EXHIBIT 10.1
-COPY-
SECOND AMENDMENT AND WAIVER
This SECOND AMENDMENT AND
WAIVER (this “ Amendment ”) is entered into
as of January 31, 2008, among HALIFAX CORPORATION OF
VIRGINIA , f/k/a Halifax Corporation, a Virginia corporation
(“ Halifax ”), HALIFAX ENGINEERING, INC.
, a Virginia corporation (“ Engineering ”),
MICROSERV LLC , a Delaware limited liability company
(“ Microserv ”) and HALIFAX ALPHANATIONAL
ACQUISITION, INC. , a Delaware corporation (“
AlphaNational ”; collectively with Halifax,
Engineering and Microserv, “ Borrower ”), and
PROVIDENT BANK , a Maryland banking corporation (“
Bank ”).
WITNESSETH:
WHEREAS, the Borrower and the Bank
entered into that certain Fourth Amended and Restated Loan and
Security Agreement dated as of June 29, 2007 (as amended,
restated, supplemented or modified from time to time, including the
amendments and waivers set forth in that certain First Amendment
and Waiver dated November 13, 20007, the “ Loan
Agreement ”; capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to such terms in
the Loan Agreement);
WHEREAS, the following Events of
Default have occurred under the Loan Agreement: (a) Borrower
failing to maintain a minimum Tangible Net Worth plus Subordinated
Debt of not less than $4,000,000.00 as of December 31, 2007;
(b) Borrower failing to maintain a ratio of Total Liabilities
less Subordinated Debt to Tangible Net Worth plus Subordinated Debt
of not greater than 4.0:1 as of December 31, 2007;
(c) Borrower failing to maintain a Current Ratio equal to or
greater than 1.4:1 as of December 31, 2007; and
(d) Borrower failing to pay the principal, interest and late
charges owed under the Auxiliary Revolver Facility at the
December 31, 2007 maturity thereof (the “ Existing
Defaults ”);
WHEREAS, the Existing Defaults are
continuing and remain unwaived, and the Borrower has requested that
the Bank waive the Existing Defaults;
WHEREAS, the Bank has agreed to the
requested waiver on the terms and conditions provided herein;
and
WHEREAS, the Borrower has further
requested that certain terms and conditions of the Loan Agreement
and the Promissory Notes evidencing the Revolving Line of Credit
and the Auxiliary Revolver Facility be amended, and the Bank has
agreed to the requested amendments on the terms and conditions
provided herein;
NOW THEREFORE, in consideration of
the foregoing premises and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Amounts Due . The
Borrower acknowledges and agrees that as of January 30, 2008
the outstanding principal balance due under: (a) the Line of
Credit is Five Million Eighty-Eight Thousand Four Hundred Forty
Nine Dollars and 55/100 ($5,088,449.55) with accrued interest due
in the amount of Thirty Thousand Eight Hundred Eighty Dollars and
00/100 ($30,880); and
(b) the Auxiliary Revolver Facility is Nine Hundred Hundred
Thousand Dollars and 00/100 ($$900,000) with accrued interest due
in the amount of Seventeen Thousand Nine Hundred Nine Dollars and
20/100 ($17,909.20) and that such sums are in fact now due and
owing without defense, set-off or counterclaim whatsoever.
2. Amendment to the Loan
Agreement .
A.
Section I.A.4 of the Loan Agreement is hereby modified and
amended by replacing the definition of “Auxiliary Maximum
Credit Amount” with the following:
“Auxiliary Maximum Credit Amount” means Nine Hundred
Thousand Dollars ($900,000) as such amount may be reduced by the
payments described in Section II.A.2. below.
B.
Section I.A.15 of the Loan Agreement is hereby modified and
amended by replacing the definition of “Maximum Line of
Credit Amount” with the following:
“Maximum
Line of Credit Amount” means Six Million Dollars
($6,000,000).
C.
Section II.A.1. of the Loan Agreement is hereby modified and
amended by adding the following to the end thereof:
“Notwithstanding the foregoing, the Borrower cannot request
any advance under the Line of Credit after April 28, 2008, and
all amounts outstanding under the Line of Credit shall be due and
paid in full on April 30, 2008. Provided, however, that if the
Borrower provides the Bank with evidence, satisfactory in the sole
and absolute discretion of the Bank, that Borrower has received an
indefeasible capital infusion of not less than $1,250,000 in the
form either of stockholders’ equity or subordinated debt
acceptable to the Bank, in the Bank’s sole and absolute
discretion, by no later than 5:00 p.m., on April 15, 2008,
then the Borrower, upon notice from the Bank, shall be permitted to
continue to borrower funds under the Line of Credit until
July 29, 2008 and all amounts outstanding under the Line of
Credit shall thereafter be due and paid in full on July 31,
2008.”
D.
Section II.A.2. of the Loan Agreement is hereby modified and
amended by replacing the last sentence thereof with the
following:
“The
Borrower shall make payments of $25,000 each on the 15th day of
February, March, and April 2008 which sums shall be applied to
the reduction of the principal amount outstanding hereunder and
such payments shall constitute permanent reductions of the
Auxiliary Maximum Credit Amount. Notwithstanding the provisions set
forth above regarding the operation of the Auxiliary Revolver
Facility, the Borrower cannot request any advance under the
Auxiliary Revolver Facility after February 1, 2008 and all
amounts outstanding under the Auxiliary Revolver Facility shall
thereafter be due and paid in full as set forth above and finally
on April 30, 2008. Provided, however, that if the
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Borrower
provides the Bank with evidence, satisfactory in the sole and
absolute discretion of the Bank, that the Borrower has received an
indefeasible capital infusion of not less than $1,250,000 in the
form either of stockholders’ equity or subordinated debt
acceptable to the Bank, in the Bank’s sole and absolute
discretion, by no later than 5:00 p.m., on April 15, 2008,
then, upon notice from the Bank, the Borrower shall make principal
payments of $25,000 each on the 15th day of May, June and
July 2008 and all amounts outstanding under the Auxiliary
Revolver Facility shall thereafter be due and paid in full on
July 31, 2008. The Borrower shall arrange for the Escrow Agent
to pay any funds or proceeds due to the Borrower from the INDUS
Escrow directly to the Bank to be applied, provided the Borrower is
not in default hereunder, towards the reduction of the principal
balance of the Auxiliary Revolver Facility. If the Borrower is in
default hereunder any payment received derived from INDUS Escrow
funds shall applied in the manner determined by the Bank. In the
event that the Bank consents to the Borrower’s sale or
financing of any of the Borrower’s assets outside of assets
sold or financed in the ordinary course of the Borrower’s
business, the proceeds of such sale or financing shall be paid
directly to the Bank to be applied to the reduction of the
principal balance of the Auxiliary Revolver Facility. If the
Borrower is in default hereunder any payment received derived from
such sale or financing shall applied in the manner determined by
the Bank. The phrase “ INDUS Escrow” shall mean the
funds held by an escrow agent in favor of the Borrower relating to
the Borrower’s sale of its secure network
business.”
E.
Section II. C of the Loan Agreement is hereby modified and
amended by replacing the first sentence thereof with the
following:
“The
interest rates on the Loan, and the method of calculating interest
upon the Loan, the term of the Loan, the method and times of
repayment, and other conditions pertaining to the repayment of the
Loan shall, at the option of Bank, be evidenced by Bank’s
form of promissory note, and/or as otherwise set forth herein or in
appropriate writings between the parties as determined by
Bank.”
F.
Section V.G of the Loan Agreement is hereby modified and
amended by replacing the entire Section with the following:
“G.
Field Examination . Bank or any of its agents or
representatives may from time to time, during normal business
hours, inspect, check, make copies of or extracts from the books,
records and files of Borrower, and visit and inspect
Borrower’s offices and any of the Collateral wherever
located. Borrower shall make the same available at any time for
such purposes, and shall pay all expenses related to such
inspections. Unless an Event of Default has occurred and is
continuing, the Borrower will be charged for no more than one field
examination during each six month period commencing on
February 1, 2008.”
G.
Section VI of the Loan Agreement is hereby modified and
amended by replacing the opening paragraph thereof with the
following:
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“ VI.
EVENTS OF DEFAULT . The occurrence of any of the following, or
the failure by Borrower to comply with Paragraph V.M.6, or the
failure of Borrower to make any payment hereunder when due, shall
automatically be a default hereunder:”
3. Waiver . The Bank
acknowledges that the Existing Defaults currently exist. Subject to
the fulfillment of the conditions precedent to the effectiveness of
this Amendment set forth in Section 4, the Bank hereby waives
the Existing Defaults.
4. No Other Amendments or
Waivers . Except in connection with the amendments and the
waivers expressly set forth above, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of
any right, power or remedy of the Bank under the Loan Agreement or
any of the other related documents, nor constitute a waiver of any
provision of the Loan Agreement or any of the other related
documents. Except for the amendments set forth above, the text of
the Loan Agreement and all other related documents shall remain
unchanged and in full force and effect and hereby ratifies and
confirms its respective obligations thereunder. The Borrower
acknowledges and expressly agrees that the Bank reserves the right
to, and does in fact, require strict compliance with all terms and
provisions of the Loan Agreement.
5. Conditions Precedent to
Effectiveness . This Amendment shall become effective as of the
date hereof when, and only when, the Bank shall have received the
following, in form and substance satisfactory to the Bank:
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a. |
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counterparts of this Amendment executed by each Borrower; |
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b. |
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payment in full, in immediately available funds, to the Bank of
one-half of amendment fee described below in the amount of $17,250,
such fee being fully earned and non-refundable upon the
effectiveness of this Amendment; |
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c. |
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payment in full of all other fees and expenses due and payable
to the Bank under the Loan Agreement and in connection with the
execution and delivery of this Amendment and the transactions
described herein, including, without limitation, the fees and
expenses of counsel to the Bank, if any; and |
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d. |
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such other information, documents, including amended and
restated promissory notes, instruments, certificates or approvals
as may be set forth within this Agreement or as the Bank or the
Bank’s counsel may reasonably require. |
6. Additional Agreements
. The Borrower agrees as follows:
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The Bank shall, upon receipt from Borrower of a payroll ACH
file for clearing, place an administrative hold on account number
2065310687 in the amount |
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