WAIVER, CONSENT AND SECOND AMENDMENT
Exhibit 10.1
WAIVER,
CONSENT AND SECOND AMENDMENT
WAIVER, CONSENT AND SECOND
AMENDMENT, dated as of November 3, 2009 (this “Amendment”), to the Loan
and Security Agreement, dated as of May 25, 2007 (the “Loan Agreement”), among
Del Global Technologies Corp. (“Del Global”), RFI Corporation and Del Medical
Imaging Corp. (collectively, the “Borrowers”) and Capital One Leveraged Finance
Corp., formerly known as North Fork Business Capital Corporation (the “Lender”).
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in the Loan Agreement.
WITNESSETH:
WHEREAS, the Borrowers and the
Lender are parties to the Loan Agreement, under which the Lender has agreed to
make, and has made, Loans and other extensions of credit and accommodations to
the Borrowers on the terms and subject to the conditions set forth therein;
and
WHEREAS, the Borrowers have
requested that the Lender agree, and the Lender has agreed, (i) to waive Events
of Default that have occurred and are continuing, (ii) to consent to the
Borrowers’ departure from complying with certain provisions of the Loan
Agreement and (iii) to amend certain provisions of the Loan Agreement, each upon
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, the Borrowers
and the Lender agree as follows:
SECTION 1. Waivers.
Effective as of the date hereof, subject to the satisfaction of the conditions
of effectiveness specified in Section 4 hereof, the Lender hereby waives the
Events of Default that have occurred and are continuing under Section 9.1(b) of
the Loan Agreement as a result of violations of Sections 8.1 and 8.2 of the Loan
Agreement solely for the period ended July 31, 2009.
SECTION 2. Consents.
Effective as of the date hereof, subject to the satisfaction of the conditions
of effectiveness specified in Section 4 hereof, the Lender hereby consents to
(i) the change of the Borrowers’ chief executive office and principal place of
business to 000 Xxxx-Xxxx Xxxxx, Xxx Xxxxx, Xxx Xxxx 00000 and (ii) the sale of
all or substantially all of the assets, the liquidation or the dissolution of
Del Medical Imaging Corp. in accordance with applicable law.
SECTION 3. Amendments
to the Loan Agreement. Effective as of the date hereof, subject to the
satisfaction of the conditions of effectiveness specified in Section 4 hereof,
the Loan Agreement is amended as follows:
(a) Section
1.1 is amended as follows:
(i) by
amending and restating the following definitions:
“Adjusted Earnings”
means, for any period, with respect to Del Global and its Subsidiaries on a
consolidated basis but, without giving effect to the net income of Villa Sistemi
or any adjustments thereto (i) net income (as that term is determined in
accordance with GAAP) for such period, plus (ii) the amount of depreciation and
amortization of fixed and intangible assets deducted in determining such net
income for such period, plus (iii) all Interest Expense and all fees for the use
of money or the availability of money, including commitment, facility and like
fees and charges upon Indebtedness (including Indebtedness to the Lender) paid
or payable during such period, plus (iv) provision for income tax expense during
such period, less (v) provision for income tax benefit during such period, plus
(vi) non-recurring unusual or extraordinary losses (including, without
limitation, losses arising from the Employment Dispute not to exceed $1,000,000
in the aggregate for all periods) as classified in accordance with GAAP (or less
any non-recurring or extraordinary gains), plus (vii) expenses recorded as a
result of the issuance of stock options to employees or directors of Del Global,
less (viii) the amount of all gains (or plus the amount of all losses) realized
during such period upon the sale or other disposition of property or assets that
are sold or otherwise disposed of outside the ordinary course of business that
is included in the calculation of net income for such period.
“Maximum Amount of the
Revolving Facility” means Three Million Dollars
($3,000,000).
“Pricing Increment”
means (i) 2.00% per annum for Base Rate Advances and (ii) 4.50% per annum for
LIBOR Rate Advances.;
(ii) by
deleting the definitions of “Fixed Charge Coverage Ratio,” “Leverage Ratio” and
“Specified Asset Value”; and
(iii) by
inserting the following new definitions in the appropriate alphabetical
order:
“Borrowing Base” has the meaning
specified in Section 2.1(a).
“Borrowing Base
Certificate” has the meaning specified in Section
7.1(k)(vii)
“Eligible Inventory”
means only such Inventory of RFI located in the United States consisting of raw
materials or finished goods, which is free from any claim of title or Lien in
favor of any Person (other than Liens in favor of the Lender) and with respect
to which no event has occurred and no condition exists which could reasonably be
expected to impair substantially RFI’s ability to use or sell such Inventory in
the ordinary course of its business and which the Lender, in its sole
discretion, shall deem eligible to serve as collateral for Advances or Letters
of Credit, based on such considerations as the Lender may deem appropriate from
time to time and less any such reserves as the Lender, in its sole discretion,
may require, including, without limitation, reserves for special order goods. No
Inventory of RFI shall be Eligible Inventory unless the Lender has a perfected
first priority Lien thereon. The value of Eligible Inventory shall be computed
at the lower of cost (computed on a “first in, first out” basis) or market. Any
Inventory of RFI that is not in the control or possession of RFI and is covered
by a warehouse receipt, a xxxx of lading or other document of title shall in no
event be Eligible Inventory unless such warehouse receipt, xxxx of lading or
document of title is in the name of or held by the Lender. No Inventory of RFI
shall be Eligible Inventory unless (i) it is located on property owned by RFI;
or (ii) it is located on property leased by RFI or in a contract warehouse which
is subject to a Collateral Access Agreement executed by the lessor or contract
warehouseman, as the case may be, and segregated or otherwise separately
identifiable from goods of others, if any, stored on the premises. No Inventory
of RFI shall be Eligible Inventory if it is in transit or it is consigned to or
from RFI. In addition, and without limitation of the foregoing, the Lender may
treat any Inventory as ineligible if:
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(a) it
is not owned solely by RFI or RFI does not have sole and good, valid and
marketable title thereto; or
(b) it
is packing or shipping materials or maintenance supplies; or
(c) it
is goods returned or rejected by RFI’s customer; or
(d) it
(i) is excess (as so reserved by RFI from time to time or as otherwise
determined by the Lender) or (ii) is obsolete, defective, damaged, slow moving
or unmerchantable, or (iii) is samples or inventory on hand which is used for
promotional and other sales activities, or (iv) does not otherwise conform to
the representations and warranties contained in the Loan Documents;
or
(e) it
is repossessed, attached, seized, made subject to a writor distress warrant,
levied upon or brought within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors; or
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(f) it
is goods acquired by RFI in or as part of a “bulk” transfer or sale of assets
and such acquisition is not consummated in the ordinary course of business
unless RFI has complied with all applicable bulk sales or bulk transfer laws in
connection with such acquisition.
“Eligible Receivables”
means and includes only those unpaid Receivables of RFI, without duplication,
which (i) arise out of a bona fide sale of goods or rendition of services of the
kind ordinarily sold or rendered by RFI in the ordinary course of its business,
(ii) are made to a Person competent to contract therefor who is not an Affiliate
or an employee of RFI and is not controlled by an Affiliate of RFI, (iii) are
not subject to renegotiation or redating, (iv) are free and clear of any Lien in
favor of any Person other than Liens in favor of the Lender and Liens permitted
under clause (iii) of Section 7.2(i) and (v) mature as stated in the invoice or
other supporting data covering such sale or services. No Receivable of RFI shall
be an Eligible Receivable (i) unless the Lender has a perfected first priority
Lien thereon, (ii) if it is more than ninety days past the date of the original
invoice therefor or more than sixty days past its due date or (iii) unless the
delivery of the goods or the rendition of the services giving rise to such
Receivable has been completed. The Lender may treat any Receivable as ineligible
if:
(a) any
warranty contained in this Agreement or in any other Loan Document with respect
to such Receivable or in any assignment or statement of warranties or
representations relating to such Receivable delivered by RFI to the Lender has
been breached or is untrue in any material respect or RFI is not in compliance
with all applicable laws with respect to such Receivable; or
(b) the
account debtor or any Affiliate of the account debtor has disputed liability,
has or has asserted a right of setoff or has made any claim with respect to any
other Receivable due from such account debtor or Affiliate to RFI, to the extent
of the amount of such dispute or claim, or the amount of such actual or asserted
right of setoff, as the case may be; or
(c) the
account debtor or any of its assets or any Affiliate of the account debtor or
any of its assets is the subject of an Insolvency Event or, in the sole
discretion of the Lender, is likely to become the subject of an Insolvency
Event, unless such account debtor or Affiliate has been provided with a debtor
in possession credit facility pursuant to Section 364 of the Bankruptcy Code or
a similar arrangement reasonably acceptable to the Lender; or
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(d) the
account debtor or any Affiliate of the account debtor has called a meeting of
its creditors to obtain any general financial accommodation; or
(e) the
account debtor is also a supplier to or creditor of RFI, to the extent of the
aggregate amount owed by RFI to the account debtor; or
(f) the
sale or rendition of services is to an account debtor outside the United States
or Canada, unless it is on letter of credit, acceptance or other terms
acceptable to the Lender; or
(g) fifty
percent (50%) or more of the accounts of any account debtor and its Affiliates
to RFI are unpaid more than ninety days past the date of the original invoices
therefor or more than sixty days past due; or
(h) the
account debtor is the United States of America or any department, agency or
instrumentality thereof and such Receivable would cause Eligible Receivables
from the United States of America or any department, agency or instrumentality
thereof to exceed $250,000, unless RFI assigns its right to payment under such
Receivable to the Lender as collateral hereunder in full compliance with
(including, without limitation, the filing of a written notice of the assignment
and a copy of the assignment with, and receipt of acknowledgment thereof by, the
appropriate contracting and disbursing offices pursuant to) the Assignment of
Claims Act of 1940, as amended (31 U.S.C. § 3727; 41 U.S.C. § 15);
or
(i) to
the extent such Receivable would cause more than 25% of Eligible Receivables to
be payable by the same account debtor; or
(j) the
Lender believes, in its sole discretion, that collection of such Receivable is
insecure or that such Receivable may not be paid by reason of the account
debtor’s inability or unwillingness to pay.
(b) Section
2.1(a) is amended by:
(i) deleting
“150% of the Specified Asset Value” and substituting therefor the sum of (i) 85%
of the amount of Eligible Receivables, (ii) 40% of the value of Eligible
Inventory and (iii) 60% of the fair market value of the Property secured by the
Mortgage as determined by the Lender in its sole discretion from time to time
(the “Borrowing Base”)”; and
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(ii) adding
the following sentence at the end thereof: “The Lender, at any time in the
exercise of its reasonable discretion, may (A) establish and increase or
decrease reserves against Eligible Receivables and Eligible Inventory, (B)
reduce the advance rates against Eligible Receivables and Eligible Inventory, or
thereafter increase such advance rates to any level equal to or below the
advance rates previously in effect and (C) impose additional restrictions (or
eliminate the same) to the standards of eligibility set forth in the definitions
of “Eligible Receivables” and “Eligible Inventory.”
(c) Section
2.1(b) is amended by inserting after “as amended” the following “amended and
restated,”.
(d) Section
2.5(a)(i)(A) is amended by deleting “150% of the Specified Asset Value” and
substituting therefor “the Borrowing Base”.
(e) Section
4.5 is amended by adding at the end thereof the following: “for each month
through December 1, 2009 and in the amount of $16,000 for each month
thereafter”.
(f) Section
7.1(k) is amended by adding the following new subsection at the end
thereof:
“(vii)
Borrowing Base Certificates. Monthly (or more frequently as the Lender may from
time to time request), not later than the second Business Day of each month (or
the second Business Day following such request), a certificate, substantially in
the form of Exhibit H (a “Borrowing Base Certificate”), (i) detailing the
Eligible Inventory and the Eligible Receivables, containing a calculation of
availability and reflecting all sales, collections, and debit and credit
adjustments, as of the last day of (or for) the preceding month (or such shorter
period, as the case may be), and (ii) evidencing the fair market value of the
Property secured by the Mortgage as of the last day of (or for) the preceding
month (or such other date or period as the Lender may designate), which shall be
prepared by the chief financial officer of RFI and certified by such
officer.”
(g) Section
8.1 is amended and restated as follows:
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“SECTION
8.1 Adjusted Earnings. The Adjusted Earnings for any period set forth below
shall not be less than the amount set forth below opposite such
period:
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Period
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Minimum
Adjusted Earnings
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November
1, 2009 through January 31, 2010
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$215,000
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November
1, 2009 through April 30, 2010
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585,000”
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(h) Sections
8.2(a) and 8.3 are deleted.
(i) Sections
8.4 and 8.5 are renumbered as Sections 8.2 and 8.3, respectively. Section 9.1(b)
is amended by deleting “, 8.3, 8.4”.
(k) Section
11.1 is amended by deleting
00000
Xxxx Xxxx Xxxxxx
Xxxxxxxx
Xxxx, Xxxxxxxx 00000
Telecopy:
(000) 000-0000
Attn.:
Xx. Xxxx X. Xxxxx”
and
substituting therefor
00X Xxxxx
Xxxx Xxxxxx
Xxxxxxx,
Xxxxxxxx 00000
Telecopy:
(000) 000-0000
Attn.:
Xx. Xxxx X. Xxxxx”
(1) Exhibit
C is amended and restated in the form of Annex I hereto.
(m) A
new Exhibit H is added in the form of Annex II hereto.
(n) Schedule
6.1(b) is amended and restated in the form of Annex III hereto.
SECTION 4. Conditions
of Effectiveness. This Amendment shall become effective when, and only
when, the Lender shall have received (a) counterparts of this Amendment, duly
executed by the Borrowers, (b) a second amended and restated revolving credit
note in the maximum principal amount of $3,000,000, duly executed by each
Borrower, (c) payment of an amendment fee in the amount of $75,000, which shall
be deemed fully earned when paid and shall be non-refundable, and (d) payment of
the costs and expenses (including, without limitation, reasonable attorneys’
fees) incurred by the Lender in connection with this Amendment.
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SECTION 5. Representations and
Warranties of teh Borrowers. Each Borrower represents and warrants
as follows:
(a) Such
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York or Delaware, as the case may be, and is
qualified to do business under the laws of such other jurisdictions in which its
failure to so qualify could have a Material Adverse Effect.
(b) The
execution, delivery and performance by such Borrower of this Amendment (i) are
within such Borrower’s corporate powers, have been duly authorized by all
necessary corporate action and do not contravene (A) such Borrower’s Governing
Documents, (B) any Requirement of Law or (C) any Material Contract and (ii) will
not result in or require the creation or imposition of any Lien upon or with
respect to any property now owned or hereafter acquired by such
Borrower.
(c) No
authorization, approval or other action by, and no notice to or filing with, any
Governmental Authority or other Person is required for the due execution,
delivery and performance by such Borrower of this Amendment.
(d) This
Amendment and the Loan Agreement as amended hereby constitute the legal, valid
and binding obligations of such Borrower enforceable against such Borrower in
accordance with their respective terms except as enforceability may be limited
by (i) bankruptcy, insolvency or similar laws affecting creditors’ rights
generally and (ii) general principles of equity.
(e) Except
as specified in Schedule 6.1(r) to the Loan Agreement, there is no pending or,
to the best of such Borrower’s knowledge after due inquiry, threatened
litigation, contested claim, investigation, arbitration or governmental
proceeding by or against such Borrower before any court, Governmental Authority
or arbitrator which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect or which purports to affect the
legality, validity or enforceability of this Amendment or the Loan Agreement as
amended hereby.
(f) Except
as specified in Section 1 hereof, no Default has occurred and is
continuing.
SECTION 6. Reference
to and Effect on the Loan Agreement.
(a) On
and after the date hereof, each reference in the Loan Agreement to “this
Agreement,” “hereunder,” “hereof,” “herein” and words of like import. and each
reference in the other Loan Documents to the Loan Agreement shall mean and be a
reference to the Loan Agreement as amended hereby.
(b) Except
as specifically waived, consented to or amended above, (i) the Loan Agreement
and each other Loan Document shall remain in full force and effect and are
hereby ratified and confirmed by each of the parties hereto and (ii) the Lender
shall not be deemed to have waived any rights or remedies it may have under the
Loan Agreement, any other Loan Document or applicable law.
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(c) The
execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of or an amendment to any right,
power or remedy of the Lender under any of the Loan Documents, or constitute a
waiver of or an amendment to any provision of any of the Loan
Documents.
SECTION 7. Costs and
Expenses. The Borrowers agree to pay, on demand, all reasonable
out-of-pocket costs and expenses incurred by the Lender in connection with the
preparation, negotiation and execution of this Amendment (including, without
limitation, the reasonable fees and expenses of counsel to the
Lender).
SECTION 8. Counterparts;
Telecopied Signatures. This Amendment may be executed in counterparts and
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all of which shall together constitute
one and the same instrument. This Amendment may be executed and delivered by
telecopier or other electronic means with the same force and effect as if the
same were a fully executed and delivered original manual
counterpart.
SECTION 9. GOVERNING
LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT AND
ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS AMENDMENT, WHETHER
SOUNDING IN CONTRACT, TORT OR EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF
THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be executed by their respective
officers thereunto duly authorized, as of the date first above
written.
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By:
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/s/
Xxxx Xxxxx
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Name:
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Xxxx
Xxxxx
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Title:
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Chief
Financial Officer
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RFI
CORPORATION
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By:
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/s/
Xxxx Xxxxx
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Name:
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Xxxx
Xxxxx
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Title:
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Chief
Financial Officer
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DEL
MEDICAL IMAGING CORP.
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By:
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/s/
Xxxx Xxxxx
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Name:
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Xxxx
Xxxxx
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Title:
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Chief
Financial Officer
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CAPITAL
ONE LEVERAGED FINANCE CORP., formerly known as NORTH FORK BUSINESS CAPITAL
CORPORATION
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By:
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/s/
Xxxxxx X. Xxxxxxx
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Name:
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Xxxxxx
X. Xxxxxxx
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Title:
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Senior
Vice President
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