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EXHIBIT 10.11
SECOND AMENDMENT TO
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment"),
dated and effective as of June 30, 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, and amended by the First Amendment to
Credit Agreement, dated as of October 26, 1995 (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 definition is added to Section 1.1 of
the Agreement:
"Borrowing Base Loans" means, at the time
in question, 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.
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 $15,619,500 in
the case of Crestar and $6,880,500 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) 60% of Eligible Billed
Receivables, plus (b) the applicable Inventory Component.
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"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, 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 dates
of the initial invoices, then all Accounts Receivable owed by
such Customer shall be included in a separate line item on the
Agings and, at the option of either Bank, 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" shall mean 15% 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 $5,000,000.
"Maximum Amount" means, with respect to the Advances,
$22,500,000; provided, however, that the applicable Maximum
Amount on any date
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shall be further reduced by the amount of the prepayment of
the Advances required by Section 2.10(e) of this Agreement.
"Spread" shall mean 2.50%.
"Termination Date" means August 19, 1996,
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. The last sentence of Section 2.1(a) is deleted in
its entirety and replaced with the following:
"Within 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 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. Section 2.1(b) is deleted in its entirety and
replaced with the following provisions:
"(b) In addition to the prepayments
required by Sections 2.10(d) and (e), the Borrower shall
immediately prepay the Advances to the extent that the sum of
the aggregate unpaid principal balance of the Advances plus the
aggregate face amounts of the Letters of Credit at any time
exceeds the Maximum Amount then applicable. If, after any
mandatory prepayment of the Advances, all or a portion of the
aggregate face amount of outstanding Letters of Credit still
exceeds the applicable Maximum Amount, the Borrower, within
five days of the Agent's demand therefor, shall pay to the
Agent an amount of cash equal to such excess amount, and such
amounts of cash shall be held by the Agent in a cash
collateral account for the benefit of the Banks, over which
the Agent shall have the exclusive power of withdrawal, as
security for the Obligations arising out of the Letters of
Credit and the corresponding LC Agreements."
5. The following provisions are added to the end of
Section 2.10:
"(d) The Borrower shall immediately prepay the
Obligations to the extent that the Borrowing Base is less than
70% of the outstanding Borrowing Base Loans at any time.
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(e) The Borrower shall apply the net sales
proceeds of any debt or equity securities issued by the
Borrower or any assets sold by the Borrower (other than
Inventory sold in the ordinary course of business) to the
prepayment of the Obligations.
(f) Any prepayments required by Sections
2.10(d) or (e) shall be applied first to the Term Loans, then
to the Advances and then to the cash collateral account for
the Letters of Credit described in Section 2.1(b)."
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 1/8 of 1% per
annum of the Maximum Amount, to be paid on July 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 20 days after the end of each calendar month,
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 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 in comparative form the
respective consolidated figures for the corresponding date and
period 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.l(b) is deleted in its
entirety and replaced with the following:
"(7) On or before the 20th 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
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Borrowing Base as of the end of such week and a detailed list
of all cash receipts for, and non-cash credits issued during,
such week;"
9. Section 7.1(g) is deleted in its entirety and
replaced with the following:
"(g) Right of Inspection. At any reasonable time and
from time to time, permit the Banks, any agent or
representative of the Banks, or any consultant engaged by the
Banks, 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 Borrower and any
Subsidiary, to observe, analyze and review the operations and
systems of the Borrower and any Subsidiary, and to discuss the
affairs, finances and accounts of the Borrower and any
Subsidiary with any of their respective officers and directors
and the Borrower's independent accountants. The Borrower
shall provide its full cooperation to the agents,
representatives and consultants of the Banks and shall
reimburse the Banks for any expenses incurred by the Banks in
connection with any audits or consulting engagements."
10. Section 7.3 is deleted in its entirety.
11. In consideration of the Agent's services rendered in
accordance with the terms of the Loan Documents, simultaneously with the
execution of this Amendment, the Borrower agrees to pay to the Agent, for the
sole benefit of the Agent, the Agent's fee specified in the letter agreement of
even date herewith between the Borrower and the Agent, as the same may be
amended from time to time.
12. 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.
13. 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.
14. 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
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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.
15. 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.
16. This Amendment shall be governed by the laws of the
Commonwealth of Virginia, without reference to conflict of laws principles.
17. 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]
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WITNESS the following signatures.
BORROWER:
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MICRODYNE CORPORATION,
a Maryland corporation
By: [sig]
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Name: [sig]
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Title: Executive Vice President
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AGENT:
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CRESTAR BANK
By:
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Xxxxxx X. Xxxxxx
Senior Vice President
BANKS:
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CRESTAR BANK
By:
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Xxxxxx X. Xxxxxx
Senior Vice President
NBD BANK
By:
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Xxxxx X. Xxxxxxxx
Authorized Agent
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