will not engage directly or
indirectly in any business other than its current line of business
described elsewhere in this Agreement.
.. ERISA COMPLIANCE. Neither the Borrower nor any Commonly Controlled
Entity shall: (a) engage in or permit any "prohibited transaction" (as
defined in ERISA); (b) cause any "accumulated funding deficiency" as
defined in ERISA and/or the Internal Revenue Code; (c) terminate any
pension plan in a manner which could result in the imposition of a lien
on the property of the Borrower pursuant to ERISA; (d) terminate or
consent to the termination of any Multiemployer Plan; or (e) incur a
complete or partial withdrawal with respect to any Multiemployer Plan.
.. PROHIBITION ON HAZARDOUS MATERIALS. The Borrower shall not place,
manufacture or store or permit to be placed, manufactured or stored any
Hazardous Materials on any property owned or controlled by the Borrower
or for which the Borrower is responsible other than Hazardous Materials
placed or stored on such property in accordance with applicable Laws in
the ordinary course of the Borrower's business expressly described in
this Agreement.
.. METHOD OF ACCOUNTING. The Borrower shall not change the method of
accounting employed in the preparation of the financial statements
furnished prior to the date of this Agreement to the Lender, unless
required to conform to GAAP and on the condition that the Borrower's
accountants shall furnish such information as the Lender may request to
reconcile the changes with the Borrower's prior financial statements.
.. COMPENSATION. Neither the Borrower nor any of its Subsidiaries will
pay any bonuses, fees, compensation, commissions, salaries, drawing
accounts, or other payments (cash and non-cash), whether direct or
indirect, to any stockholders of the Borrower or its Subsidiaries, or any
Affiliate of the Borrower or its Subsidiaries, other than reasonable
bonuses, compensation for actual services rendered by stockholders in
their capacity as officers or employees of the Borrower or any Subsidiary
and pursuant to any non-compete or other agreements in existence as of
the date hereof which provide for certain payments to officers or
employees of the Borrower or its Subsidiaries, or entered into in
connection with any Permitted Acquisition.
.. TRANSFER OF COLLATERAL. The Borrower will not transfer, or permit
the transfer, to another location of any of the Collateral or the books
and records related to any of the Collateral, without providing the
Lender with thirty (30) days prior written notice thereof, along with
such financing statements or other documents as the Lender deems
necessary in its sole but reasonable discretion to maintain its lien on
the Collateral.
<PAGE>
.. DISPOSITION OF COLLATERAL. The Borrower will not sell, transfer,
assign, convey, lease, assign, transfer or otherwise dispose of the
Collateral, except, prior to an Event of Default, dispositions expressly
permitted elsewhere in this Agreement, the sale of Inventory in the
ordinary course of business, and the sale of unnecessary or obsolete
Equipment, but only if the proceeds of the sale of such Equipment are (a)
used to purchase similar Equipment to replace the unnecessary or obsolete
Equipment or (b) immediately turned over to the Lender for application to
the Obligations.
ARTICLE
DEFAULT AND RIGHTS AND REMEDIES
SECTION . EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute "Events of Default" under the
provisions of this Agreement:
.. FAILURE TO PAY. The failure of the Borrower to pay any of the
Obligations as and when due and payable in accordance with the provisions
of this Agreement, the Notes and/or any of the other Financing Documents;
.. BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or
warranty made in this Agreement or in any report, statement, schedule,
certificate, opinion (including any opinion of counsel for the Borrower),
financial statement or other document furnished in connection with this
Agreement, any of the other Financing Documents, or the Obligations,
shall prove to have been false or misleading when made (or, if
applicable, when reaffirmed) in any material respect and the Borrower
shall have failed to cure said false or misleading representations or
warranties within thirty (30) days after written notice by the Lender to
the Borrower.
.. FAILURE TO COMPLY WITH COVENANTS. The failure of the Borrower to
perform, observe or comply with any covenant, condition or agreement
contained in this Agreement Sections 6.1 hereof or in Section 6.2 of this
Agreement and such failure shall continue for a period of thirty (30)
days after written notice by the Lender to the Borrower.
.. OTHER COVENANTS. The failure of the Borrower to perform, observe or
comply with any covenant, condition or agreement contained in this
Agreement, other than those set forth in Sections 7.1.2 or 7.1.3 above,
which default shall remain unremedied for thirty (30) days after written
notice thereof to the Borrower by the Lender.
.. DEFAULT UNDER OTHER FINANCING DOCUMENTS OR OBLIGATIONS. A default
shall occur under any of the other Financing Documents or under any other
Obligations, and such default is not cured within any applicable grace
period provided therein.
<PAGE>
.. RECEIVER; BANKRUPTCY. The Borrower shall (a) apply for or consent
to the appointment of a receiver, trustee or liquidator of itself or any
of its property, (b) admit in writing its inability to pay its debts as
they mature, (c) make a general assignment for the benefit of creditors,
(d) be adjudicated a bankrupt or insolvent, (e) file a voluntary petition
in bankruptcy or a petition or an answer seeking or consenting to
reorganization or an arrangement with creditors or to take advantage of
any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding
under any such law, or take corporate action for the purposes of
effecting any of the foregoing, or (f) by any act indicate its consent
to, approval of or acquiescence in any such proceeding or the appointment
of any receiver of or trustee for any of its property, or suffer any such
receivership, trusteeship or proceeding to continue undischarged for a
period of sixty (60) days, or (g) by any act indicate its consent to,
approval of or acquiescence in any order, judgment or decree by any court
of competent jurisdiction or any Governmental Authority enjoining or
otherwise prohibiting the operation of a material portion of the
Borrower's business or the use or disposition of a material portion of
the Borrower's assets.
.. INVOLUNTARY BANKRUPTCY, ETC. (a) An order for relief shall be
entered in any involuntary case brought against the Borrower under the
Bankruptcy Code, or (b) any such case shall be commenced against the
Borrower and shall not be dismissed within sixty (60) days after the
filing of the petition, or (c) an order, judgment or decree under any
other Law is entered by any court of competent jurisdiction or by any
other Governmental Authority on the application of a Governmental
Authority or of a Person other than the Borrower (i) adjudicating the
Borrower bankrupt or insolvent, or (ii) appointing a receiver, trustee or
liquidator of the Borrower, or of a material portion of the Borrower's
assets, or (iii) enjoining, prohibiting or otherwise limiting the
operation of a material portion of the Borrower's business or the use or
disposition of a material portion of the Borrower's assets, and such
order, judgment or decree continues unstayed and in effect for a period
of thirty (30) days from the date entered.
.. JUDGMENT. Unless adequately insured in the opinion of the Lender,
the entry of a final judgment for the payment of money involving more
than $500,000 against the Borrower, and the failure by the Borrower to
discharge the same, or cause it to be discharged, within thirty (30) days
from the date of the order, decree or process under which or pursuant to
which such judgment was entered, or to secure a stay of execution pending
appeal of such judgment.
.. EXECUTION; ATTACHMENT. Any execution or attachment shall be levied
against the Collateral, or any part thereof, and such execution or
attachment shall not be set aside, discharged or stayed within thirty
(30) days after the same shall have been levied.
.. DEFAULT UNDER OTHER BORROWINGS. Default shall be made with respect
to any Indebtedness for Borrowed Money (other than the Loans, but
including any Subordinated Indebtedness) if the effect of such default is
to accelerate the maturity of such evidence of the Indebtedness for
Borrowed Money or to permit the holder or obligee thereof or other party
thereto to cause any indebtedness to become due prior to its stated
maturity.
<PAGE>
.. LIQUIDATION, TERMINATION, DISSOLUTION, CHANGE IN MANAGEMENT, ETC.
If the Borrower shall liquidate, dissolve or terminate its existence or
shall suspend or terminate a substantial portion of its business
operations, without the prior written consent of the Lender or if C.E.
Velez at any time owns less than forty percent (40%) of the Borrower or
if on a combined basis C.E. Velez, the Borrower's 401K plan, and the
Borrower's stock ownership plan fail at any time to maintain a
controlling interest in the Borrower.
Notwithstanding anything contained in Sections 7.1.1 through 7.1.11
hereof to the contrary, the Borrower shall only be entitled to one (1)
grace and/or cure period for any Event of Default during any period of
three hundred sixty five (365) consecutive days.
SECTION . REMEDIES. Upon the occurrence of any Event of Default, the
Lender may at any time thereafter exercise any one or more of the
following rights, powers or remedies:
.. ACCELERATION. The Lender may declare the Obligations to be
immediately due and payable, notwithstanding anything contained in this
Agreement or in any of the other Financing Documents to the contrary,
without presentment, demand, protest, notice of protest or of dishonor,
or other notice of any kind, all of which the Borrower hereby waives.
.. FURTHER ADVANCES. The Lender may from time to time without notice
to the Borrower suspend, terminate or limit any further loans or other
extensions of credit under this Agreement and under any of the other
Financing Documents. Further, upon the occurrence of an Event of Default
or Default specified in Sections 7.1.6 (Receiver; Bankruptcy) or 7.1.7
(Involuntary Bankruptcy, etc.) above, the Revolving Credit Commitment and
any agreement in any of the Financing Documents to provide additional
credit shall immediately and automatically terminate and the unpaid
principal amount of the Notes (with accrued interest thereon) and all
other Obligations then outstanding, shall immediately become due and
payable without further action of any kind and without presentment,
demand, protest or notice of any kind, all of which are hereby expressly
waived by the Borrower.
.. UNIFORM COMMERCIAL CODE. The Lender shall have all of the rights
and remedies of a secured party under the applicable Uniform Commercial
Code and other applicable Laws. Upon demand by the Lender, the Borrower
shall assemble the Collateral and make it available to the Lender, at a
place designated by the Lender. The Lender or its agents may without
notice from time to time enter upon the Borrower's premises to take
possession of the Collateral, to remove it, to render it unusable, to
process it or otherwise prepare it for sale, or to sell or otherwise
dispose of it.
<PAGE>
Any written notice of the sale, disposition or other intended action by
the Lender with respect to the Collateral which is sent in accordance
with Section 8.1 hereof to the Borrower at the address set forth in
ARTICLE 8 of this Agreement, or such other address of the Borrower which
may from time to time be shown on the Lender's records, at least ten (10)
days prior to such sale, disposition or other action, shall constitute
commercially reasonable notice to the Borrower. The Lender may
alternatively or additionally give such notice in any other commercially
reasonable manner. Nothing in this Agreement shall require the Lender to
give any notice not required by applicable Laws.
If any consent, approval, or authorization of any state, municipal or
other governmental department, agency or authority or of any person, or
any person, corporation, partnership or other entity having any interest
therein, should be necessary to effectuate any sale or other disposition
of the Collateral, the Borrower agrees to execute all such applications
and other instruments, and to take all other action, as may be required
in connection with securing any such consent, approval or authorization.
.. SPECIFIC RIGHTS WITH REGARD TO COLLATERAL. In addition to all other
rights and remedies provided hereunder or as shall exist at law or in
equity from time to time, the Lender may (but shall be under no
obligation to), without notice to the Borrower, and the Borrower hereby
irrevocably appoints the Lender as its attorney-in-fact, with power of
substitution, in the name of the Lender or in the name of the Borrower or
otherwise, for the use and benefit of the Lender, but at the cost and
expense of the Borrower and without notice to the Borrower:
() request any Account Debtor obligated on any of the
Accounts to make payments thereon directly to the Lender, with the Lender
taking control of the cash and non-cash proceeds thereof;
() compromise, extend or renew any of the Collateral or deal with the
same as it may deem advisable;
() make exchanges, substitutions or surrenders of all or any part of
the Collateral;
() copy, transcribe, or remove from any place of business of the
Borrower, all books, records, ledger sheets, correspondence, invoices
and documents, relating to or evidencing any of the Collateral or without
cost or expense to the Lender, make such use of the Borrower's place(s)
of business as may be reasonably necessary to administer, control and
collect the Collateral;
() repair, alter or supply goods if necessary to fulfill in whole or in
part the purchase order of any Account Debtor;
() demand, collect, receipt for and give renewals, extensions,
discharges and releases of any of the Collateral;
() institute and prosecute legal and equitable proceedings to enforce
collection of, or realize upon, any of the Collateral;
<PAGE>
() settle, renew, extend, compromise, compound, exchange or adjust
claims in respect of any of the Collateral or any legal proceedings
brought in respect thereof;
() endorse or sign the name of the Borrower upon any items of payment,
certificates of title, instruments, securities, stock powers, documents,
documents of title, or other writing relating to or part of the
Collateral and on any Proof of Claim in Bankruptcy against an Account
Debtor;
() notify the Post Office authorities to change the address for the
delivery of mail to the Borrower to such address or Post Office Box as
the Lender may designate and receive and open all mail addressed to the
Borrower; and
() take any other action necessary or beneficial to realize upon or
dispose of the Collateral.
.. APPLICATION OF PROCEEDS. Any proceeds of sale or other disposition
of the Collateral will be applied by the Lender to the payment of the
Enforcement Costs, and any balance of such proceeds will be applied by
the Lender to the payment of the balance of the Obligations in such order
and manner of application as the Lender may from time to time in its sole
and absolute discretion determine. If the sale or other disposition of
the Collateral fails to fully satisfy the Obligations, the Borrower shall
remain liable to the Lender for any deficiency.
.. PERFORMANCE BY LENDER After the occurrence of any Default, the
Lender without further notice to or demand upon the Borrower and without
waiving or releasing any of the Obligations or any Default or Event of
Default, may (but shall be under no obligation to) at any time thereafter
make such payment or perform such act for the account and at the expense
of the Borrower, and may enter upon the premises of the Borrower for that
purpose and take all such action thereon as the Lender may consider
necessary or appropriate for such purpose and the Borrower hereby
irrevocably appoints the Lender as its attorney-in-fact to do so, with
power of substitution, in the name of the Lender or in the name of the
Borrower or otherwise, for the use and benefit of the Lender, but at the
cost and expense of the Borrower and without notice to the Borrower. All
sums so paid or advanced by the Lender together with interest thereon
from the date of payment, advance or incurring until paid in full at the
Post-Default Rate and all costs and expenses, shall be deemed part of the
Enforcement Costs, shall be paid by the Borrower to the Lender on demand,
and shall constitute and become a part of the Obligations.
<PAGE>
.. OTHER REMEDIES. The Lender may from time to time proceed to protect
or enforce its rights by an action or actions at law or in equity or by
any other appropriate proceeding, whether for the specific performance of
any of the covenants contained in this Agreement or in any of the other
Financing Documents, or for an injunction against the violation of any of
the terms of this Agreement or any of the other Financing Documents, or
in aid of the exercise or execution of any right, remedy or power granted
in this Agreement, the Financing Documents, and/or applicable Laws. The
Lender is authorized to offset and apply to all or any part of the
Obligations all moneys, credits and other property of any nature
whatsoever of the Borrower now or at any time hereafter in the possession
of, in transit to or from, under the control or custody of, or on deposit
with, the Lender.
ARTICLE
MISCELLANEOUS
SECTION . NOTICES. All notices, requests and demands to or upon the
parties to this Agreement shall be in writing and shall be deemed to have
been given or made when delivered by hand on a Business Day, or two (2)
days after the date when deposited in the mail, postage prepaid by
registered or certified mail, return receipt requested, or when sent by
overnight courier, on the Business Day next following the day on which
the notice is delivered to such overnight courier, addressed as follows:
Borrower: CTA Incorporated
6116 Executive Boulevard
Suite 800
Rockville, Maryland 20852
Mr. Gregory H. Wagner, Chief
Financial Officer and EVP
With a copy to: Richard A. Steinwurtzel, Esq.
Fried, Frank, Harris, Shriver & Jacobson
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Lender: FIRST UNION COMMERCIAL CORPORATION
1970 Chain Bridge Road, Fifth Floor
McLean, Virginia 22102
Attention: Barbara Boehm, Vice President
with a copy to: Richard M. Pollak, Esquire
Ober, Kaler, Grimes & Shriver
a Professional Corporation
1401 H Street, N.W. Suite 500
Washington, D.C. 20005
<PAGE>
By written notice, each party to this Agreement may change the address to
which notice is given to that party, provided that such changed notice
shall include a street address to which notices may be delivered by
overnight courier in the ordinary course on any Business Day.
SECTION . AMENDMENTS; WAIVERS. This Agreement and the other Financing
Documents may not be amended, modified, or changed in any respect except
by an agreement in writing signed by the Lender and the Borrower. No
waiver of any provision of this Agreement or of any of the other
Financing Documents, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in
writing. No course of dealing between the Borrower and the Lender and no
act or failure to act from time to time on the part of the Lender shall
constitute a waiver, amendment or modification of any provision of this
Agreement or any of the other Financing Documents or any right or remedy
under this Agreement, under any of the other Financing Documents or under
applicable Laws.
Without implying any limitation on the foregoing:
() Any waiver or consent shall be effective only in the specific
instance, for the terms and purpose for which given, subject to such
conditions as the Lender may specify in any such instrument.
() No waiver of any Default or Event of Default shall extend to any
subsequent or other Default or Event of Default, or impair any right
consequent thereto.
() No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in the same, similar or
other circumstance.
() No failure or delay by the Lender to insist upon the strict
performance of any term, condition, covenant or agreement of this
Agreement or of any of the other Financing Documents, or to exercise any
right, power or remedy consequent upon a breach thereof, shall constitute
a waiver, amendment or modification 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 any time or times.
() By accepting payment after the due date of any amount payable under
this Agreement or under any of the other Financing Documents, the Lender
shall not be deemed to waive the right either to require prompt payment
when due of all other amounts payable under this Agreement or under any
of the other Financing Documents, or to declare a default for failure to
effect such prompt payment of any such other amount.
<PAGE>
SECTION . CUMULATIVE REMEDIES. The rights, powers and remedies provided
in this Agreement and in the other Financing Documents are cumulative,
may be exercised concurrently or separately, may be exercised from time
to time and in such order as the Lender shall determine and are in
addition to, and not exclusive of, rights, powers and remedies provided
by existing or future applicable Laws. In order to entitle the Lender to
exercise any remedy reserved to it in this Agreement, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Agreement. Without limiting the generality of the
foregoing, the Lender may:
() proceed against the Borrower or any other Person who may be liable
for all or any part of the Obligations;
() proceed against the Borrower with or without proceeding under any of
the other Financing Documents or against any Collateral or other
collateral and security for all or any part of the Obligations;
() without reducing or impairing the obligation of the Borrower and
without notice, release or compromise with any guarantor or other Person
liable for all or any part of the Obligations under the Financing
Documents or otherwise;
() without reducing or impairing the obligations of the Borrower and
without notice thereof: () fail to perfect the Lien in any or all
Collateral or to release any or all the Collateral or to accept
substitute Collateral, () approve the making of advances under the
Revolving Loan under this Agreement, () waive any provision of this
Agreement or the other Financing Documents, () exercise or fail to
exercise rights of set-off or other rights, or () accept partial payments
or extend from time to time the maturity of all or any part of the
Obligations.
SECTION . SEVERABILITY. In case one or more provisions, or part thereof,
contained in this Agreement or in the other Financing Documents shall be
invalid, illegal or unenforceable in any respect under any Law, then
without need for any further agreement, notice or action:
() the validity, legality and enforceability of the remaining
provisions shall remain effective and binding on the parties thereto and
shall not be affected or impaired thereby;
() the obligation to be fulfilled shall be reduced to the limit of such
validity;
() if such provision or part thereof pertains to repayment of the
Obligations, then, at the sole and absolute discretion of the Lender, all
of the Obligations of the Borrower to the Lender shall become immediately
due and payable; and
<PAGE>
() if affected provision or part thereof does not pertain to repayment
of the Obligations, but operates or would prospectively operate to
invalidate this Agreement in whole or in part, then such provision or
part thereof only shall be void, and the remainder of this Agreement
shall remain operative and in full force and effect.
SECTION . ASSIGNMENTS BY LENDER. The Lender may, without notice to, or
consent of, the Borrower, sell, assign or transfer to or participate with
any Person or Persons all or any part of the Obligations, and each such
Person or Persons shall have the right to enforce the provisions of this
Agreement and any of the other Financing Documents as fully as the
Lender, provided that the Lender shall continue to have the unimpaired
right to enforce the provisions of this Agreement and any of the other
Financing Documents as to so much of the Obligations that the Lender has
not sold, assigned or transferred. In connection with the foregoing, the
Lender shall have the right to disclose to any such actual or potential
purchaser, assignee, transferee or participant all financial records,
information, reports, financial statements and documents obtained in
connection with this Agreement and any of the other Financing Documents
or otherwise.
SECTION . SUCCESSORS AND ASSIGNS. This Agreement and all other Financing
Documents shall be binding upon and inure to the benefit of the Borrower
and the Lender and their respective successors and assigns, except that
the Borrower shall not have the right to assign its rights hereunder or
any interest herein without the prior written consent of the Lender.
SECTION . CONTINUING AGREEMENTS. All covenants, agreements,
representations and warranties made by the Borrower in this Agreement, in
any of the other Financing Documents, and in any certificate delivered
pursuant hereto or thereto shall survive the making by the Lender of the
Loans and the execution and delivery of the Notes, shall be binding upon
the Borrower regardless of how long before or after the date hereof any
of the Obligations were or are incurred, and shall continue in full force
and effect so long as any of the Obligations are outstanding and unpaid.
From time to time upon the Lender's request, and as a condition of the
release of any one or more of the Security Documents, the Borrower and
other Persons obligated with respect to the Obligations shall provide the
Lender with such acknowledgments and agreements as the Lender may require
to the effect that there exists no defenses, rights of setoff or
recoupment, claims, counterclaims, actions or causes of action of any
kind or nature whatsoever against the Lender, its agents and others, or
to the extent there are, the same are waived and released.
<PAGE>
SECTION . ENFORCEMENT COSTS. The Borrower agrees to pay to the Lender on
demand all Enforcement Costs, together with interest thereon from the
date incurred or advanced until paid in full at a per annum rate of
interest equal at all times to the Post-Default Rate. Enforcement Costs
shall be immediately due and payable at the time advanced or incurred,
whichever is earlier. Without implying any limitation on the foregoing,
the Borrower agrees, as part of the Enforcement Costs, to pay upon demand
any and all stamp and other Taxes and fees payable or determined to be
payable in connection with the execution and delivery of this Agreement
and the other Financing Documents and to save the Lender harmless from
and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay any Taxes or fees referred to in this
Section. The provisions of this Section shall survive the execution and
delivery of this Agreement, the repayment of the other Obligations and
shall survive the termination of this Agreement.
SECTION . APPLICABLE LAW; JURISDICTION.
.. As a material inducement to the Lender to enter into this Agreement,
the Borrower acknowledges and agrees that the Financing Documents,
including, this Agreement, shall be governed by the Laws of the State, as
if each of the Financing Documents and this Agreement had each been
executed, delivered, administered and performed solely within the State
even though for the convenience and at the request of the Borrower, one
or more of the Financing Documents may be executed elsewhere. The Lender
acknowledges, however, that remedies under certain of the Financing
Documents which relate to property outside the State may be subject to
the laws of the state in which the property is located.
.. The Borrower irrevocably submits to the jurisdiction of any state or
federal court sitting in the State over any suit, action or proceeding
arising out of or relating to this Agreement or any of the other
Financing Documents. The Borrower irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding brought
in any such court and 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 and may be
enforced in any court in which the Borrower is subject to jurisdiction,
by a suit upon such judgment, PROVIDED that service of process is
effected upon the Borrower in one of the manners specified in this
Section or as otherwise permitted by applicable Laws.
.. The Borrower hereby irrevocably designates and appoints The
Corporation Trust, Incorporated, 32 South Street, Baltimore, Maryland, as
the Borrower's authorized agent to receive on the Borrower's behalf
service of any and all process that may be served in any suit, action or
proceeding of the nature referred to in this Section in any state or
federal court sitting in the State. If such agent shall cease so to act,
the Borrower shall irrevocably designate and appoint without delay
another such agent in the State satisfactory to the Lender and shall
promptly deliver to the Lender evidence in writing of such other agent's
acceptance of such appointment and its agreement that such appointment
shall be irrevocable.
<PAGE>
.. The Borrower hereby consents to process being served in any suit,
action or proceeding of the nature referred to in this Section by (i) the
mailing of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to the Borrower at the Borrower's
address designated in or pursuant to Section 8.1 hereof, and (ii) serving
a copy thereof upon the agent, if any, designated and appointed by the
Borrower as the Borrower's agent for service of process by or pursuant to
this Section. The Borrower irrevocably 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 the Borrower. Nothing in this Section shall affect the
right of the Lender to serve process in any manner otherwise permitted by
law or limit the right of the Lender otherwise to bring proceedings
against the Borrower in the courts of any jurisdiction or jurisdictions.
SECTION . DUPLICATE ORIGINALS AND COUNTERPARTS. This Agreement may be
executed in any number of duplicate originals or counterparts, each of
such duplicate originals or counterparts shall be deemed to be an
original and all taken together shall constitute but one and the same
instrument.
SECTION . HEADINGS. The headings in this Agreement are included herein
for convenience only, shall not constitute a part of this Agreement for
any other purpose, and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
SECTION . NO AGENCY. Nothing herein contained shall be construed to
constitute the Borrower as the Lender's agent for any purpose whatsoever
or to permit the Borrower to pledge any of the Lender's credit. The
Lender shall not be responsible nor liable for any shortage, discrepancy,
damage, loss or destruction of any part of the Collateral wherever the
same may be located and regardless of the cause thereof. The Lender
shall not, by anything herein or in any of the Financing Documents or
otherwise, assume any of the Borrower's obligations under any contract or
agreement assigned to the Lender, and the Lender shall not be responsible
in any way for the performance by the Borrower of any of the terms and
conditions thereof.
SECTION . DATE OF PAYMENT. Should the principal of or interest on the
Notes become due and payable on other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and in the
case of principal, interest shall be payable thereon at the rate per
annum specified in the Notes during such extension.
SECTION . ENTIRE AGREEMENT. This Agreement is intended by the Lender and
the Borrower to be a complete, exclusive and final expression of the
agreements contained herein. Neither the Lender nor the Borrower shall
hereafter have any rights under any prior agreements pertaining to the
matters addressed by this Agreement but shall look solely to this
Agreement for definition and determination of all of their respective
rights, liabilities and responsibilities under this Agreement.
<PAGE>
SECTION . WAIVER OF TRIAL BY JURY. THE BORROWER AND THE LENDER HEREBY
JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
WHICH THE BORROWER AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN
ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING
DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF
TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS
AGREEMENT.
This waiver is knowingly, willingly and voluntarily made by the Borrower
and the Lender, and the Borrower and the Lender hereby represent that no
representations of fact or opinion have been made by any individual to
induce this waiver of trial by jury or to in any way modify or nullify
its effect. The Borrower and the Lender further represent that they have
been represented in the signing of this Agreement and in the making of
this waiver by independent legal counsel, selected of their own free
will, and that they have had the opportunity to discuss this waiver with
counsel.
SECTION . LIABILITY OF THE LENDER. The Borrower hereby agrees that the
Lender shall not be chargeable for any negligence, mistake, act or
omission of any accountant, examiner, agency or attorney employed by the
Lender in making examinations, investigations or collections, or
otherwise in perfecting, maintaining, protecting or realizing upon any
lien or security interest or any other interest in the Collateral or
other security for the Obligations, other than for errors or mistakes,
which arise directly from the Lender's gross negligence or willful
misconduct.
By inspecting the Collateral or any other properties of the Borrower or
by accepting or approving anything required to be observed, performed or
fulfilled by the Borrower or to be given to the Lender pursuant to this
Agreement or any of the other Financing Documents, the Lender shall not
be deemed to have warranted or represented the condition, sufficiency,
legality, effectiveness or legal effect of the same, and such acceptance
or approval shall not constitute any warranty or representation with
respect thereto by the Lender.
SECTION . ARBITRATION. Upon demand of any party hereto, whether
made before or after institution of any judicial proceeding, any dispute,
claim or controversy arising out of, connected with or relating to this
Agreement and other Financing Documents ("Disputes") between or among
parties to this Agreement shall be resolved by binding arbitration as
provided herein. Institution of a judicial proceeding by a party does not
waive the right of that party to demand arbitration hereunder. Disputes
may include, without limitation, tort claims, counterclaims, disputes as
to whether a matter is subject to arbitration, claims brought as class
actions, claims arising from Financing Documents executed in the future,
or claims arising out of or connected with the transaction reflected by
this Agreement.
<PAGE>
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA") and Title 9 of the U.S.
Code. All arbitration hearings shall be conducted in the city in which
the office of Lender first stated above is located. The expedited
procedures set forth in Rule 51 ET SEQ. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be
entered in any court having jurisdiction. The panel from which all
arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired
judge from the highest court of general jurisdiction, state or Federal,
of the state where the hearing will be conducted or if such person is not
available to serve, the single arbitrator may be a licensed attorney.
Notwithstanding the foregoing, this arbitration provision does not apply
to Disputes under or related to swap agreements.
SECTION . PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the
preceding binding arbitration provisions, Lender and Borrower agree to
preserve, without diminution, certain remedies that any party hereto may
employ or exercise freely, independently or in connection with an
arbitration proceeding or after an arbitration action is brought. Lender
and Borrower shall have the right to proceed in any court of proper
jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of sale granted
under Financing Documents or under applicable law or by judicial
foreclosure and sale, including a proceeding to confirm the sale; (ii)
all rights of self-help including peaceful occupation of real property
and collection of rents, set-off, and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Preservation of these
remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a Dispute.
The Borrower and Lender agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby
waive any right or claim to punitive or exemplary damages they have now
or which may arise in the future in connection with any Dispute whether
the Dispute is resolved by arbitration or judicially.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have executed and
delivered this Agreement under their respective seals as of the day and
year first written above.
WITNESS/ATTEST: CTA INCORPORATED
_______________________
By:________________________________(SEAL)
Gregory H. Wagner
Executive Vice President and Chief Financial
Officer
<PAGE>
FIRST UNION COMMERCIAL
CORPORATION
By:________________________________(SEAL)
Barbara Boehm
Vice President
<PAGE>
LIST OF EXHIBITS
A-1. Revolving Credit Note
A-2. Term Note
B. Litigation
C. Permitted Liens
<PAGE>
EXHIBIT B
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") dated November 21, 1997,
among Dr. C. E. Velez ("Velez"), Mr. B. A. Claussen ("Claussen") and Mr.
Terry J. Piddington ("Piddington") (collectively, the "Sellers") and
John O. Wagner, as the trustee (the "Trustee") of the CTA INCORPORATED
EMPLOYEE STOCK OWNERSHIP PLAN TRUST (the "Trust"), which implements and
forms a part of the CTA INCORPORATED EMPLOYEE STOCK OWNERSHIP PLAN (the
"Plan"). The Trust and the Plan are hereinafter collectively referred to
as the "ESOP".
R E C I T A L S:
WHEREAS, the Sellers collectively own 3,191,503 shares of common
stock, par value $.01 per share ("Common Stock") of CTA INCORPORATED, a
Colorado corporation ("CTA") and Sellers desire to sell to the Trustee and
the Trustee desires to purchase from Sellers certain of these shares in
accordance with the terms of this Agreement.
WHEREAS, the board of directors of the Company by unanimous resolution
has waived the Company's right of first refusal, if any, with respect to
any and all shares of the Seller's Common Stock to be sold hereby.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereby agree as follows:
ARTICLE 1
SALE OF STOCK
1.1 VELEZ SALE. Subject to the terms and conditions of this Agreement, at
the Closing (defined below), Velez shall sell to the Trustee, and the
Trustee shall purchase from Velez, 228,960 shares of Common Stock (the
"Velez Shares") for a per share purchase price of $10.10 and a total
purchase price of $2,312,496.00.
1.2 CLAUSSEN SALE. Subject to the terms and conditions of this
Agreement, at the Closing (defined below), Claussen shall sell to the
Trustee, and the Trustee shall purchase from Claussen, 39,979 shares of
Common Stock ( the "Claussen Shares") for a per share purchase price of
$10.10 and a total purchase price of $403,787.90.
1.3 PIDDINGTON SALE. Subject to the terms and conditions of this
Agreement, at the Closing (defined below), Piddington shall sell to the
Trustee, and the Trustee shall purchase from Piddington, 24,000 shares of
Common Stock (the "Piddington Shares") for a per share purchase price of
$10.10 and a total purchase price of $242,400.
ARTICLE 2
CLOSING
2.1 TIME AND PLACE. The exchange of items described in Section 2.2
below (the "Closing") shall be held at the offices of CTA, located at 6116
Executive Boulevard, Suite 800, Rockville, Maryland 20852, at 10 a.m.,
local time, on November 21, 1997, or at such other time and place as shall
be mutually agreed upon by the parties. The date of the Closing is
sometimes referred to herein as the "Closing Date."
2.2 DELIVERIES. On the Closing Date (a) the Trustee shall deliver to
each Seller payment, by federal wire transfer or cashier's check,
representing the purchase price in accordance with Sections 1.1, 1.2 and
1.3 above; (b) the Sellers shall deliver to the Trustee certificates
representing the Common Stock described in Sections 1.1, 1.2 and 1.3 above,
duly endorsed to the Trustee or accompanied by duly executed stock powers,
in transferable form with any requisite stock transfer stamps attached; and
(c) the parties shall deliver all other documents or agreements required by
this Agreement.
ARTICLE 3
VELEZ'S REPRESENTATIONS AND WARRANTIES
Velez represents and warrants to the Trustee as follows:
3.1 TITLE TO STOCK. Velez is the record and beneficial owner of the
Velez Shares, which, as of Closing, shall be free and clear of any security
interest, claim, lien, pledge, option, encumbrance or restriction (on
transferability or otherwise). The delivery to the Trustee on the Closing
Date of certificates for the Velez Shares will convey to the Trustee lawful
and valid title thereto, free and clear of any security interest, claim,
lien, pledge, option, encumbrance or restriction whatsoever.
3.2 NECESSARY AUTHORITY; ENFORCEABILITY. Velez has the legal
competence to enter into, deliver and perform this Agreement and to
consummate the transactions contemplated herein. This Agreement has been
duly executed and delivered by Velez, and constitutes the legal, valid and
binding obligations of Velez enforceable against Velez in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally now or hereafter in effect, and subject to the availability of
equitable remedies.
3.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by Velez and Velez's consummation of the transactions
contemplated hereby, do not and will not (i) require the consent, approval,
authorization, order, filing, registration or qualification of or with any
court, governmental authority or third person, (ii) conflict with or result
in any material violation of or default under any provision of any
mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise or license to which Velez is party or by which
he may be bound, (iii) violate any law, ordinance, rule, regulation,
judgment, order or decree applicable to Velez, or (iv) result in the
creation of any security interest, claim, lien, charge or encumbrance upon
any of the Velez Shares.
3.4 NO BROKERS. Velez has not entered into any contract, arrangement
or understanding with any person or incurred any liability which would
result in the obligation of any person to pay any finder's fees, brokerage
or agent's commissions or other like payments in connection with this
Agreement or the consummation of the transactions contemplated hereby.
ARTICLE 4
CLAUSSEN'S REPRESENTATIONS AND WARRANTIES
Claussen represents and warrants to the Trustee as follows:
4.1 TITLE TO STOCK. Claussen is the record and beneficial owner of
the Claussen Shares, which, as of Closing, shall be free and clear of any
security interest, claim, lien, pledge, option, encumbrance or restriction
(on transferability or otherwise). The delivery to the Trustee on the
Closing Date of certificates for the Claussen Shares will convey to the
Trustee lawful and valid title thereto, free and clear of any security
interest, claim, lien, pledge, option, encumbrance or restriction
whatsoever.
4.2 NECESSARY AUTHORITY; ENFORCEABILITY. Claussen has the legal
competence to enter into, deliver and perform this Agreement and to
consummate the transactions contemplated herein. This Agreement has been
duly executed and delivered by Claussen, and constitutes the legal, valid
and binding obligations of Claussen enforceable against Claussen in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of
creditors' rights generally now or hereafter in effect, and subject to the
availability of equitable remedies.
4.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by Claussen and Claussen's consummation of the transactions
contemplated hereby, do not and will not (i) require the consent, approval,
authorization, order, filing, registration or qualification of or with any
court, governmental authority or third person, (ii) conflict with or result
in any material violation of or default under any provision of any
mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise or license to which Claussen is party or by
which he may be bound, (iii) violate any law, ordinance, rule, regulation,
judgment, order or decree applicable to Claussen, or (iv) result in the
creation of any security interest, claim, lien, charge or encumbrance upon
any of the Claussen Shares.
4.4 NO BROKERS. Claussen has not entered into any contract,
arrangement or understanding with any person or incurred any liability
which would result in the obligation of any person to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection
with this Agreement or the consummation of the transactions contemplated
hereby.
ARTICLE 5
PIDDINGTON'S REPRESENTATIONS AND WARRANTIES
Piddington represents and warrants to the Trustee as follows:
5.1 TITLE TO STOCK. Piddington is the record and beneficial owner of
the Piddington Shares, which, as of Closing, shall be free and clear of any
security interest, claim, lien, pledge, option, encumbrance or restriction
(on transferability or otherwise). The delivery to the Trustee on the
Closing Date of certificates for the Piddington Shares will convey to the
Trustee lawful and valid title thereto, free and clear of any security
interest, claim, lien, pledge, option or encumbrance or restriction
whatsoever.
5.2 NECESSARY AUTHORITY; ENFORCEABILITY. Piddington has the legal
competence to enter into, deliver and perform this Agreement and to
consummate the transactions contemplated herein. This Agreement has been
duly executed and delivered by Piddington, and constitutes the legal, valid
and binding obligations of Piddington enforceable against Piddington in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of
creditors' rights generally now or hereafter in effect, and subject to the
availability of equitable remedies.
5.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement by Piddington and Piddington's consummation of the transactions
contemplated hereby, do not and will not (i) require the consent, approval,
authorization, order, filing, registration or qualification of or with any
court, governmental authority or third person, (ii) conflict with or result
in any material violation of or default under any provision of any
mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise or license to which Piddington is party or by
which he may be bound, (iii) violate any law, ordinance, rule, regulation,
judgment, order or decree applicable to Piddington, or (iv) result in the
creation of any security interest, claim, lien, charge or encumbrance upon
any of the Piddington Shares.
5.4 NO BROKERS. Piddington has not entered into any contract,
arrangement or understanding with any person or incurred any liability
which would result in the obligation of any person to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection
with this Agreement or the consummation of the transactions contemplated
hereby.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE
The Trustee, in his capacity as such, represents and warrants to the
Sellers as follows:
6.1 NECESSARY AUTHORITY. The Trustee has full power and authority
under the ESOP to execute and deliver this Agreement on behalf of the ESOP
and to consummate the transactions contemplated hereby. This Agreement has
been duly authorized, executed and delivered by the Trustee on behalf of
the ESOP, and constitutes the legal, valid and binding obligation of the
ESOP, enforceable against the ESOP in accordance with its terms, except as
the same may be limited by the Employee Retirement Income Security Act of
1974, as amended from time to time ("ERISA"), bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally now or hereafter in effect, and subject to the availability of
equitable remedies.
6.2 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Trustee, in its capacity as such and on behalf of the
ESOP, and the consummation of the transactions contemplated hereby do not
and will not (a) require the consent, approval, authorization, order,
filing, registration or qualification of or with any court, government
authority or third person; (b) conflict with or result in the breach of any
provision of, or constitute a default under, the ESOP or any agreement,
indenture or other instrument to which the Trustee, in its capacity as
such, or the ESOP, is a party or by which it or its assets may be bound; or
(c) violate any law, ordinance, rule, regulation, judgment, order or decree
binding upon the Trustee, in its capacity as such, or the ESOP or give rise
to any liability to the ESOP under Title I of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended from time to time (the "Code").
6.3 QUALIFICATION. The ESOP is, in form, an "employee stock
ownership plan" within the meaning of Section 4975(e)(7) of the Code and,
in form, qualifies under Section 401(a) of the Code. The Trust has been
duly constituted in accordance with valid and binding trust instruments, is
validly existing and, in form, qualifies under Section 501(a) of the Code.
6.4 INVESTMENT REPRESENTATIONS. The Trust is acquiring the Velez
Shares, the Claussen Shares and the Piddington Shares for its own account,
for investment, and not with a view to, or for sale in connection with, the
distribution thereof or of any interest therein, in violation of state or
federal law. The Trustee understands that the Velez Shares, Claussen
Shares and Piddington Shares may not be sold or otherwise disposed of
unless registered under the Securities Act of 1933 or exempted from
registration.
6.5 NO BROKERS. The ESOP has not entered into any contract,
arrangement or understanding with any person or incurred any liability
which could result in the obligation of any person to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection
with this Agreement or the consummation of the transactions contemplated
hereby.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS AT THE CLOSING. The
respective obligations of each party to this Agreement to effect the
purchase and sale of the Velez Shares, the Claussen Shares and the
Piddington Shares shall be subject to the satisfaction at or prior to the
Closing of the following conditions:
(a) All third party consents required in connection with the
purchase and sale of the Velez Shares, the Claussen Shares and the
Piddington Shares hereunder shall have been obtained.
(b) No temporary restraining order, preliminary or permanent
injunction, or other order issued by any court of competent jurisdiction or
other legal or regulatory restraint or prohibition preventing the
consummation of the purchase and sale of the Velez Shares, the Claussen
Shares and the Piddington Shares shall have been issued, nor shall any
proceeding brought by any governmental agency seeking any of the foregoing
be pending; nor shall there be any action taken, or any statute, rule,
regulation, or order enacted, entered, enforced, or deemed applicable to
the purchase and sale of the Velez Shares, the Claussen Shares and the
Piddington Shares which makes the consummation of such transaction illegal.
7.2 ADDITIONAL CONSENTS TO OBLIGATIONS OF THE TRUSTEE. In addition
to the conditions set forth in Section 7.1, the obligations of the Trustee
to purchase the Velez Shares, the Claussen Shares and the Piddington Shares
shall be subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) All of the representations and warranties made by the
Sellers herein shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if such representations and
warranties had been made as of the Closing Date, except as expressly
contemplated herein.
(b) Sellers shall have performed in all material respects all
obligations required to be performed by them under this Agreement on or
prior to the Closing Date.
(c) The Trustee shall have received an appraisal or opinion from
its financial advisor to the effect that the purchase price payable by the
ESOP constitutes no more than "adequate consideration" within the meaning
of ERISA.
(d) All other agreements and documents required to be executed
or delivered by Sellers shall have been executed and delivered by them as
contemplated hereby.
7.3 ADDITIONAL CONDITIONS TO SELLERS' OBLIGATIONS. In addition to
the conditions set forth in Section 7.1, Sellers' obligations respectively
to sell the Velez Shares, the Claussen Shares and the Piddington Shares to
the Trustee shall be subject to the satisfaction at or prior to the Closing
of the following conditions:
(a) All of the representations and warranties made by the
Trustee herein shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if such representations and
warranties had been made as of the Closing Date, except as expressly
contemplated herein, and Sellers shall have received a certificate to such
effect signed by the Trustee.
(b) The Trustee shall have performed in all material respects
all obligations required to be performed by it under this Agreement on or
prior to the Closing Date, and Sellers shall have received a certificate to
such effect signed by the Trustee.
(c) All other agreements or documents required to be executed or
delivered by the Trustee shall have been executed and delivered by it as
contemplated hereby.
ARTICLE 8
INDEMNIFICATION
8.1 SELLERS. Sellers shall severally, and not jointly, indemnify and
hold harmless the Trustee and its authorized agents and representatives
against any and all costs, losses, claims, liabilities, fines, penalties,
damages and expenses suffered by any of them in connection with any
inaccuracy in or breach of any representations or warranties of such Seller
made herein or any breach of this Agreement by such Seller.
8.2 LIMITATION OF LIABILITY. Each Seller's liability under 8.1 shall
be limited to the amount of consideration such Seller received from the
Trustee for the shares of Common Stock sold pursuant to this Agreement,
except as may be required by applicable law.
8.3 TRUSTEE. The Trustee hereby indemnifies and holds harmless each
Seller and his authorized agents and representatives against any and all
costs, losses, claims, liabilities, fines, penalties, damages and expenses
suffered by any of them resulting solely from any inaccuracy in or breach
of any representations or warranties of the Trustee made herein or any
breach of this Agreement by the Trustee.
ARTICLE 9
GENERAL
9.1 EXECUTION OF COUNTERPART. For the convenience of the parties,
this Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same document.
9.2 NOTICES. All notices which are required or may be given pursuant
to the terms of this Agreement shall be in writing and shall be sufficient
in all respects if delivered personally, by registered or certified mail,
postage prepaid, overnight courier, or by facsimile, as follows:
If to the Sellers:
C. E. Velez
c/o CTA INCORPORATED
6116 Executive Boulevard
Suite 800
Rockville, Maryland 20852
If to the ESOP:
Attention: John O. Wagner, Trustee
CTA Employee Stock Ownership Plan
c/o CTA INCORPORATED
6116 Executive Boulevard
Suite 800
Rockville, Maryland 20852
Facsimile: (301) 816-1460
or to such other address or facsimile number as shall be furnished in like
manner by any party to the others. Any such notice shall be deemed to have
been given, received and become effective for all purposes at the time it
shall have been (a) delivered to the addressee as indicated by the return
receipt (if transmitted by mail) or the affidavit of the messenger (if
transmitted by personal delivery) or the confirmation of receipt (if
transmitted via facsimile); or (b) presented for delivery to the addressee
as so indicated during normal business hours, if such delivery shall have
been refused for any reason.
9.3 ASSIGNMENT AND SUCCESSORS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns. No party shall assign any of its rights or
obligations hereunder without the prior written consent of the other
parties other than to a party that acquired substantially all of the
transferor's assets through a merger or asset purchase.
9.4 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the substantive laws of the State of
Maryland, except as preempted by ERISA or required by the Code.
9.5 ENTIRE AGREEMENT. This Agreement, together with the schedules
hereto, constitutes the entire agreement among the parties hereto, and no
party hereto shall be bound by any communications between them on the
subject matter hereof unless such communications are in writing and bear a
date contemporaneous with or subsequent to the date hereof. Any prior
written agreements or letters of intent among the parties shall, upon the
execution of this Agreement, be null and void.
9.6 HEADINGS. The headings in the sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof or
affect the meaning or interpretation hereof.
9.7 REPRESENTATIONS AS TO COMPLIANCE WITH LAW. Whenever a
representation or warranty is made herein with respect to compliance with
any law, that representation means the applicable subject matter is in
compliance with applicable statutes, regulations and ordinances as in
existence on the date hereof and on the Closing Date and does not extend to
any amendments or revisions of such laws adopted subsequent to such dates.
9.8 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision hereunder.
9.9 FACSIMILE SIGNATURES. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile shall be effective as
delivery of a manually executed counterpart of this Agreement.
9.10 ERISA CONSTRUCTION. Whenever possible, each provision of this
Agreement shall be construed and interpreted in such manner as to be
effective and valid under ERISA and the Code, and regulations issued
thereunder, but if any provision of this Agreement shall be prohibited by,
or invalid or unenforceable under, such statutes or regulations, such
provision shall be ineffective and unenforceable to the extent of such
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
9.11 WAIVER, DISCHARGE, ETC. This Agreement may not be released,
discharged or modified except by an instrument in writing signed on behalf
of each of the parties hereto. The failure of a party to enforce any
provision of this Agreement shall not be deemed a waiver by such party of
any other provision or subsequent breach of the same or any other
obligation hereunder.
9.12 ACTION TAKEN AS TRUSTEE. This document was executed by the
Trustee, not in his individual capacity, but solely as Trustee of the
Trust. The performance of this Agreement by the Trustee and any and all
duties, obligations and liabilities of the Trustee hereunder shall be
effected by him only as Trustee. The Trustee does not undertake nor shall
he have any individual liability or obligation of any nature whatsoever by
virtue of the execution and delivery of this Agreement, or the
representations, covenants or warranties contained herein.
- 1 -
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement the day and
year first above written.
CTA INCORPORATED
EMPLOYEE STOCK OWNERSHIP TRUST
By: ____________________________________
John O. Wagner, Trustee
__________________________________________
C. E. Velez
__________________________________________
B. A. Claussen
__________________________________________
Terry J. Piddington
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement the day and
year first above written.
CTA INCORPORATED
EMPLOYEE STOCK OWNERSHIP TRUST
By: /S/JOHN O. WAGNER
John O. Wagner, Trustee
/S/C. E. VELEZ
C. E. Velez
/S/B. A. CLAUSSEN
B. A. Claussen
/S/TERRY J. PIDDINGTON
Terry J. Piddington
- 3 -
<PAGE>
[LEGG MASON WOOD WALKER, INCORPORATED LETTERHEAD]
September 10, 1997
Board of Directors
CTA INCORPORATED
6116 Executive Boulevard
Suite 800
Rockville, Maryland 20852
Members of the Board:
You have requested our opinion (the "Opinion") as to the fair market
value of minority holdings of Common Stock of CTA INCORPORATED ("CTA" or
the "Company") as of June 30, 1997. We understand that the Company intends
to use the Opinion for the purpose of contributing common stock to an
employee stock plan.
In rendering our Opinion we have, among other things:
(i) reviewed the audited financial statements of CTA for each of the
five years ended December 31, 1992 through December 31, 1996;
(ii) reviewed the unaudited financial statements of CTA for the six
months ended June 30, 1996 and 1997;
(iii) reviewed certain other information relating to the business,
earnings, cash flow, assets and prospects of the Company;
(iv) reviewed contract backlog data and contract profiles prepared by
management;
(v) reviewed certain data regarding the financial performance and
market valuation of selected public companies we deemed to be
engaged in operations similar to those of CTA;
(vi) reviewed data relating to recent merger and acquisition activity
in relevant industry classifications; and
(vii) met with senior management of CTA to discuss the operating
performance and future prospects of the Company.
We have relied without independent verification on information
supplied to us by CTA and its employees, representatives and independent
public accountants as well as information available from generally
recognized public sources and, accordingly, do not assume responsibility
for the accuracy or completeness of such information. Additionally, we
have not made an appraisal of any assets of CTA. Our Opinion herein is
necessarily based upon conditions and circumstances as they exist, have
been disclosed to us and can be evaluated as of the date hereof.
In recommending a 17.5% Discount Factor for the minority holdings of
CTA Common Stock we note that while there is no active trading market for
the Common Stock, there have been limited treasury stock purchases by the
Company, its Employee Stock Option Plan and employees of CTA.
Based upon our analysis of the foregoing and upon such other data as
we have considered relevant to our analysis, it is our Opinion that the
fair market value of minority holdings of CTA Common Stock of CTA
INCORPORATED falls in a range of $8.60 per share to $11.60 per share as of
June 30, 1997, with an expected value of $10.10 per share.
Very truly yours,
LEGG MASON WOOD WALKER, INCORPORATED
By:_______/S/SCOTT R. COUSINO_________
Scott R. Cousino
Managing Director
