EXHIBIT 10(r)
Signet Bank
Government Contracting Lending Unit
7799 Leesburg Pike
Falls Church VA 22043
703-714-5032
800-665-4258
June 11, 1996
Mr. Joseph O'Connell
Chief Financial Officer
Questech, Inc.
7600-A Leesburg Pike
Falls Church, VA 22403
Re: Amended and Restated Loan and Security Agreement
dated June 3, 1996
Dear Joe,
With reference to my conversation with Sherry Weisenborn, this letter is to
confirm our agreement that the amount of approximately $193,000,
representing the (net) capitalization of software development costs, will
not be deducted from Shareholders' Equity, for the purpose of calculating
the minimum Tangible Net Worth as defined in our referenced Loan Agreement.
This is based on your representations that said amount represents the
aggregate costs, net of related depreciation, expended for the purpose of
developing the accounting/management system for your Company's own use, and
that you do not foresee any material additional expenses connected to it.
Sincerely,
Loriana Cipolletti
Vice President
Customer #
Note #
PROMISSORY NOTE
$6,000,000.00 3 June , 1996
Falls Church, Virginia
FOR VALUE RECEIVED, QUESTECH, INC., a Virginia corporation ("QuesTech"),
QUESTECH SERVICE COMPANY, a Virginia corporation formerly known as
Engineering Resources, Inc. ("QTSC"), and QUESTECH PACKAGING, INC., a
Virginia corporation ("QTPI"; QuesTech, QTSC and QTPI are referred to
individually as a "Borrower" and collectively as the "Borrowers"), hereby
jointly and severally promise to pay to the order of SIGNET BANK, a Virginia
banking corporation formerly known as Signet Bank/Virginia (the "Lender"), at
North Tower, 5th floor, 7799 Leesburg Pike, Falls Church, Virginia 22043, or
such other location as the holder hereof may in writing designate, the
principal sum of Six Million and no/100 Dollars ($6,000,000.00) or such
lesser amount as shall equal the aggregate unpaid principal amount of the
Loans made by the Lender to the Borrowers in accordance with the Loan
Agreement in lawful money of the United States of America in immediately
available funds, on the Termination Date, and to pay interest on the unpaid
principal amount of the Loans, at such office, in like money and funds, for
the period commencing on the date of each Loan until such Loan shall be paid
in full, at the rate or rates per annum and on the dates provided in the Loan
Agreement. The Borrowers may borrow, prepay without penalty and reborrow
hereunder in accordance with the provisions of the Loan Agreement.
This Promissory Note is the Note referred to in the Amended and Restated
Loan and Security Agreement dated as of the date hereof (as amended,
modified, supplemented and replaced from time to time hereafter, the "Loan
Agreement") among the Borrowers and the Lender, and evidences Loans made by
the Lender thereunder. Capitalized terms used in this Promissory Note which
are not otherwise defined herein have the respective meanings assigned to
them in the Loan Agreement.
The Lender is hereby authorized by the Borrowers to maintain records of
the amount of each Loan made by the Lender in accordance with the Loan
Agreement, the date such Loan is made, and the amount of each payment or
prepayment of principal, interest, or other charges made in respect of such
Loan received by the Lender. The Borrowers agree that, absent manifest
error, the amounts so evidenced in such records shall constitute conclusive
evidence of the amount owed hereunder.
Upon the occurrence and continuation of an Event of Default, the
principal hereof and accrued interest hereon may be declared to be, or may
become, forthwith due and payable in the manner, upon the conditions and with
the effect provided in the Loan Agreement.
The Borrowers and every guarantor and endorser hereof hereby waive
presentment, demand, notice of dishonor, protest and all other demands and
notices in connection with the delivery, acceptance, performance and
enforcement of this Promissory Note.
The Promissory Note is given in substitution for, and not in novation
of, that certain Promissory Note of QuesTech and QTSC to the Lender in the
principal amount of Four Million and no/100 Dollars ($4,000,000.00) dated
July 15, 1991.
IN WITNESS WHEREOF, the Borrowers have caused their corporate names to
be signed by their duly authorized officers under seal as of the date and
year first above written.
QUESTECH, INC., a Virginia corporation
ATTEST: By: ________________________________
Vincent L. Salvatori, Chairman
C. Burkholder
(Asst.) Secretary
[corporate seal]
QUESTECH SERVICE COMPANY, a Virginia
corporation
ATTEST: By: ________________________________
Vincent L. Salvatori, Chairman
C. Burkholder
(Asst.) Secretary
[corporate seal]
QUESTECH PACKAGING, INC., a Virginia
corporation
ATTEST: By: ________________________________
Vincent L. Salvatori, Chairman
C. Burkholder
(Asst.) Secretary
[corporate seal]
COMMONWEALTH OF VIRGINIA )
)to-wit:
COUNTY OF FAIRFAX )
The foregoing instrument was subscribed, sworn to, and acknowledged
before me, the undersigned notary public on this 3 day of June , 1996, in
the jurisdiction aforesaid, by Vincent L. Salvatori, the Chairman of
QuesTech, Inc., in behalf of, and as the duly authorized act of, such
corporation.
M. D. Benford
Notary Public [SEAL]
My commission expires: 4/30/2000
COMMONWEALTH OF VIRGINIA )
)to-wit:
COUNTY OF FAIRFAX )
The foregoing instrument was subscribed, sworn to, and acknowledged
before me, the undersigned notary public on this 3 day of June , 1996, in
the jurisdiction aforesaid, by Vincent L. Salvatori, the Chairman of
QuesTech, Inc., in behalf of, and as the duly authorized act of, such
corporation.
M. D. Benford
Notary Public [SEAL]
My commission expires: 4/30/2000
COMMONWEALTH OF VIRGINIA )
)to-wit:
COUNTY OF FAIRFAX )
The foregoing instrument was subscribed, sworn to, and acknowledged
before me, the undersigned notary public on this 3 day of June , 1996, in
the jurisdiction aforesaid, by Vincent L. Salvatori, the Chairman of
QuesTech, Inc., in behalf of, and as the duly authorized act of, such
corporation.
M. D. Benford
Notary Public [SEAL]
My commission expires: 4/30/2000
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as of the
3 day of June , 1996, is made by and among QUESTECH, INC., a
Virginia corporation ("QuesTech"), QUESTECH SERVICE COMPANY, a Virginia
corporation formerly known as Engineering Resources, Inc. ("QTSC"), QUESTECH
PACKAGING, INC., a Virginia corporation ("QTPI"; QuesTech, QTSC and QTPI are
referred to individually as a "Borrower" and collectively as the "Borrowers")
and SIGNET BANK, a Virginia banking corporation formerly known as Signet
Bank/Virginia (the "Lender").
A. The Lender, QuesTech, and QTSC entered into a Loan and Security
Agreement dated as of July 15, 1991 (as amended through the date hereof,
the "Original Agreement," together with certain other documents defined
therein as "Loan Documents," the "Original Loan Documents") pursuant to
which the Lender has agreed to extend credit to QuesTech and QTSC (the
"Original Borrowers") and the Original Borrowers have agreed to obtain
credit from the Lender on the terms set forth in such Original
Agreement.
B. The Original Borrowers have requested that the Lender modify the
Original Loan Documents, among other purposes, to permit QTPI to become
a Borrower and to extend the Termination Date, and the Lender has
consented to such request subject to the execution of this Agreement and
satisfaction of the conditions specified herein.
C. The Lender and the Borrowers desire to execute this Agreement to set
forth the revised terms and conditions on which the Lender will extend
credit to the Borrowers and the Borrowers will obtain credit from the
Lender.
Accordingly, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Lender and the Borrowers agree as
follows:
SECTION 1. Definitions. Certain terms used in this Agreement are
defined in this Section 1. These terms, and the additional terms defined
above, shall have the meanings assigned wherever the terms appear in this
Agreement. These meanings are also applicable to the singular and plural
forms of the terms defined.
"Account Receivable" means collectively and includes any of the
following, whether now owned or hereafter acquired by a Borrower: all
present and future rights to payments for goods sold or leased or for
services rendered, whether or not represented by instruments or chattel
paper, and whether or not earned by performance; all present and future
rights to payments arising out of the licensing of computer software and
systems; all accounts, contract rights, chattel paper, instruments and
documents; proceeds of any letter of credit of which a Borrower is a
beneficiary; all forms of obligations whatsoever owed to a Borrower, together
with all instruments and documents of title representing any of the
foregoing; all rights in any returned or repossessed goods; all rights,
security and guaranties with respect to any of the foregoing, including,
without limitation, any right of stoppage in transit; together with all
property included within the definitions of "accounts", "chattel paper",
"documents" and "instruments" set forth in the UCC; provided, however, that
accounts receivable from Munchkin Bottling, Inc. shall not be included as
Accounts Receivable for the purposes of this Agreement.
"Act" means the Securities Act of 1933, as amended.
"Administrative Fee" means the fee in the amount of Five Hundred and
no/100 Dollars ($500.00) for each calendar month (or partial month) to be
paid by the Borrowers to the Lender pursuant to Section 2.4 hereof in
consideration of the expenses incurred by the Lender in connection with
administering the Loans and monitoring the Collateral.
"Affiliate" means, with respect to any specified Person, any other
Person which, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of management and policies of a
Person, whether through ownership of common stock, by contract, or otherwise.
"Agent" means QuesTech in its capacity as agent for the Borrowers in
connection with this Agreement.
"Agreement" means this Amended and Restated Loan and Security Agreement,
as the same may be amended, modified or supplemented from time to time.
"Application" means an Irrevocable Standby Letter of Credit Application
and Agreement which shall be substantially in the form of Exhibit A attached
hereto.
"Bank" means any commercial banking corporation, savings bank or other
financial institution.
"Blue Sky Laws" means the securities laws of one or more states.
"Borrowing Base" means, at the time in question, the sum of (a) 85% of
Eligible Billed Government Receivables and (b) 80% of Eligible Billed
Commercial Receivables as depicted in the Borrowing Base Certificate the
Lender has most recently received pursuant to Section 2.1(e) or Section
5.8(g) provided, however, that (i) the Borrowing Base shall be reduced by the
sum of the aggregate face amount of Letters of Credit outstanding on the date
the Borrowing Base is being calculated plus the aggregate amount of all
drafts drawn under or purporting to be drawn under the Letters of Credit that
have been paid by the Lender and for which the Lender has not been reimbursed
pursuant hereto, (ii) at all times the Borrowing Base shall remain subject to
verification by the Lender, and (iii) in no event shall the Borrowing Base
attributable to the Accounts Receivable described in clause (b) of this
definition of "Borrowing Base" exceed One Million and no/100 Dollars
($1,000,000.00).
"Borrowing Base Certificate" means a certificate of the Borrowers
substantially in the form attached hereto as Exhibit B (or such subsequent
form as the Lender shall require) containing a computation of the Borrowing
Base as of the date depicted therein and a certification that no Default or
Event of Default has occurred and is continuing.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required to close under the laws
of the State.
"Capital Lease" means any lease which has been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Cash Collateral Account" means each of the non-interest bearing bank
accounts which the Lender shall cause to be opened pursuant to Section 3.2
hereof. The initial Cash Collateral Account for QuesTech is account number
652036925. The initial Cash Collateral Account for QTSC is account number
6520430049. The initial Cash Collateral Account for QTPI is account number
6520430031.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Closing" means the date on which the initial disbursement of the Loans
is made.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time.
"Collateral" means collectively and includes all Equipment, General
Intangibles, Inventory, Accounts Receivable and all other property of a
Borrower in which a Lien is granted to the Lender pursuant to this Agreement
or any other Loan Document.
"Commercial Customer" means any Customer other than the Government.
"Commitment Fee" means the quarterly fee to be paid by the Borrowers to
the Lender pursuant to Section 2.5 hereof in consideration of the commitment
by the Lender to make Loans hereunder. The Commitment Fee due for each
calendar quarter (or portion thereof) shall equal the product of the
Commitment Fee Rate in effect for such quarter (or portion thereof)
multiplied by the difference between Six Million and no/100 Dollars
($6,000,000.00) and the sum of the average daily principal balance of the
Loans during such quarter (or applicable portion thereof) plus the average
daily face amount of all Letters of Credit outstanding during such quarter
(or applicable portion thereof).
"Commitment Fee Rate" means the rate calculated by multiplying three-
eighths percent ( %) by a fraction the numerator of which is the number of
days in the calendar quarter, or shorter period, for which the Commitment Fee
Rate is being calculated and the denominator of which is 360.
"Customer" means any Person obligated on an Account Receivable.
"Debt" means collectively and includes (a) indebtedness or liability for
borrowed money, or for the deferred purchase price of property or services;
(b) obligations as a lessee under a Capital Lease; (c) obligations to
reimburse the issuer of letters of credit or acceptances; (d) all guaranties,
endorsements (other than for collection or deposit in the ordinary course of
business), and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person, or otherwise to assure a
creditor against loss; and (e) obligations secured by any Lien on property
owned by the Person, whether or not the obligations have been assumed.
"Default" means any event which with the giving of notice, the lapse of
time, or both, would constitute an Event of Default.
"Default Rate" means a rate of interest equal to 3% above the otherwise
applicable rate.
"Eligible Billed Commercial Receivable" means any Eligible Billed
Receivable which does not arise out of a prime contract between a Borrower
and the Government; provided that, for so long as more than 50% of the
Eligible Receivables due from any Commercial Customer remains unpaid for more
than 90 days following the date of initial invoice to such Commercial
Customer for such Eligible Receivables, then no Accounts Receivable of such
Commercial Customer may be included as Eligible Billed Commercial
Receivables.
"Eligible Billed Government Receivable" means any Eligible Billed
Receivable which arises out of a prime contract between a Borrower and the
Government.
"Eligible Billed Receivable" means any Eligible Receivable that has been
billed to the appropriate Customer and is aged less than 90 days from the
date of the initial invoice.
"Eligible Receivable" means any Account Receivable of a Borrower (a)
that represents valid obligations of a Customer to make payment to such
Borrower for goods shipped or delivered or services completed under valid
contracts of sale or service; (b) on which the Customer is not an Affiliate
of a Borrower; (c) with respect to which the Borrowers have no knowledge or
notice of any inability of the Customer to make full payment; (d) from the
face amount of which has been deducted all payments, set-offs, contras,
amounts subject to adverse claims made in writing to the Borrowers,
contractual allowances, bad debt reserves and other credits applicable
thereto; (e) that is subject to no Liens other than those permitted by this
Agreement; (f) that continues to be in full conformity with the
representations and warranties made by the Borrowers to the Lender in this
Agreement with respect thereto; (g) with respect to which the Lender is and
continues to be satisfied with the credit standing of the Customer; (h) on
which the Customer is not a foreign government or an entity organized and
existing under the laws of a country other than the United States; and (i)
which is not an Excluded Government Final Invoice Receivable; provided,
however, and without limiting any other provisions of this Agreement with
respect to the exclusion of Accounts Receivable from the category of Eligible
Receivables and the Borrowing Base, that if the Lender reasonably determines
that the collectability of any Account Receivable makes it unacceptable for
inclusion in the Borrowing Base and gives written notice to the Borrowers
indicating the reasons for such determination, then such Account Receivable
shall thereafter be excluded from the category of Eligible Receivables.
"Employee Benefit Plan" means any employee welfare benefit plan or
employee pension benefit plan, as those terms are defined in Sections 3(1)
and 3(2) of ERISA, for the benefit of employees of a Borrower or any ERISA
Affiliate.
"Environmental Laws" means all federal, state or local laws, rules,
regulations or orders relating to air, water or noise pollution, employee
health and safety, or the production, storage, labeling, transportation or
disposition of waste or hazardous or toxic substances, including, but not
limited to CERCLA, the Toxic Substances Control Act of 1976, as amended, the
Resource Conservation Recovery Act of 1976, as amended, the Clean Air Act, as
amended, the Federal Water Pollution Control Act, as amended, or the
Occupational Safety and Health Act of 1970, as amended.
"Equipment" means collectively and includes all of the following,
whether now owned or hereafter acquired by a Borrower: equipment and
fixtures, including, without limitation, computer hardware, computer software
and systems, furniture, machinery, vehicles and trade fixtures, together with
any and all accessories, accessions, parts and appurtenances thereto,
substitutions therefor and replacements thereof, together with all other such
items which are included within the definitions of "equipment" and "fixtures"
as set forth in the UCC.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with a Borrower would be treated as a "single
employer" within the meaning of Code Sections 414(b), (c), (m), (n) or (o).
"Event of Default" means any of the events specified as an "Event of
Default" under this Agreement, provided that any requirement for the giving
of notice, the lapse of time, or both, or any other condition, has been
satisfied.
"Excluded Government Final Invoice Receivable" means any Account
Receivable relating to the last payment due to a Borrower under a prime
contract between such Borrower and the Government unless (a) such contract is
a "Fixed Price Contract" (as defined in Federal Acquisition Regulation Part
16.2, or any successor regulation) which does not include any provision for
progress payments, incentive arrangements, or price redetermination or (b)
the Lender has consented in writing to the exclusion of such Account
Receivable from the category of Excluded Government Final Invoice
Receivables.
"Financial Reporting Month" means a calendar month or such other
substantially equivalent financial reporting period adopted by a Borrower and
approved by the Lender.
"GAAP" means generally accepted accounting principles consistently
applied.
"General Intangibles" means collectively and includes all of the
following, whether now owned or hereafter acquired by a Borrower: choses in
action, causes of action and all other intangible property of every kind and
nature, including, without limitation, corporate or other business records,
inventions, designs, patents, patent applications, trademarks, trademark
applications, trade names, trade secrets, goodwill, registrations,
copyrights, licenses, franchises, customer lists, tax refunds, tax refund
claims, rights of claims against carriers and shippers, leases and rights to
indemnification, together with all property which is included within the
definition of "general intangibles" as set forth in the UCC.
"Government" means the United States of America or any agency or
instrumentality thereof.
"Indemnitee" shall mean the Lender, its Affiliates, and its and their
respective directors, officers, employees, agents, successors and assigns.
"Intellectual Property" shall mean all letters patent, licenses, trade
names, trademarks, copyrights, inventions, service marks, trademark
registrations, service mark registrations and copyright registrations,
whether domestic or foreign and applications for any of the foregoing, and
all proprietary technology, know-how, trade secrets or other intellectual
property rights owned or used by a Borrower or any Subsidiary in the
operation of their respective businesses.
"Interest Payment Date" means the last day of each calendar month.
"Inventory" means collectively and includes all of the following,
whether now owned or hereafter acquired by a Borrower: all goods held or
intended for sale or lease by a Borrower, or furnished or to be furnished
under contracts of service, all raw materials, work in process, finished
goods, materials and supplies of every nature used or usable in connection
with the manufacture, packing, shipping, advertising or sale of any such
goods, together with all property included within the definition of
"inventory" set forth in the UCC. "Inventory" shall not include goods held
by a Borrower on consignment.
"Kitty Hawk Guaranty" means a guaranty by QuesTech which satisfies the
following conditions: (i) the aggregate principal amount of the guaranteed
Debt does not exceed One Million Dollars ($1,000,000), (ii) the guaranteed
Debt is secured by a first priority deed of trust or mortgage Lien in certain
land and improvements located in Dayton, Ohio currently owned by Kitty Hawk
Office Center L.P. and currently occupied by QuesTech as a tenant, and (iii)
such guaranty remains in effect only while QuesTech occupies such property as
a tenant.
"Letter of Credit" means any letter of credit issued for the benefit of
QuesTech hereunder pursuant to an Application submitted by QuesTech and
accepted by the Lender.
"License" shall mean any certificate, license, franchise, permit or
other authorization.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory
or other), or preference, priority, or other security agreement, or
preferential arrangement, charge or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the UCC or comparable law of any jurisdiction to evidence any
of the foregoing).
"Loans" means the loans to be made to the Borrowers (through the Agent)
by the Lender pursuant to this Agreement.
"Loan Documents" means this Agreement, the Note, and any other document
now or hereafter executed or delivered in connection with the Obligations in
evidence thereof or as security therefor, including, without limitation, any
guaranty, life insurance assignment, pledge agreement, security agreement,
deed of trust, mortgage, promissory note or subordination agreement.
"Maximum Amount" means, at any time, the lesser of (a) Six Million and
no/100 Dollars ($6,000,000.00) or (b) the then-applicable Borrowing Base.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 4001(a) (3) of ERISA.
"Note" means the promissory note in form and substance acceptable to the
Lender in the original principal amount of Six Million and no/100 Dollars
($6,000,000.00) (as it may be amended, modified supplemented or replaced from
time to time) evidencing the obligation of the Borrowers to pay the Principal
Balance together with interest on the Principal Balance.
"Obligations" means the Loans, the Note, all indebtedness and
obligations of the Borrowers under this Agreement and the other Loan
Documents, as well as all other obligations and indebtedness of a Borrower to
the Lender, now existing or hereafter arising, of every kind and description,
whether or not evidenced by notes or other instruments, and whether such
obligations are direct or indirect, fixed or contingent, liquidated or
unliquidated, including, without limitation, any overdrafts in any deposit
account maintained by a Borrower with the Lender and all obligations of a
Borrower with respect to letters of credit issued by the Lender for the
account of such Borrower.
"Operating Account" means deposit account number 6520236917 in the name
of the Agent, as agent for the Borrowers, maintained with the Lender into
which all Loans will be disbursed.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, limited liability company,
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of
whatever nature.
"Prime Rate" means the rate of interest established from time to time by
the Lender and announced by the Lender as its prime rate. The Prime Rate is
not necessarily the lowest or most favorable rate of interest charged by the
Lender on extensions of credit to debtors.
"Principal Balance" means the aggregate outstanding principal balance of
the Loans.
"Proceeding" shall mean any action, suit or proceeding before any
Tribunal.
"Reportable Event" means any of the events described in Section 4043(b)
of ERISA.
"State" means the Commonwealth of Virginia.
"Subsidiary" means a corporation now existing or hereafter formed of
which shares of stock having ordinary voting power to elect a majority of the
board of directors or other managers of such corporation are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by a Borrower. Where
appropriate in the context, QTSC and QTPI shall be deemed to be Subsidiaries
of QuesTech.
"Tangible Net Worth" means, at any date, all amounts which, in
accordance with GAAP, would be included under stockholders' equity on the
consolidated balance sheet of QuesTech and its Subsidiaries on such date;
provided that, in any event, such amounts are to be net of amounts carried on
the books of QuesTech and its Subsidiaries for (a) any write-up in the book
value of any assets resulting from a revaluation thereof subsequent to the
date of this Agreement; (b) treasury stock; (c) unamortized debt discount
expense; (d) any cost of investments in excess of net assets acquired at any
time of acquisition; (e) loans or advances to any Affiliate of a Borrower or
Subsidiary, or directors, officers, employees or shareholders of a Borrower,
any Affiliate of a Borrower, or any Subsidiary; (f) patents, patent
applications, copyrights, trademarks, trade names, good will, research and
development costs, organizational expenses, capitalized software development
costs and other like intangibles; and (g) any investments in securities which
are not actively traded on a national securities exchange.
"Tax Return" shall mean any federal, state and local income, excise,
property and other tax return or report.
"Termination Date" means May 31, 1997 and any extension or extensions
thereof granted by the Lender in its sole discretion.
"Thermo-Forming Debt" means Debt of QTPI in an aggregate amount not to
exceed Two Million Dollars ($2,000,000) incurred or to be incurred in
connection with the acquisition of the Thermo-Forming Equipment, but excludes
any additional or replacement Debt for such purpose.
"Thermo-Forming Equipment" means certain thermo-forming plastic
machinery owned or to be owned (or leased or to be leased pursuant to a
Capital Lease) by QTPI and located or to be located in QTPI's Newport News,
Virginia facility.
"Thermo-Forming Lien" means a purchase-money Lien in favor of the
Person(s) supplying and/or financing the Thermo-Forming Equipment, which
Liens secure Debt of QTPI not exceeding an aggregate principal amount of Two
Million Dollars ($2,000,000).
"Total Liabilities" means, at any date, the aggregate amount of all
consolidated liabilities of QuesTech and its Subsidiaries (including tax and
other proper accruals), computed in accordance with GAAP.
"Tribunal" means any federal, state, municipal, foreign, territorial, or
other court, arbitration panel or governmental body, subdivision, agency,
department, commission, board, bureau or instrumentality having jurisdiction
over the matter concerned.
"UCC" means the Uniform Commercial Code as adopted in the State and all
amendments thereto.
SECTION 2. Loans.
2.1. Amount and Borrowing Procedure.
(a) Subject to the terms and conditions of this Agreement, the Lender
agrees to make Loans to the Borrowers (through the Agent) from time to time
until the Termination Date; provided, however, that, after giving effect to
the Loan to be made, in no event shall the Principal Balance plus the
available face amount of outstanding Letters of Credit plus the aggregate
amount of drafts drawn under or purporting to be drawn under the Letters of
Credit that have been paid by the Lender and for which the Lender has not
been reimbursed pursuant hereto exceed the Maximum Amount, with Loans to be
repaid with Loans to be advanced on such date being excluded from the
Principal Balance for the purposes of such calculation. Subject to the
foregoing limitation, the Borrowers (acting through the Agent) may borrow,
repay without penalty and re-borrow hereunder from the date hereof until the
Termination Date.
(b) Subject to the terms and conditions of this Agreement, the
Application applicable thereto and the other Loan Documents, the Lender
agrees to issue Letters of Credit to QuesTech in an aggregate amount not to
exceed Five Hundred Thousand and no/100 Dollars ($500,000.00); provided,
however, that the Principal Balance plus the available face amount of
outstanding Letters of Credit plus the aggregate amount of drafts drawn under
or purporting to be drawn under the Letters of Credit that have been paid by
the Lender and for which the Lender has not been reimbursed pursuant hereto
shall never exceed the Maximum Amount, with the face amount of Letters of
Credit to be replaced by Letters of Credit to be issued on such date being
excluded from the calculation of the outstanding face amount of Letters of
Credit for such purposes. The expiration date for each Letter of Credit
shall be acceptable to the Lender in its sole and absolute discretion.
(c) If the Principal Balance, plus the available face amount of
outstanding Letters of Credit, plus the aggregate amount of drafts drawn
under or purporting to be drawn under the Letters of Credit that have been
paid by the Lender and for which the Lender has not been reimbursed pursuant
hereto exceeds the Maximum Amount, the Borrowers shall immediately prepay the
Loans to the extent necessary to reduce such excess. If after such
prepayment the available face amount of outstanding Letters of Credit plus
the aggregate amount of drafts drawn under or purporting to be drawn under
the Letters of Credit that have been paid by the Lender and for which the
Lender has not been reimbursed pursuant hereto exceeds the Maximum Amount,
the Borrowers shall immediately deliver to the Lender such additional
collateral as the Lender shall deem necessary to adequately secure the
Borrowers' obligations with respect to such Letters of Credit and unrepaid
drawings.
(d) At Closing, all Loans outstanding under the Original Agreement
shall become Loans under this Agreement. Except as provided by the preceding
sentence, the proceeds of the Loans shall be used for business or commercial
purposes, including supporting the issuance by the Lender of Letters of
Credit at the request of QuesTech, and for no other purposes.
(e) Only the Agent may request Loans. Any request for a Loan must be
received by the Lender not later than 1:00 p.m. (Washington, D.C. time) on
the date on which the Loan is to be made. Each request must specify the
amount of the Loan and, at the option of the Lender, shall be accompanied by
a current Borrowing Base Certificate, which may be transmitted by telecopy to
the Lender at (703) 506-9553, or such other number as the Lender may
designate in written notice to the Agent. If a Borrowing Base Certificate is
transmitted by telecopy, the Agent shall maintain the original of such
Borrowing Base Certificate as a permanent record for so long as any of the
Obligations remain outstanding and shall allow the Lender to inspect such
Borrowing Base Certificate and shall provide copies of such original to the
Lender upon its request therefor. The proceeds of the Loans will be credited
to the Operating Account. Loans may be requested by those individuals
designated by the Agent from time to time in written instruments delivered to
the Lender; provided, however, that the Borrowers shall remain liable with
respect to any Loan disbursed by the Lender in good faith hereunder, even if
such a Loan is requested by an individual who has not been so designated.
The Borrowers agree to confirm in writing from time to time, when and as
requested by the Lender, the purpose for which the proceeds of each Loan were
used.
(f) Any request for a Letter of Credit to be issued must be made by
delivery to the Lender, not later than five (5) Business Days prior to the
date of issuance of such requested Letter of Credit, of a properly completed
and executed Application. The fee for each Letter of Credit shall be an
amount equal to an opening fee of Five Hundred and no/100 Dollars ($500.00)
plus a non-refundable commission of two percent (2%) per annum of the undrawn
portion of the Letter of Credit, payable in advance upon issuance and
thereafter on each anniversary of the date of issuance of such Letter of
Credit. The Lender is authorized to advance on behalf of QuesTech as a Loan
all sums required to be paid by QuesTech to the Lender in respect of any such
Letter of Credit pursuant to the terms of the Application (including the fee
set forth above), provided that the Lender may, but shall not be obligated to
make such Loans if, after the disbursement thereof, the Principal Balance,
plus the available face amount of outstanding Letters of Credit, plus the
aggregate amount of drafts drawn under or purporting to be drawn under the
Letters of Credit that have been paid by the Lender and for which the Lender
has not been reimbursed pursuant hereto would exceed the Maximum Amount. The
provisions of the Application are deemed incorporated in this Agreement by
this reference and shall be binding upon the Lender and the Borrowers as if
fully set forth herein. If a conflict exists between the terms of the
Application and any other Loan Document, the terms of the Application shall
control with respect to any Letter of Credit issued pursuant to such
Application but not as to other matters governed by this Agreement or such
Loan Document.
2.2. Interest. Each Loan shall bear interest on the unpaid principal
balance thereof from time to time outstanding, for each day from the date
such Loan is made until it becomes due, at a per annum rate equal to the
Prime Rate plus one-quarter percent (1/4%). Payments of interest on each Loan
shall be made on each Interest Payment Date beginning on the Interest Payment
Date next succeeding the date of disbursement of such Loan. At the option of
the Lender, the Loans shall bear interest at the Default Rate, payable on
demand, for each day during any period of Default hereunder.
2.3. Note. The obligation of the Borrowers to repay the Loans, together
with interest thereon, shall be evidenced by the Note. The unpaid principal
balance of the Note shall be payable on the Termination Date, subject to
acceleration, termination or prepayment under the terms of this Agreement.
2.4. Administrative Fee. The obligation of the Borrowers to pay the
Administrative Fee shall commence on the date hereof and shall continue until
the Obligations have been fully and completely paid and discharged.
Commencing on the Interest Payment Date following the date hereof and
continuing on each subsequent Interest Payment Date until the Obligations
have been fully and completely paid and discharged, the Borrowers shall pay
the Administrative Fee due for the month (or partial month) ending on such
Interest Payment Date. Any accrued and unpaid portion of this fee shall be
paid on the Termination Date. The Administrative Fee due on February 29,
1996 shall include any accrued and unpaid portion of such fee due under the
Original Agreement.
2.5 Commitment Fee. The obligation of the Borrowers to pay the
Commitment Fee shall commence on the date hereof and shall continue until the
Obligations have been fully and completely paid and discharged. Commencing
on June 30, 1996 and continuing on the last day of each subsequent calendar
quarter thereafter (i.e. March 31, June 30, September 30 and December 31)
until the Obligations have been fully and completely paid and discharged, the
Borrowers shall pay the Commitment Fee due for the quarter (or portion
thereof) then ending. Any accrued and unpaid portion of this fee shall be
paid on the Termination Date. The Commitment Fee due on March 31, 1996 shall
include any accrued and unpaid portion of such fee due under the Original
Agreement.
2.6. Payments and Computations. All payments hereunder (including any
payment or prepayment of principal, interest, fees and other charges) or with
respect to the Note or the Loans shall be made in lawful money of the United
States of America, in immediately available funds, to the Lender at its
office at North Tower, 5th Floor, 7799 Leesburg Pike, Falls Church, Virginia
22043, or at such other place as the Lender may in writing designate, and
shall be applied, at the option of the Lender, first to accrued Obligations
other than principal and interest, next to accrued interest and then to
principal. If any payment of principal, interest or fees is not due on a
Business Day, then the due date will be extended to the next succeeding full
Business Day and interest and fees will be payable with respect to the
extension. If any payment of principal, interest or fees is not made within
seven days of its due date, the Borrowers agree to pay to the Lender a late
charge equal to 5% of the amount of the payment. The rate at which interest
accrues on the unpaid principal balance of the Loans shall be changed
effective as of the date of any change in the Prime Rate. Except as
otherwise specifically provided, interest and fees shall be computed on the
basis of a year of 360 days and actual days elapsed. The Lender may, but
shall not be obligated to, debit the amount of any payment due under this
Agreement to any deposit account or loan account of a Borrower maintained
with the Lender.
2.7. Termination of Credit Facility by Borrowers. The Borrowers may
terminate the credit facility provided for in this Agreement and discontinue
borrowing hereunder by giving not less than 30 Business Days' prior written
notice of such termination to the Lender. The termination of the credit
facility provided for in this Agreement shall not affect the rights of the
Lender with respect to any Obligations arising prior or subsequent to such
termination and the provisions of this Agreement shall remain in full force
and effect until the Obligations have been fully and completely paid and
discharged. Once the Obligations have been fully and completely paid and
discharged and all obligations of the Lender to make Loans has terminated,
the Lender will release its Liens in the Collateral.
2.8. Extensions of Termination Date. The Lender may from time to time,
in its sole discretion, extend the Termination Date by giving written notice
of such extension to the Borrowers. During any such periods of extension,
the remaining terms and conditions of this Agreement shall remain in full
force and effect.
2.9 Appointment of QuesTech as Agent. The Borrowers hereby appoint
QuesTech to act as Agent as herein specified for the Borrowers hereunder,
including, specifically to request and receive all Loans. Each of the
Borrowers hereby authorizes the Agent to take such action on its behalf under
the provisions of the Loan Documents and any other instruments and agreements
referred to herein, and to exercise such powers and to perform such duties
hereunder, as are specifically delegated to or required of the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto.
QuesTech agrees to act as the Agent on behalf of the Borrowers to the extent
provided in the Loan Documents.
SECTION 3. Covenants, Representations and Other Terms Regarding
Collateral.
3.1. Security Interest. Each Borrower hereby grants to the Lender, its
successors and assigns, a security interest in the Collateral, all additions
and accessions thereto and replacements thereof and all proceeds and products
thereof, all books of account and records, including all computer software
relating thereto, all policies of insurance on any property of such Borrower
and all proceeds of such policies, all of which shall secure the Obligations.
3.2. Accounts Receivable.
(a) The Borrowers represent and warrant as to each and every Account
Receivable, which is an account, now existing or hereafter arising, that, to
the best of their knowledge: (i) it is a bona fide existing obligation,
valid and enforceable against the Customer, for goods sold or leased or
services rendered in the ordinary course of business; (ii) it is subject to
no dispute, defense or offset except as disclosed in writing to the Lender;
(iii) the supporting documents, instruments, chattel paper and other
evidences of indebtedness, if any, delivered to the Lender are genuine,
complete valid and enforceable in accordance with their terms; (iv) it is not
subject to any discount, allowance or special terms of payment except as
disclosed in writing to the Lender; and (v) except to the extent the
Assignment of Claims Act of 1940 or similar state law may apply to an Account
Receivable from the Government, it is not and shall not be subject to any
prohibition or limitation upon assignment.
(b) The Borrowers shall immediately notify the Lender of: (i) any
dispute with a Customer relating to an Account Receivable due from such
Customer in excess of Two Hundred Fifty Thousand and no/100 Dollars
($250,000.00) and (ii) any bankruptcy, insolvency, receivership, assignment
for the benefit of creditors or suspension of business of any Customer of
which a Borrower has knowledge.
(c) It is intended that the Lender shall receive direct payments in
respect of Accounts Receivable from Customers, and the Lender shall have the
right to notify Customers of its security interest in the Accounts Receivable
and require payments to be made directly to the Lender. Each Borrower will
notify each of its Customers of the Lender's security interest in the
Accounts Receivable and shall direct all Customers to make payments on
Accounts Receivable to the Cash Collateral Account designated by the Lender
by printing such direction on all invoices given to Customers.
(d) To facilitate its receipt of direct payments in respect of Accounts
Receivable from Customers, the Lender has caused one or more Cash Collateral
Accounts to be opened and maintained at the principal office of the Lender.
The Lender may open additional Cash Collateral Accounts as it may deem
necessary or desirable. The Cash Collateral Accounts will contain only cash
proceeds of the Accounts Receivable. Any cash proceeds (as such term is
defined in Section 9-306(1) of the UCC) received by the Lender directly from
Customers obligated to make payments under Accounts Receivable pursuant to
clause (c) of this Section 3.2 or from a Borrower pursuant to clause (e) of
this Section 3.2, whether consisting of checks, notes, drafts, bills of
exchange, money orders, commercial paper or other proceeds received on
account of any Collateral, shall be promptly deposited in the Cash Collateral
Accounts, and until so deposited shall be held in trust by the Lender in
recognition of the Lender's security interest therein and shall not be
commingled with any funds not constituting proceeds of Collateral. The name
in which the Cash Collateral Accounts is carried shall clearly indicate that
the funds deposited therein are the property of the appropriate Borrower,
subject to the security interest of the Lender hereunder. Such proceeds,
when deposited, shall continue to be security for the Obligations and shall
not constitute payment thereof until applied as hereinafter provided. The
Lender shall have sole dominion and control over the funds deposited in the
Cash Collateral Accounts, and such funds may be withdrawn therefrom only by
the Lender. Provided that no Default or Event of Default exists, each
Business Day the Lender (after final collection) will apply the funds in the
Cash Collateral Accounts to reduce the Obligations and will transfer any
remaining funds to the Operating Account.
(e) Each Borrower shall cause all payments from Customers in respect of
Accounts Receivable collected by it to be delivered to the Lender forthwith
upon receipt for deposit in the appropriate Cash Collateral Account, in the
original form in which received (with such endorsements or assignments as may
be necessary to permit collection thereof by the Lender) and until so
deposited shall be held in trust by the Borrowers in recognition of the
Lender's security interest therein and shall not be commingled with any funds
of the Borrowers not constituting proceeds of Collateral. Each Borrower
hereby appoints the Lender and any officer, employee or agent of the Lender
as the Lender may from time to time designate as attorneys-in-fact for such
Borrower to endorse and sign the name of such Borrower on all checks, drafts,
money orders or other media of payment so delivered and to perform all
actions necessary or desirable in the discretion of the Lender to effect the
provisions of this Section 3.2(e) and to carry out the intent hereof, to do
any act which such Borrower is required to do pursuant to the terms of this
Section 3.2(e), and to exercise such rights and powers as such Borrower might
exercise with respect to the Collateral, all at the cost and expense of the
Borrowers. Any endorsements or assignments made pursuant to the foregoing
power of attorney shall, for all purposes, be deemed to have been made by the
Borrower granting such power of attorney prior to any endorsement or
assignment thereof by the Lender. The Lender may use any convenient or
customary means for the purpose of collecting such checks, drafts, money
orders or other media of payment.
(f) To facilitate the direct collection of payments made in respect of
Accounts Receivable, the Lender shall have the right to take over each
Borrower's post office boxes or make other arrangements, with which the
Borrowers shall cooperate, to receive each Borrower's mail.
(g) Each Borrower shall execute all other agreements, instruments and
documents and shall perform all further acts which the Lender may require
with respect to Accounts Receivable owing by the Government to ensure
compliance with the Assignment of Claims Act of 1940, as amended, and all
applicable regulations issued pursuant thereto.
3.3. Inventory and Equipment.
(a) All of the Inventory and Equipment having a value of Three Hundred
Thousand and no/100 Dollars ($300,000.00) or more will be kept only at such
places as the Borrowers shall designate from time to time by written notice
to the Lender. The Borrowers shall give the Lender prior written notice
before Inventory or Equipment is moved or delivered to a location other than
such designated places of business and the Lender's lien and security
interest will be maintained despite the location of the Inventory or
Equipment. In connection with any such move or change, the Borrowers shall
execute and deliver to the Lender such financing statements as Lender shall
require, in form and substance reasonably satisfactory to the Lender, to
maintain the perfection and priority of the Lender's lien in such Equipment
or Inventory. The Borrowers shall not, without the prior written consent of
the Lender, move or deliver the Inventory or Equipment to a location outside
of the United States of America.
(b) The Borrowers shall keep and maintain the Equipment in good
operating condition and repair. The Borrowers shall not permit any of the
Equipment to become a fixture to any real estate unless subordination
agreements satisfactory to the Lender are obtained by any owner or mortgagee
of such real estate. The Borrowers shall, immediately on demand therefor by
the Lender, deliver to the Lender any and all evidence of ownership of any of
the Equipment. None of the Equipment shall be sold, transferred, leased or
otherwise disposed of without the prior written consent of the Lender, except
for (i) sales or dispositions of Equipment which a Borrower determines in
good faith to be obsolete, (ii) sales or dispositions of Equipment which is
contemporaneously replaced with Equipment of comparable value and utility,
and (iii) other sales or dispositions of Equipment which, in the aggregate,
do not exceed One Hundred Thousand and no/100 Dollars ($100,000.00) in value
during any calendar year.
(c) The Lender's security interest shall extend and attach to Inventory
which is presently in existence and is owned by a Borrower or in which a
Borrower purchases or acquires an interest at any time and from time to time
in the future, whether such Inventory is in transit or in a Borrower's
constructive, actual or exclusive occupancy or possession or not and wherever
the same may be located, including, without limitation, all Inventory which
may be located at the premises of a Borrower or upon the premises of any
carriers, forwarding agents, truckers, warehousemen, vendors, selling agents,
finishers, convertors or other third parties who may have possession of the
Inventory.
(d) Upon sale, exchange, lease or disposition of the Inventory or
Equipment, the security interest of the Lender shall without break in
continuity and without further formality or act continue in and attach to all
cash and non-cash proceeds of such sale, exchange, lease or disposition,
including Inventory returned or rejected by customers or repossessed by
either a Borrower or the Lender. As to any such sale, exchange, lease or
disposition, the Lender shall have all of the rights of an unpaid seller,
including stoppage in transit, replevin, detinue and reclamation.
(e) The Borrowers shall not sell, lease, encumber or dispose of or
permit the sale, lease, encumbrance or disposal of any Inventory without the
prior written consent of the Lender, except for (i) sales or leases made in
the ordinary course of business and (ii) other dispositions which, in the
aggregate, do not exceed Fifty Thousand and no/100 Dollars ($50,000.00) in
value during any calendar year.
3.4. Defense of Collateral. Each Borrower, at its expense, will defend
the Collateral against any claims or demands adverse to the Lender's security
interest therein and will promptly pay, when due, the uncontested portion of
all taxes or assessments levied against the Borrowers on the Collateral.
3.5. Information Regarding Collateral. The Borrowers shall provide the
Lender such information as the Lender may from time to time reasonably
request with respect to the Collateral, including, without limitation,
statements describing, designating, identifying and evaluating all Collateral
and listing all sales and purchases of Inventory occurring within a
designated time period.
3.6. Insurance of Collateral. The Borrowers shall have the Equipment
and Inventory insured against loss or damage by fire, theft, burglary,
pilferage, loss in transportation and such other hazards as the Lender shall
specify, by insurers satisfactory to the Lender, in amounts satisfactory to
the Lender and under policies containing loss payable clauses satisfactory to
the Lender. Each such policy shall, at the option of the Lender, contain a
provision that it may not be canceled or any of its terms amended, modified
or waived, without giving the Lender 30 days' prior written notice. At the
request of the Lender, all of such policies shall be deposited with the
Lender. The Borrowers agree that the Lender shall have a security interest
in such policies and the proceeds thereof, and, if any loss should occur, the
proceeds may be applied to the payment of the Obligations or to the
replacement or restoration of the Inventory or Equipment damaged or
destroyed, as the Lender may elect or direct. After the occurrence of a
Default or an Event of Default, the Lender shall have the right to file
claims under any insurance policies, to receive, receipt and give acquittance
for any payments that may be made thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any of the insurance policies.
3.7. Perfection of Security Interest. The Borrowers shall perform any
and all steps in all relevant or appropriate jurisdictions as may be
necessary or reasonably requested by the Lender to perfect, maintain and
protect the Lender's security interest in the Collateral. The Borrowers
shall pay taxes and costs of, or incidental to, any recording or filing of
any financing statements concerning the Collateral. The Borrowers agree that
a carbon, photographic, photostatic or other reproduction of this Agreement
or of a financing statement is sufficient as a financing statement; provided
that this shall not limit the obligations of the Borrowers to execute
separate or subsequent financing statements with respect to the Collateral
upon the Lender's request.
3.8. Power of Attorney. Each Borrower hereby appoints the Lender and
any officer, employee or agent of the Lender as the Lender may from time to
time designate as attorneys-in-fact for such Borrower to perform all actions
necessary or desirable in the discretion of the Lender to effect the
provisions of this Agreement and to carry out the intent hereof, to do any
act which such Borrower is required to do pursuant to the terms of this
Agreement, and to exercise such rights and powers as such Borrower might
exercise with respect to the Collateral, all at the reasonable cost and
expense of such Borrower. Each Borrower agrees that neither the Lender nor
any other such attorney-in-fact will be liable for any acts of omission or
commission, unless such acts were willful and malicious, nor for any error of
judgment or mistake of law or fact. This power is coupled with an interest
and is irrevocable so long as any Obligations are outstanding. The Lender
agrees that it shall not exercise any rights under this Section prior to the
occurrence of a Default.
3.9. Limitations on Obligations. It is expressly agreed by the
Borrowers that, anything herein to the contrary notwithstanding, the
Borrowers shall remain liable under each Account Receivable and contract
giving rise to each Account Receivable to observe and perform all the
conditions and obligations to be observed and performed by the Borrowers
thereunder, all in accordance with and pursuant to the terms and provisions
of each such Account Receivable and contract. The Lender shall not have any
obligation or liability under any Account Receivable or contract by reason of
or arising out of this Agreement or the assignment of such Account Receivable
or contract to the Lender or the receipt by the Lender of any payment
relating to the Account Receivable pursuant hereto, nor shall the Lender be
required or obligated in any manner to perform or fulfill any of the
obligations of the Borrowers under or pursuant to any Account Receivable or
contract, or to make any payment, or to make any inquiry as to the nature or
the sufficiency of any payment received by it or the sufficiency of any
performance by any party under any Account Receivable, or to present or file
any claim, or to take any action to collect or enforce any performance of the
payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
3.10. Indemnification. In any suit, proceeding or action brought by
or against the Lender relating to the Collateral, the Borrowers will save,
indemnify and keep the Lender harmless from and against all expense, loss or
damage suffered by reason of any defense, set-off, counterclaim, recoupment
or reduction of liability whatsoever of any obligor thereunder, arising out
of a breach by the Borrowers of any obligation thereunder or arising out of
any other agreement, indebtedness or liability at any time owing to or in
favor of such obligor or its successors from the Borrowers, and all such
obligations of the Borrowers shall be and remain enforceable against and only
against the Borrowers and shall not be enforceable against the Lender. The
foregoing obligation of the Borrowers to indemnify the Lender shall survive
the payment of the Obligations and the termination of this Agreement but
shall not extend to any suit, proceeding or action arising out of the
Lender's gross negligence or willful misconduct.
SECTION 4. Representations and Warranties. As of the date hereof and
as of each date a Loan is requested hereunder, the Borrowers represent and
warrant to the Lender:
4.1. Incorporation, Good Standing and Due Qualification. Each Borrower
and its Subsidiaries is a corporation duly organized, validly existing, and
in good standing under the laws of the jurisdiction of its incorporation; has
the corporate power and authority to own its assets and to transact the
business in which it is now engaged or in which it is proposed to be engaged;
and is duly qualified as a foreign corporation and in good standing under the
laws of each other jurisdiction in which such qualification is required.
4.2. Corporate Power and Authority. The execution, delivery and
performance by each Borrower of the Loan Documents to which each is a party
have been duly authorized by all necessary corporate action and do not and
will not (a) require any consent or approval of the stockholders of such
corporation; (b) contravene such corporation's charter or bylaws; (c) result
in a material breach of or constitute a default under any material agreement
or instrument to which such corporation is a party or by which it or its
properties may be bound or affected; (d) result in, or require, the creation
or imposition of any Lien, upon or with respect to any of the properties now
owned or hereafter acquired by such corporation except as specifically
created by or permitted under the Loan Documents; and (e) to each Borrower's
best knowledge cause such corporation to be in default under any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
applicable to such corporation.
4.3. Legally Enforceable Agreement. This Agreement is, and each of the
other Loan Documents when delivered under this Agreement will be, legal,
valid and binding obligations of the Borrowers, enforceable against the
Borrowers, as the case may be, in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency,
receivership or by general principles of equity.
4.4. Financial Statements. The financial statements of the Borrowers
which have been furnished to the Lender in connection with this Agreement are
complete and correct in all material respects in accordance with GAAP and
fairly present the financial condition of such Borrower, and, since the date
of each such statement, there has been no material adverse change in the
condition (financial or otherwise), business or operations of the Borrowers.
4.5. Litigation. Except as disclosed in writing to the Lender, there is
no pending or, to each Borrower's best knowledge, threatened action or
proceeding against or affecting a Borrower or any Subsidiary before any
Tribunal, which may, in any one case or in the aggregate, materially
adversely affect the financial condition, operations, properties or business
of a Borrower or any Subsidiary.
4.6. Ownership and Liens. Each Borrower and each Subsidiary has title
to all of its assets, including the Collateral and none of the Collateral or
such assets, to the best of each Borrower's knowledge, is subject to any
Lien, except Liens permitted by this Agreement.
4.7. ERISA.
(a) Prohibited Transactions. No transaction has occurred in
connection with which a Borrower or any Subsidiary would be subject to a
liability for either a civil penalty assessed pursuant to Section 502(i)
of ERISA or a tax imposed by Code Section 4975.
(b) Plan Termination. There has been no termination of an Employee
Benefit Plan or trust created under any Employee Benefit Plan that has or
will give rise to liability to the PBGC on the part of a Borrower or an ERISA
Affiliate. No withdrawal or other liability has been incurred under Title IV
of ERISA with respect to any Employee Benefit Plan by a Borrower or an ERISA
Affiliate. The PBGC has not instituted proceedings to terminate any Employee
Benefit Plan.
(c) Accumulated Funding Deficiency. Full payment has been made of
all amounts which are required under the terms of each Employee Benefit Plan
to have been paid as contributions to such Employee Benefit Plan as of the
last day of the most recent fiscal year of such Employee Benefit Plan ended
on or before the date of this Agreement, and no accumulated funding
deficiency (as defined in Section 302 of ERISA and Code Section 412), whether or
not waived, exists with respect to any Employee Benefit Plan. Each Borrower and
each ERISA Affiliate are current with all required installments under Code
Section 412.
(d) Relationship of Benefits to Pension Plan Assets. The current
value of the benefit liabilities (as defined in Section 4001(a)(16) of ERISA) of
each Employee Benefit Plan does not exceed the fair market value of the
assets of such Employee Benefit Plan. Neither a Borrower nor any ERISA
Affiliate is required to provide security to an Employee Benefit Plan under
Code Section 401(a)(29). No lien under Code Section 412(n) or Sections
312(f) or 4068 of ERISA has been or is reasonably expected by the Borrowers
to be imposed on the assets of a Borrower or any ERISA Affiliate.
(e) Multiemployer Plan. Neither the Borrowers nor any ERISA
Affiliate participates in or contributes to or, since September 26, 1980 has
participated in or contributed to, any Multiemployer Plan.
(f) Compliance with ERISA. The Borrowers and the ERISA Affiliates
are in compliance in all material respects with those provisions of ERISA
which are applicable to them. Any Employee Benefit Plan which is intended to
be "qualified" under Code Section 401(a) is so qualified. No Reportable
Event has occurred with respect to any Employee Benefit Plan. Each Employee
Benefit Plan has been administered in compliance with ERISA and the applicable
provisions of the Code, and in accordance with its terms and any related
agreements or documents. Each Borrower may terminate its contributions to
any other Employee Benefit Plan maintained by it without incurring any
liability to any person interested therein. Except as disclosed in writing
to the Lender, there is no pending or, to the best knowledge of each
Borrower, threatened assessment, complaint, proceeding or investigation of
any kind before any Tribunal, including, but not limited to, the Internal
Revenue Service, the Department of Labor, the PBGC or any court of competent
jurisdiction, related to an Employee Benefit Plan, nor is there any basis
therefor. The Borrowers and each ERISA Affiliate have complied with the
continuation coverage requirements of Code Section 4980B and Part 6 of Title
1 of ERISA and any predecessor provisions thereto.
4.8. Taxes. The Borrowers and each Subsidiary have (a) timely filed or
caused to be filed all Tax Returns required to be filed for all periods up to
and including the date hereof in each jurisdiction in which they are or have
been subject to taxation and such returns and reports are true and correct,
have timely filed all claims for refunds to which they are entitled and have
timely paid or caused to be paid in full all taxes which are due and payable
to any taxing authorities for such periods, (b) fully paid or accrued on
their respective books an amount sufficient to pay all taxes to the extent of
known liabilities therefor which are not yet due and payable, (c) made or
caused to be made all withholdings of taxes required to be made, and such
withholdings have either been paid to the appropriate governmental authority
or set aside in separate accounts for such purposes, and (d) otherwise
satisfied, in all material respects, all legal requirements applicable to
them with respect to all aforementioned obligations of all taxing
jurisdictions, and neither the Internal Revenue Service nor any other taxing
authority is now asserting or, to the best knowledge of each Borrower,
threatening to assert against a Borrower or any Subsidiary any deficiency or
claim for additional taxes or any interest thereon or penalties in connection
therewith.
4.9. Debt. No Borrower is in any manner directly or contingently
obligated with respect to any Debt which is not permitted by this Agreement.
No Borrower is in default with respect to any such Debt.
4.10. Corporate Name; Chief Executive Office. During the five years
immediately preceding the date of this Agreement, neither a Borrower nor any
predecessor of a Borrower has used any corporate or fictitious name other
than its current corporate name and the names listed on Schedule 4.10
attached hereto. The chief executive office of the Borrowers, within the
meaning of Section 9.103(3)(d) of the UCC is 7600-A Leesburg Pike, Falls
Church, Virginia 22043.
4.11. Environmental and Safety Matters. The operation of the
business of the Borrowers and all Subsidiaries complies in all material
respects with all applicable Environmental Laws. The Borrowers and all
Subsidiaries have timely obtained all licenses and permits and timely filed
all reports required to be filed under any applicable Environmental Laws.
Neither a Borrower nor any Subsidiary has, and, to the best knowledge of each
Borrower, no other Person has, stored any chemical or hazardous substances,
including any "Hazardous Substances," "Pollutants" or "Contaminants" (as such
terms are defined in CERCLA), asbestos, petroleum products, or
polychlorinated biphenyls on, beneath or about any of the owned or leased
properties of a Borrower or any Subsidiary in violation of any applicable
legal requirements, including any Environmental Laws. Except as otherwise
disclosed to the Lender in writing prior to the date hereof, to the best
knowledge of each Borrower, there is no condition relating to or resulting
from the release or discharge into the soil, surface waters, groundwaters,
drinking water supplies, navigable waters, land, surface or subsurface
strata, ambient air or any other environmental medium which has resulted or
could result in any damage, loss, cost, expense, claim, demand, order or
liability to or against a Borrower or any Subsidiary by any Tribunal or other
third party relating to or resulting from the operation of its business or
otherwise related to any real property owned or leased of a Borrower or any
Subsidiary, irrespective of the cause of such condition. Neither a Borrower
nor any Subsidiary has received notice from any Tribunal or private or public
entity advising a Borrower or any Subsidiary that it is potentially
responsible for response costs with respect to a release or threatened
release of any Hazardous Substances. Neither a Borrower nor any Subsidiary
has and, to the best knowledge of each Borrower, no other Person has, buried,
dumped or otherwise disposed of any Hazardous Substances on, beneath or about
any property of a Borrower or any Subsidiary or on, beneath or about any
other property in violation of any applicable legal requirements, including
any Environmental Laws. Neither a Borrower nor any Subsidiary has received
notice of violation of any Environmental Law or zoning or land use ordinance,
law or regulation relating to the operation of the business of the Borrowers
or any Subsidiary, nor is either Borrower aware of any such violation.
4.12. Licenses. The Borrowers and all Subsidiaries possess all
Licenses from federal, state and local governmental or regulatory authorities
that are necessary for the ownership, maintenance and operation of their
respective businesses as now conducted or as proposed to be conducted and the
ownership or leasing of their respective properties where the failure to
possess such Licenses would have a material adverse effect on the condition
(financial or otherwise), operations, business or property of such Borrower
or such Subsidiary. The Licenses are in full force and effect, and the
Borrowers and each Subsidiary, as the case may be, are in compliance in all
material respects with all of such Licenses.
4.13. Intellectual Property. The Borrowers and all Subsidiaries own
all right, title and interest in and to all Intellectual Property used in and
material to the operation of their respective businesses or, for such
Intellectual Property that is not owned, possesses adequate licenses or other
legally enforceable rights to use the same. Each Borrower has no reason to
believe that any valid basis exists upon which a claim adversely affecting
any such Intellectual Property may be asserted against a Borrower or any
Subsidiary. To the best knowledge of each Borrower, no Person is infringing
upon the Intellectual Property used by a Borrower or any Subsidiary material
to the operation of their respective businesses. Each Borrower has taken
appropriate steps to protect the secrecy, confidentiality and value of its
and all Subsidiaries' rights in and to such Intellectual Property and to
prevent others from using such Intellectual Property without consent.
4.14. Absence of Payments. None of the Borrowers, any Subsidiary,
any of their respective directors, officers, agents or employees, or, to the
best knowledge of each Borrower, any other Person acting on behalf of any
such Person has made any unlawful contributions, payments, gifts or
entertainment, or made any unlawful expenditures relating to political
activity, to government officials or others.
4.15. Related Party Transactions. No present or former officer,
director, stockholder or Affiliate of a Borrower is a party to any
transaction or series of transactions with a Borrower which requires payments
by a Borrower to such officer, director, stockholder or Affiliate other than
normal and customary employment compensation and benefits, except for (i) the
related party transactions in existence and disclosed on Schedule 4.15
attached hereto and (ii) other related party transactions which, in the
aggregate, do not involve payments in excess of Fifty Thousand and no/100
Dollars ($50,000.00) in any calendar year.
4.16. Disclosure. All facts material to the financial condition,
results of operations, business, prospects and property of the Borrowers and
each Subsidiary have heretofore been disclosed to the Lender. No
representation or warranty made by a Borrower in this Agreement or in any of
the other Loan Documents, or in any statement, certificate, exhibit or
schedule furnished or to be furnished to the Lender pursuant to this
Agreement or any of the other Loan Documents or in connection with the
transactions contemplated herein and therein, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein and therein not
misleading.
SECTION 5. Affirmative Covenants. The Borrowers covenant and agree
with the Lender that each will:
5.1. Maintenance of Existence. Preserve and maintain, and cause each
Subsidiary to preserve and maintain, its corporate existence and good
standing in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which to the best of each
Borrower's knowledge such qualification is required.
5.2. Maintenance of Records. Keep, and cause each Subsidiary to keep,
adequate records and books of account, in which complete entries will be made
in accordance with GAAP, reflecting all financial transactions of each
Borrower and each Subsidiary, and maintain the principal records and books of
account of each Borrower and each Subsidiary, including those concerning the
Collateral, at the chief executive office of each Borrower.
5.3. Maintenance of Properties. Maintain, keep and preserve, and cause
each Subsidiary to maintain, keep and preserve, all of its properties
(tangible and intangible) necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear
excepted.
5.4. Conduct of Business. Continue, and cause each Subsidiary to
continue, to engage in an efficient and economical manner in a business of
the same general type as conducted by it on the date of this Agreement.
5.5. Maintenance of Insurance. Maintain, and cause each Subsidiary to
maintain, insurance with financially sound and reputable insurance companies
or associations in such amounts and covering such risks as are usually
carried by companies engaged in the same or a similar business and similarly
situated, including, without limitation, insurance covering the Inventory and
Equipment as required hereby.
5.6. Compliance with Laws. Comply, and cause each Subsidiary to comply,
in all material respects with all applicable laws, rules, regulations and
orders (including, without limitation, ERISA), such compliance to include,
without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property,
except as contested in good faith and through appropriate proceedings deemed
reasonably acceptable to the Lender.
5.7. Right of Inspection. At any reasonable time and from time to time,
permit the Lender or any agent or representative thereof to audit and verify
the Collateral, examine and make copies of and abstracts from the records and
books of account of, and visit the properties of, the Borrowers and any
Subsidiary, and to discuss the affairs, finances and accounts of the
Borrowers and any Subsidiary with any of their respective officers, directors
or shareholders and each Borrower's independent accountants; and in
connection with any such inspection, pay to the Lender upon demand its then
standard fee for such inspections to compensate the Lender for the cost
incurred and the commitment of resources required for conducting such
inspection.
5.8. Reporting Requirements. Furnish to the Lender:
(a) Quarterly Financial Statements. As soon as available and in
an event within forty-five (45) days after the end of each of the first three
fiscal quarters of each fiscal year of QuesTech, Securities and Exchange
Commission Form 10-Q for such fiscal quarter. Such Form 10-Q's shall be
certified by the chief financial officer of each Borrower, the Treasurer of
each Borrower or such other financial officer of each Borrower as is
acceptable to the Lender, to present fairly the financial condition of the
Borrowers (subject to year-end adjustment) and shall be accompanied by a
calculation of the financial covenants applicable to the financial statement
contained in such Form 10-Q's pursuant to Section 5.12 hereof;
(b) Annual Financial Statements. As soon as available and in any
event within ninety (90) days after the end of each fiscal year of QuesTech,
Securities and Exchange Commission Form 10-K for such fiscal year. The
consolidated statements contained in such Form 10-K shall be accompanied by
an audit opinion thereon acceptable to the Lender of an independent certified
public accountant firm selected by the Borrowers and acceptable to the Lender
and shall also be accompanied by a calculation of the financial covenants
certified by the chief financial officer of the Borrower, the Treasurer of
the Borrower or such other financial officer of the Borrower as is acceptable
to the Lender, which are applicable to the financial statements contained in
such Form 10-K pursuant to Section 5.12 hereof;
(c) Management Letters. Promptly upon receipt thereof, copies of
any reports submitted to a Borrower or any Subsidiary by independent
certified public accountants in connection with examination of the financial
statements of a Borrower or any Subsidiary made by such accountants;
(d) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits and proceedings before any Tribunal
affecting a Borrower or any Subsidiary, which, in the reasonable opinion of
the Borrowers, if determined adversely, could have a material adverse effect
on the financial condition, properties or operations of such Borrower or such
Subsidiary;
(e) Notice of Defaults and Events of Default. As soon as possible
and in any event within five (5) Business Days after the occurrence of each
Default and Event of Default, a written notice setting forth the details of
such Default or Event of Default and the action which is proposed to be taken
by the Borrowers with respect thereto;
(f) Proxy Statements, Etc. Promptly following the Lender's
request therefor, copies of all proxy statements, financial statements and
reports which a Borrower or any Subsidiary sends to its stockholders, and
copies of all regular, periodic and special reports, and all registration
statements which a Borrower or any Subsidiary files with the Securities and
Exchange Commission or any governmental authority which may be substituted
therefor, or with any national securities exchange;
(g) Borrowing Base Certificate and Receivables Detail. On or
before the tenth (10th) Business Day of each Financial Reporting Month, a
Borrowing Base Certificate appropriately completed and executed by the chief
financial officer of each Borrower, the Treasurer of each Borrower or such
other financial officer of each Borrower as is acceptable to the Lender and
including a computation of the Borrowing Base as of the last day of the
previous Financial Reporting Month, accompanied by (i) schedules of all
outstanding Accounts Receivable as of the last day of the previous Financial
Reporting Month showing the age of such Accounts Receivable in intervals of
not more than thirty (30) days, (ii) such other supporting documents to the
schedules as Lender may from time to time reasonably request, and (iii) such
invoices, instruments, chattel paper and other evidences of indebtedness
representing any Accounts Receivable, duly endorsed in blank or to the
Lender, as the Lender may request;
(h) Government Contract Audits. Promptly after a Borrower's
receipt thereof, notice of any final decision of a contracting officer
disallowing costs aggregating more than Two Hundred Thousand and no/100
Dollars ($200,000.00), which disallowed costs arise out of any audit of such
Borrower's contracts with the Government;
(i) Notice of Claimed Defaults. Immediately upon becoming aware
that the holder of any Debt or Lien has given notice or taken any action with
respect to a claimed breach, default or event of default, a written notice
specifying the notice given or action taken by such holder and the nature of
the claimed breach, default or event of default by a Borrower thereunder, and
the action being taken or proposed to be taken with respect thereto; and
(j) Contract Backlog Report. If requested by the Lender, reports
relating to the Accounts Receivable included in any Borrowing Base
Certificate setting forth a description of contracts giving rise to such
Accounts Receivable, the percentage of completion of the work to be performed
with respect to such contracts, the amounts billed under such contracts and
the amounts remaining to be billed, in form and detail satisfactory to the
Lender; and
(k) General Information. Such other information respecting the
condition or operations, financial or otherwise, of the Borrowers or any
Subsidiary or Corporate Guarantor as the Lender may from time to time
reasonably request.
5.9. Licenses. Keep, and cause each Subsidiary to keep, all Licenses
and all other agreements necessary to operate the business of such Borrower
or such Subsidiary in full force and effect and free from burdensome
restrictions and comply in all material respects with all terms and
conditions thereof.
5.10. ERISA. (a) Make, and cause each Subsidiary to make, prompt
payments of contributions required by the terms of each Employee Benefit Plan
and meet the minimum funding standards set forth under ERISA and the Code
with respect to each Employee Benefit Plan to which such standards apply; (b)
notify the Lender immediately of any fact, including, without limitation, any
Reportable Event, arising in connection with any Employee Benefit Plan which,
more likely than not, would constitute grounds for the termination thereof by
the PBGC or for the appointment by the appropriate United States district
court of a trustee to administer the Employee Benefit Plan; (c) notify the
Lender immediately of the intent by a Borrower to terminate any Employee
Benefit Plan; (d) notify the Lender immediately of the adoption of an
amendment to any Employee Benefit Plan (or of any other event) which causes
any Employee Benefit Plan to fail to have sufficient assets to qualify for a
standard termination under Section 4041 of ERISA or to require providing
security under Code Section 401(a)(29); (e) promptly after receipt thereof,
furnish to the Lender a copy of any notice received by a Borrower or any
Subsidiary from the PBGC relating to the intention of the PBGC to terminate
any Employee Benefit Plan or to appoint a trustee to administer any Employee
Benefit Plan; (f) promptly after receipt thereof, furnish to the Lender a
copy of any notice received by a Borrower or any Subsidiary from the Internal
Revenue Service relating to the intention of the Internal Revenue Service to
disqualify any Employee Benefit Plan or to refuse to grant a favorable
determination letter with regard to any Employee Benefit Plan; (g) notify the
Lender immediately of any lawsuit, claim for damages or administrative
proceeding in which an Employee Benefit Plan or a fiduciary with respect
thereto is a defendant; and (h) furnish to the Lender, promptly upon its
request therefor, such additional information concerning each and every
Employee Benefit Plan as may be reasonably requested, including, but not
limited to, the annual report required to be filed under ERISA and any
notices filed or proposed to be filed in connection with any of the
foregoing.
5.11. Environmental Matters. Notify the Lender immediately of the
receipt by a Borrower or any Subsidiary of any notice from any Tribunal that
there has been a violation by a Borrower or any Subsidiary of any
Environmental Law and that remediation of such violation is necessary and
assume responsibility for, and control the process of, any response action,
penalties or correction associated with such violation.
5.12. Financial Covenants.
(a) Minimum Tangible Net Worth. As of the ending date of the
financial period depicted in each consolidated balance sheet of QuesTech
required to be delivered to the Lender under the terms of this Agreement (as
part of Form 10-Q or Form 10-K, as applicable), maintain a Tangible Net Worth
of at least Three Million and no/100 Dollars ($3,000,000.00).
(b) Leverage Ratio. As of the ending date of the financial period
depicted in each consolidated balance sheet of QuesTech required to be
delivered to the Lender under the terms of this Agreement (as part of Form
10-Q or Form 10-K, as applicable), maintain a ratio of Total Liabilities to
Tangible Net Worth of not greater than 5.0 to 1.
(c) Profitability. As of the end of each fiscal year of
QuesTech, ensure that QuesTech's consolidated net income (after the payment
or provision for payment of income taxes) for the year then ending, as
depicted in QuesTech's consolidated income statement required to be delivered
to the Lender under the terms of this Agreement (as part of Form 10-K), shall
be at least One Dollar ($1).
SECTION 6. Negative Covenants. Each Borrower agrees that it will not:
6.1. Liens. Create, incur, assume or permit to exist, or permit any
Subsidiary to create, incur, assume or permit to exist, any Lien upon or with
respect to any of its properties, now owned or hereafter acquired, except:
(a) Liens in favor of the Lender; (b) Liens which are incidental to the
conduct of the business of the Borrowers or any Subsidiary arising in
connection with operating lease obligations evidencing the rights of the
lessors under such leases or are created in connection with Debt of the
Borrowers permitted by Section 6.2 (c) below; in which case such Liens shall
be subordinated to the Liens of the Lender on terms satisfactory to the
Lender, (c) Liens on Equipment in existence on the date of this Agreement and
disclosed in Schedule 6.1(c) attached hereto; (d) Liens securing obligations
of a Subsidiary to a Borrower or another Subsidiary; (e) carriers, warehouse
or mechanics Liens incurred in the ordinary course of business which either
(i) remain unperfected or (ii) are being contested by the Borrowers in good
faith in connection with which the Borrowers either have bonded over such
Lien or have provided additional Collateral reasonably satisfactory to the
Lender securing the payment of such Lien and all interest or penalties due
thereon; (f) the Thermo-Forming Lien; (g) purchase-money Liens, other than
the Thermo-Forming Lien, on any fixed assets provided that (i) any property
subject to any such purchase-money Lien is acquired by a Borrower or any
Subsidiary in the ordinary course of its respective business and the
purchase-money Lien on any such property is created contemporaneously with
such acquisition (ii) each such purchase-money Lien shall attach only to the
property so acquired; and (iii) the Debt secured by all such purchase-money
Liens, plus the Debt secured by Liens described in clause (b) above, shall
not exceed One Million Fifteen Thousand and no/100 Dollars ($1,015,000.00) at
any time outstanding in the aggregate; and (h) Liens securing Debt of the
Borrowers permitted by Section 6.2(g) below.
6.2. Debt. Create, incur, assume or permit to exist, or permit any
Subsidiary to create, incur, assume or permit to exist, any Debt, except (a)
the Obligations; (b) Debt in existence on the date of this Agreement and
depicted in Schedule 6.2 attached hereto; (c) Debt of a Borrower subordinated
to the Obligations on terms satisfactory to the Lender; (d) subject to the
limitations specified in Section 6.8 and 6.11 hereof, Debt of any Subsidiary
to a Borrower or another Subsidiary; (e) ordinary trade accounts payable; (f)
Debt of a Borrower or any Subsidiary secured by purchase-money Liens
permitted by this Agreement; (g) other Debt of the Borrowers outstanding at
any time which does not exceed Twenty-Five Thousand and no/100 Dollars
($25,000.00) in the aggregate; and (h) the Thermo-Forming Debt.
6.3. Mergers, Etc. Merge or consolidate with a Person, or permit any
Subsidiary to do so without the prior written consent of the Lender, which
will not be unreasonably withheld, except that (a) any Subsidiary may merge
into or transfer assets to a Borrower and (b) any Subsidiary may merge into
or consolidate with or transfer assets to any other Subsidiary.
6.4. Leases. Create, incur, assume, or permit to exist, or permit any
Subsidiary to create, incur, assume or permit to exist, any obligation as
lessee for the rental or hire of any real or personal property, except as is
necessary in connection with such party's normal and customary business
activities.
6.5. Sale and Leaseback. Sell, transfer or otherwise dispose of, or
permit any Subsidiary to sell, transfer or otherwise dispose of, any real or
personal property to any Person and thereafter directly or indirectly lease
back the same or similar property.
6.6. Dividends. Declare or pay any dividends; purchase, redeem, retire,
or otherwise acquire for value any of its capital stock now or hereafter
outstanding; make any distribution of assets to its stockholders whether in
cash, assets or obligations of a Borrower; allocate or otherwise set apart
any sum for the payment of any dividend or distribution on, or for the
purchase, redemption, or retirement of, any shares of its capital stock; make
any other distribution by reduction of capital or otherwise in respect of any
shares of its capital stock; or permit any Subsidiary to purchase or
otherwise acquire for value any stock of a Borrower or another Subsidiary,
except that if there is no Default at such time (a) a Borrower may declare
and deliver dividends and make distributions payable solely in common stock
of such Borrower, (b) a Borrower may purchase or otherwise acquire shares of
its capital stock by exchange for or out of the proceeds received from a
substantially concurrent issue of new shares of its capital stock, and (c) a
Borrower may purchase, redeem, or retire any of its capital stock for cash
consideration; provided that (i) no Borrower shall purchase, redeem or retire
any of its capital stock for cash consideration if after giving effect to the
proposed transaction the aggregate amount of all such payments by the
Borrowers during the then-current fiscal year will exceed One Hundred
Thousand and no/100 Dollars ($100,000.00) and (ii) no Borrower shall declare
or pay any dividends as permitted under this Section 6.6 until the Lender has
received written notice from such Borrower at least five (5) Business Days in
advance of declaring or paying any such dividend and has also received such
other information as the Lender may have requested in order to verify the
amount of the proposed dividends and to determine that the conditions
precedent to the making of the requested dividends have been satisfied.
6.7. Sale of Assets. Sell, lease, assign, transfer or otherwise dispose
of or permit any Subsidiary to sell, lease, assign, transfer or otherwise
dispose of, any of its now owned or hereafter acquired assets (including,
without limitation, shares of stock and indebtedness of Subsidiaries,
Accounts Receivable and leasehold interests), except: (a) the sale of
Inventory in the ordinary course of business; (b) the sale or other
disposition of Equipment which a Borrower determines in good faith to be
obsolete; and (c) the sale, lease, assignment, or other transfer by any
Subsidiary of its assets to a Borrower.
6.8. Loans. Make, or permit any Subsidiary to make, any loan or advance
to any Person except for (a) loans or advances to employees, officers or
directors of a Borrower or any Subsidiary not exceeding at any time
outstanding the aggregate principal sum of (i) Fifty Thousand and no/100
Dollars ($50,000.00) plus (ii) reasonable advances for anticipated business
expenses of employees that would be reimbursable to such employees under such
Borrower's expense reimbursement policy not exceeding One Hundred Eighty
Thousand and no/100 Dollars ($180,000.00) in the aggregate outstanding at any
time and (b) loans from one Borrower to another.
6.9. Guaranties, Etc. Assume, guarantee, endorse or otherwise be or
become directly or contingently responsible or liable (including, but not
limited to, an agreement to purchase any obligation, stock, assets, goods or
services, or to supply or advance any funds, assets, goods or services, or to
maintain or cause such Person to maintain a minimum working capital or net
worth, or otherwise to assure the creditors of any Person against loss) for
obligations of any Person, except (a) guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (b) guaranties by a Borrower of Debt of another Borrower,
and (c) the Kitty Hawk Guaranty.
6.10. Acquisitions. Purchase or acquire, or permit any Subsidiary to
purchase or acquire without the prior written consent of the Lender, which
will not be unreasonably withheld, (a) all or substantially all of the assets
of any Person, or (b) any capital stock of or ownership interest in any other
Person.
6.11. Transaction with Affiliate. Except as specifically permitted by
the terms of this Agreement, (including, without limitation, Section 6.8
hereof), enter into any transaction, including without limitation, the
purchase, sale or exchange of property or the rendering of any service, with
any Affiliate, or permit any subsidiary to enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or
the rendering of any service, with any Affiliate, except in the ordinary
course of and pursuant to the reasonable requirements of such Borrower's or
such Subsidiary's business and upon fair and reasonable terms no less
favorable to such Borrower or such Subsidiary than would be applicable in a
comparable arm's-length transaction with a Person not an Affiliate.
6.12. Change of Chief Executive Office and Corporate Name. Move the
principal records and books of account of any Borrower or any Subsidiary,
including those concerning the Collateral from its chief executive office or
change its chief executive office or the name under which it does business
without (a) giving the Lender at least thirty (30) days prior written notice,
and (b) executing and delivering financing statements reasonably satisfactory
to the Lender prior to such move or change.
SECTION 7. Conditions of Lending. The making of the Loans shall be
subject to the following conditions:
7.1. Conditions Precedent to Closing. The initial disbursement of the
Loans shall be subject to the following conditions precedent:
(a) The Loan Documents shall have been appropriately completed, duly
executed by the parties thereto, recorded and or filed where necessary and
delivered to the Lender, and all taxes and fees with respect to such
recording and filing shall have been paid by the Borrowers.
(b) No Default or Event of Default shall have occurred and be
continuing.
(c) All representations and warranties contained herein shall be true
and correct at the date of the Closing.
(d) All legal matters incident to the Loans shall be satisfactory to
counsel for the Lender, and each Borrower agrees to execute and deliver to
the Lender such additional documents and certificates relating to the Loans
as the Lender may reasonably request.
(e) If required by the Lender, the Lender shall have received an
opinion of counsel to the Borrowers as to such matters as the Lender may
request, in form and substance satisfactory to the Lender and its counsel.
(f) Financing statements in form and substance satisfactory to the
Lender shall have been properly filed in each office where necessary to
perfect the Lender's security interest in the Collateral, termination
statements shall have been filed with respect to any other financing
statements covering all or any portion of the Collateral (except with respect
to Liens permitted by this Agreement), and all taxes and fees with respect to
such recording and filing shall have been paid by the Borrowers; provided
that the Lender may choose to waive this condition with respect to the filing
of certain financing statements or termination statements prior to Closing.
(g) If requested by the Lender, each Borrower shall have delivered to
the Lender (i) certified copies of evidence of all corporate actions taken by
such Borrower to authorize the execution and delivery of this Agreement, the
Note and the other Loan Documents, (ii) a certificate of incumbency for the
officers of each Borrower executing the Loan Documents required herein, (iii)
a good standing certificate dated not more than 30 days prior to the date of
the Closing from the appropriate state official of any state in which each
Borrower is incorporated or qualified to do business, and (iv) such
additional supporting documents as the Lender or counsel for the Lender may
reasonably request.
(h) The Lender shall have received a Borrowing Base Certificate, a
listing and aging of Accounts Receivable, a listing of accounts payable of
the Borrowers, a report setting forth the status of all contracts, all of
which shall be of a current date, shall be appropriately completed and duly
executed by the chief financial officer of each Borrower, the Treasurer of
each Borrower or such other financial officer of each Borrower as is
acceptable to the Lender and generally shall be in form and substance
satisfactory to the Lender.
(i) The Lender shall have received evidence satisfactory to it that
each Borrower has obtained the insurance required by this Agreement.
(j) The Lender shall have received such landlord and mortgagee waivers
as it shall request with respect to any landlord or mortgagee which may claim
or have an interest in any of the Collateral.
7.2. Conditions Precedent to Subsequent Disbursements. The disbursement
of subsequent Loans shall be subject to the following conditions precedent:
(a) No Default or Event of Default shall have occurred and be
continuing.
(b) No material adverse change shall have occurred in the financial
condition of a Borrower.
(c) All representations and warranties contained herein shall be true
and correct at the date of such disbursement.
(d) No change shall have occurred in any law or regulations thereunder
or interpretations thereof which in the opinion of counsel for the Lender
would make it illegal for the Lender to make Loans hereunder.
(e) If required by the Lender, the Borrowers shall have delivered to
the Lender a current Borrowing Base Certificate, a listing and aging of
Accounts Receivable, a listing of accounts payable of each Borrower, a report
setting forth the status of all contracts, all of which shall be of a current
date, shall be appropriately completed and duly executed by the chief
financial officer of each Borrower, the Treasurer of each Borrower or such
other financial officer of each Borrower as is acceptable to the Lender and
generally shall be in form and substance satisfactory to the Lender.
(f) If previously waived by the Lender as a condition to Closing,
financing statements and/or termination statements shall have been filed in
each location where the Lender deems such filing necessary to perfect its
security interest in the Collateral or terminate a previously perfected
security interest in the Collateral.
SECTION 8. Default.
8.1. Events of Default. Each of the following shall constitute an Event
of Default under this Agreement:
(a) The failure of a Borrower to pay any Obligation to the Lender
including, without limitation, the principal of or interest on the Note or
any of the Loans, when the same shall become due and payable, whether at
maturity, as a result of the Lender's demand for payment or otherwise, and
such failure shall continue for a period of ten (10) days after the date when
the Lender's notice of such failure (which notice may be a computer generated
late payment notice) is deemed effective pursuant to Section 9.3 hereof; or
(b) The refusal by a Borrower to permit the Lender to inspect, examine,
verify or audit the Collateral in accordance with the provisions of this
Agreement; or
(c) The failure of a Borrower to perform or observe any covenant set
forth herein (except any such failure resulting in the occurrence of another
Event of Default described in this Section) or to perform or observe any
other term, condition, covenant, warranty, agreement or other provision
contained in this Agreement or any of the other Loan Documents; provided that
if such failure is capable of cure, then such failure shall constitute an
Event of Default only if such failure is not cured within ten (10) days after
the date when a notice from the Lender specifying such failure is deemed
effective pursuant to Section 9.3 hereof; or
(d) The existence of any material inaccuracy in any representation or
warranty made by a Borrower or any statement or representation made in any
certificate, report or opinion delivered pursuant hereto or in connection
with any borrowing hereunder or the occurrence of any material breach
thereof; or
(e) The occurrence of a default under and the acceleration of any other
obligation of a Borrower or any Subsidiary for the payment of any Debt in
excess of One Hundred Thousand and no/100 Dollars ($100,000.00), unless and
to the extent that the declaration of default and acceleration is being
contested in good faith in a court of appropriate jurisdiction; or
(f) The making by a Borrower of an assignment for the benefit of
creditors, the filing by a Borrower of a petition in bankruptcy or a petition
or application to any Tribunal for the appointment of any receiver or trustee
for a Borrower or any substantial part of its property, or the commencement
by a Borrower of any proceeding relating to such Borrower under any
reorganization, arrangement, readjustments of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or
(g) The failure within 60 days after the filing of a bankruptcy
petition or the commencement of any proceeding against a Borrower seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, to have such proceeding dismissed, or the failure within 60 days
after the appointment, without the consent or acquiescence of a Borrower, of
any trustee, receiver or liquidator of such Borrower or of all or any
substantial part of the properties of such Borrower to have such appointment
vacated; or
(h) The occurrence of any of the events described in the two
immediately preceding clauses with respect to a Subsidiary, or any property
of a Subsidiary; or
(i) The entry of any judgment against a Borrower or any Subsidiary in
excess of One Hundred Thousand and no/100 Dollars ($100,000.00) or the
attachment of any property of a Borrower or any Subsidiary having a value in
excess of One Hundred Thousand and no/100 Dollars ($100,000.00) and the
failure by the affected Person to pay, discharge, bond-off or cause to be
dismissed such judgement or attachment within 60 days, unless and to the
extent that the judgment or attachment is appealed in good faith to a court
of higher jurisdiction and the appeal remains pending; or
(j) The occurrence of a material adverse change in the financial or
business condition of a Borrower or a Subsidiary; or
(k) The failure of QuesTech to own at least ninety percent (90%) of the
outstanding capital stock of QTSC and QTPI; or
(l) The issuance to a Borrower or any Subsidiary of (i) a cure notice
or a show-cause notice relating to a possible termination for default under
any contract which is either a contract with the Government or is a
subcontract (at any tier) which is related to a contract between a third
party and the Government and, within thirty (30) calendar days after the date
of such notice, no written notification is received by such Borrower or such
Subsidiary from the cognizant Contracting Officer or customer official
stating that a termination will not occur; or (ii) a notice of actual
termination for default (complete or partial), under any such contract or
subcontract; or (iii) a notice of suspension or a notice of proposed
debarment from contracting or subcontracting with the Government; provided,
however, that no Event of Default shall be declared based upon clauses (i) or
(ii) of this Section 8.1(l) if the notice in question is issued at a time
when the Unearned Contract Value of the contract or subcontract in question
is less than Five Hundred Thousand and no/100 Dollars ($500,000.00). The
term "Unearned Contract Value" shall mean the difference between (1) the then
fully funded dollar value of the contract or subcontract, whether or not
earned, and (2) the total amounts previously billed and properly billable for
accepted end items or services; or
(m) The occurrence of any of the following events: (i) the termination
of any Employee Benefit Plan in a distress termination under Section 4041(c)
of ERISA or an involuntary termination under Section 4042 of ERISA; (ii) the
failure to maintain, or the filing of a request for a waiver of, the minimum
funding standard with respect to any Employee Benefit Plan; (iii) the
occurrence of any event which causes any Employee Benefit Plan to cease to
have sufficient assets at all times so as to qualify for a standard
termination under Section 4041 of ERISA; (iv) the occurrence of any event
which causes the unfunded liability with regard to all such Employee Benefit
Plans in the aggregate to become an amount in excess of $10,000; (v) the
appointment of a trustee by an appropriate United States district court to
administer any Employee Benefit Plan; or (vi) the institution of any
proceedings by the PBGC to terminate any such Employee Benefit Plan or to
appoint a trustee to administer any such Employee Benefit Plan; or
(n) The occurrence of an event of default under any other Loan
Document.
8.2. Remedies upon Default. Upon the occurrence of an Event of Default,
the following provisions shall be applicable:
(a) The Lender may, at its option, declare all Obligations, whether
incurred prior to, contemporaneous with, or subsequent to the date of this
Agreement, and whether represented in writing or otherwise, immediately due
and payable without presentment, demand, protest, notice of non-payment or
any other notice required by law relative thereto, all of which are hereby
expressly waived by the Borrowers and terminate the Lender's obligation to
make Loans hereunder; provided, however, that upon the occurrence of an Event
of Default specified in Sections 8.1(f) or (g), all Obligations automatically
will be due and payable and the Lender's obligation to make Loans hereunder
will automatically terminate without further action by the Lender. If any of
the Obligations, including, without limitation, the Loans, shall be evidenced
by a demand instrument, the right of the Lender to declare any and all
Obligations to be immediately due and payable, as well as the recitation of
the above events permitting the Lender to declare all Obligations due and
payable, shall not constitute an election by the Lender to waive its right to
demand payment under a demand instrument at any time and in any event, as the
Lender, in its discretion, may deem appropriate. In addition, the Lender may
exercise all of its rights and remedies against the Borrowers and any
Collateral.
(b) The Lender may foreclose its lien and security interest in the
Collateral in any way permitted by law and shall have without limitation, the
remedies of a secured party under the UCC. The Lender may notify the account
debtors obligated on any of the Collateral to make payments thereon directly
to the Lender, take control of the cash and non-cash proceeds of any such
Collateral and may enter each Borrower's premises with legal process and
without incurring liability to the Borrowers and remove the Collateral to
such place or places as the Lender may deem advisable, or the Lender may
require the Borrowers to assemble the Collateral and make the Collateral
available to the Lender at a convenient place and, with or without having the
Collateral at the time or place of sale, the Lender may sell or otherwise
dispose of all or any part of the Collateral whether in its then condition or
after further preparation or processing, either at public or private sale or
at any broker's board, in lots or in bulk, for cash or for credit, at any
time or place, in one or more sales, and upon such terms and conditions as
the Lender may elect. The Lender shall give not less than five (5) Business
Days prior written notice to the Borrowers of the time and place of any sale
of the Collateral, which each Borrower hereby agrees constitutes commercially
reasonable notice. At any such sale the Lender may be the purchaser.
(c) The Borrowers recognize that the Lender may be unable to effect a
public sale of all or a part of the Collateral by reason of certain
prohibitions contained in the Act and/or the Blue Sky Laws, but may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire the
Collateral for their own account, for investment and without a view to the
distribution or resale thereof. The Borrowers understand that private sales
so made may be at prices and on other terms less favorable than if the
Collateral were sold at public sales, and agrees that the Lender has no
obligation to delay the sale of any of the Collateral for the period of time
necessary to permit the issuer of the Collateral (even if the issuer agrees)
to register the Collateral for sale under the Act or the Blue Sky Laws. Each
Borrower agrees that private sales made under the foregoing circumstances
shall be deemed to have been made in a commercially reasonable manner.
(d) The proceeds from any sale of the Collateral by the Lender shall
first be applied to any costs and expenses in securing possession of the
Collateral, and to any expenses in connection with the sale. The net
proceeds will be applied toward the payment of the Obligations. Application
of the net proceeds as to particular Obligations or as to principal or
interest shall be in the Lender's absolute discretion. Any deficiency will
be paid to the Lender forthwith upon demand, and any surplus will be paid to
the Borrowers or in accordance with law if the Borrowers are not otherwise
indebted to the Lender.
(e) To the extent that the Obligations are now or hereafter secured by
property other than the Collateral described herein or by the guarantee,
endorsement or property of any other Person, then the Lender shall have the
right to proceed against such other property, guarantee or endorsement upon
the occurrence of Event of Default, and the Lender shall have the right in
its sole discretion to determine which rights, security, liens, security
interests or remedies the Lender shall at any time pursue, relinquish,
subordinate, modify or take any other action with respect thereto, without in
any way modifying or affecting any of them or any of the Lender's rights
hereunder.
(f) The Lender is hereby authorized at any time or from time to time,
without notice to the Borrowers (any such notice being expressly waived by
each Borrower) to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held, including any
certificate of deposit, and other indebtedness at any time owed by the Lender
to or for the credit of account of a Borrower against any and all of the
Obligations.
(g) EACH BORROWER, HAVING KNOWLEDGE THAT IT MAY BE ENTITLED TO NOTICE
AND A HEARING PRIOR TO REPOSSESSION OF THE COLLATERAL, HEREBY WAIVES ANY
RIGHT THAT IT MAY HAVE UNDER EXISTING OR FUTURE LAW TO NOTICE OF FORECLOSURE
AND ANY OTHER ACT DESCRIBED HEREIN, TO ANY HEARING THAT MAY BE HELD RELATING
TO FORECLOSURE OR ANY OTHER SUCH ACTS, AND TO ANY NOTICE THAT MAY BE REQUIRED
TO BE GIVEN BY THE LENDER PRIOR TO SUCH HEARING. EACH BORROWER HEREBY
EXPRESSLY RELEASES THE LENDER AND ITS AGENTS FROM ANY AND ALL LIABILITY
RELATING TO SUCH FORECLOSURE AND ANY OTHER ACTS DESCRIBED HEREIN. THE
FOREGOING WAIVER SHALL NOT APPLY TO SPECIFIC NOTICE OBLIGATIONS OF THE LENDER
SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
(h) The Lender may itself perform or comply, or otherwise cause
performance or compliance with the obligations of the Borrowers contained in
this Agreement, including, without limitation, the obligations of the
Borrowers to defend and insure the Collateral. The expenses of the Lender
incurred in connection with such performance or compliance, together with
interest thereon at the Default Rate, shall be payable by the Borrowers to
the Lender on demand and shall constitute Obligations.
SECTION 9. Miscellaneous.
9.1. Collection Costs. The Borrowers shall pay all of the reasonable
costs and expenses incurred by the Lender in connection with the enforcement
of this Agreement and the other Loan Documents, including, without
limitation, reasonable attorneys' fees and expenses.
9.2. Effect on Original Loan Documents, Modification and Waiver.
(a) QuesTech and QTSC acknowledge and agree that their respective
obligations under the Original Loan Documents remain valid and enforceable
obligations and that the execution and delivery of this Agreement and the
other Loan Documents executed in connection herewith shall not be construed
as a novation of any of the Original Loan Documents. If any provision of
this Agreement or any of the other Loan Documents is avoided or found to be
unenforceable, the corresponding provision of the Original Loan Documents
shall be automatically reinstated. QuesTech and QTSC further acknowledges
and agrees that, as of the date hereof, they have no offsets or defenses
against the payment of any of their obligations under the Original Loan
Documents. As a specific inducement to the Lender without which QuesTech and
QTSC acknowledge the Lender would not enter into this Agreement and the other
Loan Documents, QuesTech and QTSC hereby waive any and all claims that they
may have against the Lender, as of the date hereof, arising out of or
relating to the Original Loan Documents, whether sounding in tort or any
other basis.
(b) The terms and conditions pursuant to which the Lender is
making the Loans available to the Borrowers and the other terms and
conditions generally related to the relationship between the Borrowers and
the Lender are completely restated in this Agreement and the other Loan
Documents executed in connection herewith. Accordingly, the Original Loan
Documents are superseded by this Agreement and the other Loan Documents
executed in connection herewith except as provided in the immediately
following sentence. Notwithstanding the foregoing, the Original Loan
Documents shall survive and remain in effect to the extent they grant
collateral to the Lender as security for the obligations of any of the
Borrowers outstanding on the date hereof or are otherwise necessary to
support the grant of such collateral. In the event of a conflict between the
terms of the Original Loan Documents and the terms of this Agreement and the
other Loan Documents executed in connection herewith, the terms of this
Agreement and the other Loan Documents executed in connection herewith shall
control.
(c) This Agreement, the other Loan Documents executed in
connection herewith and the Original Loan Documents [subject, however, to the
limitations set forth in Sections 9.2(a) and (b)] contain the entire
agreement between the parties.
(d) No modification or waiver of any provision of any of these
documents and no consent by the Lender to any departure therefrom by the
Borrowers shall be effective unless such modification or waiver shall be in
writing and signed by an officer of the Lender with a title of assistant vice
president or any higher office, and the same shall then be effective only for
the period and on the conditions and for the specific instances and purposes
specified in such writing.
(e) No notice to or demand on the Borrowers in any case shall
entitle the Borrowers to any other or further notice or demand in similar or
other circumstances.
(f) No failure or delay by the Lender in exercising any right,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
and remedies herein provided are cumulative and not exclusive of any rights
or remedies otherwise provided by law.
9.3. Notices. All notices, requests, demands or other communications
required or permitted by or in connection with this Agreement or any other
Loan Document, without implying the obligation to provide any such notice,
request, demand or other communication, shall be in writing addressed to the
appropriate address set forth below or to such other address as may be
hereafter specified by written notice by the Lender or the Borrowers, as
applicable, forwarded in like manner. Any such notice, request, demand or
other communication shall be deemed to be effective one (1) day after
dispatch if sent by telegram, mailgram, Purolator Delivery, express mail,
Federal Express or any other commercially recognized overnight delivery
service or two (2) days after dispatch if sent by registered or certified
mail, return receipt requested. Notwithstanding the foregoing, all notices,
requests, demands or other communications shall be considered to be effective
upon receipt if accomplished by hand delivery.
To the Lender: North Tower, 5th Floor
7799 Leesburg Pike
Falls Church, Virginia 22043
Attention: Loriana Cipolletti
To the Agent and the
Borrowers: 7600-A Leesburg Pike
Falls Church, Virginia 22043
Attention: Vincent L. Salvatori
and
7600-A Leesburg Pike
Falls Church, Virginia 22043
Attention: Joseph P. O'Connell, Jr.
9.4. Counterparts. This Agreement may be executed by the parties hereto
individually or in any combination, in one or more counterparts, each of
which shall be an original and all of which together constitute one and the
same agreement.
9.5. Captions. The captions of the various sections and paragraphs of
this Agreement have been inserted only for the purpose of convenience; such
captions are not a part of this Agreement and shall not be deemed in any
manner to modify, explain, enlarge or restrict any of the provisions of this
Agreement.
9.6. Survival of Agreements. All agreements, representations and
warranties made herein shall survive the delivery of this Agreement and the
making and renewal of the Loans hereunder.
9.7. Fees and Expenses. Whether or not any Loans are made hereunder,
the Borrowers shall pay on demand all costs and expenses incurred by the
Lender in connection with the preparation, negotiation, execution, delivery,
filing, recording and administration of this Agreement and any of the
documents executed or delivered in connection herewith, including, without
limitation, the reasonable fees and expenses of counsel to the Lender and
local counsel who may be retained by the Lender, with respect to this
Agreement and such documents and any amendments thereof and with respect to
advising the Lender as to its rights and responsibilities thereunder.
9.8. Use of Defined Terms. All terms defined in this Agreement shall
have the defined meanings when used in certificates, reports or other
documents made or delivered pursuant to this Agreement, unless the context
shall otherwise require.
9.9. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and bind the
respective parties hereto and their successors and assigns; provided,
however, that no Borrower may assign its rights hereunder without the prior
written consent of the Lender.
(b) At any time and from time to time, the Lender may grant to one or
more Banks participating interests in the Lender's commitment to make Loans
hereunder or in any or all of the Loans or the Note. In the event of any
such grant by the Lender of a participating interest to a Bank, whether or
not upon notice to the Borrowers, the Lender shall remain responsible for the
performance of its obligations hereunder, and the Lender shall continue to
deal solely and directly with the Borrowers in connection with the Lender's
rights and obligations under this Agreement. Any agreement pursuant to which
the Lender may grant such a participation interest shall provide that the
Lender shall retain the sole right and responsibility to enforce the
obligations of the Borrowers hereunder including, without limitation, the
right to approve any amendment, modification or waiver of any provision of
this Agreement; provided that such participation agreement may provide that
the Lender will not agree to any modification, amendment or waiver of this
Agreement which would have the effect increasing or decreasing the Maximum
Amount, extending the Termination Date, subjecting the Lender to any
additional obligation, reducing the principal of or rate of interest on any
Loan, or postponing the date fixed for any payment of principal of or
interest on any Loan or fees hereunder or under the Note without the consent
of such Bank. An assignment or other transfer which is not permitted by
subsection (c) or (d) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) At any time, the Lender may assign to one or more Banks all, or a
proportionate part of all, of the Lender's rights and obligations under this
Agreement and the Note, and such Bank shall assume such rights and
obligations, pursuant to an instrument executed by such Bank and the Lender,
with (and subject to) the consent of the Borrowers; provided that if such
Bank is an affiliate of the Lender, the Borrowers' consent shall not be
required. Upon execution and delivery of such an instrument and payment by
such Bank to the Lender of an amount equal to the purchase price agreed
between the Lender and such Bank, such Bank shall become a party to this
Agreement and shall have all the rights and obligations of the Lender to the
extent of such Bank's commitment to make Loans as set forth in such Bank's
instrument of assumption, and the Lender shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any
assignment pursuant to this subsection (c), the Lender and the Borrowers
shall make appropriate arrangements so that, if required, a new Note is
issued to the Bank. If the Bank is not incorporated under the laws of the
United States of America or a state thereof, it shall, prior to the first
date on which interest or fees are payable hereunder for its account deliver
to the Borrowers certification as to exemption from deduction or withholding
of any United States federal income taxes.
(d) The Lender may at any time assign all or any portion of its rights
under this Agreement and the Note to a Federal Reserve Bank. No such
assignment shall release the Lender from its obligations hereunder.
(e) The Lender may furnish any information concerning the Borrowers in
its possession from time to time to any Bank which is or may become a
participant or assignee under this Section 9.9 and may furnish such
information in response to credit inquiries consistent with general banking
practice.
9.10. Accounting Terms. All accounting terms used herein which are
not otherwise expressly defined in this Agreement shall have the meanings
respectively given to them in accordance with GAAP in effect on the date of
this Agreement. Except as otherwise provided herein, all financial
computations made pursuant to this Agreement shall be made in accordance with
GAAP and all balance sheets and other financial statements shall be prepared
in accordance with GAAP. Except as otherwise provided herein, whenever
reference is made in any provision of this Agreement to a balance sheet or
other financial statement or the information depicted therein for performing
a financial computation, such terms shall mean the most recent consolidated
balance sheet or other financial statement received by the Lender pursuant to
the terms hereof.
9.11. Consent to Jurisdiction. Each Borrower irrevocably submits to
the jurisdiction of any Virginia State court sitting in the County of Fairfax
or the United States District Court for the Eastern District of Virginia,
sitting in Alexandria, Virginia over any suit, action or proceeding arising
out of or relating to this Agreement. To the fullest extent it may
effectively do so under applicable law, each Borrower irrevocably waives and
agrees not to assert, by way of motion, as a defense or otherwise, any claim
that it is not subject to the jurisdiction of any such court, 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.
9.12. Enforcement of Judgments. Each Borrower agrees, to the
fullest extent it may effectively do so under applicable law, that a judgment
in any suit, action or proceeding of the nature referred to in Section 9.11
brought in any such court shall be conclusive and binding upon such Borrower
and may be enforced in the courts of the United States of America or the
Commonwealth of Virginia (or any other courts to the jurisdiction of which
such Borrower is or may be subject) by a suit upon such judgment.
9.13. Waiver of Jury Trial. [INTENTIONALLY DELETED]
9.14. Service of Process. Each Borrower consents to process being
served in any suit, action or proceeding of the nature referred to in Section
9.11 by mailing a copy thereof by registered or certified mail postage
prepaid, return receipt requested, to the Borrowers' address specified in or
designated pursuant to Section 9.3. Each Borrower agrees that such service
(i) shall be deemed in every respect effective service of process upon such
Borrower in any such suit, action or proceeding and (ii) shall, to the
fullest extent permitted by law, be taken and held to be valid personal
service upon and personal delivery to such Borrower.
9.15. No Limitation on Service or Suit. Nothing in this Section 9
shall affect the right of the Lender to serve process in any manner permitted
by law, or limit any right that the Lender may have to bring proceedings
against the Borrowers in the courts of any jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other
jurisdiction.
9.16. Indemnification. At all times prior to and after the
consummation of the transactions contemplated by this Agreement, the
Borrowers will indemnify and hold each Indemnitee harmless from and against
all losses, damages, claims, fines, costs and expenses (including, without
limitation, reasonable attorneys' fees, costs and expenses) incurred by any
such Indemnitee, whether direct or indirect, as a result of or arising from
or relating to any Proceedings by any Person, whether threatened or
initiated, asserting a claim for any legal or equitable remedy against any
Indemnitee arising from or in connection with this Agreement, the Note or any
of the other Loan Documents, and any of the transactions contemplated herein
or therein, except to the extent such losses, damages, claims, fines, costs
or expenses are due to the willful misconduct or gross negligence of the
Lender; provided that in connection with such indemnification obligations,
the Borrowers shall not be liable for any settlement effected by any
Indemnitee without the Borrowers' prior consent (which the Borrowers shall
not unreasonably withhold, delay or condition) and the Borrowers shall have
the right to participate at their sole cost and expense in the defense of any
proceeding for which such indemnification may be sought. In the event of any
Proceeding, the Lender shall promptly and as soon as is practicable notify
the Borrowers of the existence of such Proceeding, provided that the Lender's
failure to do so shall not preclude any Indemnitee from seeking
indemnification hereunder. At the request of the Lender, the Borrowers will
indemnify any Person to whom the Lender transfers or sells all or any portion
of its interest in the Loans or participations therein on the terms set forth
above. The obligations of the Borrowers under this Section 9.16 shall
survive the termination of this Agreement and payment of the Obligations.
9.17. No Partnership, Joint Venture or Agency. Neither this
Agreement nor any of the Loan Documents shall in any respect be interpreted,
deemed or construed as making the Lender a partner or joint venturer with the
Borrowers, nor shall they be interpreted, deemed or construed as making the
Lender the agent of representative of the Borrowers, and each Borrower agrees
not to make any contrary assertion, contention, claim or counterclaim in any
action, suit or other legal proceeding involving the Lender.
9.18. Interpretation.
(a) This Agreement and the rights and obligations of the parties
hereunder shall be construed and interpreted in accordance with the laws of
the Commonwealth of Virginia, excluding principles of conflict of laws.
(b) The Lender hereby acknowledges and agrees that this Agreement shall
be subject to and interpreted in accordance with all applicable legal,
regulatory and contractual obligations of the Borrowers with respect to the
security, privacy or nondisclosure of certain information regarding the
business of the Borrowers. By way of example and not limitation, the Lender
acknowledges and agrees that the Borrowers may be prohibited from (i)
disclosing the location of certain information with respect to certain
Accounts Receivable, (ii) providing access to certain books and records and
(iii) permitting the Lender to inspect certain Collateral. The Lender hereby
agrees that the compliance of the Borrowers with such legal, regulatory and
contractual obligations shall not give rise to an Event of Default hereunder,
even if such compliance conflicts with the representations, warranties,
covenants, agreements and conditions set forth herein.
9.19 Joint and Several Obligations. The Borrowers are jointly and
severally liable for all Obligations.
IN WITNESS WHEREOF, the Borrowers and the Lender have caused this
Agreement to be signed by their duly authorized representatives all as of the
day and year first above written, with the specific intention that this
Agreement constitute a document under seal.
QUESTECH, INC. a Virginia corporation
ATTEST: By: _________________________________
Vincent L. Salvatori, Chairman
C. Burkholder
(Asst.) Secretary
[corporate seal]
QUESTECH SERVICE COMPANY, a Virginia
corporation
ATTEST: By: _________________________________
Vincent L. Salvatori, Chairman
C. Burkholder
(Asst.) Secretary
[corporate seal]
QUESTECH PACKAGING, INC., a Virginia
corporation
ATTEST: By: _________________________________
Vincent L. Salvatori, Chairman
C. Burkholder
(Asst.) Secretary
[corporate seal]
SIGNET BANK, a Virginia banking corporation
By: _____________________________
Loriana Cipolletti, Vice President
EXHR.JUN EXHIBIT A
FORM OF IRREVOCABLE LETTER OF CREDIT
APPLICATION AND AGREEMENT
EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
SCHEDULE 4.10
BORROWER NAMES SCHEDULE 4.15
RELATED PARTY TRANSACTIONS SCHEDULE 6.1(c)
SCHEDULE OF PERMITTED EQUIPMENT LIENS
SCHEDULE 6.2(b)
SCHEDULE OF PERMITTED DEBT