SECOND AMENDMENT TO CREDIT AGREEMENT AND WAIVER
THIS SECOND AMENDMENT TO CREDIT AGREEMENT AND WAIVER (this
"Amendment"), dated as of February 9, 2000, is by and among Condor Systems, Inc.
(the "Borrower"), certain subsidiaries of the Borrower identified on the
signature pages hereto (the "Guarantors"), the lenders identified on the
signature pages hereto (the "Lenders") and Bank of America, N.A., formerly Bank
of America National Trust and Savings Association, as agent for the Lenders (in
such capacity, the "Agent").
W I T N E S S E T H
WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent have
entered into that certain Credit Agreement dated as of April 15, 1999, as
amended as of April 27, 1999 (as so amended, the "Existing Credit Agreement");
WHEREAS, the parties to the Existing Credit Agreement have agreed to
amend the Existing Credit Agreement as provided herein;
NOW, THEREFORE, in consideration of the agreements hereinafter set
forth, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
PART 1
DEFINITIONS
SUBPART 1.1 Certain Definitions. Unless otherwise defined herein or the
context otherwise requires, the following terms used in this Amendment,
including its preamble and recitals, have the following meanings:
"Amended Credit Agreement" means the Existing Credit Agreement
as amended hereby.
"Amendment No. 2 Effective Date" is defined in Subpart 4.1.
SUBPART 1.2 Other Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Amendment, including its preamble
and recitals, have the meanings provided in the Amended Credit Agreement.
<PAGE>
PART 2
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment No. 2
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Part 2. Except as so amended, the Existing Credit Agreement and all
other Credit Documents shall continue in full force and effect.
SUBPART 2.1 Amendments to Section 1.1.
(a) The pricing grid contained in the definition of "Applicable
Percentage" appearing in Section 1.1 of the Existing Credit Agreement is hereby
amended and replaced with the pricing grid set forth below:
<TABLE>
Applicable Percentages
-------------------------------------------------------------------------------------------
For For Standby For
Pricing Total For Base Rate Letter of Credit For Trade Letter Unused
Level Leverage Ratio Eurodollar Loans Loans Fee of Credit Fee Fee
-------------- ---------------- ------------------ ---------------- ------------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
I > 5.0 to 1.0 4.00% 2.75% 4.00% 2.00% 2.00%
-
-------------- ---------------- ------------------ ---------------- ------------------- ------------------ ----------------
< 5.0_ to 1.0
II but > 4.5 to 1.0 3.25% 2.00% 3.25% 1.625% 1.25%
-
-------------- ---------------- ------------------ ---------------- ------------------- ------------------ ----------------
III < 4.5 to 1.0
but > 4.0 to 1.0 3.00% 1.75% 3.00% 1.50% 1.00%
-------------- ---------------- ------------------ ---------------- ------------------- ------------------ ----------------
IV < 4.0 to 1.0 2.75% 1.50% 2.75% 1.375% 1.00%
but > 3.0 to 1.0
-
-------------- ---------------- ------------------ ---------------- ------------------- ------------------ ----------------
V < 3.0 to 1.0 2.50% 1.25% 2.50% 1.25% 1.00%
</TABLE>
(b) The definition of "Committed Amount" appearing in Section 1.1 of
the Credit Agreement is hereby amended and restated in its entirety to read as
follows:
"Committed Amount" means $50,000,000, as such amount may be
reduced or increased from time to time as provided in Section 3.4.
(c) The definition of "Excluded Asset Disposition" appearing in Section
1.1 of the Credit Agreement is hereby amended and restated in its entirety to
read as follows:
"Excluded Asset Disposition" means, with respect to any
Consolidated Party, (i) the sale of inventory in the ordinary course of
such Consolidated Party's business, (ii) the sale or disposition of
machinery and equipment no longer used or useful in the conduct of such
Consolidated Party's business, (iii) any Equity Issuance by such
Consolidated Party and (iv) any sale, lease, transfer or other
disposition of Property by such Consolidated Party to any Credit Party.
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(d) The definition of "Permitted Acquisition" appearing in Section 1.1
of the Credit Agreement is hereby amended and restated in its entirety to read
as follows:
"Permitted Acquisition" means an Acquisition by the Borrower
or any Subsidiary of the Borrower, provided that (i) the Property
acquired (or the Property of the Person acquired) in such Acquisition
is used or useful in the business of defense electronics (or any
reasonable extensions or expansions thereof), (ii) the Agent shall have
received all items in respect of the Capital Stock or Property acquired
in such Acquisition (and/or the seller thereof) required to be
delivered by the terms of Section 7.12 and/or Section 7.13 within the
time periods provided therein, (iii) in the case of an Acquisition of
the Capital Stock of another Person, the board of directors (or other
comparable governing body) of such other Person shall not have taken
(and not rescinded) any action to oppose such Acquisition, (iv) if the
aggregate consideration paid with respect to such Acquisition exceeds
$2,500,000, the Borrower shall have delivered to the Agent a Pro Forma
Compliance Certificate demonstrating that, upon giving effect to such
Acquisition on a Pro Forma Basis, the Credit Parties shall be in
compliance with all of the Total Leverage Ratio and the Senior Leverage
Ratio, (v) if the EBITDA of the Person or Property to be acquired in
such Acquisition for the most recent 12 calendar-month period preceding
the date of such Acquisition is greater than 25% of Consolidated EBITDA
for the most recent fiscal year preceding the date of such Acquisition
with respect to which the Agent has received the Required Financial
Information, then the EBITDA of such Person or Property for such period
shall be audited in accordance with GAAP by independent certified
public accountants of recognized national standing reasonably
acceptable to the Agent (whose opinion shall not be limited as to the
scope or qualified as to going concern status), (vi) the
representations and warranties made by the Credit Parties in any Credit
Document shall be true and correct in all material respects at and as
if made as of the date of such Acquisition (after giving effect
thereto) except to the extent such representations and warranties
expressly relate to an earlier date, (vii) after giving effect to such
Acquisition, there shall be at least $3,500,000 of availability
existing under the Committed Amount, (viii) the Total Leverage Ratio as
of the most recent fiscal quarter end preceding the date of such
Acquisition with respect to which the Agent has received the Required
Financial Information is less than or equal to 5.0 to 1.0, provided
that the Acquisition by the Borrower of SciCom shall not fail to be a
Permitted Acquisition solely by virtue of this clause (viii) if (A)
such Acquisition is consummated on or before March 31, 2000, (B) the
aggregate consideration (including cash and noncash consideration) paid
in connection with such Acquisition, together with related fees and
expenses, does not exceed $6,500,000 and (C) the Borrower shall have
received an equity contribution from the Sponsor in an amount that,
together with the amount of the equity contribution made pursuant to
Subpart 4.1.3 of Amendment No. 2, is at least equal to $10,000,000 and
(ix) the aggregate consideration (including cash and non-cash
consideration and any assumption of Indebtedness, but excluding
consideration consisting of any Capital Stock of the Parent issued to
the seller of the Capital Stock or Property acquired in such
Acquisition, the proceeds of any Equity Issuance by the Parent
occurring subsequent to the Closing Date and the proceeds of any Asset
Disposition, Excluded Asset Disposition or Involuntary Disposition by
any Consolidated Party occurring subsequent to the Closing Date) for
all such Acquisitions occurring after the Closing Date shall not exceed
$35,000,000 plus the amount of any increase in the Committed Amount
pursuant to Section 3.4(b).
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(e) The definition of "Permitted Investments" appearing in Section 1.1
of the Credit Agreement is hereby amended and restated in its entirety to read
as follows:
"Permitted Investments" means Investments which are (i) cash
and Cash Equivalents; (ii) accounts receivable acquired by any
Consolidated Party in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; (iii)
Investments consisting of Capital Stock, obligations, securities or
other property received by any Consolidated Party in settlement of
accounts receivable (created in the ordinary course of business) from
bankrupt obligors; (iv) Investments existing as of the Closing Date and
set forth in Schedule 1.1B and extensions or renewals thereof, provided
that no such extension or renewal shall increase the amount of such
Investment as of the Closing Date; (vi) advances or loans to directors,
officers, employees, agents, customers or suppliers that do not exceed
$1,000,000 in the aggregate at any one time outstanding for all of the
Consolidated Parties; (vii) Investments in any Credit Party; (viii)
Investments made prior to December 31, 1999 in Joint Ventures and
Consolidated Parties which are not Credit Parties; (ix) Investments
arising pursuant to Hedging Agreements permitted under Section 8.1(d);
(x) Investments funded with the proceeds of Equity Issuance occurring
subsequent to the Closing Date; (xi) Investments consisting of Eligible
Reinvestments made pursuant to Section 7.6 or Section 8.5; (xii)
Permitted Acquisitions; (xiii) Investments constituting consideration
received in connection with an Asset Disposition permitted by Section
8.5, (xiv) Investments consisting of the Global Advances, (xv)
Investments consisting of notes payable issued by any officer, director
or employee of the Borrower or any of its Subsidiaries as payment for
Capital Stock of the Borrower purchased by such officer, director or
employee pursuant to the exercise of options and (xvi) other
Investments in an aggregate principal amount not to exceed $2,500,000
at any time outstanding.
(f) The following new definitions are hereby added to Section 1.1 of
the Credit Agreement in the appropriate alphabetical order to read as follows:
"Amendment No. 2" means the Second Amendment to Credit
Agreement and Waiver dated as of February 9, 2000 by and among the
Borrower, the Guarantors, the Required Lenders and the Agent.
"Application Period" means, with respect to any Asset
Disposition, the period beginning with the consummation of such Asset
Disposition and ending on the earlier of (i) 180 days thereafter or
(ii) the date specified in the Subordinated Note Indenture by which the
Net Cash Proceeds from such Asset Disposition must be reinvested in
Eligible Reinvestments or used to prepay the Loans.
"Asset Disposition Prepayment Event" means, with respect to
any Asset Disposition involving assets having an aggregate net book
value in excess of $500,000, the failure of the Credit Parties to apply
(or cause to be applied) an amount equal to the Net Cash Proceeds of
such Asset Disposition to make Eligible Reinvestments during the
Application Period for such Asset Disposition.
"Borrowing Base" means, as of any day, the sum of (a) 85% of
Eligible Receivables plus (b) 50% of Eligible Inventory plus (c) 50% of
Unbilled Receivables, in
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each case as set forth in the most recent Borrowing Base Certificate
delivered to the Agent and the Lenders in accordance with the terms of
Section 7.1(m).
"Borrowing Base Certificate" shall have the meaning assigned
to such term in Section 7.1(m).
"Eligible Inventory" means, as of any date of determination
and without duplication, the aggregate book value of all raw materials
and finished goods inventory owned by the Borrower or any of its
Domestic Subsidiaries but excluding in any event (i) inventory which is
(a) not subject to a perfected, first priority Lien in favor of the
Agent to secure the Credit Party Obligations or (b) subject to any
other Lien that is not a Permitted Lien, (ii) inventory which is not in
good condition or fails to meet standards for sale or use imposed by
governmental agencies, departments or divisions having regulatory
authority over such goods, (iii) inventory which is not useable or
salable at prices approximating their cost in the ordinary course of
the business, (iv) inventory located outside of the United States, (v)
inventory located at a location not owned by the Borrower or any of its
Subsidiaries with respect to which the Agent shall not have received a
landlord's, warehousemen's, bailee's or appropriate waiver satisfactory
to the Agent, (vi) inventory which is leased or on consignment, (vii)
inventory not at a location of the Borrower or a Subsidiary of the
Borrower which has been disclosed to the Agent pursuant to this Credit
Agreement and (viii) inventory which fails to meet such other
specifications and requirements as may from time to time be established
by the Agent in its reasonable discretion.
"Eligible Receivables" means, as of any date of determination
and without duplication, the aggregate book value of all accounts
receivable, receivables, and obligations for payment created or arising
from the sale of inventory or the rendering of services in the ordinary
course of business owned by or owing to the Borrower or any of its
Domestic Subsidiaries (collectively, the "Receivables") but excluding
in any event (i) any Receivable which is (a) not subject to a
perfected, first priority Lien in favor of the Agent to secure the
Credit Party Obligations or (b) subject to any other Lien that is not a
Permitted Lien, (ii) Receivables which are more than 90 days (or, in
the case of a Receivable which represents a liquidation payment due
from the United States government (or any of its agencies) and/or with
respect to which an audit is being or has been conducted, 120 days)
past the later of (a) the invoice date or (b) the date upon which the
related services were performed or goods were shipped, (iii) any
Receivable not otherwise excluded by clause (ii) above but owing from
an account debtor more than 50% of whose outstanding Receivables are
then excluded by such clause (ii), unless the exclusion by such clause
(ii) is a result of a legitimate dispute by the account debtor, (iv)
Receivables evidenced by notes, chattel paper or other instruments,
unless such notes, chattel paper or instruments, to the extent that the
Receivables evidenced thereby exceed $50,000 individually and $500,000
in the aggregate, have been delivered to and are in the possession of
the Agent, (v) Receivables owing by an account debtor which is not
solvent or is subject to any bankruptcy or insolvency proceeding of any
kind, (vi) Receivables which are contingent or subject to offset,
deduction, counterclaim, dispute or other defense to payment, in each
case to the extent of such offset, deduction, counterclaim, dispute or
other defense, (vii) Receivables for which any direct or indirect
Subsidiary or any Affiliate is the account debtor, (viii) Receivables
representing a sale to the
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government of the United States, any foreign government or any agency
or instrumentality thereof unless (A) the Federal Assignment of Claims
Act or other similar applicable law has been complied with to the
satisfaction of the Agent with respect to the granting of a security
interest in such Receivable or (B) the account debtor owing such
Receivables is required to make payment of such Receivables into a
bank account subject to a Bank Agency Agreement and (ix) Receivables
which fail to meet such other specifications and requirements as may
from time to time be established by the Agent in its reasonable
discretion. As used in this definition of "Eligible Receivables", each
United States or foreign governmental agency shall be treated as a
separate account debtor.
"SciCom" means Andrews SciCom, Inc., a Texas corporation.
"Unbilled Receivables" means, as of any date of determination,
the aggregate book value of all Receivables owned by or owing to the
Borrower or any of its Domestic Subsidiaries that have not yet been
invoiced but will be invoiced within 90 days.
SUBPART 2.2 Amendments to Section 2.1. Sections 2.1(a) and 2.1(b)(ii)
of the Existing Credit Agreement are hereby amended and restated in their
entireties to read as follows:
2.1 Revolving Loans.
(a) Commitment. Subject to the terms and conditions hereof and
in reliance upon the representations and warranties set forth herein,
each Lender severally agrees to make available to the Borrower such
Lender's Commitment Percentage of revolving credit loans requested by
the Borrower in Dollars ("Revolving Loans") from time to time from the
Closing Date until the Maturity Date, or such earlier date as the
Commitments shall have been terminated as provided herein; provided,
however, that the sum of the aggregate outstanding principal amount of
Revolving Loans shall not exceed the Committed Amount; provided,
further, (A) with regard to each Lender individually, such Lender's
outstanding principal amount of Revolving Loans shall not exceed such
Lender's Commitment Percentage of the Committed Amount, (B) the sum of
the aggregate outstanding principal amount of Revolving Loans plus LOC
Obligations plus Swingline Loans shall not exceed the Committed Amount
and (C) the sum of the aggregate outstanding principal amount of
Revolving Loans plus Swingline Loans shall not exceed the Borrowing
Base. Revolving Loans may consist of Base Rate Loans or Eurodollar
Loans, or a combination thereof, as the Borrower may request; provided,
however, that no more than 10 Eurodollar Loans shall be outstanding
hereunder at any time (it being understood that, for purposes hereof,
Eurodollar Loans with different Interest Periods shall be considered as
separate Eurodollar Loans, even if they begin on the same date,
although borrowings, extensions and conversions may, in accordance with
the provisions hereof, be combined at the end of existing Interest
Periods to constitute a new Eurodollar Loan with a single Interest
Period). Revolving Loans hereunder may be repaid and reborrowed in
accordance with the provisions hereof.
(b) Revolving Loan Borrowings.
*******
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(ii) Minimum Amounts. Each Eurodollar Loan or Base
Rate Loan that is a Loan shall be in a minimum aggregate
principal amount of $500,000 and integral multiples of $50,000
in excess thereof (or the remaining amount of the Committed
Amount, if less), subject to Sections 2.2(e) and 2.3(b)(iii).
SUBPART 2.3 Amendments to Section 2.3. Section 2.3(a) of the Existing
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
2.3 Swingline Loan Subfacility.
(a) Swingline Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set
forth herein, the Swingline Lender, in its individual capacity, agrees
to make certain revolving credit loans requested by the Borrower in
Dollars to the Borrower (each a "Swingline Loan" and, collectively, the
"Swingline Loans") from time to time from the Closing Date until the
Maturity Date for the purposes hereinafter set forth; provided,
however, (i) the aggregate principal amount of Swingline Loans
outstanding at any time shall not exceed ZERO DOLLARS ($0) (the
"Swingline Committed Amount"), (ii) the sum of the aggregate
outstanding principal amount of Revolving Loans plus LOC Obligations
plus Swingline Loans shall not exceed the Committed Amount and (iii)
the sum of the aggregate outstanding principal amount of Revolving
Loans plus Swingline Loans shall not exceed the Borrowing Base.
Swingline Loans hereunder shall be made as Base Rate Loans and may be
repaid and reborrowed in accordance with the provisions hereof.
SUBPART 2.4 Amendments to Section 3.3. Section 3.3 of the Existing
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part from time to time; provided,
however, that each partial prepayment of Loans (other than Swingline
Loans) shall be in a minimum principal amount of $500,000 and integral
multiples of $50,000 in excess thereof (or the then remaining principal
balance of the Revolving Loans, if less). Subject to the foregoing
terms, amounts prepaid under this Section 3.3(a) shall be applied as
the Borrower may elect; provided that if the Borrower fails to specify
a voluntary prepayment then such prepayment shall be applied to Loans,
first to Base Rate Loans and then to Eurodollar Loans in direct order
of Interest Period maturities. All prepayments under this Section
3.3(a) shall be subject to Section 3.12, but otherwise without premium
or penalty, and, in the case of Eurodollar Loans, shall be accompanied
by interest on the principal amount prepaid through the date of
prepayment.
(b) Mandatory Prepayments.
---------------------
(i) Committed Amount/ Borrowing Base. If at any time,
the sum of the aggregate outstanding principal amount of
Revolving Loans plus LOC Obligations plus Swingline Loans
shall exceed the Committed Amount, the Borrower immediately
shall prepay the Revolving Loans and (after all Revolving
Loans have been repaid) cash collateralize the LOC
Obligations, in an amount sufficient to
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eliminate such excess. If at any time, the sum of the
aggregate outstanding principal amount of Revolving Loans
plus Swingline Loans shall exceed the Borrowing Base, the
Borrower immediately shall prepay the Revolving Loans and
Swingline Loans, in an amount sufficient to eliminate such
excess.
(ii) Cash on Hand. If at any time the cash on hand
and Cash Equivalents of the Consolidated Parties exceed
$6,000,000, the Borrower shall immediately prepay the Loans in
an aggregate amount equal to such excess (except to the extent
that such excess is attributable to Net Cash Proceeds or
Excess Proceeds from Asset Dispositions or Involuntary
Dispositions, as the case may be, which have not yet been
required to be applied to the prepayment of the Loans pursuant
to clause (iii) below) (such prepayment to be applied as set
forth in clause (v) below).
(iii) (A) Asset Dispositions. Immediately upon the
occurrence of any Asset Disposition Prepayment Event,
the Borrower shall prepay the Loans in an aggregate
amount equal to 100% of the Net Cash Proceeds of the
related Asset Disposition not applied (or caused to
be applied) by the Credit Parties to make Eligible
Reinvestments within the Application Period (such
prepayment to be applied as set forth in clause (v)
below).
(B) Casualty and Condemnation Events.
Immediately upon the occurrence of any event
requiring application of any Excess Proceeds to the
prepayment of Loans (and cash collateralization of
LOC Obligations) pursuant to Section 7.6(b), the
Borrower shall prepay the Loans in the amount
required by such Section 7.6(b) (such prepayment to
be applied as set forth in clause (v) below).
(iv) Equity Issuances. Immediately upon receipt by a
Consolidated Party of proceeds from the Equity Issuance
required under Subpart 4.1.3 of Amendment No. 2 or made
pursuant to clause (viii) of the definition of "Permitted
Acquisition", the Borrower shall prepay the Loans in an
aggregate amount equal to 100% of the Net Cash Proceeds of
such Equity Issuance (such prepayment to be applied as set
forth in clause (v) below).
(v) Application of Mandatory Prepayments. All amounts
required to be paid pursuant to this Section 3.3(b) shall be
applied to Revolving Loans and Swingline Loans. Within the
parameters of the applications set forth above, prepayments
shall be applied first to Swingline Loans, second to Revolving
Loans which are Base Rate Loans and third to Revolving Loans
which are Eurodollar Loans (in direct order of Interest Period
maturities). All prepayments under this Section 3.3(b) shall
be subject to Section 3.12, but otherwise without premium or
penalty, and shall be accompanied by interest on the principal
amount prepaid through the date of prepayment.
(vi) Prepayment Account. If the Borrower is required
to make a mandatory prepayment of Eurodollar Loans under this
Section 3.3(b), the Borrower shall have the right, in lieu of
making such prepayment in full, to deposit an amount equal to
such mandatory prepayment with the Agent in a cash
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collateral account maintained (pursuant to documentation
reasonably satisfactory to the Agent) by and in the sole
dominion and control of the Agent. Any amounts so deposited
shall be held by the Agent as collateral for the prepayment
of such Eurodollar Loans and shall be applied to the
prepayment of the applicable Eurodollar Loans at the end of
the current Interest Periods applicable thereto. At the
request of the Borrower, amounts so deposited shall be
invested by the Agent in Cash Equivalents maturing prior to
the date or dates on which it is anticipated that such
amounts will be applied to prepay such Eurodollar Loans; any
interest earned on such Cash Equivalents will be for the
account of the Borrower and the Borrower will deposit with
the Agent the amount of any loss on any such Cash
Equivalents to the extent necessary in order that the amount
of the prepayment to be made with the deposited amounts may
not be reduced.
SUBPART 2.5 Amendments to Section 3.4. Sections 3.4(a)(i) and 3.4(b)(1)
of the Existing Credit Agreement are hereby amended and restated in their
entireties to read as follows:
3.4 Termination and Reduction of Committed Amount; Increase of
Committed Amount.
(a) Reductions in Committed Amount.
(i) General. The Borrower may from time to time
permanently reduce or terminate the Committed Amount in whole
or in part (in minimum aggregate amounts of $500,000 or in
integral multiples of $50,000 in excess thereof (or, if less,
the full remaining amount of the then applicable Committed
Amount)) upon three Business Days' prior written notice to the
Agent; provided, however, no such termination or reduction
shall be made which would cause the sum of the aggregate
outstanding principal amount of Revolving Loans plus LOC
Obligations plus Swingline Loans to exceed the Committed
Amount unless, concurrently with such termination or
reduction, the Loans are repaid to the extent necessary to
eliminate such excess. The Agent shall promptly notify each
affected Lender of receipt by the Agent of any notice from the
Borrower pursuant to this Section 3.4(a).
***********
(b) Increase in Committed Amount. The Borrower shall have the
right, upon at least ten (10) Business Days' prior written notice to
the Agent, to effectuate a one-time increase of up to $15,000,000 in
the Committed Amount, subject, however, to satisfaction of the
following conditions precedent:
(1) no Event of Default shall have occurred and be
continuing on the date on which such Committed Amount increase
is to become effective, and the Total Leverage Ratio as of the
most recent fiscal quarter end preceding the date of such
increase with respect to which the Agent has received the
Required Financial Information is less than or equal to 5.0 to
1.0;
SUBPART 2.6 Amendments to Section 5.2. Section 5.2(e) of the Existing
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
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5.2 Conditions to all Extensions of Credit.
The obligations of each Lender to make any Loan (other than
Revolving Loans pursuant to Sections 2.2(c) and 2.3(b)) and of the
Issuing Lender to issue or extend any Letter of Credit (including the
initial Loans and the initial Letter of Credit) are subject to
satisfaction of the following conditions in addition to satisfaction on
the Closing Date of the conditions set forth in Section 5.1:
***********
(e) Immediately after giving effect to the making of
such Loan (and the application of the proceeds thereof) or to
the issuance of such Letter of Credit, as the case may be, (i)
the sum of the aggregate outstanding principal amount of
Revolving Loans plus LOC Obligations plus Swingline Loans
shall not exceed the Committed Amount and (ii) the sum of the
aggregate outstanding principal amount of Revolving Loans plus
Swingline Loans shall not exceed the Borrowing Base.
SUBPART 2.7 Amendments to Section 7.1. Sections 7.1(l), (m) and (n) are
hereby added to Section 7.1 of the Existing Credit Agreement to read as follows,
and Section 7.1(l) of the Existing Credit Agreement is hereby reidentified as
Section 7.1(o):
7.1 Information Covenants.
The Credit Parties will furnish, or cause to be furnished, to
the Agent and each of the Lenders:
***********
(l) Monthly Financial Statements. As soon as
available, and in any event within 30 days after the close of
each fiscal month of the Consolidated Parties (other than a
month ending on the last day of a fiscal quarter or fiscal
year) monthly management cash flow reports in the form of
Exhibit 7.1(l) hereto. Such monthly financial statements shall
be accompanied by a signed statement of an Executive Officer
of the Borrower certifying that, to the best of his knowledge
and belief, (i) such monthly financial statements are true and
correct in all material respects and have been prepared in a
manner consistent with GAAP applied on a consistent basis
(subject to the absence of footnotes and changes resulting
from audit and normal year-end audit adjustments) and (ii) no
Default or Event of Default has occurred and is continuing.
(m) Borrowing Base Certificates. Within 25 days after
the end of each calendar month, a certificate as of the end of
the immediately preceding month, substantially in the form of
Exhibit 7.1(m) and certified by an Executive Officer of the
Borrower to be true and correct as of the date thereof (a
"Borrowing Base Certificate").
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(n) Contract Backlog Report. At the time of delivery
of the financial statements described in Sections 7.1(a) and
7.1(b), a report on contract backlog for all contracts
providing goods or services valued in excess of $2,500,000 for
the fiscal quarter most recently ended, together with
estimates of the costs and time to complete, such report to be
in form and substance reasonably acceptable to the Agent.
SUBPART 2.8 Amendments to Section 7.6. Section 7.6(b) of the Existing
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
7.6 Insurance.
*******
(b) In the event that the Consolidated Parties receive Net
Cash Proceeds in excess of $500,000 in aggregate amount during any
fiscal year of the Consolidated Parties ("Excess Proceeds") on account
of any loss of, damage to or destruction of, or any condemnation or
other taking for public use of, any Property of the Consolidated
Parties (with respect to any Consolidated Party, an "Involuntary
Disposition"), the Credit Parties shall, within the period of 180 days
following the date of receipt of such Excess Proceeds, apply (or cause
to be applied) an amount equal to such Excess Proceeds to (i) make
Eligible Reinvestments (including but not limited to the repair or
replacement of the related Property) or (ii) prepay the Loans (and cash
collateralize LOC Obligations) in accordance with the terms of Section
3.3(b)(iii)(B). All excess proceeds received by any Credit Party shall
be subject to the security interest of the Agent (for the ratable
benefit of the Lenders) under the Collateral Documents. Pending final
application of the Net Cash Proceeds of any Involuntary Disposition,
the Consolidated Parties may apply such Net Cash Proceeds to
temporarily reduce the Revolving Loans or to make Investments in Cash
Equivalents.
SUBPART 2.9 Amendments to Section 7.10. Section 7.10 of the Existing
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
7.10 Audits/Inspections.
Upon reasonable notice and during normal business hours, each
Credit Party will, and will cause each of its Subsidiaries to, permit
representatives appointed by the Agent, including, without limitation,
independent accountants, agents, attorneys, and appraisers, to, at the
expense of the Credit Parties, visit and inspect its property,
including its books and records, its accounts receivable and inventory,
its facilities and its other business assets, and to make photocopies
or photographs thereof and to write down and record any information
such representative obtains and shall permit the Agent or its
representatives to investigate and verify the accuracy of information
provided to the Lenders and to discuss all such matters with the
officers, employees and representatives of such Person; provided that
the obligations of each Credit Party under this Section 7.10 shall be
subject to applicable laws, rules and regulations (including, without
limitation, any regulations of the United States Department of Defense
or any agency of any foreign government) and any contract to which any
Consolidated Party is a party (including, without limitation, any
contract with the United States Department of Defense or any branch of
the United States military or any
11
<PAGE>
foreign government or any agency or instrumentality thereof). The
Credit Parties agree that the Agent, and its representatives, may
conduct an annual audit of the Collateral, at the expense of the
Credit Parties.
SUBPART 2.10 Amendments to Section 7.11. Sections 7.11(a) and 7.11(c)
of the Existing Credit Agreement are hereby amended and restated in their
entireties to read as follows:
7.11 Financial Covenants.
(a) Total Leverage Ratio. The Total Leverage Ratio,
as of the last day of each fiscal quarter of the Borrower,
shall be less than or equal to:
(i) for the fiscal quarter ending December
31, 1999, 7.50 to 1.00;
(ii) for the fiscal quarter ending March 31,
2000, 9.00 to 1.00;
(iii) for the fiscal quarter ending June 30,
2000, 9.75 to 1.00;
(iv) for the fiscal quarter ending September
30, 2000, 7.50 to 1.00;
(v) for the fiscal quarter ending December
31, 2000, 7.00 to 1.00;
(vi) for any fiscal quarter ending in the
period from January 1, 2001 to and including December
31, 2001, 6.00 to 1.00;
(vii) for any fiscal quarter ending in the
period from January 1, 2002 to and including December
31, 2002, 4.75 to 1.00;
(viii) for any fiscal quarter ending in the
period from January 1, 2003 to and including December
31, 2003, 4.25 to 1.00; and
(ix) for any fiscal quarter ending in the
period from January 1, 2004 and at all times
thereafter, 4.00 to 1.00.
*******
(c) Fixed Charge Coverage Ratio. The Fixed Charge
Coverage Ratio, as of the last day of each fiscal quarter of
the Borrower, shall be greater than or equal to:
(i) for any fiscal quarter ending in the
period from the Closing Date to and including
December 31, 1999, 1.00 to 1.00;
(ii) the fiscal quarter ending March 31,
2000, 0.55 to 1.00;
12
<PAGE>
(iii) for the fiscal quarter ending June 30,
2000, 0.75 to 1.00;
(iv) for the fiscal quarter ending September
30, 2000, 0.75 to 1.00;
(v) for the fiscal quarter ending December
31, 2000, 0.85 to 1.00;
(vi) for any fiscal quarter ending in the
period from January 1, 2001 to and including December
31, 2001, 1.05 to 1.00; and
(vii) for any fiscal quarter ending in the
period from January 1, 2002 and at all times
thereafter, 1.20 to 1.00.
SUBPART 2.11 Amendments to Section 7.16. Section 7.16(a) of the
Existing Credit Agreement is hereby amended and restated in its entirety to read
as follows:
7.16 Further Assurances.
(a) On or prior to March 31, 2000, the Borrower shall cause
Condor Data Management, Ltd. to be dissolved.
SUBPART 2.12 Amendments to Section 8.1. Sections 8.1(g) and 8.1(h) of
the Existing Credit Agreement are hereby amended and restated in their
entireties to read as follows:
8.1 Indebtedness.
The Credit Parties will not permit any Consolidated Party to
contract, create, incur, assume or permit to exist any Indebtedness,
except:
*******
(g) other secured or unsecured Indebtedness hereafter
incurred by any Consolidated Party provided that the total of
all such Indebtedness shall not exceed an aggregate principal
amount of $2,500,000 at any one time outstanding; and
(h) other unsecured Indebtedness hereafter incurred
by any Consolidated Party provided that the total of all such
Indebtedness shall not exceed an aggregate principal amount of
$2,500,000 at any one time outstanding.
SUBPART 2.13 Amendments to Section 8.5. Section 8.5 of the Existing
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
8.5 Asset Dispositions.
The Credit Parties will not permit any Consolidated Party to
make any Asset Disposition (including, without limitation, any Sale and
Leaseback Transaction) unless (a) at least 75% of the consideration
paid in connection therewith shall be cash or Cash
13
<PAGE>
Equivalents or Eligible Assets, (b) the aggregate net book value of
all of the assets sold or otherwise disposed of by the Consolidated
Parties in all such transactions after the Closing Date (other than
any such transaction to the extent that the consideration received
consists of Eligible Assets or the Net Cash Proceeds thereof are use
to make Eligible Reinvestments within the Application Period) shall
not exceed $10,000,000 and (c) if the aggregate net book value of the
assets sold or otherwise disposed of in any such transactions exceeds
$2,000,000, the Borrower shall have delivered to the Agent a Pro Forma
Compliance Certificate demonstrating that, upon giving effect on a Pro
Forma Basis to such transaction, no Event of Default under Section
7.11 would exist hereunder. Pending final application of the Net Cash
Proceeds of any Asset Disposition, the Consolidated Parties may apply
such Net Cash Proceeds to temporarily reduce the Revolving Loans or to
make Investments in Cash Equivalents.
Upon a sale of assets or the sale of Capital Stock of a
Consolidated Party permitted by this Section 8.5, the Agent shall (to
the extent applicable) deliver to the Credit Parties, upon the Credit
Parties' request and at the Credit Parties' expense, such documentation
as is reasonably necessary to evidence the release of the Agent's
security interest, if any, in such assets or Capital Stock, including,
without limitation, amendments or terminations of UCC financing
statements, if any, the return of stock certificates, if any, and the
release of such Consolidated Party from all of its obligations, if any,
under the Credit Documents.
SUBPART 2.14 Amendments to Section 8.12. Section 8.12 of the Existing
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
8.12 Capital Expenditures.
The Credit Parties will not permit Consolidated Capital
Expenditures for any fiscal year to exceed $5,000,000.
SUBPART 2.15 Amendments to Section 8.14. Section 8.14 of the Existing
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
8.14 Operating Lease Obligations.
The Credit Parties will not permit any Consolidated Party to
enter into, assume or permit to exist any obligations for the payment
of rent under Operating Leases which in the aggregate for all such
Persons in any fiscal year would exceed (a) for fiscal year 2000,
$4,000,000 and (b) for any fiscal year thereafter, the product of (i)
$4,000,000 times (ii) the sum of (A) one (1) plus (B) the Consumer
Price Index as reported by the Bureau of Labor Statistics.
SUBPART 2.16 Amendments to Schedule 6.10. Schedule 6.10 to the Existing
Credit Agreement is hereby amended and replaced with Schedule 6.10 attached
hereto.
SUBPART 2.17 Amendments to Schedule 6.14. Schedule 6.14 to the Existing
Credit Agreement is hereby amended and replaced with Schedule 6.14 attached
hereto.
14
<PAGE>
SUBPART 2.18 Amendments to Schedule 6.16(a). Schedule 6.16(a) to the
Existing Credit Agreement is hereby amended and replaced with Schedule 6.16(a)
attached hereto.
SUBPART 2.19 Amendments to Schedule 6.16(b). Schedule 6.16(b) to the
Existing Credit Agreement is hereby amended and replaced with Schedule 6.16(b)
attached hereto.
SUBPART 2.20 Amendments to Schedule 6.16(c). Schedule 6.16(c) to the
Existing Credit Agreement is hereby amended and replaced with Schedule 6.16(c)
attached hereto.
SUBPART 2.21 New Exhibit 7.1(m). A new Exhibit 7.1(m) in the form of
Exhibit 7.1(m) attached hereto is hereby added to the Existing Credit Agreement.
PART 3
WAIVERS
The Required Lenders hereby waive (a) the Event of Default existing as
of the date hereof caused by the Credit Parties failure to comply with Section
8.15 of the Existing Credit Agreement and (b) the Event of Default caused by the
Credit Parties failure to comply with Section 7.16(a) of the Existing Credit
Agreement so long as the Credit Parties dissolve Condor Data Management, Ltd. on
or before March 31, 2000.
PART 4
CONDITIONS TO EFFECTIVENESS
SUBPART 4.1 Amendment No. 2 Effective Date. This Amendment shall be and
become effective as of the date hereof (the "Amendment No. 2 Effective Date")
when all of the conditions set forth in this Part 4 shall have been satisfied,
and thereafter this Amendment shall be known, and may be referred to, as
"Amendment No. 2."
SUBPART 4.1.1 Execution of Counterparts of Amendment. The
Agent shall have received counterparts of this Amendment, which shall
have been duly executed on behalf of each of the Borrower, the
Guarantors and the Required Lenders.
SUBPART 4.1.2 Bank Agency Agreement. The Agent shall have
received a Bank Agency Agreement, which collectively shall have been
duly executed on behalf of each of the Borrower, the applicable
Guarantors, Union Bank of California, N.A. and the Agent.
SUBPART 4.1.3 Sponsor Equity Contribution. The Borrower shall
have received an equity contribution from the Sponsors in an amount
equal to $8,000,000. Such equity contribution shall be on terms and
conditions satisfactory to the Agent. The Borrower shall have applied
the Net Cash Proceeds from such Equity Issuance to prepay the Loans as
provided in Section 3.3(b)(iv) of the Amended Credit Agreement.
15
<PAGE>
SUBPART 4.1.4 Fees and Expenses.
(a) Amendment Fee. The Borrower shall have paid to
the Agent for the account of each Lender which shall have
executed this Amendment on or prior to February 9, 2000 an
amendment fee equal to 0.375% of such Lender's Commitment.
(b) Attorneys Fees. The Borrower shall have paid the
legal fees and expenses of Moore & Van Allen, PLLC, counsel to
the Agent, invoiced at least one Business Day prior to the
Amendment No. 2 Effective Date.
SUBPART 4.1.5 Further Assurances. The Credit Parties shall
have provided satisfactory evidence to the Agent that the Credit
Parties have used commercially reasonable efforts to comply with
Section 7.16(b) of the Existing Credit Agreement.
SUBPART 4.1.6 Other Items. The Agent shall have received such
other documents, agreements or information which may be reasonably
requested by the Agent.
PART 5
MISCELLANEOUS
SUBPART 5.1 Representations and Warranties. The Credit Parties hereby
represent and warrant to the Agent and the Lenders that, after giving effect to
this Amendment, (a) no Default or Event of Default exists under the Credit
Agreement or any of the other Credit Documents and (b) the representations and
warranties set forth in Section 6 of the Existing Credit Agreement are, subject
to the limitations set forth therein, true and correct in all material respects
as of the date hereof (except for those which expressly relate to an earlier
date).
SUBPART 5.2 Reaffirmation of Credit Party Obligations. Each Credit
Party hereby ratifies the Credit Agreement and acknowledges and reaffirms (a)
that it is bound by all terms of the Credit Agreement applicable to it and (b)
that it is responsible for the observance and full performance of its respective
Credit Party Obligations.
SUBPART 5.3 Cross-References. References in this Amendment to any Part
or Subpart are, unless otherwise specified, to such Part or Subpart of this
Amendment.
SUBPART 5.4 Instrument Pursuant to Existing Credit Agreement. This
Amendment is a Credit Document executed pursuant to the Existing Credit
Agreement and shall (unless otherwise expressly indicated therein) be construed,
administered and applied in accordance with the terms and provisions of the
Existing Credit Agreement.
SUBPART 5.5 References in Other Credit Documents. At such time as this
Amendment No. 2 shall become effective pursuant to the terms of Subpart 4.1, all
references in the Credit Documents to the "Credit Agreement" shall be deemed to
refer to the Credit Agreement as amended by this Amendment No. 2.
16
<PAGE>
SUBPART 5.6 Counterparts/Telecopy. This Amendment may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement. Delivery of executed counterparts of this Amendment by telecopy shall
be effective as an original and shall constitute a representation that an
original shall be delivered.
SUBPART 5.7 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SUBPART 5.8 Successors and Assigns. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
17
<PAGE>
IN WITNESS WHEREOF the Borrower, the Guarantors and the Required
Lenders have caused this Amendment to be duly executed on the date first above
written.
BORROWER: CONDOR SYSTEMS, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
GUARANTORS: CEI SYSTEMS, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
AGENT: BANK OF AMERICA, N.A., formerly Bank of
America National Trust and Savings Association,
in its capacity as Agent
By:_______________________________
Name:_____________________________
Title:____________________________
LENDERS: BANK OF AMERICA, N.A., formerly Bank of
America National Trust and Savings Association,
in its capacity as a Lender
By:_______________________________
Name:_____________________________
Title:____________________________
ANTARES CAPITAL CORPORATION,
in its capacity as Documentation Agent and
individually as a Lender
By:_______________________________
Name:_____________________________
Title:____________________________
PARIBAS
By:_______________________________
Name:_____________________________
Title:____________________________
By:_______________________________
Name:_____________________________
Title:____________________________
UNION BANK OF CALIFORNIA, N.A.
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
Exhibit 7.1(m)
FORM OF
BORROWING BASE CERTIFICATE
For the calendar month ended _______________, 200__.
I, ______________________, ((TITLE)) of CONDOR SYSTEMS, INC. (the
"Borrower") hereby certify that, to the best of my knowledge and belief, with
respect to that certain Credit Agreement dated as of April 15, 1999 (as amended,
modified, restated or supplemented from time to time, the "Credit Agreement";
all of the defined terms in the Credit Agreement are incorporated herein by
reference) among the Borrower, the Guarantors, the Lenders and Bank of America,
N. A., formerly Bank of America National Trust and Savings Association, as
Agent:
RECEIVABLES
1. Receivables (as defined in the
definition of Eligible Receivables in
Section 1.1 of the Credit Agreement) $_____________
2. (i) Receivables not subject
to a perfected, first priority Lien
in favor of the Agent to secure the
Credit Party Obligations $_____________
(ii) Receivables subject
to any Lien, other than
a Permitted Lien $_____________
(iii) Receivables which are more than
90 days (or, in the case of a
Receivable which represents a
liquidation payment due from the United
States government (or any of its
agencies) and/or with respect to which
an audit is being or has been
conducted, 120 days) past the later of
(a) the invoice date or (b) the date
upon which the related services were
performed or goods were shipped $____________
(iv) any Receivable not otherwise
excluded by clause (iii) above but
owing from an account debtor more than
50% of whose outstanding Receivables
<PAGE>
are then excluded by clause (iii),
unless such exclusion is a result of a
legitimate dispute by the account
debtor $_____________
(v) Receivables evidenced by notes,
chattel paper or other instruments
(unless such notes, chattel paper or
instruments, to the extent that the
Receivables evidenced thereby exceed
$50,000 individually and $500,000 in
the aggregate have been delivered to
and are in the possession of the Agent) $_____________
(vi) Receivables owing
by an account debtor which is not
solvent or is subject to any bankruptcy
or insolvency proceeding of any kind $_____________
(vii) Receivables which are contingent
or subject to offset, deduction,
counterclaim, dispute or other defense
to payment, in each case to the extent
of such offset, deduction,
counterclaim, dispute or other defense $_____________
(viii) Receivables for
which any direct or indirect Subsidiary
of the Borrower or any Affiliate of the
Borrower is the account debtor $_____________
(ix) Receivables representing a sale to
the government of the United States,
any foreign government or any agency or
instrumentality thereof (unless (A) the
Federal Assignment of Claims Act or
other similar applicable law with
respect to the Agent's security
interest in such Receivable has been
complied with to the satisfaction of
the Agent or (B) the account debtor
owing such Receivables is required to
make payment of such Receivables into a
bank account subject to a Bank Agency
Agreement) $_____________
(x) Receivables which
fail to meet such other specifications
as have been established by the Agent
in its reasonable discretion $_____________
<PAGE>
(xi) Sum of lines (i) through (x) $_____________
3. Eligible Receivables
(Line 1 less Line 2(xi)) $_____________
4. Eligible Receivables Borrowing
Base (85% of Eligible Receivables) $_____________
UNBILLED RECEIVABLES
5. Receivables that have not yet
been invoiced $_____________
6. Unbilled Receivables Borrowing Base
(50% of Line 5) $_____________
INVENTORY
7. Inventory (as defined in the
definition of Eligible Inventory in
Section 1.1 of the Credit Agreement) $_____________
8. (i) Inventory not subject
to a perfected, first priority Lien
in favor of the Agent to secure the
Credit Party Obligations $_____________
(ii) Inventory subject
to any Lien, other than
a Permitted Lien $_____________
(iii) Inventory which is not in good
condition or fails to meet standards
for sale or use imposed by governmental
agencies, departments or divisions
having regulatory authority over such
goods $_____________
(iv) Inventory which is not useable
or salable at prices approximating
their cost in the ordinary course of
business $_____________
(v) Inventory located outside of the
United States $_____________
<PAGE>
(vi) Inventory located at a location
not owned by the Borrower or any of its
Subsidiaries with respect to which the
Agent shall not have received a
landlord's, warehousemen's, bailee's or
appropriate waiver satisfactory to the
Agent $_____________
(vii) Inventory which is leased or on
consignment $_____________
(viii) inventory not at a location which
has been disclosed to the Agent pursuant
to the Credit Agreement $_____________
(ix) Inventory which fails to meet
such other specifications as have
been established by the Agent $_____________
(x) Sum of lines (i) through (ix) $_____________
9. Eligible Inventory
(Line 7 less Line 8(x)) $_____________
----
10. Eligible Inventory Borrowing
Base (50% of Eligible Inventory) $_____________
BORROWING BASE
11. Total Borrowing Base availability
(Line 4 plus Line 6 plus Line 10) $_____________
12. Aggregate Outstanding Revolving Loans
and Swingline Loans under the Credit
Agreement $_____________
<PAGE>
13. If Line #11 is greater than Line #12, then
the difference ($________) (or, if less,
the remaining amount of the
Committed Amount) is available for
extensions of credit under the Revolving
Commitments; if Line #12
is greater than Line #11, then the Borrower
shall prepay or otherwise reduce so much of
the outstanding Revolving Loans and
Swingline Loans as shall be necessary to
eliminate such excess ($_________).
With reference to this Borrowing Base certificate, I hereby certify
that the above statements are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this _____ day
of ______________, 200_.
CONDOR SYSTEMS, INC.
By:_______________________
Name:_____________________
Title:____________________]
