EXHIBIT 10.21
AMENDMENT AND WAIVER TO CREDIT AGREEMENT
This Amendment and Waiver to Credit Agreement (this "AMENDMENT") is dated
as of the 31st day of March, 2011 and is by and between Orbit International
Corp., Xxxxxxx Electronics, Inc., Tulip Development Laboratory, Inc. and
Integrated Consulting Services, Inc. d/b/a Integrated Combat Systems (each a
"BORROWER" and collectively, the "BORROWERS"), and Capital One, National
Association ("BANK") (this "AMENDMENT").
WHEREAS, on March 10, 2010 the Bank made available to the Borrowers a line
of credit in the amount of $3,000,000.00 and a term loan in the amount of
$4,654,761.84 pursuant to a Credit Agreement dated as of March 10, 2010 between
the Borrowers and the Bank (as amended from time to time, the "CREDIT
AGREEMENT") and evidenced by, respectively, a Line of Credit Note dated March
10, 2010 from the Borrowers to the Bank (as amended from time to time, the "LINE
OF CREDIT NOTE") and the Term Loan Note dated March 10, 2010 from the Borrowers
to the Bank (as amended from time to time, the "TERM LOAN NOTE") and secured by
a Security Agreement dated March 10, 2010 from the Borrowers to the Bank (the
"SECURITY AGREEMENT") (the Credit Agreement, the Line of Credit Note, the Term
Loan Note, the Security Agreement, and all other documents executed and
delivered in connection therewith, collectively, the "FINANCING DOCUMENTS");
WHEREAS, the Borrowers have requested that the Bank modify certain
covenants set forth in the Credit Agreement and waive compliance with certain
covenants set forth in the Credit Agreement to which the Bank has agreed
provided the Borrowers enter into this Amendment;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Borrowers and the Bank hereby
agree as follows:
1. Capitalized terms not defined herein shall have the meaning set
forth in the Credit Agreement.
2. The definition of "Consolidated Debt Service Coverage Ratio" set forth in
Section 1.01 of the Credit Agreement is hereby amended to read in its entirety
as follows:
"Consolidated Debt Service Coverage Ratio" means the ratio of the
Borrowers' (1) earnings before interest, taxes, depreciation and amortization,
plus non-cash goodwill impairment charges, plus non-cash share-based
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compensation expense, plus costs related to non-renewal of senior officer
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contract, minus cash taxes, minus cash stock repurchases, each calculated for
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the immediately preceding four quarters, to (2) current maturities of long term
Debt and lease obligations plus scheduled payments to former officer for the
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following four quarters plus interest expense for the immediately preceding four
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quarters, all calculated in accordance with GAAP and tested quarterly.
3. The definition of "Line of Credit Maturity Date" set forth in Section
1.01 of the Credit Agreement is hereby amended to read in its entirety as
follows:
"Line of Credit Maturity Date" means August 15, 2011.
4. The following definition is hereby added to Section 1.01 of the Credit
Agreement:
"Liquidity" shall mean cash plus marketable securities plus net
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availability under the Borrowing Base before adding back cash and marketable
securities and tested daily and submitted with the Borrowing Base Certificate.
5. The following Section 5.12 is hereby added to the Credit Agreement:
Section 5.12. Establishment of Blocked Account.
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On or before April 30, 2011, Orbit International Corp. and Xxxxxxx Electronics,
Inc. shall establish a blocked account at Capital One, National Association and
Tulip Development Laboratory, Inc. and Integrated Consulting Services, Inc.
d/b/a Integrated Combat Systems shall establish a blocked account (each a
"Blocked Account" and collectively, the "Blocked Accounts") at a third party
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bank (the "Third Party Bank"), in the Bank's and the Third Party Bank's name, as
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applicable, for the benefit of the Borrowers. Upon the occurrence of an Event
of Default which continues beyond any applicable notice or cure period, the Bank
may require that the Borrowers direct all of their Account Debtors to make all
payments on the Accounts directly to a post office box ("Lock Box") at Capital
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One, National Association with respect to Orbit International Corp. and Xxxxxxx
Electronics, Inc., and at the Third Party Bank with respect to Tulip Development
Laboratory, Inc. and Integrated Consulting Services, Inc. d/b/a Integrated
Combat Systems, with, in the name of, and under exclusive control of the Bank or
the Third Party Bank, as applicable. All payments received in the Lock Box
shall be deposited into the Blocked Accounts, and the Borrowers will immediately
deposit into the Blocked Accounts all payments received by the Borrowers for
inventory or services sold, leased or rendered by the Borrowers and received by
the Borrowers in the identical form in which such payments were received,
whether by cash or check. If the Borrowers, any Affiliate or Subsidiary of the
Borrowers, or any shareholder, officer, director, employee or agent of the
Borrowers or any Affiliate or Subsidiary, or any other Person acting for or in
concert with the Borrowers shall receive any monies, checks, notes, drafts or
other payments relating to or as proceeds of accounts receivable or other
Collateral, the Borrowers and each such Person shall receive all such items in
trust for, and as the sole and exclusive property of, the Bank or the Third
Party Bank, as applicable, for its benefit and, immediately upon receipt
thereof, shall remit the same (or cause the same to be remitted) in kind to the
Blocked Account. The Borrowers agree that all payments made to the Blocked
Accounts established by the Borrowers or otherwise received by the Bank, whether
in respect of the accounts receivable of the Borrowers or as proceeds of other
Collateral of the Borrowers or otherwise, will be applied, on account of the
Line of Credit Loans, on account of any scheduled currently due monthly payments
on the Term Loan and also on account of such other due and payable obligations
(excluding payments on the Term Loan which are not currently due and payable) of
the Borrowers as the Bank shall determine in accordance with the terms of this
Agreement. The Borrowers agree to pay all fees, costs and expenses which the
Borrowers incur in connection with opening and maintaining a Lock Box and
Blocked Account. All of such fees, costs and expenses which remain unpaid by
the Borrowers pursuant to any Lock Box or Blocked Account Agreement with the
Borrowers, to the extent same shall have been paid by the Bank hereunder, shall
constitute Line of Credit Loans hereunder, shall be payable to the Bank for its
benefit by the Borrowers upon demand, and, until paid, shall bear interest at
the highest rate then applicable to Line of Credit Loans hereunder. All checks,
drafts, instruments and other items of payment or proceeds of collateral
delivered to the Bank or the Third Party Bank in kind shall be endorsed by the
Borrowers to the Bank or the Third Party Bank, as applicable, and, if that
endorsement of any such item shall not be made for any reason, the Bank or the
Third Party Bank, as applicable, is hereby irrevocably authorized to endorse the
same on the Borrowers' behalf. For the purpose of this paragraph, the Borrowers
irrevocably hereby make, constitute and appoint the Bank and the Third Party
Bank, as applicable, (and all Persons designated by the Bank or the Third Party
Bank, as applicable, for that purpose) as the Borrowers' true and lawful
attorney and agent-in-fact (i) to endorse each Borrower's name upon said items
of payment and/or proceeds of collateral of the Borrowers and upon any chattel
paper, document, instrument, invoice or similar document or agreement relating
to any accounts receivable of the Borrowers or goods pertaining thereto; (ii) to
take control in any manner of any item of payment or proceeds thereof; (iii) to
have access to any lock box or postal box into which any of Borrowers' mail is
deposited; and (iv) open and process all mail addressed to any Borrower and
deposited therein.
6. Section 7.01 of the Credit Agreement is hereby amended to read in its
entirety as follows:
Section 7.01. Consolidated Debt Service Coverage Ratio. Commencing with the
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period ending September 30, 2011 and at all times thereafter, the Borrowers
shall maintain a Consolidated Debt Service Coverage Ratio of not less than 1.25
to 1.00 (to be tested as of the end of September 30, 2011 and each Fiscal
Quarter thereafter on a rolling four (4) quarter basis).
7. Section 7.03 of the Credit Agreement is hereby amended to read in its
entirety as follows
Section 7.03. The Borrowers, on a consolidated basis, shall have a net
profit before interest, taxes and Bank and other legal fees associated with the
waivers and amendments to this Agreement dated as of March 31, 2011 of not less
than (i) One Hundred Thousand Dollars ($100,000.00) for the Fiscal Quarter
ending March 31, 2011 and (ii) Five Hundred Thirty Thousand Dollars
($530,000.00) for the Fiscal Quarter ending June 30, 2011.
8. The following Section 7.04 is hereby added to the Credit Agreement:
Section 7.04 Liquidity. The Borrowers shall maintain at all times a
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minimum Liquidity of not less than $1,200,000.00.
9. The Bank hereby waives compliance with Section 7.03 for the Fiscal
Quarter ending December 31, 2010 provided the actual operating loss before
goodwill and Intangible Asset impairment charges was not greater than
$2,101,000.00 as at December 31, 2010.
10. Exhibit H of the Credit Agreement is hereby amended to read in its
entirety as follows:
CONTINUED ON NEXT PAGE
EXHIBIT H
CAPITAL ONE, N.A.
ASSET BASED LENDING DEPARTMENT BORROWING BASE/LIQUIDITY CERTIFICATE
COMPANY NAME: ORBIT INTERNATIONAL CORP AND SUBSIDIARIES
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DATE:
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Orbit
International Xxxxxxx Tulip ICS
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1.Accounts Receivable (line 5 of previous BBC) $ $ $ $
2.Additions to Accounts Receivable
since last BBC
New Sales Dated _____/_____/_____
to _____/_____/_____ $ $ $ $
(Attach Sales Register)
3.Reductions to Accounts Receivable since last BBC
(A) Gross Reductions
(Remit # ________ to ________) $ $ $ $
(B) Credit Memos issued since
last BBC $ $ $ $
(C) Total Reductions $ $ $ $
4. Other Adjustments to
Accounts Receivable (*Explain) $ $ $ $
5. New Accounts Receivable Balance $ $ $ $
0.Xxxxx Ineligible Accounts
(line G. from last Monthly BBC) $ $ $ $
7.Eligible Accounts Receivable
(line 5 minus line 6) $ $ $ $
8. Accounts Receivable Availability
(85% of line 7) $ $ $ $
9. Total Accounts Receivable Avail.
(Orbit, Xxxxxxx, Tulip and ICS - line 8) $
10. Gross Eligible Inventory
(From last monthly BBC) $ $ $ $
11. Total Gross Eligible Inventory
(Orbit, Xxxxxxx, Tulip and ICS - line 10) $
12. Inventory Avail. (the lesser of $3MM,
50% of line 11 or Line 9) $
13. TOTAL GROSS AVAILABILITY - A/R
& INVENTORY (line 9 + 12) $
14. NEW LINE OF CREDIT LOAN BALANCE $
15. AVAILABILITY BEFORE TERM LOAN (13-14) $
16. TERM LOAN OUTSTANDING $
17. AVAILABILITY BEORE CASH AND MKT.
SECURITIES (15-16) $
18. If shortfall CASH AND MKT. Securities
over $1,000M $
19. If shortfall enter APPROVED
OVERADVANCE ONLY $
19. Collateral Availability/Shortfall $
*Explain:
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If a collateral shortfall exists, the loan balance MUST be reduced, or cash
collateral provided, for an amount greater than or equal to the shortfall.
LIQUIDITY COVENANT COMPLIANCE
a)Cash + Marketable Securities $
b)Borrowing Base Availability before adding back Cash and
Marketable securities (Line 17 of Borrowing Base Certificate)$
c)Liquidity (a + b) $
d)Required Liquidity $ 1,200,000.00
e)Excess/(Shortfall) (c - d) $
f)In compliance? Circle One Yes / No
The undersigned hereby certifies to Capital One, N.A. (the "Bank") that (1) the
information provided herein is true, correct, complete and accurate as of the
dates stated above and has been prepared in a manner consistent with the
preparation of prior Borrowing Base/Liquidity Certificates to the Bank, (2)
except as set
forth below, the undersigned is currently in compliance with all terms,
covenants, conditions contained in any agreement between the Bank and the
undersigned and in each of the other loan documents, and all of the
undersigned's representations and warranties in any other loan documents are
currently
true and correct, and (3) except as set forth below, no default or event of
default has occurred and is currently continuing under any agreement between
the undersigned and the Bank, or will occur after giving effect to any loan
requested herewith. The undersigned agrees that in the event of any conflict
between the Borrowing Base/Liquidity Certificate and other loan documents, the
terms of the other loan documents shall control. The undersigned further
acknowledges that the Bank will rely on the foregoing in making credit available
to the undersigned.
ORBIT INTERNATIONAL CORP AND SUBSIDIARIES
Prepared by: _____________________ Authorized Signature:________________________
11. The obligation of the Bank to enter into this Amendment is subject to
the following:
(a) Receipt by the Bank of a fully executed counterpart of this
Amendment from the Borrowers;
(b) The Borrowers shall have established Blocked Accounts at the Bank or a
Third Party Bank by April 30, 2011;
(c) Receipt by the Bank of fully executed Blocked Account Agreements from
Orbit International Corp. and Xxxxxxx Electronics, Inc. by April 6, 2011, which
Blocked Account Agreements shall be in form and substance satisfactory to the
Bank;
(d) Receipt by the Bank of a copy of fully executed Blocked Account
Agreements between Tulip Development Laboratory, Inc., Integrated Consulting
Services, Inc. d/b/a Integrated Combat Systems and a Third Party Bank by April
30, 2011;
(e) Receipt by the Bank of an assignment of life insurance policy no.
950650077PR (the "Life Insurance Policy") issued by Metropolitan Life Insurance
Company (the "Insurance Company") insuring Xxxxxx Sunshine by April 6, 2011,
which assignment shall be in form and substance satisfactory to the Bank;
(f) The Borrowers shall convert the Life Insurance Policy to cash and shall
cause the Insurance Company to deposit in the Blocked Account at the Bank the
sum of not less than Five Hundred Seventy Five Thousand and 00/100 Dollars
($575,000.00) (the "Cash Deposit"), representing a portion of the cash surrender
value of the Life Insurance Policy, on or before October 15, 2011, which Cash
Deposit shall be pledged to the Bank as additional collateral for the Loans and
the Borrowers shall execute and deliver such documents, if any, as may
reasonably be required by the Bank to evidence said pledge; and
(g) The Borrowers shall pay to the Bank its fee for this Amendment in
the amount of $10,000.00 together with all other fees and out-of-pocket
disbursements incurred by the Bank in connection with this Amendment, including
legal fees incurred by the Bank in the preparation, consummation, administration
and enforcement of this Amendment.
12. The Borrowers ratify and reaffirm the Financing Documents and the
Financing Documents, as hereby amended, shall remain in full force and effect.
13. The Borrowers represent and warrant that (a) the representations and
warranties contained in the Credit Agreement are true and correct in all
material respects as of the date of this Amendment, (b) no condition, at, or
event which could constitute an event of default under the Credit Agreement, the
Notes or any other Financing Documents exists, and (c) no condition, event, act
or omission has occurred, which, with the giving of notice or passage of time,
would constitute an event of default under the Credit Agreement, the Notes or
any other Financing Document.
14. The Borrowers acknowledge that as of the date of this Amendment they
have no offsets or defenses with respect to all amounts owed by it to the Bank
arising under or related to the Financing Documents on or prior to the date of
this Amendment. The Borrowers fully, finally and forever release and discharge
the Bank and its successors, assigns, directors, officers, employees, agents and
representatives from any and all claims, causes of action, debts and
liabilities, of whatever kind or nature, in law or in equity, whether now known
or unknown to them, which they may have and which may have arisen in connection
with the Financing Documents or the actions or omissions of the Bank related to
the Financing Documents on or prior to the date hereof. The Borrowers
acknowledge and agree that this Amendment is limited to the terms outlined above
and shall not be construed as an agreement to change any other terms or
provisions of the Financing Documents. This Amendment shall not establish a
course of dealing or be construed as evidence of any willingness on the Bank's
part to grant other or future agreements, should any be requested.
15. This Amendment is a modification only and not a novation. Except for
the above-quoted modifications, the Financing Documents, any loan agreements,
credit agreements, reimbursement agreements, security agreements, mortgages,
deeds of trust, pledge agreements, assignments, guaranties, instruments or
documents executed in connection with the Financing Documents, and all the terms
and conditions thereof, shall be and remain in full force and effect with the
changes herein deemed to be incorporated therein. This Amendment is to be
considered attached to the Financing Documents and made a part thereof. This
Amendment shall not release or affect the liability of any guarantor of the
Notes or credit facility executed in reference to the Financing Documents, if
any, or release any owner of collateral granted as security for the Financing
Documents. The validity, priority and enforceability of the Financing Documents
shall not be impaired hereby. To the extent that any provision of this
Amendment conflicts with any term or condition set forth in the Financing
Documents, or any document executed in conjunction therewith, the provisions of
this Amendment shall supersede and control. The Bank expressly reserves all
rights against all parties to the Financing Documents.
16. This Amendment shall be governed and construed in accordance with the
laws of the State of New York
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be executed as
of the day and year first above written.
BORROWERS:
ORBIT INTERNATIONAL CORP.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: Acting Chief Financial Officer
XXXXXXX ELECTRONICS, INC.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
TULIP DEVELOPMENT LABORATORY, INC.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
INTEGRATED CONSULTING SERVICES, INC.
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
BANK:
CAPITAL ONE,
NATIONAL ASSOCIATION
By: /s/ Xxxx Xxxxxxx
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Name: Xxxx Xxxxxxx
Title: Vice President
