Amendment to Loan and Security Agreement Between Silicon Valley Bank and Microlog Corporation, Microlog Corporation of Maryland, and Old Dominion Systems Incorporated of Maryland

Summary

This amendment updates the loan and security agreement between Silicon Valley Bank and the borrowers: Microlog Corporation, Microlog Corporation of Maryland, and Old Dominion Systems Incorporated of Maryland. It revises the credit limit, financial covenants, and maturity date, increases audit fees, and requires 21 days' notice for new loan requests. The amendment also removes a previous warrant provision and requires the borrowers to pay a $35,000 non-refundable fee. All other terms of the original agreement remain in effect unless specifically changed by this amendment.

EX-10.8 2 0002.txt EXHIBIT 10.8 EXHIBIT 10.8 Amendment to Loan and Security Agrement With Silicon Valley Bank - -------------------------------------------------------------------------------- AMENDMENT TO LOAN DOCUMENTS BORROWERS: MICROLOG CORPORATION MICROLOG CORPORATION OF MARYLAND OLD DOMINION SYSTEMS INCORPORATED OF MARYLAND DATE: JANUARY 26, 2001 THIS AMENDMENT TO LOAN DOCUMENTS is entered into between Silicon Valley Bank ("Silicon") and the borrowers named above (jointly and severally, "Borrower"). The parties hereto agree to amend the Loan and Security Agreement between them, dated March 24, 1999 (as previously amended, the "Loan Agreement"), as follows, effective as of the date hereof. (Capitalized terms used but not defined in this Amendment shall have the meanings set forth in the Loan Agreement.) 1. AMENDMENT TO CREDIT LIMIT. Section 1 of the Schedule is hereby amended to read as follows: "1. CREDIT LIMIT (Section 1.1): An amount not to exceed the lesser of: (i) $1,000,000 at any one time outstanding (the "Maximum Credit Limit"); or (ii) 75% of the amount of Borrower's Eligible Receivables (as defined in Section 8 above), provided that, at no time shall the outstanding Loans against Receivables owing to Old Dominion Systems Incorporated of Maryland ("ODSM") exceed the lesser of: (i) $700,000; or (ii) at any time, 75% of the sum of the four most recent RSE Timecard Summaries submitted to ODSM by Applied Physics Laboratory. Loans will be made to each Borrower based on the Eligible Receivables of each Borrower, subject to the Credit Limit set forth above for all Loans to all Borrowers combined. LETTER OF CREDIT SUBLIMIT (Section 1.5): $500,000" 2. AMENDMENT TO FINANCIAL COVENANT. Section 5 of the Schedule is hereby amended to read as follows: "5. FINANCIAL COVENANTS (Section 5.1): Borrower shall comply with each of the following covenant(s). Compliance shall be determined as of the end of each month, except as otherwise specifically provided below: -1- SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS - -------------------------------------------------------------------------------- MINIMUM TANGIBLE NET WORTH: As of each of the following dates, Borrower's Tangible Net Worth shall be an amount equal to at least the sum of: (i) the amount opposite such date; plus (ii) 80% of all consideration received after January 26, 2001, for equity securities and subordinated debt of the Borrower. January 31, 2001 $1,800,000 February 28, 2001 $1,400,000 March 31, 2001 $1,400,000 April 30, 2001 $1,600,000 May 31, 2001 $1,100,000 June 30, 2001 $1,100,000 July 31, 2001 $1,500,000 August 31, 2001 $1,000,000 September 30, 2001 $1,000,000 October 31, 2001 $1,500,000 November 30, 2001 $1,500,000 December 31, 2001 $1,500,000 January 31, 2002, and thereafter $1,800,000 In no event shall the amount of this Minimum Tangible Net Worth covenant be decreased. DEFINITIONS. For purposes of the foregoing financial covenant(s), the following terms shall have the following meanings: "Liabilities" shall have the meaning ascribed thereto by generally accepted accounting principles. "Tangible Net Worth" shall mean the excess of total assets over total liabilities, determined in accordance with generally accepted accounting principles, with the following adjustments: (A) there shall be excluded from assets: (i) notes, accounts receivable and other obligations owing to the Borrower from its officers or other Affiliates, and (ii) all assets which would be classified as intangible assets under generally accepted accounting principles, including without limitation goodwill, licenses, patents, trademarks, trade names, copyrights, capitalized software and organizational costs, licenses and franchises (B) there shall be excluded from liabilities: all indebtedness which is subordinated to the Obligations under a subordination agreement in form specified by Silicon or by language in the instrument evidencing the indebtedness which is acceptable to Silicon in its discretion." -2- SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS - -------------------------------------------------------------------------------- 3. NEW MATURITY DATE. Section 4 of the Schedule is hereby amended in its entirety to read as follows: "4. MATURITY DATE (Section 6.1): January 26, 2002, subject to early termination as provided in Section 6.2 above." 4. AUDIT FEES. The third sentence of Section 5.4 of the Loan Agreement, which currently reads "The foregoing inspections and audits shall be at Borrower's expense and the charge therefor shall be $500 per person per day (or such higher amount as shall represent Silicon's then current standard charge for the same), plus reasonable out of pocket expenses." is hereby amended to read as follows: "The foregoing inspections and audits shall be at Borrower's expense and the charge therefor shall be $600 per person per day (or such higher amount as shall represent Silicon's then current standard charge for the same), plus reasonable out of pocket expenses." 5. 21-DAY NOTICE OF REQUEST FOR LOANS. Notwithstanding any other term or condition of the Loan Agreement, including but not limited the terms of that certain Amendment to Loan Documents dated April 21, 2000 (the "April 2000 Amendment"), Borrower hereby agrees to provide Silicon at least 21 days' prior written notice of Borrower's first request for a Loan subsequent to the date of this Amendment, and Silicon shall have no obligation to make any Loan unless and until Borrower has complied with such notice requirement. 6. ELIMINATION OF WARRANT PROVISION. Section 6 of the April 2000 Amendment (the "Warrant Provision") currently reads as follows: "6. WARRANT. Borrower hereby agrees that, within 30 days after Silicon makes its first Loan to Borrower subsequent to the date of this Amendment, Borrower shall provide Silicon with a five-year warrant (the "Warrant") to purchase a sufficient number of shares of common stock of Borrower (the "Number of Shares"), at a sufficient price per share (the "Warrant Price"), so that the product of the Warrant Price multiplied by the Number of Shares is equal to at least two percent (2.0%) of the Maximum Credit Limit in effect on the date of issuance of the Warrant (the "Issue Date"). The terms of the Warrant shall be set forth in a Warrant to Purchase Stock and related documents (including but not limited to a weighted average Anti-Dilution Agreement and a Registration Rights Agreement which grants registration rights if the shares issued upon exercise of the Warrant are not then eligible for resale under rule 144 of the Securities Act of 1933), without regard to volume restriction, which documents shall be customary and reasonable for transactions of this nature and shall be acceptable to Silicon Valley in its discretion. The Warrant shall be deemed fully earned on the Issue Date, and shall be in addition to all interest and other fees. The forms of documentation required pursuant to this section shall be finalized and agreed upon prior to the date of the first Loan to Borrower subsequent to the date of this Amendment." -3- SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS - -------------------------------------------------------------------------------- This will confirm that Borrower and Silicon hereby agree to eliminate the Warrant Provision, and that the Warrant Provision is hereby eliminated and shall have no further force or effect. 4. FEE. In consideration for Silicon entering into this Amendment, Borrower shall concurrently pay Silicon a fee in the amount of $35,000, which shall be non-refundable and in addition to all interest and other fees payable to Silicon under the Loan Documents. Silicon is authorized to charge said fee to Borrower's loan account. 5. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon that all representations and warranties set forth in the Loan Agreement, as amended hereby, are true and correct. 6. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior written amendments to the Loan Agreement signed by Silicon and Borrower, and the other written documents and agreements between Silicon and Borrower set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and understandings between the parties with respect to the subject hereof. Except as herein expressly amended, all of the terms and provisions of the Loan Agreement, and all other documents and agreements between Silicon and Borrower shall continue in full force and effect and the same are hereby ratified and confirmed. BORROWER: SILICON: MICROLOG CORPORATION SILICON VALLEY BANK BY /s/ Kirk E. Isenbart BY /s/ John Atanasoff --------------------------------- --------------------------------- TITLE Principal Financial Officer TITLE Vice President ------------------------------ ------------------------------ BORROWER: BORROWER: MICROLOG CORPORATION OF OLD DOMINION SYSTEMS MARYLAND INCORPORATED OF MARYLAND BY /s/ Kirk E. Isenbart BY /s/ Kirk E. Isenbart --------------------------------- --------------------------------- TITLE Principal Financial Officer TITLE Principal Financial Officer ------------------------------ ------------------------------ -4- SILICON VALLEY BANK AMENDMENT TO LOAN DOCUMENTS - -------------------------------------------------------------------------------- CONSENT The undersigned guarantor acknowledges that its consent to the foregoing Amendment to Loan Documents is not required, but the undersigned nevertheless does hereby consent to the foregoing Agreement and to the documents and agreements referred to therein. The Continuing Guaranty by the undersigned and the Borrowers, and any and all other documents and agreements of the undersigned in favor of Silicon shall continue in full force and effect and the same are hereby ratified and affirmed. SYSTEMS FINANCIAL By /s/ Kirk E. Isenbart --------------------------------------- Title Principal Financial Officer ------------------------------------ -5-