Exhibit 10.1
EXECUTION COPY
SECOND AMENDMENT TO FIRST LIEN CREDIT
AGREEMENT
This Second Amendment (this “
Amendment ”) to First Lien Credit Agreement is entered
into as of June 26, 2008 (the “ Amendment Effective
Date ”), by and among KRATOS DEFENSE AND SECURITY
SOLUTIONS, INC. , a Delaware corporation (“
Borrower ”), KEYBANK NATIONAL ASSOCIATION , as
Administrative Agent (“ Administrative Agent ”)
and the Lenders party hereto.
RECITALS
WHEREAS , reference
is made to that certain First Lien Credit Agreement, dated as of
December 31, 2007 (as amended from time to time, the “
Credit Agreement ”; capitalized terms used herein
without definition have the meanings ascribed to such terms in the
Credit Agreement), among Borrower, KeyBank National Association, as
administrative agent and issuing lender thereunder, and the lenders
party thereto;
WHEREAS , Borrower
has requested that the Administrative Agent and the Lenders agree
to amend the Credit Agreement to allow for certain additional
add-backs to Consolidated EBITDA (as included in the
Borrower’s computation of the Maximum First Lien Leverage
Ratio, Maximum Total Leverage Ratio, the Minimum Fixed Charge
Coverage Ratio and Minimum Consolidated EBITDA covenants set forth
in Sections 7.12(a), (b), (d) and (e));
WHEREAS , Borrower
has further requested that the Lenders approve the Unsecured
Subordinated Convertible Notes issued by SYS, which will be a
Subsidiary of the Borrower upon the consummation of the Acquisition
of SYS by the Borrower, in the face amount of $3,125,000
(collectively the “ Subordinated Notes ”) as
Subordinated Debt for purposes of Section 7.1(f) of the
Credit Agreement; and
WHEREAS , subject
to the terms and conditions hereof, the Administrative Agent and
the Lenders have agreed to make such requested amendments to the
Credit Agreement and approve such Subordinated Notes;
NOW THEREFORE , in
consideration of the premises and the mutual covenants herein
contained, the parties hereto hereby agree as follows:
Section 1.
Section References . Unless otherwise expressly
stated herein, all Section references herein shall refer to
Sections of the Credit Agreement.
Section 2.
Amendments to Section 1.1 of the Credit Agreement .
(a)
Section 1.1 of
the Credit Agreement is hereby amended by adding the following
clause (l) to the definition of “Consolidated
EBITDA”, immediately after existing clause
(k) thereof:
“amounts
representing actual transaction costs incurred by the target in any
Permitted Acquisition consummated by the Borrower in which 100% of
the purchase price in connection therewith (as set forth in the
definitive purchase agreement with respect thereto and if not
specified therein, then based on a valuation acceptable to the
Lenders) is paid in Equity Securities of the Company, provided that
such amounts (i) shall be limited to transaction costs paid in
cash and incurred directly in connection with such Permitted
Acquisition and prior to the consummation of such Permitted
Acquisition and (ii) shall not exceed, with respect to each
such Permitted Acquisition, an aggregate amount equal to 5.0% of
the purchase price in connection therewith (as set forth in the
definitive purchase agreement with respect thereto and if not
specified therein, then based on a valuation acceptable to the
Lenders);”
Section 3.
Approval of the Subordinated Notes . The Lenders
hereby approve the Subordinated Notes as Subordinated Debt for
purposes of compliance with Section 7.1(f) of the Credit
Agreement; provided , however , that such approval is
expressly conditioned on receipt of a duly executed Subordination
Agreement in the form attached hereto as Exhibit A from
holders of Subordinated Notes representing no less than 95% of the
aggregate principal amount of all of Subordinated Notes within 10
days from the closing of the Acquisition of SYS by the Borrower;
provided further , that the Borrower shall use its
best efforts to obtain a duly executed Subordination Agreement in
the form attached hereto as Exhibit A from all remaining
holders as soon as possible.
Section 4.
Conditions Precedent . The effectiveness of this
Amendment is subject to the satisfaction of each of the following
conditions precedent:
(a)
The Lenders shall
have received all of the following, in form and substance
satisfactory to the Lenders:
(i)
Amendment . This Amendment, duly executed and
delivered by each Credit Party, the Administrative Agent, the
Lenders and the Second Lien Administrative Agent;
(ii)
Expenses . The expenses and other amounts payable
on the Amendment Effective Date referred to in Section 8
hereof, including, but not limited to, reimbursement or payment of
all out-of-pocket expenses (including the reasonable legal fees and
expenses of Latham & Watkins LLP, counsel to the
Administrative Agent and the Lenders) required to be reimbursed or
paid by Borrower hereunder or under any other Loan Document;
and
(iii) Additional Information
. Such
additional documents, instruments and information as Administrative
Agent may reasonably request to effect the transactions
contemplated hereby.
(b)
Representations and Warranties . On the Amendment
Effective Date, the representations and warranties contained herein
and in the other Loan Documents shall be true and correct in all
material respects on and as of the Amendment Effective Date to the
same extent as though made on and as of that date, except to the
extent such representations and warranties specifically relate to
an earlier date, in which case such representations and warranties
shall have been true and correct in all material respects on and as
of such earlier date.
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(c)
Completion of
Proceedings . All partnership, corporate and other
proceedings taken or to be taken in connection with the
transactions contemplated hereby shall be satisfactory in form and
substance to Administrative Agent and its counsel, and
Administrative Agent and such counsel shall have received all such
counterpart originals or certified copies of such documents as
Administrative Agent may reasonably request.
(d)
No
Default . On the Amendment Effective Date after
giving effect to this Amendment, no event shall have occurred and
be continuing that would constitute a Default or an Event of
Default.
Section 5.
Representations and Warranties; Reaffirmation of Grant
. Each Credit Party hereby represents and warrants to the
Administrative Agent and the Lenders that, as of the Amendment
Effective Date and after giving effect to this Amendment,
(a) all representations and warranties of the Credit Parties
set forth in the Credit Agreement and in any other Loan Document
are true and correct in all material respects on and as of the
Amendment Effective Date to the same extent as though made on and
as of such date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case
such representations and warranties shall have been true and
correct in all material respects on and as of such earlier date,
(b) no Default or Event of Default has occurred and is
continuing, (c) the Credit Agreement (as amended by this
Amendment) and all other Loan Documents are and remain legally
valid, binding obligations of the Credit Parties, enforceable
against each such Credit Party in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting
creditors’ rights generally or by equitable principles
relating to enforceability and (d) each of the Security
Documents to which such Credit Party is a party and all of the
Collateral described therein do and shall continue to secure the
payment of all Obligations as set forth in such respective Security
Documents. Each Credit Party that is a party to the Pledge
and Security Agreement or any of the other Security Documents
hereby reaffirms its grant of a security interest in the Collateral
to the Administrative Agent for the ratable benefit of the Secured
Parties (as defined in the Pledge and Security Agreement), as
collateral security for the prompt and complete payment and
performance when due of the Obligations.
Section 6.
Survival of Representations and Warranties . All
representations and warranties made in this Amendment or any other
Loan Document shall survive the execution and delivery of this
Amendment, and no investigation by the Administrative Agent or the
Lenders shall affect the representations and warranties or the
right of the Administrative Agent and the Lenders to rely upon
them. If any representation or warranty made in this
Amendment is false in any material respect as of the date made or
deemed made, then such shall constitute an Event of Default under
the Credit Agreement.
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Section 7.
Reference to Agreement . Each of the Loan Documents,
including the Credit Agreement, and any and all other agreements,
documents or instruments now or hereafter executed and/or delivered
pursuant to the terms hereof or pursuant to the terms of the Credit
Agreement as amended hereby, are hereby amended so that any
reference in such Loan Documents to the Credit Agreement, whether
direct or indirect, shall mean a reference to the Credit Agreement
as amended hereby. This Amendment shall constitute a Loan
Document under the Credit Agreement.
Section 8.
Costs and Expenses of the Lenders . Company shall pay
on demand all reasonable costs and expenses of the Administrative
Agent and the Lenders (including the reasonable fees, costs and
expenses of counsel to the Administrative Agent and/or the Lenders)
incurred in connection with the preparation, execution and delivery
of this Amendment.
Section 9.
Governing Law . THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES
THEREOF.
Section 10.
Execution . This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, 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. Delivery of an executed counterpart
of a signature page to this Amendment by telecopier (or
electronic mail (in PDF format)) shall be effective as delivery of
a manually executed counterpart of this Amendment.
Section 11.
Limited Effect . This Amendment relates only to the
specific matters expressly covered herein, shall not be considered
to be a waiver of any rights, claims or remedies any Lender may
have under, or compliance by the Borrower with any term or
provision of, the Credit Agreement or any other Loan Document or
applicable law, and shall not be considered to create a course of
dealing or to otherwise obligate in any respect any Lender to
execute similar or other amendments or grant any waivers under the
same or similar or other circumstances in the future.
Section 12.
Ratification by Guarantors . Each of the Guarantors
acknowledges that its consent to this Amendment is not required,
but each of the und
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