Exhibit 10.1
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED
REVOLVING CREDIT SECURITY AGREEMENT
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This First Amendment to Second Amended and Restated Revolving Credit and
Security Agreement (the "Amendment") is made this 14th day of July, 2006, by and
among COMPUDYNE CORPORATION, a Nevada corporation ("CompuDyne"), COMPUDYNE -
PUBLIC SAFETY & JUSTICE, INC., a Virginia corporation (CompuDyne Safety"),
NORMENT SECURITY GROUP, INC., a Delaware corporation ("Norment"), NORSHIELD
CORPORATION, an Alabama corporation ("Norshield"), FIBER SENSYS, LLC, a Delaware
limited liability company ("Fiber"), COMPUDYNE - INTEGRATED ELECTRONICS
DIVISION, LLC, a Delaware limited liability company ("CompuDyne Integrated"),
CORRLOGIC, LLC, a Delaware limited liability company ("CorrLogic"), XANALYS
CORPORATION, a Delaware corporation ("Xanalys"), and SIGNAMI DCS, LLC, a
Delaware limited liability company ("Signami") (CompuDyne, CompuDyne Safety,
Norment, Norshield, Fiber, CompuDyne Integrated and CorrLogic, Xanalys and
Signami, each a "Borrower", and collectively "Borrowers"), the financial
institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender") and PNC BANK, NATIONAL
ASSOCIATION ("PNC"), as agent for Lenders (PNC, in such capacity, the "Agent").
BACKGROUND
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A. On December 19, 2005, Borrowers, Lenders and Agent entered into, inter
alia, a certain Second Amended and Restated Revolving Credit and Security
Agreement (as same has been or may be amended, modified, renewed, extended,
replaced, or substituted from time to time, the "Loan Agreement"), to reflect
certain financing arrangements between the parties thereto. The Loan Agreement
and all other documents executed in connection therewith are collectively
referred to as the "Existing Financing Agreements." All capitalized terms not
otherwise defined herein shall have the meaning ascribed thereto in the Loan
Agreement. In the case of a direct conflict between the provisions of the Loan
Agreement and the provisions of this Amendment, the provisions hereof shall
prevail.
B. The Borrowers have requested and the Agent and the Lenders have agreed
to modify certain definitions, terms and conditions in the Loan Agreement.
C. The parties have agreed, subject to the terms and conditions of this
Amendment, to modify and amend the Existing Financing Agreements.
NOW THEREFORE, with the foregoing background hereinafter deemed
incorporated by reference herein and made part hereof, the parties hereto,
intending to be legally bound, promise and agree as follows:
1. Amendment to Loan Agreement. Upon the Effective Date, the Loan
Agreement shall be amended as follows:
(a) A new definition of "CD Advance Rate" shall be added to Section
1.2 of the Loan Agreement as follows:
"CD Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(viii).
(b) The definition of "Advances Rates" shall be deleted in its
entirety and replaced as follows:
"Advance Rates" shall have the meaning set forth in
Section 2.1(a)(y)(viii).
(c) Section 2.1(a) of the Loan Agreement shall be deleted in its
entirety, and replaced as follows:
(a) Amount of Revolving Advances. Subject to the terms and
conditions set forth in this Agreement including Sections 2.1(b), 2.1(c)
and 2.1(d), each Lender, severally and not jointly, will make Revolving
Advances to Borrowers in aggregate amounts outstanding at any time equal to
such Lender's Commitment Percentage of the lesser of (x) the Maximum
Revolving Advance Amount less the aggregate Maximum Undrawn Amount of all
outstanding Letters of Credit and (y) an amount equal to the sum of:
(i) up to 80%, subject to the provisions of Section 2.1(b)
hereof ("Receivables Advance Rate"), of Eligible Receivables, plus
(ii) up to the lesser of (A) 50%, subject to the provisions
of Section 2.1(b) hereof, of the value of Eligible Inventory
("Inventory Advance Rate") and (B) $3,000,000 in the aggregate at any
one time, plus
(iii) up to the lesser of (A) 50%, subject to the provisions
of Sections 2.1(b) and 2.1(c) hereof, of the value of Costs in Excess
of Billings ("Costs in Excess Advance Rate") and (B) $5,000,000 in the
aggregate at any one time, plus
(iv) $1,487,500, which represents 70% of the FMV of Real
Property; provided that, the amount set forth in this Section
2.1(a)(y)(iv) shall be reduced (but not below zero) by $12,395.83 on
the first day of each month, commencing on February 1, 2006, plus
(v) subject to Section 2.1(d) hereof, the lesser of (a)
$1,600,000 and (B) the value of the Borrowers' machinery and equipment
as adjusted by the M&E Reset Value; provided, that the amount set
forth in this Section 2.1(a)(y)(v) shall be reduced (but not below
zero) by the Amortization Amount on the first day of each month and,
commencing on the applicable Amortization Date., plus
(vi) 90%, subject to the provisions of Section 2.1(b)
hereof, of the Current Value of Marketable Securities ("Marketable
Securities Advance Rate"), plus
(vii) up to the lesser of (A) 80%, subject to the provisions
of Section 2.1(b) hereof, of the value of Eligible Government
Receivables ("Government Receivables Advance Rate") and (B) $1,000,000
in the aggregate at any one time, plusup to 100% of the value of cash
and certificates of deposit pledged to Agent and Lenders, pursuant to
documentation satisfactory to Agent in its sole and absolute
discretion ("CD Advance Rate" and together with the Receivables
Advance Rate, Inventory Advance Rate, the Costs in Excess Advance
Rate, the Marketable Securities Advance Rate and the Government
Receivables Advance Rate, collectively, the "Advance Rates"), minus
(ix) the aggregate Maximum Undrawn Amount of all outstanding
Letters of Credit, including without limitation, the Existing Letters
of Credit, minus
(x) such reserves as Agent may reasonably deem proper and
necessary in its Permitted Discretion from time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii) (iii),
(iv), (v), (vi), (vii) and (viii) minus (y) Sections 2.1 (a)(y)(ix) and (x)
at any time and from time to time shall be referred to as the "Formula
Amount". The Revolving Advances shall be evidenced by one or more secured
promissory notes (collectively, the "Revolving Credit Note") substantially
in the form attached hereto as Exhibit 2.1(a).
(d) A new Section 2.1(d) shall be added to the Loan Agreement as
follows:
2.1(d) Recalculation of Machinery and Equipment Advance Amount.
Commencing with July 1, 2006, on or after January 1 and July 1 of each
year, Borrowers shall submit to Agent a schedule ("M&E Value Schedule")
evidencing the value of Borrowers' machinery and equipment as of such date,
and such schedule shall list for the prior six month period ending on each
December 31 and June 30, as applicable, (i) all purchases of unencumbered
equipment and machinery (other than Liens in favor of the Agent for the
benefit of the Lenders) during such period, together with copies of all
invoices and other documentation reasonably requested by Agent evidencing
the net invoice cost of such purchase (excluding taxes, shipping, delivery,
handling, installation, overhead and other so called "soft" costs) and (ii)
the value of the machinery and equipment sold or retired by Borrowers
during such period. Agent shall have at least five (5) days to review and
approve the M&E Value Schedule and the value of the Borrowers' machinery
and equipment set forth therein in its reasonable credit judgment (as
approved, the "M&E Reset Value"). Upon Borrowers' delivery of the Borrowing
Base Certificate immediately following Agent's approval of the M&E Value
Schedule (each such date, a "Reset Date"), Agent shall permit Borrowers to
request Advances against the M&E Reset Value and such M&E Reset Value shall
be amortized by 1/60th of the M&E Reset Value (the "Amortization Amount")
commencing with each March 1 or September 1, as applicable, following each
Reset Date (each such date, the "Amortization Date"); provided, however,
the first Amortization Date shall be August 1, 2006.
(e) Section 7.3 of the Loan Agreement shall be deleted in its
entirety, and replaced as follows:
7.3 Guarantees. Become liable upon the obligations or
liabilities of any Person by assumption, endorsement or guaranty thereof or
otherwise (other than to Lenders) except (i) the endorsement of checks in
the Ordinary Course of Business and (ii) guarantees executed by one or more
Borrowers guaranteeing Indebtedness incurred by another Borrower so long as
the incurrence of such Indebtedness is permitted by such Borrower
hereunder.
(f) Section 7.11 of the Loan Agreement shall be deleted in its
entirety, and replaced as follows:
7.11 Leases. Enter as lessee into any lease arrangement for real
or personal property (unless capitalized and permitted under Section 7.6
hereof) if after giving effect thereto, aggregate annual rental payments
for all leased property would exceed $4,000,000 in any one fiscal year in
the aggregate for all Borrowers.
(g) Section 7.21 of the Loan Agreement shall be deleted in its
entirety, and replaced as follows:
7.21 Subordinated Notes and Industrial Revenue Bonds. At any
time, directly or indirectly, pay, prepay, repurchase, redeem, retire or
otherwise acquire, or make any payment on account of any principal of,
interest on or premium payable in connection with the repayment or
redemption of the Subordinated Notes; provided that (A) if Borrowers'
Unrestricted Undrawn Borrowing Base Availability plus cash and marketable
securities on hand after giving effect to such payment is less than Fifteen
Million Dollars ($15,000,000) and no Default or Event of Default exists or
would exist after giving to any such payment, Borrowers may pay the
regularly scheduled payments of interest due on the Subordinated Notes, (B)
if Borrowers' Unrestricted Undrawn Borrowing Base Availability plus cash
and marketable securities on hand after giving effect to such payment is
equal to or in excess of Fifteen Million Dollars ($15,000,000), Borrowers
may pay the regularly scheduled payments of interest due on the
Subordinated Notes regardless of whether Borrowers are in compliance with
the covenant set forth in Section 6.5(a) so long as no other Default or
Event of Default exists or would exist after giving effect to such payment,
and (C) Borrowers may repurchase or redeem up to a maximum aggregate amount
of $2,000,000 of Subordinated Notes; provided that, (i) the purchase price
for any Subordinated Notes repurchased or redeemed shall not exceed seventy
five percent (75%) of par value and (ii) at the time of, and after giving
effect to, such repurchase or redemption, Borrowers would be in compliance
with the limitations set forth in Sections 7.21(A) or 7.21(B) above.
2. Consent. Notwithstanding anything to the contrary contained in
the Loan Agreement to the contrary, Agent and Lenders hereby consent to the
acquisition by Signami of the assets as contemplated by the terms of the Asset
Purchase Agreement (as defined below).
3. Reaffirmation. Each Borrower hereby:
(a) reaffirms all representations and warranties made to Agent
and Lenders under the Loan Agreement and all of the other Existing Financing
Agreements and confirms that all are true and correct in all material respects
as of the date hereof (except to the extent any such representations and
warranties specifically relate to a different date, in which case such
representations and warranties shall be true and correct in all material
respects on and as of such other specific date);
(b) reaffirms all of the covenants contained in the Loan
Agreement, covenants to abide thereby until all Advances, Obligations and other
liabilities of Borrowers to Agent and Lenders under the Loan Agreement of
whatever nature and whenever incurred, are satisfied and/or released by Agent
and Lenders; and
(c) Except as modified by the terms hereof, all of the other
terms and conditions of the Loan Agreement, as amended, and all other of the
Existing Financing Agreements are hereby reaffirmed and shall continue in full
force and effect as therein written.
4. Representations and Warranties. Each Borrower hereby:
(a) represents and warrants that no Default or Event of Default
has occurred and is continuing under any of the Existing Financing Agreements;
(b) except as modified hereby, represents and warrants that it
has the authority and legal right to execute, deliver and carry out the terms of
this Amendment, that such actions were duly authorized by all necessary
corporate or limited liability company action and that the officers executing
this Amendment on its behalf were similarly authorized and empowered, and that
this Amendment does not contravene any provisions of its articles of
incorporation or by-laws, or certificate of formation or operating agreement, as
applicable, or other formation documents, or of any contract or agreement to
which it is a party or by which any of its properties are bound; and
(c) represents and warrants that this Amendment and all
assignments, instruments, documents, and agreements executed and delivered in
connection herewith, are valid, binding and enforceable in accordance with their
respective terms.
5. Conditions Precedent/Effectiveness Conditions. This Amendment
shall be effective upon satisfaction of the following conditions precedent
("Effective Date") (all documents to be in form and substance satisfactory to
Agent and Agent's counsel):
(a) Agent shall have received this Amendment fully executed
by Borrowers;
(b) Receipt by Agent of a non-refundable amendment fee in
the amount of $25,000, which shall be fully earned as of the date of this
Amendment;
(c) Agent shall have received fully executed copy of that
certain Asset Purchase Agreement by and among CompuDyne, Signami, Signami, LLC,
Bert Jones, Gary Kenworthy and Apple Oak Farms dated on or about July 14, 2006
(the "Asset Purchase Agreement");
(d) Replacements of, and supplements to, any exhibits,
schedules or supplements to the Loan Agreement as necessary to reflect any
change resulting from consummations of the transactions under the Asset Purchase
Agreement; and
(e) Agent shall have received such other agreements,
documents or information as requested by Agent in its sole discretion.
6. Conditions Subsequent. Within ten (10) Business Days following
consummation of the transaction contemplated under the Asset Purchase Agreement,
the Borrowers shall have delivered to Agent the following, if applicable, (in
form and substance acceptable in all aspects to Agent):
(a) Landlord waivers, in form and substance satisfactory to
Agent for all premises occupied by or to be occupied by Signami, or where
Collateral of Signami at any time is held;
(b) Certified copies of or original insurance policies of
Signami along with a standard Lender's Loss Payee and Additional Insured
Endorsement issued in favor of Agent;
(c) Uniform Commercial Code, judgment, and federal and
state tax lien searches against Signami with the Secretary of State and local
filing office of each state where New Borrower maintains its executive office, a
place of business or assets, showing that the property of Signami is not subject
to any Liens except for Liens permitted in the Loan Agreement, all at the
expense of Borrowers;
(d) UCC financing statements and such other documents,
instruments and writings required to be executed and/or delivered by Signami
under any provision of the Loan Agreement, as amended hereby;
(e) A good standing certificate showing Signami to be in
good standing in its state of incorporation or formation and in each other state
or foreign country in which it is doing and presently intends to do business
except any such jurisdiction for which such failure to be so qualified will not
have a Material Adverse Effect or adversely effect Agent's and/or Lenders' right
hereunder; and
(f) A collateral pledge agreement executed by CompuDyne
Integrated pledging the ownership interests of Signami to Agent and Lenders.
7. Further Assurances. Each Borrower hereby agrees to take all such
actions and to execute and/or deliver to Agent and Lenders all such documents,
assignments, financing statements and other documents, as Agent and Lenders may
reasonably require from time to time, to effectuate and implement the purposes
of this Amendment.
8. Payment of Expenses. Borrowers shall pay or reimburse Agent and
Lenders for its reasonable attorneys' fees and expenses in connection with the
preparation, negotiation and execution of this Amendment and the documents
provided for herein or related hereto.
9. Confirmation of Obligations. Borrowers' confirm and acknowledge
that as of the close of business on July 3, 2006, the outstanding Obligations
consist of (i) $0 of Revolving Advances, (ii) issued and outstanding Letters of
Credit in the Maximum Undrawn Amount equal to $14,171,130.25 and (iii) all fees,
costs and expenses incurred to date in connection with the Loan Agreement and
the Other Loan Documents.
10. Miscellaneous.
(a) Third Party Rights. No rights are intended to be created
hereunder for the benefit of any third party donee, creditor, or incidental
beneficiary.
(b) Headings. The headings of any paragraph of this Amendment
are for convenience only and shall not be used to interpret any provision
hereof.
(c) Modifications. No modification hereof or any agreement
referred to herein shall be binding or enforceable unless in writing and signed
on behalf of the party against whom enforcement is sought.
(d) Governing Law. The terms and conditions of this Amendment
shall be governed by the laws of the Commonwealth of Pennsylvania.
(e) Counterparts. This Amendment may be executed in any number
of counterparts and by facsimile, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered by their duly authorized officers as of the date first above
written.
COMPUDYNE CORPORATION
By:
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Name:
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Title:
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COMPUDYNE - PUBLIC SAFETY & JUSTICE, INC.
By:
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Name:
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Title:
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NORSHIELD CORPORATION
By:
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Name:
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Title:
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FIBER SENSYS, LLC
By:
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Name:
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Title:
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COMPUDYNE - INTEGRATED ELECTRONICS DIVISION, LLC
By:
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Name:
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Title:
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[Signature Page 1 of 2 (First Amendment To Second Amended And Restated
Revolving Credit Security Agreement)]
CORRLOGIC, LLC
By:
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Name:
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Title:
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NORMENT SECURITY GROUP, INC.
By:
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Name:
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Title:
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XANALYS CORPORATION
By:
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Name:
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Title:
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SIGNAMI DCS, LLC
By:
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Name:
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Title:
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PNC BANK, NATIONAL ASSOCIATION,
as Lender and as Agent
By:
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James P. Sierakowski, Vice President
[Signature Page 2 of 2 (First Amendment To Second Amended And Restated
Revolving Credit Security Agreement)]