1
EXHIBIT 10.13
FOURTH AMENDMENT TO
CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT ("the "Amendment"), dated and
effective as of September 27, 1996, is made by and between MICRODYNE
CORPORATION, a Maryland corporation (the "Borrower"), CRESTAR BANK and NBD BANK
(the "Banks"), and CRESTAR BANK ("Crestar") as agent (the "Agent") for the
Banks.
RECITALS
The Borrower, the Banks and the Agent are parties to a Credit
Agreement, dated as of January 27, 1995, as amended by the First Amendment to
Credit Agreement, dated as of October 26, 1995, the Second Amendment to Credit
Agreement, dated as of June 30, 1996 (the "Second Amendment"), and the Third
Amendment to Credit Agreement, dated as of August 19, 1996 (as further amended,
modified or supplemented from time to time, the "Agreement"). Terms defined in
the Agreement shall have the same defined meanings when such terms are used in
this Amendment.
The Borrower, the Agent and the Banks have agreed to amend certain
provisions of the Agreement. Accordingly, for valuable consideration, the
receipt and sufficiency of which are acknowledged, the Borrower, the Banks and
the Agent agree as follows:
1. The following definitions are added to Section 1.1 of
the Agreement:
"Applicable DC Advance Percentage" means the percentage
approved by the Banks from time to time for purposes of determining the
appropriate amounts of Eligible Data Communications Receivables to be
included in the Borrowing Base. As of September 30, 1996, the
Applicable DC Advance Percentage shall be 40%. If the average Dilution
Rate is 20% or less for two successive fiscal quarters, the Banks will
increase the Applicable DC Advance Percentage to 60%; provided,
however, that if the Dilution Rate exceeds 20% for any subsequent
fiscal quarter, the Banks may reduce the Applicable DC Advance
Percentage to 40%. Notwithstanding the foregoing, if the Banks
determine in their sole discretion at any time that the then-applicable
percentage is not an appropriate percentage based on the Dilution Rate
for a particular quarter, the Banks may lower the Applicable DC Advance
Percentage to a level that they deem appropriate, but in no event to
less than 20%. Each change in the Applicable DC Advance Percentage
shall become effective on the next Business Day following written
notice from the Agent to the Borrower.
"Dilution Rate" means, for any fiscal quarter, a fraction
(expressed as a percentage), the numerator of which is the aggregate
amount of cash and non-cash
2
credits issued to Customers of the Data Communications division during
such quarter (including, without limitation, returns, stock rotation
credits and billing adjustments), and the denominator of which is the
gross sales of the Borrower for the immediately preceding fiscal
quarter.
"Eligible Data Communications Receivables" means Eligible
Receivables arising out of the operation of the Borrower's Data
Communications division.
"Eligible Equipment" means machinery and equipment, in good
and workable condition, to which the Borrower has title and in which
the Banks have a first priority security interest, free and clear of
all other Liens, including, without limitation, any Liens arising out
of Capital Leases; provided, however, that in no event shall Eligible
Equipment include fixtures that form part of the Eligible Real Estate.
"Eligible Real Estate" means the Land and the building and
fixtures located on the Land; provided, however, that such Land,
building and fixtures shall not become Eligible Real Estate unless and
until the Agent receives a mortgagee title insurance policy, issued by
Ticor Title Insurance Company, in the amount of $5,000,000, insuring
the Mortgage as a valid first Lien against the fee simple title to the
Land and such buildings and fixtures, and containing no exceptions,
printed form or otherwise, other than (a) real estate taxes not yet due
and payable, (b) an exception for matters that would be disclosed by a
current survey, and (c) the exceptions listed as items 4 through 14 in
Section II of Schedule B of Attorney's Title Insurance Fund, Inc.
Commitment No. C-2358100, dated September 13, 1996.
"Land" means Xxxx 00 xxxxxxx 00, xxxxxxxxx, Xxxxx 000, Xxxx
Xx. 00. Silver Spring Xxxxxx, Xxxxxx County, Florida, as the same are
platted in Plat Book J, Pages 227 through 231, Public Records of
Xxxxxx County, Florida.
"Value" means, with respect to the Eligible Real Estate (a)
prior to the receipt and approval by the Banks of an appraisal of the
Eligible Real Estate, the assessed value thereof, based on the Xxxxxx
County, Florida real estate tax assessment, and (b) upon the receipt
and approval by the Banks of such appraisal, 80% of the appraised value
of the Eligible Real Estate; in either case, not to exceed $5,000,000.
Any appraisal shall be ordered by the Agent and shall conform to the
regulatory guidelines applicable to each Bank.
2. The following definitions contained in Section 1.1 of the
Agreement are deleted in their entirety and replaced with the following
provisions:
"Advance Commitment" means (a) from the date hereof until
December 30, 1996, $12,148,500 in the case of Crestar and $5,351,500
in the
2
3
case of NBD; (b) as of December 31, 1996, and until March 30, 1997,
$10,065,900 in the case of Crestar and $4,434,100 in the case of NBD;
and (c) as of March 31, 1997, and until June 29, 1997, $5,553,600 in
the case of Crestar and $2,446,400 in the case of NBD; and (d) as of
June 30, 1997, and at all times thereafter, $3,471,000 in the case of
Crestar and $1,529,000 in the case of NBD; provided, however that each
Bank's Advance Commitment shall be reduced automatically by its
Commitment Percentage of any Maximum Amount reduction resulting from a
prepayment of the Advances pursuant to Section 2.10(e).
"Borrowing Base" means, at the time in question, the sum of
the following: (a) Applicable DC Advance Percentage of Eligible Data
Communications Receivables, plus (b) 80% of Eligible Billed Receivables
that do not arise out of the Borrower's Data Communications division,
plus (c) the applicable Inventory Component, plus (d) 30% of the net
book value of Eligible Equipment, plus (e) the Value of the Eligible
Real Estate, provided, however, that at no time shall the Borrowing
Base attributable to the Inventory Component exceed the Borrowing Base
attributable to clauses (a) and (b) of this definition.
"Eligible Receivables" means Accounts Receivable of the
Borrower (a) that represent valid obligations incurred by a Customer
for goods shipped or delivered or services completed under valid
contracts of sale, lease or service that have been formally awarded to
the Borrower and for which all required contract documents have been
executed by the Customer and the Borrower and, in the case of Accounts
Receivable owed by the Government, for which funds have been
appropriated and allocated; (b) with respect to which the applicable
goods have been delivered to and accepted by the Customer on an
absolute sale basis and not on a xxxx and hold sale basis, a
consignment sale basis, a guaranteed sale basis, a sale or return
basis or on the basis of any other similar understanding; (c) on which
the Customer is not an Affiliate or Subsidiary of the Borrower; (d)
with respect to which the Borrower has no knowledge or notice of any
inability of the Customer to make full payment; (e) from the face
amounts of which have been deducted all payments, setoffs, amounts
subject to adverse claims made in writing to the Borrower, contractual
allowances, bad debt reserves and other credits applicable thereto,
(f) that are subject to no Liens other than those permitted by this
Agreement; (g) that continue to be in full conformity with the
representations and warranties made by the Borrower to the Banks in
this Agreement and the Security Agreement; (h) with respect to which
the Banks are and continue to be satisfied with the credit standing of
the Customer; (i) on which the Customer is not a creditor of the
Borrower, and (j) on which, unless an Acceptable Foreign Customer or
otherwise approved by the Banks in writing, in their sole discretion,
the Customer is not a Foreign Customer; provided, however, and without
limiting any other provisions of this Agreement with respect to the
exclusion of Receivables from the category of Eligible Receivables and
the Borrowing Base,
3
4
that (1) if either Bank reasonably determines that the collectibility
of any Account Receivable makes it unacceptable for inclusion as an
Eligible Receivable and gives written notice to the Borrower indicating
the reasons for such determination, then such Account Receivable shall
thereafter be excluded from the category of Eligible Receivables, (2)
if more than 50% of the aggregate face amount of Accounts Receivable
owed by a Customer other than the Government are aged more than 90 days
from the date of the initial invoices, then all Accounts Receivable
owed by such Customer shall be included in a separate line item on the
Aging and shall be excluded from the category of Eligible Receivables,
and (3) in no case shall Eligible Receivables include any Account
Receivable representing or arising out of retainages, holdbacks,
revenues recognized or costs incurred in excess of approved or allowed
reimbursement rates, cost overruns, unauthorized work or work beyond
the scope of a contract, rebillings or contracts secured by surety
bonds.
"Inventory Component" means 20% of Eligible Inventory, valued
at the lower of cost or market, but in no event shall the Inventory
Component included in the Borrowing Base be more than $6,000,000.
"Maximum Amount" means, with respect to the Advances, (a) as
of September 30, 1996, until December 30, 1996, $17,500,000, (b) as of
December 31, 1996, and until March 30, 1997, $14,500,000, (c) as of
March 31, 1997, and until June 29, 1997, $8,000,000, and (d) as of June
30, 1997, and at all times thereafter, $5,000,000; provided, however,
that the applicable Maximum Amount on any date shall be further reduced
by the amount of the prepayment of the Advances required by Section
2.10(e) of this Agreement.
"Termination Date" means September 30, 1997, any earlier date
of termination in whole of the Commitments pursuant to Section 9.1, or
any later date if the Termination Date is extended in the sole
discretion of the Banks in accordance with Section 2.4.
3. Section 2.1(a) is deleted in its entirety and replaced
with the following:
"SECTION 2.1 The Advances.
(a) Each Bank severally agrees, subject to the terms and
conditions of this Agreement, to make Advances to the Borrower from
time to time on any Business Day during the period from the date hereof
until the Termination Date in an aggregate amount not to exceed at any
time outstanding the amount of such Bank's Advance Commitment. The
aggregate outstanding amount of Advances shall not exceed the Maximum
Amount at any time. With the limits of each Bank's Advance Commitment
and up to the Maximum Amount, the Borrower may borrow, prepay pursuant
to Section 2.10 and reborrow hereunder from the date of this Agreement
until the Termination Date; provided, however, that no Advance will be
disbursed by
4
5
any Bank if, after such disbursement, the Borrower would be required to
make a prepayment of the Obligations in accordance with the provisions
of Section 2.10(d)."
4. The Borrower acknowledges and agrees that the term "Borrowing
Base Loans" means, at any time, the sum of (a) the aggregate of the principal
balances of the outstanding Advances, (b) the aggregate of the principal
balances of the outstanding Term Loans, and (c) the aggregate of the face
amounts of the outstanding Letters of Credit. Section 2.10(d) is amended to read
as follows:
"(d) The Borrower shall immediately prepay the Obligations to
the extent that (1) the Borrowing Base is less than 75% of the
outstanding Borrowing Base Loans at any time until December 30, 1996,
(2) as of December 31, 1996, and until March 30, 1997, the Borrowing
Base is less than 80% of the Borrowing Base Loans at any time, and (3)
as of March 31, 1997, and at all times thereafter, the Borrowing Base
is less than 100% of the outstanding Borrowing Base Loans at any time."
5. The Borrower agrees that it shall no longer have the right to
designate a Loan to be, continue a Loan as or convert a Loan into a Eurodollar
Rate Loan, and the provisions of Section 2.9 are no longer applicable. In
addition, Section 2.6 is deleted in its entirely and replaced with the
following:
"SECTION 2.6 Interest". The Borrower shall pay interest on the
unpaid principal amount of each Advance and Term Loan, on each Interest
Payment Date, at a rate per annum equal to the Base Rate plus 1%,
adjusted daily when and as the Base Rate is changed."
6. The first sentence of Section 2.11 is deleted and replaced
with the following:
"(a) In consideration of Advances to be made by the Banks, the
Borrower agrees to pay to the Agent for the account of each Bank a
commitment fee equal to 1/2 of 1% per annum of the Maximum Amount, to
be paid in advance on the first day of each calendar quarter, beginning
on October 1, 1996."
7. Subsection (1) of Section 7.1(b) is deleted in its entirety
and replaced with the following:
"(1) As soon as available and, in any event, within
15 days after the end of each of the first two calendar months of each
fiscal quarter and within 30 days after the end of the last calendar
month of each fiscal quarter, unaudited financial statements consisting
of a consolidated balance sheet of the Borrower and its Subsidiaries as
of the end of such month, consolidated statements of operations and
stockholders' equity of the Borrower and its Subsidiaries for the month
then ended and for the period commencing at the end of the previous
fiscal year and ending with the last day of the preceding month, all in
reasonable detail and stating comparative
5
6
form the respective consolidated figures for the corresponding dates
and periods in the previous fiscal year and all prepared in accordance
with GAAP. Such statements shall be accompanied by reports itemizing
raw materials, work in process and finished goods Inventory by division
and revenues and gross profits by division. Such financial statements
and reports shall be certified to be accurate by the chief financial
officer of the Borrower."
8. Subsection (7) of Section 7.1(b) is deleted in its entirety
and replaced with the following:
"(7) On or before the 15th day of each calendar
month, (i) an Aging as of the last day of the previous calendar month,
(ii) a report identifying, in sufficient detail for the Banks, all
Inventory on hand as of the end of the previous calendar month, (iii) a
Borrowing Base Certificate signed by the chief financial officer of the
Borrower, (iv) such other supporting documents to the schedules as
either Bank from time to time reasonably may request, and (v) such
invoices, instruments, chattel paper and other evidence of indebtedness
representing any Accounts Receivable, duly endorsed in blank or to the
Banks, as the Banks may request. In addition to the foregoing, the
Borrower shall deliver to the Agent, within five Business Days after
the end of each week, a Borrowing Base Certificate setting forth a
calculation of the Borrowing Base as of the end of such week,
accompanied by a current summary Aging, a current listing and aging of
accounts payable, and a detailed list of all cash receipts for, and
non-cash credits issued during, such week;"
9. Pursuant to the provisions of Subsection 9 of Section 7.1(b),
the Borrower (a) agrees to provide to the Agent, within 45 days after the end of
each March 31 and September 30, a listing of any product line of the Borrower
for which the turnover ratio determined in accordance with GAAP) was less than 2
to 1 for the 12-month period then ended, (b) authorizes the Agent to receive
such information as it may request with respect to Accounts Receivable
verifications obtained by the Borrower's independent accounting firm, and the
Borrower authorizes such accounting firm to review and discuss the results of
such verifications with the Banks.
10. Clause (4) of Section 7.2(c) is deleted.
11. Notwithstanding the provisions of Section 7.2(d)(1) and
7.2(i), the Borrower shall not enter into any Permitted Acquisition without the
prior written consent of the Banks.
12. Section 7.3, which was deleted by the Second Amendment,
is now reinstated and shall be amended to read in its entirety as
follows:
"SECTION 7.3 Financial Covenants. So long as any Note
shall remain unpaid, any Letter of Credit shall remain
outstanding or any Bank shall have any
6
7
Commitment hereunder, the Borrower shall maintain, unless the Banks
shall otherwise consent in writing.
(a) Net Income. For the fiscal quarter ending on
December 31, 1996, and each subsequent fiscal quarter, Net Income or
greater than $1.
(b) Tangible Net Work. As of the end of each
fiscal quarter of the Borrower, beginning on December 31, 1996,
Tangible Net Worth of not less than the Tangible Net Worth reflected
in the Borrower's audited financial statements for the fiscal year
ending September 29, 1996.
13. Within 30 Business Days after its receipt of the written
request of the Agent, the Borrower agrees that it shall (a) contribute the
assets of its Telemetry and Manufacturing Support Services divisions to two
wholly-owned Subsidiaries of the Borrower in a manner acceptable to the Banks,
and (b) pledge the stock of such Subsidiaries to the Banks as security for the
Obligations pursuant to a pledge agreement in form and substance acceptable to
the Banks. Such Subsidiaries shall become jointly and severally liable under the
Loan Documents and shall pledge all of their assets to secure the Obligations in
a manner acceptable to the Banks.
14. The Borrower agrees that not later than October 10, 1996, the
Borrower shall record the Mortgage among the Xxxxxx County, Florida, land
records and deliver to the Agent the mortgagee title insurance policy described
in the definition of Eligible Receivables.
15. Except for the amendments to the Agreement expressly set forth
above, the Agreement and the other Loan Documents shall remain in full force and
effect. The Borrower acknowledges and agrees that this Amendment only amends the
terms of the Agreement and is not a novation, and the Borrower ratifies and
confirms the remaining terms and provisions of the Agreement and the other Loan
Documents in all respects. Nothing in this Amendment shall require the Banks to
grant any further amendments to the terms of the Loan Documents. The failure of
the Borrower to perform or observe any covenant or agreement contained herein
shall constitute an Event of Default under the Credit Agreement.
16. The Borrower acknowledges and agrees that (a) there are no
defenses, counterclaims or setoffs against any of its obligations under the Loan
Documents, and (b) the prior grant of a security interest in the Collateral
created by the Security Agreement and the Patent and Trademark Assignment
continues to secure the Obligations, is in full force and effect, and is
ratified and confirmed by the Borrower in all respects.
17. The Borrower represents and warrants that this Amendment has
been duly authorized, executed and delivered by it in accordance with
resolutions adopted by its board of directors. All other representations and
warranties made by the Borrower in the Loan Documents are incorporated by
reference in this Amendment and are deemed to have been repeated as of the date
of this Amendment with the same force and effect as if set forth in
7
8
this Amendment, except that any representation or warranty relating to any
financial statements shall be deemed to be applicable to the financial
statements most recently delivered to the Banks in accordance with the
provisions of the Loan Documents.
18. The Borrower agrees to pay all costs and expenses incurred by
the Agent and the Banks in connection with this Amendment, including, but not
limited to, reasonable attorneys' fees.
19. This Amendment shall be governed by the laws of the
Commonwealth of Virginia, without reference to conflict of laws principles.
20. This Amendment may be executed by the parties 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 instrument.
[SIGNATURES ON FOLLOWING PAGE]
8
9
WITNESS the following signatures.
BORROWER:
MICRODYNE CORPORATION
a Maryland corporation
By: /s/ XXXXXX X. XXXXXXXXXX
----------------------------
Name: Xxxxxx X. Xxxxxxxxxx
-------------------------
Title: President
-------------------------
AGENT:
CRESTAR BANK
By: /s/ XXXXXX X. XXXXXX
--------------------------
Xxxxxx X. Xxxxxx
Senior Vice President
BANKS:
CRESTAR BANK
By: /s/ XXXXXX X. XXXXXX
--------------------------
Xxxxxx X. Xxxxxx
Senior Vice President
NBD BANK
By: /s/ XXXXXXX X. XXXXXX
--------------------------
Xxxxxxx X. Xxxxxx
Authorized Agent
9
