SECOND AMENDMENT AGREEMENT
among
VICON INDUSTRIES, INC.
and
IBJ SCHRODER BANK & TRUST COMPANY
Amending the Credit Agreement among
VICON INDUSTRIES, INC
and IBJ SCHRODER BANK & TRUST COMPANY, dated as of December 27, 1995, as amended
by the First Amendment Agreement, dated as of August 19, 1996
Dated as of February 5, 1997
THIS SECOND AMENDMENT AGREEMENT dated as of February 5,1997 (this
"Amendment") among VICON INDUSTRIES, INC., a New York corporation (the
"Borrower") and IBJ SCHRODER BANK & TRUST COMPANY, a New York banking
corporation (the "Bank"),
W I T N E S S E T H:
WHEREAS, the Borrower and the Bank have entered into a Credit Agreement
dated as of December 27, 1995, as amended by that First Amendment Agreement,
dated as of August 19, 1996 (collectively, the "Agreement"; the terms defined in
the Agreement are used in this Amendment as in the Agreement unless otherwise
defined in this Amendment); and
WHEREAS, the Borrower desires, and the Bank is willing on the terms and
conditions set forth below, to modify certain terms of the Agreement in order
to, among other things, increase the Commitment;
NOW, THEREFORE, in consideration of the mutual premises herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Borrower and the Bank have agreed to amend the
Agreement as hereinafter set forth:
SECTION 1. Amendment to Agreement. The Agreement is, subject to the
satisfaction of the conditi9ns to effectiveness set forth in Section 2 hereof,
hereby amended as follows:
(a) The definitions of "Applicable Margin," "Commitment" and "Formula
Amount" 1.01 (Defined Terms) of the Agreement are amended to read in their
entirety as follows:
"'Applicable Margin' shall mean, with respect to any Loan, one
percent (1.0%) per annum."
"'Commitment' shall mean the Bank's commitment to make Loans prior
to the Commitment Expiration Date up to the maximum aggregate
principal amount equal to (i) prior to the Second Amendment
Effective Date, $5,500,000 and (ii) on and after the Second
Amendment Effective Date, $6,500,000 at any time outstanding, as
referred to in Section 2.01(a)."
"'Commitment Expiration Date" shall mean (i) prior to the Second
Amendment Effective Date, December 31, 1997 and (ii) on and
after the Second Amendment Effective Date, January 31, 1999."
"'Formula Amount' shall mean, as at any date at which the same is
to be determined, an amount equal to the sum of (a) 80 per cent of
the amount of Eligible Accounts Receivable as at such date, plus
(b) (i) prior to the Second Amendment Effective Date, 25 per cent
and (ii) on and after the Second
Amendment Effective Date, 30 per cent of the value of Eligible Inventory
consisting of finished goods of the Borrower, provided, however, that the amount
calculated pursuant to (b) shall not exceed $3,000,000; and minus such reserve
as deemed necessary or appropriate by the Bank to reflect any contingencies, or
the consequences of any breach or contravention of laws, including without
limitation, Environmental Laws and laws related to OSHA, by the Borrower. The
Bank may, in its sole discretion, at any time or times upon three Business Days'
prior notice to the Borrower, increase or decrease the ratio of its advances
against Eligible Accounts Receivable or Eligible Inventory, or both, and, in the
event that any such ratio shall be decreased for any reason, such decrease shall
become effective immediately for purposes of calculating the maximum amount of
new Loans hereunder and the maximum amount of Loans which may be outstanding
hereunder. The Borrower acknowledges that such changes in the ratio of advances
against Eligible Accounts Receivable and Eligible Inventory may require the
immediate prepayment of Loans by the Borrower."
"Interest Coverage Ratio" shall mean, for any period for which the
same is to be determined, the ratio of (a) earnings from
continuing operations of the Borrower before interest, taxes,
depreciation and amortization (excluding amortization of gain on
sale and leaseback transactions) for such period, provided.
however that the calculation of such earnings for the Period
1/1/97 - 3/31/97 shall exclude the amount of losses incurred with
respect to moving expenses related to the Borrower's new corporate
offices not to exceed [$175,000] (which represents losses) in the
aggregate, to (b) the interest expense of the Borrower for such
period net of all intercompany interest, determined in accordance
with GAAP.
(b) Section 1.01 (Defined Terms) of the Agreement is hereby amended by
adding the following definitions in the proper alphabetical order:
"'Second Amendment' shall mean the Second Amendment Agreement
dated as of February 5, 1997 between the Borrower and the Bank."
"'Second Amendment Effective Date' shall mean the date on which
the conditions in Section 2 of the Second Amendment are satisfied
or waived by the Bank."
(c) Subsection (b) of Section 2.07 (Optional Prepayments of the Loans)
is hereby amended to read in its entirety as follows:
"(b) The Borrower may, upon at least ten Business Days' prior
written notice to the Bank, elect to terminate or permanently
reduce the Commitment not more than once during any Fiscal Quarter
in an amount not less than $250,000 with such additional
increments in integral multiples of $100,000; provided. however
that (i) any reduction of the Commitment shall be accompanied by
prepayment of Loans, together with accrued interest on the amount
prepaid to the date of such prepayment, to the extent (if any)
that the aggregate principal amount of the Loans then outstanding
exceeds the amount of the Commitment as then reduced, (ii) any
such termination of the Commitment shall be accompanied by
prepayment in lull of all Loans then outstanding; together with
accrued interest thereon to the date of such prepayment and any
unpaid commitment fee then accrued under Section 2.11(b) hereof,
and by payment of a fee ("Commitment Reduction Fee") equal to two
per cent of the amount so reduced or terminated in the first
twelve months following the date of execution and delivery of this
Agreement, and equal to one-half of one percent of the amount so
reduced or terminated for the period beginning December 27, 1996
through the Commitment Expiration Date."
(d) Subsection (c) of Section 7.01 (Indebtedness) of the Agreement is
hereby amended to read in its entirety as follows:
"(c) Indebtedness of the Borrower which is unsecured (or secured
by the Liens referred to in Section 7.02(c) and (d)) and incurred
in the normal course of business in connection with installment
purchases or Capitalized Leases of equipment or fixed assets, in
an aggregate amount not exceeding $400,000 at any one time
outstanding.
(e) Schedule 7.08 (Issuances and Dispositions of Securities) is hereby
amended by adding the information contained on Exhibit A hereto to
the end thereof.
(f) Subsection (A) of Section 9.03 (Net Income) of the Agreement is
hereby amended by adding the following proviso to the end thereof:
",provided. however that the calculation of Net Income for the
Period 1/1/97-3/31/97 shall exclude the amount of losses incurred
with respect to moving expenses related to the Borrower's new
corporate offices not to exceed [$175,000] (which represents
losses) in the aggregate."
(g) Section 9.05 (Maximum Capital Expenditures) of the Agreement is
hereby amended in its entirety to read as follows"
"During each Fiscal Year including, without limitation, Fiscal
Year 1998, Capital Expenditures shall not exceed $500,000 per
Fiscal Year, provided, however, that during Fiscal Year 1997,
Capital Expenditures shall not exceed $1,000,000."
SECTION 2. Conditions to Effectiveness. This Amendment shall become
effective only upon the satisfaction or waiver of all of the following
conditions precedent:
(a) The Borrower and the Bank shall have duly executed and delivered this
Amendment (whether the same or different copies) and the Bank shall have
received a copy of this Amendment signed by the Borrower;
(b) The Borrower and the Subordinated Lenders shall have duly executed and
delivered the First Amendment No. 1 and Consent to Subordination Agreement
("Subordination Agreement Amendment"), dated as of the date hereof (whether the
same or different copies), substantially in the form attached hereto as Exhibit
B and the Bank shall have received a copy or copies of such Subordination
Agreement Amendment signed by the Borrower and the Subordinated Lenders;
(c) The Borrower shall have duly executed and delivered the Second
Amended and Restated Revolving Credit Note, dated as of the date hereof,
substantially in the form attached hereto as Exhibit C;
(d) The Bank shall have received the fees and expense reimbursements
referred to in Section 5 hereof; and
(e) The Bank shall have received such other documents, opinions,
approvals or appraisals as the Bank may reasonably request.
SECTION 3. Representations and Warranties. In order to induce the Bank to
enter into this Amendment, the Borrower hereby represents and warrants to the
Bank that (i) it has the lull power, capacity, right and legal authority to
execute, deliver and perform its obligations under this Amendment and the other
Related Documents to which it is a party, and the Borrower has taken all
appropriate action necessary to authorize the execution and delivery of; and the
performance of its obligations under this Amendment and the other Related
Documents to which it is a party, (ii) this Amendment, the Agreement (as amended
by this Amendment) and the other Related Documents constitute legal, valid and
binding obligations of the Borrower enforceable against the Borrower in
accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization or moratorium or similar laws affecting the rights of
creditors generally, (iii) the representations and warranties contained in the
Agreement and in each of the other Related Documents to which it is a party are
true and correct on and as of the date hereof as though made on and as of such
date, except for changes which have occurred and which were not prohibited by
the terms of the Agreement, (iv) no Default or Event of Default has occurred and
is continuing, or would result from the execution, delivery and performance by
the Borrower of this Amendment, the Agreement (as amended by this Amendment) or
any of the other Related Documents to which it is a party, and (v) the Borrower
is not in default in the payment or performance of any of its obligations under
any mortgage, indenture, security agreement, contract, undertaking or other
agreement or instrument to which it is a party or which purports to be binding
upon it or any of its properties or assets, which default would have a material
adverse effect on the management, business, operations, properties, assets or
condition (financial or otherwise) of the Borrower, (vi) the Borrower is in
compliance with all applicable statutes, laws, rules, regulations, orders and
judgments, the contravention or violation of which would have a material adverse
effect on the management, business, operations, properties, assets or condition
(financial or otherwise) of the Borrower, (vii) no material adverse change in
the business or assets, or in the condition (financial or otherwise) of the
Borrower, and (viii) no litigation or administrative proceeding of or before any
court or governmental body or agency is now pending, nor, to the best knowledge
of the Borrower upon reasonable inquiry, is any such litigation or proceeding
now threatened against the Borrower or any of its properties, nor, to the best
knowledge of the Borrower upon reasonable inquiry, is there a valid basis for
the initiation of any such litigation or proceeding, which if adversely
determined (after giving effect to all applicable insurance coverage then in
existence) would have a material adverse effect on the business, assets or
condition (financial or otherwise) of the Borrower;
SECTION 4. Reference to and Effect on the Documents. (A) Each reference
in the Agreement to "this Agreement", '1hereunder", "hereof', "herein" or words
of like import, and each reference to the Agreement in the Related Documents
other than the Agreement, shall mean and be a reference to the Agreement as
amended hereby.
(B) Except as specifically amended hereby, the Agreement and all other
Related Documents, and all other documents, agreements, instruments or writings
entered into in connection therewith, shall remain in lull force and effect and
are hereby ratified, confirmed and acknowledged by the Borrower. The amendments
set forth above are limited precisely as written and shall not be deemed to (i)
be a consent to any waiver or modification of any other term or condition of the
Agreement or any document delivered pursuant thereto or (ii) prejudice any right
or rights which the Bank may now or in the future have in connection with the
Agreement or the other Related Documents.
(C) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of the Bank under any of the
Related Documents, nor constitute a waiver or modification of any provision of
any of the Related Documents, nor a waiver of any now existing or hereafter
arising Defaults of Events of Default.
SECTION 5. Fees and Expenses. (A) The Borrower hereby agrees to pay, or
cause to be paid to, the Bank a non-refundable amendment fee of$l0,000.
(13) The Borrower hereby agrees to pay the Bank on demand for all costs,
expenses, charges and taxes (other than any income taxes relating to income of
the Bank), including, without limitation, all reasonable fees and disbursements
of counsel, incurred by the Bank in connection with the preparation,
negotiation, administration and enforcement of this Amendment and the other
Related Documents to be delivered hereunder.
SECTION 6. Governing Law. This Amendment and the rights and obligations
of the parties hereunder shall be governed by and construed and interpreted in
accordance with the substantive laws of the State of New York, without regard
for its conflict of laws principles.
SECTION 7. Headings. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
SECTION 8. Successors. This Amendment shall be binding upon the successors,
assigns, heirs, executors and administrators of the parties hereto.
SECTION. 9. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Amendment by signing any such
counterpart.
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
VICON INDUSTRIES, INC.
IBJ SCHRODER BANK & TRUST COMPANY
By:
Name:
Title: