EXHIBIT 10.1
AMENDMENT AND WAIVER TO CREDIT AGREEMENT
This Amendment and Waiver to Credit Agreement is dated as of the 21st day
of May, 2010 and is by and between Orbit International Corp., Behlman
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, N.A. ("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 and a term loan in the amount of
$4,654,761.84 pursuant to a Credit Agreement dated 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
Borrowers to Bank (as amended from time to time, the "LINE OF CREDIT NOTE") and
the Term Loan Note dated March 10, 2010 from Borrowers to 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 "Applicable Margin" set forth in Section 1.01 of the
Credit Agreement is hereby amended to read in its entirety as follows:
"Applicable Margin" means (i) with respect to Line of Credit Loans which
are LIBOR Loans, two percent (2.00%) and with respect to Line of Credit Loans
which are Prime Rate Loans, one percent (1.00%), and (ii) with respect to the
Term Loan which is a LIBOR Loan, three percent (3.00%) and with respect to the
Term Loan which is a Prime Rate Loan, one and one half of one percent (1.50%).
3. Section 2.01(b) of the Credit Agreement is hereby amended to read in its
entirety as follows:
(b) Commencing May 21, 2010, each Line of Credit Loan shall be a Prime
Rate Loan as a Borrower may request subject to and in accordance with the terms
and conditions hereof. Each such request shall be submitted to Bank on the
Bank's standard form, a copy of which is attached hereto as Exhibit C.
Notwithstanding anything to the contrary contained in this Agreement, the
Borrowers may not convert any Prime Rate Loan into a LIBOR Loan. All or any
portion of any Line of Credit Loan that is currently a LIBOR Loan as of May 21,
2010 may remain a LIBOR Loan until the end of the applicable Interest Period at
which time such LIBOR Loan shall convert to a Prime Rate Loan.
4. The following sentence is hereby added to the end of Section 2.01(c) of
the Credit Agreement:
Notwithstanding the foregoing, until July 15, 2010, the aggregate principal
amount of outstanding Line of Credit Loans plus the outstanding principal amount
of the Term Loan may exceed by the Borrowing Base by an amount not to exceed
Eight Hundred Thousand Dollars ($800,000.00) (the "Overdraft"). So long as an
Overdraft is existing, no additional Line of Credit Loans shall be available to
the Borrowers.
5. The following sentence is hereby added to the end of Section 2.03 of the
Credit Agreement:
Notwithstanding anything to the contrary contained in this Agreement,
commencing on and after May 21, 2010, the Term Loan shall only be a Prime Rate
Loan and the Borrowers may not convert any Prime Rate Loan into a LIBOR Loan.
All or any portion of the Term Loan that is currently a LIBOR Loan as of May 21,
2010 may remain a LIBOR Loan until the end of the applicable Interest Period at
which time such LIBOR Loan shall convert to a Prime Rate Loan.
6. The last sentence of Section 5.07 of the Credit Agreement is hereby
amended to read in its entirety as follows:
In addition, the Bank shall have the right to obtain a field examination of
the Borrowers' Accounts and inventory, at Borrowers' expense, by the Bank's
field examiner or an outside firm engaged by the Bank, at any time provided that
so long as no Event of Default has occurred and is continuing, such field
examination shall not be required more than four (4) times in any calendar year.
Currently, the cost of a field examination is $850.00 per day per examiner plus
expenses.
7. Section 5.10(4) of the Credit Agreement is hereby amended to read in its
entirety as follows:
(4) Borrowing Base Certificate; Monitoring Reports. (i) Within fifteen
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(15) days of the end of each month, a Borrowing Base Certificate with (a) an
accounts receivable aging schedule (including the scheduling of all respective
due dates and cancel dates and setting forth those due more than 30 days, 60
days, 90 days and 120 days) and (b) a quarterly summary report of inventory
broken down by raw material, finished goods and work-in-process which quarterly
summary report shall be as of the date of the end of the most recent fiscal
quarter; and (ii) no later than on Wednesday of each week for the prior week's
end through June 25, 2010 and thereafter on a daily basis by 3:00 pm on the
following Business Day a Certificate in the form of Exhibit H attached hereto;
and (iii) within fifteen (15) days of the end of each month, a schedule of all
backlog, work-in-process and completed contracts, in the form attached hereto as
Exhibit I, in substance reasonably satisfactory to Bank.
8. The following subsection (13) is hereby added to Section 5.10 of the
Credit Agreement:
(10) Cash Receipt and Disbursement Schedule. No later June 3, 2010, a
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cash receipts and disbursement projection schedule for the next ensuing thirteen
(13) weeks, in form and substance reasonably satisfactory to Bank.
9. Section 6.11 of the Credit Agreement is amended to delete the following:
(provided the repurchase of stock shall be permitted only if such repurchase
will not cause a violation of any financial covenants set forth in Article VII
herein)
10. Section 7.01 of the Credit Agreement is 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 March 31, 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 March 31, 2011 and each Fiscal Quarter
thereafter on a rolling four (4) quarter basis).
11. The following Section 7.03 is hereby added to the Credit Agreement:
Section 7.03 Net Profit. The Borrowers, on a consolidated basis, shall
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have a net profit before interest, taxes, goodwill impairment and intangible
asset charges and Bank and other legal fees associated with the waivers and
amendments to this Agreement dated as of May 21, 2010 of not less than (i)
Twenty Two Thousand Dollars ($22,000.00) for the Fiscal Quarter ending June 30,
2010, (ii) Three Hundred Twenty One Thousand Dollars ($321,000.00) for the
Fiscal Quarter ending September 30, 2010, and (iii) Eight Hundred Ten Thousand
Dollars ($810,000.00) for the Fiscal Quarter ending December 31, 2010.
12. The following Exhibit H is hereby added to the Agreement:
CONTINUED ON NEXT PAGE
EXHIBIT H
CAPITAL ONE, N.A. EXHIBIT "H"
ASSET BASED LENDING DEPARTMENT BORROWING BASE CERTIFICATE
COMPANY NAME: ORBIT INTERNATIONAL CORP AND SUBSIDIARIES DATE:
- ------------- ----------------------------------------- ---------
Orbit International Behlman Tulip ICS
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 $ $ $ $
6. Total 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, Behlman, Tulip
and ICS - line 8) $
10. Gross Eligible Inventory
(From last monthly BBC) $ $ $ $
11.Total Gross Eligible
Inventory (Orbit, Behlman, 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 BEFORE
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:
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.
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 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 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:
____________________________________________
13. The following Exhibit I is hereby added to the Agreement:
CONTINUED ON NEXT PAGE
EXHIBIT I
Orbit Instruments - Backlog/WIP/Completed Contracts
As of Example 12/15/10
Total Contract Scheduled Shipments Actual Shipments
-------------- ------------------- ----------------
Total Est. Est. Sched. Actual
Date Est. 1st. Contract Gross GP Shipment Shipment
Contract Name Awarded Ship Date Amount Profit % Quarter $ Amount Cost GP % Quarter Amount
- --------------- -------- --------- ---------- -------- ----- --------- -------- -------- ----- --------- --------
ABC Co. SR228 3/2/2010 4/30/2010 $1,000,000 $700,000 30.0% Q2 2010 $300,000 $210,000 30.0% Q2 2010
Q3 2010 $400,000 $280,000 30.0% Q3 2010 $300,000
Q4 2010 $200,000 $140,000 30.0% Q4 2010 $400,000
Q1 2011 $100,000 $ 70,000 30.0% Q1 2011
Q2 2011 Q2 2011
Q3 2011 Q3 2011
Prime Co. CC099 $ 300,000 $200,000 33.3% Q2 2010 Q2 2010
Q3 2010 $150,000 $100,050 33.3% Q3 2010 $150,000
Q4 2010 $150,000 $100,050 33.3% Q4 2010 $150,000
Actual Shipments Cumulative
---------------- ----------
Shipped Cost GP % Balance
Contract Name Cost GP % To Date To Date To Date Remaining Comments
- --------------- -------- ----- -------- -------- -------- ---------- ----------------
ABC Co. SR228 $ 0 $ 0 0.0% $1,000,000 Delayed due to
$215,000 28.3% $300,000 $215,000 28.3% $ 700,000 testing at Prime
$300,000 25.0% $700,000 $515,000 26.4% $ 300,000 Level - expect
fully shipped by
Q3 2011
Prime Co. CC099
$100,050 33.3% $150,000 $100,050 33.3% $ 150,000 On schedule
$100,050 33.3% $300,000 $200,100 33.3% $ 0
14. The Bank hereby waives compliance with Section 7.01 for the Fiscal
Quarter ending March 31, 2010 provided the actual Consolidated Debt Service
Coverage Ratio was not less than 0.88 to 1.0 as at March 31, 2010.
15. The Borrowers ratify and reaffirm the Financing Documents and the
Financing Documents, as hereby amended, shall remain in full force and effect.
16. 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.
17. The Borrower agrees to pay to the Bank its fee for this Amendment in the
amount of $25,000.00 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.
18. This Amendment shall become effective only after it is fully executed by
the Borrowers and the Bank and the Bank has received the fees required pursuant
to Section 17 herein.
19. The Borrowers acknowledge that as of the date of this Amendment it has
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.
20. This Amendment is a modification only and not a novation. Except for
the above-quoted modification(s), 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.
21. 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/ Mitchell Binder
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Name: Mitchell Binder
Title: Chief Financial Officer
BEHLMAN ELECTRONICS, INC.
By:/s/ Mitchell Binder
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Name: Mitchell Binder
Title: Chief Financial Officer
TULIP DEVELOPMENT LABORATORY, INC.
By:/s/ Mitchell Binder
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Name: Mitchell Binder
Title: Chief Financial Officer
INTEGRATED CONSULTING SERVICES, INC.
By:/s/ Mitchell Binder
- ------------------------
Name: Mitchell Binder
Title: Chief Financial Officer
BANK:
CAPITAL ONE, N.A.
By:/s/ Dawn Juliano
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Name: Dawn Juliano
Title: Vice President