EXHIBIT 7
FIFTH AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
FIFTH AMENDMENT, dated as of February 13, 1996 (the "Amendment"), to
the Amended and Restated Credit Agreement, dated as of April 12, 1995, among NAI
Technologies, Inc., a New York corporation (the "Borrower"), Chemical Bank, a
New York banking corporation ("Chemical"), The Bank of New York, a New York
banking corporation ("BNY"), and each of the other financial institutions which
from time to time becomes party thereto (together with Chemical and BNY, the
"Banks"), BNY, as administrative agent (in such capacity, the "Administrative
Agent"), and Chemical, as collateral agent (in such capacity, the "Collateral
Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks, the Administrative Agent and the
Collateral Agent are parties to that certain Amended and Restated Credit
Agreement, dated as of April 12, 1995 (as amended by certain amendments, dated
as of August 14, 1995, October 13, 1995, November 6, 1995 and January 5, 1996,
the "Credit Agreement");
WHEREAS, unless otherwise defined herein, terms defined in the Credit
Agreement and used herein are used herein as therein defined;
WHEREAS, the Borrower and certain investors (the "Investors") have
entered into agreements whereby the Investors have agreed to purchase up to
$9,300,000 of convertible subordinated notes of the Borrower in exchange for
certain consideration pursuant to the Subscription Agreements (as hereinafter
defined); and
WHEREAS, the Borrower has requested and the Banks have agreed to
consent to (i) the incurrence of such subordinated indebtedness and (ii) the
extension of the Maturity Date on the terms hereinafter set forth.
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENT TO ARTICLE I. Article I of the Credit Agreement is
hereby amended (a) by adding the following defined terms to Section 1.01
thereof:
"Consolidated Interest Expense" shall mean, for any period, Interest
Expense net of interest income of the Borrower and its Subsidiaries for
such period, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Income" shall mean, for any period, the consolidated
Net Income (or deficit) of the Borrower and its Subsidiaries for such
period (taken as a cumulative whole), determined in accordance with
GAAP.
"Consolidated Net Worth" shall mean, with respect to the Borrower and
its Subsidiaries on a consolidated basis, as of any date, the amount of
common stockholders' equity shown on a consolidated balance sheet of
the Borrower and its Subsidiaries as of such date (determined in
accordance with GAAP); provided that for purposes of calculating
Consolidated Net Worth, deficits shall not be deducted from
Consolidated Net Income when calculating such amount.
"Interest Coverage Ratio" shall mean, as to any period, the ratio of
(x) the sum of (i) Consolidated Net Income for such period, (ii)
Consolidated Interest Expense for such period, (iii) federal, state and
local income taxes deducted from revenue in determining such
Consolidated Net Income and (iv) amortization of deferred debt expense
to (y) Consolidated Interest Expense for such period.
"Investors" shall mean Charles S. Holmes and such other investors who
purchase Subordinated Notes pursuant to the Subscription Agreements.
"Net Income" shall mean, with respect to the Borrower for any period,
net income computed in accordance with GAAP.
"Registration Rights Agreement" shall mean one or more of those certain
Registration Rights Agreements to be entered into by the Borrower and
the Investors which agreements shall be in the form of Exhibit C
hereto.
"Shelf Registration Agreement" shall mean that certain Shelf
Registration Agreement to be entered into by the Borrower and the
Banks, which agreement shall provide for the registration of shares of
capital stock previously issued to the Banks and shall be in form and
substance satisfactory to the Banks.
"Subordinated Indebtedness" shall mean the Indebtedness incurred by the
Borrower evidenced by the Subordinated Notes.
"Subordinated Notes" shall mean those certain notes to be executed by
the Borrower in favor of the Investors in the aggregate principal
amount of up to $9,300,000, which notes shall be in the form of Exhibit
B hereto.
"Subscription Agreements" shall mean one or more of those certain
Subscription Agreements to be entered into by the Borrower and the
Investors, in connection with the issuance of the Subordinated
Indebtedness.
(b) by amending the definitions of "Consolidated Current Ratio", "Consolidated
Quick Ratio" and "Maturity Date" in their entirety as follows:
"Consolidated Current Ratio" shall mean the ratio of (x) the sum of
consolidated current assets of the Borrower and its Subsidiaries plus
an amount equal to the difference between
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the Total Commitment in effect on the date of such determination and
the aggregate principal amount outstanding in respect of the Loans as
of such date, in each case after giving effect to any payments of
principal made, and the concurrent reduction of the Total Commitment,
on such date pursuant to Section 2.08 hereof to (y) consolidated
current liabilities of the Borrower and its Subsidiaries, each
determined by reference to the consolidated financial statements of the
Borrower and its Subsidiaries provided pursuant to Section 5.01 hereof.
"Consolidated Quick Ratio" shall mean the ratio of (x) the sum of
Consolidated Quick Assets plus an amount equal to the difference
between the Total Commitment in effect on the date of such
determination and the aggregate principal amount outstanding in respect
of the Loans as of such date, in each case after giving effect to any
payments of principal made, and the concurrent reduction of the Total
Commitment, on such date pursuant to Section 2.08 hereof to (y)
consolidated current liabilities of the Borrower and its Subsidiaries,
determined by reference to the consolidated financial statements of the
Borrower and its Subsidiaries provided pursuant to Section 5.01 hereof.
"Maturity Date" shall mean January 15, 1999.
and (c) by deleting the definitions "Extended Maturity Date" and "Consolidated
Tangible Net Worth" in their entirety.
SECTION 2. AMENDMENTS TO ARTICLE II. Article II of the Credit Agreement
is hereby amended by (a) amending Section 2.08(b) in its entirety to read as
follows:
(b) The Borrower shall make the following scheduled payments of the Loans
in the principal amount of (i) $500,000 on the last Business Day of each
quarter commencing on March 31, 1996 and ending on December 31, 1996, (ii)
$750,000 on the last Business Day of each quarter commencing on March 31,
1997 and ending on December 31, 1998 and (iii) $7,175,000, or such other
principal amount of the Loans which may be outstanding, on the Maturity
Date.
and (b) amending Section 2.08(c) in its entirety to read as
follows:
(c) Upon (x) any sale or series of related sales within any twelve month
period of assets by the Borrower or any of its Subsidiaries (other than
sales of inventory in the ordinary course of business or the sale of
equipment which is uneconomic, obsolete or no longer
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useful and which, in the latter instance, does not have an aggregate value
in excess of $50,000) in which the amount of sale proceeds generated by
such sale or series of related sales of assets exceeds $100,000 in the
aggregate, and (y) the sale of the Hauppauge Property, the Borrower shall
prepay the Loans in an amount equal to 100% of such sale proceeds (net of
reasonable costs in connection therewith) PROVIDED that in connection with
the sale or sales described in clause (x), no such prepayment shall be
required to the extent such sale proceeds are promptly used to purchase
replacement assets for those sold.
SECTION 3. AMENDMENT TO ARTICLE V. Article V of the Credit Agreement is
hereby amended by amending Section 5.07 in its entirety to read as follows:
SECTION 5.07. MAINTENANCE OF ACCOUNTS. Maintain or cause to be
maintained at all times all operating accounts and other accounts
(including without limitation accounts for the deposit of proceeds of sales
of assets) with the Collateral Agent.
SECTION 4. AMENDMENTS TO ARTICLE VI. Article VI of the Credit Agreement
is hereby amended (a) by amending Section 6.03(vi) thereof in its entirety to
read as follows:
(vi) Subordinated Indebtedness of the Borrower to the Investors in an
aggregate amount not to exceed $9,300,000, which Indebtedness shall be
subordinate in right of payment to the Indebtedness owed to the Banks under
this Agreement on terms satisfactory to the Bank.
and (b) by amending Sections 6.04 and Sections 6.14 through 6.17 in their
entirety to read as follows:
SECTION 6.04. CAPITAL EXPENDITURES. Make or commit to make Capital
Expenditures for any fiscal year in an aggregate amount in excess of $2
million.
SECTION 6.14. MAINTENANCE OF CONSOLIDATED CURRENT RATIO. Permit the
Consolidated Current Ratio at the end of any fiscal quarter for the fiscal
years set forth below to fall below the ratios set forth opposite such
fiscal years:
Date Ratio
---- -----
1996 1.30 to 1.0
1997 1.50 to 1.0
1998 1.75 to 1.0
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SECTION 6.15. MAINTENANCE OF CONSOLIDATED QUICK RATIO. Permit the
Consolidated Quick Ratio at the end of any fiscal quarter for the fiscal years
set forth below to fall below the ratios set forth opposite such fiscal years:
Date Ratio
---- -----
1996 0.55 to 1.0
1997 0.75 to 1.0
1998 1.00 to 1.0
SECTION 6.16. MAINTENANCE OF CONSOLIDATED NET WORTH. Permit
Consolidated Net Worth for the following periods to fall below the amounts set
forth opposite such periods at any time during such periods:
Period Amount
February 13 through $7,500,000
December 30, 1996
December 31, 1996 through $7,500,000 plus
December 30, 1997 an amount equal to
50% of Consolidated
Net Income for
fiscal year 1996
December 31, 1997 through $7,500,000 plus
December 30, 1998 an amount equal
to the sum of
50% of Consolidated
Net Income for
fiscal years 1996
and 1997 in the
aggregate
December 31, 1998 through $7,500,000 plus
Maturity Date an amount equal
to the sum of
50% of Consolidated
Net Income for
fiscal years 1996,
1997 and 1998 in
the aggregate
SECTION 6.17. MAINTENANCE OF INTEREST COVERAGE RATIO. Permit the
Interest Coverage Ratio at each date set forth below, for the period of four
fiscal quarters ending on such date, to fall below the ratios set forth opposite
such dates:
Date Ratio
December 31, 1996 1.00 to 1
March 31, 1997 1.25 to 1
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June 30, 1997 and thereafter 1.50 to 1
SECTION 5. EXHIBITS. Exhibits A-1 and A-2 are hereby replaced in their
entirety by Exhibit A hereto.
SECTION 6. CONFIRMATION OF LIENS. The Borrower hereby confirms that,
pursuant to the terms of the Credit Agreement and the Security Documents, the
Borrower and the Guarantors have granted Liens on all of their assets to the
Collateral Agent for the benefit of the Banks. The Borrower hereby further
confirms that it will not and will not permit its Subsidiaries to incur, create,
assume or suffer to exist any Lien on any property or assets, income or profits
of the Borrower or any of its Subsidiaries other than those permitted by Section
6.01 of the Credit Agreement, and any such granting of any such Lien in favor of
any third person, including the holders of the Subordinated Indebtedness (as
hereinafter defined) shall constitute an Event of Default under the Credit
Agreement. Nothing contained herein shall constitute a release or modification
of any Lien in favor of the Collateral Agent and the Banks in any Collateral
which constitutes security for any of the Obligations.
SECTION 7. COUNTERPARTS. This Amendment may be executed in any number
of counterparts, each of which shall constitute an original and all of which
when taken together shall constitute one and the same instrument.
SECTION 8. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective as of the date hereof (the "Effective Date") when all of the following
shall have occurred:
(a) The Banks shall have each received counterparts of this Amendment,
duly executed by the Borrower;
(b) The Borrower shall have executed and delivered amended Notes to
each of the Banks, in substantially the form of Exhibit A hereto;
(c) The Borrower shall have received an amount not less than
$6,800,000 in cash representing the net proceeds received in respect of
Subordinated Indebtedness;
(d) The Banks shall have received copies of the fully executed
Subordinated Notes;
(e) The Banks shall have received a copies of the fully executed
Subscription Agreements and the Registration Rights Agreements;
(f) The Banks shall have received a fully executed copy of a Shelf
Registration Agreement, in substantially the form of Exhibit D hereto;
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(g) The Banks shall have received the favorable written opinion of
Whitman Breed Abbott & Morgan, counsel to the Borrower, dated the Effective
Date, in substantially the form of Exhibit E hereto;
(h) The Borrower shall be in compliance with all of the terms and
provisions set forth in the Credit Agreement to be observed and performed
and, after giving effect to this Amendment, no Event of Default or event
which upon notice or lapse of time or both would constitute an Event of
Default shall have occurred and be continuing;
(i) All representations and warranties contained in Section 3 of the
Credit Agreement and the other Loan Documents shall be true and correct in
all material respects on and as of the Effective Date, except to the extent
that such representations and warranties expressly relate to an earlier
date;
(j) The Banks shall have received the projected and consolidated
income and loss statements, budgets and cash flow statements on a monthly,
quarterly and annual basis for the period through and including December
31, 1998, which shall be in form and substance satisfactory to the Banks;
and
(k) The Collateral Agent shall confirm in writing that the Lockbox
Agreement shall be terminated upon the occurrence of the Effective Date.
SECTION 9. RATIFICATION. Except to the extent hereby amended, the
Credit Agreement remains in full force and effect and is hereby ratified and
affirmed. References in the Loan Documents to the Credit Agreement shall mean
such document as amended by this Amendment, as the same may be further amended,
supplemented or otherwise modified from time to time.
SECTION 10. COSTS AND EXPENSES. All out-of-pocket expenses incurred by
the Banks, including the reasonable fees and disbursements of Zalkin, Rodin &
Goodman LLP, special counsel for the Agents and the Banks, incurred in
connection with the negotiation and preparation of this Amendment shall be paid
by the Borrower as provided in Subsection 9.05 of the Credit Agreement. The
Borrower hereby confirms that the Borrower shall be obligated to reimburse the
Banks' reasonable expenses incurred in the retention of a financial advisor to
the Banks in connection with the administration of the Loans or the protection
or enforcement of the Banks' rights in connection therewith.
SECTION 11. REFERENCES. This Amendment shall be limited precisely as
written and shall not be deemed (a) to be a consent
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granted pursuant to, or a waiver or modification of, any other term or condition
of the Credit Agreement or any of the instruments or agreements referred to
therein or (b) to prejudice any right or rights which the Administrative Agent,
Collateral Agent or the Banks may now have or have in the future under or in
connection with the Credit Agreement or the Loan Documents or any of the
instruments or agreements referred to therein.
SECTION 12. APPLICABLE LAW. THIS AMENDMENT SHALL IN ALL RESPECTS BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
SECTION 13. HEADINGS. Section headings in this Amendment are included
herein for convenience of reference only and are not to affect the construction
of, or to be taken into consideration in interpreting, this Amendment.
SECTION 14. INTEGRATION. This Amendment represents the entire agreement
of the parties hereto with respect to the amendment of the Credit Agreement and
the terms of any letters and other documentation entered into among the Borrower
and any Bank or the Administrative Agent or the Collateral Agent prior to the
execution of this Amendment which relate to the amendment of the Credit
Agreement shall be replaced by the terms of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
NAI TECHNOLOGIES, INC.
By: /s/ Richard A. Schneider
_______________________________
Title: Executive Vice President
THE BANK OF NEW YORK
AS ADMINISTRATIVE AGENT AND AS A BANK
By: /s/ Richard Maybaum
______________________________
Vice President
CHEMICAL BANK
AS COLLATERAL AGENT AND AS A BANK
By: /s/ Kathy A. Duncan
______________________________
Vice President
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Consented to as of this
13th day of February, 1996
NAI TECHNOLOGIES - SYSTEMS DIVISION CORPORATION
By: /s/ Richard A. Schneider
_________________________
Title: Secretary
WILCOM, INC.
By: /s/ Richard A. Schneider
_________________________
Title: Secretary
ARATHON, V.I., INC.
By: /s/ Richard A. Schneider
_________________________
Title: Secretary
CODAR TECHNOLOGY, INC.
By: /s/ Richard A. Schneider
_________________________
Title: Secretary
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