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C3 REPORTS MODIFICATION OF EXISTING SENIOR AND SUBORDINATED NOTE AGREEMENTS

 C3 REPORTS MODIFICATION OF EXISTING
 SENIOR AND SUBORDINATED NOTE AGREEMENTS
 HERNDON, Va., July 31 /PRNewswire/ -- C3, Inc., announced today that it has entered into agreements with its senior lender, American Security Bank, and two of its three subordinated note holders, GTE Corporation and Cottonwood Holdings, to modify the company's existing agreements with these parties effective July 20, 1992.
 C3 had been noncompliant with three of five of its financial maintenance covenants with ASB and four of five of its financial covenants with its subordinated note holders. A contributing factor to C3's violation of the covenants of both the senior and subordinate debt was the net worth of Telos Corporation being lower than expected as of its acquisition by C3 from GTE on Jan. 14, 1992. C3's loan agreements do have a mechanism to address the net worth difference, allowing the covenants to be reset. However, the necessary steps to reset the covenants have yet to be completed. ASB, GTE and Cottonwood agreed to waive compliance with these covenants as of and for the period ended June 30, 1992. Amendments to the financial maintenance covenants have been approved by ASB, GTE and Cottonwood. These amendments will be effective for the period after July 20, 1992, through the maturity of the agreements with the company and ASB, GTE and Cottonwood.
 However, Union de Banques Suisses (Luxembourg) S.A., one of the subordinated note holders, has not yet agreed to the waiver and has not amended the existing financial maintenance covenants. Under the terms of the UBS' note agreements, such noncompliance is an event of default, and UBS may declare the note to be immediately due and payable. If UBS calls an event of default, UBS would be subject to a 180 day standstill provision before it can accelerate the note.
 The ASB debt matures in June of 1993 and the subordinated notes mature in January of 2002.
 As previously reported in a press release dated May 27, 1992, a majority of the common shareholders of C3 have signed a letter of intent to sell their shares to WSV Acquisition Company, a Delaware corporation. The letter of intent which originally expired on June 29, 1992, has been extended to July 31, 1992.
 -0- 7/31/92
 /CONTACT: Joseph Beninati of C3, 703-471-6000/ CO: C3, Inc. ST: Virginia IN: SU:


GK-LR -- NY062 -- 5780 07/31/92 17:00 EDT
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Publication:PR Newswire
Date:Jul 31, 1992
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