EXHIBIT 10.1
EXTENSION AGREEMENT
THIS
EXTENSION
AGREEMENT
is made and entered
into as of June 24,
2005, by and among LYNCH SYSTEMS, INC. ("Borrower"), a South Dakota
corporation;
LYNCH
CORPORATION,
an Indiana
corporation
("Guarantor");
and SUNTRUST
BANK
("Lender"), a Georgia banking corporation.
RECITALS:
Lender and
Borrower
entered
into a certain
Amended and
Restated
Credit
Agreement
dated
June 10,
2002 (as at any time
amended,
the
"Credit
Agreement"),
pursuant
to which
Lender made
available a revolving
credit and
letter of credit
facility to
Borrower,
which
revolving
credit and letter of
credit
facility
is
secured
by
security
interests
in and liens upon all or
substantially
all of the assets of Borrower and are guaranteed
unconditionally
by Guarantor.
Lender made a term loan (the "Term
Loan") to Borrower as
evidenced
by a certain
Term Loan
Promissory
Note,
dated August 4, 2003 in the original
principal amount of $498,000 (as at any time amended, the "Term
Note"),
payment
of which is secured by, among other
things,
a lien upon and security
title to
certain real
property of Borrower
pursuant to the terms of a certain
Security
Deed and Agreement made as of March 30, 2001, between Borrower and
Lender (as at
any time amended, the "Security Deed"; together with the Term Note
and all other
agreements
and
instruments
executed in connection
therewith,
the "Term Loan
Documents").
Events of Default
under (and as
defined
in) the Credit
Agreement
exist
and are
continuing,
in
consequence
of which
Lender
is
entitled
to
terminate
further advances to Borrower,
to declare the entire balance owing to
it from
Borrower to be
immediately
due and payable,
to enforce its liens and
security interests in the collateral
securing its claims against Borrower,
and
to enforce its claims against Guarantor.
All of the liabilities and
obligations
under the Credit
Agreement
and the Term Note became due and payable on May 31, 2005.
Borrower and
Guarantor
desire that Lender
extend the due date for
repayment of the Obligations to the Termination
Date (as hereinafter
defined);
continue to make credit available to Borrower prior to the
Termination Date; and
allow
Borrower to use Cash
Collateral
(as
hereinafter
defined) prior to the
Termination Date.
Lender
is
willing
to
extend
the due date for
repayment
of the
Obligations,
to continue
making
credit
available to
Borrower,
and to allow
Borrower
to use
Cash
Collateral
under
the
terms
and
conditions
of
this
Agreement.
NOW,
THEREFORE,
for
TEN
DOLLARS
($10.00)
in hand
paid
and in
consideration
of the premises and the mutual covenants
herein
contained,
the
parties hereto, intending to be legally bound hereby, agree as
follows:
1. DEFINITIONS; RULES OF CONSTRUCTION.
(a) Capitalized
terms used in this Agreement,
unless
otherwise
defined,
shall have the meaning ascribed to such terms in the Credit
Agreement.
In
addition,
as used
herein,
the
following
terms
shall have the
meanings
ascribed to them:
"ACCEPTABLE
COMMITMENT
LETTER"
shall mean a commitment
letter
that is issued by a bank or other financial
institution
acceptable
to Lender, provides for Take-Out Financing on or before the last
day
of the Extension Period and has no due diligence, credit approval
or
other
conditions
precedent
to
funding
other
than
customary
conditions relating to documentation and closing.
"AGREEMENT" shall mean this Agreement.
"APPLICABLE
LAW"
shall
mean all laws,
rules
and
regulations
applicable
to the Person,
conduct,
transaction,
covenant or Loan
Document
in
question,
including
all
applicable
common
law and
equitable
principles;
all
provisions
of
all
applicable
state,
federal and foreign constitutions,
statutes, rules, regulations and
orders of governmental bodies; and all orders, judgments and
decrees
of all courts and arbitrators.
"AVAILABILITY"
shall
mean,
on
any
date,
the
sum
of
(i)
eighty-five
percent
(85%)
of
Borrower's
aggregate
Eligible
Receivables
less
taxes,
discounts,
credits,
allowances
and
Retainages, plus (ii) fifty percent (50%) of the value (at the
lower
of cost
or
market
and in
accordance
with
GAAP)
of
Borrower's
Eligible Inventory.
"BORROWING BASE CERTIFICATE" shall mean a certificate executed by
Borrower
in favor of Lender,
in a form
acceptable
to Lender,
by
which Borrower shall certify to Lender the amount of Availability
on
the date of such certificate
(and showing the calculation
thereof,
including
all Eligible
Accounts
and Eligible
Inventory as of the
date of the certificate)
"CASH COLLATERAL" shall mean cash proceeds of Borrower's Accounts
Receivable
collected
by Borrower
from its Account
Debtors in the
ordinary course of business.
"COLLECTIONS" shall mean all proceeds received from a sale, lease
or other disposition of any of the Collateral, including payments
by
Borrower's
customers and any proceeds of insurance
relating to any
of the Collateral.
"ELIGIBLE
RECEIVABLE"
shall mean each
Eligible
Export-Related
Accounts and each Accounts
Receivable that is not an Export-Related
Account Receivable but that is acceptable to Lender and deemed to
be
eligible by Lender in the exercise of its customary credit
judgment;
PROVIDED,
HOWEVER,
that no Account
Receivable shall qualify as an
Eligible
Receivable if (a) it does not arise from the sale of goods
or the
performance of services in the ordinary course of Borrower's
business, (b) it is not subject to a valid, perfected first
priority
Lien in
favor
of
Lender,
(c)
any
covenant,
representation
or
warranty
contained
in the Credit
Documents
with
respect to such
Account
Receivable
has
been
breached,
(d)
it is not
owned
by
Borrower
or it is is
subject to any right,
claim or
interest
of
another
Person
other
than the Lien in favor of
Lender,
(e) with
-2-
respect to such
Account
Receivable
an invoice
has not been sent,
except in the case of Percentage of Completion Accounts
Receivable,
(f) it arises from the sale of defense articles or defense
services,
(g) it is due and payable
more that one hundred
eighty
(180) days
from
the date of the
invoice,
with the
exception
of an
Account
Receivable for Retainage
which may not (x) exceed ten percent (10%)
of
the
aggregate
amount
that
Borrower
is to
receive
under
a
particular
Domestic
Contract
and (y) be for a term
greater
than
thirteen (13) months,
(h) it is not paid within sixty (60) calendar
days from its original due date,
(i) it arises from a sale of goods
to or
performance
of services
from an Affiliate
of Borrower,
an
employee of borrower,
a
stockholder
of Borrower,
a subsidiary of
Borrower,
a Person
with a
controlling
interest
in Borrower or a
Person which shares common controlling ownership with Borrower,
(j)
it is backed by a letter of credit
unless the goods
covered by the
subject
letter of credit have been
shipped,
except in the case of
Percentage of Completion
Accounts
Receivable,
(k) Lender,
in its
reasonable judgment, deems such Account Receivable uncollectible
for
any
reason,
(l) it is due and
payable
in a
currency
other than
Dollars,
(m) it is due and payable from a military
Account Debtor,
(n) it is due and payable
from an Account
Debtor who applies
for,
suffers,
or
consents
to the
appointment
of,
or the
taking
of
possession
by, a
receiver,
custodian,
trustee or
liquidator
of
itself or of all or a
substantial
part of its
property or calls a
meeting of its
creditors;
admits in writing its
inability,
or is
generally
unable,
to pay its
debts as they
become
due or ceases
operations of its present business;
makes a general
assignment for
the benefit of creditors; commences a voluntary case under any
state
or federal
bankruptcy
laws (as now or hereinafter
in effect);
is
adjudicated as bankruptcy or insolvent;
files a petition seeking to
take
advantage of any other
petition
which is filed against it in
any involuntary case under such bankruptcy laws; or takes any
action
for the purpose of
effecting
any of the
foregoing,
(o) it arises
from a
bill-and-hold,
guaranteed
sale,
sale-and-return,
sale on
approval,
consignment or any other repurchase or return basis or is
evidenced
by
chattel
paper,
(p) the
goods
giving
rise to such
Account
Receivable
have not been shipped to the Account
Debtor or
the services
giving rise to such Account
Receivable
have not been
performed by Borrower or the Account
Receivable
otherwise does not
represent
a
final
sale,
except
in the
case
of
Percentage
of
Completion
Accounts
receivable,
(q) it is subject to any
offset,
deduction,
defense,
dispute, or counterclaim or the Account Debtor
is also a creditor or supplier of Borrower or the Account
Receivable
is
contingent
in any respect or for any reason,
(r)
Borrower has
made
any
agreement
with
the
Account
Debtor
for any
deduction
therefrom,
except for discounts or allowances
made in the ordinary
course of business
for prompt
payment,
all of which
discounts or
allowances
are
reflected in the
calculation
of the face value of
each respective
invoice releated
thereto,
or (s) any of the goods
giving rise to such Account Receivable have been returned,
rejected
or repossesed.
"ELIGIBLE
INVENTORY"
shall
mean
all
Eligible
Export-Related
Inventory and all Inventory that is not Export-Related Inventory
but
that is finished
goods and is acceptable to Lender and deemed to be
eligible by Lender in the exercise of its customary credit
judgment;
PROVIDED,
HOWEVER,
that no
Inventory
shall
qualify as
Eligible
Inventory
if (a) it is not
subject
to a
valid,
perfected
first
priority
Lien in favor of
Lender,
(b) it is located at an address
that has not been
disclosed to Lender in writing,
(c) it is placed
by Borrower on consignment
or held by Borrower on consignment
from
another Person, (d) it consists of raw materials, work in process
or
materials
used or consumed or to be used or consumed in
Borrower's
-3-
business or in the
processing,
production,
packaging,
promotion,
delivery or shipping of Inventory,
(e) it is in the possession of a
processor or bailee,
or located on premises
leased or subleased to
Borrower,
or on premises subject to a mortgage in favor of a Person
other than Lender,
unless such
processor or bailee or mortgagee or
the lessor or
sublessor of such
premises,
as the case may be, has
executed and delivered all documentation
which Lender shall require
to evidence the
subordination or other limitation or extinguishment
of such Person's
rights with respect to such Inventory and Lender's
right to gain access thereto, (f) it is produced in violation of
the
Fair Labor
Standards
Act or subject to the "hot goods"
provisions
contained in 29 U.S.C. ss. 215 or any successor
statute or section,
(g) as to such Inventory,
any covenant,
representation or warranty
with respect to such Inventory contained in the Credit Documents
has
been breached, (h) it is not located in the United States, (i) it
is
demonstration
Inventory,
(j) it consists of
proprietary
software
(i.e.
software designed solely for Borrower's
internal use and not
intended
for
resale),
(k)
it
is
damaged,
obsolete,
returned,
defective, recalled or unfit for further processing, (l) it has
been
previously
exported
from the
United
States,
(m) it
constitutes
defense
articles
or
defense
services,
or
(n)
it
is
to
be
incorporated
into
goods
whose
sale
would
result in an
Account
Receivable which would not be an Eligible Receivable.
"EXTENSION
CONDITIONS"
shall mean the
conditions
to
Lender's
extension of the due date of the
Obligations set forth in Section 4
of this Agreement.
"EXTENSION
PERIOD" shall mean the period
commencing on the date
of this
Agreement
and ending at 5:00
o'clock p.m. on the close of
business on August 31, 2005;
provided that if Borrower
delivers to
Lender an
Acceptable
Commitment
Letter after July 31,
2005,
but
before August 31, 2005, and each of the Extension Conditions
remains
satisfied,
the
Extension
Period
shall
be
deemed
to have
been
extended to 5:00
o'clock
p.m. on the close of business on the date
that is 30 days after the date of Lender's receipt of the
Acceptable
Commitment Letter.
"INSOLVENCY PROCEEDING" shall mean any action, case or proceeding
commenced by or against a Person,
or any
agreement of such Person,
for (a) the entry of an order for
relief
under any
chapter of the
Bankruptcy Code or other
insolvency or debt adjustment law (whether
state,
federal or
foreign);
(b) the
appointment
of a
receiver,
trustee,
liquidator or other
custodial for such Person or any part
of its property; (c) an assignment or trust mortgage for the
benefit
of creditors of such Person; or (d) the liquidation,
dissolution or
winding up of the affairs of such Person.
"LOAN
DOCUMENTS"
shall mean the Credit
Documents
and the Term
Loan Documents.
"OBLIGATIONS"
shall
mean
all
liabilities,
indebtedness
and
obligations at any time owing by Borrower to Lender,
whether direct
or indirect,
absolute or contingent,
due or to become due, secured
or unsecured or
liquidated
or
unliquidated,
including all of the
Revolver Obligations and all of the Term Loan Obligations.
"OBLIGORS" shall mean Borrower and Guarantor.
-4-
"OVERADVANCE"
shall
mean,
on any
date of
determination,
the
amount by which the outstanding Revolver Obligations
(including all
undrawn Letters of Credit at 102% of the face amount of such
Letters
of Credit and all fees and expenses
incurred by Lender) exceeds the
Availability.
"PAID IN FULL" shall mean, with reference to the Obligations, the
full,
final
and
indefeasible
payment
in
full
of all
of
such
Obligations,
the
termination
of all
commitments
and
any
other
obligations
that Lender may have under any of the Credit
Documents
to
extend
or renew
credit,
and the
depositing
with
Lender
by
Borrower of cash in an amount equal to 102% of the aggregate
undrawn
amount of all Letters of Credit outstanding and all other
contingent
obligations at the time due and owing Lender.
"PAYROLL TAXES" shall mean all taxes and deposits
required to be
paid or withheld from the wages or salaries of Borrower's
employees.
"REVOLVER
OBLIGATIONS" shall mean all of the "Obligations" under
(and as defined in) the Credit Agreement.
"STIPULATED DEFAULTS" shall mean the Events of Default referenced
in Section 2(c) of this Agreement.
"TAKE-OUT
FINANCING"
shall mean financing
procured by Borrower
from a third-party financing source in an amount sufficient to
cause
all of the
Ob
